EXHIBIT 4(a)

                       NATIONAL TRANSACTION NETWORK, INC.


                Convertible Subordinated Note Purchase Agreement
                           Dated as of August 18, 1997









                       NATIONAL TRANSACTION NETWORK, INC.
                                117 Flanders Road
                        Westborough, Massachusetts 01581


                                                           As of August 18, 1997



International Verifact Inc.
79 Torbarrie Road
Toronto, Ontario
Canada M3L 1G5

         Re:  Convertible Subordinated Notes

Gentlemen:

         National  Transaction  Network,   Inc.,  a  Delaware  corporation  (the
"Company"),  hereby  agrees with  International  Verifact  Inc.,  a  corporation
organized under the laws of Canada (the "Purchaser") as follows:

                                    ARTICLE I

                        PURCHASE, SALE AND TERMS OF NOTES

         1.01.  The Notes.  The Company has  authorized the issuance and sale to
the Purchaser of the Company's Convertible  Subordinated Notes, in the aggregate
principal  amount of $1,000,000.  The  Convertible  Subordinated  Notes shall be
substantially  in the form set forth in Exhibit I hereto and are herein referred
to individually as a "Note" and  collectively as the "Notes",  which terms shall
also include any notes delivered in exchange or replacement therefor.

         1.02.  Purchase and Sale of Notes. The Company agrees to issue and sell
to the  Purchaser  from time to time,  and,  subject to and in reliance upon the
representations,  warranties,  terms  and  conditions  of  this  Agreement,  the
Purchaser  agrees  to  purchase  the Notes for an  aggregate  purchase  price of
$1,000,000.  Such  purchases  and sales  shall take place at such time as may be
mutually agreed upon (each a "Closing").  At each Closing the Company will issue
one  Note,  payable  to the  order of the  Purchaser,  in the  principal  amount
indicated in such Note against  delivery of the  principal  amount  indicated in
such Note by wire transfer to an account specified by the Company, in payment of
the full purchase price for the Notes.

         1.03. Payments and Endorsements.  Payments of principal and interest on
the Notes,  shall be made  directly  by check duly  mailed or  delivered  to the
Purchaser  at its  address  referred  to in Section  9.03  hereof,  without  any
presentment  or notation of  payment,  except that prior to 








any  transfer  of any Note,  the holder of record  shall  endorse on such Note a
record  of the date to which  interest  has been paid and all  payments  made on
account of principal of such Note.

         1.04.  Redemptions.

                  (a) Required Redemptions.  On the Due Date (as defined in each
Note)  or the  accelerated  maturity  of the  Notes,  the  Company  will pay the
principal  amount of the Notes then  outstanding  together  with all accrued and
unpaid interest then due thereon.

                  (b) No Optional Redemptions. The Company may not, at any time,
redeem the Notes except as otherwise  specifically provided for herein or in the
Notes.

         1.05.  Payment on  Non-Business  Days.  Whenever any payment to be made
shall be due on a  Saturday,  Sunday or a public  holiday  under the laws of the
Commonwealth of  Massachusetts,  such payment may be made on the next succeeding
business  day, and such  extension of time shall in such case be included in the
computation of payment of interest due.

         1.06.  Registration,  etc. The Company shall  maintain at its principal
office a register of the Notes and shall record  therein the names and addresses
of the registered  holders of the Notes,  the address to which notices are to be
sent and the  address  to which  payments  are to be made as  designated  by the
registered  holder if other than the address of the holder,  and the particulars
of all transfers,  exchanges and  replacements  of Notes.  No transfer of a Note
shall be valid  unless made on such  register for the  registered  holder or his
executors  or  administrators  or his or their  duly  appointed  attorney,  upon
surrender  therefor  for exchange as  hereinafter  provided,  accompanied  by an
instrument in writing,  in form and  execution  reasonably  satisfactory  to the
Company.  Each Note  issued  hereunder,  whether  originally  or upon  transfer,
exchange or replacement  of a Note or Notes,  shall be registered on the date of
execution  thereof by the Company and shall be dated the date to which  interest
has been paid on such Notes or Note.  The  registered  holder of a Note shall be
that  person in whose name the Note has been so  registered  by the  Company.  A
registered  holder  shall be deemed the owner of a Note for all purposes of this
Agreement  and,  subject to the  provisions  hereof,  shall be  entitled  to the
principal  and interest  evidenced by such Note free from all equities or rights
of setoff  or  counterclaim  between  the  Company  and the  transferor  of such
registered holder or any previous registered holder of such Note.

         1.07. Transfer and Exchange of Notes. Subject to compliance with United
States federal and applicable state  securities  laws, the registered  holder of
any Note or Notes may, prior to maturity or prepayment  thereof,  surrender such
Note or Notes at the  principal  office of the Company for transfer or exchange.
Within a reasonable time after notice to the Company from a registered holder of
its  intention to make such  exchange and without  expense  (other than transfer
taxes,  if any) to such registered  holder,  the Company shall issue in exchange
therefor  another  Note or Notes,  in such  denominations  as  requested  by the
registered  holder,  for the  same  aggregate  principal  amount  as the  unpaid
principal  amount  of the Note or  Notes  so  surrendered  and  having  the same
maturity and rate of interest, containing the same provisions and subject to the
same terms and conditions as the Note or Notes so surrendered.




                                       2





         1.08.  Replacement of Notes.  Upon receipt of evidence  satisfactory to
the Company of the loss,  theft,  destruction  or mutilation of any Note and, if
requested in the case of any such loss,  theft or destruction,  upon delivery of
an indemnity bond or other agreement or security reasonably  satisfactory to the
Company, or, in the case of any such mutilation, upon surrender and cancellation
of such Note,  the Company  will issue a new Note,  of like tenor and amount and
dated the date to which  interest has been paid,  in lieu of such lost,  stolen,
destroyed or mutilated Note.

         1.09.  Subordination.  The  Company,  for itself,  its  successors  and
assigns,  covenants and agrees,  and the Purchaser and each successor  holder of
the Notes by his or its acceptance thereof,  likewise covenants and agrees, that
notwithstanding  any other provision of this Agreement or the Notes, the payment
of the  principal  of and  interest  on  each  and  all of the  Notes  shall  be
subordinated  in right of payment,  to the extent and in the manner  hereinafter
set  forth,  to the prior  payment in full of all  Senior  Debt (as  hereinafter
defined) at any time  outstanding.  The  provisions  of this  Section 1.09 shall
constitute a continuing representation to all persons who, in reliance upon such
provisions,  become the holders of or continue  to hold  Senior  Debt,  and such
provisions  are made for the  benefit of the  holders of Senior  Debt,  and such
holders  are hereby  made  obligees  hereunder  the same as if their  names were
written  herein as such,  and they or any of them may  proceed to  enforce  such
provisions  against the  Company or against  the holder of any Note  without the
necessity of joining the Company as a party.

                  (a) Payment of Senior Debt. In the event of any  insolvency or
bankruptcy  proceedings,  or any  receivership,  liquidation,  reorganization or
other similar proceedings in connection therewith, relative to the Company or to
its property,  or, in the event of any  proceedings  for voluntary  liquidation,
dissolution or other winding up of the Company or  distribution or marshaling of
its assets or any  composition  with  creditors of the  Company,  whether or not
involving  insolvency or bankruptcy,  then and in any such event all Senior Debt
shall be paid in full  before any  payment  or  distribution  of any  character,
whether in cash,  securities or other property,  shall be made on account of the
Notes;  and any such  payment  or  distribution,  except  securities  which  are
subordinated  and junior in right of payment to the  payment of all Senior  Debt
then outstanding in terms of substantially  the same tenor as this Section 1.09,
which would, but for the provisions hereof, be payable or deliverable in respect
of the Notes shall be paid or  delivered  directly to the holders of Senior Debt
(or their duly  authorized  representatives),  in the  proportions in which they
hold the same,  until all Senior  Debt  shall have been paid in full,  and every
holder of the Notes by  becoming  a holder  thereof  shall have  designated  and
appointed  the  holder or holders  of Senior  Debt (and  their  duly  authorized
representatives) as his or its agents and  attorneys-in-fact to demand, sue for,
collect and receive such Senior Debt holder's ratable share of all such payments
and  distributions and to file any necessary proof of claim therefor and to take
all such other  action  (including  the right to vote such Senior Debt  holder's
ratable  share  of the  Notes),  in the  name of the  holders  of the  Notes  or
otherwise, as such Senior Debt holders (or their authorized representatives) may
determine to be necessary or  appropriate  for the  enforcement  of this Section
1.09.  The  Purchaser  and  each  successor  holder  of the  Notes by its or his
acceptance thereof agrees to execute,  at the request of the Company, a separate
agreement  with any holder of Senior Debt on the terms set forth in this 



                                       3





Section 1.09,  and to take all such other action as such holder or such holder's
representative  may request in order to enable such holder to enforce all claims
upon or in respect of such holder's ratable share of the Notes.

                  (b) No Payment on Notes Under Certain Conditions. In the event
that any default  occurs in the payment of the  principal  of or interest on any
Senior Debt (whether as a result of the  acceleration  thereof by the holders of
such Senior Debt or otherwise) and during the  continuance of such default for a
period  up  to  one  hundred  eighty  (180)  days  and  thereafter  if  judicial
proceedings  shall have been instituted with respect to such defaulted  payment,
or (if a shorter  period)  until such  payment has been made or such default has
been cured or waived in writing  by such  holder of Senior  Debt then and during
the  continuance  of such event no payment of principal or interest on the Notes
shall be made by the  Company  or  accepted  by any  holder of the Notes who has
received notice from the Company or from a holder of Senior Debt of such events.

                  (c)   Payments   Held  in  Trust.   In  case  any  payment  or
distribution  shall be paid or  delivered  to any holder of the Notes before all
Senior  Debt  shall  have  been  paid  in  full,  despite  or  in  violation  or
contravention of the terms of this  subordination,  such payment or distribution
shall be held in trust for and paid and  delivered  ratably  to the  holders  of
Senior Debt (or their duly  authorized  representatives),  until all Senior Debt
shall have been paid in full.

                  (d) Subrogation.  Subject to the payment in full of all Senior
Debt and until the Notes  shall be paid in full,  the holders of the Notes shall
be  subrogated  to the rights of the  holders  of Senior  Debt (to the extent of
payments  or  distributions  previously  made to such  holders  of  Senior  Debt
pursuant to the provisions of  subsections  (a) and (c) of this Section 1.09) to
receive  payments or  distributions  of assets of the Company  applicable to the
Senior Debt.  No such  payments or  distributions  applicable to the Senior Debt
shall,  as between  the  Company  and its  creditors,  other than the holders of
Senior  Debt and the  holders  of the  Notes,  be deemed to be a payment  by the
Company to or on account of the Notes; and for the purposes of such subrogation,
no payments or  distributions to the holders of Senior Debt to which the holders
of the Notes would be entitled  except for the  provisions  of this Section 1.09
shall,  as between  the  Company  and its  creditors,  other than the holders of
Senior  Debt and the  holders  of the  Notes,  be deemed to be a payment  by the
Company to or on account of the Senior Debt.

                  (e) Scope of Section.  The provisions of this Section 1.09 are
intended  solely for the purpose of defining the relative  rights of the holders
of the Notes,  on the one hand, and the holders of the Senior Debt, on the other
hand.  Nothing  contained in this Section 1.09 or elsewhere in this Agreement or
the Notes is intended to or shall impair, as between the Company,  its creditors
other  than the  holders of Senior  Debt,  and the  holders  of the  Notes,  the
obligation of the Company,  which is unconditional  and absolute,  to pay to the
holders of the Notes the  principal of and interest on the Notes as and when the
same shall become due and payable in accordance  with the terms  thereof,  or to
affect the  relative  rights of the  holders of the Notes and  creditors  of the
Company other than the holders of the Senior Debt, nor shall anything  herein or
therein  prevent the holder of any Note from  accepting any payment with respect
to such Note or exercising  all remedies  otherwise  permitted by applicable law
upon default under such Note,  



                                       4






subject to the rights,  if any, under this Section 1.09 of the holders of Senior
Debt in respect of cash,  property or securities of the Company  received by the
holders of the Notes.

                  (f)  Survival  of Rights.  The right of any  present or future
holder of Senior  Debt to enforce  subordination  of the Notes  pursuant  to the
provisions  of this Section 1.09 shall not at any time be prejudiced or impaired
by any act or  failure to act on the part of the  Company or any such  holder of
Senior Debt, including,  without limitation,  any forbearance,  waiver, consent,
compromise,  amendment,  extension, renewal, or taking or release of security of
or in respect of any Senior Debt or by  noncompliance  by the  Company  with the
terms of such subordination  regardless of any knowledge thereof such holder may
have or otherwise be charged with.

                  (g) Amendment or Waiver.  The  provisions of this Section 1.09
may not be amended or waived in any manner  which is  detrimental  to any Senior
Debt without the consent of the holders of all then existing Senior Debt.

                  (h) Senior Debt Defined. The term "Senior Debt" shall mean (i)
all  indebtedness  of the Company for money  borrowed from banks,  including any
extension  or  renewals  thereof,  whether  outstanding  on the date  hereof  or
thereafter created or incurred, which is not by its terms subordinate and junior
to or on a parity with the Notes and which is permitted hereby at the time it is
created or incurred,  and (ii) all  guaranties  by the Company  which are not by
their  terms  subordinate  and junior to or on a parity with the Notes and which
are  permitted  hereby  at the  time  they  are  made,  of  indebtedness  of any
subsidiary  of the  Company if such  indebtedness  would have been  Senior  Debt
pursuant  to  the  provisions  of  clause  (i) of  this  sentence  had  it  been
indebtedness of the Company.





                                   ARTICLE II

                      CONDITIONS TO PURCHASER'S OBLIGATION

         The  obligation of the Purchaser to purchase and pay for the Note being
purchased by it at each Closing is subject to the  satisfaction of the following
conditions:

         2.01.  Representations  and  Warranties  to be True  and  Correct.  The
representations  and warranties  contained in Article IV shall be true, complete
and correct on and as of the date of this Convertible Subordinated Note Purchase
Agreement and the  President of the Company shall have  certified to such effect
to the Purchasers in writing.

         2.02. Documentation at Closing. The Purchaser shall have received prior
to or at the Closing a Security  Agreement,  in the form  attached as Exhibit II
(the  "Security  Agreement"),  and all related  financing  statements  and other
similar instruments and documents, shall have been executed and delivered to the
Purchaser by a duly authorized officer of the Company.

         2.03.  All  Proceedings  to be  Satisfactory.  All  corporate and other
proceedings  to be taken by the  Company  in  connection  with the  transactions
contemplated  hereby and all documents 




                                       5






incident  thereto shall be  satisfactory in form and substance to the Purchaser,
and the  Purchaser  shall  have  received  all  such  counterpart  originals  or
certified or other  copies of such  documents as the  Purchaser  reasonably  may
request.

                                   ARTICLE III

                 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

         The Purchaser  understands  and  acknowledges  that the Notes are being
offered and sold under one or more of the exemptions from registration  provided
for in Section 4(2) of the Securities Act of 1933, as amended,  (the "Securities
Act") including  Regulation D promulgated  thereunder,  and any applicable state
securities  laws; that he or it is purchasing the Notes without being offered or
furnished any offering  literature or prospectus  other than publicly  available
reports filed with the U.S.  Securities and Exchange  Commission  ("SEC");  that
these  transactions  have not been  reviewed  or  approved  by the SEC or by any
regulatory  authority charged with the  administration of the securities laws of
any state; that all documents, records and books pertaining to these investments
have  been  made   available  to  the  Purchaser  and  his  or  its   respective
representatives,   including  attorneys,   tax  advisors,   financial  advisors,
accountants  and/or  purchaser  representatives,  if any. The  Purchaser  hereby
further represents and warrants as follows:

         3.01. Residence.  The Purchaser is a bona fide resident and domiciliary
(not a temporary or transient  resident) of the jurisdiction set forth under his
or its name on the first page of this Agreement and has no present  intention of
becoming a resident of any other state, province or jurisdiction.

         3.02. Suitability. The Purchaser confirms that he or it understands and
has  fully  considered  for  purposes  of this  investment,  the  risks  of this
investment  and  understands  that (i) this  investment  is suitable only for an
investor  who is able to bear the  economic  consequences  of losing  his entire
investment,  (ii) the purchase of the Notes is a  speculative  investment  which
involves  a high  degree of risk of loss by the  Purchaser  of his or its entire
investment,  and (iii) there are substantial restrictions on the transferability
of the Notes and any shares of Common  Stock of the Company  which may be issued
upon conversion of the Notes and accordingly,  it may not be possible for him or
it to liquidate his or its investment in such securities in case of emergency.

         3.03. Lack of Liquidity.  The Purchaser  confirms that he or it is able
(i) to bear the economic risk of this investment, (ii) to hold the Notes and any
shares of Common Stock of the Company issued upon conversion of the Notes for an
indefinite  period of time, and (iii) presently to afford a complete loss of his
or its investment;  and represents that he or it has sufficient liquid assets so
that the  illiquidity  associated  with this investment will not cause any undue
financial  difficulties or affect the Purchaser's  ability to provide for his or
its current  needs and  possible  financial  contingencies,  and that his or its
commitment to all  speculative  investments  is reasonable in relation to his or
its net worth and annual income.




                                       6






         3.04.  Knowledge  and  Experience.  The  Purchaser  either  (1)  has  a
pre-existing   personal  or  business  relationship  with  the  Company  or  its
principals or (2) by reason of the Purchaser's  business or financial experience
is capable of  evaluating  the merits and risks of an  investment in the Company
and the Notes and of making an informed investment  decision,  and of protecting
his or its own interests in connection with this investment.

         3.05. Access to Management.  The Purchaser confirms that, in making his
or its  decision  to  purchase  the  Notes,  he or it  has  relied  solely  upon
independent  investigations  made by him or it and that he or it has been  given
the opportunity to ask questions of, and to receive answers from, management and
other  persons  acting on behalf of the Company  concerning  the Company and the
terms and conditions of this investment.

         3.06.  Investment Intent. The Notes are being acquired,  and the shares
of Common  Stock of the  Company  issued  upon  conversion  of the Notes will be
acquired,  by the Purchaser  solely for his or its own account,  for  investment
purposes  only,  and not with a view to, or in  connection  with,  any resale or
distribution thereof; the Purchaser has no contract, undertaking, understanding,
agreement or arrangement,  formal or informal, with any person to sell, transfer
or pledge to any  person  such  securities  or any part  thereof,  any  interest
therein or any rights thereto;  the Purchaser has no present plans to enter into
any such  contract,  undertaking,  agreement or  arrangement;  and the Purchaser
understands  the  legal  consequences  of  the  foregoing   representations  and
warranties to mean that he or it must bear the economic risk of this  investment
for an  indefinite  period  of  time  because  such  securities  have  not  been
registered under the Securities Act or any applicable state securities laws and,
therefore,  cannot be sold unless  they are  subsequently  registered  under the
Securities Act and applicable  state  securities  laws (which the Company is not
obligated,  and has no  intention,  to do) or  unless  an  exemption  from  such
registration is available.

         3.07.  Restrictive Legend. The Purchaser consents to the placement of a
restrictive  legend on the Notes and any shares of Common  Stock of the  Company
issued upon conversion of the Notes as required by applicable securities laws.

         3.08.  No Brokers or  Advertisement.  The Purchaser has not engaged any
broker, dealer,  finder,  commission agent or other similar person in connection
with the  offer,  offer  for  sale,  or sale of the  Notes  and is not under any
obligation to pay any broker's fee, or commission in connection  with his or its
investment  and has not been offered or sold Notes  through  publication  of any
advertisement.

         3.09.  Knowledge,  Experience and Suitability.  The Purchaser currently
has such  knowledge and  experience  in financial and business  matters as to be
able to  evaluate  the merits and risks of an  investment  in the  Company.  The
Purchaser has read carefully and understands this Convertible  Subordinated Note
Purchase Agreement and has consulted its own attorney,  accountant or investment
adviser with respect to the investment  contemplated  hereby and its suitability
for the Purchaser.



                                       7






                                   ARTICLE IV

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         The Company represents and warrants to the Purchaser that:

         4.01.  Organization, Qualifications and Corporate Power.

                  (a) The Company is a corporation  duly  incorporated,  validly
existing  and in good  standing  under the laws of the State of Delaware  and is
duly licensed or qualified to transact business as a foreign  corporation and is
in  good  standing  in the  Commonwealth  of  Massachusetts  and in  each  other
jurisdiction  in which the failure to be so licensed or  qualified  would have a
material  adverse effect on the business or financial  condition of the Company.
The Company has the corporate power and authority to own and hold its properties
and to carry on its business as now  conducted  and as proposed to be conducted,
and to execute, deliver and perform this Agreement and the Notes.

                  (b) The Company has no subsidiaries.  The Company does not (i)
own of record or beneficially, directly or indirectly, (A) any shares of capital
stock or securities  convertible into capital stock of any other  corporation or
(B) any  participating  interest  in any  partnership,  joint  venture  or other
non-corporate business enterprise or (ii) control,  directly or indirectly,  any
other entity.

         4.02.  Authorization of Agreements, Etc.

                  (a)  The  execution  and  delivery  by  the  Company  of  this
Agreement and the Notes and the  performance  by the Company of its  obligations
hereunder and thereunder  have been duly  authorized by all requisite  corporate
action and will not  violate  any  provision  of law,  any order of any court or
other agency of government,  the Certificate of Incorporation of the Company, as
amended (the "Charter") or the By-laws of the Company, as amended.

                  (b) Sufficient  shares of authorized but unissued Common Stock
of the Company shall be reserved by  appropriate  corporate  action prior to the
Company's issuance of each Note in connection with the prospective conversion of
each of the Notes.

         4.03.  Validity.  This  Agreement  and the  Notes  have  each been duly
executed and delivered by the Company and each constitutes the legal,  valid and
binding obligation of the Company, enforceable in accordance with its terms.

         4.04.  Authorized  Capital Stock.  The authorized  capital stock of the
Company consists of 20,000,000 shares of Common Stock, $.15 par value per share,
(the "Common Stock") and 5,000,000 shares of Preferred Stock, $.10 par value per
share ("Preferred Stock").




                                       8




                                    ARTICLE V

                               REGISTRATION RIGHTS

         5.01.  Registration  Rights. If at any time the Company shall determine
to register  under the  Securities  Act  (including  pursuant to a demand of any
stockholder  of the Company  exercising  registration  rights) any of its Common
Stock of the type  which has been or may be issued  upon the  conversion  of the
Notes (the "Registrable Shares"), other than on Form S-8 or its then equivalent,
it shall send to Purchaser written notice of such  determination  and, if within
thirty (30) days after  receipt of such  notice,  Purchaser  shall so request in
writing,  the Company shall use its best efforts to include in such registration
statement all or any part of the  Registrable  Shares  Purchaser  requests to be
registered,  except  that if,  in  connection  with any  offering  involving  an
underwriting  of  Common  Stock  to be  issued  by  the  Company,  the  managing
underwriter  shall  impose a  limitation  on the number of shares of such Common
Stock which may be included in any such registration  statement because,  in its
judgment, such limitation is necessary to effect an orderly public distribution,
then the Company  shall be obligated to include in such  registration  statement
only such  limited  portion  of the  Registrable  Shares  with  respect to which
Purchaser has requested inclusion hereunder.

         5.02. Effectiveness.  The Company will use its best efforts to maintain
the  effectiveness  for up to two  (2)  months  of  any  registration  statement
pursuant to which any of the Registrable Shares are being offered, and from time
to time will amend or supplement such registration  statement and the prospectus
contained  therein as and to the extent  necessary to comply with the Securities
Act and any applicable state securities statute or regulation.  The Company will
also provide  Purchaser with as many copies of the  prospectus  contained in any
such registration statement as it may reasonably request.

         5.03.  Indemnification  of Holder of Registrable  Shares.  In the event
that the Company  registers any of the  Registrable  Shares under the Securities
Act, the Company will indemnify and hold harmless Purchaser and each underwriter
of the Registrable Shares so registered  (including any broker or dealer through
whom such shares may be sold) and each person,  if any, who controls such holder
or any such  underwriter  within the meaning of Section 15 of the Securities Act
from and against any and all losses, claims,  damages,  expenses or liabilities,
joint  or  several,  to  which  they or any of them  become  subject  under  the
Securities  Act or under any other statute or at common law or  otherwise,  and,
except as  hereinafter  provided,  will  reimburse  each such holder,  each such
underwriter  and each such  controlling  person,  if any, for any legal or other
expenses  reasonably  incurred  by  them  or  any of  them  in  connection  with
investigating  or  defending  any  actions  whether  or  not  resulting  in  any
liability,  insofar as such losses, claims,  damages,  expenses,  liabilities or
actions  arise out of or are based upon any untrue  statement or alleged  untrue
statement of a material fact  contained in the  registration  statement,  in any
preliminary  or amended  preliminary  prospectus  or in the  prospectus  (or the
registration   statement  or   prospectus  as  from  time  to  time  amended  or
supplemented  by the  Company) 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  in order to make the  statements  therein not  misleading  or any
violation  by the  Company  of any  rule or  regulation  promulgated  under  the
Securities  Act  



                                       9






applicable  to the  Company and  relating to action or inaction  required of the
Company in connection with such  registration,  unless such untrue  statement or
omission  was  made in such  registration  statement,  preliminary  or  amended,
preliminary  prospectus or  prospectus  in reliance upon and in conformity  with
information  furnished in writing to the Company in connection therewith by such
holder of  Registrable  Shares,  any such  underwriter  or any such  controlling
person  expressly for use therein.  Promptly  after  receipt by  Purchaser,  any
underwriter or any  controlling  person,  of notice of the  commencement  of any
action  in  respect  of which  indemnity  may be  sought  against  the  Company,
Purchaser,  or such underwriter or such controlling  person, as the case may be,
will notify the Company in writing of the commencement  thereof, and, subject to
the provisions  hereinafter stated, the Company shall assume the defense of such
action (including the employment of counsel,  who shall be counsel  satisfactory
to Purchaser,  such underwriter or such controlling person, as the case may be),
and the payment of expenses  insofar as such action  shall relate to any alleged
liability  in respect of which  indemnity  may be sought  against  the  Company.
Purchaser,  any such underwriter or any such  controlling  person shall have the
right to employ  separate  counsel in any such action and to  participate in the
defense  thereof but the fees and expenses of such  counsel  shall not be at the
expense  of  the  Company  unless  the  employment  of  such  counsel  has  been
specifically  authorized  by the  Company.  The  Company  shall not be liable to
indemnify any person for any settlement of any such action effected  without the
Company's consent. The Company shall not, except with the approval of each party
being indemnified  under this Section 5.05,  consent to entry of any judgment or
enter into any  settlement  which  does not  include  as an  unconditional  term
thereof  the  giving  by the  claimant  or  plaintiff  to the  parties  being so
indemnified  of a  release  from  all  liability  in  respect  to such  claim or
litigation.

         5.04.  Indemnification  of  Company.  In the  event  that  the  Company
registers any of the Registrable Shares under the Securities Act, Purchaser will
indemnify  and hold  harmless the Company,  each of its  directors,  each of its
officers who have signed the  registration  statement,  each  underwriter of the
Registrable  Shares so registered  (including  any broker or dealer through whom
such of the  shares  may be sold) and each  person,  if any,  who  controls  the
Company  within the meaning of Section 15 of the Securities Act from and against
any and all losses, claims, damages, expenses or liabilities,  joint or several,
to which  they or any of them may become  subject  under the  Securities  Act or
under  any  other  statute  or at  common  law  or  otherwise,  and,  except  as
hereinafter  provided,  will  reimburse  the  Company  and each  such  director,
officer,  underwriter  or  controlling  person  for any legal or other  expenses
reasonably  incurred by them or any of them in connection with  investigating or
defending any actions whether or not resulting in any liability, insofar as such
losses, claims,  damages,  expenses,  liabilities or actions arise out of or are
based upon any untrue  statement or alleged untrue  statement of a material fact
contained  in  the  registration   statement,  in  any  preliminary  or  amended
preliminary  prospectus or in the prospectus (or the  registration  statement or
prospectus as from time to time amended or  supplemented) 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  in order to make the  statements
therein not  misleading,  but only insofar as any such statement or omission was
made in reliance upon and in conformity with information furnished in writing to
the Company in  connection  therewith  by Purchaser  expressly  for use therein;
provided, however, that Purchaser's obligations hereunder shall be limited to an
amount  equal to the proceeds to such holder of the  Registrable  Shares sold



                                       10







in such  registration.  Promptly after receipt of notice of the  commencement of
any action in respect of which  indemnity  may be sought  against such holder of
Registrable  Shares,  the  Company  will  notify  Purchaser  in  writing  of the
commencement  thereof,  and such holder of Registrable Shares shall,  subject to
the provisions  hereinafter stated, assume the defense of such action (including
the employment of counsel, who shall be counsel satisfactory to the Company) and
the  payment of  expenses  insofar as such  action  shall  relate to the alleged
liability in respect of which  indemnity may be sought  against  Purchaser.  The
Company and each such director, officer, underwriter or controlling person shall
have the right to employ separate  counsel in any such action and to participate
in the defense thereof but the fees and expenses of such counsel shall not be at
the expense of Purchaser unless employment of such counsel has been specifically
authorized by Purchaser.  Purchaser  shall not be liable to indemnify any person
for any settlement of any such action effected without such holder's consent.

         5.05.  Expenses.  In the case of a registration under Section 5.01, the
Company shall bear all costs and expenses of each such registration,  including,
but not limited to,  printing,  legal and  accounting  expenses,  Securities and
Exchange  Commission  filing  fees and "blue sky" fees and  expenses;  provided,
however,  that the Company shall have no obligation to pay or otherwise bear (i)
any  portion  of the fees or  disbursements  of more  than one  counsel  for the
Purchaser in connection with the registration of their  Registrable  Shares,  or
(ii) any portion of the underwriters'  commissions or discounts  attributable to
the Registrable Shares being offered and sold by the Purchaser.


                                   ARTICLE VI

                               CONVERSION OF NOTES

         6.01.   Conversion  Right.  Subject  to  and  in  compliance  with  the
provisions  of this  Article VI, all or any part of the  principal  and interest
amount  outstanding  of any Note may,  at the option of the holder  thereof,  be
converted at any time or from time to time into  fully-paid  and  non-assessable
shares of Common Stock.

         6.02.  Applicable Conversion Value.  The  "Applicable Conversion Value"
shall be computed as follows:

                  (a) In  the  event  that  the  Company  has  acquired  another
corporation or legal entity for which shares of the Company's  Common Stock were
used to pay for all or any part of such acquisition (the "Acquisition  Shares"),
then the price at which any Note may be converted into Common Stock shall be the
value of such Acquisition Shares; or

                  (b) In the event that the  Company  has not  acquired  another
corporation  or legal entity at the time that  Purchaser  converts any Note into
shares of Common  Stock  pursuant to Section  6.01,  then the price at which any
Note may be converted into Common Stock shall be determined by mutual  agreement
of the  parties,  provided,  however,  that in no  event  shall  the  Applicable
Conversion  Value  under this  Section  6.02(b) be less than the  average of the
closing  



                                       11






price of the Common Stock for the twenty  business  days  preceding  the date of
notice of conversion as provided by Purchaser pursuant to Section 6.05.

         6.03. Upon  Extraordinary  Common Stock Event. Upon the happening of an
Extraordinary  Common Stock Event (as  hereinafter  defined),  if the Applicable
Conversion  Value has been determined in accordance with 6.02(a),  then it shall
be adjusted by  multiplying  such  effective  Applicable  Conversion  Value by a
fraction,  the  numerator of which shall be the number of shares of Common Stock
outstanding  immediately prior to such Extraordinary  Common Stock Event and the
denominator  of which shall be the number of shares of Common Stock  outstanding
immediately  after such  Extraordinary  Common Stock  Event,  and the product so
obtained shall  thereafter be the Applicable  Conversion  Value.  The Applicable
Conversion  Value,  as so adjusted,  shall be readjusted in the same manner upon
the happening of any successive Extraordinary Common Stock Event or Events.

         "Extraordinary  Common  Stock  Event"  shall  mean  (i)  the  issue  of
additional  shares of the Common  Stock as a dividend or other  distribution  on
outstanding  Common Stock,  (ii) a subdivision of  outstanding  shares of Common
Stock  into a  greater  number  of  shares  of the  Common  Stock,  or  (iii)  a
combination of  outstanding  shares of the Common Stock into a smaller number of
shares of the Common Stock.

         6.04. (a) Adjustment for 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 unless the
Company is the surviving entity, 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,  each
holder of a Note,  on the  conversion  thereof as provided in this Article VI 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 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
converted its Note, immediately prior thereto.

         6.05.  Exercise of  Conversion  Privilege.  To exercise its  conversion
privilege,  a holder of a Note shall  surrender such Note being converted to the
Company at its principal office, and shall give written notice to the Company at
that office that such holder elects to convert such Note, or a portion  thereof.
Such notice shall also state the name or names (with  address or  addresses)  in
which the certificate or  certificates  for shares of Common Stock issuable upon
such conversion shall be issued. The Note so surrendered for conversion shall be
accompanied by proper  assignment  thereof to the Company or in blank.  The date
when such  written  notice is received by the  Company,  together  with the Note
being  converted,  shall be the  "Conversion  Date." As promptly as  practicable
after the  Conversion  Date,  the Company  shall issue and shall  deliver to the
holder of the Note being converted, or on its written order, such certificate or
certificates  as it may request for the number of whole  shares of Common  Stock
issuable upon the  conversion of such Note in accordance  with the provisions of
this  Article VI, cash in the amount of all accrued 



                                       12





and unpaid  interest on such Note up to and including the  Conversion  Date, and
cash,  as provided  in Section  6.06,  in respect of any  fraction of a share of
Common Stock issuable upon such  conversion.  Such conversion shall be deemed to
have been effected  immediately prior to the close of business on the Conversion
Date,  and at such  time the  rights of the  holder as a holder of a Note  shall
cease and the  person or  persons  in whose  name or names  any  certificate  or
certificates  for shares of Common Stock shall be issuable upon such  conversion
shall be deemed to have  become the holder or holders of record of the shares of
Common Stock represented thereby.

         6.06. Cash in Lieu of Fractional Shares. No fractional shares of Common
Stock  or  scrip  representing  fractional  shares  shall  be  issued  upon  the
conversion  of a Note.  Instead of any  fractional  shares of Common Stock which
would  otherwise be issuable upon conversion of a Note, the Company shall pay to
the holder of the Note which was converted a cash  adjustment in respect of such
fractional  shares in an amount  equal to the same  fraction of the market price
per share of the Common Stock (as determined in a reasonable  manner  prescribed
by the Board of Directors) at the close of business on the Conversion  Date. The
determination  as to whether or not any fractional  shares are issuable shall be
based upon the total  principal  amount of Notes being converted at any one time
by any holder thereof, not upon each Note being converted.

         6.07.  Partial  Conversion.  In  the  event  some  but  not  all of the
principal amount represented by a Note surrendered by a holder is converted, the
Company  shall  execute  and  deliver to or on the order of the  holder,  at the
expense of the Company,  a new Note  representing the principal amount which was
not converted.

         6.08.  Reservation  of Common  Stock.  The  Company  shall at all times
reserve and keep available out of its  authorized but unissued  shares of Common
Stock,  solely for the purpose of effecting the  conversion  of the Notes,  such
number of its shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding  Notes and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the  conversion of all then  outstanding,  the Company shall take such corporate
action as may be  necessary to increase its  authorized  but unissued  shares of
Common Stock to such number of shares as shall be sufficient for such purpose.


                                   ARTICLE VII

                                EVENTS OF DEFAULT

         7.01.  Events of Default.  If any of the following  events  ("Events of
Default") shall occur and be continuing:

                  (a) The Company shall fail to pay any installment of principal
of any of the Notes,  which is not cured within  thirty (30) business days after
written notice of default from Purchaser; or




                                       13






                  (b) The Company shall be involved in financial difficulties as
evidenced  (i) by its  admitting  in  writing  its  inability  to pay its  debts
generally as they become due; (ii) by its commencement of a voluntary case under
Title 11 of the United  States  Code as from time to time in  effect,  or by its
authorizing,  by  appropriate  proceedings  of its Board of  Directors  or other
governing body, the  commencement of such a voluntary case;  (iii) by its filing
an  answer  or  other  pleading  admitting  or  failing  to  deny  the  material
allegations of a petition filed against it commencing an involuntary  case under
said Title 11, or seeking,  consenting to or  acquiescing  in the relief therein
provided, or by its failing to controvert timely the material allegations of any
such petition;  (iv) by the entry of an order for relief in any involuntary case
commenced  under said Title 11; (v) by its seeking  relief as a debtor under any
applicable  law, other than said Title 11, of any  jurisdiction  relating to the
liquidation or reorganization of debtors or to the modification or alteration of
the rights of creditors,  or by its consenting to or acquiescing in such relief;
(vi) by the entry of an order by a court of competent  jurisdiction  (a) finding
it to be bankrupt or  insolvent,  (b)  ordering or  approving  its  liquidation,
reorganization or any modification or alteration of the rights of its creditors,
or (c) assuming custody of, or appointing a receiver or other custodian for, all
or a substantial part of its property;  or (vii) by its making an assignment for
the  benefit  of,  or  entering  into a  composition  with,  its  creditors,  or
appointing or consenting to the appointment of a receiver or other custodian for
all or a substantial part of its property; or

                  (c) Any judgment,  writ, warrant of attachment or execution or
similar  process  shall be issued or levied  against a  substantial  part of the
property of the Company and such judgment, writ, or similar process shall not be
released,  vacated or fully  bonded  within  ninety (90) days after its issue or
levy;

then, and in any such event, the Purchaser or any other holder of the Notes may,
by notice to the  Company,  declare the entire  unpaid  principal  amount of the
Notes,  all interest accrued and unpaid thereon to be forthwith due and payable,
whereupon the Notes and all such accrued  interest shall become and be forthwith
due and  payable  (unless  there shall have  occurred an Event of Default  under
subsection 7.01(b) in which case all such amounts shall automatically become due
and payable),  without  presentment,  demand,  protest or further  notice of any
kind, all of which are hereby expressly waived by the Company.

         7.02.  Annulment of Defaults.  Section 7.01 is subject to the condition
that,  if at any time after the  principal of any of the Notes shall have become
due and payable, and before any judgment or decree for the payment of the moneys
so due, or any thereof,  shall have been  entered,  all arrears of interest upon
all the Notes  and all  other  sums  payable  under  the  Notes  and under  this
Agreement  (except the  principal of the Notes which by such  declaration  shall
have become  payable)  shall have been duly paid,  and every  other  default and
Event of Default shall have been made good or cured, then and in every such case
the holders of fifty-one  percent (51%) or more in principal amount of all Notes
then outstanding may, by written instrument filed with the Company,  rescind and
annul such declaration and its consequences; but no such rescission or annulment
shall extend to or affect any  subsequent  default or Event of Default or impair
any right consequent thereon.



                                       14







                                  ARTICLE VIII

                                  MISCELLANEOUS

         8.01. No Waiver;  Cumulative Remedies.  No failure or delay on the part
of the  Purchaser,  or any other  holder of the Notes in  exercising  any right,
power or remedy  hereunder  shall  operate  as a waiver  thereof;  nor shall any
single or partial exercise of any such right, power or remedy preclude any other
or further exercise thereof or the exercise of any other right,  power or remedy
hereunder.  The  remedies  herein  provided  are not  exclusive  of any remedies
provided by law.

         8.02. Amendments, Waivers and Consents. Any provision in this Agreement
or the Notes to the  contrary  notwithstanding,  changes in or additions to this
Agreement may be made, and compliance  with any covenant or provision  herein or
therein  set forth may be omitted or waived,  if the  Company  (i) shall  obtain
consent  thereto  in writing  from the  holder or holders of at least  fifty-one
percent (51%) in principal amount of all Notes then outstanding, and (ii) shall,
in each case,  deliver  copies of such consent in writing to any holders who did
not execute the same; provided that no such consent shall be effective to reduce
or to  postpone  the date fixed for the  payment of the  principal  or  interest
payable on any Note, without the consent of the holder thereof, or to reduce the
percentage  of the Notes the consent of the  holders of which is required  under
this  Section.  Any waiver or consent may be given  subject to  satisfaction  of
conditions  stated  therein and any waiver or consent shall be effective only in
the  specific  instance and for the  specific  purpose for which given.  Written
notice of any waiver or consent effected under this subsection shall promptly be
delivered by the Company to any holders who did not execute the same.

         8.03. Addresses for Notices,  etc. All notices,  requests,  demands and
other  communications  provided  for  hereunder  shall be in writing  (including
telegraphic  communication)  and mailed or  telegraphed or delivered to: (i) the
Company or the Purchaser at its address show on the first page of this Agreement
and (ii) to any other holder of the Notes at such holder's address for notice as
set forth in the register maintained by the Company, and (iii) as to each of the
foregoing,  at such other  address as shall be  designated  by such  person in a
written  notice to the other party  complying  as to delivery  with the terms of
this  Section.  All such  notices,  requests,  demands and other  communications
shall,  when  mailed or sent via  facsimile,  respectively,  be  effective  when
deposited  in the mails or  delivered to the  telegraph  company,  respectively,
addressed as aforesaid.

         8.04. Binding Effect; Assignment.  This Agreement shall be binding upon
and inure to the benefit of the Company and the Purchaser  and their  respective
successors and assigns.

         8.05. Survival of Representations  and Warranties.  All representations
and warranties  made in this Agreement,  the Notes,  or any other  instrument or
document  delivered  in  connection  herewith or  therewith,  shall  survive the
execution and delivery hereof or thereof and the making of the loans.



                                       15






         8.06. Prior Agreements. This Agreement constitutes the entire agreement
between  the parties  and  supersedes  any prior  understandings  or  agreements
concerning the subject matter hereof.

         8.07. Severability. The invalidity or unenforceability of any provision
hereof  shall in no way  affect  the  validity  or  enforceability  of any other
provision.

         8.08. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the Commonwealth of Massachusetts.

         8.09.  Headings.  Article,  Section  and  subsection  headings  in this
Agreement are included  herein for  convenience  of reference only and shall not
constitute a part of this Agreement for any other purpose.

         8.10.  Counterparts.  This  Agreement  may be executed in any number of
counterparts,  all of which taken  together  shall  constitute  one and the same
instrument, and each of the parties hereto may execute this Agreement by signing
any such counterpart.



                                       16





         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized,  as of the date
first above written.

                                           NATIONAL TRANSACTION NETWORK, INC.


                                           By: /s/ Milton A. Alpern
                                              --------------------------------

                                           INTERNATIONAL VERIFACT INC.


                                           By: /s/ Peter H. Henry
                                              --------------------------------

                                           By: /s/ L. Barry Thomson
                                              --------------------------------





                                       17



                                                                       Exhibit I

NEITHER THIS NOTE NOR THE SECURITIES WHICH MAY BE ISSUED UPON CONVERSION OF THIS
NOTE HAVE BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED,  OR ANY
APPLICABLE STATE SECURITIES  LAWS, BY REASON OF SPECIFIC  EXEMPTIONS  THEREUNDER
AND CANNOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY
UNLESS  SUBSEQUENTLY  REGISTERED  THEREUNDER  OR  UNLESS  APPLICABLE  EXEMPTIONS
THEREFROM ARE AVAILABLE.


                       NATIONAL TRANSACTION NETWORK, INC.

                     CONVERTIBLE SUBORDINATED NOTE DUE 200_

$[Principal Amount]                                                       [Date]

         For value  received,  National  Transaction  Network,  Inc., a Delaware
corporation  (the "Company"),  hereby promises to pay to International  Verifact
Inc. or  registered  assigns  (hereinafter  referred to as the  "Payee"),  on or
before  ____ __,  ____[five  year term] (the "Due  Date") the  principal  sum of
____________________  ($_______) or such part thereof as then remains unpaid and
to pay accrued and unpaid  interest  from the date hereof on the whole amount of
said  principal sum remaining at the end of each quarter  unpaid at a rate equal
to The First  National Bank of Boston's best prime rate, as announced at the end
of each  calendar  quarter,  plus (i) 2% or (ii) 5% during any period  which the
Company is in default of its covenants in respect of its working capital line of
credit with Silicon  Valley Bank, in each case  calculated and compounded on the
last day of each quarter,  such interest to be payable together with the payment
of the principal of this Note. Principal and interest shall be payable in lawful
money of the United States of America at the principal office of the Payee or at
such other place as the legal holder may designate  from time to time in writing
to the Company.  Interest shall be computed on the basis of a 360-day year and a
90-day calendar quarter.

         This Note is issued  pursuant to and is  entitled to the  benefits of a
certain Convertible Subordinated Note Purchase Agreement, dated as of August __,
1997,  between the Company and  International  Verifact Inc. (as the same may be
amended from time to time, hereinafter referred to as the "Agreement"), and each
holder  of this  Note,  by his  acceptance  hereof,  agrees  to be  bound by the
provisions  of the  Agreement,  including,  without  limitation,  that:  (i) the
principal  of and  interest  on this Note is  subordinated  to Senior  Debt,  as
defined in the Agreement, (ii) in case of an Event of Default, as defined in the
Agreement,  the  principal  of this Note may become or may be  declared  due and
payable in the manner and with the effect  provided in the  Agreement  and (iii)
this Note is  convertible  at the option of the  holder  hereof  into  shares of
Common Stock of the Company in the manner set forth in this Agreement.










         This Note is  secured  by and  entitled  to the  benefits  of a certain
Security   Agreement  (as  that  term  is  defined  in  the  Agreement),   dated
________________ __, 199_, from the Company to International Verifact Inc.

         In case any payment herein provided for shall not be paid when due, the
Company  promises  to pay  all  cost of  collection,  including  all  reasonable
attorney's fees.

         This Note shall be governed by, and construed in accordance  with,  the
laws of the Commonwealth of Massachusetts.

         The Company and all endorsers and  guarantors of this Note herein waive
presentment,  demand,  notice of  nonpayment,  protest and all other demands and
notices in connection with the delivery, acceptance,  performance or enforcement
of this Note.

                                             NATIONAL TRANSACTION NETWORK, INC.


                                             By:________________________________
                                                       [Name and Title]








                                                                      Exhibit II

                               SECURITY AGREEMENT

      The  undersigned,   National   Transaction   Network,   Inc.,  a  Delaware
corporation  with a place  of  business  and  executive  office  located  at 117
Flanders Road,  Westborough,  Massachusetts 01581 (hereinafter  referred to as a
"Debtor") hereby grants to International  Verifact Inc., a Canadian  corporation
with a place of business and  executive  office  located at 79  Torbarrie  Road,
Toronto,  Ontario,  CANADA M3L 1G5 (hereinafter  called the "Secured Party"),  a
security interest in and agrees and acknowledges that Secured Party has and will
continue to have a security interest in the following:

      (A)  All  of  Debtor's  inventory  of  whatever  name,  nature,   kind  or
description,  all Debtor's goods held for sale or lease or to be furnished under
contracts of service, finished goods, work in process, raw materials,  materials
used or  consumed by the  Debtor,  parts,  supplies,  all  wrapping,  packaging,
advertising,  labeling,  and shipping materials,  devices,  names and marks, all
contract rights and documents  relating to any of the foregoing,  whether any of
the foregoing be now existing or hereafter arising,  wherever located, now owned
or  hereafter  acquired  by the Debtor  (all of which is  sometimes  hereinafter
referred to as "Inventory");

      (B) All of the Debtor's presently owned and hereafter acquired  equipment,
machinery,  furniture,  fixtures  and all other  tangible  personal  property of
whatsoever  kind or nature,  together with all proceeds  thereof,  additions and
accessions  thereto or replacements  thereof or  substitutions  therefor (all of
which is sometimes hereinafter referred to as "Equipment");

      (C) All of the  Debtor's  accounts,  accounts  receivable,  notes,  bills,
drafts, acceptances,  instruments, documents, chattel paper and all other debts,
obligations  and liabilities in whatever form owing to the Debtor for goods sold
by it or for  services  rendered  by it, or  however  otherwise  established  or
created, all guaranties and security therefor,  all right, title and interest of
the Debtor in the goods or services which gave rise thereto, including rights of
an unpaid  seller of goods or  services;  whether  any of the  foregoing  be now
existing  or  hereafter  arising,  now or  hereafter  received  by or  owing  or
belonging to the Debtor (all of which are sometimes  hereinafter  referred to as
"Accounts");

      (D) All of the Debtor's general intangibles, including without limitation,
names, goodwill, trade secrets, copyrights,  trademarks, trademark applications,
tradenames, patents, patent applications, licenses, other intellectual property,
permits,  governmental  approvals,  deposit accounts, tax refunds,  claims under
insurance  policies (whether or not proceeds from  Collateral),  other rights to
payment,  rights of setoff, choses in action,  rights under judgments,  computer
programs and software,  contract rights, and all contracts and agreements to, or
of which it is a party or beneficiary,  and all intangible  personal property of
whatsoever kind or nature now owned by the Debtor as well as any and all thereof
that may be hereafter acquired and in and to all proceeds thereof;









      (E) All of the  Debtor's  books and  records,  as they  exist from time to
time, relating to (A) through (D) above, inclusive;

      (F) All other  assets of every nature and  description,  whether it be now
existing or  hereafter  arising and whether now or  hereafter  belonging  to the
Debtor;

(all hereinafter sometimes collectively referred to as "Collateral");  to secure
the payment of all sums due or which may become due under  certain  Notes of the
Debtor  which may be issued  from time to time in up to an  aggregate  principal
amount of One Million Dollars ($1,000,000), such notes to be issued from time to
time pursuant to a certain Convertible Subordinated Note Purchase Agreement (the
"Purchase  Agreement")  by and between the Debtor and Secured Party as of August
__, 1997  (hereinafter  sometimes  collectively  referred to as  "Obligation" or
"Obligations").

I.  WARRANTIES AND COVENANTS.

      The Debtor hereby warrants and covenants that:

      (A) The Equipment and Inventory are used primarily for business purposes.

      (B) The Equipment and Inventory of the Debtor will be kept at the Debtor's
place of  business.  The Debtor will  promptly  notify the Secured  Party of any
change in the  location  of the  Collateral,  and the Debtor will not remove the
Equipment  from its place of business  without the prior written  consent of the
Secured Party.  The Debtor will notify the Secured  Party,  at least twenty (20)
days prior to any such event,  of any change in the  Debtor's  exact legal name,
any change in its place of business or location of Equipment or Inventory or its
establishment of any new place of business or location of Equipment or Inventory
or office where its records concerning Accounts and other assets are kept.

      (C) The Debtor will have and maintain  insurance at all times with respect
to all its  Collateral  against  risks  of fire  (including  so-called  extended
coverage),  theft,  embezzlement  and such  other  risks as  Secured  Party  may
reasonably  require  containing such terms. If and when requested by the Secured
Party,  the  Debtor  shall  furnish  Secured  Party with  certificates  or other
evidence of compliance  with the foregoing  insurance  provision and the Secured
Party may act either in its name or as attorney for the Debtor (for that purpose
by these presents duly  authorized and appointed with full power of substitution
and revocation) in obtaining,  adjusting,  settling and canceling such insurance
and endorsing any drafts in payment of any loss.

      (D) The Debtor will pay promptly when due all taxes and  assessments  upon
its  Collateral  or for its use or operation or upon this  Agreement or upon any
note or notes secured hereby. In its sole discretion, the Secured Party may: (i)
discharge taxes and liens levied or placed on Collateral; (ii) pay for insurance
thereon or the  maintenance  and  preservation  thereof;  or (iii) if the Debtor
shall fail to make required  deposits in respect of F.I.C.A.  or any withholding
taxes, make such deposits or pay such taxes, in whole or in part, or set up such
reserves as the Secured Party in its sole  discretion  deem necessary in respect
of the Debtor's liability  therefor.  Any 









amount  so paid,  deposited  or  reserved  for shall  constitute  a loan for all
purposes  hereunder,  and the Debtor  promises to repay the  Secured  Party such
amounts  upon the Secured  Party's  demand.  Nothing  herein  shall be deemed to
obligate the Secured  Party to do any of the foregoing and the making of any one
or more such payments; deposits or reserves shall not constitute an agreement by
the Secured Party to take any further or similar action or a waiver of any right
of the Secured Party hereunder.

      (E) The  Debtor  will keep its  Collateral  at all times in good order and
repair,  reasonable wear and tear excepted,  and will make necessary renewals of
and replacements to the same with goods of equal value and serviceability,  free
of  all  liens,   security   interests  and  encumbrances,   which  goods  shall
automatically become subject to this Agreement.

II.  ADDITIONAL RIGHTS AND ASSURANCES.

      (A) Subject to Article VI of this Agreement, the Secured Party will at any
time following an occurrence of an Event of Default  hereunder have the right to
take physical  possession of the Collateral  and to maintain such  possession on
the Debtor's  premises or to remove the  Collateral  or any part thereof to such
other places as the Secured  Party may desire.  If the Secured  Party  exercises
such  right,  the Debtor  shall at its sole  expense  upon the  Secured  Party's
request  assemble the same and make it available to the Secured Party at a place
reasonably  convenient  to  the  Secured  Party.  If  any  Inventory  is in  the
possession or control of any of the Debtor's  agents or  processors,  the Debtor
shall,  at the Secured  Party's  request,  notify  them of the  Secured  Party's
security interest therein and, at the Secured Party's request,  instruct them to
hold the same for the Secured Party's account and subject to the Secured Party's
instructions.

      (B) The Secured  Party may at any time after an  occurrence of an Event of
Default (i) in its own name or in the name of others  communicate  with  account
debtors in order to verify with them to the  Secured  Party's  satisfaction  the
existence,  amount and terms of any Accounts and the absence of any  reductions,
discounts,  defenses or offsets with  respect  thereto,  or (ii) notify  account
debtors  that  Collateral  has been  assigned  to the  Security  Party  and that
payments by such debtors  shall be made  directly to the Secured  Party.  At the
Secured Party's request,  the Debtor will notify any or all such debtors of such
assignment,  give  instruction  and/or indicate on billings to such debtors that
their  Accounts  shall be paid to the Secured  Party and/or  supply such debtors
with a copy of this Agreement.

      (C)  Subsequent  to the  occurrence  of any Event of Default,  the Secured
Party shall have full power, in its own name or that of the Debtor,  to collect,
endorse,  compromise,  settle,  sell or  otherwise  deal  with any or all of the
Collateral or proceeds  thereof.  Subsequent  to the  occurrence of any Event of
Default,  the Debtor  agrees upon  request of the  Secured  Party to appoint any
officer or agent of the Secured Party as true and lawful attorney-in-fact,  with
power of substitution, to endorse the name of the Debtor or any of its officers,
trustees or agents upon any Accounts,  notes,  checks,  drafts, money orders, or
other  instruments  of  payment  (including  under any  policy of  insurance  on
Collateral) or Collateral  that may come into possession of the Secured Party in
full or part payment of any amounts owing to Secured Party;  to sign and endorse
the name of the  Debtor or any of its  officers,  trustees  or  agents  upon any
invoice, freight or express 










bill, bill of lading,  storage or warehouse  receipts,  drafts against  debtors,
assignments,  verifications  and notices in connection  with  Accounts,  and any
instruments or documents relating thereto or to the Debtor's rights therein;  to
give written  notice to such offices and  officials of the United  States Postal
Service to effect such  change or changes of address so that all mail  addressed
to the Debtor may be delivered  directly to the Secured  Party;  to take any and
all other actions necessary or appropriate to collect, compromise,  settle, sell
or otherwise deal with any or all of the Collateral or proceeds thereof;  and to
obtain,  adjust,  settle and cancel any insurance;  hereby granting to each said
attorney-in-fact or his substitute full power to do any and all things necessary
or appropriate to be done in and about the premises as fully and  effectually as
the  Debtor  might  or  could  do,  and  hereby  ratifying  all  that  any  said
attorney-in-fact  or his  substitute  shall  lawfully  do or cause to be done by
virtue hereof.

      (D) The Debtor  hereby  assigns to the Secured  Party all sums,  including
without  limitation  return of premiums,  which may become payable under any and
all of such Debtor's  policies of insurance and directs each  insurance  company
issuing any such policy to make payment which would  otherwise be due thereunder
to the Debtor directly to the Secured Party.

      (E) In the  event  of the  sale,  exchange  or  disposition  of any of the
Collateral (other than finished goods in the ordinary course of business) or any
interest  therein  (and no such sale,  exchange or other  disposition  is hereby
authorized  or  consented  to),  the Secured  Party's  security  interest  shall
nevertheless  continue in such  Collateral  (including  without  limitation  all
proceeds,  cash and  non-cash)  notwithstanding  such  sale,  exchange  or other
disposition;  and the Secured  Party's receipt of any such proceeds shall not be
deemed or  construed  to be an  authorization  of or  consent  to any such sale,
exchange or other disposition.

      (F) Any and all  instruments,  documents,  policies  and  certificates  of
insurance,  securities,  goods, accounts, choses in action, general intangibles,
chattel paper, cash,  property and the proceeds thereof (whether or not the same
are  Collateral or proceeds  thereof) owned by the Debtor or in which the Debtor
has an interest, which now or hereafter are at any time in possession or control
of the Secured Party or any affiliate of the Secured Party or in transit by mail
or carrier to or from the Secured Party or such  affiliate or in the  possession
of any third party acting in its behalf,  without  regard to whether the Secured
Party or such affiliate received the same in pledge,  for safekeeping,  as agent
for collection or  transmission or otherwise or had  conditionally  released the
same, shall  constitute  security for Obligations and may be applied at any time
to Obligations which are then owing, whether due or not due.

      (G) A carbon, photographic,  or other reproduction of a security agreement
or a financing  statement is sufficient  as a financing  statement to the extent
permitted under applicable law.

III.  EVENTS OF DEFAULT.

      The Debtor shall be in default under this  Agreement upon the happening of
any of the following  events or conditions  (individually  and  collectively  an
"Event of Default"):










      (A) Failure by the Debtor to observe or perform any  covenant or agreement
referred to herein and, if no other grace or cure period is applicable  thereto,
the continuance of such failure for thirty (30) business days; or

      (B) An Event of Default (as defined in the Purchase  Agreement) shall have
occurred and is continuing and such Event of Default has not been annulled.

IV.  REMEDIES.

      (A) If an Event of Default occurs:

              (1) The Secured Party may declare all  obligations  secured hereby
to be immediately due and payable without presentment,  demand, protest or other
notice of any kind, all of which are hereby expressly waived.

              (2) The  Secured  Party may  exercise  and shall  have any and all
rights and remedies accorded it by the Massachusetts  Uniform Commercial Code or
the  Uniform  Commercial  Code as adopted in such  state  whose laws  govern the
disposition of certain Collateral. The requirement of reasonable notice shall be
met, if notice  containing such  information as may be required under applicable
law is mailed,  postage prepaid,  to the Debtor or other person entitled thereto
at least ten (10) days (including  non-business days) before the time of sale or
disposition of the Collateral.

              (3) The Debtor  designates and appoints the Secured Party its true
and lawful  attorney with full power of  substitution  in its own name or in the
name of such Debtor to demand, collect,  receive, receipt for, sue for, compound
and give  acquittance  for,  any and all  amounts  due and to become  due on the
Accounts and to endorse the name of such Debtor on all commercial paper given in
payment or  part-payment  thereof and in its  reasonable  discretion to file any
claim or take any other  action  which the  Secured  Party may  reasonably  deem
necessary or  appropriate  to protect and preserve and realize upon the security
interest  of the Secured  Party in the  Accounts or the  proceeds  thereof.  The
Secured  Party shall also have the right to (i) open all mail  addressed  to the
Debtor;  (ii) change the Post Office box or mailing  address of the Debtor;  and
(iii) use the Debtor's stationery and billing forms or facsimiles  thereof,  for
the purpose of collecting Accounts and realizing upon the Collateral.

      (B) No delay in  accelerating  the maturity of any obligation as aforesaid
or in taking  any other  action  with  respect  to any  Event of  Default  or in
exercising any rights with respect to the  Collateral  such affect the rights of
the Secured Party later to take such action with respect thereto,  and no waiver
as to one Event of Default shall affect rights as to any other default.

V.  MISCELLANEOUS.

      (A) In case any one or more of the provisions  contained  herein should be
invalid,  illegal or  unenforceable  in any respect,  the validity,  legality or
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.








      (B) All rights of the Secured Party  hereunder  shall inure to the benefit
of its successors and assigns;  and all obligations of the Debtor shall bind the
successors or assigns of the Debtor.  All the provisions of this Agreement shall
be  construed  by and  administered  in  accordance  with the local  laws of the
Commonwealth of Massachusetts.  This Agreement shall become effective when it is
signed  by the  Debtor.  The  Debtor  acknowledges  receipt  of a copy  of  this
Agreement.

      (C) In the absence of gross negligence or willful misconduct,  neither the
Secured Party nor any  attorney-in-fact  appointed  hereunder shall be liable to
the Debtor or any other person for any act or  omission,  any mistake of fact or
any error of judgment in exercising any right or remedy granted herein.

VI.  FIRST RIGHTS OF BANK.

      The Secured Party and the Debtor acknowledge that the Debtor has granted a
security  interest  to the  Silicon  Valley  Bank  ("Bank")  to  secure  certain
obligations  of the Debtor to the Bank.  Both the  Secured  Party and the Debtor
hereby  expressly  acknowledge  that the  security  interest  in the  Collateral
created hereby is subordinate and junior to the security interest of the Bank in
the Collateral.

      Signed and delivered this __th day of ______ 199_.

                                          NATIONAL TRANSACTION NETWORK, INC.


                                          By:___________________________________


                                          INTERNATIONAL VERIFACT INC.


                                          By:___________________________________