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                                                                    EXHIBIT 10.2

                          REGISTRATION RIGHTS AGREEMENT

         REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of July 31,
2007, by and among Raptor Networks Technology, Inc., a Colorado corporation,
with headquarters located at 1241 Dyer Road, Suite 150, Santa Ana, California
92705 (the "COMPANY"), and the undersigned investors (each, an "INVESTOR", and
collectively, the "INVESTORS").

                  WHEREAS:

         A. In connection with the Securities Purchase Agreement, dated as of
July 31, 2007, by and among the Company and the Investors (the "SECURITIES
PURCHASE AGREEMENT"), the Company has agreed, upon the terms and subject to the
conditions set forth in the Securities Purchase Agreement, to issue and sell to
each Investor (i) senior secured convertible notes of the Company (the "NOTES"),
which will, among other things, be convertible into shares of the Company's
common stock, $0.001 par value per share (the "COMMON STOCK", as converted, the
"CONVERSION SHARES") in accordance with the terms of the Notes, and (ii) three
series of warrants (the "WARRANTS"), which will be exercisable to purchase
shares of Common Stock (as exercised collectively, the "WARRANT SHARES").

         B. In accordance with the terms of the Securities Purchase Agreement,
the Company has agreed to provide certain registration rights under the
Securities Act of 1933, as amended, and the rules and regulations thereunder, or
any similar successor statute (collectively, the "1933 ACT"), and applicable
state securities laws.

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

         1. DEFINITIONS.

         Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement. As
used in this Agreement, the following terms shall have the following meanings:

              a. "ADDITIONAL EFFECTIVE DATE" means the date that the applicable
Additional Registration Statement is declared effective by the SEC.

              b. "ADDITIONAL EFFECTIVENESS DEADLINE" means the date which is (i)
in the event that an Additional Registration Statement is not subject to a
review by the SEC, 60 calendar days after the earlier of the Additional Filing
Deadline and the Additional Filing Date or (ii) in the event that an Additional
Registration Statement is subject to a review by the SEC, 90 calendar days after
the earlier of the Additional Filing Deadline and the Additional Filing Date.

              c. "ADDITIONAL FILING DATE" means the date that the applicable
Additional Registration Statement is filed with the SEC.

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              d. "ADDITIONAL FILING DEADLINE" means 30 calendar days from the
date of the applicable Investor Demand; PROVIDED HOWEVER, that if such date
would otherwise fall between February 11 and April 14 of a particular year and
the Company's most recent 1934 Act (as defined below) reports do not include
financial statements less than 135 days old, such date shall be extended for
that particular Additional Registration Statement to April 15 of such year.

              e. "ADDITIONAL REGISTRABLE SECURITIES" means (i) the Conversion
Shares issued or issuable upon conversion of the Notes then outstanding and not
previously registered on a Registration Statement, (ii) the Warrant Shares
issuable upon the exercise of any Warrants then outstanding and not previously
registered on a Registration Statement and (iii) any capital stock of the
Company issued or issuable with respect to the Conversion Shares, the Notes, the
Warrant Shares, or the Warrants as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise, without regard to any
limitations on conversions of the Notes or exercises of the Warrants.

              f. "ADDITIONAL REGISTRATION STATEMENT" a registration statement or
registration statements of the Company filed under the 1933 Act covering any
Additional Registrable Securities.

              g. "ADDITIONAL REQUIRED REGISTRATION AMOUNT" means the Maximum
Allowable Amount of the remaining sum of (i) the number of previously
unregistered Conversion Shares issued and issuable pursuant to the Notes as of
the trading day immediately preceding the applicable date of determination and
(ii) the number of previously unregistered Warrant Shares issued and issuable
pursuant to the Warrants as of the trading day immediately preceding the
applicable date of determination, all subject to adjustment as provided in
Section 2(f) (without regard to any limitations on conversion of the Notes or
exercise of the Warrants). Unless a different priority is specified in writing
to the Company by an Investor as to such Investor's Registrable Securities at
least five (5) Business Days prior to the applicable Additional Filing Deadline,
the Company shall first register (w) all Conversion Shares, then (x) all Series
N Warrant Shares (as defined in the Securities Purchase Agreement), then (y) all
Series P Warrant Shares (as defined in the Securities Purchase Agreement) and
finally (z) all Series O Warrant Shares (as defined in the Securities Purchase
Agreement).

              h. "AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT" means that
certain Amended and Restatement Registration Rights Agreement, dated as of
January 18, 2007, by and among the Company and the investors listed on the
signature pages thereto.

              i. "BUSINESS DAY" means any day other than Saturday, Sunday or any
other day on which commercial banks in the City of New York are authorized or
required by law to remain closed.

              j. "CLOSING DATE" shall have the meaning set forth in the
Securities Purchase Agreement.

              k. "EFFECTIVE DATE" means the Initial Effective Date or an
Additional Effective Date, as applicable.

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              l. "EFFECTIVENESS DEADLINE" means the Initial Effectiveness
Deadline or an Additional Effectiveness Deadline, as applicable.

              m. "EXISTING REGISTRABLE SECURITIES" means Registrable Securities
as defined in the Amended and Restated Registration Rights Agreement.

              n. "FILING DEADLINE" means the Initial Filing Deadline or an
Additional Filing Deadline, as applicable.

              o. "HOLIDAY" means a day other than a Business Day or on which
trading does not take place on the Principal Market (a "HOLIDAY"); to the extent
any deadlines or dates of Company obligations referenced herein fall on a
Holiday, such deadlines or dates shall be extended to the next date that is not
a Holiday.

              p. "INITIAL EFFECTIVE DATE" means the date that the Initial
Registration Statement is declared effective by the SEC.

              q. "INITIAL FILING DEADLINE" means 30 calendar days from the date
of the applicable Investor Demand; PROVIDED HOWEVER, that if such date would
otherwise fall between February 11 and April 14 of a particular year and the
Company's most recent 1934 Act (as defined below) reports do not include
financial statements less than 135 days old, such date shall be extended to
April 15 of such year.

              r. "INITIAL FILING DATE" means the date that the Initial
Registration Statement is filed with the SEC.

              s. "INITIAL EFFECTIVENESS DEADLINE" means the date which is (i) in
the event that the Initial Registration Statement is not subject to a review by
the SEC, 60 calendar days after the earlier of the Initial Filing Deadline and
the Initial Filing Date or (ii) in the event that the Initial Registration
Statement is subject to a review by the SEC, 90 calendar days after the earlier
of the Initial Filing Deadline and the Initial Filing Date.

              t. "INITIAL REGISTRABLE SECURITIES" means (i) the Conversion
Shares issued or issuable upon conversion of the Notes, (ii) the Warrant Shares
issued or issuable upon exercise of the Warrants and (iii) any capital stock of
the Company issued or issuable with respect to the Conversion Shares, the Notes,
the Warrant Shares, or the Warrants as a result of any stock split, stock
dividend, recapitalization, exchange or similar event or otherwise, without
regard to any limitations on conversions of the Notes or exercises of the
Warrants.

              u. "INITIAL REGISTRATION STATEMENT" means a registration statement
or registration statements of the Company filed under the 1933 Act covering the
Initial Required Registration Amount of Initial Registrable Securities.

              v. "INITIAL REQUIRED REGISTRATION AMOUNT" means the Maximum
Allowable Amount of the sum of (i) the number of Conversion Shares issued and
issuable pursuant to the Notes as of the trading day immediately preceding the
applicable date of determination and (ii) the number of Warrant Shares issued
and issuable pursuant to the Warrants as of the trading day immediately
preceding the applicable date of determination, all subject to adjustment as

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provided in Section 2(f) (without regard to any limitations on conversion of the
Notes or exercise of the Warrants). Unless a different priority is specified in
writing to the Company by an Investor at least five (5) Business Days prior to
the Initial Filing Deadline, the Company shall first register (w) all Conversion
Shares, then (x) all Series N Warrant Shares, then (y) all Series P Warrant
Shares and finally (z) all Series O Warrant Shares.

              w. "INVESTOR" means an Investor or any transferee or assignee
thereof to whom an Investor assigns its rights under this Agreement and who
agrees to become bound by the provisions of this Agreement in accordance with
Section 9 and any transferee or assignee thereof to whom a transferee or
assignee assigns its rights under this Agreement and who agrees to become bound
by the provisions of this Agreement in accordance with Section 9.

              x. "INVESTOR DEMAND" means a written request by an Investor to the
Company that the Company prepare and file with the SEC the Initial Registration
Statement to register the Initial Registrable Securities or an Additional
Registration Statement to register Additional Registrable Securities, as
applicable.

              y. "MAXIMUM ALLOWABLE AMOUNT" means a number of shares of Common
Stock equal to 30% (or the greatest such other percentage as is permitted by the
SEC) of the issued and outstanding Common Stock of the Company that is not
beneficially owned by an affiliate of the Company.

              z. "PERSON" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.

              aa. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant to
Rule 415 and the declaration or ordering of effectiveness of such Registration
Statement(s) by the SEC.

              bb. "REGISTRABLE SECURITIES" means the Initial Registrable
Securities and the Additional Registrable Securities.

              cc. "REGISTRATION STATEMENT" means the Initial Registration
Statement or an Additional Registration Statement, as applicable.

              dd. "REQUIRED HOLDERS" means the holders of at least a majority of
the Registrable Securities.

              ee. "REQUIRED REGISTRATION AMOUNT" means with respect to the
Initial Registration Statement, the Initial Required Registration Amount or with
respect to an Additional Registration Statement, the Additional Required
Registration Amount, as applicable.

              ff. "RULE 415" means Rule 415 under the 1933 Act or any successor
rule providing for offering securities on a continuous or delayed basis.

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              gg. "SEC" means the United States Securities and Exchange
Commission.

         2. REGISTRATION.

              a. INITIAL MANDATORY REGISTRATION. The Required Holders may
deliver to the Company a notice (the "EXISTING REGISTRATION TERMINATION
NOTICE"), a copy of which shall be delivered to the Investors, requesting that
the Company withdraw the effectiveness of the registration statement on Form
SB-2 designated by SEC File No. 333-140178 filed pursuant to the Amended and
Restated Registration Rights Agreement and declared effective by the SEC (the
"MOST RECENT REGISTRATION STATEMENT"), and the Company shall on, but not prior
to, the fifth (5th) Business Day after delivery of the Existing Registration
Termination Notice (the "EXISTING REGISTRATION WITHDRAWAL DATE"), withdraw the
effectiveness of the Most Recent Registration Statement. The Required Holders
shall be permitted to revoke the Existing Registration Termination Notice at any
time prior to the Existing Registration Withdrawal Date. Upon the withdrawal of
the Most Resent Registration Statement on the Existing Registration Withdrawal
Date, the Company shall be deemed to have satisfied its registration obligations
pursuant to Sections 2(a) and 2(b) of the Amended and Restated Registration
Rights Agreement as to the Registrable Securities (as defined in the Amended and
Restated Registration Rights Agreement) and the Company's obligation to file an
Additional Registration Statement (as defined in the Amended and Restated
Registration Rights Agreement) shall be suspended until such time as the Company
is permitted to file an Additional Registration Statement (as defined in the
Amended and Restated Registration Rights Agreement) by the SEC without violating
its registration obligations pursuant to Sections 2(a) and 2(b) of this
Agreement. After the Existing Registration Termination Notice has been delivered
to the Company, an Investor may deliver to the Company an Investor Demand
requesting that the Company prepare and file with the SEC the Initial
Registration Statement to register the Initial Registrable Securities beginning
on the date which is the later of (i) five (5) months following the Effective
Date (as defined in the Amended and Restated Registration Rights Agreement) of
the Most Recent Registration Statement and (ii) thirty (30) days after the
earlier of (x) the date substantially all of the Existing Registrable Securities
covered by the Most Recent Registration Statement are sold and (y) the date the
withdrawal of effectiveness of the Most Recent Registration Statement becomes
effective with the SEC. Upon receipt of an Investor Demand in accordance with
the preceding sentence, the Company shall prepare and as soon as practicable but
in no event later than the Initial Filing Deadline, file with the SEC the
Initial Registration Statement on Form SB-2 covering the resale of the Maximum
Allowable Amount of the Initial Registrable Securities. In the event that Form
SB-2 is unavailable for such a registration, the Company shall use such other
form as is available for such a registration on another appropriate form
reasonably acceptable to the Required Holders, subject to the provisions of
Section 2(e). The Initial Registration Statement prepared pursuant hereto shall
register for resale at least the number of shares of Common Stock equal to the
Initial Required Registration Amount determined as of date the Initial
Registration Statement is initially filed with the SEC. The Initial Registration
Statement shall contain (except if otherwise directed by the Required Holders)
the "SELLING STOCKHOLDERS" and "PLAN OF DISTRIBUTION" sections in substantially
the form attached hereto as EXHIBIT B. The Company shall use its best efforts to
have the Initial Registration Statement declared effective by the SEC as soon as
practicable, but in no event later than the Initial Effectiveness Deadline. By
9:30 am on the Business Day following the Initial Effective Date, the Company
shall file with the SEC in accordance with Rule 424 under the 1933 Act the final
prospectus to be used in connection with sales pursuant to the Initial
Registration Statement.

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              b. ADDITIONAL MANDATORY REGISTRATION. An Investor successively may
deliver to the Company an Investor Demand requesting that the Company prepare
and file with the SEC an Additional Registration Statement to register any
Additional Registrable Securities beginning on the date which is the later of
(i) five (5) months following the Initial Effective Date and (ii) the date
thirty (30) days after the date substantially all of the Registrable Securities
registered under the immediately preceding Registration Statement are sold and
thereafter on the date which is the later of (i) five (5) months following the
Additional Effective Date of the immediately preceding Additional Registration
Statement and (ii) the date thirty (30) days after the date substantially all of
the Registrable Securities registered under the immediately preceding
Registration Statement are sold until the earlier date of when (x) all
Additional Registrable Securities have been registered on Additional
Registration Statements and (y) all Additional Registrable Securities not
previously registered on an Additional Registration Statement may be sold by the
Investors without restriction under Rule 144(k) promulgated under the 1933 Act.
Upon receipt of an Investor Demand, the Company shall (x) promptly send a copy
of such Investor Demand to all other Investors and (y) prepare and as soon as
practicable but in no event later than the Additional Filing Deadline, file with
the SEC such Additional Registration Statement on Form SB-2 covering the resale
of the Maximum Allowable Amount of the Additional Registrable Securities set
forth on an Investor Demand and in any additional Investor Demand received at
least five (5) Business Days prior to the applicable Additional Filing Deadline.
In the event that Form SB-2 is unavailable for such a registration, the Company
shall use such other form as is available for such a registration on another
appropriate form reasonably acceptable to the Required Holders, subject to the
provisions of Section 2(e). The Additional Registration Statement prepared
pursuant hereto shall register for resale at least the number of shares of
Common Stock equal to the Additional Required Registration Amount determined as
of date the Additional Registration Statement is initially filed with the SEC.
The Additional Registration Statement shall contain (except if otherwise
directed by the Required Holders) the "SELLING STOCKHOLDERS" and "PLAN OF
DISTRIBUTION" sections in substantially the form attached hereto as EXHIBIT B.
The Company shall use its best efforts to have the Additional Registration
Statement declared effective by the SEC as soon as practicable, but in no event
later than the Additional Effectiveness Deadline. By 9:30 am on the Business Day
following the Additional Effective Date of the applicable Additional
Registration Statement, the Company shall file with the SEC in accordance with
Rule 424 under the 1933 Act the final prospectus to be used in connection with
sales pursuant to such Additional Registration Statement.

              c. ALLOCATION OF REGISTRABLE SECURITIES. The initial number of
Registrable Securities included in any Registration Statement and any increase
or decrease in the number of Registrable Securities included therein shall be
allocated pro rata among the Investors based on the number of Registrable
Securities held by each Investor at the time the Registration Statement covering
such initial number of Registrable Securities or increase thereof is declared
effective by the SEC. In the event that an Investor sells or otherwise transfers
any of such Investor's Registrable Securities, each transferee shall be
allocated a pro rata portion of the then remaining number of Registrable
Securities included in such Registration Statement for such transferor. Any
shares of Common Stock included in a Registration Statement and which remain
allocated to any Person which ceases to hold any Registrable Securities covered
by such Registration Statement shall be allocated to the remaining Investors,

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pro rata based on the number of Registrable Securities then held by such
Investors which are covered by such Registration Statement. In no event shall
the Company include any securities other than Registrable Securities on any
Registration Statement without the prior written consent of the Required
Holders; except that the shares of Common Stock underlying the Montgomery
Warrants (as defined in Section 30(u) of the Notes) and the shares of Common
Stock underlying the Existing Registrable Securities may be included in one or
more Registration Statements, provided that all of the remaining Conversion
Shares issued or issuable upon conversion of all of the Notes and all of the
remaining Warrant Shares issued or issuable upon exercise of all of the Warrants
are included in the same Registration Statement or have previously been included
in one or more Registration Statements.

              d. LEGAL COUNSEL. Subject to Section 5 hereof, each Investor (with
Cedar Hill Capital Partners Onshore, LP and Cedar Hill Capital Partners
Offshore, Ltd. (together, "CEDAR HILL") being deemed one Investor for purposes
hereof) and or shall have the right to select one legal counsel to review and
oversee any registration pursuant to this Section 2 ("LEGAL COUNSEL"). The
Company and Legal Counsel shall reasonably cooperate with each other in
performing the Company's obligations under this Agreement.

              e. FORM S-3. The Company shall undertake to register the
Registrable Securities on Form S-3 as soon as such form is available for use by
the Company, provided that the Company shall maintain the effectiveness of the
Registration Statement then in effect until such time as a Registration
Statement on Form S-3 covering the Registrable Securities has been declared
effective by the SEC.

              f. SUFFICIENT NUMBER OF SHARES REGISTERED. In the event the number
of shares available under a Registration Statement filed pursuant to Section
2(a) or Section 2(b) is insufficient to cover all of the Registrable Securities
required pursuant to this Agreement to be covered by such Registration Statement
or an Investor's allocated portion of the Registrable Securities pursuant to
Section 2(c) required pursuant to this Agreement to be covered by such
Registration Statement, the Company shall amend the applicable Registration
Statement, or file a new Registration Statement (on the short form available
therefor, if applicable), or both, so as to cover at least the Required
Registration Amount as of the trading day immediately preceding the date of the
filing of such amendment or new Registration Statement, in each case, as soon as
permitted by the SEC. The Company shall use its best efforts to cause such
amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof. For purposes of the foregoing
provision, the number of shares available under a Registration Statement shall
be deemed "insufficient to cover all of the Registrable Securities required
pursuant to this Agreement to be covered by such Registration Statement" if at
any time the number of shares of Common Stock available for resale under the
Registration Statement is less than the product determined by multiplying (i)
the Required Registration Amount as of such time by (ii) 0.80. The calculation
set forth in the foregoing sentence shall be made without regard to any
limitations on the conversion of the Notes or the exercise of the Warrants and
such calculation shall assume that the Notes are then convertible into shares of
Common Stock at the then prevailing Conversion Rate (as defined in the Notes)
and that the Warrants are then exercisable for shares of Common Stock at the
then prevailing Exercise Price (as defined in the Warrants).

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              g. EFFECT OF FAILURE TO FILE AND OBTAIN AND MAINTAIN EFFECTIVENESS
OF REGISTRATION STATEMENT. If (i) a Registration Statement covering all of the
Registrable Securities required to be covered thereby and required to be filed
by the Company pursuant to this Agreement is (A) not filed with the SEC on or
before the respective Filing Deadline (a "FILING FAILURE") or (B) not declared
effective by the SEC on or before the respective Effectiveness Deadline (an
"EFFECTIVENESS FAILURE") or (ii) on any day after the applicable Effective Date
sales of all of the Registrable Securities required to be included on such
Registration Statement cannot be made (other than during an Allowable Grace
Period (as defined in Section 3(r)) pursuant to such Registration Statement
(including, without limitation, because of a failure to keep such Registration
Statement effective, to disclose such information as is necessary for sales to
be made pursuant to such Registration Statement, to register a sufficient number
of shares of Common Stock or to maintain the listing of the Common Stock) (a
"MAINTENANCE FAILURE") then, as partial relief for the damages to any holder by
reason of any such delay in or reduction of its ability to sell the underlying
shares of Common Stock (which remedy shall not be exclusive of any other
remedies available at law or in equity), the Company shall pay to each holder of
Registrable Securities relating to such Registration Statement an amount in cash
equal to two percent (2.0%) of the aggregate Purchase Price (as such term is
defined in the Securities Purchase Agreement) of such Investor's Notes relating
to the Registrable Securities included in such Registration Statement on each of
the following dates: (i) the day of a Filing Failure and on every thirtieth day
(pro rated for periods totaling less than thirty days) after a Filing Failure
until such Filing Failure is cured; (ii) (A) the day of an Effectiveness Failure
(except if such Effectiveness Failure occurs between February 11 and April 14 of
a particular year and the Effectiveness Failure occurs because the Company's
most recent 1934 Act reports do not include financial statements less than 135
days old, the Registration Delay Payment pursuant to this clause (A) shall not
apply) and (B) on every thirtieth day (pro rated for periods totaling less than
thirty days) after an Effectiveness Failure until such Effectiveness Failure is
cured; and (iii) the initial day of a Maintenance Failure and on every thirtieth
day (pro rated for periods totaling less than thirty days) after a Maintenance
Failure until such Maintenance Failure is cured. The payments to which a holder
shall be entitled pursuant to this Section 2(g) are referred to herein as
"REGISTRATION DELAY PAYMENTS." Registration Delay Payments shall be paid on the
day of the Filing Failure, Effectiveness Failure and the initial day of a
Maintenance Failure, as applicable, and thereafter on the earlier of (I) the
thirtieth day after the event or failure giving rise to the Registration Delay
Payments has occurred and (II) the third Business Day after the event or failure
giving rise to the Registration Delay Payments is cured. In the event the
Company fails to make Registration Delay Payments in a timely manner, such
Registration Delay Payments shall bear interest at the rate of two percent
(2.0%) per month (prorated for partial months) until paid in full.
Notwithstanding anything herein to the contrary, in no event shall the aggregate
Registration Delay Payments exceed twelve and one-half percent (12.5%) of the
aggregate Purchase Price for all Investors (the "REGISTRATION DELAY PAYMENTS
CAP"). Notwithstanding anything to the contrary contained herein, in no event
shall the Company be liable for any damages in connection with the Warrants or
Warrant Shares. In addition, and notwithstanding anything to the contrary
contained herein, in no event shall the Registration Delay Payments be payable
with respect to any Registrable Securities that are not included on any
applicable Registration Statement solely as a result of a comment received by
the SEC requiring a limit on the number of Registrable Securities included in
such Registration Statement in order for such Registration Statement to be able
to avail itself of Rule 415.

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         3. RELATED OBLIGATIONS.

         At such time as the Company is obligated to file a Registration
Statement with the SEC pursuant to Section 2(a), 2((b), 2(e) or 2(f), the
Company will use its best efforts to effect the registration of the Registrable
Securities in accordance with the intended method of disposition thereof and,
pursuant thereto, the Company shall have the following obligations:

              a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities and use its
best efforts to cause such Registration Statement relating to the Registrable
Securities to become effective as soon as practicable after such filing (but in
no event later than the Effectiveness Deadline). The Company shall keep each
Registration Statement effective pursuant to Rule 415 at all times until the
earlier of (i) the date as of which the Investors may sell all of the
Registrable Securities covered by such Registration Statement without
restriction pursuant to Rule 144(k) (or any successor thereto) promulgated under
the 1933 Act or (ii) the date on which the Investors shall have sold all of the
Registrable Securities covered by such Registration Statement (the "REGISTRATION
PERIOD"). The Company shall ensure that each Registration Statement (including
any amendments or supplements thereto and prospectuses contained therein) shall
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein, or necessary to make the statements therein
(in the case of prospectuses, in the light of the circumstances in which they
were made) not misleading. The term "best efforts" shall mean, the Company's
reasonable best efforts, which include among other things, that the Company
shall submit to the SEC, within two (2) Business Days after the later of the
date that (i) the Company learns that no review of a particular Registration
Statement will be made by the staff of the SEC or that the staff has no further
comments on a particular Registration Statement, as the case may be, and (ii)
the approval of Legal Counsel pursuant to Section 3(c) (which approval is
immediately sought), a request for acceleration of effectiveness of such
Registration Statement to a time and date not later than 48 hours after the
submission of such request.

              b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the 1933 Act, as may be necessary to keep such Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by such Registration Statement
until such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the seller or
sellers thereof as set forth in such Registration Statement. In the case of
amendments and supplements to a Registration Statement which are required to be
filed pursuant to this Agreement (including pursuant to this Section 3(b)) by
reason of the Company filing a report on Form 10-QSB, Form 10-KSB or any
analogous report under the Securities Exchange Act of 1934, as amended (the
"1934 ACT"), the Company shall have incorporated such report by reference into
such Registration Statement, if applicable, or shall file such amendments or
supplements with the SEC on the same day on which the 1934 Act report is filed
which created the requirement for the Company to amend or supplement such
Registration Statement.

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              c. The Company shall (A) permit Legal Counsel to review and
comment upon (i) the Initial Registration Statement at least one (1) Business
Day prior to its filing with the SEC and any Additional Registration Statement
at least five (5) Business Days prior to its filing with the SEC and (ii) all
amendments and supplements to all Registration Statements (except for amendments
and supplements required to be filed by reason of the Company filing Annual
Reports on Form 10-K or Form 10 KSB, Quarterly Reports on Form 10-Q or 10-QSB,
or Current Reports on Form 8-K (except those that refer to an Investor or the
transactions contemplated hereby, which will be subject to such review and
comment) and any similar or successor reports) within a reasonable number of
days prior to their filing with the SEC, and (B) not file any Registration
Statement or amendment or supplement thereto in a form to which Legal Counsel
reasonably objects. The Company shall not submit a request for acceleration of
the effectiveness of a Registration Statement or any amendment or supplement
thereto without the prior approval of Legal Counsel, which consent shall not be
unreasonably withheld. The Company shall furnish to Legal Counsel, without
charge, (i) copies of any correspondence from the SEC or the staff of the SEC to
the Company or its representatives relating to any Registration Statement, (ii)
promptly after the same is prepared and filed with the SEC, one copy of any
Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference, if
requested by an Investor, and all exhibits and (iii) upon the effectiveness of
any Registration Statement, one copy of the prospectus included in such
Registration Statement and all amendments and supplements thereto. The Company
shall reasonably cooperate with Legal Counsel in performing the Company's
obligations pursuant to this Section 3.

              d. The Company shall furnish to each Investor whose Registrable
Securities are included in any Registration Statement, without charge, (i)
promptly after the same is prepared and filed with the SEC, at least one copy of
such Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference, if
requested by an Investor, all exhibits and each preliminary prospectus, (ii)
upon the effectiveness of any Registration Statement, ten (10) copies of the
prospectus included in such Registration Statement and all amendments and
supplements thereto (or such other number of copies as such Investor may
reasonably request) and (iii) such other documents, including copies of any
preliminary or final prospectus, as such Investor may reasonably request from
time to time in order to facilitate the disposition of the Registrable
Securities owned by such Investor.

              e. The Company shall use its best efforts to (i) register and
qualify, unless an exemption from registration and qualification applies, the
resale by Investors of the Registrable Securities covered by a Registration
Statement under such other securities or "blue sky" laws of all applicable
jurisdictions in the United States, (ii) prepare and file in those
jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(e), (y) subject itself
to general taxation in any such jurisdiction, or (z) file a general consent to

                                       10

<PAGE>

service of process in any such jurisdiction. The Company shall promptly notify
Legal Counsel and each Investor who holds Registrable Securities of the receipt
by the Company of any notification with respect to the suspension of the
registration or qualification of any of the Registrable Securities for sale
under the securities or "blue sky" laws of any jurisdiction in the United States
or its receipt of notice of the initiation or threatening of any proceeding for
such purpose.

              f. The Company shall notify Legal Counsel and each Investor in
writing of the happening of any event, as promptly as practicable after becoming
aware of such event, as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading (provided that in no event shall such
notice contain any material, nonpublic information), and, subject to Section
3(r), promptly prepare a supplement or amendment to such Registration Statement
to correct such untrue statement or omission, and deliver ten (10) copies of
such supplement or amendment to Legal Counsel and each Investor (or such other
number of copies as Legal Counsel or such Investor may reasonably request). The
Company shall also promptly notify Legal Counsel and each Investor in writing
(i) when a prospectus or any prospectus supplement or post-effective amendment
has been filed, and when a Registration Statement or any post-effective
amendment has become effective (notification of such effectiveness shall be
delivered to Legal Counsel and each Investor by facsimile or e-mail on the same
day of such effectiveness and by overnight mail), (ii) of any request by the SEC
for amendments or supplements to a Registration Statement or related prospectus
or related information, and (iii) of the Company's reasonable determination that
a post-effective amendment to a Registration Statement would be appropriate.

              g. The Company shall use its best efforts to prevent the issuance
of any stop order or other suspension of effectiveness of a Registration
Statement, or the suspension or the qualification of any of the Registrable
Securities for sale in any jurisdiction and, if such an order or suspension is
issued, to obtain the withdrawal of such order or suspension at the earliest
possible moment and to notify Legal Counsel and each Investor who holds
Registrable Securities being sold of the issuance of such order and the
resolution thereof or its receipt of notice of the initiation or threat of any
proceeding for such purpose.

              h. If any Investor is deemed to be, alleged to be or reasonably
believes it may be deemed or alleged to be, an underwriter or is required under
applicable securities laws to be described in the Registration Statement as an
underwriter, at the reasonable request of any Investor, the Company shall
furnish to such Investor, on the date of the effectiveness of the Registration
Statement and thereafter from time to time on such dates as an Investor may
reasonably request (i) a letter, dated such date, from the Company's independent
certified public accountants in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the Investors, and (ii) an opinion, dated as of
such date, of counsel representing the Company for purposes of such Registration
Statement, in form, scope and substance as is customarily given in an
underwritten public offering, addressed to the Investors.

                                       11

<PAGE>

              i. Upon the written request of any investor in connection with
such Investor's due diligence requirements, if any, the Company shall make
available for inspection by (i) any Investor, (ii) Legal Counsel and (iii) one
firm of accountants or other agents retained by the Investors (collectively, the
"INSPECTORS"), all pertinent financial and other records, and pertinent
corporate documents and properties of the Company (collectively, the "RECORDS"),
as shall be reasonably deemed necessary by each Inspector, and cause the
Company's officers, directors and employees to supply all information which any
Inspector may reasonably request; provided, however, that each Inspector shall
agree to hold in strict confidence and shall not make any disclosure (except to
an Investor) or use of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required under the 1933 Act, (b) the release of such
Records is ordered pursuant to a final, non-appealable subpoena or order from a
court or government body of competent jurisdiction, or (c) the information in
such Records has been made generally available to the public other than by
disclosure in violation of this Agreement or any other Transaction Document.
Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein (or in any other confidentiality agreement between
the Company and any Investor) shall be deemed to limit the Investors' ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.

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

              k. The Company shall use its best efforts either to (i) cause all
of the Registrable Securities covered by a Registration Statement to be listed
on each securities exchange on which securities of the same class or series
issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange or
(ii) secure the inclusion for quotation of all of the Registrable Securities on
The NASDAQ Global Market or (iii) if, despite the Company's best efforts, the
Company is unsuccessful in satisfying the preceding clauses (i) and (ii), to
secure the inclusion for quotation on The NASDAQ Capital Market or the American
Stock Exchange for such Registrable Securities and, without limiting the
generality of the foregoing, to use its best efforts to arrange for at least two
market makers to register with the National Association of Securities Dealers,
Inc. ("NASD") as such with respect to such Registrable Securities. The Company
shall pay all fees and expenses in connection with satisfying its obligation
under this Section 3(k).

                                       12

<PAGE>

              l. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, facilitate
the timely preparation and delivery of certificates (not bearing any restrictive
legend) representing the Registrable Securities to be offered pursuant to an
effective Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the Investors may reasonably
request and registered in such names as the Investors may request.

              m. If requested by an Investor, the Company shall (i) as soon as
practicable incorporate in a prospectus supplement or post-effective amendment
such information as an Investor reasonably requests to be included therein
relating to the sale and distribution of Registrable Securities, including,
without limitation, information with respect to the number of Registrable
Securities being offered or sold, the purchase price being paid therefor and any
other terms of the offering of the Registrable Securities to be sold in such
offering; (ii) as soon as practicable make all required filings of such
prospectus supplement or post-effective amendment after being notified of the
matters to be incorporated in such prospectus supplement or post-effective
amendment; and (iii) as soon as practicable, supplement or make amendments to
any Registration Statement if reasonably requested by an Investor holding any
Registrable Securities.

              n. The Company shall use its best efforts to cause the Registrable
Securities covered by a Registration Statement to be registered with or approved
by such other governmental agencies or authorities as may be necessary to
consummate the disposition of such Registrable Securities.

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

              p. The Company shall otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC in connection with any
registration hereunder.

              q. Within two (2) Business Days after a Registration Statement
which covers Registrable Securities is ordered effective by the SEC, the Company
shall deliver, and shall cause legal counsel for the Company to deliver, to the
transfer agent for such Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such Registration Statement)
confirmation that such Registration Statement has been declared effective by the
SEC in the form attached hereto as EXHIBIT A.

                                       13

<PAGE>

              r. Notwithstanding anything to the contrary herein, at any time
after the Effective Date of an applicable Registration Statement, the Company
may (x) delay the disclosure of material, non-public information concerning the
Company the disclosure of which at the time is not, in the good faith opinion of
the Board of Directors of the Company and its counsel, in the best interest of
the Company and, in the opinion of counsel to the Company otherwise required and
(y) file supplements and/or amendments to the Registration Statement to
incorporate filings under the 1934 Act into the Registration Statement in order
to maintain the effectiveness of the Registration Statement which may cause the
Registration Statement to be ineffective while being reviewed by the SEC (each,
a "GRACE PERIOD"); provided, that the Company shall promptly (i) notify the
Investors in writing of the existence of material, non-public information or
other event giving rise to a Grace Period (provided that in each notice the
Company will not disclose the content of such material, non-public information
to the Investors) and the date on which the Grace Period will begin, and (ii)
notify the Investors in writing of the date on which the Grace Period ends; and,
provided further, that no Grace Period of the type described in clause (x) above
shall exceed ten (10) consecutive days, no Grace Period of the type described in
clause (y) above shall exceed twenty (20) consecutive days and during any three
hundred sixty five (365) day period such Grace Periods shall not exceed an
aggregate of sixty (60) days and the first day of any Grace Period must be at
least five (5) trading days after the last day of any prior Grace Period (each,
an "ALLOWABLE GRACE PERIOD"). For purposes of determining the length of a Grace
Period above, the Grace Period shall begin on and include the date the Investors
are prohibited from selling Registrable Securities under the Registration
Statement due to the ineffectiveness of the Registration Statement and shall end
on and include the date the effectiveness of the Registration Statement is
restored and the Investors can continue to sell Registrable Securities pursuant
to such Registration Statement. The provisions of Section 3(g) hereof shall not
be applicable during the period of any Allowable Grace Period. Upon expiration
of the Grace Period, the Company shall again be bound by the first sentence of
Section 3(f) with respect to the information giving rise thereto unless such
material, non-public information is no longer applicable. Notwithstanding
anything to the contrary, the Company shall cause its transfer agent to deliver
unlegended shares of Common Stock to a transferee of an Investor in accordance
with the terms of the Securities Purchase Agreement in connection with any sale
of Registrable Securities with respect to which an Investor has entered into a
contract for sale and delivered a copy of the prospectus included as part of the
applicable Registration Statement (unless an exemption from such prospectus
delivery requirement exists) the ineffectiveness of the Registration Statement
and for which the Investor has not yet settled.

         4. OBLIGATIONS OF THE INVESTORS.

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

                                       14

<PAGE>

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

              c. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(g) or
the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(g) or the
first sentence of 3(f) or receipt of notice that no supplement or amendment is
required. Notwithstanding anything to the contrary, the Company shall cause its
transfer agent to deliver unlegended shares of Common Stock to a transferee of
an Investor in accordance with the terms of the Securities Purchase Agreement in
connection with any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale prior to the Investor's receipt of
a notice from the Company of the happening of any event of the kind described in
Section 3(g) or the first sentence of 3(f) and for which the Investor has not
yet settled.

              d. Each Investor covenants and agrees that it will comply with the
prospectus delivery requirements of the 1933 Act as applicable to it or an
exemption therefrom in connection with sales of Registrable Securities pursuant
to the Registration Statement.

         5. EXPENSES OF REGISTRATION.

         All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company shall be paid by the Company.
The Company shall also reimburse each Investor (with Cedar Hill being deemed one
Investor for purposes hereof) for the fees and disbursements of Legal Counsel in
connection with registration, filing or qualification pursuant to Sections 2 and
3 of this Agreement which amount shall be limited to $15,000 per Investor (and
limited to a total of $15,000 for each group of affiliated Investors) for each
Registration Statement filed by the Company with the SEC.

         6. INDEMNIFICATION.

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

              a. To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Investor, the directors,
officers, members, partners, employees, agents, representatives of, and each
Person, if any, who controls any Investor within the meaning of the 1933 Act or
the 1934 Act (each, an "INDEMNIFIED PERSON"), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges, costs, reasonable
attorneys' fees, amounts paid in settlement or expenses, joint or several,
(collectively, "CLAIMS") incurred in investigating, preparing or defending any

                                       15

<PAGE>

action, claim, suit, inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or other
regulatory agency, body or the SEC, whether pending or threatened, whether or
not an indemnified party is or may be a party thereto ("INDEMNIFIED DAMAGES"),
to which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon: (i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other "blue sky" laws of any jurisdiction in
which Registrable Securities are offered ("BLUE SKY FILING"), or the omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in the light of the circumstances under which
the statements therein were made, not misleading, (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement or (iv) any violation of this
Agreement (the matters in the foregoing clauses (i) through (iv) being,
collectively, "VIOLATIONS"). Subject to Section 6(c), the Company shall
reimburse the Indemnified Persons, promptly as such expenses are incurred and
are due and payable, for any legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim by an
Indemnified Person arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by such Indemnified Person for such Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3(d) and (ii) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of the Company, which consent shall not be
unreasonably withheld or delayed. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.

              b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement and each Person, if any,
who controls the Company within the meaning of the 1933 Act or the 1934 Act
(each, an "INDEMNIFIED PARTY"), against any Claim or Indemnified Damages to
which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim or Indemnified Damages arise out of or are
based upon any Violation, in each case to the extent, and only to the extent,
that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and, subject to Section 6(c), such

                                       16

<PAGE>

Investor will reimburse any legal or other expenses reasonably incurred by an
Indemnified Party in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6(b)
and the agreement with respect to contribution contained in Section 7 shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld or delayed; provided, further, however, that the Investor
shall be liable under this Section 6(b) for only that amount of a Claim or
Indemnified Damages as does not exceed the net proceeds to such Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9.

              c. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim,
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses of not more than one counsel for such
Indemnified Person or Indemnified Party to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. In the case of an
Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Investors holding at least a majority in
interest of the Registrable Securities included in the Registration Statement to
which the Claim relates. The Indemnified Party or Indemnified Person shall
cooperate fully with the indemnifying party in connection with any negotiation
or defense of any such action or Claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably available to the
Indemnified Party or Indemnified Person which relates to such action or Claim.
The indemnifying party shall keep the Indemnified Party or Indemnified Person
reasonably apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent, provided, however, that the indemnifying party shall
not unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the prior written consent of the Indemnified Party or Indemnified
Person, consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party or Indemnified Person of a
release from all liability in respect to such Claim or litigation, and such
settlement shall not include any admission as to fault on the part of the
Indemnified Party. Following indemnification as provided for hereunder, the

                                       17

<PAGE>

indemnifying party shall be subrogated to all rights of the Indemnified Party or
Indemnified Person with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action.

              d. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.

              e. The indemnity agreements contained herein shall be in addition
to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.

         7. CONTRIBUTION.

         To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no Person involved in the sale of Registrable Securities which Person is
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) in connection with such sale shall be entitled to contribution
from any Person involved in such sale of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (ii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities pursuant to
such Registration Statement.

         8. REPORTS UNDER THE 1934 ACT.

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

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

              b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements and the filing of such reports
and other documents is required for the applicable provisions of Rule 144; and

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

                                       18

<PAGE>

         9. ASSIGNMENT OF REGISTRATION RIGHTS.

         The rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of such Investor's
Registrable Securities if: (i) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment; (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the Registrable Securities with respect to which such
registration rights are being transferred or assigned; (iii) immediately
following such transfer or assignment the further disposition of such
Registrable Securities by the transferee or assignee is restricted under the
1933 Act or applicable state securities laws; (iv) at or before the time the
Company receives the written notice contemplated by clause (ii) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein; and (v) such transfer shall have been made
in accordance with the applicable requirements of the this Agreement and the
other Transaction Documents (as defined in the Securities Purchase Agreement).

         10. AMENDMENT OF REGISTRATION RIGHTS.

         Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the Required Holders. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon each Investor and the Company. No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the Registrable Securities. No consideration shall be offered or
paid to any Person to amend or consent to a waiver or modification of any
provision of this Agreement unless the same consideration also is offered to all
of the parties to this Agreement.

         11. MISCELLANEOUS.

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

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

                                       19

<PAGE>

         If to the Company:

                  Raptor Networks Technology, Inc.
                  1241 E. Dyer Road, Suite 150
                  Santa Ana, CA 92705
                  Telephone:        (949) 623-9300
                  Facsimile:        (949) 623-9400
                  Attention:        Chief Executive Officer

                  With a copy to:

                  Rutan & Tucker, LLP
                  611 Anton Blvd. 14th Floor
                  Costa Mesa, CA 92626
                  Telephone:        (949) 641-5100
                  Facsimile:        (949) 546-9035
                  Attention:        Thomas J. Crane, Esq.

         If to Legal Counsel:

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

                  and

                  Sadis & Goldberg LLP
                  551 5th Avenue
                  New York, New York 10176
                  Telephone:        (212) 947-3793
                  Facsimile:        (212) 947-3796
                  Attention:        Ron Geffner, Esq.

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

                                       20

<PAGE>

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

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

              e. This Agreement, the other Transaction Documents (as defined in
the Securities Purchase Agreement) and the instruments referenced herein and
therein constitute the entire agreement among the parties hereto with respect to
the subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, the other Transaction Documents and the instruments
referenced herein and therein supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.

              f. Subject to the requirements of Section 9, this Agreement shall
inure to the benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto.

              g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.

                                       21

<PAGE>

              h. This Agreement may be executed in identical counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. 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.

              i. 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 any 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.

              j. All consents and other determinations required to be made by
the Investors pursuant to this Agreement shall be made, unless otherwise
specified in this Agreement, by the Required Holders.

              k. 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.

              l. 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.

              m. The obligations of each Investor hereunder are several and not
joint with the obligations of any other Investor, and no provision of this
Agreement is intended to confer any obligations on any Investor vis-a-vis any
other Investor. Nothing contained herein, and no action taken by any Investor
pursuant hereto, shall be deemed to constitute the Investors as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated herein.

                            [Signature Page Follows]

                                       22

<PAGE>

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

                                           COMPANY:

                                           RAPTOR NETWORKS TECHNOLOGY, INC.

                                           By: /s/ Thomas M. Wittenschlaeger
                                               ---------------------------------
                                               Name:  Thomas M. Wittenschlaeger
                                               Title: Chief Executive Officer

                                       23

<PAGE>

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

                                         INVESTORS:

                                         CASTLERIGG MASTER INVESTMENTS LTD.

                                         By: Sandell Asset Management Corp.

                                         By:    /s/ Patrick T. Burke
                                                --------------------------------
                                         Name:  Patrick T. Burke
                                         Title: Senior Managing Director

                                       24

<PAGE>

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

                                         INVESTORS:

                                         CEDAR HILL CAPITAL PARTNERS ONSHORE, LP

                                         By:    /s/ Charles Cascarilla
                                                --------------------------------
                                         Name:  Charles Cascarilla
                                         Title: Principal

                                       25

<PAGE>

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

                                         INVESTORS:

                                         CEDAR HILL CAPITAL PARTNERS
                                         OFFSHORE, LTD.

                                         By:   /s/ Charles Cascarilla
                                               ---------------------------------
                                               Name:   Charles Cascarilla
                                               Title:  Principal

                                       26

<PAGE>

                              SCHEDULE OF INVESTORS

<TABLE>
<S>     <C>
                                                                              INVESTOR'S REPRESENTATIVE'S
                                                                              ---------------------------
                                             INVESTOR'S ADDRESS                         ADDRESS
                                            --------------------                        -------
             INVESTOR                       AND FACSIMILE NUMBER                  AND FACSIMILE NUMBER
             --------                       --------------------                  --------------------

CASTLERIGG MASTER INVESTMENTS LTD    c/o Sandell Asset Management Corp.        Schulte Roth & Zabel LLP
                                     40 West 57th Street                       919 Third Avenue
                                     26th Floor                                New York, New York 10022
                                     New York, New York  10019                 Attn:  Eleazer Klein, Esq.
                                     Attention: Cem Hacioglu/Matthew Pliskin   Facsimile:  (212) 593-5955
                                     Facsimile:     (212) 603-5710             Telephone:  (212) 756-2000
                                     Telephone:     (212) 603-5775

CEDAR HILL CAPITAL PARTNERS          445 Park Avenue, 5th Floor                Sadis & Goldberg LLP
ONSHORE, LP                          New York, New York 10022                  551 5th Avenue
                                     Attention: Charles Cascarilla             New York, New York 10176
                                     Facsimile: (646) 417-7702                 Attention: Ron Geffner, Esq.
                                     Telephone: (212) 201-5804                 Facsimile: (212) 947-3796
                                     Residence: New York                       Telephone: (212) 947-3793

CEDAR HILL CAPITAL PARTNERS          445 Park Avenue, 5th Floor                Sadis & Goldberg LLP
OFFSHORE. LTD                        New York, New York 10022                  551 5th Avenue
                                     Attention: Charles Cascarilla             New York, New York 10176
                                     Facsimile: (646) 417-7702                 Attention: Ron Geffner, Esq.
                                     Telephone: (212) 201-5804                 Facsimile: (212) 947-3796
                                     Residence: Cayman Islands                 Telephone: (212) 947-3793
</TABLE>

                                       27

<PAGE>

                                                                       EXHIBIT A

                         FORM OF NOTICE OF EFFECTIVENESS
                         -------------------------------
                            OF REGISTRATION STATEMENT
                            -------------------------

First American Stock Transfer
706 E. Bell Road
Phoenix, Arizona 85022
Attention:  Salli Marinov

                      Re: RAPTOR NETWORKS TECHNOLOGY, INC.

Ladies and Gentlemen:

         [We are][I am] counsel to Raptor Networks Technology, Inc., a Colorado
corporation (the "Company"), and have represented the Company in connection with
that certain Securities Purchase Agreement (the "PURCHASE AGREEMENT") entered
into by and among the Company and the investors named therein (collectively, the
"HOLDERS") pursuant to which the Company issued to the Holders convertible notes
(the "NOTES") convertible into the Company's common stock, $0.001 par value per
share (the "COMMON STOCK") and three series of warrants exercisable for shares
of Common Stock (the "WARRANTS"). Pursuant to the Purchase Agreement, the
Company also has entered into a Registration Rights Agreement with the Holders
(the "REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company agreed,
among other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement), including the shares of Common Stock issuable
upon conversion of the Notes and the shares of Common Stock issuable upon
exercise of the Warrants, under the Securities Act of 1933, as amended (the
"1933 ACT"). In connection with the Company's obligations under the Registration
Rights Agreement, on ____________ ___, 200_, the Company filed a Registration
Statement on Form SB-2 (File No. 333-_____________) (the "REGISTRATION
STATEMENT") with the Securities and Exchange Commission (the "SEC") relating to
the Registrable Securities which names each of the Holders as a selling
stockholder thereunder.

         In connection with the foregoing, [we][I] advise you that a member of
the SEC's staff has advised [us][me] by telephone that the SEC has entered an
order declaring the Registration Statement effective under the 1933 Act at
[ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and [we][I] have
no knowledge, after telephonic inquiry of a member of the SEC's staff, that any
stop order suspending its effectiveness has been issued or that any proceedings
for that purpose are pending before, or threatened by, the SEC and the
Registrable Securities are available for resale under the 1933 Act pursuant to
the Registration Statement.

         This letter shall serve as our standing instruction to you that the
shares of Common Stock are freely transferable by the Holders pursuant to the
Registration Statement. You need not require further letters from us to effect
any future legend-free issuance or reissuance of shares of Common Stock to the
Holders as contemplated by the Company's Irrevocable Transfer Agent Instructions
dated _____________, 2007.

                                                       Very truly yours,

                                                       [ISSUER'S COUNSEL]

                                                       By:_____________________
CC:       [LIST NAMES OF HOLDERS]

                                       28

<PAGE>

                                                                       EXHIBIT B

                              SELLING STOCKHOLDERS

         The shares of Common Stock being offered by the selling stockholders
are issuable upon conversion of the convertible notes and upon exercise of the
warrants. For additional information regarding the issuance of those convertible
notes and warrants, see "Private Placement of Convertible Notes and Warrants"
above. We are registering the shares of Common Stock in order to permit the
selling stockholders to offer the shares for resale from time to time. Except
for the ownership of the Convertible Notes and the Warrants issued pursuant to
the Securities Purchase Agreement, the selling stockholders have not had any
material relationship with us within the past three years.

         The table below lists the selling stockholders and other information
regarding the beneficial ownership of the shares of Common Stock by each of the
selling stockholders. The second column lists the number of shares of Common
Stock beneficially owned by each selling stockholder, based on its ownership of
the convertible notes and warrants, as of ________, 200_, assuming conversion of
all convertible notes and exercise of the warrants held by the selling
stockholders on that date, without regard to any limitations on conversions or
exercise.

         The third column lists the shares of Common Stock being offered by this
prospectus by the selling stockholders.

         In accordance with the terms of registration rights agreement among the
Company and the selling stockholders, this prospectus covers the resale of (i) [
] shares of Common Stock issuable upon conversion of the convertible notes as of
the trading day immediately preceding the date the registration statement is
initially filed with the SEC and (ii) [ ] shares of Common Stock issuable upon
exercise of the related warrants as of the trading day immediately preceding the
date the registration statement is initially filed with the SEC. Because the
conversion price of the convertible notes and the exercise price of the warrants
may be adjusted, the number of shares that will actually be issued may be more
or less than the number of shares being offered by this prospectus. The fourth
column assumes the sale of all of the shares offered by the selling stockholders
pursuant to this prospectus.

         Under the terms of the convertible notes and the warrants, a selling
stockholder may not convert the convertible notes or exercise the warrants to
the extent such conversion or exercise would cause such selling stockholder,
together with its affiliates, to beneficially own a number of shares of Common
Stock which would exceed 4.99% of our then outstanding shares of Common Stock
following such conversion or exercise, excluding for purposes of such
determination shares of Common Stock issuable upon conversion of the convertible
notes which have not been converted and upon exercise of the warrants which have
not been exercised. The number of shares in the second column does not reflect
this limitation. The selling stockholders may sell all, some or none of their
shares in this offering. See "Plan of Distribution."

                                       29

<PAGE>

<TABLE>
<S>     <C>
                                                                    MAXIMUM NUMBER OF SHARES
                                                                    ------------------------
                                          NUMBER OF SHARES OWNED     TO BE SOLD PURSUANT TO      NUMBER OF SHARES
                                          ----------------------     ----------------------      ----------------
NAME OF SELLING STOCKHOLDER                  PRIOR TO OFFERING           THIS PROSPECTUS        OWNED AFTER OFFERING
---------------------------                  -----------------           ---------------        --------------------
CASTLERIGG MASTER INVESTMENTS (1)                                                                        0
CEDAR HILL CAPITAL PARTNERS ONSHORE,
LP (2)
CEDAR HILL CAPITAL PARTNERS OFFSHORE,
LTD. (3)
</TABLE>

         (1) Sandell Asset Management Corp. ("SAMC") is the investment manager
of Castlerigg Master Investments Ltd. ("Master"). Thomas Sandell is the
sole-shareholder of SAMC and may be deemed to have voting and dispositive power
over the shares beneficially owned by Master. No other natural person has voting
or dispositive power over the shares being registered on behalf of Master.
Castlerigg International Ltd. ("Castlerigg International") is the controlling
shareholder of Castlerigg International Holdings Limited ("Holdings"). Holdings
is the controlling shareholder of Master. Each of Holdings and Castlerigg
International may be deemed to share beneficial ownership of the shares
beneficially owned by Castlerigg Master Investments. SAMC, Mr. Sandell, Holdings
and Castlerigg International each disclaims beneficial ownership of the
securities with respect to which indirect beneficial ownership is described.

         (2) Power to vote or dispose of the shares is shared by Emil Woods and
Charles Cascarilla, who are the principals of Cedar Hill Capital Partners, LLC,
which is the investment advisor to Cedar Hill Capital Partners Onshore, LP.

         (3) Power to vote or dispose of the shares is shared by Emil Woods and
Charles Cascarilla, who are the principals of Cedar Hill Capital Partners, LLC,
which is the investment advisor to Cedar Hill Capital Partners Offshore, Ltd.

                                       30

<PAGE>

                              PLAN OF DISTRIBUTION

         We are registering the shares of Common Stock issuable upon conversion
of the convertible notes and upon exercise of the warrants to permit the resale
of these shares of Common Stock by the holders of the convertible notes and
warrants from time to time after the date of this prospectus. We will not
receive any of the proceeds from the sale by the selling stockholders of the
shares of Common Stock. We will bear all fees and expenses incident to our
obligation to register the shares of Common Stock.

         The selling stockholders may sell all or a portion of the shares of
Common Stock beneficially owned by them and offered hereby from time to time
directly or through one or more underwriters, broker-dealers or agents. If the
shares of Common Stock are sold through underwriters or broker-dealers, the
selling stockholders will be responsible for underwriting discounts or
commissions or agent's commissions. The shares of Common Stock may be sold in
one or more transactions at fixed prices, at prevailing market prices at the
time of the sale, at varying prices determined at the time of sale, or at
negotiated prices. These sales may be effected in transactions, which may
involve crosses or block transactions,

         o    on any national securities exchange or quotation service on which
              the securities may be listed or quoted at the time of sale;

         o    in the over-the-counter market;

         o    in transactions otherwise than on these exchanges or systems or in
              the over-the-counter market;

         o    through the writing of options, whether such options are listed on
              an options exchange or otherwise;

         o    ordinary brokerage transactions and transactions in which the
              broker-dealer solicits purchasers;

         o    block trades in which the broker-dealer will attempt to sell the
              shares as agent but may position and resell a portion of the block
              as principal to facilitate the transaction;

         o    purchases by a broker-dealer as principal and resale by the
              broker-dealer for its account;

         o    an exchange distribution in accordance with the rules of the
              applicable exchange;

         o    privately negotiated transactions;

         o    short sales;

         o    sales pursuant to Rule 144;

                                       31

<PAGE>

         o    broker-dealers may agree with the selling securityholders to sell
              a specified number of such shares at a stipulated price per share;

         o    a combination of any such methods of sale; and

         o    any other method permitted pursuant to applicable law.

         If the selling stockholders effect such transactions by selling shares
of Common Stock to or through underwriters, broker-dealers or agents, such
underwriters, broker-dealers or agents may receive commissions in the form of
discounts, concessions or commissions from the selling stockholders or
commissions from purchasers of the shares of Common Stock for whom they may act
as agent or to whom they may sell as principal (which discounts, concessions or
commissions as to particular underwriters, broker-dealers or agents may be in
excess of those customary in the types of transactions involved). In connection
with sales of the shares of Common Stock or otherwise, the selling stockholders
may enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the shares of Common Stock in the course of hedging in
positions they assume. The selling stockholders may also sell shares of Common
Stock short and deliver shares of Common Stock covered by this prospectus to
close out short positions and to return borrowed shares in connection with such
short sales. The selling stockholders may also loan or pledge shares of Common
Stock to broker-dealers that in turn may sell such shares.

         The selling stockholders may pledge or grant a security interest in
some or all of the convertible notes, warrants or shares of Common Stock owned
by them and, if they default in the performance of their secured obligations,
the pledgees or secured parties may offer and sell the shares of Common Stock
from time to time pursuant to this prospectus or any amendment to this
prospectus under Rule 424(b)(3) or other applicable provision of the Securities
Act of 1933, as amended, amending, if necessary, the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus. The selling stockholders also may
transfer and donate the shares of Common Stock in other circumstances in which
case the transferees, donees, pledgees or other successors in interest will be
the selling beneficial owners for purposes of this prospectus.

         The selling stockholders and any broker-dealer participating in the
distribution of the shares of Common Stock may be deemed to be "underwriters"
within the meaning of the Securities Act, and any commission paid, or any
discounts or concessions allowed to, any such broker-dealer may be deemed to be
underwriting commissions or discounts under the Securities Act. At the time a
particular offering of the shares of Common Stock is made, a prospectus
supplement, if required, will be distributed which will set forth the aggregate
amount of shares of Common Stock being offered and the terms of the offering,
including the name or names of any broker-dealers or agents, any discounts,
commissions and other terms constituting compensation from the selling
stockholders and any discounts, commissions or concessions allowed or reallowed
or paid to broker-dealers.

         Under the securities laws of some states, the shares of Common Stock
may be sold in such states only through registered or licensed brokers or
dealers. In addition, in some states the shares of Common Stock may not be sold
unless such shares have been registered or qualified for sale in such state or
an exemption from registration or qualification is available and is complied
with.

                                       32

<PAGE>

         There can be no assurance that any selling stockholder will sell any or
all of the shares of Common Stock registered pursuant to the registration
statement, of which this prospectus forms a part.

         The selling stockholders and any other person participating in such
distribution will be subject to applicable provisions of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder, including,
without limitation, Regulation M of the Exchange Act, which may limit the timing
of purchases and sales of any of the shares of Common Stock by the selling
stockholders and any other participating person. Regulation M may also restrict
the ability of any person engaged in the distribution of the shares of Common
Stock to engage in market-making activities with respect to the shares of Common
Stock. All of the foregoing may affect the marketability of the shares of Common
Stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of Common Stock.

         We will pay all expenses of the registration of the shares of Common
Stock pursuant to the registration rights agreement, estimated to be $125,000 in
total, including, without limitation, Securities and Exchange Commission filing
fees and expenses of compliance with state securities or "blue sky" laws;
provided, however, that a selling stockholder will pay all underwriting
discounts and selling commissions, if any. We will indemnify the selling
stockholders against liabilities, including some liabilities under the
Securities Act, in accordance with the registration rights agreements, or the
selling stockholders will be entitled to contribution. We may be indemnified by
the selling stockholders against civil liabilities, including liabilities under
the Securities Act, that may arise from any written information furnished to us
by the selling stockholder specifically for use in this prospectus, in
accordance with the related registration rights agreement, or we may be entitled
to contribution.

         Once sold under the registration statement, of which this prospectus
forms a part, the shares of Common Stock will be freely tradable in the hands of
persons other than our affiliates.

                                       33<PAGE>

                                                                    EXHIBIT 10.3

                                 [FORM OF NOTE]

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED
BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS
OF THIS NOTE, INCLUDING SECTIONS 3(C)(III) AND 20(A) HEREOF. THE PRINCIPAL
AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON
CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF
PURSUANT TO SECTION 3(C)(III) OF THIS NOTE.

                        RAPTOR NETWORKS TECHNOLOGY, INC.

                         SENIOR SECURED CONVERTIBLE NOTE

Issuance Date:  August 1, 2007         Original Principal Amount: U.S. $[*]

         FOR VALUE RECEIVED, Raptor Networks Technology, Inc., a Colorado
corporation (the "COMPANY"), hereby promises to pay to [CASTLERIGG MASTER
INVESTMENTS LTD.] [CEDAR HILL CAPITAL PARTNERS ONSHORE, LP] [CEDAR HILL CAPITAL
PARTNERS OFFSHORE. LTD.] or registered assigns ("HOLDER") the amount set out
above as the Original Principal Amount (as reduced pursuant to the terms hereof
pursuant to redemption, conversion or otherwise, the "PRINCIPAL") when due,
whether upon the Maturity Date (as defined below), acceleration, redemption or
otherwise (in each case in accordance with the terms hereof) and to pay interest
("INTEREST") on any outstanding Principal at the applicable Interest Rate (as
defined below) from the date set out above as the Issuance Date (the "Issuance
DATE") until the same becomes due and payable, whether upon an Interest Date (as
defined below) or, the Maturity Date, acceleration, conversion, redemption or
otherwise (in each case in accordance with the terms hereof). This Senior
Secured Convertible Note (including all Senior Secured Convertible Notes issued
in exchange, transfer or replacement hereof, this "NOTE") is one of an issue of
Senior Secured Convertible Notes issued pursuant to the Securities Purchase
Agreement on the Closing Date (collectively, the "NOTES" and such other Senior
Secured Convertible Notes, the "OTHER NOTES"). Certain capitalized terms used
herein are defined in Section 30.

--------------
* Notes issued in the in the following original principal amounts: Castlerigg
Master Investments Ltd. ($2,500,000); Cedar Hill Capital Partners Onshore, LP
($495,000); and Cedar Hill Capital Partners Offshore, Ltd. ($505,000)

<PAGE>

         (1) PAYMENTS OF PRINCIPAL. On the Maturity Date, the Company shall pay
to the Holder an amount (the "FINAL PAYMENT AMOUNT") in cash representing all
outstanding Principal, accrued and unpaid Interest and accrued and unpaid Late
Charges (as defined in Section 26), if any, on such Principal and Interest. The
"MATURITY DATE" shall be August 1, 2010, as may be extended at the option of the
Holder (i) in the event that, and for so long as, an Event of Default (as
defined in Section 4(a)) shall have occurred and be continuing on the Maturity
Date (as may be extended pursuant to this Section 1) or any event shall have
occurred and be continuing on the Maturity Date (as may be extended pursuant to
this Section 1) that with the passage of time and the failure to cure would
result in an Event of Default, (ii) through the date that is ten (10) Business
Days after the consummation of a Change of Control in the event that a Change of
Control is publicly announced or a Change of Control Notice (as defined in
Section 5(b)) is delivered prior to the Maturity Date and (iii) in its sole
discretion, upon delivering a notice to the Company at least ten (10) Business
Days prior to the originally scheduled Maturity Date indicating such Holder's
electing to have the payment of all or any portion of its Final Payment Amount
payable on the originally scheduled Maturity Date deferred up to a date that is
two (2) years from the originally scheduled Maturity Date. Any notice delivered
by the Holder pursuant to the preceding subparagraph (iii) shall set forth (1)
the amount of the Final Payment Amount being deferred and (2) the date that such
amount shall now be payable. Any amount deferred pursuant to the preceding
subparagraph (iii) shall continue to accrue Interest through the designated
payment date unless such amount is earlier converted into Common Stock,
redeemed, repurchased, liquidated or otherwise becomes no longer outstanding in
accordance with the terms hereof. Other than as specifically permitted by this
Note, the Company may not prepay any portion of the outstanding Principal,
accrued and unpaid interest or accrued and unpaid Late Charges on Principal and
Interest, if any.

                                      -2-

<PAGE>

         (2) INTEREST; INTEREST RATE. Interest on this Note shall commence
accruing on the Issuance Date and shall be computed on the basis of a 360-day
year comprised of twelve (12) thirty (30) day months and shall be payable in
arrears for each Calendar Quarter on the first (1st) day of the succeeding
Calendar Quarter during the period beginning on the Issuance Date and ending on,
and including, the Maturity Date (each, an "INTEREST DATE") with the first (1st)
Interest Date being October 1, 2007. Interest shall be payable on each Interest
Date, to the record holder of this Note on the applicable Interest Date, and to
the extent that any Principal amount of this Note is converted prior to such
Interest Date, accrued and unpaid Interest with respect to such converted
Principal amount and accrued and unpaid Late Charges, if any, with respect to
such Principal and Interest shall be payable by way of inclusion of such
Interest and Late Charges in the Conversion Amount, in accordance with Section
3(b)(i). From and after the occurrence and during the continuance of an Event of
Default, the Interest Rate shall be increased to fifteen percent (15.0%) per
annum. In the event that such Event of Default is subsequently cured, the
adjustment referred to in the preceding sentence shall cease to be effective as
of the date of such cure; provided that the Interest as calculated and unpaid at
such increased rate during the continuance of such Event of Default shall
continue to apply to the extent relating to the days after the occurrence of
such Event of Default through and including the date of cure of such Event of
Default.

         (3) CONVERSION OF NOTES. This Note shall be convertible into shares of
the Company's common stock, par value $0.001 per share (the "COMMON STOCK"), on
the terms and conditions set forth in this Section 3.

              (a) CONVERSION RIGHT. Subject to the provisions of Section 3(d)
and subject to the Company's right to elect to pay accrued and unpaid Interest
and Late Charges, if any, in cash as set forth in Section 3(c)(i), at any time
or times on or after the Issuance Date, the Holder shall be entitled to convert
any portion of the outstanding and unpaid Conversion Amount (as defined below)
into fully paid and nonassessable shares of Common Stock in accordance with
Section 3(c), at the Conversion Rate (as defined below). The Company shall not
issue any fraction of a share of Common Stock upon any conversion. If the
issuance would result in the issuance of a fraction of a share of Common Stock,
the Company shall round such fraction of a share of Common Stock up to the
nearest whole share. The Company shall pay any and all transfer, stamp and
similar taxes that may be payable with respect to the issuance and delivery of
Common Stock upon conversion of any Conversion Amount.

              (b) CONVERSION RATE. Subject to the Company's right to elect to
pay accrued and unpaid Interest and Late Charges, if any, in cash as set forth
in Section 3(c)(i), the number of shares of Common Stock issuable upon
conversion of any Conversion Amount pursuant to Section 3(a) shall be determined
by dividing (x) such Conversion Amount by (y) the Conversion Price (the
"CONVERSION RATE").

                   (i) "CONVERSION AMOUNT" means the sum of (A) the portion of
the Principal to be converted, redeemed or otherwise with respect to which this
determination is being made, (B) accrued and unpaid Interest with respect to
such Principal and (C) accrued and unpaid Late Charges with respect to such
Principal and Interest.

                                      -3-

<PAGE>

                   (ii) "CONVERSION PRICE" means, as of any Conversion Date (as
defined below) or other date of determination, $1.2029, subject to adjustment as
provided herein.

              (c) MECHANICS OF CONVERSION.

                   (i) OPTIONAL CONVERSION. To convert any Conversion Amount
into shares of Common Stock on any Trading Day (a "CONVERSION DATE"), the Holder
shall (A) transmit by facsimile (or otherwise deliver), for receipt on or prior
to 11:59 p.m., New York Time, on a Business Day, a copy of an executed notice of
conversion in the form attached hereto as EXHIBIT I (the "CONVERSION NOTICE") to
the Company and (B) if required by Section 3(c)(iii), surrender this Note to a
common carrier for delivery to the Company as soon as practicable on or
following such date (or an indemnification undertaking with respect to this Note
in the case of its loss, theft or destruction). Accrued and unpaid Interest and
Late Charges, if any, on any Principal portion of the Conversion Amount being
converted shall be payable to the record holder of this Note on the applicable
Share Delivery Date (as defined below) in shares of Common Stock so long as
there has been no Equity Conditions Failure; provided however, that the Company
may, at its option following notice to the Holder, pay accrued and unpaid
Interest and/or Late Charges, if any, on any Principal portion of the Conversion
Amount being converted on the applicable Share Delivery Date in cash ("CASH
INTEREST/CHARGES"). On or before the second (2nd) Trading Day following the date
of receipt of a Conversion Notice, the Company shall transmit by facsimile a
confirmation of receipt of such Conversion Notice to the Holder and the
Company's transfer agent (the "TRANSFER AGENT"). On or before the third (3rd)
Business Day following the date of receipt of a Conversion Notice (the "SHARE
DELIVERY DATE"), the Company shall (1) (x) provided that the Transfer Agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer Program and that securities are to be issued without legends pursuant
to Section 2(g) of the Securities Purchase Agreement, credit such aggregate
number of shares of Common Stock (including any shares of Common Stock delivered
in respect of Interest and/or Late Charges) to which the Holder shall be
entitled to the Holder's or its designee's balance account with DTC through its
Deposit Withdrawal Agent Commission system or (y) if the Transfer Agent is not
participating in the DTC Fast Automated Securities Transfer Program or if
securities are to be issued with legends pursuant to Section 2(g) of the
Securities Purchase Agreement, issue and deliver to the address as specified in
the Conversion Notice, a certificate, registered in the name of the Holder or
its designee, for the number of shares of Common Stock to which the Holder shall
be entitled and (2) if the Company has elected to pay Cash Interest/Charges, pay
to the Holder in cash an amount equal to the accrued and unpaid Interest and/or
Late Charges, if any, on the Principal portion of the Conversion Amount up to
and including the Conversion Date. If this Note is physically surrendered for
conversion pursuant to Section 3(c)(iii) and the outstanding Principal of this
Note is greater than the Principal portion of the Conversion Amount being
converted, then the Company shall as soon as practicable and in no event later
than five (5) Business Days after receipt of this Note and at its own expense,
issue and deliver to the holder a new Note (in accordance with Section 20(d))
representing the outstanding Principal not converted. The Person or Persons
entitled to receive the shares of Common Stock issuable upon a conversion of
this Note shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on the Conversion Date.

                                      -4-

<PAGE>

                   (ii) COMPANY'S FAILURE TO TIMELY CONVERT. If the Company
shall fail to issue a certificate to the Holder or credit the Holder's balance
account with DTC, as applicable, for the number of shares of Common Stock to
which the Holder is entitled upon conversion of any Conversion Amount on or
prior to the date which is five (5) Trading Days after the Conversion Date (a
"CONVERSION FAILURE"), then (A) the Company shall pay damages to the Holder for
each Trading Day of such Conversion Failure in an amount equal to 1.5% of the
product of (I) the sum of the number of shares of Common Stock not issued to the
Holder on or prior to the Share Delivery Date and to which the Holder is
entitled, and (II) the Closing Sale Price of the Common Stock on the Share
Delivery Date and (B) the Holder, upon written notice to the Company, may void
its Conversion Notice with respect to, and retain or have returned, as the case
may be, any portion of this Note that has not been converted pursuant to such
Conversion Notice; PROVIDED that the voiding of a Conversion Notice shall not
affect the Company's obligations to make any payments which have accrued prior
to the date of such notice pursuant to this Section 3(c)(ii) or otherwise. In
addition to the foregoing, if within three (3) Trading Days after the Company's
receipt of the facsimile copy of a Conversion Notice the Company shall fail to
issue and deliver a certificate to the Holder or credit the Holder's balance
account with DTC for the number of shares of Common Stock to which the Holder is
entitled upon such holder's conversion of any Conversion Amount, and if on or
after such Trading Day the Holder purchases (in an open market transaction or
otherwise) Common Stock to deliver in satisfaction of a sale by the Holder of
the number of shares of Common Stock issuable upon such conversion that the
Holder anticipated receiving from the Company (a "BUY-IN"), then the Company
shall, within five (5) Trading Days after the Holder's request and in the
Holder's discretion, either (A) pay cash to the Holder in an amount equal to the
Holder's total purchase price (including brokerage commissions and other out of
pocket expenses, if any) for such number of shares of Common Stock so purchased
(the "BUY-IN PRICE"), at which point the Company's obligation to deliver such
certificate (and to issue such Common Stock) shall terminate, or (B) promptly
honor its obligation to deliver to the Holder a certificate or certificates
representing such Common Stock and pay cash to the Holder in an amount equal to
the excess (if any) of the Buy-In Price over the product of (1) such number of
shares of Common Stock, times (2) the Closing Bid Price on the Conversion Date.

                   (iii) REGISTRATION; BOOK-ENTRY. The Company shall maintain a
register (the "REGISTER") for the recordation of the names and addresses of the
holders of each Note and the principal amount of the Notes held by such holders
(the "REGISTERED NOTES"). The entries in the Register shall be conclusive and
binding for all purposes absent manifest error. The Company and the holders of
the Notes shall treat each Person whose name is recorded in the Register as the
owner of a Note for all purposes, including, without limitation, the right to
receive payments of Principal and Interest hereunder, notwithstanding notice to
the contrary. A Registered Note may be assigned or sold in whole or in part only
by registration of such assignment or sale on the Register. Upon its receipt of
a request to assign or sell all or part of any Registered Note by a Holder, the
Company shall record the information contained therein in the Register and issue
one or more new Registered Notes in the same aggregate principal amount as the
principal amount of the surrendered Registered Note to the designated assignee
or transferee pursuant to Section 20. Notwithstanding anything to the contrary
set forth herein, upon conversion of any portion of this Note in accordance with
the terms hereof, the Holder shall not be required to physically surrender this

                                      -5-

<PAGE>

Note to the Company unless (A) the entire outstanding Principal amount
represented by this Note is being converted or (B) the Holder has provided the
Company with prior written notice (which notice may be included in a Conversion
Notice) requesting reissuance of this Note upon physical surrender of this Note.
The Holder and the Company shall maintain records showing the Principal,
Interest and Late Charges, if any, converted and the dates of such conversions
or shall use such other method, reasonably satisfactory to the Holder and the
Company, so as not to require physical surrender of this Note upon conversion
(except as required above).

                   (iv) PRO RATA CONVERSION; DISPUTES. In the event that the
Company receives a Conversion Notice from more than one holder of Notes for the
same Conversion Date and the Company can convert some, but not all, of such
portions of the Notes submitted for conversion, the Company, subject to Section
3(d), shall convert from each holder of Notes electing to have Notes converted
on such date a pro rata amount of such holder's portion of its Notes submitted
for conversion based on the principal amount of Notes submitted for conversion
on such date by such holder relative to the aggregate principal amount of all
Notes submitted for conversion on such date. In the event of a dispute as to the
number of shares of Common Stock issuable to the Holder in connection with a
conversion of this Note, the Company shall issue to the Holder the number of
shares of Common Stock not in dispute and resolve such dispute in accordance
with Section 25.

              (d) LIMITATIONS ON CONVERSIONS.

                   (i) BENEFICIAL OWNERSHIP. The Company shall not effect any
conversion of this Note, and the Holder of this Note shall not have the right to
convert any portion of this Note pursuant to Section 3(a), to the extent that
after giving effect to such conversion, the Holder (together with the Holder's
affiliates) would beneficially own in excess of 4.99% (the "MAXIMUM PERCENTAGE")
of the number of shares of Common Stock outstanding immediately after giving
effect to such conversion. For purposes of the foregoing sentence, the number of
shares of Common Stock beneficially owned by the Holder and its affiliates shall
include the number of shares of Common Stock issuable upon conversion of this
Note with respect to which the determination of such sentence is being made, but
shall exclude the number of shares of Common Stock which would be issuable upon
(A) conversion of the remaining, nonconverted portion of this Note beneficially
owned by the Holder or any of its affiliates and (B) exercise or conversion of
the unexercised or nonconverted portion of any other securities of the Company
(including, without limitation, any Other Notes or warrants) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by the Holder or any of its affiliates. Except as set
forth in the preceding sentence, for purposes of this Section 3(d)(i),
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "1934 ACT"). For purposes of
this Section 3(d)(i), in determining the number of outstanding shares of Common
Stock, the Holder may rely on the number of outstanding shares of Common Stock
as reflected in (x) the Company's most recent Form 10-K, Form 10-KSB, Form 10-Q,
Form 10-QSB, Form 8-K or other public filing with the Securities Exchange
Commission, as the case may be (y) a more recent public announcement by the
Company or (z) any other notice by the Company or the Transfer Agent setting
forth the number of shares of Common Stock outstanding. For any reason at any
time, upon the written or oral request of the Holder, the Company shall within
two (2) Business Days confirm orally and in writing to the Holder the number of
shares of Common Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to the conversion

                                      -6-

<PAGE>

or exercise of securities of the Company, including this Note, by the Holder or
its affiliates since the date as of which such number of outstanding shares of
Common Stock was reported. By written notice to the Company, the Holder may
increase or decrease the Maximum Percentage to any other percentage not in
excess of 9.99% specified in such notice; provided that (i) any such increase
will not be effective until the sixty-first (61st) day after such notice is
delivered to the Company, and (ii) any such increase or decrease will apply only
to the Holder and not to any other holder of Notes.

                   (ii) ELIGIBLE MARKET REGULATION. The Company shall not be
obligated to issue any shares of Common Stock upon conversion of this Note if
the issuance of such shares of Common Stock would exceed the aggregate number of
shares of Common Stock which the Company may issue upon conversion or exercise,
as applicable, of the Notes and Warrants without breaching the Company's
obligations under the rules or regulations of any applicable Eligible Market
(the "EXCHANGE CAP"), except that such limitation shall not apply in the event
that the Company (A) obtains the approval of its stockholders as required by the
applicable rules of such Eligible Market for issuances of Common Stock in excess
of such amount or (B) obtains a written opinion from outside counsel to the
Company that such approval is not required, which opinion shall be reasonably
satisfactory to the Required Holders. Until such approval or written opinion is
obtained, no purchaser of the Notes pursuant to the Securities Purchase
Agreement (the "PURCHASERS") shall be issued in the aggregate, upon conversion
or exercise or otherwise, as applicable, of Notes or Warrants, shares of Common
Stock in an amount greater than the product of the Exchange Cap multiplied by a
fraction, the numerator of which is the principal amount of Notes issued to a
Purchaser pursuant to the Securities Purchase Agreement on the Closing Date and
the denominator of which is the aggregate principal amount of all Notes issued
to the Purchasers pursuant to the Securities Purchase Agreement on the Closing
Date (with respect to each Purchaser, the "EXCHANGE CAP ALLOCATION"). In the
event that any Purchaser shall sell or otherwise transfer any of such
Purchaser's Notes, the transferee shall be allocated a pro rata portion of such
Purchaser's Exchange Cap Allocation, and the restrictions of the prior sentence
shall apply to such transferee with respect to the portion of the Exchange Cap
Allocation allocated to such transferee. In the event that any holder of Notes
shall convert all of such holder's Notes into a number of shares of Common Stock
which, in the aggregate, is less than such holder's Exchange Cap Allocation,
then the difference between such holder's Exchange Cap Allocation and the number
of shares of Common Stock actually issued to such holder shall be allocated to
the respective Exchange Cap Allocations of the remaining holders of Notes on a
pro rata basis in proportion to the aggregate principal amount of the Notes then
held by each such holder.

         (4) RIGHTS UPON EVENT OF DEFAULT.

              (a) EVENT OF DEFAULT. Each of the following events shall
constitute an "EVENT OF DEFAULT":

                   (i) the failure of the applicable Registration Statement
required to be filed pursuant to the Registration Rights Agreement to be
declared effective by the SEC on or prior to the date that is sixty (60) days
after the applicable Effectiveness Deadline (as defined in the Registration
Rights Agreement), or, while the applicable Registration Statement is required
to be maintained effective pursuant to the terms of the Registration Rights
Agreement, the effectiveness of the applicable Registration Statement lapses for

                                      -7-

<PAGE>

any reason (including, without limitation, the issuance of a stop order) or is
unavailable to any holder of the Notes for sale of all of such holder's
Registrable Securities (as defined in the Registration Rights Agreement)
required to be registered thereon in accordance with the terms of the
Registration Rights Agreement, and such lapse or unavailability continues for a
period of ten (10) consecutive days or for more than an aggregate of thirty (30)
days in any 365-day period (other than days during an Allowable Grace Period (as
defined in the Registration Rights Agreement)); provided, however, that
notwithstanding anything to the contrary contained herein, the Company's failure
to meet one or more of the requirements of this Section 4(a) shall not
constitute an Event of Default where such failure is solely the result of a
comment received by the SEC requiring a limit on the number of Registrable
Securities included in the applicable Registration Statement in order for such
Registration Statement to be able to avail itself of Rule 415 under the 1933
Act;

                   (ii) the suspension from trading or failure of the Common
Stock to be listed on an Eligible Market for a period of five (5) consecutive
Trading Days or for more than an aggregate of ten (10) Trading Days in any
365-day period;

                   (iii) the Company's (A) failure to cure a Conversion Failure
by delivery of the required number of shares of Common Stock within ten (10)
Business Days after the applicable Conversion Date or (B) notice, written or
oral, to any holder of the Notes, including by way of public announcement or
through any of its agents, at any time, of its intention not to comply with a
request for conversion of any Notes into shares of Common Stock that is tendered
in accordance with the provisions of the Notes, other than pursuant to Section
3(d);

                   (iv) at any time following the tenth (10th) consecutive
Business Day that the Holder's Authorized Share Allocation (as defined below) is
less than the number of shares of Common Stock that the Holder would be entitled
to receive upon a conversion of the full Conversion Amount of this Note (without
regard to any limitations on conversion set forth in Section 3(d) or otherwise);

                   (v) the Company's failure to pay to the Holder any amount of
Principal, Interest, Late Charges or other amounts when and as due under this
Note (including, without limitation, the Company's failure to pay any redemption
payments or amounts hereunder) or any other Transaction Document (as defined in
the Securities Purchase Agreement) or any other agreement, document, certificate
or other instrument delivered in connection with the transactions contemplated
hereby and thereby to which the Holder is a party, except, in the case of a
failure to pay Interest and Late Charges when and as due, in which case only if
such failure continues for a period of at least five (5) Business Days;

                   (vi) any default under, redemption of or acceleration prior
to maturity of any Indebtedness of the Company or any of its Subsidiaries (as
defined in Section 3(a) of the Securities Purchase Agreement) which,
individually or in the aggregate, exceeds $50,000, other than with respect to
any Other Notes;

                                      -8-

<PAGE>

                   (vii) the Company or any of its Subsidiaries, pursuant to or
within the meaning of Title 11, U.S. Code, or any similar Federal, foreign or
state law for the relief of debtors (collectively, "BANKRUPTCY LAW"), (A)
commences a voluntary case, (B) consents to the entry of an order for relief
against it in an involuntary case, (C) consents to the appointment of a
receiver, trustee, assignee, liquidator or similar official (a "CUSTODIAN"), (D)
makes a general assignment for the benefit of its creditors or (E) admits in
writing that it is generally unable to pay its debts as they become due;

                   (viii) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (A) is for relief against the Company or
any of its Subsidiaries in an involuntary case, (B) appoints a Custodian of the
Company or any of its Subsidiaries or (C) orders the liquidation of the Company
or any of its Subsidiaries;

                   (ix) a final judgment or judgments for the payment of money
aggregating in excess of $350,000 are rendered against the Company or any of its
Subsidiaries and which judgments are not, within sixty (60) days after the entry
thereof, bonded, discharged or stayed pending appeal, or are not discharged
within sixty (60) days after the expiration of such stay; provided, however,
that any judgment which is covered by insurance or an indemnity from a credit
worthy party shall not be included in calculating the $350,000 amount set forth
above so long as the Company provides the Holder a written statement from such
insurer or indemnity provider (which written statement shall be reasonably
satisfactory to the Holder) to the effect that such judgment is covered by
insurance or an indemnity and the Company will receive the proceeds of such
insurance or indemnity within thirty (30) days of the issuance of such judgment;

                   (x) the Company breaches any representation, warranty,
covenant or other term or condition of any Transaction Document, except, in the
case of a breach of a covenant or other term or condition of any Transaction
Document which is curable, only if such breach continues for a period of at
least ten (10) consecutive Business Days;

                   (xi) any breach or failure in any respect to comply with
either of Section 16 of this Note or Section 4(r) of the Securities Purchase
Agreement;

                   (xii) the Company or any Subsidiary shall fail to perform or
comply with any covenant or agreement contained in the Security Agreement (as
defined in the Securities Purchase Agreement) to which it is a party, in the
case of a breach of a covenant or other term or condition which is curable and
except where such failure to comply with such covenant or agreement contained in
the Security Agreement shall for any reason fail or cease to create a valid and
perfected first priority security interest in favor of the Collateral Agent for
the benefit of the Buyers, only if such breach continues for a period of at
least ten (10) consecutive Business Days;

                   (xiii) any material provision (as determined by the
Collateral Agent) of any Security Document (as defined in the Securities
Purchase Agreement) shall at any time for any reason (other than pursuant to the
express terms thereof) cease to be valid and binding on or enforceable against
the Company or any Subsidiary intended to be a party thereto, or the validity or
enforceability thereof shall be contested by any party thereto other then the
Collateral Agent, or a proceeding shall be commenced by the Company or any
Subsidiary or any governmental authority having jurisdiction over any of them,
seeking to establish the invalidity or unenforceability thereof, or the Company
or any Subsidiary shall deny in writing that it has any liability or obligation
purported to be created under any Security Document;

                                      -9-

<PAGE>

                   (xiv) the Security Agreement or any other Security Document,
after delivery thereof pursuant hereto, shall for any reason fail or cease to
create a valid and perfected and, except to the extent permitted by the terms
hereof or thereof, first priority Lien in favor of the Collateral Agent for the
benefit of the holders of the Notes on any Collateral (as defined in the
Security Documents) purported to be covered thereby;

                   (xv) any bank at which any deposit account, blocked account,
or lockbox account of the Company or any Subsidiary is maintained shall fail to
comply with any material term of any deposit account, blocked account, lockbox
account or similar agreement to which such bank is a party or any securities
intermediary, commodity intermediary or other financial institution at any time
in custody, control or possession of any investment property of the Company or
any Subsidiary shall fail to comply with any of the material terms of any
investment property control agreement to which such Person is a party (it being
understood that only accounts pursuant to which the Collateral Agent has
requested account control agreements should be subject to this clause (xv)); OR

                   (xvi) any Event of Default (as defined in the Other Notes)
occurs with respect to any Other Notes.

              (b) REDEMPTION RIGHT. Upon the occurrence of an Event of Default
with respect to this Note, the Company shall within two (2) Business Days
deliver written notice thereof via facsimile and overnight courier (an "EVENT OF
DEFAULT NOTICE") to the Holder. At any time after the earlier of the Holder's
receipt of an Event of Default Notice and the Holder becoming aware of an Event
of Default, the Holder may require the Company to redeem all or any portion of
this Note by delivering written notice thereof (the "EVENT OF DEFAULT REDEMPTION
NOTICE") to the Company, which Event of Default Redemption Notice shall indicate
the Conversion Amount of this Note the Holder is electing to require the Company
to redeem. Each portion of this Note subject to redemption by the Company
pursuant to this Section 4(b) shall be redeemed by the Company at a price equal
to the greater of (i) the product of (A) the Conversion Amount to be redeemed
and (B) the Redemption Premium and (ii) the product of (A) the product of (1)
the Conversion Rate with respect to such Conversion Amount in effect at such
time as the Holder delivers an Event of Default Redemption Notice and (2) the
Equity Value Redemption Premium and (B) the greater of (1) the Closing Sale
Price of the Common Stock on the date immediately preceding such Event of
Default, (2) the Closing Sale Price of the Common Stock on the date immediately
after such Event of Default and (3) the Closing Sale Price of the Common Stock
on the date the Holder delivers the Event of Default Redemption Notice (the
"EVENT OF DEFAULT REDEMPTION PRICE"). Redemptions required by this Section 4(b)
shall be made in accordance with the provisions of Section 14. To the extent
redemptions required by this Section 4(b) are deemed or determined by a court of
competent jurisdiction to be prepayments of the Note by the Company, such
redemptions shall be deemed to be permitted voluntary prepayments. The parties
hereto agree that in the event of the Company's redemption of any portion of the
Note under this Section 4(b), the Holder's damages would be uncertain and
difficult to estimate because of the parties' inability to predict future
interest rates and the uncertainty of the availability of a suitable substitute
investment opportunity for the Holder. Accordingly, any Redemption Premium due
under this Section 4(b) is intended by the parties to be, and shall be deemed, a
reasonable estimate of the Holder's actual loss of its investment opportunity
and not as a penalty.

                                      -10-

<PAGE>

         (5) RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.

              (a) ASSUMPTION. The Company shall not enter into or be party to a
Fundamental Transaction unless (i) the Successor Entity assumes in writing all
of the obligations of the Company under this Note and the other Transaction
Documents in accordance with the provisions of this Section 5(a) pursuant to
written agreements in form and substance reasonably satisfactory to the Required
Holders and approved by the Required Holders prior to such Fundamental
Transaction, including agreements to deliver to each holder of Notes in exchange
for such Notes a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to the Notes, including,
without limitation, having a principal amount and interest rate equal to the
principal amounts and the interest rates of the Notes then outstanding held by
such holder, having similar conversion rights and having similar ranking to the
Notes, and satisfactory to the Required Holders and (ii) the Successor Entity
(including its Parent Entity) is a publicly traded corporation whose common
stock is quoted on or listed for trading on an Eligible Market (a "PUBLIC
SUCCESSOR ENTITY"). Upon the occurrence of any Fundamental Transaction, the
Successor Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of this Note
referring to the "Company" shall refer instead to the Successor Entity), and may
exercise every right and power of the Company and shall assume all of the
obligations of the Company under this Note with the same effect as if such
Successor Entity had been named as the Company herein. Upon consummation of the
Fundamental Transaction, the Successor Entity shall deliver to the Holder
confirmation that there shall be issued upon conversion or redemption of this
Note at any time after the consummation of the Fundamental Transaction, in lieu
of the shares of the Company's Common Stock (or other securities, cash, assets
or other property) issuable upon the conversion or redemption of the Notes prior
to such Fundamental Transaction, such shares of the publicly traded common stock
(or their equivalent) of the Successor Entity (including its Parent Entity), as
adjusted in accordance with the provisions of this Note. The provisions of this
Section shall apply similarly and equally to successive Fundamental Transactions
and shall be applied without regard to any limitations on the conversion or
redemption of this Note.

              (b) REDEMPTION RIGHT. No sooner than fifteen (15) days nor later
than ten (10) days prior to the consummation of a Change of Control, but not
prior to the public announcement of such Change of Control, the Company shall
deliver written notice thereof via facsimile and overnight courier to the Holder
(a "CHANGE OF CONTROL NOTICE"). At any time during the period beginning after
the Holder's receipt of a Change of Control Notice and ending twenty (20)
Trading Days after the date of the consummation of such Change of Control, the
Holder may require the Company to redeem all or any portion of this Note by
delivering written notice thereof ("CHANGE OF CONTROL REDEMPTION NOTICE") to the
Company, which Change of Control Redemption Notice shall indicate the Conversion
Amount the Holder is electing to require the Company to redeem. The portion of
this Note subject to redemption pursuant to this Section 5 shall be redeemed by
the Company in cash at a price equal to the greater of (i) 200% of the
Conversion Amount being redeemed and (ii) the product of (A) the product of (1)
the Equity Value Redemption Premium and (2) the Conversion Amount being redeemed

                                      -11-

<PAGE>

multiplied by (B) the quotient determined by dividing (x) the aggregate cash
consideration and the aggregate cash value of any non-cash consideration per
Common Share to be paid to the holders of the Common Shares upon consummation of
the Change of Control (any such non-cash consideration consisting of marketable
securities to be valued at the higher of (x) the Closing Sale Price of such
securities as of the Trading Day immediately prior to the consummation of such
Change of Control, (y) the Closing Sale Price as of the Trading Day immediately
following the public announcement of such proposed Change of Control and (z) the
Closing Sale Price as of the Trading Day immediately prior to the public
announcement of such proposed Change of Control) by (y) the Conversion Price
(the "CHANGE OF CONTROL REDEMPTION PRICE"). Redemptions required by this Section
5 shall be made in accordance with the provisions of Section 14 and shall have
priority to payments to stockholders in connection with a Change of Control. To
the extent redemptions required by this Section 5(b) are deemed or determined by
a court of competent jurisdiction to be prepayments of the Note by the Company,
such redemptions shall be deemed to be voluntary prepayments. Notwithstanding
anything to the contrary in this Section 5, but subject to Section 3(d), until
the Change of Control Redemption Price (together with any interest thereon) is
paid in full, the Conversion Amount submitted for redemption under this Section
5(c) (together with any interest thereon) may be converted, in whole or in part,
by the Holder into Common Stock pursuant to Section 3. The parties hereto agree
that in the event of the Company's redemption of any portion of the Note under
this Section 5(b), the Holder's damages would be uncertain and difficult to
estimate because of the parties' inability to predict future interest rates and
the uncertainty of the availability of a suitable substitute investment
opportunity for the Holder. Accordingly, any Change of Control redemption
premium due under this Section 5(b) is intended by the parties to be, and shall
be deemed, a reasonable estimate of the Holder's actual loss of its investment
opportunity and not as a penalty.

         (6) RIGHTS UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.

              (a) PURCHASE RIGHTS. If at any time the Company grants, issues or
sells any Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "PURCHASE RIGHTS"), then the Holder will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the
number of shares of Common Stock acquirable upon complete conversion of this
Note (without taking into account any limitations or restrictions on the
convertibility of this Note) 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.

              (b) OTHER CORPORATE EVENTS. In addition to and not in substitution
for any other rights hereunder, prior to the consummation of any Fundamental
Transaction pursuant to which holders of shares of Common Stock are entitled to
receive securities or other assets with respect to or in exchange for shares of
Common Stock (a "CORPORATE EVENT"), the Company shall make appropriate provision
to insure that the Holder will thereafter have the right to receive upon a
conversion of this Note, at the Holder's option, (i) in addition to the shares
of Common Stock receivable upon such conversion, such securities or other assets
to which the Holder would have been entitled with respect to such shares of

                                      -12-

<PAGE>

Common Stock had such shares of Common Stock been held by the Holder upon the
consummation of such Corporate Event (without taking into account any
limitations or restrictions on the convertibility of this Note) or (ii) in lieu
of the shares of Common Stock otherwise receivable upon such conversion, such
securities or other assets received by the holders of shares of Common Stock in
connection with the consummation of such Corporate Event in such amounts as the
Holder would have been entitled to receive had this Note initially been issued
with conversion rights for the form of such consideration (as opposed to shares
of Common Stock) at a conversion rate for such consideration commensurate with
the Conversion Rate. Provision made pursuant to the preceding sentence shall be
in a form and substance satisfactory to the Required Holders. The provisions of
this Section shall apply similarly and equally to successive Corporate Events
and shall be applied without regard to any limitations on the conversion or
redemption of this Note.

         (7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES.

              (a) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF COMMON STOCK.
If and whenever on or after the Subscription Date, the Company issues or sells,
or in accordance with this Section 7(a) is deemed to have issued or sold, any
shares of Common Stock (including the issuance or sale of shares of Common Stock
owned or held by or for the account of the Company, but excluding shares of
Common Stock deemed to have been issued or sold by the Company in connection
with any Excluded Security) for a consideration per share (the "NEW ISSUANCE
PRICE") less than a price (the "APPLICABLE PRICE") equal to the Conversion Price
in effect immediately prior to such issue or sale (the foregoing a "DILUTIVE
ISSUANCE"), then immediately after such Dilutive Issuance the Conversion Price
then in effect shall be reduced to an amount equal to the New Issuance Price.
For purposes of determining the adjusted Conversion Price under this Section
7(a), the following shall be applicable:

                   (i) ISSUANCE OF OPTIONS. If the Company in any manner grants
or sells any Options and the lowest price per share for which one share of
Common Stock is issuable upon the exercise of any such Option or upon conversion
or exchange or exercise of any Convertible Securities issuable upon exercise of
such Option is less than the Applicable Price, then such share of Common Stock
shall be deemed to be outstanding and to have been issued and sold by the
Company at the time of the granting or sale of such Option for such price per
share. For purposes of this Section 7(a)(i), the "lowest price per share for
which one share of Common Stock is issuable upon the exercise of any such Option
or upon conversion or exchange or exercise of any Convertible Securities
issuable upon exercise of such Option" shall be equal to the sum of the lowest
amounts of consideration (if any) received or receivable by the Company with
respect to any one share of Common Stock upon granting or sale of the Option,
upon exercise of the Option and upon conversion or exchange or exercise of any
Convertible Security issuable upon exercise of such Option. No further
adjustment of the Conversion Price shall be made upon the actual issuance of
such share of Common Stock or of such Convertible Securities upon the exercise
of such Options or upon the actual issuance of such Common Stock upon conversion
or exchange or exercise of such Convertible Securities.

                                      -13-

<PAGE>

                   (ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in
any manner issues or sells any Convertible Securities and the lowest price per
share for which one share of Common Stock is issuable upon such conversion or
exchange or exercise thereof is less than the Applicable Price, then such share
of Common Stock shall be deemed to be outstanding and to have been issued and
sold by the Company at the time of the issuance or sale of such Convertible
Securities for such price per share. For the purposes of this Section 7(a)(ii),
the "lowest price per share for which one share of Common Stock is issuable upon
such conversion or exchange or exercise" shall be equal to the sum of the lowest
amounts of consideration (if any) received or receivable by the Company with
respect to any one share of Common Stock upon the issuance or sale of the
Convertible Security and upon the conversion or exchange or exercise of such
Convertible Security. No further adjustment of the Conversion Price shall be
made upon the actual issuance of such share of Common Stock upon conversion or
exchange or exercise of such Convertible Securities, and if any such issue or
sale of such Convertible Securities is made upon exercise of any Options for
which adjustment of the Conversion Price had been or are to be made pursuant to
other provisions of this Section 7(a), no further adjustment of the Conversion
Price shall be made by reason of such issue or sale.

                   (iii) CHANGE IN OPTION PRICE OR RATE OF CONVERSION. If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion, exchange or exercise of any Convertible
Securities, or the rate at which any Convertible Securities are convertible into
or exchangeable or exercisable for Common Stock changes at any time, the
Conversion Price in effect at the time of such change shall be adjusted to the
Conversion Price which would have been in effect at such time had such Options
or Convertible Securities provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold. For purposes of this Section 7(a)(iii), if
the terms of any Option or Convertible Security that was outstanding as of the
Subscription Date are changed in the manner described in the immediately
preceding sentence, then such Option or Convertible Security and the Common
Stock deemed issuable upon exercise, conversion or exchange thereof shall be
deemed to have been issued as of the date of such change. No adjustment shall be
made if such adjustment would result in an increase of the Conversion Price then
in effect.

                   (iv) CALCULATION OF CONSIDERATION RECEIVED. In case any
Option or Convertible Security is issued in connection with the issue or sale of
other securities of the Company, together comprising one integrated transaction
in which no specific consideration is allocated to such Option or Convertible
Security by the parties thereto, the Option or Convertible Security will be
deemed to have been issued for a consideration of $.01. If any Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor will be deemed to
be the net amount received by the Company therefor. If any Common Stock, Options
or Convertible Securities are issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the Company
will be the fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration received by
the Company will be the Closing Sale Price of such securities on the date of
receipt. If any Common Stock, Options or Convertible Securities are issued to
the owners of the non-surviving entity in connection with any merger in which
the Company is the surviving entity, the amount of consideration therefor will
be deemed to be the fair value of such portion of the net assets and business of

                                      -14-

<PAGE>

the non-surviving entity as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any consideration
other than cash or securities will be determined jointly by the Company and the
Required Holders. If such parties are unable to reach agreement within ten (10)
days after the occurrence of an event requiring valuation (the "VALUATION
EVENT"), the fair value of such consideration will be determined within five (5)
Business Days after the tenth (10th) day following the Valuation Event by an
independent, reputable appraiser jointly selected by the Company and the
Required Holders. The determination of such appraiser shall be deemed binding
upon all parties absent manifest error and the fees and expenses of such
appraiser shall be borne by the Company.

                   (v) RECORD DATE. If the Company takes a record of the holders
of Common Stock for the purpose of entitling them (A) to receive a dividend or
other distribution payable in Common Stock, Options or in Convertible Securities
or (B) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue or
sale of the Common Stock deemed to have been issued or sold upon the declaration
of such dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.

              (b) ADJUSTMENT OF CONVERSION PRICE UPON SUBDIVISION OR COMBINATION
OF COMMON STOCK. If the Company at any time on or after the Subscription Date
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its outstanding shares of Common Stock into a greater
number of shares, the Conversion Price in effect immediately prior to such
subdivision will be proportionately reduced. If the Company at any time on or
after the Subscription Date combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, the Conversion Price in effect immediately prior to
such combination will be proportionately increased.

              (c) OTHER EVENTS. If any event occurs of the type contemplated by
the provisions of this Section 7 but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Company's Board of Directors will make an appropriate adjustment in the
Conversion Price so as to protect the rights of the Holder under this Note;
provided that no such adjustment will increase the Conversion Price as otherwise
determined pursuant to this Section 7.

         (8) [Intentionally Omitted].

         (9) COMPANY'S RIGHT OF MANDATORY CONVERSION.

                                      -15-

<PAGE>

              (a) MANDATORY CONVERSION. If at any time from and after the
Issuance Date (the "MANDATORY CONVERSION ELIGIBILITY DATE"), (i) the arithmetic
average of the Weighted Average Price of the Common Stock for any five (5)
consecutive Trading Days following the Mandatory Conversion Eligibility Date
(the "MANDATORY CONVERSION MEASURING PERIOD") equals or exceeds either (A) 150%
(the "FIRST CONVERSION THRESHOLD") or (B) 175% (the "SECOND CONVERSION
THRESHOLD") of the Conversion Price on the Closing Date (subject to appropriate
adjustments for stock splits, stock dividends, stock combinations and other
similar transactions after the Subscription Date) and (ii) there is not then an
Equity Conditions Failure, the Company shall have the right to require the
Holder to convert (1) if the First Conversion Threshold has been met, up to the
First Conversion Threshold Amount or (2) if the Second Conversion Threshold has
been met, up to the entire Conversion Amount then remaining under this Note, in
each CASE as designated in the Mandatory Conversion Notice (as defined below)
into fully paid, validly issued and nonassessable shares of Common Stock in
accordance with Section 3(c) hereof at the Conversion Price as of the Mandatory
Conversion Date (as defined below) (a "MANDATORY CONVERSION"). The Company may
exercise its right to require conversion under this Section 9(a) by delivering
within not more than two (2) Trading Days following the end of such Mandatory
Conversion Measuring Period a written notice thereof by facsimile and overnight
courier to all, but not less than all, of the holders of Notes and the Transfer
Agent (the "MANDATORY CONVERSION NOTICE" and the date all of the holders
received such notice by facsimile is referred to as the "MANDATORY CONVERSION
NOTICE DATE"). The Mandatory Conversion Notice shall be irrevocable. The
Mandatory Conversion Notice shall state (u) the Trading Day selected for the
Mandatory Conversion in accordance with Section 9(a), which Trading Day shall be
no later than ten (10) Business Days following the Mandatory Conversion Notice
Date (the "MANDATORY CONVERSION DATE"), (v) the aggregate Conversion Amount,
including any applicable First Conversion Threshold Amount, of the Notes subject
to Mandatory Conversion from the Holder and all of the holders of the Notes
pursuant to this Section 9 (and analogous provisions under the Other Notes), (w)
the number of shares of Common Stock to be issued to such Holder on the
Mandatory Conversion Date, (x) that upon consummation of the Mandatory
Conversion the Series O Warrants shall become exercisable in accordance with the
terms thereof, (y) the number of shares of Common Stock into which the Series O
Warrants shall become exercisable and (z) that there has been no Equity
Conditions Failure; provided, however, that the Company may not effect a
Mandatory Conversion under this Section in excess of the Holder Pro Rata Amount
of the applicable Volume Limitation. Notwithstanding the foregoing, the Company
may effect only one (1) Mandatory Conversion with respect to the First
Conversion Threshold Amount during any twenty (20) consecutive Trading Days.

              (b) PRO RATA CONVERSION REQUIREMENT. If the Company elects to
cause a conversion of any Conversion Amount of this Note pursuant to Section
9(a), then it must simultaneously take the same action in the same proportion
with respect to the Other Notes. If the Company elects a Mandatory Conversion of
this Note pursuant to Section 9(a) (or similar provisions under the Other Notes)
with respect to less than all of the Conversion Amounts of the Notes then
outstanding, then the Company shall require conversion of a Conversion Amount
from each of the holders of the Notes equal to the product of (i) the aggregate
Conversion Amount of Notes which the Company has elected to cause to be
converted pursuant to Section 9(a), multiplied by (ii) the fraction, the
numerator of which is the sum of the aggregate Original Principal Amount of the
Notes purchased by such holder of outstanding Notes and the denominator of which
is the sum of the aggregate Original Principal Amount of the Notes purchased by
all holders holding outstanding Notes (such fraction with respect to each holder

                                      -16-

<PAGE>

is referred to as its "CONVERSION ALLOCATION PERCENTAGE," and such amount with
respect to each holder is referred to as its "PRO RATA CONVERSION AMOUNT");
provided, however, that in the event that any holder's Pro Rata Conversion
Amount exceeds the outstanding Principal amount of such holder's Note, then such
excess Pro Rata Conversion Amount shall be allocated amongst the remaining
holders of Notes in accordance with the foregoing formula. In the event that the
initial holder of any Notes shall sell or otherwise transfer any of such
holder's Notes, the transferee shall be allocated a pro rata portion of such
holder's Conversion Allocation Percentage and the Pro Rata Conversion Amount.

         (10) HOLDER'S RIGHT OF OPTIONAL CONVERSION/REDEMPTION.

              (a) GENERAL. At any time and from time to time after August 1,
2010, the Holder shall have the right, in its sole discretion, to require that
the Company, provided there has been no Equity Conditions Failure convert, or,
at the Company's election, redeem a Principal amount of this Note in an amount
up to the Available Conversion/Redemption Amount plus accrued and unpaid Late
Charges with respect to such Principal and Interest (the "CONVERSION/REDEMPTION
AMOUNT") by delivering written notice thereof (a "HOLDER OPTIONAL
CONVERSION/REDEMPTION NOTICE" and the date the Holder delivers such notice, the
"HOLDER OPTIONAL CONVERSION/REDEMPTION NOTICE DATE"). Within one (1) Business
Day of the Holder Optional Conversion/Redemption Notice Date, the Company shall
deliver to the Holder a written notice (a "COMPANY CONVERSION/REDEMPTION NOTICE"
and the date the Holder receives such written notice, the "COMPANY
CONVERSION/REDEMPTION NOTICE DATE") which notice shall (i) either (A) confirm
that the Conversion/Redemption Amount shall be converted (an "OPTIONAL
CONVERSION") in full (the "OPTIONAL CONVERSION AMOUNT") or (B)(1) state that the
Company elects to redeem (an "OPTIONAL REDEMPTION"), in whole or in part, the
Conversion/Redemption Amount and (2) specify the portion which the Company
elects to redeem pursuant to an Optional Redemption (such amount to be redeemed,
the "OPTIONAL REDEMPTION AMOUNT") and the portion, if any, that the Company
elects to convert pursuant to an Optional Conversion (such amount also, an
"OPTIONAL CONVERSION AMOUNT") and (ii) if the Conversion/Redemption Amount is to
be paid, in whole or in part, pursuant to an Optional Conversion Amount, certify
that there has been no Equity Conditions Failure. Each Company
Conversion/Redemption Notice shall be irrevocable. The Company shall redeem and
convert any Optional Redemption Amounts and Optional Conversion Amounts within
five (5) Trading Days of the Company Conversion/Redemption Notice Date (the
"OPTIONAL CONVERSION/REDEMPTION DATE"). The portion of this Note subject to
redemption pursuant to this Section 10 shall be redeemed by the Company in cash
at a price equal to the Optional Redemption Amount (the "HOLDER OPTIONAL
REDEMPTION PRICE").

              (b) MECHANICS OF HOLDER OPTIONAL CONVERSION. (i) If the Company
delivers a Company Conversion/Redemption Notice electing an Optional Conversion
in accordance with Section 10(a), then, on the Trading Day prior to the Optional
Conversion/Redemption Date, the Company shall, or shall direct the Transfer
Agent to, deliver to the Holder's account with DTC, or issue the Holder a
certificate for, a number of shares of Common Stock equal to the quotient of (A)
such Optional Conversion Amount divided by (B) the Optional Conversion Price
(the "PRE-CONVERSION SHARES"). On the Trading Day immediately after the end of
the Optional Conversion/Redemption Measuring Period (the "HOLDER
CONVERSION/REDEMPTION SETTLEMENT DATE"), the Company shall, or shall direct the

                                      -17-

<PAGE>

Transfer Agent to, deliver to the Holder's account with DTC, or issue the Holder
a certificate for, a number of additional shares of Common Stock, if any, equal
to the Holder Balance Conversion Shares. If an Event of Default occurs during
any applicable Optional Conversion/Redemption Measuring Period and the Holder
elects an Event of Default Redemption in accordance with Section 4(b), then, at
the Holder's option, either (1) the Holder, upon receipt of the Event of Default
Redemption Price (which Redemption Price includes redemption of any portion of a
Holder Optional Conversion Amount represented by Pre-Conversion Shares that the
Holder shall return to the Company), shall return any Pre-Conversion Shares
delivered in connection with the Holder Optional Conversion/Redemption Date,
which the Holder has not otherwise sold, transferred or disposed of, to the
Company or (2) the Conversion Amount used to calculate the Event of Default
Redemption Price shall be reduced by the product of (x) the Holder Optional
Conversion Amount applicable to such Holder Optional Conversion/Redemption Date
multiplied by (y) the Holder Conversion Share Ratio.

                   (ii) If there is an Equity Conditions Failure at the Holder
Optional Conversion/Redemption Date or the Holder Optional Conversion/Redemption
Settlement Date, as applicable, then at the option of the Holder designated in
writing to the Company, the Holder may require the Company to do either one or
both of the following: (A) the Company shall redeem all or any part designated
by the Holder of the unconverted Holder Optional Conversion Amount (such
designated amount is referred to as the "HOLDER DESIGNATED REDEMPTION AMOUNT")
on such Holder Optional Conversion/Redemption Date or Holder
Conversion/Redemption Settlement Date, as applicable, and the Company shall pay
to the Holder on such Holder Optional Conversion/Redemption Date or Holder
Conversion/Redemption Settlement Date, as applicable, by wire transfer of
immediately available funds, an amount in cash equal to 125% of such Holder
Designated Redemption Amount, and/or (B) the Holder Optional Conversion shall be
null and void with respect to all or any part designated by the Holder of the
unconverted Holder Optional Conversion Amount and the Holder shall be entitled
to all the rights of a holder of this Note with respect to such amount of the
Holder Optional Conversion Amount; provided, however, that the Conversion Price
for such unconverted Holder Optional Conversion Amount shall thereafter be
adjusted to equal the lesser of (1) the Optional Conversion Price as in effect
on the date on which the Holder voided the Holder Optional Conversion and (2)
the Optional Conversion Price as in effect on the date on which the Holder
delivers a Conversion Notice relating thereto. In the event the Holder elects to
require payment of the Holder Designated Redemption Amount upon an Equity
Conditions Failure following the Holder Optional Conversion/Redemption Date, at
the Holder's option, either (x) the Holder shall, upon receipt of a Holder
Designated Redemption Amount (which amount includes redemption of any portion of
a Holder Optional Conversion Amount represented by Pre-Conversion Shares that
the Holder shall return to the Company), return any Pre-Conversion Shares
delivered in connection with the applicable Holder Optional
Conversion/Redemption Date, which the Holder has not otherwise sold, transferred
or disposed of, to the Company or (y) any related Holder Designated Redemption
Amount shall be reduced by the product of (I) the Holder Optional Conversion
Amount applicable to such Holder Optional Conversion/Redemption Date multiplied
by (II) the Holder Conversion Share Ratio. If the Company fails to redeem the
Holder Designated Redemption Amount on or before the Holder Optional
Conversion/Redemption Date or Holder Conversion/Redemption Settlement Date, as
applicable, by payment of such amount on such Holder Optional
Conversion/Redemption Date or Holder Conversion/Redemption Settlement Date, as
applicable, then the Holder shall have the rights set forth in Section 14(a) as
if the Company failed to pay the applicable Holder Optional Redemption Price and
all other rights under this Note (including, without limitation, such failure
constituting an Event of Default described in Section 4(a)(xi)).

                                      -18-

<PAGE>

              (c) MECHANICS OF HOLDER OPTIONAL REDEMPTION. Optional Redemptions
made pursuant to this Section 10 shall be made in accordance with Section 14.

         (11) HOLDER'S RIGHT OF REDEMPTION OF OPTIONAL REDEMPTION AMOUNT. . At
each of the first (1st) and second (2nd) anniversaries of the Issuance Date (an
"OPTIONAL ANNUAL REDEMPTION ELIGIBILITY DATE"), the Holder shall have the right,
in its sole discretion, to require that the Company redeem (an "OPTIONAL ANNUAL
REDEMPTION") a portion of this Note equal to up to one third (1/3) of the
initial Principal amount of this Note by delivering written notice thereof (an
"OPTIONAL ANNUAL REDEMPTION NOTICE" and the date the Holder delivers such
notice, the "OPTIONAL ANNUAL REDEMPTION NOTICE DATE") which notice shall state
(i) the portion of the initial Principal Amount that is being redeemed (the
"OPTIONAL ANNUAL REDEMPTION AMOUNT") and (ii) the date on which the Optional
Annual Redemption shall occur which date shall be not less than five (5)
Business Days from the Annual Redemption Notice Date (the "OPTIONAL ANNUAL
REDEMPTION DATE"). The portion of this Note subject to redemption pursuant to
this Section 11 shall be redeemed by the Company in cash at a price equal to the
Optional Annual Redemption Amount plus any accrued and unpaid Interest thereon
plus Late Charges, if any, on such Principal and Interest (the "OPTIONAL ANNUAL
REDEMPTION PRICE"). If the Holder chooses to exercise an Optional Annual
Redemption on the first (1st) anniversary of the Issuance Date for an Optional
Annual Redemption Amount greater than one sixth (1/6) of the initial Principal
amount of this Note, the Company shall redeem the first one sixth (1/6) of such
Principal amount in cash at the Optional Annual Redemption Price, and at the
Company's election, either redeem the remaining Optional Annual Redemption
Amount in cash at the Optional Annual Redemption Price or convert all or a
portion of such amount greater than one sixth (1/6) into Common Stock (also, an
"OPTIONAL CONVERSION", and such amount to be converted, also an "OPTIONAL
CONVERSION AMOUNT"). Within one (1) Business Day of the Optional Annual
Redemption Notice Date, the Company shall deliver to the Holder a written notice
(a "COMPANY OPTIONAL ANNUAL REDEMPTION NOTICE" and the date the Holder receives
such written notice, the "COMPANY OPTIONAL ANNUAL REDEMPTION NOTICE DATE") which
notice shall (i) either (A) specify that the Optional Annual Redemption Amount
shall be redeemed in its entirety or (B)(1) state that the Company elects to
convert, in whole or in part, a portion of the Optional Annual Redemption Amount
and (2) specify the portion which the Company elects to convert and the portion,
if any, that the Company elects to redeem and (ii) if the Annual Optional
Redemption Amount is to be partially converted, certify that there has been no
Equity Conditions Failure. Each Company Optional Annual Redemption Notice shall
be irrevocable. The Company shall redeem and convert any amounts within five (5)
Trading Days of the Optional Annual Redemption Notice Date. Optional Annual
Redemptions made pursuant to this Section 11 shall be made in accordance with
Section 14. Optional Conversions made pursuant to this Section 11 shall be made
in accordance with Section 10(b).

         (12) NONCIRCUMVENTION. The Company hereby covenants and agrees that the
Company will not, by amendment of its Articles of Incorporation, Bylaws or
through any reorganization, transfer of assets, consolidation, merger, scheme of
arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of this Note, and will at all times in good faith carry out all of the
provisions of this Note and take all action as may be required to protect the
rights of the Holder of this Note.

                                      -19-

<PAGE>

         (13) RESERVATION OF AUTHORIZED SHARES.

              (a) RESERVATION. Commencing on the Issuance Date, the Company
shall reserve out of its authorized and unissued Common Stock a number of shares
of Common Stock for each of the Notes equal to 130% of the Conversion Rate with
respect to the Conversion Amount of each such Note as of the Issuance Date and,
for so long thereafter as any of the Notes are outstanding, the Company shall
take all action necessary to reserve and keep available out of its authorized
and unissued Common Stock, solely for the purpose of effecting the conversion of
the Notes, 130% of the number of shares of Common Stock as shall from time to
time be necessary to effect the conversion of all of the Notes then outstanding;
provided that at no time shall the number of shares of Common Stock so reserved
be less than the number of shares required to be reserved by the previous
sentence (without regard to any limitations on conversions) (such applicable
amount, the "REQUIRED RESERVE AMOUNT"). The initial number of shares of Common
Stock reserved for conversions of the Notes and each increase in the number of
shares so reserved shall be allocated pro rata among the holders of the Notes
based on the principal amount of the Notes held by each holder at the Closing
(as defined in the Securities Purchase Agreement) or increase in the number of
reserved shares, as the case may be (the "AUTHORIZED SHARE ALLOCATION"). In the
event that a holder shall sell or otherwise transfer any of such holder's Notes,
each transferee shall be allocated a pro rata portion of such holder's
Authorized Share Allocation. Any shares of Common Stock reserved and allocated
to any Person which ceases to hold any Notes shall be allocated to the remaining
holders of Notes, pro rata based on the principal amount of the Notes then held
by such holders.

              (b) INSUFFICIENT AUTHORIZED SHARES. If at any time while any of
the Notes remain outstanding the Company does not have a sufficient number of
authorized and unreserved shares of Common Stock to satisfy its obligation to
reserve for issuance upon conversion of the Notes at least a number of shares of
Common Stock equal to the Required Reserve Amount (an "AUTHORIZED SHARE
FAILURE"), then the Company shall immediately take all action necessary to
increase the Company's authorized shares of Common Stock to an amount sufficient
to allow the Company to reserve the Required Reserve Amount for the Notes then
outstanding. Without limiting the generality of the foregoing sentence, as soon
as practicable after the date of the occurrence of an Authorized Share Failure,
but in no event later than seventy-five (75) days after the occurrence of such
Authorized Share Failure, the Company shall hold a meeting of its stockholders
for the approval of an increase in the number of authorized shares of Common
Stock. In connection with such meeting, the Company shall provide each
stockholder with a proxy statement and shall use its best efforts to solicit its
stockholders' approval of such increase in authorized shares of Common Stock and
to cause its board of directors to recommend to the stockholders that they
approve such proposal.

         (14) HOLDER'S REDEMPTIONS.

                                      -20-

<PAGE>

              (a) MECHANICS. The Company shall deliver the applicable Event of
Default Redemption Price to the Holder within five (5) Business Days after the
Company's receipt of the Holder's Event of Default Redemption Notice. If the
Holder has submitted a Change of Control Redemption Notice in accordance with
Section 5(b), the Company shall deliver the applicable Change of Control
Redemption Price to the Holder (i) concurrently with the consummation of such
Change of Control if such notice is received prior to the consummation of such
Change of Control and (ii) within five (5) Business Days after the Company's
receipt of such notice otherwise. The Company shall deliver the applicable
Optional Annual Redemption Price to the Holder on the applicable Optional Annual
Redemption Date. The Company shall deliver the applicable Holder Optional
Redemption Price on the applicable Optional Redemption Date. In the event of a
redemption of less than all of the Conversion Amount of this Note, the Company
shall promptly cause to be issued and delivered to the Holder a new Note (in
accordance with Section 20(d)) representing the outstanding Principal which has
not been redeemed. In the event that the Company does not pay the applicable
Redemption Price to the Holder within the time period required, at any time
thereafter and until the Company pays such unpaid Redemption Price in full, the
Holder shall have the option, in lieu of redemption, to require the Company to
promptly return to the Holder all or any portion of this Note representing the
Conversion Amount that was submitted for redemption and for which the applicable
Redemption Price (together with any Late Charges thereon) has not been paid.
Upon the Company's receipt of such notice, (x) the applicable Redemption Notice
shall be null and void with respect to such Conversion Amount, (y) the Company
shall immediately return this Note, or issue a new Note (in accordance with
Section 20(d)) to the Holder representing the sum of such Conversion Amount to
be redeemed together with accrued and unpaid Interest with respect to such
Conversion Amount and accrued and unpaid Late Charges with respect to such
Conversion Amount and Interest and (z) the Conversion Price of this Note or such
new Notes shall be adjusted to the lesser of (A) the Conversion Price as in
effect on the date on which the applicable Redemption Notice is voided and (B)
the lowest Closing Bid Price of the Common Stock during the period beginning on
and including the date on which the applicable Redemption Notice is delivered to
the Company and ending on and including the date on which the applicable
Redemption Notice is voided. The Holder's delivery of a notice voiding a
Redemption Notice and exercise of its rights following such notice shall not
affect the Company's obligations to make any payments of Late Charges which have
accrued prior to the date of such notice with respect to the Conversion Amount
subject to such notice.

              (b) REDEMPTION BY OTHER HOLDERS. Upon the Company's receipt of
notice from any of the holders of the Other Notes for redemption or repayment as
a result of an event or occurrence substantially similar to the events or
occurrences described in Section 4(b), Section 5(b) or Section 10 (each, an
"OTHER REDEMPTION NOTICE"), the Company shall immediately, but no later than two
(2) Business Days of its receipt thereof, forward to the Holder by facsimile a
copy of such notice. If the Company receives a Redemption Notice and one or more
Other Redemption Notices, during the seven (7) Business Day period beginning on
and including the date which is three (3) Business Days prior to the Company's
receipt of the Holder's Redemption Notice and ending on and including the date
which is three (3) Business Days after the Company's receipt of the Holder's
Redemption Notice and the Company is unable to redeem all principal, interest
and other amounts designated in such Redemption Notice and such Other Redemption
Notices received during such seven (7) Business Day period, then the Company
shall redeem a pro rata amount from each holder of the Notes (including the
Holder) based on the principal amount of the Notes submitted for redemption
pursuant to such Redemption Notice and such Other Redemption Notices received by
the Company during such seven (7) Business Day period.

                                      -21-

<PAGE>

         (15) VOTING RIGHTS. The Holder shall have no voting rights as the
holder of this Note, except as required by law, including, but not limited to,
the Colorado Corporations and Associations Act, and as expressly provided in
this Note.

         (16) COVENANTS.

              (a) RANK. All payments due under this Note (a) shall rank PARI
PASSU with all Other Notes and the Existing Notes and (b) shall be senior to all
other Indebtedness of the Company and its Subsidiaries other than Permitted
Senior Indebtedness.

              (b) INCURRENCE OF INDEBTEDNESS. So long as this Note is
outstanding, the Company shall not, and the Company shall not permit any of its
Subsidiaries to, directly or indirectly, incur or guarantee, assume or suffer to
exist any Indebtedness, other than the Indebtedness evidenced by this Note and
the Other Notes and other Permitted Indebtedness.

              (c) EXISTENCE OF LIENS. So long as this Note is outstanding, the
Company shall not, and the Company shall not permit any of its Subsidiaries to,
directly or indirectly, allow or suffer to exist any mortgage, lien, pledge,
charge, security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by the Company or any of its
Subsidiaries (collectively, "LIENS") other than Permitted Liens.

              (d) RESTRICTED PAYMENTS. The Company shall not, and the Company
shall not permit any of its Subsidiaries to, directly or indirectly, redeem,
defease, repurchase, repay or make any payments in respect of, by the payment of
cash or cash equivalents (in whole or in part, whether by way of open market
purchases, tender offers, private transactions or otherwise), all or any portion
of any Permitted Indebtedness, whether by way of payment in respect of principal
of (or premium, if any) or interest on, such Indebtedness if at the time such
payment is due or is otherwise made or, after giving effect to such payment, an
event constituting, or that with the passage of time and without being cured
would constitute, an Event of Default has occurred and is continuing.

              (e) RESTRICTION ON REDEMPTION AND CASH DIVIDENDS. Until all of the
Notes have been converted, redeemed or otherwise satisfied in accordance with
their terms, the Company shall not, directly or indirectly, redeem, repurchase
or declare or pay any cash dividend or distribution on its capital stock without
the prior express written consent of the Required Holders.

         (17) PARTICIPATION. The Holder, as the holder of this Note, shall be
entitled to receive such dividends paid and distributions made to the holders of
Common Stock to the same extent as if the Holder had converted this Note into
Common Stock (without regard to any limitations on conversion herein or
elsewhere) and had held such shares of Common Stock on the record date for such
dividends and distributions. Payments under the preceding sentence shall be made
concurrently with the dividend or distribution to the holders of Common Stock.

                                      -22-

<PAGE>

         (18) VOTE TO ISSUE, OR CHANGE THE TERMS OF, NOTES. The affirmative vote
at a meeting duly called for such purpose or the written consent without a
meeting of the Required Holders shall be required for any change or amendment to
this Note or the Other Notes.

         (19) TRANSFER. This Note and any shares of Common Stock issued upon
conversion of this Note may be offered, sold, assigned or transferred by the
Holder without the consent of the Company, subject only to the provisions of
Section 3(c)(iii) above and Section 2(f) of the Securities Purchase Agreement.

         (20) REISSUANCE OF THIS NOTE.

              (a) TRANSFER. If this Note is to be transferred, the Holder shall
surrender this Note to the Company, whereupon the Company will forthwith issue
and deliver upon the order of the Holder a new Note (in accordance with Section
20(d)), registered as the Holder may request, representing the outstanding
Principal being transferred by the Holder and, if less than the entire
outstanding Principal is being transferred, a new Note (in accordance with
Section 20(d)) to the Holder representing the outstanding Principal not being
transferred. The Holder and any assignee, by acceptance of this Note,
acknowledge and agree that, by reason of the provisions of Section 3(c)(iii)
following conversion or redemption of any portion of this Note, the outstanding
Principal represented by this Note may be less than the Principal stated on the
face of this Note.

              (b) LOST, STOLEN OR MUTILATED NOTE. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Note, and, in the case of loss, theft or destruction, of
any indemnification undertaking by the Holder to the Company in customary form
and, in the case of mutilation, upon surrender and cancellation of this Note,
the Company shall execute and deliver to the Holder a new Note (in accordance
with Section 20(d)) representing the outstanding Principal.

              (c) NOTE EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Note is
exchangeable, upon the surrender hereof by the Holder at the principal office of
the Company, for a new Note or Notes (in accordance with Section 20(d) and in
principal amounts of at least $100,000) representing in the aggregate the
outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time
of such surrender.

              (d) ISSUANCE OF NEW NOTES. Whenever the Company is required to
issue a new Note pursuant to the terms of this Note, such new Note (i) shall be
of like tenor with this Note, (ii) shall represent, as indicated on the face of
such new Note, the Principal remaining outstanding (or in the case of a new Note
being issued pursuant to Section 20(a) or Section 20(c), the Principal
designated by the Holder which, when added to the principal represented by the
other new Notes issued in connection with such issuance, does not exceed the
Principal remaining outstanding under this Note immediately prior to such
issuance of new Notes), (iii) shall have an issuance date, as indicated on the
face of such new Note, which is the same as the Issuance Date of this Note, (iv)
shall have the same rights and conditions as this Note, and (v) shall represent
accrued and unpaid Interest and Late Charges, if any, on the Principal and
Interest of this Note, from the Issuance Date.

                                      -23-

<PAGE>

         (21) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in
addition to all other remedies available under this Note and any of the other
Transaction Documents at law or in equity (including a decree of specific
performance and/or other injunctive relief), and nothing herein shall limit the
Holder's right to pursue actual and consequential damages for any failure by the
Company to comply with the terms of this Note. Amounts set forth or provided for
herein with respect to payments, conversion and the like (and the computation
thereof) shall be the amounts to be received by the Holder and shall not, except
as expressly provided herein, be subject to any other obligation of the Company
(or the performance thereof). The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the Holder
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.

         (22) PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this
Note is placed in the hands of an attorney for collection or enforcement or is
collected or enforced through any legal proceeding or the Holder otherwise takes
action to collect amounts due under this Note or to enforce the provisions of
this Note or (b) there occurs any bankruptcy, reorganization, receivership of
the Company or other proceedings affecting Company creditors' rights and
involving a claim under this Note, then the Company shall pay the costs incurred
by the Holder for such collection, enforcement or action or in connection with
such bankruptcy, reorganization, receivership or other proceeding, including,
but not limited to, attorneys' fees and disbursements.

         (23) CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly
drafted by the Company and all the Purchasers and shall not be construed against
any person as the drafter hereof. The headings of this Note are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Note.

         (24) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part
of the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.

         (25) DISPUTE RESOLUTION. In the case of a dispute as to the
determination of the Closing Bid Price, the Closing Sale Price or the Weighted
Average Price or the arithmetic calculation of the Conversion Rate, Conversion
Price or any Redemption Price, the Company shall submit the disputed
determinations or arithmetic calculations via facsimile within three (3)
Business Days of receipt, or deemed receipt, of the Conversion Notice or
Redemption Notice or other event giving rise to such dispute, as the case may
be, to the Holder. If the Holder and the Company are unable to agree upon such
determination or calculation within three (3) Business Days of such disputed
determination or arithmetic calculation being submitted to the Holder, then the

                                      -24-

<PAGE>

Company shall, within three (3) Business Days submit via facsimile (a) the
disputed determination of the Closing Bid Price, the Closing Sale Price or the
Weighted Average Price to an independent, reputable investment bank selected by
the Company and approved by the Holder or (b) the disputed arithmetic
calculation of the Conversion Rate, Conversion Price or any Redemption Price to
the Company's independent, outside accountant. The Company, at the Company's
expense, shall cause the investment bank or the accountant, as the case may be,
to perform the determinations or calculations and notify the Company and the
Holder of the results no later than ten (10) Business Days from the time it
receives the disputed determinations or calculations. Such investment bank's or
accountant's determination or calculation, as the case may be, shall be binding
upon all parties absent demonstrable error.

         (26) NOTICES; PAYMENTS.

              (a) NOTICES. Whenever notice is required to be given under this
Note, unless otherwise provided herein, such notice shall be given in accordance
with Section 10(f) of the Securities Purchase Agreement. The Company shall
provide the Holder with prompt written notice of all actions taken pursuant to
this Note, including in reasonable detail a description of such action and the
reason therefore. Without limiting the generality of the foregoing, the Company
will give written notice to the Holder (i) immediately upon any adjustment of
the Conversion Price, setting forth in reasonable detail, and certifying, the
calculation of such adjustment and (ii) at least twenty (20) days prior to the
date on which the Company closes its books or takes a record (A) with respect to
any dividend or distribution upon the Common Stock, (B) with respect to any pro
rata subscription offer to holders of Common Stock or (C) for determining rights
to vote with respect to any Fundamental Transaction, dissolution or liquidation,
provided in each case that such information shall be made known to the public
prior to or in conjunction with such notice being provided to the Holder.

              (b) PAYMENTS. Whenever any payment of cash is to be made by the
Company to any Person pursuant to this Note, such payment shall be made in
lawful money of the United States of America by a check drawn on the account of
the Company and sent via overnight courier service to such Person at such
address as previously provided to the Company in writing (which address, in the
case of each of the Purchasers, shall initially be as set forth on the Schedule
of Buyers attached to the Securities Purchase Agreement); provided that the
Holder may elect to receive a payment of cash via wire transfer of immediately
available funds by providing the Company with prior written notice setting out
such request and the Holder's wire transfer instructions. 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 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. Any amount of Principal or other amounts due under the Transaction
Documents, other than Interest, which is not paid when due shall result in a
late charge being incurred and payable by the Company in an amount equal to
interest on such amount at the rate of eighteen percent (18%) per annum from the
date such amount was due until the same is paid in full ("LATE Charge").

                                      -25-

<PAGE>

         (27) CANCELLATION. After all Principal, accrued Interest and other
amounts at any time owed on this Note have been paid in full, this Note shall
automatically be deemed canceled, shall be surrendered to the Company for
cancellation and shall not be reissued.

         (28) WAIVER OF NOTICE. To the extent permitted by law, the Company
hereby waives demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Note and the Securities Purchase Agreement.

         (29) GOVERNING LAW. This Note shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Note shall be governed by, the internal
laws of the State of New York, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of New York. The Company hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in The City of
New York, Borough of Manhattan, for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. In the event that any provision
of this Note 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 such provision which may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
of this Note. Nothing contained herein shall be deemed or operate to preclude
the Holder from bringing suit or taking other legal action against the Company
in any other jurisdiction to collect on the Company's obligations to the Holder,
to realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court ruling in favor of the Holder. THE COMPANY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

         (30) CERTAIN DEFINITIONS. For purposes of this Note, the following
terms shall have the following meanings:

              (a) "APPROVED STOCK PLAN" means any employee benefit plan which
has been approved by the Board of Directors of the Company, pursuant to which
the Company's securities may be issued to any employee, consultant, officer or
director for services provided to the Company.

                                      -26-

<PAGE>

              (b) "AVAILABLE CONVERSION/REDEMPTION AMOUNT" means the Holder Pro
Rata Amount of 20% of the aggregate dollar trading volume (as reported on
Bloomberg) of the Common Stock on the Principal Market over the twenty (20)
consecutive Trading Day period immediately prior to the applicable Holder
Optional Conversion/Redemption Notice Date.

              (c) "BLOOMBERG" means Bloomberg Financial Markets.

              (d) "BUSINESS DAY" means any day other than Saturday, Sunday or
other day on which commercial banks in The City of New York are authorized or
required by law to remain closed.

              (e) "CALENDAR QUARTER" means each of: the period beginning on and
including January 1 and ending on and including March 31; the period beginning
on and including April 1 and ending on and including June 30; the period
beginning on and including July 1 and ending on and including September 30; and
the period beginning on and including October 1 and ending on and including
December 31.

              (f) "CHANGE OF CONTROL" means any Fundamental Transaction other
than (i) any reorganization, recapitalization or reclassification of the Common
Stock in which holders of the Company's voting power immediately prior to such
reorganization, recapitalization or reclassification continue after such
reorganization, recapitalization or reclassification to hold publicly traded
securities and, directly or indirectly, the voting power of the surviving entity
or entities necessary to elect a majority of the members of the board of
directors (or their equivalent if other than a corporation) of such entity or
entities, or (ii) pursuant to a migratory merger effected solely for the purpose
of changing the jurisdiction of incorporation of the Company.

              (g) "CHANGE OF CONTROL CONSIDERATION" means, for any Change of
Control, an amount, if any, equal to the sum of the aggregate cash consideration
and the aggregate cash value of any marketable securities per share of Common
Stock to be paid to the holders of the Common Stock upon consummation of such
Change of Control, with any such marketable securities to be valued at the
Closing Sale Price of such securities as of the Trading Day following the public
announcement of such proposed Change of Control.

              (h) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means, for any
security as of any date, the last closing bid price and last closing trade
price, respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price,
as the case may be, then the last bid price or last trade price, respectively,
of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg,
or, if the Principal Market is not the principal securities exchange or trading
market for such security, the last closing bid price or last trade price,
respectively, of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if
the foregoing do not apply, the last closing bid price or last trade price,
respectively, of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price or last trade price, respectively, is reported for such security by
Bloomberg, the average of the bid prices, or the ask prices, respectively, of
any market makers for such security as reported in the "pink sheets" by Pink
Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid
Price or the Closing Sale Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Bid Price or the

                                      -27-

<PAGE>

Closing Sale Price, as the case may be, of such security on such date shall be
the fair market value as mutually determined by the Company and the Holder. If
the Company and the Holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved pursuant to Section 25. All
such determinations shall be appropriately adjusted for any stock dividend,
stock split, stock combination or other similar transaction during the
applicable calculation period.

              (i) "CLOSING DATE" shall have the meaning set forth in the
Securities Purchase Agreement, which date is the date the Company initially
issued Notes pursuant to the terms of the Securities Purchase Agreement.

              (j) "CONSOLIDATED NET INCOME" means, for any applicable period,
the net income (loss) of the Company and its Subsidiaries for such period,
determined on a consolidated basis and in accordance with GAAP, but excluding
from the determination of Consolidated Net Income (without duplication) (a) any
extraordinary or non recurring gains or losses or gains or losses from
Dispositions, (b) restructuring charges, (c) any tax refunds, net operating
losses or other net tax benefits, (d) effects of discontinued operations and (e)
interest income (including interest paid-in-kind).

              (k) "CONTINGENT OBLIGATION" means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
Indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto.

              (l) "CONVERTIBLE SECURITIES" means any stock or securities (other
than Options) directly or indirectly convertible into or exercisable or
exchangeable for Common Stock.

              (m) "DISPOSITION" means any transaction, or series of related
transactions, pursuant to which the Company or any of its Subsidiaries sells,
assigns, transfers or otherwise disposes of any property or assets (whether now
owned or hereafter acquired) to any Person (other than the Company or any of its
Subsidiaries), in each case, whether or not the consideration therefor consists
of cash, securities or other assets owned by the acquiring Person, excluding any
sales of inventory in the ordinary course of business on ordinary business
terms.

              (n) "EFFECTIVE DATE" has the meaning ascribed to such term in the
Registration Rights Agreement.

              (o) "ELIGIBLE MARKET" means the Principal Market, The New York
Stock Exchange, Inc., the American Stock Exchange, The NASDAQ Global Market, The
NASDAQ Global Select Market or The NASDAQ Capital Market.

                                      -28-

<PAGE>

              (p) "EQUITY CONDITIONS" means that each of the following
conditions is satisfied: (i) on each day during the period beginning six (6)
months prior to the applicable date of determination and ending on and including
the applicable date of determination (the "EQUITY CONDITIONS MEASURING PERIOD"),
either (x) the Registration Statements filed pursuant to the Registration Rights
Agreement shall be effective and available for the resale of all remaining
Registrable Securities in accordance with the terms of the Registration Rights
Agreement and there shall not have been any Grace Periods (as defined in the
Registration Rights Agreement); provided, however, that in connection with a
Mandatory Conversion this condition shall be deemed satisfied if one or more
Registration Statements covering the shares of Common Stock to be issued
(including Common Stock issuable upon exercise of any Series O Warrants that
have become exercisable on any Mandatory Conversion Date) on the applicable
Mandatory Conversion Date are effective and available for the resale of such
shares of Common Stock (the foregoing, the "REGISTRATION CONDITION"); or (y) all
shares of Common Stock issuable upon conversion of the Notes and exercise of the
Warrants shall be eligible for sale without restriction and without the need for
registration under any applicable federal or state securities laws; (ii) on each
day during the Equity Conditions Measuring Period, the Common Stock is
designated for quotation on the Principal Market or any other Eligible Market
and shall not have been suspended from trading on such exchange or market (other
than suspensions of not more than two (2) days and occurring prior to the
applicable date of determination due to business announcements by the Company)
nor shall delisting or suspension by such exchange or market been threatened or
pending either (A) in writing by such exchange or market or (B) by falling below
the then effective minimum listing maintenance requirements of such exchange or
market; (iii) during the one (1) year period ending on and including the date
immediately preceding the applicable date of determination, the Company shall
have delivered shares of Common Stock upon conversion of the Notes and upon
exercise of the Warrants to the holders on a timely basis as set forth in
Section 3(c)(i) hereof (and analogous provisions under the Other Notes) and
Section 1(a) of the Warrants; (iv) any applicable shares of Common Stock to be
issued in connection with the event requiring determination may be issued in
full without violating Section 3(d) hereof and the rules or regulations of the
Principal Market or any applicable Eligible Market; (v) the Company shall not
have failed to timely make any payments within ten (10) Business Days of when
such payment is due pursuant to any Transaction Document; (vi) during the Equity
Conditions Measuring Period, there shall not have occurred either (A) the public
announcement of a pending, proposed or intended Fundamental Transaction which
has not been abandoned, terminated or consummated, or (B) an Event of Default or
(C) an event that with the passage of time or giving of notice would constitute
an Event of Default; (vii) the Company shall have no knowledge of any fact that
would cause (x) the Registration Statements required pursuant to the
Registration Rights Agreement not to be effective and available for the resale
of all remaining Registrable Securities in accordance with the terms of the
Registration Rights Agreement, or in the case of a Mandatory Conversion, the
Registration Statements covering the shares of Common Stock to be issued
(including Common Stock issuable upon exercise of any Series O Warrants that
have become exercisable on any Mandatory Conversion Date) on the applicable
Mandatory Conversion Date, not to be effective and available for the resale of
such shares of Common Stock or (y) any shares of Common Stock issuable upon
conversion of the Notes and shares of Common Stock issuable upon exercise of the
Warrants not to be eligible for sale without restriction pursuant to Rule 144(k)
and any applicable state securities laws after the second (2nd) anniversary of
the Subscription Date; (viii) the Company otherwise shall have been in
compliance with any provision, covenant, representation or warranty of any
Transaction Document and (ix) if required by the terms of the Securities
Purchase Agreement, the Company shall have obtained the Stockholder Approval on
or before the Stockholder Meeting Deadline.

                                      -29-

<PAGE>

              (q) "EQUITY CONDITIONS FAILURE" means that (i) on any day during
the period commencing ten (10) Trading Days prior to the applicable Conversion
Date through the applicable Share Delivery Date, (ii) on any day during the
period commencing ten (10) Trading Days prior to the applicable Mandatory
Conversion Notice Date through the applicable Mandatory Conversion Date, or
(iii) on any day during the period commencing ten (10) Trading Days prior to the
applicable Holder Optional Conversion/Redemption Notice Date through the
applicable Optional Conversion/Redemption Date, the Equity Conditions have not
been satisfied (or waived in writing by the Holder).

              (r) "EQUITY VALUE REDEMPTION PREMIUM" means for any Change of
Control Notice or Event of Default Notice, as applicable, delivered or required
to be delivered in connection with a Change of Control or Event of Default, as
applicable, 200%.

              (s) "EXCLUDED SECURITIES" means any Common Stock issued or
issuable: (i) in connection with any Approved Stock Plan; (ii) upon conversion
of the Notes or the exercise of the Warrants; (iii) pursuant to a bona fide firm
commitment underwritten public offering with a nationally recognized underwriter
which generates gross proceeds to the Company in excess of $25,000,000 (other
than an "at-the-market offering" as defined in Rule 415(a)(4) under the 1933 Act
and "equity lines"); (iv) in connection with any strategic acquisition or
transaction by the Company, whether through an acquisition of stock or a merger
of any business, assets or technologies the primary purpose of which is not to
raise equity capital; (v) upon exercise of any Options or Convertible Securities
which are outstanding on the day immediately preceding the Subscription Date,
provided that the terms of such Options or Convertible Securities are not
amended, modified or changed on or after the Subscription Date, and (vi) in
connection with a strategic acquisition or strategic partnership by the Company,
the primary purpose of which is not to raise capital.

              (t) "EXISTING NOTES" means the Amended and Restated Notes and the
Additional Notes issued pursuant to that certain Amendment and Exchange
Agreement, dated as of January 22, 2007, by and between the Company and
Castlerigg Master Investments Ltd., and the Amended and Restated Notes and the
Additional Notes issued pursuant to that certain Amendment and Exchange
Agreement, dated as of January 18, 2007, by and between the Company and Cedar
Hill Capital Partners Onshore, LP.

              (u) "FISCAL QUARTER" means each of the fiscal quarters adopted by
the Company for financial reporting purposes that correspond to the Company's
fiscal year that ends on December 31, or such other fiscal quarter adopted by
the Company for financial reporting purposes in accordance with GAAP.

              (v) "FIRST CONVERSION THRESHOLD AMOUNT" means an amount equal to
50% of the Conversion Amount of this Note on the Issuance Date.

              (w) "FUNDAMENTAL TRANSACTION" means that the Company shall,
directly or indirectly, in one or more related transactions, (i) consolidate or
merge with or into (whether or not the Company is the surviving corporation)
another Person or Persons, or (ii) sell, assign, transfer, convey or otherwise
dispose of all or substantially all of the properties or assets of the Company
to another Person, or (iii) allow another Person to make a purchase, tender or
exchange offer that is accepted by the holders of more than 50% of the

                                      -30-

<PAGE>

outstanding shares of Voting Stock (not including any shares of Voting Stock
held by the Person or Persons making or party to, or associated or affiliated
with the Persons making or party to, such purchase, tender or exchange offer),
or (iv) consummate a stock purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with another Person whereby such other Person acquires
more than the 50% of the outstanding shares of Voting Stock (not including any
shares of Voting Stock held by the other Person or other Persons making or party
to, or associated or affiliated with the other Persons making or party to, such
stock purchase agreement or other business combination), or (v) reorganize,
recapitalize or reclassify its Common Stock or (vi) any "person" or "group" (as
these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange
Act), other than the Holder, is or shall become the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of
the aggregate Voting Stock of the Company.

              (x) "GAAP" means United States generally accepted accounting
principles, consistently applied.

              (y) "HOLDER BALANCE CONVERSION SHARES" means, for the Holder
Optional Conversion/Redemption Date, a number of shares of Common Stock equal to
(i) the Post-Conversion Shares for such date MINUS (ii) the amount of any
Pre-Conversion Shares delivered before or on such date; provided that in the
event that the amount of Pre-Conversion Shares exceeds the Post-Conversion
Shares for such date (such excess, the "HOLDER CONVERSION SHARES EXCESS"), the
outstanding Principal under this Note shall be reduced by the product of (x) the
Holder Conversion Share Excess and (y) the Optional Conversion Price and the
Holder Balance Conversion Shares shall equal zero (0); provided, further,
however that if all of the outstanding Principal under this Note is being
converted and/or redeemed on such Holder Optional Conversion/Redemption Date,
then the Holder Balance Conversion Shares shall equal zero (0).

              (z) "HOLDER CONVERSION SHARE RATIO" means, as to the Holder
Optional Conversion/Redemption Date, the quotient of (i) the number of
Pre-Conversion Shares delivered in connection with such Holder Optional
Conversion/Redemption Date DIVIDED BY (ii) the number of Post-Conversion Shares
relating to such Holder Optional Conversion/Redemption Date.

              (aa) "HOLDER PRO RATA AMOUNT" means a fraction (i) the numerator
of which is the Principal amount of this Note on the Closing Date and (ii) the
denominator of which is the aggregate principal amount of all Notes issued to
the initial purchasers pursuant to the Securities Purchase Agreement on the
Closing Date.

              (bb) "INDEBTEDNESS" of any Person means, without duplication (i)
all indebtedness for borrowed money, (ii) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services, including
(without limitation) "capital leases" in accordance with GAAP (other than trade
payables entered into in the ordinary course of business), (iii) all
reimbursement or payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (iv) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or businesses,

                                      -31-

<PAGE>

(v) all indebtedness created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case with respect
to any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (vi) all
monetary obligations under any leasing or similar arrangement which, in
connection with GAAP, consistently applied for the periods covered thereby, is
classified as a capital lease, (vii) all indebtedness referred to in clauses (i)
through (vi) above secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any
property or assets (including accounts and contract rights) owned by any Person,
even though the Person which owns such assets or property has not assumed or
become liable for the payment of such indebtedness, and (viii) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (i) through (vii) above.

              (cc) "INTEREST RATE" means, 9.25% per annum, subject to adjustment
as provided herein.

              (dd) "OPTIONAL CONVERSION PRICE" means, the lower of (i) the
applicable Conversion Price and (ii) that price which shall be computed as 90%
of the Optional Conversion Average Market Price; provided, however, that if the
Optional Conversion Average Market Price is above $1.00, then the Optional
Conversion Price shall be computed as 92.5% of the Optional Conversion Average
Market Price. All such determinations shall be appropriately adjusted for any
stock split, stock dividend, stock combination during or other similar
transaction that proportionately decreases or increases the price of the Common
Stock during the applicable Optional Conversion/Redemption Measuring Period.
"OPTIONAL CONVERSION AVERAGE MARKET PRICE" means the lesser of (i) the
arithmetic average of the lowest Weighted Average Price of the Common Stock
during the fifteen (15) consecutive Trading Days ending on the Trading Day
immediately prior to the Optional Conversion/Redemption Date (each such period,
an "OPTIONAL CONVERSION/REDEMPTION MEASURING PERIOD") and (ii) the arithmetic
average of the lowest Weighted Average Price of the Common Stock during any
three (3) consecutive Trading Day period during the Optional
Conversion/Redemption Measuring Period.

              (ee) "OPTIONS" means any rights, warrants or options to subscribe
for or purchase shares of Common Stock or Convertible Securities.

              (ff) "PARENT ENTITY" of a Person means an entity that, directly or
indirectly, controls the applicable Person and whose common stock or equivalent
equity security is quoted or listed on an Eligible Market, or, if there is more
than one such Person or Parent Entity, the Person or Parent Entity with the
largest public market capitalization as of the date of consummation of the
Fundamental Transaction.

              (gg) "PERMITTED INDEBTEDNESS" means (i) the Indebtedness evidenced
by this Note, the Other Notes and the Existing Notes (ii) Permitted Senior
Indebtedness and (iii) the Boston Life and Woodruff Sawyer Indebtedness
described on Schedule 3(s) to the Securities Purchase Agreement.

                                      -32-

<PAGE>

              (hh) "PERMITTED LIENS" means (i) any Lien for taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP, (ii) any
statutory Lien arising in the ordinary course of business by operation of law
with respect to a liability that is not yet due or delinquent, (iii) any Lien
created by operation of law, such as materialmen's liens, mechanics' liens and
other similar liens, arising in the ordinary course of business with respect to
a liability that is not yet due or delinquent or that are being contested in
good faith by appropriate proceedings, (iv) Liens (A) upon or in any equipment
(as defined in the Security Agreement) acquired or held by the Company or any of
its Subsidiaries to secure the purchase price of such equipment or indebtedness
incurred solely for the purpose of financing the acquisition or lease of such
equipment, or (B) existing on such equipment at the time of its acquisition,
provided that the Lien is confined solely to the property so acquired and
improvements thereon, and the proceeds of such equipment, (v) Liens incurred in
connection with the extension, renewal or refinancing of the indebtedness
secured by Liens of the type described in clauses (i) and (iv) above, provided
that any extension, renewal or replacement Lien shall be limited to the property
encumbered by the existing Lien and the principal amount of the Indebtedness
being extended, renewed or refinanced does not increase, (vi) leases or
subleases and licenses and sublicenses granted to others in the ordinary course
of the Company's business, not interfering in any material respect with the
business of the Company and its Subsidiaries taken as a whole, (vii) Liens in
favor of customs and revenue authorities arising as a matter of law to secure
payments of custom duties in connection with the importation of goods, (viii)
Liens arising from judgments, decrees or attachments in circumstances not
constituting an Event of Default under Section 4(a)(ix) and (ix) Liens securing
Permitted Senior Indebtedness.

              (ii) "PERMITTED SENIOR INDEBTEDNESS" the principal of (and
premium, if any), interest on, and all fees and other amounts (including,
without limitation, any reasonable out-of-pocket costs, enforcement expenses
(including reasonable out-of-pocket legal fees and disbursements), collateral
protection expenses and other reimbursement or indemnity obligations relating
thereto) payable by Company and/or its Subsidiaries under or in connection with
any credit facility to be entered into by the Company and/or its Subsidiaries
with one or more financial institutions (and on terms and conditions) at any
time following the Effective Date of the final Registration Statement filed to
register the amount of Registrable Securities issuable upon conversion of the
Notes, in form and substance reasonably satisfactory to the Required Holders;
PROVIDED, HOWEVER, that such Indebtedness may only be incurred if (i) the Equity
Conditions are satisfied as of the date such Indebtedness is being incurred (the
"INCURRENCE DATE"), (ii) either (A) the Closing Sale Price of the Common Stock
is greater than $1.00 for each of forty (40) consecutive Trading Days ending on
the Trading Day immediately preceding the Incurrence Date or (B) the aggregate
dollar trading volume (as reported on Bloomberg) of the Common Stock on the
Principal Market or other Eligible Market is greater than $200,000 for each of
forty (40) consecutive Trading Days ending on the Trading Day immediately
preceding the Incurrence Date and (iii) such Indebtedness is in the form of a
borrowing base loan to the Company and/or its Subsidiaries with the collateral
in such borrowing base consisting of the eligible inventory and/or accounts
receivable of the Company and its Subsidiaries.

              (jj) "PERSON" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, any other entity and a government or any department or agency
thereof.

                                      -33-

<PAGE>

              (kk) "POST-CONVERSION SHARES" means, for the Holder Optional
Conversion/Redemption Date, that number of shares of Common Stock equal to the
applicable Optional Conversion Amount for such Holder Optional
Conversion/Redemption Date DIVIDED BY the Optional Conversion Price (without
taking into account the delivery of any Pre-Conversion Shares).

              (ll) "PRINCIPAL MARKET" means the OTC Bulletin Board.

              (mm) "REDEMPTION NOTICES" means, collectively, the Event of
Default Redemption Notices, the Change of Control Redemption Notices, and the
Company Conversion/Redemption Notice (if an Optional Redemption has been
elected), each of the foregoing, individually, a Redemption Notice.

              (nn) "REDEMPTION PREMIUM" means (i) in the case of the Events of
Default described in Section 4(a)(i) - (vi) and (ix) - (xvi), 125% or (ii) in
the case of the Events of Default described in Section 4(a)(vii) - (viii), 100%.

              (oo) "REDEMPTION PRICES" means, collectively, the Event of Default
Redemption Price, Change of Control Redemption Price, and the Holder Optional
Redemption Price, each of the foregoing, individually, a Redemption Price.

              (pp) "REGISTRATION RIGHTS AGREEMENT" means that certain
registration rights agreement dated as of July 31, 2007 and among the Company
and the initial holders of the Notes, as the same may be amended, modified or
supplemented from time to time, relating to, among other things, the
registration of the resale of the Common Stock issuable upon conversion of the
Notes and exercise of the Warrants.

              (qq) "REQUIRED HOLDERS" means the holders of Notes representing at
least a majority of the aggregate principal amount of the Notes then
outstanding.

              (rr) "SEC" means the United States Securities and Exchange
Commission.

              (ss) "SECURITIES PURCHASE AGREEMENT" means that certain securities
purchase agreement dated as of the Subscription Date by and among the Company
and the initial holders of the Notes, as the same may be amended, modified or
supplemented from time to time, pursuant to which the Company issued the Notes
and Warrants.

              (tt) "SERIES O WARRANTS" has the meaning ascribed to such term in
the Securities Purchase Agreement, and shall include all warrants issued in
exchange therefor or replacement thereof.

              (uu) "SUBSCRIPTION DATE" means July 31, 2007.

              (vv) "SUCCESSOR ENTITY" means the Person, which may be the
Company, formed by, resulting from or surviving any Fundamental Transaction or
the Person with which such Fundamental Transaction shall have been made,
provided that if such Person is not a publicly traded entity whose common stock
or equivalent equity security is quoted or listed for trading on an Eligible
Market, Successor Entity shall mean such Person's Parent Entity.

                                      -34-

<PAGE>

              (ww) "TRADING DAY" means any day on which the Common Stock is
traded on the Principal Market, or, if the Principal Market is not the principal
trading market for the Common Stock, then on the principal securities exchange
or securities market on which the Common Stock is then traded; provided that
"Trading Day" shall not include any day on which the Common Stock is scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the
Common Stock is suspended from trading during the final hour of trading on such
exchange or market (or if such exchange or market does not designate in advance
the closing time of trading on such exchange or market, then during the hour
ending at 4:00:00 p.m., New York Time).

              (xx) "VOLUME LIMITATION" means 20% of the aggregate dollar trading
volume (as reported on Bloomberg) of the Common Stock on the Principal Market
over the twenty (20) consecutive Trading Day period immediately prior to the
applicable Interest Notice Date or the Mandatory Conversion Notice Date, as
applicable.

              (yy) "VOTING STOCK" of a Person means capital stock of such Person
of the class or classes pursuant to which the holders thereof have the general
voting power to elect, or the general power to appoint, at least a majority of
the board of directors, managers or trustees of such Person (irrespective of
whether or not at the time capital stock of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).

              (zz) "WARRANTS" has the meaning ascribed to such term in the
Securities Purchase Agreement, and shall include all warrants issued in exchange
therefor or replacement thereof.

              (aaa) "WEIGHTED AVERAGE PRICE" means, for any security as of any
date, the dollar volume-weighted average price for such security on the
Principal Market during the period beginning at 9:30:01 a.m., New York Time (or
such other time as the Principal Market publicly announces is the official open
of trading), and ending at 4:00:00 p.m., New York Time (or such other time as
the Principal Market publicly announces is the official close of trading) as
reported by Bloomberg through its "Volume at Price" functions, or, if the
foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York Time (or
such other time as such market publicly announces is the official open of
trading), and ending at 4:00:00 p.m., New York Time (or such other time as such
market publicly announces is the official close of trading) as reported by
Bloomberg, or, if no dollar volume-weighted average price is reported for such
security by Bloomberg for such hours, the average of the highest closing bid
price and the lowest closing ask price of any of the market makers for such
security as reported in the "pink sheets" by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.). If the Weighted Average Price cannot be
calculated for a security on a particular date on any of the foregoing bases,
the Weighted Average Price of such security on such date shall be the fair
market value as mutually determined by the Company and the Holder. If the
Company and the Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved pursuant to Section 25. All such
determinations shall be appropriately adjusted for any stock dividend, stock
split, stock combination or other similar transaction during the applicable
calculation period.

                                      -35-

<PAGE>

         (31) DISCLOSURE. Upon receipt or delivery by the Company of any notice
in accordance with the terms of this Note, unless the Company has in good faith
determined that the matters relating to such notice do not constitute material,
nonpublic information relating to the Company or its Subsidiaries, the Company
shall within two (2) Business Days after any such receipt or delivery publicly
disclose such material, nonpublic information on a Current Report on Form 8-K or
otherwise. In the event that the Company believes that a notice contains
material, nonpublic information relating to the Company or its Subsidiaries, the
Company so shall indicate to such Holder contemporaneously with delivery of such
notice, and in the absence of any such indication, the Holder shall be allowed
to presume that all matters relating to such notice do not constitute material,
nonpublic information relating to the Company or its Subsidiaries.

                            [Signature Page Follows]

                                      -36-

<PAGE>

                  IN WITNESS WHEREOF, the Company has caused this Note to be
duly executed as of the Issuance Date set out above.

                                          RAPTOR NETWORKS TECHNOLOGY, INC.

                                          By:  /s/ Thomas M. Wittenschlaeger
                                               ---------------------------------
                                               Name: Thomas M. Wittenschlaeger
                                               Title: CEO

                                      -37-

<PAGE>

                                    EXHIBIT I

                        RAPTOR NETWORKS TECHNOLOGY, INC.
                                CONVERSION NOTICE

Reference is made to the Senior Secured Convertible Note (the "NOTE") issued to
the undersigned by Raptor Networks Technology, Inc. (the "COMPANY"). In
accordance with and pursuant to the Note, the undersigned hereby elects to
convert the Conversion Amount (as defined in the Note) of the Note indicated
below into shares of Common Stock par value $0.001 per share (the "COMMON
STOCK") of the Company, as of the date specified below.

         Date of Conversion:
                              --------------------------------------------------

         Aggregate Conversion Amount to be converted:
                                                       -------------------------

Please confirm the following information:

         Conversion Price:
                            ----------------------------------------------------

         Number of shares of Common Stock to be issued:
                                                         -----------------------

Please issue the Common Stock into which the Note is being converted in the
following name and to the following address:

         Issue to:
                    ------------------------------------------------------------

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

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

         Facsimile Number:
                            ----------------------------------------------------

         Authorization:
                         -------------------------------------------------------

                  By:
                       ---------------------------------------------------------

                       Title:
                               -------------------------------------------------

Dated:
        ------------------------------------------------------------------------

         Account Number:
                          ------------------------------------------------------
           (if electronic book entry transfer)

         Transaction Code Number:
                                   ---------------------------------------------
           (if electronic book entry transfer)
                                                --------------------------------

                                      -38-

<PAGE>

                                 ACKNOWLEDGMENT

         The Company hereby acknowledges this Conversion Notice and hereby
directs First American Stock Transfer to issue the above indicated number of
shares of Common Stock in accordance with the Transfer Agent Instructions dated
July __, 2007 from the Company and acknowledged and agreed to by First American
Stock Transfer.

                                            RAPTOR NETWORKS TECHNOLOGY, INC.

                                            By:______________________________
                                                  Name:
                                                  Title:

                                      -39-

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