Document:

Engagement Letter with Innovator Capital Limited

Exhibit 10.46

PRIVATE & CONFIDENTIAL

Doug Frater Esq.,

Chief Executive Officer 

Global Green Solutions Inc., 

789 West Pender Street Suite 1010

Vancouver Al V6C 1H2

22nd February2008 

Dear Sirs,

ENGAGEMENT LETTER

We refer to our various conversations and exchanges of correspondence. You have explained to us that, Global Green Solutions Inc., ("Global Green") or (the "Company"), requires expert corporate finance and international capital markets advice, (the "Advisory Service"). We also understand that the Company wishes to have expert corporate communications, investor relations, media advice and other services, which will result in awareness of Global Green being substantially raised within Europe (the "Communications Service"). 

We further understand that the Company is interested in raising various sums of money over the foreseeable future, via equity or equity related offerings, project or project related finance and any other forms of finance as maybe suitable from time to time, (the "Financings").

More specifically and with respect to the Financings we understand that there is an immediate need for up to US$10,000,000, (ten million United Sates dollars) in equity and up to a further US$100,000,000, (one hundred million United States dollars) in project finance.

It is proposed that Innovator Capital Limited ("ICL") or ("Innovator"), working in close consultation with the Company and some of its existing advisers, will use all reasonable endeavours to assist the Company by providing the Advisory Service and the Communications Service which, from Innovator's perspective, will result in Global Green' stock price having momentum, liquidity and trade, more often than not, closer to fair value. The Financings, also achieved with the assistance of Innovator, will enable the Company to have access to more than adequate funding for the successful execution of its business plan.

We further understand that currently Global Green's shares (the "Shares") under a trading symbol of GGRN are traded on the OTC Bulletin Board, ("OTCBB"). It is our opinion that the Shares also should be tradeable on a major European stock exchange(s). It is probable that we will insist upon Germany as the country whose stock exchanges would be the most appropriate for the Shares. Should this transpire, Global Green would require the services of a Designated Sponsor. We would view it as being in the best interests of the Company and its investors, and essential to maximise the likelihood of success of the Financings, for the Shares to have such a formal Designated Sponsor and be traded on the German national electronic exchange known as XETRA in addition to the Frankfurt Stock Exchange.

 

 

In order to ensure fair, orderly and liquid markets for small-cap company's shares in Germany, the Frankfurt Stock Exchange formally approved the implementation of the Designated Sponsor programme. A Designated Sponsor has a specific role under the regulations of the Exchange. Said role is to provide liquidity in their corporate client's shares in accordance with the price, size and spread rules of the Deutsche Borse (see attached .pdf extract from "Exchange Rules for the Frankfurt Stock Exchange"). 

Innovator will recommend providers of such services whose costs are anticipated to be approximately €50,000 per annum, payable quarterly in advance. For said amount the Designated Sponsor would normally provide directly or indirectly:

	      	a)      	
A continuous, firm, minimum spread bid and ask, in size for the Shares on the agreed exchanges (the "Trading Service").

		b)      	
The necessary and sufficient International Arbitrage needed to maintain the Trading Service.

		c)      	
A minimum eight-page investment grade research report with newsflashes and three quarterly updates in both the German and English languages (the "Research Service").

Global Green, under the rules and regulations of the Deutsche Borse, would have to contract separately with any Designated Sponsor, however Innovator may recommend the decoupling of the Research Service from the Trading Service should it deem it necessary. Such decoupling would result in the fee mentioned above being reduce by approximately 50% (fifty per cent). Global Green and Innovator will review the requirements, costs and timing as to a listing on the Frankfurt Stock Exchange under the Advisory Services and fees determined in this agreement but will enter into a separate agreement to implement such listing and Designated Sponsor

We now have pleasure in setting out below the terms and conditions according to which Innovator proposes to act for the Company.

With regard to the Advisory Service the role of Innovator will consist inter alia of:

	      	1.      	
Working with Global Green senior management so that ICL may perform the necessary due diligence required by Innovator's regulators;

		2.      	
Working with Global Green senior management so that ICL may understand the exact nature of the Company's business plan;

		3.      	
Working with Global Green senior management so that ICL may understand the exact nature of the Company's successes to-date and future milestones;

		4.      	
Working with Global Green senior management so that ICL may understand the current ownership of the Company's shares and their geographical distribution;

		5.      	
Working with Global Green senior management so that ICL may understand the Company's revenue sources and their geographical distribution;

		6.      	
Working with Global Green senior management so that ICL may understand the Company's future revenue sources and their geographical distribution;

		7.      	
Working with Global Green senior management to select the appropriate Designated Sponsor;

		8.      	
Working with Global Green senior management to select the appropriate Research Service;

		9.      	
Monitoring the service received by the Company from its Designated Sponsor;

		10.      	
Assisting the Company in identifying additional research analysts to follow the Company;

		11.      	
Monitoring the service received by the Company from its research analysts and the Research Service;

		12.      	
Advising the Company on all aspects of international Corporate Finance tools and techniques as might be in the Company's best interests;

		13.      	
Advising the Company on all aspects of the international Capital Markets' tools and techniques as might be in the Company's best interests;

 

 

2

	      	14.      	
Advising the Company on all matters as might effect the capital market's perception of the Company;

		15.      	
Providing any and all further assistance as may be reasonably required by Global Green and be within the competence of Innovator.

With regard to the Communications Service the role of Innovator will consist inter alia of:

	      	1.      	
Advising the Company, in conjunction with its exiting advisers, on all Financial Public Relations, Public Relations & Investor Relations strategy with a particular focus on the United Kingdom, Germany and Switzerland;

		2.      	
Assisting the Company in dealing with the media whether it be, broadsheet, wire, internet protocol, financial, trade or otherwise;

		3.      	
Briefing the Company on any relevant sector information and ensuring a two way flow of such information;

		4.      	
Assisting the Company with any documents proposed for use in relation to increasing awareness of the Company's existence and its opportunities;

		5.      	
Preparing documents such as press releases, Q&A and to address any specific issues that the Company may reasonably request;

		6.      	
Providing a press clippings service of articles, taken from the mainstream press and key trade journals, which relate to the Company;

		7.      	
Disseminating the Company's press releases:

		 	a.      	
to analysts

		 	b.      	
to media

		 	c.      	
to any persons that the Company may reasonably request

		 	d.      	
to stock exchanges via RNS any other systems as Innovator may see fit;

		8.      	
Providing any and all further assistance as may be reasonably required by Global Green and be within the competence of Innovator.

With regard to the Financings the role of Innovator will consist inter alia of:

	      	1.      	
Working with Global Green senior management to ascertain the precise amount of funds that are needed by the company and by when;

		2.      	
Working with Global Green senior management to not neglect the interests of existing Global Green shareholders, to ascertain any interest they may have in further investment in Global Green and their capacity to assist in the Financings;

		3.      	
Working with Global Green senior management to clarify the appetite of certain other individuals and professional investors for investment in Global Green;

		4.      	
Organising for and accompanying Global Green senior management to meetings, with potential qualified and reputable investors;

		5.      	
Working with Global Green senior management and their appointed legal representatives to provide drafts of all necessary documents for the completion of the Financings;

		6.      	
Working with Global Green senior management and assisting in the negotiation of the terms with investors to ensure that final terms, of all aspects of the Financings, are in the best interest of the Company;

		7.      	
Providing any and all further assistance as may be reasonably required by Global Green and be within the competence of Innovator.

With regard to an integrated and synchronized investor and public relations implementation, Innovator will liaise with Global Greens US based IR and PR designated persons.

All services will be carried out with reasonable skill and care.

Any additional services required, beyond the scope of the services listed above, during the period of the mandate proposed hereby must be agreed in writing between Innovator and the Company together with the amount of additional

 

3

remuneration payable in respect of such additional services. In this event, we may issue a supplementary mandate agreement. The terms of this letter and the Appendix hereto will apply to any such additional services provided by us in connection with this proposed engagement letter, whether or not such additional services are subject to a supplementary mandate letter, (the "Agreement") or (the "Engagement Letter").

Assistance given to Global Green by Innovator with regard to the Principality of Monaco, Cleantech Investor Conference will form services contracted under this agreement. Both Global Green and Innovator remain bound by the Non Disclosure Agreement and its non-circumvention verbiage that is already in force between them.

Subject to there not being any negative material change in the Company's fortunes or current market conditions, and subject to contract, we anticipate that the equity funds referred to above will be received by you or your appointed legal representatives, over a period of nine months, such period to commence upon our receipt of your counter-signature of this document evidencing your agreement to this proposed Agreement. Project finance is likely to be received within six months after signature of this document and signature of the necessary and sufficient documentation referring to the relevant project.

In remuneration for our role in respect of the Advisory and Communications Services, Innovator will receive a nonrefundable engagement fee from Global Green of $10,500 (ten thousand five hundred USD) upon signature of this Engagement Letter (the "Engagement Fee"). An additional amount of $10,500 (ten thousand five hundred USD) increasing to $15,000 (fifteen Thousand) after Innovator Capital secures the first $2,000,000 (two million USD) in equity financing, payable monthly in advance (the "Retainer Fee"). In addition Innovator will receive 40,000 (forty thousand) shares of Global Green per quarter in advance.

In remuneration of our role with reference to the Financings as set out above and herein, ICL will receive a placing fee or commission in respect of the equity or equity related portions of any Financings of 6% (six per cent) of all monies raised and in respect of the non-equity (debt financing) related portions, a 1.5% (one and one half per cent) fee will be payable, (the "Placing Commissions"). Said Placing Commissions will be payable immediately on the dates any proceeds of any such Financings are made available to the Company or its representatives. Innovator reserves the right to take all or any part of such fees in Shares valued on the same terms as issued in connection with any equity financing. In the case of a non-equity financing the valuation at which Shares will be made available to Innovator will be the closing price of the Shares on the day before the announcement of the relevant transaction, the closing price of the Shares on the day of the relevant transaction or the four week trailing volume weighted average price (VWAP), as per the "HP" function on the Bloomberg quote system, whichever the lower.

In respect of any equity related Financings, Innovator will also receive warrants, as part if its compensation package on each of the Financings (the "Financing Warrants"), expiring 2 years from the date of the closing of each of the respective Financings, to acquire Ordinary Shares in the Company at a price equal to a 25% per cent (twenty five percent) premium to the price of each of the respective Financings, and the number of warrants being commensurate with the value of 10% (ten per cent) of the gross proceeds of the each of the equity or equity related respective Financings.

Innovator will be entitled to reimbursement of all of its reasonable out-of-pocket expenses directly incurred in the fulfillment of its mission as set out above and herein, in particular, but not limited to, travel, accommodation, telecommunications and, as appropriate, any outside professional fees and costs such as lawyers, accountants and due diligence fees etc. Invoices in respect of out-of-pocket expenses incurred will be submitted to the Company on a monthly basis, together with supporting receipts and documentation, which invoices will be payable upon receipt. No 

 

 

 

4

such out-of-pocket expense in an amount in excess of €1,000 will be incurred without Global Green's prior consent in writing.

VAT will be payable on all of above fees where applicable.

For the purposes of managing an orderly and professional approach to investors, Global Green will furnish ICL with an up-to-date shareholder list, which will include contact details, specifically, but not limited to, email addresses, for said shareholders and Global Green will ensure that an approach by ICL is expected.

If the above indicated terms and conditions are acceptable to you, we would be grateful if you would so confirm by signing, dating and returning to us a copy of this Engagement Letter and the attached Appendix "Terms and Conditions".

Such signature and return will constitute your exclusive mandate to Innovator on the terms and conditions set out above and herein and as further set out in the attached Appendix headed `Terms and Conditions', valid for a duration of 12 (twelve) months from the date of your agreement to this proposed mandate and renewable thereafter by tacit consent. Such mandate will be a valid and legally binding obligation on the parties hereto, enforceable in accordance with its terms.

This Agreement incorporates the Terms and Conditions set out in the attached Appendix ("Terms and Conditions"), but subject to the aforesaid, represents the entire understanding between the parties hereto and supersedes any prior agreements or understandings (whether written or oral) between or among the parties.

Should Global Green, during a period of 3 (three) years from the date of expiration of this mandate, conclude an agreement with any of the parties introduced by Innovator which leads to the raising of finance or other type of transaction then, in the case of a capital raising a commission will be payable to Innovator, on the following basis: if within 24 months, the commission will be 50% (fifty per cent) of the equivalent of the Placing Commission, if within 36 months said figure will be 25%.(twenty five per cent) In the case of some other type of transaction, an industry standard fee will be payable to Innovator discounted on the same percentage basis. The parties further agree not to circumvent each other or behave in any way that might result in the other party being disadvantaged commercially, financially or otherwise.

It is understood that in the event of the Company receiving information, before or during the life of this agreement, with respect to any of their products or services that could be interpreted as likely to have a material negative effect on the Company's value, the Company will immediately inform ICL. ICL reserves the right, in such event, to terminate its relationship with the Company with immediate effect albeit in a fair, orderly and professional manner. In the case of such an event all fees due Innovator will become immediately payable.

It is expressly understood and agreed by the parties hereto, that this Agreement does not, and will not, constitute an undertaking of whatsoever nature by Innovator to acquire shares of, or otherwise invest in, or provide financing to Global Green. Only a definitive and regularly constituted agreement duly entered into by, and between, Global Green on the one hand, and an investor(s), on the other will constitute a contractual agreement binding in its terms.

It is further expressly understood and agreed that Innovator is and will be entitled to rely upon all statements of fact, and all further written information provided by Global Green and/or its officers or representatives in the context of this mission. Any material errors or omissions, or material lack of adequacy in the context of this Engagement, in any such statement or written information will constitute a material breach of contract under the terms and conditions of this mission and, as such, could give rise to a claim, or claims, for damages by Innovator.

 

 

 

5

It is understood and agreed that any advice rendered by us is provided solely under the terms of our engagement and for your benefit, and may not be used or relied on by any other person or for any other purpose, without our prior written consent.

This Agreement will be governed by and construed in accordance with the laws of England and Wales. Both parties agree to move immediately to Mediation in the event of a dispute. In the event that Mediation fails to settle the dispute, all disputes arising out of or in connection with this Engagement Letter will be finally settled in the English courts in London.

We thank you for the confidence you have shown in Innovator, and remaining at your disposal, we are,

Yours faithfully,

 

	For:  	Innovator Capital Limited  
	  
	By:  	MUNGO PARK  
	  	Mungo Park, Chairman  

 

We hereby agree to, and undertake to abide by the above-mentioned and attached terms and conditions of this Agreement dated this 22nd Day of February 2008.

 

	For:  	Global Green Solutions Inc.  
	  
	By:  	DOUG FRATER  
	  	Doug Frater, President and CEO  
	  	23rd February, 2008  

 

 

 

 

 

 

 

6

APPENDIX

Terms and Conditions

1. Period and terms of Engagement

Innovator's engagement hereunder (the "Engagement") will continue for a minimum of 12 (twelve) months from the date of counter signature of this letter ("Date of Engagement") unless agreed after an initial 6 month review or extended in writing, or in the event of a termination (see section 7 below).

The Engagement will be exclusive to Innovator within Europe.

Please note that by entering into or performing our obligations under this letter we are not representing that it is or will be possible or advisable for the transactions, which are the subject of the Engagement to proceed. The conclusions Innovator may reach in respect of the Engagement may change, in the light of circumstances prevailing at the time.

This letter does not oblige Innovator to sell, acquire, or place any investments, or to lend monies, unless and until it is expressly agreed otherwise in writing.

2. Authority

Innovator is entitled to assume that any instructions received by us have been properly authorised by you. We may act upon telephone instructions from you prior to the receipt of any written instruction or confirmation. Innovator also reserves the right to record any telephone conversations between us or between your professional advisers and us and ICL undertakes to inform of such action in advance.

“Innovator represents and warrants that it holds all necessary authorizations and licenses in each relevant jurisdiction to perform all of the services contemplated in the Engagement.

3. Notices

Any notice given in connection with the Engagement must be in writing and may be communicated by email, letter or facsimile. Notices to Innovator shall be sent to the address (and facsimile numbers) given in our letter heading, unless we advise you otherwise, and for the attention of Mr Mungo Park.

Your mailing and email addresses for notices, for the attention of Doug Frater, unless you advise otherwise, are:

Global Green Solutions Inc., 789 West 

Pender Street Suite Suite 1010

Vancouver Al V6C 1112

dougfrater@globalgreensolutionsinc.com

4. Information provided by you to Innovator

You agree to make promptly available to Innovator any information, assistance and documentation which we may reasonably require for the purpose of this Engagement. You agree that all documentation provided to Innovator in connection with the Engagement will not be false or misleading and that all statements made or expressions of opinion, expectation or intent made by you will be honestly held and made on reasonable grounds. You undertake if anything occurs to render the aforementioned false or misleading you will notify us as soon as practicable. You agree to advise us in advance of any significant steps that you, your agents or advisers propose to take in relation to the Engagement.

 

7

5. Announcements, public statements or documents published by you

You agree to ensure that every announcement, public statement or document made or published by you (or your agents) during Innovator's Engagement will contain all particulars required to comply with all applicable law and regulations. Furthermore, you agree that, subject to any disclosure required by law or regulation including the rules of any relevant stock exchange, no such announcement, public statement or document will be published relating to the Engagement in any way without first consulting with and then obtaining the prior written consent of Innovator. If anything occurs within a reasonable time after publication of any such statement, announcement or document to render the same untrue, unfair, inaccurate or misleading, you will promptly notify Innovator and take all steps which Innovator may require to correct the matter.

6. Independence policy and disclosure of material interest

Innovator will take reasonable steps to ensure that all advice given to you or all action undertaken on your behalf is not in any way biased or affected either because of any action Innovator may take or knowledge which Innovator may have as a result of acting for any other client, or as a result of the existence of any material interest which Innovator or a connected or associated company or another client may have in or related directly or indirectly to the proposed transaction such that a conflict of duty may exist or may arise, for whatever reason. Innovator will disclose to you any material interests or conflicts of interest, which may arise except where it is not practical to make such a disclosure. Disclosure may be either orally or in writing and Innovator will take reasonable steps to ensure that you do not object to the material interest or conflict of interest.

7. Termination

Innovator's engagement hereunder may not be terminated in advance of the termination date (see 1. "Period and terms of Engagement"), except by mutual agreement or as agreed after a 6 month initial review. Following the termination date any termination notice must be provided in writing, giving three months notice, and receipt by Innovator is to be acknowledged, without dealt', by email, except for the initial 6 month review which will require no notice.

Termination will not affect any legal rights or obligations, which may have already accrued between the parties to this agreement.

8. Confidentiality

All confidential information which each of us (or any connected persons) receives from the other or any of the other party's subsidiaries or other professional advisers will be held in strict confidence unless the other party specifically consents to the disclosure of that confidential information in writing. This section will not apply to any information, which is in the public domain or enters it other than as a result of a breach of this paragraph, is lawfully received from a third party without any obligation of confidentiality, or is independently developed by either party without access to the knowledge or use of the confidential information or is required to be disclosed by law or by regulation including the rules of any stock exchange to which the relevant party is subject. Neither Innovator nor any connected person will have any duty to disclose to you any information, which comes to its notice in the course of carrying on any other business and we may be prohibited from disclosing information to you as prescribed by law or regulatory bodies. All correspondence and other papers held by Innovator in relation to any matter undertaken for you will be Innovator's sole property with the exception of original contracts and share certificates and other documents of title held to your order.

9. Law and regulation

Both parties agree that they will comply with all the relevant laws and regulatory requirements in any jurisdiction that may be relevant to this Engagement. They will use their reasonable endeavours to ensure that all necessary authorisations, approvals, consents and filings to enable the Engagement to proceed or otherwise in connection with the Engagement are promptly obtained or made. They agree that if the other party is requested by any regulatory or governmental authority (including, but not limited to the FSA, Bank of England or any relevant designated Stock Exchange) to disclose any information relating to your affairs, then, the other party may do so.

8

10. Complaints

In the event that you have any complaint about our services, you should contact our Compliance Officer or Compliance Oversight Function Holder, and if the complaint is not resolved to your satisfaction you may complain directly to the Financial Ombudsman Service.

11. Compensation

Compensation may be available under the Financial Services and Markets Act scheme in the event that Innovator is unable to meet any of its liabilities. Innovator can provide an explanation on request.

12. Indemnity

It is agreed that both parties, the Company and Innovator, will indemnify each other and their connected persons (including but not limited to their employees, directors, group companies, agents and advisers) against all costs, losses, damages, claims and expenses, which may be incurred by them or made against them in any jurisdiction arising out of the Engagement and will reimburse each other and their connected persons in full for all costs, charges and expenses (including legal fees) reasonably incurred in investigating, preparing or defending any pending or threatened claim provided that such costs, losses, damages, claims and expenses do not arise from the negligence or wilful default of the other party or its connected persons. It is agreed that neither Innovator nor the Company nor any connected person will have any liability whatsoever (whether in contract, tort or otherwise) to each other for or in connection with things done or omitted to be done pursuant to the Engagement other than arising out of the negligence or wilful default of either party or its connected persons. This section ("Indemnity") is in addition to any rights that either party or its connected persons may have at common law or otherwise (including, but not limited to, any right of contribution).

13. Limitation of liability

Neither the Company nor Innovator will have liability for any loss, damage, costs, expenses, or other claims for compensation arising from any information or instructions supplied by each other, which are incomplete, inaccurate, illegible, out of sequence or in the wrong form or any other fault by the other party.

The aggregate liability of each party to the other and their connected persons in respect of any losses or damages and costs suffered or incurred in connection with this Engagement, but excluding any such losses, damages or costs arising from the fraud or dishonesty of either party or in respect of liabilities which cannot be lawfully limited or excluded, will be limited to the total amounts of fees paid by the Company to Innovator in respect of the Engagement (or any such fee amount which would have been payable had the Financing achieved successful completion).

14. General

This letter does not affect any other agreement, which Innovator has entered into with you in respect of any other transaction or matter, nor any other agreement, which Innovator may enter into in the future (subject to section 1 of this Appendix).

In all dealings with third parties Innovator will be acting as agent on your behalf and not as principal. Innovator will have no authority to bind you.

The benefits of this letter will inure to your successors and assignees and the obligations and liabilities assumed in this letter by you will be binding on their respective successors and assignees.

If any part of this agreement becomes or is declared illegal, invalid or unenforceable for any reason whatsoever, such part will be deemed to be deleted, provided always that if any such deletion substantially affects or alters the commercial basis of these terms and conditions, the parties will negotiate in good faith to amend and modify them as may be necessary or desirable in the circumstances.

9

These terms and conditions are subject to change by agreement, or at any time by Innovator sending to you a written notice describing the relevant change(s) to the extent that the changes are limited to those changes that are required to ensure compliance with the rules of any regulatory authority. No such change will affect any legal rights or obligations which may have previously accrued to or been incurred by Innovator or you.

In the event of any failure, interruption or delay in the performance of Innovator's obligations hereunder resulting from acts, events or circumstances not reasonably in Innovator's control, including, but not limited to, industrial disputes, acts or regulations of any governmental or supranational bodies or authorities, breakdown, failure or malfunction of any telecommunications or computer services, systemic or market risk, Innovator will not be liable or have any responsibility of any kind for any loss or damage incurred or suffered by you or any other person as a result thereof. A person who is not a party to this Engagement letter will have no right under the Contracts (Rights of Third Parties) Act 1999.

The failure or delay by Innovator in exercising any right under this Engagement letter will not operate as a waiver of such right. The single or partial exercise of any right by Innovator will not prevent any other or further exercise of such a right or any other right. No breach of any provision of this Engagement letter by you will be waived except with the express written consent of Innovator.

15. Governing Law

This Agreement will be governed by and construed in accordance with the laws of the England and Wales. Both parties agree to move immediately to Mediation in the event of a dispute. In the event that Mediation fails to settle the dispute, all disputes arising out of or in connection with this Engagement Letter will be a matter for the English courts in London.

16. Confirmation

Please confirm, by signing and returning to Innovator the enclosed copy of this letter, that the above accurately sets out the services that you have asked Innovator to provide and that the terms of Innovator's Engagement set out in this letter are acceptable to you.

 

Signed and agreed,

	For:  	Innovator Capital Limited  
	By:  	MUNGO PARK  
	  	Mungo Park, Chairman  

 

We hereby agree to, and undertake to abide by the above-mentioned and attached terms and conditions of this Agreement dated this 22nd Day of February 2008.

 

	For:  	Global Green Solutions Inc.  
	  
	By:  	DOUG FRATER  
	  	Doug Frater, Chief Executive Officer  
	  	23rd February, 2008  

 

 

10THIS NOTE AND THE  SECURITIES  ISSUABLE  UPON  CONVERSION  HEREOF  HAVE NOT BEEN
REGISTERED  UNDER  THE  SECURITIES  ACT OF 1933,  AS  AMENDED  (THE  "ACT"),  OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH  REGISTRATION  OR RECEIPT BY THE COMPANY OF A
WRITTEN  OPINION  OF  COUNSEL  IN  THE  FORM,  SUBSTANCE  AND  SCOPE  REASONABLY
SATISFACTORY  TO THE COMPANY  THAT THIS NOTE AND THE  SECURITIES  ISSUABLE  UPON
CONVERSION HEREOF MAY BE SOLD,  TRANSFERRED,  OR OTHERWISE DISPOSED OF, UNDER AN
EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.

THIS NOTE AND THE INDEBTEDNESS EVIDENCED HEREBY ARE SUBJECT TO THE INTERCREDITOR
AGREEMENT, DATED AS OF MARCH 7, 2008, AMONG ACCELERANT PARTNERS LLC, THE SELLERS
LISTED THERETO, SOUTHRIDGE INVESTMENT GROUP LLC AND TOTAL LUXURY GROUP, INC.

                            TOTAL LUXURY GROUP, INC.

             Form of Junior Unsecured 9% Convertible Promissory Note

Date: March 7, 2008                                           $[_______________]

     For value received,  TOTAL LUXURY GROUP, INC., an Indiana  corporation (the
"Maker"   or  the   "Company")   hereby   promises   to  pay  to  the  order  of
[______________] (together with its successors,  representatives,  and permitted
assigns, the "Holder"),  in accordance with the terms hereinafter provided,  the
principal amount of [__________] ($____________) dollars, together with interest
thereon.  The Maker is issuing this junior  unsecured 9% convertible  promissory
note to the Holder pursuant to the Purchase Agreement (as defined in Section 1.1
hereof).  The senior secured 9% convertible  promissory notes issued pursuant to
the Stock Purchase Agreement dated as of the date hereof between the Company and
Accelerant  Partners LLC shall  hereinafter be referred to as the "Senior Notes"
and such Holders as the "Senior  Note  Holders".  Any other junior  unsecured 9%
convertible  promissory  notes issued  pursuant to the Purchase  Agreement shall
hereinafter  be referred to as the "Other  Notes" and such Holders as the "Other
Holders;"  collectively,  this note and the Other  Notes are  referred to as the
"Notes."

     All payments  under or pursuant to this Note shall be made in United States
Dollars  in  immediately  available  funds to the  Holder at the  address of the
Holder as set forth in the  Purchase  Agreement  or at such  other  place as the
Holder  may  designate  from  time to time in  writing  to the  Maker or by wire
transfer of funds to the Holder's  account,  instructions for which are attached
hereto as Exhibit A. The outstanding principal balance of this Note shall be due
and payable on the thirty-month  anniversary of the Issuance Date (the "Maturity
Date") or at such earlier time as provided herein.

<PAGE>

                                   ARTICLE I

     Section 1.1 Purchase  Agreement.  This Note has been executed and delivered
pursuant  to the  Stock  Purchase  Agreement  dated  as of March  7,  2008  (the
"Purchase  Agreement")  by and among the Maker and the sellers  listed  therein.
Capitalized  terms used and not otherwise defined herein shall have the meanings
set forth for such terms in the Purchase Agreement.

     Section 1.2  Interest.  Beginning  on the  issuance  date of this Note (the
"Issuance  Date"),  the  outstanding  principal  balance of this Note shall bear
interest  ("Interest"),  in arrears,  at a rate per annum equal to nine  percent
(9%),  payable  quarterly  commencing on March 31, 2008 and on the last business
day of each  June,  September,  December,  and March  thereafter  so long as any
principal amount evidenced by this Note remains  outstanding.  Interest shall be
computed on the basis of a 360-day  year of twelve (12) 30-day  months and shall
accrue commencing on the Issuance Date.  Furthermore,  upon the occurrence of an
Event of  Default  (as  defined  in  Section  2.1  hereof),  then to the  extent
permitted by law, the Maker will pay interest in cash to the Holder,  payable on
demand,  on the outstanding  principal balance of this Note from the date of the
Event of Default through the Maturity Date at a new rate of the lesser of twelve
percent (12%) and the maximum applicable legal rate per annum.

     Section 1.3 Cash or Stock. At the option of the Maker, Interest may be paid
in cash or registered  shares of Common Stock of the Maker.  Upon the payment of
Interest in registered  shares of Common  Stock,  the number of shares of Common
Stock to be issued to the Holder shall be an amount equal to the quotient of (x)
the  Interest  payment  due  (y)  multiplied  by  1.2  and  (z)  divided  by (z)
one-hundred  percent (100%) of the average of the VWAP (as defined below) of the
closing  trading price for the ten (10) trading days  immediately  preceding the
date the Interest  payment is due. For purposes  hereof,  "VWAP" shall mean, for
any date,  (i) the daily volume  weighted  average price of the Common Stock for
such date on the OTC  Bulletin  Board as reported by  Bloomberg  Financial  L.P.
("Bloomberg")  (based on a trading day from 9:30 a.m.  Eastern Time to 4:02 p.m.
Eastern Time);  (ii) if the Common Stock is not then listed or quoted on the OTC
Bulletin Board and if prices for the Common Stock are then reported in the "Pink
Sheets" published by the Pink Sheets,  LLC (or a similar  organization or agency
succeeding to its functions of reporting prices),  the most recent bid price per
share of the Common  Stock so reported;  or (iii) in all other  cases,  the fair
market  value  of a share  of  Common  Stock  as  determined  by an  independent
appraiser selected in good faith by the Holder and reasonably  acceptable to the
Maker.

     Section 1.4 Ranking and Covenants.

          (a) Except as set forth in Schedule 1.4(a),  no indebtedness of any of
     the Maker is senior to this Note in right of payment,  whether with respect
     to interest,  damages or upon  liquidation  or dissolution or otherwise and
     the Maker will not,  and will not permit any  Subsidiary  to,  directly  or
     indirectly,  incur any Lien on or with  respect to any of its  property  or
     assets  now owned or  hereafter  acquired  or any  interest  therein or any
     income or  profits  therefrom  without  the prior  written  consent  of the
     Holder.

                                       2
<PAGE>

          (b) So long as any  Notes are  outstanding,  none of the Maker nor any
     Subsidiary shall,  directly or indirectly without the prior written consent
     of the  Holder,  (i)  redeem,  purchase  or  otherwise  acquire  any of the
     Company's  capital  stock or set aside any  monies  for such a  redemption,
     purchase  or other  acquisition;  (ii)  issue any  options  or  convertible
     securities  with an  exercise  price or a  conversion  price or a number of
     underlying  shares that floats or resets or otherwise  varies or is subject
     to adjustment based (directly or indirectly) on market prices of the Common
     Stock;  or (iii) issue any  securities  having any rights,  privileges,  or
     preferences superior to or in pari passu with the rights,  privileges,  and
     preferences of the Holder.

     Section 1.5 Payment on Non-Business  Days.  Whenever any payment to be made
shall be due on a  Saturday,  Sunday or a public  holiday  under the laws of the
State of New York, such payment may be due on the next  succeeding  business day
and such next  succeeding day shall be included in the calculation of the amount
of accrued interest payable on such date.

     Section 1.6 Transfer.  This Note may be transferred or sold, subject to the
provisions  of Section 4.8 of this Note, or pledged,  hypothecated  or otherwise
granted as security by the Holder.

     Section 1.7  Replacement.  Upon receipt of a duly  executed,  notarized and
unsecured  written  statement from the Holder with respect to the loss, theft or
destruction of this Note (or any  replacement  hereof) and a standard  indemnity
reasonably  satisfactory  to the Maker,  or, in the case of a mutilation of this
Note, upon surrender and  cancellation of such Note, the Maker shall issue a new
Note,  of like tenor and  amount,  in lieu of such lost,  stolen,  destroyed  or
mutilated Note.

                                   ARTICLE II

                           EVENTS OF DEFAULT; REMEDIES
                           ---------------------------

     Section  2.1 Events of  Default.  The  occurrence  of any of the  following
events shall be an "Event of Default" under this Note:

          (a) the Maker shall fail to make any  principal  or interest  payments
     due under this Note on the date such  payments  are due and such default is
     not  fully  cured  within  three (3)  business  days  after the  occurrence
     thereof; or

          (b) At any time  subsequent to the  suspension  from listing,  without
     subsequent  listing on any one of, or the failure of the Common Stock to be
     listed  or  quoted on at least one of the Pink  Sheets  LLC,  OTC  Bulletin
     Board,  the American Stock Exchange,  the NASDAQ Global Market,  the NASDAQ
     Capital  Market or The New York Stock  Exchange,  Inc.  for a period of ten
     (10) consecutive Trading Days; or

          (c) the  Company's  notice to the Holder,  including  by way of public
     announcement, at any time, of its inability to comply (including for any of
     the reasons  described in Section  3.8(a)  hereof) or its  intention not to
     comply  with proper  requests  for  conversion  of this Note into shares of
     Common Stock; or

                                       3
<PAGE>

          (d) either (i) the Maker  shall fail to timely  deliver  the shares of
     Common Stock upon  conversion  of the Note, or (ii) the Maker shall fail to
     make the payment of any fees and/or  liquidated  damages under this Note or
     the  Purchase  Agreement,  which  failure is not  remedied  within ten (10)
     business days after the incurrence thereof; or

          (e) default shall be made in the  performance or observance of (i) any
     covenant, condition or agreement contained in this Note and such default is
     not fully cured  within ten (10)  business  days after the Holder  delivers
     written notice to the Maker of the occurrence thereof or (ii) any covenant,
     condition or  agreement  contained  in the  Purchase  Agreement,  the Other
     Notes, the Warrant or any other  Transaction  Document which is not covered
     by any other  provisions  of this Section 2.1 and such default is not fully
     cured  within ten (10)  business  days after the  Holder  delivers  written
     notice to the Maker of the occurrence thereof; or

          (f) any  material  representation  or  warranty  made by either of the
     Maker herein or in the Purchase Agreement, the Other Notes, the Warrant, or
     any other Transaction  Document shall prove to have been false or incorrect
     or  breached  in a  material  respect  on the date as of which made and the
     Holder delivers written notice to the Maker of the occurrence thereof; or

          (g) the Maker shall after the Issuance Date (A) default in any payment
     of any amount or amounts of  principal  of or interest on any  indebtedness
     (other than the indebtedness  hereunder) the aggregate  principal amount of
     which  indebtedness  is in  excess  of  $100,000  or  (B)  default  in  the
     observance or performance of any other  agreement or condition  relating to
     any indebtedness or contained in any instrument or agreement evidencing, or
     relating  thereto,  or any other event shall occur or condition  exist, the
     effect of which  default or other  event or  condition  is to cause,  or to
     permit  the  holder or  holders or  beneficiary  or  beneficiaries  of such
     indebtedness  to  cause  with  the  giving  of  notice  if  required,  such
     indebtedness to become due prior to its stated maturity; or

          (h) the Maker shall (i) apply for or consent to the appointment of, or
     the taking of possession by, a receiver,  custodian,  trustee or liquidator
     of itself or of all or a substantial  part of its property or assets,  (ii)
     make a general assignment for the benefit of its creditors,  (iii) commence
     a  voluntary  case  under  the  United  States  Bankruptcy  Code (as now or
     hereafter  in  effect)  or under the  comparable  laws of any  jurisdiction
     (foreign or domestic),  (iv) file a petition  seeking to take  advantage of
     any bankruptcy, insolvency, moratorium, reorganization or other similar law
     affecting the enforcement of creditors' rights generally,  (v) acquiesce in
     writing  to any  petition  filed  against it in an  involuntary  case under
     United States  Bankruptcy Code (as now or hereafter in effect) or under the
     comparable laws of any jurisdiction (foreign or domestic),  or (vi) issue a
     notice of  bankruptcy  or winding down of its  operations  or issue a press
     release regarding same; or

          (i) a  proceeding  or case shall be commenced in respect of the Maker,
     without its application or consent, in any court of competent jurisdiction,
     seeking  (i)  the  liquidation,  reorganization,  moratorium,  dissolution,

                                       4
<PAGE>

     winding  up,  or  composition  or  readjustment  of  its  debts,  (ii)  the
     appointment of a trustee, receiver, custodian, liquidator or the like of it
     or of all or any  substantial  part of its  assets in  connection  with its
     liquidation  or  dissolution or (iii) similar relief in respect of it under
     any law  providing for the relief of debtors,  and such  proceeding or case
     described  in clause (i),  (ii) or (iii)  shall  continue  undismissed,  or
     unstayed  and in effect,  for a period of thirty (30) days or any order for
     relief  shall  be  entered  in an  involuntary  case  under  United  States
     Bankruptcy  Code (as now or  hereafter  in effect) or under the  comparable
     laws of any jurisdiction  (foreign or domestic) against either of the Maker
     or  action  under  the  laws  of any  jurisdiction  (foreign  or  domestic)
     analogous to any of the foregoing  shall be taken with respect to either of
     the Maker and shall continue  undismissed,  or unstayed and in effect for a
     period of thirty (30) days; or

          (j) the  failure of the  Company to  instruct  its  transfer  agent to
     remove any legends  from shares of Common  Stock  eligible to be sold under
     Rule 144 of the Securities Act and issue such  unlegended  certificates  to
     the Holder within five (5) business days of the Holder's request so long as
     the Holder has provided  reasonable  assurances  to the Company,  and based
     thereon the Company has determined, that such shares of Common Stock can be
     sold pursuant to Rule 144; or

          (k) the  failure  of the Maker to pay any  amounts  due to the  Holder
     herein or any other  Transaction  Document within five (5) business days of
     the date such  payments  are due and such default is not fully cured within
     five (5)  business  days after the Holder  delivers  written  notice to the
     Maker of the occurrence thereof; or

          (l) the occurrence of an event of default under any other  Transaction
     Document.

     Section 2.2 Remedies Upon An Event of Default. If an Event of Default shall
have occurred and shall be  continuing,  the Holder of this Note may at any time
at its option,  (a) declare the entire  unpaid  principal  balance of this Note,
together with all interest accrued hereon, due and payable,  and thereupon,  the
same shall be accelerated and so due and payable,  without presentment,  demand,
protest,  or  notice,  all of which are  hereby  expressly  unconditionally  and
irrevocably waived by the Maker; provided,  however, that upon the occurrence of
an Event of Default  described  in (i) Sections  2.1(h) or (i), the  outstanding
principal balance and accrued interest  hereunder shall be automatically due and
payable and (ii) Sections 2.1(b)-(g),  or (j)-(l), demand the prepayment of this
Note  pursuant to Section 3.7 hereof,  (b) demand that the  principal  amount of
this Note then  outstanding  shall be converted into shares of Common Stock at a
Conversion  Price per share  calculated  pursuant to Section 3.1 hereof assuming
that the date  that the  Event of  Default  occurs  is the  Conversion  Date (as
defined in Section  3.1  hereof),  (c)  appoint a majority of the members of the
entire board of directors of the Maker, or (d) exercise or otherwise enforce any
one or more of the Holder's rights, powers,  privileges,  remedies and interests
under this Note, the Purchase  Agreement,  or applicable law. No course of delay
on the part of the  Holder  shall  operate  as a  waiver  thereof  or  otherwise
prejudice the right of the Holder. No remedy conferred hereby shall be exclusive
of any other remedy referred to herein or now or hereafter  available at law, in
equity, by statute or otherwise. In connection with the Holder's exercise of any
of its  remedies  hereunder,  the Maker shall use its best  efforts to cooperate
with  the  Holder  to the  end  that  the  Holder's  rights  hereunder  will  be
effectuated.

                                       5
<PAGE>

                                  ARTICLE III

                 CONVERSION; ANTIDILUTION; PREPAYMENT; COVENANTS

     Section 3.1  Conversion.  At any time on or after the Issuance  Date,  this
Note  shall be  convertible  (in whole or in part),  at the option of the Holder
(the "Optional  Conversion"),  into such number of fully paid and non-assessable
shares of Common Stock (the "Conversion  Rate") as is determined by dividing (x)
that portion of the  outstanding  principal  balance  under this Note as of such
date that the Holder elects to convert by (y) the  Conversion  Price (as defined
in Section 3.2(a) hereof),  then in effect on the date on which the Holder faxes
a notice of conversion (the "Optional Conversion Notice"), duly executed, to the
Company (facsimile number (___) __-______,  Attn.: _____________) (the "Optional
Conversion Date"); provided, however, that the Conversion Price shall be subject
to adjustment as described in Section 3.6 of this Note. The Holder shall deliver
this Note to the Company at the address  designated in the Purchase Agreement as
soon as  practicable  after  such time that this Note is fully  converted.  With
respect to partial  conversions  of this Note, the Company shall keep and attach
hereto  written  records  of the  amount  of  this  Note  converted  as of  each
Conversion Date.

     Section 3.2 Conversion Price.

          (a)  The  term  "Conversion  Price"  shall  mean  $0.04,   subject  to
     adjustment under Section 3.6 hereof.

          (b) The term  "Conversion  Shares"  shall  mean such  shares of Common
     Stock issuable upon Conversion of this Note.

     Section 3.3 Mechanics of Conversion.

          (a)  Not  later  than  three  (3)  Trading  Days  after  any  Optional
     Conversion  Date (the  "Delivery  Date"),  the  Company  or its  designated
     transfer  agent,  as applicable,  shall issue and deliver to the Depository
     Trust  Company  ("DTC")  account on the  Holder's  behalf  via the  Deposit
     Withdrawal  Agent  Commission  System ("DWAC") as specified in the Optional
     Conversion  Notice,  registered  in the name of the Holder or its designee,
     for the  number  of shares of  Common  Stock to which the  Holder  shall be
     entitled. Notwithstanding the foregoing, in the alternative, not later than
     the Delivery Date,  the Company shall deliver to the  applicable  Holder by
     express  courier  a  certificate  or  certificates  which  shall be free of
     restrictive legends and trading  restrictions (other than those required by
     Section 5.1 of the Purchase Agreement) representing the number of shares of
     Common Stock being  acquired upon the  conversion of this Note.  If, in the
     case of any  Optional  Conversion,  such DWAC  transfer or  certificate  or
     certificates  are not delivered to or as directed by the applicable  Holder
     by the Delivery Date, the Holder shall be entitled by written notice to the
     Company  at any  time on or  before  its  receipt  of such  certificate  or
     certificates  thereafter,  to rescind such  conversion,  in which event the
     Company  shall  immediately  return  this  Note  tendered  for  conversion,
     whereupon  the  Company  and the  Holder  shall each be  restored  to their
     respective  positions  immediately  prior to the delivery of such notice of

                                       6
<PAGE>

     revocation,  except that any amounts  described in Sections  3.3(b) and (c)
     shall be payable  through  the date  notice of  rescission  is given to the
     Maker.

          (b) The Company understands that a delay in the delivery of the shares
     of Common Stock upon conversion of this Note beyond the Delivery Date could
     result in economic  loss to the Holder.  If the Company fails to deliver to
     the Holder such shares via DWAC or a certificate or  certificates  pursuant
     to this Section hereunder by the Delivery Date, the Maker shall pay to such
     Holder,  in cash, an amount per Trading Day for each Trading Day until such
     shares are delivered via DWAC or certificates are delivered,  together with
     interest  on such  amount at a rate of 10% per annum,  accruing  until such
     amount  and any  accrued  interest  thereon  is paid in full,  equal to the
     greater  of (A)  (i) 1% of the  aggregate  principal  amount  of the  Notes
     requested  to be  converted  for the first five (5) Trading  Days after the
     Delivery  Date and (ii) 2% of the aggregate  principal  amount of the Notes
     requested to be converted  for each Trading Day  thereafter  and (B) $5,000
     per day (which  amount  shall be paid as  liquidated  damages  and not as a
     penalty).  Nothing  herein  shall limit a Holder's  right to pursue  actual
     damages  for the  Company's  failure to deliver  certificates  representing
     shares of  Common  Stock (as the case may be) upon  conversion  within  the
     period  specified herein and such Holder shall have the right to pursue all
     remedies  available  to  it  at  law  or  in  equity  (including,   without
     limitation,  a decree of specific  performance  and/or injunctive  relief).
     Notwithstanding anything to the contrary contained herein, the Holder shall
     be  entitled  to withdraw  an  Optional  Conversion  Notice,  and upon such
     withdrawal the Maker shall only be obligated to pay the liquidated  damages
     accrued  in  accordance  with  this  Section  3.3(b)  through  the date the
     Optional Conversion Notice is withdrawn.

          (c) In addition to any other rights  available  to the Holder,  if the
     Company  fails to cause its  transfer  agent to  transmit  to the  Holder a
     certificate  or  certificates  representing  the  shares  of  Common  Stock
     issuable upon  conversion of this Note on or before the Delivery  Date, and
     if after such date the Holder is required by its broker to purchase  (in an
     open market  transaction or otherwise) shares of Common Stock to deliver in
     satisfaction of a sale by the Holder of the shares of Common Stock issuable
     upon  conversion of this Note which the Holder  anticipated  receiving upon
     such  exercise  (a  "Buy-In"),  then the Maker shall (1) pay in cash to the
     Holder the amount by which (x) the Holder's total purchase price (including
     brokerage commissions,  if any) for the shares of Common Stock so purchased
     exceeds (y) the amount  obtained by multiplying (A) the number of shares of
     Common Stock  issuable  upon  conversion  of this Note that the Company was
     required  to deliver to the Holder in  connection  with the  conversion  at
     issue  multiplied  by (B) the price at which the sell order  giving rise to
     such purchase obligation was executed, and (2) at the option of the Holder,
     either reinstate the portion of the Note and equivalent number of shares of
     Common  Stock for which such  conversion  was not honored or deliver to the
     Holder the number of shares of Common Stock that would have been issued had
     the Company timely  complied with its  conversion and delivery  obligations
     hereunder. For example, if the Holder purchases Common Stock having a total
     purchase  price of $11,000 to cover a Buy-In with  respect to an  attempted
     conversion  of shares of Common Stock with an  aggregate  sale price giving
     rise to such  purchase  obligation  of  $10,000,  under  clause  (1) of the
     immediately  preceding  sentence  the Maker  shall be  required  to pay the
     Holder $1,000. The Holder shall provide the Maker written notice indicating

                                       7
<PAGE>

     the amounts  payable to the Holder in respect of the Buy-In,  together with
     applicable  confirmations  and other evidence  reasonably  requested by the
     Maker.  Nothing  herein  shall  limit a Holder's  right to pursue any other
     remedies available to it hereunder, at law or in equity including,  without
     limitation,  a decree of specific performance and/or injunctive relief with
     respect  to  the   Company's   failure  to  timely   deliver   certificates
     representing  shares  of  Common  Stock  upon  conversion  of this  Note as
     required pursuant to the terms hereof.

     Section   3.4   Ownership   Cap  and   Certain   Conversion   Restrictions.
Notwithstanding anything to the contrary set forth in Section 3 of this Note, at
no time may the  Holder  convert  all or a portion of this Note if the number of
shares of Common Stock to be issued  pursuant to such  conversion  would exceed,
when  aggregated  with all other  shares of Common  Stock owned by the Holder at
such time, the number of shares of Common Stock which would result in the Holder
beneficially  owning (as  determined  in  accordance  with Section  13(d) of the
Exchange  Act and the rules  thereunder)  more than  9.99% of all of the  Common
Stock outstanding at such time;  provided,  however,  that upon a Holder of this
Note providing the Company with sixty-one (61) days notice  (pursuant to Section
4.1 hereof)  (the  "Waiver  Notice")  that such Holder  would like to waive this
Section  3.4 with  regard to any or all  shares of Common  Stock  issuable  upon
conversion  of this Note,  this  Section  3.4 will be of no force or effect with
regard  to all or a  portion  of  the  Note  referenced  in the  Waiver  Notice;
provided,  further,  that  during the  sixty-one  (61) day  period  prior to the
Maturity Date of this Note the Holder may waive this Section 3.4 upon  providing
the  Waiver  Notice at any time  during  such  sixty-one  (61) day  period;  and
provided,  further,  that any Waiver Notice during the sixty-one (61) day period
prior to the Maturity Date will not be effective until the Maturity Date.

     Section 3.5 Intentionally omitted.

     Section 3.6 Adjustment of Conversion Price.

          (a) The Conversion  Price shall be subject to adjustment  from time to
     time as follows:

                    (i)  Adjustments for Stock Splits and  Combinations.  If the
               Company shall at any time or from time to time after the Issuance
               Date,  effect a stock split of the outstanding  Common Stock, the
               applicable  Conversion Price in effect  immediately  prior to the
               stock split shall be  proportionately  decreased.  If the Company
               shall at any time or from time to time after the  Issuance  Date,
               combine the  outstanding  shares of Common Stock,  the applicable
               Conversion Price in effect  immediately  prior to the combination
               shall be  proportionately  increased.  Any adjustments under this
               Section  3.6(a)(i) shall be effective at the close of business on
               the date the stock split or combination occurs.

                    (ii) Adjustments for Certain Dividends and Distributions. If
               the  Company  shall at any time or from  time to time  after  the
               Issuance  Date,  make  or  issue  or set a  record  date  for the
               determination  of holders of Common  Stock  entitled to receive a
               dividend or other distribution payable in shares of Common Stock,
               then,  and in each  event,  the  applicable  Conversion  Price in
               effect  immediately  prior to such event shall be decreased as of

                                       8
<PAGE>

               the time of such issuance or, in the event such record date shall
               have been fixed, as of the close of business on such record date,
               by multiplying the applicable  Conversion Price then in effect by
               a fraction:

                         (1) the numerator of which shall be the total number of
                    shares of Common  Stock issued and  outstanding  immediately
                    prior to the time of such  issuance or the close of business
                    on such record date; and

                         (2) the  denominator of which shall be the total number
                    of shares of Common Stock issued and outstanding immediately
                    prior to the time of such  issuance or the close of business
                    on such  record  date  plus the  number  of shares of Common
                    Stock issuable in payment of such dividend or distribution.

                    (iii) Adjustment for Other Dividends and  Distributions.  If
               the  Company  shall at any time or from  time to time  after  the
               Issuance  Date,  make  or  issue  or set a  record  date  for the
               determination  of holders of Common  Stock  entitled to receive a
               dividend  or other  distribution  payable in other than shares of
               Common Stock, then, and in each event, an appropriate revision to
               the applicable Conversion Price shall be made and provision shall
               be made (by adjustments of the Conversion  Price or otherwise) so
               that the  holders of this Note  shall  receive  upon  conversions
               thereof,  in  addition  to the  number of shares of Common  Stock
               receivable thereon, the number of securities of the Company which
               they would have received had this Note been converted into Common
               Stock on the date of such  event and had  thereafter,  during the
               period  from  the  date  of  such  event  to  and  including  the
               Conversion  Date,  retained such  securities  (together  with any
               distributions   payable  thereon  during  such  period),   giving
               application  to all  adjustments  called for during  such  period
               under this Section  3.6(a)(iii) with respect to the rights of the
               holders of this Note and the Other Notes; provided, however, that
               if such  record  date shall have been fixed and such  dividend is
               not fully paid or if such  distribution  is not fully made on the
               date fixed  therefor,  the Conversion  Price shall be adjusted to
               the  Conversion  Price  in  effect   immediately  prior  to  such
               adjustment  until the time of actual payment of such dividends or
               distributions.

                    (iv)   Adjustments   for   Reclassification,   Exchange   or
               Substitution.  If the Common Stock  issuable  upon  conversion of
               this  Note at any time or from time to time  after  the  Issuance
               Date shall be changed to the same or  different  number of shares
               of any class or  classes of stock,  whether by  reclassification,
               exchange, substitution or otherwise (other than by way of a stock
               split or combination of shares or stock dividends provided for in
               Sections 3.6(a)(i), (ii) and (iii), or a reorganization,  merger,
               consolidation,   or  sale  of  assets  provided  for  in  Section
               3.6(a)(v)),  then, and in each event, an appropriate  revision to
               the Conversion  Price shall be made and provisions  shall be made
               (by adjustments of the Conversion Price or otherwise) so that the
               Holder shall have the right  thereafter to convert this Note into
               the kind and  amount of  shares  of stock  and  other  securities
               receivable upon reclassification, exchange, substitution or other
               change,  by holders of the number of shares of Common  Stock into
               which such Note might have been  converted  immediately  prior to
               such  reclassification,  exchange,  substitution or other change,
               all subject to further adjustment as provided herein.

                    (v) Adjustments for Reorganization, Merger, Consolidation or
               Sales of  Assets.  If at any time or from time to time  after the
               Issuance  Date  there  shall be a capital  reorganization  of the
               Company  (other  than by way of a stock split or  combination  of

                                       9
<PAGE>

               shares  or  stock  dividends  or  distributions  provided  for in
               Section  3.6(a)(i),   (ii)  and  (iii),  or  a  reclassification,
               exchange  or  substitution  of  shares  provided  for in  Section
               3.6(a)(iv)),  or a merger or consolidation of the Company with or
               into another  corporation where the holders of outstanding voting
               securities of the Company  prior to such merger or  consolidation
               do not own over fifty  percent  (50%) of the  outstanding  voting
               securities  of the  merged or  consolidated  entity,  immediately
               after  such  merger  or  consolidation,  or  the  sale  of all or
               substantially  all of the  Company's  properties or assets to any
               other  person  (an  "Organic  Change"),  then  as a part  of such
               Organic Change,  (A) if the surviving  entity in any such Organic
               Change is a public  company  that is  registered  pursuant to the
               Securities Exchange Act of 1934, as amended, and its common stock
               is listed or quoted on a national  exchange  or the OTC  Bulletin
               Board, an appropriate  revision to the Conversion  Price shall be
               made  and  provision   shall  be  made  (by  adjustments  of  the
               Conversion  Price)  so that  the  Holder  shall  have  the  right
               thereafter  to  convert  such  Note  into the kind and  amount of
               shares of stock and other  securities  or property of the Company
               or any  successor  corporation  as it would  have  received  as a
               result of such Organic  Change if it had converted this Note into
               Common Stock immediately prior to such Organic Change, and (B) if
               the surviving  entity in any such Organic  Change is not a public
               company that is registered  pursuant to the  Securities  Exchange
               Act of 1934,  as  amended,  or its common  stock is not listed or
               quoted on a national  exchange  or the OTC  Bulletin  Board,  the
               Holder  shall  have the right to demand  prepayment  pursuant  to
               Section 3.7(b) hereof. In any such case,  appropriate  adjustment
               shall  be  made  in the  application  of the  provisions  of this
               Section  3.6(a)(v) with respect to the rights of the Holder after
               the Organic Change to the end that the provisions of this Section
               3.6(a)(v) (including any adjustment in the applicable  Conversion
               Price  then in effect  and the number of shares of stock or other
               securities  deliverable  upon  conversion  of this Note) shall be
               applied after that event in as nearly an equivalent manner as may
               be practicable.

                    (vi)  Subsequent  Common Stock and Common Stock  Equivalents
               Issues.  In the event the Company,  shall,  at any time after the
               Full  Ratchet  Period,  issue or sell any  Additional  Shares  of
               Common  Stock or  Common  Stock  Equivalents  (otherwise  than as
               provided in the foregoing  subsections of this Section 3.6), at a
               price  per share  less  than the  Conversion  Price,  or  without
               consideration, the Conversion Price then in effect upon each such
               issuance  shall be adjusted to that price (rounded to the nearest
               cent)  determined  by  multiplying  the  Conversion  Price  by  a
               fraction: (1) the numerator of which shall be equal to the sum of
               (A) the number of shares of Common Stock outstanding  immediately
               prior to the issuance of such  Additional  Shares of Common Stock
               plus (B) the  number of shares of Common  Stock  (rounded  to the
               nearest  whole share) which the aggregate  consideration  for the
               total number of such Additional  Shares of Common Stock so issued
               would purchase at a price per share equal to the then  Conversion
               Price;  and (2) the  denominator  of which  shall be equal to the
               number of shares of Common Stock  outstanding  immediately  after
               the  issuance  of such  Additional  Shares  of Common  Stock.  No
               adjustment  of the number of shares of Common Stock shall be made
               upon the issuance of any Additional  Shares of Common Stock which
               are issued  pursuant  to the  exercise  of any  warrants or other
               subscription  or purchase  rights or pursuant to the  exercise of
               any conversion or exchange rights in any Common Stock Equivalents
               if any such adjustment  shall  previously have been made upon the
               issuance of such warrants or other rights or upon the issuance of
               such  Common  Stock  Equivalents  (or  upon the  issuance  of any
               warrant or other rights therefore).

                    (vii)  Consideration for Stock. In case any shares of Common
               Stock or any Common  Stock  Equivalents  shall be issued or sold:

                                       10
<PAGE>

                         (1) in connection with any merger or  consolidation  in
                    which the Company is the surviving  corporation  (other than
                    any   consolidation   or  merger  in  which  the  previously
                    outstanding  shares of Common Stock of the Company  shall be
                    changed to or exchanged for the stock or other securities of
                    another corporation),  the amount of consideration  therefor
                    shall be, deemed to be the fair market value,  as determined
                    reasonably  and in good faith by the board of  directors  of
                    the Company (the "Board"), of such portion of the assets and
                    business of the  nonsurviving  corporation  as the Board may
                    determine to be attributable to such shares of Common Stock,
                    Convertible  Securities,  rights or warrants or options,  as
                    the case may be; or

                         (2) in the event of any  consolidation or merger of the
                    Company  in  which  the   Company   is  not  the   surviving
                    corporation or in which the previously outstanding shares of
                    Common  Stock  of the  Company  shall  be  changed  into  or
                    exchanged  for the  stock or  other  securities  of  another
                    corporation,  or  in  the  event  of  any  sale  of  all  or
                    substantially  all of the assets of the Company for stock or
                    other  securities of any  corporation,  the Company shall be
                    deemed to have issued a number of shares of its Common Stock
                    for  stock or  securities  or other  property  of the  other
                    corporation  computed  on the basis of the  actual  exchange
                    ratio on which the  transaction  was  predicated,  and for a
                    consideration  equal to the fair market value on the date of
                    such  transaction  of all such stock or  securities or other
                    property of the other  corporation.  If any such calculation
                    results in adjustment of the applicable Conversion Price, or
                    the  number  of  shares  of  Common  Stock   issuable   upon
                    conversion of the Notes, the determination of the applicable
                    Conversion  Price or the  number of  shares of Common  Stock
                    issuable upon conversion of the Notes  immediately  prior to
                    such  merger,  consolidation  or sale,  shall be made  after
                    giving effect to such  adjustment of the number of shares of
                    Common Stock issuable upon  conversion of the Notes.  In the
                    event Common Stock is issued with other shares or securities
                    or other  assets  of the  Company  for  consideration  which
                    covers both, the consideration  computed as provided in this
                    Section  3.6(viii)  shall be allocated among such securities
                    and assets as determined in good faith by the Board.

          (b) Record Date.  In case the Company shall take record of the holders
     of its Common Stock for the purpose of entitling  them to subscribe  for or
     purchase Common Stock or Convertible Securities, then the date of the issue
     or sale of the  shares of Common  Stock  shall be deemed to be such  record
     date.

          (c)  Certain  Issues   Excepted.   Anything  herein  to  the  contrary
     notwithstanding,  the Company shall not be required to make any  adjustment
     to the Conversion  Price in connection with (i) securities  issued pursuant
     to the  conversion or exercise of  convertible  or  exercisable  securities
     issued or outstanding on or prior to the date of the Purchase  Agreement or
     issued  pursuant to the Purchase  Agreement  (so long as the  conversion or
     exercise  price in such  securities  are not  amended  to lower  such price
     and/or  adversely  affect the Holder),  (ii) the Conversion  Shares,  (iii)
     Common Stock issued or the issuance or grants of options to purchase Common
     Stock  pursuant to the  Company's  stock option  plans and  employee  stock
     purchase plans that either (x) exist on the date of the Purchase Agreement,
     or (y) do not exceed ten percent (10%) of the  outstanding  Common Stock of
     the Company as of the date of the Purchase Agreement,  (iv) any note issued
     to the placement agent and its designees for the transactions  contemplated
     by the Purchase  Agreement and the shares of Common Stock issuable upon the

                                       11
<PAGE>

     conversion of said note; and (v) any shares of Common Stock issued upon the
     exercise  of the  warrant  issued  to  Donald  Jones  for the  transactions
     contemplated by the Purchase Agreement.

          (d)  No  Impairment.  The  Company  shall  not,  by  amendment  of its
     Certificate of  Incorporation  or through any  reorganization,  transfer of
     assets, consolidation,  merger, dissolution, issue or sale of securities or
     any  other  voluntary  action,  avoid or seek to avoid  the  observance  or
     performance  of any of the terms to be observed or  performed  hereunder by
     the  Company,  but will at all times in good faith,  assist in the carrying
     out of all the provisions of this Section 3.6 and in the taking of all such
     action  as  may be  necessary  or  appropriate  in  order  to  protect  the
     conversion rights of the Holder against  impairment.  In the event a Holder
     shall  elect to convert any Notes as provided  herein,  the Company  cannot
     refuse conversion based on any claim that such Holder or any one associated
     or  affiliated  with such Holder has been engaged in any  violation of law,
     violation of an agreement to which such Holder is a party or for any reason
     whatsoever,  unless, an injunction from a court, or notice, restraining and
     or adjoining  conversion  of all or of said Notes shall have issued and the
     Company  posts a surety  bond for the  benefit of such  Holder in an amount
     equal to one hundred  percent  (100%) of the amount of the Notes the Holder
     has  elected  to  convert,  which  bond  shall  remain in effect  until the
     completion  of  arbitration/litigation  of the dispute and the  proceeds of
     which shall be payable to such Holder (as liquidated  damages) in the event
     it obtains judgment.

          (e) Certificates as to Adjustments. Upon occurrence of each adjustment
     or readjustment of the Conversion Price or number of shares of Common Stock
     issuable  upon  conversion  of this Note  pursuant to this Section 3.6, the
     Company  at  its  expense  shall  promptly   compute  such   adjustment  or
     readjustment  in accordance with the terms hereof and furnish to the Holder
     a certificate  setting forth such adjustment and  readjustment,  showing in
     detail the facts upon which such adjustment or  readjustment is based.  The
     Company shall, upon written request of the Holder, at any time,  furnish or
     cause to be furnished to the Holder a like  certificate  setting forth such
     adjustments and readjustments, the applicable Conversion Price in effect at
     the time, and 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
     the conversion of this Note.  Notwithstanding  the  foregoing,  the Company
     shall not be obligated  to deliver a  certificate  unless such  certificate
     would  reflect an increase or decrease of at least one percent (1%) of such
     adjusted amount.

          (f)  Issue  Taxes.  The  Maker  shall  pay any and all issue and other
     taxes,  excluding federal, state or local income taxes, that may be payable
     in respect of any issue or delivery of shares of Common Stock on conversion
     of this Note pursuant thereto; provided,  however, that the Maker shall not
     be  obligated  to pay  any  transfer  taxes  resulting  from  any  transfer
     requested by the Holder in connection with any such conversion.

          (g) Fractional  Shares.  No fractional shares of Common Stock shall be
     issued upon  conversion of this Note. In lieu of any  fractional  shares to
     which the Holder  would  otherwise  be  entitled,  the Maker shall pay cash
     equal to the product of the fraction that would  evidence  such  fractional
     shares multiplied by one-hundred  percent (100%) of the average of the VWAP
     for the  ten  (10)  consecutive  Trading  Days  immediately  preceding  the
     Conversion Date.

                                       12
<PAGE>

          (h)  Reservation of Common Stock.  The Company shall at all times when
     this Note  shall be  outstanding,  reserve  and keep  available  out of its
     authorized but unissued Common Stock,  one hundred twenty percent (120%) of
     such  number  of  shares  of  Common  Stock as shall  from  time to time be
     sufficient to effect the conversion of this Note.  The Company shall,  from
     time to time in accordance with Indiana law, increase the authorized number
     of shares of Common Stock if at any time the unissued  number of authorized
     shares shall not be sufficient to satisfy the Company's  obligations  under
     this Section 3.6(h).

          (i)  Regulatory  Compliance.  If any  shares  of  Common  Stock  to be
     reserved for the purpose of conversion of this Note require registration or
     listing with or approval of any governmental  authority,  stock exchange or
     other  regulatory  body  under any  federal or state law or  regulation  or
     otherwise  before  such  shares may be  validly  issued or  delivered  upon
     conversion,  the Company shall, at its sole cost and expense, in good faith
     and as  expeditiously  as possible,  endeavor to secure such  registration,
     listing or approval, as the case may be.

     Section 3.7 Prepayment.

          (a) Prepayment Upon an Event of Default.  Notwithstanding  anything to
     the contrary contained herein,  upon the occurrence of an Event of Default,
     the Holder shall have the right,  at such Holder's  option,  to require the
     Maker to prepay in cash all or a portion  of this Note at a price  equal to
     one hundred percent (100%) of the aggregate  principal  amount of this Note
     plus  all  accrued  and  unpaid  interest  applicable  at the  time of such
     request.  Nothing in this Section  3.7(a)  shall limit the Holder's  rights
     under Section 2.2 hereof.

          (b) Prepayment Option Upon Major Transaction. In addition to all other
     rights of the Holder contained herein,  simultaneous with the occurrence of
     a Major Transaction (as defined below), the Holder shall have the right, at
     the  Holder's  option,  to  require  the  Maker to  prepay in cash all or a
     portion  of the  Holder's  Notes  at a price  equal to one  hundred  twenty
     percent  (120%)  of the  aggregate  principal  amount of this Note plus all
     accrued and unpaid interest (the "Major Transaction Prepayment Price").

          (c) Prepayment  Option Upon Triggering Event. In addition to all other
     rights of the Holder contained herein, after a Triggering Event (as defined
     below), the Holder shall have the right, at the Holder's option, to require
     the Maker to prepay all or a portion of this Note in cash at a price  equal
     to one hundred twenty percent (120%) of the aggregate  principal  amount of
     this Note plus all  accrued  and unpaid  interest  (the  "Triggering  Event
     Prepayment Price," and, collectively with the Major Transaction  Prepayment
     Price, the "Prepayment Price").

          (d) "Major Transaction." A "Major Transaction" shall be deemed to have
     occurred at such time as any of the following events:

               (i) the  consolidation,  merger or other business  combination of
          the Company  with or into  another  Person (as defined in Section 4.13
          hereof) (other than (A) pursuant to a migratory merger effected solely
          for the purpose of changing the  jurisdiction of  incorporation of the
          Company or (B) a consolidation,  merger or other business  combination
          in which holders of the Company's  voting power  immediately  prior to
          the transaction  continue after the  transaction to hold,  directly or
          indirectly,  the  voting  power of the  surviving  entity or  entities

                                       13
<PAGE>

          necessary to elect a majority of the members of the board of directors
          (or their  equivalent if other than a  corporation)  of such entity or
          entities); or

               (ii) the sale or transfer of more than fifty percent (50%) of the
          Company's assets (based on the fair market value as determined in good
          faith by the Board) other than  inventory  in the  ordinary  course of
          business in one or a related series of transactions; or

               (iii) closing of a purchase, tender or exchange offer made to the
          holders of more than fifty percent (50%) of the outstanding  shares of
          Common Stock in which more than fifty percent (50%) of the outstanding
          shares of Common Stock were tendered and accepted; or

               (iv) a change in more than  fifty  percent  (50%) of the  current
          members of the Company's Board of Directors as of the Issuance Date.

               (v) the occurrence of a "Qualified Financing" which shall mean an
          underwritten public offering of the Company's common stock pursuant to
          which the gross proceeds of at least $5 million is raised.

          (e) "Triggering  Event." A "Triggering  Event" shall be deemed to have
     occurred at such time as any of the following events:

               (i) the suspension from listing,  without  subsequent  listing on
          any one of,  or the  failure  of the  Common  Stock to be listed on at
          least one of the Pink  Sheets,  the OTC Bulletin  Board,  the American
          Stock Exchange, the Nasdaq Global Market, the Nasdaq Capital Market or
          The  New  York  Stock  Exchange,  Inc.,  for  a  period  of  ten  (10)
          consecutive Trading Days;

               (ii) the  Company's  notice to the  Holder or any Other  Holders,
          including by way of public announcement, at any time, of its inability
          to comply  (including  for any of the  reasons  described  in  Section
          3.8(a) hereof) or its intention not to comply with proper requests for
          conversion of any Notes into shares of Common Stock; or

               (iii) the  Company's  failure to comply with a Conversion  Notice
          tendered in  accordance  with the  provisions of this Note within five
          (5) Trading  Days after the  receipt by the Company of the  Conversion
          Notice; or

               (iv) the Company  deregisters its shares of Common Stock and as a
          result such shares of Common Stock are no longer publicly traded; or

               (v) the Company consummates a "going private"  transaction and as
          a result the Common Stock is no longer registered under Sections 12(b)
          or 12(g) of the Exchange Act; or

               (vi) the Maker breaches any representation, warranty, covenant or
          other term or condition of the Purchase  Agreement,  this Note, or any
          other agreement,  document,  certificate or other instrument delivered
          in connection with the  transactions  contemplated  thereby or hereby,
          except to the  extent  that  such  breach  would  not have a  Material

                                       14
<PAGE>

          Adverse Effect (as defined in the Purchase  Agreement) and except,  in
          the case of a breach  of a  covenant  which is  curable,  only if such
          breach continues for a period of a least twenty (20) business days.

          (f)   Mechanics  of   Prepayment   at  Option  of  Holder  Upon  Major
     Transaction.  No sooner than fifteen (15) days nor later than ten (10) days
     prior to the consummation of a Major Transaction,  but in no event prior to
     the public announcement of such Major Transaction,  the Maker shall deliver
     written  notice  thereof via facsimile and  overnight  courier  ("Notice of
     Major  Transaction")  to the Holder of this Note and the Other Holders.  At
     any time after receipt of a Notice of Major Transaction (or, in the event a
     Notice of Major  Transaction  is not delivered at least ten (10) days prior
     to a Major Transaction, at any time during the ten (10) day period prior to
     a Major Transaction),  the Holder of this Note and the Other Holders of the
     Other Notes then  outstanding  may  require the Maker to prepay,  effective
     immediately prior to the consummation of such Major Transaction, all or any
     portion of this Note then outstanding by delivering  written notice thereof
     via  facsimile and  overnight  courier  ("Notice of Prepayment at Option of
     Holder Upon Major Transaction") to the Maker, which Notice of Prepayment at
     Option of Holder Upon Major  Transaction  shall  indicate (i) the principal
     amount of this Note that the Holder is  electing  to have  prepaid and (ii)
     the applicable Major Transaction  Prepayment Price, as calculated  pursuant
     to Section 3.7(b) above.

          (g) Mechanics of Prepayment at Option of Holder Upon Triggering Event.
     Within three (3) business days after the occurrence of a Triggering  Event,
     the Maker shall deliver  written notice thereof via facsimile and overnight
     courier ("Notice of Triggering Event") to the Holder and the Other Holders.
     At any time  after  the  earlier  of the  Holder's  receipt  of a Notice of
     Triggering  Event and the Holder becoming aware of a Triggering  Event, the
     Holder  of  this  Note  and the  Other  Holders  of the  Other  Notes  then
     outstanding may require the Maker to prepay all or any portion of this Note
     then  outstanding  by delivering  written  notice thereof via facsimile and
     overnight   courier  ("Notice  of  Prepayment  at  Option  of  Holder  Upon
     Triggering  Event") to the Maker,  which Notice of  Prepayment at Option of
     Holder Upon Triggering Event shall indicate (i) the amount of the Note that
     the Holder is electing to have prepaid and (ii) the  applicable  Triggering
     Event Prepayment Price, as calculated pursuant to Section 3.7(c) above. The
     Holder  shall only be  permitted  to require  the Maker to prepay this Note
     pursuant to Section 3.7 hereof for the greater of a period of ten (10) days
     after receipt by the Holder of a Notice of Triggering  Event or for so long
     as such Triggering Event is continuing.

          {h) [Reserved.]

          {i) [Reserved.]

          (j)  Payment  of  Prepayment  Price.  Upon  the  Maker'  receipt  of a
     Notice(s)  of  Prepayment  at Option of Holder Upon  Triggering  Event or a
     Notice(s) of Prepayment at Option of Holder Upon Major Transaction from the
     Holder or the Other  Holders,  the Maker  shall  notify  the Holder or such
     Other  Holder,  as the case may be, by facsimile of the Maker's  receipt of
     such Notice(s) of Prepayment at Option of Holder Upon  Triggering  Event or
     Notice(s) of Prepayment at Option of Holder Upon Major  Transaction  within
     two (2) business days of the Maker'  receipt of the same and the Holder and
     each Other Holder which has sent such a notice  shall  promptly  thereafter
     submit to the Maker this Note (or  certificates  representing  a portion of
     this Note if the Holder elects not to have all of the outstanding principal
     and accrued interest hereunder prepaid) or the Other Notes (or certificates
     representing a portion of the Other Notes if the Other Holders elect not to
     have  all of the  outstanding  principal  and  accrued  interest  hereunder

                                       15
<PAGE>

     prepaid)  which  the  Holder  or Other  Holders,  as the case may be,  have
     elected to have prepaid. The Maker shall deliver the applicable  Triggering
     Event Prepayment  Price to the Holder,  within five (5) business days after
     the Maker' receipt of this Note or the certificates related thereto, as the
     case may be, and, in the case of a prepayment  pursuant to Section  3.7(f),
     the Maker shall deliver the applicable Major  Transaction  Prepayment Price
     immediately  prior to the consummation of the Major  Transaction;  provided
     that the Holder's  original Note or the Other Holders' original Other Note,
     or the certificates  related  thereto,  shall have been so delivered to the
     Maker;  provided  further  that if the Maker is unable to prepay all of the
     Notes to be  prepaid,  the Maker  shall  prepay an amount to the Holder and
     each Other Holder of this Note and the Other Notes being  prepaid  equal to
     such  holder's  pro rata  amount of all Notes being  prepaid.  If the Maker
     shall fail to prepay all of the Notes submitted for prepayment  (other than
     pursuant to a dispute as to the  arithmetic  calculation  of the Prepayment
     Price),  in  addition to any remedy such holder of the Notes may have under
     this Note and the  Purchase  Agreement,  the  applicable  Prepayment  Price
     payable in respect of such Notes not  prepaid  shall bear  interest  at the
     rate of two percent (2%) per month (prorated for partial months) until paid
     in full.  Until the Maker pay such unpaid  applicable  Prepayment  Price in
     full to a holder of the Notes submitted for  prepayment,  such holder shall
     have the option  (the "Void  Optional  Prepayment  Option")  to, in lieu of
     prepayment,  require the Maker to promptly  return to such holder(s) all of
     the Notes that were submitted for  prepayment by such holder(s)  under this
     Section  3.7 and for which  the  applicable  Prepayment  Price has not been
     paid, by sending  written  notice  thereof to the Maker via facsimile  (the
     "Void Optional  Prepayment  Notice").  Upon the Maker' receipt of such Void
     Optional  Prepayment  Notice(s) and prior to payment of the full applicable
     Prepayment Price to such holder,  (i) the Notice(s) of Prepayment at Option
     of Holder Upon Triggering Event or the Notice(s) of Prepayment at Option of
     Holder Upon Major  Transaction,  as the case may be, shall be null and void
     ab initio with  respect to those Notes  submitted  for  prepayment  and for
     which the  applicable  Prepayment  Price has not been paid,  (ii) the Maker
     shall  immediately  return  any such Notes  submitted  to the Maker by each
     holder for  prepayment  under  this  Section  and for which the  applicable
     Prepayment  Price has not been paid and (iii) the Conversion  Price of such
     returned Notes shall be adjusted to the lesser of (A) the Conversion  Price
     as in effect on the date on which the applicable  Void Optional  Prepayment
     Notice(s) is  delivered  to the Maker and (B) the lowest  closing bid price
     during  the  period  beginning  on the  date  on  which  the  Notice(s)  of
     Prepayment of Option of Holder Upon Major  Transaction  or the Notice(s) of
     Prepayment at Option of Holder Upon  Triggering  Event, as the case may be,
     is delivered to the Maker and ending on the date on which the Void Optional
     Prepayment Notice(s) is delivered to the Maker; provided that no adjustment
     shall  be  made if such  adjustment  would  result  in an  increase  of the
     Conversion  Price then in effect.  A holder's  delivery of a Void  Optional
     Prepayment  Notice and exercise of its rights  following  such notice shall
     not effect the Maker'  obligations  to make any payments which have accrued
     prior to the date of such notice. Payments provided for in this Section 3.7
     shall have priority to payments to other  stockholders in connection with a
     Major Transaction.

     Section 3.8 Inability to Fully Convert.

          (a)  Holder's  Option if Maker  Cannot  Fully  Convert.  If,  upon the
     Company's receipt of a Conversion  Notice,  the Company cannot issue shares
     of Common Stock for any reason, including, without limitation,  because the

                                       16
<PAGE>

     Company  (x) does not have a  sufficient  number of shares of Common  Stock
     authorized  and available or (y) is otherwise  prohibited by applicable law
     or by the rules or regulations of any stock exchange, interdealer quotation
     system or other  self-regulatory  organization  with  jurisdiction over the
     Company or any of its securities from issuing all of the Common Stock which
     is to be issued to the Holder  pursuant to a  Conversion  Notice,  then the
     Company shall issue as many shares of Common Stock,  as it is able to issue
     in accordance with the Holder's  Conversion Notice and, with respect to the
     unconverted  portion of this Note, the Holder,  solely at Holder's  option,
     can elect to:

               (i)  require  the Maker to prepay  that  portion of this Note for
          which the Company is unable to issue Common Stock in  accordance  with
          the Holder's Conversion Notice (the "Mandatory Prepayment") at a price
          per share equal to the Triggering  Event  Prepayment  Price as of such
          Conversion Date (the "Mandatory Prepayment Price");

               (ii) void its Conversion  Notice and retain or have returned,  as
          the case may be,  this Note (or the  portion  thereof)  that was to be
          converted  pursuant  to  the  Conversion  Notice  (provided  that  the
          Holder's  voiding its  Conversion  Notice shall not affect the Maker's
          obligations  to make any payments which have accrued prior to the date
          of such notice); or

               (iii)  exercise its Buy-In  rights  pursuant to and in accordance
          with  the  terms  and  provisions  of  Section  3.3(c)  of this  Note.

          (b)  Mechanics  of  Fulfilling  Holder's  Election.  Upon receipt of a
     facsimile copy of a Conversion Notice from the Holder which cannot be fully
     satisfied as described in Section  3.8(a)  above,  the Company shall within
     two (2)  Trading  Days  send via  facsimile  to the  Holder a notice of the
     Company's  inability to fully satisfy the Conversion Notice (the "Inability
     to Fully Convert  Notice").  Such  Inability to Fully Convert  Notice shall
     indicate  (i) the reason why the  Company  is unable to fully  satisfy  the
     Holder's  Conversion  Notice,  (ii) the amount of this Note which cannot be
     converted and (iii) the applicable  Mandatory  Prepayment Price. The Holder
     shall notify the Maker of its election  pursuant to Section 3.8(a) above by
     delivering  written  notice via facsimile to the Maker ("Notice in Response
     to Inability to Convert").

          (c) Payment of Prepayment Price. If the Holder shall elect to have its
     Notes prepaid pursuant to Section  3.8(a)(i) above, the Maker shall pay the
     Mandatory  Prepayment  Price to the Holder  within  thirty (30) days of the
     Maker's receipt of the Holder's Notice in Response to Inability to Convert,
     provided  that,  prior to the  Maker's  receipt of the  Holder's  Notice in
     Response to Inability to Convert the Company has not  delivered a notice to
     the Holder stating,  to the  satisfaction of the Holder,  that the event or
     condition  resulting  in the  Mandatory  Prepayment  has been cured and all
     Conversion  Shares  issuable to the Holder can and will be delivered to the
     Holder in  accordance  with the terms of this Note. If the Maker shall fail
     to pay the applicable  Mandatory Prepayment Price to the Holder on the date
     that is three (3)  business  days  following  the  Maker's  receipt  of the
     Holder's Notice in Response to Inability to Convert (other than pursuant to
     a dispute as to the  determination  of the  arithmetic  calculation  of the
     Prepayment Price), in addition to any remedy the Holder may have under this
     Note and the Purchase Agreement,  such unpaid amount shall bear interest at
     the rate of two percent (2%) per month  (prorated for partial months) until
     paid in full. Until the full Mandatory  Prepayment Price is paid in full to
     the Holder,  the Holder may (i) void the Mandatory  Prepayment with respect

                                       17
<PAGE>

     to that portion of the Note for which the full Mandatory  Prepayment  Price
     has not been paid,  (ii) receive back such Note, and (iii) require that the
     Conversion Price of such returned Note be adjusted to the lesser of (A) the
     Conversion  Price as in effect on the date on which the  Holder  voided the
     Mandatory Prepayment and (B) the lowest VWAP during the period beginning on
     the Conversion  Date and ending on the date the Holder voided the Mandatory
     Prepayment.

          (d)  Pro-rata  Conversion  and  Prepayment.  In the event the  Company
     receives a Conversion  Notice from the Holder and the Other  Holders on the
     same day and the Company can convert and prepay some,  but not all, of this
     Note  pursuant to this Section 3.8,  the Company  shall  convert and prepay
     from the Holder  and each Other  Holder  electing  to have its Other  Notes
     converted  and  prepaid at such time an amount  equal to the Holder or such
     Other  Holder's  pro rata amount of all the Notes and the Other Notes being
     converted and prepaid at such time.

     Section 3.9 No Rights as Stockholder.  Nothing contained in this Note shall
be construed as  conferring  upon the Holder,  prior to the  conversion  of this
Note,  the right to vote or to  receive  dividends  or to  consent or to receive
notice as a  stockholder  in respect  of any  meeting  of  stockholders  for the
election of directors of the Company or of any other matter, or any other rights
as a stockholder of the Company.

                                   ARTICLE IV

                                  MISCELLANEOUS

     Section  4.1  Notices.  Any  notice,  demand,   request,  waiver  or  other
communication  required or permitted to be given  hereunder  shall be in writing
and shall be  effective  (a) upon hand  delivery,  telecopy or  facsimile at the
address or number  designated  in the  Purchase  Agreement  (if  delivered  on a
business day during normal  business hours where such notice is to be received),
or the first business day following such delivery (if delivered  other than on a
business day during normal  business  hours where such notice is to be received)
or (b) on the  second  business  day  following  the date of  mailing by express
courier  service,  fully  prepaid,  addressed  to such  address,  or upon actual
receipt  of such  mailing,  whichever  shall  first  occur.  The Maker will give
written  notice to the  Holder at least ten (10) days prior to the date on which
the Company takes a record (x) with respect to any dividend or distribution upon
the Common Stock, (y) with respect to any pro rata subscription offer to holders
of  Common  Stock or (z) for  determining  rights to vote  with  respect  to any
Organic  Change,  dissolution,  liquidation  or winding-up but in no event shall
such notice be provided to the Holder prior to such information being made known
to the public.  The Maker also will give  written  notice to the Holder at least
ten  (10)  days  prior to the date on which  any  Organic  Change,  dissolution,
liquidation  or winding-up  will take place but in no event shall such notice be
provided to the Holder prior to such information being made known to the public.
The Maker shall promptly  notify the Holder of any notices sent or received,  or
any actions taken with respect to the Other Notes.

     Section 4.2 Governing Law; Consent to Jurisdiction. The parties acknowledge
and agree that any claim, controversy,  dispute or action relating in any way to
this agreement or the subject matter of this agreement  shall be governed solely
by the laws of the State of  Delaware,  without  regard to any  conflict of laws
doctrines.  The parties  irrevocably  consent to being served with legal process
issued from the state and  federal  courts  located in New York and  irrevocably

                                       18
<PAGE>

consent to the exclusive  personal  jurisdiction of the federal and state courts
situated in the State of New York. The parties  irrevocably waive any objections
to the personal  jurisdiction  of these courts.  Said courts shall have sole and
exclusive  jurisdiction  over any and all claims,  controversies,  disputes  and
actions which in any way relate to this  agreement or the subject matter of this
agreement.  The parties also irrevocably  waive any objections that these courts
constitute an oppressive, unfair, or inconvenient forum and agree not to seek to
change venue on these grounds or any other grounds.  Nothing in this Section 4.2
shall affect or limit any right to serve  process in any other manner  permitted
by law.

     Section  4.3  Headings.  Article  and  section  headings  in this  Note are
included  herein for purposes of  convenience  of  reference  only and shall not
constitute a part of this Note for any other purpose.

     Section 4.4 Remedies,  Characterizations,  Other Obligations,  Breaches and
Injunctive Relief. The remedies provided in this Note shall be cumulative and in
addition to all other  remedies  available  under this Note, at law or in equity
(including,  without limitation,  a decree of specific  performance and/or other
injunctive  relief),  no  remedy  contained  herein  shall be deemed a waiver of
compliance  with the  provisions  giving rise to such remedy and nothing  herein
shall  limit a Holder's  right to pursue  actual  damages for any failure by the
Maker to comply with the terms of this Note.  Amounts set forth or provided  for
herein with respect to payments,  conversion  and the like (and the  computation
thereof) shall be the amounts to be received by the Holder hereof and shall not,
except as expressly  provided herein,  be subject to any other obligation of the
Maker (or the performance thereof). Each of the Maker acknowledges that a breach
by it of its obligations  hereunder will cause  irreparable and material harm to
the  Holder and that the  remedy at law for any such  breach may be  inadequate.
Therefore  each Maker agrees that, in the event of any such breach or threatened
breach, the Holder shall be entitled,  in addition to all other available rights
and remedies,  at law or in equity,  to seek and obtain such  equitable  relief,
including  but not  limited  to an  injunction  restraining  any such  breach or
threatened  breach,  without the necessity of showing  economic loss and without
any bond or other security being required.

     Section 4.5  Enforcement  Expenses.  The Maker  agrees to pay all costs and
expenses  of the  Holder  incurred  as a result  of  enforcement  of this  Note,
including, without limitation, reasonable attorneys' fees and expenses.

     Section 4.6 Binding Effect. The obligations of the Maker and the Holder set
forth  herein  shall be binding  upon the  successors  and  assigns of each such
party,  whether or not such  successors  or assigns are  permitted  by the terms
hereof.

     Section  4.7  Amendments.  This Note may not be  modified or amended in any
manner except in writing executed by the Maker and the Holder.

     Section  4.8  Compliance  with  Securities  Laws.  The  Holder of this Note
acknowledges  that this  Note is being  acquired  solely  for the  Holder's  own
account and not as a nominee for any other party,  and for investment,  and that
the Holder shall not offer,  sell or otherwise  dispose of this Note.  This Note
and any Note issued in substitution or replacement  therefor shall be stamped or
imprinted with a legend in substantially the following form:

                                       19
<PAGE>

           "THIS  NOTE  AND THE  SECURITIES  ISSUABLE  UPON  CONVERSION
           HEREOF HAVE NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF
           1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES
           LAWS,  AND MAY NOT BE SOLD OR  TRANSFERRED IN THE ABSENCE OF
           SUCH  REGISTRATION  OR RECEIPT  BY THE  COMPANY OF A WRITTEN
           OPINION  OF  COUNSEL  IN  THE  FORM,   SUBSTANCE  AND  SCOPE
           REASONABLY  SATISFACTORY  TO THE COMPANY  THAT THIS NOTE AND
           THE SECURITIES  ISSUABLE UPON CONVERSION HEREOF MAY BE SOLD,
           TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF, UNDER AN
           EXEMPTION  FROM  REGISTRATION  UNDER THE ACT AND SUCH  STATE
           SECURITIES LAWS."

     Section 4.9 Accredited  Investor Status. In no event may the Holder convert
this Note in whole or in part unless the Holder is an  "accredited  investor" as
defined in Regulation D under the Act.

     Section 4.10 Parties in Interest. This Note shall be binding upon, inure to
the benefit of and be enforceable by the Maker,  the Holder and their respective
successors and permitted assigns.

     Section 4.11 Failure or Indulgence  Not Waiver.  No failure or delay on the
part of the Holder in the exercise of any power,  right or  privilege  hereunder
shall operate as a waiver thereof,  nor shall any single or partial  exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right,  power or  privilege,  nor shall any waiver by the Holder of
any such  right or  rights  on any one  occasion  be deemed a waiver of the same
right or rights on any future occasion.

     Section 4.12 Maker's Waivers.

          (a) Except as otherwise  specifically  provided herein,  the Maker and
     all others  that may become  liable for all or any part of the  obligations
     evidenced  by this  Note,  hereby  waive  presentment,  demand,  notice  of
     nonpayment,  protest and all other demands' and notices in connection  with
     the delivery, acceptance,  performance and enforcement of this Note, and do
     hereby  consent  to any number of  renewals  of  extensions  of the time or
     payment  hereof and agree that any such renewals or extensions  may be made
     without notice to any such persons and without  affecting  their  liability
     herein and do further  consent to the release of any person liable  hereon,
     all without  affecting the liability of the other  persons,  firms or Maker
     liable for the payment of this Note, AND DO HEREBY WAIVE TRIAL BY JURY.

          (b) THE MAKER  ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS
     A PART IS A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE
     LAW,  HEREBY  WAIVES ITS RIGHT TO NOTICE AND  HEARING  WITH  RESPECT TO ANY

                                       20
<PAGE>

     PREJUDGMENT REMEDY WHICH THE HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE
     TO USE.

     Section 4.13  Definitions.  For the purposes  hereof,  the following  terms
shall have the following meanings:

     "Convertible  Securities"  means  any  convertible  securities,   warrants,
options or other rights to subscribe for or to purchase or exchange for,  shares
of Common Stock or Common Stock Equivalents.

     "Options"  shall mean any rights,  warrants or options to subscribe  for or
purchase Common Stock or Convertible Securities of the Company.

     "Person"  means  an  individual  or  a  corporation,   partnership,  trust,
incorporated or  unincorporated  association,  joint venture,  limited liability
company, joint stock company,  government (or an agency or political subdivision
thereof) or other entity of any kind.

     "Trading  Day" means (a) a day on which the  Common  Stock is traded on the
Pink Sheets, OTC Bulletin Board, or (b) if the Common Stock is not traded on the
OTC  Bulletin  Board,  a day  on  which  the  Common  Stock  is  quoted  in  the
over-the-counter  market  as  reported  by  Pink  Sheets  LLC  (or  any  similar
organization or agency succeeding its functions of reporting prices);  provided,
however,  that in the event that the Common Stock is not listed or quoted as set
forth in (a) or (b) hereof, then Trading Day shall mean any day except Saturday,
Sunday  and any day which  shall be a legal  holiday  or a day on which  banking
institutions in the State of New York are authorized or required by law or other
government action to close.

     Section  4.14 Usury.  All  agreements  between the Maker and the Holder are
hereby expressly  limited to provide that in no contingency or event whatsoever,
whether by reason of  acceleration  of  maturity of the  indebtedness  evidenced
hereby or  otherwise,  shall the amount  paid or agreed to be paid to the Holder
for the use,  forbearance  or detention  of the  indebtedness  evidenced  hereby
exceed the  maximum  amount  which the  Holder is  permitted  to  receive  under
applicable  law.  If,  from any  circumstances  whatsoever,  fulfillment  of any
provision hereof or of the Stock Purchase Agreement or any document  thereunder,
at  the  time  performance  of  such  provision  shall  be  due,  shall  involve
transcending  the limit of validity  prescribed by law,  then,  ipso facto,  the
obligation to be fulfilled shall  automatically  be reduced to the limit of such
validity, and if from any circumstance the Holder shall ever receive as interest
an amount which would exceed the highest lawful rate, such amount which would be
excessive interest shall be applied to the reduction of the principal balance of
any of the Maker's obligations to the Holder, and not to the payment of interest
hereunder. To the extent permitted by applicable law, all sums paid or agreed to
be paid for the use,  forbearance or detention of the indebtedness  evidenced by
this Note shall be amortized, prorated, allocated and spread throughout the full
term of such  indebtedness  until  payment in full,  to the end that the rate or
amount  of  interest  on  account  of such  indebtedness  does  not  exceed  any
applicable usury ceiling.  As used herein,  the term "applicable law" shall mean
the law in effect as of the date hereof,  provided,  however,  that in the event

                                       21
<PAGE>

there is a change  in the law  which  results  in a higher  permissible  rate of
interest,  then this Note shall be governed by such new law as of its  effective
date.  This  provision  shall  control every other  provision of all  agreements
between the Maker and the Holder.

                                       22
<PAGE>

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

                                                TOTAL LUXURY GROUP, INC.

                                                By:  ___________________________
                                                     Name:
                                                     Title:

                                       23
<PAGE>

                                    EXHIBIT A

                                WIRE INSTRUCTIONS

Payee: ________________________________________________________

Bank:  ________________________________________________________

Address: _____________________________________________________

         ______________________________________________________

Bank No.: _____________________________________________________

Account No.:  __________________________________________________

Account Name: _________________________________________________

                                       24
<PAGE>

                                     FORM OF

            NOTICE OF OPTIONAL CONVERSION INTO SHARES OF COMMON STOCK

              (To be Executed by the Registered Holder in order to
                 Convert the Note into Shares of Common Stock)

The undersigned hereby  irrevocably elects to convert $ ________________  of the
principal  amount of the above Note No. ___ into shares of Common Stock of TOTAL
LUXURY GROUP, INC. (the "Company") according to the conditions hereof, as of the
date written below.

Date of Conversion _________________________________________________________

Applicable Conversion Price __________________________________________________

Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the Date of Conversion: ___________________________________

Signature___________________________________________________________________

         [Name]

Address:__________________________________________________________________

        __________________________________________________________________

                                       25
<PAGE>

                                 Schedule 1.4(a)

     1. Senior Secured 9% Convertible Promissory Note dated March 7, 2008.

                                       26
<PAGE>

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00138-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00138-of-00352.parquet"}]]