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NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK  ISSUABLE  UPON  EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN
MAY BE  OFFERED,  SOLD,  TRANSFERRED,  PLEDGED OR  OTHERWISE  DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE  REGISTRATION  STATEMENT UNDER SUCH ACT OR SUCH LAWS OR
AN  EXEMPTION  FROM  REGISTRATION  UNDER  SUCH ACT AND SUCH LAWS  WHICH,  IN THE
OPINION OF COUNSEL FOR THE COMPANY, IS AVAILABLE.

 Void after 5:00 P.M. New York City time on the last day of the Exercise Period,
                            as defined in the Warrant

                          COMMON STOCK PURCHASE WARRANT

                                       OF

                                  OTHNET, INC.

      This  is  to  certify  that,   FOR  VALUE   RECEIVED,   __________________
("Holder"),  is entitled to purchase,  subject to the provisions of this warrant
("Warrant"),  from Othnet, Inc., a Delaware  corporation (the "Company"),  at an
exercise price per share equal to 140% of the conversion  price of the Company's
Series B Preferred Stock, subject to adjustment as provided in this Warrant (the
"Warrant  Exercise Price"),  ______________  (_____) shares of common stock, par
value $0.001 per share ("Common Stock").  The shares of Common Stock deliverable
upon such exercise, and as adjusted from time to time, are hereinafter sometimes
referred to as "Warrant  Shares." 1. ISSUANCE OF WARRANT.  This Warrant is being
issued  pursuant to that  certain  Subscription  Agreement  dated as of the date
hereof  between  the  Company  and the Holder  (the  "Subscription  Agreement").
Capitalized  terms used herein and not otherwise defined shall have the meanings
ascribed thereto in the Subscription Agreement. In addition, the following terms
have the meanings set forth below:

      "Closing  Price"  means,  as of any date,  the last trading  price for the
Common  Stock as reported by the NASD OTC  Bulletin  Board,  or other  principal
exchange or  electronic  trading  system on which the shares of Common Stock are
quoted or traded.

            "Convertible  Securities"  shall  mean  evidences  of  indebtedness,
shares of stock or other securities, which are convertible into or exchangeable,
with or without  payment of additional  consideration  in cash or property,  for
shares of Common Stock, either immediately or upon the occurrence of a specified
date or a specified event.

            "Exercise  Period"  shall  mean the  period  commencing  on the date
hereof and ending at 5 p.m.,  Eastern  Time on  _____________,  2010 [five years
from date of issuance].

            "Permitted Issuances" shall mean (i) Common Stock issued pursuant to
a stock split or subdivision, (ii) Common Stock issuable or issued to employees,
consultants or directors of the Company  directly or pursuant to a stock plan or
other compensation arrangement approved by the Board of Directors of the Company
at the then fair market value, (iii) capital stock, debt instruments convertible
into capital  stock or warrants or options to purchase  capital  stock issued in
connection with bona fide acquisitions, mergers, purchases, corporate partnering
agreements,  joint  ventures  or  similar  transactions,  the terms of which are
approved by the Board of Directors of the Company,  and (iv) Common Stock issued
or issuable upon conversion of the Warrants or any other securities  exercisable
or exchangeable  for, or convertible into shares of Common Stock  outstanding as
of January 5, 2005.

<PAGE>

            "Placement"  means the  private  placement  by the  Company of up to
$4,000,000  worth  of Units  consisting  of  shares  of the  Company's  Series B
Convertible Preferred Stock and Warrants, including this Warrant.

            "Redemption  Conditions" means each of the following conditions to a
redemption  of this Warrant by the Company : (i) the closing  price per share of
Common  Stock,  or the  average  of the  closing  bid and ask price per share of
Common  Stock,  if  applicable,  has been at least 200% of the Warrant  Exercise
Price   (as   adjusted   for   any   stock   splits,   combinations   or   other
recapitalizations)  for thirty (30) consecutive  trading days ending on the date
of the  Redemption  Notice  (hereinafter  defined)  (the  "Redemption  Measuring
Period"), (ii) the average daily trading volume of the Company's Common Stock as
reported on the OTC  Bulletin  Board  ("OTCBB")  or other  electronic  quotation
system or stock exchange as then listed,  averages at least 2,000,000  shares of
Common  Stock  per day for  thirty  (30)  consecutive  trading  days  prior to a
Redemption  Notice (as hereinafter  defined),  (iii) the resale of the shares of
Common  Stock  issuable  upon  exercise of this Warrant is  registered  with the
Securities and Exchange Commission (the "SEC") for resale to the public under an
effective   registration   statement  and  all  such  shares  remain  registered
thereafter  until  redemption,  and (iv) the Company's Common Stock is quoted on
the OTCBB or a similar electronic quotation system or stock exchange on the date
of the Redemption Notice.

      2. EXERCISE OF WARRANT.  This Warrant may be exercised in whole or in part
at any  time or from  time to time  from the date  hereof  until  the end of the
Exercise  Period by  presentation  and  surrender  hereof to the  Company at its
principal office, or at the office of its stock transfer agent, if any, with the
Purchase  Form annexed  hereto duly executed and  accompanied  by payment of the
Warrant  Exercise  Price for the number of shares of Common  Stock  specified in
such form. If this Warrant  should be exercised in part only, the Company shall,
upon  surrender  of this  Warrant  for  cancellation,  execute and deliver a new
Warrant  evidencing  the rights of the Holder  hereof to purchase the balance of
the shares of Common Stock purchasable hereunder. Upon receipt by the Company of
this Warrant at its office, or by the stock transfer agent of the Company at its
office, in proper form for exercise, the Holder shall be deemed to be the holder
of  record  of  the  shares  of  Common  Stock   issuable  upon  such  exercise,
notwithstanding  that the stock  transfer  books of the  Company  shall  then be
closed or that  certificates  representing such shares of Common Stock shall not
then be actually  delivered  to the Holder.  As soon as  practicable  after each
exercise of this Warrant, in whole or in part, and in any event within seven (7)
days thereafter,  the Company at its expense (including the payment by it of any
applicable  issue taxes) will cause to be issued in the name of and delivered to
the Holder hereof or,  subject to Section 6 hereof,  as the Holder (upon payment
by the Holder of any  applicable  transfer  taxes) may direct a  certificate  or
certificates  (with  appropriate  restrictive  legends,  as applicable)  for the
number of duly authorized,  validly issued, fully paid and non-assessable shares
of Common Stock to which the Holder shall be entitled  upon  exercise  plus,  in
lieu of any  fractional  share to which the Holder would  otherwise be entitled,
all issuances of Common Stock shall be rounded up to the nearest whole share.

                                       2
<PAGE>

      3. RESERVATION OF SHARES/FRACTIONAL SHARES. The Company hereby agrees that
at all times there shall be reserved for issuance  and/or delivery upon exercise
of this  Warrant  such number of shares of Common Stock as shall be required for
issuance and delivery  upon exercise of this  Warrant.  No fractional  shares or
script representing  fractional shares shall be issued upon the exercise of this
Warrant. Instead, the Company will round up to the nearest whole share.

      4.  EXCHANGE,  TRANSFER,  ASSIGNMENT  OR LOSS OF WARRANT.  This Warrant is
exchangeable,  without expense,  at the option of the Holder,  upon presentation
and   surrender   hereof  to  the  Company  for  other   Warrants  of  different
denominations entitling the holder thereof to purchase in the aggregate the same
number of shares of Common Stock purchasable  hereunder.  Upon surrender of this
Warrant to the  Company or at the office of its stock  transfer  agent,  if any,
with the Assignment  Form annexed  hereto duly executed and funds  sufficient to
pay any transfer tax, the Company shall,  without charge,  execute and deliver a
new Warrant in the name of the assignee  named in such  instrument of assignment
and this  Warrant  shall  promptly be  canceled.  This Warrant may be divided or
combined  with other  Warrants  which carry the same  rights  upon  presentation
hereof  at the  office of the  Company  or at the  office of its stock  transfer
agent,  if  any,  together  with a  written  notice  specifying  the  names  and
denominations  in which new  Warrants  are to be issued and signed by the Holder
hereof.  The term "Warrant" as used herein includes any Warrants into which this
Warrant  may be divided or  exchanged.  Upon  receipt by the Company of evidence
satisfactory  to it of the  loss,  theft,  destruction  or  mutilation  of  this
Warrant,  and  (in  the  case of  loss,  theft  or  destruction)  of  reasonably
satisfactory  indemnification,  and  upon  surrender  and  cancellation  of this
Warrant,  if  mutilated,  the Company  will execute and deliver a new Warrant of
like tenor.  Any such new Warrant  executed and  delivered  shall  constitute an
additional  contractual  obligation  on the part of the Company,  whether or not
this  Warrant so lost,  stolen,  destroyed,  or  mutilated  shall be at any time
enforceable by anyone.

      5. RIGHTS AND  OBLIGATIONS OF THE HOLDER.  The Holder shall not, by virtue
of this  Warrant,  be entitled to any rights of a  stockholder  in the  Company,
either at law or  equity,  and the  rights of the  Holder  are  limited to those
expressed in the Warrant and are not  enforceable  against the Company except to
the extent set forth herein. In addition, no provision hereof, in the absence of
affirmative  action by  Holder  to  purchase  shares  of  Common  Stock,  and no
enumeration herein of the rights or privileges of Holder hereof, shall give rise
to any liability of such Holder for the purchase price of any Common Stock or as
a stockholder of the Company,  whether such liability is asserted by the Company
or by creditors of the Company.

      6. ANTI-DILUTION  PROVISIONS.  The Warrant Exercise Price in effect at any
time and the number and kind of  securities  purchasable  upon  exercise of each
Warrant  shall be subject to  adjustment  as follows and the Company  shall give
each Holder  notice of any event  described  below which  requires an adjustment
pursuant to this Section 6 at the time of such event:

                                       3
<PAGE>

            (a) Stock Dividends,  Subdivisions and Combinations.  If at any time
the Company shall:

                  (i) take a record of the  holders of its Common  Stock for the
purpose  of  entitling  them  to  receive  a  dividend   payable  in,  or  other
distribution of, shares of Common Stock,

                  (ii) subdivide or reclassify its outstanding  shares of Common
Stock into a larger number of shares of Common Stock, or

                  (iii) combine or reclassify its  outstanding  shares of Common
Stock  into a smaller  number of shares of Common  Stock or  otherwise  effect a
reverse stock split,

then (i) the  number  of  shares of Common  Stock  for  which  this  Warrant  is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record  holder of the same
number of  shares  of  Common  Stock  for  which  this  Warrant  is  exercisable
immediately  prior to the occurrence of such event, or the record date therefor,
whichever is earlier, would own or be entitled to receive after the happening of
such event,  and (ii) the Warrant  Exercise  Price(s) shall be adjusted to equal
(A) the Warrant Exercise Price immediately prior to such event multiplied by the
number of  shares  of  Common  Stock  for  which  this  Warrant  is  exercisable
immediately  prior to the  adjustment  divided  by (B) the  number of shares for
which this Warrant is exercisable immediately after such adjustment.

            (b) Certain Other Distributions and Adjustments.

                  (i) If at any  time the  Company  shall  take a record  of the
holders of its Common  Stock for the  purpose of  entitling  them to receive any
dividend or other distribution of:

                        (A) cash,

                        (B) any evidences of its indebtedness, any shares of its
stock or any other securities or property of any nature  whatsoever  (other than
Convertible Securities or shares of Common Stock), or

                        (C) any  warrants or other  rights to  subscribe  for or
purchase any evidences of its indebtedness, any shares of its stock or any other
securities  or  property  of  any  nature  whatsoever  (other  than  Convertible
Securities or shares of Common Stock),

then,  upon exercise of this  Warrant,  Holder shall be entitled to receive such
dividend or distribution  with respect to the amount of Common Stock received on
such exercise, and, if such dividend or distribution shall have been securities,
any property  subsequently  distributed  with respect thereto.  However,  in the
event  that at the time the  Company  has taken a record of the  holders  of its
Common Stock for the purposes  described  above: (i) the resale of the shares of
Common Stock issuable upon exercise of this Warrant is not  registered  with the
SEC for resale to the public under an effective registration statement; and (ii)
the Common  Stock  issuable  upon  exercise of this Warrant is not quoted on the
OTCBB or a similar electronic  quotation system or stock exchange,  Holder shall
be entitled to receive such dividend or  distribution as if Holder had exercised
this Warrant.

                                       4
<PAGE>

                  (ii) A  reclassification  of the Common  Stock  (other  than a
change in par  value,  or from par value to no par value or from no par value to
par value)  into  shares of Common  Stock and shares of any other class of stock
shall be deemed a distribution by the Company to the holders of its Common Stock
of such shares of such other class of stock and in such event,  upon exercise of
this Warrant, Holder shall be entitled to receive such distribution with respect
to the amount of Common Stock received on such  exercise,  and, if such dividend
or  distribution   shall  have  been  securities,   any  property   subsequently
distributed with respect thereto, and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller  number of shares of Common Stock as a
part of such  reclassification,  such change  shall be deemed a  subdivision  or
combination,  as the case may be, of the  outstanding  shares  of  Common  Stock
within the meaning of Section 6(a).  However,  in the event that at the time the
Company has reclassified its Common Stock, as described above: (i) the resale of
the  shares of Common  Stock  issuable  upon  exercise  of this  Warrant  is not
registered with the SEC for resale to the public under an effective registration
statement;  and (ii) the Common Stock  issuable upon exercise of this Warrant is
not  quoted  on the  OTCBB or a  similar  electronic  quotation  system or stock
exchange,  Holder shall be entitled to receive such  distribution,  and, if such
dividend or distribution shall have been securities,  any property  subsequently
distributed with respect thereto, as if Holder had exercised this Warrant.

            (c) Issuance of Additional Shares of Common Stock.

                  (i) If, at any time prior to the  exercise of the Warrants the
Company  shall  issue  or sell any  shares  of  Common  Stock  in  exchange  for
consideration  in an amount per share of Common Stock less than the  Convertible
Preferred  Stock  Conversion  Price,  as  defined  in  the  Company's  Series  A
Convertible  Preferred Stock and Series B Convertible  Preferred  Certificate of
Designation  (the  "Discounted  Price," each such sale or issuance a "Discounted
Price  Transaction"  and the number of shares sold or issued in such  Discounted
Price Transaction the "Discounted Sale Volume"), other than Permitted Issuances,
then (A) the Warrant  Exercise Price then in effect shall be adjusted so that it
shall equal the price  determined by multiplying  the Warrant  Exercise Price in
effect  immediately  prior to such event by a fraction,  of which the  numerator
shall be the sum of the amount of Common Stock  outstanding  immediately  before
such Discounted Price  Transaction,  plus the quotient  obtained by dividing the
total  proceeds  of  such  Discounted  Price  Transaction  by  such  Convertible
Preferred Stock  Conversion  Price,  and of which the  denominator  shall be the
amount of Common Stock  outstanding  immediately  following  such  exercise (for
purposes of determining the amount of Common Stock outstanding,  all outstanding
securities  exercisable for or convertible  into Common Stock shall be deemed to
have been so  exercised  or  converted),  and (B) the number of shares of Common
Stock for which  this  Warrant is  exercisable  shall be  adjusted  to equal the
product obtained by multiplying the Warrant Exercise Price in effect immediately
prior to such  Discounted  Price  Transaction  by the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to such Discounted
Price Transaction and dividing the product thereof by the Warrant Exercise Price
resulting from the adjustment made pursuant to clause (A) above.

                                       5
<PAGE>

                  (ii) The  provisions  of  paragraph  (i) of this  Section 6(c)
shall  not  apply to any  issuance  of  shares  of  Common  Stock  for  which an
adjustment  is provided  under Section 6(a) or 6(b). No adjustment of the number
of shares of Common Stock for which this Warrant shall be  exercisable  shall be
made under paragraph (i) of this Section 6(c) upon the issuance of any shares of
Common Stock which are issued  pursuant to the exercise of any warrants or other
subscription or purchase rights or pursuant to the exercise of any conversion or
exchange rights in any  Convertible  Securities,  if any such  adjustment  shall
previously  have been made upon the issuance of such warrants or other rights or
upon the issuance of such  Convertible  Securities  (or upon the issuance of any
warrant or other rights therefor) pursuant to Section 6(d) or Section 6(e).

            (d) Issuance of Warrants or Other Rights. If at any time the Company
shall:  (i) take a record of the holders of its Common  Stock for the purpose of
entitling  them to receive a  distribution  of, or (ii) in any  manner  issue or
sell,  any warrants or other  rights to subscribe  for or purchase any shares of
Common  Stock  or any  Convertible  Securities,  whether  or not the  rights  to
exchange or convert  thereunder are immediately  exercisable,  and the price per
share for which Common Stock is issuable  upon the exercise of such  warrants or
other rights or upon conversion or exchange of such Convertible Securities shall
be less than the  Warrant  Exercise  Price,  then the number of shares for which
this Warrant is exercisable and the Warrant  Exercise Price shall be adjusted as
provided  in  Section  6(c) on the basis  that the  maximum  number of shares of
Common Stock issuable pursuant to all such warrants or other rights or necessary
to effect the conversion or exchange of all such Convertible Securities shall be
deemed to have been issued and  outstanding  and the Company  shall be deemed to
have received all the consideration  payable therefor, if any, as of the date of
issuance of such warrants or other rights. No further  adjustment of the Warrant
Exercise Price(s) shall be made upon the actual issue of such Common Stock or of
such  Convertible  Securities  upon exercise of such warrants or other rights or
upon the actual  issuance of such Common Stock upon such  conversion or exchange
of such Convertible Securities.

            (e) Issuance of Convertible  Securities.  If at any time the Company
shall  take a record of the  holders  of its  Common  Stock for the  purpose  of
entitling  them to receive a  distribution  of, or shall in any manner  (whether
directly  or by  assumption  in a merger in which the  Company is the  surviving
corporation)  issue or sell,  any  Convertible  Securities,  whether  or not the
rights to exchange or convert  thereunder are immediately  exercisable,  and the
price per share for which  Common  Stock is  issuable  upon such  conversion  or
exchange  shall be less than the  Warrant  Exercise  Price,  then the  number of
shares of Common  Stock for which this  Warrant is  exercisable  and the Warrant
Exercise  Price shall be adjusted as provided in Section  6(c) on the basis that
the maximum number of shares of Common Stock  necessary to effect the conversion
or  exchange  of all such  Convertible  Securities  shall be deemed to have been
issued  and  outstanding  and  the  Company  shall  have  received  all  of  the
consideration  payable  therefor,  if any,  as of the date of  issuance  of such
Convertible  Securities.  If any issue or sale of Convertible Securities is made
upon  exercise of any warrant or other right to subscribe for or to purchase any
such  Convertible  Securities  for which  adjustments of the number of shares of
Common  Stock for which this  Warrant is  exercisable  and the Warrant  Exercise
Price  have  been  or are to be  made  pursuant  to  Section  6(d),  no  further
adjustment  of the number of shares of Common  Stock for which  this  Warrant is
exercisable  and the  Warrant  Exercise  Price  shall be made by  reason of such
record, issue or sale.

                                       6
<PAGE>

            (f) Superseding  Adjustment.  If at any time after any adjustment of
the number of shares of Common Stock for which this Warrant is  exercisable  and
the Warrant  Exercise  Price(s) shall have been made pursuant to Section 6(d) or
Section 6(e) as the result of any issuance of  warrants,  rights or  Convertible
Securities,

                  (i) such  warrants or rights,  or the right of  conversion  or
exchange  in such  other  Convertible  Securities,  shall  expire,  and all or a
portion of such warrants or rights,  or the right of conversion or exchange with
respect to all or a portion of such other  Convertible  Securities,  as the case
may be, shall not have been exercised, or

                  (ii) the  consideration  per share for which  shares of Common
Stock are  issuable  pursuant to such  warrants or rights,  or the terms of such
other Convertible Securities,  shall be increased solely by virtue of provisions
therein contained for an automatic increase in such consideration per share upon
the occurrence of a specified date or event,

then for each  outstanding  Warrant such previous  adjustment shall be rescinded
and  annulled  and the shares of Common  Stock  which  were  deemed to have been
issued by virtue of the  computation  made in connection  with the adjustment so
rescinded  and annulled  shall no longer be deemed to have been issued by virtue
of such  computation  made in  connection  with the  adjustment so rescinded and
annulled  shall no  longer  be  deemed  to have  been  issued  by virtue of such
computation.  Thereupon,  a  re-computation  shall be made of the effect of such
rights or options or other Convertible Securities on the basis of:

                        (A)  treating  the  number of shares of Common  Stock or
other property,  if any, theretofore actually issued or issuable pursuant to the
previous exercise of any such warrants or rights or any such right of conversion
or exchange, as having been issued on the date or dates of any such exercise and
for  the  consideration  actually  received  and  receivable  therefor,  and

                        (B)  treating  any such  warrants  or rights or any such
other  Convertible  Securities  which then  remain  outstanding  as having  been
granted  or  issued   immediately  after  the  time  of  such  increase  of  the
consideration  per share for which shares of Common Stock or other  property are
issuable  under  such  warrants  or  rights  or  other  convertible  Securities;
whereupon  a new  adjustment  of the number of shares of Common  Stock for which
this Warrant is  exercisable  and the Warrant  Exercise  Price(s) shall be made,
which new adjustment  shall  supersede the previous  adjustment so rescinded and
annulled.

            (g) No  adjustment in the Warrant  Exercise  Price shall be required
unless  such  adjustment  would  require an increase or decrease of at least one
cent ($0.01) in such price;  provided,  however,  that any adjustments  which by
reason of this Section 6(g) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 6(g) shall be made to the nearest  cent or to the nearest  one-hundredth
of a share, as the case may be.

            (h) The Company may retain a firm of independent  public accountants
of recognized standing selected by the Board (who may be the regular accountants
employed by the Company) to make any computation required by this Section 6.

                                       7
<PAGE>

            (i) In the event that at any time, as a result of an adjustment made
pursuant to Section 6(a), (b) or (c) of this Warrant,  the Holder of any Warrant
thereafter  shall become  entitled to receive any shares of the  Company,  other
than Common Stock, thereafter the number of such other shares so receivable upon
exercise of any Warrant  shall be subject to  adjustment  from time to time in a
manner and on terms as nearly  equivalent as practicable to the provisions  with
respect to the Common Stock  contained in Sections 6(a) through (h),  inclusive,
of this Warrant.

            (j) Notwithstanding  the foregoing,  no adjustment shall be effected
due to, or as a result of, any Permitted  Issuances.

            (k) Other Action Affecting Common Stock. In case at any time or from
time to time the Company  shall take any action in respect of its Common  Stock,
other than any action described in this Section 6, then, unless such action will
not have a materially adverse effect upon the rights of the Holders,  the number
of shares of Common Stock or other stock for which this  Warrant is  exercisable
and/or the  purchase  price  thereof  shall be adjusted in such manner as may be
equitable in the circumstances.

      7. REDEMPTION.

            (a)  Redemption  Option.  Upon the  satisfaction  of the  Redemption
Conditions, the Company may, at the option of its Board of Directors at any time
following the Final Closing  redeem all (but not less than all) of the Warrants,
out of funds  legally  available  therefor  by paying the  Redemption  Price (as
hereafter defined) in cash for each Warrant then redeemed.

            (b)  Redemption  Price.  The  Redemption  Price under this Section 7
shall be $0.01 per Warrant,  subject to  adjustment  for any stock split,  stock
dividend, recapitalization, combination or adjustment after the date hereof.

            (c)  Notice.  Notice  of any  proposed  redemption  of the  Warrants
pursuant to this Section 7 shall be given by the Company by sending by certified
mail, postage prepaid, a copy of such notice (the "Redemption  Notice") at least
30 days  prior to the date on which it  proposes  to redeem  the  Warrants  (the
"Redemption  Date") to the holders of the Warrants  including  the Holder or any
subsequent  holder(s) of record of this Warrant,  at their respective  addresses
appearing on the books of the Company or given by such  holder(s) to the Company
for the purposes of notice,  or if no such address  appears or is given,  at the
principal office of the Company.  Such notice shall state the Redemption Date to
which such  notice  relates,  the number of  Warrants  to be  redeemed  from all
holders  thereof and from the Holder of this Warrant,  the Redemption  Price per
Warrant,  the record date for purposes of such  redemption and the date on which
such holders' right to exercise the Warrants will terminate, and shall call upon
the Holders to  surrender  to the Company on said  Redemption  Date at the place
designated in the notice such holder's certificate or certificates  representing
the Warrants to be redeemed unless exercised prior to such date.

            (d) Payment. On the Redemption Date, the funds legally available for
redemption of the Warrants shall be used to redeem the Warrants from the holders
thereof at the  Redemption  Price and the Company  shall be obligated to pay the
holder(s) the Redemption  Price of the Warrants to the extent they have not been
exercised as of such date.

                                       8
<PAGE>

            (e) Redemption Procedures. On or after a Redemption Date, the Holder
shall  surrender  this  Warrant  to the  Company,  or its  agent,  at the  place
designated  in the aforesaid  notice and shall  thereupon be entitled to receive
payment of the Redemption  Price therefor.  Upon payment of the Redemption Price
each surrendered Warrant shall be cancelled.

            (f)  Termination  of Rights.  Notwithstanding  that the  Warrants so
called  for  redemption  shall  not have  been  surrendered,  from and after the
Redemption  Date, all rights of the Holder of this Warrant and all other holders
of Warrants shall forthwith cease and terminate,  except for right of the Holder
to receive payment of the Redemption Price upon surrender of this Warrant.

                                       9
<PAGE>

      8. OFFICER'S CERTIFICATE.  Whenever the Warrant Exercise Price(s) shall be
adjusted as required by the provisions of Section 6 of this Warrant, the Company
shall  forthwith file in the custody of its Secretary or an Assistant  Secretary
at its principal  office and with its stock transfer agent, if any, an officer's
certificate  showing the  adjusted  Warrant  Exercise  Price(s) and the adjusted
number of shares  of  Common  Stock  issuable  upon  exercise  of each  Warrant,
determined as herein  provided,  setting  forth in  reasonable  detail the facts
requiring  such  adjustment,  including a statement of the number of  additional
shares of Common  Stock,  if any,  and such other facts as shall be necessary to
show the reason  for and the  manner of  computing  such  adjustment.  Each such
officer's certificate shall be forwarded to Holder as provided in Section 13.

      9.  NOTICES  TO  WARRANT  HOLDERS.  So  long  as  this  Warrant  shall  be
outstanding,  (1) if the Company shall pay any dividend or make any distribution
upon Common  Stock,  or (2) if the Company  shall offer to the holders of Common
Stock for  subscription  or purchase by them any share of any class or any other
rights, or (3) if any capital reorganization of the Company, reclassification of
the capital stock of the Company, consolidation or merger of the Company with or
into another entity,  tender offer  transaction for the Company's  Common Stock,
sale, lease or transfer of all or  substantially  all of the property and assets
of the Company, or voluntary or involuntary dissolution,  liquidation or winding
up of the  Company  shall  be  effected,  or (4) if  the  Company  shall  file a
registration statement under the Securities Act of 1933, as amended (the "Act"),
on any form other  than on Form S-4 or S-8 or any  successor  form,  then in any
such case, the Company shall cause to be mailed by certified mail to the Holder,
at least ten days prior to the date  specified in clauses (1),  (2), (3) or (4),
as the case may be, of this Section 9 a notice containing a brief description of
the  proposed  action and  stating the date on which (i) a record is to be taken
for  the  purpose  of such  dividend,  distribution  or  rights,  or  (ii)  such
reclassification,    reorganization,   consolidation,   merger,   tender   offer
transaction,  conveyance,  lease,  dissolution,  liquidation or winding up is to
take  place and the  date,  if any is to be fixed,  as of which the  holders  of
Common  Stock  or  other   securities  shall  receive  cash  or  other  property
deliverable upon such reclassification,  reorganization,  consolidation, merger,
conveyance,  dissolution,  liquidation or winding up, or (iii) such registration
statement is to be filed with the SEC.

      10.   RECLASSIFICATION,   REORGANIZATION   OR  MERGER.   In  case  of  any
reclassification,  capital  reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another  corporation (other than a merger with a subsidiary
in which merger the Company is the continuing or surviving corporation and which
does not result in any reclassification,  capital reorganization or other change
of  outstanding  shares of Common Stock of the class  issuable  upon exercise of
this  Warrant)  or  in  case  of  any  sale,  lease  or  conveyance  of  all  or
substantially  all of the  assets  of  the  Company,  the  Company  shall,  as a
condition precedent to such transaction,  cause effective  provisions to be made
so that (i) the  Holder  shall  have the right  thereafter  by  exercising  this
Warrant, to purchase the kind and amount of shares of stock and other securities
and property receivable upon such  reclassification,  capital reorganization and
other  change,  consolidation,  merger,  sale or  conveyance  by a holder of the
number of shares of Common Stock which could have been  purchased  upon exercise
of  this   Warrant   immediately   prior  to  such   reclassification,   change,
consolidation,  merger, sale or conveyance,  and (ii) the successor or acquiring
entity shall expressly assume the due and punctual observance and performance of
each  covenant and condition of this Warrant to be performed and observed by the
Company and all obligations and liabilities hereunder (including but not limited
to the provisions of Section 3 regarding the increase in the number of shares of
Warrant Shares potentially issuable hereunder). Any such provision shall include
provision for adjustments which shall be as nearly equivalent as possible to the
adjustments  provided for in this  Warrant.  The  foregoing  provisions  of this
Section  10 shall  similarly  apply  to  successive  reclassifications,  capital
reorganizations  and  changes  of  shares  of  Common  Stock  and to  successive
consolidations,  mergers, sales or conveyances.  In the event that in connection
with any such capital reorganization or reclassification, consolidation, merger,
sale or  conveyance,  additional  shares  of  Common  Stock  shall be  issued in
exchange, conversion,  substitution or payment, in whole in part, for a security
of the Company  other than Common  Stock,  any such issue shall be treated as an
issuance of Common Stock covered by the provisions of Section 6 of this Warrant.

                                       10
<PAGE>

      11.  TRANSFER TO COMPLY WITH THE SECURITIES  ACT OF 1933.  This Warrant or
the Warrant  Shares or any other  security  issued or issuable  upon exercise of
this Warrant may not be sold or otherwise disposed of except as follows:

            (i) to a person who, in the opinion of counsel for the Company, is a
person to whom this Warrant or Warrant Shares may legally be transferred without
registration and without the delivery of a current prospectus under the Act with
respect  thereto and then only against receipt of an agreement of such person to
comply  with the  provisions  of this  Section 11 with  respect to any resale or
other  disposition of such  securities  which agreement shall be satisfactory in
form and substance to the Company and its counsel; or

            (ii) to any person upon  delivery of a  prospectus  then meeting the
requirements of the Act relating to such securities and the offering thereof for
such sale or disposition.

      12.  GOVERNING  LAW;  JURISDICTION.  The  corporate  laws of the  State of
Delaware shall govern all issues  concerning the relative  rights of the Company
and  its  stockholders.  All  issues  concerning  the  construction,   validity,
enforcement  and  interpretation  of  this  Warrant  shall  be  governed  by and
construed in accordance with the internal laws of the State of Delaware  without
giving effect to the principles of conflicts of law thereof.  The parties hereto
agree that venue in any and all actions and  proceedings  related to the subject
matter of this Warrant  shall be in the state and federal  courts in and for New
York, New York, which courts shall have exclusive jurisdiction for such purpose,
and the parties hereto irrevocably submit to the exclusive  jurisdiction of such
courts  and  irrevocably  waive  the  defense  of an  inconvenient  forum to the
maintenance of any such action or proceeding.  Service of process may be made in
any manner  recognized  by such courts.  This Warrant and any term hereof may be
changed,  waived,  discharged  or  terminated  only by an  instrument in writing
signed by the party against which enforcement of the change,  waiver,  discharge
or  termination  is  sought.

      13.  NOTICES.  Any and all notices or other  communications  or deliveries
required or permitted to be provided  hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of  transmission,  if
such  notice or  communication  is  delivered  via  facsimile  at the  facsimile
telephone  number  specified in this Section  prior to 6:30 p.m.  (New York City
time) on a Business Day,  (ii) the Business Day after the date of  transmission,
if such notice or  communication  is delivered  via  facsimile at the  facsimile
telephone number specified in this Agreement later than 6:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the  Business Day  following  the date of mailing,  if sent by  nationally
recognized  overnight courier service,  or (iv) upon actual receipt by the party
to whom such notice is required  to be given.  The address for such  notices and
communications shall be as follows:

                                       11
<PAGE>

     If to the Company: Othnet, Inc.
                        6100 Center Drive, Suite 900
                        Los Angeles, CA 90045
                        Attn: President
                        Tel: 310-426-8000 ; Fax: 310-426-8010

     If to the Holder:  To the Address Set Forth In the Records of the Company

     With copies to:    Maxim Group, LLC
                        405 Lexington Avenue
                        New York, N.Y. 10017
                        Facsimile No.: (212) 895-3783 Attn: Anthony Sarkis

      14.  PAYMENT OF TAXES.  The Company will pay all  documentary  stamp taxes
attributable  to the issuance of shares of Common Stock  underlying this Warrant
upon exercise of this Warrant; provided,  however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the  registration of any  certificate  for shares of Common Stock  underlying
this Warrant in a name other that of the Holder.  The Holder is responsible  for
all other tax  liability  that may arise as a result of holding or  transferring
this Warrant or receiving  shares of Common Stock  underlying  this Warrant upon
exercise hereof.

                            [SIGNATURE PAGE FOLLOWS]

                                       12
<PAGE>

      IN WITNESS WHEREOF,  this Warrant has been duly executed as of ___________
___, 2005

                                       OTHNET, INC.

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

                                       13
<PAGE>

                                  PURCHASE FORM

                           Dated: _____________, 200__

      The undersigned  hereby  irrevocably elects to exercise the within Warrant
to the extent of  purchasing  ______  shares of Common  Stock and  hereby  makes
payment of $_________ in payment of the actual exercise price thereof.  Schedule
1 attached  hereto  specifies the Warrant Shares from which the shares of Common
Stock are being purchased and the Warrant Exercise Price(s) for such shares.

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

<PAGE>

                     INSTRUCTIONS FOR REGISTRATION OF STOCK

Name:
     ---------------------------------------------------------
         (Please typewrite or print in block letters)

Signature:
          ----------------------------------------------------

Social Security or Employer Identification No.:
                                               ---------------

<PAGE>

                                 ASSIGNMENT FORM

      FOR VALUE RECEIVED,  _____________________________  hereby sells,  assigns
and transfer unto:

Name:
     ---------------------------------------------------------
         (Please typewrite or print in block letters)

Signature:
          ----------------------------------------------------

Social Security or Employer Identification No.:
                                               ---------------

The right to purchase Common Stock  represented by this Warrant to the extent of
shares  as to which  such  right is  exercisable  and  does  hereby  irrevocably
constitute and appoint attorney to transfer the same on the books of the Company
with full power of substitution.

      Dated:_______________, 200_.

                                       Signature:
                                                  ------------------------------

Signature Guaranteed:

---------------------------EXHIBIT 4.1

     THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
     REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
     "ACT"). THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
     IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
     SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM,
     SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN
     COMPARABLE TRANSACTIONS THAT REGISTRATION IS NOT REQUIRED UNDER
     SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 OR REGULATION S
     UNDER SAID ACT.

                        CALLABLE SECURED CONVERTIBLE NOTE

Seattle, Washington

February 25, 2005                                                      $________

      FOR VALUE RECEIVED, VERIDICOM INTERNATIONAL, INC., a Delaware corporation
(hereinafter called the "BORROWER"), hereby promises to pay to the order of
_______________ or registered assigns (the "HOLDER") the sum of
_____________Dollars ($________), payable $__________ [an amount equivalent to
1/33 of the principal amount] (the "MONTHLY AMOUNT") on the first day of each
month commencing on May 25, 2005 (each, a "REPAYMENT DATE") with any unpaid
principal balance due on February 25, 2008 (the "MATURITY DATE"), and to pay
interest on the unpaid principal balance hereof at the rate of ten percent (10%)
(the "INTEREST RATE") per annum from February 25, 2005 (the "ISSUE DATE") until
the same becomes due and payable, whether at maturity or upon acceleration or by
prepayment or otherwise; provided, however, that on the last business day of
each month after the Issue Date (each, a "DETERMINATION DATE"), if the Average
Daily Price (as defined herein) of the common stock, $.001 par value per share,
of the Borrower (the "COMMON STOCK") for each day of the month ending on the
applicable Determination Date exceeds one hundred twenty five percent (125%) of
the Initial Market Price (as defined herein), the Interest Rate for such month
shall automatically be reduced to zero percent (0.0%). Any amount of principal
or interest on this Note which is not paid when due shall bear interest at the
rate of fifteen percent (15%) per annum from the due date thereof until the same
is paid ("DEFAULT INTEREST"). Interest shall commence accruing on the Issue
Date, shall be computed on the basis of a 365-day year and the actual number of
days elapsed and shall be payable monthly in arrears. All payments due hereunder
(to the extent not converted into Common Stock in accordance with the terms
hereof) shall be made in lawful money of the United States of America. All
payments shall be made at such address as the Holder shall hereafter give to the
Borrower by written notice made in accordance with the provisions of this Note.
Whenever any amount expressed to be due by the

<PAGE>

terms of this Note is due on any day which is not a business day, the same shall
instead be due on the next succeeding day which is a business day and, in the
case of any interest payment date which is not the date on which this Note is
paid in full, the extension of the due date thereof shall not be taken into
account for purposes of determining the amount of interest due on such date. As
used in this Note, the term "business day" shall mean any day other than a
Saturday, Sunday or a day on which commercial banks in the city of New York, New
York are authorized or required by law or executive order to remain closed. Each
capitalized term used herein, and not otherwise defined, shall have the meaning
ascribed thereto in that certain Securities Purchase Agreement, dated February
25, 2005, pursuant to which this Note was originally issued (the "PURCHASE
AGREEMENT").

         This Note is free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive rights or
other similar rights of shareholders of the Borrower and will not impose
personal liability upon the holder thereof. The obligations of the Borrower
under this Note shall be secured by that certain Intellectual Security
Agreement, dated February 25, 2005, by and among the Borrower, the Holder and
the other parties thereto (the "IP SECURITY AGREEMENT").

         The following terms shall apply to this Note:

                                   ARTICLE I.
                           CONVERSION REPAYMENT OPTION

                  1.1 PAYMENT OF MONTHLY AMOUNT IN CASH OR COMMON STOCK. Subject
to the terms hereof, the Holder shall have the option to elect to accept payment
of the Monthly Amount on each Repayment Date either in cash or in shares of
Common Stock, or a combination of both. Each month by the fifth (5th) business
day prior to each Repayment Date (the "NOTICE DATE"), the Holder shall deliver
to Borrower a written notice in the form of Exhibit B attached hereto electing
to convert the Monthly Amount payable on the next Repayment Date in either cash
or Common Stock, or a combination of both (each, a "REPAYMENT ELECTION NOTICE").
If a Repayment Election Notice is not delivered by the Holder on or before the
applicable Notice Date for such Repayment Date, then the Borrower shall pay the
Monthly Amount due on such Repayment Date in cash. Any portion of the Monthly
Amount paid in cash on a Repayment Date, shall be paid to the Holder an amount
equal to the portion of the Monthly Amount due and owing to Holder on the
Repayment Dale. If the Holder converts all or a portion of the Monthly Amount in
shares of Common Stock, the number of such shares to be issued by the Borrower
to the Holder on such Repayment Date shall be the number determined by dividing
(x) the portion of the Monthly Amount to be paid in shares of Common Stock, by
(y) the then applicable Conversion Price.

                  1.2 CREDIT AGAINST MONTHLY AMOUNT. Any amounts converted by
the Holder pursuant to Section 2.1 shall be deemed to constitute payments of
outstanding principal applying to Monthly Amounts for the remaining Repayment
Dates in chronological order.

                                       2
<PAGE>

                          ARTICLE II. CONVERSION RIGHTS

                  2.1 CONVERSION RIGHT. If the average of the Average Daily
Prices (as defined in Section 2.2(a)) for the preceding five (5) trading days is
greater than the Initial Market Price (as defined in Section 2.2(a)), the Holder
shall have the right from time to time, and at any time on or prior to the
earlier of (i) the Maturity Date and (ii) the date of payment of the Default
Amount (as defined in Article IV) pursuant to Section 2.6(a) or Article IV, the
Optional Prepayment Amount (as defined in Section 6.1 or any payments pursuant
to Section 2.7, each in respect of the remaining outstanding principal amount of
this Note to convert all or any part of the outstanding principal amount of this
Note into fully paid and non-assessable shares of Common Stock, as such Common
Stock exists on the Issue Date, or any shares of capital stock or other
securities of the Borrower into which such Common Stock shall hereafter be
changed or reclassified at the conversion price (the "CONVERSION PRICE")
determined as provided herein (a "Conversion"); provided, however, that if an
Event of Default shall have occurred and be continuing, the Holder shall have
the right to convert all or any part of the outstanding principal amount of this
Note into fully paid and non-assessable shares of Common Stock at any time at
the Conversion Price; provided, further that in no event shall the Holder be
entitled to convert any portion of this Note in excess of that portion of this
Note upon conversion of which the sum of (1) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of the Notes or the unexercised or unconverted portion of
any other security of the Borrower (including, without limitation, the warrants
issued by the Borrower pursuant to the Purchase Agreement) subject to a
limitation on conversion or exercise analogous to the limitations contained
herein) and (2) the number of shares of Common Stock issuable upon the
conversion of the portion of this Note with respect to which the determination
of this proviso is being made, would result in beneficial ownership by the
Holder and its affiliates of more than 4.9% of the outstanding shares of Common
Stock. For purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulations 13D-G thereunder,
except as otherwise provided in clause (1) of such proviso. The number of shares
of Common Stock to be issued upon each conversion of this Note shall be
determined by dividing the Conversion Amount (as defined below) by the
applicable Conversion Price then in effect on the date specified in the notice
of conversion, in the form attached hereto as Exhibit A (the "NOTICE OF
CONVERSION"), delivered to the Borrower by the Holder in accordance with Section
2.4 below; provided that the Notice of Conversion is submitted by facsimile (or
by other means resulting in, or reasonably expected to result in, notice) to the
Borrower before 6:00 p.m., New York, New York time on such conversion date (the
"CONVERSION DATE"). The term "CONVERSION AMOUNT" means, with respect to any
conversion of this Note, the sum of (1) the principal amount of this Note to be
converted in such conversion plus (2) accrued and unpaid interest, if any, on
such principal amount at the interest rates provided in this Note to the
Conversion Date plus (3) Default Interest, if any, on the amounts referred to in
the immediately preceding clauses (1) and/or (2) plus (4) at the Holder's
option, any amounts owed to the Holder pursuant to Sections 2.3 and 2.4(g)
hereof or pursuant to Section 2(c) of that certain Registration Rights
Agreement, dated as of February 25, 2005, executed in connection with the
initial issuance of this Note and the other Notes issued on the Issue Date (the
"REGISTRATION RIGHTS Agreement").

                                       3
<PAGE>

                  2.2 CONVERSION PRICE.

                      (A) CALCULATION OF CONVERSION PRICE. The Conversion Price
shall be equal to seventy percent (70%) of the Initial Market Price (as defined
herein) (subject, in each case, to equitable adjustments for stock splits, stock
dividends or rights offerings by the Borrower relating to the Borrower's
securities or the securities of any subsidiary of the Borrower, combinations,
recapitalization, reclassifications, extraordinary distributions and similar
events); provided however, that if an Event of Default shall have occurred and
be continuing, the Conversion Price shall be equal to the lesser of (i) fifty
percent (50%) of the Initial Market Price or (ii) the Variable Conversion Price.
The "INITIAL MARKET PRICE" shall mean $1.27. The "VARIABLE CONVERSION PRICE"
shall mean the Applicable Percentage (as defined herein) multiplied by the
Market Price (as defined herein). "MARKET PRICE" means the average of the
Average Daily Prices (as defined herein) for the Common Stock for the five (5)
days prior to the date the Conversion Notice is sent by the Holder to the
Borrower via facsimile (the "CONVERSION DATE"). "AVERAGE DAILY PRICE" means, for
any security as of any date, the price based on the VWAP. "VWAP" shall mean the
daily volume weighted average price of the Common Stock on the principal trading
market for such security as reported by Bloomberg, L.P. using the VWAP function.
If the Average Daily Price cannot be calculated for such security on such date
in the manner provided above, the Average Daily Price shall be the fair market
value as mutually determined by the Borrower and the holders of a majority in
interest of the Notes being converted for which the calculation of the Average
Daily Price is required in order to determine the Conversion Price of such
Notes. "TRADING DAY" shall mean any day on which the Common Stock is traded for
any period on the OTCBB, or on the principal securities exchange or other
securities market on which the Common Stock is then being traded. "APPLICABLE
PERCENTAGE" shall mean 50.0%.

                      (B) CONVERSION PRICE DURING MAJOR ANNOUNCEMENTS.
Notwithstanding anything contained in Section 2.2(a) to the contrary, in the
event the Borrower (i) makes a public announcement that it intends to
consolidate or merge with any other corporation (other than a merger in which
the Borrower is the surviving or continuing corporation and its capital stock is
unchanged) or sell or transfer all or substantially all of the assets of the
Borrower or (ii) any person, group or entity (including the Borrower) publicly
announces a tender offer to purchase 50% or more of the Borrower's Common Stock
(or any other takeover scheme) (the date of the announcement referred to in
clause (i) or (ii) is hereinafter referred to as the "ANNOUNCEMENT DATE"), then
the Conversion Price shall, effective upon the Announcement Date and continuing
through the Adjusted Conversion Price Termination Date (as defined below), be
equal to the lower of (x) the Conversion Price which would have been applicable
for a Conversion occurring on the Announcement Date and (y) the Conversion Price
that would otherwise be in effect. From and after the Adjusted Conversion Price
Termination Date, the Conversion Price shall be determined as set forth in
Section 2.2(a). For purposes hereof, "ADJUSTED CONVERSION PRICE TERMINATION
DATE" shall mean, with respect to any proposed transaction or tender offer (or
takeover scheme) for which a public announcement as contemplated by this Section
2.2(b) has been made, the date upon which the Borrower (in the case of clause
(i) above) or the person, group or entity (in the case of clause (ii) above)
consummates or publicly announces the termination or abandonment of the proposed
transaction or tender offer (or takeover scheme) which caused this Section
2.2(b) to become operative.

                                       4
<PAGE>

                  2.3 AUTHORIZED SHARES. The Borrower covenants that during the
period the conversion right exists, the Borrower will reserve from its
authorized and unissued Common Stock a sufficient number of shares, free from
preemptive rights, to provide for the issuance of Common Stock upon the full
conversion of this Note and the other Notes issued pursuant to the Purchase
Agreement. The Borrower is required at all times to have authorized and reserved
two times the number of shares that is actually issuable upon full conversion of
the Notes (based on the Conversion Price of the Notes or the Exercise Price of
the Warrants in effect from time to time) (the "RESERVED AMOUNT"). The Reserved
Amount shall be increased from time to time in accordance with the Borrower's
obligations pursuant to Section 4(h) of the Purchase Agreement. The Borrower
represents that upon issuance, such shares will be duly and validly issued,
fully paid and non-assessable. In addition, if the Borrower shall issue any
securities or make any change to its capital structure which would change the
number of shares of Common Stock into which the Notes shall be convertible at
the then current Conversion Price, the Borrower shall at the same time make
proper provision so that thereafter there shall be a sufficient number of shares
of Common Stock authorized and reserved, free from preemptive rights, for
conversion of the outstanding Notes. The Borrower (i) acknowledges that it has
irrevocably instructed its transfer agent to issue certificates for the Common
Stock issuable upon conversion of this Note, and (ii) agrees that its issuance
of this Note shall constitute full authority to its officers and agents who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for shares of Common Stock in accordance with the terms
and conditions of this Note.

                  If, at any time a Holder of this Note submits a Notice of
Conversion, and the Borrower does not have sufficient authorized but unissued
shares of Common Stock available to effect such conversion in accordance with
the provisions of this Article II (a "CONVERSION DEFAULT"), subject to Section
5.8, the Borrower shall issue to the Holder all of the shares of Common Stock
which are then available to effect such conversion. The portion of this Note
which the Holder included in its Conversion Notice and which exceeds the amount
which is then convertible into available shares of Common Stock (the "EXCESS
AMOUNT") shall, notwithstanding anything to the contrary contained herein, not
be convertible into Common Stock in accordance with the terms hereof until (and
at the Holder's option at any time after) the date additional shares of Common
Stock are authorized by the Borrower to permit such conversion, at which time
the Conversion Price in respect thereof shall be the lesser of (i) the
Conversion Price on the Conversion Default Date (as defined below) and (ii) the
Conversion Price on the Conversion Date thereafter elected by the Holder in
respect thereof. In addition, the Borrower shall pay to the Holder payments
("CONVERSION DEFAULT PAYMENTS") for a Conversion Default in the amount of (x)
the sum of (1) the then outstanding principal amount of this Note plus (2)
accrued and unpaid interest on the unpaid principal amount of this Note through
the Authorization Date (as defined below) plus (3) Default Interest, if any, on
the amounts referred to in clauses (1) and/or (2), multiplied by (y) .24,
multiplied by (z) (N/365), where N = the number of days from the day the holder
submits a Notice of Conversion giving rise to a Conversion Default (the
"CONVERSION DEFAULT DATE") to the date (the "AUTHORIZATION DATE") that the
Borrower authorizes a sufficient number of shares of Common Stock to effect
conversion of the full outstanding principal balance of this Note. The Borrower
shall use its best efforts to authorize a sufficient number of shares of Common
Stock as soon as practicable following the earlier of (i) such time that the
Holder notifies the Borrower or that the Borrower otherwise becomes aware that
there are or likely will be insufficient authorized and unissued shares to allow

                                       5
<PAGE>

full conversion thereof and (ii) a Conversion Default. The Borrower shall send
notice to the Holder of the authorization of additional shares of Common Stock,
the Authorization Date and the amount of Holder's accrued Conversion Default
Payments. The accrued Conversion Default Payments for each calendar month shall
be paid in cash or shall be convertible into Common Stock (at such time as there
are sufficient authorized shares of Common Stock) at the applicable Conversion
Price, at the Borrower's option, as follows:

                      (A) In the event Holder elects to take such payment in
cash, cash payment shall be made to Holder by the fifth (5th) day of the month
following the month in which it has accrued; and

                      (B) In the event Holder elects to take such payment in
Common Stock, the Holder may convert such payment amount into Common Stock at
the Conversion Price (as in effect at the time of conversion) at any time after
the fifth day of the month following the month in which it has accrued in
accordance with the terms of this Article II (so long as there is then a
sufficient number of authorized shares of Common Stock).

                  The Holder's election shall be made in writing to the Borrower
at any time prior to 6:00 p.m., New York, New York time, on the third day of the
month following the month in which Conversion Default payments have accrued. If
no election is made, the Holder shall be deemed to have elected to receive cash.
Nothing herein shall limit the Holder's right to pursue actual damages (to the
extent in excess of the Conversion Default Payments) for the Borrower's failure
to maintain a sufficient number of authorized shares of Common Stock, and each
holder shall have the right to pursue all remedies available at law or in equity
(including degree of specific performance and/or injunctive relief).

                  2.4 METHOD OF CONVERSION.

                      (A) MECHANICS OF CONVERSION. Subject to Section 2.1, this
Note may be converted by the Holder in whole or in part at any time from time to
time after the Issue Date, by (A) submitting to the Borrower a Notice of
Conversion (by facsimile or other reasonable means of communication dispatched
on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B)
subject to Section 2.4(b), surrendering this Note at the principal office of the
Borrower.

                      (B) SURRENDER OF NOTE UPON CONVERSION. Notwithstanding
anything to the contrary set forth herein, upon conversion of this Note in
accordance with the terms hereof, the Holder shall not be required to physically
surrender this Note to the Borrower unless the entire unpaid principal amount of
this Note is so converted. The Holder and the Borrower shall maintain records
showing the principal amount so converted and the dates of such conversions or
shall use such other method, reasonably satisfactory to the Holder and the
Borrower, so as not to require physical surrender of this Note upon each such
conversion. In the event of any dispute or discrepancy, such records of the
Borrower shall be controlling and determinative in the absence of manifest
error. Notwithstanding the foregoing, if any portion of this Note is converted
as aforesaid, the Holder may not transfer this Note unless the Holder first
physically surrenders this Note to the Borrower, whereupon the Borrower will
forthwith issue and deliver upon the order of the Holder a new Note of like
tenor, registered as the Holder (upon payment by the Holder of any applicable
transfer taxes) may request, representing in the aggregate the remaining unpaid
principal amount of this Note. The Holder and any assignee, by acceptance of
this Note, acknowledge and agree that, by reason of the provisions of this
paragraph, following conversion of a portion of this Note, the unpaid and
unconverted principal amount of this Note represented by this Note may be less
than the amount stated on the face hereof.

                                       6
<PAGE>

                      (C) PAYMENT OF TAXES. The Borrower shall not be required
to pay any tax which may be payable in respect of any transfer involved in the
issue and delivery of shares of Common Stock or other securities or property on
conversion of this Note in a name other than that of the Holder (or in street
name), and the Borrower shall not be required to issue or deliver any such
shares or other securities or property unless and until the person or persons
(other than the Holder or the custodian in whose street name such shares are to
be held for the Holder's account) requesting the issuance thereof shall have
paid to the Borrower the amount of any such tax or shall have established to the
satisfaction of the Borrower that such tax has been paid.

                      (D) DELIVERY OF COMMON STOCK UPON CONVERSION. Upon receipt
by the Borrower from the Holder of a facsimile transmission (or other reasonable
means of communication) of a Notice of Conversion meeting the requirements for
conversion as provided in this Section 2.4, the Borrower shall issue and deliver
or cause to be issued and delivered to or upon the order of the Holder
certificates for the Common Stock issuable upon such conversion within two (2)
business days after such receipt (and, solely in the case of conversion of the
entire unpaid principal amount hereof, surrender of this Note) (such second
business day being hereinafter referred to as the "DEADLINE") in accordance with
the terms hereof and the Purchase Agreement (including, without limitation, in
accordance with the requirements of Section 2(g) of the Purchase Agreement that
certificates for shares of Common Stock issued on or after the effective date of
the Registration Statement upon conversion of this Note shall not bear any
restrictive legend).

                      (E) OBLIGATION OF BORROWER TO DELIVER COMMON STOCK. Upon
receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to
be the holder of record of the Common Stock issuable upon such conversion, the
outstanding principal amount and the amount of accrued and unpaid interest on
this Note shall be reduced to reflect such conversion, and, unless the Borrower
defaults on its obligations under this Article II, all rights with respect to
the portion of this Note being so converted shall forthwith terminate except the
right to receive the Common Stock or other securities, cash or other assets, as
herein provided, on such conversion. If the Holder shall have given a Notice of
Conversion as provided herein, the Borrower's obligation to issue and deliver
the certificates for Common Stock shall be absolute and unconditional,
irrespective of the absence of any action by the Holder to enforce the same, any
waiver or consent with respect to any provision thereof, the recovery of any
judgment against any person or any action to enforce the same, any failure or
delay in the enforcement of any other obligation of the Borrower to the holder
of record, or any setoff, counterclaim, recoupment, limitation or termination,
or any breach or alleged breach by the Holder of any obligation to the Borrower,
and irrespective of any other circumstance which might otherwise limit such
obligation of the Borrower to the Holder in connection with such conversion. The
Conversion Date specified in the Notice of Conversion shall be the Conversion
Date so long as the Notice of Conversion is received by the Borrower before 6:00
p.m., New York, New York time, on such date.

                                       7
<PAGE>

                      (F) DELIVERY OF COMMON STOCK BY ELECTRONIC TRANSFER. In
lieu of delivering physical certificates representing the Common Stock issuable
upon conversion, provided the Borrower's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST")
program, upon request of the Holder and its compliance with the provisions
contained in Section 2.1 and in this Section 2.4, the Borrower shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Holder by crediting the account of
Holder's Prime Broker with DTC through its Deposit Withdrawal Agent Commission
("DWAC") system.

                      (G) FAILURE TO DELIVER COMMON STOCK PRIOR TO DEADLINE.
Without in any way limiting the Holder's right to pursue other remedies,
including actual damages and/or equitable relief, the parties agree that if
delivery of the Common Stock issuable upon conversion of this Note is more than
three (3) days after the Deadline (other than a failure due to the circumstances
described in Section 2.3 above, which failure shall be governed by such Section)
the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond
the Deadline that the Borrower fails to deliver such Common Stock. Such cash
amount shall be paid to Holder by the fifth day of the month following the month
in which it has accrued or, at the option of the Holder (by written notice to
the Borrower by the first day of the month following the month in which it has
accrued), shall be added to the principal amount of this Note, in which event
interest shall accrue thereon in accordance with the terms of this Note and such
additional principal amount shall be convertible into Common Stock in accordance
with the terms of this Note.

                  2.5 CONCERNING THE SHARES. The shares of Common Stock issuable
upon conversion of this Note may not be sold or transferred unless (i) such
shares are sold pursuant to an effective registration statement under the Act or
(ii) the Borrower or its transfer agent shall have been furnished with an
opinion of counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to the effect that
the shares to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration or (iii) such shares are sold or transferred
pursuant to Rule 144 under the Act (or a successor rule) ("RULE 144") or (iv)
such shares are transferred to an "affiliate" (as defined in Rule 144) of the
Borrower who agrees to sell or otherwise transfer the shares only in accordance
with this Section 2.5 and who is an Accredited Investor (as defined in the
Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and
subject to the removal provisions set forth below), until such time as the
shares of Common Stock issuable upon conversion of this Note have been
registered under the Act as contemplated by the Registration Rights Agreement or
otherwise may be sold pursuant to Rule 144 without any restriction as to the
number of securities as of a particular date that can then be immediately sold,
each certificate for shares of Common Stock issuable upon conversion of this
Note that has not been so included in an effective registration statement or
that has not been sold pursuant to an effective registration statement or an
exemption that permits removal of the legend, shall bear a legend substantially
in the following form, as appropriate:

                                       8
<PAGE>

     "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
     REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
     SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE
     ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
     UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND
     SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE
     TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
     UNLESS SOLD PURSUANT TO RULE 144 OR REGULATION S UNDER SAID ACT."

                  The legend set forth above shall be removed and the Borrower
shall issue to the Holder a new certificate therefor free of any transfer legend
if (i) the Borrower or its transfer agent shall have received an opinion of
counsel, in form, substance and scope customary for opinions of counsel in
comparable transactions, to the effect that a public sale or transfer of such
Common Stock may be made without registration under the Act and the shares are
so sold or transferred, (ii) such Holder provides the Borrower or its transfer
agent with reasonable assurances that the Common Stock issuable upon conversion
of this Note (to the extent such securities are deemed to have been acquired on
the same date) can be sold pursuant to Rule 144 or (iii) in the case of the
Common Stock issuable upon conversion of this Note, such security is registered
for sale by the Holder under an effective registration statement filed under the
Act or otherwise may be sold pursuant to Rule 144 without any restriction as to
the number of securities as of a particular date that can then be immediately
sold. Nothing in this Note shall (i) limit the Borrower's obligation under the
Registration Rights Agreement or (ii) affect in any way the Holder's obligations
to comply with applicable prospectus delivery requirements upon the resale of
the securities referred to herein.

                  2.6 EFFECT OF CERTAIN EVENTS.

                      (A) EFFECT OF MERGER, CONSOLIDATION, ETC. At the option of
the Holder, the sale, conveyance or disposition of all or substantially all of
the assets of the Borrower, the effectuation by the Borrower of a transaction or
series of related transactions in which more than 50% of the voting power of the
Borrower is disposed of, or the consolidation, merger or other business
combination of the Borrower with or into any other Person (as defined below) or
Persons when the Borrower is not the survivor shall either: (i) be deemed to be
an Event of Default (as defined in Article IV) pursuant to which the Borrower
shall be required to pay to the Holder upon the consummation of and as a
condition to such transaction an amount equal to the Default Amount (as defined
in Article IV) or (ii) be treated pursuant to Section 2.6(b) hereof. "PERSON"
shall mean any individual, corporation, limited liability company, partnership,
association, trust or other entity or organization.

                      (B) ADJUSTMENT DUE TO MERGER, CONSOLIDATION, ETC. If, at
any time when this Note is issued and outstanding and prior to conversion of all
of the Notes, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a result of which
shares of Common Stock of the Borrower shall be changed into the same or a
different number of shares of another class or classes of stock or securities of
the Borrower or another entity, or in case of any sale or conveyance of all or
substantially all of the assets of the Borrower other than in connection with a
plan of complete liquidation of the Borrower, then the Holder of this Note shall

                                       9
<PAGE>

thereafter have the right to receive upon conversion of this Note, upon the
basis and upon the terms and conditions specified herein and in lieu of the
shares of Common Stock immediately theretofore issuable upon conversion, such
stock, securities or assets which the Holder would have been entitled to receive
in such transaction had this Note been converted in full immediately prior to
such transaction (without regard to any limitations on conversion set forth
herein), and in any such case appropriate provisions shall be made with respect
to the rights and interests of the Holder of this Note to the end that the
provisions hereof (including, without limitation, provisions for adjustment of
the Conversion Price and of the number of shares issuable upon conversion of the
Note) shall thereafter be applicable, as nearly as may be practicable in
relation to any securities or assets thereafter deliverable upon the conversion
hereof. The Borrower shall not effect any transaction described in this Section
2.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days
prior written notice (but in any event at least fifteen (15) days prior written
notice) of the record date of the special meeting of shareholders to approve, or
if there is no such record date, the consummation of, such merger,
consolidation, exchange of shares, recapitalization, reorganization or other
similar event or sale of assets (during which time the Holder shall be entitled
to convert this Note) and (b) the resulting successor or acquiring entity (if
not the Borrower) assumes by written instrument the obligations of this Section
2.6(b). The above provisions shall similarly apply to successive consolidations,
mergers, sales, transfers or share exchanges.

                      (C) ADJUSTMENT DUE TO DISTRIBUTION. If the Borrower shall
declare or make any distribution of its assets (or rights to acquire its assets)
to holders of Common Stock as a dividend, stock repurchase, by way of return of
capital or otherwise (including any dividend or distribution to the Borrower's
shareholders in cash or shares (or rights to acquire shares) of capital stock of
a subsidiary (i.e., a spin-off)) (a "DISTRIBUTION"), then the Holder of this
Note shall be entitled, upon any conversion of this Note after the date of
record for determining shareholders entitled to such Distribution, to receive
the amount of such assets which would have been payable to the Holder with
respect to the shares of Common Stock issuable upon such conversion had such
Holder been the holder of such shares of Common Stock on the record date for the
determination of shareholders entitled to such Distribution.

                      (D) ADJUSTMENT DUE TO DILUTIVE ISSUANCE. If, at any time
when any Notes are issued and outstanding, the Borrower issues or sells, or in
accordance with this Section 2.6(d) hereof is deemed to have issued or sold, any
shares of Common Stock for no consideration or for a consideration per share
(before deduction of reasonable expenses or commissions or underwriting
discounts or allowances in connection therewith) less than the Initial Market
Price in effect on the date of such issuance (or deemed issuance) of such shares
of Common Stock (a "DILUTIVE ISSUANCE"), then immediately upon the Dilutive
Issuance, the Initial Market Price will be reduced to the amount of the
consideration per share received by the Borrower in such Dilutive Issuance;
provided that only one adjustment will be made for each Dilutive Issuance.

                      The Borrower shall be deemed to have issued or sold shares
of Common Stock if the Borrower in any manner issues or grants any warrants,
rights or options, whether or not immediately exercisable, to subscribe for or
to purchase Common Stock or other securities convertible into or exchangeable
for Common Stock ("CONVERTIBLE SECURITIES") (such warrants, rights and options
to purchase Common Stock or Convertible Securities are hereinafter referred to

                                       10
<PAGE>

as "OPTIONS") and the price per share for which Common Stock is issuable upon
the exercise of such Options is less than the Initial Market Price then in
effect, then the Initial Market Price shall be equal to such price per share.
For purposes of the preceding sentence, the "price per share for which Common
Stock is issuable upon the exercise of such Options" is determined by dividing
(i) the total amount, if any, received or receivable by the Borrower as
consideration for the issuance or granting of all such Options, plus the minimum
aggregate amount of additional consideration, if any, payable to the Borrower
upon the exercise of all such Options, plus, in the case of Convertible
Securities issuable upon the exercise of such Options, the minimum aggregate
amount of additional consideration payable upon the conversion or exchange
thereof at the time such Convertible Securities first become convertible or
exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the exercise of all such Options (assuming full conversion of
Convertible Securities, if applicable). No further adjustment to the Conversion
Price will be made upon the actual issuance of such Common Stock upon the
exercise of such Options or upon the conversion or exchange of Convertible
Securities issuable upon exercise of such Options.

                      Additionally, the Borrower shall be deemed to have issued
or sold shares of Common Stock if the Borrower in any manner issues or sells any
Convertible Securities, whether or not immediately convertible (other than where
the same are issuable upon the exercise of Options), and the price per share for
which Common Stock is issuable upon such conversion or exchange is less than the
Initial Market Price then in effect, then the Initial Market Price shall be
equal to such price per share. For the purposes of the preceding sentence, the
"price per share for which Common Stock is issuable upon such conversion or
exchange" is determined by dividing (i) the total amount, if any, received or
receivable by the Borrower as consideration for the issuance or sale of all such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Borrower upon the conversion or exchange
thereof at the time such Convertible Securities first become convertible or
exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No
further adjustment to the Initial Market Price will be made upon the actual
issuance of such Common Stock upon conversion or exchange of such Convertible
Securities.

                      (E) PURCHASE RIGHTS. If, at any time when any Notes are
issued and outstanding, the Borrower issues any convertible securities or rights
to purchase stock, warrants, securities or other property (the "PURCHASE
RIGHTS") pro rata to the record holders of any class of Common Stock, then the
Holder of this Note will be entitled to acquire, upon the terms applicable to
such Purchase Rights, the aggregate Purchase Rights which such Holder could have
acquired if such Holder had held the number of shares of Common Stock acquirable
upon complete conversion of this Note (without regard to any limitations on
conversion contained herein) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.

                      (F) NOTICE OF ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Price as a result of the events
described in this Section 2.6, the Borrower, at its expense, shall promptly
compute such adjustment or readjustment and prepare and furnish to the Holder of
a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Borrower shall, upon the written request at any time of the Holder, furnish to
such Holder a like certificate setting forth (i) such adjustment or
readjustment, (ii) the Conversion Price at the time in effect and (iii) the
number of shares of Common Stock and the amount, if any, of other securities or
property which at the time would be received upon conversion of the Note.

                                       11
<PAGE>

                      (G) EXCEPTIONS TO ADJUSTMENT OF CONVERSION PRICE. No
adjustment to the Conversion Price will be made (i) upon the exercise of any
warrants, options or convertible securities granted, issued and outstanding on
the date of issuance of this Note; (ii) upon the grant or exercise of any stock
or options which may hereafter be granted or exercised under any employee
benefit plan, stock option plan or restricted stock plan of the Borrower now
existing or to be implemented in the future, so long as the issuance of such
stock or options is approved by a majority of the independent members of the
Board of Directors of the Borrower or a majority of the members of a committee
of independent directors established for such purpose; or (iii) upon the
exercise of the Warrants or conversion of the Notes.

                  2.7 TRADING MARKET LIMITATIONS. Unless permitted by the
applicable rules and regulations of the principal securities market on which the
Common Stock is then listed or traded, in no event shall the Borrower issue upon
conversion of or otherwise pursuant to this Note and the other Notes issued
pursuant to the Purchase Agreement more than the maximum number of shares of
Common Stock that the Borrower can issue pursuant to any rule of the principal
United States securities market on which the Common Stock is then traded (the
"MAXIMUM SHARE AMOUNT"), which shall be 19.99% of the total shares outstanding
on the Closing Date (as defined in the Purchase Agreement), subject to equitable
adjustment from time to time for stock splits, stock dividends, combinations,
capital reorganizations and similar events relating to the Common Stock
occurring after the date hereof. Once the Maximum Share Amount has been issued
(the date of which is hereinafter referred to as the "MAXIMUM CONVERSION DATE"),
if the Borrower fails to eliminate any prohibitions under applicable law or the
rules or regulations of any stock exchange, interdealer quotation system or
other self-regulatory organization with jurisdiction over the Borrower or any of
its securities on the Borrower's ability to issue shares of Common Stock in
excess of the Maximum Share Amount (a "TRADING MARKET PREPAYMENT EVENT"), in
lieu of any further right to convert this Note, and in full satisfaction of the
Borrower's obligations under this Note, the Borrower shall pay to the Holder,
within fifteen (15) business days of the Maximum Conversion Date (the "TRADING
MARKET PREPAYMENT DATE"), an amount equal to 130% times the sum of (a) the then
outstanding principal amount of this Note immediately following the Maximum
Conversion Date, plus (b) accrued and unpaid interest on the unpaid principal
amount of this Note to the Trading Market Prepayment Date, plus (c) Default
Interest, if any, on the amounts referred to in clause (a) and/or (b) above,
plus (d) any optional amounts that may be added thereto at the Maximum
Conversion Date by the Holder in accordance with the terms hereof (the then
outstanding principal amount of this Note immediately following the Maximum
Conversion Date, plus the amounts referred to in clauses (b), (c) and (d) above
shall collectively be referred to as the "REMAINING CONVERTIBLE AMOUNT"). With
respect to each Holder of Notes, the Maximum Share Amount shall refer to such
Holder's pro rata share thereof determined in accordance with Section 5.8 below.
In the event that the sum of (x) the aggregate number of shares of Common Stock
issued upon conversion of this Note and the other Notes issued pursuant to the
Purchase Agreement plus (y) the aggregate number of shares of Common Stock that

                                       12
<PAGE>

remain issuable upon conversion of this Note and the other Notes issued pursuant
to the Purchase Agreement, represents at least one hundred percent (100%) of the
Maximum Share Amount (the "TRIGGERING Event"), the Borrower will use its best
efforts to seek and obtain Shareholder Approval (or obtain such other relief as
will allow conversions hereunder in excess of the Maximum Share Amount) as soon
as practicable following the Triggering Event and before the Maximum Conversion
Date. As used herein, "SHAREHOLDER APPROVAL" means approval by the shareholders
of the Borrower to authorize the issuance of the full number of shares of Common
Stock which would be issuable upon full conversion of the then outstanding Notes
but for the Maximum Share Amount.

                  2.8 STATUS AS SHAREHOLDER. Upon submission of a Notice of
Conversion by a Holder, (i) the shares covered thereby (other than the shares,
if any, which cannot be issued because their issuance would exceed such Holder's
allocated portion of the Reserved Amount or Maximum Share Amount) shall be
deemed converted into shares of Common Stock and (ii) the Holder's rights as a
Holder of such converted portion of this Note shall cease and terminate,
excepting only the right to receive certificates for such shares of Common Stock
and to any remedies provided herein or otherwise available at law or in equity
to such Holder because of a failure by the Borrower to comply with the terms of
this Note. Notwithstanding the foregoing, if a Holder has not received
certificates for all shares of Common Stock prior to the tenth (10th) business
day after the expiration of the Deadline with respect to a conversion of any
portion of this Note for any reason, then (unless the Holder otherwise elects to
retain its status as a holder of Common Stock by so notifying the Borrower) the
Holder shall regain the rights of a Holder of this Note with respect to such
unconverted portions of this Note and the Borrower shall, as soon as
practicable, return such unconverted Note to the Holder or, if the Note has not
been surrendered, adjust its records to reflect that such portion of this Note
has not been converted. In all cases, the Holder shall retain all of its rights
and remedies (including, without limitation, (i) the right to receive Conversion
Default Payments pursuant to Section 2.3 to the extent required thereby for such
Conversion Default and any subsequent Conversion Default and (ii) the right to
have the Conversion Price with respect to subsequent conversions determined in
accordance with Section 2.3) for the Borrower's failure to convert this Note.

                         ARTICLE III. CERTAIN COVENANTS

                  3.1 DISTRIBUTIONS ON CAPITAL STOCK. So long as the Borrower
shall have any obligation under this Note, the Borrower shall not without the
Holder's written consent (a) pay, declare or set apart for such payment, any
dividend or other distribution (whether in cash, property or other securities)
on shares of capital stock other than dividends on shares of Common Stock solely
in the form of additional shares of Common Stock or (b) directly or indirectly
or through any subsidiary make any other payment or distribution in respect of
its capital stock except for distributions pursuant to any shareholders' rights
plan which is approved by a majority of the Borrower's disinterested directors.

                  3.2 RESTRICTION ON STOCK REPURCHASES. So long as the Borrower
shall have any obligation under this Note, the Borrower shall not without the
Holder's written consent redeem, repurchase or otherwise acquire (whether for
cash or in exchange for property or other securities or otherwise) in any one
transaction or series of related transactions any shares of capital stock of the
Borrower or any warrants, rights or options to purchase or acquire any such
shares.

                                       13
<PAGE>

                  3.3 LIMITATION ON LIENS. So long as the Borrower shall have
any obligation under this Note, the Borrower will not transfer, pledge,
hypothecate, encumber, license (except for non-exclusive licenses granted by the
Borrower in the ordinary course of business), sell or otherwise dispose of any
of the Intellectual Property (as defined in the IP Security Agreement) without
the prior written consent of the Holder.

                  3.4 SALE OF ASSETS. So long as the Borrower shall have any
obligation under this Note, the Borrower shall not, without the Holder's written
consent, sell, lease or otherwise dispose of any significant portion of its
assets outside the ordinary course of business. Any consent to the disposition
of any assets may be conditioned on a specified use of the proceeds of
disposition.

                  3.5 ADVANCES AND LOANS. So long as the Borrower shall have any
obligation under this Note, the Borrower shall not, without the Holder's written
consent, lend money, give credit or make advances to any person, firm, joint
venture or corporation, including, without limitation, officers, directors,
employees, subsidiaries and affiliates of the Borrower, except loans, credits or
advances (a) in existence or committed on the date hereof and which the Borrower
has informed Holder in writing prior to the date hereof, (b) made in the
ordinary course of business or (c) not in excess of $50,000.

                  3.6 CONTINGENT LIABILITIES. So long as the Borrower shall have
any obligation under this Note, the Borrower shall not, without the Holder's
written consent, assume, guarantee, endorse, contingently agree to purchase or
otherwise become liable upon the obligation of any person, firm, partnership,
joint venture or corporation, except by the endorsement of negotiable
instruments for deposit or collection and except assumptions, guarantees,
endorsements and contingencies (a) in existence or committed on the date hereof
and which the Borrower has informed Holder in writing prior to the date hereof,
and (b) similar transactions in the ordinary course of business.

                         ARTICLE IV. EVENTS OF DEFAULT

                  If any of the following events of default (each, an "EVENT OF
DEFAULT") shall occur:

                  4.1 FAILURE TO PAY PRINCIPAL OR INTEREST. The Borrower fails
to pay the principal hereof or interest thereon when due on this Note, whether
at maturity, upon a Trading Market Prepayment Event pursuant to Section 2.7,
upon acceleration or otherwise;

                  4.2 CONVERSION AND THE SHARES. The Borrower fails to issue
shares of Common Stock to the Holder (or announces or threatens that it will not
honor its obligation to do so) upon exercise by the Holder of the conversion
rights of the Holder in accordance with the terms of this Note (for a period of
at least sixty (60) days, if such failure is solely as a result of the
circumstances governed by Section 2.3 and the Borrower is using its best efforts
to authorize a sufficient number of shares of Common Stock as soon as
practicable), fails to transfer or cause its transfer agent to transfer

                                       14
<PAGE>

(electronically or in certificated form) any certificate for shares of Common
Stock issued to the Holder upon conversion of or otherwise pursuant to this Note
as and when required by this Note or the Registration Rights Agreement, or fails
to remove any restrictive legend (or to withdraw any stop transfer instructions
in respect thereof) on any certificate for any shares of Common Stock issued to
the Holder upon conversion of or otherwise pursuant to this Note as and when
required by this Note or the Registration Rights Agreement (or makes any
announcement, statement or threat that it does not intend to honor the
obligations described in this paragraph) and any such failure shall continue
uncured (or any announcement, statement or threat not to honor its obligations
shall not be rescinded in writing) for ten (10) days after the Borrower shall
have been notified thereof in writing by the Holder;

                  4.3 FAILURE TO TIMELY FILE REGISTRATION OR EFFECT
REGISTRATION. The Borrower fails to file the Registration Statement within sixty
(60) days following the Closing Date (as defined in the Purchase Agreement) or
obtain effectiveness with the Securities and Exchange Commission of the
Registration Statement within one hundred sixty-five (165) days following the
Closing Date (as defined in the Purchase Agreement) or such Registration
Statement lapses in effect (or sales cannot otherwise be made thereunder
effective, whether by reason of the Borrower's failure to amend or supplement
the prospectus included therein in accordance with the Registration Rights
Agreement or otherwise) for more than twenty (20) consecutive days or forty (40)
days in any twelve month period after the Registration Statement becomes
effective;

                  4.4 BREACH OF COVENANTS. The Borrower breaches any material
covenant or other material term or condition contained in Sections 2.3, 2.6 or
2.7 of this Note, or Sections 4(c), 4(e), 4(h), 4(i), 4(j) or 5 of the Purchase
Agreement and such breach continues for a period of ten (10) days after written
notice thereof to the Borrower from the Holder;

                  4.5 BREACH OF REPRESENTATIONS AND WARRANTIES. Any
representation or warranty of the Borrower made herein or in any agreement,
statement or certificate given in writing pursuant hereto or in connection
herewith (including, without limitation, the Purchase Agreement and the
Registration Rights Agreement), shall be false or misleading in any material
respect when made and the breach of which has (or with the passage of time will
have) a material adverse effect on the rights of the Holder with respect to this
Note, the Purchase Agreement or the Registration Rights Agreement;

                  4.6 RECEIVER OR TRUSTEE. The Borrower or any subsidiary of the
Borrower shall make an assignment for the benefit of creditors, or apply for or
consent to the appointment of a receiver or trustee for it or for a substantial
part of its property or business, or such a receiver or trustee shall otherwise
be appointed;

                  4.7 JUDGMENTS. Any money judgment, writ or similar process
shall be entered or filed against the Borrower or any subsidiary of the Borrower
or any of its property or other assets for more than $100,000, and shall remain
unvacated, unbonded or unstayed for a period of twenty (20) days unless
otherwise consented to by the Holder, which consent will not be unreasonably
withheld;

                                       15
<PAGE>

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

                  4.9 DELISTING OF COMMON STOCK. The Borrower shall fail to
maintain the listing of the Common Stock on at least one of the OTCBB or an
equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap
Market, the New York Stock Exchange, or the American Stock Exchange; or

                  4.10 DEFAULT UNDER OTHER NOTES. An Event of Default has
occurred and is continuing under any of the other Notes issued pursuant to the
Purchase Agreement, then, upon the occurrence and during the continuation of any
Event of Default specified in Section 4.1, 4.2, 4.3, 4.4, 4.5, 4.7, 4.9, or
4.10, at the option of the Holders of a majority of the aggregate principal
amount of the outstanding Notes issued pursuant to the Purchase Agreement
exercisable through the delivery of written notice to the Borrower by such
Holders (the "DEFAULT NOTICE"), and upon the occurrence of an Event of Default
specified in Section 4.6 or 4.8, the Notes shall become immediately due and
payable and the Borrower shall pay to the Holder, in full satisfaction of its
obligations hereunder, an amount equal to the greater of (i) 130% times the sum
of (w) the then outstanding principal amount of this Note plus (x) accrued and
unpaid interest on the unpaid principal amount of this Note to the date of
payment (the "MANDATORY PREPAYMENT DATE") plus (y) Default Interest, if any, on
the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to
the Holder pursuant to Sections 2.3 and 2.4(g) hereof or pursuant to Section
2(c) of the Registration Rights Agreement (the then outstanding principal amount
of this Note to the date of payment plus the amounts referred to in clauses (x),
(y) and (z) shall collectively be known as the "DEFAULT SUM") or (ii) the
"parity value" of the Default Sum to be prepaid, where parity value means (a)
the highest number of shares of Common Stock issuable upon conversion of or
otherwise pursuant to such Default Sum in accordance with Article I, treating
the Trading Day immediately preceding the Mandatory Prepayment Date as the
"Conversion Date" for purposes of determining the lowest applicable Conversion
Price, unless the Default Event arises as a result of a breach in respect of a
specific Conversion Date in which case such Conversion Date shall be the
Conversion Date), multiplied by (b) the highest Closing Price for the Common
Stock during the period beginning on the date of first occurrence of the Event
of Default and ending one day prior to the Mandatory Prepayment Date (the
"DEFAULT AMOUNT") and all other amounts payable hereunder shall immediately
become due and payable, all without demand, presentment or notice, all of which
hereby are expressly waived, together with all costs, including, without
limitation, legal fees and expenses, of collection, and the Holder shall be
entitled to exercise all other rights and remedies available at law or in
equity. If the Borrower fails to pay the Default Amount within five (5) business
days of written notice that such amount is due and payable, then the Holder
shall have the right at any time, so long as the Borrower remains in default
(and so long and to the extent that there are sufficient authorized shares), to
require the Borrower, upon written notice, to immediately issue, in lieu of the
Default Amount, the number of shares of Common Stock of the Borrower equal to
the Default Amount divided by the Conversion Price then in effect.

                                       16
<PAGE>

                            ARTICLE V. MISCELLANEOUS

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

                  5.2 NOTICES. Any notice herein required or permitted to be
given shall be in writing and may be personally served or delivered by courier
or sent by United States mail and shall be deemed to have been given upon
receipt if personally served (which shall include telephone line facsimile
transmission) or sent by courier or three (3) days after being deposited in the
United States mail, certified, with postage pre-paid and properly addressed, if
sent by mail. For the purposes hereof, the address of the Holder shall be as
shown on the records of the Borrower; and the address of the Borrower shall be
3800-999 3rd Avenue, Seattle, Washington 98104, facsimile number: 206-224-6207.
Both the Holder and the Borrower may change the address for service by service
of written notice to the other as herein provided.

                  5.3 AMENDMENTS. This Note and any provision hereof may only be
amended by an instrument in writing signed by the Borrower and the majority in
interest of the Holders. The term "Note" and all reference thereto, as used
throughout this instrument, shall mean this instrument (and the other Notes
issued pursuant to the Purchase Agreement) as originally executed, or if later
amended or supplemented, then as so amended or supplemented.

                  5.4 ASSIGNABILITY. This Note shall be binding upon the
Borrower and its successors and assigns, and shall inure to be the benefit of
the Holder and its successors and assigns. Each transferee of this Note must be
an "accredited investor" (as defined in Rule 501(a) of the 1933 Act).
Notwithstanding anything in this Note to the contrary, this Note may be pledged
as collateral in connection with a bona fide margin account or other lending
arrangement.

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

                  5.6 GOVERNING LAW. THIS NOTE SHALL BE ENFORCED, GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS. THE BORROWER HEREBY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS NOTE, THE AGREEMENTS
ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO
THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT
SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN

                                       17
<PAGE>

EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS NOTE SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING ATTORNEYS'
FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH DISPUTE.

                  5.7 CERTAIN AMOUNTS. Whenever pursuant to this Note the
Borrower is required to pay an amount in excess of the outstanding principal
amount (or the portion thereof required to be paid at that time) plus accrued
and unpaid interest plus Default Interest on such interest, the Borrower and the
Holder agree that the actual damages to the Holder from the receipt of cash
payment on this Note may be difficult to determine and the amount to be so paid
by the Borrower represents stipulated damages and not a penalty and is intended
to compensate the Holder in part for loss of the opportunity to convert this
Note and to earn a return from the sale of shares of Common Stock acquired upon
conversion of this Note at a price in excess of the price paid for such shares
pursuant to this Note. The Borrower and the Holder hereby agree that such amount
of stipulated damages is not plainly disproportionate to the possible loss to
the Holder from the receipt of a cash payment without the opportunity to convert
this Note into shares of Common Stock.

                  5.8 ALLOCATIONS OF MAXIMUM SHARE AMOUNT AND RESERVED AMOUNT.
The Maximum Share Amount and Reserved Amount shall be allocated pro rata among
the Holders of Notes based on the principal amount of such Notes issued to each
Holder. Each increase to the Maximum Share Amount and Reserved Amount shall be
allocated pro rata among the Holders of Notes based on the principal amount of
such Notes held by each Holder at the time of the increase in the Maximum Share
Amount or Reserved Amount. In the event a Holder shall sell or otherwise
transfer any of such Holder's Notes, each transferee shall be allocated a pro
rata portion of such transferor's Maximum Share Amount and Reserved Amount. Any
portion of the Maximum Share Amount or Reserved Amount which remains allocated
to any person or entity which does not hold any Notes shall be allocated to the
remaining Holders of Notes, pro rata based on the principal amount of such Notes
then held by such Holders.

                  5.9 DAMAGES SHARES. The shares of Common Stock that may be
issuable to the Holder pursuant to Sections 2.3 and 2.4(g) hereof and pursuant
to Section 2(c) of the Registration Rights Agreement ("DAMAGES SHARES") shall be
treated as Common Stock issuable upon conversion of this Note for all purposes
hereof and shall be subject to all of the limitations and afforded all of the
rights of the other shares of Common Stock issuable hereunder, including without
limitation, the right to be included in the Registration Statement filed
pursuant to the Registration Rights Agreement. For purposes of calculating
interest payable on the outstanding principal amount hereof, except as otherwise
provided herein, amounts convertible into Damages Shares ("DAMAGES AMOUNTS")
shall not bear interest but must be converted prior to the conversion of any
outstanding principal amount hereof, until the outstanding Damages Amounts is
zero.

                                       18
<PAGE>

                  5.10 DENOMINATIONS. At the request of the Holder, upon
surrender of this Note, the Borrower shall promptly issue new Notes in the
aggregate outstanding principal amount hereof, in the form hereof, in such
denominations of at least $50,000 as the Holder shall request.

                  5.11 PURCHASE AGREEMENT. By its acceptance of this Note, each
Holder agrees to be bound by the applicable terms of the Purchase Agreement.

                  5.12 NOTICE OF CORPORATE EVENTS. Except as otherwise provided
below, the Holder of this Note shall have no rights as a Holder of Common Stock
unless and only to the extent that it converts this Note into Common Stock. The
Borrower shall provide the Holder with prior notification of any meeting of the
Borrower's shareholders (and copies of proxy materials and other information
sent to shareholders). In the event of any taking by the Borrower of a record of
its shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation,
reclassification or recapitalization) any share of any class or any other
securities or property, or to receive any other right, or for the purpose of
determining shareholders who are entitled to vote in connection with any
proposed sale, lease or conveyance of all or substantially all of the assets of
the Borrower or any proposed liquidation, dissolution or winding up of the
Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20)
days prior to the record date specified therein (or thirty (30) days prior to
the consummation of the transaction or event, whichever is earlier), of the date
on which any such record is to be taken for the purpose of such dividend,
distribution, right or other event, and a brief statement regarding the amount
and character of such dividend, distribution, right or other event to the extent
known at such time. The Borrower shall make a public announcement of any event
requiring notification to the Holder hereunder substantially simultaneously with
the notification to the Holder in accordance with the terms of this Section
5.12.

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

                            ARTICLE VI. CALL OPTION

                  6.1 CALL OPTION. Notwithstanding anything to the contrary
contained in this Article VII so long as (i) no Event of Default or Trading
Market Prepayment Event shall have occurred and be continuing, and (ii) the
Borrower has a sufficient number of authorized shares of Common Stock reserved
for issuance upon full conversion of the Notes, then, at any time after the

                                       19
<PAGE>

Issue Date, the Borrower shall have the right, exercisable on not less than ten
(10) Trading Days prior written notice to the Holders of the Notes (which notice
may not be sent to the Holders of the Notes until the Borrower is permitted to
prepay the Notes pursuant to this Section 6.1), to prepay all of the outstanding
Notes in accordance with this Section 6.1. Any notice of prepayment hereunder
(an "OPTIONAL PREPAYMENT") shall be delivered to the Holders of the Notes at
their registered addresses appearing on the books and records of the Borrower
and shall state (1) that the Borrower is exercising its right to prepay all of
the Notes issued on the Issue Date and (2) the date of prepayment (the "OPTIONAL
PREPAYMENT NOTICE"). On the date fixed for prepayment (the "OPTIONAL PREPAYMENT
DATE"), the Borrower shall make payment of the Optional Prepayment Amount (as
defined below) to or upon the order of the Holders as specified by the Holders
in writing to the Borrower at least one (1) business day prior to the Optional
Prepayment Date. If the Borrower exercises its right to prepay the Notes, the
Borrower shall make payment to the holders of an amount in cash (the "OPTIONAL
PREPAYMENT AMOUNT") equal to (1) if the Common Stock is trading at or below
$3.00 per share, 130% multiplied by the sum of (w) the then outstanding
principal amount of this Note plus (x) accrued and unpaid interest on the unpaid
principal amount of this Note to the Optional Prepayment Date plus (y) Default
Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any
amounts owed to the Holder pursuant to Sections 2.3 and 2.4(g) hereof or
pursuant to Section 2(c) of the Registration Rights Agreement (the then
outstanding principal amount of this Note to the date of payment plus the
amounts referred to in clauses (x), (y) and (z) shall collectively be known as
the "OPTIONAL PREPAYMENT SUM") or (2) if the Common Stock is trading above $3.00
per share, the Optional Prepayment Sum plus the product of (A) the number of
shares of Common Stock then issuable upon full conversion of this Note (based
upon the then applicable Conversion Price and without regard to the limitation
set forth in Section 2.1) multiplied by (B) the difference between the average
of the Average Daily Prices for the Common Stock for the preceding five (5) days
minus the then applicable Conversion Price. Notwithstanding notice of an
Optional Prepayment, the Holders shall at all times prior to the Optional
Prepayment Date maintain the right to convert all or any portion of the Notes in
accordance with Article II and any portion of Notes so converted after receipt
of an Optional Prepayment Notice and prior to the Optional Prepayment Date set
forth in such notice and payment of the aggregate Optional Prepayment Amount
shall be deducted from the principal amount of Notes which are otherwise subject
to prepayment pursuant to such notice. If the Borrower delivers an Optional
Prepayment Notice and fails to pay the Optional Prepayment Amount due to the
Holders of the Notes within two (2) business days following the Optional
Prepayment Date, the Borrower shall forever forfeit its right to redeem the
Notes pursuant to this Section 6.1.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       20
<PAGE>

                  IN WITNESS WHEREOF, Borrower has caused this Note to be signed
in its name by its duly authorized officer this 25th day of February, 2005.

                                         VERIDICOM INTERNATIONAL, INC.

                                         By:      ______________________________
                                                  Paul Mann
                                                  President and Chief Executive
                                                  Officer

                                       21
<PAGE>

                                    EXHIBIT A

                              NOTICE OF CONVERSION

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

                  The undersigned hereby irrevocably elects to convert
$__________ principal amount of the Note (defined below) into shares of common
stock, par value $.001 per share ("COMMON STOCK"), of Veridicom International,
Inc., a Delaware corporation (the "BORROWER") according to the conditions of the
convertible Notes of the Borrower dated as of February 25, 2005 (the "Notes"),
as of the date written below. If securities are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates. No
fee will be charged to the Holder for any conversion, except for transfer taxes,
if any. A copy of each Note is attached hereto (or evidence of loss, theft or
destruction thereof).

                  The Borrower shall electronically transmit the Common Stock
issuable pursuant to this Notice of Conversion to the account of the undersigned
or its nominee with DTC through its Deposit Withdrawal Agent Commission system
("DWAC TRANSFER").

         Name of DTC Prime Broker: _____________________________________________

         Account Number: _______________________________________________________

                  In lieu of receiving shares of Common Stock issuable pursuant
to this Notice of Conversion by way of a DWAC Transfer, the undersigned hereby
requests that the Borrower issue a certificate or certificates for the number of
shares of Common Stock set forth below (which numbers are based on the Holder's
calculation attached hereto) in the name(s) specified immediately below or, if
additional space is necessary, on an attachment hereto:

         Name: _________________________________________________________________

         Address: ______________________________________________________________

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

                  Date of Conversion:___________________________

                  Applicable Conversion Price:____________________

                  Number of Shares of Common Stock to be Issued Pursuant to

                  Conversion of the Notes:______________

                  Signature:___________________________________

                  Name:______________________________________

                  Address:____________________________________

                                       22
<PAGE>

The Borrower shall issue and deliver shares of Common Stock to an overnight
courier not later than three business days following receipt of the original
Note(s) to be converted, and shall make payments pursuant to the Notes for the
number of business days such issuance and delivery is late.

                                       23
<PAGE>

                                    EXHIBIT B

                           CONVERSION ELECTION NOTICE

(To be executed by the Holder in order to convert all or part of a Monthly
Amount into Common Stock)

[Name and Address of Holder]

Holder hereby elects to convert $_______________ of the Monthly Amount due on
[specify applicable Repayment Date] under the Convertible Term Note issued by
VERIDICOM INTERNATIONAL, INC. dated February 25, 2005 by delivery of Shares of
Common Stock of VERIDICOM INTERNATIONAL, INC. on and subject to the conditions
set forth in Article II of such Note.

1. Initial Market Price: $___________________

2. Amount to be Paid:    $___________________

3. Shares To Be Delivered (2 divided by 1):    ___________________

4. Cash payment to be made by Borrower:       $___________________

Date: ___________________                                    ___________________

                                     By: ______________________________________

                                     Name: ____________________________________

                                     Title: ___________________________________

                                       24
<PAGE>

      SCHEDULE OF INVESTORS
                                                              Investment ($)
      Name of Investor                                       amount in Notes
      --------------------------------------------------    -------------------

      AJW Partners, LLC                                      $      140,000

      AJW Qualified Partners, LLC                                   390,000

      AJW Offshore, Ltd.                                            450,000

      New Millennium Capital Partners II, LLC                        20,000

      Alpha Capital                                                 200,000

      Enable Growth Partners LP                                     100,000

      Whalehaven Capital Fund Limited                               200,000

      Meadowbrook Opportunity Fund, LLC                             120,000

      TCMP3 Partners                                                 80,000
                                                            -------------------
                                                             $    1,700,000
                                                            -------------------

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