Document:

SECURITIES PURCHASE AGREEMENT

         This Securities  Purchase  Agreement (this  "Agreement") is dated as of
May 31, 2006 among Liska Biometry,  Inc., a Florida  corporation whose principal
place  of  business  is  located  at 100  Main  Street,  Dover,  NH  03820  (the
"Company"),  and CAMOFI Master LDC (including  its  successors and assigns,  the
"Purchaser").

         WHEREAS,  subject  to the  terms  and  conditions  set  forth  in  this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act") and Rule 506 promulgated thereunder,  the Company desires
to issue and sell to the Purchaser,  and the Purchaser  desires to purchase from
the  Company,  securities  of the  Company  as  more  fully  described  in  this
Agreement.

         NOW,  THEREFORE,  IN CONSIDERATION of the mutual covenants contained in
this Agreement,  and for other good and valuable  consideration  the receipt and
adequacy of which are hereby  acknowledged,  the Company and the Purchaser agree
as follows:

                                   ARTICLE I.
                                   DEFINITIONS

      1.1  Definitions.  In  addition  to the terms  defined  elsewhere  in this
Agreement:  (a) capitalized terms that are not otherwise defined herein have the
meanings  given to such  terms in the Notes  (as  defined  herein),  and (b) the
following terms have the meanings indicated in this Section 1.1:

            "Action"  shall have the  meaning  ascribed  to such term in Section
      3.1(j).

            "Affiliate"  means any Person that,  directly or indirectly  through
      one or more  intermediaries,  controls  or is  controlled  by or is  under
      common  control  with a Person,  as such  terms are used in and  construed
      under Rule 144 under the Securities Act. With respect to a Purchaser,  any
      investment  fund or managed  account  that is  managed on a  discretionary
      basis by the same investment manager as the Purchaser will be deemed to be
      an Affiliate of the Purchaser.

            "Acquisition   Agreements"   means,    collectively,    the   merger
      agreement(s) and/or purchase  agreement(s)  whereby the Company is merging
      and/or  acquiring  the stock  and/or  assets of Digital  Card,  Markow and
      Sogedex.

            "CAMOFI" means CAMOFI Master LDC.

            "Closing"  means  the  closing  of  the  purchase  and  sale  of the
      Securities pursuant to Section 2.1.

            "Closing  Date" means the  Trading  Day when all of the  Transaction
      Documents  have been  executed  and  delivered by the  applicable  parties
      thereto, and all conditions  precedent to (i) the Purchaser's  obligations
      to pay the  Subscription  Amount  and (ii) the  Company's  obligations  to
      deliver the Securities have been satisfied or waived.

            "Commission" means the Securities and Exchange Commission.
<PAGE>

            "Common Stock" means the common stock of the Company,  no par value,
      and any  securities  into which such common stock shall  hereinafter  have
      been reclassified into.

            "Common Stock  Equivalents"  means any  securities of the Company or
      the Subsidiaries  which would entitle the holder thereof to acquire at any
      time Common  Stock,  including  without  limitation,  any debt,  preferred
      stock, rights,  options,  warrants or other instrument that is at any time
      convertible  into or  exchangeable  for, or otherwise  entitles the holder
      thereof to receive, Common Stock.

            "Company Counsel" means Eaton & Van Winkle.

            "Conversion  Price" shall have the meaning  ascribed to such term in
      the Note.

            "Digital Card" means Digital Card Services, Inc.

            "Disclosure  Schedules" shall have the meaning ascribed to such term
      in Section 3.1 hereof.

            "Effective  Date"  means  the  date  that the  initial  Registration
      Statement  filed  by  the  Company  pursuant  to the  Registration  Rights
      Agreement is first declared effective by the Commission.

            "Escrow  Account"  means the escrow  account  set up pursuant to the
      Escrow Agreement.

            "Escrow Agreement" means the Escrow Agreement dated the date hereof,
      among  the  Company,  the  Purchaser,  and KMR in the  form of  Exhibit  G
      attached hereto.

            "Escrow  Agreement  Side  Letter"  means the Escrow  Agreement  Side
      Letter dated the date hereof,  between the Company and the  Purchaser,  in
      the form of Exhibit H attached hereto.

            "Exchange  Act"  means  the  Securities  Exchange  Act of  1934,  as
      amended.

            "Exempt  Issuance"  means the issuance of (a) shares of Common Stock
      or options  to  employees,  officers ,  directors  or  consultants  of the
      Company pursuant to any stock or option plan duly adopted by a majority of
      the  non-employee  members of the Board of  Directors  of the Company or a
      majority  of  the  members  of  a  committee  of  non-employee   directors
      established  for such purpose,  or (b) securities  upon the exercise of or
      conversion of any securities  issued  hereunder,  convertible  securities,
      options or warrants  issued and outstanding on the date of this Agreement,
      provided that such securities have not been amended since the date of this
      Agreement to increase the number of such securities.

            "GAAP"  shall  have the  meaning  ascribed  to such term in  Section
      3.1(h) hereof.

            "KMR" means Katten Muchin Rosenman.

            "Liens" means a lien, charge, security interest,  encumbrance, right
      of first refusal, preemptive right or other restriction.

            "Markow"  means  Markow  Photo  Properties,  Inc.,  with a  business
      address at 2202 East McDowell Road, Phoenix, AZ.

                                    2 of 28
<PAGE>

            "Material  Adverse  Effect" shall have the meaning  assigned to such
      term in Section 3.1(b) hereof.

            "Material  Permits" shall have the meaning  ascribed to such term in
      Section 3.1(m).

            "Note" means the 10% Senior Secured Convertible Note due, subject to
      the terms  therein,  three years from its date of issuance,  issued by the
      Company to the Purchaser hereunder, in the form of Exhibit A.

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

            "Proceeding"  means  an  action,   claim,  suit,   investigation  or
      proceeding  (including,  without  limitation,  an investigation or partial
      proceeding, such as a deposition), whether commenced or threatened.

            "Registration   Rights  Agreement"  means  the  Registration  Rights
      Agreement,  dated the date hereof, among the Company and the Purchaser, in
      the form of Exhibit D attached hereto.

            "Registration  Statement" means a registration statement meeting the
      requirements set forth in the  Registration  Rights Agreement and covering
      the resale of the  Underlying  Shares by the  Purchaser as provided for in
      the Registration Rights Agreement.

            "Required Approvals" shall have the meaning ascribed to such term in
      Section 3.1(e).

            "Required  Minimum"  means,  as of any date,  the maximum  aggregate
      number of shares of Common  Stock then issued or  potentially  issuable in
      the future pursuant to the Transaction Documents, including any Underlying
      Shares  issuable  upon  exercise or conversion in full of all Warrants and
      Notes  (including  Underlying  Shares  issuable  as payment of  interest),
      ignoring any conversion or exercise limits set forth therein, and assuming
      that  the  Conversion  Price  is at all  times  on and  after  the date of
      determination  75%  of the  then  Conversion  Price  on  the  Trading  Day
      immediately prior to the date of determination.

            "Rule 144" means Rule 144 promulgated by the Commission  pursuant to
      the Securities  Act, as such Rule may be amended from time to time, or any
      similar rule or  regulation  hereafter  adopted by the  Commission  having
      substantially the same effect as such Rule.

            "SEC  Reports"  shall  have the  meaning  ascribed  to such  term in
      Section 3.1(h) hereof.

            "Securities"  means  the  Notes,  the  Underlying  Shares,  and  the
      Warrants.

            "Securities Act" means the Securities Act of 1933, as amended.

            "Security  Agreement" means the Security  Agreement,  dated the date
      hereof,  between the Company and the  Purchaser,  in the form of Exhibit E
      attached hereto.

            "Security  Documents" means the Security  Agreement,  the Subsidiary
      Guarantee and any other documents and filings required thereunder in order
      to grant the Purchaser a perfected  security interest in all of the assets
      of the Company, including all UCC-1 filing receipts.

                                    3 of 28
<PAGE>

            "Sogedex" means Sogedex, a French corporation.

            "Special Adjustment Provisions" means (i) the closing of the Sogedex
      transaction  by the  Company,  (ii) the sale of equity  securities  by the
      Company  with  proceeds  of at  least $4  million  at an  effective  price
      (pre-split, etc.) of at least $0.60 per share, (iii) the closing bid price
      for the  Common  Stock on the 180th day from the  Original  Issue  Date is
      greater than the then  applicable  Conversion  Price and (iv) the VWAP for
      the twenty days immediately prior to the 180th day from the Original Issue
      Date is greater than the then applicable Conversion Price.

            "Subscription  Amount"  means,  as to the  Purchaser,  the aggregate
      amount to be paid for Notes and Warrants purchased  hereunder as specified
      below the  Purchaser's  name on the signature  page of this  Agreement and
      next to the heading "Subscription Amount", in United States Dollars and in
      immediately available funds.

            "Subsidiary"  means any  subsidiary  of the  Company as set forth on
      Schedule 3.1(a).

            "Subsidiary  Guarantee"  means the Subsidiary  Guarantee,  dated the
      date hereof, among each of the Subsidiaries and the Purchaser, in the form
      of Exhibit F attached hereto.

            "Trading  Day" means a day on which the Common  Stock is traded on a
      Trading Market.

            "Trading  Market" means the following  markets or exchanges on which
      the Common  Stock is listed or quoted for trading on the date in question:
      the Nasdaq  SmallCap  Market,  the American Stock  Exchange,  the New York
      Stock Exchange, the Nasdaq National Market or the OTC Bulletin Board.

            "Transaction  Documents"  means  this  Agreement,   the  Notes,  the
      Warrants,   the  Security  Agreement,   the  Subsidiary   Guarantee,   the
      Registration  Rights  Agreement  and any  other  documents  or  agreements
      executed in connection with the transactions contemplated hereunder.

            "Underlying  Shares" means the shares of Common Stock  issuable upon
      conversion  of the Notes,  the Warrant  Shares,  and the shares issued and
      issuable in lieu of the cash payment on the Notes.

            "VWAP" means, for any date, the price determined by the first of the
      following clauses that applies:  (a) if the Common Stock is then listed or
      quoted on a Trading Market, the daily volume weighted average price of the
      Common Stock for such date (or the nearest  preceding date) on the primary
      Trading  Market  on which  the  Common  Stock is then  listed or quoted as
      reported by  Bloomberg  Financial  L.P.  (based on a Trading Day from 9:30
      a.m. EST to 4:02 p.m.  Eastern  Time) using the VAP  function;  (b) if the
      Common  Stock is not then  listed or quoted on the  Trading  Market and if
      prices  for the  Common  Stock  are then  reported  in the  "Pink  Sheets"
      published by the Pink  Sheets,  LLC (or a similar  organization  or agency
      succeeding  to its  functions  of reporting  prices),  the most recent bid
      price  per  share of the  Common  Stock so  reported;  or (c) in all other
      cases, the fair market value of a share of Common Stock as determined by a
      nationally  recognized-independent appraiser selected in good faith by the
      Purchaser.

            "Warrants" means the Common Stock purchase warrants,  in the form of
      Exhibit B and delivered to the Purchaser at the Closing in accordance with
      Section 2.2(a) hereof, which Warrants shall be exercisable immediately and
      have a term of exercise equal to seven years.

                                    4 of 28
<PAGE>

            "Warrant  Shares"  means the shares of Common  Stock  issuable  upon
      exercise of the Warrants.

                                  ARTICLE II.
                                PURCHASE AND SALE

      2.1  Closing.  On the  Closing  Date,  upon the terms and  subject  to the
conditions set forth herein,  concurrent with the execution and delivery of this
Agreement by the parties  hereto,  the Company agrees to sell, and the Purchaser
agrees to purchase $5,000,000  aggregate principal amount of the Notes,  secured
by a first priority lien, more fully described in the Security Agreement, on all
assets of the Company and its  Subsidiaries.  The Purchaser shall deliver to the
Company via wire transfer or a certified check immediately available funds equal
to its Subscription  Amount (it being understood that $2,000,000 of the proceeds
of the Notes  shall be placed in the Escrow  Account  (as  defined in the Escrow
Agreement)) and the Company shall deliver to the Purchaser its Note and Warrants
as  determined  pursuant  to Section  2.2(a),  and the other  items set forth in
Section 2.2 issuable at the Closing.  Upon  satisfaction  of the  conditions set
forth in Section 2.2, the Closing shall occur at the offices of the Company,  or
such other location as the parties shall mutually agree.

      2.2 Deliveries.

      a)    On the Closing  Date,  the Company  shall deliver to the counsel for
            the Purchaser the following:

            (i)   this Agreement duly executed by the Company;

            (ii)  two Notes  with an  aggregate  principal  amount  equal to the
                  Purchaser's Subscription Amount, registered in the name of the
                  Purchaser;

            (iii) a Warrant  registered in the name of the Purchaser to purchase
                  12,500,000  shares  of  Common  Stock of the  Company  with an
                  exercise price of $0.40 per share;

            (iv)  the  Registration   Rights  Agreement  duly  executed  by  the
                  Company;

            (v)   the Security  Agreement,  duly executed by the Company,  along
                  with all the Security Documents;

            (vi)  the Subsidiary Guarantees, duly executed by the Subsidiaries;

            (vii) the  Lock-Up  Agreement,  duly  executed by the  Company,  all
                  officers and directors;

            (viii) the Escrow Agreement, duly executed by the Company and KMR;

            (ix)  the  Escrow  Agreement  Side  Letter,  duly  executed  by  the
                  Company;

            (x)   a legal opinion of Company Counsel; and

                                    5 of 28
<PAGE>

            (xi)  an agreement by holders of the Company's  debt to  subordinate
                  their debt to the debt of CAMOFI and to extend the maturity of
                  such debt beyond May 31, 2009.

      b)    On the Closing  Date,  the  Purchaser  shall  deliver or cause to be
            delivered to Company Counsel the following:

            (i)   this Agreement duly executed by the Purchaser;

            (ii)  the  Purchaser's  Subscription  Amount by wire transfer to the
                  account of the Company (less  $2,000,000 which shall be placed
                  in the Escrow Account);

            (iii) the  Registration   Rights  Agreement  duly  executed  by  the
                  Purchaser;

            (iv)  the Security Agreement, duly executed by the Purchaser;

            (v)   the Subsidiary Guarantee, duly executed by the Purchaser;

            (vi)  the Escrow Agreement, duly executed by the Purchaser; and

            (vii) the  Escrow  Agreement  Side  Letter,  duly  executed  by  the
                  Purchaser.

      2.3 Closing Conditions.

      a)    The  obligations  of the Company  hereunder in  connection  with the
            Closing are subject to the following conditions being met:

            (i)   the  accuracy in all  material  respects  when made and on the
                  Closing  Date of the  representations  and  warranties  of the
                  Purchaser contained herein;

            (ii)  all  obligations,  covenants  and  agreements of the Purchaser
                  required to be performed at or prior to the Closing Date shall
                  have been performed; and

            (iii) the  delivery  by the  Purchaser  of the  items  set  forth in
                  Section 2.2(b) of this Agreement.

      b)    The respective  obligations of the Purchaser hereunder in connection
            with the Closing are subject to the following conditions being met:

            (i)   the accuracy in all  material  respects on the Closing Date of
                  the  representations  and warranties of the Company  contained
                  herein;

            (ii)  all  obligations,  covenants  and  agreements  of the  Company
                  required to be performed at or prior to the Closing Date shall
                  have been performed;

            (iii) the Purchaser  shall be satisfied  with the results of its due
                  diligence  investigation  of the Company  and its  acquisition
                  targets;

            (iv)  the Audit of Markow shall have been  completed and the results
                  shall be satisfactory to the Purchaser;

                                    6 of 28
<PAGE>

            (v)   the Company shall have  completed its merger with Digital Card
                  and Markow;

            (vi)  the  Company  shall  have  completed  the  sale of at least $1
                  million in equity on terms satisfactory to the Purchaser;

            (vii) an agreement by holders of the Company's  debt to  subordinate
                  their debt to the debt of CAMOFI and to extend the maturity of
                  such debt beyond May 31, 2009;

            (viii) the  Purchaser   shall  be  satisfied   with  the  pro  forma
                  capitalization of the Company;

            (ix)  the Purchaser  shall be satisfied  with the Company's  current
                  and projected uses of cash;

            (x)   the  delivery by the Company of the items set forth in Section
                  2.2(a) of this Agreement;

            (xi)  there shall have been no Material  Adverse Effect with respect
                  to the Company and its Subsidiaries since the date hereof; and

            (xii) from the date  hereof  to the  Closing  Date,  trading  in the
                  Common Stock shall not have been  suspended by the  Commission
                  (except  for any  suspension  of trading  of limited  duration
                  agreed to by the Company, which suspension shall be terminated
                  prior to the  Closing),  and, at any time prior to the Closing
                  Date, trading in securities generally as reported by Bloomberg
                  Financial Markets shall not have been suspended or limited, or
                  minimum  prices shall not have been  established on securities
                  whose trades are reported by such  service,  or on any Trading
                  Market,  nor shall a  banking  moratorium  have been  declared
                  either by the United States or New York State  authorities nor
                  shall there have occurred any material  outbreak or escalation
                  of hostilities or other national or international  calamity of
                  such  magnitude  in its  effect  on, or any  material  adverse
                  change in, any financial  market  which,  in each case, in the
                  reasonable  judgment of the Purchaser,  makes it impracticable
                  or inadvisable to purchase the Notes at the Closing.

                                    7 of 28
<PAGE>

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

      3.1 Representations and Warranties of the Company.  Except as set forth in
the Disclosure Schedule which Disclosure Schedule shall be deemed a part hereof,
each of the  Company  (including  Digital  Card,  Markow  and  Sogedex)  and its
Subsidiaries  hereby makes the representations and warranties set forth below to
the Purchaser. Additionally, all of the representations and warranties contained
in the Acquisition  Agreements are hereby  incorporated by reference as if fully
set forth herein.

            (a) Subsidiaries. All of the direct and indirect subsidiaries of the
      Company  are set  forth in the  Disclosure  Schedule.  The  Company  owns,
      directly or indirectly, all of the capital stock or other equity interests
      of each  Subsidiary  free and clear of any  Liens,  and all the issued and
      outstanding  shares of capital stock of each Subsidiary are validly issued
      and are fully  paid,  non-assessable  and free of  preemptive  and similar
      rights to  subscribe  for or  purchase  securities.  If the Company has no
      subsidiaries,   then  references  in  the  Transaction  Documents  to  the
      Subsidiaries will be disregarded.

            (b)  Organization  and  Qualification.  Each of the  Company and the
      Subsidiaries  is an  entity  duly  incorporated  or  otherwise  organized,
      validly  existing and in good standing under the laws of the  jurisdiction
      of its  incorporation or organization (as applicable),  with the requisite
      power and authority to own and use its  properties and assets and to carry
      on its  business  as  currently  conducted.  Neither  the  Company nor any
      Subsidiary  is in  violation  or default of any of the  provisions  of its
      respective  certificate  or  articles  of  incorporation,  bylaws or other
      organizational  or  charter  documents.   Each  of  the  Company  and  the
      Subsidiaries is duly qualified to conduct business and is in good standing
      as a foreign corporation or other entity in each jurisdiction in which the
      nature  of the  business  conducted  or  property  owned by it makes  such
      qualification necessary, except where the failure to be so qualified or in
      good  standing,  as the  case may be,  could  not  have or  reasonably  be
      expected  to  result in (i) a  material  adverse  effect on the  legality,
      validity or  enforceability of any Transaction  Document,  (ii) a material
      adverse effect on the results of operations,  assets, business,  prospects
      or  financial  condition of the Company and the  Subsidiaries,  taken as a
      whole,  or (iii) a material  adverse  effect on the  Company's  ability to
      perform in any material  respect on a timely basis its  obligations  under
      any Transaction  Document (any of (i), (ii) or (iii), a "Material  Adverse
      Effect") and no Proceeding  has been  instituted in any such  jurisdiction
      revoking,  limiting or curtailing  or seeking to revoke,  limit or curtail
      such power and authority or qualification.

            (c)  Authorization;  Enforcement.  The  Company  has  the  requisite
      corporate  power  and  authority  to  enter  into  and to  consummate  the
      transactions  contemplated  by  each  of  the  Transaction  Documents  and
      otherwise  to carry out its  obligations  thereunder.  The  execution  and
      delivery  of each of the  Transaction  Documents  by the  Company  and the
      consummation by it of the transactions contemplated thereby have been duly
      authorized  by all  necessary  action  on the part of the  Company  and no
      further  action is required by the Company in connection  therewith  other
      than in connection with the Required Approvals.  Each Transaction Document
      has been (or upon  delivery  will have been) duly  executed by the Company
      and, when delivered in accordance  with the terms hereof,  will constitute
      the valid and binding  obligation of the Company  enforceable  against the
      Company in  accordance  with its terms except (i) as limited by applicable
      bankruptcy,  insolvency,  reorganization,  moratorium  and  other  laws of
      general application  affecting  enforcement of creditors' rights generally
      and (ii) as limited  by laws  relating  to the  availability  of  specific
      performance, injunctive relief or other equitable remedies.

                                    8 of 28
<PAGE>

            (d) No Conflicts.  The  execution,  delivery and  performance of the
      Transaction  Documents by the Company and the  consummation by the Company
      of the other  transactions  contemplated  thereby do not and will not: (i)
      conflict   with  or  violate  any   provision  of  the  Company's  or  any
      Subsidiary's  certificate  or articles of  incorporation,  bylaws or other
      organizational or charter documents,  or (ii) conflict with, or constitute
      a default  (or an event  that with  notice or lapse of time or both  would
      become a default)  under,  result in the  creation of any Lien upon any of
      the  properties  or assets of the  Company or any  Subsidiary,  or give to
      others any rights of termination,  amendment, acceleration or cancellation
      (with or without notice, lapse of time or both) of, any agreement,  credit
      facility,  debt or other  instrument  (evidencing  a Company or Subsidiary
      debt or  otherwise)  or other  understanding  to which the  Company or any
      Subsidiary  is a party or by which any property or asset of the Company or
      any  Subsidiary  is bound or  affected,  or (iii)  subject to the Required
      Approvals,  conflict  with or  result  in a  violation  of any law,  rule,
      regulation,  order, judgment,  injunction,  decree or other restriction of
      any court or  governmental  authority to which the Company or a Subsidiary
      is subject  (including federal and state securities laws and regulations),
      or by which any property or asset of the Company or a Subsidiary  is bound
      or affected; except in the case of each of clauses (ii) and (iii), such as
      could not have or reasonably  be expected to result in a Material  Adverse
      Effect.

            (e)  Filings,  Consents  and  Approvals.  Except as set forth in the
      Disclosure  Schedule,  the Company is not  required to obtain any consent,
      waiver,  authorization or order of, give any notice to, or make any filing
      or registration  with, any court or other federal,  state,  local or other
      governmental  authority or other Person in connection  with the execution,
      delivery and performance by the Company of the Transaction Documents.

            (f) Issuance of the  Securities.  The Securities are duly authorized
      and,  when  issued  and  paid  for  in  accordance   with  the  applicable
      Transaction  Documents,  will be duly and validly  issued,  fully paid and
      nonassessable,  free and clear of all Liens  imposed by the Company  other
      than restrictions on transfer  provided for in the Transaction  Documents.
      The  Underlying  Shares,  when issued in accordance  with the terms of the
      Transaction   Documents,   will  be   validly   issued,   fully  paid  and
      nonassessable,  free and clear of all Liens  imposed by the  Company.  The
      Company has reserved  from its duly  authorized  capital stock a number of
      shares of Common  Stock for  issuance  of the  Underlying  Shares at least
      equal to the Required Minimum on the date hereof. The Company has not, and
      to the  knowledge  of the  Company,  no Affiliate of the Company has sold,
      offered for sale or  solicited  offers to buy or otherwise  negotiated  in
      respect of any  security (as defined in Section 2 of the  Securities  Act)
      that would be  integrated  with the offer or sale of the  Securities  in a
      manner that would require the registration under the Securities Act of the
      sale of the Securities to the Purchaser,  or that would be integrated with
      the  offer  or  sale of the  Securities  for  purposes  of the  rules  and
      regulations of any Trading Market.

            (g)  Capitalization.  The  capitalization  of the  Company is as set
      forth in the Description of Securities section of the Disclosure Schedule.
      The  Company  has not issued any capital  stock  since.  No Person has any
      right of first refusal,  preemptive right, right of participation,  or any
      similar  right to  participate  in the  transactions  contemplated  by the
      Transaction Documents.  Except as set forth in the Disclosure Schedule, as
      a  result  of the  purchase  and  sale  of the  Securities,  there  are no
      outstanding  options,  warrants,  script  rights to subscribe to, calls or
      commitments of any character whatsoever relating to, or securities, rights
      or obligations  convertible into or exchangeable for, or giving any Person
      any right to  subscribe  for or acquire,  any shares of Common  Stock,  or
      contracts,  commitments,  understandings  or  arrangements  by  which  the
      Company  or any  Subsidiary  is or may  become  bound to issue  additional
      shares  of  Common  Stock,   or  securities  or  rights   convertible   or
      exchangeable  into shares of Common  Stock.  The  issuance and sale of the
      Securities  will not  obligate the Company to issue shares of Common Stock
      or other  securities to any Person (other than the Purchaser) and will not
      result  in a right of any  holder of  Company  securities  to  adjust  the
      exercise,  conversion,  exchange or reset price under such securities. All
      of the  outstanding  shares of capital  stock of the  Company  are validly
      issued, fully paid and nonassessable,  have been issued in compliance with
      all federal and state securities laws, and none of such outstanding shares
      was issued in  violation  of any  preemptive  rights or similar  rights to
      subscribe for or purchase securities. No further approval or authorization
      of any  stockholder,  the Board of  Directors  of the Company or others is
      required  for the  issuance  and  sale  of the  Securities.  There  are no
      stockholders  agreements,  voting  agreements or other similar  agreements
      with  respect to the  Company's  capital  stock to which the  Company is a
      party or, to the  knowledge  of the  Company,  between or among any of the
      Company's stockholders.

                                    9 of 28
<PAGE>

            (h) SEC  Reports;  Financial  Statements.  The Company has filed all
      reports  required  to be  filed  by it under  the  Securities  Act and the
      Exchange Act,  including  pursuant to Section 13(a) or 15(d) thereof,  for
      the two years  preceding  the date hereof (or such  shorter  period as the
      Company  was  required  by law  to  file  such  material)  (the  foregoing
      materials,  including the exhibits thereto, being collectively referred to
      herein as the "SEC  Reports")  on a timely  basis or has  received a valid
      extension of such time of filing and has filed any such SEC Reports  prior
      to the expiration of any such extension. As of their respective dates, the
      SEC Reports complied in all material respects with the requirements of the
      Securities  Act and the Exchange Act and the rules and  regulations of the
      Commission  promulgated  thereunder,  and  none of the SEC  Reports,  when
      filed,  contained  any untrue  statement of a material  fact or omitted to
      state a material fact required to be stated  therein or necessary in order
      to make the statements  therein, in light of the circumstances under which
      they were made, not  misleading.  The financial  statements of the Company
      included  in  the  SEC  Reports  comply  in  all  material  respects  with
      applicable  accounting  requirements  and the rules and regulations of the
      Commission with respect  thereto as in effect at the time of filing.  Such
      financial  statements  have been prepared in accordance with United States
      generally  accepted  accounting  principles  applied on a consistent basis
      during the periods involved ("GAAP"), except as may be otherwise specified
      in  such  financial  statements  or the  notes  thereto  and  except  that
      unaudited  financial  statements may not contain all footnotes required by
      GAAP, and fairly present in all material  respects the financial  position
      of the Company and its  consolidated  subsidiaries as of and for the dates
      thereof and the results of operations  and cash flows for the periods then
      ended,  subject,  in  the  case  of  unaudited   statements,   to  normal,
      immaterial, year-end audit adjustments.

            (i) Material Changes. Since the date of the latest audited financial
      statements  included  within  the  SEC  Reports,  except  as  specifically
      disclosed in the SEC Reports,  (i) there has been no event,  occurrence or
      development that has had or that could reasonably be expected to result in
      a  Material  Adverse  Effect,  (ii)  the  Company  has  not  incurred  any
      liabilities  (contingent  or otherwise)  other than (A) trade payables and
      accrued  expenses  incurred in the ordinary course of business  consistent
      with past practice and (B) liabilities not required to be reflected in the
      Company's  financial  statements  pursuant  to  GAAP  or  required  to  be
      disclosed in filings made with the  Commission,  (iii) the Company has not
      altered its method of  accounting,  (iv) the  Company has not  declared or
      made  any  dividend  or  distribution  of cash or  other  property  to its
      stockholders or purchased,  redeemed or made any agreements to purchase or
      redeem any shares of its capital  stock and (v) the Company has not issued
      any equity  securities  to any  officer,  director  or  Affiliate,  except
      pursuant to existing Company stock option plans. The Company does not have
      pending before the Commission  any request for  confidential  treatment of
      information.

                                    10 of 28
<PAGE>

            (j) Litigation.  Other than as set forth in the Disclosure  Schedule
      under the caption "Legal  Proceedings," there is no action, suit, inquiry,
      notice  of  violation,  proceeding  or  investigation  pending  or, to the
      knowledge of the Company, threatened against or affecting the Company, any
      Subsidiary or any of their respective  properties  before or by any court,
      arbitrator,  governmental or administrative agency or regulatory authority
      (federal,  state,  county, local or foreign)  (collectively,  an "Action")
      which (i)  adversely  affects or  challenges  the  legality,  validity  or
      enforceability  of any of the  Transaction  Documents or the Securities or
      (ii) could, if there were an unfavorable  decision,  have or reasonably be
      expected to result in a Material  Adverse Effect.  Neither the Company nor
      any Subsidiary,  nor any director or officer  thereof,  is or has been the
      subject of any Action involving a claim of violation of or liability under
      federal or state  securities  laws or a claim of breach of fiduciary duty.
      There has not been,  and to the  knowledge  of the  Company,  there is not
      pending or contemplated, any investigation by the Commission involving the
      Company or any current or former  director or officer of the Company.  The
      Commission  has not issued any stop order or other  order  suspending  the
      effectiveness  of any  registration  statement filed by the Company or any
      Subsidiary under the Exchange Act or the Securities Act.

            (k) Labor  Relations.  No material  labor dispute  exists or, to the
      knowledge of the Company, is imminent with respect to any of the employees
      of the Company which could  reasonably be expected to result in a Material
      Adverse Effect.

            (l)  Compliance.  Neither the Company nor any  Subsidiary  (i) is in
      default  under or in violation of (and no event has occurred  that has not
      been waived that, with notice or lapse of time or both,  would result in a
      default by the Company or any  Subsidiary  under),  nor has the Company or
      any Subsidiary  received  notice of a claim that it is in default under or
      that it is in violation of, any indenture, loan or credit agreement or any
      other agreement or instrument to which it is a party or by which it or any
      of its  properties is bound  (whether or not such default or violation has
      been waived),  (ii) is in violation of any order of any court,  arbitrator
      or governmental body, or (iii) is or has been in violation of any statute,
      rule  or  regulation  of any  governmental  authority,  including  without
      limitation all foreign,  federal,  state and local laws  applicable to its
      business except in each case as could not have a Material Adverse Effect.

            (m) Regulatory Permits. The Company and the Subsidiaries possess all
      certificates,   authorizations  and  permits  issued  by  the  appropriate
      federal,  state,  local or foreign  regulatory  authorities  necessary  to
      conduct  their  respective  businesses  as  described  in the SEC Reports,
      except  where  the  failure  to  possess  such  permits  could not have or
      reasonably be expected to result in a Material  Adverse Effect  ("Material
      Permits"),  and neither the Company nor any  Subsidiary  has  received any
      notice of proceedings  relating to the revocation or  modification  of any
      Material Permit.

            (n) Title to Assets.  The Company and the Subsidiaries have good and
      marketable  title in fee simple to all real property owned by them that is
      material to the business of the Company and the  Subsidiaries and good and
      marketable  title in all personal  property owned by them that is material
      to the business of the Company and the Subsidiaries, in each case free and
      clear of all Liens, except for Liens as do not materially affect the value
      of such  property and do not  materially  interfere  with the use made and
      proposed to be made of such  property by the Company and the  Subsidiaries
      and Liens for the payment of federal, state or other taxes, the payment of
      which is neither  delinquent  nor subject to penalties.  Any real property
      and facilities  held under lease by the Company and the  Subsidiaries  are
      held by them under valid,  subsisting and enforceable  leases of which the
      Company and the Subsidiaries are in compliance.

                                    11 of 28
<PAGE>

            (o) Patents and Trademarks.  The Company and the Subsidiaries  have,
      or have  rights to use,  all  patents,  patent  applications,  trademarks,
      trademark applications,  service marks, trade names, copyrights,  licenses
      and other similar rights  necessary or material for use in connection with
      their respective  businesses as described in the SEC Reports and which the
      failure to so have could have a Material Adverse Effect (collectively, the
      "Intellectual  Property  Rights").  Neither the Company nor any Subsidiary
      has received a written notice that the  Intellectual  Property Rights used
      by the Company or any Subsidiary  violates or infringes upon the rights of
      any  Person.  To the  knowledge  of the  Company,  all  such  Intellectual
      Property Rights are  enforceable and there is no existing  infringement by
      another Person of any of the Intellectual Property Rights of others.

            (p)  Insurance.  The  Company  and the  Subsidiaries  are insured by
      insurers of recognized  financial  responsibility  against such losses and
      risks and in such amounts as are prudent and  customary in the  businesses
      in which the Company and the Subsidiaries are engaged,  including, but not
      limited to,  directors and officers  insurance  coverage at least equal to
      $1,000,000.  To the best of Company's knowledge,  such insurance contracts
      and  policies  are  accurate  and  complete.  Neither  the Company nor any
      Subsidiary has any reason to believe that it will not be able to renew its
      existing insurance coverage as and when such coverage expires or to obtain
      similar coverage from similar insurers as may be necessary to continue its
      business without a significant increase in cost.

            (q) Transactions With Affiliates and Employees.  Except as set forth
      in the SEC Reports,  none of the officers or directors of the Company and,
      to the  knowledge of the Company,  none of the employees of the Company is
      presently a party to any  transaction  with the Company or any  Subsidiary
      (other than for services as employees, officers and directors),  including
      any contract,  agreement or other arrangement providing for the furnishing
      of services to or by, providing for rental of real or personal property to
      or from, or otherwise requiring payments to or from any officer,  director
      or such employee or, to the knowledge of the Company,  any entity in which
      any officer,  director, or any such employee has a substantial interest or
      is an officer,  director,  trustee or  partner,  in each case in excess of
      $50,000  other  than (i) for  payment  of  salary or  consulting  fees for
      services  rendered,  (ii) reimbursement for expenses incurred on behalf of
      the Company and (iii) for other employee benefits,  including stock option
      agreements under any stock option plan of the Company.

            (r) Sarbanes-Oxley;  Internal Accounting Controls. The Company is in
      material  compliance with all provisions of the Sarbanes-Oxley Act of 2002
      which are  applicable  to it as of the Closing  Date.  The Company and the
      Subsidiaries  maintain a system of internal accounting controls sufficient
      to provide  reasonable  assurance  that (i)  transactions  are executed in
      accordance  with  management's  general or specific  authorizations,  (ii)
      transactions are recorded as necessary to permit  preparation of financial
      statements in conformity  with GAAP and to maintain asset  accountability,
      (iii) access to assets is permitted only in accordance  with  management's
      general or specific  authorization,  and (iv) the recorded  accountability
      for assets is compared with the existing  assets at  reasonable  intervals
      and  appropriate  action is taken  with  respect to any  differences.  The
      Company has established  disclosure controls and procedures (as defined in
      Exchange Act Rules  13a-15(e) and  15d-15(e)) for the Company and designed
      such   disclosure   controls  and   procedures  to  ensure  that  material
      information relating to the Company,  including its Subsidiaries,  is made
      known  to  the  certifying  officers  by  others  within  those  entities,
      particularly  during the period in which the Company's most recently filed
      periodic  report  under  the  Exchange  Act,  as the case may be, is being
      prepared.   The  Company's   certifying   officers   have   evaluated  the
      effectiveness  of the  Company's  controls and  procedures  as of the date
      prior to the filing date of the most recently filed periodic  report under
      the Exchange Act (such date, the "Evaluation Date"). The Company presented
      in its most  recently  filed  periodic  report  under the Exchange Act the
      conclusions of the  certifying  officers  about the  effectiveness  of the
      disclosure  controls and procedures  based on their  evaluations as of the
      Evaluation Date. Since the Evaluation Date, there have been no significant
      changes in the  Company's  internal  controls  (as such term is defined in
      Item 307(b) of Regulation S-K under the Exchange Act) or, to the Company's
      knowledge,  in other factors that could significantly affect the Company's
      internal controls.

                                    12 of 28
<PAGE>

            (s) Certain  Fees.  Except as set forth in the  Disclosure  Schedule
      under  the  caption  "Recent  Sales  of  Unregistered  Securities;  Use of
      Proceeds  from  Registered  Securities,"  no brokerage or finder's fees or
      commissions are or will be payable by the Company to any broker, financial
      advisor or consultant, finder, placement agent, investment banker, bank or
      other  Person  with  respect  to the  transactions  contemplated  by  this
      Agreement. The Purchaser shall have no obligation with respect to any fees
      or with  respect to any claims  made by or on behalf of other  Persons for
      fees of a type  contemplated in this Section that may be due in connection
      with the transactions contemplated by this Agreement.

            (t) Private  Placement.  Assuming  the  accuracy of the  Purchaser's
      representations  and warranties set forth in Section 3.2, no  registration
      under  the  Securities  Act is  required  for the  offer  and  sale of the
      Securities by the Company to the  Purchaser as  contemplated  hereby.  The
      issuance and sale of the  Securities  hereunder  does not  contravene  the
      rules and regulations of the Trading Market.

            (u) Investment Company.  The Company is not, and is not an Affiliate
      of, and immediately after receipt of payment for the Securities,  will not
      be or be an Affiliate of, an  "investment  company"  within the meaning of
      the Investment Company Act of 1940, as amended.  The Company shall conduct
      its  business  in a  manner  so that it will  not  become  subject  to the
      Investment Company Act.

            (v) Registration Rights.  Except as contemplated by the transactions
      hereunder,  no Person  has any right to cause the  Company  to effect  the
      registration under the Securities Act of any securities of the Company.

            (w) Listing and Maintenance Requirements. The Company's Common Stock
      is  registered  pursuant to Section  12(g) of the  Exchange  Act,  and the
      Company  has taken no action  designed  to, or which to its  knowledge  is
      likely to have the effect of,  terminating the  registration of the Common
      Stock under the Exchange Act nor has the Company received any notification
      that the Commission is contemplating  terminating such  registration.  The
      Company  has not, in the 12 months  preceding  the date  hereof,  received
      notice  from any Trading  Market on which the Common  Stock is or has been
      listed or quoted to the effect that the Company is not in compliance  with
      the  listing or  maintenance  requirements  of such  Trading  Market.  The
      Company  is,  and  has no  reason  to  believe  that  it  will  not in the
      foreseeable future continue to be, in compliance with all such listing and
      maintenance requirements.

            (x) Application of Takeover  Protections.  The Company and its Board
      of Directors have taken all necessary  action,  if any, in order to render
      inapplicable any control share acquisition,  business combination,  poison
      pill  (including  any  distribution  under a  rights  agreement)  or other
      similar  anti-takeover   provision  under  the  Company's  Certificate  of
      Incorporation  (or similar charter  documents) or the laws of its state of
      incorporation  that is or could become  applicable  to the  Purchaser as a
      result of the Purchaser and the Company  fulfilling  their  obligations or
      exercising their rights under the Transaction Documents, including without
      limitation as a result of the Company's issuance of the Securities and the
      Purchaser's ownership of the Securities.

                                    13 of 28
<PAGE>

            (y) Disclosure.  The Company  confirms that neither it nor any other
      Person  acting on its behalf has  provided  any of the  Purchaser or their
      agents  or  counsel  with  any  information   that  constitutes  or  might
      constitute material,  nonpublic  information.  The Company understands and
      confirms that the Purchaser will rely on the foregoing representations and
      covenants in effecting  transactions  in  securities  of the Company.  All
      disclosure provided to the Purchaser  regarding the Company,  its business
      and  the  transactions   contemplated  hereby,  including  the  Disclosure
      Schedules to this Agreement, furnished by or on behalf of the Company with
      respect to the  representations  and  warranties  made herein are true and
      correct with respect to such  representations  and  warranties  and do not
      contain  any  untrue  statement  of a  material  fact or omit to state any
      material fact necessary in order to make the statements  made therein,  in
      light of the circumstances under which they were made, not misleading. The
      Company  acknowledges  and agrees that no Purchaser  makes or has made any
      representations   or   warranties   with   respect  to  the   transactions
      contemplated hereby other than those specifically set forth in Section 3.2
      hereof.

            (z) No Integrated Offering. Assuming the accuracy of the Purchaser's
      representations  and  warranties  set forth in Section  3.2,  neither  the
      Company, nor any of its affiliates,  nor any Person acting on its or their
      behalf  has,  directly  or  indirectly,  made any  offers  or sales of any
      security or solicited any offers to buy any security,  under circumstances
      that would cause this offering of the  Securities  to be  integrated  with
      prior  offerings by the Company for purposes of the  Securities Act or any
      applicable shareholder approval provisions, including, without limitation,
      under the rules and  regulations  of any exchange or  automated  quotation
      system  on which  any of the  securities  of the  Company  are  listed  or
      designated.

            (aa) Solvency. To the best of its knowledge,  based on the financial
      condition of the Company as of the Closing Date after giving effect to the
      receipt by the  Company of the  proceeds  from the sale of the  Securities
      hereunder, (i) the Company's fair saleable value of its assets exceeds the
      amount that will be required to be paid on or in respect of the  Company's
      existing  debts  and  other   liabilities   (including   known  contingent
      liabilities) as they mature;  (ii) the Company's  assets do not constitute
      unreasonably small capital to carry on its business for the current fiscal
      year as now  conducted  and as  proposed  to be  conducted  including  its
      capital needs taking into account the particular  capital  requirements of
      the business conducted by the Company,  and projected capital requirements
      and capital  availability  thereof; and (iii) the current cash flow of the
      Company,  together with the proceeds the Company would receive, were it to
      liquidate  all of its assets,  after taking into  account all  anticipated
      uses of the cash,  would be sufficient to pay all amounts on or in respect
      of its debt when such  amounts are  required to be paid.  The Company does
      not intend to incur  debts  beyond  its  ability to pay such debts as they
      mature  (taking  into account the timing and amounts of cash to be payable
      on or in respect of its debt).  The Company has no  knowledge of any facts
      or  circumstances  which  lead  it  to  believe  that  it  will  file  for
      reorganization or liquidation under the bankruptcy or reorganization  laws
      of any jurisdiction within one year from the Closing Date. The SEC Reports
      set forth as of the dates  thereof all  outstanding  secured and unsecured
      Indebtedness of the Company or any Subsidiary, or for which the Company or
      any  Subsidiary  has  commitments.  For the  purposes  of this  Agreement,
      "Indebtedness"  shall  mean  (a) any  liabilities  for  borrowed  money or
      amounts  owed in excess of  $50,000  (other  than trade  accounts  payable
      incurred  in  the  ordinary  course  of  business),  (b)  all  guaranties,
      endorsements and other  contingent  obligations in respect of Indebtedness
      of  others,  whether  or not the same are or  should be  reflected  in the
      Company's  balance  sheet (or the notes  thereto),  except  guaranties  by
      endorsement of negotiable instruments for deposit or collection or similar
      transactions in the ordinary course of business; and (c) the present value
      of any lease payments in excess of $50,000 due under leases required to be
      capitalized  in  accordance  with  GAAP.   Neither  the  Company  nor  any
      Subsidiary is in default with respect to any Indebtedness.

                                    14 of 28
<PAGE>

            (bb) Tax Status.  Except for matters that would not, individually or
      in the  aggregate,  have or reasonably be expected to result in a Material
      Adverse  Effect,  the Company and each  Subsidiary has filed all necessary
      federal,  state and foreign  income and franchise tax returns and has paid
      or  accrued  all  taxes  shown  as due  thereon,  and the  Company  has no
      knowledge  of a tax  deficiency  which  has been  asserted  or  threatened
      against the Company or any Subsidiary.

            (cc) No General  Solicitation.  Neither  the  Company nor any person
      acting on behalf of the Company has offered or sold any of the  Securities
      by any form of general  solicitation or general  advertising.  The Company
      has  offered the  Securities  for sale only to the  Purchaser  and certain
      other  "accredited  investors"  within  the  meaning of Rule 501 under the
      Securities Act.

            (dd) Foreign  Corrupt  Practices.  Neither the  Company,  nor to the
      knowledge  of the Company,  any agent or other person  acting on behalf of
      the Company,  has (i) directly or  indirectly,  used any corrupt funds for
      unlawful  contributions,  gifts,  entertainment or other unlawful expenses
      related to foreign or domestic political activity,  (ii) made any unlawful
      payment to foreign or domestic government officials or employees or to any
      foreign or domestic  political  parties or campaigns from corporate funds,
      (iii) failed to disclose  fully any  contribution  made by the Company (or
      made by any  person  acting on its  behalf of which the  Company is aware)
      which is in violation of law, or (iv) violated in any material respect any
      provision of the Foreign Corrupt Practices Act of 1977, as amended

            (ee)  Accountants.  The  Company's  accountants  are Stark  Winter &
      Schenkein & Co., LLP. To the Company's  knowledge,  such accountants,  who
      the  Company  expects  will  express  their  opinion  with  respect to the
      financial statements to be included in the Company's Annual Report on Form
      10-KSB for the year ending  December  31, 2005,  are a  registered  public
      accounting firm as required by the Securities Act.

            (ff)  Seniority.  As of the Closing Date, no  indebtedness  or other
      equity of the Company is senior to, or pari passu with, the Notes in right
      of  payment,  whether  with  respect to interest  or upon  liquidation  or
      dissolution,  or otherwise,  other than  indebtedness  secured by purchase
      money  security  interests  (which is senior only as to underlying  assets
      covered thereby) and capital lease obligations (which is senior only as to
      the property covered thereby).

            (gg) No  Disagreements  with  Accountants and Lawyers.  There are no
      disagreements of any kind presently existing, or reasonably anticipated by
      the Company to arise,  between  the  accountants  and lawyers  formerly or
      presently  employed by the Company and the Company is current with respect
      to  any  fees  owed  to  its  accountants  and  lawyers.  By  making  this
      representation   the  Company   does  not,   in  any  manner,   waive  the
      attorney/client  privilege or the  confidentiality  of the  communications
      between the Company and its lawyers.

            (hh) Acknowledgment  Regarding  Purchaser's  Purchase of Securities.
      The Company acknowledges and agrees that the Purchaser is acting solely in
      the capacity of an arm's length  purchaser with respect to the Transaction
      Documents and the transactions  contemplated  hereby.  The Company further
      acknowledges  that no  Purchaser  is  acting  as a  financial  advisor  or
      fiduciary of the Company (or in any similar capacity) with respect to this
      Agreement and the transactions contemplated hereby and any advice given by
      any  Purchaser  or any of their  respective  representatives  or agents in
      connection with this Agreement and the transactions contemplated hereby is
      merely  incidental  to the  Purchaser's  purchase of the  Securities.  The
      Company further represents to the Purchaser that the Company's decision to
      enter  into  this  Agreement  has been  based  solely  on the  independent
      evaluation of the transactions  contemplated hereby by the Company and its
      representatives.  The  Company  further  acknowledges  that in addition to
      purchasing  Securities,  the Purchaser or its  affiliates  may directly or
      indirectly  own Common Stock and  Preferred  Stock in the Company and that
      such parties, exercising their rights hereunder may adversely impact their
      other holdings as well as the other equity holders in the Company.

                                    15 of 28
<PAGE>

            (ii) Lock-Up  Agreement.  The Company shall obtain from each officer
      and director,  of the Company,  a lock-up  agreement  satisfactory  to the
      Purchaser,  which  prohibits the sale of stock in the Company for one year
      from the date of Closing.

            (jj) Marketing.  The Company agrees to spend  reasonable  amounts to
      market  the  Company,  and it will  use an  investor  relations  firm  and
      investor service programs satisfactory to the Purchaser.  The Company will
      issue a press release or file a form 8-K publicly  announcing the material
      terms of this deal within one Trading Day of the Closing.

      3.2 Representations and Warranties of the Purchaser.  The Purchaser hereby
represents  and warrants as of the date hereof and as of the Closing Date to the
Company as follows:

            (a)  Organization;  Authority.  The  Purchaser  is  an  entity  duly
      organized,  validly  existing and in good  standing  under the laws of the
      jurisdiction of its organization with full right, corporate or partnership
      power and  authority  to enter  into and to  consummate  the  transactions
      contemplated by the  Transaction  Documents and otherwise to carry out its
      obligations  thereunder.  The execution,  delivery and  performance by the
      Purchaser of the  transactions  contemplated  by this  Agreement have been
      duly  authorized by all necessary  corporate or similar action on the part
      of the  Purchaser.  Each  Transaction  Document to which it is a party has
      been duly executed by the  Purchaser,  and when delivered by the Purchaser
      in accordance with the terms hereof, will constitute the valid and legally
      binding obligation of the Purchaser,  enforceable against it in accordance
      with its terms, except (i) as limited by general equitable  principles and
      applicable bankruptcy,  insolvency,  reorganization,  moratorium and other
      laws of general  application  affecting  enforcement of creditors'  rights
      generally,  (ii)  as  limited  by laws  relating  to the  availability  of
      specific  performance,  injunctive relief or other equitable  remedies and
      (iii)  insofar  as  indemnification  and  contribution  provisions  may be
      limited by applicable law.

            (b) Purchaser  Representation.  The Purchaser  understands  that the
      Securities are "restricted  securities" and have not been registered under
      the Securities Act or any applicable state securities law and is acquiring
      the  Securities as principal for its own account and not with a view to or
      for distributing or reselling such Securities or any part thereof,  has no
      present  intention  of  distributing  any of  such  Securities  and has no
      arrangement  or  understanding   with  any  other  persons  regarding  the
      distribution  of such  Securities  (this  representation  and warranty not
      limiting  the  Purchaser's  right to sell the  Securities  pursuant to the
      Registration  Statement or otherwise in compliance with applicable federal
      and state  securities  laws).  The Purchaser is acquiring  the  Securities
      hereunder in the ordinary  course of its business.  The Purchaser does not
      have any  agreement or  understanding,  directly or  indirectly,  with any
      Person to distribute any of the Securities.

                                    16 of 28
<PAGE>

            (c)  Purchaser  Status.  At the time the  Purchaser  was offered the
      Securities,  it was,  and at the date  hereof  it is,  and on each date on
      which it  exercises  any Warrants or converts any Notes it will be either:
      (i) an "accredited investor" as defined in Rule 501(a)(1), (a)(2), (a)(3),
      (a)(7)  or  (a)(8)  under  the   Securities   Act  or  (ii)  a  "qualified
      institutional  buyer" as defined in Rule 144A(a) under the Securities Act.
      The Purchaser is not required to be registered  as a  broker-dealer  under
      Section 15 of the Exchange Act.

            (d)  Experience of the  Purchaser.  The  Purchaser,  either alone or
      together with its representatives,  has such knowledge, sophistication and
      experience  in  business  and  financial  matters  so as to be  capable of
      evaluating  the  merits  and risks of the  prospective  investment  in the
      Securities,  and has so evaluated the merits and risks of such investment.
      The  Purchaser is able to bear the economic  risk of an  investment in the
      Securities  and, at the present time, is able to afford a complete loss of
      such investment.

            (e)  General  Solicitation.  The  Purchaser  is not  purchasing  the
      Securities  as a result  of any  advertisement,  article,  notice or other
      communication   regarding  the  Securities  published  in  any  newspaper,
      magazine  or  similar  media  or  broadcast  over  television  or radio or
      presented  at any  seminar or any other  general  solicitation  or general
      advertisement.

      The Company  acknowledges  and agrees that the Purchaser  does not make or
      has not  made  any  representations  or  warranties  with  respect  to the
      transactions  contemplated  hereby other than those specifically set forth
      in this Section 3.2.

                                  ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

      4.1 Transfer Restrictions.

            (a) The Securities may only be disposed of in compliance  with state
      and federal securities laws. In connection with any transfer of Securities
      other than pursuant to an effective registration statement or Rule 144, to
      the Company or to an  affiliate  of a Purchaser  or in  connection  with a
      pledge as  contemplated  in Section  4.1(b),  the  Company may require the
      transferor  thereof  to  provide  to the  Company  an  opinion  of counsel
      selected by the transferor and reasonably  acceptable to the Company,  the
      form and substance of which opinion  shall be reasonably  satisfactory  to
      the  Company,   to  the  effect  that  such   transfer  does  not  require
      registration of such transferred Securities under the Securities Act. As a
      condition of transfer,  any such  transferee  shall agree in writing to be
      bound by the  terms of this  Agreement  and  shall  have the  rights  of a
      Purchaser under this Agreement and the Registration Rights Agreement.

            (b) The Purchaser  agrees to the imprinting,  so long as is required
      by this  Section  4.1(b),  of a  legend  on any of the  Securities  in the
      following form:

      NEITHER THESE  SECURITIES NOR THE SECURITIES  INTO WHICH THESE  SECURITIES
      ARE EXERCISABLE  CONVERTIBLE  HAVE BEEN REGISTERED WITH THE SECURITIES AND
      EXCHANGE COMMISSION OR THE SECURITIES  COMMISSION OF ANY STATE IN RELIANCE
      UPON AN EXEMPTION FROM  REGISTRATION  UNDER THE SECURITIES ACT OF 1933, AS
      AMENDED (THE "SECURITIES  ACT"), AND,  ACCORDINGLY,  MAY NOT BE OFFERED OR
      SOLD EXCEPT  PURSUANT TO AN  EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE
      SECURITIES  ACT  OR  PURSUANT  TO AN  AVAILABLE  EXEMPTION  FROM,  OR IN A
      TRANSACTION  NOT  SUBJECT  TO,  THE   REGISTRATION   REQUIREMENTS  OF  THE
      SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE  STATE SECURITIES LAWS AS
      EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE  TRANSFEROR TO SUCH EFFECT,
      THE  SUBSTANCE  OF WHICH SHALL BE  REASONABLY  ACCEPTABLE  TO THE COMPANY.
      THESE  SECURITIES  AND THE  SECURITIES  ISSUABLE  UPON  EXERCISE  OF THESE
      SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
      OTHER LOAN SECURED BY SUCH SECURITIES.

                                    17 of 28
<PAGE>

            The Company  acknowledges  and agrees that a Purchaser may from time
      to time pledge pursuant to a bona fide margin  agreement with a registered
      broker-dealer  or  grant  a  security  interest  in  some  or  all  of the
      Securities to a financial  institution that is an "accredited investor" as
      defined in Rule 501(a) under the Securities Act and who agrees to be bound
      by the provisions of this Agreement and the Registration  Rights Agreement
      and, if required  under the terms of such  arrangement,  the Purchaser may
      transfer pledged or secured Securities to the pledgees or secured parties.
      Such a pledge or transfer  would not be subject to approval of the Company
      and no legal  opinion of legal  counsel of the pledgee,  secured  party or
      pledgor  shall be required in  connection  therewith.  Further,  no notice
      shall be required of such pledge. At the appropriate  Purchaser's expense,
      the Company will execute and deliver such  reasonable  documentation  as a
      pledgee  or  secured  party  of  Securities  may  reasonably   request  in
      connection with a pledge or transfer of the Securities,  including, if the
      Securities are subject to registration pursuant to the Registration Rights
      Agreement,   the  preparation  and  filing  of  any  required   prospectus
      supplement  under  Rule  424(b)(3)  under  the  Securities  Act  or  other
      applicable provision of the Securities Act to appropriately amend the list
      of Selling Stockholders thereunder.

            (c) Certificates  evidencing the Underlying Shares shall not contain
      any legend (including the legend set forth in Section 4.1(b) hereof):  (i)
      while a  registration  statement  (including the  Registration  Statement)
      covering  the resale of such  security is effective  under the  Securities
      Act, or (ii) following any sale of such Underlying Shares pursuant to Rule
      144, or (iii) if such  Underlying  Shares are eligible for sale under Rule
      144(k),   or  (iv)  if  such  legend  is  not  required  under  applicable
      requirements of the Securities Act (including judicial interpretations and
      pronouncements  issued by the staff of the Commission).  The Company shall
      cause its counsel to issue a legal opinion to the Company's transfer agent
      promptly  after the Effective  Date if required by the Company's  transfer
      agent to effect the removal of the legend hereunder. If all or any portion
      of a Note or Warrant is converted or exercised (as  applicable)  at a time
      when there is an effective  registration  statement to cover the resale of
      the Underlying Shares, or if such Underlying Shares may be sold under Rule
      144(k)  or if such  legend  is not  otherwise  required  under  applicable
      requirements  of the Securities Act  (including  judicial  interpretations
      thereof) then such Underlying  Shares shall be issued free of all legends.
      The Company  agrees that  following the Effective  Date or at such time as
      such legend is no longer required under this Section  4.1(c),  it will, no
      later than three Trading Days following the delivery by a Purchaser to the
      Company or the  Company's  transfer  agent of a  certificate  representing
      Underlying  Shares (with notice to the Company of delivery to the transfer
      agent),  as  applicable,  issued  with a  restrictive  legend  (such third
      Trading Day, the "Legend Removal Date"),  deliver or cause to be delivered
      to the Purchaser a certificate  representing such shares that is free from
      all restrictive  and other legends.  The Company may not make any notation
      on its records or give  instructions  to any transfer agent of the Company
      that enlarge the restrictions on transfer set forth in this Section.

                                    18 of 28
<PAGE>

            (d) In addition  to a  Purchaser's  other  available  remedies,  the
      Company shall pay to a Purchaser,  in cash, as partial  liquidated damages
      and not as a penalty,  for each $1,000 of Underlying  Shares (based on the
      VWAP of the Common Stock on the date such  Securities are submitted to the
      Company's  transfer agent) delivered for removal of the restrictive legend
      and subject to this Section 4.1(c),  $5 per Trading Day (increasing to $10
      per Trading Day 5 Trading  Days after such  damages  have begun to accrue)
      for each Trading Day after the Legend Removal Date until such  certificate
      is  delivered  without  a legend.  Such  liquidated  damages  shall not be
      incurred  during  any  period  in which  the  delay is  occasioned  by the
      Company's  transfer  agent or other  independent  party not  acting at the
      Company's  direction  to delay  the  issuance  and not as a result  of any
      negligence or wrongdoing on the Company's part. Nothing herein shall limit
      a Purchaser's  right to pursue actual damages for the Company's failure to
      deliver  certificates  representing  any  Securities  as  required  by the
      Transaction Documents,  and a Purchaser shall have the right to pursue all
      remedies  available  to  it  at  law  or  in  equity  including,   without
      limitation, a decree of specific performance and/or injunctive relief.

            (e) The Purchaser agrees that the removal of the restrictive  legend
      from certificates representing Securities as set forth in this Section 4.1
      is predicated  upon the Company's  reliance that such  Purchaser will sell
      any Securities  pursuant to either the  registration  requirements  of the
      Securities Act, including any applicable prospectus delivery requirements,
      or an exemption therefrom.

      4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of the  Securities  may result in dilution of the  outstanding  shares of Common
Stock,  which dilution may be substantial under certain market  conditions.  The
Company  further   acknowledges  that  its  obligations  under  the  Transaction
Documents,  including without  limitation its obligation to issue the Underlying
Shares pursuant to the Transaction Documents, are unconditional and absolute and
not  subject  to any  right  of  set  off,  counterclaim,  delay  or  reduction,
regardless  of the effect of any such dilution or any claim the Company may have
against any Purchaser and  regardless of the dilutive  effect that such issuance
may have on the ownership of the other stockholders of the Company.

      4.3 Furnishing of Information.  As long as any Purchaser owns  Securities,
the Company  covenants to timely file (or obtain  extensions in respect  thereof
and file within the applicable grace period) all reports required to be filed by
the Company  after the date hereof  pursuant to the Exchange Act. As long as any
Purchaser  owns  Securities,  if the  Company is not  required  to file  reports
pursuant to the Exchange Act, it will prepare and furnish to such  Purchaser and
make publicly  available in accordance  with Rule 144(c) such  information as is
required for such Purchaser to sell the  Securities  under Rule 144. The Company
further  covenants  that it will  take  such  further  action  as any  holder of
Securities may reasonably request,  all to the extent required from time to time
to enable such Person to sell such  Securities  without  registration  under the
Securities Act within the limitation of the exemptions provided by Rule 144.

      4.4  Integration.  The Company  shall not sell,  offer for sale or solicit
offers to buy or  otherwise  negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the  Securities  in a manner that would  require the  registration  under the
Securities  Act of the sale of the  Securities to the Purchaser or that would be
integrated  with the offer or sale of the  Securities  for purposes of the rules
and regulations of any Trading Market.

      4.5  Conversion  and Exercise  Procedures.  The form of Notice of Exercise
included in the  Warrants and the form of Notice of  Conversion  included in the
Notes set forth the  totality of the  procedures  required of the  Purchaser  in
order to exercise the Warrants or convert the Notes. No additional legal opinion
or other  information  or  instructions  shall be required of the  Purchaser  to
exercise its Warrants or convert its Notes. The Company shall honor exercises of
the Warrants and conversions of the Notes and shall deliver Underlying Shares in
accordance  with  the  terms,  conditions  and  time  periods  set  forth in the
Transaction Documents.

                                    19 of 28
<PAGE>

      4.6 Securities Laws Disclosure;  Publicity.  The Company and the Purchaser
shall  consult with each other in issuing any other press  releases with respect
to the  transactions  contemplated  hereby,  and  neither  the  Company  nor the
Purchaser  shall issue any such press release or otherwise  make any such public
statement  without the prior  consent of the Company,  with respect to any press
release of the Purchaser,  or without the prior consent of the  Purchaser,  with
respect  to  any  press  release  of  the  Company,   which  consent  shall  not
unreasonably be withheld, except if such disclosure is required by law, in which
case the  disclosing  party  shall  promptly  provide the other party with prior
notice of such public statement or communication. Notwithstanding the foregoing,
the Company shall not publicly  disclose the name of the  Purchaser,  or include
the name of the Purchaser in any filing with the  Commission  or any  regulatory
agency or Trading  Market,  without the prior written consent of such Purchaser,
except  (i)  as  required  by  federal  securities  law  in  connection  with  a
registration statement and (ii) to the extent such disclosure is required by law
or Trading Market regulations,  in which case the Company shall provide the such
Purchaser with prior notice of such disclosure  permitted under subclause (i) or
(ii).

      4.7  Shareholder  Rights  Plan.  No claim will be made or  enforced by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring  Person" under any  shareholder  rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the  provisions of any such plan or  arrangement,  by
virtue of  receiving  Securities  under the  Transaction  Documents or under any
other  agreement  between  the  Company and such  Purchaser.  The Company  shall
conduct  its  business  in a manner so that it will not  become  subject  to the
Investment Company Act.

      4.8 Non-Public Information.  The Company covenants and agrees that neither
it nor any other Person  acting on its behalf will provide any  Purchaser or its
agents or counsel with any  information  that the Company  believes  constitutes
material non-public information,  unless prior thereto such Purchaser shall have
executed  a written  agreement  regarding  the  confidentiality  and use of such
information.  The Company  understands  and confirms that the Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.

      4.9 Use of Proceeds.  The Company shall use the net proceeds from the sale
of the Securities hereunder for certain acquisitions  (including Markow, Digital
Card and Sogedex;  it being  understood  that  $2,000,000 of the proceeds of the
Notes will be deposited  in the Escrow  Account on the Closing Date and shall be
subject  to the terms and  conditions  of the  Escrow  Agreement  and the Escrow
Account Side Letter) and related expenses.

      4.10  Reimbursement.  If any Purchaser becomes involved in any capacity in
any  Proceeding  by or against  any Person who is a  stockholder  of the Company
(except as a result of sales, pledges,  margin sales and similar transactions by
the  Purchaser  to or with any current  stockholder),  solely as a result of the
Purchaser's acquisition of the Securities under this Agreement, the Company will
reimburse the Purchaser for its reasonable  legal and other expenses  (including
the cost of any  investigation  preparation and travel in connection  therewith)
incurred  in  connection   therewith,   as  such  expenses  are  incurred.   The
reimbursement  obligations  of the  Company  under  this  paragraph  shall be in
addition to any  liability  which the Company may otherwise  have,  shall extend
upon the same terms and  conditions  to any  Affiliates of the Purchaser who are
actually  named in such  action,  proceeding  or  investigation,  and  partners,
directors,  agents,  employees and controlling persons (if any), as the case may
be, of the Purchaser and any such Affiliate, and shall be binding upon and inure
to the benefit of any successors, assigns, heirs and personal representatives of
the Company,  the  Purchaser  and any such  Affiliate  and any such Person.  The
Company  also  agrees  that  neither  the  Purchaser  nor any  such  Affiliates,
partners,  directors,  agents,  employees or controlling  persons shall have any
liability to the Company or any Person asserting claims on behalf of or in right
of the  Company  solely as a result  of  acquiring  the  Securities  under  this
Agreement.

                                    20 of 28
<PAGE>

      4.11  Indemnification  of  Purchaser.  Subject to the  provisions  of this
Section  4.11,  the  Company  will  indemnify  and  hold the  Purchaser  and its
directors,  officers,  shareholders,  partners,  employees and agents  (each,  a
"Purchaser Party") harmless from any and all losses,  liabilities,  obligations,
claims,  contingencies,  damages,  costs and expenses,  including all judgments,
amounts paid in  settlements,  court costs and  reasonable  attorneys'  fees and
costs of investigation  that any Purchaser Party may suffer or incur as a result
of or  relating  to (a) any  breach of any of the  representations,  warranties,
covenants or  agreements  made by the Company in this  Agreement or in the other
Transaction  Documents or (b) any action instituted against a Purchaser,  or any
of them or their respective Affiliates, by any stockholder of the Company who is
not an  Affiliate  of the  Purchaser,  with  respect to any of the  transactions
contemplated  by the Transaction  Documents  (unless such action is based upon a
breach of the  Purchaser's  representation,  warranties  or covenants  under the
Transaction Documents or any agreements or understandings the Purchaser may have
with any such stockholder or any violations by the Purchaser of state or federal
securities laws or any conduct by the Purchaser which constitutes  fraud,  gross
negligence,  willful misconduct or malfeasance).  If any action shall be brought
against any Purchaser Party in respect of which indemnity may be sought pursuant
to this  Agreement,  the Purchaser  Party shall  promptly  notify the Company in
writing, and the Company shall have the right to assume the defense thereof with
counsel of its own choosing.  Any Purchaser Party shall have the right to employ
separate counsel in any such action and participate in the defense thereof,  but
the fees and expenses of such counsel  shall be at the expense of the  Purchaser
Party except to the extent that (i) the employment thereof has been specifically
authorized  by the  Company in  writing,  (ii) the  Company  has failed  after a
reasonable  period of time to assume such defense and to employ counsel or (iii)
in such action there is, in the reasonable  opinion of such separate counsel,  a
material  conflict on any material issue between the position of the Company and
the  position of the  Purchaser  Party.  The  Company  will not be liable to any
Purchaser Party under this Agreement (i) for any settlement by a Purchaser Party
effected  without  the  Company's  prior  written  consent,  which  shall not be
unreasonably  withheld or delayed; or (ii) to the extent, but only to the extent
that a loss, claim, damage or liability is attributable to any Purchaser Party's
breach of any of the representations,  warranties,  covenants or agreements made
by the Purchaser in this Agreement or in the other Transaction  Documents or any
violations by the Purchaser of state or federal  securities  laws or any conduct
by the Purchaser which constitutes fraud,  gross negligence,  willful misconduct
or malfeasance.

      4.12 Reservation and Listing of Securities.

            (a) The Company  shall  maintain a reserve from its duly  authorized
      shares of Common Stock for issuance pursuant to the Transaction  Documents
      in such amount as may be required to fulfill its obligations in full under
      the Transaction Documents.

            (b) If, on any date,  the number of  authorized  but  unissued  (and
      otherwise  unreserved)  shares of Common  Stock is less than the  Required
      Minimum on such date, then the Board of Directors of the Company shall use
      commercially  reasonable  efforts to amend the  Company's  certificate  or
      articles  of  incorporation  to  increase  the  number of  authorized  but
      unissued  shares of Common Stock to at least the Required  Minimum at such
      time,  as soon as  possible  and in any event not later  than the 90th day
      after such date.

                                    21 of 28
<PAGE>

            (c) The Company  shall,  if  applicable:  (i) in the time and manner
      required by the Trading Market,  prepare and file with such Trading Market
      an additional  shares listing  application  covering a number of shares of
      Common  Stock at least equal to the  Required  Minimum on the date of such
      application,  (ii) take all steps necessary to cause such shares of Common
      Stock to be approved for listing on the Trading Market as soon as possible
      thereafter,  (iii) provide to the Purchaser evidence of such listing,  and
      (iv)  maintain the listing of such Common Stock on any date at least equal
      to the  Required  Minimum on such date on such  Trading  Market or another
      Trading Market.

      4.13  Subsequent  Equity Sales.  In addition to the  limitations set forth
herein,  from the date hereof until such time as no  Purchaser  holds any of the
Securities,  the Company shall be prohibited  from effecting or entering into an
agreement  to  effect  any  Subsequent  Financing  involving  a  "Variable  Rate
Transaction" or an "MFN Transaction" (each as defined below). The term "Variable
Rate Transaction"  shall mean a transaction in which the Company issues or sells
(i) any debt or equity  securities  that are convertible  into,  exchangeable or
exercisable  for,  or include the right to receive  additional  shares of Common
Stock either (A) at a conversion,  exercise or exchange rate or other price that
is based upon and/or  varies with the trading  prices of or  quotations  for the
shares of Common  Stock at any time after the  initial  issuance of such debt or
equity securities, or (B) with a conversion,  exercise or exchange price that is
subject to being reset at some  future  date after the initial  issuance of such
debt or equity security or upon the occurrence of specified or contingent events
directly or indirectly  related to the business of the Company or the market for
the Common Stock. The term "MFN  Transaction"  shall mean a transaction in which
the Company issues or sells any securities in a capital  raising  transaction or
series of related  transactions which grants to an investor the right to receive
additional  shares based upon future  transactions  of the Company on terms more
favorable  than those granted to such investor in such  offering.  Any Purchaser
shall be entitled to obtain  injunctive  relief  against the Company to preclude
any such  issuance,  which  remedy  shall be in addition to any right to collect
damages.  Notwithstanding  the  foregoing,  this Section 4.13 shall not apply in
respect of an Exempt  Issuance,  except that no Variable Rate Transaction or MFN
Transaction shall be an Exempt Issuance.

      4.14 RESERVED.

      4.15  Most  Favored  Nation  Provision.  Any time the  Company  effects  a
subsequent  financing,  the  Purchaser  may elect,  in its sole  discretion,  to
exchange all or some of its Notes and Warrants (treated for this purpose only as
a unit)  then held by it for the  securities  issued in a  subsequent  financing
based on the then  outstanding  principal amount of the Note plus any other fees
then owed by the Company to the Purchaser,  at the effective price at which such
securities are sold in such subsequent financing.

      4.16 Additional  Participation  Right.  During the term of the Notes,  the
Purchaser shall have the right to participate in up to 50% of any debt or equity
financing of the Company on the same terms as those  offered to such third party
providing the financing by giving notice to the Company  within 10 Business Days
after receipt of an investment request.

      4.17  Additional  Investment  Right.  During  the term of the  Notes,  the
Company  agrees that the Purchaser  shall have the right (at its sole option) to
cause the Company to issue to the  Purchaser  additional  notes in an  aggregate
principal  amount  of  up  to  $2,500,000  on  the  same  terms  and  conditions
(including, without limitation, the same interest rate, Conversion Price then in
effect (using the lowest Conversion Price of all of the Notes issued pursuant to
this Agreement),  proportionate  warrant coverage (at the same exercise prices),
amortization  schedule,  fees,  expenses,  etc.) as set forth in the Transaction
Documents.

                                    22 of 28
<PAGE>

                                   ARTICLE V.
                                  MISCELLANEOUS

      5.1  Termination.  This Agreement may be terminated by any  Purchaser,  by
written notice to the other parties,  if the Closing has not been consummated on
or before June 15, 2006; provided that no such termination will affect the right
of any party to sue for any breach by the other party (or parties).

      5.2 Legal Fees.  At the Closing,  the Company has agreed to (i)  reimburse
Centrecourt  Asset  Management  LLC  ("CAM")  $25,000,  for its  legal  fees and
expenses,  (ii) CAM's  out-of-pocket due diligence and other expenses,  of which
$25,000 has already been paid and (iii) pay CAM $187,500 as a  structuring  fee.
Except as expressly set forth in the Transaction Documents to the contrary, each
party shall pay the fees and expenses of its advisers, counsel,  accountants and
other experts, if any, and all other expenses incurred by such party incident to
the  negotiation,  preparation,  execution,  delivery  and  performance  of this
Agreement.  The Company shall pay all transfer agent fees, stamp taxes and other
taxes and duties levied in connection with the issuance of any Securities.

      5.3  Entire  Agreement.  The  Transaction  Documents,  together  with  the
exhibits and schedules thereto,  contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

      5.4 Notices.  Any and all notices or other  communications  or  deliveries
required or permitted to be provided  hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of  transmission,  if
such notice or  communication is delivered via facsimile at the facsimile number
set forth on the signature  pages  attached  hereto prior to 5:30 p.m. (New York
City  time)  on a  Trading  Day,  (b) the next  Trading  Day  after  the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile  number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (c) the second  Trading Day following the date of mailing,  if sent by U.S.
nationally  recognized  overnight courier service, or (d) upon actual receipt by
the party to whom such  notice is  required  to be given.  The  address for such
notices and communications shall be as set forth on the signature pages attached
hereto.

      5.5 Amendments;  Waivers.  No provision of this Agreement may be waived or
amended except in a written instrument  signed, in the case of an amendment,  by
the Company and the Purchaser or, in the case of a waiver,  by the party against
whom  enforcement  of any such waiver is sought.  No waiver of any default  with
respect to any provision,  condition or  requirement of this Agreement  shall be
deemed to be a  continuing  waiver in the  future or a waiver of any  subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise  any right  hereunder in
any manner impair the exercise of any such right.

      5.6  Construction.  The headings herein are for  convenience  only, do not
constitute a part of this  Agreement  and shall not be deemed to limit or affect
any of the provisions hereof. 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.

      5.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their  successors and permitted  assigns.  The
Company may not assign this  Agreement  or any rights or  obligations  hereunder
without the prior written consent of the Purchaser. Any Purchaser may assign any
or all of its rights under this  Agreement  to any Person to whom the  Purchaser
assigns or transfers any Securities,  provided such transferee agrees in writing
to be bound,  with  respect to the  transferred  Securities,  by the  provisions
hereof that apply to the "Purchaser".

                                    23 of 28
<PAGE>

      5.8 No  Third-Party  Beneficiaries.  This  Agreement  is intended  for the
benefit of the parties  hereto and their  respective  successors  and  permitted
assigns and is not for the benefit of, nor may any provision  hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.11.

      5.9 Governing Law. All questions  concerning the  construction,  validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance  with the internal laws of the State of
New York,  without  regard to the  principles of conflicts of law thereof.  Each
party  agrees  that  all  legal  proceedings   concerning  the  interpretations,
enforcement and defense of the  transactions  contemplated by this Agreement and
any other Transaction  Documents  (whether brought against a party hereto or its
respective affiliates,  directors, officers, shareholders,  employees or agents)
shall be commenced  exclusively  in the state and federal  courts sitting in the
City 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  (including  with respect to the  enforcement  of any of the  Transaction
Documents), 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 improper
or inconvenient venue for such proceeding.  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 via registered or certified
mail or  overnight  delivery  (with  evidence of  delivery) to such party at the
address in effect for  notices to it under this  Agreement  and agrees that such
service  shall  constitute  good and  sufficient  service of process  and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve  process in any manner  permitted by law. The parties  hereby waive all
rights  to a trial  by jury.  If  either  party  shall  commence  an  action  or
proceeding to enforce any  provisions  of the  Transaction  Documents,  then the
prevailing  party in such action or proceeding  shall be reimbursed by the other
party for its  attorneys'  fees and other costs and expenses  incurred  with the
investigation, preparation and prosecution of such action or proceeding.

      5.10 Survival.  The representations and warranties  contained herein shall
survive  the  Closing  and  the  delivery,  exercise  and/or  conversion  of the
Securities, as applicable for the applicable statue of limitations.

      5.11   Execution.   This   Agreement  may  be  executed  in  two  or  more
counterparts,  all of which when taken  together shall be considered one and the
same agreement and shall become effective when  counterparts have been signed by
each party and  delivered  to the other  party,  it being  understood  that both
parties need not sign the same  counterpart.  In the event that any signature is
delivered by facsimile  transmission,  such  signature  shall create a valid and
binding  obligation of the party executing (or on whose behalf such signature is
executed)  with the same force and effect as if such  facsimile  signature  page
were an original thereof.

      5.12  Severability.  If any  provision  of  this  Agreement  is held to be
invalid or unenforceable in any respect,  the validity and enforceability of the
remaining  terms  and  provisions  of  this  Agreement  shall  not in any way be
affected or impaired  thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor,  and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

                                    24 of 28
<PAGE>

      5.13  Rescission and  Withdrawal  Right.  Notwithstanding  anything to the
contrary  contained in (and  without  limiting  any similar  provisions  of) the
Transaction  Documents,  whenever  any  Purchaser  exercises a right,  election,
demand or option  under a  Transaction  Document and the Company does not timely
perform its related  obligations  within the periods therein provided,  then the
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice,  demand or election in whole
or in part  without  prejudice  to its  future  actions  and  rights;  provided,
however,  in the case of a rescission of a conversion of a Note or exercise of a
Warrant,  the  Purchaser  shall be required to return any shares of Common Stock
subject to any such rescinded conversion or exercise notice.

      5.14   Replacement  of  Securities.   If  any  certificate  or  instrument
evidencing any Securities is mutilated,  lost, stolen or destroyed,  the Company
shall  issue or cause to be issued in  exchange  and  substitution  for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument,  but only upon receipt of evidence reasonably satisfactory to the
Company  of such  loss,  theft  or  destruction  and  customary  and  reasonable
indemnity,  if requested.  The  applicants  for a new  certificate or instrument
under  such  circumstances  shall  also  pay any  reasonable  third-party  costs
associated with the issuance of such replacement Securities.

      5.15  Remedies.  In  addition to being  entitled  to  exercise  all rights
provided herein or granted by law,  including  recovery of damages,  each of the
Purchaser  and the Company  will be entitled to specific  performance  under the
Transaction  Documents.  The  parties  agree that  monetary  damages  may not be
adequate  compensation  for  any  loss  incurred  by  reason  of any  breach  of
obligations  described in the  foregoing  sentence and hereby agrees to waive in
any action for specific  performance  of any such  obligation the defense that a
remedy at law would be adequate.

      5.16 Payment Set Aside.  To the extent that the Company makes a payment or
payments to any Purchaser  pursuant to any  Transaction  Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such  enforcement  or exercise or any part thereof are  subsequently
invalidated,  declared to be fraudulent or  preferential,  set aside,  recovered
from, disgorged by or are required to be refunded,  repaid or otherwise restored
to the  Company,  a  trustee,  receiver  or  any  other  person  under  any  law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable  cause of action),  then to the extent of any such  restoration
the  obligation  or part thereof  originally  intended to be satisfied  shall be
revived and  continued  in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

      5.17 Usury. To the extent it may lawfully do so, the Company hereby agrees
not to insist upon or plead or in any manner  whatsoever  claim, and will resist
any and all efforts to be compelled  to take the benefit or advantage  of, usury
laws wherever enacted, now or at any time hereafter in force, in connection with
any claim, action or proceeding that may be brought by any Purchaser in order to
enforce any right or remedy under any Transaction Document.  Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed  and  provided  that  the  total  liability  of  the  Company  under  the
Transaction  Documents  for payments in the nature of interest  shall not exceed
the maximum lawful rate authorized  under  applicable law (the "Maximum  Rate"),
and, without  limiting the foregoing,  in no event shall any rate of interest or
default  interest,  or both of them,  when aggregated with any other sums in the
nature  of  interest  that  the  Company  may  be  obligated  to pay  under  the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
contract  rate of  interest  allowed by law and  applicable  to the  Transaction
Documents is  increased  or  decreased  by statute or any official  governmental
action subsequent to the date hereof,  the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the Transaction  Documents
from the  effective  date  forward,  unless such  application  is  precluded  by
applicable law. If under any circumstances whatsoever, interest in excess of the
Maximum  Rate  is  paid  by  the  Company  to  any  Purchaser  with  respect  to
indebtedness  evidenced  by the  Transaction  Documents,  such  excess  shall be
applied  by  the  Purchaser  to  the  unpaid  principal   balance  of  any  such
indebtedness  or be refunded to the Company,  the manner of handling such excess
to be at the Purchaser's election.

                                    25 of 28
<PAGE>

      5.18  Liquidated  Damages.  The Company's  obligations  to pay any partial
liquidated  damages or other amounts owing under the Transaction  Documents is a
continuing  obligation of the Company and shall not  terminate  until all unpaid
partial liquidated damages and other amounts have been paid  notwithstanding the
fact that the instrument or security  pursuant to which such partial  liquidated
damages or other amounts are due and payable shall have been canceled.

                            (Signature Pages Follow)

                                    26 of 28
<PAGE>

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

LISKA BIOMETRY, INC.                                     Address for Notice:
                                                         -------------------

_______________________________________                  Liska Biometry, Inc.
Name:                                                    100 Main Street
Title:                                                   Dover, NH 03820

With a copy to (which shall not constitute notice):

                   REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE FOR PURCHASER FOLLOWS

                                    27 of 28
<PAGE>

        PURCHASER SIGNATURE PAGES TO LISKA SECURITIES PURCHASE AGREEMENT

         IN  WITNESS  WHEREOF,  the  undersigned  have  caused  this  Securities
Purchase   Agreement  to  be  duly  executed  by  their  respective   authorized
signatories as of the date first indicated above.

Name of Investing Entity: ______________________________________________________
Signature of Authorized Signatory of Investing Entity: _________________________
Name of Authorized Signatory: __________________________________________________
Title of Authorized Signatory: _________________________________________________
Email Address of Authorized Entity:_____________________________________________

Address for Notice of Investing Entity:

Address for Delivery of Securities for Investing Entity (if not same as above):

Subscription Amount:
Warrant Shares:
EIN Number:  PROVIDE THIS UNDER SEPARATE COVER

                            SIGNATURE PAGES CONTINUE

                                    28 of 28EXHIBIT A

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
HAVE  BEEN  REGISTERED  WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION  OR THE
SECURITIES   COMMISSION  OF  ANY  STATE  IN  RELIANCE  UPON  AN  EXEMPTION  FROM
REGISTRATION  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED  (THE  "SECURITIES
ACT"),  AND,  ACCORDINGLY,  MAY NOT BE OFFERED  OR SOLD  EXCEPT  PURSUANT  TO AN
EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR PURSUANT TO AN
AVAILABLE  EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE  REGISTRATION
REQUIREMENTS  OF THE  SECURITIES  ACT AND IN ACCORDANCE  WITH  APPLICABLE  STATE
SECURITIES  LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH  EFFECT,  THE  SUBSTANCE  OF WHICH SHALL BE  REASONABLY  ACCEPTABLE  TO THE
COMPANY.  THIS  SECURITY AND THE  SECURITIES  ISSUABLE  UPON  CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION  WITH A BONA FIDE MARGIN  ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

Original Issue Date: May 31, 2006
Original Conversion Price (subject to adjustment herein): $0.40

                                                                      $3,000,000

                       10% SENIOR SECURED CONVERTIBLE NOTE
                                DUE MAY 31, 2009

      THIS NOTE is one of a series of duly  authorized  and  issued  10%  Senior
Secured Convertible Notes of Liska Biometry, inc., a Florida corporation, having
a  principal  place  of  business  at 100 Main  Street,  Dover,  NH  03820  (the
"Company"),  designated as its 10% Senior Secured  Convertible Note, due May 31,
2009 (the "Note(s)").

      FOR VALUE  RECEIVED,  the Company  promises to pay to CAMOFI Master LDC or
its registered  assigns (the  "Holder"),  the principal sum of $3,000,000 on May
31,  2009 or such  earlier  date as the Notes are  required or  permitted  to be
repaid as provided  hereunder (the "Maturity Date"),  and to pay interest to the
Holder on the aggregate  unconverted and then  outstanding  principal  amount of
this Note in accordance with the provisions hereof.  This Note is subject to the
following additional provisions:

      Section 1. Definitions.  For the purposes hereof, in addition to the terms
defined  elsewhere in this Note:  (a)  capitalized  terms not otherwise  defined
herein have the meanings given to such terms in the Purchase Agreement,  and (b)
the following terms shall have the following meanings:

            "Alternate  Consideration"  shall  have  the  meaning  set  forth in
      Section 5(e)(iii).

            "AMEX" shall mean the American Stock Exchange LLC.

            "Business  Day"  means any day except  Saturday,  Sunday and any day
      which shall be a federal  legal  holiday in the United  States or a day on
      which  banking  institutions  in the State of New York are  authorized  or
      required by law or other government action to close.

            "Change of Control  Transaction"  means the occurrence of any of (i)
      an  acquisition  after the date hereof by an individual or legal entity or
      "group" (as described in Rule 13d-5(b)(1)  promulgated  under the Exchange
      Act) of effective  control (whether through legal or beneficial  ownership
      of capital stock of the Company, by contract or otherwise) of in excess of
      33% of the voting securities of the Company,  or (ii) a replacement at one
      time or within a three year period of more than one-half of the members of
      the  Company's  board of directors  which is not approved by a majority of
      those  individuals  who are members of the board of  directors on the date
      hereof (or by those individuals who are serving as members of the board of
      directors  on any date  whose  nomination  to the board of  directors  was
      approved by a majority of the  members of the board of  directors  who are
      members on the date hereof),  or (iii) Christopher LeClerc or Charles Benz
      shall no longer be employed by the Company as Chief Executive Officer on a
      full time basis,  or (iv) the  execution by the Company of an agreement to
      which the Company is a party or by which it is bound, providing for any of
      the events set forth above in (i) or (ii).
<PAGE>

            "Common Stock" means the common stock,  no par value, of the Company
      and stock of any other  class into which such  shares may  hereafter  have
      been reclassified or changed.

            "Conversion  Date" shall have the meaning set forth in Section  4(a)
      hereof.

            "Conversion Price" shall have the meaning set forth in Section 4(b).

            "Conversion  Shares" means the shares of Common Stock  issuable upon
      conversion of Notes or as payment of interest in accordance with the terms
      hereof.

            "Effectiveness  Date" shall have the  meaning  given to such term in
      the Registration Rights Agreement.

            "Effectiveness  Period" shall have the meaning given to such term in
      the Registration Rights Agreement.

            "Equity  Conditions" shall mean, during the period in question,  (i)
      the  Company  shall have duly  honored  all  conversions  and  redemptions
      scheduled  to  occur or  occurring  by  virtue  of one or more  Notice  of
      Conversions,  if any, (ii) all liquidated  damages and other amounts owing
      in respect of the Notes shall have been paid;  (iii) there is an effective
      Registration  Statement  (or,  in the  case of the  shares  issuable  upon
      conversion of the Notes,  the Holder may resell such shares without regard
      to the volume  limitations under Rule 144(k)) pursuant to which the Holder
      is permitted  to utilize the  prospectus  thereunder  to resell all of the
      shares  issuable  pursuant to the  Transaction  Documents (and the Company
      believes,   in  good  faith,   that  such   effectiveness   will  continue
      uninterrupted  for the  foreseeable  future),  (iv)  the  Common  Stock is
      trading on the Trading Market and all of the shares  issuable  pursuant to
      the Transaction  Documents are listed for trading on a Trading Market (and
      the Company believes, in good faith, that trading of the Common Stock on a
      Trading Market will continue  uninterrupted  for the foreseeable  future),
      (v) there is a sufficient  number of authorized but unissued and otherwise
      unreserved  shares of Common  Stock for the  issuance of all of the shares
      issuable  pursuant  to the  Transaction  Documents,  (vi)  there  is  then
      existing no Event of Default or event  which,  with the passage of time or
      the giving of notice,  would constitute an Event of Default,  (vii) all of
      the shares issued or issuable  pursuant to the transaction  proposed would
      not violate the  limitations  set forth in Section 4(c),  (viii) no public
      announcement of a pending or proposed Fundamental  Transaction,  Change of
      Control  Transaction or acquisition  transaction has occurred that has not
      been  consummated  and (ix) the closing  price for the Common  Stock is at
      least 115% of the Conversion Price (as adjusted).

            "Event of Default" shall have the meaning set forth in Section 8.

                                    2 of 22
<PAGE>

            "Exchange  Act"  means  the  Securities  Exchange  Act of  1934,  as
      amended.

            "Fundamental  Transaction"  shall  have  the  meaning  set  forth in
      Section 5(e)(iii) hereof.

            "Interest Conversion Rate" means 85% of the volume-weighted  average
      closing price for the 10 Trading Days immediately  prior to the applicable
      Interest Payment Date.

            "Late Fees" shall have the meaning set forth in the second paragraph
      to this Note.

            "Mandatory  Prepayment  Amount" for any Notes shall equal the sum of
      (i) 125% of the principal amount of Notes to be prepaid,  plus all accrued
      and unpaid interest thereon, and (ii) all other amounts,  costs,  expenses
      and liquidated damages due in respect of such Notes.

            "Monthly  Conversion  Price"  shall  have the  meaning  set forth in
      Section 6(a) hereof.

            "Monthly  Redemption" shall mean the redemption of the Note pursuant
      to Section 6(a) hereof.

            "Monthly  Redemption Amount" shall mean, as to a Monthly Redemption,
      1/27th of the original principal amount in the aggregate.

            "Monthly  Redemption  Date" means the 1st of each month,  commencing
      February 2007 and ending upon the full redemption of this Note.

            "Original  Issue Date" shall mean the date of the first  issuance of
      the Notes regardless of the number of transfers of any Note and regardless
      of the number of instruments which may be issued to evidence such Note.

            "Person"  means  a  corporation,   an  association,  a  partnership,
      organization,  a  business,  an  individual,  a  government  or  political
      subdivision thereof or a governmental agency.

            "Purchase Agreement" means the Securities Purchase Agreement,  dated
      as of May 31,  2006,  to which the  Company  and the  original  Holder are
      parties,  as  amended,  modified  or  supplemented  from  time  to time in
      accordance with its terms.

            "Registration   Rights  Agreement"  means  the  Registration  Rights
      Agreement,  dated as of the date of the Purchase  Agreement,  to which the
      Company and the  original  Holder are  parties,  as  amended,  modified or
      supplemented from time to time in accordance with its terms.

            "Registration  Statement" means a registration statement meeting the
      requirements  set forth in the  Registration  Rights  Agreement,  covering
      among  other  things  the resale of the  Conversion  Shares and naming the
      Holder as a "selling stockholder" thereunder.

            "Securities  Act" means the Securities Act of 1933, as amended,  and
      the rules and regulations promulgated thereunder.

            "Sogedex" means Sogedex, a French corporation.

            "Special Adjustment Provisions" means (i) the closing of the Sogedex
      transaction  by the  Company,  (ii) the sale of equity  securities  by the
      Company  with  proceeds  of at  least $4  million  at an  effective  price
      (pre-split, etc.) of at least $0.60 per share, (iii) the closing bid price
      for the  Common  Stock on the 180th day from the  Original  Issue  Date is
      greater than the then  applicable  Conversion  Price and (iv) the VWAP for
      the twenty days immediately prior to the 180th day from the Original Issue
      Date is greater than the then applicable Conversion Price.

                                    3 of 22
<PAGE>

            "Subsidiary"  shall  have  the  meaning  given  to such  term in the
      Purchase Agreement.

            "Trading  Day" means a day on which the Common  Stock is traded on a
      Trading Market.

            "Trading  Market" means the following  markets or exchanges on which
      the Common  Stock is listed or quoted for trading on the date in question:
      the Nasdaq  SmallCap  Market,  the American Stock  Exchange,  the New York
      Stock Exchange, the Nasdaq National Market or the OTC Bulletin Board.

            "Transaction  Documents"  shall  have the  meaning  set forth in the
      Purchase Agreement.

            "Qualified  Equity  Offering"  means  an  equity  financing  for the
      account of the Company in which  shares of common  stock,  or  securities,
      directly or indirectly,  convertible  into or  exchangeable or exercisable
      for  shares of  common  stock  are  issued,  which  financing  results  in
      cumulative aggregate proceeds to the Company of at least $15 million.

            "VWAP" means, for any date, the price determined by the first of the
      following clauses that applies:  (a) if the Common Stock is then listed or
      quoted on a Trading Market, the daily volume weighted average price of the
      Common Stock for such date (or the nearest  preceding date) on the primary
      Trading  Market  on which  the  Common  Stock is then  listed or quoted as
      reported by  Bloomberg  Financial  L.P.  (based on a Trading Day from 9:30
      a.m. EST to 4:02 p.m.  Eastern  Time) using the VAP  function;  (b) if the
      Common  Stock is not then  listed or quoted on the  Trading  Market and if
      prices  for the  Common  Stock  are then  reported  in the  "Pink  Sheets"
      published by the Pink  Sheets,  LLC (or a similar  organization  or agency
      succeeding  to its  functions  of reporting  prices),  the most recent bid
      price  per  share of the  Common  Stock so  reported;  or (c) in all other
      cases, the fair market value of a share of Common Stock as determined by a
      nationally  recognized-independent  appraiser  selected  in good  faith by
      Holders  holding  a  majority  of  the  principal  amount  of  Notes  then
      outstanding.

      Section 2. Interest.

            a)  Payment  of  Interest  in Cash or Kind.  The  Company  shall pay
      interest to the Holder on the aggregate  unconverted and then  outstanding
      principal  amount  of this  Note at the  rate  of 10% per  annum,  payable
      monthly in  arrears  beginning  on the first such date after the  Original
      Issue Date,  on each  Conversion  Date (as to that  principal  amount then
      being  converted),  on the Maturity Date (except that, if any such date is
      not a Business Day, then such payment shall be due on the next  succeeding
      Business Day) and on each Monthly  Redemption  Date (as to that  principal
      amount then being redeemed) (each such date, an "Interest  Payment Date"),
      in cash or shares of Common Stock at the Interest  Conversion  Rate,  or a
      combination thereof; provided,  however, payment in shares of Common Stock
      may only  occur if during  the 10 Trading  Days  immediately  prior to the
      applicable  Interest  Payment Date all of the Equity  Conditions have been
      met,  the  payment in shares of Common  Stock  would not exceed 25% of the
      volume for any of the previous 10 Trading Days and the Company  shall have
      given the Holder notice in  accordance  with the notice  requirements  set
      forth below.

                                    4 of 22
<PAGE>

            b) Company's  Election to Pay Interest in Kind. Subject to the terms
      and conditions  herein,  the decision whether to pay interest hereunder in
      shares of Common Stock or cash shall be at the  discretion of the Company.
      Should the  Company  elect to pay  interest  in kind,  it shall be paid in
      registered  shares of Common  Stock  valued at 85% of the  volume-weighted
      average closing price for the 10 days prior to the interest  payment date.
      Not less than 10 Trading Days prior to each  Interest  Payment  Date,  the
      Company  shall  provide the Holder with written  notice of its election to
      pay  interest  hereunder  either in cash or shares  of Common  Stock  (the
      Company may  indicate in such notice that the  election  contained in such
      notice shall continue for later periods until revised).  Within 10 Trading
      Days prior to an Interest  Payment Date, the Company's  election  (whether
      specific to an Interest  Payment Date or continuous)  shall be irrevocable
      as  to  such  Interest  Payment  Date.   Subject  to  the   aforementioned
      conditions,  failure to timely provide such written notice shall be deemed
      an election by the Company to pay the  interest on such  Interest  Payment
      Date in cash.

            c) Interest Calculations.  Interest shall be calculated on the basis
      of a 360-day year and shall accrue daily  commencing on the Original Issue
      Date until payment in full of the principal sum, together with all accrued
      and unpaid interest and other amounts which may become due hereunder,  has
      been made.  Interest shall be compounded  monthly.  Payment of interest in
      shares of Common Stock shall otherwise occur pursuant to Section  4(d)(ii)
      and only for  purposes of the payment of interest in shares,  the Interest
      Payment Date shall be deemed the Conversion Date.  Interest shall cease to
      accrue with respect to any principal amount  converted,  provided that the
      Company in fact  delivers  the  Conversion  Shares  within the time period
      required by Section 4(d)(ii) and if not so delivered, interest will accrue
      until delivery of the Conversion  Shares.  Interest hereunder will be paid
      to the Person in whose name this Note is  registered on the records of the
      Company   regarding   registration  and  transfers  of  Notes  (the  "Note
      Register").  Except  as  otherwise  provided  herein,  if at any  time the
      Company pays interest  partially in cash and partially in shares of Common
      Stock,  then such payment shall be  distributed  ratably among the Holders
      based upon the principal amount of Notes held by each Holder.

            d) Late Fee.  All  overdue  accrued  and unpaid  interest to be paid
      hereunder  shall  entail a late fee at the rate of 20% per  annum (or such
      lower maximum amount of interest  permitted to be charged under applicable
      law) ("Late Fee") which will accrue daily,  from the date such interest is
      due hereunder  through and including the date of payment.  Notwithstanding
      anything to the contrary contained herein, if on any Interest Payment Date
      the Company has elected to pay interest in Common Stock and is not able to
      pay accrued  interest in the form of Common Stock because it does not then
      satisfy the  conditions  for payment in the form of Common Stock set forth
      above, then, the Company shall pay cash.

            e) Optional Prepayment.  The Company shall have the right to prepay,
      in  cash,  all or a  portion  of the  Notes  at any  time  at  115% of the
      principal  amount thereof plus accrued  interest to the date of repayment.
      The Company  shall give the Holder at least ten (10) day's  prior  written
      notice of its  intention  to prepay all or a portion  of the Note,  during
      which time the Holder  shall have the right to convert  any portion of the
      Note into Common Stock.

            f)  Mandatory  Repayment.  If the Company (i) engages in a Qualified
      Equity  Offering,  (ii)  shall  be  a  party  to  any  Change  of  Control
      Transaction  or  Fundamental  Transaction  or (iii) shall agree to sell or
      dispose any of its assets in one or more transactions (whether or not such
      sale would constitute a Change of Control  Transaction),  the Company will
      be required to repay, in cash, the aggregate principal amount of the Notes
      not converted to Common Stock at 115% of the principal  amount  thereof to
      such date of repayment.

                                    5 of 22
<PAGE>

      Section 3. Registration of Transfers and Exchanges.

            a) Different  Denominations.  This Note is exchangeable for an equal
      aggregate principal amount of Notes of different authorized  denominations
      as requested by the Holder  surrendering  the same. No service charge will
      be made for such registration of transfer or exchange.

            b) Investment Representations.  This Note has been issued subject to
      certain investment representations of the original Holder set forth in the
      Purchase  Agreement and may be transferred or exchanged only in compliance
      with the Purchase  Agreement and applicable  federal and state  securities
      laws and regulations.

            c)  Reliance  on Note  Register.  Prior  to due  presentment  to the
      Company  for  transfer  of this  Note,  the  Company  and any agent of the
      Company may treat the Person in whose name this Note is duly registered on
      the Note Register as the owner hereof for the purpose of receiving payment
      as herein provided and for all other purposes, whether or not this Note is
      overdue,  and  neither the Company nor any such agent shall be affected by
      notice to the contrary.

      Section 4. Conversion.

            a) Voluntary  Conversion.  At any time after the Original Issue Date
      until this Note is no longer  outstanding,  this Note shall be convertible
      into shares of Common  Stock at the option of the  Holder,  in whole or in
      part at any time and from  time to time  (subject  to the  limitations  on
      conversion  set forth in Section  4(c)  hereof).  The Holder  shall effect
      conversions  by delivering to the Company the form of Notice of Conversion
      attached hereto as Annex A (a "Notice of Conversion"),  specifying therein
      the  principal  amount of Notes to be converted and the date on which such
      conversion is to be effected (a "Conversion  Date"). If no Conversion Date
      is specified in a Notice of Conversion,  the Conversion  Date shall be the
      date that such  Notice of  Conversion  is  provided  hereunder.  To effect
      conversions  hereunder,  the Holder  shall not be required  to  physically
      surrender Notes to the Company unless the entire  principal amount of this
      Note plus all accrued and unpaid  interest  thereon has been so converted.
      Conversions  hereunder  shall have the effect of lowering the  outstanding
      principal  amount  of  this  Note in an  amount  equal  to the  applicable
      conversion.  The Holder and the Company shall maintain records showing the
      principal amount converted and the date of such  conversions.  The Company
      shall deliver any objection to any Notice of Conversion  within 3 Business
      Days  of  receipt  of  such  notice.  In  the  event  of  any  dispute  or
      discrepancy,   the  records  of  the  Holder  shall  be  controlling   and
      determinative  in the  absence  of  manifest  error.  The  Holder  and any
      assignee,  by  acceptance  of this Note,  acknowledge  and agree that,  by
      reason of the  provisions  of this  paragraph,  following  conversion of a
      portion of this Note, the unpaid and unconverted  principal amount of this
      Note may be less than the amount  stated on the face hereof.  However,  at
      the Company's request,  the Holder shall surrender the Note to the Company
      within five (5) Trading  Days  following  such  request so that a new Note
      reflecting the correct principal amount may be issued to Holder.

            b)  Conversion   Price.  The  conversion  price  in  effect  on  any
      Conversion Date (subject to adjustment herein) shall be equal to $0.40 per
      share.

                                    6 of 22
<PAGE>

            c) Conversion Limitations;  Holder's Restriction on Conversion.  The
      Company shall not effect any conversion of this Note, and the Holder shall
      not have the right to  convert  any  portion  of this  Note,  pursuant  to
      Section 4(a) or otherwise,  to the extent that after giving effect to such
      conversion,  the Holder  (together with the Holder's  affiliates),  as set
      forth on the applicable  Notice of Conversion,  would  beneficially own in
      excess of 4.99% of the  number of shares of the 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 the  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 4(c), beneficial ownership shall be
      calculated  in  accordance  with Section 13(d) of the Exchange Act. To the
      extent  that  the  limitation  contained  in  this  section  applies,  the
      determination  of whether this Note is  convertible  (in relation to other
      securities  owned by the  Holder)  and of which a portion  of this Note is
      convertible  shall be in the sole  discretion  of such  Holder.  To ensure
      compliance with this  restriction,  the Holder will be deemed to represent
      to the  Company  each time it  delivers a Notice of  Conversion  that such
      Notice of Conversion has not violated the  restrictions  set forth in this
      paragraph  and the Company  shall have no  obligation to verify or confirm
      the accuracy of such determination.  For purposes of this Section 4(c), 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-QSB or Form 10-KSB,  as the case
      may be, (y) a more recent  public  announcement  by the Company or (z) any
      other notice by the Company or the Company's  Transfer Agent setting forth
      the number of shares of Common Stock outstanding. Upon the written or oral
      request of the Holder,  the Company  shall within two Trading 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  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.  The  provisions of this Section 4(c)
      may be waived by the Holder upon, at the election of the Holder,  not less
      than 61 days' prior  notice to the  Company,  and the  provisions  of this
      Section  4(c) shall  continue  to apply until such 61st day (or such later
      date, as  determined by the Holder,  as may be specified in such notice of
      waiver).

            d) Mechanics of Conversion

                  i.  Conversion  Shares  Issuable Upon  Conversion of Principal
            Amount.  The  number  of  shares of  Common  Stock  issuable  upon a
            conversion hereunder shall be determined by the quotient obtained by
            dividing  (x) the  outstanding  principal  amount of this Note to be
            converted by (y) the Conversion Price. i.

                  ii. Delivery of Certificate  Upon  Conversion.  Not later than
            three  Trading  Days after any  Conversion  Date,  the Company  will
            deliver to the Holder (A) a certificate or certificates representing
            the Conversion Shares which shall be free of restrictive legends and
            trading  restrictions  (other than those  required  by the  Purchase
            Agreement)  representing  the number of shares of Common Stock being
            acquired  upon the  conversion  of Notes  (including,  if so  timely
            elected by the  Company,  shares of Common  Stock  representing  the
            payment of accrued  interest)  and (B) a bank check in the amount of
            accrued  and unpaid  interest  (if the  Company is  required  to pay
            accrued  interest in cash).  The Company shall,  if available and if
            allowed under  applicable  securities  laws, use its best efforts to
            deliver any certificate or certificates  required to be delivered by
            the Company under this Section electronically through the Depository
            Trust  Corporation  or  another  established   clearing  corporation
            performing similar functions.

                                    7 of 22
<PAGE>

                  iii.  Failure to Deliver  Certificates.  If in the case of any
            Notice  of  Conversion  such  certificate  or  certificates  are not
            delivered  to or as directed by the  applicable  Holder by the third
            Trading Day after a Conversion Date, the Holder shall be entitled by
            written  notice to the  Company at any time on or before its receipt
            of such  certificate  or  certificates  thereafter,  to rescind such
            conversion,  in which event the Company shall immediately return the
            certificates representing the principal amount of Notes tendered for
            conversion.

                  iv. Obligation  Absolute;  Partial Liquidated  Damages. If the
            Company  fails  for  any  reason  to  deliver  to  the  Holder  such
            certificate  or  certificates  pursuant  to Section  4(d)(ii) by the
            third Trading Day after the  Conversion  Date, the Company shall pay
            to such Holder, in cash, as liquidated damages and not as a penalty,
            for each $1000 of principal amount being  converted,  $5 per Trading
            Day  (increasing  to $10 per Trading Day after 5 Trading  Days after
            such damages  begin to accrue) for each Trading Day after such third
            Trading Day until such  certificates  are  delivered.  The Company's
            obligations  to  issue  and  deliver  the  Conversion   Shares  upon
            conversion  of this Note in  accordance  with the terms  hereof  are
            absolute and  unconditional,  irrespective of any action or inaction
            by the  Holder to  enforce  the same,  any  waiver or  consent  with
            respect  to any  provision  hereof,  the  recovery  of any  judgment
            against any Person or any action to enforce the same, or any setoff,
            counterclaim,  recoupment,  limitation or termination, or any breach
            or  alleged  breach  by  the  Holder  or  any  other  Person  of any
            obligation to the Company or any  violation or alleged  violation of
            law by the Holder or any other person, and irrespective of any other
            circumstance  which might  otherwise  limit such  obligation  of the
            Company  to the  Holder  in  connection  with the  issuance  of such
            Conversion Shares; provided, however, such delivery -------- -------
            shall not  operate as a waiver by the Company of any such action the
            Company may have  against the Holder.  In the event a Holder of this
            Note shall elect to convert any or all of the outstanding  principal
            amount hereof,  the Company may not refuse  conversion  based on any
            claim that the Holder or any one  associated or affiliated  with the
            Holder of has been engaged in any violation of law, agreement or for
            any other reason,  unless,  an injunction  from a court,  on notice,
            restraining and or enjoining  conversion of all or part of this Note
            shall have been sought and obtained  and the Company  posts a surety
            bond for the  benefit  of the  Holder  in the  amount of 150% of the
            principal amount of this Note  outstanding,  which is subject to the
            injunction,  which bond shall remain in effect until the  completion
            of  arbitration/litigation  of the dispute and the proceeds of which
            shall be payable to such  Holder to the extent it obtains  judgment.
            In the absence of an  injunction  precluding  the same,  the Company
            shall  issue  Conversion  Shares  or, if  applicable,  cash,  upon a
            properly noticed  conversion.  Nothing herein shall limit a Holder's
            right to  pursue  actual  damages  or  declare  an Event of  Default
            pursuant  to Section 8 herein for the  Company's  failure to deliver
            Conversion Shares within the period specified herein and such Holder
            shall have the right to pursue all  remedies  available to it at law
            or in equity  including,  without  limitation,  a decree of specific
            performance  and/or  injunctive  relief.  The  exercise  of any such
            rights  shall not  prohibit  the  Holders  from  seeking  to enforce
            damages  pursuant to any other  Section  hereof or under  applicable
            law.

                                    8 of 22
<PAGE>

                  v.  Compensation  for  Buy-In on  Failure  to  Timely  Deliver
            Certificates  Upon  Conversion.  In  addition  to any  other  rights
            available  to the  Holder,  if the  Company  fails for any reason to
            deliver to the Holder such  certificate or certificates  pursuant to
            Section 4(d)(ii) by the third Trading Day after the Conversion Date,
            and if after such third  Trading  Day the Holder is  required by its
            brokerage  firm  to  purchase  (in an  open  market  transaction  or
            otherwise) Common Stock to deliver in satisfaction of a sale by such
            Holder  of  the  Conversion  Shares  which  the  Holder  anticipated
            receiving upon such conversion (a "Buy-In"),  then the Company shall
            (A) pay in cash to the Holder (in addition to any remedies available
            to or elected by the  Holder)  the amount by which (x) the  Holder's
            total purchase price (including brokerage  commissions,  if any) for
            the Common  Stock so  purchased  exceeds  (y) the product of (1) the
            aggregate  number  of  shares  of  Common  Stock  that  such  Holder
            anticipated receiving from the conversion at issue multiplied by (2)
            the actual  sale  price of the Common  Stock at the time of the sale
            (including  brokerage  commissions,  if  any)  giving  rise  to such
            purchase  obligation  and (B) at the  option of the  Holder,  either
            reissue Notes in principal  amount equal to the principal  amount of
            the  attempted  conversion  or  deliver  to the Holder the number of
            shares of Common  Stock that would have been  issued had the Company
            timely  complied  with  its  delivery   requirements  under  Section
            4(d)(ii). For example, if the Holder purchases Common Stock having a
            total purchase price of $11,000 to cover a Buy-In with respect to an
            attempted  conversion of Notes with respect to which the actual sale
            price of the  Conversion  Shares at the time of the sale  (including
            brokerage  commissions,   if  any)  giving  rise  to  such  purchase
            obligation   was  a  total  of  $10,000  under  clause  (A)  of  the
            immediately preceding sentence, the Company shall be required to pay
            the Holder  $1,000.  The Holder  shall  provide the Company  written
            notice  indicating  the amounts  payable to the Holder in respect of
            the  Buy-In.   Notwithstanding  anything  contained  herein  to  the
            contrary,  if a Holder  requires  the  Company  to make  payment  in
            respect of a Buy-In for the failure to timely  deliver  certificates
            hereunder  and the  Company  timely pays in full such  payment,  the
            Company shall not be required to pay such Holder liquidated  damages
            under Section 4(d)(iv) in respect of the  certificates  resulting in
            such Buy-In.

                  vi.  Reservation  of  Shares  Issuable  Upon  Conversion.  The
            Company  covenants  that it  will  at all  times  reserve  and  keep
            available out of its authorized and unissued  shares of Common Stock
            solely for the purpose of issuance upon  conversion of the Notes and
            payment of interest on the Note, each as herein provided,  free from
            preemptive rights or any other actual contingent  purchase rights of
            persons other than the Holders,  not less than such number of shares
            of the Common Stock as shall (subject to any additional requirements
            of the  Company as to  reservation  of such  shares set forth in the
            Purchase Agreement) be issuable (taking into account the adjustments
            and   restrictions   of  Section  5)  upon  the  conversion  of  the
            outstanding  principal  amount of the Notes and  payment of interest
            hereunder.  The Company  covenants  that all shares of Common  Stock
            that shall be so issuable  shall,  upon  issue,  be duly and validly
            authorized,  issued  and  fully  paid,  nonassessable  and,  if  the
            Registration  Statement is then effective  under the Securities Act,
            registered  for public  sale in  accordance  with such  Registration
            Statement.

                  vii.  Fractional  Shares.  Upon  a  conversion  hereunder  the
            Company   shall  not  be  required   to  issue  stock   certificates
            representing  fractions  of shares of the Common  Stock,  but may if
            otherwise  permitted,  make a cash  payment  in respect of any final
            fraction of a share  based on the VWAP at such time.  If the Company
            elects not, or is unable,  to make such a cash  payment,  the Holder
            shall be  entitled to  receive,  in lieu of the final  fraction of a
            share, one whole share of Common Stock.

                                    9 of 22
<PAGE>

                  viii.  Transfer Taxes. The issuance of certificates for shares
            of the Common Stock on conversion of the Notes shall be made without
            charge to the Holders thereof for any  documentary  stamp or similar
            taxes that may be payable  in  respect of the issue or  delivery  of
            such certificate, provided that the Company shall not be required to
            pay any tax that may be payable in respect of any transfer  involved
            in the issuance and delivery of any such certificate upon conversion
            in a name other  than that of the Holder of such Notes so  converted
            and the  Company  shall not be  required  to issue or  deliver  such
            certificates  unless or until the person or persons  requesting  the
            issuance  thereof  shall have paid to the Company the amount of such
            tax or shall have  established  to the  satisfaction  of the Company
            that such tax has been paid.

            e)  Forced  Conversion.   Notwithstanding  anything  herein  to  the
      contrary,  if the  Company has  satisfied  all AMEX  listing  requirements
      (other than the equity  requirement) and to satisfy the equity requirement
      the Company is required by the AMEX to convert a portion of the Notes into
      equity,  the Holders  shall convert only that portion of the Notes (not to
      exceed 50% of the aggregate  principal amount  outstanding) into preferred
      stock of the Company (the terms of such preferred stock to be satisfactory
      to the Holders, but, in any event, the terms shall include the issuance of
      additional seven year warrants) that is necessary to satisfy the AMEX. All
      other AMEX listing requirements shall be satisfied by the Company prior to
      the Forced  Conversion.  The Company may not affect a Forced Conversion if
      such Forced  Conversion  would  result in the  Holder's  violation  of the
      ownership  limitations  set  forth in  Section  4(c)  hereof.  Any  Forced
      Conversion  shall be applied ratably to all Holders based on their initial
      purchases of Notes pursuant to the Purchase Agreement.

      Section 5. Certain Adjustments.

            a) Stock  Dividends  and Stock Splits.  If the Company,  at any time
      while the  Notes  are  outstanding:  (A)  shall  pay a stock  dividend  or
      otherwise make a  distribution  or  distributions  on shares of its Common
      Stock or any other  equity  or equity  equivalent  securities  payable  in
      shares of Common Stock (which,  for avoidance of doubt,  shall not include
      any shares of Common  Stock  issued by the Company  pursuant to this Note,
      including as interest thereon), (B) subdivide outstanding shares of Common
      Stock into a larger  number of shares,  (C) combine  (including  by way of
      reverse  stock  split)  outstanding  shares of Common Stock into a smaller
      number of shares, or (D) issue by reclassification of shares of the Common
      Stock any  shares of capital  stock of the  Company,  then the  Conversion
      Price shall be multiplied  by a fraction of which the  numerator  shall be
      the number of shares of Common Stock (excluding  treasury shares,  if any)
      outstanding  before such event and of which the  denominator  shall be the
      number of shares  of  Common  Stock  outstanding  after  such  event.  Any
      adjustment   made  pursuant  to  this  Section   shall  become   effective
      immediately  after the record date for the  determination  of stockholders
      entitled  to  receive  such  dividend  or  distribution  and shall  become
      effective   immediately  after  the  effective  date  in  the  case  of  a
      subdivision, combination or re-classification.

            b)  Subsequent  Equity  Sales.  If the  Company  or  any  Subsidiary
      thereof,  as applicable,  at any time while this Note is  outstanding  and
      after June 30, 2006  (provided  that such  equity  sales prior to June 30,
      2006 are at then current  market  prices),  shall offer,  sell,  grant any
      option to  purchase  or offer,  sell or grant  any  right to  reprice  its
      securities, or otherwise dispose of or issue (or announce any offer, sale,
      grant or any option to purchase or other  disposition) any Common Stock or
      Common Stock Equivalents  entitling any Person to acquire shares of Common
      Stock, at an effective price per share less than the then Conversion Price
      (such lower price, the "Base Share Price" and such issuances collectively,
      a "Dilutive Issuance"), as adjusted hereunder (if the holder of the Common
      Stock or Common Stock Equivalents so issued shall at any time,  whether by
      operation  of  purchase  price  adjustments,  reset  provisions,  floating
      conversion,  exercise or exchange prices or otherwise, or due to warrants,
      options  or rights  per share  which is  issued  in  connection  with such
      issuance,  be entitled to receive  shares of Common  Stock at an effective
      price per share which is less than the  Conversion  Price,  such  issuance
      shall be deemed to have  occurred  for less  than the  Conversion  Price),
      then, the Conversion  Price shall be reduced to equal the Base Share Price
      and the number of Conversion Shares issuable hereunder shall be increased.
      Such  adjustment  shall be made whenever such Common Stock or Common Stock
      Equivalents are issued. The Company shall notify the Holder in writing, no
      later than the Trading Day  following  the issuance of any Common Stock or
      Common Stock Equivalents  subject to this section,  indicating therein the
      applicable  issuance price, or of applicable reset price,  exchange price,
      conversion  price and other  pricing  terms  (such  notice  the  "Dilutive
      Issuance  Notice").  For  purposes  of  clarification,  whether or not the
      Company provides a Dilutive Issuance Notice pursuant to this Section 3(b),
      upon the  occurrence  of any  Dilutive  Issuance,  after  the date of such
      Dilutive Issuance the Holder is entitled to receive a number of Conversion
      Shares  based upon the Base Share Price  regardless  of whether the Holder
      accurately refers to the Base Share Price in the Notice of Conversion.

                                    10 of 22
<PAGE>

            c) Pro Rata  Distributions.  If the Company, at any time while Notes
      are outstanding,  shall distribute to all holders of Common Stock (and not
      to Holders)  evidences of its indebtedness or assets or rights or warrants
      to  subscribe  for or purchase  any  security,  then in each such case the
      Conversion  Price shall be determined by multiplying such Conversion Price
      in effect  immediately prior to the record date fixed for determination of
      stockholders  entitled to receive such distribution by a fraction of which
      the  denominator  shall  be the  VWAP  determined  as of the  record  date
      mentioned  above,  and of which the  numerator  shall be such VWAP on such
      record  date less the then fair  market  value at such  record date of the
      portion  of  such  assets  or  evidence  of  indebtedness  so  distributed
      applicable to one  outstanding  share of the Common Stock as determined by
      the Board of Directors in good faith. In either case the adjustments shall
      be  described  in a  statement  provided  to the Holders of the portion of
      assets or evidences of  indebtedness  so distributed or such  subscription
      rights  applicable to one share of Common Stock.  Such adjustment shall be
      made  whenever any such  distribution  is made and shall become  effective
      immediately after the record date mentioned above.

            d) Other Adjustments. In addition to the other adjustments set forth
      in this  Section 5, in the event that the Company  fails to satisfy all of
      the Special Adjustment Provisions on or before the 180th day following the
      Closing Date (or the next Business Day if such 180th day is not a Business
      Day), on such 180th day the  Conversion  Price shall be reset to the lower
      of: (i) the initial  Conversion  Price;  (ii) the closing bid price of the
      Common Stock on the 180th day;  and (iii) the VWAP for the twenty  Trading
      Days immediately prior to the 180th day.

            e) Calculations. All calculations under this Section 5 shall be made
      to the nearest cent or the nearest 1/100th of a share, as the case may be.
      The number of shares of Common Stock  outstanding  at any given time shall
      not includes shares of Common Stock owned or held by or for the account of
      the Company,  and the description of any such shares of Common Stock shall
      be  considered  on issue or sale of Common  Stock.  For  purposes  of this
      Section  5, the number of shares of Common  Stock  deemed to be issued and
      outstanding as of a given date shall be the sum of the number of shares of
      Common Stock (excluding treasury shares, if any) issued and outstanding.

                                    11 of 22
<PAGE>

            f) Notice to Holders.

                  i.  Adjustment to Conversion  Price.  Whenever the  Conversion
            Price is  adjusted  pursuant  to any of this  Section 5, the Company
            shall  promptly  mail to each  Holder a  notice  setting  forth  the
            Conversion  Price after such  adjustment  and setting  forth a brief
            statement of the facts  requiring  such  adjustment.  If the Company
            issues a variable rate security,  despite the prohibition thereon in
            the Purchase  Agreement,  the Company shall be deemed to have issued
            Common  Stock or Common  Stock  Equivalents  at the lowest  possible
            conversion  or  exercise  price  at  which  such  securities  may be
            converted or exercised  in the case of a Variable  Rate  Transaction
            (as  defined in the  Purchase  Agreement),  or the  lowest  possible
            adjustment  price in the case of an MFN  Transaction  (as defined in
            the Purchase Agreement).

                  ii. Notice to Allow  Conversion by Holder.  If (A) the Company
            shall declare a dividend (or any other  distribution)  on the Common
            Stock;  (B) the Company  shall declare a special  nonrecurring  cash
            dividend on or a  redemption  of the Common  Stock;  (C) the Company
            shall  authorize  the  granting to all  holders of the Common  Stock
            rights or  warrants  to  subscribe  for or  purchase  any  shares of
            capital stock of any class or of any rights; (D) the approval of any
            stockholders of the Company shall be required in connection with any
            reclassification of the Common Stock, any consolidation or merger to
            which  the  Company  is a  party,  any  sale or  transfer  of all or
            substantially  all of the assets of the Company,  of any  compulsory
            share  exchange  whereby the Common  Stock is  converted  into other
            securities,  cash or property;  (E) the Company shall  authorize the
            voluntary or involuntary  dissolution,  liquidation or winding up of
            the affairs of the Company;  then,  in each case,  the Company shall
            cause  to be filed  at each  office  or  agency  maintained  for the
            purpose of conversion of the Notes,  and shall cause to be mailed to
            the Holders at their last  addresses  as they shall  appear upon the
            stock books of the Company,  at least 20 calendar  days prior to the
            applicable record or effective date hereinafter  specified, a notice
            stating  (x) the  date on  which a  record  is to be  taken  for the
            purpose  of  such  dividend,  distribution,  redemption,  rights  or
            warrants,  or if a record is not to be  taken,  the date as of which
            the  holders of the Common  Stock of record to be  entitled  to such
            dividend,  distributions,  redemption,  rights or warrants are to be
            determined   or  (y)  the  date  on  which  such   reclassification,
            consolidation,  merger, sale, transfer or share exchange is expected
            to  become  effective  or  close,  and the  date as of  which  it is
            expected  that  holders  of the  Common  Stock  of  record  shall be
            entitled  to  exchange   their   shares  of  the  Common  Stock  for
            securities,   cash  or  other   property   deliverable   upon   such
            reclassification,  consolidation,  merger,  sale,  transfer or share
            exchange;  provided,  that the  failure  to mail such  notice or any
            defect  therein  or in the  mailing  thereof  shall not  affect  the
            validity of the  corporate  action  required to be specified in such
            notice.  Holders  are  entitled to convert  Notes  during the 20-day
            period  commencing  the date of such notice to the effective date of
            the event triggering such notice.

                                    12 of 22
<PAGE>

                  iii. Fundamental Transaction.  If, at any time while this Note
            is outstanding,  (A) the Company effects any merger or consolidation
            of the Company with or into another Person,  (B) the Company effects
            any  sale  of all or  substantially  all of its  assets  in one or a
            series of related  transactions,  (C) any tender  offer or  exchange
            offer  (whether  by the  Company  or another  Person)  is  completed
            pursuant to which holders of Common Stock are permitted to tender or
            exchange their shares for other securities, cash or property, or (D)
            the Company effects any  reclassification of the Common Stock or any
            compulsory  share  exchange  pursuant  to which the Common  Stock is
            effectively  converted into or exchanged for other securities,  cash
            or property (in any such case, a  "Fundamental  Transaction"),  then
            upon any  subsequent  conversion of this Note, the Holder shall have
            the right to receive, for each Conversion Share that would have been
            issuable upon such conversion  absent such Fundamental  Transaction,
            the same kind and amount of securities, cash or property as it would
            have  been   entitled  to  receive  upon  the   occurrence  of  such
            Fundamental  Transaction if it had been,  immediately  prior to such
            Fundamental  Transaction,  the  holder of one share of Common  Stock
            (the   "Alternate   Consideration").   For   purposes  of  any  such
            conversion,  the  determination  of the  Conversion  Price  shall be
            appropriately  adjusted  to  apply to such  Alternate  Consideration
            based on the amount of Alternate  Consideration  issuable in respect
            of one share of Common Stock in such  Fundamental  Transaction,  and
            the Company shall apportion the Conversion Price among the Alternate
            Consideration in a reasonable  manner  reflecting the relative value
            of any  different  components  of the  Alternate  Consideration.  If
            holders of Common  Stock are given any choice as to the  securities,
            cash or property to be received in a Fundamental  Transaction,  then
            the  Holder  shall be  given  the same  choice  as to the  Alternate
            Consideration it receives upon any conversion of this Note following
            such Fundamental Transaction.  To the extent necessary to effectuate
            the foregoing provisions,  any successor to the Company or surviving
            entity in such Fundamental  Transaction  shall issue to the Holder a
            new note consistent with the foregoing provisions and evidencing the
            Holder's  right to convert such note into  Alternate  Consideration.
            The  terms  of  any  agreement   pursuant  to  which  a  Fundamental
            Transaction  is effected  shall  include  terms  requiring  any such
            successor or surviving  entity to comply with the provisions of this
            paragraph (c) and insuring  that this Note (or any such  replacement
            security) will be similarly adjusted upon any subsequent transaction
            analogous to a Fundamental Transaction.

                  iv.  Exempt  Issuance.   Notwithstanding  the  foregoing,   no
            adjustment will be made under this Section 5 in respect of an Exempt
            Issuance.

      Section 6. Monthly Redemption

            a) Monthly  Redemption.  Beginning  February  2007,  on each Monthly
      Redemption Date the Company shall redeem the Holder's  Monthly  Redemption
      Amount plus accrued but unpaid interest, the sum of all liquidated damages
      and any other  amounts  then owing to such  Holder in respect of the Note.
      The Monthly Redemption Amount due on each Monthly Redemption Date shall be
      paid in cash; provided,  however, as to any Monthly Redemption and upon 10
      Trading  Days'  prior  written  irrevocable  notice,  in  lieu  of a  cash
      redemption  payment,  the  Company  may  elect  to pay  100% of a  Monthly
      Redemption in Conversion  Shares based on a conversion  price equal to 85%
      of the  average  of the 10  consecutive  VWAPs  immediately  prior  to the
      applicable  Monthly  Redemption  Date (subject to adjustment for any stock
      dividend,  stock split, stock combination or other similar event affecting
      the  Common  Stock  during  such 10  Trading  Day  period)  (the  "Monthly
      Conversion Price");  provided,  however,  that the Company may not pay the
      Monthly  Redemption  Amount in Conversion  Shares  unless,  on the Monthly
      Redemption Date and during the 20 Trading Day period  immediately prior to
      the Monthly Redemption Date, the Equity Conditions have been satisfied and
      the  payment in shares of Common  Stock would not exceed 25% of the volume
      for any of the previous 10 Trading Days. The Holder may convert,  pursuant
      to Section  4(a),  any  principal  amount of the Note subject to a Monthly
      Redemption  at any  time  prior to the date  that the  Monthly  Redemption
      Amount  and all  amounts  owing  thereon  are due and  paid in  full.  Any
      principal amount of Note converted during any 20 day period until the date
      the  Monthly  Redemption  Amount  is paid  shall be first  applied  to the
      principal amount subject to the Monthly  Redemption and such Holder's cash
      payment of the Monthly  Redemption Amount on such Monthly  Redemption Date
      shall be  reduced  accordingly,  and any  remaining  principal  amount  so
      converted  shall be applied  against the next  principal  scheduled  to be
      repaid.  The Company covenants and agrees that it will honor all Notice of
      Conversions tendered up until such amounts are paid in full. The Company's
      determination  to pay a  Monthly  Redemption  in cash or  shares of Common
      Stock  shall be applied  ratably  to all  Holders  based on their  initial
      purchases  of Notes  pursuant to the Purchase  Agreement.  Anything to the
      contrary notwithstanding, if the Company pays a Monthly Redemption in cash
      (whether by election or inability to satisfy the  conditions  necessary to
      pay in Conversion  Shares),  such Monthly Redemption shall be made at 102%
      of the amount due.

                                    13 of 22
<PAGE>

            b)  Redemption  Procedure.  The payment of cash  and/or  issuance of
      Common Stock, as the case may be, pursuant to a Monthly  Redemption  shall
      be made on the Monthly Redemption Date. If any portion of the cash payment
      for a  Monthly  Redemption  shall  not  be  paid  by  the  Company  by the
      respective due date,  interest shall accrue thereon at the rate of 18% per
      annum (or the maximum rate permitted by applicable law, whichever is less)
      until the payment of the Monthly Redemption Amount, plus all amounts owing
      thereon is paid in full.  Alternatively,  if any  portion  of the  Monthly
      Redemption  Amount remains unpaid after such date, the Holders  subject to
      such  redemption may elect,  by written notice to the Company given at any
      time thereafter, to invalidate ab initio such redemption,  notwithstanding
      anything herein contained to the contrary.

      Section  7.  Negative  Covenants.  So long as any  portion of this Note is
outstanding, the Company will not and will not permit any of its Subsidiaries to
directly or indirectly:

            a) enter  into,  create,  incur,  assume  or  suffer  to  exist  any
      indebtedness  or  liens  of any  kind,  on or with  respect  to any of its
      property or assets now owned or hereafter acquired or any interest therein
      or any income or profits  therefrom that is senior to,  subordinated to or
      pari passu with,  in any  respect,  the  Company's  obligations  under the
      Notes;

            b) amend its certificate of incorporation,  bylaws or to her charter
      documents so as to adversely affect any rights of the Holder;

            c) repay, repurchase or offer to repay, repurchase, make any payment
      in respect of or  otherwise  acquire  any of its Common  Stock,  Preferred
      Stock, or other equity  securities other than as to the Conversion  Shares
      to the extent permitted or required under the Transaction  Documents or as
      otherwise permitted by the Transaction Documents;

            d) engage in any transactions with any officer,  director,  employee
      or any  affiliate of the Company,  including  any  contract,  agreement or
      other  arrangement  providing  for the  furnishing  of  services to or by,
      providing for rental of real or personal property to or from, or otherwise
      requiring  payments to or from any officer,  director or such employee or,
      to the  knowledge  of the  Company,  any  entity  in  which  any  officer,
      director,  or  any  such  employee  has a  substantial  interest  or is an
      officer,  director,  trustee or partner, in each case in excess of $10,000
      other  than (i) for  payment  of salary or  consulting  fees for  services
      rendered,  (ii)  reimbursement  for  expenses  incurred  on  behalf of the
      Company and (iii) for other  employee  benefits,  including  stock  option
      agreements under any stock option plan of the Company; or

            e) create or acquire any Subsidiary after the date hereof unless (i)
      such Subsidiary is a wholly-owned  Subsidiary of the Company and (ii) such
      Subsidiary  becomes  party to the Security  Agreement  and the  Subsidiary
      Guaranty  (either by executing a  counterpart  thereof or an assumption or
      joinder  agreement in respect  thereof) and, to the extent required by the
      Purchaser,  satisfied each condition of this Agreement and the Transaction
      Documents as if such Subsidiary were a Subsidiary on the Closing Date;

                                    14 of 22
<PAGE>

            f)  enter  into  any  agreement  with any  holder  of the  Company's
      securities without the prior written consent of the Holder;

            g) authorize or approve any reverse stock split of the Common Stock;
      or

            h) enter into any agreement with respect to any of the foregoing.

      Section 8. Events of Default.

            a) "Event of Default",  wherever  used herein,  means any one of the
      following events (whatever the reason and whether it shall be voluntary or
      involuntary  or effected by operation of law or pursuant to any  judgment,
      decree or order of any court,  or any  order,  rule or  regulation  of any
      administrative or governmental body):

                  i. any default in the payment of (A) the  principal  of amount
            of any Note, or (B) interest (including Late Fees) on, or liquidated
            damages in respect  of, any Note,  in each case free of any claim of
            subordination,  as and when the same shall  become  due and  payable
            (whether  on  a  Conversion   Date  or  the  Maturity   Date  or  by
            acceleration or otherwise)  which default,  solely in the case of an
            interest  payment or other  default  under clause (B) above,  is not
            cured, within 3 Trading Days;

                  ii. the  Company  shall  fail to observe or perform  any other
            covenant  or  agreement  contained  in this Note or any of the other
            Transaction  Documents  (other  than a breach by the  Company of its
            obligations  to deliver  shares of Common  Stock to the Holder  upon
            conversion  which  breach is  addressed in clause (xii) below) which
            failure is not cured,  if  possible  to cure,  within the earlier to
            occur of (A) 5 Trading Days after notice of such default sent by the
            Holder or by any other  Holder  and (B) 10  Trading  Days  after the
            Company shall become or should have become aware of such failure;

                  iii. a default or event of  default  (subject  to any grace or
            cure period  provided for in the applicable  agreement,  document or
            instrument)  shall occur under (A) any of the Transaction  Documents
            other than the Notes,  or (B) any other material  agreement,  lease,
            document or  instrument  to which the Company or any  Subsidiary  is
            bound,  which default,  solely in the case of a default under clause
            (B) above, is not cured, within 10 Trading Days;

                  iv. any  representation  or warranty made herein, in any other
            Transaction  Document,  in any written statement  pursuant hereto or
            thereto, or in any other report,  financial statement or certificate
            made or  delivered  to the Holder or any other holder of Notes shall
            be untrue or incorrect  in any material  respect as of the date when
            made or deemed made;

                                    15 of 22
<PAGE>

                  v. (i) the Company or any of its Subsidiaries  shall commence,
            or  there  shall  be  commenced  against  the  Company  or any  such
            Subsidiary,  a case under any  applicable  bankruptcy  or insolvency
            laws as now or hereafter in effect or any successor thereto,  or the
            Company or any Subsidiary  commences any other  proceeding under any
            reorganization,  arrangement, adjustment of debt, relief of debtors,
            dissolution,  insolvency  or  liquidation  or  similar  law  of  any
            jurisdiction  whether  now or  hereafter  in effect  relating to the
            Company or any Subsidiary thereof or (ii) there is commenced against
            the  Company  or  any  Subsidiary   thereof  any  such   bankruptcy,
            insolvency  or other  proceeding  which  remains  undismissed  for a
            period of 60 days; or (iii) the Company or any Subsidiary thereof is
            adjudicated  by a  court  of  competent  jurisdiction  insolvent  or
            bankrupt;  or any order of relief or other order  approving any such
            case or proceeding is entered; or (iv) the Company or any Subsidiary
            thereof  suffers any appointment of any custodian or the like for it
            or any substantial part of its property which continues undischarged
            or  unstayed  for a period  of 60 days;  or (v) the  Company  or any
            Subsidiary  thereof  makes a general  assignment  for the benefit of
            creditors;  or (vi) the  Company  shall fail to pay,  or shall state
            that it is  unable  to pay,  or shall be  unable  to pay,  its debts
            generally as they become due; or (vii) the Company or any Subsidiary
            thereof  shall  call a  meeting  of  its  creditors  with a view  to
            arranging a composition,  adjustment or  restructuring of its debts;
            or (viii) the Company or any Subsidiary  thereof shall by any act or
            failure to act  expressly  indicate  its consent to,  approval of or
            acquiescence in any of the foregoing; or (ix) any corporate or other
            action is taken by the  Company or any  Subsidiary  thereof  for the
            purpose of effecting any of the foregoing;

                  vi. the Company or any Subsidiary  shall default in any of its
            obligations under any mortgage,  credit agreement or other facility,
            indenture  agreement,  factoring agreement or other instrument under
            which  there may be  issued,  or by which  there may be  secured  or
            evidenced any indebtedness for borrowed money or money due under any
            long term  leasing or  factoring  arrangement  of the  Company in an
            amount exceeding  $50,000,  whether such  indebtedness now exists or
            shall  hereafter  be created and such  default  shall result in such
            indebtedness becoming or being declared due and payable prior to the
            date on which it would otherwise become due and payable;

                  vii. the Common  Stock shall not be eligible for  quotation on
            or quoted  for  trading  on a Trading  Market and shall not again be
            eligible  for and quoted or listed for trading  thereon  within five
            Trading Days;

                  viii.  the Company shall redeem or  repurchase  more than a de
            minimis  number of its  outstanding  shares of Common Stock or other
            equity   securities  of  the  Company  (other  than  redemptions  of
            Conversion Shares and repurchases of shares of Common Stock or other
            equity  securities  of  departing  officers  and  directors  of  the
            Company;  provided such repurchases shall not exceed $50,000, in the
            aggregate,  for all officers and  directors  during the term of this
            Note);

                  ix. a  Registration  Statement  shall not have  been  declared
            effective by the  Commission  on or prior to the 210th  calendar day
            after the Closing Date;

                  x. if,  during the  Effectiveness  Period  (as  defined in the
            Registration   Rights   Agreement),   the   effectiveness   of   the
            Registration Statement lapses for any reason or the Holder shall not
            be permitted  to resell  Registrable  Securities  (as defined in the
            Registration Rights Agreement) under the Registration  Statement, in
            either  case,  for  more  than  10  consecutive  Trading  Days or 15
            non-consecutive  Trading Days during any 12 month period;  provided,
            however, that in the event that the Company is negotiating a merger,
            consolidation,  acquisition or sale of all or  substantially  all of
            its assets or a similar  transaction  and in the written  opinion of
            counsel  to  the  Company,  the  Registration  Statement,  would  be
            required  to be  amended  to  include  information  concerning  such
            transactions or the parties thereto that is not available or may not
            be publicly disclosed at the time, the Company shall be permitted an
            additional  10  consecutive  Trading  during  any  12  month  period
            relating to such an event;

                                    16 of 22
<PAGE>

                  xi. an Event (as defined in the Registration Rights Agreement)
            shall not have been cured to the satisfaction of the Holder prior to
            the expiration of thirty days from the Event Date (as defined in the
            Registration Rights Agreement) relating thereto (other than an Event
            resulting from a failure of an Registration Statement to be declared
            effective by the  Commission on or prior to the  Effectiveness  Date
            (as defined in the Registration  Rights  Agreement),  which shall be
            covered by Section 8(a)(ix);

                  xii.  the  Company  shall  fail  for  any  reason  to  deliver
            certificates  to a Holder  prior to the  fifth  Trading  Day after a
            Conversion  Date pursuant to and in accordance  with Section 4(d) or
            the Company shall provide notice to the Holder,  including by way of
            public  announcement,  at any time,  of its  intention not to comply
            with requests for  conversions  of any Notes in accordance  with the
            terms hereof; or

                  xiii. the Company shall fail for any reason to pay in full the
            amount of cash due pursuant to a Buy-In  within 5 Trading Days after
            notice  therefor  is  delivered  hereunder  or shall fail to pay all
            amounts  owed on account of an Event of Default  within five days of
            the date due. i.

            b) Remedies Upon Event of Default.  If any Event of Default  occurs,
      the full principal  amount of this Note,  together with interest and other
      amounts  owing  in  respect  thereof,  to the date of  acceleration  shall
      become, at the Holder's election, immediately due and payable in cash. The
      aggregate  amount  payable upon an Event of Default  shall be equal to the
      Mandatory Prepayment Amount. Commencing 5 days after the occurrence of any
      Event of Default that results in the eventual  acceleration  of this Note,
      the interest  rate on this Note shall accrue at the rate of 18% per annum,
      or such lower  maximum  amount of interest  permitted to be charged  under
      applicable law. All Notes for which the full Mandatory  Prepayment  Amount
      hereunder  shall have been paid in accordance  herewith  shall promptly be
      surrendered to or as directed by the Company.  The Holder need not provide
      and the Company hereby waives any  presentment,  demand,  protest or other
      notice of any kind, and the Holder may immediately and without  expiration
      of any  grace  period  enforce  any and  all of its  rights  and  remedies
      hereunder and all other  remedies  available to it under  applicable  law.
      Such declaration may be rescinded and annulled by Holder at any time prior
      to payment hereunder and the Holder shall have all rights as a Note holder
      until such time, if any, as the full payment under this Section shall have
      been  received by it. No such  rescission  or  annulment  shall affect any
      subsequent Event of Default or impair any right consequent thereon.

      Section 9. Miscellaneous.

            a)  Notices.   Any  and  all  notices  or  other  communications  or
      deliveries  to be provided by the Holders  hereunder,  including,  without
      limitation,  any Notice of  Conversion,  shall be in writing and delivered
      personally,  by  facsimile,  sent  by a  nationally  recognized  overnight
      courier service, addressed to the Company, at the address set forth above,
      facsimile number 603-742-0005,  Attn: Christopher LeClerc, Chief Executive
      Officer,  or such other  address or  facsimile  number as the  Company may
      specify for such purposes by notice to the Holders delivered in accordance
      with  this  Section.  Any and  all  notices  or  other  communications  or
      deliveries to be provided by the Company hereunder shall be in writing and
      delivered  personally,  by  facsimile,  sent  by a  nationally  recognized
      overnight  courier  service  addressed  to each  Holder  at the  facsimile
      telephone  number or address of such Holder  appearing on the books of the
      Company,  or if no such facsimile  telephone number or address appears, at
      the  principal  place of  business  of the  Holder.  Any  notice  or other
      communication or deliveries  hereunder shall be deemed given and effective
      on the  earliest  of (i) the  date of  transmission,  if  such  notice  or
      communication is delivered via facsimile at the facsimile telephone number
      specified in this Section  prior to 5:30 p.m.  (New York City time),  (ii)
      the date after the date of  transmission,  if such notice or communication
      is delivered via facsimile at the facsimile  telephone number specified in
      this  Section  later  than 5:30 p.m.  (New York City time) on any date and
      earlier  than  11:59 p.m.  (New York City  time) on such  date,  (iii) the
      second  Business Day following the date of mailing,  if sent by nationally
      recognized  overnight courier service,  or (iv) upon actual receipt by the
      party to whom such notice is required to be given.

                                    17 of 22
<PAGE>

            b) Absolute  Obligation.  Except as expressly  provided  herein,  no
      provision  of this  Note  shall  alter or  impair  the  obligation  of the
      Company,  which is absolute and  unconditional,  to pay the  principal of,
      interest and liquidated damages (if any) on, this Note at the time, place,
      and rate, and in the coin or currency,  herein prescribed.  This Note is a
      direct debt obligation of the Company. This Note ranks pari passu with all
      other Notes now or hereafter issued under the terms set forth herein

            c) Lost or Mutilated  Note. If this Note shall be  mutilated,  lost,
      stolen or destroyed,  the Company  shall execute and deliver,  in exchange
      and substitution for and upon cancellation of a mutilated Note, or in lieu
      of or in substitution for a lost, stolen or destroyed Note, a new Note for
      the principal amount of this Note so mutilated,  lost, stolen or destroyed
      but only upon receipt of evidence of such loss,  theft or  destruction  of
      such Note, and of the ownership hereof, and indemnity,  if requested,  all
      reasonably satisfactory to the Company.

            d) Security  Interest.  This Note is a direct debt obligation of the
      Company  and,  pursuant to the  Security  Agreement  is secured by a first
      priority  perfected  security interest in all of the assets of the Company
      for the benefit of the Holders.

            e)  Governing  Law.  All  questions   concerning  the  construction,
      validity, enforcement and interpretation of this Note shall be governed by
      and  construed  and enforced in  accordance  with the internal laws of the
      State of New York,  without  regard to the  principles of conflicts of law
      thereof.  Each party  agrees  that all legal  proceedings  concerning  the
      interpretations,  enforcement and defense of the transactions contemplated
      by any of the  Transaction  Documents  (whether  brought  against  a party
      hereto or its respective affiliates,  directors,  officers,  shareholders,
      employees or agents)  shall be  commenced in the state and federal  courts
      sitting  in the City of New  York,  Borough  of  Manhattan  (the "New York
      Courts").  Each party hereto hereby  irrevocably  submits to the exclusive
      jurisdiction  of the New York Courts for the  adjudication  of any dispute
      hereunder or in connection  herewith or with any transaction  contemplated
      hereby or discussed  herein  (including with respect to the enforcement of
      any of the Transaction  Documents),  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, or such
      New York Courts are improper or  inconvenient  venue for such  proceeding.
      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 via  registered  or  certified  mail or  overnight
      delivery  (with  evidence  of  delivery)  to such party at the  address in
      effect for  notices to it under  this Note and  agrees  that such  service
      shall  constitute  good and  sufficient  service  of  process  and  notice
      thereof.  Nothing contained herein shall be deemed to limit in any way any
      right to serve  process in any manner  permitted by law. Each party hereto
      hereby  irrevocably  waives, to the fullest extent permitted by applicable
      law,  any and all right to trial by jury in any legal  proceeding  arising
      out of or relating to this Note or the transactions  contemplated  hereby.
      If either  party  shall  commence an action or  proceeding  to enforce any
      provisions  of this  Note,  then the  prevailing  party in such  action or
      proceeding  shall be reimbursed by the other party for its attorneys  fees
      and other costs and expenses incurred with the investigation,  preparation
      and prosecution of such action or proceeding.

                                    18 of 22
<PAGE>

            f) Waiver.  Any  waiver by the  Company or the Holder of a breach of
      any  provision  of this Note shall not operate as or be  construed to be a
      waiver of any other breach of such provision or of any breach of any other
      provision of this Note. The failure of the Company or the Holder to insist
      upon strict  adherence  to any term of this Note on one or more  occasions
      shall  not be  considered  a waiver  or  deprive  that  party of the right
      thereafter to insist upon strict  adherence to that term or any other term
      of this Note. Any waiver must be in writing.

            g) Severability.  If any provision of this Note is invalid,  illegal
      or unenforceable,  the balance of this Note shall remain in effect, and if
      any  provision is  inapplicable  to any person or  circumstance,  it shall
      nevertheless remain applicable to all other persons and circumstances.  If
      it shall be found that any  interest or other amount  deemed  interest due
      hereunder violates applicable laws governing usury, the applicable rate of
      interest due hereunder shall automatically be lowered to equal the maximum
      permitted rate of interest.  The Company  covenants (to the extent that it
      may lawfully do so) that it shall not at any time insist upon,  plead,  or
      in any manner  whatsoever  claim or take the benefit or advantage  of, any
      stay,  extension or usury law or other law which would prohibit or forgive
      the Company from paying all or any portion of the principal of or interest
      on this Note as contemplated herein,  wherever enacted, now or at any time
      hereafter in force,  or which may affect the covenants or the  performance
      of this  indenture,  and the Company (to the extent it may lawfully do so)
      hereby  expressly  waives all  benefits or  advantage of any such law, and
      covenants  that it will not, by resort to any such law,  hinder,  delay or
      impeded the execution of any power herein granted to the Holder,  but will
      suffer and permit  the  execution  of every such as though no such law has
      been enacted.

            h) Next  Business  Day.  Whenever  any  payment or other  obligation
      hereunder  shall be due on a day other than a Business  Day,  such payment
      shall be made on the next succeeding Business Day.

            i) Headings. The headings contained herein are for convenience only,
      do not  constitute a part of this Note and shall not be deemed to limit or
      affect any of the provisions hereof.

            j) Seniority. This Note is senior in right of payment to any and all
      other indebtedness of the Company.

                             *********************

                                    19 of 22
<PAGE>

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

                                          LISKA BIOMETRY, INC.

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

                                    20 of 22
<PAGE>

                                     ANNEX A

                              NOTICE OF CONVERSION

      The  undersigned  hereby elects to convert  principal under the 10% Senior
Secured  Convertible  Note of Liska Biometry,  Inc., a Florida  corporation (the
"Company"),  due on May 31, 2009, into shares of common stock, no par value (the
"Common Stock"),  of the Company  according to the conditions  hereof, as of the
date  written  below.  If shares are to be issued in the name of a person  other
than the  undersigned,  the undersigned will pay all transfer taxes payable with
respect  thereto and is delivering  herewith such  certificates  and opinions as
reasonably  requested  by the Company in  accordance  therewith.  No fee will be
charged to the holder for any  conversion,  except for such transfer  taxes,  if
any.

      By the delivery of this Notice of Conversion  the  undersigned  represents
and  warrants to the Company  that its  ownership  of the Common  Stock does not
exceed the amounts  determined in accordance  with Section 13(d) of the Exchange
Act, specified under Section 4 of this Note.

      The undersigned agrees to comply with the prospectus delivery requirements
under the  applicable  securities  laws in  connection  with any transfer of the
aforesaid shares of Common Stock.

Conversion calculations:
                           Date to Effect Conversion:

                           Principal Amount of Notes to be Converted:

                           Payment of Interest in Common Stock __ yes  __ no
                              If yes,  $_____ of Interest  Accrued on Account of
                              Conversion at Issue.

                           Number of shares of Common  Stock to be issued:

                           Signature:

                           Name:

                           Address:

                                    21 of 22
<PAGE>

                                   Schedule 1

                               CONVERSION SCHEDULE

The 10% Senior Secured  Convertible  Notes due on May 31, 2009, in the aggregate
principal  amount of  $____________  issued by Liska  Biometry,  Inc., a Florida
corporation.  This Conversion Schedule reflects conversions made under Section 4
of the above referenced Note.

                                     Dated:

<TABLE>
<CAPTION>
=============================== ========================= ======================= ==============================

                                                           Aggregate Principal
                                                             Amount Remaining
      Date of Conversion                                      Subsequent to
(or for first entry, Original                                   Conversion
         Issue Date)              Amount of Conversion         (or original              Company Attest
                                                            Principal Amount)
------------------------------- ------------------------- ----------------------- ------------------------------
<S>                             <C>                       <C>                     <C>

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

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

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

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

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

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

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

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

=============================== ========================= ======================= ==============================
</TABLE>

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00105-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00105-of-00352.parquet"}]]