Document:

EXCHANGE AGREEMENT

            This Convertible Note Exchange Agreement (the "Agreement") is made
as of the 31st day of December 1999, by and between Interiors, Inc., a Delaware
corporation ("Interiors") and Endeavour Capital Fund SA (hereinafter referred to
as the "Holder") of 1,500 shares of Series C Convertible Preferred Stock (the
"Preferred Stock") of Interiors.

                                    Recitals

      A. Holder is currently the record owner of 1,500 shares of Preferred
Stock.

      B. Interiors has created a secured convertible note (the "Notes") with all
of the rights and privileges set forth in the Note annexed hereto as Exhibit A.

      C. By this Agreement, Interiors desires to assign, convey, transfer and
deliver to the Holder of the Preferred Stock that principal amount of Notes set
forth beside the Holder's name on Schedule A hereto, in exchange for the
surrender of the Preferred Stock, set forth on such Schedule.

                             Statement of Agreement

      NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

      1. Exchange of Preferred Shares. Interiors and the Holder agree to
exchange that number of shares of Preferred Stock for that principal amount of
Notes as set forth on Schedule A and warrants (in the form of Exhibit B annexed
hereto) to purchase 110,000 shares of Interiors Class A Common Stock (the
"Common Stock"), pursuant to the terms set forth herein and the Escrow Agreement
(annexed hereto as Exhibit C) within ten Business Days after the date hereof.
The "Exchange Date" shall be defined as the date the Escrow Agent receives the
original Note and the Preferred Stock being exchange thereby. On the Exchange
Date, the Holder will cease to have any right to receipt or payment of dividends
in whole or in part, on the Preferred Stock, but will begin the right to receipt
or payment of interest or principal on the Notes.

      1.1 Conditions to Closing of the Exchange. Upon the terms and satisfaction
of each of the following conditions, and in reliance upon the representations
and warranties contained in this Agreement, Interiors and the Holder agree to
exchange the Preferred Stock for the Notes and Warrants (the business date each
of these conditions are satisfied is hereby referred to as the "Closing Date"):

            (a) Acceptance by the Holder of a satisfactory Exchange Agreement
      (including all Exhibits annexed hereto) and due execution by all parties
      of this Agreement and the Exhibits annexed hereto;

            (b) Delivery into escrow by Interiors of the original Notes and the
      original Warrants to be issued as per the terms of the Escrow Agreement;

<PAGE>

            (c) All representations and warranties of Interiors contained herein
      and in all Exhibits (and the representations and warranties of Petals,
      Inc. contained in the Security Agreement) annexed hereto shall remain true
      and correct in all material respects as of the Closing Date;

            (d) Holder shall have received an opinion of counsel substantially
      in the form of Exhibit D annexed hereto;

            (e) Interiors shall have obtained all permits and qualifications
      required by any state for the issuance of the Notes and Warrants, or shall
      have the availability of exemptions therefrom. At the Closing Date, all
      laws and regulations to which Interiors and Holder are subject shall
      legally permit the issuance of the Notes and Warrants;

            (f) Interiors and Petals, Inc. shall have executed the financing
      statements and Security Agreement, and filed same with the proper state
      authorities in the states of New York and Delaware giving notice of the
      Holder's security interest in the Collateral; and

            (g) Interiors shall have obtained consents for Interiors to
      participate in this transaction from any party necessary to complete this
      transaction.

      2. Representations and Warranties of Interiors and Holder.

      2.1 Interiors Representations and Warranties.

            (a) Organization and Good Standing. Interiors is a corporation duly
incorporated and validly existing and in good standing under the laws of the
State of Delaware, with the full authority to issue the Notes and complete the
exchange as set forth herein and to carry out the provisions hereof, and has all
requisite corporate authority to own its properties and to carry on its business
as now being conducted except as described in the "SEC Documents" (defined as
Interiors filings with the SEC during the 12 consecutive months immediately
preceding the Closing Date). Interiors is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, other than those (individually or in the aggregate) in
which the failure so to qualify would not reasonably be expected to have a
"Material Adverse Effect" (defined as any effect on the business, operations,
properties, prospects, or financial condition of Interiors and/or its
subsidiaries that is material and adverse to Interiors and its subsidiaries and
affiliates, taken as a whole, and/or any condition, circumstance, or situation
that would prohibit or otherwise in any material respect interfere with the
ability of Interiors to enter into and perform any of its obligations under this
Agreement, the Escrow Agreement, the Security Agreement, the Registration Rights
Agreement, the Notes, or Warrants in any material respect. Interiors is not in
violation of any material terms of its Articles of Incorporation (as defined
below) or Bylaws (as defined below).

            (b) Notes and Warrants. The Notes and Warrants, when issued pursuant
to the terms of this Agreement will be duly authorized, and validly issued, and
will be subject to no lien or encumbrance. The Notes shall be convertible into
shares of Common Stock pursuant to the terms and conditions set forth in the
Note in the form attached hereto as Exhibit A. The Warrants shall be

                                       2
<PAGE>

exercisable for shares of Common Stock pursuant to the terms and conditions of
the Warrant in the form annexed hereto as Exhibit B.

            (c) Registration Rights. The terms and conditions of the
Registration Rights Agreement between Interiors and the Holder, substantially in
the form annexed hereto as Exhibit E, shall be executed by the parties herein,
and remain in full force and effect when exchange occurs pursuant to the terms
of this Agreement, and all provisions of the Registration Rights Agreement are
incorporated herein by reference and made a part of this Agreement.

            (d) Execution of this Agreement. Interiors has the full right, power
and authority to enter into and to perform its obligations under this Agreement
and all other agreements, certificates and documents executed and delivered, or
to be executed and delivered, by Interiors in connection herewith (collectively,
with this Agreement, the "Interiors Documents"), and to issue the Notes and
Warrants. This Agreement has been duly authorized, executed and delivered by
Interiors, and the Interiors Documents are (or when executed and delivered will
be) legal, valid and binding obligations of Interiors, enforceable in accordance
with their respective terms. The execution, issuance and delivery of this
Agreement, and all Exhibits annexed hereto by Interiors and the consummation by
it of the transactions contemplated hereby and thereby have been duly authorized
by all necessary corporate action and no further consent or authorization of
Interiors, its shareholders, or its Board of Directors is necessary. This
Agreement, and all Exhibits annexed hereto, have been duly executed and
delivered by Interiors and constitute valid and binding obligations of Interiors
enforceable against Interiors in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws relating to, or affecting generally the enforcement of, creditors' rights
and remedies or by other equitable principles of general application. Upon their
issuance and delivery pursuant to this Agreement, the Notes and Warrants will be
validly issued, fully paid and nonassessable, and will be free of any liens or
encumbrances other than those created hereunder or by the actions of the Holder;
provided, however, that the Notes and Warrants are subject to restrictions on
transfer under state and/or federal securities laws. The issuance of the Notes
and Warrants will not give rise to any preemptive right or right of first
refusal or right of participation on behalf of any person other than the Holder
pursuant to the terms of this Agreement.

            (e) Information True and Correct. All the information that is set
forth in this Agreement with respect to the Interiors is correct and complete as
of the date of this Agreement.

            (f) Capitalization. As of September 27, 1999, the authorized capital
stock of Interiors consists of 60,000,000 shares of Class A Common Stock, $0.001
par value, of which 31,378,067 shares of Class A Common Stock are outstanding,
2,500,000 shares of Class B Common Stock, of which 2,445,000 shares of Class B
Common Stock are outstanding, and 5,300,000 shares of preferred stock, of which
1,002,907 of Series A Preferred Stock are outstanding, 200,000 shares of Series
B Preferred Stock are outstanding, and 6,527 shares of Series C Preferred Stock
are outstanding. All of the outstanding shares of the Interior's capital stock
have been duly and validly authorized and issued and are fully paid and
nonassessable. No shares of common stock or preferred stock of Interiors are
entitled to preemptive or similar rights. Except as disclosed in the SEC
Documents or on Schedule 2.1(f) annexed hereto, there are no outstanding
options, warrants, rights to subscribe to, calls or commitments of any

                                       3
<PAGE>

character whatsoever relating to, or, except as a result of the issuance of the
Notes and Warrants, securities, rights or obligations convertible into or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of common stock, or contracts, commitments, understandings, or
arrangements by which Interiors or any subsidiary is or may become bound to
issue additional shares of common stock or securities or rights convertible or
exchangeable into shares of common stock. Except as disclosed in the SEC
Documents or on Schedule 2.1(f) annexed hereto, and to the knowledge of
Interiors, no person or group of persons beneficially owns (as determined
pursuant to Rule 13d-3 promulgated under the Exchange Act) or has the right to
acquire by agreement with or by obligation binding upon Interiors beneficial
ownership of in excess of five percent of the Common Stock.

            (g) Common Stock. Interiors has registered its Common Stock pursuant
to Section 12(g) of the Exchange Act and is in full compliance with all
reporting requirements of the Exchange Act, and such Common Stock is currently
listed or quoted, and trades, on the Nasdaq Small Cap Stock Market, and
Interiors is in full compliance with the rules and regulations of the Nasdaq
Small Cap Stock Market.

            (h) SEC Documents. Interiors has delivered or made available to the
Holder true and complete copies of the SEC Documents. Interiors has not provided
to the Holder any information that, according to applicable law, rule or
regulation, should have been disclosed publicly prior to the date hereof by
Interiors, but which has not been so disclosed. The SEC Documents comply in all
material respects with the requirements of the Securities Act and/or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder and none of the SEC Documents contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of Interiors included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of Interiors as of the dates thereof and the results of operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Interiors has filed a Form
12b-25 on June 30, 1999, relating to its Form 10-K for the year ended June 30,
1999 and agrees that it shall file the aforementioned Form 10-K in a timely
manner as set forth on the Form 12b-25.

            (i) Valid Issuances. Neither the issuance of the Notes and Warrants,
nor the Company's performance of its obligations under this Agreement, and all
Exhibits annexed hereto, will (i) result in the creation or imposition by the
Company of any liens, charges, claims or other encumbrances upon the Notes,
Warrants, or shares of Common Stock issuable upon exercise of the Warrants (the
"Warrant Shares"), issued or issuable hereunder, or any of the assets of the
Company other than the security interest granted under the Security Agreement,
or (ii) entitle the

                                       4
<PAGE>

holders of Outstanding Capital Shares to preemptive or other rights to subscribe
to or acquire any Capital Shares or other securities of Interiors.

            (j) No General Solicitation or Advertising in Regard to this
Transaction. Neither Interiors nor any of its affiliates, nor any distributor or
any person acting on its or their behalf (i) has conducted or will conduct any
general solicitation (as that term is used in Rule 502(c) of Regulation D) or
general advertising in connection with the issuance of the Notes and Warrants,
or (ii) has made any offers or sales of any security or solicited any offers to
buy any security under any circumstances that would require registration of the
Notes and Warrants under the Securities Act, except as contemplated by this
Agreement.

            (k) Corporate Documents. Interiors has furnished or made available
to the Holder true and correct copies of Interior's Articles of incorporation,
as amended and in effect on the date hereof (the "Articles of Incorporation"),
and Interior's bylaws, as amended and in effect on the date hereof (the
"ByLaws"). The Articles of Incorporation and ByLaws are in full force and effect
as of the Closing Date, without change or amendment.

            (l) No Conflicts. The execution, delivery and performance of this
Agreement (including all Exhibits annexed hereto) by Interiors and the
consummation by Interiors of the transactions contemplated hereby and thereby,
including without limitation the issuance of the Notes, Warrants and Warrant
Shares, do not and will not (i) result in a violation of the Articles of
Incorporation or ByLaws or (ii) conflict with, or constitute a material default
(or an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, patent, patent license, indenture, instrument or
any "lock-up" or similar provision of any underwriting or similar agreement to
which Interiors is a party, or (iii) result in a violation of any federal, state
or local law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations) applicable to Interiors or by which any
property or asset of Interiors is bound or affected, nor is Interiors otherwise
in violation of, in conflict with, or in default under, any of the foregoing
except as would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. The business of Interiors is not being
conducted in violation of any law, ordinance or regulation of any governmental
entity, except for possible violations that either singly or in the aggregate
would not reasonably be expected to have a Material Adverse Effect. Except for
the filing of a Form D within 15 days after the Closing Date (which Interiors
agrees it will file), and such other form(s) required by "blue sky" laws,
Interiors is not required under federal, state or local law, rule or regulation
to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or issue the
Note, or Warrant, in accordance with the terms hereof; provided that, for
purposes of the representation made in this sentence, Interiors is assuming and
relying upon the accuracy of the relevant representations and agreements of the
Holder herein.

            (m) No Material Adverse Change. Since January 1, 1999, no Material
Adverse Effect has occurred or exists with respect to Interiors, except as
disclosed in the SEC Documents, or as publicly announced.

                                       5
<PAGE>

            (n) No Undisclosed Liabilities. Interiors has no liabilities or
obligations, known or unknown, absolute or otherwise (individually or in the
aggregate), which are not disclosed in the SEC Documents or otherwise publicly
announced, or as incurred in the ordinary course of its businesses since January
1, 1999, or which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect.

            (o) No Undisclosed Events or Circumstances. Since January 1, 1999,
no event or circumstance has occurred or exists with respect to Interiors or its
businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by Interiors, but which has not been so
publicly announced or disclosed in the SEC Documents.

            (p) Litigation and Other Proceedings. Except as set forth in the SEC
Documents, there are no lawsuits or proceedings pending or to the knowledge of
Interiors threatened, against the Company, nor has the Company received any
written or oral notice of any such action, suit, proceeding or investigation,
which would reasonably be expected to have a Material Adverse Effect. Except as
set forth in the SEC Documents, no judgment, order, writ, injunction or decree
or award has been issued by or, so far as is known by Interiors, requested of
any court, arbitrator or governmental agency which would be reasonably expected
to result in a Material Adverse Effect.

            (q) Accuracy of Reports and Information. Interiors is in compliance,
to the extent applicable, with all reporting obligations under either Section
12(b), 12(g) or 15(d) of the Exchange Act. Interiors has complied in all
material respects and to the extent applicable with all reporting obligations,
under either Section 13(a) or 15(d) of the Exchange Act for a period of at least
twelve (12) months immediately preceding the Closing Date.

            (r) Acknowledgment of Dilution. Interiors is aware and acknowledges
that issuance of Common Stock upon the conversion of the Notes and/or exercise
of the Warrants, may result in dilution of the outstanding shares of Common
Stock, which dilution may be substantial under certain market conditions.
Interiors further acknowledges that its obligation to issue Additional Shares in
accordance with the terms of the Registration Rights Agreement, Underlying
Shares in accordance with the Notes, and Warrant Shares in accordance with the
Warrant is unconditional and absolute regardless of the effect of any such
dilution.

            (s) Employee Relations. Interiors is not involved in any labor
dispute, nor, to the knowledge of Interiors, is any such dispute threatened
which could reasonably be expected to have a Material Adverse Effect. None of
Interior's employees is a member of a union and Interiors believes that its
relations with its employees are good.

            (t) Insurance. Interiors is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of Interiors believes to be prudent and customary in the businesses
in which Interiors is engaged. Interiors has no notice to believe that it will
not be able to renew its existing insurance coverage as and when such coverage
expires, or obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material Adverse Effect.

                                       6
<PAGE>

            (u) Board Approval. The Board of Directors of Interiors has
concluded, in its good faith business judgment that the issuances of the
securities of Interiors in connection with this Agreement are in the best
interests of Interiors.

            (v) Integration. Interiors, any of its affiliates, or any person
acting on its or their behalf has not, shall not, and shall use its best efforts
to ensure that no affiliate shall, directly or indirectly, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security of
Interiors that would be integrated with the issuance of the Notes and Warrants
in a manner that would require the registration under the Securities Act of the
issue of the Notes and Warrants to the Holder. The Notes and Warrants are being
offered and sold pursuant to the terms hereunder, are not being offered and sold
as part of a previously commenced private placement of securities.

            (w) Patents and Trademarks. Interiors has, or has rights to use, all
patents, patent applications, trademarks, trademark applications, service marks,
trade names, copyrights, licenses, trade secrets and other intellectual property
rights which are necessary for use in connection with its business or which the
failure to so have would have a Material Adverse Effect (collectively, the
"Intellectual Property Rights"). To the best knowledge of Interiors, none of the
Intellectual Property Rights infringe on any rights of any other Person, and
Interiors either owns or has duly licensed or otherwise acquired all necessary
rights with respect to the Intellectual Property Rights. Interiors has not
received any notice from any third party of any claim of infringement by
Interiors of any of the Intellectual Property Rights, and has no reason to
believe there is any basis for any such claim. To the best knowledge of
Interiors, there is no existing infringement by another Person on any of the
Intellectual Property Rights.

            (x) Use of Proceeds. The net proceeds are to be used for general
working capital and not for the repayment of any judgment.

            (y) Subsidiaries. Except as disclosed in the SEC Documents,
Interiors does not presently own or control, directly or indirectly, any
interest in any other corporation, partnership, association or other business
entity. Petals, Inc. ("Petals") is a wholly owned subsidiary of the Company. The
Company is the beneficial owner all of the outstanding shares of Petals (a total
of 411 shares of Petals common stock). Petals is authorized to, and has the
power to enter into, and perform its obligations as set forth in this Agreement
and all Exhibits annexed hereto.

            (z) No Private Placements. Except as disclosed in the SEC Documents
and in Schedule 4.3 annexed hereto, Interiors has not conducted a private
placement of its Common Stock or of any debt or equity instrument convertible
into Common Stock within one year prior to the Closing Date. Except for the
transactions contemplated hereby, there are no outstanding securities issued by
Interiors that are entitled to registration rights under the Securities Act.
Except as disclosed in the SEC Documents, there are no outstanding securities
issued by Interiors that are directly or indirectly convertible into,
exercisable into, or exchangeable for, shares of Common Stock, that have
anti-dilution or similar rights that would be affected by the issuance of the
Notes, Warrants, Warrant Shares, and/or Underlying Shares.

                                       7
<PAGE>

            (aa) Permits; Compliance. Interiors and each of its subsidiaries is
in possession of and operating in compliance with all franchises, grants,
authorizations, licenses, permits, easements, variances, exemptions, consents,
certificates, approvals and orders necessary to own, lease and operate its
properties and to carry on its business as it is now being conducted
(collectively, the "Interiors Permits") all of which are valid and in full force
and effect, and there is no action pending or, to the knowledge of Interiors,
threatened regarding the suspension or cancellation of any of the Interiors
Permits except for such Interiors Permits, the failure of which to possess, or
the cancellation, or suspension of which, would not, individually or in the
aggregate, have a Material Adverse Effect. To Interior's knowledge, neither
Interiors nor any of its subsidiaries is in material conflict with, or in
material default or material violation of, any of the Interiors Permits. Since
January 1, 1999 neither Interiors nor any of its subsidiaries has received any
notification with respect to possible material conflicts, material defaults or
material violations of applicable laws.

            (bb) Taxes. Except where non-compliance would not have a Material
Adverse Effect, all federal, state, city and other tax returns, reports and
declarations required to be filed by or on behalf of Interiors have been filed
and such returns are complete and accurate and disclose all taxes (whether based
upon income, operations, purchases, sales, payroll, licenses, compensation,
business, capital, properties or assets or otherwise) required to be paid in the
periods covered thereby.

            (cc) No Bankruptcy. Interiors is aware of no facts or claims against
it that would, and Interiors has no present intention to, liquidate the assets
of Interiors and/or seek bankruptcy protection either voluntarily or
involuntarily.

            (dd) No Default. Except where non-compliance would not have a
Material Adverse Effect, Interiors is not in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust or other material instrument
or agreement to which it is a party or by which it is or its property is bound.

            (ee) Absence of Events of Default. Except as set forth in the SEC
Documents and this Agreement, no Event of Default, as defined in any agreement
to which Interiors is a party, and no event which, with the giving of notice or
the passage of time or both, would become an Event of Default (as so defined),
has occurred and is continuing, which would have a Material Adverse Effect.

            (ff) Governmental Consent, etc. Except for the filing of the Form D
and any state securities filings, no consent, approval or authorization of or
designation, declaration or filing with any governmental authority on the part
of Interiors is required in connection with the valid execution and delivery of
this Agreement, or the offer, sale or issuance of the Notes, Warrants,
Underlying Shares and/or Warrant Shares, or the consummation of any other
transaction contemplated hereby.

            (gg) Intellectual Property Rights. Except as disclosed in the SEC
Documents, Interiors has sufficient trademarks, trade names, patent rights,
copyrights and licenses to conduct

                                       8
<PAGE>

its business. To Interior's knowledge, neither Interiors nor its products is
infringing or will infringe any trademark, trade name, patent right, copyright,
license, trade secret or other similar right of others currently in existence;
and there is no claim being made against Interiors regarding any trademark,
trade name, patent, copyright, license, trade secret or other intellectual
property right which could have a Material Adverse Effect.

            (hh) Material Contracts. Except as set forth in the SEC Documents,
the agreements to which Interiors is a party described in the SEC Documents are
valid agreements, in full force and effect Interiors is not in material breach
or material default (with or without notice or lapse of time, or both) under any
of such agreements and, to Interior's knowledge, the other contracting party or
parties thereto are not in material breach or material default (with or without
notice or lapse of time, or both) under any of such agreements.

            (ii) Title to Assets. Except as set forth in SEC Documents,
Interiors has good and marketable title to all properties and material assets
described in the SEC Documents as owned by it, free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest other than
such as are not material to the business of Interiors.

            (jj) Full Disclosure. There is no fact known to Interiors (other
than general economic conditions known to the public generally) that has not
been publicly disclosed by Interiors or disclosed in writing to the Investor
which could reasonably be expected to have a Material Adverse Effect, or could
reasonably be expected to materially and adversely affect the ability of
Interiors to perform its obligations pursuant to this Agreement.

            (kk) Security Interest. Interiors agrees to cause Petals to give the
Holder a security interest on the Collateral during the time that any portion of
the Notes remains outstanding. Interiors represents and warrants that as of the
Closing Date there are no liens, encumbrances, claims or security interests on
the Collateral, other than the security interest given to the Holder pursuant to
this Agreement and the Security Agreement, and the security given to Limeridge
LLC which is acknowledged by all parties hereto. Interiors hereby agrees to file
a UCC-1 Financing Statement on the Collateral in favor of the Holder. Interiors
agrees that it will not, and will not cause Petals to, encumber the Collateral
in any way during the time the Notes remain outstanding.

      2.2 Holder's Representations and Warranties.

            (a) Title. The Holder is the owner, beneficially and of record, of
all the shares of Preferred Stock set forth beside its name on Schedule A,
exchanged hereby, free and clear of all liens, encumbrances, security
agreements, equities, options, claims, charges and restrictions. The Holder has
full power to transfer the Preferred Stock exchanged hereby with Interiors
without obtaining the consent or approval of any other person, entity or
governmental authority. The Preferred Stock being exchanged hereby constitute
all of the Preferred Stock owned by the Holder.

            (b) Information True and Correct. All the information that is set
forth in this Agreement with respect to the Holder is correct and complete as of
the date of this Agreement.

                                       9
<PAGE>

            (c) Knowledge and Experience. The Holder has such knowledge and
experience in financial and business matters that the Holder, together with its
representatives and advisors, if any, is capable of evaluating the merits and
risks of an investment in the Notes.

            (d) Holder's Liquidity. The Holder has adequate means of providing
for its current needs and contingencies and has no need for liquidity in
connection with the investment contemplated herein. The Holder acknowledges that
it must bear the economic risk of investment in the Notes for an indefinite
period of time, and that it could bear a loss of its entire investment in the
Notes, without materially impairing its financial wherewithal.

            (e) Execution of this Agreement. The Holder has the full right,
power and authority to enter into and to perform this Agreement and all other
agreements, certificates and documents executed and delivered, or to be executed
and delivered, by the Holder in connection herewith (collectively, with this
Agreement, the "Holder Documents"). This Agreement has been duly authorized,
executed and delivered by the Holder, and the Holder Documents are (or when
executed and delivered will be) legal, valid and binding obligations of the
Holder, enforceable in accordance with their respective terms.

            (f) Intent. Without limiting its ability to resell the Securities
pursuant to an effective registration statement or an exemption from
registration, the Holder has no present arrangement (whether or not legally
binding) at any time to sell the Notes and/or Warrants to or through any person
or entity; provided, however, that by making the representations herein, the
Holder does not agree to hold the securities for any minimum or other specific
term and reserves the right to dispose of the securities at any time in
accordance with federal and state securities laws applicable to such
disposition. Without limiting its ability to resell the securities, the Holder
represents that the Notes and Warrants are acquired for the Holder's own
account, for investment purposes only and not for distribution or resale to
others. The Holder agrees that it will not sell the securities unless they are
registered under the Securities Act or unless an exemption from such
registration is available.

            (g) Accredited Investor/Investment Experience. The Holder is an
accredited investor (as defined in Rule 501 of Regulation D), and has such
experience in business and financial matters that it is capable of evaluating
the merits and risks of an investment in the Notes and Warrants. As of the
Closing Date, the Holder (i) has adequate means of providing for its current
need and possible personal contingencies, (ii) has no need for liquidity in this
investment, (iii) is able to bear the substantial economic risk of an investment
in the Notes and Warrant for an indefinite period, and (iv) can afford the
complete loss of its investment. The Holder recognizes the highly speculative
nature of this investment. The Holder acknowledges that it has carefully read
the SEC Documents and the terms and conditions of the Notes and Warrants and
fully understands the contents thereof.

            (h) Not an Affiliate. The Holder is neither an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of
Interiors.

            (i) Absence of Conflicts. The execution and delivery of this
Agreement and any other document or instrument executed in connection herewith,
and the consummation of the transactions contemplated hereby and thereby, and
compliance with the requirements thereof,

                                       10
<PAGE>

will not (a) violate the organizational documents of any of the Holder; (b)
violate any law, rule, regulation, order, writ, judgment, injunction, decree or
award binding on the Holder, or, to the knowledge of the Holder; (c) violate any
provision of any indenture, instrument or agreement to which the Holder is a
party or are subject, or by which the Holder or any of its assets is bound; (d)
conflict with or constitute a material default thereunder; (e) result in the
creation or imposition of any lien pursuant to the terms of any such indenture,
instrument or agreement, or constitute a breach of any fiduciary duty owed by
the Holder to any third party; or (f) require the approval of any third-party
(which has not been obtained) pursuant to any material contract, agreement,
instrument, relationship or legal obligation to which the Holder is subject or
to which any of its assets, operations or management may be subject.

            (j) Disclosure; Access to Information. The Holder has received all
documents, records, books and other information pertaining to Holder's
investment in Interiors that have been requested by the Holder. The Holder has
had the opportunity to ask questions of, and receive answers from, Interiors.

            (k) Manner of Sale. At no time was the Holder presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising in
connection with the offer and sale of the Notes and Warrants.

            (l) Exemption from Registration. The Holder acknowledges and
understands that the Notes and Warrant have not been registered under the
Securities Act by reason of an exemption under the provisions of the Securities
Act.

            (m) No Legal, Tax or Investment Advice. The Holder understands that
nothing in this Agreement or any other materials presented to the Holder in
connection with the purchase and sale of the Notes and Warrants constitutes
legal, tax or investment advice. The Holder has relied on, and have consulted
with, such legal, tax and investment advisors as the Holder, in its sole
discretion, has deemed necessary or appropriate in connection with its purchase
of the Notes and Warrants.

      4. Covenants of Interiors. Interiors hereby covenants as follows:

            (a) Registration Rights. Interiors shall cause the Registration
Rights Agreement to remain in full force and effect so long as any Registrable
Securities (as defined in the Registration Rights Agreement) remain outstanding
and the Company shall comply in all material respects with the terms thereof.

            (b) Reservation of Common Stock. As of the date hereof, Interiors
has authorized and reserved, and Interiors shall continue to reserve and keep
available at all times, free of preemptive rights, no less than 150% of the
Underlying Shares assuming conversion of the full principal amount of Notes on
the Trading Day immediately preceding the Closing Date, plus 100% of the Warrant
Shares for the purpose of enabling Interiors to satisfy any obligation to issue
the Underlying Shares and Warrant Shares; such number of shares of Common Stock
to be reserved shall be calculated based upon the Conversion Price and Exercise
Price under the terms of this Agreement, the Notes and Warrants on the Trading
Day immediately preceding the

                                       11
<PAGE>

Closing Date. The number of shares so reserved shall be increased to reflect
potential decreases in the Common Stock that Interiors may thereafter be so
obligated to issue by reason of adjustments to the Conversion Price and/or
Exercise Price as set forth in the Notes and Warrants, or in the event of a
reduction of the bid price of the Common Stock as reported by Bloomberg LP.

            (c) Listing of Common Stock. Interiors shall (a) not later than the
30th calendar day following the Closing Date prepare and file with the national
securities exchange, market or trading facility on which the Common Stock is
then listed, an additional shares listing application covering at least the sum
of (i) 150% the number of Underlying Shares as would be issuable upon a
conversion of (and as payment of dividends in respect of) the full principal
amount of the Notes, assuming such conversion occurred on the Closing Date, and
(ii) the Warrant Shares issuable upon exercise in full of the Warrants, (b) take
all steps necessary to cause such shares to be approved for listing on the
national securities exchange, market or trading facility on which the Common
Stock is then listed as soon as possible thereafter, and (c) provide to the
Holder evidence of such listing, and Interiors shall maintain the listing of the
Common Stock on such exchange or market for so long as the Notes, Warrants,
Warrant Shares and/or Underlying Shares, is owned by the Holder. In addition, if
at any time the number of shares of Common Stock issuable on conversion of all
then outstanding principal amount of Notes, and/or upon exercise in full of the
Warrant is greater than the number of shares of Common Stock theretofore listed
with the national securities exchange, market or trading facility of the Common
Stock, Interiors shall promptly take such action (including the actions
described in the preceding sentence), if required pursuant to the rules and
regulations of the national securities exchange, market or trading facility of
the Common Stock, to file an additional shares listing application with the
national securities exchange, market or trading facility of the Common Stock
covering at least a number of shares equal to the sum of (x) 150% of the number
of Underlying Shares as would then be issuable upon a conversion in full of the
Notes, and (y) the number of Warrant Shares as would be issuable upon exercise
in full of the Warrants. Interiors warrants that it (i) has not received any
notice, oral or written, affecting it's continued listing on the Nasdaq Small
Cap Market, and (ii) is in full compliance with the requirements for continued
listing on the Nasdaq Small Cap Market. Interiors will take no action, which
would adversely impact its continued listing or the eligibility of Interiors for
such listing. Interiors will comply with the listing and trading requirements of
its Common Stock on the Nasdaq Small Cap Market (and of any then national
securities exchange, market or trading facility of the Common Stock) and will
comply in all respects with Interior's reporting, filing and other obligations
under the bylaws or rules of the national securities exchange, market or trading
facility of the Common Stock. If Interiors receives notification from Nasdaq or
any other entity stating that Interiors is not in compliance with the listing
qualifications of such Principal Market, Interiors will immediately thereafter
give written notice to the Holder and take all action necessary to bring
Interiors into compliance with all applicable listing standards of the national
securities exchange, market or trading facility of the Common Stock.

            (d) Exchange Act Registration. Interiors will maintain the
registration of the Common Stock under Section 12 of the Exchange Act, will
comply in all respects with its reporting and filing obligations under the
Exchange Act, and will not take any action or file any

                                       12
<PAGE>

document (whether or not permitted by Exchange Act or the rules thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under said Act.

            (e) Corporate Existence. Interiors will take all steps necessary to
preserve and continue the corporate existence of Interiors and Petals.

            (f) Notice of Certain Events Affecting Registration. Interiors will
immediately notify the Holder upon the occurrence of any of the following events
in respect of a registration statement or related prospectus in respect of an
offering of Registrable Securities: (i) receipt of any request for additional
information by the SEC or any other federal or state governmental authority
during the period of effectiveness of the Registration Statement for amendments
or supplements to the Registration Statement or related prospectus; (ii) the
issuance by the SEC or any other federal or state governmental authority of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) the happening of any event that makes any statement made in the
Registration Statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the related prospectus, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (v) the Interior's reasonable determination that a
post-effective amendment to the Registration Statement would be appropriate.
Interiors will promptly make available to the Holder any such supplement or
amendment to the related prospectus.

            (g) Consolidation; Merger. For so long as any of the Notes,
Warrants, Underlying Shares and/or Warrant Shares are owned by the Holder,
Interiors shall not, at any time after the date hereof, effect any merger or
consolidation of Interiors with or into, or a transfer of all or substantially
all of the assets of Interiors to, another entity (a "Consolidation Event")
unless the resulting successor or acquiring entity (if not Interiors) assumes by
written instrument the obligation to deliver to the Holder such shares of stock
and/or securities as the Holder is entitled to receive pursuant to this
Agreement, and all Exhibits annexed hereto.

            (h) Issuance of Underlying Shares and Warrant Shares. The issuance
of the Warrant Shares and the Underlying Shares pursuant to exercise of the
Warrants and the conversion of the Notes, shall be made in accordance with the
provisions and requirements of Section 4(2) of the Securities Act or Regulation
D and any applicable state securities law.

            (i) Legal Opinion. Interior's independent counsel shall deliver to
the Holder upon execution of this Agreement, an opinion in the form of Exhibit
D. Interiors will obtain for the Holder, at Interiors expense, any and all
opinions of counsel which may be reasonably

                                       13
<PAGE>

required in order to convert the Notes and/or exercise the Warrants, including,
but not limited to, obtaining for the Holder an opinion of counsel, subject only
to receipt of a notice of conversion (the "Notice of Conversion") in the form of
Exhibit F, and/or subject only to a receipt of a notice of exercise in the form
annexed to the Warrant, directing Interior's transfer agent to remove the legend
from the certificate.

            (j) Restrictions on Future Financing. Interiors agrees that it shall
not enter into any financing transactions which provide for (i) the issuance of
shares of Common Stock that are freely tradable by such holder prior to the
first anniversary of the Closing Date, or (ii) any securities that are
convertible into Common Stock prior to the first anniversary of the Closing
Date.

            (k) Exercise of Warrants. Interiors will permit the Holder to
exercise its right to purchase shares of Common Stock upon exercise of the
Warrants as is set forth in the Warrants.

            (l) Conversion of Notes. Interiors will permit the Holder to
exercise its right to convert the Notes by telecopying an executed and completed
Notice of Conversion to Interiors.

            (m) Increase in Authorized Shares. At such time as Interiors would
be, if a Notice of Conversion or notice of exercise (as the case may be) were to
be delivered on such date, precluded from (a) converting in full all of the
Notes that remain unconverted at such date (and paying any accrued but unpaid
dividends in respect thereof in shares of Common Stock), or (b) honoring the
exercise in full of the Warrant, due to the unavailability of a sufficient
number of shares of authorized but unissued or re-acquired Common Stock, the
Board of Directors of Interiors shall promptly (and in any case within 75
calendar days from such date) hold a shareholders meeting in which the
shareholders would vote for authorization to amend the Articles of Incorporation
to increase the number of shares of Common Stock which Interiors is authorized
to issue to at least a number of shares equal to the sum of (i) all shares of
Common Stock then outstanding, (ii) the number of shares of Common Stock
issuable on account of all outstanding warrants, options and convertible
securities (other than the Notes and Warrants) and on account of all shares
reserved under any stock option, stock purchase, warrant or similar plan, (iii)
150% of the number of Underlying Shares as would then be issuable upon a
conversion in full of the then outstanding Notes and as payment of all future
dividends thereon in shares of Common Stock in accordance with the terms of this
Agreement and the Notes, and (iv) such number of Warrant Shares as would then be
issuable upon the exercise in full of the Warrant. In connection therewith, the
Board of Directors shall (x) adopt proper resolutions authorizing such increase,
(y) recommend to its shareholders, and otherwise use its best efforts to
promptly and duly obtain shareholder approval to carry out such resolutions and
(z) within five Business Days of obtaining such shareholder authorization, file
an appropriate amendment to the Articles of Incorporation to evidence such
increase. The foregoing shall not relieve Interiors from any claim for damages
that the Holder may have against Interiors as a result of Interiors not having a
sufficient number of authorized shares of Common Stock to satisfy its
obligations under this Agreement or any Exhibit annexed hereto.

                                       14
<PAGE>

            (n) Notice of Breaches. Each of Interiors on the one hand, and the
Holder on the other, shall give prompt written notice to the other of any breach
by it of any representation, covenant, warranty or other agreement contained in
this Agreement or any Exhibit annexed hereto, as well as any events or
occurrences arising after the date hereof, which would reasonably be likely to
cause any representation, covenant, or warranty or other agreement of such
party, as the case may be, contained in this Agreement or any Exhibit annexed
hereto, to be incorrect or breached as of such Closing Date. However, no
disclosure by either party pursuant to this Section shall be deemed to cure any
breach of any representation, warranty or other agreement contained in this
Agreement or any Exhibit annexed hereto. Notwithstanding the generality of the
foregoing, Interiors shall promptly notify the Holder of any notice or claim
(written or oral) that it receives from any lender of Interiors to the effect
that the consummation of the transactions contemplated by this Agreement or any
Exhibit annexed hereto, violates or would violate any written agreement or
understanding between such lender and Interiors, and Interiors shall promptly
furnish by facsimile to the Holder a copy of any written statement in support of
or relating to such claim or notice.

            (o) Transfer of Intellectual Property Rights. Except in the ordinary
course of Interior's business or in connection with the sale of all or
substantially all of its assets, Interiors shall not transfer, sell or otherwise
dispose of, any Intellectual Property Rights, or allow the Intellectual Property
Rights to become subject to any Liens, or fail to renew such Intellectual
Property Rights (if renewable and would otherwise expire); provided, however,
Interiors may license the Intellectual Property Rights.

            (p) Notices. Interiors agrees to provide all holders of Notes and
Warrants with copies of all notices and information, including without
limitation notices and proxy statements in connection with any meetings, that
are provided to the holders of shares of Common Stock, contemporaneously with
the delivery of such notices or information to such Common Stock holders.

            (q) Questions/Answers. Interiors shall provide the Holder with the
opportunity to ask additional questions of, and receive answers (all of which
information shall be limited to information in the public domain) from Interiors
concerning Interiors during the period that the Holder owns the Notes and/or
Warrants.

            (r) Rule 144 Compliance. Interiors covenants and agrees that for so
long as any of the Common Stock issuable upon conversion of the Notes remain
outstanding and continue to be "restricted securities" within the meaning of
Rule 144 under the Act, Interiors shall cooperate in order to permit resales of
the Underlying Shares pursuant to Rule 144 under the Act. Interiors shall
provide its transfer agent any and all papers necessary to complete the transfer
under Rule 144, including, but not limited to, opinions of counsel to its
transfer agent, and Interiors shall continue to file all material required to be
filed pursuant to Sections 13(a) or 15(d) of the 1934 Act.

            (s) Transfer Agent. Interiors agrees that it shall issue the
Transfer Agent instructions annexed hereto as Exhibit G to its transfer agent as
per the terms of the Registration Rights Agreement.

                                       15
<PAGE>

      4. Notices. All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing and, unless
otherwise specified herein, shall be (i) personally served, (ii) deposited in
the mail, registered or certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a Business
Day between the hours of 9:00 a.m. and 5:00 p.m. where such notice is to be
received), or the first Business Day following such delivery (if delivered other
than on a Business Day between the hours of 9:00 a.m. and 5:00 p.m. where such
notice is to be received), (b) on the second Business Day following the date of
mailing by reputable courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur, or (c) five
calendar days after sent by regular mail. The addresses for such communications
shall be:

      If to Interiors:

                  Interiors, Inc.
                  320 Washington Street
                  Mount Vernon, New York 10553
                  Attention: Max Munn, President
                  Telephone:  (914) 665-5400
                  Facsimile: (914) 665-5469

      If to the Holder:

                  Endeavour Capital Fund SA
                  The Maduro Building, P.O. Box 662,
                  Wickhams Cay, Road Town, Tortola,
                  British Virgin Islands
                  Telephone: (284) 494-2217
                  Facsimile: (284) 494-3917
                  Attention: Phil Williams

            with a copy to:

                  Scott H. Goldstein, Esq.
                  The Goldstein Law Group, P.C.
                  65 Broadway, 10th Floor
                  New York, New York 10006
                  Telephone No. (212) 809-4220
                  Telecopier No. (212) 809-4228

                                       16
<PAGE>

      5. Choice of Law/Jurisdiction. This Agreement and all transactions
contemplated by this Agreement shall be exclusively governed by, and construed
and enforced in accordance with, the internal laws of the State of New York
without regard to principles of conflicts of laws. Each party consents to the
exclusive jurisdiction of the United States District Court of the Southern
District of New York in connection with any dispute arising under this Agreement
and hereby waive, to the maximum extent permitted by law, any objection,
including any objection based on forum non conveniens, to the bringing of any
such proceeding in such jurisdictions.

      6. Survival of Representations. All statements contained in any
certificate or instrument or conveyance delivered by or on behalf of the parties
pursuant to this Agreement or in connection with the transactions contemplated
hereby shall be deemed to be additional representations and warranties of the
parties making such disclosure. All representations and warranties shall survive
the exchange as contemplated herein.

      7. Assignment. Neither this Agreement nor any of the rights or obligations
hereunder may be assigned by either party without the prior written consent of
the other party hereto, which consent shall not be unreasonably withheld or
delayed. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, and no other person shall have any right, benefit or obligation
hereunder.

      8. Entire Agreement; Amendments and Waivers. This Agreement, together with
all exhibits, attachments and schedules hereto, constitutes the entire agreement
among the parties pertaining to the subject matter hereof and supersedes all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. No supplement, amendment, modification or waiver of
this Agreement shall be binding unless executed in writing by the party to be
bound thereby. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.

      9. Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein shall
for any reason be held invalid, illegal or unenforceable in any respect, then
such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement or any other instrument.

      10. Further Assurances. The parties shall cooperate and take such actions,
and execute such other documents, in connection with the transactions
contemplated herein, as either may reasonably request in order to carry out the
provisions or purpose of this Agreement.

      11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

      12. Indemnification. Interiors agrees to indemnify and hold harmless the
Holder and each agent and affiliate of the Holder against any losses, claims,
damages or liabilities, joint or several (which shall, for all purposes of this
Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees), to which any of the Holder may become

                                       17
<PAGE>

subject, under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon the breach by Interiors of any term of this Agreement. This indemnity
agreement will be in addition to any liability, which Interiors may otherwise
have. The Holder agrees that it will indemnify and hold harmless Interiors, and
each officer, director of Interiors or person, if any, who controls Interiors
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities (which shall, for all purposes of this Agreement, include, but not
be limited to, all costs of defense and investigation and all attorneys' fees)
to which Interiors or any such officer, director or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon the breach by such Person of any term of this Agreement. This
indemnity agreement will be in addition to any liability, which the Holder or
any subsequent assignee may otherwise have.

      Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve the indemnifying
party from any liability which it may have to any indemnified party otherwise
than as to the particular item as to which indemnification is then being sought
solely pursuant to this Section. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party similarly
notified, assume the defense thereof, subject to the provisions herein stated
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation, unless the
indemnifying party shall not pursue the action to its final conclusion. The
indemnified party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the indemnified party; provided that if the indemnified party is
one of the Investor, the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party, or (ii) the named
parties to any such action (including any impleaded parties) include both the
Investor and the indemnifying party and the Investor shall have been advised by
such counsel that there may be one or more legal defenses available to the
indemnifying party different from or in conflict with any legal defenses which
may be available to the Holder (in which case the indemnifying party shall not
have the right to assume the defense of such action on behalf of the Holder, it
being understood, however, that the indemnifying party shall, in connection with
any one such action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable only for the reasonable fees and expenses of one
separate firm of attorneys for the Holder, which firm shall be designated in
writing by the Holder). No settlement of any action against an indemnified party
shall be made without the prior written consent of the indemnified party, which
consent shall not be unreasonably withheld.

                                       18
<PAGE>

      Each party hereby agrees that if another party to this Agreement obtains a
judgment against it in such a proceeding, the party which obtained such judgment
may enforce same by summary judgment in the courts of any country having
jurisdiction over the party against whom such judgment was obtained, and each
party hereby waives any defenses available to it under local law and agrees to
the enforcement of such a judgment. Each party to this Agreement irrevocably
consents to the service of process in any such proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to such party
at its address set forth herein. Nothing herein shall affect the right of any
party to serve process in any other manner permitted by law. Each party waives
its right to a trial by jury. If the Holder, or any person claimed to be
affiliated or associated with the Investor, becomes involved in any capacity in
any action, proceeding or investigation brought by or against any such person,
including shareholders of Interiors, in connection with or as a result of any
matter referred to in this Agreement or any Exhibit annexed hereto, Interiors
shall reimburse the Investor and/or those claimed to be affiliated or associated
with the Holder for its legal fees and expenses and other expenses (including
the cost of any investigation and preparation) incurred in connection therewith,
provided, however, that if at the conclusion of such action, proceeding or
investigation it shall be finally judicially determined by a court of competent
jurisdiction that indemnity for such fees and expenses is contrary to law, or
that the Holder is not the prevailing party then in that event, Interiors shall
not be responsible for such payment.

      13. Contribution. In order to provide for just and equitable contribution
under the Securities Act in any case in which (i) the indemnified party makes a
claim for indemnification pursuant to Section 11.2 hereof but is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 11.2 hereof
provide for indemnification in such case, or (ii) contribution under the
Securities Act may be required on the part of any indemnified party, then
Interiors and the Holder shall contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and investigation and all attorneys' fees), in either such case (after
contribution from others) on the basis of relative fault as well as any other
relevant equitable considerations. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in Section 12 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contributions from any person who was
not guilty of such fraudulent misrepresentation.

                                       19
<PAGE>

      14. Counterparts; Facsimile; Amendments. This Agreement may be executed in
multiple counterparts, each of which may be executed by less than all of the
parties and shall be deemed to be an original instrument which shall be
enforceable against the parties actually executing such counterparts and all of
which together shall constitute one and the same instrument. Except as otherwise
stated herein, in lieu of the original documents, a facsimile transmission or
copy of the original documents shall be as effective and enforceable as the
original. This Agreement may be amended only by a writing executed by the
Company on the one hand, and all of the Investor on the other hand.

      15. Entire Agreement. This Agreement, and the Exhibits and Schedules
annexed hereto, set forth the entire agreement and understanding of the parties
relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written relating to the subject matter hereof. The terms and
conditions of all Exhibits and Schedules to this Agreement are incorporated
herein by this reference and shall constitute part of this Agreement as is fully
set forth herein.

      16. Survival; Severability. The representations, and warranties of the
parties hereto shall survive for a period of one year after the termination of
this Agreement as provided above. If any provision of this Agreement becomes or
is declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.

      17. Title and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.

      18. Reporting Entity for the Common Stock. The reporting entity relied
upon for the determination of the trading price or trading volume of the Common
Stock on any given Trading Day for the purposes of this Agreement and all
Exhibits shall be Bloomberg, L.P. or any successor thereto. The written mutual
consent of the Holder and Interiors shall be required to rely upon any other
reporting entity.

      19. Replacement of Certificates. Upon (i) receipt of evidence reasonably
satisfactory to Interiors of the loss, theft, destruction or mutilation of any
of the Notes, Warrants, Additional Shares, Warrant Shares and/or Underlying
Shares, and (ii) in the case of any such loss, theft or destruction of such
certificate, upon delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to Interiors, and to Interior's transfer agent,
or (iii) in the case of any such mutilation, on surrender and cancellation of
such certificate, Interiors at its expense will execute and deliver, in lieu
thereof, a new certificate of like tenor.

      20. Exchange. Interiors shall pay to the Holder the sum equal to one
percent (1%) of the outstanding principal amount of the Notes on the last
Business Day of each calendar month (or such earlier day that the Note has been
redeemed and/or converted) (pro rated for any period less than a full calendar
month) after the Closing Date for as long as the Notes remain outstanding. The
first such payment shall be due on the Closing Date and shall cover the period

                                       20
<PAGE>

from September 30, 1999 through November 30, 1999. All future payment(s) shall
be made within five business days of when due and shall be payable in
immediately available funds.

      21. Publicity. Interiors and the Holder shall consult with each other in
issuing any press releases or otherwise making public statements with respect to
the transactions contemplated hereby and no party shall issue any such press
release or otherwise make any such public statement without the prior written
consent of the other parties, which consent shall not be unreasonably withheld
or delayed, except that no prior consent shall be required if such disclosure is
required by law, in which such case the disclosing party shall provide the other
parties with prior notice of such public statement. Notwithstanding the
foregoing, Interiors shall not publicly disclose the name of the Holder without
the prior written consent of the Holder, except to the extent required by law,
in which case Interiors shall provide the Holder with prior written notice of
such public disclosure.

EXHIBITS:

A:    Note
B:    Common Stock Purchase Warrant
C:    Escrow Agreement
D:    Legal Opinion
E:    Registration Rights Agreement
F:    Notice of Conversion

                                       21
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Exchange Agreement
to be duly executed, on the day and year first above written.

                                        INTERIORS, INC.

                                        By: /s/ Max Munn
                                          --------------------------------------
                                          Name:
                                          Title:

                                        ENDEAVOUR CAPITAL FUND SA

                                        By: /s/
                                           -------------------------------------
                                           Name:
                                           Title:

                                       22
<PAGE>

                                   Schedule A

                              Principal Amount of            No. Shares of
         Holder                      Notes                  Preferred Stock
         ------                      -----                  ---------------

Endeavour Capital Fund SA          $1,744,518                    1,500

                                       23No.   2                                                           $1,744,518 USD
     ---

                                 INTERIORS, INC.

                 Secured Convertible Note due September 29, 2004

      THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
APPLICABLE STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER
THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THERE IS AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

            This Secured Convertible Note is duly authorized issue of Secured
Convertible Notes of Interiors Inc., a Delaware corporation (the "Issuer"),
issued on December 31, 1999 (the "Issuance Date"), and designated as its Secured
Convertible Note due September 29, 2004 (the "Note").

            This Note has been issued under the terms and provisions of the
Exchange Agreement dated as of December 31, 1999 between the Issuer and Holder
(the "Exchange Agreement") and shall be subject to all of the terms and
conditions and entitled to all of the benefits thereof. This Note has been
secured by the Collateral (as defined in the Security Agreement) pursuant to the
terms of the Exchange Agreement and a security agreement (the "Security
Agreement") entered into between the Issuer and the Holder.

                FOR VALUE RECEIVED, the Issuer promises to pay to

                            Endeavour Capital Fund SA

             the registered holder hereof or its registered assigns,
                  if any (the "Holder"), the principal sum of:

       One Million Seven Hundred Forty Four Thousand Five Hundred Eighteen

                             United States Dollars,
<PAGE>

on or prior to September 29, 2004 (the "Maturity Date") or such earlier date
this Note is required to be repaid by the Issuer pursuant to the terms herein,
and to pay interest, as outlined below, at the rate of seventeen percent (17%)
per annum on the principal sum outstanding for the term of this Note. Accrual of
interest shall commence as of September 30, 1999, and shall accrue from day to
day. Interest shall be payable in cash by the Issuer upon the earlier to occur
of (a) a Conversion Date, (b) redemption as set forth below, or (c) upon an
Event of Default as defined below. Unless otherwise agreed in writing by both
parties hereto, the interest so payable will be paid to the person in whose name
this Note (or one or more predecessor Notes) is registered on the records of the
Issuer regarding registration and transfers of the Note (the "Note Register"),
provided, however, that the Issuer's obligation to a transferee of this Note
arises only if such transfer, sale or other disposition is made in accordance
with the terms and conditions contained in the Exchange Agreement and this Note.

      In the event this Note is outstanding on the Maturity Date it shall
automatically be converted into shares of the Issuer's Class A Common Stock,
$0.001 par value per share (the "Common Stock") (as set forth below) as if the
Holder voluntarily elected such conversion in accordance with the procedures,
terms and conditions set forth in this Note, provided, that such shares of
Common Stock are either (a) registered at such time for resale under the
Securities Act, or (b) otherwise resalable under the Securities Act without
restriction to limitation under Rule 144, and (i) the Common Stock is listed on
the Nasdaq Small Cap Market or other principal market of the Common Stock at
such time and has been listed on such market for at least the preceding sixty
trading days, (ii) there has not been any suspension in the trading of the
Common Stock on the Nasdaq Small Cap Market or other Principal Market, and the
(iii) the Issuer has been in compliance in all material respects with the terms
and conditions of this Note, the Exchange Agreement, and the Security Agreement
 . In the event that (i), (ii), and (iii) of the preceding sentence are not
satisfied then the Issuer shall be obligated to pay the Holder the cash value of
the principal amount of this Note outstanding on such date as if such Note had
been converted and sold on such date (at the Bid Price as defined below) in
accordance with the conversion provisions set forth below, plus all unpaid
interest. Principal and interest are payable at the address last appearing on
the Note Register as designated in writing by the Holder hereof from time to
time.

      The Note is subject to the following additional provisions:

      1. The Note is exchangeable for like Notes in equal aggregate principal
amount of authorized denominations, as requested by the Holder surrendering the
same, but shall not be issuable in denominations of less than $50,000 (unless
such amount represents the remaining principal balance outstanding). No service
charge will be made for such registration or transfer or exchange.

      2. The Issuer shall be entitled to withhold from all payments of principal
and/or interest of this Note any amounts required to be withheld under the
applicable provisions of the U.S. Internal Revenue Code of 1986, as amended, or
other applicable laws at the time of such payments.

                                       23
<PAGE>

      3. This Note has been issued subject to investment representations of the
original Holder hereof and may be transferred or exchanged only in compliance
with the Securities Act and applicable state securities laws. Prior to the due
presentment for such transfer of this Note, the Issuer and any agent of the
Issuer may treat the person in whose name this Note is duly registered on the
Note Register as the owner hereof for the purpose of receiving payment as herein
provided and all other purposes, whether or not this Note is overdue, and
neither the Issuer nor any such agent shall be affected by notice to the
contrary. The transferee shall be bound, as the original Holder by the same
representations and terms described herein and under the Exchange Agreement.

      4. The Holder is entitled, at its option, at any time after September 29,
2000 to convert this Note, in whole or in part, in accordance with the following
terms and conditions:

            (a) The Holder may exercise its right to convert the Note by
telecopying an executed and completed notice of conversion (the "Notice of
Conversion") to the Issuer and delivering the original Note to the Issuer by
express courier. Each Business Day on which a Notice of Conversion is telecopied
to and received by the Issuer in accordance with the provisions hereof shall be
deemed a "Conversion Date". The Issuer will transmit the certificates
representing shares of Common Stock issuable upon conversion of the Note
(together with the certificates representing the Note not so converted) to the
Holder via express courier, by electronic transfer (if applicable) or otherwise
within five Business Days after the Conversion Date, provided, the Issuer has
received the original Note being so converted. If the Company has not received
the original Note being converted within three Business Days after Conversion
Date, then the Issuer shall transmit the certificates representing the shares of
Common Stock issuable upon conversion of the Note (together with the
certificates representing the Note not so converted) to the Holder via express
courier, by electronic transfer (if applicable) or otherwise within three
Business Days after receipt of the original Note being converted. In addition to
any other remedies which may be available to the Holder, in the event that the
Issuer fails to effect delivery of such shares of Common Stock within (i) five
Business Days after receipt of a Notice of Conversion (provided the Issuer has
received the original Note within three Business Days after the Conversion
Date), or (ii) three Business Days after receipt of the original Note being
converted if the Issuer has not received the original Note being converted
within three Business Days after the Conversion Date, the Holder will be
entitled to revoke the Notice of Conversion by delivering a notice to such
effect to the Issuer whereupon the Issuer and the Holder shall each be restored
to their respective positions immediately prior to delivery of the Notice of
Conversion. The Notice of Conversion and Note representing the portion of the
Note converted shall be delivered as follows:

            To the Issuer:

                        Interiors, Inc.
                        320 Washington Street
                        Mount Vernon, New York 10553
                        Telephone:  (914) 665-5400
                        Facsimile: (914) 665-5469
                        Attention: President

                                       3
<PAGE>

                  or to such other address as may be communicated by the Issuer
            to the Holder in writing.

            In the event that the Common Stock issuable upon conversion of the
Note is not delivered to the Holder within (i) seven Business Days after the
Conversion Date (provided the Issuer has received the original Notice of
Conversion and Note within three Business Days after the Conversion Date), or
(ii) three Business Days after receipt of the original Notice of Conversion and
original Note being converted if the Issuer has not received the original Notice
of Conversion and original Note being converted within three Business Days after
the Conversion Date (and assuming the Holder has not revoked such Notice of
Conversion as permitted above), the Issuer shall pay to the Holder, in
immediately available funds, upon demand, as liquidated damages for such failure
and not as a penalty, for each $100,000 principal amount of Note sought to be
converted, $250 for each calendar day that the shares of Common Stock are not
delivered, which liquidated damages shall run from the eighth Business Day after
the Conversion Date up until the time that either the Notice of Conversion is
revoked or the Common Stock is delivered, at which time such liquidated damages
shall cease. Any and all payments required pursuant to this paragraph shall be
payable only in cash immediately. The Holder's right to liquidated damages
pursuant to the terms of this Section shall in no way affect the Holder's right
pursuant to Section 7 below to consider this Note immediately due and payable
upon the occurrence of an Event of Default (as defined in Section 7 below).

            (b) The Holder may, at its sole option convert this Note into that
number of shares of fully paid and nonassessable shares of Common Stock (the
"Conversion Shares") which is to be derived from dividing the Conversion Amount
by the Conversion Price. For purposes of this Note, the term "Conversion Amount"
shall mean the principal dollar amount of the Note being converted. The
"Conversion Price" shall be equal to one hundred (100%) percent of the average
of Bid Price during the five consecutive trading days immediately preceding a
Conversion Date, as such Conversion Price shall be adjusted pursuant to the
terms hereof. The "Bid Price" shall be deemed to be the reported last bid price
regular way of the Common Stock as reported by Bloomberg LP or if unavailable,
on the principal national securities exchange on which the Common Stock is
listed or admitted to trading, or if the Common Stock is not listed or admitted
to trading on any national securities exchange, the closing bid price as
reported by Nasdaq or such other system then in use, or, if the Common Stock is
not quoted by any such organization, the closing bid price in the
over-the-counter market as furnished by the principal national securities
exchange on which the Common Stock is traded. The principal amount of this Note
shall be reduced as per that principal amount indicated on the Notice of
Conversion upon the proper receipt by the Holder of such shares of Common Stock
due upon such Notice of Conversion.

            (c) Upon each adjustment of the Conversion Price, the Holder shall
thereafter be entitled to (but not obligated to) receive upon conversion of this
Note, at the Conversion Price resulting from such adjustment, the number of
shares of Common Stock obtained by (i) multiplying the Conversion Price in
effect immediately prior to such adjustment by the number of shares of Common
Stock receivable hereunder immediately prior to such adjustment and (ii)
dividing the product thereof by the Conversion Price resulting from such
adjustment.

                                       4
<PAGE>

            (d)   The Conversion Price shall be adjusted as follows:

                  (i) In the case of any amendment to the Issuer's Certificate
of Incorporation to change the designation of the Common Stock or the rights,
privileges, restrictions or conditions in respect to the Common Stock or
division of the Common Stock, this Note shall be adjusted so as to provide that
upon exercise thereof, the Holder shall receive, in lieu of each share of Common
Stock theretofore issuable upon such conversion, the kind and amount of shares,
other securities, money and property receivable upon such designation, change or
division by the Holder issuable upon such conversion had the conversion occurred
immediately prior to such designation, change or division. This Note shall be
deemed thereafter to provide for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section. The provisions of this Subsection (i) shall apply in the same manner to
successive reclassifications, changes, consolidations and mergers.

                  (ii) If the Issuer shall at any time subdivide its outstanding
shares of Common Stock into a greater number of shares of Common Stock, or
declare a dividend or make any other distribution upon the Common Stock payable
in shares of Common Stock, the Conversion Price in effect immediately prior to
such subdivision or dividend or other distribution shall be proportionately
reduced, and conversely, in case the outstanding shares of Common Stock shall be
combined into a smaller number of shares of Common Stock, the Conversion Price
in effect immediately prior to such combination shall be proportionately
increased.

                  (iii) If any capital reorganization or reclassification of the
capital stock of the Issuer, or any consolidation or merger of the Issuer with
or into another corporation or other entity, or the sale of all or substantially
all of the Issuer's assets to another corporation or other entity shall be
effected in such a way that holders of shares of Common Stock shall be entitled
to receive stock, securities, other evidence of equity ownership or assets with
respect to or in exchange for shares of Common Stock, then, as a condition of
such reorganization, reclassification, consolidation, merger or sale (except as
otherwise provided below in this Section) lawful and adequate provisions shall
be made whereby the Holder shall thereafter have the right to receive upon the
conversion hereof upon the basis and upon the terms and conditions specified
herein, such shares of stock, securities, other evidence of equity ownership or
assets as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Common Stock equal to the number of shares of
Common Stock immediately theretofore receivable upon the conversion of this Note
under this Section had such reorganization, reclassification, consolidation,
merger or sale not taken place, and in any such case appropriate provisions
shall be made with respect to the rights and interests of the holder to the end
that the provisions hereof (including, without limitation, provisions for
adjustments of the Conversion Price and of the number of shares of Common Stock
receivable upon the conversion of this Note) shall thereafter be applicable, as
nearly as may be, in relation to any shares of stock, securities, other evidence
of equity ownership or assets thereafter deliverable upon the exercise hereof
including an immediate adjustment, by reason of such consolidation or merger, of
the Conversion Price to the value for the Common Stock reflected, by the terms
of such consolidation or merger if the value so reflected is less than the
Conversion Price in effect immediately prior to such consolidation or merger.
Subject to the terms of this Note, in the event

                                       5
<PAGE>

of a merger or consolidation of the Issuer with or into another corporation or
other entity as a result of which the number of shares of common stock of the
surviving corporation or other entity issuable to investors of Common Stock, is
greater or lesser than the number of shares of Common Stock of the Issuer
outstanding immediately prior to such merger or consolidation, then the
Conversion Price in effect immediately prior to such merger or consolidation
shall be adjusted in the same manner as though there were a subdivision or
combination of the outstanding shares of Common Stock. The Issuer shall not
effect any such consolidation, merger or sale, unless, prior to the consummation
thereof, the successor corporation (if other than the Issuer) resulting from
such consolidation or merger or the corporation purchasing such assets shall
assume by written instrument the obligation to deliver to the Holder such shares
of stock, securities, other evidence of equity ownership or assets as, in
accordance with the foregoing provisions, the Holder may be entitled to receive
or otherwise acquire. If a purchase, tender or exchange offer is made to and
accepted by the holders of more than fifty (50%) percent of the outstanding
shares of Common Stock, the Issuer shall not effect any consolidation, merger or
sale with the person having made such offer or with any affiliate of such
person, unless prior to the consummation of such consolidation, merger or sale
the Holder shall have been given a reasonable opportunity to then elect to
receive upon the conversion of this Note the amount of stock, securities, other
evidence of equity ownership or assets then issuable with respect to the number
of shares of Common Stock in accordance with such offer.

                  (iv) In case the Issuer shall, at any time prior to conversion
of this Note, consolidate or merge with any other corporation or other entity
(where the Issuer is not the surviving entity) or transfer all or substantially
all of its assets to any other corporation or other entity, then the Issuer
shall, as a condition precedent to such transaction, cause effective provision
to be made so that the Holder upon the conversion of this Note after the
effective date of such transaction shall be entitled to receive the kind and,
amount of shares, evidences of indebtedness and/or other securities or property
receivable on such transaction by the Holder of the number of shares of Common
Stock as to which this Note was convertible immediately prior to such
transaction (without giving effect to any restriction upon such exercise); and,
in any such case, appropriate provision shall be made with respect to the rights
and interests of the Holder to the end that the provisions of this Note shall
thereafter be applicable (as nearly as may be practicable) with respect to any
shares, evidences of indebtedness or other securities or assets thereafter
deliverable upon conversion of this Note. Upon the occurrence of any event
described in this Subsection (iv), the Holder shall have the right to (i)
convert this Note immediately prior to such event at a Conversion Price equal to
the lesser of (a) the then Conversion Price or (b) the price per share of Common
Stock paid in such event, (ii) retain ownership of this Note, in which event,
appropriate provisions shall be made so that this Note shall be convertible at
the Holder's option into shares of stock, securities or other equity ownership
of the surviving or acquiring entity, or (iii) force redemption of the then
outstanding principal amount of this Note in accordance with the provisions of
Section 18 below.

                  (v) Whenever the Conversion Price shall be adjusted pursuant
to this Section the Issuer shall promptly mail by registered or certified mail,
return receipt requested, to the Holder a certificate signed by its President or
Vice President and by its Treasurer, or Secretary, setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated (including a description of

                                       6
<PAGE>

the basis on which the Board of Directors of the Issuer made any determination
hereunder), and the Conversion Price after giving effect to such adjustment, and
shall cause copies of such certificates to be mailed (by first-class mail,
postage prepaid) to the Holder. The Issuer shall make such certificate and mail
it to the Holder immediately after each adjustment.

            (e) The Issuer will not, by amendment of its Certificate of
Incorporation or through any reorganization, recapitalization, 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 Issuer, but will
at all times in good faith assist in the carrying out of all the provisions of
this Note and in taking of all such action as may be necessary or appropriate in
order to protect the conversion rights of the Holder against impairment.

            (f) In the event of any liquidation, dissolution or winding up of
the Issuer, whether voluntary or involuntary, before any distribution may be
made with respect to the Issuer's Common Stock or any other class of common
stock or preferred stock of the Issuer, the Holder shall be entitled to receive
out of the assets available for distribution to shareholders an amount in cash
equal to the Redemption Price of such principal amount of Note then outstanding
(the "Liquidation Amount"). If any portion of the principal amount of this Note
shall have been prepaid or converted into Common Stock prior to such
liquidation, dissolution or winding up, the interest component of the
Liquidation Amount pursuant to clause (ii) above shall be calculated annually
based on the average principal amount of this Note which shall be outstanding
during each consecutive twelve month period from the date of issuance of this
Note to the date immediately prior to such liquidation, dissolution or winding
up of the Company. If the assets of the Company available for distribution to
shareholders shall be insufficient to pay the Holder the full Liquidation Amount
to which they shall be entitled, then any such distribution of assets of the
Issuer shall be distributed ratably to all of the holders of the Notes. After
the payment of the Liquidation Amount shall have been made in full to the Holder
or funds necessary for such payment shall have been set aside by the Issuer in
trust for the account of holders of the Notes so as to be available for such
payments, the holders of the Notes shall be entitled to no further participation
in the distribution of the assets of the Issuer, and the remaining assets of the
Issuer legally available for distribution to shareholders shall be distributed
among the holders of Common Stock and any other classes or series of Common
Stock or preferred stock of the Issuer in accordance with their respective
terms.

      5. No provision of this Note shall alter or impair the obligation of the
Issuer, which is absolute and unconditional, upon an Event of Default (as
defined below), to pay the principal of, and interest on this Note at the place,
time, and rate, and in the coin or currency herein prescribed.

      6. The Issuer hereby expressly waives demand and presentment for payment,
notice on nonpayment, protest, notice of protest, notice of dishonor, notice of
acceleration or intent to accelerate, and diligence in taking any action to
collect amounts called for hereunder and shall be directly and primarily liable
for the payment of all sums owing and to be owing hereon, regardless of and
without any notice, diligence, act or omission as or with respect to the
collection of any amount called for hereunder.

                                       7
<PAGE>

      7. If one or more of the following described events (each of which being
an "Event of Default" hereunder) shall occur and shall be continuing (as set
forth below) for a period of seven Business Days after notice from the Holder:

            (a) any of the representations, covenants, or warranties made by the
      Issuer herein, or in the Exchange Agreement and/or Security Agreement
      shall have been incorrect when made; or

            (b) any of the representations, covenants, or warranties made by
      Petals, Inc. in the Security Agreement shall have been incorrect when made
      in any material respect; or

            (c) the Issuer shall breach, fail to perform, or fail to observe in
      any material respect any material covenant, term, provision, condition,
      agreement or obligation of the Issuer under this Note (or any security of
      the Issuer held by the Holder), the Security Agreement, the Registration
      Rights Agreement entered into between the Issuer and the Holder of even
      date herewith (the "Registration Rights Agreement"), and the Exchange
      Agreement, between the parties of even date herewith; or

            (d) Petals, Inc. shall breach, fail to perform, or fail to observe
      in any material respect any material covenant, term, provision, condition,
      agreement or obligation of Petals, Inc. under the Security Agreement
      between the parties of even date herewith; or

            (e) a trustee, liquidator or receiver shall be appointed for the
      Issuer (and/or Petals, Inc.) or for a substantial part of its property or
      business without its consent and shall not be discharged within thirty
      (30) calendar days after such appointment; or

            (f) any governmental agency or any court of competent jurisdiction
      at the instance of any governmental agency shall assume custody or control
      of the whole or any substantial portion of the properties or assets of the
      Issuer (and/or Petals, Inc.) and shall not be dismissed within thirty (30)
      calendar days thereafter; or

            (g) bankruptcy reorganization, insolvency or liquidation proceedings
      or other proceedings for relief under any bankruptcy law or any law for
      the relief of debtors shall be instituted by or against the Issuer (and/or
      Petals, Inc.) and, if instituted against the Issuer (and/or Petals, Inc.),
      Issuer (and/or Petals, Inc.) shall by any action or answer approve of,
      consent to or acquiesce in any such proceedings or admit the material
      allegations of, or default in answering a petition filed in any such
      proceeding or such proceedings shall not be dismissed within thirty (30)
      calendar days thereafter; or

            (h) the Common Stock is suspended and/or delisted from trading on
      the Nasdaq Small Cap Market, or the Issuer has received notice of final
      action concerning delisting from the Nasdaq Small Cap Market, unless in
      each such instance, the Issuer's Common Stock shall be listed on the
      Nasdaq National Market, the American Stock Exchange or the New York Stock
      Exchange within seven business days from such suspension and/or delisting
      on the Nasdaq Small Cap Market; or

                                       8
<PAGE>

            (i) the Registration Statement including the shares of Common Stock
      underlying this Note has not been filed with the Securities and Exchange
      Commission and/or declared effective in a timely manner as per Sections
      3(a) and 3(f) of the Registration Rights Agreement, or the effectiveness
      of such Registration Statement shall be suspended for more than seven
      consecutive business days; or

            (j) the Issuer shall have failed to pay interest within five
      Business Days of when due hereunder and/or principal within three Business
      Days of when due hereunder and/or comply with the redemption provisions
      contained herein within three Business Days of when due hereunder; in each
      case, upon receipt of written notice of such payment default; or

            (k) the Issuer shall have failed to timely deliver shares of Common
      Stock issuable upon conversion of the Notes and/or exercise of the
      Warrants issued by the Issuer pursuant to the terms of this Note and the
      Warrants; or

            (l) the Issuer, or any other party, shall, at any time after the
      Issuance Date, (i) in any way materially and adversely alter Holder's
      security interest that it has been granted in the Collateral pursuant to
      the Security Agreement, or (ii) sell, transfer or convey the Collateral;
      or

            (m) the Company and/or Petals, Inc. shall cease operations, cease to
      operate as a going concern, terminate its corporate existence, or sell,
      transfer and/or convey all or substantially all of its assets, or either
      shall combine with another entity whereby the Issuer is not the surviving
      entity; or

            (n) a judgment in excess of $100,000 shall be entered against Debtor
      and/or Subsidiary or a warrant of execution or similar process shall be
      issued or levied against its property and within thirty (30) days after
      such judgment, warrant or process shall not have been paid in full or
      proper appeal of the same made; or

            (o) the occurrence of any "Event of Default" as that term is defined
      in the Security Agreement.

      then, or at any time thereafter, and in each and every such case, unless
such Event of Default shall have been cured or waived in writing by the Holder
(which waiver shall not be deemed to be a waiver of any subsequent default) or
cured as provided herein, at the option of the Holder, and in the Holder's sole
discretion, the Holder may consider the entire principal amount of this Note
(and all interest through such date) immediately due and payable in cash, at the
cash equivalent of the Redemption Price for such then outstanding principal
amount of Note, (or the Holder shall be entitled to recover from the Collateral
as per the terms of the Security Agreement, but shall be entitled to enforce its
rights hereunder in the event the Collateral is insufficient to the amounts due
and owing as aforesaid) without presentment, demand protest or notice of any
kind, all of which are hereby expressly waived, anything herein or in any note
or other instruments contained to the contrary notwithstanding, and Holder may
immediately, and without expiration of any period of grace, enforce any and all
of the Holder's rights and remedies

                                       9
<PAGE>

provided herein or any other rights or remedies afforded by law (including but
not limited to consequential damages if any). It is agreed that in the event of
such action, such Holder shall be entitled to receive all reasonable fees, costs
and expenses incurred, including without limitation such reasonable fees and
expenses of attorneys. Nothing contained herein shall limit the rights of the
Holder to collect liquidated damages as provided herein or in any other
agreement entered into between the Holder and the Issuer, or any other damages
that the Holder may otherwise be entitled to under the terms of this Note, the
Exchange Agreement, or the Security Agreement.

      8. In case any provision of this Note is held by a court of competent
jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is
enforceable to the maximum extent possible, and the validity and enforceability
of the remaining provisions of this Note will not in any way be affected or
impaired thereby.

      9. [this section intentionally left blank]

      10. This Note, together with all documents referenced herein, embodies the
full and entire understanding and agreement between the Issuer and Holder with
respect to the subject matter hereof and supersedes all prior oral or written
agreements and understandings relating to the subject matter hereof. Neither
this Note nor any terms hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the Issuer and the Holder. All
capitalized terms not otherwise defined herein shall have the same meaning as
given in the Exchange Agreement. In the event of any inconsistencies between
this Note and the Exchange Agreement, the Note shall control. No statement,
representation, warranty, covenant or agreement of any kind not expressly set
forth in this Note shall affect, or be used to interpret, change or restrict,
the express terms and provisions of this Note.

      11. This Note will be exclusively construed and enforced in accordance
with and governed exclusively by the laws of the State of New York, except for
matters arising under the Securities Act, without reference to principles of
conflicts of law. Each of the parties consents to the exclusive jurisdiction of
the U.S. District Court sitting in the Southern District of the State of New
York sitting in Manhattan in connection with any dispute arising under this Note
and hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on forum non conveniens, to the bringing of any
such proceeding in such jurisdictions. Each party hereby agrees that if the
other party to this Note obtains a judgment against it in such a proceeding, the
party which obtained such judgment may enforce same by summary judgment in the
courts of any country having jurisdiction over the party against whom such
judgment was obtained, and each party hereby waives any defenses available to it
under local law and agrees to the enforcement of such a judgment. Each party to
this Note irrevocably consents to the service of process in any such proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to such party at its address set forth herein. Nothing herein shall
affect the right of any party to serve process in any other manner permitted by
law. Each party waives its right to a trial by jury.

                                       10
<PAGE>

      12. The convertibility of this Note shall be restricted such that that
portion of the Note which, if otherwise converted, would result in Holder owning
4.99% or more of the then issued and outstanding Common Stock, shall not be
convertible until the Holder is not an owner of 4.99% or more of the then issued
and outstanding Common Stock.

      13. In the event the Issuer, at any time while this Note is outstanding,
shall issue any shares of Common Stock (or any instrument convertible into
Common Stock), otherwise than: (i) pursuant to options, warrants, instruments
and agreements under which convertible notes and/or shares of convertible
preferred stock of the Issuer were issued, or other obligations to issue shares
of Common Stock as of the Issuance Date, all as described in the SEC filings
made by the Issuer within twelve months prior to the Issuance Date, or (ii) all
shares reserved for issuance pursuant to the Issuer's stock option, incentive,
or other similar plan, which plan and which grant was in effect as of the
Issuance Date and approved by the Board of Directors of the Issuer ((i) and (ii)
collectively referred to as the "Existing Obligations"), for a consideration
less than the Conversion Price that would be in effect at the time of such
issue, then, and thereafter successively upon each such issue, the Conversion
Price shall be amended from then on to be equal to the lesser of (i) one hundred
(100%) percent of the average of the Bid Prices during the five consecutive
trading days immediately preceding a Conversion Date, or (ii) the resulting
quotient from the following formula: (y) the number of shares of Common Stock
outstanding immediately prior to such issue shall be multiplied by the
Conversion Price in effect at the time of such issue and the product shall be
added to the aggregate consideration, if any received by the Issuer upon such
issue of additional shares of Common Stock; and (z) the sum so obtained shall be
divided by the number of shares of Common Stock outstanding immediately after
such issue. Except for the Existing Obligations, and options that may be issued
under any employee incentive stock option and/or any qualified stock option plan
adopted by the Issuer, for the purposes of this adjustment, the issuance of any
security of the Issuer carrying the right to convert such security into shares
of Common Stock or of any warrant, right, or option to purchase Common Stock
shall result in an adjustment to the Conversion Price upon issuance of shares of
Common Stock upon the Holder's exercise of its conversion rights.

      14. In the event the Holder shall elect to convert any portion of this
Note as provided herein, the Issuer cannot refuse conversion based on any claim
that the Holder or anyone associated or affiliated with the Holder has been
engaged in any violation of law, unless an injunction from a court, restraining
and/or enjoining conversion of all or part of said portion of this Note shall
have been issued and the Issuer posts a surety bond for the benefit of the
Holder in the amount of 130% of the principal amount of the Note sought to be
converted plus outstanding interest through such date, which is subject to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to the Holder in the event it obtains a favorable judgment (but shall not in any
way limit any additional damages the Holder may be entitled to).

      15. Upon receipt by the Issuer of evidence of the loss, theft, destruction
or mutilation of any Note certificate(s), and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the Issuer, and
upon the cancellation of the Note certificate(s), if mutilated, the Issuer shall
execute and deliver new certificates for Note(s) of like tenure and date.

                                       11
<PAGE>

      16. This Note does not entitle the Holder to any voting rights or other
rights as a shareholder of the Issuer prior to the conversion into Common Stock
thereof, except as provided by applicable law. If, however, at the time of the
surrender of this Note and conversion the Holder hereof shall be entitled to
convert this Note, the shares of Common Stock so issued shall be and be deemed
to be issued to the Holder as the record owner of such shares as of the close of
business on the Conversion Date.

      17. Except as expressly provided herein or as required by law, so long as
this Note remains outstanding, the Issuer shall not, without the approval by
vote or written consent by the Holder, take any action that would adversely
affect the rights, preferences or privileges of this Note.

      18. The Issuer shall have the right to redeem this Note, in whole or in
part (except that portion of the principal amount of this Note that is the
subject of a Notice of Conversion which has previously been sent to the Issuer),
in cash at the Redemption Price (as defined below) at any time by thereafter
providing written notice (the "Redemption Notice") to the Holder. The Issuer
shall wire transfer the appropriate amount of funds to the Holder to complete
the redemption, which shall be (if the Redemption Notice is received via
facsimile by the Holder prior to the first anniversary of the Issuance Date) no
later than the tenth Business Day after the Holder has received the Redemption
Notice via facsimile (the "Redemption Date") and if the Redemption Notice is
received via facsimile by the Holder after the first anniversary of the Issuance
Date no later than the third Business Day after the Holder has received the
Redemption Notice via facsimile (also referred to as a Redemption Date. Upon
facsimile receipt of the Redemption Notice, the Holder's right to convert this
Note shall terminate and be canceled immediately; provided, however, that the
right to convert this Note shall immediately be reinstated if the Issuer fails
to comply with the redemption provisions hereof. In the event the Issuer fails
to wire the appropriate amount of funds to the Holders as set forth in the
Redemption Notice on or before the Redemption Date, or shall otherwise fail to
comply with the redemption provisions set forth herein on three separate
occasions, then the Issuer shall have waived its right to redeem any portion of
this Note at any time thereafter (the foregoing shall have not be deemed as a
waiver by the Holder of any rights it may have under Section 7 herein).

            The Redemption Notice shall set forth (i) the Redemption Date, (ii)
the Redemption Price, as defined below, and (iii) the principal amount of the
Note being redeemed. The Redemption Notice shall be irrevocable, and it shall be
delivered by facsimile to the Holder at its address as the same shall appear on
the books of the Issuer.

            The Redemption Price shall be equal to the sum of (a) the entire
outstanding principal amount of this Note being redeemed, (b) any and all
payment due to the Holder from the Issuer pursuant to the terms of the Exchange
Agreement, and (c) all accrued and unpaid interest on this Note.

            At the close of business on the Redemption Date, subject to the
Holder's receipt of the applicable Redemption Price, the portion of this Note
being redeemed shall be automatically canceled and converted into a right to
receive the Redemption Price, and all rights of this Note, including the right
to conversion shall cease without further action. Immediately following the
Redemption Date (assuming full compliance by the Issuer with the redemption
provisions set forth herein), the Holder shall surrender its original Note at
the office of the Issuer,

                                       12
<PAGE>

and the Issuer shall issue to the Holder a new Note certificate for the
principal amount that remains outstanding, if any.

      The Redemption Price shall be adjusted proportionally upon any adjustment
of the Conversion Price as set forth above.

      The Issuer shall not be entitled to send any Redemption Notice and begin
the redemption procedure hereunder unless it has:

            (i) the full amount of the Redemption Price in cash, available in a
      demand or other immediately available account in a bank or similar
      financial institution;

            (ii) immediately available credit facilities, in the full amount of
      the Redemption Price with a bank or similar financial institution; or

            (iii) a combination of the items set forth in (a) and (b) above,
      aggregating the full amount of the Redemption Price.

               [the balance of this page intentionally left blank]

                                       13
<PAGE>

            IN WITNESS WHEREOF, the Issuer has caused this Convertible Note to
be duly executed by an officer thereunto duly authorized.

                                        INTERIORS, INC.

                                        By /s/ Max Munn
                                          --------------------------------------
                                          Name: Max Munn
                                          Title: President

Date: December 31, 1999

                                       14

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00001-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00001-of-00352.parquet"}]]