Document:

EX-10..5

THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS NOTE AND THE
COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
PACIFIC BIOMETRICS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

SECURED CONVERTIBLE TERM NOTE

FOR VALUE RECEIVED, PACIFIC BIOMETRICS, INC., a Delaware corporation (the “Borrower”), hereby
promises to pay to LAURUS MASTER FUND, LTD., c/o Ironshore Corporate Services Ltd., P.O. Box 1234
G.T., Queensgate House, South Church Street, Grand Cayman, Cayman Islands, Fax: 345-949-9877 (the
“Holder”) or its registered assigns or successors in interest, on order, the sum of One Million
Five Hundred Thousand Dollars ($1,500,000.00), together with any accrued and unpaid interest
hereon, on January 31, 2008 (the “Maturity Date”) if not sooner paid.

Capitalized terms used herein without definition shall have the meanings ascribed to such
terms in that certain Securities Purchase Agreement dated as of the date hereof between the
Borrower and the Holder (the “Purchase Agreement”).

The following terms shall apply to this Note:

ARTICLE I

INTEREST & AMORTIZATION

1.1(a) Interest Rate. Subject to Sections 4.11 and 5.6 hereof, interest payable on
this Note shall accrue from the date hereof to the Maturity Date at a rate per annum (the “Interest
Rate”) equal to the “prime rate” published in The Wall Street Journal from time to time,
plus two percent (2%). The prime rate shall be increased or decreased as the case may be for each
increase or decrease in the prime rate in an amount equal to such increase or decrease in the prime
rate; each change to be effective as of the day of the change in such rate. Interest shall be (i)
calculated on the basis of a 360 day year, and (ii) payable monthly, in arrears, commencing on
March 1, 2005 and on the first business day of each consecutive calendar month thereafter until the
Maturity Date (and on the Maturity Date), whether by acceleration or otherwise (each, a “Repayment
Date”).

1.1 (b) Interest Rate Adjustment. The Interest Rate shall be calculated on the last
business day of each month hereafter until the Maturity Date (each a “Determination Date”) and
shall be subject to adjustment as set forth herein. If (i) the Borrower shall have registered the
shares of the Borrower’s common stock underlying each of the conversion of the Note and that
certain warrant issued to Holder on a registration statement declared effective by the Securities
and Exchange Commission (the “SEC”), and (ii) the market price (the “Market Price”) of the Common
Stock as reported by Bloomberg, L.P. on the Principal Market (as defined below) for the five (5)
trading days immediately preceding a Determination Date exceeds the then applicable Fixed
Conversion Price by at least twenty five percent (25%), the Interest Rate for the succeeding
calendar month shall automatically be reduced by 200 basis points (200 b.p.) (2.0.%) for each
incremental twenty five percent (25%) increase in the Market Price of the Common Stock above the
then applicable Fixed Conversion Price. If (i) the Borrower shall not have registered the shares of
the Borrower’s common stock underlying the conversion of the Note and that certain warrant issued
to Holder on a registration statement declared effective by the SEC and which remains effective,
and (ii) the Market Price of the Common Stock as reported by Bloomberg, L.P. on the principal
market for the five (5) trading days immediately preceding a Determination Date exceeds the then
applicable Fixed Conversion Price by at least twenty five percent (25%), the Interest Rate for the
succeeding calendar month shall automatically be decreased by 100 basis points (100 b.p.) (1.0.%)
for each incremental twenty five percent (25%) increase in the Market Price of the Common Stock
above the then applicable Fixed Conversion Price. Notwithstanding the foregoing (and anything to
the contrary contained in herein), in no event shall the Interest Rate be less than zero percent
(0%).

1.2 Minimum Monthly Principal Payments. Amortizing payments of the aggregate
principal amount outstanding under this Note at any time (the “Principal Amount”) shall begin on
August 1, 2005 and shall recur on the first business day of each succeeding month thereafter until
the Maturity Date (each, an “Amortization Date”). Subject to Article 3 below, beginning on the
first Amortization Date, the Borrower shall make monthly payments to the Holder on each Repayment
Date, each in the amount of $50,000.00, together with any accrued and unpaid interest to date on
such portion of the Principal Amount plus any and all other amounts which are then owing under this
Note, the Purchase Agreement or any other Related Agreement but have not been paid (collectively,
the “Monthly Amount”). Any Principal Amount that remains outstanding on the Maturity Date shall be
due and payable on the Maturity Date.

ARTICLE II

CONVERSION REPAYMENT

2.1 (a) Payment of Monthly Amount in Cash or Common Stock. Each month by the fifth
(5th) business day prior to each Amortization Date (the “Notice Date”), the Holder shall
deliver to Borrower a written notice in the form of Exhibit B attached hereto converting the
Monthly Amount payable on the next Repayment Date in either cash or Common Stock, or a combination
of both (each, a “Repayment Notice”). If a Repayment Notice is not delivered by the Holder on or
before the applicable Notice Date for such Repayment Date, then the Borrower shall pay the Monthly
Amount due on such Repayment Date in cash. Any portion of the Monthly Amount paid in cash on a
Repayment Date, shall be paid to the Holder an amount equal to 102% of the principal portion of the
Monthly Amount due and owing to Holder on the Repayment Date. If the Holder converts all or a
portion of the Monthly Amount in shares of Common Stock as provided herein, the number of such
shares to be issued by the Borrower to the Holder on such Repayment Date shall be the number
determined by dividing (x) the portion of the Monthly Amount to be paid in shares of Common Stock,
by (y) the then applicable Fixed Conversion Price. For purposes hereof, the initial “Fixed
Conversion Price” means $1.17 (which has been determined on the date of this Note as an amount
equal to 102% of the average closing price for the ten (10) trading days immediately prior to the
date of this Note).

(b) Monthly Amount Conversion Guidelines. Subject to Sections 2.1(a), 2.2, and 3.2
hereof, the Holder shall convert all or a portion of the Monthly Amount due on each Repayment Date
in shares of Common Stock if the average closing price of the Common Stock as reported by
Bloomberg, L.P. on the Principal Market for the five (5) trading days immediately preceding such
Repayment Date was greater than or equal to 115% of the Fixed Conversion Price, provided, however,
that such conversions shall not exceed twenty five percent (25%) of the aggregate dollar trading
volume of the Common Stock for the five (5) day trading period immediately preceding delivery of a
Notice of Conversion to the Borrower. Any part of the Monthly Amount due on a Repayment Date that
the Holder has not converted into shares of Common Stock shall be paid by the Borrower in cash on
such Repayment Date. Any part of the Monthly Amount due on such Repayment Date which must be paid
in cash (as a result of the closing price of the Common Stock on one or more of the five (5)
trading days preceding the applicable Repayment Date being less than 115% of the Fixed Conversion
Price) shall be paid in cash, within three (3) business days of the applicable Repayment Date.

2.2 No Effective Registration. Notwithstanding anything to the contrary herein, none
of the Borrower’s obligations to the Holder may be converted into Common Stock unless (i) either
(x) an effective current Registration Statement (as defined in the Registration Rights Agreement)
covering the shares of Common Stock to be issued in connection with satisfaction of such
obligations exists or (y) an exemption from registration of the Common Stock is available to
pursuant to Rule 144 of the Securities Act and (ii) no Event of Default hereunder exists and is
continuing, unless such Event of Default is cured within any applicable cure period or is
otherwise waived in writing by the Holder in whole or in part at the Holder’s option.

Any amounts converted by the Holder pursuant to this Section 2.2 shall be deemed to constitute
payments of outstanding fees, interest and principal arising in connection with Monthly Amounts for
the remaining Repayment Dates, in chronological order.

2.3 Optional Redemption in Cash. The Borrower will have the option of prepaying this
Note (“Optional Redemption”) by paying to the Holder a sum of money equal to one hundred thirty
percent (130%) of the then outstanding principal amount of this Note together with accrued but
unpaid interest thereon and any and all other sums due, accrued or payable to the Holder arising
under this Note, the Purchase Agreement, or any Related Agreement (the “Redemption Amount”)
outstanding on the day written notice of redemption (the “Notice of Redemption”) is given to the
Holder. The Notice of Redemption shall specify the date for such Optional Redemption (the
“Redemption Payment Date”) which date shall be seven (7) business days after the date of the Notice
of Redemption (the “Redemption Period”). A Notice of Redemption shall not be effective with respect
to any portion of this Note for which the Holder has a pending election to convert pursuant to
Section 3.1, or for conversions initiated or made by the Holder pursuant to Section 3.1 during the
Redemption Period. The Redemption Amount shall be determined as if such Holder’s conversion
elections had been completed immediately prior to the date of the Notice of Redemption. On the
Redemption Payment Date, the Redemption Amount must be paid in good funds to the Holder. In the
event the Borrower fails to pay the Redemption Amount on the Redemption Payment Date as set forth
herein, then such Redemption Notice will be null and void.

ARTICLE III

CONVERSION RIGHTS

3.1. Holder’s Conversion Rights. The Holder shall have the right, but not the
obligation, to convert all or any portion of the then aggregate outstanding principal amount of
this Note, together with interest and fees due hereon, into shares of Common Stock subject to the
terms and conditions set forth in this Article III. The Holder may exercise such right by delivery
to the Borrower of a written notice of conversion not less than one (1) day prior to the date upon
which such conversion shall occur.

3.2 Conversion Limitation. Notwithstanding anything contained herein to the contrary,
the Holder shall not be entitled to convert pursuant to the terms of this Note an amount that would
be convertible into that number of Conversion Shares which would exceed the difference between the
number of shares of Common Stock beneficially owned by such Holder or issuable upon exercise of
warrants held by such Holder and 4.99% of the outstanding shares of Common Stock of the Borrower.
For the purposes of the immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act and Regulation 13d-3 thereunder. The Holder may
void the Conversion Share limitation described in this Section 3.2 upon 75 days prior notice to the
Borrower or without any notice requirement upon an Event of Default.

3.3 Mechanics of Holder’s Conversion. (a) In the event that the Holder elects to
convert this Note into Common Stock, the Holder shall give notice of such election by delivering an
executed and completed notice of conversion (“Notice of Conversion”) to the Borrower and such
Notice of Conversion shall provide a breakdown in reasonable detail of the Principal Amount,
accrued interest and fees being converted. On each Conversion Date (as hereinafter defined) and in
accordance with its Notice of Conversion, the Holder shall make the appropriate reduction to the
Principal Amount, accrued interest and fees as entered in its records and shall provide written
notice thereof to the Borrower within two (2) business days after the Conversion Date. Each date on
which a Notice of Conversion is delivered or telecopied to the Borrower in accordance with the
provisions hereof shall be deemed a Conversion Date (the “Conversion Date”). A form of Notice of
Conversion to be employed by the Holder is annexed hereto as Exhibit A.

(b) Pursuant to the terms of the Notice of Conversion, the Borrower will issue instructions to
the transfer agent accompanied by an opinion of counsel within one (1) business day of the date of
the delivery to Borrower of the Notice of Conversion and shall cause the transfer agent to transmit
the certificates representing the Conversion Shares to the Holder by crediting the account of the
Holder’s designated broker with the Depository Trust Corporation (“DTC”) through its Deposit
Withdrawal Agent Commission (“DWAC”) system within three (3) business days after receipt by the
Borrower of the Notice of Conversion (the “Delivery Date”). In the case of the exercise of the
conversion rights set forth herein the conversion privilege shall be deemed to have been exercised
and the Conversion Shares issuable upon such conversion shall be deemed to have been issued upon
the date of receipt by the Borrower of the Notice of Conversion. The Holder shall be treated for
all purposes as the record holder of such Common Stock, unless the Holder provides the Borrower
written instructions to the contrary.

3.4 Conversion Mechanics.

(a) The number of shares of Common Stock to be issued upon each conversion of this Note shall
be determined by dividing that portion of the principal and interest and fees to be converted, if
any, by the then applicable Fixed Conversion Price. In the event of any conversions of outstanding
principal amount under this Note in part pursuant to this Article III, such conversions shall be
deemed to constitute conversions of outstanding principal amount applying to Monthly Amounts for
the remaining Repayment Dates in chronological order. By way of example, if the original principal
amount of this Note is $1,500,000 and the Holder converted $100,000 of such original principal
amount prior to the first Repayment Date, then (1) the principal amount of the Monthly Amount due
on the first Repayment Date would equal $0, (2) the principal amount of the Monthly Amount due on
the second Repayment Date would equal $0 and (3) the principal amount of the Monthly Amount due on
the third Repayment Dates would be $50,000.00.

(b) The Fixed Conversion Price and number and kind of shares or other securities to be issued
upon conversion is subject to adjustment from time to time upon the occurrence of certain events,
as follows:

A. Stock Splits, Combinations and Dividends. If the shares of Common Stock are
subdivided or combined into a greater or smaller number of shares of Common Stock, or if a dividend
is paid on the Common Stock in shares of Common Stock, the Fixed Conversion Price or the Conversion
Price, as the case may be, shall be proportionately reduced in case of subdivision of shares or
stock dividend or proportionately increased in the case of combination of shares, in each such case
by the ratio which the total number of shares of Common Stock outstanding immediately after such
event bears to the total number of shares of Common Stock outstanding immediately prior to such
event.

B. Borrower Covenants. During the period the conversion right exists, the Borrower will
reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for
the issuance of Common Stock upon the full conversion of this Note. The Borrower represents that
upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. The
Borrower agrees that its issuance of this Note shall constitute full authority to its officers,
agents, and transfer agents who are charged with the duty of executing and issuing stock
certificates to execute and issue the necessary certificates for shares of Common Stock upon the
conversion of this Note.

C. Share Issuances. Subject to the provisions of this Section 3.4, if the Borrower
shall at any time prior to the conversion or repayment in full of the Principal Amount issue any
shares of Common Stock or securities convertible into Common Stock to a person other than
the Holder (except (i) pursuant to Subsections A or B above; (ii) pursuant to currently outstanding
options, warrants, or other rights to acquire the Common Stock of the Borrower outstanding on the
date hereof as disclosed in the Borrower’s Securities Exchange Act of 1934 filings or as disclosed
to to Holder in writing; or (iii) pursuant to securities that may be issued under any employee
stock option and/or any stock plan adopted by the Borrower) (iv) pursuant to stock options and/or
stock granted under the Borrower’s stock option plan for Borrower’s officers, directors, employees
and advisors pursuant to arrangements, plans or contracts approved by the Borrower’s board of
directors; (v) upon conversion of any preferred stock of the Borrower outstanding on the date
hereof, or (vi) in connection with acquisition transactions approved by the Borrower’s board of
directors provided, however, that the aggregate consideration for any individual acquisition f
shall not exceed $2,500,000 in the aggregate, without the prior written consent of Laurus, which
consent shall not be unreasonably withheld) for a consideration per share (the “Offer Price”) less
than the Fixed Conversion Price in effect at the time of such issuance, then the Fixed Conversion
Price shall be immediately reset to such lower Offer Price. For purposes hereof, the issuance of
any security of the Borrower convertible into or exercisable or exchangeable for Common Stock shall
result in an adjustment to the Fixed Conversion Price at the time of issuance of such securities.

D. Reclassification, etc. If the Borrower at any time shall, by reclassification or
otherwise, change the Common Stock into the same or a different number of securities of any class
or classes, this Note, as to the unpaid Principal Amount and accrued interest thereon, shall
thereafter be deemed to evidence the right to purchase an adjusted number of such securities and
kind of securities as would have been issuable as the result of such change with respect to the
Common Stock immediately prior to such reclassification or other change.

3.5 Issuance of New Note. Upon any partial conversion of this Note, a new Note
containing the same date and provisions of this Note shall, at the request of the Holder, be issued
by the Borrower to the Holder for the principal balance of this Note and interest which shall not
have been converted or paid. The Borrower will pay no costs, fees or any other consideration to the
Holder for the production and issuance of a new Note.

ARTICLE IV

EVENTS OF DEFAULT

Upon the occurrence and continuance of an Event of Default beyond any applicable grace period,
the Holder may make all sums of principal, interest and other fees then remaining unpaid hereon and
all other amounts payable hereunder immediately due and payable. In the event of such an
acceleration, within five (5) days after written notice from Holder to Borrower (each occurrence
being a “Default Notice Period”) the amount due and owing to the Holder shall be 130% of the
outstanding principal amount of the Note (plus accrued and unpaid interest and fees, if any) (the
“Default Payment”). If, with respect to any Event of Default, the Borrower cures the Event of
Default, the Event of Default will be deemed to no longer exist and any rights and remedies of
Holder pertaining to such Event of Default will be of no further force or effect. The Default
Payment shall be applied first to any fees due and payable to Holder pursuant to the Note or the
Related Agreements, then to accrued and unpaid interest due on the Note and then to outstanding
principal balance of the Note.

The occurrence of any of the following events set forth in Sections 4.1 through 4.10,
inclusive, is an “Event of Default”:

4.1 Failure to Pay Principal, Interest or other Fees. The Borrower fails to pay when
due any installment of principal, interest or other fees hereon in accordance herewith, or the
Borrower fails to pay when due any amount due under any other promissory note issued by Borrower,
and in any such case, such failure shall continue for a period of three (3) days following the date
upon which any such payment was due.

4.2 Breach of Covenant. The Borrower breaches any covenant or any other term or
condition of this Note or the Purchase Agreement in any material respect, or the Borrower or any of
its Subsidiaries breaches any covenant or any other term or condition of any Related Agreement in
any material respect and, any such case, such breach, if subject to cure, continues for a period of
thirty (30) days after the occurrence thereof.

4.3 Breach of Representations and Warranties. Any representation or warranty made by
the Borrower in this Note or the Purchase Agreement, or by the Borrower or any of its Subsidiaries
in any Related Agreement, shall, in any such case, be false or misleading in any material respect
on the date that such representation or warranty was made or deemed made.

4.4 Receiver or Trustee. The Borrower or any of its Subsidiaries shall make an
assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver
or trustee for it or for a substantial part of its property or business; or such a receiver or
trustee shall otherwise be appointed.

4.5 Judgments. Any money judgment, writ or similar final process shall be entered or
filed against the Borrower or any of its Subsidiaries or any of their respective property or other
assets for more than $250,000, and shall remain unvacated, unbonded or unstayed for a period of
forty four (44) days.

4.6 Bankruptcy. Borrower shall (i) apply for, consent to, or suffer to exist the
appointment of, or the taking of possession by, a receiver, custodian, trustee, liquidator or other
fiduciary of itself or of all or a substantial part of its property, (ii) make a general assignment
for the benefit of creditors, (iii) commence a voluntary case under any state or federal bankruptcy
laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a
petition seeking to take advantage of any other law providing for the relief of debtors, (vi)
acquiesce to, or fail to have dismissed, within sixty (60) days, any petition filed against it in
any involuntary case under such bankruptcy laws, or (vii) take any action for the purpose of
effecting any of the.

4.7 Stop Trade. An SEC stop trade order or Principal Market trading suspension of the
Common Stock shall be in effect for five (5) consecutive days or five (5) days during a period of
ten (10) consecutive days, excluding in all cases a suspension of all trading on a Principal
Market, provided that the Borrower shall not have been able to cure such trading suspension
within thirty (30) days of the notice thereof or list the Common Stock on another Principal Market
within sixty (60) days of such notice. The “Principal Market” for the Common Stock shall include
the NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ National Market System, American Stock
Exchange, or New York Stock Exchange (whichever of the foregoing is at the time the principal
trading exchange or market for the Common Stock, or any securities exchange or other securities
market on which the Common Stock is then being listed or traded.

4.8 Failure to Deliver Common Stock or Replacement Note. The Borrower shall fail
(i) to timely deliver Common Stock to the Holder pursuant to and in the form required by this Note,
and Section 9 of the Purchase Agreement, if such failure to timely deliver Common Stock shall not
be cured within two (2) business days or (ii) to deliver a replacement Note to Holder within seven
(7) business days following receipt by Borrower of notice from Holder of the required date of such
issuance pursuant to this Note, the Purchase Agreement or any Related Agreement (to the extent
required under such agreements).

4.9 Default Under Related Agreements or Other Agreements. The occurrence and
continuance of any Event of Default (as defined in any Related Agreement) or any event of default
(or similar term) under any other indebtedness.

DEFAULT RELATED PROVISIONS

4.11 Payment Grace Period. Following the occurrence and continuance of an Event of
Default beyond any applicable cure period hereunder, the Borrower shall pay the Holder a default
interest rate of one and one half percent (1.5%) per month on all amounts due and owing under the
Note, which default interest shall be payable upon demand.

4.12 Conversion Privileges. The conversion privileges set forth in Article III shall
remain in full force and effect immediately from the date hereof and until this Note is paid in
full.

4.13 Cumulative Remedies. The remedies under this Note shall be cumulative.

ARTICLE V

MISCELLANEOUS

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

5.2 Notices. Any notice herein required or permitted to be given shall be in writing
and shall be deemed effectively given: (a) upon personal delivery to the party notified, (b) when
sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not,
then on the next business day, (c) five days after having been sent by registered or certified
mail, return receipt requested, postage prepaid, or (d) one day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written verification of receipt.
All communications shall be sent to the Borrower at the address provided in the Purchase Agreement
executed in connection herewith with a copy to Cairncross and Hempleman, P.S. 254 Second Avenue
#500 Seattle, WA 98104 Attn: Tim Woodland, and to the Holder at the address provided in the
Purchase Agreement for such Holder, with a copy to John E. Tucker, Esq., 825 Third Avenue,
14th Floor, New York, New York 10022, facsimile number (212) 541-4434, or at such other
address as the Borrower or the Holder may designate by ten days advance written notice to the other
parties hereto. A Notice of Conversion shall be deemed given when made to the Borrower pursuant to
the Purchase Agreement.

5.3 Amendment Provision. The term “Note” and all reference thereto, as used
throughout this instrument, shall mean this instrument as originally executed, or if later amended
or supplemented, then as so amended or supplemented, and any successor instrument issued pursuant
to Section 3.5 hereof, as it may be amended or supplemented.

5.4 Assignability. This Note shall be binding upon the Borrower and its successors
and assigns, and shall inure to the benefit of the Holder and its successors and assigns, and may
be assigned by the Holder so long as (i) no assignment may be made to a competitor of the Borrower
and (ii) the Holder shall make no more than two (2) assignments hereof in the aggregate . This Note
shall not be assigned by the Borrower without the consent of the Holder.

5.5 Governing Law. This Note shall be governed by and construed in accordance with
the laws of the State of New York, without regard to principles of conflicts of laws. Any action
brought by either party against the other concerning the transactions contemplated by this
Agreement shall be brought only in the state courts of New York or in the federal courts located in
the state of New York. Both parties and the individual signing this Note on behalf of the Borrower
agree to submit to the jurisdiction of such courts. The prevailing party shall be entitled to
recover from the other party its reasonable attorney’s fees and costs. In the event that any
provision of this Note is invalid or unenforceable under any applicable statute or rule of law,
then such provision shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such provision which may
prove invalid or unenforceable under any law shall not affect the validity or unenforceability of
any other provision of this Note. Nothing contained herein shall be deemed or operate to preclude
the Holder from bringing suit or taking other legal action against the Borrower in any other
jurisdiction to collect on the Borrower’s obligations to Holder, to realize on any collateral or
any other security for such obligations, or to enforce a judgment or other court in favor of the
Holder.

5.6 Maximum Payments. Nothing contained herein shall be deemed to establish or
require the payment of a rate of interest or other charges in excess of the maximum permitted by
applicable law. In the event that the rate of interest required to be paid or other charges
hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be
credited against amounts owed by the Borrower to the Holder and thus refunded to the Borrower.

5.7 Security Interest and Guarantee. The Holder has been granted a security interest
(i) in certain assets of the Borrower and its Subsidiaries as more fully described in the Master
Security Agreement dated as of the date hereof and (ii) pursuant to the Stock Pledge Agreement
dated as of the date hereof. The obligations of the Borrower under this Note are guaranteed by
certain Subsidiaries of the Borrower pursuant to the Subsidiary Guaranty dated as of the date
hereof.

5.8 Construction. Each party acknowledges that its legal counsel participated in the
preparation of this Note and, therefore, stipulates that the rule of construction that ambiguities
are to be resolved against the drafting party shall not be applied in the interpretation of this
Note to favor any party against the other.

5.9 Cost of Collection. If default is made in the payment of this Note, the Borrower
shall pay to Holder reasonable costs of collection, including reasonable attorney’s fees.

[Balance of page intentionally left blank; signature page follows.]

1

IN WITNESS WHEREOF, the Borrower has caused this Convertible Term Note to be signed in its
name effective as of this 31st day of January, 2005.

	 	 	 
	PACIFIC BIOMETRICS, INC.
	By:

Name:

Title:

	 	/s/ Ronald R. Helm

Ronald R. Helm

Chief Executive Officer

WITNESS:

     

2

EXHIBIT A

NOTICE OF CONVERSION

(To be executed by the Holder in order to convert all or part of the Note into Common Stock

[Name and Address of Holder]

The Undersigned hereby converts $     of the principal due on [specify applicable Repayment
Date] under the Convertible Term Note issued by PACIFIC BIOMETRICS, INC. dated January 31, 2005 by
delivery of Shares of Common Stock of PACIFIC BIOMETRICS, INC. on and subject to the conditions set
forth in Article III of such Note.

	 	 	 	 	 	 	 	 	 
	1.
	 	Date of Conversion                 
	 	 	—	 
	2.
	 	Shares To Be Delivered:            
	 	 	—	 

By:     

Name:     

Title:     

3

EXHIBIT B

CONVERSION NOTICE

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

[Name and Address of Holder]

Holder hereby converts $     of the Monthly Amount due on [specify applicable Repayment Date]
under the Convertible Term Note issued by PACIFIC BIOMETRICS, INC. dated January 31, 2005 by
delivery of Shares of Common Stock of PACIFIC BIOMETRICS, INC. on and subject to the conditions set
forth in Article III of such Note.

	 	 	 	 	 
	1.Fixed Conversion Price:
	 	$	—	 
	2.Amount to be paid:
	 	$	—	 
	3.Shares To Be Delivered (2 divided by 1):__________________

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

	Date: ____________
	 	LAURUS  MASTER FUND, LTD.

By:     

Name:     

Title:     

4EX-10..6

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this “Agreement”) is made and entered into as of January
31, 2005, by and between Pacific Biometrics, Inc., a Delaware corporation (the “Company”), and
Laurus Master Fund, Ltd. (the “Purchaser”).

This Agreement is made pursuant to the Securities Purchase Agreement, dated as of the date
hereof, by and between the Purchaser and the Company (the “Securities Purchase Agreement”), and
pursuant to the Note and the Warrants referred to therein.

The Company and the Purchaser hereby agree as follows:

1. Definitions. Capitalized terms used and not otherwise defined herein that are
defined in the Securities Purchase Agreement shall have the meanings given such terms in the
Securities Purchase Agreement. As used in this Agreement, the following terms shall have the
following meanings:

"Commission” means the Securities and Exchange Commission.

"Common Stock” means shares of the Company’s common stock, par value $0.01 per share.

"Effectiveness Date” means June 1, 2005.

"Effectiveness Period” shall have the meaning set forth in Section 2(a).

"Exchange Act” means the Securities Exchange Act of 1934, as amended, and any successor
statute.

"Filing Date” means, with respect to the Registration Statement required to be filed
hereunder, a date no later than March 15, 2005 and with respect to shares of Common Stock issuable
to the Holder as a result of adjustments to the Fixed Conversion Price made pursuant to Section 3.4
of the Secured Convertible Term Note or Section 4 of the Warrant or otherwise, sixty (60) days
after the occurrence such event or the date of the adjustment of the Fixed Conversion Price.

"Holder” or “Holders” means the Purchaser or any of its affiliates or transferees to the
extent any of them hold Registrable Securities.

"Indemnified Party” shall have the meaning set forth in Section 5(c).

"Indemnifying Party” shall have the meaning set forth in Section 5(c).

"Note” has the meaning set forth in the Securities Purchase Agreement.

"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.

"Prospectus” means the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from a prospectus filed
as part of an effective registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the Registration Statement,
and all other amendments and supplements to the Prospectus, including post-effective amendments,
and all material incorporated by reference or deemed to be incorporated by reference in such
Prospectus.

"Registrable Securities” means the shares of Common Stock issuable upon the conversion of the
Note and exercise of the Warrants.

"Registration Statement” means each registration statement required to be filed hereunder,
including the Prospectus, amendments and supplements to such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration statement.

"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.

"Rule 415” means Rule 415 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.

"Rule 424” means Rule 424 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.

"Securities Act” means the Securities Act of 1933, as amended, and any successor statute.

"Securities Purchase Agreement” means the agreement between the parties hereto calling for the
issuance by the Company of $1,500,000 of convertible Note plus Warrants.

"Trading Market” means any of the NASD OTC Bulletin Board, NASDAQ SmallCap Market, the Nasdaq
National Market, the American Stock Exchange or the New York Stock Exchange.

"Warrants” means the Common Stock purchase warrants issued pursuant to the Securities Purchase
Agreement.

2. Registration.

(a) On or prior to the Filing Date the Company shall prepare and file with the
Commission a Registration Statement covering the Registrable Securities for an offering to
be made on a continuous basis pursuant to Rule 415. The Registration Statement shall be on
Form SB-2 (except if the Company is not then eligible to register for resale the
Registrable Securities on Form SB-2, in which case such registration shall be on another
appropriate form in accordance herewith). The Company shall cause the Registration
Statement to become effective and remain effective as provided herein. The Company shall
use its reasonable commercial efforts to cause the Registration Statement to be declared
effective under the Securities Act as promptly as possible after the filing thereof, but in
any event no later than the Effectiveness Date. The Company shall use its reasonable
commercial efforts to keep the Registration Statement continuously effective under the
Securities Act until the date which is the earlier date of (i) when all Registrable
Securities have been sold or (ii) when all Registrable Securities may be sold immediately
without registration under the Securities Act and without volume restrictions pursuant to
Rule 144(k), as determined by the counsel to the Company pursuant to a written opinion
letter to such effect, addressed and acceptable to the Company’s transfer agent and the
affected Holders or (iii) January 31, 2008 (the “Effectiveness Period”).

(b) If: (i) the Registration Statement is not filed on or prior to the Filing Date;
(ii) the Registration Statement is not declared effective by the Commission by the
Effectiveness Date; (iii) after the Registration Statement is filed with and declared
effective by the Commission, the Registration Statement ceases to be effective (by
suspension or otherwise) as to all Registrable Securities to which it is required to relate
at any time prior to the expiration of the Effectiveness Period (without being succeeded
immediately by an additional registration statement filed and declared effective) for a
period of time which shall exceed 30 days in the aggregate per year or more than 20
consecutive calendar days (defined as a period of 365 days commencing on the date the
Registration Statement is declared effective); or (iv) the Common Stock is not listed or
quoted, or is suspended from trading on any Trading Market for a period of three (3)
consecutive Trading Days (provided the Company shall not have been able to cure such
trading suspension within 30 days of the notice thereof or list the Common Stock on another
Trading Market); (any such failure or breach being referred to as an “Event,” and for
purposes of clause (i) or (ii) the date on which such Event occurs, or for purposes of
clause (iii) the date which such 30 day or 20 consecutive day period (as the case may be)
is exceeded, or for purposes of clause (iv) the date on which such three (3) Trading Day
period is exceeded, being referred to as “Event Date”), then until the applicable Event is
cured, the Company shall pay to each Holder an amount in cash, as liquidated damages and
not as a penalty, equal to one and one half percent (1.50%) for each thirty (30) day
period (prorated for partial periods) on a daily basis of the original principal amount of
the Note. While such Event continues, such liquidated damages shall be paid not less often
than each thirty (30) days. Any unpaid liquidated damages as of the date when an Event has
been cured by the Company shall be paid within three (3) days following the date on which
such Event has been cured by the Company.

(c) Within three business days of the Effectiveness Date, the Company shall cause its
counsel to issue an opinion substantially in the form attached hereto as Exhibit A, to the
transfer agent stating that the shares are subject to an effective registration statement
and can be reissued free of restrictive legend upon notice of a sale by Laurus and
confirmation by Laurus that it has complied with the prospectus delivery requirements,
provided that the Company has not advised the transfer agent orally or in writing that the
opinion has been withdrawn. Copies of the blanket opinion required by this Section 2(c)
shall be delivered to Laurus within the time frame set forth above.

3. Registration Procedures. If and whenever the Company is required by the provisions
hereof to effect the registration of any Registrable Securities under the Securities Act, the
Company will, as expeditiously as possible:

(a) prepare and file with the Commission the Registration Statement with respect to
such Registrable Securities, respond as promptly as possible to any comments received from
the Commission, and use its best efforts to cause the Registration Statement to become and
remain effective for the Effectiveness Period with respect thereto, and promptly provide to
the Purchaser copies of all filings and Commission letters of comment relating thereto;

(b) prepare and file with the Commission such amendments and supplements to the
Registration Statement and the Prospectus used in connection therewith as may be necessary
to comply with the provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement and to keep such Registration
Statement effective until the expiration of the Effectiveness Period;

(c) furnish to the Purchaser such number of copies of the Registration Statement and
the Prospectus included therein (including each preliminary Prospectus) as the Purchaser
reasonably may request to facilitate the public sale or disposition of the Registrable
Securities covered by the Registration Statement;

(d) use its commercially reasonable efforts to register or qualify the Purchaser’s
Registrable Securities covered by the Registration Statement under the securities or “blue
sky” laws of such jurisdictions within the United States as the Purchaser may reasonably
request, provided, however, that the Company shall not for any such purpose be required to
qualify generally to transact business as a foreign corporation in any jurisdiction where
it is not so qualified or to consent to general service of process in any such
jurisdiction;

(e) list the Registrable Securities covered by the Registration Statement with any
securities exchange on which the Common Stock of the Company is then listed;

(f) immediately notify the Purchaser at any time when a Prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event of which
the Company has knowledge as a result of which the Prospectus contained in such
Registration Statement, as then in effect, includes an untrue statement of a material fact
or omits to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing; and

(g) make available for inspection by the Purchaser and any attorney, accountant or
other agent retained by the Purchaser, all publicly available, non-confidential financial
and other records, pertinent corporate documents and properties of the Company, and cause
the Company’s officers, directors and employees to supply all publicly available,
non-confidential information reasonably requested by the attorney, accountant or agent of
the Purchaser.

It shall be a condition precedent to the obligation of the Company to take any action
pursuant to this Section with respect to the Registrable Securities of Purchaser that
Purchaser shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities as shall
be required to effect the registration of such Purchaser’s Registrable Securities.

4. Registration Expenses. All expenses relating to the Company’s compliance with
Sections 2 and 3 hereof, including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel and independent public accountants for the Company,
fees and expenses (including reasonable counsel fees) incurred in connection with complying with
state securities or “blue sky” laws, fees of the NASD, transfer taxes, fees of transfer agents and
registrars, fees of, and disbursements incurred by, one counsel for the Holders (to the extent such
counsel is required due to Company’s failure to meet any of its obligations hereunder), are called
“Registration Expenses”. All selling commissions applicable to the sale of Registrable Securities,
including any fees and disbursements of any special counsel to the Holders beyond those included in
Registration Expenses, are called “Selling Expenses.” The Company shall only be responsible for
all Registration Expenses. Selling Expenses shall be for the account of the Holder.

5. Indemnification.

(a) In the event of a registration of any Registrable Securities under the Securities
Act pursuant to this Agreement, the Company will indemnify and hold harmless the Purchaser,
and its officers, directors and each other person, if any, who controls the Purchaser
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which the Purchaser, or such persons may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any Registration
Statement under which such Registrable Securities were registered under the Securities Act
pursuant to this Agreement, any preliminary Prospectus or final Prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse the
Purchaser, and each such person for any reasonable legal or other expenses incurred by them
in connection with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such case if and to
the extent that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by or on behalf of the Purchaser or any such person
in writing specifically for use in any such document.

(b) In the event of a registration of the Registrable Securities under the Securities
Act pursuant to this Agreement, the Purchaser will indemnify and hold harmless the Company,
and its officers, directors and each other person, if any, who controls the Company within
the meaning of the Securities Act, against all losses, claims, damages or liabilities,
joint or several, to which the Company or such persons may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact which was furnished in writing by the Purchaser to
the Company expressly for use in (and such information is contained in) the Registration
Statement under which such Registrable Securities were registered under the Securities Act
pursuant to this Agreement, any preliminary Prospectus or final Prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse the Company
and each such person for any reasonable legal or other expenses incurred by them in
connection with investigating or defending any such loss, claim, damage, liability or
action, provided, however, that the Purchaser will be liable in any such case if and only
to the extent that any such loss, claim, damage or liability arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished in writing to the Company by or on behalf of the
Purchaser specifically for use in any such document. Notwithstanding the provisions of
this paragraph, the Purchaser shall not be required to indemnify any person or entity in
excess of the amount of the aggregate net proceeds received by the Purchaser in respect of
Registrable Securities in connection with any such registration under the Securities Act.

(c) Promptly after receipt by a party entitled to claim indemnification hereunder (an
“Indemnified Party”) of notice of the commencement of any action, such Indemnified Party
shall, if a claim for indemnification in respect thereof is to be made against a party
hereto obligated to indemnify such Indemnified Party (an “Indemnifying Party”), notify the
Indemnifying Party in writing thereof, but the omission so to notify the Indemnifying Party
shall not relieve it from any liability which it may have to such Indemnified Party other
than under this Section 5(c) and shall only relieve it from any liability which it may have
to such Indemnified Party under this Section 5(c) if and to the extent the Indemnifying
Party is prejudiced by such omission. In case any such action shall be brought against any
Indemnified Party and it shall notify the Indemnifying Party of the commencement thereof,
the Indemnifying Party shall be entitled to participate in and, to the extent it shall
wish, to assume and undertake the defense thereof with counsel satisfactory to such
Indemnified Party, and, after notice from the Indemnifying Party to such Indemnified Party
of its election so to assume and undertake the defense thereof, the Indemnifying Party
shall not be liable to such Indemnified Party under this Section 5(c) for any legal
expenses subsequently incurred by such Indemnified Party in connection with the defense
thereof; if the Indemnified Party retains its own counsel, then the Indemnified Party shall
pay all fees, costs and expenses of such counsel, provided, however, that, if the
defendants in any such action include both the indemnified party and the Indemnifying Party
and the Indemnified Party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those available to the
Indemnifying Party or if the interests of the Indemnified Party reasonably may be deemed to
conflict with the interests of the Indemnifying Party, the Indemnified Party shall have the
right to select one separate counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with the reasonable expenses and fees of such
separate counsel and other expenses related to such participation to be reimbursed by the
Indemnifying Party as incurred.

(d) In order to provide for just and equitable contribution in the event of joint
liability under the Securities Act in any case in which either (i) the Purchaser, or any
officer, director or controlling person of the Purchaser, makes a claim for indemnification
pursuant to this Section 5 but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of time to
appeal or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 5 provides for
indemnification in such case, or (ii) contribution under the Securities Act may be required
on the part of the Purchaser or such officer, director or controlling person of the
Purchaser in circumstances for which indemnification is provided under this Section 5;
then, and in each such case, the Company and the Purchaser will contribute to the aggregate
losses, claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion so that the Purchaser is responsible only for the portion
represented by the percentage that the public offering price of its securities offered by
the Registration Statement bears to the public offering price of all securities offered by
such Registration Statement, provided, however, that, in any such case, (A) the Purchaser
will not be required to contribute any amount in excess of the public offering price of all
such securities offered by it pursuant to such Registration Statement; and (B) no person or
entity guilty of fraudulent misrepresentation (within the meaning of Section 10(f) of the
Act) will be entitled to contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.

..

6. Miscellaneous.

(a) Remedies. In the event of a breach by the Company or by a Holder, of any
of their respective obligations under this Agreement, each Holder or the Company, as the
case may be, in addition to being entitled to exercise all rights granted by law and under
this Agreement, including recovery of damages, will be entitled to specific performance of
its rights under this Agreement.

(b) No Piggyback on Registrations. Except as and to the extent specified in
Schedule 7(b) hereto, neither the Company nor any of its security holders (other than the
Holders in such capacity pursuant hereto) may include securities of the Company in any
Registration Statement other than the Registrable Securities, and the Company shall not
after the date hereof enter into any agreement providing any such right for inclusion of
 shares in the Registration Statement to any of its security holders. Except as and to the
extent specified in Schedule 7(b) hereto, the Company has not previously entered into any
agreement granting any registration rights with respect to any of its securities to any
Person that have not been fully satisfied.

(c) Compliance. Each Holder covenants and agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in connection
with sales of Registrable Securities pursuant to the Registration Statement.

(d) Discontinued Disposition. Each Holder agrees by its acquisition of such
Registrable Securities that, upon receipt of a notice from the Company of the occurrence of
a Discontinuation Event (as defined below), such Holder will forthwith discontinue
disposition of such Registrable Securities under the applicable Registration Statement
until such Holder’s receipt of the copies of the supplemented Prospectus and/or amended
Registration Statement or until it is advised in writing (the “Advice”) by the Company that
the use of the applicable Prospectus may be resumed, and, in either case, has received
copies of any additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement. The Company may
provide appropriate stop orders to enforce the provisions of this paragraph. For purposes
of this Section 7(d), a “Discontinuation Event” shall mean (i) when the Commission notifies
the Company whether there will be a “review” of such Registration Statement and whenever
the Commission comments in writing on such Registration Statement (the Company shall
provide true and complete copies thereof and all written responses thereto to each of the
Holders); (ii) any request by the Commission or any other Federal or state governmental
authority for amendments or supplements to such Registration Statement or Prospectus or for
additional information; (iii) the issuance by the Commission of any stop order suspending
the effectiveness of such Registration Statement covering any or all of the Registrable
Securities or the initiation of any Proceedings for that purpose; (iv) the receipt by the
Company of any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and/or
(v) the occurrence of any event or passage of time that makes the financial statements
included in such Registration Statement ineligible for inclusion therein or any statement
made in such Registration Statement or Prospectus or any document incorporated or deemed to
be incorporated therein by reference untrue in any material respect or that requires any
revisions to such Registration Statement, Prospectus or other documents so that, in the
case of such Registration Statement or Prospectus, as the case may be, it will not contain
any untrue statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.

(e) Piggy-Back Registrations. If at any time during the Effectiveness Period
there is not an effective Registration Statement covering all of the Registrable Securities
and the Company shall determine to prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form S-4 or Form S-8 (each as
promulgated under the Securities Act) or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity or business
or equity securities issuable in connection with stock option or other employee benefit
plans, then the Company shall send to each Holder written notice of such determination and,
if within fifteen days after receipt of such notice, any such Holder shall so request in
writing, the Company shall include in such registration statement all or any part of such
Registrable Securities such holder requests to be registered to the extent the Company may
do so without violating registration rights of others which exist as of the date of this
Agreement, subject to customary underwriter cutbacks applicable to all holders of
registration rights and subject to obtaining any required the consent of any selling
stockholder(s) to such inclusion under such registration statement.

(f) The Company will at all times have authorized and reserved a sufficient number of
 shares of Common Stock for the full conversion of the Note and exercise of the Warrants.

(g) Amendments and Waivers. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the same shall
be in writing and signed by the Company and the Holders of the then outstanding Registrable
Securities. Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the rights of
certain Holders and that does not directly or indirectly affect the rights of other Holders
may be given by Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates; provided, however, that the provisions of this sentence may not
be amended, modified, or supplemented except in accordance with the provisions of the
immediately preceding sentence.

(h) Notices. Any notice or request hereunder may be given to the Company or
the Purchaser at the respective addresses set forth below or as may hereafter be specified
in a notice designated as a change of address under this Section 7(h). Any notice or
request hereunder shall be given by registered or certified mail, return receipt requested,
hand delivery, overnight mail, Federal Express or other national overnight next day carrier
(collectively, “Courier”) or telecopy (confirmed by mail). Notices and requests shall be,
in the case of those by hand delivery, deemed to have been given when delivered to any
party to whom it is addressed, in the case of those by mail or overnight mail, deemed to
have been given three (3) business days after the date when deposited in the mail or with
the overnight mail carrier, in the case of a Courier, the next business day following
timely delivery of the package with the Courier, and, in the case of a telecopy, when
confirmed. The address for such notices and communications shall be as follows:

	 	 	 	 	 
	If to the Company:
	 	Pacific Biometrics, Inc.

	 
	 	220 West Harrison Street
	 
	 	Seattle, WA 98119

	 
	 	Attention: Chief Executive  Officer

	 
	 	Facsimile: (206) 298-9838

	 
	 	with a copy to:

	 
	 	Carincross & Hemplemann, P.S.

	 
	 	254 Second Avenue #500
	 
	 	Seattle, WA  98104

	 
	 	Attention: Tim Woodland, Esq.

	 
	 	Facsimile: (206) 587-2308

	If to a Purchaser:
	 	To the address set forth under such

	 
	 	Purchaser name on the signature pages

	 
	 	hereto.

	If to any other Person who
	 	To the address of such Holder as it

	is then the registered
	 	appears in the stock transfer books of

	Holder:
	 	the Company

or such other address as may be designated in writing hereafter in accordance with this
Section 7(g) by such Person.

(i) Successors and Assigns. This Agreement shall inure to the benefit of and
be binding upon the successors and permitted assigns of each of the parties and shall inure
to the benefit of each Holder. The Company may not assign its rights or obligations
hereunder without the prior written consent of each Holder. Each Holder may assign their
respective rights hereunder in the manner and to the Persons as permitted under the Note .

(j) Execution and Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an original and, all
of which taken together shall constitute one and the same Agreement. In the event that any
signature is delivered by facsimile transmission, such signature shall create a valid
binding obligation of the party executing (or on whose behalf such signature is executed)
the same with the same force and effect as if such facsimile signature were the original
thereof.

(k) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement 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 Proceedings
concerning the interpretations, enforcement and defense of the transactions contemplated by
this Agreement shall be commenced exclusively in the state and federal courts sitting in
the City of New York, Borough of Manhattan. Each party hereto hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the City of New York,
Borough of Manhattan for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such Proceeding is improper.
Each party hereto hereby irrevocably waives personal service of process and consents to
process being served in any such 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. 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 Agreement or the transactions contemplated hereby. If
either party shall commence a Proceeding to enforce any provisions of a Transaction
Document, then the prevailing party in such Proceeding shall be reimbursed by the other
party for its reasonable attorneys fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Proceeding.

(l) Cumulative Remedies. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.

(m) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their reasonable efforts to find and employ
an alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.

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

[BALANCE OF PAGE INTENTIONALLY LEFT BLANK;

SIGNATURE PAGE FOLLOWS]

1

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the
date first written above.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Pacific Biometrics, Inc.
	 	Laurus Master Fund, Ltd.

	By:
	 	/s/ Ronald R. Helm	 	By:                             
	 	 	/s/	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Name:
	 	Ronald R. Helm                     
	 	Name:
	 	 	 	 
	Title:
	 	Chief Executive Officer            
	 	Title:
	 	 	 	 
	 
	 	 	 	 	 	Address for Notices:
	 	 	 	 
	 	 	 	 	 	 	825 Third Avenue - 14th Floor

	 
	 	 	 	 	 	New York, NY  10022
	 	 	 	 
	 
	 	 	 	 	 	Attention: Eugene Grin
	 	 	 	 
	 
	 	 	 	 	 	Facsimile: 212-541-4434
	 	 	 	 

2

EXHIBIT A

[Month __, 2005]

	 
	[Continental Stock Transfer
& Trust Company
Two Broadway
New York, NY 10004
Attn: William Seegraber]

	 	 	 
	Re:

	 	Pacific Biometrics, Inc. Registration Statement on Form SB-2

Ladies and Gentlemen:

As counsel to [company name] , a Delaware corporation (the “Company”), we have been requested
to render our opinion to you in connection with the resale by the individuals or entitles listed on
Schedule A attached hereto (the “Selling Stockholders”), of an aggregate of [amount]shares (the
“Shares”) of the Company’s Common Stock.

A Registration Statement on Form SB-2 under the Securities Act of 1933, as amended (the
“Act”), with respect to the resale of the Shares was declared effective by the Securities and
Exchange Commission on [date]. Enclosed is the Prospectus dated [date]. We understand that the
Shares are to be offered and sold in the manner described in the Prospectus.

Based upon the foregoing, upon request by the Selling Stockholders at any time while the
registration statement remains effective, it is our opinion that the Shares have been registered
for resale under the Act and new certificates evidencing the Shares upon their transfer or
re-registration by the Selling Stockholders may be issued without restrictive legend. We will
advise you if the registration statement is not available or effective at any point in the future.

Very truly yours,

[Company counsel]

3

Schedule A

	 	 	 
	Selling Stockholder

	 	Shares

Being Offered
	 

	 	 

4

SCHEDULE 7(b)

to

Registration Rights Agreement, dated as of January 31, 2005,

by and between Pacific Biometrics, Inc., a Delaware corporation,

and Laurus Master Fund, Ltd., a Cayman Islands company

	 	 	 	 	 
	Schedule 7(b)Outstanding Registration Rights.

	 	•	 	The Company has granted outstanding registration rights to the following persons:	 

	 	•	 	Holders of the Company’s Series A convertible preferred stock, with respect to the
 shares of common stock into which the preferred stock may be converted (currently
approximately 516,665 shares of common stock);

	 	•	 	Holders of up to 3,846,000 shares of Company common stock who purchased the shares
in the Company’s PIPE offering that closed in March 2004;

	 	•	 	Holders of stock purchase warrants for the purchase of up to approximately 228,297
shares of Company common stock.

	 	•	 	The Company currently has an effective registration
statement on Form SB-2 (No. 333-113822) on file with the
Securities and Exchange Commission with respect to the
re-sale of up to 11,343,140 shares of common stock. The
Company included in that registration statement restricted
 shares held by other holders of Company securities, in
addition to shares held by certain holders of outstanding
registration rights listed above.

	 	•	 	Pursuant to the Registration Rights Agreement dated as of
May 28, 2004, as amended, the Company granted outstanding
registration rights to Laurus Master Fund, Ltd. with respect
to shares of common stock underlying the convertible note
and warrants described therein.

	 	•	 	In addition, the Company has granted registration rights to
its brokers for the shares of common stock underlying
certain warrants that may be issued to the brokers in the
future, in connection with their assistance in placing the
$2.5 million debt investment with Laurus in May 2004, and
the $1.5 million debt investment with Laurus in January
2005.

	 	•	 	The Company currently has an effective registration
statement on Form SB-2 (No. 333-116968) on file with the
Securities and Exchange Commission with respect to the
re-sale of up to 4,269,361 shares of common stock underlying
convertible notes and warrants described therein.

5

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