PATH 1 NETWORK TECHNOLOGIES INC.

                          SECURITIES PURCHASE AGREEMENT


                                November 7, 2002














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                                TABLE OF CONTENTS

                                                                            Page

1. AGREEMENT TO SELL AND PURCHASE..............................................1

2. FEES AND WARRANT............................................................1

3. CLOSING, DELIVERY AND PAYMENT...............................................2

         3.1      Closing......................................................2

         3.2      Delivery.....................................................2

4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................3

         4.1      Organization, Good Standing and Qualification................3

         4.2      Subsidiaries.................................................3

         4.3      Capitalization; Voting Rights................................3

         4.4      Authorization; Binding Obligations...........................4

         4.5      Liabilities..................................................4

         4.6      Agreements; Action...........................................4

         4.7      Obligations to Related Parties...............................5

         4.8      Changes......................................................5

         4.9      Title to Properties and Assets; Liens, Etc...................7

         4.10     Intellectual Property........................................7

         4.11     Compliance with Other Instruments............................7

         4.12     Litigation...................................................8

         4.13     Tax Returns and Payments.....................................8

         4.14     Employees....................................................8

         4.15     Registration Rights and Voting Rights........................8

         4.16     Compliance with Laws; Permits................................9

         4.17     Environmental and Safety Laws................................9

         4.18     Valid Offering...............................................9

         4.19     Full Disclosure..............................................9

         4.20     Insurance...................................................10

         4.21     SEC Reports.................................................10

         4.22     No Market Manipulation......................................10

         4.23     Listing.....................................................10

         4.24     No Integrated Offering......................................10

         4.25     Stop Transfer...............................................10

         4.26     Dilution....................................................11

5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS...........................11

         5.1      Requisite Power and Authority...............................11

         5.2      Investment Representations..................................11

         5.3      Purchaser Bears Economic Risk...............................11

         5.4      Acquisition for Own Account.................................11

         5.5      Purchaser Can Protect Its Interest..........................11

         5.6      Accredited Investor.........................................12

         5.7      Legends.....................................................12

         5.8      No Shorting.................................................12

         5.9      Distribution of Registered Shares...........................12

6. COVENANTS OF THE COMPANY...................................................13

         6.1      Stop-Orders.................................................13

         6.2      Listing.....................................................13

         6.3      Market Regulations..........................................13

         6.4      Reporting Requirements......................................13

         6.5      Use of Funds................................................14

         6.6      Access to Facilities........................................14

         6.7      Taxes.......................................................14

         6.8      Insurance...................................................14

         6.9      Intellectual Property.......................................14

         6.10     Properties..................................................14

         6.11     Confidentiality.............................................15

         6.12     Required Approvals..........................................15

         6.13     Reissuance of Securities....................................15

         6.14     Opinion.....................................................16

7. COVENANTS OF THE COMPANY AND PURCHASERS REGARDING INDEMNIFICATION..........16

         7.1      Company Indemnification.....................................16

         7.2      Purchaser's Indemnification.................................16

         7.3      Procedures..................................................16

8. CONVERSION OF CONVERTIBLE NOTE.............................................16

         8.1      Mechanics of Conversion.....................................17

         8.2      Mandatory Redemption........................................18

         8.3      Maximum Conversion..........................................18

         8.4      Injunction - Posting of Bond................................18

         8.5      Buy-In......................................................19

         8.6      Optional Redemption.........................................19

9. REGISTRATION RIGHTS........................................................20

         9.1      Registration Rights Granted.................................20

         9.2      Registration Procedures.....................................21

         9.3      Provision of Documents......................................22

         9.4      Non-Registration Events.....................................23

         9.5      Expenses....................................................24

         9.6      Indemnification and Contribution............................24

10. OFFERING RESTRICTIONS.....................................................26

11. SECURITY INTEREST.........................................................26

12. MISCELLANEOUS.............................................................26

         12.1     Governing Law...............................................26

         12.2     Survival....................................................27

         12.3     Successors and Assigns......................................27

         12.4     Entire Agreement............................................27

         12.5     Severability................................................27

         12.6     Amendment and Waiver........................................27

         12.7     Delays or Omissions.........................................27

         12.8     Notices.....................................................28

         12.9     Attorneys' Fees.............................................28

         12.10    Titles and Subtitles........................................28

         12.11    Counterparts................................................28

         12.12    Broker's Fees...............................................28

         12.13    Indemnification.............................................28

         12.14    Construction................................................28


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                        PATH 1 NETWORK TECHNOLOGIES INC.
                          SECURITIES PURCHASE AGREEMENT


     THIS SECURITIES  PURCHASE  AGREEMENT (the  "Agreement") is made and entered
into as of November 7th, 2002, by and among Path 1 Network  Technologies Inc., a
Delaware  corporation  (the  "Company"),  and Laurus Master Fund,  Ltd. a Cayman
Islands company (the "Purchaser").

                                    RECITALS

     WHEREAS,  the Company has authorized the sale of a 12% Convertible  Note in
an aggregate principal amount of $300,000 (the "Note"),  convertible into shares
of the Company's common stock, $0.001 par value per share (the "Common Stock");

     WHEREAS,  the  Company  wishes to issue a warrant  (the  "Warrant")  to the
Purchaser to purchase  shares of the Company's  Common Stock in connection  with
Purchaser's purchase of the Note;

     WHEREAS,  Purchaser  desires to purchase  the Note and Warrant on the terms
and conditions set forth herein; and

     WHEREAS,  the  Company  desires  to issue and sell the Note and  Warrant to
Purchaser on the terms and conditions set forth herein.

                                    AGREEMENT

     NOW,  THEREFORE,  in consideration of the foregoing recitals and the mutual
promises,  representations,  warranties and covenants  hereinafter set forth and
for other good and valuable consideration,  the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

     1. AGREEMENT TO SELL AND PURCHASE. Pursuant to the terms and conditions set
forth in this  Agreement,  on the  Closing  Date (as  defined in Section 3), the
Company  agrees to sell to the  Purchaser,  and the  Purchaser  hereby agrees to
purchase  from the  Company a Note in the  amount  of  $300,000  convertible  in
accordance with the terms thereof into shares of the Company's Common Stock. The
Note purchased on the Closing Date shall be known as the "Offering." The form of
Note is annexed  hereto as  Exhibit  A. The Note will have a  Maturity  Date (as
defined in the Note)  eighteen  months from the date of issuance.  Collectively,
the Note and  Warrant  (as  defined in Section 2) and Common  Stock  issuable in
payment of the Note upon conversion of the Note and upon exercise of the Warrant
are referred to as the "Securities."

     2. FEES AND WARRANT.

     (a) The  Company  will  issue and  deliver  to the  Purchaser  a Warrant to
purchase  75,000  shares of Common Stock in  connection  with the Offering  (the
"Warrant")  pursuant to Section 1 hereof.  The Warrant  must be delivered on the
Closing  Date.  A form of Warrant is annexed  hereto as Exhibit B. The per share
"Purchase  Price" of Common Stock as defined in the Warrant  shall be equal to $
..85,  subject to  adjustment  as  described  therein.  All the  representations,
covenants, warranties,  undertakings, and indemnification, and other rights made
or granted to or for the benefit of the Purchaser by the Company are hereby also
made and granted in respect of the Warrant  and shares of the  Company's  Common
Stock issuable upon exercise of the Warrant (the "Warrant Shares").

     (b) The Company shall reimburse the Purchaser for its reasonable legal fees
for services  rendered to the Purchaser in preparation of this Agreement and the
Related  Agreements,  and  expenses  in  connection  with  the  Purchaser's  due
diligence  review of the Company and relevant  matters.  Amounts  required to be
paid hereunder will be paid at the Closing and shall not exceed $2,500.

     (c) The Company  will pay a cash fee in the amount of ten percent  (10%) of
the aggregate  gross  purchase  price to be paid to the Company from the sale of
Note in the Offering (the "Fund Management  Fee") to Laurus Capital  Management,
L.L.C., a Delaware limited  liability  company.  The Fund Management Fee must be
paid on the Closing Date. The aforementioned  Fund Management Fee and legal fees
will be payable at the  Closing  out of funds held  pursuant  to a Funds  Escrow
Agreement to be entered into by the Company, Purchaser and an Escrow Agent.

     3. CLOSING, DELIVERY AND PAYMENT.

     3.1 Closing. Subject to the terms and conditions herein, the closing of the
transactions contemplated hereby (the "Closing"),  which closing is comprised of
Purchaser's  purchase of Note in the  aggregate  principal  amount of  $300,000,
shall take place on the date hereof,  at the offices of Daniel M. Laifer,  Esq.,
152 West 57th Street, 4th Floor, New York, New York 10019, or at such other time
or  place  as the  Company  and  Purchaser  may  mutually  agree  (such  date is
hereinafter referred to as the "Closing Date").

     3.2 Delivery.  At the Closing,  subject to the terms and conditions hereof,
the Company will deliver to the Purchaser a Note in the form attached as Exhibit
A  representing  the  principal  amount of $300,000 and a Common Stock  Purchase
Warrant in the form attached as Exhibit B in the Purchaser's  name  representing
75,000 Warrant  Shares and the Purchaser  will deliver to the Company  $300,000,
less fees and expenses by certified  funds or wire  transfer made payable to the
order of the Company,  cancellation  of  indebtedness  or any combination of the
foregoing.

     4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

     The Company hereby  represents and warrants to the Purchaser as of the date
of this Agreement as set forth below.

     4.1  Organization,  Good  Standing  and  Qualification.  The  Company  is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware.  The Company has the corporate  power and authority to
own and  operate  its  properties  and  assets,  to  execute  and  deliver  this
Agreement, the Warrant to be issued in connection with this Agreement, the Funds
Escrow Agreement,  the Security  Agreement and all other agreements  referred to
herein (collectively,  the "Related Agreements"), to issue and sell the Note and
the shares of Common Stock issuable upon conversion of the Note (the "Conversion
Shares"), to issue and sell the Warrant and the Warrant Shares, and to carry out
the provisions of this Agreement and the Related  Agreements and to carry on its
business as presently conducted. The Company is duly qualified and is authorized
to do  business  and  is in  good  standing  as a  foreign  corporation  in  all
jurisdictions  in which the nature of its activities and of its properties (both
owned  and  leased)  makes  such  qualification  necessary,   except  for  those
jurisdictions in which failure to do so would not have a material adverse effect
on the Company or its business.

     4.2 Subsidiaries. Except as disclosed on Schedule 4.2, the Company does not
own or control any equity  security or other interest of any other  corporation,
limited  partnership  or other  business  entity.  If any  entity  is  listed on
Schedule 4.2 and the Company owns a controlling interest in such entity, each of
the  representations and warranties set forth in this Section 4 are being hereby
restated with respect to such entity  (modified as  appropriate to the nature of
such entity.)

     4.3 Capitalization; Voting Rights.

     (a) The authorized  capital stock of the Company,  immediately prior to the
Closing, consists of (i) 10,000,000 shares of Common Stock, par value $0.001 per
share and (ii) 20,000,000  shares of Class B Common Stock,  par value $0.001 per
share, [8,440,275] shares of Common Stock of which are issued and outstanding.

     (b) Other than (i) the shares  reserved  for issuance  under the  Company's
stock  option  plans;  and (ii)  shares  which may be granted  pursuant  to this
Agreement  and  the  Related  Agreements,  there  are  no  outstanding  options,
warrants,  rights (including conversion or preemptive rights and rights of first
refusal), proxy or stockholder agreements,  or arrangements or agreements of any
kind for the purchase or acquisition  from the Company of any of its securities.
Neither  the  offer,  issuance  or sale of any of the  Note or  Warrant,  or the
issuance of any of the Conversion Shares or Warrant Shares, nor the consummation
of any transaction  contemplated  hereby will result in a change in the price or
number of any  securities of the Company  outstanding,  under  anti-dilution  or
other similar provisions contained in or affecting any such securities.

     (c) All issued and  outstanding  shares of the  Company's  Common Stock (i)
have  been  duly   authorized   and  validly  issued  and  are  fully  paid  and
nonassessable  and (ii) were issued in compliance with all applicable  state and
federal laws concerning the issuance of securities.

     (d) The rights,  preferences,  privileges and restrictions of the shares of
the  Common  Stock  are as  stated  in the  Certificate  of  Incorporation  (the
"Charter").  The Conversion Shares and Warrant Shares have been duly and validly
reserved for  issuance.  When issued in compliance  with the  provisions of this
Agreement and the Company's  Charter,  the  Securities  will be validly  issued,
fully  paid and  nonassessable,  and will be free of any liens or  encumbrances;
provided,  however,  that the  Securities  may be  subject  to  restrictions  on
transfer  under state and/or federal  securities  laws as set forth herein or as
otherwise required by such laws at the time a transfer is proposed.

     4.4 Authorization; Binding Obligations. All corporate action on the part of
the  Company,  its  officers,  directors  and  stockholders  necessary  for  the
authorization of this Agreement and the Related  Agreements,  the performance of
all obligations of the Company  hereunder at the Closing and the  authorization,
sale,  issuance and delivery of the Securities  pursuant  hereto and the Related
Agreements  has been taken or will be taken prior to the Closing.  The Agreement
and the Related  Agreements,  when  executed  and  delivered,  will be valid and
binding  obligations of the Company  enforceable in accordance with their terms,
except (a) as  limited by  applicable  bankruptcy,  insolvency,  reorganization,
moratorium  or  other  laws of  general  application  affecting  enforcement  of
creditors'  rights,  and (b)  general  principles  of equity that  restrict  the
availability  of  equitable  remedies.  The sale of the Note and the  subsequent
conversion of the Note into Conversion Shares are not and will not be subject to
any  preemptive  rights or rights of first  refusal that have not been  properly
waived or complied with. The sale of the Warrant and the subsequent  exercise of
the Warrant for Warrant Shares are not and will not be subject to any preemptive
rights or rights of first refusal that have not been properly waived or complied
with. The Note and the Warrant,  when executed and delivered in accordance  with
the  terms of this  Agreement,  will be valid  and  binding  obligations  of the
Company, enforceable in accordance with their respective terms.

     4.5 Liabilities.  The Company has no material  liabilities and, to the best
of its knowledge,  knows of no material contingent  liabilities,  except current
liabilities  incurred in the  ordinary  course of business  which have not been,
either in any individual case or in the aggregate, material.

     4.6 Agreements; Action.

     (a)  There  are  no  agreements,  understandings,  instruments,  contracts,
proposed transactions,  judgments, orders, writs or decrees to which the Company
is a party  or to its  knowledge  by which it is bound  which  may  involve  (i)
obligations  (contingent or otherwise) of, or payments to, the Company in excess
of $50,000 (other than  obligations of, or payments to, the Company arising from
purchase or sale agreements entered into in the ordinary course of business), or
(ii) the  transfer or license of any patent,  copyright,  trade  secret or other
proprietary  right to or from the Company (other than licenses  arising from the
purchase of "off the shelf" or other  standard  products),  or (iii)  provisions
restricting  the  development,  manufacture  or  distribution  of the  Company's
products or  services,  or (iv)  indemnification  by the Company with respect to
infringements  of  proprietary  rights,  or (v) the Company's  default  judgment
against a foreign  individual,  for $3.5 million and related costs,  issued by a
court in San Diego in October 2002.

     (b) The Company has not (i) declared or paid any  dividends,  or authorized
or made any  distribution  upon or with  respect  to any  class or series of its
capital stock,  (ii) incurred any  indebtedness  for money borrowed or any other
liabilities  individually  in excess of $50,000 or, in the case of  indebtedness
and/or liabilities  individually less than $50,000, in excess of $100,000 in the
aggregate (other than trade payables in the ordinary course of business),  (iii)
made any loans or advances  to any  person,  other than  ordinary  advances  for
travel  expenses,  or (iv) sold,  exchanged or otherwise  disposed of any of its
assets or rights, other than the sale of its inventory in the ordinary course of
business.

     (c) For the purposes of subsections  (a) and (b) above,  all  indebtedness,
liabilities,  agreements,  understandings,  instruments,  contracts and proposed
transactions  involving the same person or entity (including persons or entities
the Company has reason to believe are affiliated  therewith) shall be aggregated
for the  purpose  of  meeting  the  individual  minimum  dollar  amounts of such
subsections.

     4.7 Obligations to Related Parties. There are no obligations of the Company
to officers, directors,  stockholders or employees of the Company other than (a)
for payment of salary for services  rendered,  (b)  reimbursement for reasonable
expenses  incurred on behalf of the  Company,  (c) for other  standard  employee
benefits  made  generally  available to all  employees  (including  stock option
agreements  outstanding  under any stock  option  plan  approved by the Board of
Directors of the Company) and (d) obligations listed in the Company's  financial
statements.  None of the officers,  directors or stockholders of the Company, or
any members of their immediate families, are indebted to the Company.  Except as
described  above,  none  of the  officers,  directors  or,  to the  best  of the
Company's knowledge, key employees or stockholders of the Company or any members
of their immediate  families,  are indebted to the Company or have any direct or
indirect ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation which competes with the Company,  other than passive  investments in
publicly traded companies  (representing less than 1% of such company) which may
compete with the Company.  Except as described  above,  no officer,  director or
stockholder,  or any  member  of  their  immediate  families,  is,  directly  or
indirectly,  interested  in  any  material  contract  with  the  Company  and no
agreements, understandings or proposed transactions are contemplated between the
Company and any such person. The Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.

     4.8 Changes. Since June 30, 2002, there has not been:

     (a) Any change in the assets, liabilities,  financial condition,  prospects
or  operations  of the Company,  other than  changes in the  ordinary  course of
business,  none  of  which  individually  or in  the  aggregate  has  had  or is
reasonably   expected  to  have  a  material  adverse  effect  on  such  assets,
liabilities, financial condition, prospects or operations of the Company;

     (b) Any resignation or termination of any officer, key employee or group of
employees of the Company,  except for two officers who are  voluntarily  leaving
the Company;

     (c) Any material adverse change, except in the ordinary course of business,
in the contingent  obligations  of the Company by way of guaranty,  endorsement,
indemnity, warranty or otherwise;

     (d) Any damage,  destruction or loss,  whether or not covered by insurance,
materially  and  adversely  affecting the  properties,  business or prospects or
financial condition of the Company;

     (e) Any waiver by the  Company of a  valuable  right or of a material  debt
owed to it;

     (f) Any direct or indirect  loans made by the  Company to any  stockholder,
employee,  officer or director of the Company,  other than  advances made in the
ordinary course of business;

     (g)  Any  material  adverse  change  in  any  compensation  arrangement  or
agreement with any employee, officer, director or stockholder;

     (h) Any declaration or payment of any dividend or other distribution of the
assets of the Company;

     (i) Any labor organization activity related to the Company;

     (j) Any debt,  obligation or liability  incurred,  assumed or guaranteed by
the Company,  except those for  immaterial  amounts and for current  liabilities
incurred in the ordinary course of business;

     (k)  Any  sale,   assignment  or  transfer  of  any  patents,   trademarks,
copyrights, trade secrets or other intangible assets;

     (l) Any change in any material agreement to which the Company is a party or
by which it is bound which may have a material  adverse  change on the business,
assets,  liabilities,  financial  condition,  operations  or  prospects  of  the
Company;

     (m) Any other event or condition of any character that, either individually
or  cumulatively,  has or may  materially  and  adversely  affect the  business,
assets,  liabilities,  financial  condition,  prospects  or  operations  of  the
Company; or

     (n) Any  arrangement  or  commitment  by the  Company to do any of the acts
described in subsection (a) through (m) above.

     4.9 Title to Properties  and Assets;  Liens,  Etc. The Company has good and
marketable  title to its properties and assets,  and good title to its leasehold
estates, in each case subject to no mortgage,  pledge, lien, lease,  encumbrance
or charge,  other than (a) those  resulting from taxes which have not yet become
delinquent,  (b) minor liens and  encumbrances  which do not materially  detract
from the  value  of the  property  subject  thereto  or  materially  impair  the
operations  of the  Company,  and (c) those  that have  otherwise  arisen in the
ordinary course of business.  All facilities,  machinery,  equipment,  fixtures,
vehicles and other properties  owned,  leased or used by the Company are in good
operating  condition  and  repair  and are  reasonably  fit and  usable  for the
purposes for which they are being used.  The Company is in  compliance  with all
material terms of each lease to which it is a party or is otherwise bound.

     4.10 Intellectual Property.

     (a) The Company owns or possesses  sufficient  legal rights to all patents,
trademarks,  service marks, trade names,  copyrights,  trade secrets,  licenses,
information  and  other  proprietary  rights  and  processes  necessary  for its
business as now conducted and to the Company's  knowledge as presently  proposed
to be conducted (the "Intellectual Property"), without any known infringement of
the rights of others. There are no outstanding  options,  licenses or agreements
of any kind relating to the  foregoing  proprietary  rights,  nor is the Company
bound by or a party to any  options,  licenses  or  agreements  of any kind with
respect to the patents,  trademarks,  service  marks,  trade names,  copyrights,
trade secrets, licenses,  information and other proprietary rights and processes
of any other person or entity  other than such  licenses or  agreements  arising
from the purchase of "off the shelf" or standard products.

     (b) The Company  has not  received  any  communications  alleging  that the
Company has violated any of the patents, trademarks, service marks, trade names,
copyrights or trade secrets or other  proprietary  rights of any other person or
entity, nor is the Company aware of any basis therefor.

     (c) The Company  does not believe it is or will be necessary to utilize any
inventions,  trade secrets or  proprietary  information  of any of its employees
made prior to their  employment  by the Company,  except for  inventions,  trade
secrets or proprietary  information  that have been  rightfully  assigned to the
Company.

     4.11  Compliance  with Other  Instruments.  The Company is not in any known
violation or default of any term of the Charter or Bylaws,  or of any  provision
of any mortgage, indenture, contract, agreement, instrument or contract to which
it is party or by which it is bound or of any judgment,  decree,  order or writ.
The execution,  delivery and  performance of and compliance  with this Agreement
and the Related  Agreements,  and the issuance and sale of  Securities  pursuant
hereto,  will not,  with or  without  the  passage  of time or giving of notice,
result  in  any  such  known  material  violation,  or be in  conflict  with  or
constitute a default under any such term or provision, or result in the creation
of any mortgage,  pledge, lien, encumbrance or charge upon any of the properties
or assets of the Company or the suspension,  revocation,  impairment, forfeiture
or nonrenewal of any permit,  license,  authorization or approval  applicable to
the Company, its business or operations or any of its assets or properties.

     4.12  Litigation.  There is no action,  suit,  proceeding or  investigation
pending or, to the Company's knowledge, currently threatened against the Company
that questions the validity of this  Agreement or the Related  Agreements or the
right of the Company to enter into any of such agreements,  or to consummate the
transactions  contemplated  hereby or  thereby,  or which might  result,  either
individually or in the aggregate,  in any material adverse change in the assets,
condition, affairs or prospects of the Company, financially or otherwise, or any
change in the current equity ownership of the Company,  nor is the Company aware
that there is any basis for any of the foregoing.  The Company is not a party or
subject to the provisions of any order, writ, injunction,  judgment or decree of
any court or government  agency or  instrumentality.  There is no action,  suit,
proceeding  or  investigation  by the  Company  currently  pending  or which the
Company  intends to initiate,  other than the  Company's  $3.5  million  default
judgment awarded to it against a foreign defendant.

     4.13 Tax Returns and Payments. The Company has timely filed all tax returns
(federal, state and local) required to be filed by it. All taxes shown to be due
and payable on such  returns,  any  assessments  imposed,  and to the  Company's
knowledge  all other  taxes due and  payable  by the  Company  on or before  the
Closing,  have  been  paid or  will  be  paid  prior  to the  time  they  become
delinquent.  The  Company  has not been  advised  (a)  that any of its  returns,
federal,  state or other,  have been or are being audited as of the date hereof,
or (b) of any  deficiency  in  assessment  or proposed  judgment to its federal,
state or other taxes.  The Company has no knowledge of any  liability of any tax
to be imposed  upon its  properties  or assets as of the date of this  Agreement
that is not adequately provided for.

     4.14 Employees.  The Company has no collective  bargaining  agreements with
any of its employees. There is no labor union organizing activity pending or, to
the Company's knowledge,  threatened with respect to the Company. The Company is
not a party to or bound by any currently effective employment contract, deferred
compensation  arrangement,  bonus plan,  incentive  plan,  profit  sharing plan,
retirement  agreement or other employee  compensation plan or agreement.  To the
Company's  knowledge,  no employee of the Company,  nor any consultant with whom
the  Company  has  contracted,  is in  violation  of any term of any  employment
contract,  proprietary  information agreement or any other agreement relating to
the right of any such  individual  to be employed by, or to contract  with,  the
Company  because of the nature of the  business to be  conducted by the Company;
and to the Company's  knowledge  the continued  employment by the Company of its
present  employees,  and the  performance  of the Company's  contracts  with its
independent  contractors,  will not result in any such violation. The Company is
not aware that any of its employees is obligated  under any contract  (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment,  decree or order of any court or  administrative  agency,  that
would  interfere with their duties to the Company.  The Company has not received
any notice  alleging that any such  violation  has occurred.  No employee of the
Company has been granted the right to continued  employment by the Company or to
any material compensation  following termination of employment with the Company.
The Company is not aware that any  officer,  key  employee or group of employees
intends to terminate his, her or their employment with the Company, nor does the
Company have a present intention to terminate the employment of any officer, key
employee  or group of  employees,  other than its chief  accounting  officer and
executive director of operations.

     4.15  Registration  Rights and Voting Rights.  The Company is presently not
under any  obligation,  and has not granted any rights,  to register  any of the
Company's  presently  outstanding  securities or any of its securities  that may
hereafter be issued. To the Company's  knowledge,  no stockholder of the Company
has entered into any agreement  with respect to the voting of equity  securities
of the Company.

     4.16 Compliance with Laws; Permits. To its knowledge, the Company is not in
violation of any applicable statute, rule,  regulation,  order or restriction of
any domestic or foreign  government or any  instrumentality or agency thereof in
respect of the conduct of its business or the ownership of its properties  which
violation  would   materially  and  adversely   affect  the  business,   assets,
liabilities,  financial  condition,  operations or prospects of the Company.  No
governmental  orders,  permissions,  consents,  approvals or authorizations  are
required to be obtained and no  registrations or declarations are required to be
filed in connection  with the  execution and delivery of this  Agreement and the
issuance  of any of the  Securities,  except  such as has been duly and  validly
obtained or filed,  or with  respect to any filings  that must be made after the
Closing,  as will be filed in a timely manner.  The Company has all  franchises,
permits,  licenses and any similar  authority  necessary  for the conduct of its
business as now being  conducted by it, the lack of which could  materially  and
adversely affect the business,  properties,  prospects or financial condition of
the Company.

     4.17  Environmental and Safety Laws. The Company is not in violation of any
applicable   statute,   law  or  regulation   relating  to  the  environment  or
occupational health and safety, and to its knowledge,  no material  expenditures
are or will be required in order to comply with any such existing  statute,  law
or regulation.  No Hazardous  Materials (as defined below) are used or have been
used, stored, or disposed of by the Company or, to the Company's  knowledge,  by
any other person or entity on any property owned, leased or used by the Company.
For the purposes of the preceding sentence, "Hazardous Materials" shall mean (a)
materials which are listed or otherwise  defined as "hazardous" or "toxic" under
any applicable  local,  state,  federal and/or foreign laws and regulations that
govern the existence and/or remedy of contamination on property,  the protection
of the environment from contamination, the control of hazardous wastes, or other
activities involving hazardous substances,  including building materials, or (b)
any petroleum products or nuclear materials.

     4.18 Valid  Offering.  Assuming  the  accuracy of the  representations  and
warranties of the Purchaser  contained in this  Agreement,  the offer,  sale and
issuance of the Securities will be exempt from the registration  requirements of
the Securities  Act of 1933, as amended (the  "Securities  Act"),  and will have
been registered or qualified (or are exempt from registration and qualification)
under the registration,  permit or qualification  requirements of all applicable
state  securities  laws.  Neither  the  Company  nor any agent on its behalf has
solicited  or will  solicit  any  offers to sell or has  offered to sell or will
offer to sell all or any part of the  Securities  to any person or persons so as
to bring the sale of such  Securities  by the  Company  within the  registration
provisions of the Securities Act or any state securities laws.

     4.19 Full  Disclosure.  The Company has  provided  the  Purchaser  with all
information  requested  by the  Purchaser  in  connection  with its  decision to
purchase the Note and Warrant, including all information the Company believes is
reasonably necessary to make such investment  decision.  Neither this Agreement,
the exhibits and schedules hereto, the Related Agreements nor any other document
delivered by the Company to Purchaser or its  attorneys or agents in  connection
herewith or therewith or with the transactions  contemplated  hereby or thereby,
contain any known untrue  statement of a material fact nor omit to state a known
material  fact  necessary in order to make the  statements  contained  herein or
therein,  in light of the  circumstances in which they are made, not misleading.
Any financial  projections and other estimates  provided to the Purchaser by the
Company  were  based  on  the  Company's  experience  in  the  industry  and  on
assumptions  of fact and opinion as to future  events which the Company,  at the
date  of  the  issuance  of  such  projections  or  estimates,  believed  to  be
reasonable.  As of the date  hereof no facts have come to the  attention  of the
Company that would, in its opinion,  require the Company to revise or amplify in
any material  respect the  assumptions  underlying  such  projections  and other
estimates or the conclusions derived therefrom.

     4.20 Insurance. The Company has general commercial, product liability, fire
and casualty insurance policies with coverage customary for companies  similarly
situated to the Company.

     4.21 SEC Reports.  The Company has filed all proxy statements,  reports and
other documents  required to be filed by it under the Exchange Act including (i)
its Annual Report on Form 10-K for the fiscal year ended December 31, 2001, (ii)
its Quarterly  Reports on Form 10-Q for the fiscal quarters ended March 30, 2002
and June 30, 2002 and (iii) its Proxy Statement dated May 7, 2002 (collectively,
the "SEC  Reports").  Each SEC Report  was in  substantial  compliance  with the
requirements  of its  respective  form  and  none  of the SEC  Reports,  nor the
financial  statements (and the notes thereto) included in the SEC Reports, as of
their respective dates,  contained any known untrue statement of a material fact
or omitted to state a material fact  required to be stated  therein or necessary
to make the statements  therein,  in light of the circumstances under which they
were made, not misleading.

     4.22 No Market Manipulation.  The Company has not taken, and will not take,
directly or  indirectly,  any action  designed to, or that might  reasonably  be
expected to, cause or result in  stabilization  or  manipulation of the price of
the Common Stock of the Company to  facilitate  the sale or resale of any of the
Securities  being  offered  hereby  or  affect  the  price at  which  any of the
Securities being offered hereby may be issued.

     4.23 Listing.  The Company's  Common Stock is listed for trading on the OTC
Bulletin  Board and  satisfies all  requirements  for the  continuation  of such
listing.  The Company has not  received any notice that its Common Stock will be
delisted from the OTC Bulletin  Board or that the Common Stock does not meet all
requirements for the continuation of such listing.

     4.24  No  Integrated  Offering.   Neither  the  Company,  nor  any  of  its
affiliates,  nor any  person  acting on its or their  behalf,  has  directly  or
indirectly  made any offers or sales of any security or solicited  any offers to
buy any  security  under  circumstances  that would  cause the  offering  of the
Securities  pursuant to this Agreement to be integrated  with prior offerings by
the Company for purposes of the  Securities  Act which would prevent the Company
from selling the Securities  pursuant to Rule 506 under the  Securities  Act, or
any applicable  exchange-related  stockholder approval provisions.  Nor will the
Company or any of its affiliates or  subsidiaries  take any action or steps that
would  cause  the  offering  of  the  Securities  to be  integrated  with  other
offerings.

     4.25 Stop Transfer. The Securities are restricted securities as of the date
of this  Agreement.  The Company will not issue any stop transfer order or other
order  impeding the sale and delivery of any of the  Securities  at such time as
the Securities are registered for public sale or an exemption from  registration
is available, except as required by federal securities laws.

     4.26  Dilution.  The  number  of  shares  of  Common  Stock  issuable  upon
conversion of the Note and exercise of the Warrant may increase substantially in
certain   circumstances,   including,   but  not  necessarily  limited  to,  the
circumstance  wherein the trading  price of the Common Stock  declines  prior to
conversion or exercise of such securities.  The Company's executive officers and
directors have studied and fully  understand the nature of the Securities  being
sold hereby and recognize that they have a potential  dilutive effect. The Board
of Directors of the Company has concluded,  in its good faith business judgment,
that  such  issuance  is in the  best  interests  of the  Company.  The  Company
specifically  acknowledges  that its  obligation  to issue the  shares of Common
Stock upon  conversion  of the Note and  exercise of the Warrant is binding upon
the Company and enforceable regardless of the dilution such issuance may have on
the ownership interests of other shareholders of the Company.

     5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.

     The Purchaser hereby represents and warrants to the Company with respect to
itself or himself as follows (such  representations and warranties do not lessen
or obviate the  representations  and warranties of the Company set forth in this
Agreement):

     5.1 Requisite  Power and Authority.  Purchaser has all necessary  power and
authority  under all  applicable  provisions  of law to execute and deliver this
Agreement  and the Related  Agreements  and to carry out their  provisions.  All
action on  Purchaser's  part  required for the lawful  execution and delivery of
this Agreement and the Related Agreements have been or will be effectively taken
prior to the Closing. Upon their execution and delivery,  this Agreement and the
Related  Agreements  will  be  valid  and  binding   obligations  of  Purchaser,
enforceable in accordance with their terms,  except (a) as limited by applicable
bankruptcy,  insolvency,  reorganization,  moratorium  or other  laws of general
application  affecting  enforcement of creditors'  rights, and (b) as limited by
general  principles  of equity  that  restrict  the  availability  of  equitable
remedies.

     5.2 Investment  Representations.  Purchaser understands that the Securities
are being offered and sold pursuant to an exemption from registration  contained
in the Securities Act based in part upon Purchaser's  representations  contained
in the Agreement.

     5.3 Purchaser Bears Economic Risk. Purchaser has substantial  experience in
evaluating  and  investing in private  placement  transactions  of securities in
companies  similar to the Company so that it is capable of evaluating the merits
and risks of its  investment  in the Company and has the capacity to protect its
own interests.  Purchaser must bear the economic risk of this  investment  until
the Securities are  registered  pursuant to the Securities  Act, or an exemption
from registration is available.

     5.4  Acquisition  for Own  Account.  Purchaser  is  acquiring  the Note for
Purchaser's  own account for investment  only, and not with a view towards their
distribution.

     5.5 Purchaser Can Protect Its Interest. Purchaser represents that by reason
of its, or of its management's,  business or financial experience, Purchaser has
the capacity to protect its own  interests in connection  with the  transactions
contemplated in this Agreement, and the Related Agreements.  Further,  Purchaser
is  aware  of no  publication  of  any  advertisement  in  connection  with  the
transactions contemplated in the Agreement.

     5.6  Accredited  Investor.  Purchaser  represents  that it is an accredited
investor within the meaning of Regulation D under the Securities Act.

     5.7 Legends.

     (a) The Note shall bear the following  legend until the Note and Conversion
Shares are covered by an effective registration statement filed with the SEC:

     "THIS NOTE AND THE COMMON STOCK ISSUABLE UPON  CONVERSION OF THIS NOTE HAVE
     NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED,  OR, IF
     APPLICABLE,  STATE SECURITIES LAWS. THIS NOTE AND THE COMMON STOCK ISSUABLE
     UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD,  OFFERED FOR SALE, PLEDGED OR
     HYPOTHECATED  IN THE ABSENCE OF AN EFFECTIVE  REGISTRATION  STATEMENT AS TO
     THIS NOTE OR SUCH SHARES  UNDER SAID ACT AND  APPLICABLE  STATE  SECURITIES
     LAWS OR AN  OPINION OF COUNSEL  REASONABLY  SATISFACTORY  TO PATH 1 NETWORK
     TECHNOLOGIES INC. THAT SUCH REGISTRATION IS NOT REQUIRED."

     (b) The Conversion  Shares and the Warrant Shares shall bear a legend which
shall be in substantially the following form until such shares are covered by an
effective registration statement filed with the SEC:

     "THE SHARES  REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
     THE SECURITIES ACT OF 1933, AS AMENDED, OR IF APPLICABLE,  STATE SECURITIES
     LAWS.  THESE  SHARES  MAY  NOT  BE  SOLD,  OFFERED  FOR  SALE,  PLEDGED  OR
     HYPOTHECATED  IN THE ABSENCE OF AN EFFECTIVE  REGISTRATION  STATEMENT UNDER
     SUCH  SECURITIES  ACT AND  APPLICABLE  STATE  LAWS OR AN OPINION OF COUNSEL
     REASONABLY  SATISFACTORY  TO PATH 1  NETWORK  TECHNOLOGIES  INC.  THAT SUCH
     REGISTRATION IS NOT REQUIRED."

     (c) The Warrant shall bear the following legend:

     "THIS WARRANT AND THE COMMON SHARES  ISSUABLE UPON EXERCISE OF THIS WARRANT
     HAVE NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED,  OR
     APPLICABLE  STATE  SECURITIES  LAWS.  THIS  WARRANT  AND THE COMMON  SHARES
     ISSUABLE UPON  EXERCISE OF THIS WARRANT MAY NOT BE SOLD,  OFFERED FOR SALE,
     PLEDGED  OR  HYPOTHECATED  IN  THE  ABSENCE  OF AN  EFFECTIVE  REGISTRATION
     STATEMENT AS TO THIS WARRANT OR THE UNDERLYING SHARES OF COMMON STOCK UNDER
     SAID ACT AND  APPLICABLE  STATE  SECURITIES  LAWS OR AN  OPINION OF COUNSEL
     REASONABLY  SATISFACTORY  TO PATH 1  NETWORK  TECHNOLOGIES  INC.  THAT SUCH
     REGISTRATION IS NOT REQUIRED."

     5.8 No Shorting.  The  Purchaser  will not and will not cause any person or
entity to engage in "short sales" of the Company's Common Stock.

     5.9 Distribution of Registered  Shares. The Purchaser agrees not to sell on
a monthly  basis more than 20% of the  volume of the shares of the Common  Stock
traded during such month on the  Principal  Market on which the shares of Common
Stock are listed for trading.  Notwithstanding  the foregoing,  if the Purchaser
has not used its 20%  allotment  in a given  month,  it may carry  forward  such
allotment for up to 5 trading days of the following month.


     6.  COVENANTS OF THE  COMPANY.  The Company  covenants  and agrees with the
Purchaser as follows:

     6.1 Stop-Orders.  The Company will advise the Purchaser,  promptly after it
receives  notice of issuance by the  Securities  and  Exchange  Commission  (the
"SEC"), any state securities commission or any other regulatory authority of any
stop  order  or of any  order  preventing  or  suspending  any  offering  of any
securities  of the Company,  or of the  suspension of the  qualification  of the
Common  Stock of the Company for  offering or sale in any  jurisdiction,  or the
initiation of any proceeding for any such purpose.

     6.2 Listing. The Company shall promptly secure the listing of the shares of
Common Stock  issuable upon  conversion of the Note and upon the exercise of the
Warrant  upon the  Principal  Market upon which  shares of Common Stock are then
listed  (subject to official notice of issuance) and shall maintain such listing
so long as any other shares of Common Stock shall be so listed. The Company will
maintain the listing of its Common Stock on a Principal Market,  and will comply
in all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the National  Association of Securities  Dealers ("NASD")
and such exchanges, as applicable. The Company will provide the Purchaser copies
of all notices it receives  notifying the Company of the  threatened  and actual
delisting of the Common Stock from any Principal Market.

     6.3  Market  Regulations.  The  Company  shall  notify  the  SEC,  NASD and
applicable  state  authorities,  in accordance with their  requirements,  of the
transactions  contemplated by this Agreement, and shall take all other necessary
action and  proceedings as may be required and permitted by applicable law, rule
and regulation,  for the legal and valid issuance of the Securities to Purchaser
and promptly provide copies thereof to Purchaser.

     6.4 Reporting  Requirements.  The Company will timely file with the SEC all
reports  required to be filed  pursuant  to the  Exchange  Act and refrain  from
terminating its status as an issuer required by the Exchange Act to file reports
thereunder even if the Exchange Act or the rules or regulations thereunder would
permit  such  termination.  In  addition,  within 15 days  after the end of each
calendar  month,  the Company will provide to the  Purchaser a monthly cash flow
statement for the immediately preceding month.

     6.5 Use of Funds.  The Company  agrees that it will use the proceeds of the
sale of the Note  and  Warrant  for  general  corporate  purposes  only,  in the
ordinary course of its business and consistent  with past practice and,  without
limiting the generality of the foregoing,  shall not use such proceeds to make a
loan to any employee,  officer, director or stockholder of the Company, to repay
any loan or other  obligation  of the Company or to repurchase or pay a dividend
on shares of Common Stock or other  securities of the Company (in any such case,
regardless of whether such loan or payment was authorized by the Company's Board
of  Directors  prior to the date  hereof),  other  than any such  repurchase  or
payment  explicitly  required,  permitted or  contemplated  by the terms of this
Agreement or the other Related Agreements.

     6.6 Access to  Facilities.  The  Company  will  permit any  representatives
designated  by the Purchaser (or any  transferee of the  Purchaser),  so long as
such  person  holds any  Securities  upon  reasonable  notice and during  normal
business hours, at such person's expense and accompanied by a representative  of
the Company, to (a) visit and inspect any of the properties of the Company,  (b)
examine  the  corporate  and  financial  records  of the  Company  (unless  such
examination is not permitted by federal,  state or local law or by contract) and
make copies thereof or extracts therefrom and (c) discuss the affairs,  finances
and  accounts  of  any  such  corporations  with  the  directors,  officers  and
independent accountants of the Company.

     6.7 Taxes. The Company will promptly pay and discharge, or cause to be paid
and  discharged,  when  due and  payable,  all  lawful  taxes,  assessments  and
governmental  charges or levies  imposed upon the income,  profits,  property or
business  of the  Company;  provided,  however,  that any such tax,  assessment,
charge or levy  need not be paid if the  validity  thereof  shall  currently  be
contested in good faith by appropriate proceedings and if the Company shall have
set aside on its books  adequate  reserves with respect  thereto,  and provided,
further,  that the  Company  will pay all such  taxes,  assessments,  charges or
levies  forthwith  upon the  commencement  of  proceedings to foreclose any lien
which may have attached as security therefor.

     6.8  Insurance.  The Company will keep its assets which are of an insurable
character  insured by financially  sound and reputable  insurers against loss or
damage by fire,  explosion  and  other  risks  customarily  insured  against  by
companies in the Company's  line of business,  in amounts  sufficient to prevent
the Company from  becoming a  co-insurer  and not in any event less than 100% of
the insurable value of the property insured; and the Company will maintain, with
financially  sound and reputable  insurers,  insurance against other hazards and
risks and  liability  to persons  and  property  to the extent and in the manner
customary  for  companies in similar  businesses  similarly  situated and to the
extent available on commercially reasonable terms.

     6.9  Intellectual  Property.  The Company shall  maintain in full force and
effect its corporate existence, rights and franchises and all licenses and other
rights to use  Intellectual  Property  owned or possessed  by it and  reasonably
deemed to be necessary to the conduct of its business.

     6.10  Properties.  The Company  will keep its  properties  in good  repair,
working order and condition, reasonable wear and tear excepted, and from time to
time make all needful and proper repairs, renewals, replacements,  additions and
improvements  thereto;  and the  Company  will at all  times  comply  with  each
provision  of all  leases  to which it is a party  or  under  which it  occupies
property if the breach of such provision could  reasonably be expected to have a
material adverse effect.

     6.11  Confidentiality.  The Company  agrees that it will not disclose,  and
will not include in any public announcement,  the name of the Purchaser,  unless
expressly  agreed to by the  Purchaser  or unless and until such  disclosure  is
required by law or  applicable  regulation,  and then only to the extent of such
requirement.

     6.12  Required  Approvals.  For so long as at  least  40% of the  principal
amount of the Note is  outstanding,  the  Company,  without  the  prior  written
consent of the Purchaser, shall not:

     (a)  directly  or  indirectly  declare  or pay any  dividends  or make  any
distributions  upon any of its capital stock or other equity  securities (or any
securities   directly  or  indirectly   convertible   into  or   exercisable  or
exchangeable for equity securities);

     (b) liquidate,  dissolve or effect a recapitalization,  reclassification or
reorganization in any form of transaction  (including,  without limitation,  any
reorganization  into a limited  liability  company,  a partnership  or any other
non-corporate  entity which is treated as a partnership  for federal  income tax
purposes or a stock split or "reverse" stock split of the Common Stock);

     (c) create,  incur,  assume or suffer to exist  indebtedness  exceeding  an
aggregate principal amount of $750,000 outstanding at any time;

     (d) become subject to (including,  without limitation,  by way of amendment
to or  modification  of) any  agreement or  instrument  which by its terms would
(under any circumstances) restrict the Company's right to perform the provisions
of this Agreement or any of the agreements contemplated thereby;

     (e)  consent to or  implement  any  termination,  amendment,  modification,
supplement  or waiver  of (a) the  certificate  or  articles  of  incorporation,
bylaws,  regulations  or other  constitutional  documents  of the Company or any
subsidiary  or (b) any  material  contract  to which  it is a  party;  provided,
however,  that such  documents  may be amended or  modified if and to the extent
that such amendment or modification is not substantive or material and could not
be adverse to the Company or the Purchaser; or

     (f)  change  the  business  of the  Company  from a network  communications
technology company.

     6.13 Reissuance of Securities.  The Company agrees to reissue  certificates
representing  the Securities  without the legends set forth in Section 5.7 above
at such  time  as (a)  the  holder  thereof  is  permitted  to  dispose  of such
Securities  pursuant to Rule 144(k) under the Securities Act, or (b) upon resale
subject  to an  effective  registration  statement  after  such  Securities  are
registered  under the  Securities  Act. The Company agrees to cooperate with the
Purchaser in connection with all resales pursuant to Rule 144(d) and Rule 144(k)
and provide legal opinions  necessary to allow such resales provided the Company
and its counsel receive reasonably  requested  representations  from the selling
Purchaser and broker, if any.

     6.14  Opinion.  On the  Closing  Date,  the  Company  will  deliver  to the
Purchaser  an opinion  acceptable  to the  Purchaser  from the  Company's  legal
counsel in the form annexed  hereto as Exhibit D. The Company will  provide,  at
the Company's expense, such other legal opinions in the future as are reasonably
necessary for the conversion of the Note and exercise of the Warrant.

     7. COVENANTS OF THE COMPANY AND PURCHASER REGARDING INDEMNIFICATION.

     7.1  Company  Indemnification.   The  Company  agrees  to  indemnify,  hold
harmless,   reimburse  and  defend  Purchaser,  each  of  Purchaser's  officers,
directors,  agents,  affiliates,  control persons,  and principal  shareholders,
against  any  claim,  cost,  expense,  liability,  obligation,  loss  or  damage
(including reasonable legal fees) of any nature, incurred by or imposed upon the
Purchaser   which   results,   arises   out  of  or  is   based   upon  (i)  any
misrepresentation  by  Company  or breach of any  warranty  by  Company  in this
Agreement  or in any  exhibits  or  schedules  attached  hereto  or any  Related
Agreement,  or (ii) any  breach or  default  in  performance  by  Company of any
covenant or  undertaking  to be  performed  by Company  hereunder,  or any other
agreement entered into by the Company and Purchaser relating hereto.

     7.2  Purchaser's  Indemnification.  Purchaser  agrees  to  indemnify,  hold
harmless,  reimburse and defend the Company and each of the Company's  officers,
directors,  agents, affiliates,  control persons and principal shareholders,  at
all times  against any claim,  cost,  expense,  liability,  obligation,  loss or
damage (including  reasonable legal fees) of any nature,  incurred by or imposed
upon  the  Company  which  results,  arises  out of or is  based  upon  (i)  any
misrepresentation  by  Purchaser  or breach of any warranty by Purchaser in this
Agreement  or in any  exhibits  or  schedules  attached  hereto  or any  Related
Agreement;  or (ii) any breach or default in  performance  by  Purchaser  of any
covenant or  undertaking  to be performed by Purchaser  hereunder,  or any other
agreement entered into by the Company and Purchaser relating hereto.

     7.3  Procedures.  The procedures and  limitations  set forth in Section 9.6
shall apply to the indemnifications set forth in Sections 7.1 and 7.2 above.

     8. CONVERSION OF CONVERTIBLE NOTE.

     Subject  to the  provisions  of  Article  III of the  Note,  the  following
provisions shall apply:

     8.1 Mechanics of Conversion.

     (a) Provided  the  Purchaser  has  notified the Company of the  Purchaser's
intention to sell the Conversion  Shares and the Conversion  Shares are included
in an effective registration statement or are otherwise exempt from registration
when sold:  (i) Upon the  conversion  of the Note or part  thereof,  the Company
shall,  at its own cost and expense,  take all necessary  action  (including the
issuance of an opinion of counsel) to assure that the Company's  transfer  agent
shall issue stock  certificates in the name of the Purchaser (or its nominee) or
such other persons as designated by the Purchaser and in such  denominations  to
be specified  representing  the number of Conversion  Shares  issuable upon such
conversion;  and (ii) The Company warrants that no instructions other than these
instructions  have been or will be given to the transfer  agent of the Company's
Common  Stock  and  that  the  Conversion  Shares  issued  will  be  unlegended,
free-trading, and freely transferable, and will not contain a legend restricting
the resale or transferability of the Conversion Shares.

     (b)  Purchaser  will give notice of its  decision to exercise  its right to
convert the Note or part  thereof by  telecopying  or  otherwise  delivering  an
executed  and  completed  notice of the number of shares to be  converted to the
Company  (the "Notice of  Conversion").  The  Purchaser  will not be required to
surrender the Note until the Purchaser  receives a certificate or  certificates,
as the case may be,  representing  the  Conversion  Shares or until the Note has
been fully satisfied. Each date on which a Notice of Conversion is telecopied or
delivered  to the Company in  accordance  with the  provisions  hereof  shall be
deemed a "Conversion Date." The Company will or will cause the transfer agent to
transmit  the  Company's  Common  Stock  certificates  representing  the  shares
issuable upon conversion of the Note (and a certificate representing the balance
of the Note not so  converted,  if requested by  Purchaser) to the Purchaser via
express  courier for receipt by such Purchaser  within three business days after
receipt by the Company of the Notice of Conversion  (the  "Delivery  Date").  In
lieu of delivering physical certificates,  provided the Company's transfer agent
is  participating  in  the  Depository  Trust  Company  ("DTC")  Fast  Automated
Securities  Transfer program,  upon request of the Holder, the Company shall use
commercially  reasonably  efforts to cause its transfer agent to  electronically
transmit  such  shares  to  the  Purchaser  by  crediting  the  account  of  the
Purchaser's  prime  broker  with  DTC  through  its  Deposit   Withdrawal  Agent
Commission system.

     (c) The Company  understands that a delay in the delivery of the Conversion
Shares in the form  required  pursuant  to  Section 8 hereof,  or the  Mandatory
Redemption Payment described in Section 8.2 hereof,  beyond the Delivery Date or
Mandatory  Redemption  Payment  Date (as defined in Section 8.2) could result in
economic loss to the Purchaser.  As compensation to the Purchaser for such loss,
the Company  agrees to pay late  payments to the  Purchaser for late issuance of
the  Conversion  Shares in the form  required  pursuant to Section 8 hereof upon
conversion of the Note or late payment of the Mandatory  Redemption  Payment, in
the  amount  of $100 per  business  day  after the  Delivery  Date or  Mandatory
Redemption  Payment  Date,  as the case may be, for each $10,000 Note  principal
being converted or redeemed.  The Company shall pay any payments  incurred under
this  Section in  immediately  available  funds  upon  demand.  Furthermore,  in
addition to any other remedies  which may be available to the Purchaser,  in the
event that the Company fails for any reason to effect delivery of the Conversion
Shares by the Delivery Date or make payment by the Mandatory  Redemption Payment
Date,  the  Purchaser  will be  entitled  to revoke all or part of the  relevant
Notice  of  Conversion  or  rescind  all or  part  of the  notice  of  Mandatory
Redemption  by delivery of a notice to such effect to the Company  whereupon the
Company and the Purchaser shall each be restored to their  respective  positions
immediately  prior to the  delivery of such  notice,  except  that late  payment
charges  described  above shall be payable through the date notice of revocation
or rescission is given to the Company.

     (d)  Nothing  contained  herein or in any  document  referred  to herein or
delivered  in  connection  herewith  shall be deemed to establish or require the
payment  of a rate of  interest  or  other  charges  in  excess  of the  maximum
permitted by applicable law. In the event that the rate of interest or dividends
required  to be paid or  other  charges  hereunder  exceed  the  maximum  amount
permitted by such law, any payments in excess of such maximum  shall be credited
against  amounts  owed by the  Company to a Purchaser  and thus  refunded to the
Company.

     8.2  Mandatory  Redemption.  In the  event the  Company  is unable to issue
Conversion Shares on a Delivery Date, or upon an Event of Default, as defined in
the Note, or at any time when a Note is convertible, for any reason, then at the
Purchaser's  election,  the Company must pay to the Purchaser  five (5) business
days after request by the Purchaser or on the Delivery Date (if requested by the
Purchaser) a sum of money  determined by  multiplying  the principal of the Note
required to be converted and not so converted (or otherwise not convertible,  as
applicable)  by  130%,   together  with  accrued  but  unpaid  interest  thereon
("Mandatory  Redemption  Payment").  The  Mandatory  Redemption  Payment must be
received  by the  Purchaser  on the  same  date  as the  Conversion  Shares  are
otherwise deliverable or within five (5) business days after request,  whichever
is sooner ("Mandatory  Redemption Payment Date").  Upon receipt of the Mandatory
Redemption Payment, the corresponding Note principal and interest will be deemed
paid and no longer outstanding.

     8.3 Maximum Conversion. The Purchaser shall not be entitled to convert on a
Conversion  Date that amount of a Note in connection  with that number of shares
of Common  Stock which would be in excess of the sum of (i) the number of shares
of Common Stock  beneficially  owned by the Purchaser on a Conversion  Date, and
(ii) the number of shares of Common Stock  issuable  upon the  conversion of the
Note with respect to which the  determination of this proviso is being made on a
Conversion Date, which would result in beneficial  ownership by the Purchaser of
more than 4.99% of the outstanding shares of Common Stock of the Company on such
Conversion  Date. For the purposes of the proviso to the  immediately  preceding
sentence,  beneficial  ownership  shall be determined in accordance with Section
13(d) of the  Exchange  Act and  Regulation  13d-3  thereunder.  Subject  to the
foregoing,  a Purchaser  shall not be limited to aggregate  conversions  of only
4.99%. A Purchaser may void the conversion  limitation described in this Section
8.3 upon 75 days prior notice to the Company. Upon an Event of Default under the
Note, the conversion  limitation in this Section 8.3 shall automatically  become
null and void.

     8.4  Injunction - Posting of Bond. In the event a Purchaser  shall elect to
convert a Note or part thereof,  the Company may not refuse  conversion  for any
reason,  unless  an  injunction  from a court,  on  notice,  restraining  and or
enjoining  conversion  of all or part of said Note  shall  have been  sought and
obtained and the Company  posts a surety bond for the benefit of such  Purchaser
in the  amount  of 130% of the  amount  of the  Note,  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 such Purchaser to the extent it obtains judgment.

     8.5 Buy-In. In addition to any other rights available to the Purchaser,  if
the Company fails to deliver to the Purchaser  Conversion Shares by the Delivery
Date and if after the Delivery Date the  Purchaser  purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
sale by such  Purchaser  of the Common  Stock  which the  Purchaser  anticipated
receiving upon such conversion (a "Buy-In"),  then the Company shall pay in cash
to the  Purchaser  (in addition to any remedies  available to or elected by such
Purchaser)  the  amount  by  which  (A) the  Purchaser's  total  purchase  price
(including  brokerage  commissions,  if any) for the  shares of Common  Stock so
purchased  exceeds (B) the aggregate  principal  and/or  interest  amount of the
Note, for which such conversion was not timely  honored,  together with interest
thereon at a rate of 15% per annum,  accruing  until such amount and any accrued
interest  thereon  is paid in full  (which  amount  shall be paid as  liquidated
damages and not as a penalty). For example, if the Purchaser purchases shares of
Common  Stock  having a total  purchase  price of $11,000 to cover a Buy-In with
respect to an attempted conversion of $10,000 of Note principal and/or interest,
the Company shall be required to pay the Purchaser  $1,000,  plus interest.  The
Purchaser  shall  provide  the Company  written  notice  indicating  the amounts
payable to the Purchaser in respect of the Buy-In.

     8.6 Optional Redemption.  The Company will have the option of redeeming any
outstanding  Note ("Optional  Redemption") by paying to Purchaser a sum of money
as follows:

          from the Closing  Date  through 90 days after the Closing  Date - 120%
          from 91 days  through 135 days after the Closing Date - 135%
          after 135 days following the Closing Date - 150%

of the principal  amount of the Note  together with accrued but unpaid  interest
and any and all other sums due,  accrued or  payable  to the  Purchaser  arising
under this Agreement, Note or any other document delivered herewith ("Redemption
Amount")  outstanding on the day notice of redemption ("Notice of Redemption) is
given to a Purchaser  ("Redemption  Date").  A Notice of  Redemption  may not be
given in connection  with any portion of Note for which notice of conversion has
been  given  by  the  Purchaser  at any  time  before  receipt  of a  Notice  of
Redemption.  The Purchaser may elect within five (5) business days after receipt
of a Notice of Redemption to give the Company Notice of Conversion in connection
with some or all of the Note principal and interest which was the subject of the
Notice  of  Redemption.  A  Notice  of  Redemption  must  be  accompanied  by  a
certificate  signed by the chief executive officer or chief financial officer of
the Company  stating that the Company has on deposit and segregated  ready funds
equal to the Redemption Amount. The Redemption Amount must be paid in good funds
to the  Purchaser  no later  than the  seventh  (7th)  business  day  after  the
Redemption Date ("Optional  Redemption  Payment Date"). In the event the Company
fails to pay the Redemption Amount by the Optional Redemption Payment Date, then
the Redemption Notice will be null and void and the Company will thereafter have
no  further  right to  effect an  Optional  Redemption,  and at the  Purchaser's
election,  the Redemption Amount will be deemed a Mandatory  Redemption  Payment
and the Optional  Redemption Payment Date will be deemed a Mandatory  Redemption
Payment  Date.  Such failure  will also be deemed an Event of Default  under the
Note.  Any Notice of  Redemption  must be given to all holders of Note issued in
connection with the Offering,  in proportion to their holdings of Note principal
on a Redemption Date.

     9. REGISTRATION RIGHTS.

     9.1  Registration  Rights Granted.  The Company hereby grants the following
registration rights to the Purchaser.

     (a) For a period  commencing 90 days after the Closing Date,  but not later
than four (4) years after the Closing Date (the  "Request  Date"),  the Company,
upon a written request ("Request for Registration") therefore from the Purchaser
(the Conversion  Shares and Warrant Shares issued or issuable upon conversion of
the Note or exercise of the Warrant issued  hereunder,  being,  the "Registrable
Securities"), shall prepare and file with the SEC a registration statement under
the Securities Act covering the Registrable  Securities which are the subject of
such  request,   unless  the  Company  has  given  the  Purchaser  a  Notice  of
Registration and/or such Registrable  Securities are the subject of an effective
registration  statement.  As a condition precedent to the Company's  preparation
and filing of a registration statement, the Purchaser shall promptly provide the
Company  with all such  information  as the  Company  reasonably  requests.  The
obligation  of the  Company  under  this  Section  9.1 shall be  limited  to two
registration  statements.  Notwithstanding  the foregoing,  if the Note has been
fully  converted  or  redeemed  in full,  then the  Purchaser  will not have the
registration rights with respect to the Warrant Shares set forth in this Section
9.1(a).

     (b) If the Company at any time  proposes to register any of its  securities
under the Act for sale to the  public,  whether  for its own  account or for the
account of other security  holders or both,  except with respect to registration
statements on Forms S-4, S-8 or another form not available for  registering  the
Registrable  Securities  for  sale  to  the  public,  provided  the  Registrable
Securities are not otherwise subject to an effective registration statement, the
Company will give the Purchaser  written notice  ("Notice of  Registration")  to
cause such  Registrable  Securities  to be included  with the  securities  to be
covered by the registration  statement  proposed to be filed by the Company.  In
the event that any  registration  pursuant to this  Section  9.1(b) shall be, in
whole or in  part,  an  underwritten  public  offering  of  Common  Stock of the
Company,  the number of shares of Registrable  Securities to be included in such
an underwriting may be reduced by the managing  underwriter if and to the extent
that the Company and the  underwriter  shall  reasonably  be of the opinion that
such inclusion would adversely affect the marketing of the securities to be sold
by the Company  therein;  provided,  however,  that the Company shall notify the
Purchaser  in  writing  of any  such  reduction.  Notwithstanding  the  forgoing
provisions,  or Section  9.1(a)  hereof,  the Company  may  withdraw or delay or
suffer a delay of any  registration  statement  referred to in Section 9.1(a) or
(b) without  thereby  incurring any liability to the  Purchaser,  so long as the
registration provisions are otherwise complied with by the Company.

     (c) If, a Request for  Registration is received by the Company  pursuant to
Section 9.1(a) and the Company  determines to proceed with the  preparation  and
filing of a registration  statement  under the Securities  Act, such Request for
Registration  shall be deemed to have been  given  pursuant  to  Section  9.1(b)
rather than Section  9.1(a),  and the rights of the  Purchaser  pursuant to such
Request for Registration shall be governed by Section 9.1(b).

     (d) The  Company  shall file a Form SB-2  registration  statement  (or such
other form that it is  eligible  to use) in order to  register  the  Registrable
Securities  for resale and  distribution  under the  Securities Act with the SEC
within 30 days of written request from the Purchaser, but in no event shall such
request  be made prior to the  reduction  of the  principal  amount of the Note,
dated May 16, 2002,  to $200,000  (the "Filing  Date"),  and use its  reasonable
commercial efforts to cause such registration statement to be declared effective
within 90 days of the Filing  Date (the  "Effective  Date").  The  Company  will
register not less than a number of shares of Common Stock in the  aforedescribed
registration  statement  that is equal  to the  Warrant  Shares  and 200% of the
Conversion Shares issuable at the Conversion Prices set forth in the Warrant and
Note,  respectively,  that would be in effect on the Closing Date or the date of
filing of such  registration  statement  (employing the  conversion  price which
would result in the greater  number of Shares),  assuming the conversion of 100%
of the Note which are then outstanding or issuable  hereunder,  and at least one
share of common  stock for each  common  share  issuable  upon  exercise  of the
Warrant  which  are  then  outstanding  or  issuable  hereunder  (employing  the
Conversion  Price  that  would  result in the  greater  number of  shares).  The
Registrable  Securities  shall be  reserved  and set aside  exclusively  for the
benefit of the Purchaser and the holders of the Warrant, as the case may be, and
not issued,  employed or reserved  for anyone other than the  Purchaser  and the
holders of the Warrant. Such registration  statement will be promptly amended or
additional  registration  statements  will be  promptly  filed by the Company as
necessary to register  additional  Company  Shares to allow the public resale of
all  Common  Stock  included  in and  issuable  by  virtue  of  the  Registrable
Securities.  No securities of the Company other than the Registrable  Securities
will be included in the registration statement described in this Section 9.1(d).

     9.2 Registration Procedures. If and whenever the Company is required by the
provisions hereof to effect the registration of the Registrable Securities under
the Act, the Company will, as expeditiously as possible:

     (a) prepare and file with the SEC a registration  statement with respect to
such securities and use its best efforts to cause such registration statement to
become and remain  effective  for the  period of the  distribution  contemplated
thereby  (determined as herein provided),  and promptly provide to the Purchaser
copies of all filings and SEC letters of comment;

     (b) prepare and file with the SEC such  amendments and  supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration  statement effective until the later of: (i)
six months after the latest exercise  period of the Warrant;  (ii) twelve months
after the Maturity  Date of the Note or (iii) four years after the Closing Date,
and  comply  with the  provisions  of the  Securities  Act with  respect  to the
disposition of all of the Registrable  Securities  covered by such  registration
statement in accordance with the Purchaser's  intended method of disposition set
forth in such registration statement for such period;

     (c) furnish to the Purchaser,  and to each  underwriter if any, such number
of copies of the  registration  statement and the  prospectus  included  therein
(including each preliminary  prospectus) as the Purchaser reasonably may request
to facilitate the public sale or  disposition of the securities  covered by such
registration statement;

     (d) use its best efforts to register or qualify the Purchaser's Registrable
Securities covered by such registration  statement under the securities or "blue
sky"  laws  of  such  jurisdictions  as the  Purchaser  and in  the  case  of an
underwritten public offering, the managing underwriter shall reasonably request,
provided,  however,  that the Company shall not for any such purpose be required
to qualify  generally  to  transact  business  as a foreign  corporation  in any
jurisdiction  where it is not so qualified  or to consent to general  service of
process in any such jurisdiction;

     (e) list the Registrable  Securities covered by such registration statement
with any  securities  exchange on which the Common  Stock of the Company is then
listed;

     (f)  immediately  notify  the  Purchaser  and each  underwriter  under such
registration  statement  at any  time  when a  prospectus  relating  thereto  is
required to be delivered under the Securities Act, of the happening of any event
of which the Company has knowledge as a result of which the prospectus contained
in such registration  statement, as then in effect, includes an untrue statement
of a  material  fact or omits to state a  material  fact  required  to be stated
therein or necessary to make the  statements  therein not misleading in light of
the circumstances then existing; and

     (g)  make  available  for  inspection  by the  Purchaser,  any  underwriter
participating in any distribution pursuant to such registration  statement,  and
any  attorney,   accountant  or  other  agent   retained  by  the  Purchaser  or
underwriter,  all  publicly  available,  non-confidential  financial  and  other
records,  pertinent corporate documents and properties of the Company, and cause
the  Company's  officers,   directors  and  employees  to  supply  all  publicly
available,  non-confidential  information  reasonably  requested  by the seller,
underwriter,  attorney, accountant or agent in connection with such registration
statement.

     9.3 Provision of Documents.

     (a) In connection  with each  registration  hereunder,  the Purchaser  will
furnish to the Company in writing such  information and  representation  letters
with respect to itself and the proposed  distribution by it as reasonably  shall
be necessary in order to assure  compliance  with federal and  applicable  state
securities  laws. In  connection  with each  registration  pursuant to Section 9
covering an underwritten public offering, the Company and the Purchaser agree to
enter into a written  agreement  with the managing  underwriter in such form and
containing such provisions as are customary in the securities  business for such
an arrangement  between such underwriter and companies of the Company's size and
investment stature.

     9.4  Non-Registration  Events. The Company and the Purchaser agree that the
Purchaser  will suffer  damages if any  registration  statement  required  under
Section  9.1(a) above is not filed within 30 days after  written  request by the
holder and not declared  effective by the SEC within 90 days after such request,
and maintained in the manner and within the time periods contemplated by Section
9 hereof,  and it would not be feasible to ascertain  the extent of such damages
with precision.  Accordingly,  if (i) the  Registration  Statement  described in
Section  9.1(a) is not filed within 30 days of such written  request,  or is not
declared effective by the SEC on or prior to the date that is 90 days after such
request,  or (ii) the  registration  statement on Form S-3 or such other form as
described  in Section  9.1(d) is not filed on or before  the Filing  Date or not
declared effective on or before the sooner of the Effective Date, or within five
days of  receipt  by the  Company  of a  communication  from  the SEC  that  the
registration  statement  described in Section  9.1(d) will not be  reviewed,  or
(iii) any registration statement described in Section 9.1(a) or (d) is filed and
declared  effective but shall  thereafter  cease to be effective  (without being
succeeded immediately by an additional registration statement filed and declared
effective)  for a period of time which shall exceed 30 days in the aggregate per
year but not more than 20 consecutive  calendar days (defined as a period of 365
days commencing on the date the  Registration  Statement is declared  effective)
(each such event  referred  to in this  Section  9.4 is  referred to herein as a
"Non-Registration  Event"),  then,  for so long as such  Non-Registration  Event
shall  continue,  the Company  shall pay in cash as  Liquidated  Damages to each
holder of any  Registrable  Securities  an amount  equal to two percent (2%) per
month or part thereof during the pendency of such Non-Registration  Event of the
initial  principal  amount of the Note issued in  connection  with the Offering,
whether or not converted,  and whether or not redeemed. In the event a Mandatory
Redemption  Payment is  demanded  from the  Company by the  holder  pursuant  to
Section 8.2 of this  Agreement,  then the Liquidated  Damages  described in this
Section  9.4  shall no  longer  accrue  on the  portion  of the  purchase  price
underlying the Mandatory Redemption Payment,  from and after the date the holder
receives the Mandatory Redemption Payment. It shall be deemed a Non-Registration
Event to the  extent  that all the  Common  Stock  included  in the  Registrable
Securities  and  underlying  the  Securities  is not  included  in an  effective
registration  statement  as of and after the  Effective  Date at the  conversion
prices in effect from and after the Effective Date.

     9.5  Expenses.  All  expenses  incurred  by the Company in  complying  with
Section 9, including,  without  limitation,  all  registration  and filing fees,
printing  expenses,  fees and  disbursements  of counsel and independent  public
accountants for the Company,  fees and expenses  (including  reasonable  counsel
fees) incurred in connection with complying with state  securities or "blue sky"
laws, fees of the NASD,  transfer taxes, fees of transfer agents and registrars,
fees of, and disbursements incurred by, one counsel for the Purchaser, and costs
of insurance are called "Registration  Expenses". All underwriting discounts and
selling commissions applicable to the sale of Registrable Securities,  including
any fees and  disbursements of any special counsel to the Purchaser beyond those
included in Registration Expenses, are called "Selling Expenses."

     The Company will pay all  Registration  Expenses.  All Selling  Expenses in
connection  with each  registration  statement under Section 9 shall be borne by
the Purchaser.

     9.6 Indemnification and Contribution.

     (a) In the event of a registration of any Registrable  Securities under the
Securities  Act  pursuant  to Section 9, the  Company  will  indemnify  and hold
harmless the Purchaser,  and its officers,  directors and each other person,  if
any,  who  controls  the  Purchaser  within the meaning of the  Securities  Act,
against any losses, claims,  damages or liabilities,  joint or several, to which
the  Purchaser,  or such persons 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 any untrue statement or alleged
untrue  statement of any material fact contained in any  registration  statement
under which such Registrable Securities were registered under the Securities Act
pursuant to Section 9, any preliminary  prospectus or final prospectus contained
therein,  or any amendment or supplement  thereof,  or arise out of or are based
upon the omission or alleged  omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Purchaser,  and each such person for any reasonable legal
or other expenses incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action;  provided,  however, that the
Company  will not be liable in any such case if and to the extent  that any such
loss,  claim,  damage  or  liability  arises  out of or is based  upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by any the Purchaser or any such person in
writing specifically for use in any such document.

     (b) In the event of a registration of the Registrable  Securities under the
Securities  Act pursuant to Section 9, the  Purchaser  will  indemnify  and hold
harmless the Company, and its officers, directors and each other person, if any,
who controls the Company within the meaning of the Securities  Act,  against all
losses, claims,  damages or liabilities,  joint or several, to which the Company
or such  persons  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 any untrue  statement or alleged untrue
statement of any material fact  contained in the  registration  statement  under
which such  Registrable  Securities  were  registered  under the  Securities Act
pursuant to Section 9, any preliminary  prospectus or final prospectus contained
therein,  or any amendment or supplement  thereof,  or arise out of or are based
upon the omission or alleged  omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Company and each such person for any reasonable  legal or
other expenses  incurred by them in connection with  investigating  or defending
any such loss, claim, damage, liability or action,  provided,  however, that the
Purchaser  will be liable in any such  case if and only to the  extent  that any
such loss,  claim,  damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished in writing to the Company by the Purchaser
specifically for use in any such document.

     (c) Promptly after receipt by an indemnified  party  hereunder of notice of
the  commencement  of any action,  such  indemnified  party shall, if a claim in
respect thereof is to be made against the indemnifying  party hereunder,  notify
the  indemnifying  party in writing  thereof,  but the omission so to notify the
indemnifying  party shall not relieve it from any liability which it may have to
such  indemnified  party  other than under  this  Section  9.6(c) and shall only
relieve it from any liability which it may have to such indemnified  party under
this Section 9.6(c) if and to the extent the indemnifying party is prejudiced by
such omission.  In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying  party of the  commencement  thereof,
the indemnifying party shall be entitled to participate in and, to the extent it
shall  wish,  to  assume  and   undertake  the  defense   thereof  with  counsel
satisfactory to such indemnified  party, and, after notice from the indemnifying
party to such  indemnified  party of its election so to assume and undertake the
defense thereof,  the indemnifying party shall not be liable to such indemnified
party under this Section 9.6(c) for any legal expenses  subsequently incurred by
such  indemnified  party in  connection  with the  defense  thereof  other  than
reasonable  costs of  investigation  and of liaison  with  counsel so  selected,
provided,  however,  that, if the defendants in any such action include both the
indemnified  party and the  indemnifying  party and the indemnified  party shall
have reasonably  concluded that there may be reasonable defenses available to it
which are different  from or additional to those  available to the  indemnifying
party or if the interests of the indemnified  party  reasonably may be deemed to
conflict with the interests of the indemnifying  party, the indemnified  parties
shall have the right to select one  separate  counsel  and to assume  such legal
defenses and otherwise to  participate  in the defense of such action,  with the
reasonable expenses and fees of such separate counsel and other expenses related
to such participation to be reimbursed by the indemnifying party as incurred.

     (d) In order to provide for just and equitable contribution in the event of
joint  liability  under the  Securities  Act in any case in which either (i) the
Purchaser,  or any  controlling  person  of the  Purchaser,  makes a  claim  for
indemnification pursuant to this Section 9.6 but it 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 this  Section  9.6  provides  for  indemnification  in such  case,  or (ii)
contribution  under  the  Securities  Act  may be  required  on the  part of the
Purchaser or  controlling  person of the  Purchaser in  circumstances  for which
indemnification is provided under this Section 9.6; then, and in each such case,
the Company and the Purchaser will contribute to the aggregate  losses,  claims,
damages or  liabilities to which they may be subject  (after  contribution  from
others) in such  proportion  so that the Purchaser is  responsible  only for the
portion  represented  by the  percentage  that the public  offering price of its
securities  offered by the  registration  statement bears to the public offering
price  of all  securities  offered  by such  registration  statement,  provided,
however,  that,  in any such case,  (A) the  Purchaser  will not be  required to
contribute  any  amount  in  excess  of the  public  offering  price of all such
securities  offered by it pursuant to such  registration  statement;  and (B) no
person or entity guilty of fraudulent  misrepresentation  (within the meaning of
Section  10(f) of the Act) will be entitled to  contribution  from any person or
entity who was not guilty of such fraudulent misrepresentation.

     10.  OFFERING  RESTRICTIONS.  Except  as  previously  disclosed  in the SEC
Reports or stock or stock  options  granted to  employees  or  directors  of the
Company;  or  equity or debt  issued  in  connection  with an  acquisition  of a
business or assets by the  Company;  or the  issuance by the Company of stock in
connection with the  establishment  of a joint venture  partnership or licensing
arrangement  including,  but not limited to, any investment by Leitch Technology
Corporation  (these  exceptions   hereinafter   referred  to  as  the  "Excepted
Issuances"),  the Company will not issue any securities with a variable/floating
conversion  feature  which  are or  could  be (by  conversion  or  registration)
free-trading  securities  prior to the  expiration  of 12 months from the actual
effective date of the registration  statement  described in Section 9.1(d) above
(the "Exclusion Period"). Notwithstanding the above, if the Purchaser elects not
to further fund the Company following the transaction  contemplated  hereby, the
Purchaser shall waive the provisions of this Section 10.

     11. SECURITY INTEREST.  The Company has granted to the Purchaser a security
interest in certain assets of the Company pursuant to a Security  Agreement.  It
is hereby agreed and  acknowledged  by the Company that the Note and any and all
monetary  obligations  arising under the Note or this  Agreement are included in
the Obligations as defined in the Security Agreement, dated May 16, 2002.

     12. MISCELLANEOUS.

     12.1 Governing  Law. This  Agreement  shall be governed by and construed in
accordance with the laws of the State of New York,  without regard to principles
of  conflicts  of laws.  Any action  brought by either  party  against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in the state of
New York.  Both parties and the  individuals  executing this Agreement and other
agreements on behalf of the Company agree to submit to the  jurisdiction of such
courts and waive  trial by jury.  The  prevailing  party  shall be  entitled  to
recover from the other party its reasonable  attorney's  fees and costs.  In the
event that any provision of this Agreement or any other  agreement  delivered in
connection  herewith is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed  inoperative to the extent that
it may  conflict  therewith  and shall be deemed  modified to conform  with such
statute  or  rule of  law.  Any  such  provision  which  may  prove  invalid  or
unenforceable  under any law shall not affect the validity or  enforceability of
any other provision of any agreement.

     12.2 Survival.  The representations,  warranties,  covenants and agreements
made  herein  shall  survive any  investigation  made by the  Purchaser  and the
closing of the transactions  contemplated  hereby.  All statements as to factual
matters  contained in any  certificate  or other  instrument  delivered by or on
behalf of the  Company  pursuant  hereto  in  connection  with the  transactions
contemplated  hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.

     12.3 Successors and Assigns. Except as otherwise expressly provided herein,
the  provisions  hereof shall inure to the benefit of, and be binding upon,  the
successors,  assigns,  heirs, executors and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of the Securities from time to time.

     12.4 Entire Agreement.  This Agreement,  the exhibits and schedules hereto,
the  Related  Agreements  and the  other  documents  delivered  pursuant  hereto
constitute the full and entire  understanding  and agreement between the parties
with regard to the subjects  hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.

     12.5 Severability. In case any provision of the Agreement shall be invalid,
illegal or  unenforceable,  the  validity,  legality and  enforceability  of the
remaining provisions shall not in any way be affected or impaired thereby.

     12.6 Amendment and Waiver.

     (a) This Agreement may be amended or modified only upon the written consent
of the Company and the Purchaser.

     (b) The  obligations  of the  Company  and the rights of the holders of the
Securities  under the Agreement  may be waived only with the written  consent of
such  holders  of  Securities.  The rights of the holder of a Note may be waived
only with the written consent of the holder of such Note.

     12.7  Delays  or  Omissions.  It is  agreed  that no delay or  omission  to
exercise  any right,  power or remedy  accruing  to any party,  upon any breach,
default or  noncompliance  by another party under this  Agreement or the Related
Agreements,  shall  impair  any such  right,  power or  remedy,  nor shall it be
construed to be a waiver of any such breach,  default or  noncompliance,  or any
acquiescence  therein, or of or in any similar breach,  default or noncompliance
thereafter occurring. All remedies, either under this Agreement, the Note or the
Related  Agreements,  by law  or  otherwise  afforded  to any  party,  shall  be
cumulative and not alternative.

     12.8  Notices.  All notices  required or  permitted  hereunder  shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be  notified,  (b) when sent by  confirmed  telex or  facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day,  (c) five days after  having been sent by  registered  or  certified  mail,
return receipt requested,  postage prepaid,  or (d) one day after deposit with a
nationally  recognized  overnight  courier,  specifying next day delivery,  with
written verification of receipt. All communications shall be sent to the Company
at the address as set forth on the signature page hereof and to the Purchaser at
the address set forth on the signature  page hereto for such  Purchaser,  with a
copy in the case of the  Purchaser  to Daniel  M.  Laifer,  Esq.,  152 West 57th
Street,  4th Floor, New York, NY 10019,  facsimile number (212) 541-4434,  or at
such other  address as the Company or the  Purchaser  may  designate by ten days
advance written notice to the other parties hereto.

     12.9 Attorneys' Fees. In the event that any suit or action is instituted to
enforce any provision in this  Agreement,  the prevailing  party in such dispute
shall be entitled to recover from the losing party all fees,  costs and expenses
of enforcing  any right of such  prevailing  party under or with respect to this
Agreement,  including,  without limitation, such reasonable fees and expenses of
attorneys and accountants,  which shall include,  without limitation,  all fees,
costs and expenses of appeals.

     12.10 Titles and Subtitles.  The titles of the sections and  subsections of
the Agreement are for convenience of reference only and are not to be considered
in construing this Agreement.

     12.11 Facsimile Signatures; Counterparts. This Agreement may be executed by
facsimile  signatures and in any number of counterparts,  each of which shall be
an original, but all of which together shall constitute one instrument.

     12.12  Broker's  Fees.  Each party hereto  represents  and warrants that no
agent,  broker,  investment banker,  person or firm acting on behalf of or under
the  authority  of such party  hereto is or will be entitled to any  broker's or
finder's fee or any other  commission  directly or indirectly in connection with
the transactions contemplated herein, except as specified herein with respect to
the  Purchaser.  Each party hereto  further agrees to indemnify each other party
for any claims,  losses or expenses  incurred by such other party as a result of
the representation in this Section 12.12 being untrue.

     12.13  Indemnification.  The Company shall  indemnify the Purchaser for any
losses or  expenses  incurred by the  Purchaser  in  connection  with any claims
brought  against  the  Purchaser  by  any  third  party   (including  any  other
stockholder of the Company) as a result of the transactions contemplated by this
Agreement,  other than for a breach of  representation  or warranty  made by the
Purchaser herein.

     12.14  Construction.   Each  party  acknowledges  that  its  legal  counsel
participated  in the  preparation of this Agreement and,  therefore,  stipulates
that the rule of construction  that  ambiguities are to be resolved  against the
drafting party shall not be applied in the  interpretation  of this Agreement to
favor any party against the other.



<PAGE>


                 [Securities Purchase Agreement Signature Page]

     IN WITNESS  WHEREOF,  the  parties  hereto  have  executed  the  SECURITIES
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.


COMPANY:                          PURCHASER:

PATH 1 NETWORK TECHNOLOGIES INC.  LAURUS MASTER FUND, LTD.

By:  /s/ John R. Zavoli           By:  /s/ David Grin
   -----------------------------      -----------------------------
Name: John R. Zavoli              Name: David Grin
Title: Chief Financial Officer    Address: c/o Ironshore Corporate Services Ltd.
Address:                               P.O.  Box 1234  G.T.,  Queensgate  House,
3636 Nobel Drive, Suite 275            South Church Street
San Diego, California 92122            Grand Cayman, Cayman Islands








<PAGE>




                                LIST OF EXHIBITS


Form of Offering Convertible Note                                      Exhibit A

Form of Warrant                                                        Exhibit B

Form of Opinion                                                        Exhibit C




<PAGE>


                                       A-1
                                    EXHIBIT A

                            FORM OF CONVERTIBLE NOTE

THIS NOTE AND THE COMMON SHARES  ISSUABLE UPON  CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THIS NOTE AND THE
COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE,  PLEDGED  OR  HYPOTHECATED  IN THE  ABSENCE OF AN  EFFECTIVE  REGISTRATION
STATEMENT  AS TO THIS NOTE UNDER  SAID ACT OR AN  OPINION OF COUNSEL  REASONABLY
SATISFACTORY TO PATH 1 NETWORK  TECHNOLOGIES INC., THAT SUCH REGISTRATION IS NOT
REQUIRED.


                                CONVERTIBLE NOTE

     FOR  VALUE  RECEIVED,   PATH  1  NETWORK   TECHNOLOGIES  INC.,  a  Delaware
corporation  (hereinafter  called the  "Borrower"),  hereby  promises  to pay to
LAURUS MASTER FUND, LTD., c/o Ironshore  Corporate  Services Ltd., P.O. Box 1234
G.T.,  Queensgate House, South Church Street, Grand Cayman, Cayman Islands, Fax:
345-949-9877 (the "Holder") or its registered assigns, on order, without demand,
the sum of Three  Hundred  Thousand  Dollars  ($300,000),  with any  accrued and
unpaid interest on May 7, 2004 (the "Maturity Date").

     The following terms shall apply to this Note:

                                    ARTICLE I

                           DEFAULT RELATED PROVISIONS

     1.1 Payment  Grace  Period.  The Borrower  shall have a seven (7) day grace
period to pay any monetary amounts due under this Note, after which grace period
a default interest rate of five percent (5%) per annum above the then applicable
interest rate hereunder shall apply to the amounts owed hereunder.

     1.2 Conversion  Privileges.  The Conversion Privileges set forth in Article
II shall  remain in full force and effect  immediately  from the date hereof and
until the Note is paid in full.

     1.3 Interest Rate. Interest payable on this Note shall accrue at the annual
rate of twelve percent (12%) and be payable in arrears commencing one month from
the date hereof and on the first business day of each consecutive calendar month
thereafter,  and on the Maturity Date, accelerated or otherwise, due and payable
as described below.



                                   ARTICLE II

                       PAYMENTS OF PRINCIPAL AND INTEREST

     2.1 Monthly Payments. Subject to the terms of this Article II, the Borrower
shall repay one-eighteenth of the original principal amount of this Note (to the
extent  such  amount has not been  converted  pursuant  to Article  III  below),
together with interest accrued to date on such portion of the original principal
amount plus any and all default payments owing under the Purchase  Agreement but
not previously  paid  (collectively  the "Monthly  Amount"),  in accordance with
Section 2.2 below, on the first business day of each consecutive  calendar month
(each,  a  "Repayment  Date"),  beginning  on the first  such day  which  occurs
following the date hereof.

     2.2 Cash or Common Stock. Subject to the terms hereof, the Borrower has the
sole option to  determine  whether to satisfy  payment of the Monthly  Amount in
full on each  Repayment  Date either in cash or in shares of Common Stock,  or a
combination  of both.  The  Borrower  shall  deliver  to the  Holder  a  written
irrevocable notice in the form of Exhibit B attached hereto electing to pay such
Monthly Amount in full on such Repayment Date in either cash or Common Stock, or
a combination of both ("Repayment  Election  Notice").  Such Repayment  Election
Notice  shall be  delivered  at  least  ten (10)  days  prior to the  applicable
Repayment  Date (the date of such notice  being  hereinafter  referred to as the
"Notice Date").  The Holder shall have the right to defer for any period of time
the  payment  of the  Monthly  Amount  in  shares  of  Common  Stock in its sole
discretion.  If such  Repayment  Election  Notice is not  delivered  within  the
prescribed period set forth in the preceding sentence,  then the repayment shall
be made in either cash or shares of Common Stock on the same terms  hereunder at
the Holder's sole option.  If the Borrower elects or is required to repay all or
a portion  of the  Monthly  Amount  in cash on a  Repayment  Date,  then on such
Repayment Date the Borrower shall pay to the Holder such amount in  satisfaction
of such  obligation.  If the Borrower elects or is required to repay any portion
of the Monthly Amount in shares of Common Stock, the number of such shares to be
issued for such  Repayment  Date shall be the number  determined by dividing (x)
the portion of the Monthly  Amount to be paid in shares of Common Stock,  by (y)
the applicable Conversion Price as of such Repayment Date.

     2.3 No  Effective  Registration.  Notwithstanding  anything to the contrary
herein,  the Borrower shall be prohibited from exercising its right to repay the
Monthly  Amount in shares of Common  Stock  (and must  deliver  cash in  respect
thereof) on the  applicable  Repayment  Date if at any time from the Notice Date
until the time at which the Holder  receive  such shares there fails to exist an
effective  registration  statement  or an Event of Default  hereunder  exists or
occurs,  unless otherwise waived in writing by the Holder in whole or in part at
the Holder's option.

     2.4  Share  Price/Issuance  Limitations.  Notwithstanding  anything  to the
contrary  herein,  if the  closing  price of the  Common  Stock as  reported  by
Bloomberg, L.P. on the Principal Market for any of the 11 trading days preceding
a Repayment Date was less than 125% of the Maximum Base Price,  and the Borrower
has  elected to pay all or a portion of the  Monthly  Amount in shares of Common
Stock, then, instead of the Borrower delivering the required number of shares of
Common Stock on the Repayment  Date,  the Holder will be permitted to convert up
to the Monthly  Amount that is payable in shares of Common Stock at a Conversion
Price of 85% of the average of the three lowest closing prices during the twenty
(20) trading days  immediately  preceding the  Conversion  Date. Any part of the
Monthly  Amount  not  converted  into  shares of Common  Stock by the  following
Repayment Date shall be paid by the Borrower in cash on such following Repayment
Date. At any time during the relevant month,  the Borrower has the option to pay
the Monthly Amount, or the unconverted part thereof,  in cash and the Conversion
Price set forth in this Section 2.4 shall no longer be applicable.

     By way of example,  for the Repayment  Date of September 1, if the Borrower
delivers a Repayment  Election  Notice on August 15 to pay the Monthly Amount in
shares of Common  Stock and if on August  10,  the stock  price was  $1.50,  the
Holder will be permitted  to convert the portion of the Monthly  Amount that the
Borrower has  determined  is payable in shares of Common Stock at the  following
Conversion  Price:  85% of the average of the three lowest closing prices during
the twenty (20) trading days  immediately  preceding the  Conversion  Date.  Any
portion of the Monthly Amount originally due September 1 that the Holder has not
converted  into  shares  of  Common  Stock by  October 1 shall be due in cash on
October 1.

     2.5 Deemed  Conversions.  Any repayment of the Monthly  Amount in shares of
Common  Stock  pursuant to the terms  hereof  shall  constitute  and be deemed a
conversion of such portion of the applicable  principal  amount of this Note for
all  purposes  under this Note and the Purchase  Agreement  (except as otherwise
provided herein).


                                   ARTICLE III

                                CONVERSION RIGHTS



<PAGE>

     3.1. Conversion into the Borrower's Common Stock.

     (a) Subject to the  provisions  set forth above,  the Holder shall have the
right, but not the obligation,  from and after the date hereof,  and then at any
time until this Note is fully  paid,  to convert the  principal  portion of this
Note and/or  interest or fees due and payable into fully paid and  nonassessable
shares of  common  stock of the  Borrower  as such  stock  exists on the date of
issuance of this Note, or any shares of capital stock of the Borrower into which
such stock shall  hereafter be changed or  reclassified  (the "Common Stock") at
the  conversion  price as defined  in Section  3.1(b)  hereof  (the  "Conversion
Price"),  determined  as provided  herein.  Upon  delivery to the  Borrower of a
Notice of  Conversion  as  described  in  Section 8 of the  Securities  Purchase
Agreement  entered  into  between  the  Borrower  and  certain  persons  who are
signatories thereto,  including the Holder, relating to this Note (the "Purchase
Agreement") of the Holder's  written  request for conversion (the date of giving
such notice of conversion being a "Conversion  Date"),  the Borrower shall issue
and deliver to the Holder within three  business days from the  Conversion  Date
that number of shares of Common  Stock for the portion of the Note  converted in
accordance with the foregoing.  At the election of the Holder, the Borrower will
deliver  accrued but unpaid  interest on the Note  through the  Conversion  Date
directly  to the  Holder on or  before  the  Delivery  Date (as  defined  in the
Purchase Agreement). The number of shares of Common Stock to be issued upon each
conversion  of this Note shall be  determined  by dividing  that  portion of the
principal of the Note to be converted  and interest,  if any, by the  Conversion
Price.  In the event of any  conversions of outstanding  principal  amount under
this Note in part pursuant to this Article III, such conversions shall be deemed
to constitute  conversions of outstanding  principal  amount applying to Monthly
Amounts for the Repayment  Dates in  chronological  order.  For example,  if the
original  principal  amount of this Note is  $300,000  and the Holder  converted
$33,333 of such original  principal  amount prior to the first  Repayment  Date,
then (1) the principal  amount of the Monthly Amount due on the first  Repayment
Date would equal $0, (2) the principal  amount of the Monthly  Amount due on the
second Repayment Date would equal $0 and (3) the principal amount of the Monthly
Amount due on each of the remaining Repayment Dates would be $16,666.

     (b)  Subject to  adjustment  as  provided  in Section  3.1(c)  hereof,  the
Conversion Price per share shall be $.85 (the "Maximum Base Price"). If an Event
of Default has occurred and be continuing  hereunder then the  Conversion  Price
shall be equal  to the  lower of (i) the  Maximum  Base  Price;  or (ii)  eighty
percent (80%) of the average of the three lowest  closing  prices for the Common
Stock on NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ National Market
System,  American Stock Exchange,  or New York Stock Exchange  (whichever of the
foregoing is at the time the principal trading exchange or market for the Common
Stock,  the  "Principal  Market"),  or  on  any  securities  exchange  or  other
securities market on which the Common Stock is then being listed or traded,  for
the thirty (30) trading days prior to but not including the Conversion Date.

     (c) The  Maximum  Base  Price  and  number  and  kind of  shares  or  other
securities to be issued upon  conversion  determined  pursuant to Section 3.1(a)
and 3.1(b),  shall be subject to adjustment from time to time upon the happening
of certain events while this conversion right remains outstanding, as follows:



<PAGE>


     A.  Merger,  Sale  of  Assets,  etc.  If the  Borrower  at any  time  shall
consolidate  with or merge into or sell or convey all or  substantially  all its
assets to any other  corporation,  this Note, as to the unpaid principal portion
thereof and accrued interest thereon, shall thereafter be deemed to evidence the
right to  purchase  such  number  and kind of  shares  or other  securities  and
property  as would  have been  issuable  or  distributable  on  account  of such
consolidation,  merger,  sale  or  conveyance,  upon  or  with  respect  to  the
securities subject to the conversion or purchase right immediately prior to such
consolidation,  merger,  sale  or  conveyance.  The  foregoing  provision  shall
similarly  apply to  successive  transactions  of a  similar  nature by any such
successor or purchaser.  Without  limiting the generality of the foregoing,  the
anti-dilution  provisions of this Section shall apply to such securities of such
successor or purchaser after any such consolidation, merger, sale or conveyance.

     B.   Reclassification,   etc.  If  the  Borrower  at  any  time  shall,  by
reclassification  or  otherwise,  change  the  Common  Stock  into the same or a
different  number of  securities  of any class or classes,  this Note, as to the
unpaid principal portion thereof and accrued interest thereon,  shall thereafter
be  deemed  to  evidence  the  right to  purchase  an  adjusted  number  of such
securities  and kind of  securities as would have been issuable as the result of
such  change  with  respect  to the  Common  Stock  immediately  prior  to  such
reclassification or other change.

     C. Stock Splits,  Combinations and Dividends. If the shares of Common Stock
are  subdivided or combined into a greater or smaller number of shares of Common
Stock,  or if a dividend is paid on the Common Stock in shares of Common  Stock,
the Conversion Price shall be proportionately  reduced in case of subdivision of
shares or stock dividend or proportionately increased in the case of combination
of shares,  in each such case by the ratio  which the total  number of shares of
Common Stock outstanding  immediately after such event bears to the total number
of shares of Common Stock outstanding immediately prior to such event.

     D.  Share  Issuance.  Subject to the  provisions  of this  Section,  if the
Borrower  at any time  shall  issue  any  shares of  Common  Stock  prior to the
conversion of the entire principal amount of the Note to a person other than the
Holder (otherwise than as: (i) provided in Sections 2.1(c)A,  2.1(c)B or 2.1(c)C
or  this  subparagraph  D; or (ii)  pursuant  to  options,  warrants,  or  other
obligations to issue shares,  outstanding on the date hereof as set forth in the
Schedules to the Purchase  Agreement (which agreement is incorporated  herein by
this  reference);  ((i) and  (ii)  above,  are  hereinafter  referred  to as the
"Existing  Option  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 reduced to the
per share purchase price of such issue of additional shares of Common Stock. The
resulting  quotient  shall be the  adjusted  conversion  price.  Except  for the
Existing  Option  Obligations  and options that may be issued under any employee
incentive  stock option  and/or any  qualified  stock option plan adopted by the
Borrower,  for purposes of this adjustment,  the issuance of any security of the
Borrower 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 the issuance of shares of Common Stock
upon exercise of such conversion or purchase rights.



<PAGE>


     (d) During the  period the  conversion  right  exists,  the  Borrower  will
reserve from its  authorized  and unissued  Common Stock a sufficient  number of
shares to provide for the issuance of Common Stock upon the full  conversion  of
this Note. The Borrower represents that upon issuance,  such shares will be duly
and validly issued, fully paid and non-assessable.  The Borrower agrees that its
issuance of this Note shall  constitute full authority to its officers,  agents,
and transfer agents who are charged with the duty of executing and issuing stock
certificates  to  execute  and issue the  necessary  certificates  for shares of
Common Stock upon the conversion of this Note.

     3.2 Method of Conversion. This Note may be converted by the Holder in whole
or in part as described  in Section  3.1(a)  hereof and the Purchase  Agreement.
Upon partial  conversion of this Note, a new Note  containing  the same date and
provisions  of this Note shall,  at the request of the Holder,  be issued by the
Borrower to the Holder for the principal balance of this Note and interest which
shall not have been converted or paid.

                                   ARTICLE IV

                                EVENT OF DEFAULT

     The  occurrence  of any of the  following  events  of  default  ("Event  of
Default") shall, at the option of the Holder hereof, make all sums of principal,
interest  and other fees then  remaining  unpaid  hereon  and all other  amounts
payable hereunder  immediately due and payable, all without demand,  presentment
or notice, or grace period, all of which hereby are expressly waived,  except as
set forth below:

     4.1 Failure to Pay Principal, Interest or other Fees. The Borrower fails to
pay any installment of principal,  interest or other fees hereon or on any other
promissory  note issued  pursuant to the Purchase  Agreement,  when due and such
failure continues for a period of ten (10) days after the due date.

     4.2 Breach of  Covenant.  The Borrower  breaches  any material  covenant or
other term or condition  of this Note or the Purchase  Agreement in any material
respect and such breach, if subject to cure,  continues for a period of ten (10)
days after written notice to the Borrower from the Holder.

     4.3 Breach of Representations and Warranties.  Any material  representation
or warranty of the Borrower made herein,  in the Purchase  Agreement,  or in any
agreement,  statement  or  certificate  given in writing  pursuant  hereto or in
connection therewith shall be false or misleading.

     4.4 Receiver or Trustee.  The  Borrower  shall make an  assignment  for the
benefit of creditors,  or apply for or consent to the  appointment of a receiver
or trustee for it or for a substantial part of its property or business; or such
a receiver or trustee shall otherwise be appointed.

     4.5 Judgments.  Any money judgment,  writ or similar final process shall be
entered or filed against the Borrower or any of its property or other assets for
more than  $500,000,  and shall  remain  unvacated,  unbonded or unstayed  for a
period of forty-five (45) days.

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

     4.7 Delisting.  Delisting of the Common Stock from the Principal  Market or
such other  principal  exchange on which the Common Stock is listed for trading;
the  Borrower's   failure  to  comply  with  the  conditions  for  listing;   or
notification that the Borrower is not in compliance with the conditions for such
continued listing.

     4.8 Concession.  A concession by the Borrower,  after applicable notice and
cure periods,  under any one or more obligations in an aggregate monetary amount
in excess of $50,000.

     4.9  Stop  Trade.  An SEC stop  trade  order or  Principal  Market  trading
suspension.

     4.10 Failure to Deliver  Common Stock or  Replacement  Note. The Borrower's
failure to timely deliver Common Stock to the Holder pursuant to and in the form
required by this Note and Section 8 of the Purchase Agreement,  or if required a
replacement Note.



<PAGE>


     4.11 Registration  Default.  The occurrence of a Non-Registration  Event as
described in Section 9.4 of the Purchase Agreement.


                                    ARTICLE V

                                  MISCELLANEOUS

     5.1 Failure or  Indulgence  Not Waiver.  No failure or delay on the part of
the Holder  hereof in the exercise of any power,  right or  privilege  hereunder
shall operate as a waiver thereof,  nor shall any single or partial  exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other  right,  power or  privilege.  All  rights  and  remedies  existing
hereunder  are  cumulative  to, and not  exclusive  of,  any rights or  remedies
otherwise available.

     5.2 Notices.  Any notice herein  required or permitted to be given shall be
in writing and shall be deemed  effectively given: (a) upon personal delivery to
the party notified, (b) when sent by confirmed telex or facsimile if sent during
normal  business hours of the recipient,  if not, then on the next business day,
(c) five days after having been sent by  registered  or certified  mail,  return
receipt  requested,  postage  prepaid,  or (d)  one  day  after  deposit  with a
nationally  recognized  overnight  courier,  specifying next day delivery,  with
written  verification  of  receipt.  All  communications  shall  be  sent to the
Borrower  at the  address  as set forth on the  signature  page to the  Purchase
Agreement  executed in connection  herewith and to the Holder at the address set
forth on the signature  page to the Purchase  Agreement for such Holder,  with a
copy to Daniel M. Laifer,  Esq., 152 West 57th Street,  4th Floor, New York, New
York 10019,  facsimile  number (212)  541-4434,  or at such other address as the
Borrower or the Holder may designate by ten days advance  written  notice to the
other parties hereto.  A Notice of Conversion shall be deemed given when made to
the Borrower pursuant to the Purchase Agreement.

     5.3 Amendment Provision. The term "Note" and all reference thereto, as used
throughout this instrument,  shall mean this instrument as originally  executed,
or if later amended or supplemented, then as so amended or supplemented.

     5.4  Assignability.  This Note shall be binding  upon the  Borrower and its
successors  and  assigns,  and shall  inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder.

     5.5 Cost of Collection. If default is made in the payment of this Note, the
Borrower shall pay the Holder hereof  reasonable costs of collection,  including
reasonable attorneys' fees.



<PAGE>


     5.6  Governing  Law.  This  Note  shall be  governed  by and  construed  in
accordance with the laws of the State of New York,  without regard to principles
of  conflicts  of laws.  Any action  brought by either  party  against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in the state of
New York.  Both  parties and the  individual  signing this Note on behalf of the
Borrower  agree to submit to the  jurisdiction  of such courts.  The  prevailing
party  shall  be  entitled  to  recover  from the  other  party  its  reasonable
attorney's  fees and  costs.  In the event  that any  provision  of this Note is
invalid or unenforceable  under any applicable statute or rule of law, then such
provision  shall  be  deemed  inoperative  to the  extent  that it may  conflict
therewith  and shall be deemed  modified to conform with such statute or rule of
law. Any such provision which may prove invalid or  unenforceable  under any law
shall not affect the validity or unenforceability of any other provision of this
Note.

     5.7 Maximum Payments. Nothing contained herein shall be deemed to establish
or require the  payment of a rate of interest or other  charges in excess of the
maximum  permitted  by  applicable  law.  In the event that the rate of interest
required to be paid or other charges  hereunder exceed the maximum  permitted by
such law,  any  payments in excess of such  maximum  shall be  credited  against
amounts owed by the Borrower to the Holder and thus refunded to the Borrower.

     5.8   Construction.   Each  party   acknowledges  that  its  legal  counsel
participated in the preparation of this Note and, therefore, stipulates that the
rule of construction  that  ambiguities are to be resolved  against the drafting
party shall not be applied in the interpretation of this Note to favor any party
against the other.


<PAGE>



     IN WITNESS  WHEREOF,  the Borrower has caused this Note to be signed in its
name effective as of this 7th day of November, 2002.

                                                PATH 1 NETWORK TECHNOLOGIES INC.


                                                By: /s/ John R. Zavoli
                                                -------------------------------



WITNESS:



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




<PAGE>


                              NOTICE OF CONVERSION

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


     The  undersigned  hereby elects to convert  $_________ of the principal and
$_________ of the interest due on the Note issued by PATH 1 NETWORK TECHNOLOGIES
INC.  on  November  ___,  2002 into  Shares  of  Common  Stock of PATH 1 NETWORK
TECHNOLOGIES INC. (the "Company")  according to the conditions set forth in such
Note, as of the date written below.



Date of Conversion:_____________________________________________________________


Conversion Price:_______________________________________________________________


Shares To Be Delivered:_________________________________________________________


Signature:______________________________________________________________________


Print Name:_____________________________________________________________________


Address:________________________________________________________________________

        ________________________________________________________________________



<PAGE>


                                    EXHIBIT B

                        FORM OF REPAYMENT ELECTION NOTICE

To:  [HOLDER AT HOLDER'S ADDRESS]

     Pursuant to Section 2.2 the Note of Path 1 Network Technologies Inc. issued
on November __, 2002, we hereby notify you that we are  irrevocably  electing to
repay  the  outstanding  Monthly  Amount  (as  defined  in the  Note) due on the
Repayment  Date (as  defined in the Note)  which  occurs on ______,  20__ (CHECK
ONE):

         _____ In full in cash on such Repayment Date.

         _____    In full in shares of the Company's Common Stock within three
(3) trading days following such Repayment Date.

                                       Path 1 Network Technologies Inc.

                                       By:
                                          --------------------------------------
                                       Name:
                                       Title:




<PAGE>


                                       B-1
                                    EXHIBIT B

                                 Form of warrant

THIS WARRANT AND THE COMMON  SHARES  ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THIS WARRANT
AND THE COMMON  SHARES  ISSUABLE  UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED  FOR SALE,  PLEDGED  OR  HYPOTHECATED  IN THE  ABSENCE  OF AN  EFFECTIVE
REGISTRATION  STATEMENT  AS TO THIS  WARRANT  UNDER  SAID ACT OR AN  OPINION  OF
COUNSEL  REASONABLY  SATISFACTORY TO PATH 1 NETWORK  TECHNOLOGIES INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.


               Right to Purchase 75,000 Shares of Common Stock of Path 1 Network
                    Technologies Inc. (subject to adjustment as provided herein)


                          COMMON STOCK PURCHASE WARRANT


No. 2002-2                                         Issue Date:  November 7, 2002

     PATH 1 NETWORK TECHNOLOGIES INC., a corporation organized under the laws of
the  State of  Delaware  (the  "Company"),  hereby  certifies  that,  for  value
received,  LAURUS  MASTER FUND,  LTD., or assigns (the  "Holder"),  is entitled,
subject to the terms set forth  below,  to purchase  from the  Company  from and
after the Issue Date of this Warrant and at any time or from time to time before
5:00  p.m.,  New York  time,  through  seven  (7)  years  after  such  date (the
"Expiration  Date"), up to 75,000 fully paid and nonassessable  shares of Common
Stock (as hereinafter defined),  $.001 par value per share, of the Company, at a
purchase price of $.85 per share (such purchase price per share as adjusted from
time to time as herein provided is referred to herein as the "Purchase  Price").
The number and  character of such shares of Common Stock and the Purchase  Price
are subject to adjustment as provided herein.

     As used herein the following terms,  unless the context otherwise requires,
have the following respective meanings:

     (a) The term "Company" shall include Path 1 Network  Technologies  Inc. and
any corporation  which shall succeed or assume the obligations of Path 1 Network
Technologies Inc. hereunder.

     (b) The term "Common Stock" includes (a) the Company's Common Stock,  $.001
par  value per  share,  as  authorized  on the date of the  Securities  Purchase
Agreement  referred to in Section 9 hereof,  (b) any other  capital stock of any
class or classes  (however  designated)  of the Company,  authorized on or after
such date, the holders of which shall have the right,  without  limitation as to
amount,  either to all or to a share of the  balance  of current  dividends  and
liquidating  dividends after the payment of dividends and  distributions  on any
shares entitled to preference, and the holders of which shall ordinarily, in the
absence of contingencies,  be entitled to vote for the election of a majority of
directors of the Company (even if the right so to vote has been suspended by the
happening of such a contingency)  and (c) any other securities into which or for
which  any of the  securities  described  in (a)  or  (b)  may be  converted  or
exchanged pursuant to a plan of recapitalization,  reorganization,  merger, sale
of assets or otherwise.

     (c) The term  "Other  Securities"  refers to any stock  (other  than Common
Stock) and other  securities  of the Company or any other person  (corporate  or
otherwise)  which the holder of the  Warrant at any time  shall be  entitled  to
receive,  or shall have received,  on the exercise of the Warrant, in lieu of or
in  addition  to Common  Stock,  or which at any time shall be issuable or shall
have been  issued in exchange  for or in  replacement  of Common  Stock or Other
Securities pursuant to Section 4 or otherwise.

     1. Exercise of Warrant.

     1.1.  Number  of Shares  Issuable  upon  Exercise.  From and after the date
hereof  through and including the  Expiration  Date,  the holder hereof shall be
entitled to receive,  upon exercise of this Warrant in whole in accordance  with
the  terms  of  subsection  1.2 or  upon  exercise  of this  Warrant  in part in
accordance with  subsection 1.3, shares of Common Stock of the Company,  subject
to adjustment pursuant to Section 4.

     1.2.  Full  Exercise.  This  Warrant may be exercised in full by the holder
hereof  by  delivery  of an  original  or fax copy of the  form of  subscription
attached as Exhibit A hereto  (the  "Subscription  Form") duly  executed by such
Holder,  to the Company at its principal  office or at the office of its warrant
agent (as provided hereinafter), accompanied by payment, in cash, wire transfer,
or by certified or official bank check  payable to the order of the Company,  in
the amount  obtained  by  multiplying  the number of shares of Common  Stock for
which this Warrant is then  exercisable  by the Purchase  Price (as  hereinafter
defined) then in effect.

     1.3. Partial Exercise. This Warrant may be exercised in part (but not for a
fractional  share) by  surrender  of this Warrant in the manner and at the place
provided in subsection  1.2 except that the amount payable by the holder on such
partial  exercise shall be the amount  obtained by multiplying (a) the number of
shares of Common Stock designated by the holder in the Subscription  Form by (b)
the Purchase Price then in effect. On any such partial exercise, the Company, at
its expense, will forthwith issue and deliver to or upon the order of the holder
hereof a new Warrant of like tenor,  in the name of the holder hereof or as such
holder  (upon  payment  by such  holder of any  applicable  transfer  taxes) may
request,  the number of shares of Common  Stock for which such Warrant may still
be exercised.

     1.4. Fair Market Value.  Fair Market Value of a share of Common Stock as of
a particular date (the "Determination Date") shall mean the Fair Market Value of
a share of the Company's  Common  Stock.  Fair Market Value of a share of Common
Stock as of a Determination Date shall mean:

          (a) If the  Company's  Common  Stock is  traded on an  exchange  or is
     quoted on the National  Association of Securities  Dealers,  Inc. Automated
     Quotation  ("NASDAQ") National Market System or the NASDAQ SmallCap Market,
     then the closing or last sale price,  respectively,  reported  for the last
     business day immediately preceding the Determination Date.

          (b) If the  Company's  Common Stock is not traded on an exchange or on
     the NASDAQ  National  Market  System or the NASDAQ  SmallCap  Market but is
     traded on the NASD OTC Bulletin Board, then the mean of the closing bid and
     asked prices reported for the last business day  immediately  preceding the
     Determination Date.

          (c) Except as provided in clause (d) below,  if the  Company's  Common
     Stock is not publicly  traded,  then as the Holder and the Company agree or
     in the absence of agreement by  arbitration  in  accordance  with the rules
     then  standing of the  American  Arbitration  Association,  before a single
     arbitrator to be chosen from a panel of persons  qualified by education and
     training to pass on the matter to be decided.

          (d)  If  the  Determination   Date  is  the  date  of  a  liquidation,
     dissolution  or  winding  up,  or any  event  deemed  to be a  liquidation,
     dissolution  or winding up  pursuant  to the  Company's  charter,  then all
     amounts to be payable per share to holders of the Common Stock  pursuant to
     the charter in the event of such  liquidation,  dissolution  or winding up,
     plus all other  amounts  to be  payable  per share in respect of the Common
     Stock in liquidation  under the charter,  assuming for the purposes of this
     clause  (d) that all of the  shares  of Common  Stock  then  issuable  upon
     exercise of the Warrant are outstanding at the Determination Date.

     1.5. Company Acknowledgment.  The Company will, at the time of the exercise
of the Warrant, upon the request of the holder hereof acknowledge in writing its
continuing  obligation  to afford to such holder any rights to which such holder
shall  continue  to be  entitled  after such  exercise  in  accordance  with the
provisions of this  Warrant.  If the holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
to such holder any such rights.

     1.6. Trustee for Warrant Holders. In the event that a bank or trust company
shall have been appointed as trustee for the holders of the Warrant  pursuant to
Subsection  3.2, such bank or trust company shall have all the powers and duties
of a warrant agent (as hereinafter  described) and shall accept, in its own name
for the  account of the  Company  or such  successor  person as may be  entitled
thereto, all amounts otherwise payable to the Company or such successor,  as the
case may be, on exercise of this Warrant pursuant to this Section 1.

     2.1 Delivery of Stock  Certificates,  etc. on Exercise.  The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the holder  hereof as the record  owner of such shares as
of the close of  business  on the date on which  this  Warrant  shall  have been
surrendered  and  payment  made  for  such  shares  as  aforesaid.  As  soon  as
practicable  after the exercise of this  Warrant in full or in part,  and in any
event  within 7 days  thereafter,  the  Company at its  expense  (including  the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the holder  hereof,  or as such holder (upon payment by such
holder  of  any  applicable  transfer  taxes)  may  direct  in  compliance  with
applicable Securities Laws, a certificate or certificates for the number of duly
and validly  issued,  fully paid and  nonassessable  shares of Common  Stock (or
Other Securities) to which such holder shall be entitled on such exercise, plus,
in lieu of any  fractional  share  to  which  such  holder  would  otherwise  be
entitled,  cash equal to such fraction  multiplied by the then Fair Market Value
of one full  share,  together  with any  other  stock  or other  securities  and
property  (including  cash,  where  applicable) to which such holder is entitled
upon such exercise pursuant to Section 1 or otherwise.

     2.2. Cashless Exercise.

          (a) Payment may be made either in (i) cash or by certified or official
     bank check  payable  to the order of the  Company  equal to the  applicable
     aggregate  Purchase  Price,  (ii) by delivery of the Warrant,  Common Stock
     and/or Common Stock  receivable  upon exercise of the Warrant in accordance
     with Section (b) below,  or (iii) by a combination  of any of the foregoing
     methods,  for the number of Common  Shares  specified in such form (as such
     exercise  number shall be adjusted to reflect any  adjustment  in the total
     number of shares of Common  Stock  issuable  to the holder per the terms of
     this  Warrant)  and the holder  shall  thereupon be entitled to receive the
     number of duly authorized,  validly issued,  fully-paid and  non-assessable
     shares of Common Stock (or Other Securities) determined as provided herein.

          (b) Notwithstanding any provisions herein to the contrary, if the Fair
     Market  Value of one share of Common  Stock is  greater  than the  Purchase
     Price  (at  the  date  of  calculation  as set  forth  below),  in  lieu of
     exercising  this Warrant for cash,  the holder may elect to receive  shares
     equal to the value (as  determined  below) of this  Warrant (or the portion
     thereof  being  cancelled)  by surrender  of this Warrant at the  principal
     office of the Company together with the properly endorsed Subscription Form
     in which event the Company  shall issue to the holder a number of shares of
     Common Stock computed using the following formula:

                           X=Y (A-B)
                                ---
                                     A

                     Where X=       the number of shares of Common Stock to be
                                    issued to the holder

                           Y=       the number of shares of Common Stock
                                    purchasable under the Warrant or, if only a
                                    portion of the Warrant is being exercised,
                                    the portion of the Warrant being exercised
                                    (at the date of such calculation)

                           A=       the Fair Market Value of one share of the
                                    Company's Common Stock (at the date of such
                                    calculation)

                           B=       Purchase Price (as adjusted to the date of
                                    such calculation)

     3. Adjustment for Reorganization, Consolidation, Merger, etc.

     3.1.  Reorganization,  Consolidation,  Merger,  etc. In case at any time or
from  time  to  time,  the  Company  shall  (a)  effect  a  reorganization,  (b)
consolidate  with or  merge  into  any  other  person,  or (c)  transfer  all or
substantially all of its properties or assets to any other person under any plan
or arrangement  contemplating the dissolution of the Company, then, in each such
case,  as a condition  to the  consummation  of such a  transaction,  proper and
adequate  provision  shall be made by the  Company  whereby  the  holder of this
Warrant,  on the exercise  hereof as provided in Section 1 at any time after the
consummation of such  reorganization,  consolidation  or merger or the effective
date of such  dissolution,  as the case may be,  shall  receive,  in lieu of the
Common  Stock (or Other  Securities)  issuable  on such  exercise  prior to such
consummation or such effective date, the stock and other securities and property
(including  cash) to which  such  holder  would  have  been  entitled  upon such
consummation or in connection with such dissolution, as the case may be, if such
holder had so exercised this Warrant,  immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 4.

     3.2. Dissolution.  In the event of any dissolution of the Company following
the  transfer  of all or  substantially  all of its  properties  or assets,  the
Company, prior to such dissolution,  shall at its expense deliver or cause to be
delivered the stock and other  securities and property  (including  cash,  where
applicable) receivable by the holders of the Warrant after the effective date of
such  dissolution  pursuant to this Section 3 to a bank or trust company  having
its  principal  office in New York,  NY, as trustee for the holder or holders of
the Warrant.

     3.3. Continuation of Terms. Upon any reorganization,  consolidation, merger
or transfer (and any  dissolution  following  any transfer)  referred to in this
Section 3, this  Warrant  shall  continue in full force and effect and the terms
hereof  shall be  applicable  to the  shares of stock and other  securities  and
property  receivable on the exercise of this Warrant after the  consummation  of
such   reorganization,   consolidation  or  merger  or  the  effective  date  of
dissolution  following  any such  transfer,  as the case  may be,  and  shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer,  the person acquiring all or substantially all of the
properties  or assets of the  Company,  whether  or not such  person  shall have
expressly  assumed  the terms of this  Warrant as  provided in Section 4. In the
event  this  Warrant  does not  continue  in full  force  and  effect  after the
consummation of the  transaction  described in this Section 3, then only in such
event  will  the  Company's  securities  and  property  (including  cash,  where
applicable) receivable by the holders of the Warrant be delivered to the Trustee
as contemplated by Section 3.2.

     4.  Extraordinary  Events  Regarding  Common  Stock.  In the event that the
Company shall (a) issue  additional  shares of the Common Stock as a dividend or
other  distribution on outstanding  Common Stock,  (b) subdivide its outstanding
shares of Common  Stock,  or (c)  combine its  outstanding  shares of the Common
Stock into a smaller  number of shares of the Common  Stock,  then, in each such
event,  the Purchase  Price  shall,  simultaneously  with the  happening of such
event,  be adjusted by multiplying  the then Purchase  Price by a fraction,  the
numerator  of which  shall be the number of shares of Common  Stock  outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common  Stock  outstanding  immediately  after such event,  and the
product so obtained shall  thereafter be the Purchase Price then in effect.  The
Purchase Price, as so adjusted,  shall be readjusted in the same manner upon the
happening of any successive  event or events described herein in this Section 4.
The  number of shares of Common  Stock  that the  holder of this  Warrant  shall
thereafter,  on the  exercise  hereof as  provided  in Section 1, be entitled to
receive shall be increased to a number  determined by multiplying  the number of
shares of Common  Stock that would  otherwise  (but for the  provisions  of this
Section 4) be issuable on such exercise by a fraction of which (a) the numerator
is the  Purchase  Price that would  otherwise  (but for the  provisions  of this
Section 4) be in effect, and (b) the denominator is the Purchase Price in effect
on the date of such exercise.

     5.  Certificate  as to  Adjustments.  In  each  case of any  adjustment  or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the  Warrant,  the Company at its expense  will  promptly  cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or  readjustment  in  accordance  with the terms of the  Warrant  and  prepare a
certificate  setting forth such adjustment or readjustment and showing in detail
the facts upon which such  adjustment  or  readjustment  is based,  including  a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold,  (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding,  and (c) the Purchase Price
and the number of shares of Common  Stock to be received  upon  exercise of this
Warrant,  in effect  immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant.  The Company will  forthwith
mail a copy of each  such  certificate  to the  holder  of the  Warrant  and any
Warrant agent of the Company (appointed pursuant to Section 11 hereof).

     6. Reservation of Stock,  etc.  Issuable on Exercise of Warrant;  Financial
Statements. The Company will at all times reserve and keep available, solely for
issuance and delivery on the exercise of the Warrant, all shares of Common Stock
(or Other Securities) from time to time issuable on the exercise of the Warrant.
This Warrant  entitles the holder hereof to receive  copies of all financial and
other  information  distributed  or required to be distributed to the holders of
the Company's Common Stock.

     7. Assignment;  Exchange of Warrant.  Subject to compliance with applicable
Securities  laws,  this  Warrant,  and  the  rights  evidenced  hereby,  may  be
transferred by any registered holder hereof (a "Transferor") with respect to any
or all of the Shares.  On the surrender  for exchange of this Warrant,  with the
Transferor's  endorsement  in  the  form  of  Exhibit  B  attached  hereto  (the
"Transferor   Endorsement   Form")  and  together   with   evidence   reasonably
satisfactory to the Company demonstrating  compliance with applicable Securities
Laws,  the  Company at its  expense but with  payment by the  Transferor  of any
applicable  transfer  taxes)  will  issue and  deliver to or on the order of the
Transferor  thereof a new Warrant of like tenor,  in the name of the  Transferor
and/or the transferee(s)  specified in such Transferor  Endorsement Form (each a
"Transferee"),  calling in the  aggregate  on the face or faces  thereof for the
number of shares of Common  Stock called for on the face or faces of the Warrant
so surrendered by the Transferor.

     8. Replacement of Warrant. On receipt of evidence  reasonably  satisfactory
to the Company of the loss,  theft,  destruction  or  mutilation of this Warrant
and, in the case of any such loss,  theft or  destruction  of this  Warrant,  on
delivery of an indemnity agreement or security  reasonably  satisfactory in form
and amount to the Company or, in the case of any such  mutilation,  on surrender
and  cancellation  of this Warrant,  the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.

     9. Registration Rights. The Holder of this Warrant has been granted certain
registration rights by the Company. These registration rights are set forth in a
Securities  Purchase  Agreement entered into by the Company and Purchaser of the
Company's 12%  Convertible  Notes (the "Notes") at or prior to the issue date of
this Warrant.  The terms of the Securities  Purchase  Agreement are incorporated
herein  by  reference.  Upon  the  occurrence  of a  Non-Registration  Event  as
described  in the  Securities  Purchase  Agreement,  in the event the Company is
unable  to issue  Common  Stock  upon  exercise  of this  Warrant  that has been
registered  in the  Registration  Statement  described in Section  9.1(d) of the
Securities  Purchase  Agreement,  within  the  time  periods  described  in  the
Securities  Purchase Agreement,  which Registration  Statement must be effective
throughout the exercise period of this Warrant, then upon written demand made by
the  Holder,  the  Company  will pay to the Holder of this  Warrant,  in lieu of
delivering  Common Stock,  a sum equal to the closing ask price of the Company's
Common  Stock on the  Principal  Market (as defined in the  Securities  Purchase
Agreement) or such other principal trading market for the Company's Common Stock
on the  trading  date  immediately  preceding  the date  notice  is given by the
Holder,  less the Purchase Price,  for each share of Common Stock  designated in
such notice from the Holder.

     10.  Maximum  Exercise.  The Holder shall not be entitled to exercise  this
Warrant on an exercise date, in connection  with that number of shares of Common
Stock  which would be in excess of the sum of (i) the number of shares of Common
Stock  beneficially  owned by the Holder and its affiliates on an exercise date,
and (ii) the number of shares of Common Stock issuable upon the exercise of this
Warrant with respect to which the determination of this proviso is being made on
an exercise date,  which would result in beneficial  ownership by the Holder and
its affiliates of more than 4.99% of the  outstanding  shares of Common Stock of
the Company on such date.  For the  purposes  of the proviso to the  immediately
preceding sentence,  beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation
13d-3 thereunder.  Subject to the foregoing,  the Holder shall not be limited to
aggregate  exercises which would result in the issuance of more than 4.99%.  The
restriction described in this paragraph may be revoked upon 75 days prior notice
from the Holder to the Company and is automatically  null and void upon an Event
of Default under the Note.

     11. Warrant Agent. The Company may, by written notice to the each holder of
the Warrant,  appoint an agent for the purpose of issuing Common Stock (or Other
Securities)  on the exercise of this Warrant  pursuant to Section 1,  exchanging
this  Warrant  pursuant to Section 7, and  replacing  this  Warrant  pursuant to
Section 8, or any of the foregoing,  and thereafter any such issuance,  exchange
or replacement, as the case may be, shall be made at such office by such agent.

     12. Transfer on the Company's  Books.  Until this Warrant is transferred on
the books of the Company,  the Company may treat the registered holder hereof as
the absolute  owner hereof for all purposes,  notwithstanding  any notice to the
contrary.

     13. Notices,  etc. All notices and other communications from the Company to
the  holder  of this  Warrant  shall be  mailed  by first  class  registered  or
certified mail,  postage prepaid,  at such address as may have been furnished to
the Company in writing by such holder or, until any such holder furnishes to the
Company an  address,  then to, and at the  address  of, the last  holder of this
Warrant who has so furnished an address to the Company.

     14. Voluntary Adjustment by the Company. The Company may at any time during
the term of this Warrant  reduce the then current  Exercise  Price to any amount
and for any period of time deemed  appropriate  by the Board of Directors of the
Company.

     15. Miscellaneous. This Warrant and any term hereof may be changed, waived,
discharged  or terminated  only by an instrument in writing  signed by the party
against which  enforcement of such change,  waiver,  discharge or termination is
sought.  This Warrant shall be governed by and construed in accordance  with the
laws of State of New York without regard to principles of conflicts of laws. Any
action brought concerning the transactions contemplated by this Warrant shall be
brought only in the state courts of New York or in the federal courts located in
the state of New York. The  individuals  executing this Warrant on behalf of the
Company  agree to submit to the  jurisdiction  of such courts and waive trial by
jury. The prevailing party shall be entitled to recover from the other party its
reasonable  attorney's  fees and costs.  In the event that any provision of this
Warrant is invalid or unenforceable under any applicable statute or rule of law,
then  such  provision  shall be deemed  inoperative  to the  extent  that it may
conflict  therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or  unenforceable  under
any law shall not affect the validity or  enforceability  of any other provision
of this  Warrant.  The  headings in this  Warrant are for  purposes of reference
only,  and shall not limit or  otherwise  affect  any of the terms  hereof.  The
invalidity or  unenforceability  of any provision  hereof shall in no way affect
the validity or enforceability of any other provision.  The Company acknowledges
that  legal  counsel  participated  in the  preparation  of  this  Warrant  and,
therefore,  stipulates that the rule of construction  that ambiguities are to be
resolved  against the drafting party shall not be applied in the  interpretation
of this Warrant to favor any party against the other party.



                      [THIS SPACE INTENTIONALLY LEFT BLANK]


<PAGE>


     IN WITNESS WHEREOF,  the Company has executed this Warrant under seal as of
the date first written above.

                                  PATH 1 NETWORK TECHNOLOGIES INC.



                                  By:_____________________________________




Witness:


________________________________



<PAGE>


                                                                      Exhibit A
                              FORM OF SUBSCRIPTION
                   (To be signed only on exercise of Warrant)

TO:  Path 1 Network Technologies Inc.

The undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable box):

___ ________ shares of the Common Stock covered by such Warrant; or

___ the maximum number of shares of Common Stock covered by such Warrant
pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned herewith makes payment of the full purchase price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):

___ $__________ in lawful money of the United States; and/or

___ the cancellation of such portion of the attached Warrant as is exercisable
for a total of _______ shares of Common Stock (using a Fair Market Value of
$_______ per share for purposes of this calculation); and/or

___ the cancellation of such number of shares of Common Stock as is necessary,
in accordance with the formula set forth in Section 2, to exercise this Warrant
with respect to the maximum number of shares of Common Stock purchaseable
pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned requests that the certificates for such shares be issued in the
name of, and delivered to ____________________ whose address is ________________

_______________________________________________________________________________.


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

Dated:___________________                _______________________________________
                                         (Signature  must  conform  to name of
                                          holder as  specified  on the face of
                                          the Warrant)


                                         _______________________________________
                                         (Address)


<PAGE>


                                                                       Exhibit B

                         FORM OF TRANSFEROR ENDORSEMENT
                   (To be signed only on transfer of Warrant)

     For value received,  the undersigned hereby sells,  assigns,  and transfers
unto the  person(s)  named  below  under  the  heading  "Transferees"  the right
represented  by the within  Warrant to  purchase  the  percentage  and number of
shares of Common Stock of Path 1 Network  Technologies  Inc. to which the within
Warrant  relates  specified  under the  headings  "Percentage  Transferred"  and
"Number Transferred,"  respectively,  opposite the name(s) of such person(s) and
appoints each such person Attorney to transfer its respective right on the books
of Path 1 Network  Technologies  Inc.  with full  power of  substitution  in the
premises.
<TABLE>

======================================== ===================================== =====================================

              Transferees                            Percentage                                Number
                                                    Transferred                             Transferred
<S>                                      <C>                                   <C>
---------------------------------------- ------------------------------------- -------------------------------------
---------------------------------------- ------------------------------------- -------------------------------------


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


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


======================================== ===================================== =====================================
</TABLE>


Dated:                  ,
       ----------------- --------        ---------------------------------------
                                         (Signature  must  conform  to name of
                                          holder as  specified  on the face of
                                          the warrant)

Signed in the presence of:


-------------------------------          ---------------------------------------
         (Name)                                      (address)

                                         ---------------------------------------
ACCEPTED AND AGREED:                                 (address)
[TRANSFEREE]


-------------------------------
         (Name)





<PAGE>


                                       C-2
                                    EXHIBIT C


                                 FORM OF OPINION


     1. The Company is a corporation validly existing and in good standing under
the laws of the State of  Delaware  and has all  requisite  corporate  power and
authority to own,  operate and lease its properties and to carry on its business
as it is now being conducted.

     2. The Company has the requisite  corporate power and authority to execute,
deliver and perform its obligations under the Agreement and Related  Agreements.
All corporate  action on the part of the Company,  its  officers,  directors and
stockholders  necessary for (i) the  authorization  of the Agreement and Related
Agreements,  and the performance of all obligations of the Company thereunder at
the  Closing,  and (ii) the  authorization,  sale,  issuance and delivery of the
Securities  pursuant to the Agreement and the Related Agreements has been taken.
The Conversion  Shares and the Warrant  Shares,  when issued  pursuant to and in
accordance  with the terms of the Agreement and upon delivery,  shall be validly
issued and outstanding, fully paid and non assessable.

     3. The execution,  delivery and  performance of the Agreement,  the Note or
the Related  Agreements by the Company and the  consummation of the transactions
contemplated  by any thereof,  will not, with or without the giving of notice or
the passage of time or both:

          (a) Violate the provisions of the Charter or bylaws of the Company; or

          (b) To the best of such  counsel's  knowledge,  violate any  judgment,
     decree, order or award of any court binding upon the Company.

     4. The Agreement and Related Agreements constitute and the Note, upon their
issuance will constitute,  valid and legally binding obligations of the Company,
and are  enforceable  against the Company in  accordance  with their  respective
terms.

     5.  The sale of the Note and the  subsequent  conversion  of the Note  into
Conversion  Shares are not and will not be subject to any preemptive  rights or,
to such counsel's knowledge, rights of first refusal that have not been properly
waived or complied with. The sale of the Warrant and the subsequent  exercise of
the Warrant for Warrant Shares are not and will not be subject to any preemptive
rights or, to such  counsel's  knowledge,  rights of first refusal that have not
been properly waived or complied with.

     6.  Assuming  the accuracy of the  representations  and  warranties  of the
Purchasers  contained  in the  Agreement,  the offer,  sale and  issuance of the
Securities will be exempt from the  registration  requirements of the Securities
Act, and will have been registered or qualified (or are exempt from registration
and qualification) under the registration,  permit or qualification requirements
of  all  applicable  state  securities  laws.  To the  best  of  such  counsel's
knowledge, neither the Company, nor any of its affiliates, nor any person acting
on its or their behalf,  has directly or indirectly  made any offers or sales of
any security or solicited  any offers to buy and  security  under  circumstances
that would cause the offering of the Securities pursuant to this Agreement to be
integrated  with prior  offerings by the Company for purposes of the  Securities
Act which would prevent the Company from selling the Securities pursuant to Rule
506 under the  Securities  Act, or any applicable  exchange-related  stockholder
approval provisions.

     7. There is no action, suit, proceeding or investigation pending or, to the
best of such counsel's knowledge,  currently threatened against the Company that
questions the validity of the  Agreement or the Related  Agreements or the right
of the  Company  to enter  into any of such  agreements,  or to  consummate  the
transactions contemplated thereby, or which might result, either individually or
in the  aggregate,  in any  material  adverse  change in the assets,  condition,
affairs or prospects of the Company,  financially or otherwise, or any change in
the current  equity  ownership  of the  Company.  To the best of such  counsel's
knowledge, the Company is not a party or subject to the provisions of any order,
writ,  injunction,  judgment  or  decree of any  court or  government  agency or
instrumentality;  nor is there any action, suit,  proceeding or investigation by
the Company currently pending or which the Company intends to initiate.





<PAGE>