Document:

Filed by Automated Filing Services Inc. (604) 609-0244 - Banyan Corporation - Exhibit 10.1

 SECURITIES PURCHASE AGREEMENT 

                     SECURITIES
  PURCHASE AGREEMENT (this "Agreement"), dated as of November 8, 2004,
  by and among Banyan Corporation, an Oregon corporation, with headquarters located
  at 1925 Century Park East, Suite 500, Los Angeles, California 90067 (the "Company"),
  and each of the purchasers set forth on the signature pages hereto (the "Buyers").

                     WHEREAS:

                     A.                The
  Company and the Buyers are executing and delivering this Agreement in reliance
  upon the exemption from securities registration afforded by the rules and regulations
  as promulgated by the United States Securities and Exchange Commission (the
  "SEC") under the Securities Act of 1933, as amended (the "1933 Act"); 

                     B.                Buyers
  desire to purchase and the Company desires to issue and sell, upon the terms
  and conditions set forth in this Agreement (i) 10% secured convertible notes
  of the Company, in the form attached hereto as Exhibit "A", in the aggregate
  principal amount of Three Million Dollars ($3,000,000) (together with any note(s)
  issued in replacement thereof or as a dividend thereon or otherwise with respect
  thereto in accordance with the terms thereof, the "Notes"), convertible
  into shares of Class A Common Stock, no par value per share, of the Company
  (the "Common Stock"), upon the terms and subject to the limitations and
  conditions set forth in such Notes and (ii) warrants, in the form attached hereto
  as Exhibit "B", to purchase 3,000,000 shares of Common Stock (the "Warrants").

                     C.                Each
  Buyer wishes to purchase, upon the terms and conditions stated in this Agreement,
  such principal amount of Notes and number of Warrants as is set forth immediately
  below its name on the signature pages hereto; and 

                     D.                Contemporaneous
  with the execution and delivery of this Agreement, the parties hereto are executing
  and delivering a Registration Rights Agreement, in the form attached hereto
  as Exhibit "C" (the "Registration Rights Agreement"), pursuant
  to which the Company has agreed to provide certain registration rights under
  the 1933 Act and the rules and regulations promulgated thereunder, and applicable
  state securities laws. 

                     NOW
  THEREFORE, the Company and each of the Buyers severally (and not jointly)
  hereby agree as follows: 

                                         1.                
  PURCHASE AND SALE OF NOTES AND WARRANTS. 

                                                             a.                Purchase
  of Notes and Warrants. On the Closing Date (as defined below), the Company
  shall issue and sell to each Buyer and each Buyer severally agrees to purchase
  from the Company such principal amount of Notes and number of Warrants as is
  set forth immediately below such Buyer's name on the signature pages hereto.

                                                             b.                
  Form of Payment. On the Closing Date (as defined below), (i)
  each Buyer shall pay the purchase price for the Notes and the Warrants to be
  issued and sold to it at the Closing (as defined below) (the "Purchase Price")
  by wire transfer of immediately available funds to the Company, in accordance
  with the Company's written wiring instructions, against delivery of the Notes
  in the principal amount equal to the Purchase Price and the number of Warrants
  as is set forth immediately below such Buyer's name on the signature pages hereto,
  and (ii) the Company shall deliver such Notes and Warrants duly executed on
  behalf of the Company, to such Buyer, against delivery of such Purchase Price.

                                                             c.                Closing
  Date. Subject to the satisfaction (or written waiver) of the conditions
  thereto set forth in Section 6 and Section 7 below, the date and time of the
  issuance and sale of the Notes and the Warrants pursuant to this Agreement (the
  "Closing Date") shall be 12:00 noon, Eastern Standard Time on November
  8, 2004, or such other mutually agreed upon time. The closing of the transactions
  contemplated by this Agreement (the "Closing") shall occur on the Closing
  Date at such location as may be agreed to by the parties. 

                                         2.                BUYERS'
  REPRESENTATIONS AND WARRANTIES. Each Buyer severally (and not jointly)
  represents and warrants to the Company solely as to such Buyer that: 

                                                             a.                Investment
  Purpose. As of the date hereof, the Buyer is purchasing the Notes and
  the shares of Common Stock issuable upon conversion of or otherwise pursuant
  to the Notes (including, without limitation, such additional shares of Common
  Stock, if any, as are issuable (i) on account of interest on the Notes, (ii)
  as a result of the events described in Sections 1.3 and 1.4(g) of the Notes
  and Section 2(c) of the Registration Rights Agreement or (iii) in payment of
  the Standard Liquidated Damages Amount (as defined in Section 2(f) below) pursuant
  to this Agreement, such shares of Common Stock being collectively referred to
  herein as the "Conversion Shares") and the Warrants and the shares of
  Common Stock issuable upon exercise thereof (the "Warrant Shares" and,
  collectively with the Notes, Warrants and Conversion Shares, the "Securities")
  for its own account and not with a present view towards the public sale or distribution
  thereof, except pursuant to sales registered or exempted from registration under
  the 1933 Act; provided, however, that by making the representations
  herein, the Buyer does not agree to hold any of the Securities for any minimum
  or other specific term and reserves the right to dispose of the Securities at
  any time in accordance with or pursuant to a registration statement or an exemption
  under the 1933 Act. 

                                                             b.                Accredited
  Investor Status. The Buyer is an "accredited investor" as that term
  is defined in Rule 501(a) of Regulation D (an "Accredited Investor").

                                                             c.                Reliance
  on Exemptions. The Buyer understands that the Securities are being offered
  and sold to it in reliance upon specific exemptions from the registration requirements
  of United States federal and state securities laws and that the Company is relying
  upon the truth and accuracy of, and the Buyer's compliance with, the representations,
  warranties, agreements, acknowledgments and understandings of the Buyer set
  forth herein in order to determine the availability of such exemptions and the
  eligibility of the Buyer to acquire the Securities. 

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                                                             d.                Information.
  The Buyer and its advisors, if any, have been, and for so long as the Notes
  and Warrants remain outstanding will continue to be, furnished with all materials
  relating to the business, finances and operations of the Company and materials
  relating to the offer and sale of the Securities which have been requested by
  the Buyer or its advisors. The Buyer and its advisors, if any, have been, and
  for so long as the Notes and Warrants remain outstanding will continue to be,
  afforded the opportunity to ask questions of the Company. Notwithstanding the
  foregoing, the Company has not disclosed to the Buyer any material nonpublic
  information and will not disclose such information unless such information is
  disclosed to the public prior to or promptly following such disclosure to the
  Buyer. Neither such inquiries nor any other due diligence investigation conducted
  by Buyer or any of its advisors or representatives shall modify, amend or affect
  Buyer's right to rely on the Company's representations and warranties contained
  in Section 3 below. The Buyer understands that its investment in the Securities
  involves a significant degree of risk. 

                                                             e.                Governmental
  Review. The Buyer understands that no United States federal or state
  agency or any other government or governmental agency has passed upon or made
  any recommendation or endorsement of the Securities. 

                                                             f.                Transfer
  or Re-sale. The Buyer understands that (i) except as provided in the
  Registration Rights Agreement, the sale or re-sale of the Securities has not
  been and is not being registered under the 1933 Act or any applicable state
  securities laws, and the Securities may not be transferred unless (a) the Securities
  are sold pursuant to an effective registration statement under the 1933 Act,
  (b) the Buyer shall have delivered to the Company an opinion of counsel that
  shall be in form, substance and scope customary for opinions of counsel in comparable
  transactions to the effect that the Securities to be sold or transferred may
  be sold or transferred pursuant to an exemption from such registration, which
  opinion shall be accepted by the Company, (c) the Securities are sold or transferred
  to an "affiliate" (as defined in Rule 144 promulgated under the 1933 Act (or
  a successor rule) ("Rule 144")) of the Buyer who agrees to sell or otherwise
  transfer the Securities only in accordance with this Section 2(f) and who is
  an Accredited Investor, (d) the Securities are sold pursuant to Rule 144, or
  (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or
  a successor rule) ("Regulation S"), and the Buyer shall have delivered
  to the Company an opinion of counsel that shall be in form, substance and scope
  customary for opinions of counsel in corporate transactions, which opinion shall
  be accepted by the Company; (ii) any sale of such Securities made in reliance
  on Rule 144 may be made only in accordance with the terms of said Rule and further,
  if said Rule is not applicable, any re-sale of such Securities under circumstances
  in which the seller (or the person through whom the sale is made) may be deemed
  to be an underwriter (as that term is defined in the 1933 Act) may require compliance
  with some other exemption under the 1933 Act or the rules and regulations of
  the SEC thereunder; and (iii) neither the Company nor any other person is under
  any obligation to register such Securities under the 1933 Act or any state securities
  laws or to comply with the terms and conditions of any exemption thereunder
  (in each case, other than pursuant to the Registration Rights Agreement). Notwithstanding
  the foregoing or anything else contained herein to the contrary, the Securities
  may be pledged as collateral in connection with a bona fide margin
  account or other lending arrangement. In the event that the Company does not
  accept the opinion of counsel provided by the Buyer with respect to the transfer
  of Securities pursuant to an exemption from registration, such as Rule 144 or
  Regulation S, within three (3) business days of delivery of the opinion to the
  Company, the Company shall pay to the Buyer 

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liquidated damages of three percent (3%) of the outstanding amount of the Notes per month plus accrued and unpaid interest on the Notes, prorated for partial months, in cash or shares at the option of the Company ("Standard Liquidated Damages
Amount"). If the Company elects to be pay the Standard Liquidated Damages Amount in shares of Common Stock, such shares shall be issued at the Conversion Price at the time of payment. 

                                                             g.                Legends.
  The Buyer understands that the Notes and the Warrants and, until such time as
  the Conversion Shares and Warrant Shares have been registered under the 1933
  Act as contemplated by the Registration Rights Agreement or otherwise may be
  sold pursuant to Rule 144 or Regulation S without any restriction as to the
  number of securities as of a particular date that can then be immediately sold,
  the Conversion Shares and Warrant Shares may bear a restrictive legend in substantially
  the following form (and a stop-transfer order may be placed against transfer
  of the certificates for such Securities): 

  
    
       "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 or unless
        sold pursuant to Rule 144 or Regulation S under said Act." 

    

  

                     The
  legend set forth above shall be removed and the Company shall issue a certificate
  without such legend to the holder of any Security upon which it is stamped,
  if, unless otherwise required by applicable state securities laws, (a) such
  Security is registered for sale under an effective registration statement filed
  under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation
  S without any restriction as to the number of securities as of a particular
  date that can then be immediately sold, or (b) such holder provides the Company
  with 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 Security may be made without registration under the 1933 Act, which
  opinion shall be accepted by the Company so that the sale or transfer is effected
  or (c) such holder provides the Company with reasonable assurances that such
  Security can be sold pursuant to Rule 144 or Regulation S. The Buyer agrees
  to sell all Securities, including those represented by a certificate(s) from
  which the legend has been removed, in compliance with applicable prospectus
  delivery requirements, if any. 

                                                             h.                Authorization;
  Enforcement. This Agreement and the Registration Rights Agreement have
  been duly and validly authorized. This Agreement has been duly executed and
  delivered on behalf of the Buyer, and this Agreement constitutes, and upon execution
  and delivery by the Buyer of the Registration Rights Agreement, such agreement
  will constitute, valid and binding agreements of the Buyer enforceable in accordance
  with their terms. 

                                                             i.                Residency.
  The Buyer is a resident of the jurisdiction set forth immediately below such
  Buyer's name on the signature pages hereto.

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                                         3.                REPRESENTATIONS
  AND WARRANTIES OF THE COMPANY. The Company represents and warrants to
  each Buyer that: 

                                                             a.                Organization
  and Qualification. The Company and each of its Subsidiaries (as defined
  below), if any, is a corporation duly organized, validly existing and in good
  standing under the laws of the jurisdiction in which it is incorporated, with
  full power and authority (corporate and other) to own, lease, use and operate
  its properties and to carry on its business as and where now owned, leased,
  used, operated and conducted. Schedule 3(a) sets forth a list of all
  of the Subsidiaries of the Company and the jurisdiction in which each is incorporated.
  The Company and each of its Subsidiaries is duly qualified as a foreign corporation
  to do business and is in good standing in every jurisdiction in which its ownership
  or use of property or the nature of the business conducted by it makes such
  qualification necessary except where the failure to be so qualified or in good
  standing would not have a Material Adverse Effect. "Material Adverse Effect"
  means any material adverse effect on the business, operations, assets, financial
  condition or prospects of the Company or its Subsidiaries, if any, taken as
  a whole, or on the transactions contemplated hereby or by the agreements or
  instruments to be entered into in connection herewith. "Subsidiaries"
  means any corporation or other organization, whether incorporated or unincorporated,
  in which the Company owns, directly or indirectly, any equity or other ownership
  interest. 

                                                             b.                Authorization;
  Enforcement. (i) The Company has all requisite corporate power and authority
  to enter into and perform this Agreement, the Registration Rights Agreement,
  the Notes and the Warrants and to consummate the transactions contemplated hereby
  and thereby and to issue the Securities, in accordance with the terms hereof
  and thereof, (ii) the execution and delivery of this Agreement, the Registration
  Rights Agreement, the Notes and the Warrants by the Company and the consummation
  by it of the transactions contemplated hereby and thereby (including without
  limitation, the issuance of the Notes and the Warrants and the issuance and
  reservation for issuance of the Conversion Shares and Warrant Shares issuable
  upon conversion or exercise thereof) have been duly authorized by the Company's
  Board of Directors and no further consent or authorization of the Company, its
  Board of Directors, or its shareholders is required, (iii) this Agreement has
  been duly executed and delivered by the Company by its authorized representative,
  and such authorized representative is the true and official representative with
  authority to sign this Agreement and the other documents executed in connection
  herewith and bind the Company accordingly, and (iv) this Agreement constitutes,
  and upon execution and delivery by the Company of the Registration Rights Agreement,
  the Notes and the Warrants, each of such instruments will constitute, a legal,
  valid and binding obligation of the Company enforceable against the Company
  in accordance with its terms. 

                                                             c.                Capitalization.
  As of the date hereof, the authorized capital stock of the Company consists
  of (i) 60,000,000 shares of Common Stock, of which 52,286,744 shares are issued
  and outstanding, no shares are reserved for issuance pursuant to securities
  (other than the Notes and the Warrants) exercisable for, or convertible into
  or exchangeable for shares of Common Stock and 96,909,090 shares are reserved
  for issuance upon conversion of the Notes and the Additional Notes (as defined
  in Section 4(l)) and exercise of the Warrants and the Additional Warrants (as
  defined in Section 4(l)) (subject to (i) the Stockholder Approval (as defined
  in Section 4(o) and (ii) adjustment pursuant to the Company's covenant set forth
  in Section 4(h) below); and (ii) 10,000,000 shares of Class A Preferred Stock,
  of which 187,500 

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 shares of Series A Convertible Preferred Stock are issued and outstanding;
  and (iii) 500,000 shares of Class B Preferred Stock, of which no Shares are
  issued and outstanding. All of such outstanding shares of capital stock are,
  or upon issuance will be, duly authorized, validly issued, fully paid and nonassessable.
  No shares of capital stock of the Company are subject to preemptive rights or
  any other similar rights of the shareholders of the Company or any liens or
  encumbrances imposed through the actions or failure to act of the Company. Except
  as disclosed in Schedule 3(c), as of the effective date of this Agreement,
  (i) there are no outstanding options, warrants, scrip, rights to subscribe for,
  puts, calls, rights of first refusal, agreements, understandings, claims or
  other commitments or rights of any character whatsoever relating to, or securities
  or rights convertible into or exchangeable for any shares of capital stock of
  the Company or any of its Subsidiaries, or arrangements by which the Company
  or any of its Subsidiaries is or may become bound to issue additional shares
  of capital stock of the Company or any of its Subsidiaries, (ii) there are no
  agreements or arrangements under which the Company or any of its Subsidiaries
  is obligated to register the sale of any of its or their securities under the
  1933 Act (except the Registration Rights Agreement) and (iii) there are no anti-dilution
  or price adjustment provisions contained in any security issued by the Company
  (or in any agreement providing rights to security holders) that will be triggered
  by the issuance of the Notes, the Warrants, the Conversion Shares or Warrant
  Shares. The Company has furnished to the Buyer true and correct copies of the
  Company's Articles of Incorporation as in effect on the date hereof ("Articles
  of Incorporation"), the Company's By-laws, as in effect on the date hereof
  (the "Bylaws"), and the terms of all securities convertible into or exercisable
  for Common Stock of the Company and the material rights of the holders thereof
  in respect thereto. The Company shall provide the Buyer with a written update
  of this representation signed by the Company's Chief Executive or Chief Financial
  Officer on behalf of the Company as of the Closing Date. 

                                                             d.                Issuance
  of Shares. Subject to the Stockholder Approval (as defined in Section
  4(o)), the Conversion Shares and Warrant Shares are duly authorized and reserved
  for issuance and, upon conversion of the Notes and exercise of the Warrants
  in accordance with their respective terms, will be validly issued, fully paid
  and non-assessable, and 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 Company and will not impose personal
  liability upon the holder thereof. 

                                                             e.                Acknowledgment
  of Dilution. The Company understands and acknowledges the potentially
  dilutive effect to the Common Stock upon the issuance of the Conversion Shares
  and Warrant Shares upon conversion of the Note or exercise of the Warrants.
  The Company further acknowledges that its obligation to issue Conversion Shares
  and Warrant Shares upon conversion of the Notes or exercise of the Warrants
  in accordance with this Agreement, the Notes and the Warrants is absolute and
  unconditional regardless of the dilutive effect that such issuance may have
  on the ownership interests of other shareholders of the Company. 

                                                             f.                No
  Conflicts. The execution, delivery and performance of this Agreement,
  the Registration Rights Agreement, the Notes and the Warrants by the Company
  and the consummation by the Company of the transactions contemplated hereby
  and thereby (including, without limitation, the issuance and reservation for
  issuance of the Conversion Shares and Warrant Shares) will not (i) conflict
  with or result in a violation of any provision of the 

6 

Articles of Incorporation or By-laws or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or
in the aggregate, have a Material Adverse Effect). Neither the Company nor any of its Subsidiaries is in violation of its Articles of Incorporation, By-laws or other organizational documents and neither the Company nor any of its Subsidiaries is in
default (and no event has occurred which with notice or lapse of time or both could put the Company or any of its Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has taken any action or failed to take any action
that would give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party or by which any property or assets of the Company or
any of its Subsidiaries is bound or affected, except for possible defaults as would not, individually or in the aggregate, have a Material Adverse Effect. The businesses of the Company and its Subsidiaries, if any, are not being conducted, and shall
not be conducted so long as a Buyer owns any of the Securities, in violation of any law, ordinance or regulation of any governmental entity. Except as specifically contemplated by this Agreement and as required under the 1933 Act and any applicable
state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency, regulatory agency, self regulatory organization or stock market or any
third party in order for it to execute, deliver or perform any of its obligations under this Agreement, the Registration Rights Agreement, the Notes or the Warrants in accordance with the terms hereof or thereof or to issue and sell the Notes and
Warrants in accordance with the terms hereof and to issue the Conversion Shares upon conversion of the Notes and the Warrant Shares upon exercise of the Warrants. Except as disclosed in Schedule 3(f), all consents, authorizations, orders,
filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company is not in violation of the listing requirements of the Over-the-Counter
Bulletin Board (the "OTCBB") and does not reasonably anticipate that the Common Stock will be delisted by the OTCBB in the foreseeable future. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing.

                                                             g.                SEC
  Documents; Financial Statements. Except as disclosed in Schedule
  3(g), the Company has timely filed all reports, schedules, forms, statements
  and other documents required to be filed by it with the SEC pursuant to the
  reporting requirements of the Securities Exchange Act of 1934, as amended (the
  "1934 Act") (all of the foregoing filed prior to the date hereof and
  all exhibits included therein and financial statements and schedules thereto
  and documents (other than exhibits to such documents) incorporated by reference
  therein, being hereinafter referred to herein as the "SEC Documents").
  The Company has delivered to each Buyer true and complete copies of the SEC
  Documents, except for such exhibits and incorporated documents. As of their
  respective dates, the SEC Documents complied in all 

7 

material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the statements
made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for such statements as have been amended or updated in subsequent filings prior the date hereof). As of their respective dates, the
financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in
the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Except as set forth in the
financial statements of the Company included in the SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to December 31, 2003 and (ii) obligations
under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in such financial statements, which, individually or in the aggregate, are not material to
the financial condition or operating results of the Company. 

                                                             h.                Absence
  of Certain Changes. Since December 31, 2003, there has been no material
  adverse change and no material adverse development in the assets, liabilities,
  business, properties, operations, financial condition, results of operations
  or prospects of the Company or any of its Subsidiaries. 

                                                             i.                Absence
  of Litigation. There is no action, suit, claim, proceeding, inquiry
  or investigation before or by any court, public board, government agency, self-regulatory
  organization or body pending or, to the knowledge of the Company or any of its
  Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries,
  or their officers or directors in their capacity as such, that could have a
  Material Adverse Effect. Schedule 3(i) contains a complete list and summary
  description of any pending or threatened proceeding against or affecting the
  Company or any of its Subsidiaries, without regard to whether it would have
  a Material Adverse Effect. The Company and its Subsidiaries are unaware of any
  facts or circumstances which might give rise to any of the foregoing. 

                                                             j.                Patents,
  Copyrights, etc.

                                                                                 (i)                The
  Company and each of its Subsidiaries owns or possesses the requisite licenses
  or rights to use all patents, patent applications, patent rights, inventions,
  know-how, trade secrets, trademarks, trademark applications, service marks,
  service names, trade names and copyrights ("Intellectual Property") necessary
  to enable it to conduct 

8 

its business as now operated (and, except as set forth in Schedule 3(j) hereof, to the best of the Company's knowledge, as presently contemplated to be operated in the future); there is no claim or action by any person pertaining to, or
proceeding pending, or to the Company's knowledge threatened, which challenges the right of the Company or of a Subsidiary with respect to any Intellectual Property necessary to enable it to conduct its business as now operated (and, except as set
forth in Schedule 3(j) hereof, to the best of the Company's knowledge, as presently contemplated to be operated in the future); to the best of the Company's knowledge, the Company's or its Subsidiaries' current and intended products, services
and processes do not infringe on any Intellectual Property or other rights held by any person; and the Company is unaware of any facts or circumstances which might give rise to any of the foregoing. The Company and each of its Subsidiaries have
taken reasonable security measures to protect the secrecy, confidentiality and value of their Intellectual Property. 

                                                                                 (ii)               All
  of the Company's computer software and computer hardware, and other similar
  or related items of automated, computerized or software systems that are used
  or relied on by the Company in the conduct of its business or that were, or
  currently are being, sold or licensed by the Company to customers (collectively,
  "Information Technology"), are Year 2000 Compliant. For purposes of this
  Agreement, the term "Year 2000 Compliant" means, with respect to the
  Company's Information Technology, that the Information Technology is designed
  to be used prior to, during and after the calendar Year 2000, and the Information
  Technology used during each such time period will accurately receive, provide
  and process date and time data (including, but not limited to, calculating,
  comparing and sequencing) from, into and between the 20th and 21st
  centuries, including the years 1999 and 2000, and leap-year calculations, and
  will not malfunction, cease to function, or provide invalid or incorrect results
  as a result of the date or time data, to the extent that other information technology,
  used in combination with the Information Technology, properly exchanges date
  and time data with it. The Company has delivered to the Buyers true and correct
  copies of all analyses, reports, studies and similar written information, whether
  prepared by the Company or another party, relating to whether the Information
  Technology is Year 2000 Compliant, if any. 

                                                             k.                No
  Materially Adverse Contracts, Etc. Neither the Company nor any of its
  Subsidiaries is subject to any charter, corporate or other legal restriction,
  or any judgment, decree, order, rule or regulation which in the judgment of
  the Company's officers has or is expected in the future to have a Material Adverse
  Effect. Neither the Company nor any of its Subsidiaries is a party to any contract
  or agreement which in the judgment of the Company's officers has or is expected
  to have a Material Adverse Effect. 

                                                             l.                Tax
  Status. Except as set forth on Schedule 3(l), the Company and
  each of its Subsidiaries has made or filed all federal, state and foreign income
  and all other tax returns, reports and declarations required by any jurisdiction
  to which it is subject (unless and only to the extent that the Company and each
  of its Subsidiaries has set aside on its books provisions reasonably adequate
  for the payment of all unpaid and unreported taxes) and has paid all taxes and
  other governmental assessments and charges that are material in amount, shown
  or determined to be due on such returns, reports and declarations, except those
  being contested in good faith and has set aside on its books provisions reasonably
  adequate for the payment of all taxes for periods subsequent to the periods
  to which such returns, reports or declarations apply. There are no unpaid taxes
  in any material amount claimed to be due by the taxing authority of 

9 

any jurisdiction, and the officers of the Company know of no basis for any such claim. The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, state or local
tax. Except as set forth on Schedule 3(l), none of the Company's tax returns is presently being audited by any taxing authority. 

                                                             m.                Certain
  Transactions. Except as set forth on Schedule 3(m) and except
  for arm's length transactions pursuant to which the Company or any of its Subsidiaries
  makes payments in the ordinary course of business upon terms no less favorable
  than the Company or any of its Subsidiaries could obtain from third parties
  and other than the grant of stock options disclosed on Schedule 3(c),
  none of the officers, directors, or employees of the Company is presently a
  party to any transaction with the Company or any of its Subsidiaries (other
  than for services as employees, officers and directors), including any contract,
  agreement or other arrangement providing for the furnishing of services to or
  by, providing for rental of real or personal property to or from, or otherwise
  requiring payments to or from any officer, director or such employee or, to
  the knowledge of the Company, any corporation, partnership, trust or other entity
  in which any officer, director, or any such employee has a substantial interest
  or is an officer, director, trustee or partner. 

                                                             n.                Disclosure.
  All information relating to or concerning the Company or any of its Subsidiaries
  set forth in this Agreement and provided to the Buyers pursuant to Section 2(d)
  hereof and otherwise in connection with the transactions contemplated hereby
  is true and correct in all material respects and the Company has not omitted
  to state any material fact necessary in order to make the statements made herein
  or therein, in light of the circumstances under which they were made, not misleading.
  No event or circumstance has occurred or exists with respect to the Company
  or any of its Subsidiaries or its or their business, properties, prospects,
  operations or financial conditions, which, under applicable law, rule or regulation,
  requires public disclosure or announcement by the Company but which has not
  been so publicly announced or disclosed (assuming for this purpose that the
  Company's reports filed under the 1934 Act are being incorporated into an effective
  registration statement filed by the Company under the 1933 Act). 

                                                             o.                Acknowledgment
  Regarding Buyers' Purchase of Securities. The Company acknowledges and
  agrees that the Buyers are acting solely in the capacity of arm's length purchasers
  with respect to this Agreement and the transactions contemplated hereby. The
  Company further acknowledges that no Buyer is acting as a financial advisor
  or fiduciary of the Company (or in any similar capacity) with respect to this
  Agreement and the transactions contemplated hereby and any statement made by
  any Buyer or any of their respective representatives or agents in connection
  with this Agreement and the transactions contemplated hereby is not advice or
  a recommendation and is merely incidental to the Buyers' purchase of the Securities.
  The Company further represents to each Buyer that the Company's decision to
  enter into this Agreement has been based solely on the independent evaluation
  of the Company and its representatives. 

                                                             p.                No
  Integrated Offering. Neither the Company, nor any of its affiliates,
  nor any person acting on its or their behalf, has directly or indirectly made
  any offers or sales in any security or solicited any offers to buy any security
  under circumstances that would 

10 

require registration under the 1933 Act of the issuance of the Securities to the Buyers. The issuance of the Securities to the Buyers will not be integrated with any other issuance of the Company's securities (past, current or future) for purposes
of any shareholder approval provisions applicable to the Company or its securities. 

                                                             q.                No
  Brokers. The Company has taken no action which would give rise to any
  claim by any person for brokerage commissions, transaction fees or similar payments
  relating to this Agreement or the transactions contemplated hereby.

                                                             r.                Permits;
  Compliance. The Company and each of its Subsidiaries is in possession
  of all franchises, grants, authorizations, licenses, permits, easements, variances,
  exemptions, consents, certificates, approvals and orders necessary to own, lease
  and operate its properties and to carry on its business as it is now being conducted
  (collectively, the "Company Permits"), and there is no action pending
  or, to the knowledge of the Company, threatened regarding suspension or cancellation
  of any of the Company Permits. Neither the Company nor any of its Subsidiaries
  is in conflict with, or in default or violation of, any of the Company Permits,
  except for any such conflicts, defaults or violations which, individually or
  in the aggregate, would not reasonably be expected to have a Material Adverse
  Effect. Since December 31, 2003, neither the Company nor any of its Subsidiaries
  has received any notification with respect to possible conflicts, defaults or
  violations of applicable laws, except for notices relating to possible conflicts,
  defaults or violations, which conflicts, defaults or violations would not have
  a Material Adverse Effect. 

                                                             s.                Environmental
  Matters. 

                                                                                 (i)                Except
  as set forth in Schedule 3(s), there are, to the Company's knowledge,
  with respect to the Company or any of its Subsidiaries or any predecessor of
  the Company, no past or present violations of Environmental Laws (as defined
  below), releases of any material into the environment, actions, activities,
  circumstances, conditions, events, incidents, or contractual obligations which
  may give rise to any common law environmental liability or any liability under
  the Comprehensive Environmental Response, Compensation and Liability Act of
  1980 or similar federal, state, local or foreign laws and neither the Company
  nor any of its Subsidiaries has received any notice with respect to any of the
  foregoing, nor is any action pending or, to the Company's knowledge, threatened
  in connection with any of the foregoing. The term "Environmental Laws"
  means all federal, state, local or foreign laws relating to pollution or protection
  of human health or the environment (including, without limitation, ambient air,
  surface water, groundwater, land surface or subsurface strata), including, without
  limitation, laws relating to emissions, discharges, releases or threatened releases
  of chemicals, pollutants contaminants, or toxic or hazardous substances or wastes
  (collectively, "Hazardous Materials") into the environment, or otherwise
  relating to the manufacture, processing, distribution, use, treatment, storage,
  disposal, transport or handling of Hazardous Materials, as well as all authorizations,
  codes, decrees, demands or demand letters, injunctions, judgments, licenses,
  notices or notice letters, orders, permits, plans or regulations issued, entered,
  promulgated or approved thereunder. 

                                                                                 (ii)                Other
  than those that are or were stored, used or disposed of in compliance with applicable
  law, no Hazardous Materials are contained on or about any real 

11 

property currently owned, leased or used by the Company or any of its Subsidiaries, and no Hazardous Materials were released on or about any real property previously owned, leased or used by the Company or any of its Subsidiaries during the period
the property was owned, leased or used by the Company or any of its Subsidiaries, except in the normal course of the Company's or any of its Subsidiaries' business. 

                                                                                 (iii)               Except
  as set forth in Schedule 3(s), there are no underground storage tanks
  on or under any real property owned, leased or used by the Company or any of
  its Subsidiaries that are not in compliance with applicable law.

                                                             t.                
  Title to Property. The Company and its Subsidiaries have good
  and marketable title in fee simple to all real property and good and marketable
  title to all personal property owned by them which is material to the business
  of the Company and its Subsidiaries, in each case free and clear of all liens,
  encumbrances and defects except such as are described in Schedule 3(t)
  or such as would not have a Material Adverse Effect. Any real property and facilities
  held under lease by the Company and its Subsidiaries are held by them under
  valid, subsisting and enforceable leases with such exceptions as would not have
  a Material Adverse Effect. 

                                                             u.                
  Insurance. The Company and each of its Subsidiaries are insured
  by insurers of recognized financial responsibility against such losses and risks
  and in such amounts as management of the Company believes to be prudent and
  customary in the businesses in which the Company and its Subsidiaries are engaged.
  Neither the Company nor any such Subsidiary has any reason to believe that it
  will not be able to renew its existing insurance coverage as and when such coverage
  expires or to obtain similar coverage from similar insurers as may be necessary
  to continue its business at a cost that would not have a Material Adverse Effect.
  The Company has provided to Buyer true and correct copies of all policies relating
  to directors' and officers' liability coverage, errors and omissions coverage,
  and commercial general liability coverage. 

                                                             v.                Internal
  Accounting Controls. The Company and each of its Subsidiaries maintain
  a system of internal accounting controls sufficient, in the judgment of the
  Company's board of directors, to provide reasonable assurance that (i) transactions
  are executed in accordance with management's general or specific authorizations,
  (ii) transactions are recorded as necessary to permit preparation of financial
  statements in conformity with generally accepted accounting principles and to
  maintain asset accountability, (iii) access to assets is permitted only in accordance
  with management's general or specific authorization and (iv) the recorded accountability
  for assets is compared with the existing assets at reasonable intervals and
  appropriate action is taken with respect to any differences. 

                                                             w.                Foreign
  Corrupt Practices. Neither the Company, nor any of its Subsidiaries,
  nor any director, officer, agent, employee or other person acting on behalf
  of the Company or any Subsidiary has, in the course of his actions for, or on
  behalf of, the Company, used any corporate funds for any unlawful contribution,
  gift, entertainment or other unlawful expenses relating to political activity;
  made any direct or indirect unlawful payment to any foreign or domestic government
  official or employee from corporate funds; violated or is in violation of any
  provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or

12 

made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee. 

                                                             x.                Solvency.
  Except as set forth in Schedule 3(x), the Company (after giving
  effect to the transactions contemplated by this Agreement) is solvent (i.e.,
  its assets have a fair market value in excess of the amount required to pay
  its probable liabilities on its existing debts as they become absolute and matured)
  and currently the Company has no information that would lead it to reasonably
  conclude that the Company would not, after giving effect to the transaction
  contemplated by this Agreement, have the ability to, nor does it intend to take
  any action that would impair its ability to, pay its debts from time to time
  incurred in connection therewith as such debts mature. Except as set forth in
  Schedule 3(x), the Company did not receive a qualified opinion
  from its auditors with respect to its most recent fiscal year end and, after
  giving effect to the transactions contemplated by this Agreement, does not anticipate
  or know of any basis upon which its auditors might issue a qualified opinion
  in respect of its current fiscal year. 

                                                             y.                No
  Investment Company. The Company is not, and upon the issuance and sale
  of the Securities as contemplated by this Agreement will not be an "investment
  company" required to be registered under the Investment Company Act of 1940
  (an "Investment Company"). The Company is not controlled by an Investment
  Company. 

                                                             z.                Breach
  of Representations and Warranties by the Company. If the Company breaches
  any of the representations or warranties set forth in this Section 3, and in
  addition to any other remedies available to the Buyers pursuant to this Agreement,
  the Company shall pay to the Buyer the Standard Liquidated Damages Amount in
  cash or in shares of Common Stock at the option of the Company, until such breach
  is cured. If the Company elects to pay the Standard Liquidated Damages Amounts
  in shares of Common Stock, such shares shall be issued at the Conversion Price
  at the time of payment. 

                                         4.                COVENANTS.

                                                             a.                Best
  Efforts. The parties shall use their best efforts to satisfy timely
  each of the conditions described in Section 6 and 7 of this Agreement.

                                                             b.                Form
  D; Blue Sky Laws. The Company agrees to file a Form D with respect to
  the Securities as required under Regulation D and to provide a copy thereof
  to each Buyer promptly after such filing. The Company shall, on or before the
  Closing Date, take such action as the Company shall reasonably determine is
  necessary to qualify the Securities for sale to the Buyers at the applicable
  closing pursuant to this Agreement under applicable securities or "blue sky"
  laws of the states of the United States (or to obtain an exemption from such
  qualification), and shall provide evidence of any such action so taken to each
  Buyer on or prior to the Closing Date. 

                                                             c.                Reporting
  Status; Eligibility to Use Form S-3, SB-2 or Form S-1. The Company's
  Common Stock is registered under Section 12(g) of the 1934 Act. The Company
  represents and warrants that it meets the requirements for the use of Form S-3
  (or if the Company is not eligible for the use of Form S-3 as of the Filing
  Date (as defined in the 

13 

Registration Rights Agreement), the Company may use the form of registration for which it is eligible at that time) for registration of the sale by the Buyer of the Registrable Securities (as defined in the Registration Rights Agreement). So long as
the Buyer beneficially owns any of the Securities, the Company shall timely file all reports required to be filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would permit such termination. The Company further agrees to file all reports required to be filed by the Company with the SEC in a timely manner so as to become eligible, and
thereafter to maintain its eligibility, for the use of Form S-3. The Company shall issue a press release describing the materials terms of the transaction contemplated hereby as soon as practicable following the Closing Date but in no event more
than two (2) business days of the Closing Date, which press release shall be subject to prior review by the Buyers. The Company agrees that such press release shall not disclose the name of the Buyers unless expressly consented to in writing by the
Buyers or unless required by applicable law or regulation, and then only to the extent of such requirement. 

                                                             d.                Use
  of Proceeds. The Company shall use the proceeds from the sale of the
  Notes and the Warrants in the manner set forth in Schedule 4(d) attached
  hereto and made a part hereof and shall not, directly or indirectly, use such
  proceeds for any loan to or investment in any other corporation, partnership,
  enterprise or other person (except in connection with its currently existing
  direct or indirect Subsidiaries) 

                                                             e.                Future
  Offerings. Subject to the exceptions described below, the Company will
  not, without the prior written consent of a majority-in-interest of the Buyers,
  not to be unreasonably withheld, negotiate or contract with any party to obtain
  additional equity financing (including debt financing with an equity component)
  that involves (A) the issuance of Common Stock at a discount to the market price
  of the Common Stock on the date of issuance (taking into account the value of
  any warrants or options to acquire Common Stock issued in connection therewith)
  or (B) the issuance of convertible securities that are convertible into an indeterminate
  number of shares of Common Stock or (C) the issuance of warrants during the
  period (the "Lock-up Period") beginning on the Closing Date and ending
  on the later of (i) two hundred seventy (270) days from the Closing Date and
  (ii) one hundred eighty (180) days from the date the Registration Statement
  (as defined in the Registration Rights Agreement) is declared effective (plus
  any days in which sales cannot be made thereunder). In addition, subject to
  the exceptions described below, the Company will not conduct any equity financing
  (including debt with an equity component) ("Future Offerings") during
  the period beginning on the Closing Date and ending two (2) years after the
  end of the Lock-up Period unless it shall have first delivered to each Buyer,
  at least twenty (20) business days prior to the closing of such Future Offering,
  written notice describing the proposed Future Offering, including the terms
  and conditions thereof and proposed definitive documentation to be entered into
  in connection therewith, and providing each Buyer an option during the fifteen
  (15) day period following delivery of such notice to purchase its pro rata share
  (based on the ratio that the aggregate principal amount of Notes purchased by
  it hereunder bears to the aggregate principal amount of Notes purchased hereunder)
  of the securities being offered in the Future Offering on the same terms as
  contemplated by such Future Offering (the limitations referred to in this sentence
  and the preceding sentence are collectively referred to as the "Capital Raising
  Limitations"). In the event the terms and conditions of a proposed Future
  Offering are amended in any respect after 

14 

delivery of the notice to the Buyers concerning the proposed Future Offering, the Company shall deliver a new notice to each Buyer describing the amended terms and conditions of the proposed Future Offering and each Buyer thereafter shall have an
option during the fifteen (15) day period following delivery of such new notice to purchase its pro rata share of the securities being offered on the same terms as contemplated by such proposed Future Offering, as amended. The foregoing sentence
shall apply to successive amendments to the terms and conditions of any proposed Future Offering. The Capital Raising Limitations shall not apply to any transaction involving (i) issuances of securities in a firm commitment underwritten public
offering (excluding a continuous offering pursuant to Rule 415 under the 1933 Act) or (ii) issuances of securities as consideration for a merger, consolidation or purchase of assets, or in connection with any strategic partnership or joint venture
(the primary purpose of which is not to raise equity capital), or in connection with the disposition or acquisition of a business, product or license by the Company. The Capital Raising Limitations also shall not apply to the issuance of securities
upon exercise or conversion of the Company's options, warrants or other convertible securities outstanding as of the date hereof or to the grant of additional options or warrants, or the issuance of additional securities, under any Company stock
option or restricted stock plan approved by the shareholders of the Company.

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

                                                             g.                Financial
  Information. The Company agrees to send the following reports to each
  Buyer until such Buyer transfers, assigns, or sells all of the Securities: (i)
  within ten (10) days after the filing with the SEC, a copy of its Annual Report
  on Form 10-KSB its Quarterly Reports on Form 10-QSB and any Current Reports
  on Form 8-K; (ii) within one (1) day after release, copies of all press releases
  issued by the Company or any of its Subsidiaries; and (iii) contemporaneously
  with the making available or giving to the shareholders of the Company, copies
  of any notices or other information the Company makes available or gives to
  such shareholders. 

                                                             h.                Authorization
  and Reservation of Shares. Subject to the Stockholder Approval (as defined
  in Section 4(o)), the Company shall at all times have authorized, and reserved
  for the purpose of issuance, a sufficient number of shares of Common Stock to
  provide for the full conversion or exercise of the outstanding Notes and Warrants
  and issuance of the Conversion Shares and Warrant Shares in connection therewith
  (based on the 

15 

Conversion Price of the Notes or Exercise Price of the Warrants in effect from time to time) and as otherwise required by the Notes. The Company shall not reduce the number of shares of Common Stock reserved for issuance upon conversion of Notes and
exercise of the Warrants without the consent of each Buyer. Subject to the Stockholder Approval (as defined in Section 4(o)), the Company shall at all times maintain the number of shares of Common Stock so reserved for issuance at an amount
("Reserved Amount") equal to no less than two (2) times the number that is then actually issuable upon full conversion of the Notes and Additional Notes and upon exercise of the Warrants and the Additional Warrants (based on the Conversion
Price of the Notes or the Exercise Price of the Warrants in effect from time to time). If at any time the number of shares of Common Stock authorized and reserved for issuance ("Authorized and Reserved Shares") is below the Reserved Amount,
the Company will promptly take all corporate action necessary to authorize and reserve a sufficient number of shares, including, without limitation, calling a special meeting of shareholders to authorize additional shares to meet the Company's
obligations under this Section 4(h), in the case of an insufficient number of authorized shares, obtain shareholder approval of an increase in such authorized number of shares, and voting the management shares of the Company in favor of an increase
in the authorized shares of the Company to ensure that the number of authorized shares is sufficient to meet the Reserved Amount. If the Company fails to obtain such shareholder approval within thirty (30) days following the date on which the number
of Reserved Amount exceeds the Authorized and Reserved Shares, the Company shall pay to the Borrower the Standard Liquidated Damages Amount, in cash or in shares of Common Stock at the option of the Buyer. If the Buyer elects to be paid the Standard
Liquidated Damages Amount in shares of Common Stock, such shares shall be issued at the Conversion Price at the time of payment. In order to ensure that the Company has authorized a sufficient amount of shares to meet the Reserved Amount at all
times, the Company must deliver to the Buyer at the end of every month a list detailing (1) the current amount of shares authorized by the Company and reserved for the Buyer; and (2) amount of shares issuable upon conversion of the Notes and upon
exercise of the Warrants and as payment of interest accrued on the Notes for one year. If the Company fails to provide such list within five (5) business days of the end of each month, the Company shall pay the Standard Liquidated Damages Amount, in
cash or in shares of Common Stock at the option of the Buyer, until the list is delivered. If the Buyer elects to be paid the Standard Liquidated Damages Amount in shares of Common Stock, such shares shall be issued at the Conversion Price at the
time of payment. 

                                                             i.                Listing.
  The Company shall promptly secure the listing of the Conversion Shares and Warrant
  Shares upon each national securities exchange or automated quotation system,
  if any, upon which shares of Common Stock are then listed (subject to official
  notice of issuance) and, so long as any Buyer owns any of the Securities, shall
  maintain, so long as any other shares of Common Stock shall be so listed, such
  listing of all Conversion Shares and Warrant Shares from time to time issuable
  upon conversion of the Notes or exercise of the Warrants. The Company will obtain
  and, so long as any Buyer owns any of the Securities, maintain the listing and
  trading of its Common Stock on the OTCBB or any equivalent replacement exchange,
  the Nasdaq National Market ("Nasdaq"), the Nasdaq SmallCap Market ("Nasdaq
  SmallCap"), the New York Stock Exchange ("NYSE"), or the American
  Stock Exchange ("AMEX") and will comply in all respects with the Company's
  reporting, filing and other obligations under the bylaws or rules of the National
  Association of Securities Dealers ("NASD") and such exchanges, as applicable.
  The Company shall promptly provide to each 

16 

Buyer copies of any notices it receives from the OTCBB and any other exchanges or quotation systems on which the Common Stock is then listed regarding the continued eligibility of the Common Stock for listing on such exchanges and quotation systems.

                                                             j.                Corporate
  Existence. So long as a Buyer beneficially owns any Notes or Warrants,
  the Company shall maintain its corporate existence and shall not sell all or
  substantially all of the Company's assets, except in the event of a merger or
  consolidation or sale of all or substantially all of the Company's assets, where
  the surviving or successor entity in such transaction (i) assumes the Company's
  obligations hereunder and under the agreements and instruments entered into
  in connection herewith and (ii) is a publicly traded corporation whose Common
  Stock is listed for trading on the OTCBB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX.

                                                             k.                No
  Integration. The Company shall not make any offers or sales of any security
  (other than the Securities) under circumstances that would require registration
  of the Securities being offered or sold hereunder under the 1933 Act or cause
  the offering of the Securities to be integrated with any other offering of securities
  by the Company for the purpose of any stockholder approval provision applicable
  to the Company or its securities. 

                                                             l.                
  Subsequent Investment. The Company and the Buyers agree that,
  upon the filing by the Company of the Registration Statement to be filed pursuant
  to the Registration Rights Agreement (the "Filing Date"), the Buyers
  shall purchase additional Notes (the "Filing Notes") in the aggregate
  principal amount of Eight Hundred Thousand Dollars ($800,000) and additional
  warrants (the "Filing Warrants") to purchase an aggregate of 800,000
  shares of Common Stock, for an aggregate purchase price of Eight Hundred Thousand
  Dollars ($800,000), with the closing of such purchase to occur within five (5)
  days of the Filing Date; provided, however, that the obligation
  of each Buyer to purchase the Filing Notes and the Filing Warrants is subject
  to the satisfaction, at or before the closing of such purchase and sale, of
  the conditions set forth in Section 7. The Company and the Buyers further agree
  that, upon the declaration of effectiveness of the Registration Statement to
  be filed pursuant to the Registration Rights Agreement (the "Effective Date"),
  the Buyers shall purchase additional notes (the "Effectiveness Notes"
  and, collectively with the Filing Notes, the "Additional Notes") in the
  aggregate principal amount of One Million Dollars ($1,000,000) and additional
  warrants (the "Effectiveness Warrants" and, collectively with the Filing
  Warrants, the "Additional Warrants") to purchase an aggregate of 1,000,000
  shares of Common Stock, for an aggregate purchase price of One Million Dollars
  ($1,000,000), with the closing of such purchase to occur within five (5) days
  of the Effective Date; provided, however, that the obligation
  of each Buyer to purchase the Additional Notes and the Additional Warrants is
  subject to the satisfaction, at or before the closing of such purchase and sale,
  of the conditions set forth in Section 7; and, provided, further,
  that there shall not have been a Material Adverse Effect as of such effective
  date. The terms of the Additional Notes and the Additional Warrants shall be
  identical to the terms of the Notes and Warrants, as the case may be, to be
  issued on the Closing Date. The Common Stock underlying the Additional Notes
  and the Additional Warrants shall be Registrable Securities (as defined in the
  Registration Rights Agreement) and shall be included in the Registration Statement
  to be filed pursuant to the Registration Rights Agreement. 

17 

                                                             m.                
  Key Man Insurance. The Company shall use its best efforts
  to obtain, on or before five (5) business days from the date hereof, key man
  life insurance on all of the Company's officers and division heads. 

                                                             n.                Sarbanes-Oxley;
  Internal Accounting Controls. The Company shall use its best
  efforts to become in material compliance with all provisions of the Sarbanes-Oxley
  Act of 2002 which are applicable to it as of the Closing Date and to maintain
  a system of internal accounting controls sufficient to provide reasonable assurance
  that (i) transactions are executed in accordance with management's general or
  specific authorizations, (ii) transactions are recorded as necessary to permit
  preparation of financial statements in accordance with GAAP and to maintain
  asset accountability, (iii) access to assets is permitted only in accordance
  with management's general or specific authorization, and (iv) the recorded accountability
  for assets is compared with the existing assets at reasonable intervals and
  appropriate action is taken with respect to any differences. 

                                                             o.                Stockholder
  Approval. The Company shall file a proxy statement or information
  statement with the SEC no later than November 19, 2004 and use its best efforts
  to obtain, on or before December 31, 2004 such approvals of the Company's stockholders
  as may be required to issue all of the shares of Common Stock issuable upon
  conversion or exercise of, or otherwise with respect to, the Notes and the Warrants
  in accordance with Oregon law and any applicable rules or regulations of the
  OTCBB and Nasdaq, either through a reverse stock split of the Common Stock or
  an increase in authorized capital (the "Stockholder Approval"). The Company
  shall furnish to each Buyer and its legal counsel promptly (but in no event
  less than two (2) business days) before the same is filed with the SEC, one
  copy of the proxy statement or information statement and any amendment thereto,
  and shall deliver to each Buyer promptly each letter written by or on behalf
  of the Company to the SEC or the staff of the SEC, and each item of correspondence
  from the SEC or the staff of the SEC, in each case relating to such proxy statement
  or information statement (other than any portion thereof which contains information
  for which the Company has sought confidential treatment). The Company will promptly
  (but in no event more than three (3) business days) respond to any and all comments
  received from the SEC (which comments shall promptly be made available to each
  Buyer). The Company shall comply with the filing and disclosure requirements
  of Section 14 under the 1934 Act in connection with the Stockholder Approval.
  The Company represents and warrants that its Board of Directors has approved
  the proposal contemplated by this Section 4(o) and shall indicate such approval
  in the proxy statement or information statement used in connection with the
  Stockholder Approval. 

                                                             p.                Breach
  of Covenants. If the Company breaches any of the covenants set
  forth in this Section 4, and in addition to any other remedies available to
  the Buyers pursuant to this Agreement, the Company shall pay to the Buyers the
  Standard Liquidated Damages Amount, in cash or in shares of Common Stock at
  the option of the Company, until such breach is cured. If the Company elects
  to pay the Standard Liquidated Damages Amount in shares, such shares shall be
  issued at the Conversion Price at the time of payment. 

                                         5.                
  TRANSFER AGENT INSTRUCTIONS. The Company shall issue irrevocable
  instructions to its transfer agent to issue certificates, registered in the
  name of each 

18 

Buyer or its nominee, for the Conversion Shares and Warrant Shares in such amounts as specified from time to time by each Buyer to the Company upon conversion of the Notes or exercise of the Warrants in accordance with the terms thereof (the
"Irrevocable Transfer Agent Instructions"). Prior to registration of the Conversion Shares and Warrant Shares under the 1933 Act or the date on which the Conversion Shares and Warrant Shares 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, all such certificates shall bear the restrictive legend specified in Section 2(g) of this Agreement. The Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section 5, and stop transfer instructions to give effect to Section 2(f) hereof (in the case of the Conversion Shares and Warrant Shares, prior to registration of the Conversion
Shares and Warrant Shares under the 1933 Act or the date on which the Conversion Shares and Warrant Shares 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), will be given by the Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Section shall affect in any way the Buyer's obligations and agreement set forth in Section 2(g) hereof to comply with all applicable prospectus delivery requirements, if any, upon re-sale of the Securities. If a Buyer provides the
Company with (i) an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the 1933 Act and such sale
or transfer is effected or (ii) the Buyer provides reasonable assurances that the Securities can be sold pursuant to Rule 144, the Company shall permit the transfer, and, in the case of the Conversion Shares and Warrant Shares, promptly instruct its
transfer agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by such Buyer. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm
to the Buyers, by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5 may be inadequate and agrees, in the event
of a breach or threatened breach by the Company of the provisions of this Section, that the Buyers shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the
necessity of showing economic loss and without any bond or other security being required. 

19 

                                         6.                CONDITIONS
  TO THE COMPANY'S OBLIGATION TO SELL. The obligation of the Company hereunder
  to issue and sell the Notes and Warrants to a Buyer at the Closing is subject
  to the satisfaction, at or before the Closing Date of each of the following
  conditions thereto, provided that these conditions are for the Company's sole
  benefit and may be waived by the Company at any time in its sole discretion:

                                                             a.                The
  applicable Buyer shall have executed this Agreement and the Registration Rights
  Agreement, and delivered the same to the Company. 

                                                             b.                The
  applicable Buyer shall have delivered the Purchase Price in accordance with
  Section 1(b) above. 

                                                             c.                The
  representations and warranties of the applicable Buyer shall be true and correct
  in all material respects as of the date when made and as of the Closing Date
  as though made at that time (except for representations and warranties that
  speak as of a specific date), and the applicable Buyer shall have performed,
  satisfied and complied in all material respects with the covenants, agreements
  and conditions required by this Agreement to be performed, satisfied or complied
  with by the applicable Buyer at or prior to the Closing Date.

                                                             d.                
  No litigation, statute, rule, regulation, executive order, decree, ruling
  or injunction shall have been enacted, entered, promulgated or endorsed by or
  in any court or governmental authority of competent jurisdiction or any self-regulatory
  organization having authority over the matters contemplated hereby which prohibits
  the consummation of any of the transactions contemplated by this Agreement.

                                         7.                CONDITIONS
  TO EACH BUYER'S OBLIGATION TO PURCHASE. The obligation
  of each Buyer hereunder to purchase the Notes and Warrants at the Closing is
  subject to the satisfaction, at or before the Closing Date of each of the following
  conditions, provided that these conditions are for such Buyer's sole benefit
  and may be waived by such Buyer at any time in its sole discretion: 

                                                             a.                The
  Company shall have executed this Agreement and the Registration Rights Agreement,
  and delivered the same to the Buyer. 

                                                             b.                The
  Company shall have delivered to such Buyer duly executed Notes (in such denominations
  as the Buyer shall request) and Warrants in accordance with Section 1(b) above.

                                                             c.                The
  Irrevocable Transfer Agent Instructions, in form and substance satisfactory
  to a majority-in-interest of the Buyers, shall have been delivered to and acknowledged
  in writing by the Company's Transfer Agent. 

                                                             d.                The
  representations and warranties of the Company shall be true and correct in all
  material respects as of the date when made and as of the Closing Date as though
  made at such time (except for representations and warranties that speak as of
  a specific date) and the Company shall have performed, satisfied and complied
  in all material respects with the covenants, agreements and conditions required
  by this Agreement to be performed, satisfied or complied with by the Company
  at or prior to the Closing Date. The Buyer shall have received 

20 

a certificate or certificates, executed by the chief executive officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by such Buyer including, but not limited to
certificates with respect to the Company's Articles of Incorporation, By-laws and Board of Directors' resolutions relating to the transactions contemplated hereby. 

                                                             e.                No
  litigation, statute, rule, regulation, executive order, decree, ruling or injunction
  shall have been enacted, entered, promulgated or endorsed by or in any court
  or governmental authority of competent jurisdiction or any self-regulatory organization
  having authority over the matters contemplated hereby which prohibits the consummation
  of any of the transactions contemplated by this Agreement. 

                                                             f.                No
  event shall have occurred which could reasonably be expected to have a Material
  Adverse Effect on the Company. 

                                                             g.                The
  Conversion Shares and Warrant Shares shall have been authorized for quotation
  on the OTCBB and trading in the Common Stock on the OTCBB shall not have been
  suspended by the SEC or the OTCBB. 

                                                             h.                The
  Buyer shall have received an opinion of the Company's counsel, dated as of the
  Closing Date, in form, scope and substance reasonably satisfactory to the Buyer
  and in substantially the same form as Exhibit "D" attached hereto. 

                                                             i.                The
  Buyer shall have received an officer's certificate described in Section 3(c)
  above, dated as of the Closing Date. 

                                         8.                GOVERNING
  LAW; MISCELLANEOUS.

                                                             a.                Governing
  Law. THIS AGREEMENT 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 PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION
  OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK WITH RESPECT
  TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO IN
  CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH
  PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE
  OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS
  UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
  SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN
  SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
  BY LAW. BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH
  SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS
  BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE PARTY WHICH DOES

21 

NOT PREVAIL IN ANY DISPUTE ARISING UNDER THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH DISPUTE. 

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

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

                                                             d.                Severability.
  In the event that any provision of this Agreement is invalid or unenforceable
  under any applicable statute or rule of law, then such provision shall be deemed
  inoperative to the extent that it may conflict therewith and shall be deemed
  modified to conform with such statute or rule of law. Any provision hereof which
  may prove invalid or unenforceable under any law shall not affect the validity
  or enforceability of any other provision hereof. 

                                                             e.                Entire
  Agreement; Amendments. This Agreement and the instruments referenced
  herein contain the entire understanding of the parties with respect to the matters
  covered herein and therein and, except as specifically set forth herein or therein,
  neither the Company nor the Buyer makes any representation, warranty, covenant
  or undertaking with respect to such matters. No provision of this Agreement
  may be waived or amended other than by an instrument in writing signed by the
  party to be charged with enforcement.

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

If to the Company: 

Banyan Corporation 

  1925 Century Park East, Suite 500 

  Los Angeles, California 90067 

  Attention: Chief Executive Officer 

  Telephone: 800-808-0899 

  Facsimile: 403-287-8804 

22 

With a copy to: 

Noel E. Guardi, Esq. 

  3224 South Newcombe Street 

  Suite 2105 

  Lakewood, Colorado 80227 

  Telephone: 303-969-8886 

  Facsimile: 303-969-8887 

                     If
  to a Buyer: To the address set forth immediately below such Buyer's name on
  the signature pages hereto.

With copy to: 

Ballard Spahr Andrews & Ingersoll, LLP 

  1735 Market Street 

  51st Floor 

  Philadelphia, Pennsylvania 19103 

  Attention: Gerald J. Guarcini, Esq. 

  Telephone: 215-864-8625 

  Facsimile: 215-864-8999 

  Email: guarcini@ballardspahr.com 

                     Each
  party shall provide notice to the other party of any change in address. 

                                                             g.                Successors
  and Assigns. This Agreement shall be binding upon and inure to the benefit
  of the parties and their successors and assigns. Neither the Company nor any
  Buyer shall assign this Agreement or any rights or obligations hereunder without
  the prior written consent of the other. Notwithstanding the foregoing, subject
  to Section 2(f), any Buyer may assign its rights hereunder to any person that
  purchases Securities in a private transaction from a Buyer or to any of its
  "affiliates," as that term is defined under the 1934 Act, without the consent
  of the Company. 

                                                             h.                Third
  Party Beneficiaries. This Agreement is intended for the benefit of the
  parties hereto and their respective permitted successors and assigns, and is
  not for the benefit of, nor may any provision hereof be enforced by, any other
  person. 

                                                             i.                Survival.
  The representations and warranties of the Company and the agreements and covenants
  set forth in Sections 3, 4, 5 and 8 shall survive the closing hereunder notwithstanding
  any due diligence investigation conducted by or on behalf of the Buyers. The
  Company agrees to indemnify and hold harmless each of the Buyers and all their
  officers, directors, employees and agents for loss or damage arising as a result
  of or related to any breach or alleged breach by the Company of any of its representations,
  warranties and covenants set forth in Sections 3 and 4 hereof or any of its
  covenants and obligations under this Agreement or the Registration Rights Agreement,
  including advancement of expenses as they are incurred. 

23 

                                                             j.                Publicity.
  The Company and each of the Buyers shall have the right to review a reasonable
  period of time before issuance of any press releases, SEC, OTCBB or NASD filings,
  or any other public statements with respect to the transactions contemplated
  hereby; provided, however, that the Company shall be entitled,
  without the prior approval of each of the Buyers, to make any press release
  or SEC, OTCBB (or other applicable trading market) or NASD filings with respect
  to such transactions as is required by applicable law and regulations (although
  each of the Buyers shall be consulted by the Company in connection with any
  such press release prior to its release and shall be provided with a copy thereof
  and be given an opportunity to comment thereon). 

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

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

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

 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 

24 

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

 BANYAN CORPORATION 

  

 ________________________________

  Michael J. Gelmon 

  Chief Executive Officer 

 

 AJW PARTNERS, LLC 

  By: SMS Group, LLC 

 ______________________________________

  Corey S. Ribotsky 

  Manager 

	 RESIDENCE: Delaware  	 
	  	 
	 ADDRESS:  	1044 Northern Boulevard
	  	 Suite 302
	  	 Roslyn, New York 11576
	  	 Facsimile: (516) 739-7115
	  	 Telephone: (516) 739-7110  

AGGREGATE SUBSCRIPTION AMOUNT:  

	 Aggregate Principal Amount of Notes:  	 $192,000  
	 Number of Warrants:  	 192,000  
	 Aggregate Purchase Price:  	 $192,000  

25 

 AJW OFFSHORE, LTD. 

  By: First Street Manager II, LLC 

 ______________________________________

  Corey S. Ribotsky 

  Manager 

	 RESIDENCE: Cayman Islands  	 
	  	 
	 ADDRESS:  	 AJW Offshore, Ltd.
	  	 P.O. Box 32021 SMB
	  	 Grand Cayman, Cayman Island, B.W.I.

AGGREGATE SUBSCRIPTION AMOUNT: 

	 Aggregate Principal Amount of Notes:  	 $492,000  
	 Number of Warrants:  	 492,000  
	 Aggregate Purchase Price:  	 $492,000  

26 

 AJW QUALIFIED PARTNERS, LLC 

  By: AJW Manager, LLC 

 ____________________________________

  Corey S. Ribotsky 

  Manager 

	 RESIDENCE: 	New York  
	  	 
	 ADDRESS:  	 1044 Northern Boulevard
	  	 Suite 302
	  	 Roslyn, New York 11576
	  	 Facsimile:      (516) 739-7115
	  	 Telephone:    (516) 739-7110

AGGREGATE SUBSCRIPTION AMOUNT: 

	 Aggregate Principal Amount of Notes:  	 $492,000  
	 Number of Warrants:  	 492,000  
	 Aggregate Purchase Price:  	 $492,000  

27 

 NEW MILLENNIUM CAPITAL PARTNERS II, LLC

  By: First Street Manager II, LLP 

 ____________________________________

  Corey S. Ribotsky 

  Manager 

	 RESIDENCE:	 New York  
	  	 
	 ADDRESS:  	 1044 Northern Boulevard
	  	 Suite 302
	  	 Roslyn, New York 11576
	  	 Facsimile:      (516) 739-7115
	  	 Telephone:    (516) 739-7110

AGGREGATE SUBSCRIPTION AMOUNT: 

	 Aggregate Principal Amount of Notes:  	 $24,000  
	 Number of Warrants:  	 24,000  
	 Aggregate Purchase Price:  	 $24,000  

28Filed by Automated Filing Services Inc. (604) 609-0244 - Banyan Corporation - Exhibit 10.2

  
     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 

	 Los Angeles, California  	 
	 November 8, 2004  	 $192,000  

                     FOR
  VALUE RECEIVED, BANYAN CORPORATION, an Oregon corporation (hereinafter
  called the "Borrower"), hereby promises to pay to the order of AJW PARTNERS,
  LLC or registered assigns (the "Holder") the sum of One Hundred Ninety-Two
  Thousand Dollars ($192,000), on November 8, 2006 (the "Maturity Date"),
  and to pay interest on the unpaid principal balance hereof at the rate of ten
  percent (10%) per annum from November 8, 2004 (the "Issue Date") until
  the same becomes due and payable, whether at maturity or upon acceleration or
  by prepayment or otherwise. 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, provided that no interest shall be due and payable
  in any month in which the Trading Price (as defined below) of the Common Stock
  (as defined below) is greater than $.22 for each Trading Day (as defined below)
  of such month. All payments due hereunder (to the extent not converted into
  Class A Common Stock, no par value per share, of the Borrower (the "Common
  Stock") in accordance with the terms hereof) shall be made in lawful money
  of the United States of America provided that interest payable for the first
  four (4) months following the Issue Date shall be payable on the date hereof
  and deemed for all purposes as a prepayment of such obligation. 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 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 November 8, 2004, 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 Security Agreement, dated November 8, 2004, by and
  between the Borrower and the Holder. 

                     The
  following terms shall apply to this Note: 

 ARTICLE I. CONVERSION RIGHTS 

                                         1.1          
  Conversion Right. 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
  III) pursuant to Section 1.6(a) or Article III, the Optional Prepayment Amount
  (as defined in Section 5.1 or any payments pursuant to Section 1.7, each in
  respect of the remaining outstanding principal amount of this Note to convert
  all or any part of the outstanding and unpaid 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 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 1.4 below; provided
  that the Notice of Conversion is submitted by facsimile (or by other means resulting
  in, or reasonably expected to result in, 

2 

 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 1.3 and 1.4(g) hereof or pursuant to Section 2(c) of that
  certain Registration Rights Agreement, dated as of November 8, 2004, executed
  in connection with the initial issuance of this Note and the other Notes issued
  on the Issue Date (the "Registration Rights Agreement"). 

                                         1.2          
  Conversion Price. 

                                                             (a)          
  Calculation of Conversion Price. The Conversion Price
  shall be the lesser of (i) the Variable Conversion Price (as defined herein)
  and (ii) the Fixed Conversion 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). 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 lowest three (3) Trading Prices (as defined below) for the Common Stock
  during the twenty (20) Trading Day period ending one Trading Day prior to the
  date the Conversion Notice is sent by the Holder to the Borrower via facsimile
  (the "Conversion Date"). "Trading Price" means, for any security
  as of any date, the intraday trading price on the Over-the-Counter Bulletin
  Board (the "OTCBB") as reported by a reliable reporting service mutually
  acceptable to and hereafter designated by Holders of a majority in interest
  of the Debentures and the Borrower or, if the OTCBB is not the principal trading
  market for such security, the intraday trading price of such security on the
  principal securities exchange or trading market where such security is listed
  or traded or, if no intraday trading price of such security is available in
  any of the foregoing manners, the average of the intraday trading prices of
  any market makers for such security that are listed in the "pink sheets" by
  the National Quotation Bureau, Inc. If the Trading Price cannot be calculated
  for such security on such date in the manner provided above, the Trading Price
  shall be the fair market value as mutually determined by the Borrower and the
  holders of a majority in interest of the Debentures being converted for which
  the calculation of the Trading Price is required in order to determine the Conversion
  Price of such Debentures. "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 60.0% . The "Fixed Conversion
  Price" shall mean $.22.

                                                             (b)          Conversion
  Price During Major Announcements. Notwithstanding anything contained in
  Section 1.2(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 

3 

 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 this Section 1.2(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 1.2(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 1.2(b) to become operative. 

                                         1.3          
  Authorized Shares. Subject to the Stockholder Approval
  (as defined in the Agreement), 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
  I (a "Conversion Default"), subject to Section 4.8, 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 

4 

 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 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 I (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). 

                                         1.4          
  Method of Conversion. 

                                                             (a)          
  Mechanics of Conversion. Subject to Section 1.1, 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 

5 

 means of communication dispatched on the Conversion Date prior
  to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(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. 

                                                             (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 1.4, 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 

6 

 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 I, 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. 

                                                             (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 1.1 and in this Section 1.4, 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 two (2) days after
  the Deadline (other than a failure due to the circumstances described in Section
  1.3 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. 

                                         1.5          
  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 

7 

 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 1.5 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: 

  
     "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. 

                                         1.6          
  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 

8 

 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 III)
  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 III) or (ii) be treated pursuant to Section
  1.6(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 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 1.6(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 1.6(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. 

9 

                                                             (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 1.6(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 Fixed Conversion 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 Fixed Conversion 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 as "Options") and
  the price per share for which Common Stock is issuable upon the exercise of
  such Options is less than the Fixed Conversion Price then in effect, then the
  Fixed Conversion 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 Fixed Conversion
  Price then in effect, then the Fixed Conversion 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
  Fixed Conversion Price will be made upon the actual issuance of such Common
  Stock upon conversion or exchange of such Convertible Securities. 

10 

                                                             (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 1.6, 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. 

                                         1.7          
  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 

11 

 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 4.8
  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 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. 

                                         1.8          
  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 1.3 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
  1.3) for the Borrower's failure to convert this Note. 

 ARTICLE II. CERTAIN COVENANTS 

                                         2.1          
  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. 

12 

                                         2.2          
  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. 

                                         2.3          
  Borrowings. So long as the Borrower shall have any
  obligation under this Note, the Borrower shall not, without the Holder's written
  consent, create, incur, assume or suffer to exist any liability for borrowed
  money, except (a) borrowings in existence or committed on the date hereof and
  of which the Borrower has informed Holder in writing prior to the date hereof,
  (b) indebtedness to trade creditors or financial institutions incurred in the
  ordinary course of business or (c) borrowings, the proceeds of which shall be
  used to repay this Note. 

                                         2.4          
  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.

                                         2.5          
  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. 

                                         2.6          
  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 III. EVENTS OF DEFAULT 

                                         If
  any of the following events of default (each, an "Event of Default")
  shall occur: 

                                         3.1          
  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
  1.7, upon acceleration or otherwise; 

13 

                                         3.2          
  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 1.3 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 (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;

                                         3.3          
  Failure to Timely File Registration or Effect Registration.
  The Borrower fails to file the Registration Statement within one hundred five
  (105) 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 fifty (150) 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; 

                                         3.4          
  Breach of Covenants. The Borrower breaches any material
  covenant or other material term or condition contained in Sections 1.3, 1.6
  or 1.7 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; 

                                         3.5          
  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; 

                                         3.6          
  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; 

14 

                                         3.7          
  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 $50,000, 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;

                                         3.8          
  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; 

                                         3.9          
  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 

                                         3.10         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 3.1, 3.2, 3.3, 3.4, 3.5, 3.7, 3.9, or 3.10, 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 3.6 or 3.8,
  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 1.3 and 1.4(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 

15 

 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. 

 ARTICLE IV. MISCELLANEOUS 

                                         4.1          
  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. 

                                         4.2          
  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 1925 Century
  Park East, Suite 500, Los Angeles, California 90067, facsimile number: 403-287-8804.
  Both the Holder and the Borrower may change the address for service by service
  of written notice to the other as herein provided. 

                                         4.3          
  Amendments. This Note and any provision hereof may
  only be amended by an instrument in writing signed by the Borrower and the Holder.
  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. 

                                         4.4          
  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. 

                                         4.5          
  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. 

                                         4.6          
  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 

16 

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

                                         4.7          
  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. 

                                         4.8          
  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. 

                                         4.9          
  Damages Shares. The shares of Common Stock that may
  be issuable to the Holder pursuant to Sections 1.3 and 1.4(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 

17 

 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. 

                                         4.10         
  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. 

                                         4.11         
  Purchase Agreement. By its acceptance of this Note,
  each Holder agrees to be bound by the applicable terms of the Purchase Agreement.

                                         4.12         
  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 4.12. 

                                         4.13         
  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. 

18 

 ARTICLE V. CALL OPTION 

                                         5.1          
  Call Option. Notwithstanding anything to the contrary
  contained in this Article V, so long as (i) no Event of Default or Trading Market
  Prepayment Event shall have occurred and be continuing, (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 Issue Date, and
  (iii) the Common Stock is trading at or below $.15 per share, 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 5.1), to prepay all of the outstanding Notes in accordance with
  this Section 5.1. 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 either (i) 130% (for prepayments occurring within thirty
  (30) days of the Issue Date), (ii) 140% (for prepayments occurring between the
  thirtieth (30th) day and the sixtieth (60th) day following
  the Issue Date) or (iii) 150% (for prepayments occurring after the sixtieth
  (60th) day following the Issue Date), 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 1.3 and 1.4(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"). 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 I 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 5.1. 

 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 

19 

                                         IN
  WITNESS WHEREOF, Borrower has caused this Note to be signed in its name
  by its duly authorized officer this 8th day of November, 2004. 

	  	BANYAN CORPORATION  
	  	 	 
	  	 	 
	  	 	 
	  	By:  	 
	  	  	 Michael J. Gelmon  
	  	  	 Chief Executive Officer  

20 

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, no par value per share
  ("Common Stock"), of Banyan Corporation, an Oregon corporation (the "Borrower")
  according to the conditions of the convertible Notes of the Borrower dated as
  of November 8, 2004 (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: _____________________________________________

21 

 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.

22

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