Document:

8-K

                                                                    EXHIBIT 10.1

                   AMENDMENT, EXCHANGE AND PURCHASE AGREEMENT

     AMENDMENT, EXCHANGE AND PURCHASE AGREEMENT (this "AGREEMENT"), dated as of
April 8, 2008, by and between InkSure Technologies Inc., a Delaware corporation,
with headquarters located at 1770 N.W. 64th Street, Fort Lauderdale, Florida
33309 (the "COMPANY"), and [Smithfield Fiduciary LLC][OTHER INVESTORS] (the
"INVESTOR").

     WHEREAS:

     A. The Company, the Investor and certain other investors (the "OTHER
INVESTORS", and collectively with the Investor, the "INVESTORS") are parties to
that certain Securities Purchase Agreement, dated as of September 30, 2005 (the
"EXISTING SECURITIES PURCHASE AGREEMENT"), pursuant to which, among other
things, the Investors purchased from the Company senior convertible notes (the
"EXISTING NOTES"), which are convertible into shares of the Company's common
stock, par value $0.01 per share (the "COMMON STOCK") (the Existing Notes as
converted, the "EXISTING CONVERSION SHARES").

     B. In connection with the execution and delivery of the Existing Securities
Purchase Agreement, the Company entered into that certain Registration Rights
Agreement, dated September 30, 2005 (the "REGISTRATION RIGHTS AGREEMENT"), by
and among the Company and the Investors, pursuant to which the Company agreed to
provide certain registration rights with respect to the Registrable Securities
(as defined in the Existing Registration Rights Agreement) under the Securities
Act of 1933, as amended (the "1933 ACT"), and the rules and regulations
promulgated thereunder, and applicable state securities laws.

     C. The Company and the Investor desire to enter into this Agreement,
pursuant to which, among other things, (I) (i) the Company and the Investor
shall amend and restate all of such Investor's Existing Notes for (a) the senior
secured convertible notes of the Company in the form attached hereto as EXHIBIT
A (the "AMENDED NOTES") in the aggregate principal amount set forth opposite
such Investor's name in column (3) on the Securities Schedule attached hereto,
which shall be convertible into shares of Common Stock (the "AMENDED AND
RESTATED CONVERSION SHARES") and (b) warrants (the "SERIES B-1 WARRANTS") to
acquire that number of shares of Common Stock set forth opposite such Investor's
name in column (6) on the Securities Schedule (as exercised, collectively, the
"SERIES B-1 WARRANT SHARES") and (ii) and the Company shall pay to the Investor,
in cash, the interest payable under such Investor's Existing Notes through the
Closing Date (the "2008 INTEREST PAYMENT") in the amount set forth opposite the
Investor's name in column (11) of the Securities Schedule attached hereto and
(II) the Investor wishes to purchase, and the Company wishes to sell, upon the
terms and conditions stated in this Agreement, (i) that aggregate principal
amount of senior secured convertible notes of the Company in the form attached
hereto as EXHIBIT A (the "NEW NOTES", and together with the Amended and Restated
Notes, the "NOTES") set forth opposite the Investor's name in column (4) on the
Securities Schedule attached hereto (which aggregate amount for the Investor and
the Other Investors shall be $3,000,000), which shall be convertible into shares
of Common Stock (the "NEW CONVERSION SHARES", and together with the Amended and
Restated Conversion Shares, the "CONVERSION SHARES"), (ii) warrants, in
substantially the form attached hereto as EXHIBIT B (the "SERIES A WARRANTS"),
to acquire up to that number of additional shares of Common Stock set forth
opposite such Investor's name in column (5) of the Securities Schedule attached
hereto (as exercised, collectively, the "SERIES A WARRANT SHARES") and (iii)
warrants in substantially the form attached hereto as EXHIBIT C (the "SERIES B-2
WARRANTS" and together with the Series A Warrants and the Series B-1 Warrants,
the "WARRANTS") to acquire that number of shares of Common Stock set forth
opposite such Investor's name in column (7) on the Securities Schedule (as
exercised, collectively, the "SERIES B-2 WARRANT SHARES" and together with the
Series A Warrant Shares and the Series B-1 Warrant Shares, the "WARRANT
SHARES").

     D. The amendment and restatement of the Existing Notes for the Amended and
Restated Notes and the Series B-1 Warrants is being made in reliance upon the
exemption from registration provided by Section 3(a)(9) of the Securities Act of
1933, as amended (the "1933 ACT").

     E. The Notes will rank senior to all outstanding and future indebtedness of
the Company and its Subsidiaries (as hereinafter defined) and will be secured by
a first priority perfected security interest, in all of the assets of the
Company and the stock and assets of each Subsidiary, as evidenced by (i) a
security agreement, in the form attached hereto as EXHIBIT D (as amended or
modified from time to time in accordance with its terms, the "SECURITY
AGREEMENT"), and (ii) the guarantees of the Subsidiaries of the Company in the
form attached hereto as EXHIBIT E (as amended or modified from time to time in
accordance with its terms, the "GUARANTEES").

     F. The New Notes also are to be secured by the balance contained from time
to time in the Cash Collateral Account (as defined in Section 4(g) below)
pursuant to an Account Control Agreement (as defined in Section 4(g) below, and
together with the Security Agreement and the Guarantees, the "SECURITY
DOCUMENTS").

     G. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings ascribed to them in the Existing Securities
Purchase Agreement.

     NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the Company and the Investor hereby agree as
follows:

     1.   AMENDMENT AND RESTATEMENT OF EXISTING NOTES; PURCHASE AND SALE OF NEW
          NOTES AND WARRANTS.

          (a) AMENDMENT AND RESTATEMENT OF EXISTING NOTES; INTEREST PAYMENT.
     Subject to satisfaction (or waiver) of the conditions set forth in Sections
     5 and 6 below, at the closing contemplated by this Agreement (the
     "CLOSING"), (i) the Investor shall surrender to the Company its Existing
     Notes and the Company shall issue and deliver to the Investor (or as
     directed by the Investor) Notes in the principal amount set forth opposite
     the Investor's name in column (3) of the Securities Schedule attached
     hereto and Series B-1 Warrants to acquire up to that number of Series B-1
     Warrant Shares as is set forth opposite the Investor's name in column (6)
     on the Securities Schedule attached hereto and (ii) the Company shall pay
     to the Investor an amount in cash equal to the Investor's 2008 Interest
     Payment, as set forth opposite such Investor's name in column (11) on the
     Securities Schedule attached hereto.

                                        2

          (b) PURCHASE OF NEW NOTES AND WARRANTS. Subject to the satisfaction
     (or waiver) of the conditions set forth in Sections 5 and 6 below, at the
     Closing, the Company agrees to issue and sell to the Investor, and the
     Investor severally, but not jointly with any Other Investor, shall purchase
     from the Company, (x) the principal amount of New Notes as is set forth
     opposite the Investor's name in column (4) on the Securities Schedule
     attached hereto, (y) Series A Warrants to acquire up to that number of
     Series A Warrant Shares as is set forth opposite the Investor's name in
     column (5) on the Securities Schedule attached hereto and (z) Series B-2
     Warrants to acquire up to that number of Series B-2 Warrant Shares as is
     set forth opposite the Investor's name in column (7) on the Securities
     Schedule attached hereto.

          (c) PURCHASE PRICE.

               (i) The purchase price for the Investor of the New Notes and the
          Warrants to be purchased by the Investor at the Closing shall be the
          amount set forth opposite the Investor's name in column (7) of the
          Securities Schedule attached hereto (the "PURCHASE PRICE"). The
          Investor shall pay $1.00 for each $1.00 of principal amount of New
          Notes and the related Warrants to be purchased at the Closing.

               (ii) The Investor and the Company agree that the New Notes and
          the related Warrants constitute an "investment unit" for purposes of
          Section 1273(c)(2) of the Internal Revenue Code of 1986, as amended
          (the "CODE"). The Investor and the Company mutually agree that the
          allocation of the issue price of such investment unit between the New
          Notes and the Warrants in accordance with Section 1273(c)(2) of the
          Code and Treasury Regulation Section 1.1273-2(h) shall be an aggregate
          amount of $10,000 allocated to the related Warrants and the balance of
          the Purchase Price allocated to the New Notes, and neither the
          Investor nor the Company shall take any position inconsistent with
          such allocation in any tax return or in any judicial or administrative
          proceeding.

          (d) CLOSING DATE. The date and time of the Closing (the "CLOSING
     DATE") shall be 10:00 a.m., New York City time, on the date hereof, subject
     to notification of satisfaction (or waiver) of the conditions to the
     Closing set forth in Sections 5 and 6 below (or such other time and date as
     is mutually agreed to by the Company and the Investor). The Closing shall
     occur on the Closing Date at the offices of Schulte Roth & Zabel LLP,
     919 Third Avenue, New York, New York 10022.

          (e) FORM OF PAYMENT. On the Closing Date, (i) the Investor shall pay
     the Purchase Price to the Company for the New Notes and the related
     Warrants to be issued and sold to the Investor at the Closing (1) by wire
     transfer of immediately available funds in accordance with the Company's
     written wire instructions the amount set forth opposite the Investor's name
     in column (9) of the Securities Schedule attached hereto less the
     Collateral Account Amount (as defined below) and (2) by wire transfer of
     immediately available funds in accordance with the Company's written wire
     instructions the amount set forth opposite the Investor's name on column
     (10) of the Securities Schedule attached hereto (the "COLLATERAL ACCOUNT
     AMOUNT") into the Cash Collateral Account and (ii) the Company shall
     deliver to the Investor (or as directed by the Investor) (A) the New Notes
     (in the principal amounts as set forth opposite the Investor's name in
     column (4) on the Securities Schedule) which the Investor is then
     purchasing and (B) the Warrants (in the amounts as set forth opposite the
     Investor's name in columns (5) and (7) on the Securities Schedule) which
     the Investor is purchasing, in each case duly executed on behalf of the
     Company and registered in the name of the Investor or its designee.

                                        3

     2.   AMENDMENTS TO TRANSACTION DOCUMENTS.

          (a) RATIFICATIONS. Except as otherwise expressly provided herein, the
     Existing Securities Purchase Agreement and each other Transaction Document
     is, and shall continue to be, in full force and effect and is hereby
     ratified and confirmed in all respects, except that on and after the
     Closing Date (i) all references in the Existing Securities Purchase
     Agreement to "this Agreement", "hereto", "hereof", "hereunder" or words of
     like import referring to the Securities Purchase Agreement shall mean the
     Existing Securities Purchase Agreement as amended by this Agreement, (ii)
     all references in the other Transaction Documents to the "Securities
     Purchase Agreement", "thereto", "thereof", "thereunder" or words of like
     import referring to the Securities Purchase Agreement shall mean the
     Existing Securities Purchase Agreement as amended by this Agreement, and
     (iii) all references in the other Transaction Documents to the
     "Registration Rights Agreement", "thereto", "thereof", "thereunder" or
     words of like import referring to the Registration Rights Agreement shall
     mean the Registration Rights Agreement as amended by this Agreement.

          (b) AMENDMENT TO TRANSACTION DOCUMENTS. Each of the Transaction
     Documents are hereby amended as follows:

               (i) All references to "Notes" shall be amended to include
          additionally the Notes as defined in this Agreement.

               (ii) All references to "Conversion Shares" shall be amended to
          include additionally the Conversion Shares as defined in this
          Agreement.

               (iii) The defined term "Transaction Documents" is hereby amended
          to include this Agreement; the Warrants, each of the Security
          Documents and the Lock-Up Agreements.

          (c) AMENDMENT OF EXISTING SECURITIES PURCHASE AGREEMENT.

               (i) The defined term "Securities" is hereby amended to include
          the Warrants and the Warrant Shares.

               (ii) The first sentence of Section 4(o)(iii) of the Existing
          Securities Purchase Agreement is hereby amended and restated in its
          entirety as follows:

     "From the date hereof until the date that the Notes are no longer
     outstanding, the Company will not, directly or indirectly, effect any
     Subsequent Placement unless the Company shall have first complied with this
     Section 4(o)(iii).

          (d) Section 4(o)(iii)(1) of the Existing Securities Purchase Agreement
     is hereby amended and restated in its entirety as follows:

                                       4

     "The Company shall deliver to each Buyer a written notice (the "OFFER
     NOTICE") of any proposed or intended issuance or sale or exchange (the
     "OFFER") of the securities being offered (the "OFFERED SECURITIES") in a
     Subsequent Placement, which Offer Notice shall (w) identify and describe
     the Offered Securities, (x) describe the price and other terms upon which
     they are to be issued, sold or exchanged, and the number or amount of the
     Offered Securities to be issued, sold or exchanged, (y) identify the
     persons or entities (if known) to which or with which the Offered
     Securities are to be offered, issued, sold or exchanged and (z) offer to
     issue and sell to or exchange with such Buyers at least fifty percent (50%)
     of the Offered Securities, allocated among such Buyers (a) based on such
     Buyer's pro rata portion of the aggregate principal amount of Notes
     purchased hereunder (the "BASIC AMOUNT"), and (b) with respect to each
     Buyer that elects to purchase its Basic Amount, any additional portion of
     the Offered Securities attributable to the Basic Amounts of other Buyers as
     such Buyer shall indicate it will purchase or acquire should the other
     Buyers subscribe for less than their Basic Amounts (the "UNDERSUBSCRIPTION
     AMOUNT")."

          (e) WARRANTS AND WARRANT SHARES. The Company and the Investor agree
     that the provisions of the Existing Securities Purchase Agreement
     concerning the Notes and Conversion Shares shall apply to the Warrants and
     the Warrant Shares issued hereunder including, without limitation, that the
     certificates or other instruments representing the Warrants and the Warrant
     Shares shall be subject to Section 2(g) of the Existing Securities Purchase
     Agreement.

          (f) TERMINATION OF REGISTRATION OBLIGATIONS UNDER THE REGISTRATION
     RIGHTS AGREEMENT. The registration obligations in Section 2 of the
     Registration Rights Agreement are hereby terminated and the Company and the
     Investor agrees that the Investor and the Company shall be relieved of
     their respective obligations under Section 2 of the Registration Rights
     Agreement. Except as modified by the provisions hereof, the Registration
     Rights Agreement shall remain in full force and effect in accordance with
     its terms.

     3.   REPRESENTATIONS AND WARRANTIES

          (a) INVESTOR BRING DOWN. The Investor hereby represents and warrants
     to the Company with respect to itself only as set forth in Section 2 of the
     Existing Securities Purchase Agreement (other than Section 2(k)) as to this
     Agreement as if such representations and warranties were made as of the
     date hereof and set forth in their entirety in this Agreement. Such
     representations and warranties to the transactions thereunder and the
     securities issued thereby are hereby deemed for purposes of this Agreement
     to be references to the transactions hereunder and the issuance of the
     securities hereby.

          (b) COMPANY BRING DOWN. Except as set forth on the Amended and
     Restated Schedules attached hereto, which shall amend and restate the
     Schedules attached to the Existing Securities Purchase Agreement, the
     Company represents and warrants to the Investor as set forth in Section 3
     (other than Sections 3(l), 3(r) and 3(dd)) of the Securities Purchase
     Agreement as if such representations and warranties were made as of the
     date hereof and set forth in their entirety in this Agreement. Such
     representations and warranties to the transactions thereunder and the
     securities issued thereby are hereby deemed for purposes of this Agreement
     to be references to the transactions hereunder and the issuance of the
     securities hereby, references therein to "Closing Date" being deemed
     references to the Closing Date as defined in Section 1(d) above, and
     references to "the date hereof" being deemed references to the date of this
     Agreement.

                                       5

          (c) NO EVENT OF DEFAULT. The Company represents and warrants to the
     Investor that after giving effect to the terms of this Agreement and the
     Other Agreements (as defined below), no Event of Default (as defined in the
     Notes) shall have occurred and be continuing as of the date hereof.

          (d) KEY EMPLOYEES. The Company represents and warrants that each
     employee or group of employees of the Company and any of its Subsidiaries
     that is a key to its operations is party to an employment agreement with
     the Company or such Subsidiary which may not be terminated prior to the
     twelve (12) month anniversary of the date hereof. The Company does not have
     a present intention, or know of a present intention of its Subsidiaries, to
     terminate the employment of any officer, key employee or group of
     employees, nor does the Company or any of its Subsidiaries know of a
     present intention of any officer, key employee or group of employees to
     terminate their employment.

          (e) SHELL COMPANY STATUS. The Company has complied with all of the
     requirements set forth in Rule 144(i)(2).

          (f) ABSENCE OF CERTAIN CHANGES. Except as disclosed in SCHEDULE 3(L),
     since the date of Company's most recently filed audited financial
     statements contained in an Annual Report on Form 10-K, there has been no
     material adverse change and no material adverse development in the
     business, properties, operations, condition (financial or otherwise),
     results of operations or prospects of the Company. Except as disclosed in
     SCHEDULE 3(L), since the date of Company's most recently filed audited
     financial statements contained in an Annual Report on Form 10-K, the
     Company has not (i) declared or paid any dividends, (ii) sold any assets,
     individually or in the aggregate, in excess of $100,000 outside of the
     ordinary course of business or (iii) had capital expenditures, individually
     or in the aggregate, in excess of $100,000. The Company has not taken any
     steps to seek protection pursuant to any bankruptcy law nor does the
     Company have any knowledge or reason to believe that its creditors intend
     to initiate involuntary bankruptcy proceedings or any actual knowledge of
     any fact which would reasonably lead a creditor to do so. The Company is
     not as of the date hereof, and after giving effect to the transactions
     contemplated hereby to occur at the applicable Closing, will not be
     Insolvent (as defined below). For purposes of this Section 3(f),
     "INSOLVENT" means (i) the present fair saleable value of the Company's
     assets is less than the amount required to pay the Company's total
     Indebtedness (as defined in Section 3(s) of the Existing Securities
     Purchase Agreement), (ii) the Company is unable to pay its debts and
     liabilities, subordinated, contingent or otherwise, as such debts and
     liabilities become absolute and matured, (iii) the Company intends to incur
     or believes that it will incur debts that would be beyond its ability to
     pay as such debts mature or (iv) the Company has unreasonably small capital
     with which to conduct the business in which it is engaged as such business
     is now conducted and is proposed to be conducted.

                                       6

          (g) EQUITY CAPITALIZATION. As of the date hereof, the authorized
     capital stock of the Company consists of (i) 50,000,000 shares of Common
     Stock, of which as of the date hereof, 16,274,768 are issued and
     outstanding, 3,152,884 shares are reserved for issuance pursuant to the
     Company's stock option and purchase plans and 1,974,118 shares are reserved
     for issuance pursuant to securities (other than the Notes) exercisable or
     exchangeable for, or convertible into, shares of Common Stock and (ii)
     10,000,000 shares of preferred stock, $0.01 par value per share, of which
     as of the date hereof, none is issued and outstanding. All of such
     outstanding shares have been, or upon issuance will be, validly issued and
     are fully paid and nonassessable. Except as disclosed in SCHEDULE 3(R): (i)
     none of the Company's capital stock is subject to preemptive rights or any
     other similar rights or any liens or encumbrances suffered or permitted by
     the Company; (ii) there are no outstanding options, warrants, scrip, rights
     to subscribe to, calls or commitments of any character whatsoever relating
     to, or securities or rights convertible into, or exercisable or
     exchangeable for, any capital stock of the Company or any of its
     Subsidiaries, or contracts, commitments, understandings or arrangements by
     which the Company or any of its Subsidiaries is or may become bound to
     issue additional capital stock of the Company or any of its Subsidiaries or
     options, warrants, scrip, rights to subscribe to, calls or commitments of
     any character whatsoever relating to, or securities or rights convertible
     into, or exercisable or exchangeable for, any capital stock of the Company
     or any of its Subsidiaries; (iii) there are no outstanding debt securities,
     notes, credit agreements, credit facilities or other agreements, documents
     or instruments evidencing Indebtedness of the Company or any of its
     Subsidiaries or by which the Company or any of its Subsidiaries is or may
     become bound; (iv) there are no financing statements securing obligations
     in any material amounts, either singly or in the aggregate, filed in
     connection with the Company or any of its Subsidiaries; (v) there are no
     agreements or arrangements under which the Company or any of its
     Subsidiaries is obligated to register the sale of any of their securities
     under the 1933 Act; (vi) there are no outstanding securities or instruments
     of the Company or any of its Subsidiaries which contain any redemption or
     similar provisions, and there are no contracts, commitments, understandings
     or arrangements by which the Company or any of its Subsidiaries is or may
     become bound to redeem a security of the Company or any of its
     Subsidiaries, except to the extent that a cashless exercise feature in
     options or warrants may be treated as a redemption; (vii) there are no
     securities or instruments containing anti-dilution or similar provisions
     that will be triggered by the issuance of the Securities; (viii) the
     Company does not have any stock appreciation rights or "phantom stock"
     plans or agreements or any similar plan or agreement; and (ix) the Company
     and its Subsidiaries have no liabilities or obligations required to be
     disclosed in the SEC Documents but not so disclosed in the SEC Documents,
     other than those incurred in the ordinary course of the Company's or its
     Subsidiaries' respective businesses and which, individually or in the
     aggregate, do not or would not have a Material Adverse Effect. The Company
     has furnished to the Buyer true, correct and complete copies of the
     Company's Certificate of Incorporation, as amended and as in effect on the
     date hereof (the "CERTIFICATE OF INCORPORATION"), and the Company's Bylaws,
     as amended and as in effect on the date hereof (the "BYLAWS"), and the
     terms of all securities convertible into, or exercisable or exchangeable
     for, shares of Common Stock and the material rights of the holders thereof
     in respect thereto.

                                       7

     4.   CERTAIN COVENANTS AND AGREEMENTS; WAIVER

          (a) BEST EFFORTS. Each party shall use its best efforts timely to
     satisfy each of the conditions to be satisfied by it as provided in
     Sections 5 and 6 of this Agreement.

          (b) DISCLOSURE OF TRANSACTIONS AND OTHER MATERIAL INFORMATION. On or
     before 8:30 a.m., New York City time, on the first Business Day following
     the date of this Agreement, the Company shall issue a press release and
     file a Current Report on Form 8-K describing the terms of the transactions
     contemplated by this Agreement in the form required by the 1934 Act and
     attaching the material Transaction Documents not previously filed
     (including, without limitation, this Agreement, the Security Documents, the
     Lock-Up Agreements (as defined below), the form of the Notes and the form
     of the Warrants) (including all attachments, the "8-K FILING"). From and
     after the filing of the 8-K Filing with the SEC, the Investor shall not be
     in possession of any material, nonpublic information received from the
     Company, any of its Subsidiaries or any of its respective officers,
     directors, employees or agents, that is not disclosed in the 8-K Filing.
     The Company shall not, and shall cause each of its Subsidiaries and its and
     each of their respective officers, directors, employees and agents, not to,
     provide the Investor with any material, nonpublic information regarding the
     Company or any of its Subsidiaries from and after the filing of the 8-K
     Filing with the SEC without the express written consent of the Investor. If
     the Investor has, or believes it has, received any such material, nonpublic
     information regarding the Company or any of its Subsidiaries, it shall
     provide the Company with written notice thereof. The Company shall, within
     five (5) Trading Days (as defined in the Notes) of receipt of such notice,
     make public disclosure of such material, nonpublic information. In the
     event of a breach of the foregoing covenant by the Company, any of its
     Subsidiaries, or any of its or their respective officers, directors,
     employees and agents, in addition to any other remedy provided herein or in
     the Transaction Documents, the Investor shall have the right to make a
     public disclosure, in the form of a press release, public advertisement or
     otherwise, of such material, nonpublic information without the prior
     approval by the Company, its Subsidiaries, or any of its or their
     respective officers, directors, employees or agents. The Investor shall not
     have any liability to the Company, its Subsidiaries, or any of its or their
     respective officers, directors, employees, stockholders or agents for any
     such disclosure. Subject to the foregoing, neither the Company, its
     Subsidiaries nor the Investor shall issue any press releases or any other
     public statements with respect to the transactions contemplated hereby;
     provided, however, that the Company shall be entitled, without the prior
     approval of the Investor, to make any press release or other public
     disclosure with respect to such transactions (i) in substantial conformity
     with the 8-K Filing and contemporaneously therewith and (ii) as is required
     by applicable law and regulations (provided that in the case of clause (i)
     the Investor shall be consulted by the Company in connection with any such
     press release or other public disclosure prior to its release). Without the
     prior written consent of the Investor, neither the Company nor any of its
     Subsidiaries or affiliates shall disclose the name of the Investor in any
     filing, announcement, release or otherwise other than in connection with
     the 8-K Filing, unless such disclosure is required by law, regulation or
     the Principal Market.

                                       8

          (c) FEES AND EXPENSES. [INSERT IN SMITHFIELD AGREEMENT ONLY: The
     Company shall reimburse the Investor for its legal and due diligence fees
     and expenses in connection with the preparation and negotiation of this
     Agreement and transactions contemplated thereby by paying any such amount
     to Schulte Roth & Zabel LLP (the "INVESTOR COUNSEL EXPENSE"). The
     Investor Counsel Expense shall be paid by the Company whether or not the
     transactions contemplated by this Agreement are consummated.] Except as
     otherwise set forth in this Agreement, each party shall pay the fees and
     expenses of its advisers, counsel, accountants and other experts, if any,
     and all other expenses incurred by such party incident to the negotiation,
     preparation, execution, delivery and performance of this Agreement.

          (d) USE OF PROCEEDS. The Company will use the proceeds from the sale
     of the New Notes and Warrants for working capital purposes, and not for (A)
     repayment of any outstanding Indebtedness of the Company or any of its
     Subsidiaries or (B) redemption or repurchase of any of its or its
     Subsidiaries' equity securities.

          (e) PUBLIC INFORMATION. At any time during the period commencing on
     the six (6) month anniversary of the Closing Date (as defined in the
     Existing Securities Purchase Agreement) and ending at such time that all of
     the Securities can be sold without the requirement to be in compliance with
     Rule 144(c)(1) and otherwise without restriction or limitation pursuant to
     Rule 144, including, if applicable, Rule 144(i), if a registration
     statement is not available for the resale of all of the Securities and the
     Company shall fail for any reason to satisfy the current public information
     requirement under Rule 144 (a "PUBLIC INFORMATION FAILURE") then, as
     partial relief for the damages to any holder of Securities by reason of any
     such delay in or reduction of its ability to sell the Securities (which
     remedy shall not be exclusive of any other remedies available at law or in
     equity), the Company shall pay to each such holder an amount in cash equal
     to two percent (2.0%) of the aggregate Purchase Price of such holder's
     Securities on the day of a Public Information Failure and on every
     thirtieth day (pro rated for periods totaling less than thirty days)
     thereafter until the earlier of (i) the date such Public Information
     Failure is cured and (ii) such time that such public information is no
     longer required pursuant to Rule 144 (assuming that no holder is an
     "affiliate" of the Company, as defined in Rule 144(a)(1)). The payments to
     which a holder shall be entitled pursuant to this Section 4(e) are referred
     to herein as "PUBLIC INFORMATION FAILURE PAYMENTS." Public Information
     Failure Payments shall be paid on the earlier of (I) the last day of the
     calendar month during which such Public Information Failure Payments are
     incurred and (II) the third Business Day after the event or failure giving
     rise to the Public Information Failure Payments is cured. In the event the
     Company fails to make Public Information Failure Payments in a timely
     manner, such Public Information Failure Payments shall bear interest at the
     rate of 1.5% per month (prorated for partial months) until paid in full.

          (f) LOCK-UP.

               (i) The Company shall not amend or waive any provision of any of
          the Lock-Up Agreements (as defined below) or the Attias Lock-Up
          Agreement (as defined below) except to extend the term of the lock-up
          period.

               (ii) The Company shall use best efforts to obtain a fully
          executed lock up agreement from Albert Attias, in the form attached
          hereto as EXHIBIT J (the "ATTIAS LOCK-UP AGREEMENT").

                                       9

          (g) CASH COLLATERAL ACCOUNT.

               (i) For purposes of this Section 4(g), the following definitions
          shall apply.

                    (1) "COLLATERAL ACCOUNT ALLOCATION" means, for each Holder,
               an amount calculated by multiplying $750,000.00 by the quotient
               determined by dividing (A) the principal amount of Notes issued
               to the applicable Holder on the Closing Date by (B) the aggregate
               principal amount of all Notes issued to all Holders on the
               Closing Date. In the event that any Holder shall sell or
               otherwise transfer any of such Holder's Notes, the transferee
               shall be allocated a pro rata portion of such Holder's Collateral
               Account Allocation.

                    (2) "HOLDER" means a holder of Notes (collectively, the
               "HOLDERS").

                    (3) "PRO RATA AMOUNT" means, for each Holder, an amount
               equal to the sum of (x) the product of (I) the Holder's
               Collateral Account Allocation and (II) a fraction the numerator
               of which is the principal amount of the Holder's Notes being
               converted or redeemed, as applicable, and the denominator of
               which is the aggregate principal amount of Notes issued to the
               Holder on the Closing Date and (y) any interest earned on such
               amount calculated in (x) pursuant to the terms of the Cash
               Collateral Account.

               (ii) On or prior to the Closing, the Company shall establish with
          a bank acceptable to the Collateral Agent (as defined in Section 4(h))
          (the "CASH COLLATERAL BANK") a deposit account (together with all
          monies on deposit in such deposit account and all certificates and
          instruments, if any, representing or evidencing such deposit account,
          the "CASH COLLATERAL ACCOUNT"), and shall cause the Cash Collateral
          Bank to enter to an account control agreement with the Collateral
          Agent, substantially in the form of EXHIBIT F (the "ACCOUNT CONTROL
          AGREEMENT"). Upon establishing the Cash Collateral Account, the
          Company shall prepay all fees payable to the Cash Collateral Bank
          pursuant to Section 16 of the Account Control Agreement through the
          Maturity Date (as defined in the Notes). Upon the request of the
          Collateral Agent, the Company shall also execute and deliver such
          other customary agreements and instruments necessary to grant the
          Collateral Agent, for the benefit of the Investor, a first priority
          perfected security interest in the Cash Collateral Account to secure
          the New Notes. The Company agrees that it shall not permit the Cash
          Collateral Account to be subject to any lien, pledge, charge, security
          interest or other encumbrance other than as provided in the
          immediately preceding sentence and except for the Lien of the Cash
          Collateral bank subject to the terms of the Account Control Agreement.
          The Cash Collateral Account shall be closed not earlier than the
          Maturity Date, unless the Cash Collateral Account shall have been
          reduced to zero in accordance with the terms contained in this Section
          4(g) prior to such date. The funds in the Cash Collateral Account
          shall be distributed as set forth below:

                    (1) On or before each Interest Date (as defined in the
               Notes), the Company shall deliver written instructions,
               countersigned by the Collateral Agent, to the Cash Collateral
               Bank directing the release of the Interest payment due to each
               Holder from the Cash Collateral Account to each Holder (each such
               written instruction, a "CASH COLLATERAL RELEASE NOTICE");

                                       10

                    (2) Upon an Event of Default (as defined in the New Notes),
               the Collateral Agent shall deliver written instructions to the
               Cash Collateral Bank directing the release of the balance of any
               amount remaining in the Cash Collateral Account to each of the
               Holders of the New Notes (allocated pro rata among the Holders
               based on the principal amount of the New Notes originally issued
               each Holder);

                    (3) On each Mandatory Conversion Date (as defined in the
               Notes), the Company shall deliver written instructions,
               countersigned by the Collateral Agent, to the Cash Collateral
               Bank directing the release from the Cash Collateral Account to
               each of the Holders of an amount equal to each Holder's Pro Rata
               Amount;

                    (4) On each Conversion Date (as defined in the Notes), the
               Company shall deliver written instructions, countersigned by the
               Collateral Agent, to the Cash Collateral Bank directing the
               release from the Cash Collateral Account to each of the Holders
               of an amount equal to each Holder's Pro Rata Amount;

                    (5) On each Company Optional Redemption Date and each Cash
               Transaction Election Redemption Date (each as defined in the
               Notes), the Company shall deliver written instructions,
               countersigned by the Collateral Agent, to the Cash Collateral
               Bank directing the release from the Cash Collateral Account to
               each of the Holders of an amount equal to each Holder's Pro Rata
               Amount; and

                    (6) If any balance remains in the Cash Collateral Account on
               the Maturity Date, the Company shall deliver written
               instructions, countersigned by the Collateral Agent, to the Cash
               Collateral Bank directing it to release to (i) the Holders
               (allocated pro rata among the holders based on the principal
               amount of the Notes held by each holder) such amount as is
               necessary to pay to the Holder any outstanding principal, accrued
               interest and late charges on the Notes and any such amount shall
               be deemed a payment of such outstanding principal, accrued
               interest and late charges on the Notes and (ii) the Company any
               balance that remains in the Cash Collateral Account after giving
               effect to the release contemplated in clause (i).

          (h) COLLATERAL AGENT. The Investor hereby (a) appoints Smithfield
     Fiduciary LLC, as the collateral agent hereunder, under the Notes and under
     the other Security Documents (in such capacity, the "COLLATERAL AGENT"),
     and (b) authorizes the Collateral Agent (and the officers, directors,
     employees and agents of Highbridge Capital Management, LLC ("HIGHBRIDGE
     CAPITAL"), its trading manager) to take such action on such Investor's
     behalf in accordance with the terms hereof and thereof. Neither the
     Collateral Agent nor Highbridge Capital shall have, by reason hereof or any
     of the other Transaction Documents, a fiduciary relationship in respect of
     any Investor. Neither the Collateral Agent, Highbridge Capital nor any of
     their respective officers, directors, employees and agents shall have any
     liability to any Investor for any action taken or omitted to be taken in
     connection herewith or with any other Transaction Document except to the
     extent caused by its own gross negligence or willful misconduct, and each
     Investor agrees to defend, protect, indemnify and hold harmless the
     Collateral Agent, Highbridge Capital and all of their respective officers,
     directors, employees and agents (collectively, the "COLLATERAL
     INDEMNITEES") from and against any losses, damages, liabilities,
     obligations, penalties, actions, judgments, suits, fees, costs and expenses
     (including, without limitation, reasonable attorneys' fees, costs and
     expenses) incurred by such Collateral Indemnitee, whether direct, indirect
     or consequential, arising from or in connection with the performance by
     such Collateral Indemnitee of the duties and obligations of Collateral
     Agent pursuant hereto or any of the Transaction Documents. The Collateral
     Agent shall not be required to exercise any discretion or take any action,
     but shall be required to act or to refrain from acting (and shall be fully
     protected in so acting or refraining from acting) upon the instructions of
     the Holders of a majority in principal amount of the Notes then
     outstanding, and such instructions shall be binding upon all Holders of
     Notes; PROVIDED, HOWEVER, that the Collateral Agent shall not be required
     to take any action which, in the reasonable opinion of the Collateral
     Agent, exposes the Collateral Agent or Highbridge Capital to liability or
     which is contrary to this Agreement or any other Transaction Document or
     applicable law. The Collateral Agent shall be entitled to rely upon any
     written notices, statements, certificates, orders or other documents or any
     telephone message believed by it in good faith to be genuine and correct
     and to have been signed, sent or made by the proper Person, and with
     respect to all matters pertaining to this Agreement or any of the other
     Transaction Documents and its duties hereunder or thereunder, upon advice
     of counsel selected by it.

                                       11

          (i) SUCCESSOR COLLATERAL AGENT.

               (i) The Collateral Agent may resign from the performance of all
          its functions and duties hereunder and under the other Transaction
          Documents at any time by giving at least thirty (30) Business Days'
          prior written notice to the Company and each Holder of Notes. Such
          resignation shall take effect upon the acceptance by a successor
          Collateral Agent of appointment pursuant to clauses (ii) and (iii)
          below or as otherwise provided below.

               (ii) Upon any such notice of resignation, the Holders of a
          majority in principal amount of the Notes then outstanding shall
          appoint a successor collateral agent. Upon the acceptance of any
          appointment as collateral agent hereunder by a successor agent, such
          successor collateral agent shall thereupon succeed to and become
          vested with all the rights, powers, privileges and duties of the
          collateral agent, and the Collateral Agent shall be discharged from
          its duties and obligations under this Agreement and the other
          Transaction Documents. After the Collateral Agent's resignation
          hereunder as the collateral agent, the provisions of this Section 4(i)
          shall inure to its benefit as to any actions taken or omitted to be
          taken by it while it was the Collateral Agent under this Agreement and
          the other Transaction Documents.

               (iii) If a successor collateral agent shall not have been so
          appointed within said thirty (30) Business Day period, the Collateral
          Agent shall then appoint a successor collateral agent who shall serve
          as the collateral agent until such time, if any, as the Holders of a
          majority in principal amount of the Notes then outstanding appoint a
          successor collateral agent as provided above.

     (j) HOLDING PERIOD. For the purposes of Rule 144, the Company acknowledges
that the holding period of the Amended and Restated Notes (including the
corresponding Amended and Restated Conversion Shares) and the Series B-1
Warrants (including the corresponding Series B-1 Warrant Shares) may be tacked
onto the holding period of the Existing Notes, and the Company agrees not to
take a position contrary to this Section 4(j). The Company agrees to take all
actions, including, without limitation, the issuance by its legal counsel of any
necessary legal opinions, necessary to issue Amended and Restated Conversion
Shares and Series B-1 Warrant Shares that are freely tradable on an Eligible
Market (as defined in the Notes) without restriction and not containing any
restrictive legend without the need for any action by the Investor.

                                       12

          (k) REVERSE STOCK-SPLITS. For so long as any Notes remain outstanding,
     the Company shall not effect a reverse stock split of any class of the
     Company's Common Stock without the consent of the Required Holders (as
     defined in Notes).

          (l) ISRAEL OPINION. Within twenty-one (21) days of the Closing Date,
     the Company shall cause Yossi Avraham, Arad & Co. Advocates, the Company's
     Israeli Counel, to deliver to the Investor a legal opinion in substantially
     the form of the EXHIBIT G-2 attached hereto.

     5.   CONDITIONS TO COMPANY'S OBLIGATIONS HEREUNDER.

          The obligations of the Company to the Investor hereunder are subject
     to the satisfaction of each of the following conditions, provided that
     these conditions are for the Company's sole benefit and may be waived by
     the Company at any time in its sole discretion by providing the Investor
     with prior written notice thereof:

          (a) The Investor shall have executed this Agreement and the Security
     Documents to which it is a party and delivered the same to the Company.

          (b) The Investor shall have delivered to the Company the Investor's
     Existing Note.

          (c) The Investor shall have delivered to the Company the Purchase
     Price set forth opposite the Investor's name in column (7) of the
     Securities Schedule attached hereto, less, [INSERT IN SMITHFIELD AGREEMENT:
     the amounts withheld pursuant to Section 4(c), and] an amount equal to the
     Investor's 2008 Interest Payment for the New Notes and the related Warrants
     being purchased by the Investor at the Closing (1) by wire transfer of
     immediately available funds in accordance with the Company's written wire
     instructions the amount set forth opposite the Investor's name in column
     (9) of the Securities Schedule attached hereto and (2) by wire transfer of
     immediately available funds for in accordance with the Company's written
     wire instructions into the Cash Collateral Account the amount set forth
     opposite the Investor's name in column (10) of the Securities Schedule
     attached hereto.

          (d) The representations and warranties of the Investor shall be true
     and correct in all material respects (except for those representations and
     warranties that are qualified by materiality or Material Adverse Effect,
     which shall be true and correct in all 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 specific date, which
     shall be true and correct as of such specified date) and the Investor shall
     have performed, satisfied and complied in all material respects with the
     covenants, agreements and conditions required by this Agreement to be
     performed, satisfied or complied with by the Investor at or prior to the
     Closing Date.

     6.   CONDITIONS TO INVESTOR'S OBLIGATIONS HEREUNDER.

          The obligations of the Investor hereunder are subject to the
     satisfaction of each of the following conditions, provided that these
     conditions are for the Investor's sole benefit and may be waived by the
     Investor at any time in its sole discretion by providing the Company with
     prior written notice thereof:

                                       13

          (a) The Company shall have executed this Agreement and each of the
     Security Documents to which it is a party and delivered the same to the
     Investor.

          (b) The Company shall have executed and delivered to the Investor the
     Notes and the Warrants being issued to the Investor at the Closing.

          (c) Each of the Other Investors shall have (i) executed agreements
     identical to this Agreement (the "OTHER AGREEMENTS") (other than
     proportional changes (the "PROPORTIONATE CHANGES") in the numbers
     reflecting the different dollar amount of such Investor's Notes and the
     number of Warrant Shares underlying such Investor's Warrants), (ii)
     satisfied or waived all conditions to the closings contemplated by such
     agreements; (iii) surrendered their Existing Notes for Notes identical to
     the Notes of the Investor hereunder (other than the Proportionate Changes);
     and (iv) delivered to the Company the Purchase Price set forth opposite the
     Other Investors' names in column (8) of the Securities Schedule attached
     hereto for the New Notes and the related Warrants being purchased by the
     Other Investors at the Closing (less an amount equal to the Investor's 2008
     Interest Payment) by wire transfer of immediately available funds pursuant
     to the wire instructions provided by the Company.

          (d) The Company shall have delivered to the Company's transfer agent,
     with a copy to the Investors, the Amended Irrevocable Transfer Agent
     Instructions, which amends and supersedes the Irrevocable Transfer Agent
     Instructions dated September 30, 2005.

          (e) The Investor shall have received the opinion of Blank Rome LLP,
     the Company's outside counsel, dated as of the Closing Date, in
     substantially the form of EXHIBIT G-1 attached hereto.

          (f) The Company shall have delivered to the Investor a certificate (or
     a fax or pdf copy of such certificate) evidencing the formation and good
     standing of the Company and each of its Subsidiaries in such entity's
     jurisdiction of formation issued by the Secretary of State (or comparable
     office) of such jurisdiction, as of a date within 10 days of the Closing
     Date.

          (g) The Company shall have delivered to the Investor a certificate (or
     a fax or pdf copy of such certificate) evidencing the Company's
     qualification as a foreign corporation and good standing issued by the
     Secretary of State (or comparable office or a bring-down certificate from
     Corporation Service Company) of each jurisdiction in which the Company
     conducts business and is required to so qualify, as of a date within 10
     days of the Closing Date.

          (h) The Company shall have delivered to the Investor a certified copy
     of the Certificate of Incorporation as certified by the Secretary of State
     of the State of Delaware (or a fax or pdf copy of such certificate) within
     ten (10) days of the Closing Date.

          (i) The Company shall have delivered to the Investor a certificate,
     executed by the Secretary of the Company and dated as of the Closing Date,
     as to (i) the resolutions approving the transactions contemplated hereby as
     adopted by the Board in a form reasonably acceptable to the Investor, (ii)
     the Certificate of Incorporation and (iii) the Bylaws, each as in effect as
     of the Closing, in the form attached hereto as EXHIBIT H.

                                       14

          (j) The representations and warranties of the Company hereunder and
     under each other Transaction Document shall be true and correct in all
     material respects (except for those representations and warranties that are
     qualified by materiality or Material Adverse Effect, which shall be true
     and correct in all 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 specific date, which shall be true and correct as of
     such specified date) and the Company shall have performed, satisfied and
     complied in all respects with the 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 and after giving effect to the
     terms of this Agreement and the Other Agreements. The Investor shall have
     received a certificate, executed by the Chief Executive Officer of the
     Company, dated as of the Closing Date, to the foregoing effect and as to
     such other matters as may be reasonably requested by the Investor in the
     form attached hereto as EXHIBIT I.

          (k) The Common Stock (I) shall be designated for quotation or listed
     on the Principal Market and (II) shall not have been suspended, as of the
     Closing Date, by the SEC or the Principal Market from trading on the
     Principal Market nor shall suspension by the SEC or the Principal Market
     have been threatened, as of the Closing Date, either (A) in writing by the
     SEC or the Principal Market or (B) by falling below the minimum listing
     maintenance requirements of the Principal Market.

          (l) The Company and each officer and director, other than Albert
     Attias, of the Company and shall have entered into a Lock-Up Agreement in
     the form attached hereto as EXHIBIT J (the "OFFICER/DIRECTOR LOCK-UP
     AGREEMENTS").

          (m) The Company and ICTS International, N.V. ("ICTS") and any
     Affiliates of ICTS that hold securities of the Company shall have entered
     into a Lock-Up Agreement in the form attached hereto as EXHIBIT K (the
     "ICTS LOCK-UP AGREEMENT").

          (n) The Company and Northwood Business Corporation shall have entered
     into a Lock-Up Agreement in the form attached hereto as EXHIBIT L (the
     "NORTHWOOD LOCK-UP AGREEMENT", and together with the Officer/Director
     Lock-Up Agreements and the ICTS Lock-Up Agreements, the "LOCK-UP
     AGREEMENTS").

          (o) In accordance with the terms of the Security Documents, the
     Company shall have delivered to the Collateral Agent (i) certificates
     representing the Subsidiaries' shares of capital stock to the extent such
     subsidiary is a corporation or otherwise has certificated capital stock,
     along with duly executed blank stock powers and (ii) appropriate financing
     statements on Form UCC-1 to be duly filed in such office or offices as may
     be necessary or, in the opinion of the Collateral Agent, desirable to
     perfect the security interests purported to be created by each Security
     Document.

                                       15

          (p) Within two (2) Business Days prior to the Closing, the Company
     shall have delivered or caused to be delivered to the Investor (i) true
     copies of UCC search results, listing all effective financing statements
     which name as debtor the Company or any of its Subsidiaries filed in the
     prior five years to perfect an interest in any assets thereof, together
     with copies of such financing statements, none of which, except as
     otherwise agreed in writing by the Investor and the Other Investors, shall
     cover any of the Collateral (as defined in the Security Documents) and the
     results of searches for any tax lien and judgment lien filed against such
     Person or its property, which results, except as otherwise agreed to in
     writing by the Investors shall not show any such Liens (as defined in the
     Security Documents); and (ii) a perfection certificate, duly completed and
     executed by the Company and each of its Subsidiaries, in form and substance
     satisfactory to the Investors.

          (q) The Company shall have obtained all governmental, regulatory or
     third party consents and approvals, if any, necessary for the sale of the
     Securities.

          (r) The Company shall have delivered to the Investor such other
     documents relating to the transactions contemplated by this Agreement as
     the Investor or its counsel may reasonably request.

     7.   TERMINATION.

          In the event that the Closing does not occur on or before five (5)
     Business Days from the date hereof, due to the Company's or the Investor's
     failure to satisfy the conditions set forth in Sections 5 and 6 hereof (and
     the nonbreaching party's failure to waive such unsatisfied conditions(s)),
     the nonbreaching party shall have the option to terminate this Agreement
     with respect to such breaching party at the close of business on such date
     without liability of any party to any other party [INSERT IN SMITHFIELD
     AGREEMENT ONLY:; PROVIDED, HOWEVER, if this Agreement is terminated
     pursuant to this Section 7, the Company shall remain obligated to reimburse
     the Investor for the expenses described in Section 4(c) above]. Upon such
     termination, the terms hereof shall be null and void and the parties shall
     continue to comply with all terms and conditions of the Transaction
     Documents, as in effect prior to the execution of this Agreement.

     8.   MISCELLANEOUS.

          (a) COUNTERPARTS. This Agreement may be executed in two or more
     identical counterparts, all of which shall be considered one and the same
     agreement and shall become effective when counterparts have been signed by
     each party and delivered to the other party; provided that a facsimile
     signature shall be considered due execution and shall be binding upon the
     signatory thereto with the same force and effect as if the signature were
     an original, not a facsimile signature.

          (b) HEADINGS. The headings of this Agreement are for convenience of
     reference and shall not form part of, or affect the interpretation of, this
     Agreement.

                                       16

          (c) SEVERABILITY. If any provision of this Agreement is prohibited by
     law or otherwise determined to be invalid or unenforceable by a court of
     competent jurisdiction, the provision that would otherwise be prohibited,
     invalid or unenforceable shall be deemed amended to apply to the broadest
     extent that it would be valid and enforceable, and the invalidity or
     unenforceability of such provision shall not affect the validity of the
     remaining provisions of this Agreement so long as this Agreement as so
     modified continues to express, without material change, the original
     intentions of the parties as to the subject matter hereof and the
     prohibited nature, invalidity or unenforceability of the provision(s) in
     question does not substantially impair the respective expectations or
     reciprocal obligations of the parties or the practical realization of the
     benefits that would otherwise be conferred upon the parties. The parties
     will endeavor in good faith negotiations to replace the prohibited, invalid
     or unenforceable provision(s) with a valid provision(s), the effect of
     which comes as close as possible to that of the prohibited, invalid or
     unenforceable provision(s).

          (d) GOVERNING LAW; JURISDICTION; JURY TRIAL. All questions concerning
     the construction, validity, enforcement and interpretation of this
     Agreement shall be governed by the internal laws of the State of New York,
     without giving effect to any choice of law or conflict of law provision or
     rule (whether of the State of New York or any other jurisdictions) that
     would cause the application of the laws of any jurisdictions other than the
     State of New York. Each party hereby irrevocably submits to the exclusive
     jurisdiction of the state and federal courts sitting in The City of New
     York, Borough of Manhattan, for the adjudication of any dispute hereunder
     or in connection herewith or with any transaction contemplated hereby or
     discussed herein, and hereby irrevocably waives, and agrees not to assert
     in any suit, action or proceeding, any claim that it is not personally
     subject to the jurisdiction of any such court, that such suit, action or
     proceeding is brought in an inconvenient forum or that the venue of such
     suit, action or proceeding is improper. Each party hereby irrevocably
     waives personal service of process and consents to process being served in
     any such suit, action or proceeding by mailing a copy thereof to such party
     at the address for such notices to it under this Agreement and agrees that
     such service shall constitute good and sufficient service of process and
     notice thereof. Nothing contained herein shall be deemed to limit in any
     way any right to serve process in any manner permitted by law. EACH PARTY
     HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST,
     A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
     WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
     HEREBY.

          (e) 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.

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

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

                                       17

          (h) ENTIRE AGREEMENT; EFFECT ON PRIOR AGREEMENTS; AMENDMENTS. Except
     for the Transaction Documents in effect prior to this Agreement (to the
     extent any such Transaction Document is not amended by this Agreement),
     this Agreement supersedes all other prior oral or written agreements
     between the Investor, the Company, their affiliates and Persons acting on
     their behalf with respect to the matters discussed herein, and this
     Agreement and the instruments referenced herein contain the entire
     understanding of the parties with respect to the matters covered herein and
     therein and, except as specifically set forth herein or therein, neither
     the Company nor the Investor makes any representation, warranty, covenant
     or undertaking with respect to such matters. No provision of this Agreement
     may be amended other than by an instrument in writing signed by the
     Company. No provision hereof may be waived other than by an instrument in
     writing signed by the party against whom enforcement 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 (on a pro rata basis), other than
     legal fee reimbursement, also is offered to all of the parties to the
     Transaction Documents, Holders of Notes or holders of the Warrants, as the
     case may be. The Company has not, directly or indirectly, made any
     agreements with any of the Investors relating to the terms or conditions of
     the transactions contemplated by the Transaction Documents except as set
     forth in the Transaction Documents.

          (i) NOTICES. Any notices, consents, waivers or other communications
     required or permitted to be given under the terms of this Agreement must be
     in writing and will be deemed to have been delivered: (i) upon receipt,
     when delivered personally; (ii) upon receipt, when sent by facsimile
     (provided confirmation of transmission is mechanically or electronically
     generated and kept on file by the sending party); or (iii) one Business Day
     after deposit with an overnight courier service, in each case properly
     addressed to the party to receive the same. The addresses and facsimile
     numbers for such communications shall be:

          If to the Company:

                   InkSure Technologies Inc.
                   1770 N.W. 64th Street, Suite 350
                   Fort Lauderdale, Florida  33309
                   Telephone:     (954) 772-8507
                   Facsimile:     (954) 772-8509
                   Attention:     Elie Housman

          Copy to:

                   Blank Rome LLP
                   The Chrysler Building
                   405 Lexington Avenue
                   New York, NY 10174-0208
                   Telephone:     (212) 885-5517
                   e-mail:        mmullman@blankrome.com
                   Facsimile:     (212) 885-5001
                   Attention:     Michael S. Mullman, Esq.

                                       18

     If to the Investor, to its address and facsimile number set forth in the
     Securities Schedule attached hereto,

          with a copy (for informational purposes only) to:

                   Schulte Roth & Zabel LLP
                   919 Third Avenue
                   New York, New York  10022
                   Telephone:     (212) 756-2000
                   Facsimile:     (212) 593-5955
                   Attention:     Eleazer N. Klein, Esq.

     or to such other address and/or facsimile number and/or to the attention of
     such other Person as the recipient party has specified by written notice
     given to each other party five (5) days prior to the effectiveness of such
     change. Written confirmation of receipt (A) given by the recipient of such
     notice, consent, waiver or other communication, (B) mechanically or
     electronically generated by the sender's facsimile machine containing the
     time, date, recipient facsimile number and an image of the first page of
     such transmission or (C) provided by an overnight courier service shall be
     rebuttable evidence of personal service, receipt by facsimile or receipt
     from an overnight courier service in accordance with clause (i), (ii) or
     (iii) above, respectively.

          (j) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
     inure to the benefit of the parties and their respective successors and
     assigns in accordance with the terms of the Existing Securities Purchase
     Agreement.

          (k) SURVIVAL. Unless this Agreement is terminated under Section 7, the
     representations and warranties of the Company and the Investor contained
     herein and the agreements and covenants set forth herein shall survive the
     Closing.

          (l) REMEDIES. The Investor and each holder of the Securities shall
     have all rights and remedies set forth in the Transaction Documents and all
     rights and remedies which such holders have been granted at any time under
     any other agreement or contract and all of the rights which such holders
     have under any law. Any Person having any rights under any provision of
     this Agreement shall be entitled to enforce such rights specifically
     (without posting a bond or other security), to recover damages by reason of
     any breach of any provision of this Agreement and to exercise all other
     rights granted by law. Furthermore, the Company recognizes that in the
     event that it fails to perform, observe, or discharge any or all of its
     obligations under this Agreement, any remedy at law may prove to be
     inadequate relief to the Investor. The Company therefore agrees that the
     Investor shall be entitled to seek temporary and permanent injunctive
     relief in any such case without the necessity of proving actual damages and
     without posting a bond or other security.

                                       19

          (m) INDEMNIFICATION.

               (i) In consideration of the Investor's execution and delivery of
          the Transaction Documents, acquiring the Securities thereunder and
          entering into this Agreement and in addition to all of the Company's
          other obligations under the Transaction Documents, the Company shall
          defend, protect, indemnify and hold harmless the Investor and each
          other holder of the Securities and all of their stockholders,
          partners, members, officers, directors, employees and direct or
          indirect investors and any of the foregoing Persons' agents or other
          representatives (including, without limitation, those retained in
          connection with the transactions contemplated by this Agreement)
          (collectively, the "INDEMNITEES") from and against any and all
          actions, causes of action, suits, claims, losses, costs, penalties,
          fees, liabilities and damages, and expenses in connection therewith
          (irrespective of whether any such Indemnitee is a party to the action
          for which indemnification hereunder is sought), and including
          reasonable attorneys' fees and disbursements (the "INDEMNIFIED
          LIABILITIES"), incurred by any Indemnitee as a result of, or arising
          out of, or relating to (a) any misrepresentation or breach of any
          representation or warranty made by the Company in the Transaction
          Documents or any other certificate, instrument or document
          contemplated hereby or thereby, (b) any breach of any covenant,
          agreement or obligation of the Company contained in the Transaction
          Documents or any other certificate, instrument or document
          contemplated hereby or thereby or (c) any cause of action, suit or
          claim brought or made against such Indemnitee by a third party
          (including for these purposes a derivative action brought on behalf of
          the Company) and arising out of or resulting from (i) the execution,
          delivery, performance or enforcement of the Transaction Documents or
          any other certificate, instrument or document contemplated hereby or
          thereby, (ii) any transaction financed or to be financed in whole or
          in part, directly or indirectly, with the proceeds of the issuance of
          the Securities, (iii) any disclosure made by the Investor pursuant to
          Section 4(c), or (iv) the status of the Investor or holder of the
          Securities as an investor in the Company pursuant to the transactions
          contemplated by the Transaction Documents. To the extent that the
          foregoing undertaking by the Company may be unenforceable for any
          reason, the Company shall make the maximum contribution to the payment
          and satisfaction of each of the Indemnified Liabilities which is
          permissible under applicable law.

               (ii) Promptly after receipt by an Indemnitee under this Section
          8(m) of notice of the commencement of any action or proceeding
          (including any governmental action or proceeding) involving an
          Indemnified Liability, such Indemnitee shall, if a claim for
          indemnification in respect thereof is to be made against any
          indemnifying party under this Section 8(m), deliver to the
          indemnifying party a written notice of the commencement thereof, and
          the indemnifying party shall have the right to participate in, and, to
          the extent the indemnifying party so desires, jointly with any other
          indemnifying party similarly noticed, to assume control of the defense
          thereof with counsel mutually satisfactory to the indemnifying party
          and the Indemnitee; provided, however, that an Indemnitee shall have
          the right to retain its own counsel with the fees and expenses of not
          more than one counsel for such Indemnitee to be paid by the
          indemnifying party, if, in the reasonable opinion of the Indemnitee,
          the representation by such counsel of the Indemnitee and the
          indemnifying party would be inappropriate due to actual or potential
          differing interests between such Indemnitee and any other party
          represented by such counsel in such proceeding. Legal counsel referred
          to in the immediately preceding sentence shall be selected by the
          Investors holding at least a majority of the Notes. The Indemnitee
          shall cooperate fully with the indemnifying party in connection with
          any negotiation or defense of any such action or Indemnified
          Liabilities by the indemnifying party and shall furnish to the
          indemnifying party all information reasonably available to the
          Indemnitee that relates to such action or Indemnified Liabilities. The
          indemnifying party shall keep the Indemnitee fully apprised at all
          times as to the status of the defense or any settlement negotiations
          with respect thereto. No indemnifying party shall be liable for any
          settlement of any action, claim or proceeding effected without its
          prior written consent, provided, however, that the indemnifying party
          shall not unreasonably withhold, delay or condition its consent. No
          indemnifying party shall, without the prior written consent of the
          Indemnitee, consent to entry of any judgment or enter into any
          settlement or other compromise which does not include as an
          unconditional term thereof the giving by the claimant or plaintiff to
          such Indemnitee of a release from all liability in respect to such
          Indemnified Liabilities or litigation. Following indemnification as
          provided for hereunder, the indemnifying party shall be subrogated to
          all rights of the Indemnitee with respect to all third parties, firms
          or corporations relating to the matter for which indemnification has
          been made. The failure to deliver written notice to the indemnifying
          party within a reasonable time of the commencement of any such action
          shall not relieve such indemnifying party of any liability to the
          Indemnitee under this Section 8(m), except to the extent that the
          indemnifying party is prejudiced in its ability to defend such action.

                                       20

               (iii) The indemnification required by this Section 8(m) shall be
          made by periodic payments of the amount thereof during the course of
          the investigation or defense, as and when bills are received or
          Indemnified Liabilities are incurred.

               (iv) The indemnity agreements contained herein shall be in
          addition to (x) any cause of action or similar right of the Indemnitee
          against the indemnifying party or others, and (y) any liabilities the
          indemnifying party may be subject to pursuant to the law.

          (n) INDEPENDENT NATURE OF INVESTOR'S OBLIGATIONS AND RIGHTS. The
     obligations of the Investor under any Transaction Document (including this
     Agreement) are several and not joint with the obligations of any Other
     Investor, and the Investor shall not be responsible in any way for the
     performance of the obligations of any Other Investor under any Transaction
     Document. Nothing contained herein or in any other Transaction Document,
     and no action taken by the Investor pursuant hereto, shall be deemed to
     constitute the Investor and Other Investors as a partnership, an
     association, a joint venture or any other kind of entity, or create a
     presumption that the Investor and Other Investors are in any way acting in
     concert or as a group, and the Company will not assert any such claim with
     respect to the obligations or the transactions contemplated by the
     Transaction Documents and the Company acknowledges that the Investor and
     Other Investors are not acting in concert or as a group with respect to
     such obligations or the transactions contemplated by the Transaction
     Documents. The Company acknowledges and the Investor confirms that the
     Investor has independently participated in the negotiation of the
     transactions contemplated hereby with the advice of its own counsel and
     advisors. The Investor shall be entitled to independently protect and
     enforce its rights, including, without limitation, the rights arising out
     of this Agreement or out of any other Transaction Documents, and it shall
     not be necessary for any Other Investor to be joined as an additional party
     in any proceeding for such purpose.

                            [SIGNATURE PAGE FOLLOWS]

                                       21

     IN WITNESS WHEREOF, the Investor and the Company have caused their
respective signature page to this Agreement to be duly executed as of the date
first written above.

                                               COMPANY:

                                               INKSURE TECHNOLOGIES INC.

                                               By: _____________________
                                                   Name:
                                                   Title:

         [Signature Page to Amendment, Exchange and Purchase Agreement]

1

     IN WITNESS WHEREOF, the Investor and the Company have caused their
respective signature page to this Agreement to be duly executed as of the date
first written above.

                                               INVESTOR:

                                               SMITHFIELD FIDUCIARY LLC

                                               By: _____________________
                                                   Name:  Adam J. Chill
                                                   Title: Authorized Signatory

              [Signature Page to Amendment and Exchange Agreement]8-K

                                                                   EXHIBIT 10.2

                               SECURITY AGREEMENT

     SECURITY AGREEMENT, dated as of April 8, 2008 (this "AGREEMENT"), made by
each of the parties set forth on the signature pages hereto (each a "GRANTOR",
and collectively, the "GRANTORS"), in favor of SMITHFIELD FIDUCIARY LLC, a
company organized under the laws of the Cayman Islands, in its capacity as
collateral agent (in such capacity, the "COLLATERAL AGENT") to the Secured
Parties (as defined below).

                              W I T N E S S E T H:

     WHEREAS, InkSure Technologies Inc., a Delaware corporation, (the
"COMPANY"), pursuant to that certain Securities Purchase Agreement, dated as of
September 30, 2005 (the "EXISTING PURCHASE AGREEMENT") issued and sold certain
Convertible Notes (the "EXISTING NOTES").

     The Company and certain investors (the "INVESTORS") are entering into
Amendment, Exchange and Purchase Agreements dated the date hereof (collectively,
the "EXCHANGE AGREEMENTS"), pursuant to which, among other things, (i) the
Existing Notes shall be amended and restated pursuant to the "Amended Notes" (as
defined therein) and (ii) the Company shall agree to sell, and the Investors
shall agree to purchase certain additional "New Notes" (as defined therein) (the
"NEW NOTES", and collectively with the Amended Notes and as each may be amended,
restated, replaced or otherwise modified from time to time in accordance with
the terms thereof, the "NOTES").

     WHEREAS, each of the Grantors (other than the Company) (each a "GUARANTOR"
and collectively, the "GUARANTORS") has executed and delivered a Guaranty, dated
the date hereof (as amended, restated, supplemented, replaced, modified or
otherwise changed from time to time, the "GUARANTY"), in favor of the Secured
Parties, to guarantee the Company's obligations under the Existing Purchase
Agreement, the Exchange Agreements, the Notes and the Transaction Documents (as
defined below);

     WHEREAS, it is a condition precedent to each of the Investors entering into
the Exchange Agreements that the Grantors execute and deliver this Agreement
providing for the grant of a first priority perfected security interest in all
of the property and assets of each Grantor to secure all of the Company's
obligations under the Existing Purchase Agreement, the Exchange Agreements, the
Notes, and the other Transaction Documents and the each Grantor's obligations
under the Guaranty; and

     WHEREAS, the Grantors have determined that the execution, delivery and
performance of this Agreement directly benefits, and is in the best interest of,
the Grantors;

     NOW, THEREFORE, in consideration of the premises and the agreements herein
and in order to induce each of the Secured Parties to enter into the
transactions under the Exchange Agreements, each Grantor agrees as follows:

     SECTION 1. DEFINITIONS.

     (a) Reference is hereby made to the Exchange Agreements and the Notes for a
statement of the terms thereof. All terms used in this Agreement and the
recitals hereto which are defined in the Existing Purchase Agreement, the
Exchange Agreements, the Notes or in Articles 8 or 9 of the Uniform Commercial
Code as in effect from time to time in the State of New York (the "CODE"), and
which are not otherwise defined herein shall have the same meanings herein as
set forth therein; PROVIDED that terms used herein which are defined in the Code
as in effect in the State of New York on the date hereof shall continue to have
the same meaning notwithstanding any replacement or amendment of such statute.

     (b) The following terms shall have the respective meanings provided for in
the Code: "Accounts", "Cash Proceeds", "Chattel Paper", "Commercial Tort Claim",
"Commodity Account", "Commodity Contracts", "Deposit Account", "Documents",
"Equipment", "Fixtures", "General Intangibles", "Goods", "Instruments",
"Inventory", "Investment Property", "Letter-of-Credit Rights", "Noncash
Proceeds", "Payment Intangibles", "Proceeds", "Promissory Notes", "Security",
"Record", "Security Account", "Software", and "Supporting Obligations".

     (c) As used in this Agreement, the following terms shall have the
respective meanings indicated below, such meanings to be applicable equally to
both the singular and plural forms of such terms:

     "COLLATERAL" means collectively, the Joint Collateral and the New Note
Collateral.

     "COLLATERAL ACCOUNT" means a deposit account number 22-652949-18 maintained
by the Company at Bank Leumi USA.

     "COPYRIGHT LICENSES" means all licenses, contracts or other agreements,
whether written or oral, naming any Grantor as licensee or licensor and
providing for the grant of any right to use or sell any works covered by any
copyright (including, without limitation, all Copyright Licenses set forth in
Part F of SCHEDULE I hereto).

     "COPYRIGHTS" means all domestic and foreign copyrights, whether registered
or not, including, without limitation, all copyright rights throughout the
universe (whether now or hereafter arising) in any and all media (whether now or
hereafter developed), in and to all original works of authorship fixed in any
tangible medium of expression, acquired or used by any Grantor (including,
without limitation, all copyrights described in Part F of SCHEDULE I hereto),
all applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Copyright Office or in any similar office or agency of the United States or any
other country or any political subdivision thereof), and all reissues,
divisions, continuations, continuations in part and extensions or renewals
thereof.

     "EVENT OF DEFAULT" shall have the meaning set forth in the Notes.

     "GOVERNMENTAL AUTHORITY" means any nation or government, any Federal,
state, city, town, municipality, county, local or other political subdivision
thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.

                                     - 2 -

     "INSOLVENCY PROCEEDING" means any proceeding commenced by or against any
Person under any provision of the Bankruptcy Code (Chapter 11 of Title 11 of the
United States Code) or under any other bankruptcy or insolvency law, assignments
for the benefit of creditors, formal or informal moratoria, compositions, or
extensions generally with creditors, or proceedings seeking reorganization,
arrangement, or other similar relief.

     "INTELLECTUAL PROPERTY" means the Copyrights, Trademarks and Patents.

     "INTELLECTUAL PROPERTY OFFICES" means, (i) with respect to United States
Copyrights or related Licenses, the United States Copyright Office, (ii) with
respect to United States Trademarks and United States Patents or related
Licenses, the United States Patent and Trademark Office and (iii) with respect
to respect to foreign Intellectual Property and related Licenses, the applicable
offices located in the jurisdictions outside of the United States and covering
rights in such jurisdictions relating to such foreign Intellectual Property and
Licenses.

     "JOINT COLLATERAL" shall have the meaning set forth for such term in
Section 2(a) hereof.

     "LICENSES" means the Copyright Licenses, the Trademark Licenses and the
Patent Licenses.

     "LIEN" means any mortgage, deed of trust, pledge, lien (statutory or
otherwise), security interest, charge or other encumbrance or security or
preferential arrangement of any nature, including, without limitation, any
conditional sale or title retention arrangement, any lease required under GAAP
to be capitalized on the balance sheet of such Person and any assignment,
deposit arrangement or financing lease intended as, or having the effect of,
security.

     "NEW NOTE COLLATERAL" means (i) the Collateral Account, all amounts which
may now or hereafter be on deposit in the Collateral Account, including without
limitation, all cash now or hereafter held in the Collateral Account; (ii) all
cash, and other property from time to time received, receivable, or otherwise
distributed in respect thereof or in exchange therefor; and (iii) to the extent
not described above, all Proceeds of any and all of the foregoing New Note
Collateral.

     "NEW NOTE HOLDERS" means the holders of the New Notes.

     "NEW NOTE OBLIGATIONS" has the meaning set forth for such term in Section
3(b) hereof.

     "NOTEHOLDERS" means the Investors and the holders of the Notes.

                                     - 3 -

     "PATENT LICENSES" means all licenses, contracts or other agreements,
whether written or oral, naming any Grantor as licensee or licensor and
providing for the grant of any right to manufacture, use or sell any invention
covered by any Patent (including, without limitation, all Patent Licenses set
forth in Part F of SCHEDULE I hereto).

     "PATENTS" means all domestic and foreign letters patent, design patents,
utility patents, industrial designs, inventions, trade secrets, ideas, concepts,
methods, techniques, processes, proprietary information, technology, know-how,
formulae, rights of publicity and other general intangibles of like nature, now
existing or hereafter acquired or used by any Grantor (including, without
limitation, all domestic and foreign letters patent, design patents, utility
patents, industrial designs, inventions, trade secrets, ideas, concepts,
methods, techniques, processes, proprietary information, technology, know-how
and formulae described in Part F of SCHEDULE I hereto), all applications,
registrations and recordings thereof (including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office, or in any similar office or agency of the United States or any
other country or any political subdivision thereof), and all reissues,
divisions, continuations, continuations in part and extensions or renewals
thereof.

     "PERSON" means an individual, corporation, limited liability company,
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture or other enterprise or entity or Governmental
Authority.

     "SECURED PARTIES" means each of the Collateral Agent and the Investors and
all other Noteholders.

     "TRADEMARK LICENSES" means all licenses, contracts or other agreements,
whether written or oral, naming any Grantor as licensor or licensee and
providing for the grant of any right concerning any Trademark, together with any
goodwill connected with and symbolized by any such trademark licenses, contracts
or agreements and the right to prepare for sale or lease and sell or lease any
and all Inventory now or hereafter owned by any Grantor and now or hereafter
covered by such licenses (including, without limitation, all Trademark Licenses
described in Part F of SCHEDULE I hereto).

     "TRADEMARKS" means all domestic and foreign trademarks, service marks,
collective marks, certification marks, trade names, business names, d/b/a's,
Internet domain names, trade styles, designs, logos and other source or business
identifiers and all general intangibles of like nature, now or hereafter owned,
adopted, acquired or used by any Grantor (including, without limitation, all
domestic and foreign trademarks, service marks, collective marks, certification
marks, trade names, business names, d/b/a's, Internet domain names, trade
styles, designs, logos and other source or business identifiers described in
Part F of SCHEDULE I hereto), all applications, registrations and recordings
thereof (including, without limitation, applications, registrations and
recordings in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any state thereof or any other country or
any political subdivision thereof), and all reissues, extensions or renewals
thereof, together with all goodwill of the business symbolized by such marks and
all customer lists, formulae and other Records of any Grantor relating to the
distribution of products and services in connection with which any of such marks
are used.

                                     - 4 -

     "TRANSACTION DOCUMENTS" means the Existing Purchase Agreement, the Exchange
Agreements, the Notes, the Guaranty, this Agreement and the other Transaction
Documents as defined in the Existing Purchase Agreement as defined by the
Exchange Agreements.

     SECTION 2. GRANT OF SECURITY INTEREST. (a) As collateral security for all
of the Obligations referred to below, each Grantor hereby pledges and assigns to
the Collateral Agent for the benefit of the Secured Parties, and grants to the
Collateral Agent for the benefit of the Secured Parties a continuing security
interest in, all personal property of each Grantor, wherever located and whether
now or hereafter existing and whether now owned or hereafter acquired, of every
kind and description, tangible or intangible (collectively, the "JOINT
COLLATERAL"), including, without limitation, the following:

     (i) all Accounts; (ii) all Chattel Paper (whether tangible or electronic);
(iii) the Commercial Tort Claims specified on Part D of SCHEDULE I hereto; (iv)
all Deposit Accounts, all cash and other property from time to time deposited
therein and the monies and property in the possession or under the control of
the Secured Parties or any affiliate, representative, agent or correspondent of
any Secured Party; (v) all Documents; (vi) all Equipment; (vii) all Fixtures;
(viii) all General Intangibles (including, without limitation, all Payment
Intangibles); (ix) all Goods; (x) all Instruments (including, without
limitation, Promissory Notes and each certificated Security); (xi) all
Inventory; (xii) all Investment Property; (xiii) all Copyrights, Patents and
Trademarks, and all Licenses; (xiv) all Letter-of-Credit Rights; (xv) all
Supporting Obligations; (xvi) all other tangible and intangible personal
property of each Grantor (whether or not subject to the Code), including,
without limitation, all bank and other accounts and all cash and all investments
therein, all proceeds, products, offspring, accessions, rents, profits, income,
benefits, substitutions and replacements of and to any of the property of any
Grantor described in the preceding clauses of this Section 2 (including, without
limitation, any proceeds of insurance thereon and all causes of action, claims
and warranties now or hereafter held by each Grantor in respect of any of the
items listed above), and all books, correspondence, files and other Records,
including, without limitation, all tapes, desks, cards, Software, data and
computer programs in the possession or under the control of any Grantor or any
other Person from time to time acting for any Grantor, in each case, to the
extent of such Grantor's rights therein, that at any time evidence or contain
information relating to any of the property described in the preceding clauses
of this Section 2 or are otherwise necessary or helpful in the collection or
realization thereof; and (xvii) all Proceeds, including all Cash Proceeds and
Noncash Proceeds, and products of any and all of the foregoing Joint Collateral;
in each case howsoever any Grantor's interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise).

     Notwithstanding anything herein to the contrary, the term "Joint
Collateral" shall not include (i) any New Note Collateral nor (ii) any General
Intangibles or other rights arising under any contracts, instruments, licenses
or other documents as to which the grant of a security interest would (A)
constitute a violation of a valid and enforceable restriction in favor of a
third party on such grant, unless and until any required consents shall have
been obtained, or (B) give any other party to such contract, instrument, license
or other document an enforceable right to terminate its obligations thereunder,
or (iii) any asset, the granting of a security interest in which would be void
or illegal under any applicable governmental law, rule or regulation, or
pursuant thereto would result in, or permit the termination of, such asset

                                     - 5 -

     (b) As collateral security for all of the New Note Obligations referred to
below, the Company hereby pledges and assigns to the Collateral Agent for the
benefit of the New Note Holders, and grants to the Collateral Agent for the
benefit of the New Note Holders a continuing security interest in, the New Note
Collateral, whether now or hereafter existing and whether now owned or hereafter
acquired.

     SECTION 3. SECURITY FOR OBLIGATIONS. (a) The security interest created
hereby in the Joint Collateral constitutes continuing collateral security for
all of the following obligations of the respective Grantor, whether now existing
or hereafter incurred (collectively, the "OBLIGATIONS"):

          (i) (A) the payment by the Company, as and when due and payable (by
     scheduled maturity, required prepayment, acceleration, demand or
     otherwise), of all amounts from time to time owing by it in respect of the
     Existing Purchase Agreement, the Exchange Agreements, the Notes and the
     other Transaction Documents, including, without limitation, all principal
     of and interest on the Notes (including, without limitation, all interest
     that accrues after the commencement of any Insolvency Proceeding, whether
     or not the payment of such interest is unenforceable or is not allowable
     due to the existence of such Insolvency Proceeding), and (B) in the case of
     any other Grantor, the payment by such Grantor, as and when due and payable
     of all "Guaranteed Obligations" under (and as defined in) the Guaranty,
     including, without limitation, in both cases, all fees, commissions,
     expense reimbursements, indemnifications and all other amounts due or to
     become due under any of the Transaction Documents; and

          (ii) the due performance and observance by each Grantor of all of its
     other obligations from time to time existing in respect of any of the
     Transaction Documents, including without limitation, with respect to any
     conversion or redemption rights of the Noteholders.

     (b) The security interest created hereby in the New Note Collateral
constitutes continuing collateral security for all of the following obligations
of the Company, whether now existing or hereafter incurred (collectively, the
"NEW NOTE OBLIGATIONS"):

          (i) the payment by the Company, as and when due and payable (by
     scheduled maturity, required prepayment, acceleration, demand or
     otherwise), of all amounts from time to time owing by it in respect of the
     New Notes, including, without limitation, all principal of and interest on
     the New Notes (including, without limitation, all interest that accrues
     after the commencement of any Insolvency Proceeding, whether or not the
     payment of such interest is unenforceable or is not allowable due to the
     existence of such Insolvency Proceeding); and

          (ii) the due performance and observance by the Company of all of its
     other obligations from time to time existing in respect of any of the New
     Notes, including without limitation, with respect to any conversion or
     redemption rights of the New Note Holders under the New Notes.

                                     - 6 -

     SECTION 4. REPRESENTATIONS AND WARRANTIES. Each Grantor represents and
warrants as of the date of this Agreement as follows:

     (a) Part A of SCHEDULE I hereto sets forth (i) the exact legal name of each
Grantor, and (ii) the state of incorporation, organization or formation and the
organizational identification number of each Grantor in such state.

     (b) There is no pending or threatened action, suit, proceeding or claim
affecting any Guarantor before any Governmental Authority or any arbitrator, or
any order, judgment or award issued by any Governmental Authority or arbitrator,
in each case, that would reasonably be expected to adversely affect the grant by
any Grantor, or the perfection, of the security interest purported to be created
hereby in the Collateral, or the exercise by the Collateral Agent of any of its
rights or remedies hereunder.

     (c) All Federal, state and local tax returns and other reports required by
applicable law to be filed by any Grantor have been filed, or extensions have
been obtained, and all taxes, assessments and other governmental charges imposed
upon any Grantor or any property of any Grantor (including, without limitation,
all federal income and social security taxes on employees' wages) and which have
become due and payable on or prior to the date hereof have been paid, except to
the extent contested in good faith by proper proceedings which stay the
imposition of any penalty, fine or Lien resulting from the non-payment thereof
and with respect to which adequate reserves have been set aside for the payment
thereof in accordance with generally accepted accounting principles consistently
applied ("GAAP").

     (d) All Equipment, Fixtures, Goods and Inventory of each Grantor now
existing are, and all Equipment, Fixtures, Goods and Inventory of each Grantor
hereafter existing will be, located and/or based at the addresses specified
therefor in Part B of SCHEDULE I hereto, except that each Grantor will give the
Collateral Agent written notice of any change in the location of any such
Collateral within 20 days of such change, other than to locations set forth on
Part B of SCHEDULE I hereto (or a new Part B of SCHEDULE I delivered by the
Grantors to the Collateral Agent from time to time) and with respect to which
the Collateral Agent has filed financing statements and otherwise fully
perfected its Liens thereon or will take such actions pursuant to Section 5(n).
Each Grantor's chief place of business and chief executive office, the place
where each Grantor keeps its Records concerning Accounts and all originals of
all Chattel Paper are located at the addresses specified therefor in Part B of
SCHEDULE I hereto. None of the Accounts is evidenced by Promissory Notes or
other Instruments. Set forth in Part E of SCHEDULE I hereto is a complete and
accurate list, as of the date of this Agreement, of (i) each Promissory Note,
Security and other Instrument owned by each Grantor and (ii) each Deposit
Account, Securities Account and Commodities Account of each Grantor, together
with the name and address of each institution at which each such account is
maintained, the account number for each such account and a description of the
purpose of each such account. Set forth in Part G of SCHEDULE I hereto is a
complete and correct list of each trade name used by each Grantor.

                                     - 7 -

     (e) Each Grantor has delivered to the Collateral Agent complete and correct
copies of each License described in Part F of SCHEDULE I hereto, including all
schedules and exhibits thereto, which represents all of the Licenses existing on
the date of this Agreement. Each such License sets forth the entire agreement
and understanding of the parties thereto relating to the subject matter thereof,
and there are no other agreements, arrangements or understandings, written or
oral, relating to the matters covered thereby or the rights of such Grantor or
any of its affiliates in respect thereof. Each material License now existing is,
and any material License entered into in the future will be, the legal, valid
and binding obligation of the parties thereto, enforceable against such parties
in accordance with its terms. No default under any material License by any
Grantor or to any Grantor's knowledge, any other party thereto has occurred, nor
does any defense, offset, deduction or counterclaim exist thereunder in favor of
any such party.

     (f) Each Grantor owns and controls, or otherwise possesses adequate rights
to use, all Intellectual Property, which are the only trademarks, patents,
copyrights, inventions, trade secrets, proprietary information and technology,
know-how, formulae, rights of publicity necessary to conduct its business in
substantially the same manner as conducted as of the date hereof. Part F of
SCHEDULE I hereto sets forth a true and complete list of all registered
copyrights, issued Patents, Trademarks, and Licenses owned or used by each
Grantor as of the date hereof. To the best knowledge of each Grantor, all such
Intellectual Property of each Grantor is subsisting and in full force and
effect, has not been adjudged invalid or unenforceable and has not been
abandoned in whole or in part. Except as set forth in Part F of SCHEDULE I, no
such Intellectual Property is the subject of any licensing or franchising
agreement. Each Grantor has no knowledge of any conflict with the rights of
others to any such Intellectual Property and, to the knowledge of each Grantor,
the Intellectual Property is not now infringing or in conflict with any such
rights of others in any material respect, and to the knowledge of each Grantor,
no other Person is now infringing or in conflict in any material respect with
any of the Intellectual Property. No Grantor has received any notice that it is
violating or has violated the trademarks, patents, copyrights, inventions, trade
secrets, proprietary information and technology, know-how, formulae, rights of
publicity or other intellectual property rights of any third party.

     (g) Each Grantor is and will be at all times the sole and exclusive owner
of, or otherwise has and will have adequate rights in, the Collateral free and
clear of any Liens, except for Permitted Liens, provided, that the Company shall
not create or grant any Lien upon the New Note Collateral. No effective
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording or filing office, except such
as may have been filed in favor of the Collateral Agent for the benefit of the
Secured Parties relating to this Agreement or the other Security Documents.

     (h) The exercise by the Collateral Agent of any of its rights and remedies
hereunder will not contravene any law or any contractual restriction binding on
or otherwise affecting each Grantor or any of its properties and will not result
in or require the creation of any Lien upon or with respect to any of its
properties.

                                     - 8 -

     (i) No authorization or approval or other action by, and no notice to or
filing with, any Governmental Authority or other regulatory body, is required
for (i) the grant by each Grantor, or the perfection, of the security interest
purported to be created hereby in the Collateral, or (ii) the exercise by the
Collateral Agent of any of its rights and remedies hereunder, except (A) for the
filing under the Uniform Commercial Code as in effect in the applicable
jurisdiction of the financing statements described in Part C of SCHEDULE I
hereto (or a new Part C of SCHEDULE I delivered by the Grantors to the
Collateral Agent from time to time), all of which financing statements have been
duly filed and are in full force and effect or will be duly filed and in full
force and effect, (B) with respect to Deposit Accounts, and all cash and other
property from time to time deposited therein, or Commodity Contracts for the
execution of a control agreement with the depository institution or commodity
intermediary with which such account is maintained, each as provided in Section
5(i), (C) with respect to the perfection of the security interest created hereby
in the Intellectual Property and Licenses, for the recording of the appropriate
Assignment for Security, substantially in the form of EXHIBIT A hereto in the
applicable Intellectual Property Office, (D) with respect to the perfection of
the security interest created hereby in Titled Collateral, for the submission of
an appropriate application requesting that the Lien of the Collateral Agent be
noted on the Certificate of Title or certificate of ownership, completed and
authenticated by the applicable Grantor, together with the Certificate of Title
or certificate of ownership, with respect to such Titled Collateral, to the
appropriate Governmental Authority, (E) with respect to the perfection of the
security interest created hereby in any Letter-of-Credit Rights, for the consent
of the issuer of the applicable letter of credit to the assignment of proceeds
as provided in the Uniform Commercial Code as in effect in the applicable
jurisdiction, (F) with respect to any action that may be necessary to obtain
control of Collateral constituting Electronic Chattel Paper or Investment
Property, the taking of such actions, and (G) the Collateral Agent having
possession of all Documents, Chattel Paper, Instruments and cash constituting
Collateral (subclauses (A), (B), (C), (D), (E), (F) and (G), each a "PERFECTION
REQUIREMENT" and collectively, the "PERFECTION REQUIREMENTS").

     (j) This Agreement creates in favor of the Collateral Agent a legal, valid
and enforceable security interest in (i) the Joint Collateral, as security for
the Obligations and (ii) the New Note Collateral, as security for the New Note
Obligations. The Perfection Requirements result in the perfection of such
security interests. Such security interests are, or in the case of Collateral in
which each Grantor obtains rights after the date hereof, will be, perfected,
first priority security interests, subject only to Permitted Liens and to the
Perfection Requirements, provided, that the Company shall not create or grant
any Lien upon the New Note Collateral. Such recordings and filings and all other
action necessary to perfect and protect such security interest have been duly
taken, and, in the case of Collateral in which each Grantor obtains rights after
the date hereof, will be duly taken, except for the Collateral Agent's having
possession of all Documents, Chattel Paper, Instruments and cash constituting
Collateral after the date hereof and the other actions, filings and recordations
described above, including the Perfection Requirements.

     (k) As of the date hereof, no Grantor holds any Commercial Tort Claims or
has knowledge of any pending Commercial Tort Claims, except for such Commercial
Tort Claims described in Part D of SCHEDULE I hereto.

     SECTION 5. COVENANTS AS TO THE COLLATERAL. So long as any of the
Obligations shall remain outstanding, unless the Collateral Agent shall
otherwise consent in writing:

                                     - 9 -

     (a) FURTHER ASSURANCES. Each Grantor will at its expense, at any time and
from time to time, promptly execute and deliver all further instruments and
documents and take all further action that the Collateral Agent may reasonably
request in order to: (i) perfect and protect the security interest purported to
be created hereby; (ii) enable the Collateral Agent to exercise and enforce its
rights and remedies hereunder in respect of the Collateral; or (iii) otherwise
effect the purposes of this Agreement, including, without limitation: (A)
marking conspicuously all Chattel Paper and each License and, at the request of
the Collateral Agent, each of its Records pertaining to the Collateral with a
legend, in form and substance satisfactory to the Collateral Agent, indicating
that such Chattel Paper, License or Collateral is subject to the security
interest created hereby, (B) delivering and pledging to the Collateral Agent
each Promissory Note, Security, Chattel Paper or other Instrument, now or
hereafter owned by any Grantor, duly endorsed and accompanied by executed
instruments of transfer or assignment, all in form and substance satisfactory to
the Collateral Agent, (C) executing and filing (to the extent, if any, that any
Grantor's signature is required thereon) or authenticating the filing of, such
financing or continuation statements, or amendments thereto, as may be necessary
or that the Collateral Agent may reasonably request in order to perfect and
preserve the security interest purported to be created hereby, (D) furnishing to
the Collateral Agent from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral in each case as the Collateral Agent may reasonably request,
all in reasonable detail, (E) if any Collateral shall be in the possession of a
third party, notifying such Person of the Collateral Agent's security interest
created hereby and obtaining a written acknowledgment from such Person that such
Person holds possession of the Collateral for the benefit of the Collateral
Agent, which such written acknowledgement shall be in form and substance
reasonably satisfactory to the Collateral Agent, (F) if at any time after the
date hereof, any Grantor acquires or holds any Commercial Tort Claim, promptly
notifying the Collateral Agent in a writing signed by such Grantor setting forth
a brief description of such Commercial Tort Claim and granting to the Collateral
Agent a security interest therein and in the proceeds thereof, which writing
shall incorporate the provisions hereof and shall be in form and substance
satisfactory to the Collateral Agent, (G) upon the acquisition after the date
hereof by any Grantor of any motor vehicle or other Equipment subject to a
certificate of title or ownership (other than a Motor Vehicle or Equipment that
is subject to a purchase money security interest), causing the Collateral Agent
to be listed as the lienholder on such certificate of title or ownership and
delivering evidence of the same to the Collateral Agent in accordance with
Section 5(j) hereof; and (H) taking all actions required by other law in any
relevant Uniform Commercial Code jurisdiction, or by other law as applicable in
any foreign jurisdiction.

     (b) LOCATION OF EQUIPMENT AND INVENTORY. Each Grantor will keep the
Equipment and Inventory (i) at the locations specified therefor on Part B of
SCHEDULE I hereto, or (ii) at such other locations set forth on Part B of
SCHEDULE I hereto (or a new Part B of SCHEDULE I delivered by the Grantors to
Collateral Agent from time to time) and with respect to which the Collateral
Agent has filed financing statements and otherwise fully perfected its Liens
thereon, or (iii) at such other locations in the United States, provided that
within 20 days following the relocation of Equipment or Inventory to such other
location or the acquisition of Equipment or Inventory, such Grantor shall
deliver to the Collateral Agent a new Part B of SCHEDULE I indicating such new
locations.

     (c) CONDITION OF EQUIPMENT. Each Grantor will maintain or cause the
Equipment (necessary or useful to its business) to be maintained and preserved
in good condition, repair and working order, ordinary wear and tear excepted,
and will forthwith, or in the case of any loss or damage to any Equipment of any
Grantor within a commercially reasonable time after the occurrence thereof, make
or cause to be made all repairs, replacements and other improvements in
connection therewith which are necessary or desirable, consistent with past
practice, or which the Collateral Agent may request to such end. Any Grantor
will promptly furnish to the Collateral Agent a statement describing in
reasonable detail any such loss or damage in excess of $250,000 per occurrence
to any Equipment.

                                     - 10 -

     (d) TAXES, ETC. Each Grantor agrees to pay promptly when due all property
and other taxes, assessments and governmental charges or levies imposed upon,
and all claims (including claims for labor, materials and supplies) against, the
Equipment and Inventory, except to the extent the validity thereof is being
contested in good faith by proper proceedings which stay the imposition or
enforcement of any penalty, fine or Lien resulting from the non-payment thereof
and with respect to which adequate reserves in accordance with GAAP have been
set aside for the payment thereof.

     (e) INSURANCE.

          (i) Each Grantor will, at its own expense, maintain insurance
     (including, without limitation, commercial general liability and property
     insurance) in such amounts, against such risks, in such form and with
     responsible and reputable insurance companies or associations as is
     required by any Governmental Authority having jurisdiction with respect
     thereto or as is carried generally in accordance with sound business
     practice by companies in similar businesses similarly situated. To the
     extent requested by the Collateral Agent at any time and from time to time,
     each such policy for liability insurance shall provide for all losses to be
     paid on behalf of the Collateral Agent and any Grantor as their respective
     interests may appear. To the extent requested by the Collateral Agent at
     any time and from time to time, each such policy shall (A) name the
     Collateral Agent as an additional insured party thereunder (without any
     representation or warranty by or obligation upon the Collateral Agent) as
     its interests may appear, (B) provide that there shall be no recourse
     against the Collateral Agent for payment of premiums or other amounts with
     respect thereto, and (C) provide that at least 30 days' prior written
     notice of cancellation, lapse, expiration or other adverse change shall be
     given to the Collateral Agent by the insurer. Any Grantor will, if so
     requested by the Collateral Agent, deliver to the Collateral Agent original
     or duplicate policies of such insurance. Any Grantor will also, at the
     request of the Collateral Agent, execute and deliver instruments of
     assignment of such insurance policies and cause the respective insurers to
     acknowledge notice of such assignment.

          (ii) Reimbursement under any liability insurance maintained by any
     Grantor pursuant to this Section 5(e) may be paid directly to the Person
     who shall have incurred liability covered by such insurance. During the
     continuance of an Event of Default, any proceeds of property insurance
     maintained by any Grantor pursuant to this Section 5(e) shall be paid to
     the Collateral Agent, and, at the Collateral Agent's option exercised in
     its sole discretion, the Collateral Agent, may make or may cause the
     Grantor to make, necessary repairs to or replacements, and if made by
     Grantor, any proceeds of insurance maintained by any Grantor pursuant to
     this Section 5(e) shall be paid by the Collateral Agent to any Grantor as
     reimbursement for the costs of such repairs or replacements.

                                     - 11 -

     (f) PROVISIONS CONCERNING THE ACCOUNTS AND THE LICENSES.

          (i) Each Grantor will (A) give the Collateral Agent at least 30 days'
     prior written notice of any change in such Grantor's name, identity or
     organizational structure, (B) maintain its jurisdiction of incorporation,
     organization or formation as set forth in Part A of SCHEDULE I hereto, (C)
     immediately notify the Collateral Agent upon obtaining an organizational
     identification number, if on the date hereof such Grantor did not have such
     identification number, and (D) keep adequate records concerning the
     Accounts, in accordance with the Existing Purchase Agreement and Chattel
     Paper.

          (ii) Each Grantor will, except as otherwise provided in this
     subsection (f), continue to collect, at its own expense, all amounts due or
     to become due under the Accounts. In connection with such collections, any
     Grantor may (and, upon the occurrence and during the continuance of an
     Event of Default, at the Collateral Agent's direction, will) take such
     action as any Grantor or the Collateral Agent may deem necessary or
     advisable to enforce collection or performance of the Accounts; provided,
     however, that the Collateral Agent shall have the right at any time, upon
     the occurrence and during the continuance of an Event of Default, to notify
     the account debtors or obligors under any Accounts of the assignment of
     such Accounts to the Collateral Agent and to direct such account debtors or
     obligors to make payment of all amounts due or to become due to any Grantor
     thereunder directly to the Collateral Agent or its designated agent and,
     upon such notification and at the expense of any Grantor and to the extent
     permitted by law, to enforce collection of any such Accounts and to adjust,
     settle or compromise the amount or payment thereof, in the same manner and
     to the same extent as any Grantor might have done. After receipt by any
     Grantor of a notice from the Collateral Agent that the Collateral Agent has
     notified, intends to notify, or has enforced or intends to enforce any
     Grantor's rights against the account debtors or obligors under any Accounts
     as referred to in the proviso to the immediately preceding sentence, (A)
     all amounts and proceeds (including Instruments) received by any Grantor in
     respect of the Accounts shall be received in trust for the benefit of the
     Collateral Agent hereunder, shall be segregated from other funds of any
     Grantor and shall be forthwith paid over to the Collateral Agent in the
     same form as so received (with any necessary endorsement) to be applied as
     specified in Section 7(b) hereof, and (B) no Grantor will adjust, settle or
     compromise the amount or payment of any Account or release wholly or partly
     any account debtor or obligor thereof or allow any credit or discount
     thereon. In addition, upon the occurrence and during the continuance of an
     Event of Default, the Collateral Agent may (in its sole and absolute
     discretion) direct any or all of the banks and financial institutions with
     which any Grantor either maintains a Deposit Account or a lockbox or
     deposits the proceeds of any Accounts to send immediately to the Collateral
     Agent by wire transfer (to such account as the Collateral Agent shall
     specify, or in such other manner as the Collateral Agent shall direct) all
     or a portion of such securities, cash, investments and other items held by
     such institution. Any such securities, cash, investments and other items so
     received by the Collateral Agent shall be applied as specified in
     accordance with Section 7(b) hereof; provided that any New Note Collateral
     shall be applied in accordance with the terms of the Exchange Agreements.

          (iii) Upon the occurrence and during the continuance of any material
     breach or default under any material License referred to in Part F of
     SCHEDULE I hereto by any party thereto other than any Grantor, each Grantor
     party thereto will, promptly after obtaining knowledge thereof, give the
     Collateral Agent written notice of the nature and duration thereof,
     specifying what action, if any, it has taken and proposes to take with
     respect thereto and thereafter will take reasonable steps to protect and
     preserve its rights and remedies in respect of such breach or default, or
     will obtain or acquire an appropriate substitute License.

                                     - 12 -

          (iv) Each Grantor will, at its expense, promptly deliver to the
     Collateral Agent a copy of each notice or other communication received by
     it by which any other party to any material License referred to in Part F
     of SCHEDULE I hereto purports to exercise any of its rights or affect any
     of its obligations thereunder in a manner which, in either case, would
     adversely affect the interest of the Collateral Agent or the Investors
     hereunder or under any Transaction Document, together with a copy of any
     reply by such Grantor thereto.

          (v) Each Grantor will exercise promptly and diligently each and every
     right which it may have under each material License (other than any right
     of termination) and will duly perform and observe in all respects all of
     its obligations under each material License and will take all action
     reasonably necessary to maintain such Licenses in full force and effect.
     Upon the occurrence and during the continuance of an Event of Default, no
     Grantor will, without the prior written consent of the Collateral Agent,
     cancel, terminate, amend or otherwise modify in any respect, or waive any
     provision of, any material License referred to in Part F of SCHEDULE I
     hereto.

     (g) TRANSFERS AND OTHER LIENS.

          (i) No Grantor will sell, assign (by operation of law or otherwise),
     lease, license, exchange or otherwise transfer or dispose of any of the
     Collateral, except (A) Inventory in the ordinary course of business, (B)
     worn out or obsolete assets, not necessary to the business, (C)
     non-exclusive Licenses of Intellectual Property in the ordinary course of
     business and (D) New Note Collateral as expressly provided in the Exchange
     Agreement.

          (ii) No Grantor will create, suffer to exist or grant any Lien upon or
     with respect to any Collateral, other than with respect to Joint Collateral
     only, a Permitted Lien.

                                     - 13 -

     (h) INTELLECTUAL PROPERTY.

          (i) If applicable, any Grantor shall, upon the Collateral Agent's
     written request, duly execute and deliver the applicable Assignment for
     Security in the form attached hereto as Exhibit A. Each Grantor (either
     itself or through licensees) will, and will cause each licensee thereof to,
     take all commercially reasonable action necessary to maintain all of the
     Intellectual Property in full force and effect, including, without
     limitation, using the proper statutory notices and markings and using the
     Trademarks on each applicable trademark class of goods in order to so
     maintain the Trademarks in full force and free from any claim of
     abandonment for non-use, and each Grantor will not (nor permit any licensee
     thereof to) do any act or knowingly omit to do any act whereby any
     Intellectual Property may become invalidated; provided, however, that so
     long as no Event of Default has occurred and is continuing, no Grantor
     shall have an obligation to use or to maintain any Intellectual Property
     (A) that relates solely to any product or work that has been, or is in the
     process of being, discontinued, abandoned or terminated, (B) that is being
     replaced with Intellectual Property substantially similar to the
     Intellectual Property that may be abandoned or otherwise become invalid, so
     long as the failure to use or maintain such Intellectual Property does not
     materially adversely affect the validity of such replacement Intellectual
     Property and so long as such replacement Intellectual Property is subject
     to the Lien created by this Agreement or (C) that is substantially the same
     as another Intellectual Property that is in full force, so long as such
     other Intellectual Property is subject to the Lien and security interest
     created by this Agreement. Each Grantor will cause to be taken all
     commercially reasonable necessary steps in any proceeding before applicable
     Intellectual Property Office or any similar office or agency in any other
     country or political subdivision thereof to maintain each registration of
     the Intellectual Property (other than the Intellectual Property described
     in the proviso to the immediately preceding sentence), including, without
     limitation, filing of renewals, affidavits of use, affidavits of
     incontestability and opposition, interference and cancellation proceedings
     and payment of maintenance fees, filing fees, taxes or other governmental
     fees. If any Intellectual Property (other than Intellectual Property
     described in the proviso to the second preceding sentence) is infringed,
     misappropriated, diluted or otherwise violated in any material respect by a
     third party, each Grantor shall (x) upon learning of such infringement,
     misappropriation, dilution or other violation, promptly notify the
     Collateral Agent and (y) to the extent any Grantor shall deem appropriate
     under the circumstances, promptly sue for infringement, misappropriation,
     dilution or other violation, seek injunctive relief where appropriate and
     recover any and all damages for such infringement, misappropriation,
     dilution or other violation, or take such other actions as such Grantor
     shall deem appropriate under the circumstances to protect such Intellectual
     Property. Each Grantor shall furnish to the Collateral Agent from time to
     time upon its reasonable request statements and schedules further
     identifying and describing the Intellectual Property and Licenses and such
     other reports in connection with the Intellectual Property and Licenses as
     the Collateral Agent may reasonably request, all in reasonable detail. Each
     Grantor shall modify this Agreement by amending Part F of SCHEDULE I hereto
     to include any Intellectual Property and License, as the case may be, which
     becomes part of the Collateral under this Agreement and shall execute and
     authenticate such documents and do such acts as shall be necessary or, in
     the reasonable judgment of the Collateral Agent, desirable to subject such
     Intellectual Property and Licenses to the Lien and security interest
     created by this Agreement. Notwithstanding anything herein to the contrary,
     upon the occurrence and during the continuance of an Event of Default, no
     Grantor may abandon or otherwise permit any Intellectual Property to become
     invalid without the prior written consent of the Collateral Agent, and if
     any Intellectual Property is infringed, misappropriated, diluted or
     otherwise violated in any material respect by a third party, each Grantor
     will take such commercially reasonable action as the Collateral Agent shall
     deem appropriate under the circumstances to protect such Intellectual
     Property.

          (ii) In no event shall any Grantor, either itself or through any
     agent, employee, licensee or designee, file an application for the
     registration of any Trademark or Copyright or the issuance of any Patent
     with any Intellectual Property Office, or in any similar office or agency
     of the United States or any country or any political subdivision thereof
     unless it gives the Collateral Agent prior written notice thereof. Upon
     request of the Collateral Agent, any Grantor shall execute, authenticate
     and deliver any and all assignments, agreements, instruments, documents and
     papers as the Collateral Agent may reasonably request to evidence the
     Collateral Agent's security interest hereunder in such Intellectual
     Property and the General Intangibles of any Grantor relating thereto or
     represented thereby, and each Grantor hereby appoints the Collateral Agent
     its attorney-in-fact to execute and/or authenticate and file all such
     writings for the foregoing purposes, all acts of such attorney being hereby
     ratified and confirmed, and such power (being coupled with an interest)
     shall be irrevocable until the indefeasible payment in full in cash of all
     of the Obligations in full.

                                     - 14 -

     (i) DEPOSIT, COMMODITIES AND SECURITIES ACCOUNTS. Upon the Collateral
Agent's written request, each Grantor shall cause each bank and other financial
institution with an account referred to in Part E of SCHEDULE I hereto to
execute and deliver to the Collateral Agent a control agreement, in form and
substance reasonably satisfactory to the Collateral Agent, duly executed by each
Grantor and such bank or financial institution, or enter into other arrangements
in form and substance satisfactory to the Collateral Agent, pursuant to which
such institution shall irrevocably agree, INTER ALIA, that (i) it will comply at
any time with the instructions originated by the Collateral Agent to such bank
or financial institution directing the disposition of cash, Commodity Contracts,
securities, Investment Property and other items from time to time credited to
such account, without further consent of each Grantor, which instructions the
Collateral Agent will not give to such bank or other financial institution in
the absence of a continuing Event of Default, (ii) all Commodity Contracts,
securities, Investment Property and other items of each Grantor deposited with
such institution shall be subject to a perfected, first priority security
interest in favor of the Collateral Agent, (iii) any right of set off (other
than recoupment of standard fees and returned items), banker's Lien or other
similar Lien, security interest or encumbrance shall be fully waived as against
the Collateral Agent, and (iv) upon receipt of written notice from the
Collateral Agent during the continuance of an Event of Default, such bank or
financial institution shall immediately send to the Collateral Agent by wire
transfer (to such account as the Collateral Agent shall specify, or in such
other manner as the Collateral Agent shall direct) all such cash, the value of
any Commodity Contracts, securities, Investment Property and other items held by
it. Without the prior written consent of the Collateral Agent, each Grantor
shall not make or maintain any Deposit Account, Commodity Account or Securities
Account except for the Collateral Account and accounts set forth in Part E of
SCHEDULE I hereto. The provisions of this paragraph 5(i) shall not apply to (i)
Deposit Accounts for which the Collateral Agent is the depositary and (ii)
Deposit Accounts specially and exclusively used for payroll, payroll taxes and
other employee wage and benefit payments to or for the benefit of each Grantor's
salaried or hourly employees. Notwithstanding the foregoing, the Company shall
have complied and shall continue to comply with all requirements set forth in
the Exchange Agreement regarding the Collateral Account.

     (j) MOTOR VEHICLES.

          (i) Upon the Collateral Agent's written request, each Grantor shall
     deliver to the Collateral Agent originals of the certificates of title or
     ownership for all motor vehicles owned by it with the Collateral Agent
     listed as lienholder, for the benefit of the Secured Parties (other than a
     motor vehicle that is subject to a purchase money security interest).

          (ii) Each Grantor hereby appoints the Collateral Agent as its
     attorney-in-fact, effective the date hereof and terminating upon the
     termination of this Agreement, for the purpose of, following the occurrence
     and during the continuation of an Event of Default, (A) executing on behalf
     of such Grantor title or ownership applications for filing with appropriate
     state agencies to enable motor vehicles now owned or hereafter acquired by
     such Grantor to be retitled and the Collateral Agent listed as lienholder
     thereof (other than a motor vehicle that is subject to a purchase money
     security interest), (B) filing such applications with such state agencies,
     and (C) executing such other documents and instruments on behalf of, and
     taking such other action in the name of, such Grantor as the Collateral
     Agent may deem necessary or advisable to accomplish the purposes hereof
     (including, without limitation, for the purpose of creating in favor of the
     Collateral Agent a perfected Lien on such motor vehicles and exercising the
     rights and remedies of the Collateral Agent hereunder). This appointment as
     attorney-in-fact is coupled with an interest and is irrevocable until all
     of the Obligations are indefeasibly paid in full in cash.

                                     - 15 -

          (iii) Any certificates of title or ownership delivered pursuant to the
     terms hereof shall be accompanied by odometer statements for each motor
     vehicle covered thereby.

          (iv) So long as no Event of Default shall have occurred and be
     continuing, upon the request of any Grantor, the Collateral Agent shall
     execute and deliver to any Grantor such instruments as any Grantor shall
     reasonably request to remove the notation of the Collateral Agent as
     lienholder on any certificate of title for any motor vehicle; PROVIDED,
     HOWEVER, that any such instruments shall be delivered, and the release
     effective, only upon receipt by the Collateral Agent of a certificate from
     any Grantor stating that such motor vehicle is to be sold or has suffered a
     casualty loss (with title thereto in such case passing to the casualty
     insurance company therefor in settlement of the claim for such loss) and
     the amount that any Grantor will receive as sale proceeds or insurance
     proceeds.

     (k) CONTROL. Each Grantor hereby agrees to take any or all action that may
be necessary or that the Collateral Agent may reasonably request in order for
the Collateral Agent to obtain control in accordance with Sections 9-105, 9-106
and 9-107 of the Code with respect to the following Collateral: (i) Electronic
Chattel Paper, (ii) Investment Property, and (iii) Letter-of-Credit Rights.

     (l) INSPECTION AND REPORTING. Each Grantor shall permit in accordance with
the Existing Purchase Agreement and the Exchange Agreements, the Collateral
Agent, or any agent or representatives thereof or such professionals or other
Persons as the Collateral Agent may designate, during normal business hours,
after reasonable prior notice, in the absence of an Event of Default and not
more than once a year in the absence of an Event of Default, (i) to examine and
make copies of and abstracts from any Grantor's records and books of account,
(ii) to visit and inspect its properties, (iii) to verify materials, leases,
Instruments, Accounts, Inventory and other assets of any Grantor from time to
time, (iii) to conduct audits, physical counts, appraisals and/or valuations,
examinations at the locations of any Grantor.

     (m) FUTURE SUBSIDIARIES. If any Grantor shall hereafter create or acquire
any Subsidiary, simultaneously with the creation or acquisition of such
Subsidiary, such Grantor shall (i) cause such Subsidiary to become a party to
this Agreement as an additional "Grantor" hereunder, (ii) such Grantor shall
deliver to Collateral Agent revised Schedules to this Agreement, as appropriate,
(iii) shall become a party to the Guaranty or duly execute and deliver a
guaranty of the Obligations in favor of the Collateral Agent in form and
substance reasonably acceptable to the Collateral Agent, and (iv) shall duly
execute and/or deliver such opinions of counsel and other documents, in form and
substance reasonably acceptable to the Collateral Agent, as the Collateral Agent
shall reasonably request with respect thereto, provided that any Grantor that
acquires a subsidiary on or within two days after the Closing Date shall have 10
Business Days in which to satisfy the requirements of this Section 5(m).

                                     - 16 -

     SECTION 6. ADDITIONAL PROVISIONS CONCERNING THE COLLATERAL.

     (a) To the maximum extent permitted by applicable law, and for the purpose
of taking any action that the Collateral Agent may deem necessary or advisable
to accomplish the purposes of this Agreement, each Grantor hereby (i) authorizes
the Collateral Agent to execute any such agreements, instruments or other
documents in such Grantor's name and to file such agreements, instruments or
other documents in such Grantor's name and in any appropriate filing office,
(ii) authorizes the Collateral Agent at any time and from time to time to file,
one or more financing or continuation statements, and amendments thereto,
relating to the Collateral (including, without limitation, any such financing
statements that (A) describe the Collateral as "all assets" or "all personal
property" (or words of similar effect) or that describe or identify the
Collateral by type or in any other manner as the Collateral Agent may determine
regardless of whether any particular asset of such Grantor falls within the
scope of Article 9 of the Uniform Commercial Code or whether any particular
asset of such Grantor constitutes part of the Collateral, and (B) contain any
other information required by Part 5 of Article 9 of the Uniform Commercial Code
for the sufficiency or filing office acceptance of any financing statement,
continuation statement or amendment, including, without limitation, whether such
Grantor is an organization, the type of organization and any organizational
identification number issued to such Grantor) and (iii) ratifies such
authorization to the extent that the Collateral Agent has filed any such
financing or continuation statements, or amendments thereto, prior to the date
hereof. A photocopy or other reproduction of this Agreement or any financing
statement covering the Collateral or any part thereof shall be sufficient as a
financing statement where permitted by law.

     (b) Each Grantor hereby irrevocably appoints the Collateral Agent as its
attorney-in-fact and proxy, with full authority in the place and stead of such
Grantor and in the name of such Grantor or otherwise, from time to time in the
Collateral Agent's discretion, so long as an Event of Default shall have
occurred and is continuing, to take any action and to execute any instrument
which the Collateral Agent may reasonably deem necessary or advisable to
accomplish the purposes of this Agreement (subject to the rights of each Grantor
under Section 5 hereof), including, without limitation, (i) to obtain and adjust
insurance required to be paid to the Collateral Agent pursuant to Section 5(e)
hereof, (ii) to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any Collateral, (iii) to receive, endorse, and collect any drafts or
other instruments, documents and chattel paper in connection with clause (i) or
(ii) above, (iv) to file any claims or take any action or institute any
proceedings which the Collateral Agent may deem necessary or desirable for the
collection of any Collateral or otherwise to enforce the rights of the Secured
Parties with respect to any Collateral, and (v) to execute assignments, licenses
and other documents to enforce the rights of the Secured Parties with respect to
any Collateral. This power is coupled with an interest and is irrevocable until
all of the Obligations are indefeasibly paid in full in cash.

                                     - 17 -

     (c) For the purpose of enabling the Collateral Agent to exercise rights and
remedies hereunder, at such time as the Collateral Agent shall be lawfully
entitled to exercise such rights and remedies, and for no other purpose, each
Grantor hereby grants to the Collateral Agent, to the extent assignable, an
irrevocable, non-exclusive license (exercisable without payment of royalty or
other compensation to any Grantor) to use, assign, license or sublicense any
Intellectual Property now owned or hereafter acquired by such Grantor, wherever
the same may be located, including in such license reasonable access to all
media in which any of the licensed items may be recorded or stored and to all
computer programs used for the compilation or printout thereof; provided,
however, that Collateral Agent, prior to commencing foreclosure proceedings
against the Intellectual Property, shall have no right to license the
Intellectual Property in any manner that shall have the effect of causing: (i)
any Grantor to be in violation of any then-existing License or other agreement
with any third party, or (ii) the forfeiture or invalidation of any of the
Intellectual Property, including, by way of example and not of limitation, the
unprotected disclosure of proprietary information that derives its value from
being kept secret or the naked licensing of trademark rights. Notwithstanding
anything contained herein to the contrary, but subject to the provisions of the
Existing Purchase Agreement that limit the right of any Grantor to dispose of
its property, and Section 5(g) and Section 5(h) hereof, so long as no Event of
Default shall have occurred and be continuing, any Grantor may exploit, use,
enjoy, protect, license, sublicense, assign, sell, dispose of or take other
actions with respect to the Intellectual Property in the ordinary course of its
business. In furtherance of the foregoing, unless an Event of Default shall have
occurred and be continuing, the Collateral Agent shall from time to time, upon
the request of any Grantor, execute and deliver any instruments, certificates or
other documents, in the form so requested, which such Grantor shall have
certified are appropriate (in such Grantor's judgment) to allow it to take any
action permitted above (including relinquishment of the license provided
pursuant to this clause (c) as to any Intellectual Property). Further, upon the
indefeasible payment in full in cash of all of the Obligations, the Collateral
Agent (subject to Section 10(e) hereof) shall release and reassign to any
Grantor all of the Collateral Agent's right, title and interest in and to the
Intellectual Property, and the Licenses, all without recourse, representation or
warranty whatsoever. The exercise of rights and remedies hereunder by the
Collateral Agent shall not terminate the rights of the holders of any licenses
or sublicenses theretofore granted by each Grantor in accordance with the second
sentence of this clause (c). Each Grantor hereby releases the Collateral Agent
from any claims, causes of action and demands at any time arising out of or with
respect to any actions taken or omitted to be taken by the Collateral Agent
under the powers of attorney granted herein other than actions taken or omitted
to be taken through the Collateral Agent's gross negligence or willful
misconduct, as determined by a final determination of a court of competent
jurisdiction.

     (d) If any Grantor fails to perform any agreement or obligation contained
herein, the Collateral Agent may itself perform, or cause performance of, such
agreement or obligation, in the name of such Grantor or the Collateral Agent,
and the expenses of the Collateral Agent incurred in connection therewith shall
be payable by such Grantor pursuant to Section 8 hereof and shall be secured by
the Collateral.

     (e) The powers conferred on the Collateral Agent hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the safe custody of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Collateral Agent shall have no duty as to any Collateral or as to the taking of
any necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.

                                     - 18 -

     (f) Anything herein to the contrary notwithstanding (i) each Grantor shall
remain liable under the Licenses and otherwise with respect to any of the
Collateral to the extent set forth therein to perform all of its obligations
thereunder to the same extent as if this Agreement had not been executed, (ii)
the exercise by the Collateral Agent of any of its rights hereunder shall not
release any Grantor from any of its obligations under the Licenses or otherwise
in respect of the Collateral, and (iii) the Collateral Agent shall not have any
obligation or liability by reason of this Agreement under the Licenses or with
respect to any of the other Collateral, nor shall the Collateral Agent be
obligated to perform any of the obligations or duties of any Grantor thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.

     SECTION 7. REMEDIES UPON EVENT OF DEFAULT. If any Event of Default shall
have occurred and be continuing:

     (a) The Collateral Agent may exercise in respect of the Collateral, in
addition to any other rights and remedies provided for herein or otherwise
available to it, all of the rights and remedies of a secured party upon default
under the Uniform Commercial Code (whether or not the Uniform Commercial Code
applies to the affected Collateral), and also may (i) take absolute control of
the Collateral, including, without limitation, transfer into the Collateral
Agent's name or into the name of its nominee or nominees (to the extent the
Collateral Agent has not theretofore done so) and thereafter receive, for the
benefit of the Collateral Agent, all payments made thereon, give all consents,
waivers and ratifications in respect thereof and otherwise act with respect
thereto as though it were the outright owner thereof, (ii) require each Grantor
to, and each Grantor hereby agrees that it will at its expense and upon request
of the Collateral Agent forthwith, assemble all or part of its respective
Collateral as directed by the Collateral Agent and make it available to the
Collateral Agent at a place or places to be designated by the Collateral Agent
that is reasonably convenient to both parties, and the Collateral Agent may
enter into and occupy any premises owned or leased by any Grantor where the
Collateral or any part thereof is located or assembled for a reasonable period
in order to effectuate the Collateral Agent's rights and remedies hereunder or
under law, without obligation to any Grantor in respect of such occupation, and
(iii) without notice except as specified below and without any obligation to
prepare or process the Collateral for sale, (A) sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of the
Collateral Agent's offices or elsewhere, for cash, on credit or for future
delivery, and at such price or prices and upon such other terms as the
Collateral Agent may deem commercially reasonable and/or (B) lease, license or
dispose of the Collateral or any part thereof upon such terms as the Collateral
Agent may deem commercially reasonable. Each Grantor agrees that, to the extent
notice of sale or any other disposition of its respective Collateral shall be
required by law, at least ten (10) days' notice to any Grantor of the time and
place of any public sale or the time after which any private sale or other
disposition of its respective Collateral is to be made shall constitute
reasonable notification. The Collateral Agent shall not be obligated to make any
sale or other disposition of any Collateral regardless of notice of sale having
been given. The Collateral Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. Each Grantor hereby waives any claims against the Secured Parties
arising by reason of the fact that the price at which its respective Collateral
may have been sold at a private sale was less than the price which might have
been obtained at a public sale or was less than the aggregate amount of the
Obligations, even if the Collateral Agent accepts the first offer received and
does not offer such Collateral to more than one offeree, and waives all rights
that any Grantor may have to require that all or any part of such Collateral be
marshaled upon any sale (public or private) thereof. Each Grantor hereby
acknowledges that (i) any such sale of its respective Collateral by the
Collateral Agent shall be made without warranty, (ii) the Collateral Agent may
specifically disclaim any warranties of title, possession, quiet enjoyment or
the like, and (iii) such actions set forth in clauses (i) and (ii) above shall
not adversely affect the commercial reasonableness of any such sale of
Collateral. In addition to the foregoing, (1) upon written notice to any Grantor
from the Collateral Agent after and during the continuance of an Event of
Default, such Grantor shall cease any use of the Intellectual Property or any
trademark, patent or copyright similar thereto for any purpose described in such
notice; (2) the Collateral Agent may, at any time and from time to time after
and during the continuance of an Event of Default, upon 10 days' prior notice to
such Grantor, license, whether general, special or otherwise, and whether on an
exclusive or non-exclusive basis, any of the Intellectual Property, throughout
the universe for such term or terms, on such conditions, and in such manner, as
the Collateral Agent shall in its sole discretion determine; ; provided,
however, that Collateral Agent, prior to commencing foreclosure proceedings
against the Intellectual Property, shall have no right to license the
Intellectual Property in any manner that shall have the effect of causing: (i)
any Grantor to be in violation of any then-existing License or other agreement
with any third party, or (ii) the forfeiture or invalidation of any of the
Intellectual Property, including, by way of example and not of limitation, the
unprotected disclosure of proprietary information that derives its value from
being kept secret or the naked licensing of trademark rights, and (3) the
Collateral Agent may, at any time, pursuant to the authority granted in Section
6 hereof (such authority being effective upon the occurrence and during the
continuance of an Event of Default), execute and deliver on behalf of such
Grantor, one or more instruments of assignment of the Intellectual Property (or
any application or registration thereof), in form suitable for filing, recording
or registration in any country.

                                     - 19 -

     (b) Any cash held by the Collateral Agent as Collateral and all Cash
Proceeds received by the Collateral Agent in respect of any sale of or
collection from, or other realization upon, all or any part of the Joint
Collateral shall be applied (after payment of any amounts payable to the
Collateral Agent pursuant to SECTION 8 hereof) by the Collateral Agent against,
all or any part of the Obligations in such order as the Collateral Agent shall
elect, consistent with the provisions of the Existing Purchase Agreement. Any
surplus of such cash or Cash Proceeds held by the Collateral Agent and remaining
after the indefeasible payment in full in cash of all of the Obligations shall
be paid over to whomsoever shall be lawfully entitled to receive the same or as
a court of competent jurisdiction shall direct.

     (c) In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Secured Parties are
legally entitled, each Grantor shall be liable for the deficiency, together with
interest thereon at the highest rate specified in the Notes for interest on
overdue principal thereof or such other rate as shall be fixed by applicable
law, together with the costs of collection and the reasonable fees, costs,
expenses and other client charges of any attorneys employed by the Collateral
Agent to collect such deficiency.

     (d) Each Grantor hereby acknowledges that if the Collateral Agent complies
with any applicable state, provincial, or federal law requirements in connection
with a disposition of the Collateral, such compliance will not adversely affect
the commercial reasonableness of any sale or other disposition of the Collateral
in such jurisdiction.

                                     - 20 -

     (e) The Collateral Agent shall not be required to marshal any present or
future collateral security (including, but not limited to, the Collateral) for,
or other assurances of payment of, the Obligations or any of them or to resort
to such collateral security or other assurances of payment in any particular
order, and all of the Collateral Agent's rights hereunder and in respect of such
collateral security and other assurances of payment shall be cumulative and in
addition to all other rights, however existing or arising. To the extent that
any Grantor lawfully may, each Grantor hereby agrees that it will not invoke any
law relating to the marshaling of collateral which might cause delay in or
impede the enforcement of the Collateral Agent's rights under this Agreement or
under any other instrument creating or evidencing any of the Obligations or
under which any of the Obligations is outstanding or by which any of the
Obligations is secured or payment thereof is otherwise assured, and, to the
extent that it lawfully may, each Grantor hereby irrevocably waives the benefits
of all such laws.

     SECTION 8. INDEMNITY AND EXPENSES.

     (a) Each Grantor agrees, jointly and severally, to defend, protect,
indemnify and hold the Secured Parties harmless from and against any and all
claims, damages, losses, liabilities, obligations, penalties, fees, costs and
expenses (including, without limitation, reasonable legal fees, costs, expenses,
and disbursements of such Person's counsel) to the extent that they arise out of
or otherwise result from this Agreement (including, without limitation,
enforcement of this Agreement), except to the extent resulting from such
Person's gross negligence or willful misconduct, as determined by a final
judgment of a court of competent jurisdiction.

     (b) Each Grantor agrees, jointly and severally, to pay to the Collateral
Agent upon demand the amount of any and all costs and expenses, including the
reasonable fees, costs, expenses and disbursements of counsel for the Collateral
Agent and of any experts and agents (including, without limitation, any
collateral trustee which may act as agent of the Collateral Agent), which the
Collateral Agent may incur in connection with (i) the preparation, negotiation,
execution, delivery, recordation, administration, amendment, waiver or other
modification or termination of this Agreement, (ii) the custody, preservation,
use or operation of, or the sale of, collection from, or other realization upon,
any Collateral, (iii) the exercise or enforcement of any of the rights of the
Collateral Agent hereunder, or (iv) the failure by any Grantor to perform or
observe any of the provisions hereof.

     SECTION 9. NOTICES, ETC. All notices and other communications provided for
hereunder shall be in writing and shall be mailed (by certified mail, postage
prepaid and return receipt requested), telecopied, e-mailed or delivered, at its
address set forth on the signature pages below, and if to the Collateral Agent
to it, at its address specified on the signature pages below; or as to any such
Person, at such other address as shall be designated by such Person in a written
notice to all other parties hereto complying as to delivery with the terms of
this Section 9. All such notices and other communications shall be effective (a)
if sent by certified mail, return receipt requested, when received or three days
after deposited in the mails, whichever occurs first, (b) if telecopied or
e-mailed, when transmitted (during normal business hours) and confirmation is
received, and otherwise, the day after the notice or communication was
transmitted and confirmation is received, or (c) if delivered in person, upon
delivery. For the avoidance of doubt, any Grantor organized under the laws of a
jurisdiction other than the United States, any of the states thereof or the
District of Columbia, hereby irrevocably appoint the Company as its agent for
receipt of service of process and all notices and other communications in the
United States at the address specified below.

                                     - 21 -

     SECTION 10. MISCELLANEOUS.

     (a) No amendment of any provision of this Agreement shall be effective
unless it is in writing and signed by each Grantor and the Collateral Agent, and
no waiver of any provision of this Agreement, and no consent to any departure by
each Grantor therefrom, shall be effective unless it is in writing and signed by
each Grantor and the Collateral Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.

     (b) No failure on the part of the Collateral Agent to exercise, and no
delay in exercising, any right hereunder or under any of the other Transaction
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The rights and remedies of the Secured Parties
provided herein and in the other Transaction Documents are cumulative and are in
addition to, and not exclusive of, any rights or remedies provided by law. The
rights of the Secured Parties under any of the other Transaction Documents
against any party thereto are not conditional or contingent on any attempt by
such Person to exercise any of its rights under any of the other Transaction
Documents against such party or against any other Person, including but not
limited to, any Grantor.

     (c) Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.

     (d) This Agreement shall create a continuing security interest in the
Collateral and shall (i) remain in full force and effect until the indefeasible
payment in full in cash of the Obligations (other than inchoate indemnity
obligations) and/or complete conversion of all of the Company's obligations
under the Notes in accordance with the terms thereof, and (ii) be binding on
each Grantor and all other Persons who become bound as debtor to this Agreement
in accordance with Section 9-203(d) of the Uniform Commercial Code and shall
inure, together with all rights and remedies of the Secured Parties hereunder,
to the benefit of the Secured Parties and their respective permitted successors,
transferees and assigns. Without limiting the generality of clause (ii) of the
immediately preceding sentence, without notice to any Grantor, the Secured
Parties may assign or otherwise transfer their rights and obligations under this
Agreement and any of the other Transaction Documents in accordance with the
respective Transaction Documents to any other Person and such other Person shall
thereupon become vested with all of the benefits in respect thereof granted to
the Secured Parties herein or otherwise. Upon any such assignment or transfer,
all references in this Agreement to the Secured Parties shall mean the assignee
of the Secured Parties. None of the rights or obligations of any Grantor
hereunder may be assigned or otherwise transferred without the prior written
consent of the Collateral Agent, and any such assignment or transfer without the
consent of the Collateral Agent shall be null and void.

                                     - 22 -

     (e) Upon the indefeasible payment in full in cash of the Obligations (other
than inchoate indemnity obligations) and/or complete conversion of all of the
Company's obligations under the Notes, in accordance with the terms thereof, (i)
this Agreement and the security interests created hereby shall terminate and all
rights to the Collateral shall revert to the respective Grantor that granted
such security interests hereunder, and (ii) the Collateral Agent will, upon any
Grantor's request and at such Grantor's expense, (A) return to such Grantor such
of the Collateral as shall not have been sold or otherwise disposed of or
applied pursuant to the terms hereof, and (B) execute and deliver to such
Grantor such documents as such Grantor shall reasonably request to evidence such
termination, all without any representation, warranty or recourse whatsoever.

     (f) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY
MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND
PERFECTION OR THE PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF
THE SECURITY INTEREST CREATED HEREBY, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK.

     (g) ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY DOCUMENT RELATED HERETO MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW
YORK IN THE COUNTY OF NEW YORK OR THE UNITED STATES OF AMERICA FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND APPELLATE COURTS THEREOF, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH GRANTOR AND THE COLLATERAL AGENT HEREBY ACCEPTS
FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. EACH GRANTOR AND THE COLLATERAL AGENT
HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION, SUIT OR PROCEEDING IN SUCH
RESPECTIVE JURISDICTIONS AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.

                                     - 23 -

     (h) EACH GRANTOR AND (BY ITS ACCEPTANCE OF THE BENEFITS OF THIS AGREEMENT)
THE COLLATERAL AGENT WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, ORAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES
HERETO.

     (i) The Collateral Agent and each Grantor irrevocably consents to the
service of process of any of the aforesaid courts in any such action, suit or
proceeding by the mailing of copies thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to such party at its
address provided herein, such service to become effective 10 days after such
mailing.

     (j) Nothing contained herein shall affect the right of the Collateral Agent
to serve process in any other manner permitted by law or commence legal
proceedings or otherwise proceed against any Grantor or any property of any
Grantor in any other jurisdiction.

     (k) Each Grantor irrevocably and unconditionally waives any right it may
have to claim or recover in any legal action, suit or proceeding referred to in
this Section any special, exemplary, punitive or consequential damages.

     (l) Section headings herein are included for convenience of reference only
and shall not constitute a part of this Agreement for any other purpose.

     (m) This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which shall be deemed
to be an original, but all of which taken together constitute one in the same
Agreement.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                     - 24 -

     IN WITNESS WHEREOF, each Grantor has caused this Agreement to be executed
and delivered by its officer thereunto duly authorized, as of the date first
above written.

                                                    INKSURE TECHNOLOGIES INC.

                                                    By:_________________________
                                                       Name:
                                                       Title:

                                                    Address:
                                                    ____________________________
                                                    ____________________________
                                                    ____________________________

                                                    INKSURE INC.

                                                    By:_________________________
                                                       Name:
                                                       Title:

                                                    Address:
                                                    ____________________________
                                                    ____________________________
                                                    ____________________________

                                                    IST OPERATING INC.

                                                    By:_________________________
                                                       Name:
                                                       Title:

                                                    Address:
                                                    ____________________________
                                                    ____________________________
                                                    ____________________________

                                Schedule I, Page 1

                                                    INKSURE RF, INC.

                                                    By:_________________________
                                                       Name:
                                                       Title:

                                                    Address:
                                                    ____________________________
                                                    ____________________________
                                                    ____________________________

SMITHFIELD FIDUCIARY LLC

By:_________________________
   Name:
   Title:

                               Schedule I, Page 2

                                   SCHEDULE I

PART A: Legal Names; Organizational Identification Numbers; State or
        Jurisdiction of Organizations

GRANTOR'S NAME                           STATE OF ORGANIZATION             EMPLOYER I.D.             ORGANIZATIONAL I.D.

PART B: Locations

GRANTOR'S NAME        CHIEF EXECUTIVE OFFICE     CHIEF PLACE OF BUSINESS   BOOKS AND RECORDS     INVENTORY, EQUIPMENT, ETC.
--------------        ----------------------     -----------------------   -----------------     -------------------------

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

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

PART C: Financing Statements

GRANTOR                                JURISDICTIONS FOR FILING FINANCING STATEMENTS

PART D: Commercial Tort Claims

[Describe Commercial Tort Claim]

PART E: Promissory Notes, Securities, Instruments and Deposit, Securities and
Commodities Accounts

SECURITIES

     GRANTOR             NAME OF ISSUER         NUMBER OF SHARES           CLASS           CERTIFICATE NO.(S)
     -------             --------------         ----------------           -----           ------------------

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

PROMISSORY NOTES AND OTHER INSTRUMENTS

     GRANTOR             NAME OF ISSUER        PRINCIPAL AMOUNT        MATURITY DATE
     -------             --------------        ----------------        -------------

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

DEPOSIT, SECURITIES OR COMMODITIES ACCOUNTS

     GRANTOR             NAME AND ADDRESS OF INSTITUTION     PURPOSE OF THE ACCOUNT      ACCOUNT NO.       TYPE OF ACCOUNT
     -------             -------------------------------     ----------------------      ----------        ---------------

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

PART F:  Intellectual Property

TRADEMARKS

    GRANTOR         COUNTRY     TRADEMARK    APPLICATION/ REGISTRATION NO.   FILING DATE   REGISTRATION DATE    ASSIGNEES
    -------         -------     ---------    -----------------------------   -----------   -----------------    ---------

PATENTS

COPYRIGHTS

LICENSES

PART G: Tradenames

                                     Schedule I, Page 3

                                   EXHIBIT A

        GRANT OF SECURITY INTEREST - [TRADEMARKS] [PATENTS] [COPYRIGHTS]

     WHEREAS, ______________________________ (the "ASSIGNOR") [has adopted, used
and is using, and holds all right, title and interest in and to, the trademarks
and service marks listed on ANNEX A, which trademarks and service marks are
registered or applied for in the United States Patent and Trademark Office (the
"TRADEMARKS")] [holds all right, title and interest in the letter patents,
design patents and utility patents listed on ANNEX A, which patents are issued
or applied for in the United States Patent and Trademark Office (the "PATENTS")]
[holds all right, title and interest in the copyrights listed on ANNEX A, which
copyrights are registered in the United States Copyright Office (the
"COPYRIGHTS")];

     WHEREAS, the Assignor has entered into a Security Agreement, dated as of
_________ __, 20__ (as amended, restated, replaced, supplemented, modified or as
otherwise changed from time to time, the "SECURITY AGREEMENT"), in favor of
__________, as collateral agent for certain purchasers (the "ASSIGNEE");

     WHEREAS, pursuant to the Security Agreement, the Assignor has assigned to
the Assignee and granted to the Assignee for the benefit of the Investors (as
defined in the Security Agreement) a continuing security interest in all right,
title and interest of the Assignor in, to and under the [Trademarks, together
with, among other things, the good-will of the business symbolized by the
Trademarks] [Patents] [Copyrights] and the applications and registrations
thereof, and all proceeds thereof, including, without limitation, any and all
causes of action which may exist by reason of infringement thereof and any and
all damages arising from past, present and future violations thereof (the
"COLLATERAL"), to secure the payment, performance and observance of the
"Obligations" (as defined in the Security Agreement);

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Assignor does hereby pledge,
convey, sell, assign, transfer and set over unto the Assignee and grants to the
Assignee for the benefit of the Secured Parties a continuing security interest
in the Collateral to secure the prompt payment, performance and observance of
the Obligations.

     The Assignor does hereby further acknowledge and affirm that the rights and
remedies of the Assignee with respect to the Collateral are more fully set forth
in the Security Agreement, the terms and provisions of which are hereby
incorporated herein by reference as if fully set forth herein.

     IN WITNESS WHEREOF, the Assignor has caused this Grant of Security Interest
to be duly executed by its officer thereunto duly authorized as of
_____________, 20__

                                                     [GRANTORS]

                                                    By: ________________
                                                        Name:
                                                        Title:

STATE OF ____________
                      ss.:
COUNTY OF __________

     On this ____ day of _______________, 20__, before me personally came
________________, to me known to be the person who executed the foregoing
instrument, and who, being duly sworn by me, did depose and say that s/he is the
______________________ of _________________________, a __________________, and
that s/he executed the foregoing instrument in the firm name of
______________________________, and that s/he had authority to sign the same,
and s/he acknowledged to me that he executed the same as the act and deed of
said firm for the uses and purposes therein mentioned.

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

                       ANNEX A TO ASSIGNMENT FOR SECURITY

[Trademarks and Trademark Applications]
[Patent and Patent Applications]
[Copyright and Copyright Applications]
Owned by ______________________________

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