Document:

EXHIBIT 10.1

                            CONVERTIBLE NOTE PURCHASE

                                    AGREEMENT

                            Dated as of June 5, 2002

                                      among

                                  ARMITEC, INC.

                                       and

                        THE PURCHASER LISTED ON EXHIBIT A

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                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

ARTICLE I            Purchase and Sale of Note.................................2
     Section 1.1       Purchase and Sale of Note...............................2
     Section 1.2       The Conversion Shares...................................2
     Section 1.3       Purchase Price and Closing..............................2
     Section 1.4       Warrant.................................................3

ARTICLE II           Representations and Warranties............................3
     Section 2.1       Representations and Warranties of the Company...........3
     Section 2.2       Representations and Warranties of the Purchaser........13

ARTICLE III          Covenants................................................15
     Section 3.1       Securities Compliance..................................15
     Section 3.2       Registration and Listing...............................15
     Section 3.3       Inspection Rights......................................15
     Section 3.4       Compliance with Laws...................................16
     Section 3.5       Keeping of Records and Books of Account................16
     Section 3.6       Reporting Requirements.................................16
     Section 3.7       Amendments.............................................16
     Section 3.8       Other Agreements.......................................16
     Section 3.9       Distributions..........................................17
     Section 3.10      Reservation of Shares..................................17
     Section 3.11      Transfer Agent Instructions............................17

ARTICLE IV           Conditions...............................................18
     Section 4.1       Conditions Precedent to the Obligation of the
                       Company to Sell the Note...............................18
     Section 4.2       Conditions Precedent to the Obligation of the
                       Purchaser to Purchase the Note.........................19

ARTICLE V            Registration Rights......................................20

ARTICLE VI           Certificate Legend.......................................21
     Section 6.1       Legend.................................................21

ARTICLE VII           Termination.............................................22
     Section 7.1       Termination by Mutual Consent..........................21
     Section 7.2       Other Termination......................................21
     Section 7.3       Effect of Termination..................................22

ARTICLE VIII          Indemnification.........................................22
     Section 8.1       General Indemnity......................................22
     Section 8.2       Indemnification Procedure..............................22

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                           TABLE OF CONTENTS (Cont'd)

                                                                            Page
                                                                            ----

ARTICLE IX            Miscellaneous...........................................23
     Section 9.1       Fees and Expenses......................................23
     Section 9.2       Specific Enforcement, Consent to Jurisdiction..........24
     Section 9.3       Entire Agreement; Amendment............................24
     Section 9.4       Notices................................................24
     Section 9.5       Waivers................................................25
     Section 9.6       Headings...............................................25
     Section 9.7       Successors and Assigns.................................26
     Section 9.8       No Third Party Beneficiaries...........................26
     Section 9.9       Governing Law..........................................26
     Section 9.10      Survival...............................................26
     Section 9.11      Counterparts...........................................26
     Section 9.12      Publicity..............................................26
     Section 9.13      Severability...........................................26
     Section 9.14      Further Assurances.....................................27
     Section 9.15      Remedies...............................................27

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                       CONVERTIBLE NOTE PURCHASE AGREEMENT

         This CONVERTIBLE NOTE PURCHASE  AGREEMENT (the "Agreement") is dated as
of June 5, 2002 by and  between  Armitec,  Inc.,  a  Delaware  corporation  (the
"Company"),  and the Purchaser of the Convertible Note of the Company whose name
is set forth on Exhibit A hereto (the "Purchaser").

         The parties hereto agree as follows:

                                   ARTICLE I

                            Purchase and Sale of Note

         Section 1.1 Purchase  and Sale of Note.  Upon the  following  terms and
conditions,  the Company shall issue and sell to the Purchaser and the Purchaser
shall  purchase  from the  Company,  (i) a  convertible  promissory  note in the
aggregate  principal  amount of $100,000  bearing interest at the rate of 7% per
annum, due June 5, 2004,  convertible into shares of the Company's Common Stock,
par value  $.00167 per share (the "Common  Stock"),  in  substantially  the form
attached hereto as Exhibit B (the "Note"), and (ii) a Warrant to purchase shares
of the Company's  Common Stock,  in  substantially  the form attached  hereto as
Exhibit C (the "Warrant"). The purchase price for the Note and the Warrant shall
be $100,000 (the "Purchase Price").  The Company and the Purchaser are executing
and  delivering  this  Agreement  in  accordance  with and in reliance  upon the
exemption  from  securities  registration  afforded by Rule 506 of  Regulation D
("Regulation  D") as  promulgated  by the United States  Securities and Exchange
Commission (the "Commission")  under the Securities Act of 1933, as amended (the
"Securities Act"), or Section 4(2) of the Securities Act.

         Section 1.2 The  Conversion  Shares.  Immediately  upon the filing of a
Certificate of Amendment to the Company's  Certificate of Incorporation with the
Delaware Secretary of State increasing its authorized capital stock, the Company
shall  authorize,  reserve and  maintain,  free of  preemptive  rights and other
similar  contractual rights of stockholders,  no less than 200% of the aggregate
number of shares of Common Stock needed to effect the  conversion of the Note at
the Fixed Conversion Price (as defined in the Note) and any interest accrued and
outstanding  thereon and  exercise of the  Warrant.  Any shares of Common  Stock
issuable upon  conversion of the Note and any interest  accrued and  outstanding
thereon and  exercise of the  Warrant  (and such shares when  issued) are herein
referred to as the "Conversion  Shares" and the "Warrant Shares,"  respectively.
The  Note,  the   Conversion   Shares  and  the  Warrant  Shares  are  sometimes
collectively referred to herein as the "Shares."

         Section 1.3 Purchase Price and Closing. The Company agrees to issue and
sell to the Purchaser and, in  consideration of and in express reliance upon the
representations,  warranties, covenants, terms and conditions of this Agreement,
the Purchaser agrees to purchase the Note set forth opposite its name on Exhibit
A for a purchase  price equal to $100,000.  The closing of the purchase and sale
of the Note and Warrant (the "Closing") to be acquired by the Purchaser from the
Company  under this  Agreement  shall take place at the  offices of  Naccarato &
Associates at 11:00 a.m. P.S.T. on the date on which the last to be fulfilled or
waived of the  conditions  set forth in Article IV hereof and  applicable to the
Closing shall be fulfilled or waived in  accordance  herewith or such other time

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and place or on such date as the  Purchaser  and the Company may agree upon (the
"Closing Date"). On the Closing Date, the Company shall deliver to the Purchaser
the Note and the Purchaser  shall deliver to the Company the Purchase  Price. In
addition,  each party shall  deliver all  documents,  instruments  and  writings
required to be delivered by such party pursuant to this Agreement at or prior to
the Closing. This Agreement shall become effective upon the date of execution of
this Agreement by each of the parties hereto,  which date shall be no later than
June 5, 2002, unless otherwise agreed upon by the Purchaser and the Company.

         Section 1.4  Warrant.  The Company  agrees to issue to the  Purchaser a
Warrant to purchase  1,000,000  shares of Common Stock on the Closing Date.  The
Warrant  shall have an exercise  price equal to the Warrant Price (as defined in
the Warrant) and shall expire on the fifth  anniversary  of the issuance date of
such Warrant.

                                   ARTICLE II

                         Representations and Warranties

         Section 2.1 Representations and Warranties of the Company.  The Company
hereby makes the following representations and warranties to the Purchaser:

                  (a)  Organization,  Good Standing and Power.  The Company is a
corporation duly  incorporated,  validly existing and in good standing under the
laws of the State of  Delaware  and has the  requisite  corporate  power to own,
lease and operate its properties and assets and to conduct its business as it is
now being conducted.  The Company does not have any  subsidiaries  except as set
forth on Schedule  2.1(g) hereto.  The Company and each such  subsidiary is duly
qualified as a foreign  corporation  to do business  and is in good  standing in
every  jurisdiction  in which the nature of the  business  conducted or property
owned by it makes such  qualification  necessary except for any  jurisdiction(s)
(alone or in the  aggregate)  in which the failure to be so  qualified  will not
have a Material  Adverse Effect.  For the purposes of this Agreement,  "Material
Adverse   Effect"  means  any  adverse  effect  on  the  business,   operations,
properties, prospects, or financial condition of the Company or its subsidiaries
and which is material to such entity or other entities controlling or controlled
by such entity.

                  (b) Authorization;  Enforcement. The Company has the requisite
corporate  power and  authority  to enter into and perform this  Agreement,  the
Registration  Rights Agreement  attached hereto as Exhibit D (the  "Registration
Rights Agreement"), the Transfer Agent Instructions (as defined in Section 3..11
hereof), the Pledge Agreement,  and the Warrant (collectively,  the "Transaction
Documents") and to issue and sell the Shares in accordance with the terms hereof
and the Warrant, as applicable.  The execution,  delivery and performance of the
Transaction  Documents  by  the  Company  and  the  consummation  by it  of  the
transactions  contemplated  hereby  and  thereby  have  been  duly  and  validly
authorized  by all  necessary  corporate  action,  and  no  further  consent  or
authorization  of the  Company  or its Board of  Directors  or  stockholders  is
required.  This  Agreement  has been duly executed and delivered by the Company.
The Registration  Rights Agreement will have been duly executed and delivered by

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the Company at Closing. Each of the Transaction Documents constitutes,  or shall
constitute  when executed and delivered,  a valid and binding  obligation of the
Company  enforceable against the Company in accordance with its terms, except as
such  enforceability  may  be  limited  by  applicable  bankruptcy,  insolvency,
reorganization,   moratorium,  liquidation,  conservatorship,   receivership  or
similar laws relating to, or affecting  generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.
                  (c)
                  (d)  Capitalization.  The  authorized  capital  stock  of  the
Company and the shares thereof  currently  issued and  outstanding as of June 5,
2002 are set forth on Schedule 2.1(c) hereto.  All of the outstanding  shares of
the Company's Common Stock have been duly and validly authorized.  Except as set
forth in this Agreement and the  Registration  Rights Agreement and as set forth
on Schedule 2.1(c) hereto,  no shares of Common Stock are entitled to preemptive
rights or registration  rights and there are no outstanding  options,  warrants,
scrip,  rights to subscribe to, call or commitments of any character  whatsoever
relating to, or securities  or rights  convertible  into,  any shares of capital
stock of the Company. Furthermore, except as set forth in this Agreement and the
Registration Rights Agreement and as set forth on Schedule 2.1(c),  there are no
contracts, commitments,  understandings, or arrangements by which the Company is
or may  become  bound to issue  additional  shares of the  capital  stock of the
Company or  options,  securities  or rights  convertible  into shares of capital
stock of the Company.  Except for customary transfer  restrictions  contained in
agreements entered into by the Company in order to sell restricted securities or
as  provided  on  Schedule  2.1 (c)  hereto,  the  Company is not a party to any
agreement  granting  registration  or  anti-dilution  rights to any person  with
respect to any of its equity or debt securities.  The Company is not a party to,
and it has no knowledge of, any agreement  restricting the voting or transfer of
any shares of the capital stock of the Company.  Except as set forth on Schedule
2.1(c) hereto, the offer and sale of all capital stock,  convertible securities,
rights, warrants, or options of the Company issued prior to the Closing complied
with all applicable  Federal and state securities laws, and no stockholder has a
right of rescission or damages with respect  thereto which would have a Material
Adverse Effect (as defined in Section 2.1(e) herein) on the Company's  financial
condition or operating  results.  The Company has furnished or made available to
the  Purchaser  true  and  correct  copies  of  the  Company's   Certificate  of
Incorporation  as in  effect on the date  hereof  (the  "Certificate"),  and the
Company's Bylaws as in effect on the date hereof (the "Bylaws").

                  (e) Issuance of Note. The Note to be issued at the Closing has
been duly  authorized  by all necessary  corporate  action and, when paid for or
issued in accordance with the terms hereof, the Note shall be validly issued and
outstanding,  fully  paid and  nonassessable  and free and  clear of all  liens,
encumbrances  and rights of refusal of any kind. When the Conversion  Shares and
the Warrant  Shares are issued in accordance  with the terms of the Note and the
Warrant,  respectively,  such shares will be duly  authorized  by all  necessary
corporate   action  and  validly   issued  and   outstanding,   fully  paid  and
nonassessable,  and the holders  shall be  entitled to all rights  accorded to a
holder of Common Stock.

                  (f) No Conflicts.  The execution,  delivery and performance of
the Transaction  Documents by the Company and the consummation by the Company of
the  transactions  contemplated  herein  and  therein  do not  (i)  violate  any
provision  of the  Company's  Certificate  or Bylaws,  (ii)  conflict  with,  or
constitute  a default  (or an event  which with  notice or lapse of time or both

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would  become a default)  under,  or give to others  any rights of  termination,
amendment,  acceleration or cancellation  of, any agreement,  mortgage,  deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the  Company  is a party,  (iii)  create  or  impose a lien,  charge or
encumbrance on any property of the Company under any agreement or any commitment
to which the Company is a party or by which the Company is bound or by which any
of its respective  properties or assets are bound, or (iv) result in a violation
of any  federal,  state,  local or foreign  statute,  rule,  regulation,  order,
judgment or decree (including Federal and state securities laws and regulations)
applicable to the Company or any of its subsidiaries or by which any property or
asset of the Company or any of its subsidiaries  are bound or affected,  except,
in all cases  other than  violations  pursuant  to clause  (i)  above,  for such
conflicts, defaults, terminations,  amendments, acceleration,  cancellations and
violations  as would  not,  individually  or in the  aggregate,  have a Material
Adverse  Effect.  The business of the Company and its  subsidiaries is not being
conducted  in  violation  of  any  laws,   ordinances  or   regulations  of  any
governmental  entity,  except for possible violations which singularly or in the
aggregate do not and will not have a Material Adverse Effect. The Company is not
required  under  Federal,  state or local law,  rule or regulation to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute,  deliver or perform any
of its obligations  under the Transaction  Documents or issue and sell the Note,
the Conversion Shares and the Warrant Shares in accordance with the terms hereof
or thereof  (other  than any  filings  which may be  required  to be made by the
Company with the Commission or state securities administrators subsequent to the
Closing  or any  registration  statement  which may be filed  pursuant  hereto);
provided that,  for purposes of the  representation  made in this sentence,  the
Company  is  assuming   and   relying   upon  the   accuracy  of  the   relevant
representations and agreements of the Purchaser herein.

                  (g) Commission  Documents,  Financial  Statements.  The Common
Stock of the Company is  registered  pursuant  to Section  12(b) or 12(g) of the
Securities  Exchange  Act of 1934,  as amended  (the  "Exchange  Act"),  and the
Company has timely filed all reports,  schedules,  forms,  statements  and other
documents  required  to be  filed  by it with  the  Commission  pursuant  to the
reporting requirements of the Exchange Act, including material filed pursuant to
Section  13(a) or  15(d) of the  Exchange  Act (all of the  foregoing  including
filings  incorporated  by  reference  therein  being  referred  to herein as the
"Commission  Documents").  The Company has  delivered  or made  available to the
Purchaser true and complete  copies of the Commission  Documents  filed with the
Commission  since  December  31,  2001.  The  Company  has not  provided  to the
Purchaser  any  material  non-public  information  or other  information  which,
according to applicable  law,  rule or  regulation,  should have been  disclosed
publicly  by the Company  but which has not been so  disclosed,  other than with
respect  to  the  transactions  contemplated  by  this  Agreement.  As of  their
respective  dates,  the  audited  financial   statements  as  presented  in  the
Commission  Documents  for the year  ended  December  31,  2001 (the  "Financial
Statement")  and the Form 10-QSB for the fiscal quarter ended September 30, 2001
(the "Form 10-QSB")  complied in all material  respects with the requirements of
the Exchange Act and the rules and  regulations  of the  Commission  promulgated
thereunder  and  other  federal,  state and local  laws,  rules and  regulations
applicable to such documents,  and, as of their  respective  dates,  neither the
Financial  Statement nor the Form 10-QSB  referred to above contained any untrue
statement of a material  fact or omitted to state a material fact required to be

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stated therein or necessary in order to make the statements therein, in light of
the  circumstances  under which they were made,  not  misleading.  The financial
statements of the Company included in the Commission Documents comply as to form
in all  material  respects  with  applicable  accounting  requirements  and  the
published rules and regulations of the Commission or other  applicable rules and
regulations with respect thereto.  Such financial  statements have been prepared
in accordance with generally accepted accounting  principles ("GAAP") applied on
a consistent  basis during the periods  involved (except (i) as may be otherwise
indicated in such financial  statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes or
may be  condensed  or summary  statements),  and fairly  present in all material
respects the financial  position of the Company and its  subsidiaries  as of the
dates thereof and the results of operations  and cash flows for the periods then
ended (subject,  in the case of unaudited  statements,  to normal year-end audit
adjustments).

                  (h)  Subsidiaries.  Schedule  2.1(g)  hereto  sets  forth each
subsidiary of the Company,  showing the  jurisdiction  of its  incorporation  or
organization  and showing  the  percentage  of each  person's  ownership  of the
outstanding  stock or other  interests of such  subsidiary.  For the purposes of
this Agreement, "subsidiary" shall mean any corporation or other entity of which
at least a  majority  of the  securities  or  other  ownership  interest  having
ordinary voting power (absolutely or contingently) for the election of directors
or other persons  performing similar functions are at the time owned directly or
indirectly  by the  Company  and/or  any of its other  subsidiaries.  All of the
outstanding shares of capital stock of each subsidiary have been duly authorized
and  validly  issued,  and  are  fully  paid  and  nonassessable.  There  are no
outstanding  preemptive,  conversion  or  other  rights,  options,  warrants  or
agreements  granted or issued by or binding upon any subsidiary for the purchase
or  acquisition  of any shares of capital  stock of any  subsidiary or any other
securities  convertible  into,  exchangeable  for or  evidencing  the  rights to
subscribe for any shares of such capital stock.  Except as set forth on Schedule
2.1(g),  neither  the Company nor any  subsidiary  is subject to any  obligation
(contingent  or  otherwise)  to  repurchase  or otherwise  acquire or retire any
shares of the capital  stock of any  subsidiary or any  convertible  securities,
rights,  warrants or options of the type  described in the  preceding  sentence.
Neither the Company nor any  subsidiary  is party to, nor has any  knowledge of,
any  agreement  restricting  the voting or transfer of any shares of the capital
stock of any subsidiary.

                  (i) No Material  Adverse Change.  Since December 31, 2001, the
date through  which the most recent  annual report of the Company on Form 10-KSB
has been prepared and filed with the Commission,  a copy of which is included in
the  Commission  Documents,  the Company  has not  experienced  or suffered  any
Material Adverse Effect.

                  (j) No Undisclosed Liabilities. Neither the Company nor any of
its  subsidiaries has any  liabilities,  obligations,  claims or losses (whether
liquidated or unliquidated,  secured or unsecured, absolute, accrued, contingent
or otherwise)  other than those incurred in the ordinary course of the Company's
or its  subsidiaries  respective  businesses  since December 31, 2001 and which,
individually  or in the aggregate,  do not or would not have a Material  Adverse
Effect on the  Company  or its  subsidiaries.  Schedule  2.1(i)  sets  forth all
material liabilities.

                  (k) No  Undisclosed  Events  or  Circumstances.  No  event  or
circumstance  has  occurred  or  exists  with  respect  to  the  Company  or its

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subsidiaries or their respective businesses,  properties,  prospects, operations
or  financial  condition,  which,  under  applicable  law,  rule or  regulation,
requires public disclosure or announcement by the Company but which has not been
so publicly  announced  or  disclosed.  Schedule 2.1 (j) sets forth all material
events and circumstances.

                  (l) Indebtedness.  Schedule 2.1(k) hereto sets forth as of the
date hereof all outstanding secured and unsecured Indebtedness of the Company or
any subsidiary, or for which the Company or any subsidiary has commitments.  For
the purposes of this  Agreement,  "Indebtedness"  shall mean (a) any liabilities
for  borrowed  money or  amounts  owed in excess of  $75,000  (other  than trade
accounts  payable  incurred  in  the  ordinary  course  of  business),  (b)  all
guaranties,   endorsements  and  other  contingent  obligations  in  respect  of
Indebtedness  of others,  whether or not the same are or should be  reflected in
the  Company's  balance  sheet  (or the notes  thereto),  except  guaranties  by
endorsement  of  negotiable  instruments  for deposit or  collection  or similar
transactions  in the ordinary  course of business;  and (c) the present value of
any lease  payments  in excess  of  $75,000  due  under  leases  required  to be
capitalized  in  accordance  with GAAP.  Except as set forth on Schedule  2.1(k)
hereto, neither the Company nor any subsidiary is in default with respect to any
Indebtedness.

                  (m) Title to Assets.  Except as set forth on  Schedule  2.1(l)
hereto,  each of the Company and the  subsidiaries has good and marketable title
to all of its  real  and  personal  property,  free of any  mortgages,  pledges,
charges, liens, security interests or other encumbrances,  except for those such
that,  individually or in the aggregate,  do not cause a Material Adverse Effect
on the Company's  financial  condition or operating results.  All said leases of
the Company and each of its  subsidiaries  are valid and  subsisting and in full
force and effect.

                  (n)  Actions  Pending.   There  is  no  action,  suit,  claim,
investigation  or  proceeding  pending  or,  to the  knowledge  of the  Company,
threatened against the Company or any subsidiary which questions the validity of
this Agreement or the transactions contemplated hereby or any action taken or to
be taken  pursuant  hereto or  thereto.  Except  as set forth in the  Commission
Documents,  there is no action, suit, claim, investigation or proceeding pending
or, to the  knowledge  of the  Company,  threatened,  against or  involving  the
Company, any subsidiary or any of their respective  properties or assets. Except
as set  forth on  Schedule  2.1(m)  hereto,  there  are no  outstanding  orders,
judgments,   injunctions,   awards  or  decrees  of  any  court,  arbitrator  or
governmental  or  regulatory  body against the Company or any  subsidiary or any
officers or directors of the Company or subsidiary  in their  capacities as such
that would, individually or in the aggregate, have a Material Adverse Effect.

                  (o)  Compliance  with Law. The business of the Company and the
subsidiaries  has been and is presently  being  conducted in accordance with all
applicable  federal,  state and local governmental laws, rules,  regulations and
ordinances,  except such that,  individually or in the aggregate, do not cause a
Material  Adverse  Effect.  The  Company and each of its  subsidiaries  have all
franchises,  permits,  licenses,  consents and other  governmental or regulatory
authorizations  and  approvals  necessary for the conduct of its business as now
being  conducted by it unless the failure to possess such  franchises,  permits,
licenses,  consents and other  governmental  or  regulatory  authorizations  and
approvals, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.

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                  (p)  Taxes.  The  Company  and  each of the  subsidiaries  has
accurately prepared and filed all federal,  state and other tax returns required
by law to be filed by it,  has paid or made  provisions  for the  payment of all
taxes shown to be due and all additional  assessments,  and adequate  provisions
have been and are reflected in the  financial  statements of the Company and the
subsidiaries for all current taxes and other charges to which the Company or any
subsidiary is subject and which are not  currently due and payable.  None of the
federal income tax returns of the Company or any subsidiary have been audited by
the Internal  Revenue  Service.  The Company has no knowledge of any  additional
assessments,  adjustments or contingent tax liability (whether federal or state)
pending or threatened  against the Company or any subsidiary for any period, nor
of any basis for any such assessment, adjustment or contingency.

                  (q)  Certain  Fees.  Except  as set forth on  Schedule  2.1(p)
hereto,  no brokers,  finders or financial  advisory fees or commissions will be
payable by the Company or any  subsidiary or any  Purchaser  with respect to the
transactions contemplated by this Agreement.

                  (r)  Disclosure.  To  the  best  of the  Company's  knowledge,
neither  this  Agreement  or the  Schedules  hereto  nor  any  other  documents,
certificates  or  instruments  furnished to the Purchaser by or on behalf of the
Company or any subsidiary in connection  with the  transactions  contemplated by
this Agreement  contain any untrue statement of a material fact or omit to state
a  material  fact  necessary  in order to make the  statements  made  herein  or
therein,  in the light of the circumstances under which they were made herein or
therein, not misleading.

                  (s)  Operation  of  Business.  The  Company  and  each  of the
subsidiaries owns or possesses all patents, trademarks, domain names (whether or
not registered)  and any patentable  improvements  or  copyrightable  derivative
works thereof,  websites and  intellectual  property  rights  relating  thereto,
service marks,  trade names,  copyrights,  licenses and  authorizations  and all
rights with respect to the foregoing, which are necessary for the conduct of its
business as now conducted without any conflict with the rights of others.

                  (t)  Environmental  Compliance.  The  Company  and each of its
subsidiaries have obtained all material approvals, authorization,  certificates,
consents,  licenses,  orders and permits or other similar  authorizations of all
governmental authorities,  or from any other person, that are required under any
Environmental Laws. No material permits,  licenses and other authorizations have
been issued  under any  Environmental  Laws to the Company or its  subsidiaries.
"Environmental  Laws" shall mean all applicable  laws relating to the protection
of the environment including, without limitation, all requirements pertaining to
reporting,  licensing,  permitting,  controlling,  investigating  or remediating
emissions,  discharges, releases or threatened releases of hazardous substances,
chemical substances, pollutants,  contaminants or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture,  processing,  distribution,
use,  treatment,   storage,   disposal,   transport  or  handling  of  hazardous
substances, chemical substances,  pollutants,  contaminants or toxic substances,
material or wastes,  whether solid, liquid or gaseous in nature. The Company has
all necessary  governmental  approvals required under all Environmental Laws and
used in its business or in the business of any of its subsidiaries.  The Company
and each of its subsidiaries are also in compliance with all other  limitations,

                                       8
<PAGE>

restrictions,  conditions,  standards,  requirements,  schedules and  timetables
required or imposed under all  Environmental  Laws. Except for such instances as
would not individually or in the aggregate have a Material Adverse Effect, there
are no past or present events, conditions, circumstances,  incidents, actions or
omissions  relating to or in any way affecting  the Company or its  subsidiaries
that violate or may violate any  Environmental Law after the Closing or that may
give rise to any  environmental  liability,  or otherwise  form the basis of any
claim, action,  demand, suit,  proceeding,  hearing,  study or investigation (i)
under any  Environmental  Law,  or (ii) based on or related to the  manufacture,
processing,  distribution, use, treatment, storage (including without limitation
underground storage tanks),  disposal,  transport or handling,  or the emission,
discharge,   release  or  threatened   release  of  any   hazardous   substance.
"Environmental  Liabilities"  means all  liabilities  of a person  (whether such
liabilities are owed by such person to governmental  authorities,  third parties
or otherwise)  whether  currently in existence or arising  hereafter which arise
under or relate to any Environmental Law.

                  (u)  Books  and  Records  Internal  Accounting  Controls.  The
records and documents of the Company and its subsidiaries  accurately reflect in
all material  respects the  information  relating to the business of the Company
and the  subsidiaries,  the location and  collection  of their  assets,  and the
nature of all transactions giving rise to the obligations or accounts receivable
of the  Company or any  subsidiary.  The  Company  and each of its  subsidiaries
maintain a system of internal accounting controls sufficient, in the judgment of
the  Company's  board of directors,  to provide  reasonable  assurance  that (i)
transactions  are executed in accordance with  management's  general or specific
authorizations,   (ii)   transactions   are  recorded  as  necessary  to  permit
preparation  of financial  statements  in  conformity  with  generally  accepted
accounting  principles  and to maintain  asset  accountability,  (iii) access to
assets is permitted  only in accordance  with  management's  general or specific
authorization and (iv) the recorded  accountability  for assets is compared with
the existing  assets at reasonable  intervals and  appropriate  actions is taken
with respect to any differences.

                  (v)  Material  Agreements.  Except  as set  forth on  Schedule
2.1(u)  hereto or as set forth in the  document  previously  filed with the SEC,
neither  the  Company  nor any  subsidiary  is a party  to any  written  or oral
contract, instrument, agreement, commitment,  obligation, plan or arrangement, a
copy of which would be required to be filed with the Commission as an exhibit to
a registration statement on Form S-1 or applicable form (collectively, "Material
Agreements") if the Company or any subsidiary were registering  securities under
the Securities Act. The Company and each of its subsidiaries has in all material
respects performed all the obligations  required to be performed by them to date
under the foregoing  agreements,  have received no notice of default and, to the
best of the Company's  knowledge are not in default under any Material Agreement
now in effect,  the result of which could cause a Material  Adverse  Effect.  No
written or oral contract, instrument, agreement, commitment, obligation, plan or
arrangement  of the  Company  or of any  subsidiary  limits  or shall  limit the
payment of dividends on the Company's Note, its preferred  stock, if any, or its
Common Stock.

                  (w) Transactions  with Affiliates.  Except as set forth in the
Commission  Documents and as set forth on Schedule  2.1(v) hereto,  there are no
loans, leases, agreements,  contracts, royalty agreements,  management contracts
or arrangements or other continuing  transactions  exceeding $50,000 between (a)
the Company, any subsidiary or any of their respective customers or suppliers on

                                       9
<PAGE>

the one hand,  and (b) on the other hand, any officer,  employee,  consultant or
director of the Company,  or any of its  subsidiaries,  or any person owning any
capital  stock of the Company or any  subsidiary  or any member of the immediate
family of such officer,  employee,  consultant,  director or  stockholder or any
corporation or other entity  controlled by such officer,  employee,  consultant,
director or  stockholder,  or a member of the immediate  family of such officer,
employee, consultant, director or stockholder.

                  (x)  Securities Act of 1933. The Company has complied and will
comply with all applicable  Federal and state securities laws in connection with
the offer, issuance and sale of the Note and the Warrant hereunder.  Neither the
Company nor anyone  acting on its behalf,  directly or  indirectly,  has or will
sell,  offer to sell or solicit  offers to buy the Note,  the Warrant or similar
securities  to, or solicit  offers with respect  thereto from, or enter into any
preliminary  conversations or negotiations relating thereto with, any person, or
has taken or will take any  action so as to bring the  issuance  and sale of the
Note and the Warrant under the registration provisions of the Securities Act and
applicable state securities laws. Neither the Company nor any of its affiliates,
nor any person acting on its or their behalf, has engaged in any form of general
solicitation  or general  advertising  (within the meaning of Regulation D under
the  Securities  Act) in  connection  with the offer or sale of the Note and the
Warrant.

                  (y)  Governmental  Approvals.  Except  for the  filing  of any
notice prior or subsequent to the Closing that may be required under  applicable
state and/or  Federal  securities  laws (which if required,  shall be filed on a
timely basis),  including the filing of a  registration  statement or statements
pursuant  to the  Registration  Rights  Agreement,  no  authorization,  consent,
approval,  license,  exemption  of,  filing  or  registration  with any court or
governmental department,  commission,  board, bureau, agency or instrumentality,
domestic or foreign,  is or will be necessary  for, or in connection  with,  the
execution or delivery of the Note, or for the  performance by the Company of its
obligations under the Transaction Documents.

                  (z) Employees.  Neither the Company nor any subsidiary has any
collective bargaining  arrangements or agreements covering any of its employees.
Neither the Company nor any subsidiary has any  employment  contract,  agreement
regarding proprietary information,  non-competition agreement,  non-solicitation
agreement,   confidentiality   agreement,  or  any  other  similar  contract  or
restrictive  covenant,  relating  to the  right  of  any  officer,  employee  or
consultant  to be employed or engaged by the Company or such  subsidiary.  Since
March 31,  2001,  no officer,  consultant  or key employee of the Company or any
subsidiary whose  termination,  either  individually or in the aggregate,  could
have a Material  Adverse  Effect,  has  terminated  or, to the  knowledge of the
Company,  has any present  intention of  terminating  his or her  employment  or
engagement with the Company or any subsidiary.

                  (aa) Absence of Certain  Developments.  Except as set forth on
Schedule  2.1(z) hereto,  since  December 31, 2001,  neither the Company nor any
subsidiary has:

                  (i) issued any stock,  bonds or other corporate  securities or
any rights, options or warrants with respect thereto;

                                       10
<PAGE>

                  (ii) borrowed any amount or incurred or become  subject to any
liabilities  (absolute or contingent) except current liabilities incurred in the
ordinary  course of business  which are  comparable  in nature and amount to the
current  liabilities  incurred in the  ordinary  course of  business  during the
comparable  portion of its prior fiscal year, as adjusted to reflect the current
nature and volume of the Company's or such subsidiary's business;

                  (iii) discharged or satisfied any material lien or encumbrance
or paid any material  obligation or liability  (absolute or  contingent),  other
than current liabilities paid in the ordinary course of business;

                  (iv) declared or made any payment or  distribution  of cash or
other  property to  stockholders  with  respect to its stock,  or  purchased  or
redeemed,  or made any  agreements  so to purchase or redeem,  any shares of its
capital stock;

                  (v) sold,  assigned or transferred any other tangible  assets,
or canceled  any  material  debts or claims,  except in the  ordinary  course of
business;

                  (vi)  sold,   assigned  or  transferred   any  patent  rights,
trademarks, trade names, copyrights, trade secrets or other intangible assets or
intellectual   property  rights,  or  disclosed  any  proprietary   confidential
information to any person except to customers in the ordinary course of business
or to the Purchaser or its representatives;

                  (vii) suffered any substantial  losses or waived any rights of
material value,  whether or not in the ordinary course of business,  or suffered
the loss of any material amount of prospective business;

                  (viii) made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;

                  (ix) made capital  expenditures or commitments  therefore that
aggregate in excess of $100,000;

                  (x)  entered  into any  other  transaction  other  than in the
ordinary  course of business,  or entered into any other  material  transaction,
whether or not in the ordinary course of business;

                  (xi) made  charitable  contributions  or  pledges in excess of
$25,000;

                  (xii)  suffered any material  damage,  destruction or casualty
loss, whether or not covered by insurance;

                  (xiii)   experienced  any  material  problems  with  labor  or
management in connection with the terms and conditions of their employment;

                  (xiv)  effected any two or more events of the  foregoing  kind
which in the aggregate would be material to the Company or its subsidiaries; or

                                       11
<PAGE>

                  (xv) entered into an agreement,  written or otherwise, to take
any of the foregoing actions.

                  (bb) Use of Proceeds.  The proceeds  from the sale of the Note
will be used by the Company for working capital and general corporate purposes.

                  (ab) Public Utility Holding Company Act and Investment Company
Act Status. The Company is not a "holding company" or a "public utility company"
as such terms are defined in the Public Utility  Holding Company Act of 1935, as
amended.  The Company is not,  and as a result of and  immediately  upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.

                  (ac)  ERISA.  No  liability  to the Pension  Benefit  Guaranty
Corporation  has been incurred with respect to any Plan by the Company or any of
its subsidiaries  which is or would be materially adverse to the Company and its
subsidiaries.  The  execution  and delivery of this  Agreement and the issue and
sale of the Note  will not  involve  any  transaction  which is  subject  to the
prohibitions  of Section 406 of ERISA or in connection with which a tax could be
imposed  pursuant  to Section  4975 of the  Internal  Revenue  Code of 1986,  as
amended,  provided that, if the  Purchaser,  or any person or entity that owns a
beneficial  interest in the  Purchaser,  is an "employee  pension  benefit plan"
(within the meaning of Section  3(2) of ERISA) with respect to which the Company
is a "party in  interest"  (within the meaning of Section  3(14) of ERISA),  the
requirements of Sections 407(d)(5) and 408(e) of ERISA, if applicable,  are met.
As used in this Section 2.1(ac), the term "Plan" shall mean an "employee pension
benefit  plan"  (as  defined  in  Section  3 of  ERISA)  which  is or  has  been
established or maintained,  or to which  contributions are or have been made, by
the  Company  or any  subsidiary  or by any trade or  business,  whether  or not
incorporated,  which,  together  with the  Company or any  subsidiary,  is under
common control, as described in Section 414(b) or (c) of the Code.

                  (ad) Dilutive Effect. The Company understands and acknowledges
that the number of Conversion  Shares  issuable upon  conversion of the Note and
the Warrant  Shares  issuable  upon  exercise of the  Warrant  will  increase in
certain  circumstances.  The Company further acknowledges that its obligation to
issue  Conversion  Shares upon  conversion of the Note in  accordance  with this
Agreement and its  obligations  to issue the Warrant Shares upon the exercise of
the Warrant in accordance with this Agreement and the Warrant, is, in each case,
absolute and unconditional  regardless of the dilutive effect that such issuance
may have on the ownership interest of other stockholders of the Company.

                  (ae) Filings  Under the Act and the Exchange  Act. The Company
has filed all reports and other  documents  required to be filed by it under the
Act and the  Exchange  Act,  and no such  document,  at the  time it was  filed,
contained any untrue statement of a material fact or omitted to state a material
fact necessary to make the  statements  contained  therein,  in the light of the

                                       12
<PAGE>

circumstances  under  which they were made,  not  misleading.  There has been no
material change in the Company since its last filing with the Commission  except
for changes in senior management.

         Section  2.2  Representations  and  Warranties  of the  Purchaser.  The
Purchaser  hereby makes the  following  representations  and  warranties  to the
Company:

                  (a) Organization and Standing of the Purchaser.  The Purchaser
is a corporation or partnership duly incorporated or organized, validly existing
and in good standing under the laws of the jurisdiction of its  incorporation or
organization.

                  (b)  Authorization  and Power. The Purchaser has the requisite
power and authority to enter into and perform this Agreement and to purchase the
Note being sold to it hereunder. The execution, delivery and performance of this
Agreement  and the  Registration  Rights  Agreement  by such  Purchaser  and the
consummation by it of the transactions contemplated hereby and thereby have been
duly  authorized  by all  necessary  corporate  or  partnership  action  (if the
Purchaser  is an  entity),  and no  further  consent  or  authorization  of such
Purchaser or its Board of Directors,  stockholders, or partners, as the case may
be, is required.  Each of this Agreement and the  Registration  Rights Agreement
has been duly authorized, executed and delivered by such Purchaser.

                  (c) No Conflicts.  The execution,  delivery and performance of
this Agreement and the  Registration  Rights  Agreement and the  consummation by
such Purchaser of the transactions  contemplated  hereby and thereby or relating
hereto do not and will not (i) result in a violation of such Purchaser's charter
documents or bylaws or (ii) conflict  with, or constitute a default (or an event
which with  notice or lapse of time or both would  become a default)  under,  or
give  to  others  any  rights  of   termination,   amendment,   acceleration  or
cancellation  of any agreement,  indenture or instrument to which such Purchaser
is a party,  or result in a violation of any law,  rule, or  regulation,  or any
order, judgment or decree of any court or governmental agency applicable to such
Purchaser or its properties (except for such conflicts,  defaults and violations
as would not,  individually or in the aggregate,  have a Material Adverse Effect
on such  Purchaser).  Such  Purchaser  is not  required  to obtain any  consent,
authorization or order of, or make any filing or registration with, any court or
governmental  agency in order for it to  execute,  deliver or perform any of its
obligations  under this  Agreement  or the  Registration  Rights  Agreement,  or
relating hereto or thereto, or to purchase the Note in accordance with the terms
hereof,  provided that for purposes of the representation made in this sentence,
such  Purchaser  is assuming  and  relying  upon the  accuracy  of the  relevant
representations and agreements of the Company herein.

                  (d) Acquisition  for  Investment.  The Purchaser is purchasing
the Note and acquiring the Warrant solely for its own account for the purpose of
investment and not with a view to or for sale in connection  with  distribution.
The Purchaser does not have a present intention to sell the Note or the Warrant,

                                       13
<PAGE>

nor a present  arrangement  (whether or not legally  binding)  or  intention  to
effect any  distribution  of the Note or the Warrant to or through any person or
entity; provided, however, that by making the representations herein and subject
to Section  2.2(f) below,  such Purchaser does not agree to hold the Note or the
Warrant for any minimum or other specific term and reserves the right to dispose
of the Note or the Warrant at any time in  accordance  with  Federal  securities
laws applicable to such disposition. Such Purchaser acknowledges that it is able
to bear the  financial  risks  associated  with an investment in the Note or the
Warrant  and that it has been given full  access to such  records of the Company
and the  subsidiaries and to the officers of the Company and the subsidiaries as
it  has  deemed   necessary  or   appropriate   to  conduct  its  due  diligence
investigation.

                  (e)  Accredited  Purchaser.  The  Purchaser is an  "accredited
investor" as defined in Regulation D promulgated under the Securities Act and is
a resident of the jurisdiction indicated on Exhibit A hereto.

                  (f) Rule 144. The Purchaser  understands  that the Shares must
be held indefinitely  unless such Shares are registered under the Securities Act
or an exemption from registration is available. Such Purchaser acknowledges that
such  person is  familiar  with Rule 144 of the  rules  and  regulations  of the
Commission, as amended, promulgated pursuant to the Securities Act ("Rule 144"),
and that such person has been advised  that Rule 144 permits  resales only under
certain  circumstances.  Such Purchaser understands that to the extent that Rule
144 is not  available,  such  person  will be unable to sell any Shares  without
either  registration  under  the  Securities  Act or the  existence  of  another
exemption from such registration requirement.

                  (g) General.  Such Purchaser  understands  that the Shares are
being  offered  and  sold in  reliance  on a  transactional  exemption  from the
registration requirement of Federal and state securities laws and the Company is
relying  upon  the  truth  and  accuracy  of  the  representations,  warranties,
agreements,  acknowledgments  and  understandings  of such  Purchaser  set forth
herein  in order to  determine  the  applicability  of such  exemptions  and the
suitability of such Purchaser to acquire the Shares.

                  (h) Independent Investigation;  Advertisements. The Purchaser,
in offering to purchase the Note and Warrant  hereunder,  has relied solely upon
an independent investigation made by such Purchaser and its representatives,  if
any, and has, prior to the date hereof, been given access to and the opportunity
to examine all books and records of the Company,  and all material contracts and
documents of the Company. In making its investment decision to purchase the Note
and Warrant, the Purchaser is not relying on any oral or written representations
or assurances from the Company or any other person or any  representation of the
Company or any other person other than as set forth in this Agreement, or on any
information  other than contained in the Company's public filings required under
the Act and the Exchange Act. The Purchaser is not  subscribing for the Note and
Warrant as a result of or subsequent to any  advertisement,  article,  notice or
other  communication  published in any  newspaper,  magazine or similar media or
broadcast over television or radio or presented at any seminar.

                                  ARTICLE III

                                    Covenants

         The Company  covenants with the Purchaser as follows,  which  covenants
are for the benefit of the  Purchaser  and its  permitted  assignees (as defined
herein).

                                       14
<PAGE>

         Section 3.1 Securities Compliance.

                  (a) The Company shall notify the Commission in accordance with
their rules and  regulations,  of the  transactions  contemplated  by any of the
Transaction  Documents,  and shall take all necessary  action and proceedings as
may be required and permitted by applicable  law, rule and  regulation,  for the
legal and valid  issuance of the Note and the Warrant Shares to the Purchaser or
subsequent holders.

                  (b) The Company is relying  upon the truth and accuracy of the
representations,  warranties, agreements,  acknowledgments and understandings of
the  Purchaser  set forth  herein in order to  determine  the  applicability  of
Federal  and  state  securities  laws  exemptions  and  the  suitability  of the
Purchaser to acquire the Note.

         Section 3.2 Registration and Listing. The Company will cause its Common
Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
the Exchange Act, will comply with all requirements  related to any registration
statement filed pursuant to this Agreement or the Registration Rights Agreement,
and will not take any action or file any document  (whether or not  permitted by
the Securities Act or the rules promulgated  thereunder) to terminate or suspend
such   registration  or  to  terminate  or  suspend  its  reporting  and  filing
obligations  under the  Exchange  Act or  Securities  Act,  except as  permitted
herein.  The Company  will take all action  necessary to continue the listing or
trading of its Common Stock on the over-the-counter electronic bulletin board or
any successor market.

         Section 3.3 Inspection Rights. The Company shall permit,  during normal
business hours and upon reasonable request and reasonable notice, each Purchaser
or any employees,  agents or representatives  thereof, so long as such Purchaser
shall be obligated  hereunder to purchase the Note or shall beneficially own any
Note, or shall own Conversion  Shares which,  in the  aggregate,  represent more
than 2% of the  total  combined  voting  power  of all  voting  securities  then
outstanding,  to examine and make  reasonable  copies of and  extracts  from the
records and books of account of, and visit and inspect the  properties,  assets,
operations  and business of the Company and any  subsidiary,  and to discuss the
affairs, finances and accounts of the Company and any subsidiary with any of its
officers, consultants, directors, and key employees.

         Section 3.4 Compliance  with Laws. The Company shall comply,  and cause
each  subsidiary to comply,  with all applicable  laws,  rules,  regulations and
orders, noncompliance with which could have a Material Adverse Effect.

         Section 3.5 Keeping of Records and Books of Account.  The Company shall
keep and cause each subsidiary to keep adequate records and books of account, in
which  complete  entries  will be  made in  accordance  with  GAAP  consistently
applied,   reflecting  all  financial   transactions  of  the  Company  and  its
subsidiaries,  and in which,  for each  fiscal  year,  all proper  reserves  for
depreciation, depletion, obsolescence,  amortization, taxes, bad debts and other
purposes in connection with its business shall be made.

                                       15
<PAGE>

         Section  3.6  Reporting  Requirements.  The Company  shall  furnish the
following  to  each  Purchaser  so long as such  Purchaser  shall  be  obligated
hereunder to purchase the Note or shall  beneficially own any Note, or shall own
Conversion  Shares which, in the aggregate,  represent more than 2% of the total
combined  voting  power of all voting  securities  then  outstanding,  provided,
however,  that the Company shall not be obligated to furnish the  following,  if
the  following  reports  have  been  filed by the  Company  with the  Commission
pursuant to the Commission's  "electronic data gathering and retrieval"  (EDGAR)
service:

                  (a) Quarterly Reports filed with the Commission on Form 10-QSB
as soon as  available,  and in any event within 45 days after the end of each of
the first three (3) fiscal quarters of the Company;

                  (b) Annual Reports filed with the Commission on Form 10-KSB as
soon as available,  and in any event within 90 days after the end of each fiscal
year of the Company; and

                  (c) Copies of all notices and information,  including  without
limitation  notices and proxy  statements in connection with any meetings,  that
are provided to holders of shares of Common  Stock,  contemporaneously  with the
delivery of such notices or information to such holders of Common Stock.

         Section  3.7  Amendments.  The  Company  shall  not  amend or waive any
provision of the Certificate or Bylaws of the Company,  or  Registration  Rights
Agreement in any way that would adversely  affect the  liquidation  preferences,
dividends rights,  conversion rights,  voting rights or redemption rights of the
holders of the Note.

         Section 3.8 Other Agreements.

                  (a) The Company  shall not enter into any  agreement  in which
the terms of such  agreement  would  restrict  or impair the right or ability to
perform of the Company or any subsidiary under any Transaction Document.

                  (b)  Future  Offerings.  Subject to the  exceptions  described
below,   the  Company  will  not,   without  the  prior  written  consent  of  a
majority-in-interest of the Buyer, not to be unreasonably withheld, negotiate or
contract with any party to obtain  additional  equity financing  (including debt
financing with an equity  component)  that involves any of the following  during
the period (the  "Lock-up  Period")  beginning on the Closing Date and ending on
the later of (i) two hundred  seventy  (270) days from the Closing Date and (ii)
one  hundred  eighty  (180) days from the date the  Registration  Statement  (as
defined in the Registration  Rights  Agreement) is declared  effective (plus any
days in which sales cannot be made thereunder), (A) the issuance of Common Stock
at a discount  to the market  price of the Common  Stock on the date of issuance
(taking  into  account the value of any  warrants  or options to acquire  Common
Stock  issued  in  connection  therewith)  or (B) the  issuance  of  convertible
securities that are convertible into an indeterminate number of shares of Common
Stock or (C) the issuance of warrants. The Capital Raising Limitations shall not
apply  to any  transaction  involving  (i)  issuances  of  securities  in a firm
commitment   underwritten  public  offering  (excluding  a  continuous  offering
pursuant  to Rule 415 under the 1933 Act) or (ii)  issuances  of  securities  as

                                       16
<PAGE>

consideration  for  a  merger,  consolidation  or  purchase  of  assets,  or  in
connection with any strategic  partnership or joint venture (the primary purpose
of which is not to raise equity capital),  or in connection with the disposition
or  acquisition  of a business,  product or license by the Company.  The Capital
Raising  Limitations  also shall not apply to the  issuance of  securities  upon
exercise or conversion of the Company's  options,  warrants or other convertible
securities  outstanding  as of the date  hereof  or to the  grant of  additional
options or warrants, or the issuance of additional securities, under any Company
stock  option or  restricted  stock plan  approved  by the  Stockholders  of the
Company.  In the event that the Company completes a Future Offering on any terms
more favorable to another investor than the transaction contemplated hereby, the
terms of the Notes and the  Warrants  will be amended  to reflect  any such more
favorable terms.

         Section 3.9 Distributions.  So long as any Note remain outstanding, the
Company  agrees that it shall not (i) declare or pay any  dividends  or make any
distributions  to any  holder(s) of Common  Stock or (ii)  purchase or otherwise
acquire for value,  directly or  indirectly,  any Common  Stock or other  equity
security of the Company.

         Section 3.10  Reservation of Shares.  Immediately  upon the filing of a
Certificate of Amendment to the Company's  Certificate of Incorporation with the
Delaware  Secretary of State increasing its authorized capital stock and so long
as any of the Notes or Warrants remain  outstanding,  the Company shall take all
action necessary to at all times have  authorized,  and reserved for the purpose
of issuance, no less than 200% of the aggregate number of shares of Common Stock
needed to provide  for the  issuance  of the  Conversion  Shares and the Warrant
Shares.

         Section  3.11  Transfer  Agent  Instructions.  The Company  shall issue
irrevocable  instructions  to its transfer  agent,  and any subsequent  transfer
agent,  to issue  certificates,  registered in the name of each Purchaser or its
respective nominee(s),  for the Conversion Shares and the Warrant Shares in such
amounts as  specified  from time to time by each  Purchaser  to the Company upon
conversion  of the Note or  exercise  of the  Warrant  in the form of  Exhibit E
attached hereto (the "Irrevocable Transfer Agent Instructions"). In addition the
transfer agent shall reserve  8,611,371 shares of the Company's common stock for
the Conversion  Shares until the 14C proxy  increasing the authorized  shares is
deemed  effective by the Securities and Exchange  Commission,  at which time the
reserve shares will be adjusted to the appropriate  level. Prior to registration
of the Conversion  Shares and the Warrant  Shares under the Securities  Act, all
such certificates  shall bear the restrictive legend specified in Section 6.1 of
this  Agreement.  The  Company  warrants  that no  instruction  other  than  the
Irrevocable Transfer Agent Instructions referred to in this Section 3.11 will be
given by the Company to its transfer  agent and that the Shares shall  otherwise
be freely  transferable  on the books and  records of the  Company as and to the
extent provided in this Agreement and the Registration Rights Agreement. Nothing
in this Section 3.11 shall affect in any way each  Purchaser's  obligations  and
agreements  set forth in Section  6.1 to comply with all  applicable  prospectus
delivery  requirements,  if any,  upon  resale  of the  Shares.  If a  Purchaser
provides the Company with an opinion of counsel, in a generally acceptable form,
to the effect that a public  sale,  assignment  or transfer of the Shares may be
made without registration under the Securities Act or the Purchaser provides the

                                       17
<PAGE>

Company with reasonable  assurances that the Shares can be sold pursuant to Rule
144  without any  restriction  as to the number of  securities  acquired as of a
particular date that can then be immediately  sold, the Company shall permit the
transfer,  and, in the case of the  Conversion  Shares and the  Warrant  Shares,
promptly  instruct its transfer agent to issue one or more  certificates in such
name and in such  denominations  as specified by such  Purchaser and without any
restrictive  legend.  The  Company  acknowledges  that  a  breach  by it of  its
obligations under this Section 3.11 will cause irreparable harm to the Purchaser
by  vitiating  the intent and purpose of the  transaction  contemplated  hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations  under this Section 3.11 will be inadequate and agrees, in the event
of a breach  or  threatened  breach by the  Company  of the  provisions  of this
Section  3.11,  that the Purchaser  shall be entitled,  in addition to all other
available  remedies,  to an order and/or  injunction  restraining any breach and
requiring  immediate  issuance and  transfer,  without the  necessity of showing
economic loss and without any bond or other security being required.

                                   ARTICLE IV

                                   Conditions

         Section 4.1  Conditions  Precedent to the  Obligation of the Company to
Sell the Note.  The  obligation  hereunder  of the Company to issue and sell the
Note and the Warrant to the Purchaser is subject to the  satisfaction or waiver,
at or before the Closing Date, of each of the conditions set forth below.  These
conditions  are for the Company's  sole benefit and may be waived by the Company
at any time in its sole discretion.

                  (a)   Accuracy  of  Each   Purchaser's   Representations   and
Warranties.  The  representations and warranties of each Purchaser shall be true
and  correct  in all  material  respects  as of the date when made and as of the
Closing  Date as  though  made at that  time,  except  for  representations  and
warranties that are expressly made as of a particular  date, which shall be true
and correct in all material respects as of such date.

                  (b)  Performance  by the Purchaser.  The Purchaser  shall have
performed,  satisfied and complied in all material  respects with all covenants,
agreements and conditions required by this Agreement to be performed,  satisfied
or complied with by the Purchaser at or prior to the Closing Date.

                  (c) No Injunction.  No statute,  rule,  regulation,  executive
order,  decree,   ruling  or  injunction  shall  have  been  enacted,   entered,
promulgated  or endorsed by any court or  governmental  authority  of  competent
jurisdiction  which  prohibits  the  consummation  of any  of  the  transactions
contemplated by this Agreement.

         Section 4.2 Conditions  Precedent to the Obligation of the Purchaser to
Purchase the Note. The obligation  hereunder of the Purchaser to acquire and pay
for the Note and the  Warrant is subject to the  satisfaction  or waiver,  at or
before the  Closing  Date,  of each of the  conditions  set forth  below.  These
conditions  are for the  Purchaser's  sole  benefit  and  may be  waived  by the
Purchaser at any time in its sole discretion.

                                       18
<PAGE>

                  (a) Accuracy of the Company's  Representations and Warranties.
Each of the  representations  and  warranties  of the Company  shall be true and
correct in all material  respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a particular date),  which shall be true and correct in all material
respects as of such date.

                  (b)  Performance  by  the  Company.  The  Company  shall  have
performed, satisfied and complied in all respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date.

                  (c) No  Suspension,  Etc.  From the date hereof to the Closing
Date, trading in the Company's Common Stock shall not have been suspended by the
Commission  (except for any suspension of trading of limited  duration agreed to
by the Company, which suspension shall be terminated prior to the Closing Date),
and, at any time prior to the Closing Date,  trading in securities  generally as
reported  by  Bloomberg  Financial  Markets  ("Bloomberg")  shall  not have been
suspended  or limited,  or minimum  prices  shall not have been  established  on
securities  whose  trades are  reported by  Bloomberg,  or on the New York Stock
Exchange, nor shall a banking moratorium have been declared either by the United
States or New York State authorities, nor shall there have occurred any material
outbreak  or  escalation  of  hostilities  or other  national  or  international
calamity or crisis of such  magnitude in its effect on, or any material  adverse
change in any  financial  market  which,  in each case,  in the judgment of such
Purchaser, makes it impracticable or inadvisable to purchase the Note.

                  (d) No Injunction.  No statute,  rule,  regulation,  executive
order,  decree,   ruling  or  injunction  shall  have  been  enacted,   entered,
promulgated  or endorsed by any court or  governmental  authority  of  competent
jurisdiction  which  prohibits  the  consummation  of any  of  the  transactions
contemplated by this Agreement.

                  (e)  No  Proceedings  or  Litigation.   No  action,   suit  or
proceeding  before any arbitrator or any governmental  authority shall have been
commenced,  and no investigation  by any governmental  authority shall have been
threatened,  against  the  Company or any  subsidiary,  or any of the  officers,
directors or  affiliates of the Company or any  subsidiary  seeking to restrain,
prevent or change the  transactions  contemplated by this Agreement,  or seeking
damages in connection with such transactions.

                  (f) Opinion of Counsel,  Etc. At the  Closing,  the  Purchaser
shall have received an opinion of counsel to the Company,  dated the date of the
Closing,  in the form of  Exhibit  F hereto,  and such  other  certificates  and
documents as the Purchaser or its counsel shall  reasonably  require incident to
the Closing.

                  (g) Registration Rights Agreement. At the Closing, the Company
shall have  executed and  delivered the  Registration  Rights  Agreement to each
Purchaser.

                                       19
<PAGE>

                  (h)   Certificates.   The  Company  shall  have  executed  and
delivered to each Purchaser,  the  certificates  (in such  denominations as such
Purchaser  shall  request) for the Note and the Warrant being  purchased by such
Purchaser at the Closing.

                  (i)  Resolutions.  Prior to the  Closing  Date,  the  Board of
Directors of the Company shall have adopted resolutions  consistent with Section
2.1(b)  above  in  a  form   reasonably   acceptable  to  such   Purchaser  (the
"Resolutions").

                  (j)  Reservation of Shares.  Immediately  upon the filing of a
Certificate of Amendment to the Company's  Certificate of Incorporation with the
Delaware Secretary of State increasing its authorized capital stock, the Company
shall authorize,  reserve and maintain out of its authorized and unissued Common
Stock,  solely for the purpose of effecting  the  conversion of the Note and the
exercise of the  Warrant,  a number of shares of Common  Stock equal to at least
200% of the aggregate  number of Conversion  Shares  issuable upon conversion of
the Note  outstanding  on the  Closing  Date and the  number of  Warrant  Shares
issuable upon  exercise of the Warrant  assuming such Warrant was granted on the
Closing  Date (after  giving  effect to the Note and the Warrant to be issued on
the Closing Date and assuming  such Note and Warrant were fully  convertible  or
exercisable on such date regardless of any limitation on the timing or amount of
such conversions or exercises).

                  (k) Transfer  Agent  Instructions.  The  Irrevocable  Transfer
Agent  Instructions,  in the form of Exhibit E attached hereto,  shall have been
delivered to and acknowledged in writing by the Company's transfer agent.

                  (l) Secretary's Certificate.  The Company shall have delivered
to such Purchaser a secretary's certificate, dated as of the Closing Date, as to
(i) the Resolutions,  (ii) the Certificate,  (iii) the Bylaws, each as in effect
at the Closing,  and (iv) the  authority  and  incumbency of the officers of the
Company executing the Transaction  Documents and any other documents required to
be executed or delivered in connection therewith.

ARTICLE V

                                                Registration Rights

         At the Closing, the Company and the Purchaser shall enter into a
Registration Rights Agreement in the form attached hereto as Exhibit D.

                                   ARTICLE VI

                               Certificate Legend

         Section  6.1 Legend.  Each  certificate  representing  the Note and the
Warrant and, if  appropriate,  securities  issued upon  conversion  and exercise
thereof,  shall be stamped or otherwise imprinted with a legend substantially in
the  following  form (in  addition to any legend  required by  applicable  state
securities or "blue sky" laws):

                                       20
<PAGE>

         THE   SECURITIES   REPRESENTED   BY  THIS   CERTIFICATE   (THE
         "SECURITIES")  HAVE NOT BEEN  REGISTERED  UNDER THE SECURITIES
         ACT OF 1933,  AS AMENDED (THE  "SECURITIES  ACT") OR ANY STATE
         SECURITIES LAWS AND MAY NOT BE SOLD,  TRANSFERRED OR OTHERWISE
         DISPOSED OF UNLESS  REGISTERED  UNDER THE  SECURITIES  ACT AND
         UNDER APPLICABLE STATE SECURITIES LAWS OR ARMITEC,  INC. SHALL
         HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT  REGISTRATION  OF
         SUCH  SECURITIES  UNDER  THE  SECURITIES  ACT  AND  UNDER  THE
         PROVISIONS  OF  APPLICABLE   STATE   SECURITIES  LAWS  IS  NOT
         REQUIRED.

         The Company agrees to reissue  certificates  representing  the Note and
the Warrant, without the legend set forth above if at such time, prior to making
any transfer of any Note,  Warrant,  Conversion  Shares or Warrant Shares,  such
holder  thereof shall give written  notice to the Company  describing the manner
and terms of such  transfer and removal as the Company may  reasonably  request.
Such proposed  transfer will not be effected until: (a) the Company has notified
such holder that either (i) in the opinion of Company counsel,  the registration
of such Note, Warrant,  Conversion Shares or Warrant Shares under the Securities
Act is not  required  in  connection  with  such  proposed  transfer;  or (ii) a
registration   statement   under  the  Securities  Act  covering  such  proposed
disposition  has been filed by the Company  with the  Commission  and has become
effective under the Securities Act; and (b) the Company has notified such holder
that  either:  (i) in the  opinion  of  Company  counsel,  the  registration  or
qualification  under  the  securities  or "blue  sky"  laws of any  state is not
required in connection with such proposed  disposition,  or (ii) compliance with
applicable  state  securities or "blue sky" laws has been effected.  The Company
will use its best efforts to respond to any such notice from a holder  within 10
days.  In the case of any  proposed  transfer  under this Section 6, the Company
will use reasonable  efforts to comply with any such applicable state securities
or "blue sky" laws, but shall in no event be required,  in connection therewith,
to qualify to do business in any state where it is not then qualified or to take
any action that would subject it to tax or to the general  service of process in
any state where it is not then subject.  The restrictions on transfer  contained
in Section 6.1 shall be in  addition  to, and not by way of  limitation  of, any
other restrictions on transfer contained in any other section of this Agreement.

                                  ARTICLE VII

                                   Termination

         Section  7.1  Termination  by Mutual  Consent.  This  Agreement  may be
terminated at any time prior to the Closing Date by the mutual  written  consent
of the Company and the Purchaser.

         Section 7.2 Other Termination.  This Agreement may be terminated by the
action of the Board of Directors of the Company or by the  Purchaser at any time
if the Closing shall not have been  consummated by June 10, 2002, as long as the
failure to so consummate is not the fault of the terminating party.

                                       21
<PAGE>

         Section 7.3 Effect of  Termination.  In the event of termination by the
Company or the Purchaser, written notice thereof shall forthwith be given to the
other  party  and  the  transactions  contemplated  by  this  Agreement  and the
Registration  Rights  Agreement  shall be terminated  without  further action by
either party.  If this Agreement is terminated as provided in Section 7.1 or 7.2
herein,  this  Agreement  shall become void and of no further  force and effect,
except for  Sections  9.1 and 9.2,  and  Article  VIII  herein.  Nothing in this
Section  7.3 shall be deemed to release the  Company or any  Purchaser  from any
liability  for any  breach  under  this  Agreement  or the  Registration  Rights
Agreement,  or to impair the rights of the Company and the  Purchaser  to compel
specific  performance by the other party of its obligations under this Agreement
and the Registration Rights Agreement.

                                  ARTICLE VIII

                                 Indemnification

         Section 8.1 General Indemnity. The Company agrees to indemnify and hold
harmless the Purchaser  (and its  respective  directors,  officers,  affiliates,
agents,   successors   and  assigns)  from  and  against  any  and  all  losses,
liabilities,  deficiencies,  costs,  damages and  expenses  (including,  without
limitation,  reasonable attorney's fees, charges and disbursements)  incurred by
the Purchaser as a result of any inaccuracy in or breach of the representations,
warranties or covenants  made by the Company  herein.  The  Purchaser  agrees to
indemnify and hold harmless the Company and its directors, officers, affiliates,
agents, successors and assigns from and against any and all losses, liabilities,
deficiencies,  costs,  damages  and  expenses  (including,  without  limitation,
reasonable attorneys fees, charges and disbursements) incurred by the Company as
result of any  inaccuracy  in or breach of the  representations,  warranties  or
covenants made by the Purchaser herein.

         Section  8.2   Indemnification   Procedure.   Any  party   entitled  to
indemnification  under this  Article  VIII (an  "indemnified  party")  will give
written notice to the  indemnifying  party of any matters giving rise to a claim
for  indemnification;  provided,  that the  failure  of any  party  entitled  to
indemnification  hereunder  to give notice as provided  herein shall not relieve
the indemnifying  party of its obligations under this Article VIII except to the
extent that the  indemnifying  party is actually  prejudiced  by such failure to
give  notice.  In case any  action,  proceeding  or claim is brought  against an
indemnified party in respect of which  indemnification is sought hereunder,  the
indemnifying  party  shall be  entitled  to  participate  in and,  unless in the
reasonable  judgment of the indemnified  party a conflict of interest between it
and the indemnifying party may exist with respect of such action,  proceeding or
claim, to assume the defense thereof with counsel reasonably satisfactory to the
indemnified  party.  In  the  event  that  the  indemnifying  party  advises  an
indemnified  party  that  it  will  contest  such a  claim  for  indemnification
hereunder,  or fails, within 30 days of receipt of any indemnification notice to
notify, in writing, such person of its election to defend, settle or compromise,
at its sole cost and expense,  any action,  proceeding or claim (or discontinues
its defense at any time after it commences such defense),  then the  indemnified
party may, at its option,  defend,  settle or otherwise  compromise  or pay such
action or claim. In any event, unless and until the indemnifying party elects in

                                       22
<PAGE>

writing to assume and does so assume the defense of any such  claim,  proceeding
or  action,  the  indemnified  party's  costs and  expenses  arising  out of the
defense,  settlement or compromise of any such action, claim or proceeding shall
be losses subject to  indemnification  hereunder.  The  indemnified  party shall
cooperate fully with the  indemnifying  party in connection with any negotiation
or  defense  of any such  action  or claim by the  indemnifying  party and shall
furnish to the indemnifying  party all information  reasonably  available to the
indemnified party which relates to such action or claim. The indemnifying  party
shall keep the indemnified party fully apprised at all times as to the status of
the  defense  or  any  settlement  negotiations  with  respect  thereto.  If the
indemnifying  party  elects  to  defend  any  such  action  or  claim,  then the
indemnified  party shall be entitled to participate in such defense with counsel
of its choice at its sole cost and expense.  The indemnifying party shall not be
liable for any settlement of any action,  claim or proceeding  effected  without
its prior written consent.  Notwithstanding anything in this Article VIII to the
contrary,  the  indemnifying  party shall not,  without the indemnified  party's
prior written consent, settle or compromise any claim or consent to entry of any
judgment  in  respect  thereof  which  imposes  any  future  obligation  on  the
indemnified party or which does not include,  as an unconditional  term thereof,
the  giving by the  claimant  or the  plaintiff  to the  indemnified  party of a
release  from all  liability  in  respect  of such  claim.  The  indemnification
required by this Article  VIII shall be made by periodic  payments of the amount
thereof  during the course of  investigation  or defense,  as and when bills are
received or expense,  loss,  damage or  liability  is  incurred,  so long as the
indemnified party  irrevocably  agrees to refund such moneys if it is ultimately
determined by a court of competent jurisdiction that such party was not entitled
to  indemnification.  Notwithstanding  anything  in  this  Article  VIII  to the
contrary,  the  Purchaser  shall be liable under this Article VIII for only that
amount of indemnification as does not exceed the proceeds to such Purchaser as a
result of the sale of the  Conversion  Shares by the  Purchaser.  The  indemnity
agreements  contained  herein shall be in addition to (a) any cause of action or
similar  rights of the  indemnified  party  against  the  indemnifying  party or
others,  and (b) any  liabilities  the  indemnifying  party  may be  subject  to
pursuant to the law.

                                   ARTICLE IX

                                  Miscellaneous

         Section  9.1 Fees and  Expenses.  At the  Closing,  the  Company  shall
reimburse Buyers for expenses incurred by it in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement and the other
agreements  to be  executed in  connection  herewith  ("Documents"),  including,
without  limitation,  attorneys' and  consultants'  fees and expenses,  transfer
agent fees, fees for stock quotation  services,  fees relating to any amendments
or  modifications  of the  Documents or any consents or waivers of provisions in
the Documents, fees for the preparation of opinions of counsel, escrow fees, and
costs of  restructuring  the  transactions  contemplated by the Documents.  When
possible,  the Company must pay these fees directly,  otherwise the Company must
make immediate payment for reimbursement to the Buyers for all fees and expenses
immediately  upon written notice by the Buyer or the submission of an invoice by
the Buyer If the Company  fails to reimburse  the Buyer in full within three (3)
business days of the written  notice or submission of invoice by the Buyer,  the
Company  shall pay  interest on the total amount of fees to be  reimbursed  at a
rate of 15% per annum.

                                       23
<PAGE>

         Section 9.2 Specific Enforcement, Consent to Jurisdiction.

                  (a) The Company and the Purchaser  acknowledge  and agree that
irreparable  damage would occur in the event that any of the  provisions of this
Agreement or the Registration  Rights Agreement were not performed in accordance
with their specific terms or were otherwise  breached.  It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the  provisions of this  Agreement or the  Registration  Rights
Agreement  and to  enforce  specifically  the  terms  and  provisions  hereof or
thereof,  this being in addition to any other remedy to which any of them may be
entitled by law or equity.

                  (b)  Each  of  the  Company  and  the   Purchaser  (i)  hereby
irrevocably submits to the exclusive  jurisdiction of the United States District
Court sitting in the Southern District of New York for the purposes of any suit,
action  or  proceeding  arising  out of or  relating  to this  Agreement  or the
Registration  Rights Agreement and (ii) hereby waives,  and agrees not to assert
in any such suit,  action or  proceeding,  any claim  that it is not  personally
subject to the jurisdiction of such court,  that the suit,  action or proceeding
is brought  in an  inconvenient  forum or that the venue of the suit,  action or
proceeding  is  improper.  Any suit,  action  or  proceeding  arising  out of or
relating to this  Agreement  or the  Registration  Rights  Agreement  brought by
either the Company or the Purchaser shall be brought in the  jurisdiction of the
United States District Court sitting in the Southern  District of New York. Each
of the Company and the  Purchaser  consents to process  being served in any such
suit,  action or  proceeding  by  mailing a copy  thereof  to such  party at the
address in effect for  notices to it under this  Agreement  and agrees that such
service  shall  constitute  good and  sufficient  service of process  and notice
thereof.  Nothing in this  Section 9.2 shall  affect or limit any right to serve
process in any other manner permitted by law.

         Section 9.3 Entire Agreement;  Amendment.  This Agreement  contains the
entire  understanding  of the parties with respect to the matters covered hereby
and,  except as specifically  set forth herein or in the Transaction  Documents,
neither the  Company  nor the  Purchaser  makes any  representations,  warranty,
covenant or  undertaking  with  respect to such  matters.  No  provision of this
Agreement may be waived or amended other than by a written  instrument signed by
the Company and the Purchaser,  and no provision hereof may be waived other than
by an a written  instrument  signed by the party against whom enforcement of any
such amendment or waiver is sought. No consideration shall be offered or paid to
any person to amend or consent to a waiver or  modification  of any provision of
any of the Transaction  Documents unless the same  consideration is also offered
to all of the parties to the Transaction Documents or holder of the Note, as the
case may be.

         Section 9.4  Notices.  Any  notice,  demand,  request,  waiver or other
communication  required or permitted to be given  hereunder  shall be in writing
and shall be effective (a) upon hand delivery by telex (with correct answer back
received),  telecopy or facsimile at the address or number  designated below (if
delivered on a business day during normal business hours where such notice is to
be received),  or the first  business day following  such delivery (if delivered
other than on a business day during normal  business  hours where such notice is
to be received) or (b) on the second  business day following the date of mailing

                                       24
<PAGE>

by express courier service,  fully prepaid,  addressed to such address,  or upon
actual receipt of such mailing,  whichever shall first occur.  The addresses for
such communications shall be:

If to the Company:                  Armitec, Inc.
                                    4479 Atlanta Road
                                    Smyrna, Georgia 30080
                                    Attention:  Chief Executive Officer
                                    Telephone No: (404) 261-8944
                                    Facsimile No.: (404) 842-9418

with copies (which copies
shall not constitute notice
to the Company) to:                 Greenberg Traurig, LLP
                                    Attn: Robert B. Altenbach
                                    3290 Northside Parkway, Suite 400
                                    Atlanta, Georgia 30327
                                    Telephone No.: (678) 553-2100
                                    Facsimile No.: (678) 553-2188

If to any Purchaser:                At the address of such Purchaser set forth
                                    on Exhibit A to this Agreement.

with copies (which copies
shall not constitute notice
to the Company) to:                 Naccarato & Associates
                                    19600 Fairchild, Suite 260
                                    Irvine, California 92618
                                    Attention: Owen M. Naccarato, Esq.
                                    Telephone No.:  (949) 851-9261
                                    Facsimile No.: (949) 851-9262

         Any party  hereto may from time to time  change its address for notices
by giving at least ten (10) days written  notice of such changed  address to the
other party hereto.

         Section 9.5  Waivers.  No waiver by either  party of any  default  with
respect to any provision,  condition or  requirement of this Agreement  shall be
deemed  to be a  continuing  waiver  in the  future  or a  waiver  of any  other
provisions,  condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right  hereunder in any manner  impair the exercise of
any such right accruing to it thereafter.

         Section 9.6 Headings.  The article,  section and subsection headings in
this Agreement are for convenience  only and shall not constitute a part of this
Agreement  for any other  purpose and shall not be deemed to limit or affect any
of the provisions hereof.

                                       25
<PAGE>

         Section 9.7  Successors and Assigns.  This  Agreement  shall be binding
upon and inure to the benefit of the parties and their  successors  and assigns.
After the Closing,  the  assignment  by a party to this  Agreement of any rights
hereunder shall not affect the obligations of such party under this Agreement.

         Section 9.8 No Third Party  Beneficiaries.  This  Agreement is intended
for the benefit of the parties hereto and their respective  permitted successors
and  assigns  and is not for the  benefit  of, nor may any  provision  hereof be
enforced by, any other person.

         Section 9.9  Governing  Law.  This  Agreement  shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions.

         Section  9.10  Survival.  The  representations  and  warranties  of the
Company and the Purchaser  contained in Sections  2.1(o) and (s) should  survive
indefinitely  and those  contained in Article II, with the exception of Sections
2.1(o) and (s), shall survive the execution and delivery  hereof and the Closing
until the date three (3) years from the Closing  Date,  and the  agreements  and
covenants  set forth in Article I, III,  V, VII,  VIII and IX of this  Agreement
shall survive the execution and delivery hereof and the Closing  hereunder until
the Purchaser  beneficially owns (determined in accordance with Rule 13d-3 under
the Exchange Act) less than 2% of the total combined  voting power of all voting
securities then  outstanding,  provided,  that Sections 3.1, 3.2, 3.4, 3.5, 3.7,
3.8, 3.9 and 3.12 shall not expire until the Registration  Statement required by
Section 2 of the  Registration  Rights  Agreement  is no longer  required  to be
effective under the terms and conditions of Registration Rights Agreement.

         Section 9.11 Counterparts. This Agreement may be executed in any number
of  counterparts,  all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties  hereto,  it being  understood that all
parties  need not sign the same  counterpart.  In the  event  any  signature  is
delivered  by  facsimile  transmission,  the party  using such means of delivery
shall  cause  four (4)  additional  executed  signature  pages to be  physically
delivered  to the  other  parties  within  five  (5) days of the  execution  and
delivery hereof.

         Section 9.12  Publicity.  The Company agrees that it will not disclose,
and will not  include  in any  public  announcement,  the name of the  Purchaser
without the consent of the  Purchaser,  which consent shall not be  unreasonably
withheld,  or unless and until such  disclosure is required by law or applicable
regulation, and then only to the extent of such requirement.

         Section 9.13  Severability.  The  provisions of this  Agreement and the
Registration  Rights Agreement are severable and, in the event that any court of
competent jurisdiction shall determine that any one or more of the provisions or
part of the provisions  contained in this Agreement or the  Registration  Rights
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement or the Registration
Rights  Agreement  shall be reformed and construed as if such invalid or illegal

                                       26
<PAGE>

or unenforceable  provision, or part of such provision, had never been contained
herein,  so that such  provisions  would be valid,  legal and enforceable to the
maximum extent possible.

         Section  9.14  Further  Assurances.  From  and  after  the date of this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the  Purchaser  shall  execute and deliver such  instruments,  documents and
other writings as may be reasonably  necessary or desirable to confirm and carry
out and to effectuate fully the intent and purposes of this Agreement, the Note,
the Conversion  Shares,  the Warrant,  the Warrant  Shares and the  Registration
Rights Agreement.

         Section 9.15 Remedies.  The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Buyers by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly,  the
Company  acknowledges  that the  remedy at law for a 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 the provisions of this Agreement,  that the
Buyers shall be entitled,  in addition to all other available remedies at 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.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       27
<PAGE>

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

                                        ARMITEC, INC.

                                        By:_____________________________________
                                           Name:  Bruce R. Davis
                                           Title:   Chief Executive Officer

                                        STONESTREET LIMITED PARTNERSHIP

                                        By:_____________________________________
                                           Name:
                                           Title:

                                       28
<PAGE>

                                    EXHIBIT A

                    Purchaser / Number of Notes and Warrants

Name and Residence                  Number of Notes                Dollar Amount
of Purchaser                        and Warrants Purchased         of Investment
--------------------------          -----------------------        -------------

Filter International, Ltd.          Note: $100,000.00 Note.        $100,000.00
P.O. Box 43272                      Warrant: to purchase
Harnoff Jerusalem                   1,000,000 shares of
Fax No.: 011 972 2653 6272          Common Stock.

                                       29
<PAGE>

                                    EXHIBIT B

                       Form of Convertible Promissory Note

                                       30
<PAGE>

                                    EXHIBIT C

                                 Form of Warrant

                                       31
<PAGE>

                                    EXHIBIT D

                      Form of Registration Rights Agreement

                                       32
<PAGE>

                                    EXHIBIT E

                       Form of Transfer Agent Instructions

                                       33
<PAGE>

                                    EXHIBIT F

                                 Form of Opinion

                                       34EXHIBIT 10.2

THIS NOTE HAS NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE  "ACT"),  OR  APPLICABLE  STATE  SECURITIES  LAWS,  AND  MAY  NOT BE  SOLD,
TRANSFERRED,  PLEDGED OR  HYPOTHECATED  IN THE ABSENCE OF SUCH  REGISTRATION  OR
RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE REASONABLY
ACCEPTABLE  TO  THE  MAKER)  IN  THE  FORM,   SUBSTANCE  AND  SCOPE   REASONABLY
SATISFACTORY TO THE MAKER THAT THIS NOTE MAY BE SOLD, TRANSFERRED,  HYPOTHECATED
OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND
SUCH STATE SECURITIES LAWS.

                                        A
                       Secured Convertible Promissory Note
                                due June 5, 2004

No. CN-1                                                             $100,000.00
Dated:  June 5, 2002

         For value received, ARMITEC INC., a Delaware corporation (the "Maker"),
hereby promises to pay to the order of FILTER INTERNATIONAL LTD, Located at P.O.
Box 43272,  Harnoff Jerusalem,  (together with its successors,  representatives,
and permitted assigns,  the "Holder"),  in accordance with the terms hereinafter
provided,  the principal amount of one hundred  Thousand Dollars  ($100,000.00),
together with interest thereon.

         All  payments  under or  pursuant  to this Note shall be made in United
States  Dollars in immediately  available  funds to the Holder at the address of
the  Holder  first set forth  above or at such  other  place as the  Holder  may
designate from time to time in writing to the Maker or by wire transfer of funds
to the Holder's  account,  instructions for which are attached hereto as Exhibit
A. The  outstanding  principal  balance of this Note shall be due and payable on
June 5, 2004 (the "Maturity Date") or at such earlier time as provided herein.

                                   ARTICLE I

         Section  1.1  Purchase  Agreement.  This  Note  has been  executed  and
delivered pursuant to the Convertible Note Purchase Agreement,  dated as of June
5,  2002 (the  "Purchase  Agreement"),  by and  among the Maker and the  Holder.
Capitalized  terms used and not otherwise defined herein shall have the meanings
set forth for such terms in the Purchase Agreement.

         Section 1.2  Interest.  Beginning on the date hereof,  the  outstanding
principal  balance of this Note shall bear interest,  in arrears,  at a rate per
annum  equal to seven  percent  (7%),  payable  October  1, 2002 and  thereafter

                                       1
<PAGE>

semi-annually  and upon  earlier  conversion  or  prepaid  as  provided  herein.
Interest  shall be computed on the basis of a 360-day year of twelve (12) 30-day
months  and  shall  accrue  commencing  on the  issuance  date of this Note (the
"Issuance Date"). The interest shall be payable, at the option of the Holder, in
cash or shares of the Maker's  common  stock,  par value  $.00167 per share (the
"Common Stock");  provided, that if the Holder elects to receive any interest in
Common Stock, the Maker shall issue to the Holder registered and freely tradable
shares of Common  Stock.  The  number of shares of Common  Stock to be issued as
payment of accrued and unpaid  interest  shall be determined by dividing (a) the
total amount of accrued and unpaid interest to be converted into Common Stock by
the lesser of (i) $.07 and (ii) an amount  equal to 70% of the average Per Share
Market  Value (as  defined in Section  3.2(b)  hereof) for the three (3) Trading
Days (as  defined in Section  4.13  hereof)  having the lowest Per Share  Market
Value during the thirty (30) Trading Days prior to the date the interest payment
is due.  Furthermore,  upon the occurrence of an Event of Default (as defined in
Section 2.1  hereof),  then to the extent  permitted  by law, the Maker will pay
interest to the Holder,  payable on demand, on the outstanding principal balance
of the Note from the date of the Event of Default  until  payment in full at the
rate of fifteen percent (15%) per annum.

         Section 1.3 Payment on  Non-Business  Days.  Whenever any payment to be
made shall be due on a Saturday,  Sunday or a public  holiday  under the laws of
the State of New York, such payment may be due on the next  succeeding  business
day and such next  succeeding  day shall be included in the  calculation  of the
amount of accrued interest payable on such date.

         Section 1.4 Transfer.  This Note may be transferred or sold, subject to
the  provisions  of  Section  4.8 of this  Note,  or  pledged,  hypothecated  or
otherwise granted as security by the Holder.

         Section 1.5 Replacement. Upon receipt of a duly executed, notarized and
unsecured  written  statement from the Holder with respect to the loss, theft or
destruction of this Note (or any replacement  hereof),  and without requiring an
indemnity bond or other security,  or, in the case of a mutilation of this Note,
upon surrender and  cancellation of such Note, the Maker shall issue a new Note,
of like tenor and amount, in lieu of such lost,  stolen,  destroyed or mutilated
Note.

                                   ARTICLE II

                           EVENTS OF DEFAULT; REMEDIES

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

         (a) the Maker shall fail to make the payment of any amount of principal
outstanding on the date such payment is due hereunder; or

         (b) the Maker shall fail to make any  payment of interest  for a period
of five (5) days after the date such interest is due; or

                                       2
<PAGE>

         (c) the failure of the Company in having the following:

                  (i) the Form 8 K/A (Form 8-K shall be used for current reports
under Section 13 or 15(d) of the Securities Exchange Act of 1934, filed pursuant
to Rule 13a-11 or Rule 15d-11 and for reports of nonpublic  information required
to be disclosed by Regulation FD) with audited financials filed by June 20, 2002
and  all SEC  comments  cleared  by  June  30,  2002,  and

                  (ii) the Form 14C informational  Proxy (Information to holders
of record prior to annual or other  meeting)  filed no later than June 20, 2002,
and

                  (iii)  the   Registration   Statement   ("as  defined  in  the
Registration rights Agreement") filed no later than July 1, 2002, and

                  (iv) the Registration Statement, as amended to include all the
shares required to be reserved declared effective by the Securities and Exchange
Commission ("SEC") on or prior to September 30, 2002; and,

                  v failure to reserve  the shares  required  to be  reserved in
Section 1.2 of the  Convertible  Note  Purchase  Agreement  on or before July 1,
2002.

         (d) the Common Stock shall not be eligible for  quotation on and quoted
for  trading on the OTC  Bulletin  Board  ("OTC')  or listed for  trading on the
Nasdaq SmallCap Market, New York Stock Exchange,  American Stock Exchange or the
Nasdaq  National  Market (each,  a  "Subsequent  Market") and shall not again be
eligible for and quoted or listed for trading  thereon within five Trading Days;
or

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

         (f) the Maker  shall fail to (i) timely  delivery  the shares of Common
Stock  within five trading days after  delivery of notice of  conversion  of the
Note and any  interest  accrued  and unpaid,  (ii) timely file the  Registration
Statement  as of  the  filing  date  (as  defined  in  the  Registration  Rights
Agreement) or (iii) make the payment of any fees and/or liquidated damages under
this Note, the Purchase  Agreement or the Registration  Rights Agreement,  which
failure  in the  case of  items  (i) and  (iii) of this  Section  2.1(f)  is not
remedied within seven (7) business days after the incurrence thereof; or

         (g) while the  Registration  Statement  is  required  to be  maintained
effective  pursuant  to the  terms of the  Registration  Rights  Agreement,  the
effectiveness  of the Registration  Statement lapses for any reason  (including,
without  limitation,  the  issuance  of a stop order) or is  unavailable  to the
Holder for sale of the  Registrable  Securities (as defined in the  Registration
Rights  Agreement)  in  accordance  with the  terms of the  Registration  Rights
Agreement,  and such lapse or unavailability  continues for a period of ten (10)

                                       3
<PAGE>

consecutive   Trading   Days,   provided   that  the  cause  of  such  lapse  or
unavailability is not due to factors solely within the control of Holder; or

         (h) default shall be made in the  performance  or observance of (i) any
covenant, condition or agreement contained in this Note (other than as set forth
in clause (f) of this  Section  2.1) and such  default  upon notice is not fully
cured within seven (7) business  days after the  occurrence  thereof or (ii) any
material covenant, condition or agreement contained in the Purchase Agreement or
the  Registration  Rights Agreement which is not covered by any other provisions
of this Section 2.1 and such default upon notice is not fully cured within seven
(7) business days after the occurrence thereof; or

         (i) any material representation or warranty made by the Maker herein or
in the Purchase  Agreement or the  Registration  Rights Agreement shall prove to
have been false or breached in a material  respect on the date as of which made;
or

         (j) the Maker shall issue any debt securities which are not subordinate
to this Note on such terms as are  acceptable to the Holder of a majority of the
outstanding principal amount of this holder

         (k) the Maker shall (i) default in any payment of any amount or amounts
of principal  of or interest on any  Indebtedness  (other than the  Indebtedness
hereunder) the aggregate  principal amount of which Indebtedness is in excess of
$75,000 or (ii) a material default in the observance or performance of any other
agreement  or  condition  relating  to  any  indebtedness  or  contained  in any
instrument or agreement  evidencing,  securing or relating thereto, or any other
material  event shall occur or condition  exist,  the effect of which default or
other  event or  condition  is to cause,  or to permit  the  holder or holder or
beneficiary or  beneficiaries  of such  Indebtedness to cause with the giving of
notice  if  required,  such  Indebtedness  to  become  due  prior to its  stated
maturity.  The  Maker  shall  have  seven  days to  cure  the  defaults  in this
subsection 2.1(l); or

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

         (m) the Maker's  failure to comply with a  Conversion  Notice  tendered
within five (5) business  days after the receipt by the Maker of the  Conversion
Notice and the  certificates  representing  the Notes.  The Note itself does not
have  to  be  delivered   until  fully  paid.   In  the  event  the  shares  are
electronically  transferable,  then  delivery  of the  Shares  must  be  made by

                                       4
<PAGE>

electronic transfer provided, request for such electronic transfer has been made
by the Holder. A note representing the balance of the Note not so converted will
be provided to the Holder,  if requested by Holder  provided an original Note is
delivered to the Company.  To the event that the Holder  elects not to surrender
the  Note  for  reissuance  upon  partial  payment  or  conversion,  the  Holder
indemnifies  the Company  against ant and all loss or damange  attributable to a
third-party claim in an amount in excess of the actual amount then due under the
Note.

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

                                  ARTICLE III

                      CONVERSION; ANTIDILUTION; PREPAYMENT

         Section 3.1 Conversion  Option.  Upon the earlier of the  effectiveness
date of the definitive 14c to be filed that increases the authorized,  this Note
shall be  convertible  (in whole or in part),  at the option of the Holder  (the
"Conversion  Option"),  into such number of fully paid and non-assessable shares
of Common Stock (the  "Conversion  Rate") as is  determined by dividing (x) that
portion of the  outstanding  principal  balance plus accrued and unpaid interest
under the Note as of such  date that the  Holder  elects to  convert  by (y) the
Conversion  Price (as  hereinafter  defined) then in effect on the date on which
the  Holder  faxes a  notice  of  conversion  (the  "Conversion  Notice"),  duly
executed, to the Maker (facsimile number (404) 842-9418,  Attn.: Chief Executive
Officer) (the "Conversion Date"),  provided,  however, that the Conversion Price
shall be subject to  adjustment  as described in Section 3.6 below.

         Section 3.2 Conversion Price.

         (a) The term "Conversion  Price" shall mean the lesser of (A) $.07 (the
"Fixed  Conversion  Price") and (B) an amount equal to seventy  percent (70%) of
the average  Per Share  Market  Value for the three (3) Trading  Days having the
lowest Per Share  Market  Value during the thirty (30) Trading Days prior to the

                                       5
<PAGE>

Conversion  Date,  except that if during any period (a  "Black-out  Period"),  a
Holder is unable to trade any Common Stock issued or issuable upon conversion of
the Notes  immediately due to the  postponement of filing or delay or suspension
of effectiveness of a registration  statement or because the Maker has otherwise
informed such Holder that an existing  prospectus cannot be used at that time in
the sale or transfer of such Common Stock, such Holder shall have the option but
not the obligation on any Conversion Date within ten (10) Trading Days following
the expiration of the Black-out  Period of using the Conversion Price applicable
on such  Conversion  Date or any  Conversion  Price selected by such Holder that
would have been  applicable  had such  Conversion  Date been at any earlier time
during the Black-out Period or within the ten (10) Trading Days thereafter.

         (b) The term "Per Share Market Value" means on any particular  date (a)
the  closing  bid price of the  Common  Stock on such  date on the OTC  Bulletin
Board,  The  Nasdaq  Small-Cap  Market,  the  Nasdaq  National  Market  or other
registered  national  stock exchange on which the Common Stock is then listed or
if there is no such  price on such  date,  then the  closing  bid  price on such
exchange or quotation system on the date nearest  preceding such date, or (b) if
the Common Stock is not listed then on The Nasdaq Small-Cap  Market,  the Nasdaq
National Market or any registered national stock exchange, the closing bid price
for a share of Common  Stock in the  over-the-counter  market,  as  reported  by
NASDAQ or in the National Quotation Bureau Incorporated or similar  organization
or agency  succeeding  to its  functions  of  reporting  prices) at the close of
business on such date,  then the average of the three (3) lowest  closing bid or
closing  prices,  if  applicable,  of the "Pink  Sheet"  quotes for the relevant
thirty (30) day trading  conversion  period,  as determined in good faith by the
Holder,  or (d) if the Common Stock is not then publicly  traded the fair market
value of a share of Common Stock as determined by an  Independent  Appraiser (as
defined  in  Section  4.13  hereof)  selected  in good  faith by the Holder of a
majority in  interest of the Notes;  provided,  however,  that the Maker,  after
receipt of the determination by such Independent Appraiser, shall have the right
to select an additional  Independent  Appraiser,  in which case, the fair market
value  shall  be  equal  to the  average  of the  determinations  by  each  such
Independent Appraiser; and provided,  further that all determinations of the Per
Share Market  Value shall be  appropriately  adjusted  for any stock  dividends,
stock splits or other similar transactions during such period. The determination
of fair market value by an  Independent  Appraiser  shall be based upon the fair
market  value of the Issuer  determined  on a going  concern  basis as between a
willing buyer and a willing seller and taking into account all relevant  factors
determinative  of value,  and  shall be final and  binding  on all  parties.  In
determining   the  fair  market  value  of  any  shares  of  Common  Stock,   no
consideration shall be given to any restrictions on transfer of the Common Stock
imposed by agreement or by federal or state securities laws, or to the existence
or absence of, or any limitations on, voting rights

         Section 3.3 Mechanics of Conversion.

                                       6
<PAGE>

         (a) Not later than five (5) Trading Days after any Conversion Date, the
Maker will deliver to the applicable  Holder by express courier a certificate or
certificates which shall be free of restrictive legends and trading restrictions
(other  than  those   required  by  Section  5.1  of  the  Purchase   Agreement)
representing  the  number  of shares of Common  Stock  being  acquired  upon the
conversion  of  the  Notes.  If in  the  case  of  any  Conversion  Notice  such
certificate  or  certificates  are  not  delivered  to or  as  directed  by  the
applicable  Holder by the Fifth  Trading  Day  after  the  Conversion  Date (the
"Delivery Date"), the Holder shall be entitled by written notice to the Maker at
any  time  on  or  before  its  receipt  of  such  certificate  or  certificates
thereafter,  to  rescind  such  conversion,  in  which  event  the  Maker  shall
immediately  return  the  certificates   representing  the  Notes  tendered  for
conversion,  whereupon  the Maker and the Holder shall each be restored to their
respective  positions  immediately  prior  to the  delivery  of such  notice  of
revocation,  except that any amounts  described in Sections 3.3(b) and (c) shall
be payable through the date notice of rescission is given to the Maker.

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

         (c) In addition to any other  rights  available  to the Holder,  if the
Maker fails to deliver to the Holder such  certificate or certificates  pursuant
to Section 3.3(a) by the Delivery Date and if after the Delivery Date the Holder
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by such Holder of the Conversion  Shares which
the Holder  anticipated  receiving upon such  conversion (a "Buy-In"),  then the
Maker shall pay in cash to the Holder (in addition to any remedies  available to
or elected by the Holder) the amount by which (A) the  Holder's  total  purchase

                                       7
<PAGE>

price (including brokerage  commissions,  if any) for the shares of Common Stock
so purchased  exceeds (B) the aggregate  principal amount of the Notes for which
such conversion was not timely honored, together with interest thereon at a rate
of 15% per annum, accruing until such amount and any accrued interest thereon is
paid in full  (which  amount  shall be paid as  liquidated  damages and not as a
penalty).  For example,  if the Holder purchases shares of Common Stock having a
total  purchase  price of $11,000 to cover a Buy-In with respect to an attempted
conversion of $10,000  aggregate  principal amount of the Notes, the Maker shall
be required to pay the Holder $1,000,  plus  interest.  The Holder shall provide
the Maker written notice indicating the amounts payable to the Holder in respect
of the Buy-In.

         Section 3.4 Ownership Cap. Notwithstanding anything to the contrary set
forth in  Section 3 of this Note,  at no time may a holder of this Note  convert
this Note if the number of shares of Common Stock to be issued  pursuant to such
conversion  would exceed,  when aggregated with all other shares of Common Stock
owned by such  holder at such time,  the number of shares of Common  Stock which
would  result in such holder  owning more than 9.99% of all of the Common  Stock
outstanding  at such time;  provided,  however,  that upon a holder of this Note
providing the Company with 75 days notice  (pursuant to Section 4.1 hereof) (the
"Waiver  Notice")  that such  holder  would like to waive this  Section 3.4 with
regard to any or all shares of Common Stock  issuable  upon  conversion  of this
Note,  this  Section  3.4 will be of no force or effect  with regard to all or a
portion of the Note referenced in the Waiver Notice.

         Section 3.5 Intentionally Omitted.

         Section 3.6 Adjustment of Conversion Price.

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

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

                  (ii) Adjustments for Certain Dividends and  Distributions.  If
the Maker shall at any time or from time to time after the Issuance  Date,  make
or issue or set a record date for the  determination  of holder of Common  Stock
entitled to receive a dividend or other distribution payable in shares of Common
Stock,  then, and in each event, the applicable Fixed Conversion Price in effect
immediately  prior  to such  event  shall  be  decreased  as of the time of such
issuance  or, in the event such  record  date shall have been  fixed,  as of the
close of  business on such record  date,  by  multiplying,  as  applicable,  the
applicable Fixed Conversion Price then in effect by a fraction:

                                       8
<PAGE>

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

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

                  (iii) Adjustment for Other Dividends and Distributions. If the
Maker shall at any time or from time to time after the  Issuance  Date,  make or
issue or set a record  date for the  determination  of holder  of  Common  Stock
entitled  to  receive a  dividend  or other  distribution  payable in other than
shares of Common Stock, then, and in each event, an appropriate  revision to the
applicable  Fixed Conversion Price shall be made and provision shall be made (by
adjustments  of the  Conversion  Price or  otherwise)  so that the holder of the
Notes  shall  receive  upon  conversions  thereof,  in addition to the number of
shares of Common Stock receivable thereon, the number of securities of the Maker
which they would have received had their Notes been  converted into Common Stock
on the date of such event and had thereafter, during the period from the date of
such event to and  including  the  Conversion  Date,  retained  such  securities
(together with any  distributions  payable  thereon during such period),  giving
application to all adjustments  called for during such period under this Section
3.6(a)(iii) with respect to the rights of the holder of the Notes.

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

                  (v) Adjustments for Reorganization,  Merger,  Consolidation or
Sales of  Assets.  If at any time or from time to time after the  Issuance  Date
there  shall be a capital  reorganization  of the Maker  (other than by way of a
stock  split or  combination  of  shares  or stock  dividends  or  distributions
provided  for in  Section  3.6(a)(i),  (ii) and  (iii),  or a  reclassification,
exchange or  substitution of shares  provided for in Section  3.6(a)(iv)),  or a
merger or  consolidation of the Maker with or into another  corporation,  or the
sale of all or  substantially  all of the  Maker's  properties  or assets to any
other person (an  "Organic  Change"),  then as a part of such Organic  Change an
appropriate  revision to the Conversion  Price shall be made and provision shall
be made (by adjustments of the Conversion Price or otherwise) so that the holder

                                       9
<PAGE>

of each Note shall have the right  thereafter to convert such Note into the kind
and amount of shares of stock and other  securities  or property of the Maker or
any  successor  corporation  resulting  from Organic  Change.  In any such case,
appropriate  adjustment  shall be made in the  application  of the provisions of
this  Section  3.6(a)(v)  with  respect to the rights of the holder of the Notes
after  the  Organic  Change  to the end  that  the  provisions  of this  Section
3.6(a)(v)  (including any adjustment in the applicable  Conversion Price then in
effect and the number of shares of stock or other  securities  deliverable  upon
conversion  of the  Notes)  shall be  applied  after  that event in as nearly an
equivalent manner as may be practicable.

                  (vi)  Adjustments for Issuance of Additional  Shares of Common
Stock.  If the  Maker,  at any time after the  Issuance  Date,  shall  issue any
additional  shares of Common Stock  (otherwise than as provided in the foregoing
subsections  (i) through (v) of this  Section  3.6) (the  "Additional  Shares of
Common Stock"),  at a price per share less than the applicable  Fixed Conversion
Price  then in  effect  or  without  consideration,  then the  applicable  Fixed
Conversion  Price  upon each  such  issuance  shall be  adjusted  to that  price
(rounded to the nearest cent)  determined by multiplying  the  applicable  Fixed
Conversion Price then in effect by a fraction:

                           (1) the  numerator of which shall be equal to the sum
of (A) the number of shares of Common Stock outstanding immediately prior to the
issuance of such Additional Shares of Common Stock plus (B) the number of shares
of Common  Stock  (rounded  to the  nearest  whole  share)  which the  aggregate
consideration  for the total number of such Additional Shares of Common Stock so
issued  would  purchase  at a price  per  share  equal to the  applicable  Fixed
Conversion Price then in effect, and

                           (2) the  denominator  of which  shall be equal to the
number of shares of Common Stock  outstanding  immediately after the issuance of
such Additional Shares of Common Stock.

The  provisions  of this  subsection  (vi)  shall  not  apply  under  any of the
circumstances  for which an adjustment  is provided in  subsections  (i),  (ii),
(iii), (iv) or (v) of this Section 3.6(a). No adjustment of the applicable Fixed
Conversion  Price shall be made under this subsection  (a)(iv) upon the issuance
of any Additional Shares of Common Stock which are issued pursuant to any Common
Stock  Equivalent  (as defined  below) if upon the issuance of such Common Stock
Equivalent (x) any adjustment  shall have been made pursuant to subsection (vii)
of this Section 3.6(a) or (y) no adjustment was required  pursuant to subsection
(vii) of this Section 3.6(a).  No adjustment of the applicable  Fixed Conversion
Price shall be made under this  subsection (vi) in an amount less than $.005 per
share, but any such lesser adjustment shall be carried forward and shall be made
at the time and together  with the next  subsequent  adjustment,  if any,  which
together with any adjustments so carried forward shall amount to $.005 per share
or more;  provided that upon any adjustment of the applicable  Fixed  Conversion
Price as a result of any  dividend or  distribution  payable in Common  Stock or
Convertible  Securities (as defined below) or the reclassification,  subdivision
or combination  of Common Stock into a greater or smaller number of shares,  the
foregoing  figure of $.005 per share (or such figure as last adjusted)  shall be
adjusted (to the nearest  one-half  cent) in proportion to the adjustment in the
applicable Fixed Conversion Price.

                                       10
<PAGE>

                  (vii) Issuance of Common Stock Equivalents. If the Maker, at
any time after the Issuance Date, shall issue any securities convertible into or
exchangeable for, directly or indirectly, Common Stock ("Convertible
Securities"), other than this Note, or any rights or warrants or options to
purchase any such Common Stock or Convertible Securities, shall be issued or
sold (collectively, the "Common Stock Equivalents") and the price per share for
which Additional Shares of Common Stock may be issuable thereafter pursuant to
such Common Stock Equivalent shall be less than the applicable Fixed Conversion
Price then in effect, or if, after any such issuance of Common Stock
Equivalents, the price per share for which Additional Shares of Common Stock may
be issuable thereafter is amended or adjusted, and such price as so amended
shall be less than the applicable Fixed Conversion Price in effect at the time
of such amendment, then the applicable Fixed Conversion Price upon each such
issuance or amendment shall be adjusted as provided in the first sentence of
subsection (vi) of this Section 3.6(a) on the basis that (1) the maximum number
of Additional Shares of Common Stock issuable pursuant to all such Common Stock
Equivalents shall be deemed to have been issued (whether or not such Common
Stock Equivalents are actually then exercisable, convertible or exchangeable in
whole or in part) as of the earlier of (A) the date on which the Maker shall
enter into a firm contract for the issuance of such Common Stock Equivalent, or
(B) the date of actual issuance of such Common Stock Equivalent, and (2) the
aggregate consideration for such maximum number of Additional Shares of Common
Stock shall be deemed to be the minimum consideration received or receivable by
the Maker for the issuance of such Additional Shares of Common Stock pursuant to
such Common Stock Equivalent. No adjustment of the applicable Fixed Conversion
Price shall be made under this subsection (vii) upon the issuance of any
Convertible Security which is issued pursuant to the exercise of any warrants or
other subscription or purchase rights therefor, if any adjustment shall
previously have been made to the exercise price of such warrants then in effect
upon the issuance of such warrants or other rights pursuant to this subsection
(vii). If no adjustment is required under this subsection (vii) upon issuance of
any Common Stock Equivalent or once an adjustment is made under this subsection
(vii) based upon the Per Share Market Value in effect on the date of such
adjustment, no further adjustment shall be made under this subsection (vii)
based solely upon a change in the Per Share Market Value after such date.

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

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

                           (2) in the  event of any  consolidation  or merger of
the Maker in which the Maker is not the  surviving  corporation  or in which the
previously outstanding shares of Common Stock of the Maker shall be changed into
or exchanged for the stock or other securities of another corporation, or in the
event of any sale of all or  substantially  all of the  assets  of the Maker for

                                       11
<PAGE>

stock or other securities of any corporation,  the Maker shall be deemed to have
issued a number of shares of its Common Stock for stock or  securities  or other
property of the other  corporation  computed on the basis of the actual exchange
ratio on which the transaction was predicated,  and for a consideration equal to
the  fair  market  value on the date of such  transaction  of all such  stock or
securities or other property of the other  corporation.  If any such calculation
results in adjustment of the applicable Fixed Conversion Price, or the number of
shares of Common Stock issuable upon conversion of the Notes, the  determination
of the applicable Fixed Conversion Price or the number of shares of Common Stock
issuable  upon  conversion  of the  Notes  immediately  prior  to  such  merger,
consolidation  or sale,  shall be made after giving effect to such adjustment of
the number of shares of Common Stock issuable upon conversion of the Notes.

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

         (c)  Certain  Issues   Excepted.   Anything   herein  to  the  contrary
notwithstanding,  the Maker shall not be required to make any  adjustment of the
number of shares of Common Stock issuable upon  conversion of the Notes upon the
grant after the Issuance  Date of, or the exercise  after the Issuance  Date of,
options or warrants or rights to purchase stock under the Maker's existing or to
be adopted  (issued)  stock  option  plan or options  or  warrants  or rights to
purchase stock issued to officers and/or directors of the Company.

         (d) No Impairment. The Maker shall not, by amendment of its Certificate
of   Incorporation   or  through   any   reorganization,   transfer  of  assets,
consolidation,  merger,  dissolution,  issue or sale of  securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed  hereunder  by the Maker,  but will at all
times in good faith,  assist in the carrying out of all the  provisions  of this
Section  3.6  and in the  taking  of all  such  action  as may be  necessary  or
appropriate  in order to protect  the  Conversion  Rights of the Holder  against
impairment.

In the event a Holder shall elect to convert any Notes as provided  herein,  the
Maker cannot  refuse  conversion  based on any claim that such Holder or any one
associated or  affiliated  with such Holder has been engaged in any violation of
law, violation of an agreement to which such Holder is a party or for any reason
whatsoever,  unless,  an injunction from a court, on notice,  restraining and or
adjoining  conversion  of all or of said Notes  shall  have been  issued and the
Maker posts a surety  bond for the benefit of such Holder in an amount  equal to
130% of the  amount of the Notes the Holder  has  elected  to  convert  plus the
amount of the Notes  outstanding,  which bond shall  remain in effect  until the
completion  of  arbitration/litigation  of the dispute and the proceeds of which
shall be payable to such Holder in the event it obtains judgment.

         (e) Certificates as to Adjustments.  Upon occurrence of each adjustment
or  readjustment  of the  Fixed  Conversion  Price or number of shares of Common
Stock  issuable  upon  conversion of this Note pursuant to this Section 3.6, the
Maker at its expense shall promptly  compute such  adjustment or readjustment in

                                       12
<PAGE>

accordance with the terms hereof and furnish to the Holder a certificate setting
forth such adjustment and  readjustment,  showing in detail the facts upon which
such adjustment or readjustment is based. The Maker shall,  upon written request
of the Holder,  at any time,  furnish or cause to be  furnished to such holder a
like  certificate   setting  forth  such  adjustments  and  readjustments,   the
applicable  Fixed  Conversion  Price in effect at the  time,  and the  number of
shares of Common Stock and the amount,  if any, of other  securities or property
which  at the  time  would  be  received  upon  the  conversion  of  this  Note.
Notwithstanding  the  foregoing,  the Maker shall not be  obligated to deliver a
certificate  unless such certificate would reflect an increase or decrease of at
least one percent (1%) of such adjusted amount.

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

         (g) Fractional  Shares.  No fractional  shares of Common Stock shall be
issued upon  conversion of this Note. In lieu of any fractional  shares to which
the Holder would  otherwise  be entitled,  the Maker shall pay cash equal to the
product of such  fraction  multiplied  by the  average  of the Per Share  Market
Values of the Common Stock for the five (5) consecutive Trading Days immediately
preceding the Conversion Date.

         (h)  Reservation  of Common Stock.  The Maker shall  reserve  8,611,371
shares of common stock for the holder until the 14C proxy is deemed effective by
the Securities and Exchange commission. Subsequently at all times when this Note
shall be  outstanding,  the Company shall reserve and keep  available out of its
authorized  but unissued  Common Stock,  such number of share of Common Stock as
shall from time to time be sufficient to effect the  conversion of this Note and
all interest accrued thereon; provided that the number of shares of Common Stock
so reserved shall at no time be less than 200% of the number of shares of Common
Stock  for which  this Note and all  interest  accrued  thereon  are at any time
convertible.  The Maker shall, from time to time in accordance with the Delaware
General Corporation Law, as amended, increase the authorized number of shares of
Common Stock if at any time the unissued  number of authorized  shares shall not
be sufficient to satisfy the Maker's obligations under this Section 3.6(h).

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

         Section 3.7 Prepayment.

                                       13
<PAGE>

         (a) Prepayment  Upon an Event of Default.  Notwithstanding  anything to
the  contrary  contained  herein,  upon the  occurrence  of an Event of  Default
described in Sections  2.1(a)-(k)  hereof,  the Holder shall have the right,  at
such  Holder's  option,  to require the Maker to prepay all or a portion of this
Note at a price equal to Prepayment  Price (as defined in Section  3.7(c) below)
applicable  at the time of such  request.  Nothing in this Section  3.7(a) shall
limit the Holder's rights under Section 2.2 hereof.

         (b) Prepayment Option Upon Major Transaction.  In addition to all other
rights of the  holder  of the  Notes  contained  herein,  simultaneous  with the
occurrence of a Major  Transaction (as defined below),  each holder of the Notes
shall have the right,  at such holder's  option,  to require the Maker to prepay
all or a portion of such  holder's  Notes at a price equal to the greater of (i)
115% of the aggregate  principal amount of the Notes and (ii) the product of (A)
the  Conversion  Rate and (B) the Per Share  Market Value of the Common Stock on
the Trading Day immediately preceding such Major Transaction ("Major Transaction
Prepayment Price").

         (c) Prepayment  Option Upon Triggering  Event. In addition to all other
rights of the holder of the Notes contained herein, after a Triggering Event (as
defined below),  each holder of the Notes shall have the right, at such holder's
option,  to require the Maker to prepay all or a portion of such holder's  Notes
at a price equal to the greater of (i) 130% of the aggregate principal amount of
the Notes and (ii) the product of (A) the  Conversion  Rate at such time and (B)
the Per  Share  Market  Value  of the  Common  Stock  calculated  as of the date
immediately  preceding such Triggering  Event on which the exchange or market on
which the Common Stock is traded is open  ("Triggering  Event Prepayment  Price"
and,  collectively with "Major  Transaction  Prepayment  Price," the "Prepayment
Price").

         (d) "Major  Transaction." A "Major Transaction" shall be deemed to have
occurred at such time as any of the  following  events:  (i) the  consolidation,
merger or other  business  combination  of the Maker with or into another Person
(as defined in Section  4.13  hereof)  (other  than (A)  pursuant to a migratory
merger  effected  solely  for  the  purpose  of  changing  the  jurisdiction  of
incorporation  of the Maker or (B) a  consolidation,  merger  or other  business
combination in which holder of the Maker's voting power immediately prior to the
transaction continue after the transaction to hold, directly or indirectly,  the
voting power of the surviving  entity or entities  necessary to elect a majority
of the members of the board of directors  (or their  equivalent  if other than a
corporation) of such entity or entities).

                  (ii) the sale or transfer of all or  substantially  all of the
Maker's assets; or

                  (iii)  consummation  of a purchase,  tender or exchange  offer
made to the holder of more than 30% of the outstanding shares of Common Stock.

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

                  (i) the failure of the  Registration  Statement to be declared
effective by the SEC on or prior to September 30, 2002,  provided that the Maker

                                       14
<PAGE>

has failed to file the  Registration  Statement on or before the Filing Date (as
defined in the Registration  Rights Agreement) or respond to any and each of the
SEC's comments  within  fifteen (15) days of the Maker's  receipt of each of the
SEC's comments;

                  (ii)  while  the  Registration  Statement  is  required  to be
maintained effective pursuant to the terms of the Registration Rights Agreement,
the   effectiveness  of  the  Registration   Statement  lapses  for  any  reason
(including,  without limitation, the issuance of a stop order) or is unavailable
to the holder of the Notes for sale of the Registrable Securities (as defined in
the  Registration  Rights  Agreement)  in  accordance  with  the  terms  of  the
Registration Rights Agreement,  and such lapse or unavailability continues for a
period of ten (10)  consecutive  Trading  Days,  provided that the cause of such
lapse is not due to  factors  within  the  control  of the  Maker and not due to
factors solely within the control of such holder of the Notes;

                  (iii) the suspension from trading or the failure of the Common
Stock  to be  traded  on the  OTC  Bulletin  Board  for a  period  of  five  (5)
consecutive days.

                  (iv) the Maker's notice to any holder of the Notes,  including
by way of public  announcement,  and SEC filing at any time, of its inability to
comply  (including  for any of the  reasons  described  in  Section  3.8) or its
intention not to comply with proper  requests for conversion of any of the Notes
into shares of Common Stock;

                  (v) the Maker breaches any representation,  warranty, covenant
or other term or condition of the Purchase  Agreement,  the Registration  Rights
Agreement or any other  agreement,  document,  certificate  or other  instrument
delivered in connection with the transactions contemplated thereby or hereby.

         (f) Mechanics of Prepayment at Option of Buyer Upon Major  Transaction.
No sooner  than  fifteen  (15) days nor  later  than ten (10) days  prior to the
consummation of a Major Transaction, but not prior to the public announcement of
such Major  Transaction,  the Maker shall  deliver  written  notice  thereof via
facsimile and overnight  courier ("Notice of Major  Transaction") to each holder
of the Notes. At any time after receipt of a Notice of Major Transaction (or, in
the event a Notice of Major  Transaction is not delivered at least ten (10) days
prior to a Major Transaction,  at any time within ten (10) days prior to a Major
Transaction),  any holder of the Notes then outstanding may require the Maker to
prepay,   effective   immediately  prior  to  the  consummation  of  such  Major
Transaction,  all of the holder's Notes then  outstanding by delivering  written
notice  thereof via facsimile and  overnight  courier  ("Notice of Prepayment at
Option  of  Buyer  Upon  Major  Transaction")  to the  Maker,  which  Notice  of
Prepayment  at Option of Buyer Upon Major  Transaction  shall  indicate  (i) the
number of Notes that such holder is  electing to prepay and (ii) the  applicable
Major  Transaction  Prepayment  Price, as calculated  pursuant to Section 3.7(b)
above.

         (g) Mechanics of Prepayment at Option of Buyer Upon  Triggering  Event.
Within one (1) day after the occurrence of a Triggering  Event,  the Maker shall
deliver written notice thereof via facsimile and overnight  courier  ("Notice of
Triggering Event") to each holder of the Notes. At any time after the earlier of
a holder's  receipt of a Notice of  Triggering  Event and such  holder  becoming
aware of a  Triggering  Event,  any  holder of the Notes  then  outstanding  may

                                       15
<PAGE>

require  the  Maker to  prepay  all of the Notes by  delivering  written  notice
thereof via facsimile and overnight  courier ("Notice of Prepayment at Option of
Buyer Upon Triggering Event") to the Maker, which Notice of Prepayment at Option
of Buyer Upon Triggering  Event shall indicate (i) the number of Notes that such
holder is electing to prepay and (ii) the applicable Triggering Event Prepayment
Price, as calculated pursuant to Section 3.7(c) above.

         (h)  Payment  of  Prepayment  Price.  Upon  the  Maker's  receipt  of a
Notice(s) of Prepayment at Option of Buyer Upon Triggering  Event or a Notice(s)
of Prepayment at Option of Buyer Upon Major  Transaction  from any holder of the
Notes, the Maker shall immediately  notify each holder of the Notes by facsimile
of the Maker's  receipt of such  Notice(s) of Prepayment at Option of Buyer Upon
Triggering  Event or  Notice(s)  of  Prepayment  at Option of Buyer  Upon  Major
Transaction  and each holder which has sent such a notice shall promptly  submit
to the Maker such holder's certificates representing the Notes which such holder
has elected to have prepaid.  The Maker shall deliver the applicable  Triggering
Event Prepayment Price, in the case of a prepayment  pursuant to Section 3.7(g),
to such holder  within  five (5)  business  days after the Maker's  receipt of a
Notice of Prepayment at Option of Buyer Upon  Triggering  Event and, in the case
of a  prepayment  pursuant  to  Section  3.7(f),  the Maker  shall  deliver  the
applicable  Major   Transaction   Prepayment  Price  immediately  prior  to  the
consummation  of the Major  Transaction;  provided that a holder's  certificates
representing  the Notes  shall have been so  delivered  to the  Maker;  provided
further  that if the Maker is unable to prepay  all of the Notes to be  prepaid,
the Maker shall  prepay an amount  from each  holder of the Notes being  prepaid
equal to such  holder's  pro-rata  amount  (based on the number of Notes held by
such  holder  relative  to the number of Notes  outstanding)  of all Notes being
prepaid.  If the Maker  shall  fail to prepay  all of the  Notes  submitted  for
prepayment (other than pursuant to a dispute as to the arithmetic calculation of
the  Prepayment  Price),  in addition to any remedy such holder of the Notes may
have under this Note and the Purchase Agreement, the applicable Prepayment Price
payable in respect of such Notes not prepaid  shall bear interest at the rate of
2.0% per month (prorated for partial months) until paid in full. Until the Maker
pays such unpaid  applicable  Prepayment  Price in full to a holder of the Notes
submitted for prepayment,  such holder shall have the option (the "Void Optional
Prepayment  Option")  to, in lieu of  prepayment,  require the Maker to promptly
return to such  holder(s) all of the Notes that were submitted for prepayment by
such holder(s)  under this Section 3.7 and for which the  applicable  Prepayment
Price has not been paid,  by  sending  written  notice  thereof to the Maker via
facsimile (the "Void Optional Prepayment  Notice").  Upon the Maker's receipt of
such  Void  Optional  Prepayment  Notice(s)  and  prior to  payment  of the full
applicable  Prepayment Price to such holder,  (i) the Notice(s) of Prepayment at
Option of Buyer Upon  Triggering  Event or the Notice(s) of Prepayment at Option
of Buyer Upon Major Transaction, as the case may be, shall be null and void with
respect to those Notes  submitted for  prepayment  and for which the  applicable
Prepayment Price has not been paid, (ii) the Maker shall immediately  return any
Notes  submitted to the Maker by each holder for  prepayment  under this Section
3.7(h) and for which the applicable Prepayment Price has not been paid and (iii)
the  Conversion  Price of such returned Notes shall be adjusted to the lesser of
(A) the  Conversion  Price as in effect  on the date on which the Void  Optional
Prepayment  Notice(s)  is  delivered  to the Maker and (B) the  lowest Per Share
Market Value during the period  beginning on the date on which the  Notice(s) of
Prepayment  of  Option of Buyer  Upon  Major  Transaction  or the  Notice(s)  of
Prepayment  at Option of Buyer  Upon  Triggering  event,  as the case may be, is

                                       16
<PAGE>

delivered  to the  Maker  and  ending  on the  date on which  the Void  Optional
Prepayment  Notice(s)  is delivered to the Maker;  provided  that no  adjustment
shall be made if such  adjustment  would result in an increase of the Conversion
Price then in effect. A holder's  delivery of a Void Optional  Prepayment Notice
and  exercise of its rights  following  such notice shall not effect the Maker's
obligations  to make any payments  which have accrued  prior to the date of such
notice.  Payments  provided  for in this  Section  3.7 shall  have  priority  to
payments to other stockholder in connection with a Major Transaction.

         Section 3.8 Optional Prepayment.

         (a) Subject to Section 3.8(b) below,  the Company shall have the right,
exercisable  at any time and from time to time after the Original Issue Date, in
accordance with the terms hereof and upon ten Trading Days' prior written notice
to the Holder to be prepaid (an "Optional Prepayment Notice"),  to prepay all or
any portion of the outstanding  principal amount of the Debentures which has not
previously been repaid or for which Conversion  Notices have not previously been
delivered.  The prepayment  price  applicable to prepayments  under this Section
5(a) shall  equal 130% of the unpaid  principal  and shall be paid in cash.  Any
such prepayment  shall be free of any claim of  subordination.  The Holder shall
have the right to  tender,  and the  Company  shall  honor,  Conversion  Notices
delivered  prior to the expiration of the tenth Trading Day after receipt by the
Holder of an Optional  Prepayment  Notice for such Debentures (the tenth Trading
Day after receipt by the Holder of an Optional  Prepayment Notice is referred to
herein as the "Optional Prepayment Date")

         (b) The Company shall not be entitled to deliver an Optional Prepayment
Notice to the Holder (and, if after  delivery  thereof and prior to the Optional
Prepayment  Date,  any of the following  conditions  shall cease to be met, such
notice,  at the option of the Holder,  shall be deemed no longer  effective) if:
(i) the number of shares of Common  Stock at the time  authorized,  unissued and
unreserved for all purposes is insufficient to satisfy the Company's  conversion
obligations of the aggregate principal amount of Debentures then outstanding, or
(ii) there is neither an  effective  Underlying  Shares  Registration  Statement
under which the Holder can resell all of the issued Underlying Shares and all of
the Underlying  Shares as are issuable upon  conversion in full of the principal
amount of  Debentures  subject to an Optional  Prepayment  Notice nor may all of
such issued and issuable Underlying Shares be sold by the Holder subject to such
prepayment  without volume  restrictions  pursuant to Rule 144 promulgated under
the  Securities  Act,  as  determined  by counsel to the  Company  pursuant to a
written  opinion letter,  addressed to the Company's  transfer agent in the form
and substance  acceptable to the Holder and such  transfer  agent,  or (iii) the
Common  Stock  is not then  listed  or  quoted  for  trading  on the OTC or on a
Subsequent Market.

         (c) If any  portion of the  Prepayment  Price  shall not be paid by the
Company by the second (2nd) Trading Day following the Optional  Prepayment Date,
the Prepayment Price shall be increased by 15% per annum (or such lesser maximum
amount that is permitted to be paid by applicable  law) to accrue daily from the
date such  interest is due  hereunder  through and including the date of payment
(which  amount  shall be paid as  liquidated  damages and not as a penalty).  In
addition,  if any portion of the  Prepayment  Price remains  unpaid  through the
expiration  of  the  Optional  Prepayment  Date,  the  Holder  subject  to  such

                                       17
<PAGE>

prepayment  may elect by  written  notice to the  Company  to either  (x) demand
conversion in accordance with the formula and the time period therefor set forth
in Section 4 of any portion of the principal  amount of Debentures for which the
Prepayment Price, plus accrued  liquidated damages and accrued interest thereon,
has not been paid in full (the "Unpaid Prepayment  Principal Amount"),  in which
event the  applicable Per Share Market Value shall be the lower of the Per Share
Market Value calculated on the Optional Prepayment Date and the Per Share Market
Value as of the Holder's  written  demand for  conversion,  or (y) invalidate ab
initio such optional  prepayment,  notwithstanding  anything herein contained to
the contrary.  If the Holder elects option (x) above, the Company shall,  within
five Trading Days after such election is deemed delivered hereunder,  deliver to
the Holder the shares of Common Stock  issuable  upon  conversion  of the Unpaid
Prepayment  Principal  Amount  subject to such  conversion  demand and otherwise
perform its  obligations  hereunder with respect  thereto.  If the Holder elects
option (y) above,  the Company shall  promptly,  and in any event not later than
five Trading Days from receipt of notice of such election,  return to the Holder
new  Debentures  for the full Unpaid  Prepayment  Principal  Amount and shall no
longer have any  prepayment  rights under this  Debenture.  If, upon an election
under option (x) above, the Company fails to deliver  certificates  representing
the shares of Common Stock  issuable upon  conversion  of the Unpaid  Prepayment
Principal  Amount within the time period set forth in this Section,  the Company
shall pay to the Holder in cash,  as  liquidated  damages  and not as a penalty,
$2,500 per day until the Company delivers such certificates to the Holder.

         Section 3.9 Inability to Fully Convert.

         (a) Holder's Option if Maker Cannot Fully Convert. If, upon the Maker's
receipt of a  Conversion  Notice,  the Maker cannot issue shares of Common Stock
registered  for  resale  under  the  Registration   Statement  for  any  reason,
including, without limitation,  because the Maker (w) does not have a sufficient
number of shares of Common  Stock  authorized  and  available,  (x) is otherwise
prohibited  by  applicable  law or by the  rules  or  regulations  of any  stock
exchange,  interdealer  quotation system or other  self-regulatory  organization
with  jurisdiction  over the Maker or any of its securities  from issuing all of
the Common  Stock which is to be issued to the Holder  pursuant to a  Conversion
Notice or (y)  fails to have a  sufficient  number  of  shares  of Common  Stock
registered  for resale under the  Registration  Statement,  then the Maker shall
issue as many shares of Common Stock as it is able to issue in  accordance  with
the Holder's  Conversion Notice and, with respect to the unconverted  portion of
the Note, the Holder, solely at Holder's option, can elect to:

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

                  (ii) if the Maker's  inability  to fully  convert  require the
Maker to issue  restricted  shares of Common  Stock equal to one hundred  twenty
percent  (120%) of the  number of shares of Common  Stock the Maker is unable to
deliver in accordance with such holder's Conversion Notice;

                                       18
<PAGE>

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

         (b)  Mechanics  of  Fulfilling  Holder's  Election.   The  Maker  shall
immediately  send via facsimile to the Holder,  upon receipt of a facsimile copy
of a  Conversion  Notice  from the Holder  which  cannot be fully  satisfied  as
described in Section  3.9(a) above,  a notice of the Maker's  inability to fully
satisfy the Conversion  Notice (the "Inability to Fully Convert  Notice").  Such
Inability to Fully Convert Notice shall indicate (i) the reason why the Maker is
unable to fully satisfy such holder's  Conversion Notice, (ii) the amount of the
Note which cannot be converted  and (iii) the  applicable  Mandatory  Prepayment
Price.  The Holder shall  notify the Maker of its  election  pursuant to Section
3.8(a) above by delivering written notice via facsimile to the Maker ("Notice in
Response to Inability to Convert").

         (c) Payment of Prepayment  Price. If the Holder shall elect to have its
shares  prepaid  pursuant to Section  3.9(a)(i)  above,  the Maker shall pay the
Mandatory  Prepayment  Price in cash to the Holder within five (5) business days
of the  Maker's  receipt of the  Holder's  Notice in Response  to  Inability  to
Convert,  provided that prior to the Maker's  receipt of the Holder's  Notice in
Response to  Inability  to Convert  the Maker has not  delivered a notice to the
Holder stating,  to the satisfaction of the Holder,  that the event or condition
resulting in the Mandatory  Prepayment has been cured and all Conversion  Shares
issuable  to the Holder can and will be  delivered  to the Holder in  accordance
with the terms of this  Note.  If the  Maker  shall  fail to pay the  applicable
Mandatory  Prepayment Price to the Holder on a timely basis as described in this
Section 3.8(c) (other than pursuant to a dispute as to the  determination of the
arithmetic  calculation of the Prepayment  Price), in addition to any remedy the
Holder may have under this Note and the Purchase  Agreement,  such unpaid amount
shall bear interest at the rate of 2.0% per month  (prorated for partial months)
until paid in full. Until the full Mandatory Prepayment Price is paid in full to
the Holder,  the Holder may (i) void the  Mandatory  Prepayment  with respect to
that portion of the Note for which the full Mandatory  Prepayment  Price has not
been paid,  (ii) receive back such Note,  and (iii) require that the  Conversion
Price of such  returned  Note be  adjusted  to the lesser of (A) the  Conversion
Price  as in  effect  on the date on  which  the  Holder  voided  the  Mandatory
Prepayment and (B) the lowest Per Share Market Value during the period beginning
on the  Conversion  Date and ending on the date the Holder  voided the Mandatory
Prepayment.

         Section 3.9 No Rights as  Shareholder.  Nothing  contained in this Note
shall be construed as  conferring  upon the Holder,  prior to the  conversion of
this Note, the right to vote or to receive dividends or to consent or to receive
notice as a  shareholder  in  respect  of any  meeting  of  shareholder  for the
election of directors of the Maker or of any other  matter,  or any other rights
as a shareholder  of the Maker.  Upon the issuance of a Conversion  Notice,  the
Holder shall have all rights as a shareholder of the Maker.

                                       19
<PAGE>

                                   ARTICLE IV

                                  MISCELLANEOUS

         Section 4.1  Notices.  Any  notice,  demand,  request,  waiver or other
communication  required or permitted to be given  hereunder  shall be in writing
and shall be effective (a) upon hand delivery by telex (with correct answer back
received),  telecopy or  facsimile  at the address or number  designated  in the
Purchase  Agreement (if delivered on a business day during normal business hours
where such notice is to be received),  or the first  business day following such
delivery (if delivered other than on a business day during normal business hours
where such notice is to be received) or (b) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to such
address,  or upon actual receipt of such mailing,  whichever  shall first occur.
The Maker will give written notice to the Holder at least twenty (20) days prior
to the date on which  the  Maker  closes  its  books or takes a record  (x) with
respect to any dividend or distribution  upon the Common Stock, (y) with respect
to any pro  rata  subscription  offer  to  holder  of  Common  Stock  or (z) for
determining  rights to vote with  respect to any  Organic  Change,  dissolution,
liquidation  or winding-up and in no event shall such notice be provided to such
holder prior to such information being made known to the public.  The Maker will
also give  written  notice to the Holder at least  twenty (20) days prior to the
date on which any Organic  Change,  dissolution,  liquidation or winding-up will
take place and in no event shall such notice be provided to the Holder  prior to
such information being made known to the public.

         Section 4.2 Governing Law. This Note shall be governed by and construed
in accordance  with the internal laws of the State of New York,  without  giving
effect to the choice of law  provisions.  This Note shall not be  interpreted or
construed  with any  presumption  against  the  party  causing  this  Note to be
drafted.

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

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

                                       20
<PAGE>

breach, the Holder shall be entitled,  in addition to all other available rights
and remedies,  at law or in equity,  to seek and obtain such  equitable  relief,
including  but not  limited  to an  injunction  restraining  any such  breach or
threatened  breach,  without the necessity of showing  economic loss and without
any bond or other security being required.

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

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

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

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

          " THIS NOTE HAS NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT
          OF  1933,  AS  AMENDED  (THE  "ACT"),   OR  APPLICABLE   STATE
          SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED,  PLEDGED OR
          HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY
          THE MAKER OF AN  OPINION OF COUNSEL  (WHICH  COUNSEL  SHALL BE
          REASONABLY ACCEPTABLE TO THE MAKER) IN THE FORM, SUBSTANCE AND
          SCOPE REASONABLY  SATISFACTORY TO THE MAKER THAT THIS NOTE MAY
          BE SOLD,  TRANSFERRED,  HYPOTHECATED OR OTHERWISE DISPOSED OF,
          UNDER AN EXEMPTION  FROM  REGISTRATION  UNDER THE ACT AND SUCH
          STATE SECURITIES LAWS."

         Section 4.9 Consent to  Jurisdiction.  Each of the Maker and the Holder
(i) hereby  irrevocably  submits  to the  exclusive  jurisdiction  of the United
States  District  Court  sitting in the  Southern  District  of New York and the
courts of the State of New York  located in New York county for the  purposes of
any suit, action or proceeding  arising out of or relating to this Note and (ii)
hereby waives,  and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally  subject to the  jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient  forum or that
the venue of the suit,  action or proceeding is improper.  Each of the Maker and
the  Holder  consents  to  process  being  served  in any such  suit,  action or
proceeding  by mailing a copy thereof to such party at the address in effect for
notices to it under the Purchase  Agreement  and agrees that such service  shall
constitute good and sufficient service of process and notice thereof. Nothing in
this Section 4.9 shall  affect or limit any right to serve  process in any other
manner permitted by law.

                                       21
<PAGE>

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

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

         Section 4.12 Maker Waivers.  Except as otherwise  specifically provided
herein,  the Maker and all others that may become  liable for all or any part of
the obligations evidenced by this Note, hereby waive presentment, demand, notice
of nonpayment, protest and all other demands' and notices in connection with the
delivery,  acceptance,  performance  and enforcement of this Note, and do hereby
consent to any number of renewals of  extensions  of the time or payment  hereof
and agree that any such renewals or extensions may be made without notice to any
such persons and without affecting their liability herein and do further consent
to the release of any person liable hereon,  all without affecting the liability
of the other persons, firms or Maker liable for the payment of this Note, AND DO
HEREBY WAIVE TRIAL BY JURY.

         (a) No delay or  omission on the part of the Holder in  exercising  its
rights under this Note, or course of conduct relating hereto, shall operate as a
waiver of such rights or any other right of the Holder,  nor shall any waiver by
the Holder of any such right or rights on any one occasion be deemed a waiver of
the same right or rights on any future occasion.

         (b) THE MAKER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A
PART IS A COMMERCIAL  TRANSACTION,  AND TO THE EXTENT ALLOWED BY APPLICABLE LAW,
HEREBY  WAIVES ITS RIGHT TO NOTICE AND HEARING WITH  RESPECT TO ANY  PREJUDGMENT
REMEDY WHICH THE HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.

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

         "Independent Appraiser" means a nationally recognized or major regional
investment  banking firm or firm of independent  certified public accountants of
recognized standing (which may be the firm that regularly examines the financial
statements  of  the  Issuer)  that  is  regularly  engaged  in the  business  of
appraising  the Capital  Stock or assets of  corporations  or other  entities as
going concerns, and which is not affiliated with either the Issuer or the Holder
of any Warrant.

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

         "Trading  Day" means (a) a day on which the  Common  Stock is traded on
The Nasdaq  Small-Cap  Market,  the Nasdaq National  Market or other  registered
national stock exchange on which the Common Stock has been listed, or (b) if the
Common Stock is not listed on The Nasdaq Small-Cap  Market,  the Nasdaq National
Market or any  registered  national  stock  exchange,  a day or which the Common

                                       22
<PAGE>

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

         IN WITNESS  WHEREOF,  the Company has caused this  secured  Convertible
Debenture to be duly executed by a duly authorized  officer as of the date first
above indicated.

                                           ARMITEC, INC,

                                           By:  ________________________________
                                                Name: Bruce R. Davis
                                                Title:   Chief Executive Officer

                                       23
<PAGE>

                                    EXHIBIT A

                               WIRE INSTRUCTIONS.

Payee: ________________________________________________________

Bank:  ________________________________________________________

Address: ______________________________________________________

         ______________________________________________________

Bank No.: _____________________________________________________

Account No.:  _________________________________________________

Account Name: _________________________________________________

                                       24
<PAGE>

                                     FORM OF

                              NOTICE OF CONVERSION

     (To be Executed by the Registered Holder in order to Convert the Note)

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

Date of Conversion  ____________________________________________________________

Applicable Conversion Price * __________________________________________________

* Lesser of (A) $.07 (the "Fixed  Conversion  Price") and (B) an amount equal to
seventy  percent  (70%) of the average Per Share  Market Value for the three (3)
Trading  Days having the lowest Per Share  Market  Value  during the thirty (30)
Trading Days prior to the Conversion Date.

(Please  attach  printout  of stock  prices and a worksheet  showing  conversion
calculation)

Signature_______________________________________________________________________
         [Name]

Address:________________________________________________________________________

        ________________________________________________________________________

                                       25

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