Document:

REGISTRATION RIGHTS AGREEMENT

      REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of November __,
2003, by and among Amnis Systems Inc., a Delaware corporation, with its
headquarters located at 3450 Hillview Avenue, Palo Alto, California 94304,
facsimile number: 650-855-0222 (the "Company"), and each of the undersigned
(together with their respective affiliates and any assignee or transferee of all
of their respective rights hereunder, the "Investors").

      WHEREAS:

      A. In connection with the Securities Purchase Agreement by and among the
parties hereto of even date herewith (the "Securities Purchase Agreement"), the
Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to the Investors (i) convertible debentures in the
aggregate principal amount of up to One Million One Hundred Thousand Dollars
($1,100,000) (the "Debentures") that are convertible into shares of the
Company's common stock (the "Common Stock"), upon the terms and subject to the
limitations and conditions set forth in such Debentures and (ii) warrants (the
"Warrants") to acquire an aggregate of up to 5,500,000 shares of Common Stock,
upon the terms and conditions and subject to the limitations and conditions set
forth in the Warrants dated November __, 2003; and

      B. To induce the Investors to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws;

      NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each of the
Investors hereby agree as follows:

            1. DEFINITIONS.

                  a. As used in this Agreement, the following terms shall have
the following meanings:

                        (i) "Investors" means the Investors and any transferee
or assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.

                        (ii) "register," "registered," and "registration" refer
to a registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").

                        (iii) "Registrable Securities" means the Conversion
Shares issued or issuable upon conversion or otherwise pursuant to the
Debentures (as defined in the

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Securities Purchase Agreement) including, without limitation, Damages Shares (as
defined in the Debentures) issued or issuable pursuant to the Debentures, shares
of Common Stock issued or issuable in payment of the Standard Liquidated Damages
Amount (as defined in the Securities Purchase Agreement), shares issued or
issuable in respect of interest or in redemption of the Debentures in accordance
with the terms thereof) and Warrant Shares issuable, upon exercise or otherwise
pursuant to the Warrants (as defined in the Securities Purchase Agreement), and
any shares of capital stock issued or issuable as a dividend on or in exchange
for or otherwise with respect to any of the foregoing.

                        (iv) "Registration Statement" means a registration
statement of the Company under the 1933 Act.

                  b. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Securities Purchase
Agreement or the Convertible Debenture.

            2. REGISTRATION.

                  a. Mandatory Registration. The Company shall prepare, and, on
or prior to the earlier of (i) thirty (30) days from the date of the Closing (as
defined in the Securities Purchase Agreement) (the "Filing Date"), file with the
SEC a Registration Statement on such form of Registration Statement as is then
available to effect a registration of the Registrable Securities, subject to the
consent of the Investors, which consent will not be unreasonably withheld,
covering the resale of the Registrable Securities underlying the Debentures and
Warrants issued or issuable pursuant to the Securities Purchase Agreement, which
Registration Statement, to the extent allowable under the 1933 Act and the rules
and regulations promulgated thereunder (including Rule 416), shall state that
such Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of or otherwise
pursuant to the Debentures and exercise of the Warrants to prevent dilution
resulting from stock splits, stock dividends or similar transactions. The number
of shares of Common Stock initially included in such Registration Statement
shall be no less than an amount equal to two (2) times the sum of the number of
Conversion Shares that are then issuable upon conversion of the Debentures
(based on the Variable Conversion Price as would then be in effect and assuming
the Variable Conversion Price is the Conversion Price at such time), and the
number of Warrant Shares that are then issuable upon exercise of the Warrants,
without regard to any limitation on the Investor's ability to convert the
Debentures or exercise the Warrants. The Company acknowledges that the number of
shares initially included in the Registration Statement represents a good faith
estimate of the maximum number of shares issuable upon conversion of the
Debentures and upon exercise of the Warrants.

                  b. Underwritten Offering. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Investors who hold a majority in interest of the Debentures and
the purchase price of Debentures that have been converted but not registered
subject to such underwritten offering shall have the right to select one legal
counsel and an investment banker or bankers and manager or managers to
administer the offering, which investment banker or bankers or manager or
managers shall be reasonably satisfactory to the Company.

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<PAGE>

                  c. Payments by the Company. The Company shall use its best
efforts to obtain effectiveness of the Registration Statement as soon as
practicable. If (i) the Registration Statement(s) covering the Registrable
Securities required to be filed by the Company pursuant to Section 2(a) hereof
is not filed by the Filing Date or declared effective by the SEC on or prior to
ninety (90) days following the Filing Date, or (ii) after the Registration
Statement has been declared effective by the SEC, sales of all of the
Registrable Securities cannot be made pursuant to the Registration Statement, or
(iii) the Common Stock is not listed or included for quotation on the Nasdaq
National Market ("Nasdaq"), the Nasdaq SmallCap Market ("Nasdaq SmallCap"), the
New York Stock Exchange (the "NYSE") or the American Stock Exchange (the "AMEX")
after being so listed or included for quotation, or (iv) the Common Stock ceases
to be traded on the Over-the-Counter Bulletin Board (the "OTCBB") or any
equivalent replacement exchange prior to being listed or included for quotation
on one of the aforementioned markets, then the Company will make payments to the
Investors in such amounts and at such times as shall be determined pursuant to
this Section 2(c) as partial relief for the damages to the Investors by reason
of any such delay in or reduction of their ability to sell the Registrable
Securities (which remedy shall not be exclusive of any other remedies available
at law or in equity). The Company shall pay to each holder of the Debentures or
Registrable Securities an amount equal to the then outstanding principal amount
of the Debentures (and, in the case of holders of Registrable Securities, the
principal amount of Debentures from which such Registrable Securities were
converted) ("Outstanding Principal Amount"), multiplied by the Applicable
Percentage (as defined below) times the sum of: (i) the number of months
(prorated for partial months) after the Filing Date or the end of the
aforementioned ninety (90) day period and prior to the date the Registration
Statement is declared effective by the SEC, provided, however, that there shall
be excluded from such period any delays which are solely attributable to changes
required by the Investors in the Registration Statement with respect to
information relating to the Investors, including, without limitation, changes to
the plan of distribution, or to the failure of the Investors to conduct their
review of the Registration Statement pursuant to Section 3(h) below in a
reasonably prompt manner; (ii) the number of months (prorated for partial
months) that sales of all of the Registrable Securities cannot be made pursuant
to the Registration Statement after the Registration Statement has been declared
effective (including, without limitation, when sales cannot be made by reason of
the Company's failure to properly supplement or amend the prospectus included
therein in accordance with the terms of this Agreement, but excluding any days
during an Allowed Delay (as defined in Section 3(f)); and (iii) the number of
months (prorated for partial months) that the Common Stock is not listed or
included for quotation on the OTCBB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX or
that trading thereon is halted after the Registration Statement has been
declared effective. The term "Applicable Percentage" means two hundredths (.02).
(For example, if the Registration Statement becomes effective one (1) month
after the end of such thirty-day period, the Company would pay $5,000 for each
$250,000 of Outstanding Principal Amount. If thereafter, sales could not be made
pursuant to the Registration Statement for an additional period of one (1)
month, the Company would pay an additional $5,000 for each $250,000 of
Outstanding Principal Amount.) Such amounts shall be paid in cash or, at the
Company's option, in shares of Common Stock priced at the Conversion Price (as
defined in the Debentures) on such payment date.

                  d. Piggy-Back Registrations. Subject to the last sentence of
this Section 2(d), if at any time prior to the expiration of the Registration
Period (as hereinafter defined) the Company shall determine to file with the SEC
a Registration Statement relating to

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<PAGE>

an offering for its own account or the account of others under the 1933 Act of
any of its equity securities (other than on Form S-4 or Form S-8 or their then
equivalents relating to equity securities to be issued solely in connection with
any acquisition of any entity or business or equity securities issuable in
connection with stock option or other bona fide, employee benefit plans), the
Company shall send to each Investor who is entitled to registration rights under
this Section 2(d) written notice of such determination and, if within fifteen
(15) days after the effective date of such notice, such Investor shall so
request in writing, the Company shall include in such Registration Statement all
or any part of the Registrable Securities such Investor requests to be
registered, except that if, in connection with any underwritten public offering
for the account of the Company the managing underwriter(s) thereof shall impose
a limitation on the number of shares of Common Stock which may be included in
the Registration Statement because, in such underwriter(s)' judgment, marketing
or other factors dictate such limitation is necessary to facilitate public
distribution, then the Company shall be obligated to include in such
Registration Statement only such limited portion of the Registrable Securities
with respect to which such Investor has requested inclusion hereunder as the
underwriter shall permit. Any exclusion of Registrable Securities shall be made
pro rata among the Investors seeking to include Registrable Securities in
proportion to the number of Registrable Securities sought to be included by such
Investors; provided, however, that the Company shall not exclude any Registrable
Securities unless the Company has first excluded all outstanding securities, the
holders of which are not entitled to inclusion of such securities in such
Registration Statement or are not entitled to pro rata inclusion with the
Registrable Securities; and provided, further, however, that, after giving
effect to the immediately preceding proviso, any exclusion of Registrable
Securities shall be made pro rata with holders of other securities having the
right to include such securities in the Registration Statement other than
holders of securities entitled to inclusion of their securities in such
Registration Statement by reason of demand registration rights. No right to
registration of Registrable Securities under this Section 2(d) shall be
construed to limit any registration required under Section 2(a) hereof. If an
offering in connection with which an Investor is entitled to registration under
this Section 2(d) is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such Registrable Securities in
an underwritten offering using the same underwriter or underwriters and, subject
to the provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering.

                  e. Eligibility for Form S-3, SB-2 or S-1; Conversion to Form
S-3. The Company represents and warrants that it meets the requirements for the
use of Form S-3, SB-2 or S-1 for registration of the sale by the Investors and
any other Investors of the Registrable Securities. The Company agrees to file
all reports required to be filed by the Company with the SEC in a timely manner
so as to remain eligible or become eligible, as the case may be, and thereafter
to maintain its eligibility, for the use of Form S-3. If the Company is not
currently eligible to use Form S-3, not later than five (5) business days after
the Company first meets the registration eligibility and transaction
requirements for the use of Form S-3 (or any successor form) for registration of
the offer and sale by the Investors and any other Investors of Registrable
Securities, the Company shall file a Registration Statement on Form S-3 (or such
successor form) with respect to the Registrable Securities covered by the
Registration Statement on Form SB-2 or Form S-1, whichever is applicable, filed
pursuant to Section 2(a) (and include in such Registration Statement on Form S-3
the information required by Rule 429 under the 1933 Act) or convert the
Registration Statement on Form SB-2 or Form S-1, whichever is applicable, filed

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<PAGE>

pursuant to Section 2(a) to a Form S-3 pursuant to Rule 429 under the 1933 Act
and cause such Registration Statement (or such amendment) to be declared
effective no later than ninety (90) days after the Filing Date. In the event of
a breach by the Company of the provisions of this Section 2(e), the Company will
be required to make payments pursuant to Section 2(c) hereof.

            3. OBLIGATIONS OF THE COMPANY.

      In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:

                  a. The Company shall prepare promptly, and file with the SEC
not later than the Filing Date, a Registration Statement with respect to the
number of Registrable Securities provided in Section 2(a), and thereafter use
its best efforts to cause such Registration Statement relating to Registrable
Securities to become effective as soon as possible after such filing but in no
event later than ninety (90) days from the Filing Date), and keep the
Registration Statement effective pursuant to Rule 415 at all times until such
date as is the earlier of (i) the date on which all of the Registrable
Securities have been sold and (ii) the date on which the Registrable Securities
(in the opinion of counsel to the Investors) may be immediately sold to the
public without registration or restriction (including without limitation as to
volume by each holder thereof) under the 1933 Act (the "Registration Period"),
which Registration Statement (including any amendments or supplements thereto
and prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein not misleading.

                  b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statements and the prospectus used in connection with the
Registration Statements as may be necessary to keep the Registration Statements
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by the Registration Statements
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statements. In the event the number of
shares available under a Registration Statement filed pursuant to this Agreement
is insufficient to cover all of the Registrable Securities issued or issuable
upon conversion of the Debentures and exercise of the Warrants, the Company
shall amend the Registration Statement, or file a new Registration Statement (on
the short form available therefor, if applicable), or both, so as to cover all
of the Registrable Securities, in each case, as soon as practicable, but in any
event within fifteen (15) days after the necessity therefor arises (based on the
market price of the Common Stock and other relevant factors on which the Company
reasonably elects to rely). The Company shall use its best efforts to cause such
amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof, but in any event within thirty (30)
days after the date on which the Company reasonably first determines (or
reasonably should have determined) the need therefor. In the event that the
amended and/or new Registration Statement is not declared effective within
thirty (30) days following the date on which the Company reasonably first
determines (or reasonably should have determined) the need for an amendment or
supplement to the

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<PAGE>

Registration Statement to keep such Registration Statement effective, the
Company must make payments to the Investors pursuant to Section 2(c) hereof.

                  c. The Company shall furnish to each Investor whose
Registrable Securities are included in a Registration Statement and its legal
counsel (i) promptly (but in no event more than two (2) business days) after the
same is prepared and publicly distributed, filed with the SEC, or received by
the Company, one copy of each Registration Statement and any amendment thereto,
each preliminary prospectus and prospectus and each amendment or supplement
thereto, and, in the case of the Registration Statement referred to in Section
2(a), each letter written by or on behalf of the Company to the SEC or the staff
of the SEC, and each item of correspondence from the SEC or the staff of the
SEC, in each case relating to such Registration Statement (other than any
portion of any thereof which contains information for which the Company has
sought confidential treatment), and (ii) promptly (but in no event more than two
(2) business days) after the Registration Statement is declared effective by the
SEC, such number of copies of a prospectus, including a preliminary prospectus,
and all amendments and supplements thereto and such other documents as such
Investor may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor. The Company will immediately
notify each Investor by facsimile of the effectiveness of each Registration
Statement or any post-effective amendment. The Company will promptly (but in no
event more than ten (10) days) respond to any and all comments received from the
SEC (which comments shall promptly be made available to the Investors upon
request), with a view towards causing each Registration Statement or any
amendment thereto to be declared effective by the SEC as soon as practicable,
shall promptly file an acceleration request as soon as practicable (but in no
event more than two (2) business days) following the resolution or clearance of
all SEC comments or, if applicable, following notification by the SEC that any
such Registration Statement or any amendment thereto will not be subject to
review and shall promptly file with the SEC a final prospectus as soon as
practicable (but in no event more than two (2) business days) following receipt
by the Company from the SEC of an order declaring the Registration Statement
effective. In the event of a breach by the Company of the provisions of this
Section 3(c), the Company will be required to make payments pursuant to Section
2(c) hereof.

                  d. The Company shall use reasonable efforts to (i) register
and qualify the Registrable Securities covered by the Registration Statements
under such other securities or "blue sky" laws of such jurisdictions in the
United States as the Investors who hold a majority in interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file
in those jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (a) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (b) subject itself
to general taxation in any such jurisdiction, (c) file a general consent to
service of process in any such jurisdiction, (d) provide any undertakings that
cause the Company undue expense or burden, or (e) make any change in its charter
or bylaws, which in

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<PAGE>

each case the Board of Directors of the Company determines to be contrary to the
best interests of the Company and its shareholders.

                  e. In the event Investors who hold a majority-in-interest of
the Registrable Securities being offered in the offering (with the approval of a
majority-in-interest of the Investors) select underwriters for the offering, the
Company shall enter into and perform its obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the underwriters of such
offering.

                  f. As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor of the happening of any event, of
which the Company has knowledge, as a result of which the prospectus included in
any Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to any Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request; provided that, for not more than ten (10) consecutive
trading days (or a total of not more than twenty (20) trading days in any twelve
(12) month period), the Company may delay the disclosure of material non-public
information concerning the Company (as well as prospectus or Registration
Statement updating) the disclosure of which at the time is not, in the good
faith opinion of the Company, in the best interests of the Company (an "Allowed
Delay"); provided, further, that the Company shall promptly (i) notify the
Investors in writing of the existence of (but in no event, without the prior
written consent of an Investor, shall the Company disclose to such investor any
of the facts or circumstances regarding) material non-public information giving
rise to an Allowed Delay and (ii) advise the Investors in writing to cease all
sales under such Registration Statement until the end of the Allowed Delay. Upon
expiration of the Allowed Delay, the Company shall again be bound by the first
sentence of this Section 3(f) with respect to the information giving rise
thereto.

                  g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of any
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest possible moment and to notify each
Investor who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance of such order
and the resolution thereof.

                  h. The Company shall permit a single firm of counsel
designated by the Investors to review such Registration Statement and all
amendments and supplements thereto (as well as all requests for acceleration or
effectiveness thereof) a reasonable period of time prior to their filing with
the SEC, and not file any document in a form to which such counsel reasonably
objects and will not request acceleration of such Registration Statement without
prior notice to such counsel. The sections of such Registration Statement
covering information with respect to the Investors, the Investor's beneficial
ownership of securities of the Company or the Investors intended method of
disposition of Registrable Securities shall conform to the information provided
to the Company by each of the Investors.

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                  i. The Company shall make generally available to its security
holders as soon as practicable, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the 1933 Act) covering a twelve-month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the Registration Statement.

                  j. At the request of any Investor, the Company shall furnish,
on the date that Registrable Securities are delivered to an underwriter, if any,
for sale in connection with any Registration Statement or, if such securities
are not being sold by an underwriter, on the date of effectiveness thereof (i)
an opinion, dated as of such date, from counsel representing the Company for
purposes of such Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the
underwriters, if any, and the Investors and (ii) a letter, dated such date, from
the Company's independent certified public accountants in form and substance as
is customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the underwriters, if any, and
the Investors.

                  k. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to a
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, (iv) one firm of attorneys and one
firm of accountants or other agents retained by all other Investors, and (v) one
firm of attorneys retained by all such underwriters (collectively, the
"Inspectors") all pertinent financial and other records, and pertinent corporate
documents and properties of the Company, including without limitation, records
of conversions by other holders of convertible securities issued by the Company
and the issuance of stock to such holders pursuant to the conversions
(collectively, the "Records"), as shall be reasonably deemed necessary by each
Inspector to enable each Inspector to exercise its due diligence responsibility,
and cause the Company's officers, directors and employees to supply all
information which any Inspector may reasonably request for purposes of such due
diligence; provided, however, that each Inspector shall hold in confidence and
shall not make any disclosure (except to an Investor) of any Record or other
information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (a) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
any Registration Statement, (b) the release of such Records is ordered pursuant
to a subpoena or other order from a court or government body of competent
jurisdiction, or (c) the information in such Records has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company shall not be required to disclose any confidential
information in such Records to any Inspector until and unless such Inspector
shall have entered into confidentiality agreements (in form and substance
satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 3(k). Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential. Nothing herein (or in any other
confidentiality agreement between the Company and any Investor) shall be deemed
to limit the Investor's ability to sell Registrable Securities in a manner which
is otherwise consistent with applicable laws and regulations.

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<PAGE>

                  l. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.

                  m. The Company shall (i) cause all the Registrable Securities
covered by the Registration Statement to be listed on each national securities
exchange on which securities of the same class or series issued by the Company
are then listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange, or (ii) to the extent the securities
of the same class or series are not then listed on a national securities
exchange, secure the designation and quotation, of all the Registrable
Securities covered by the Registration Statement on Nasdaq or, if not eligible
for Nasdaq, on Nasdaq SmallCap or, if not eligible for Nasdaq or Nasdaq
SmallCap, on the OTCBB or the BBX (or an equivalent exchange) and, without
limiting the generality of the foregoing, to arrange for at least two market
makers to register with the National Association of Securities Dealers, Inc.
("NASD") as such with respect to such Registrable Securities.

                  n. The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.

                  o. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to a Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Investors may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request, and, within three (3)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an instruction in the
form attached hereto as Exhibit 1 and an opinion of such counsel in the form
attached hereto as Exhibit 2.

                  p. At the request of the holders of a majority-in-interest of
the Registrable Securities, the Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and any

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<PAGE>

prospectus used in connection with the Registration Statement as may be
necessary in order to change the plan of distribution set forth in such
Registration Statement.

                  q. From and after the date of this Agreement, the Company
shall not, and shall not agree to, allow the holders of any securities of the
Company to include any of their securities in any Registration Statement under
Section 2(a) hereof or any amendment or supplement thereto under Section 3(b)
hereof without the consent of the holders of a majority-in-interest of the
Registrable Securities.

                  r. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.

            4. OBLIGATIONS OF THE INVESTORS.

      In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:

                  a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least five (5)
business days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the information the Company
requires from each such Investor.

                  b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statements hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statements.

                  c. In the event Investors holding a majority-in-interest of
the Registrable Securities being registered (with the approval of the Investors)
determine to engage the services of an underwriter, each Investor agrees to
enter into and perform such Investor's obligations under an underwriting
agreement, in usual and customary form, including, without limitation, customary
indemnification and contribution obligations, with the managing underwriter of
such offering and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of the Registrable Securities, unless
such Investor has notified the Company in writing of such Investor's election to
exclude all of such Investor's Registrable Securities from such Registration
Statement.

                  d. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(f)
or 3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the

                                       10
<PAGE>

copies of the supplemented or amended prospectus contemplated by Section 3(f) or
3(g) and, if so directed by the Company, such Investor shall deliver to the
Company (at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in such Investor's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice.

                  e. No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements in
usual and customary form entered into by the Company, (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions and any expenses in excess of those
payable by the Company pursuant to Section 5 below.

            5. EXPENSES OF REGISTRATION.

      All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualification fees, printers and accounting fees, the
fees and disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel selected by the Investors pursuant to Sections 2(b)
and 3(h) hereof shall be borne by the Company.

            6. INDEMNIFICATION.

      In the event any Registrable Securities are included in a Registration
Statement under this Agreement:

                  a. To the extent permitted by law, the Company will indemnify,
hold harmless and defend (i) each Investor who holds such Registrable
Securities, (ii) the directors, officers, partners, employees, agents and each
person who controls any Investor within the meaning of the 1933 Act or the
Securities Exchange Act of 1934, as amended (the "1934 Act"), if any, (iii) any
underwriter (as defined in the 1933 Act) for the Investors, and (iv) the
directors, officers, partners, employees and each person who controls any such
underwriter within the meaning of the 1933 Act or the 1934 Act, if any (each, an
"Indemnified Person"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "Claims") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading; (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in

                                       11
<PAGE>

light of the circumstances under which the statements therein were made, not
misleading; or (iii) any violation or alleged violation by the Company of the
1933 Act, the 1934 Act, any other law, including, without limitation, any state
securities law, or any rule or regulation thereunder relating to the offer or
sale of the Registrable Securities (the matters in the foregoing clauses (i)
through (iii) being, collectively, "Violations"). Subject to the restrictions
set forth in Section 6(c) with respect to the number of legal counsel, the
Company shall reimburse the Indemnified Person, promptly as such expenses are
incurred and are due and payable, for any reasonable legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of such Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; (ii) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld; and (iii) with respect to any
preliminary prospectus, shall not inure to the benefit of any Indemnified Person
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented, such corrected prospectus was timely made
available by the Company pursuant to Section 3(c) hereof, and the Indemnified
Person was promptly advised in writing not to use the incorrect prospectus prior
to the use giving rise to a Violation and such Indemnified Person,
notwithstanding such advice, used it. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9.

                  b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, each person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act, any
underwriter and any other shareholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such shareholder or underwriter within the meaning of the 1933 Act or
the 1934 Act (collectively and together with an Indemnified Person, an
"Indemnified Party"), against any Claim to which any of them may become subject,
under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim arises out
of or is based upon any Violation by such Investor, in each case to the extent
(and only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and subject to
Section 6(c) such Investor will reimburse any legal or other expenses (promptly
as such expenses are incurred and are due and payable) reasonably incurred by
them in connection with investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in this Section 6(b) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that the Investor shall be
liable under this Agreement (including this Section 6(b) and Section 7)

                                       12
<PAGE>

for only that amount as does not exceed the net proceeds to such Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified Party
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.

                  c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. The indemnifying party shall pay for only one
separate legal counsel for the Indemnified Persons or the Indemnified Parties,
as applicable, and such legal counsel shall be selected by Investors holding a
majority-in-interest of the Registrable Securities included in the Registration
Statement to which the Claim relates (with the approval of a
majority-in-interest of the Investors), if the Investors are entitled to
indemnification hereunder, or the Company, if the Company is entitled to
indemnification hereunder, as applicable. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.

                                       13
<PAGE>

            7. CONTRIBUTION.

      To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii) contribution (together
with any indemnification or other obligations under this Agreement) by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.

            8. REPORTS UNDER THE 1934 ACT.

      With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the investors to sell securities of the Company
to the public without registration ("Rule 144"), the Company agrees to:

                  a. make and keep public information available, as those terms
are understood and defined in Rule 144;

                  b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and

                  c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.

            9. ASSIGNMENT OF REGISTRATION RIGHTS.

      The rights under this Agreement shall be automatically assignable by the
Investors to any transferee of all or any portion of Registrable Securities if:
(i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the 1933

                                       14
<PAGE>

Act and applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, and (vi) such transferee shall be an "accredited investor" as that
term defined in Rule 501 of Regulation D promulgated under the 1933 Act.

            10. AMENDMENT OF REGISTRATION RIGHTS.

      Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with written consent of the Company, each of the
Investors (to the extent such Investor still owns Registrable Securities) and
Investors who hold a majority interest of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.

            11. MISCELLANEOUS.

                  a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.

                  b. Any notices required or permitted to be given under the
terms hereof shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall be effective five days
after being placed in the mail, if mailed by regular United States mail, or upon
receipt, if delivered personally or by courier (including a recognized overnight
delivery service) or by facsimile, in each case addressed to a party. The
addresses for such communications shall be:

                  If to the Company:

                  3450 Hillview Avenue
                  Palo Alto, California 94304
                  Attention: Lawrence Bartlett
                  Facsimile: (650) 855-0222

                                       15
<PAGE>

                  With copies to:

                  Sichenzia Ross Friedman Ference LLP
                  1065 Avenue of the Americas, 21st Floor
                  New York, New York 10018
                  Attention: Gregory Sichenzia, Esq.
                  Telephone: 212-930-9700
                  Facsimile: 212-930-9725
                  Email: GSichenzia@srfllp.net

If to an Investor: to the address set forth immediately below such Investor's
name on the signature pages to the Securities Purchase Agreement.

                  c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.

                  d. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE STATE COURTS OR THE UNITED STATES FEDERAL COURTS
LOCATED IN NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT,
THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES
FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL
SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN
ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A
FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE
AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY
OTHER LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING
UNDER THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.

                  e. In the event that any provision of this Agreement 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 provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.

                                       16
<PAGE>

                  f. This Agreement, the Warrants and the Securities Purchase
Agreement (including all schedules and exhibits thereto) constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein. This Agreement and the
Securities Purchase Agreement supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.

                  g. Subject to the requirements of Section 9 hereof, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns.

                  h. The headings in this Agreement are for convenience of
reference only and shall not form part of, or affect the interpretation of, this
Agreement.

                  i. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party. This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.

                  j. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

                  k. Except as otherwise provided herein, all consents and other
determinations to be made by the Investors pursuant to this Agreement shall be
made by Investors holding a majority of the Registrable Securities, determined
as if the all of the Debentures then outstanding have been converted into for
Registrable Securities.

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

                  m. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules
of strict construction will be applied against any party.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       17
<PAGE>

      IN WITNESS WHEREOF, the Company and the undersigned Investors have caused
this Agreement to be duly executed as of the date first above written.

AMNIS SYSTEMS INC.

------------------------------------
Scott MacCaughern
Chairman and Chief Executive Officer

SDS CAPITAL GROUP SPC, LTD.

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

ALPHA CAPITAL AKTIENGESELLSCHAFT

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

BRISTOL INVESTMENT FUND, LTD.

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

STONESTREET LIMITED PARTNERSHIP

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

                                       18PLEDGE AND SECURITY AGREEMENT

      PLEDGE AND SECURITY AGREEMENT (this "Agreement"), dated November __, 2003,
made by Amnis Systems Inc. (the "Pledgor") in favor of SDS Capital Group SPC,
Ltd., Alpha Capital Aktiengesellschaft, Bristol Investment Fund, Ltd. and
Stonestreet Limited Partnership (the "Pledgee").

                              W I T N E S S E T H:

      WHEREAS, pursuant to the provisions of that certain Securities Purchase
Agreement of even date herewith between the Pledgor and the Pledgees (the
"Purchase Agreement"), the Pledgees have agreed to lend to the Company and the
Company has agreed to borrow from the Pledgee up to $1,100,000 under certain
terms and conditions set forth in the Purchase Agreement;

      WHEREAS, pursuant to the provisions of the Purchase Agreement, and as a
condition to the obligation of the Pledgee to lend thereunder, the Pledgor has
agreed to make the pledge contemplated by this Agreement in order to induce the
Pledgee to perform its obligations under the Purchase Agreement;

      WHEREAS, the Pledgor is the sole-shareholder of Optivision, Inc., a
California company, and based on the Pledgor's representations and warranties
contained in the Purchase Agreement, such entity is its only active Subsidiary
(the "Active Subsidiary"); and

      WHEREAS, all capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Purchase Agreement.

      NOW, THEREFORE, in consideration of the premises, covenants and promises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

            SECTION 1. (A) Grant of Security Interest.

            (a) To secure the complete and timely payment, performance and
      discharge in full, as the case may be, of all of the obligations, the
      Pledgor hereby, unconditionally and irrevocably, pledges, grants and
      hypothecates to the Pledgees, a continuing security interest, subject only
      to the liens set forth on Schedule 1(a), in, a lien upon and a right of
      set-off against all of their respective right, title and interest of
      whatsoever kind and nature in the Collateral (as defined below) (the
      "Security Interest").

            (b) Terms used but not otherwise defined in this Agreement that are
      defined in Article 9 of the UCC (such as "general intangibles" and
      "proceeds") shall have the respective meanings given such terms in Article
      9 of the UCC.

            (c) As used herein, "Collateral" means the collateral in which the
      Pledgees are granted a security interest by this Agreement and which shall
      include the following,

<PAGE>

whether presently owned or existing or hereafter acquired or coming into
existence, and all additions and accessions thereto and all substitutions and
replacements thereof, and all proceeds, products and accounts thereof,
including, without limitation, all proceeds from the sale or transfer of the
Collateral and of insurance covering the same and of any tort claims in
connection therewith:

            (i) All Goods of the Pledgor, including, without limitations, all
      machinery, equipment, computers, motor vehicles, trucks, tanks, boats,
      ships, appliances, furniture, special and general tools, fixtures, test
      and quality control devices and other equipment of every kind and nature
      and wherever situated, together with all documents of title and documents
      representing the same, all additions and accessions thereto, replacements
      therefor, all parts therefor, and all substitutes for any of the foregoing
      and all other items used and useful in connection with the Pledgor's
      businesses and all improvements thereto (collectively, the "Equipment");
      and

            (ii) All Inventory of the Pledgor; and

            (iii) All of the Pledgor's contract rights and general intangibles,
      including, without limitation, all partnership interests, stock or other
      securities, licenses, distribution and other agreements, computer software
      development rights, leases, franchises, customer lists, quality control
      procedures, grants and rights, goodwill, trademarks, service marks, trade
      styles, trade names, patents, patent applications, copyrights, deposit
      accounts, income tax refunds and the Pledged Collateral as defined below
      (collectively, the "General Intangibles"); and

            (iv) All Receivables of the Pledgor including all insurance
      proceeds, and rights to refunds or indemnification whatsoever owing,
      together with all instruments, all documents of title representing any of
      the foregoing, all rights in any merchandising, goods, equipment, motor
      vehicles and trucks which any of the same may represent, and all right,
      title, security and guaranties with respect to each Receivable, including
      any right of stoppage in transit; and

            (v) All of the Pledgor's documents, instruments and chattel paper,
      files, records, books of account, business papers, computer programs and
      the products and proceeds of all of the foregoing Collateral set forth in
      clauses (i)-(iv) above.

      (B) Pledge. In order to perfect the Pledgees' security interest in certain
of the General Intangibles, the Pledgor hereby pledges to the Pledgee, and
grants to the Pledgee a continuing security interest in, the following
(collectively, the "Pledged Collateral"):

            (a) All shares of common stock including a stock power executed in
      blank

                                       2
<PAGE>

      (the "Pledged Shares") of the Active Subsidiary identified in Schedule
      1(a) annexed hereto representing the Pledged Shares, and all dividends,
      cash, instruments and other property from time to time received,
      receivable or otherwise distributed in respect of or in exchange for any
      or all of the Pledged Shares; and

            (b) all proceeds of any and all of the foregoing Pledged Collateral,
      in whatever form (including, without limitation, proceeds that constitute
      property of the types described above).

            SECTION 2. Security for Obligations. This Agreement secures the
payment and performance of the following obligations (collectively, the
"Obligations"): all present and future indebtedness, obligations, covenants,
duties and liabilities of any kind or nature of the Company to the Pledgees (or
any of them) now existing or hereafter arising under or in connection with the
Transaction Documents (as defined in Section 2(h) of the Securities Purchase
Agreement).

            SECTION 3. Delivery of Pledged Collateral. Concurrently herewith,
all certificates representing or evidencing the Pledged Shares, in suitable form
for transfer by delivery, or accompanied by instruments of transfer or
assignment duly executed in blank, are being deposited with and delivered to Amy
Wang (the "Agent"), as collateral agent for the Pledgees. The Pledged Shares
shall be held by the Agent first on behalf of both Bristol Investment Fund, LTD
("Bristol") and Alpha Capital Aktiengesellschaft ("Alpha") as set forth in that
certain Pledge and Security Agreement between the Company and Alpha dated May 9,
2003 and that certain Second Restated Intercreditor Agreement between Bristol,
Alpha, SDS Capital Group SPC, Ltd. ("SDS") and Stonestreet Limited Partnership
("Stonestreet") and acknowledged by the Company dated November __, 2003 (the
"Second Restated Intercreditor Agreement"), then on behalf of Alpha, Bristol and
SDS as set forth in that certain Pledge and Security Agreement between the
Company and Alpha, Bristol and SDS dated May 9, 2003 and the Second Restated
Intercreditor Agreement, then on behalf of Stonestreet as set forth in that
certain Pledge and Security Agreement between the Company and Stonestreet dated
September 12, 2003 and the Second Restated Intercreditor Agreement and then on
behalf of the Pledgees. The Agent shall have the right, at any time after the
occurrence of an Event of Default (as hereinafter defined), without notice to
the Pledgor, to transfer to or to register in the name of the Agent or its
nominees any or all of the Pledged Collateral. In addition, the Agent shall have
the right at any time to exchange certificates or instruments representing or
evidencing Pledged Collateral for certificates or instruments of smaller or
larger denominations.

            SECTION 4. Representations and Warranties. The Pledgor represents
and warrants as follows:

            (a) Attached hereto as Schedule 4(a) is a listing, as of the date
      hereof, of all creditors of Pledgor, including approximate amounts owed to
      each such creditor.

            (b) The Pledgor is the legal, record and beneficial owner of the
      Pledged Collateral

                                       3
<PAGE>

      and the Collateral, free and clear of any lien, security interest,
      restriction, option or other charge or encumbrance (collectively, "Liens")
      except for the security interest created by this Agreement and the liens
      disclosed on Schedule 1(a).

            (c) The pledge of the Pledged Collateral and the grant of the
      Security Interest pursuant to this Agreement creates a valid and perfected
      security interest in the Pledged Collateral and the Collateral, securing
      payment and performance of the Obligations subject only to a senior
      security interest as set forth on Schedule 1(a).

            (d) No consent of any other person or entity and no authorization,
      approval, or other action by, and no notice to or filing with, any
      governmental authority or regulatory body is required (i) for the pledge
      by the Pledgor of the Pledged Collateral pursuant to this Agreement or for
      the execution, delivery or performance of this Agreement by the Pledgor,
      (ii) for the perfection or maintenance of the security interest created
      hereby, or (iii) for the exercise by the Agent of the voting or other
      rights provided for in this Agreement or the remedies in respect of the
      Pledged Collateral pursuant to this Agreement (except as may be required
      in connection with any disposition of any portion of the Pledged
      Collateral by laws affecting the offering and sale of securities
      generally).

            (e) There are no conditions precedent to the effectiveness of this
      Agreement that have not been satisfied or waived.

            (f) The mailing address of the Pledgor is 3450 Hillview Avenue, Palo
      Alto, California 94304, and the Pledgor will not change its address except
      upon not less than thirty (30) days' prior written notice to the Agent and
      the Pledgees. The Pledgor represents and warrants that they have no place
      of business or offices where their respective books of account and records
      are kept (other than temporarily at the offices of its attorneys or
      accountants) or places where Collateral is stored or located, except as
      set forth on Schedule A attached hereto.

            (g) No part of the Collateral has been judged invalid or
      unenforceable. No written claim has been received that any Collateral or
      Pledgor's use of any Collateral violates the rights of any third party.
      There has been no adverse decision to Pledgor's claim of ownership rights
      in or exclusive rights to use the Collateral in any jurisdiction or to
      Pledgor's right to keep and maintain such Collateral in full force and
      effect, and there is no proceeding involving said rights pending or, to
      the best knowledge of the Pledgor, threatened before any court, judicial
      body, administrative or regulatory agency, arbitrator or other
      governmental authority.

            (h) The Pledgor shall at all times maintain their respective books
      of account and records relating to the Collateral at their respective
      principal place of business and their respective Collateral at the
      locations set forth on Schedule A attached hereto and may not relocate
      such books of account and records or tangible Collateral unless they

                                       4
<PAGE>

      deliver to the Pledgees at least 30 days prior to such relocation (i)
      written notice of such relocation and the new location thereof (which must
      be within the United States) and (ii) evidence that appropriate financing
      statements under the UCC and other necessary documents have been filed and
      recorded and other steps have been taken to perfect the Security Interest
      to create in favor of the Pledgees a valid, perfected and continuing lien
      in the Collateral.

            (i) Except for the filing of financing statements pursuant to the
      UCC with the proper filing and recording agencies in the jurisdictions
      indicated on Schedule B, attached hereto, no authorization or approval of
      or filing with or notice to any governmental authority or regulatory body
      is required either (i) for the grant by the Pledgor of, or the
      effectiveness of, the Security Interest granted hereby or for the
      execution, delivery and performance of this Agreement by the Pledgor or
      (ii) for the perfection of or exercise by the Pledgees of its rights and
      remedies hereunder.

            (j) Effective on the date of execution of this Agreement, the
      Pledgor hereby authorizes the Agent to file one or more financing
      statements under the UCC with respect to the Security Interest with the
      proper filing and recording agencies in the jurisdictions indicated on
      Schedule B, attached hereto and in such other jurisdictions as may be
      requested by the Pledgees.

            (k) The execution, delivery and performance of this Agreement by the
      Pledgor does not conflict with, or constitute a default (or an event that
      with notice or lapse of time or both would become a default) under, or
      give to others any rights of termination, amendment, acceleration or
      cancellation (with or without notice, lapse of time or both) of, any
      agreement, credit facility, debt or other instrument (evidencing Pledgor's
      debt or otherwise) or other understanding to which Pledgor is a party or
      by which any property or asset of the Pledgor is bound or affected. No
      consent (including, without limitation, from stock holders or creditors of
      the Pledgor) is required for the Pledgor to enter into and perform its
      obligations hereunder.

            (l) The Pledgor shall at all times maintain the liens and Security
      Interest provided for hereunder as valid and perfected liens and security
      interests in the Collateral in favor of the Pledgees until this Agreement
      and the Security Interest hereunder shall be terminated. The Pledgor
      hereby agrees to defend the same against any and all persons. The Pledgor
      shall safeguard and protect all Collateral for the account of the
      Pledgees. At the request of the Pledgees, the Pledgor will sign and
      deliver to the Pledgees at any time or from time to time one or more
      financing statements pursuant to the UCC in form reasonably satisfactory
      to the Pledgees and will pay the cost of filing the same in all public
      offices wherever filing is, or is deemed by the Pledgees to be, necessary
      or desirable to effect the rights and obligations provided for herein.
      Without limiting the generality of the foregoing, the Pledgor shall pay
      all fees, taxes and other amounts

                                       5
<PAGE>

      necessary to maintain the Collateral and the Security Interest hereunder,
      and the Pledgor shall obtain and furnish to the Pledgees from time to
      time, upon demand, such releases and/or subordinations of claims and liens
      which may be required to maintain the priority of the Security Interest
      hereunder.

            (m) The Pledgor will not transfer, pledge, hypothecate, encumber,
      license (except for non-exclusive licenses granted by a Pledgor in its
      ordinary course of business and sales of inventory), sell or otherwise
      dispose of any of the Collateral without the prior written consent of a
      majority in interest of the Pledgees.

            (n) The Pledgor shall keep and preserve its Equipment, Inventory and
      other tangible Collateral in good condition, repair and order and shall
      not operate or locate any such Collateral (or cause to be operated or
      located) in any area excluded from insurance coverage.

            (o) The Pledgor shall, within ten (10) days of obtaining knowledge
      thereof, advise the Pledgees promptly, in sufficient detail, of any
      substantial change in the Collateral, and of the occurrence of any event
      which would have a material adverse effect on the value of the Collateral
      or on the Pledgees' security interest therein.

            (p) The Pledgor shall promptly execute and deliver to the Pledgees
      such further deeds, mortgages, assignments, security agreements, financing
      statements or other instruments, documents, certificates and assurances
      and take such further action as the Pledgees may from time to time request
      and may in its sole discretion deem necessary to perfect, protect or
      enforce its security interest in the Collateral.

            (q) The Pledgor shall permit the Pledgees and their representatives
      and agents to inspect the Collateral at any time, and to make copies of
      records pertaining to the Collateral as may be requested by a Secured
      Party from time to time.

            (r) The Pledgor shall take all steps reasonably necessary to
      diligently pursue and seek to preserve, enforce and collect any rights,
      claims, causes of action and accounts receivable in respect of the
      Collateral.

            (s) The Pledgor shall promptly notify the Pledgees in sufficient
      detail upon becoming aware of any attachment, garnishment, execution or
      other legal process levied against any Collateral and of any other
      information received by the Pledgor that may materially affect the value
      of the Collateral, the Security Interest or the rights and remedies of the
      Pledgees hereunder.

            (t) All information heretofore, herein or hereafter supplied to the
      Pledgees by or on behalf of the Pledgor with respect to the Collateral is
      accurate and complete in all

                                       6
<PAGE>

      material respects as of the date furnished.

            (u) The Pledgor shall at all times preserve and keep in full force
      and effect their respective valid existence and good standing and any
      rights and franchises material to its business.

            (v) The Pledgor will not change its name, corporate structure, or
      identity, or add any new fictitious name unless it provides at least 30
      days prior written notice to the Pledgees of such change and, at the time
      of such written notification, such Pledgor provides any financing
      statements or fixture filings necessary to perfect and continue perfected
      the Security Interest granted and evidenced by this Agreement.

            (w) The Pledgor may not consign any of its Inventory or sell any of
      its Inventory on bill and hold, sale or return, sale on approval, or other
      conditional terms of sale without the consent of a majority in interest of
      the Pledgees which shall not be unreasonably withheld.

            (x) The Pledgor may not relocate its chief executive office to a new
      location without providing 30 days prior written notification thereof to
      the Pledgees and so long as, at the time of such written notification, the
      Pledgor provides any financing statements or fixture filings necessary to
      perfect and continue perfected the Security Interest granted and evidenced
      by this Agreement.

            SECTION 5. Further Assurances. The Pledgor agrees that at any time
and from time to time, at the expense of the Pledgor, the Pledgor shall promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or desirable, or that the Agent and/or the
Pledgees may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the Agent and/or
any Pledgee to exercise and enforce its rights and remedies hereunder with
respect to any Pledged Collateral.

            SECTION 6. Voting Rights; Dividends; Etc.

            (a) So long as no Event of Default shall have occurred:

                  (i) The Pledgor shall be entitled to exercise or refrain from
            exercising any and all voting and other consensual rights pertaining
            to the Pledged Collateral or any part thereof for any purpose not
            inconsistent with the terms of this Agreement; provided, however,
            that the Pledgor shall not exercise or refrain from exercising any
            such right if, in the reasonable judgment of the Pledgees, such
            action would have a material adverse effect on the value of the
            Pledged Collateral or any material part thereof; provided, further,
            that the Pledgor shall give the

                                       7
<PAGE>

            Pledgees at least ten (10) days' prior written notice of the manner
            in which it intends to exercise, or the reasons for refraining from
            exercising, any such right.

                  (ii) The Pledgor shall be entitled to receive and retain any
            and all cash dividends and interest paid in respect of the Pledged
            Collateral; provided, however, that any and all:

                        (A) dividends and interest paid or payable other than in
                  cash in respect of, and instruments and other property
                  received, receivable or otherwise distributed in respect of,
                  or in exchange for, any Pledged Collateral,

                        (B) dividends and other distributions paid or payable in
                  cash in respect of any Pledged Collateral in connection with a
                  partial or total liquidation or dissolution or in connection
                  with a reduction of capital, capital surplus or
                  paid-in-surplus, and

                        (C) cash paid, payable or otherwise distributed in
                  respect of principal of, or in redemption of, or in exchange
                  for, any Pledged Collateral,

            shall be, and shall be forthwith delivered to the Agent to hold as,
            Pledged Collateral, and shall, if received by the Pledgor, be
            received in trust for the benefit of the Pledgees, be segregated
            from the other property or funds of the Pledgor, and be forthwith
            delivered to the Agent as Pledged Collateral in the same form as so
            received (with any necessary endorsement or assignment).

            (b) Upon and after the occurrence of any Event of Default:

                  (i) All rights of the Pledgor to exercise or refrain from
            exercising the voting and other consensual rights which it would
            otherwise be entitled to exercise pursuant to Section 6(a)(i) and to
            receive the dividends and interest payments which it would otherwise
            be authorized to receive and retain pursuant to Section 6(a)(ii)
            shall cease, and all such rights shall thereupon become vested in
            the Agent who shall thereupon have the sole right to exercise or
            refrain from exercising such voting and other consensual rights and
            to receive and hold as Pledged Collateral such dividends and
            interest payments.

                  (ii) All dividends and interest payments which are received by
            the Pledgor contrary to the provisions of paragraph (i) of this
            Section 6(b) shall be

                                       8
<PAGE>

            received in trust for the benefit of the Pledgees, shall be
            segregated from other funds of the Pledgor and shall be forthwith
            paid over to the Agent as Pledged Collateral in the same form as so
            received (with any necessary endorsement).

            SECTION 7. Transfers and Other Liens; Additional Shares. The Pledgor
agrees that it shall not (i) sell, assign (by operation of law or otherwise) or
otherwise dispose of, or grant any option with respect to, any of the Pledged
Collateral, or (ii) create or permit to exist any Lien upon or with respect to
any of the Pledged Collateral, except for the security interest granted pursuant
to this Agreement.

            SECTION 8. Agent Appointed Attorney-in-Fact.

            (a) The Pledgor hereby appoints the Agent as the Pledgor's
      attorney-in-fact, with full authority in the place and stead of the
      Pledgor and in the name of the Pledgor or otherwise, from time to time in
      the Agent's discretion to take any action and to execute any instrument
      which the Agent may deem necessary or desirable to accomplish the purposes
      of this Agreement, including, without limitation, to receive, endorse and
      collect all instruments made payable to the Pledgor representing any
      dividend, interest payment or other distribution in respect of the Pledged
      Collateral or any part thereof and to give full discharge for the same.

            (b) The Pledgor authorizes the Agent, and does hereby make,
      constitute and appoint the Agent and its respective officers, agents,
      successors or assigns with full power of substitution, as the Pledgor's
      true and lawful attorney-in-fact, with power, in the name of the Pledgees
      or the Pledgor, to, after the occurrence and during the continuance of an
      Event of Default, (i) endorse any Debentures, checks, drafts, money
      orders, or other instruments of payment (including payments payable under
      or in respect of any policy of insurance) in respect of the Collateral
      that may come into possession of the Pledgees; (ii) to sign and endorse
      any financing statement pursuant to the UCC or any invoice, freight or
      express bill, bill of lading, storage or warehouse receipts, drafts
      against Pledgors, assignments, verifications and notices in connection
      with accounts, and other documents relating to the Collateral; (iii) to
      pay or discharge taxes, liens, security interests or other encumbrances at
      any time levied or placed on or threatened against the Collateral; (iv) to
      demand, collect, receipt for, compromise, settle and sue for monies due in
      respect of the Collateral; (v) generally, to do, at the option of the
      Pledgees, and at the expense of the Pledgor, at any time, or from time to
      time, all acts and things which the Pledgees deem necessary to protect,
      preserve and realize upon the Collateral and the Security Interest granted
      therein in order to effect the intent of this Agreement and the Debentures
      all as fully and effectually as the Pledgor might or could do; and (vi) in
      the event of the bankruptcy of the Pledgor, to appoint a receiver or
      equivalent person to marshall Pledgor's assets, and the Pledgor hereby
      ratifies all that said attorney shall lawfully do or cause to be done by
      virtue hereof. This power of attorney is coupled with an interest and
      shall be irrevocable for the term of this Agreement and thereafter as long
      as any of the

                                       9
<PAGE>

      Obligations shall be outstanding.

            (c) On a continuing basis, the Pledgor will make, execute,
      acknowledge, deliver, file and record, as the case may be, with the proper
      filing and recording agencies in any jurisdiction, including, without
      limitation, the jurisdictions indicated on Schedule B, attached hereto,
      all such instruments, and take all such action as may reasonably be deemed
      necessary or advisable, or as reasonably requested by the Pledgees, to
      perfect the Security Interest granted hereunder and otherwise to carry out
      the intent and purposes of this Agreement, or for assuring and confirming
      to the Pledgees the grant or perfection of a security interest in all the
      Collateral under the UCC.

            (d) The Pledgor hereby irrevocably appoints the Agent as the
      Pledgor's attorney-in-fact, with full authority in the place and stead of
      the Pledgor and in the name of the Pledgor, from time to time in the
      Agent's discretion, to take any action and to execute any instrument which
      the Pledgees may deem necessary or advisable to accomplish the purposes of
      this Agreement, including the filing, in its sole discretion, of one or
      more financing or continuation statements and amendments thereto, relative
      to any of the Collateral without the signature of the Pledgor where
      permitted by law.

            SECTION 9. Pledgees May Perform. If the Pledgor fails to perform any
agreement contained herein, the Agent and/or any Pledgee may itself perform, or
cause performance of, such agreement, and the expenses of the Agent and/or such
Pledgee incurred in connection therewith shall be payable by the Pledgor under
Section 14.

            SECTION 10. The Agent's Duties. The duties and rights of the Agent
are as set forth on Annex A attached hereto and incorporated herein by
reference. Any fees of the Agent for its services hereunder shall be paid by the
Pledgees. The powers conferred on the Agent hereunder are solely to protect the
interests of the Pledgees in the Pledged Collateral and shall not impose any
duty upon the Agent to exercise any such powers. Except for the safe custody of
any Pledged Collateral in its possession and the accounting for moneys actually
received it hereunder, neither the Agent nor any Pledgee shall have any duty as
to any Pledged Collateral, as to ascertaining or taking action with respect to
calls, conversions, exchanges, maturities, tenders or other matters relative to
any Pledged Collateral, whether or not such party has or is to have knowledge of
such matters, or as to the taking of any necessary steps to preserve rights
against any parties or any other rights pertaining to any Pledged Collateral.
The Agent and each Pledgee shall be deemed to have exercised reasonable care in
the custody and preservation of any Pledged Collateral in its possession if such
Pledged Collateral is accorded treatment substantially equal to that which such
party accords its own property.

            SECTION 11. Event of Default. The occurrence of any of the following
events shall constitute an event of default under this Agreement (each, an
"Event of Default"):

                                       10
<PAGE>

            (a) The failure of the Pledgor to observe, perform or comply with
      any act, duty, covenant, agreement or obligation under this Agreement;

            (b) If any of the representation or warranty of the Pledgor set
      forth in this Agreement shall be breached or shall be untrue or incorrect
      in any material respect;

            (c) The filing of any financing statement with regard to any of the
      Pledged Collateral other than pursuant to this Agreement, or the
      attachment of any additional Lien to any portion of the Pledged Collateral
      in favor of any Person other than the Pledgees; or

            (d) If any default or event of default shall occur under any of the
      Transaction Documents (as defined in Section 2(h) of the Securities
      Purchase Agreement), including, without limitation, any "Event of Default"
      as defined in the Convertible Debentures.

            SECTION 12. Cross-Default; Cross-Collateralization. The Pledgor
acknowledges and agrees that any default under the terms of this Agreement shall
constitute a default by the Company under the Convertible Debentures and the
other Transaction Documents, and that any default under the Convertible
Debentures or any of the other Transaction Documents shall constitute a default
under this Agreement. The security interests, liens and other rights and
interests in and relative to any of the real or personal property of the Pledgor
now or hereafter granted to the Pledgees by the Pledgor pursuant to any
agreement, document or instrument, including, but not limited to, this
Agreement, the Purchase Agreement, the Warrants or the Convertible Debentures,
shall serve as security for any and all of the Obligations, and, for the
repayment thereof, Pledgees may resort to any such collateral in such order and
manner as they may elect.

            SECTION 13. Remedies upon Event of Default. Upon and after the
occurrence of any Event of Default:

            (a) The Agent may exercise in respect of the Collateral and the
      Pledged Collateral, in addition to other rights and remedies provided for
      herein or otherwise available to the Agent (including, without limitation,
      the vesting in the Agent pursuant to Section 6(b)(i) of the sole right to
      exercise voting rights pertaining to the Pledged Collateral, including,
      without limitation, voting rights with respect to the sale of assets of
      Issuer), all the rights and remedies of a secured party on default under
      the Uniform Commercial Code in effect in the State of New York at that
      time (the "UCC"), and may also, without notice except as specified below,
      sell the Pledged Collateral or any part thereof in one or more parcels at
      public or private sale, at any exchange, broker's board or at any of the
      Agent's offices or elsewhere, for cash, on credit or for future delivery,
      and upon such other terms as the Agent may deem commercially reasonable.
      The Pledgor agrees that, to the extent notice of sale shall be required by
      law, at least ten (10) days' notice to the Pledgor of the time and place
      of any public sale or the time after which any

                                       11
<PAGE>

      private sale is to be made shall constitute reasonable notification. The
      Agent shall not be obligated to make any sale of Pledged Collateral
      regardless of notice of sale having been given. The Agent may adjourn any
      public or private sale from time to time by announcement at the time and
      place fixed therefor, and such sale may, without further notice, be made
      at the time and place to which it was so adjourned. The Pledgor
      acknowledges and agrees that the Pledged Collateral consisting of the
      Pledged Shares, and/or any other shares of common stock of Issuer, is of a
      type customarily sold on a recognized market, and accordingly that no
      notice of the sale thereof need be given.

            (b) Any cash held by the Agent or any Pledgee as Pledged Collateral
      and all cash proceeds received by the Agent or any Pledgee in respect of
      any sale of, collection from, or other realization upon all or any part of
      the Pledged Collateral may, in the discretion of the Agent or such
      Pledgee, be held as collateral for, and/or then or at any time thereafter
      be applied (after payment of any amounts payable pursuant to Section 14)
      in whole or in part against, all or any part of the Obligations, pro rata
      to the respective Obligations of each Pledgee in proportion to their
      respective principal amounts of Convertible Debentures. Any surplus of
      such cash or cash proceeds held by the Agent or any Pledgee and remaining
      after payment in full of all the Obligations shall be paid over to the
      Pledgor or to whomsoever may be lawfully entitled to receive such surplus.

            SECTION 14. Expenses. The Pledgor shall upon demand pay to the Agent
and/or the applicable Pledgee the amount of any and all reasonable expenses,
including reasonable attorneys' fees and expenses and the reasonable fees and
expenses of any experts and agents, which the Agent and/or such Pledgee may
incur in connection with (a) the administration of this Agreement, (b) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (c) the exercise or enforcement
of any of the rights of the Agent and/or such Pledgee hereunder or (d) the
failure by the Pledgor to perform or observe any of the provisions hereof.

            SECTION 15. Continuing Security Interest; Termination. This
Agreement shall create a continuing security interest in the Collateral and the
Pledged Collateral and shall remain in full force and effect until the
indefeasible payment in full of the Obligations. Upon the indefeasible payment
in full of the Obligations, the security interest granted hereby shall terminate
and all rights to the Collateral and the Pledged Collateral shall revert to the
Pledgor. Upon any such termination, the Agent shall, at the Pledgor's expense,
return to the Pledgor such of the Collateral and the Pledged Collateral as shall
not have been sold or otherwise applied pursuant to the terms hereof and execute
and deliver to the Pledgor such documents as the Pledgor shall reasonably
request to evidence such termination.

            SECTION 16. Governing Law; Terms. THIS AGREEMENT SHALL BE ENFORCED,
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO THE PRINCIPLES OF

                                       12
<PAGE>

CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION
OF THE STATE COURTS OR THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK WITH
RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO
IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH
PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE
OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.

            SECTION 17. Notice. Any notices required or permitted to be given
under the terms hereof shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall be effective five days
after being placed in the mail, if mailed by regular United States mail, or upon
receipt, if delivered personally or by courier (including a recognized overnight
delivery service) or by facsimile, in each case addressed to a party. The
addresses for such communications shall be:

                  If to the Pledgor:

                  3450 Hillview Avenue
                  Palo Alto, California 94304
                  Attention: Lawrence Bartlett
                  Facsimile: (650) 855-0222

                                       13
<PAGE>

                  With copies to:

                  Sichenzia Ross Friedman Ference LLP
                  1065 Avenue of the Americas, 21st Floor
                  New York, New York 10018
                  Attention: Gregory Sichenzia, Esq.
                  Telephone: 212-930-9700
                  Facsimile: 212-930-9725
                  Email: GSichenzia@srfllp.net

If to any Pledgees: to the address and fax number set forth immediately below
such Investor's name on the signature pages to the Securities Purchase
Agreement.

                  If to the Agent:
                  Amy Wang
                  6363 Sunset Boulevard, Fifth Floor
                  Hollywood, CA 90028
                  Fax: (323) 468-8307

      SECTION 18. Waivers.

            (a) Waivers. The Pledgor waives any right to require the Pledgees to
      (i) proceed against any person, (ii) proceed against any other collateral
      under any other agreement, (iii) pursue any other remedy, or (iv) make
      presentment, demand, dishonor, notice of dishonor, acceleration and/or
      notice of non-payment.

            (b) Waiver of Defense. No course of dealing between the Pledgor and
      the Pledgees, nor any failure to exercise nor any delay in exercising on
      the part of the Agent or any Pledgee, any right, power, or privilege under
      this Agreement or under any of the other Transaction Documents shall
      operate as a waiver. No single or partial exercise of any right, power, or
      privilege under this Agreement or under any of the other Transaction
      Documents shall preclude any other or further exercise of such right,
      power, or privilege or the exercise of any other right, power, or
      privilege.

            SECTION 19. Rights Are Cumulative. All rights and remedies of the
Agent and the Pledgees with respect to the Pledged Collateral, whether
established by this Agreement, the other Transaction Documents or by law, shall
be cumulative and may be exercised concurrently or in any order.

            SECTION 20. Indemnity. The Pledgor agrees to indemnify and hold
harmless the Agent, the Pledgees and their respective successors and assigns
against and from all liabilities, losses,

                                       14
<PAGE>

and costs (including, without limitation, reasonable attorneys' fees) arising
out of or relating to the taking or the failure to take action in respect of any
transaction effected under this Agreement or in connection with the lien
provided for herein, including, without limitation, any and all excise, sales or
other taxes which may be payable or determined to be payable with respect to any
of the Pledged Collateral. The liabilities of the Pledgor under this Section 20
shall survive the termination of this Agreement.

            SECTION 21. Severability. The provisions of this Agreement are
severable. If any provision of this Agreement is held invalid or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such provision, or part thereof, in such
jurisdiction, and shall not in any manner affect such provision or part thereof
in any other jurisdiction, or any other provision of this Agreement in any
jurisdiction.

            SECTION 22. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be considered an original, but all of which
together shall constitute one and the same instrument.

            SECTION 23. Amendments; Entire Agreement. This Agreement is subject
to modification only by a writing signed by the parties. To the extent that any
provision of this Agreement conflicts with any provision of the Purchase
Agreement or the Convertible Debentures, the provision giving Pledgees greater
rights or remedies shall govern, it being understood that the purpose of this
Agreement is to add to, and not detract from, the rights granted to Pledgees
under the Purchase Agreement and the Convertible Debentures. This Agreement, the
Purchase Agreement, the Convertible Debentures and the other Transaction
Documents constitute the entire agreement of the parties with respect to the
subject matter of this Agreement.

            SECTION 24. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs,
executors, legal representatives, successors and assigns; provided, however,
that the Pledgor may not, without the prior written consent of the Pledgees,
assign or delegate any rights, powers, duties or obligations hereunder, and any
such purported assignment or delegation without such consent shall be null and
void.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       15
<PAGE>

            IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first above written.

                                        PLEDGOR:

                                        AMNIS SYSTEMS INC.

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

                                        PLEDGEE:

                                        SDS CAPITAL GROUP SPC, LTD.

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

                                        ALPHA CAPITAL AKTIENGESELLSCHAFT

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

                                        BRISTOL INVESTMENT FUND, LTD.

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

                                        STONESTREET LIMITED PARTNERSHIP

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

                                        AGENT:

                                        ----------------------------------------
                                        Amy Wang, Esq.

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