Document:

Exhibit
      10.1

    

    LIFECELL
      CORPORATION

    

    EQUITY
      COMPENSATION PLAN 

    

    1.    Purposes
      of the Plan.
      This
      LifeCell Corporation Equity Compensation Plan (the “Plan”)
      results from the merger of the LifeCell Corporation Year 2000 Stock Option
      Plan
      (the “2000
      Plan”)
      and
      the LifeCell Corporation 2003 Non-Employee Director Stock Option Plan (the
      “Director Plan” and together with the 2000 Plan, the “Prior
      Plans”)
      and
      the amendment and restatement of the Prior Plans in the form of this Plan,
      which
      shall be the successor of the Prior Plans. The purposes of this Plan are: to
      attract and retain the best available personnel for positions of substantial
      responsibility, to provide additional incentives to Employees, Directors and
      Consultants, and to promote the success of the Company and any Parent or
      Subsidiary. Options granted under the Plan may be Incentive Stock Options or
      Nonstatutory Stock Options, as determined by the Committee at the time of grant.
      Stock Purchase Rights, Stock Awards, Unrestricted Share Awards and Stock
      Appreciation Rights may also be granted under the Plan.

    

    2.    Definitions.
      As used
      herein, the following definitions shall apply:

    

    “Applicable
      Laws”
means
      the requirements relating to the administration of equity compensation plans
      under the applicable corporate and securities laws of any of the states in
      the
      United States, U.S. federal securities laws, the Code, any stock exchange or
      quotation system on which the Common Stock is listed or quoted and the
      applicable laws of any foreign country or jurisdiction where Awards are, or
      will
      be, granted under the Plan.

    

    “Award”
means
      an Option, a Stock Purchase Right, a Stock Appreciation Right, a Stock Award
      and/or the grant of Unrestricted Shares.

    

    “Board”
means
      the Board of Directors of the Company.

    

    “Code”
means
      the Internal Revenue Code of 1986, as amended.

    

    “Committee”
means
      a
      committee of Directors appointed by the Board in accordance with Section 4
      of
      the Plan.

    

    “Common
      Stock”
means
      the common stock, par value $.001 per share, of the Company.

    

    “Company”
means
      LifeCell Corporation, a Delaware corporation.

    

    “Consultant”
means
      any person, including an advisor, engaged by the Company or a Parent or
      Subsidiary to render services to such entity, other than an Employee or a
      Director.

    

    “Director”
means
      a
      member of the Board.

    
      
        
        

      

      
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    “Employee”
means
      any person, including officers and Directors (other than Non-Employee
      Directors), serving as an employee of the Company or any Parent or Subsidiary.
      An individual shall not cease to be an Employee in the case of (i) any leave
      of
      absence approved by the Company or (ii) transfers between locations of the
      Company or between the Company, its Parent, any Subsidiary or any successor.
      For
      purposes of an Option initially granted as an Incentive Stock Option, if a
      leave
      of absence of more than three months precludes such Option from being treated
      as
      an Incentive Stock Option under the Code, such Option thereafter shall be
      treated as a Nonstatutory Stock Option for purposes of this Plan. Neither
      service as a Director nor payment of a director's fee by the Company shall
      be
      sufficient to constitute “employment” by the Company.

    

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended. 

    

    “Fair
      Market Value”
means,
      as of any date, the value of Common Stock determined as follows: 

    

    (i)    if
      the
      Common Stock is listed on any established stock exchange or a national market
      system, including without limitation the Nasdaq National Market or The Nasdaq
      SmallCap Market of The Nasdaq Stock Market, the Fair Market Value of a Share
      of
      Common Stock shall be the closing sales price of a Share of Common Stock (or
      the
      closing bid, if no such sales were reported) as quoted on such exchange or
      system for the last market trading day prior to the time of determination,
      as
      reported in The
      Wall Street Journal
      or such
      other source as the Committee deems reliable;

    

    (ii)    if
      the
      Common Stock is regularly quoted by a recognized securities dealer but is not
      listed in the manner contemplated by clause (i) above, the Fair Market Value
      of
      a Share of Common Stock shall be the mean between the high bid and low asked
      prices for the Common Stock on the last market trading day prior to the day
      of
      determination, as reported in The
      Wall Street Journal or
      such
      other source as the Committee deems reliable; or

    

    (iii)   if
      neither clause (i) above nor clause (ii) above applies, the Fair Market Value
      shall be determined in good faith by the Committee.

    

    “Incentive
      Stock Option”
means
      an Option intended to qualify as an incentive stock option within the meaning
      of
      Section 422 of the Code and the regulations promulgated thereunder.

    

    “Non-Employee
      Director”
means
      a
      Director who is not an Employee.

    

    “Nonstatutory
      Stock Option”
means
      an Option not intended to qualify as an Incentive Stock Option.

    

    “Notice
      of Grant”
means
      a
      written or electronic notice evidencing certain terms and conditions of an
      individual Option grant, Stock Purchase Right grant, Stock Award grant or grant
      of Unrestricted Shares or Stock Appreciation Rights. The Notice of Grant
      applicable to Stock Options shall be part of the Option Agreement.

    

    “Option”
means
      a
      stock option granted pursuant to the Plan.

    

    “Option
      Agreement”
means
      an agreement between the Company and an Optionee evidencing the terms and
      conditions of an individual Option grant. Each Option Agreement shall be subject
      to the terms and conditions of the Plan.

    
      
        
        

      

      
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    “Optioned
      Stock”
means
      the Common Stock subject to an Option or Stock Purchase Right.

    

    “Optionee”
means
      the holder of an outstanding Option or Stock Purchase Right granted under the
      Plan.

    

    “Parent”
means
      a
“parent corporation” of the Company (or, in the context of Section 15(c) of the
      Plan, of a successor corporation), whether now or hereafter existing, as defined
      in Section 424(e) of the Code.

    

    “Participant”
shall
      mean any Service Provider who holds an Option, a Stock Purchase Right,
      Restricted Stock, a Stock Award, Unrestricted Shares or Stock Appreciation
      Rights granted or issued pursuant to the Plan.

    

    “Restricted
      Stock”
means
      shares of Common Stock acquired pursuant to a grant of Stock Purchase Rights
      under Section 11 of the Plan.

    

    “Restricted
      Stock Purchase Agreement”
means
      a
      written agreement between the Company and an Optionee evidencing the terms
      and
      restrictions applicable to stock purchased under a Stock Purchase Right. Each
      Restricted Stock Purchase Agreement shall be subject to the terms and conditions
      of the Plan and the applicable Notice of Grant.

    

    “Rule
      16b-3”
means
      Rule 16b-3 of the Exchange Act or any successor to such Rule 16b-3, as such
      rule
      is in effect when discretion is being exercised with respect to the
      Plan.

    

    “Section
      16(b)”
means
      Section 16(b) of the Exchange Act.

    

    “Service
      Provider”
means
      an Employee, Director or Consultant.

    

    “Share”
means
      a
      share of the Common Stock, as adjusted in accordance with Section 15 of the
      Plan.

    

    “Stock
      Appreciation Right”
means
      a
      right awarded pursuant to Section 14 of the Plan.

    

    “Stock
      Award”
means
      an Award of Shares pursuant to Section 12 of the Plan.

     

    “Stock
      Award Agreement”
means
      an agreement, approved by the Committee, providing the terms and conditions
      of a
      Stock Award. 

    

    “Stock
      Award Shares”
means
      Shares subject to a Stock Award.

    

    “Stock
      Awardee”
means
      the holder of an outstanding Stock Award granted under the Plan

    

    “Stock
      Purchase Right”
means
      the right to purchase Common Stock pursuant to Section 11 of the Plan, as
      evidenced by a Notice of Grant.

    
      
        
        

      

      
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    “Subsidiary”
means
      a
      "subsidiary corporation" of the Company (or, in the context of Section 15(c)
      of
      the Plan, of a successor corporation), whether now or hereafter existing, as
      defined in Section 424(f) of the Code.

    

    “Unrestricted
      Shares”
means
      a
      grant of Shares made on an unrestricted basis pursuant to Section 13 of the
      Plan.

    

    3.    Stock
      Subject to the Plan.
      The
      maximum aggregate number of Shares that may be issued under the Plan is
      4,250,000 Shares,
      inclusive of any Shares issued under the Prior Plans. The total number of Shares
      with respect to which Incentive Stock Options may be granted shall be 4,250,000,
      inclusive of any Shares with respect to which Incentive Stock Options were
      granted under the Prior Plans. The maximum number of Shares subject to Options
      and Stock Appreciation Rights which may be issued to any Participant under
      this
      Plan and/or the Prior Plans during any calendar year is 600,000 Shares. The
      class and aggregate number of Shares referred to in this paragraph shall be
      subject to adjustment in accordance with Section 16(a) of the Plan.

    

    The
      Shares may be authorized but unissued, or reacquired, shares of Common Stock.
      If
      an Option, Stock Purchase Right or Stock Appreciation Right expires or becomes
      unexercisable without having been exercised in full or is canceled or
      terminated, or if any Shares of Restricted Stock or Shares underlying a Stock
      Award are forfeited or reacquired by the Company, the Shares that were subject
      thereto shall be added back to the Shares available for issuance under the
      Plan.
      All Options granted under a Prior Plan shall continue in effect in accordance
      with the terms of the option grant agreements entered into under such Prior
      Plan
      and the terms of this Plan. The terms of this Plan shall supercede the Prior
      Plans; provided,
      however,
      that to
      the extent that any terms of this Plan are considered to be a “modification” of
      an Incentive Stock Option granted under the 2000 Plan for purposes of Section
      424(h) of the Code, the terms of the 2000 Plan shall control.

    
      
        
        

      

      
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    4.    Administration
      of the Plan.
      

    

    (a)    Appointment
      of Committee.
      The
      Plan shall be administered by a Committee to be appointed by the Board, which
      Committee shall consist of not less than two members of the Board and shall
      be
      comprised solely of members of the Board who qualify as both non-employee
      directors as defined in Rule 16b-3(b)(3) of the Exchange Act and outside
      directors within the meaning of Department of Treasury Regulations issued under
      Section 162(m) of the Code. The Board shall have the power to add or remove
      members of the Committee, from time to time, and to fill vacancies thereon
      arising; by resignation, death, removal, or otherwise. Meetings shall be held
      at
      such times and places as shall be determined by the Committee. A majority of
      the
      members of the Committee shall constitute a quorum for the transaction of
      business, and the vote of a majority of those members present at any meeting
      shall decide any question brought before that meeting. Notwithstanding the
      foregoing, for purposes of making any determinations with respect to grants
      of
      Awards to Non-Employee Directors, the “Committee” shall be deemed to refer to
      the Nominating and Corporate Governance Committee of the Board.

    

    (b)    Powers
      of the Committee.
      Subject
      to the provisions of the Plan, the Committee shall have the authority, in its
      discretion: 

    

    (i) 
          to
      determine the Fair Market Value;

    

    (ii)
          to
      select
      the Service Providers to whom Options, Stock Purchase Rights, Stock Awards,
      Unrestricted Shares and Stock Appreciation Rights may be granted
      hereunder;

    

    (iii)    to
      determine the number of shares of Common Stock to be covered by each Award
      granted hereunder;

    

    (iv)    to
      approve forms of agreement for use under the Plan;

    

    (v)
    to
      determine the terms and conditions, not inconsistent with the terms of the
      Plan,
      of any Award granted hereunder and of any Restricted Stock Purchase Agreement.
      Such terms and conditions include, but are not limited to, the exercise price,
      the time or times when Options, Stock Purchase Rights and Stock Appreciation
      Rights may be exercised (which may be based on performance criteria), any
      vesting, acceleration or waiver of forfeiture provisions, and any restriction
      or
      limitation regarding any Option, Stock Purchase Right, Stock Appreciation Right
      or Stock Award, or the Shares of Common Stock relating thereto, based in each
      case on such factors as the Committee, in its sole discretion, shall
      determine;

    

    (vi)    to
      construe and interpret the terms of the Plan, Awards granted pursuant to the
      Plan and agreements entered into pursuant to the Plan;

    

    (vii)   to
      prescribe, amend and rescind rules and regulations relating to the Plan,
      including rules and regulations relating to sub-plans established for the
      purpose of qualifying for preferred tax treatment under foreign tax
      laws;

    

    (viii)   
        to
      modify
      or amend each Award (subject to Section 19 of the Plan), including the
      discretionary authority to extend the post-termination exercisability period
      of
      Options, Stock Appreciation Rights and/or Stock Purchase Rights longer than
      is
      otherwise provided for in the Plan and to accelerate the time at which any
      outstanding Option, Stock Purchase Right or Stock Appreciation Right may be
      exercised;

    
      
        
        

      

      
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    (ix)   to
      allow
      grantees to satisfy withholding tax obligations by having the Company withhold
      from the Shares to be issued upon exercise of an Option, Stock Appreciation
      Rights or Stock Purchase Rights that number of Shares having a Fair Market
      Value
      equal to the amount required to be withheld, provided that withholding is
      calculated at the minimum statutory withholding level. The Fair Market Value
      of
      the Shares to be withheld shall be determined on the date that the amount of
      tax
      to be withheld is to be determined. All determinations to have Shares withheld
      for this purpose shall be made by the Committee in its discretion;

    

    (x)    to
      authorize any person to execute on behalf of the Company any agreement entered
      into pursuant to the Plan and any instrument required to effect the grant of
      an
      Award previously granted by the Committee; and

    

    (xi)   to
      make
      all other determinations deemed necessary or advisable for administering the
      Plan.

    

    (c)    Effect
      of Committee's Decision.
      The
      Committee's decisions, determinations and interpretations shall be final and
      binding on all holders of Awards and Restricted Stock. Neither the Board nor
      the
      Committee, nor any member or delegate thereof, shall be liable for any act,
      omission, interpretation, construction or determination made in good faith
      in
      connection with the Plan, and each of the foregoing shall be entitled in all
      cases to indemnification and reimbursement by the Company in respect of any
      claim, loss, damage or expense (including without limitation reasonable
      attorneys’ fees) arising or resulting therefrom to the fullest extent permitted
      by law and/or under any directors’ and officers’ liability insurance coverage
      which may be in effect from time to time.

    

    5.    Eligibility.

    

    (a)    General.
      Nonstatutory Stock Options, Stock Purchase Rights, Stock Appreciation Rights,
      Stock Awards and Unrestricted Shares may be granted to Service Providers.
      Incentive Stock Options may be granted only to Employees. Notwithstanding
      anything contained herein to the contrary, an Award may be granted to a person
      who is not then a Service Provider; provided,
      however,
      that
      the grant of such Award shall be conditioned upon such person becoming a Service
      Provider at or prior to the time of the execution of the agreement evidencing
      such Award. 

    

    (b)    Non-Employee
      Director Option Grants.
      

    

    (i)    Each
      Non-Employee Director shall be granted, on the date of his initial election
      to
      the Board by shareholders or initial appointment by the Board, a Nonstatutory
      Stock Option to purchase 25,000 Shares at a per share option price (the “Option
      Price”) equal to the Fair Market Value of a share of Common Stock on such date.

    

    (ii)    On
      the
      date of the Company’s annual meeting of stockholders, there shall be granted to
      each Non-Employee Director on the date of such annual meeting a Nonstatutory
      Stock Option to purchase 10,000 Shares at a per share Option Price equal to
      the
      Fair Market Value of a Share on such date; provided,
      however,
      that
      any Non-Employee Director who receives a grant of Nonstatutory Stock Options
      pursuant to Section 5(b)(i) shall not be entitled to receive a grant of
      Nonstatutory Stock Options pursuant to this Section 5(b)(ii) in the same
      calendar year.

    
      
        
        

      

      
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    (iii)    Notwithstanding
      the foregoing provisions of this Section 5(b), no Options shall be granted
      to a
      Non-Employee Director pursuant to this Section 5(b) on and after the Company’s
      annual meeting of stockholders occurring during 2006 (the “2006 Annual
      Meeting”). Options (and other Awards) may be granted to Non-Employee Directors
      on and after the 2006 Annual Meeting under Section 5(a) and other provisions
      of
      the Plan. 

    

    6.    Limitations.

    

    (a)    Each
      Option shall be designated in the Option Agreement as either an Incentive Stock
      Option or a Nonstatutory Stock Option. However, notwithstanding such
      designation, if
      a
      single Employee becomes eligible in any given year to exercise Incentive Stock
      Options for Shares having a Fair Market Value in excess of $100,000, those
      Options representing the excess shall be treated as Nonstatutory Stock Options.
      In the previous sentence, “Incentive Stock Options” include Incentive Stock
      Options granted under the Prior Plans and any other plan of the Company or
      any
      Parent or any Subsidiary. For
      the
      purpose of deciding which Options apply to Shares that “exceed” the $100,000
      limit, Incentive Stock Options shall be taken into account in the same order
      as
      granted. The
      Fair
      Market Value of the Shares shall be determined as of the time the Option with
      respect to such Shares is granted.

    

    (b)    None
      of
      the Plan, any Award or any agreement entered into pursuant to the Plan shall
      confer upon a Participant any right with respect to continuing the grantee's
      relationship as a Service Provider with the Company, nor shall they interfere
      in
      any way with the Participant's right or the Company's right to terminate such
      relationship at any time, with or without cause.

    

    7.    Term
      of the Plan.
      Subject
      to Section 23 of the Plan, the Plan shall become effective upon its adoption
      by
      the Board. Unless terminated earlier under Section 19 of the Plan, no Awards
      may
      be granted under the Plan after March 1, 2010.

    

    8.    Term
      of Options.
      The
      term of each Option shall be stated in the applicable Option Agreement;
provided,
      however,
      that,
      unless otherwise established by the Committee with respect to Non-Statutory
      Options granted to a Non-Employee Director on or after the 2006 Annual Meeting,
      each Nonstatutory Stock Option granted to a Non-Employee Director shall, subject
      to earlier termination in accordance with Section 10(b) hereof, be exercisable
      for a period of ten years from the date of grant. In the case of an Incentive
      Stock Option, the term shall be ten (10) years from the date of grant or such
      shorter term as may be provided in the applicable Option Agreement. However,
      in
      the case of an Incentive Stock Option granted to an Optionee who, at the time
      the Incentive Stock Option is granted, owns, directly or indirectly, stock
      representing more than ten percent (10%) of the total combined voting power
      of
      all classes of stock of the Company or any Parent or Subsidiary, the term of
      the
      Incentive Stock Option shall be five (5) years from the date of grant or such
      shorter term as may be provided in the applicable Option Agreement.

    

    9.    Option
      Exercise Price; Exercisability.

    

    (a)    Exercise
      Price.
      The per
      share exercise price for the Shares to be issued pursuant to exercise of an
      Option shall be determined by the Committee, subject to the following:

    
      
        
        

      

      
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    (i)    In
      the
      case of an Incentive Stock Option 

    

    (A)    granted
      to an Employee who, at the time the Incentive Stock Option is granted, owns
      stock representing more than ten percent (10%) of the voting power of all
      classes of stock of the Company or any Parent or Subsidiary, the per Share
      exercise price shall be no less than 110% of the Fair Market Value per Share
      on
      the date of grant, or 

    

    (B)    granted
      to any Employee other than an Employee described in paragraph (A) immediately
      above, the per Share exercise price shall be no less than 100% of the Fair
      Market Value per Share on the date of grant.

    

    (ii)    Except
      as
      provided by Section 5(b) with respect to the grant of Nonstatutory Stock Options
      to Non-Employee Directors, the per Share exercise price of a Nonstatutory Stock
      Option shall be determined by the Committee.

    

    (b)    Exercise
      Period and Conditions.
      At the
      time that an Option is granted, the Committee shall fix the period within which
      the Option may be exercised and shall determine any conditions that must be
      satisfied before the Option may be exercised; provided,
      however,
      that
      unless otherwise established by the Committee with respect to Non-Statutory
      Options granted to a Non-Employee Director on or after the 2006 Annual Meeting,
      each Nonstatutory Stock Option granted to a Non-Employee Director shall, subject
      to earlier termination in accordance with Section 10(b) hereof, be exercisable
      for a period of ten years from the date of grant.

    

    10.   Exercise
      of Options; Consideration.

    

    (a)    Procedure
      for Exercise; Rights as a Shareholder.
      Any
      Option granted hereunder shall be exercisable according to the terms of the
      Plan
      and, except as provided by the Plan with respect to Nonstatutory Stock Option
      granted to Non-Employee Directors, at such times and under such conditions
      as
      determined by the Committee and set forth in the Option Agreement, provided,
      however,
      that
      unless otherwise established by the Committee with respect to Non-Statutory
      Options granted to a Non-Employee Director on or after the 2006 Annual Meeting,
      each Nonstatutory Stock Option granted to a Non-Employee Director may be
      exercised in whole or in part at any time commencing one year after the date
      of
      grant thereof. An Option shall be deemed exercised when the Company receives:
      (i) written or electronic notice of exercise (in accordance with the Option
      Agreement) from the person entitled to exercise the Option, and (ii) full
      payment for the Shares with respect to which the Option is exercised. Full
      payment may consist of any consideration and method of payment authorized by
      the
      Committee and permitted by the Option Agreement and Section 10(c) of the Plan.
      Shares issued upon exercise of an Option shall be issued in the name of the
      Optionee. Until the Shares are issued (as evidenced by the appropriate entry
      on
      the books of the Company or of a duly authorized transfer agent of the Company),
      no right to vote or receive dividends or any other rights as a shareholder
      shall
      exist with respect to the Optioned Stock, notwithstanding the exercise of the
      Option. The Company shall issue (or cause to be issued) such Shares promptly
      after the Option is exercised. No adjustment will be made for a dividend or
      other right for which the record date is prior to the date the Shares are
      issued, except as provided in Section 16 of the Plan. Exercising an Option
      in
      any manner shall decrease the number of Shares thereafter available, both for
      purposes of the Plan and for sale under the Option, by the number of Shares
      as
      to which the Option is exercised.

    

    (b)    Termination
      of Relationship as a Service Provider.
      

    
      
        
        

      

      
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    (i)    Service
      Providers other than Non-Employee Directors.
      Except
      as may be otherwise expressly provided herein or in the Option agreement,
      Options of Participants other than Non-Employee Directors shall terminate on
      the
      earlier of the date of the expiration of the Option or one day less than three
      months after the date of the severance of the employment or affiliation
      relationship between the Company and the Optionee for any reason, for or without
      cause, other than death. Whether authorized leave of absence, or absence on
      military or government service, shall constitute severance of the employment
      or
      affiliation relationship between the Company and the Optionee shall be
      determined by the Committee at the time thereof. Unless the Optionee’s Option
      agreement specifically addresses the matter and expressly provides otherwise,
      after the severance of the employment or affiliation relationship between the
      Company and the Optionee, the Optionee shall have the right, at any time prior
      to the termination of the Option, to exercise the Option solely to the extent
      the Optionee was entitled to exercise it immediately prior to the date of such
      severance. In the event of the death of the holder of an Option while in the
      employ or affiliation of the Company and before the date of expiration of such
      Option, such Option shall terminate on the earlier of such date of expiration
      or
      six months following the date of such death. After the death of the Optionee,
      his executors, administrators or any person or persons to whom his Option may
      be
      transferred by will or by the laws of descent and distribution, shall have
      the
      right, at any time prior to such termination, to exercise the Option, in whole
      (subject to the provisions of Paragraph 8 hereof, but without regard to any
      limitation set forth in or imposed pursuant to Paragraph 9 hereof) or in part.
      An employment or affiliation relationship between the Company and the Optionee
      shall be deemed to exist during any period in which the Optionee is employed
      by
      or affiliated with the Company, by any Parent or Subsidiary, by a corporation
      issuing or assuming a common stock option in a transaction to which Section
      424(a) of the Code, applies, or by a Parent or Subsidiary corporation of such
      corporation issuing or assuming a stock option (and for this purpose, the phrase
      “corporation issuing or assuming a stock option” shall be substituted for the
      word “Company” in the definitions of Parent and Subsidiary specified in Section
      2 of this Plan, and the parent-subsidiary relationship shall be determined
      at
      the time of the corporate action described in Section 424(a) of the
      Code).

    

    (ii)    Non-Employee
      Directors.
      Except
      as may be otherwise expressly provided in this Plan or by the Committee, each
      Nonstatutory Stock Option of a Non-Employee Director, to the extent it shall
      not
      have been exercised previously, shall terminate on the earlier of the
      following:

    

    (A)    On
      the
      last day of the three-month period commencing on the date
      on
      which the Non-Employee Director ceases to be a member of the Board for any
      reason other than death or permanent disability (as defined below), during
      which
      period the Non-Employee Director shall be entitled to exercise all Nonstatutory
      Stock Options held by the Non-Employee Director on the date on which the
      Non-Employee Director ceased to be a member of the Board which could have been
      exercised on such date. As used in this section, “permanent disability” means a
      physical or mental infirmity which impairs the Non-Employee Director’s ability
      to perform substantially his or her duties; or

    

    (B)    On
      the
      last day of the twelve-month period commencing either on the date of the
      Non-Employee Director’s death while serving as a member of the Board, or on the
      date of termination as a member of the Board due to permanent disability, during
      which period the Non-Employee Director, the executor or administrator of the
      Non-Employee Director’s estate or the person or persons to whom the Non-Employee
      Director’s Nonstatutory Stock Option shall have been transferred by will or the
      laws of descent or distribution, as the case may be, shall be entitled to
      exercise all Nonstatutory Stock Options in respect of the number of Shares
      that
      the Non-Employee Director would have been entitled to purchase had the
      Non-Employee Director exercised such Nonstatutory Stock Options either on the
      date of his death, or the date of termination as a member of the Board due
      to
      permanent disability.

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    (c)    Form
      of Consideration.
      The
      Committee shall determine the acceptable form of consideration for exercising
      an
      Option, including the method of payment. In the case of an Incentive Stock
      Option, the Committee shall determine the acceptable form of consideration
      at
      the time of grant. Such consideration may consist entirely of:

    

    (i)
           cash;

    

    (ii)
          check;

    

    (iii)    other
      Shares which (A) have been owned by the Optionee for more than six months on
      the
      date of surrender, and (B) have a Fair Market Value on the date of surrender
      equal to the aggregate exercise price of the Shares as to which said Option
      shall be exercised;

    

    (iv)    consideration
      received by the Company under a cashless exercise program implemented by the
      Company in connection with the Plan;

    

    (v)
    any
      combination of the foregoing methods of payment; or

    

    (vi)    such
      other consideration and method of payment for the issuance of Shares to the
      extent permitted by Applicable Laws.

    

    11.   Stock
      Purchase Rights.

    

    (a)    Rights
      to Purchase.
      Stock
      Purchase Rights may be issued either alone, in addition to, or in tandem with
      other Awards granted under the Plan and/or cash awards made outside of the
      Plan.
      After the Committee determines that it will offer Stock Purchase Rights under
      the Plan, it shall advise the offeree in writing or electronically, by means
      of
      a Notice of Grant and/or a Restricted Stock Purchase Agreement in the form
      determined by the Committee, of the terms, conditions and restrictions related
      to the offer, including the number of Shares that the offeree shall be entitled
      to purchase and the price to be paid for such Shares. The offer shall be
      accepted by execution of a Restricted Stock Purchase Agreement in the form
      determined by the Committee.

    

    (b)    Repurchase
      Option.
      Unless
      the Committee determines otherwise, the Restricted Stock Purchase Agreement
      shall grant the Company a repurchase option exercisable upon the voluntary
      or
      involuntary termination of the purchaser's service with the Company for any
      reason (including death or disability). The purchase price for Shares
      repurchased pursuant to the Restricted Stock Purchase Agreement shall be the
      original price paid by the purchaser and may be paid by cancellation of any
      indebtedness of the purchaser to the Company. The repurchase option shall lapse
      at a rate determined by the Committee.

    

    (c)    Other
      Provisions.
      The
      Restricted Stock Purchase Agreement shall contain such other terms, provisions
      and conditions not inconsistent with the Plan as may be determined by the
      Committee in its sole discretion.

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

    (d)    Rights
      as a Shareholder.
      Once
      the Stock Purchase Right is exercised, the purchaser shall have the rights
      equivalent to those of a shareholder, and shall be a shareholder when his or
      her
      purchase is entered upon the records of the duly authorized transfer agent
      of
      the Company. No adjustment will be made for a dividend or other right for which
      the record date is prior to the date the Stock Purchase Right is exercised,
      except as provided in Section 16 of the Plan.

    

    12.   Stock
      Awards.
      The
      Committee may, in its sole discretion, grant (or sell at par value or such
      higher purchase price as it determines) Shares to a Service Provider subject
      to
      such terms and conditions as the Committee sets forth in a Stock Award Agreement
      evidencing such grant. The grant of Stock Awards shall be subject to the
      following provisions:

    

    (a)    At
      the
      time a Stock Award is made, the Committee shall establish a vesting period
      (the
      "Restricted Period") applicable to the Stock Award Shares subject to such Stock
      Award. The Committee may, in its sole discretion, at the time a grant is made,
      prescribe restrictions in addition to the expiration of the Restricted Period,
      including the satisfaction of corporate or individual performance objectives.
      None of the Stock Award Shares may be sold, transferred, assigned, pledged
      or
      otherwise encumbered or disposed of during the Restricted Period applicable
      to
      such Stock Award Shares or prior to the satisfaction of any other restrictions
      prescribed by the Committee with respect to such Stock Award
      Shares.

    

    (b)    The
      Company shall issue, in the name of each Service Provider to whom Stock Award
      Shares have been granted, stock certificates representing the total number
      of
      Stock Award Shares granted to such person, as soon as reasonably practicable
      after the grant. The Company, at the direction of the Committee, shall hold
      such
      certificates, properly endorsed for transfer, for the Stock Awardee's benefit
      until such time as the Stock Award Shares are forfeited to the Company, or
      the
      restrictions lapse.

    

    (c)    Unless
      otherwise provided by the Committee, holders of Stock Award Shares shall have
      the right to vote such Shares and have the right to receive any cash dividends
      with respect to such Shares. All distributions, if any, received by a Stock
      Awardee with respect to Stock Award Shares as a result of any stock split,
      stock
      distribution, combination of shares, or other similar transaction shall be
      subject to the restrictions of this Section 12. 

    

    (d)    Unless
      otherwise provided by the Stock Award Agreement, any Stock Award Shares granted
      to a Service Provider pursuant to the Plan shall be forfeited if the Stock
      Awardee terminates employment or his consultancy arrangement with the Company
      or
      its subsidiaries for any reason prior to the expiration or termination of the
      applicable Restricted Period and the satisfaction of any other conditions
      applicable to such Stock Award Shares. Upon such forfeiture, the Stock Award
      Shares that are forfeited shall be retained in the treasury of the Company
      and
      be available for subsequent awards under the Plan.

    

    (e)    Upon
      the
      expiration or termination of the Restricted Period and the satisfaction of
      any
      other conditions prescribed by the Committee, the restrictions applicable to
      the
      Stock Award Shares shall lapse and, at the Stock Awardee’s request, a stock
      certificate for the number of Stock Award Shares with respect to which the
      restrictions have lapsed shall be delivered, free of all such restrictions,
      to
      the Stock Awardee or his beneficiary or estate, as the case may be.

    

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

     

    13.   Unrestricted
      Shares.
      The
      Committee may grant Unrestricted Shares in accordance with the following
      provisions: 

    

    (a)    The
      Committee may cause the Company to grant Unrestricted Shares to Service
      Providers at such time or times, in such amounts and for such reasons as the
      Committee, in its sole discretion, shall determine. No payment shall be required
      for Unrestricted Shares.

    

    (b)    The
      Company shall issue, in the name of each Service Provider to whom Unrestricted
      Shares have been granted, stock certificates representing the total number
      of
      Unrestricted Shares granted to such individual, and shall deliver such
      certificates to such Service Provider as soon as reasonably practicable after
      the date of grant or on such later date as the Committee shall determine at
      the
      time of grant.

    

    14.   Stock
      Appreciation Rights.
      A Stock
      Appreciation Right may be granted by the Committee either alone, in addition
      to,
      or in tandem with other Awards granted under the Plan. Each Stock Appreciation
      Right granted under the Plan shall be subject to the following terms and
      conditions:

    

    (a)    Each
      Stock Appreciation Right shall relate to such number of Shares as shall be
      determined by the Committee.

    

    (b)    The
      Award
      Date (i.e.,
      the
      date of grant) of a Stock Appreciation Right shall be the date specified by
      the
      Committee, provided that that date shall not be before the date on which the
      Stock Appreciation Right is actually granted. The Award Date of a Stock
      Appreciation Right shall not be prior to the date on which the recipient
      commences providing services as a Service Provider. The term of each Stock
      Appreciation Right shall be determined by the Committee, but shall not exceed
      ten years from the date of grant. Each Stock Appreciation Right shall become
      exercisable at such time or times and in such amount or amounts during its
      term
      as shall be determined by the Committee. Unless otherwise specified by the
      Committee, once a Stock Appreciation Right becomes exercisable, whether in
      full
      or in part, it shall remain so exercisable until its expiration, forfeiture,
      termination or cancellation.

    

    (c)    A
      Stock
      Appreciation Right may be exercised, in whole or in part, by giving written
      notice to the Committee. As soon as practicable after receipt of the written
      notice, the Company shall deliver to the person exercising the Stock
      Appreciation Right stock certificates for the Shares to which that person is
      entitled under Section 14(d) hereof.

    

    (d)    A
      Stock
      Appreciation Right shall be exercisable for Shares only. The number of Shares
      issuable upon the exercise of the Stock Appreciation Right shall be determined
      by dividing:

    

    (A)    the
      number of
      Shares for which the Stock Appreciation Right is exercised multiplied by the
      amount of the appreciation per Share (for this purpose, the "appreciation per
      Share" shall be the amount by which the Fair Market Value of a Share on the
      exercise date exceeds (x) in the case of a Stock Appreciation Right granted
      in
      tandem with an Option, the exercise price or (y) in the case of a Stock
      Appreciation Right granted alone without reference to an Option, the Fair Market
      Value of a Share on the Award Date of the Stock Appreciation Right);
      by

    

    (B)    the
      Fair
      Market Value of a Share on the exercise date.

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

    15.   Non-Transferability.
      Unless
      determined otherwise by the Committee, an Option, Stock Purchase Right or Stock
      Appreciation Right may not be sold, pledged, assigned, hypothecated,
      transferred, or disposed of in any manner other than by will or by the laws
      of
      descent or distribution and may be exercised, during the lifetime of the
      Participant, only by the Participant. If the Committee makes an Option, Stock
      Purchase Right or Stock Appreciation Right transferable, such Option, Stock
      Purchase Right or Stock Appreciation Right shall contain such additional terms
      and conditions as the Committee deems appropriate. Notwithstanding the
      foregoing, the Committee, in its sole discretion, may provide in the Option
      Agreement regarding a given Option that the Optionee may transfer, without
      consideration for the transfer, his or her Nonstatutory Stock Options to members
      of his or her immediate family, to trusts for the benefit of such family
      members, or to partnerships in which such family members are the only partners,
      provided that the transferee agrees in writing with the Company to be bound
      by
      all of the terms and conditions of this Plan and the applicable Option. During
      the period when Shares of Restricted Stock and Stock Award Shares are restricted
      (by virtue of vesting schedules or otherwise), such Shares may not be sold,
      pledged, assigned, hypothecated, transferred, or disposed of in any manner
      other
      than by will or by the laws of descent or distribution.

    

    16.   Adjustments
      Upon Changes in Capitalization, Dissolution, Merger or Asset
      Sale.

    

    (a)    Changes
      in Capitalization.
      Subject
      to any required action by the shareholders of the Company, the number of Shares
      of Common Stock covered by each outstanding Option, Stock Purchase Right, Stock
      Appreciation Right and Stock Award, the number of Shares of Restricted Stock
      outstanding and the number of Shares of Common Stock which have been authorized
      for issuance under the Plan but as to which no Options, Stock Purchase Rights,
      Stock Appreciation Rights or Stock Awards have yet been granted or which have
      been returned to the Plan upon cancellation or expiration of an Option, Stock
      Purchase Right, Stock Appreciation Right, Restricted Stock Purchase Agreement
      or
      Stock Award, as well as the price per share of Common Stock covered by each
      such
      outstanding Option, Stock Purchase Right or Stock Appreciation Right, shall
      be
      proportionately adjusted for any increase or decrease in the number of issued
      shares of Common Stock resulting from a stock split, reverse stock split, stock
      dividend, combination or reclassification of the Common Stock, or any other
      increase or decrease in the number of issued shares of Common Stock effected
      without receipt of consideration by the Company; provided,
      however,
      that
      conversion of any convertible securities of the Company shall not be deemed
      to
      have been "effected without receipt of consideration." Such adjustment shall
      be
      made by the Committee, whose determination in that respect shall be final,
      binding and conclusive. Except as expressly provided herein, no issuance by
      the
      Company of shares of stock of any class, or securities convertible into shares
      of stock of any class, shall affect, and no adjustment by reason thereof shall
      be made with respect to, the number or price of Shares of Common Stock subject
      to an Award hereunder.

    

    (b)    Corporate
      Transactions.
      If the
      Company merges or consolidates with another corporation, whether or not the
      Company is a surviving corporation, or if the Company is liquidated or sells
      or
      otherwise disposes of substantially all its assets, or if any “person” (as that
      term is used in Section 13(d) and 14(d)(2) of the Exchange Act) is or becomes
      the beneficial owner, directly or indirectly, of securities of the Company
      representing greater than 50% of the combined voting power of the Company's
      then
      outstanding securities (each such event a “Corporate
      Transaction Event”)
      then
      (i) subject to the provisions of clause (iii) below, after the effective date
      of
      such merger, consolidation, liquidation, sale or other disposition, or change
      in
      beneficial ownership, as the case may be, each holder of an outstanding Option,
      Stock Purchase Right or Stock Appreciation Right shall be entitled, upon
      exercise of such Option, Stock Purchase Right or Stock Appreciation Right to
      receive, in lieu of Shares of Common Stock, the number and class or classes
      of
      shares of such stock or other securities or property to which such holder would
      have been entitled if, immediately prior to such merger, consolidation,
      liquidation, sale or other disposition, or change in beneficial ownership,
      such
      holder had been the holder of record of a number of Shares of Common Stock
      equal
      to the number of shares as to which such Option, Stock Purchase Right and Stock
      Appreciation Right may be exercised; (ii) the Board may waive any limitations
      set forth in or imposed pursuant hereto so that all Options, Stock Purchase
      Rights and Stock Appreciation Rights from and after a date prior to the
      effective date of such Corporate Transaction Event, as specified by the Board,
      shall be exercisable in full; and (iii) all outstanding Options, Stock Purchase
      Rights and Stock Appreciation Rights may be canceled by the Board as of the
      effective date of any such Corporate Transaction Event.

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

    In
      the
      event of a Corporate Transaction Event, then, absent a provision to the contrary
      in any particular Restricted Stock Purchase Agreement or Stock Award (in which
      case the terms of such Restricted Stock Purchase Agreement or Stock Award shall
      supercede each of the provisions of this paragraph which are inconsistent with
      such Restricted Stock Purchase Agreement or Stock Award), each outstanding
      Restricted Stock Purchase Agreement and Stock Award shall be assumed or an
      equivalent agreement or award substituted by the successor corporation or a
      Parent or Subsidiary of the successor corporation. In the event that the
      Committee determines that the successor corporation or a Parent or a Subsidiary
      of the successor corporation has refused to assume or substitute an equivalent
      agreement or award for each outstanding Restricted Stock Purchase Agreement
      and
      Stock Award, all vesting periods and conditions under Restricted Stock Purchase
      Agreements and Stock Awards shall be deemed to have been satisfied.

    

    Except
      as
      hereinbefore expressly provided, the issue by the Company of shares of stock
      of
      any class, or securities convertible into shares of stock of any class, for
      cash
      or property, or for labor or services either upon direct sale or upon the
      exercise of rights or warrants to subscribe therefor, or upon conversion of
      shares or obligations of the Company convertible into sub shares or other
      securities, shall not affect, and no adjustment by reason thereof shall be
      made
      with respect to, the number or price of Shares of Common Stock then subject
      to
      outstanding Options, Stock Purchase Rights and Stock Appreciation
      Rights.

    

    17.   Substitute
      Options.
      In the
      event that the Company, directly or indirectly, acquires another entity, the
      Board may authorize the issuance of stock options (“Substitute Options”) to the
      individuals performing services for the acquired entity in substitution of
      stock
      options previously granted to those individuals in connection with their
      performance of services for such entity upon such terms and conditions as the
      Board shall determine, taking into account the conditions of Code Section
      424(a), as from time to time amended or superceded, in the case of a Substitute
      Option that is intended to be an Incentive Stock Option. Shares of capital
      stock
      underlying Substitute Stock Options shall not constitute Shares issued pursuant
      to the Plan for any purpose.

    

    18.   Date
      of Grant.
      The
      date of grant of an Option, Stock Purchase Right, Stock Appreciation Right,
      Stock Award or Unrestricted Share shall be, for all purposes, the date on which
      the Committee makes the determination granting such Option, Stock Purchase
      Right, Stock Appreciation Right, Stock Award or Unrestricted Share, or such
      other later date as is determined by the Committee. Notice of the determination
      shall be provided to each grantee within a reasonable time after the date of
      such grant.

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

    19.   Amendment
      and Termination of the Plan.
      The
      Board may modify, revise or terminate this Plan at any time and from time to
      time, subject to the approval of the Company’s stockholders to the extent
      required by Applicable Laws; provided, however, that no such modification,
      revision, or termination of the Plan may impair the rights of any Participant
      without the Participant’s written consent. All Awards granted under this Plan
      shall be subject to the terms and provisions of this Plan and any amendment,
      modification or revision of this Plan shall be deemed to amend, modify or revise
      all Awards outstanding under this Plan at the time of such amendment,
      modification or revision.

    

    20.   Conditions
      Upon Issuance of Shares.

    

    (a)    Legal
      Compliance.
      Shares
      shall not be issued in connection with the grant of any Stock Award or
      Unrestricted Share or the exercise of any Option, Stock Purchase Right or Stock
      Appreciation Right unless such grant or the exercise of such Option, Stock
      Purchase Right or Stock Appreciation Right and the issuance and delivery of
      such
      Shares shall comply with Applicable Laws and shall be further subject to the
      approval of counsel for the Company with respect to such
      compliance.

    

    (b)    Investment
      Representations.
      As a
      condition to the grant of any Stock Award or Unrestricted Share or the exercise
      of any Option, Stock Purchase Right or Stock Appreciation Right, the Company
      may
      require the person receiving such Award or exercising such Option, Stock
      Purchase Right or Stock Appreciation Right to represent and warrant at the
      time
      of any such exercise or grant that the Shares are being purchased only for
      investment and without any present intention to sell or distribute such Shares
      if, in the opinion of counsel for the Company, such a representation is
      required.

    

    (c)    Additional
      Conditions.
      The
      Committee shall have the authority to condition the grant of any Award or rights
      under any Restricted Stock Purchase Agreement in such other manner that the
      Committee determines to be appropriate, provided that such condition is not
      inconsistent with the terms of the Plan. Such conditions may include, among
      other things, obligations of recipients to execute non-compete, non-solicitation
      and non-disclosure covenants.

    

    (d)    Trading
      Policy Restrictions.
      Option,
      Stock Purchase Right and Stock Appreciation Right exercises and other Awards
      under the Plan shall be subject to the terms and conditions of any insider
      trading policy established by the Company or the Committee.

    

    21.   Inability
      to Obtain Authority.
      The
      inability of the Company to obtain authority from any regulatory body having
      jurisdiction, which authority is deemed by the Company's counsel to be necessary
      to the lawful issuance and sale of any Shares hereunder, shall relieve the
      Company of any liability in respect of the failure to issue or sell such Shares
      as to which such requisite authority shall not have been obtained.

    

    22.   Reservation
      of Shares.
      The
      Company, during the term of this Plan, will at all times reserve and keep
      available such number of Shares as shall be sufficient to satisfy the
      requirements of the Plan.

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

    23.   Shareholder
      Approval.
      The
      Plan shall be subject to approval by the shareholders of the Company within
      twelve (12) months after the date the Plan is adopted. Such shareholder approval
      shall be obtained in the manner and to the degree required under Applicable
      Laws. Notwithstanding any provision in the Plan to the contrary, any exercise
      of
      an Option, Stock Purchase Right or Stock Appreciation Right granted before
      the
      Company has obtained shareholder approval of the Plan in accordance with this
      Section 23 shall be conditioned upon obtaining such shareholder approval of
      the
      Plan in accordance with this Section 23.

    

    24.   Withholding;
      Notice of Sale.
      The
      Company shall be entitled to withhold from any amounts payable to an Employee
      any amounts which the Company determines, in its discretion, are required to
      be
      withheld under any Applicable Law as a result of any action taken by a holder
      of
      an Award. 

    

    25.   Arbitration
      of Disputes.
      Any
      controversy arising out of or relating to this Plan or an Option or other Award
      Agreement shall be resolved by arbitration conducted pursuant to the arbitration
      rules of the American Arbitration Association. The arbitration shall be final
      and binding on the parties.

    

    26.   Governing
      Law.
      This
      Plan shall be governed by the laws of the state of Delaware, without regard
      to
      conflict of law principles.

     

     

    -16-THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
         UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE
         SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
         AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT,
         OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR
         OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS THAT REGISTRATION IS NOT
         REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 OR
         REGULATION S UNDER SAID ACT.

                        CALLABLE SECURED CONVERTIBLE NOTE

New York, New York
May 16, 2006                                                          $[_______]

      FOR VALUE RECEIVED, SAFETEK INTERNATIONAL, INC., a Delaware corporation
(hereinafter called the "BORROWER"), hereby promises to pay to the order of
[_______] or registered assigns (the "HOLDER") the sum of $[_______], on May 16,
2009 (the "MATURITY DATE"), and to pay interest on the unpaid principal balance
hereof at the rate of eight percent (8%) (the "INTEREST RATE") per annum from
May 16, 2006 (the "ISSUE DATE") until the same becomes due and payable, whether
at maturity or upon acceleration or by prepayment or otherwise. Any amount of
principal or interest on this Note which is not paid when due shall bear
interest at the rate of fifteen percent (15%) per annum from the due date
thereof until the same is paid ("DEFAULT INTEREST"). Interest shall commence
accruing on the Issue Date, shall be computed on the basis of a 365-day year and
the actual number of days elapsed and shall be payable quarterly provided that
no interest shall be due and payable for any month in which the Trading Price
(as such term is defined below) is greater than $0.1875 for each Trading Day (as
such term is defined below) of the month. All payments due hereunder (to the
extent not converted into common stock, $.0001 par value per share (the "COMMON
STOCK") in accordance with the terms hereof) shall be made in lawful money of
the United States of America. All payments shall be made at such address as the
Holder shall hereafter give to the Borrower by written notice made in accordance
with the provisions of this Note. Whenever any amount expressed to be due by the
terms of this Note is due on any day which is not a business day, the same shall
instead be due on the next succeeding day which is a business day and, in the
case of any interest payment date which is not the date on which this Note is
paid in full, the extension of the due date thereof shall not be taken into
account for purposes of determining the amount of interest due on such date. As
used in this Note, the term "business day" shall mean any day other than a
Saturday, Sunday or a day on which commercial banks in the city of New York, New
York are authorized or required by law or executive order to remain closed. Each
capitalized term used herein, and not otherwise defined, shall have the meaning
ascribed thereto in that certain Securities Purchase Agreement, dated November
18, 2005, pursuant to which this Note was originally issued (the "PURCHASE
AGREEMENT").

<PAGE>

      This Note is free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive rights or
other similar rights of shareholders of the Borrower and will not impose
personal liability upon the holder thereof. The obligations of the Borrower
under this Note shall be secured by that certain Security Agreement and
Intellectual Property Security Agreement, each dated November 18, 2005 by and
between the Borrower and the Holder.

      The following terms shall apply to this Note:

                          ARTICLE I. CONVERSION RIGHTS

            1.1 CONVERSION RIGHT. The Holder shall have the right from time to
time, and at any time on or prior to the earlier of (i) the Maturity Date and
(ii) the date of payment of the Default Amount (as defined in Article III)
pursuant to Section 1.6(a) or Article III, the Optional Prepayment Amount (as
defined in Section 5.1 or any payments pursuant to Section 1.7, each in respect
of the remaining outstanding principal amount of this Note to convert all or any
part of the outstanding and unpaid principal amount of this Note into fully paid
and non-assessable shares of Common Stock, as such Common Stock exists on the
Issue Date, or any shares of capital stock or other securities of the Borrower
into which such Common Stock shall hereafter be changed or reclassified at the
conversion price (the "CONVERSION PRICE") determined as provided herein (a
"CONVERSION"); provided, however, that in no event shall the Holder be entitled
to convert any portion of this Note in excess of that portion of this Note upon
conversion of which the sum of (1) the number of shares of Common Stock
beneficially owned by the Holder and its affiliates (other than shares of Common
Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of the Notes or the unexercised or unconverted portion of
any other security of the Borrower (including, without limitation, the warrants
issued by the Borrower pursuant to the Purchase Agreement) subject to a
limitation on conversion or exercise analogous to the limitations contained
herein) and (2) the number of shares of Common Stock issuable upon the
conversion of the portion of this Note with respect to which the determination
of this proviso is being made, would result in beneficial ownership by the
Holder and its affiliates of more than 4.99% of the outstanding shares of Common
Stock and provided further that the Holder shall not be entitled to convert any
portion of this Note during any month immediately succeeding a Determination
Date on which the Borrower exercises its prepayment option pursuant to Section
5.2 of this Note. For purposes of the proviso to the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulations 13D-G
thereunder, except as otherwise provided in clause (1) of such proviso. The
number of shares of Common Stock to be issued upon each conversion of this Note
shall be determined by dividing the Conversion Amount (as defined below) by the
applicable Conversion Price then in effect on the date specified in the notice
of conversion, in the form attached hereto as Exhibit A (the "NOTICE OF
CONVERSION"), delivered to the Borrower by the Holder in accordance with Section
1.4 below; provided that the Notice of Conversion is submitted by facsimile (or
by other means resulting in, or reasonably expected to result in, notice) to the
Borrower before 6:00 p.m., New York, New York time on such conversion date (the
"CONVERSION DATE"). The term "CONVERSION AMOUNT" means, with respect to any
conversion of this Note, the sum of (1) the principal amount of this Note to be
converted in such conversion plus (2) at the Borrower's option, accrued and
unpaid interest, if any, on such principal amount at the interest rates provided
in this Note to the Conversion Date, provided, however, that the Company shall
have the right to pay any or all interest in cash plus (3) at the Borrower's
option, Default Interest, if any, on the amounts referred to in the immediately
preceding clauses (1) and/or (2) plus (4) at the Holder's option, any amounts
owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof or pursuant to
Section 2(c) of that certain Registration Rights Agreement, dated as of November
18, 2005, executed in connection with the initial issuance of this Note and the
other Notes issued on the Issue Date (the "REGISTRATION RIGHTS AGREEMENT"). The
term "DETERMINATION DATE" means the last business day of each month after the
Issue Date.

                                       2
<PAGE>

            1.2 CONVERSION PRICE.

                  (A) CALCULATION OF CONVERSION PRICE. The Conversion Price
shall be the lesser of (i) the Variable Conversion Price (as defined herein) and
(ii) the Fixed Conversion Price (subject, in each case, to equitable adjustments
for stock splits, stock dividends or rights offerings by the Borrower relating
to the Borrower's securities or the securities of any subsidiary of the
Borrower, combinations, recapitalization, reclassifications, extraordinary
distributions and similar events). The "VARIABLE CONVERSION PRICE" shall mean
the Applicable Percentage (as defined herein) multiplied by the Market Price (as
defined herein). "MARKET PRICE" means the average of the lowest three (3)
Trading Prices (as defined below) for the Common Stock during the twenty (20)
Trading Day period ending one Trading Day prior to the date the Conversion
Notice is sent by the Holder to the Borrower via facsimile (the "CONVERSION
DATE"). "TRADING PRICE" means, for any security as of any date, the intraday
trading price on the Over-the-Counter Bulletin Board (the "OTCBB") as reported
by a reliable reporting service ("REPORTING SERVICE") mutually acceptable to
Borrower and Holder and hereafter designated by Holders of a majority in
interest of the Notes and the Borrower or, if the OTCBB is not the principal
trading market for such security, the intraday trading price of such security on
the principal securities exchange or trading market where such security is
listed or traded or, if no intraday trading price of such security is available
in any of the foregoing manners, the average of the intraday trading prices of
any market makers for such security that are listed in the "pink sheets" by the
National Quotation Bureau, Inc. If the Trading Price cannot be calculated for
such security on such date in the manner provided above, the Trading Price shall
be the fair market value as mutually determined by the Borrower and the holders
of a majority in interest of the Notes being converted for which the calculation
of the Trading Price is required in order to determine the Conversion Price of
such Notes. "TRADING DAY" shall mean any day on which the Common Stock is traded
for any period on the OTCBB, or on the principal securities exchange or other
securities market on which the Common Stock is then being traded. "APPLICABLE
PERCENTAGE" shall mean 50.0%. The "FIXED CONVERSION PRICE" shall mean $.15.

                                       3
<PAGE>

                  (B) CONVERSION PRICE DURING MAJOR ANNOUNCEMENTS.
Notwithstanding anything contained in Section 1.2(a) to the contrary, in the
event the Borrower (i) makes a public announcement that it intends to
consolidate or merge with any other corporation (other than a merger in which
the Borrower is the surviving or continuing corporation and its capital stock is
unchanged) or sell or transfer all or substantially all of the assets of the
Borrower or (ii) any person, group or entity (including the Borrower) publicly
announces a tender offer to purchase 50% or more of the Borrower's Common Stock
(or any other takeover scheme) (the date of the announcement referred to in
clause (i) or (ii) is hereinafter referred to as the "ANNOUNCEMENT DATE"), then
the Conversion Price shall, effective upon the Announcement Date and continuing
through the Adjusted Conversion Price Termination Date (as defined below), be
equal to the lower of (x) the Conversion Price which would have been applicable
for a Conversion occurring on the Announcement Date and (y) the Conversion Price
that would otherwise be in effect. From and after the Adjusted Conversion Price
Termination Date, the Conversion Price shall be determined as set forth in this
Section 1.2(a). For purposes hereof, "ADJUSTED CONVERSION PRICE TERMINATION
DATE" shall mean, with respect to any proposed transaction or tender offer (or
takeover scheme) for which a public announcement as contemplated by this Section
1.2(b) has been made, the date upon which the Borrower (in the case of clause
(i) above) or the person, group or entity (in the case of clause (ii) above)
consummates or publicly announces the termination or abandonment of the proposed
transaction or tender offer (or takeover scheme) which caused this Section
1.2(b) to become operative.

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

                                       4
<PAGE>

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

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

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

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

                                       5
<PAGE>

            1.4 METHOD OF CONVERSION.

                  (A) MECHANICS OF CONVERSION. Subject to Section 1.1, this Note
may be converted by the Holder in whole or in part at any time from time to time
after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion
(by facsimile or other reasonable means of communication dispatched on the
Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to
Section 1.4(b), surrendering this Note at the principal office of the Borrower.

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

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

                  (D) DELIVERY OF COMMON STOCK UPON CONVERSION. Upon receipt by
the Borrower from the Holder of a facsimile transmission (or other reasonable
means of communication) of a Notice of Conversion meeting the requirements for
conversion as provided in this Section 1.4, the Borrower shall issue and deliver
or cause to be issued and delivered to or upon the order of the Holder
certificates for the Common Stock issuable upon such conversion within three (3)
business days after such receipt (and, solely in the case of conversion of the
entire unpaid principal amount hereof, surrender of this Note) (such third
business day being hereinafter referred to as the "DEADLINE") in accordance with
the terms hereof and the Purchase Agreement (including, without limitation, in
accordance with the requirements of Section 2(g) of the Purchase Agreement that
certificates for shares of Common Stock issued on or after the effective date of
the Registration Statement upon conversion of this Note shall not bear any
restrictive legend).

                                       6
<PAGE>

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

                  (F) DELIVERY OF COMMON STOCK BY ELECTRONIC TRANSFER. In lieu
of delivering physical certificates representing the Common Stock issuable upon
conversion, provided the Borrower's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST")
program, upon request of the Holder and its compliance with the provisions
contained in Section 1.1 and in this Section 1.4, the Borrower shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Holder by crediting the account of
Holder's Prime Broker with DTC through its Deposit Withdrawal Agent Commission
("DWAC") system.

                  (G) FAILURE TO DELIVER COMMON STOCK PRIOR TO DEADLINE. Without
in any way limiting the Holder's right to pursue other remedies, including
actual damages and/or equitable relief, the parties agree that if delivery of
the Common Stock issuable upon conversion of this Note is more than two (2)
business days after the Deadline (other than a failure due to the circumstances
described in Section 1.3 above, which failure shall be governed by such Section)
the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond
the Deadline that the Borrower fails to deliver such Common Stock. Such cash
amount shall be paid to Holder by the fifth day of the month following the month
in which it has accrued or, at the option of the Holder (by written notice to
the Borrower by the first day of the month following the month in which it has
accrued), shall be added to the principal amount of this Note, in which event
interest shall accrue thereon in accordance with the terms of this Note and such
additional principal amount shall be convertible into Common Stock in accordance
with the terms of this Note.

                                       7
<PAGE>

            1.5 CONCERNING THE SHARES. The shares of Common Stock issuable upon
conversion of this Note may not be sold or transferred unless (i) such shares
are sold pursuant to an effective registration statement under the Act or (ii)
the Borrower or its transfer agent shall have been furnished with an opinion of
counsel (which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions) to the effect that the shares to
be sold or transferred may be sold or transferred pursuant to an exemption from
such registration or (iii) such shares are sold or transferred pursuant to Rule
144 under the Act (or a successor rule) ("RULE 144") or (iv) such shares are
transferred to an "affiliate" (as defined in Rule 144) of the Borrower who
agrees to sell or otherwise transfer the shares only in accordance with this
Section 1.5 and who is an Accredited Investor (as defined in the Purchase
Agreement). Except as otherwise provided in the Purchase Agreement (and subject
to the removal provisions set forth below), until such time as the shares of
Common Stock issuable upon conversion of this Note have been registered under
the Act as contemplated by the Registration Rights Agreement or otherwise may be
sold pursuant to Rule 144 without any restriction as to the number of securities
as of a particular date that can then be immediately sold, each certificate for
shares of Common Stock issuable upon conversion of this Note that has not been
so included in an effective registration statement or that has not been sold
pursuant to an effective registration statement or an exemption that permits
removal of the legend, shall bear a legend substantially in the following form,
as appropriate:

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

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

                                       8
<PAGE>

            1.6 EFFECT OF CERTAIN EVENTS.

                  (A) EFFECT OF MERGER, CONSOLIDATION, ETC. At the option of the
Holder, the sale, conveyance or disposition of all or substantially all of the
assets of the Borrower, the effectuation by the Borrower of a transaction or
series of related transactions in which more than 50% of the voting power of the
Borrower is disposed of, or the consolidation, merger or other business
combination of the Borrower with or into any other Person (as defined below) or
Persons when the Borrower is not the survivor shall either: (i) be deemed to be
an Event of Default (as defined in Article III) pursuant to which the Borrower
shall be required to pay to the Holder upon the consummation of and as a
condition to such transaction an amount equal to the Default Amount (as defined
in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. "PERSON"
shall mean any individual, corporation, limited liability company, partnership,
association, trust or other entity or organization.

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

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

                                       9
<PAGE>

                  (D) ADJUSTMENT DUE TO DILUTIVE ISSUANCE. If, at any time when
any Notes are issued and outstanding, the Borrower issues or sells, or in
accordance with this Section 1.6(d) hereof is deemed to have issued or sold, any
shares of Common Stock for no consideration or for a consideration per share
(before deduction of reasonable expenses or commissions or underwriting
discounts or allowances in connection therewith) less than the Fixed Conversion
Price in effect on the date of such issuance (or deemed issuance) of such shares
of Common Stock (a "DILUTIVE ISSUANCE"), then immediately upon the Dilutive
Issuance, the Fixed Conversion Price will be reduced to the amount of the
consideration per share received by the Borrower in such Dilutive Issuance;
provided that only one adjustment will be made for each Dilutive Issuance.
Notwithstanding anything contained in this Section 1.6 to the contrary, the
Holder hereby acknowledges that the issuance of any shares of Common Stock in
connection with any of the transactions set forth on Schedule A, attached
hereto, shall not be deemed a Dilutive Issuance and accordingly there will be no
reduction to the Fixed Conversion Price.

                  The Borrower shall be deemed to have issued or sold shares of
Common Stock if the Borrower in any manner issues or grants any warrants, rights
or options (not including employee stock option plans), whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or other
securities convertible into or exchangeable for Common Stock ("CONVERTIBLE
SECURITIES") (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as "OPTIONS") and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Fixed Conversion Price then in effect, then the Fixed
Conversion Price shall be equal to such price per share. For purposes of the
preceding sentence, the "price per share for which Common Stock is issuable upon
the exercise of such Options" is determined by dividing (i) the total amount, if
any, received or receivable by the Borrower as consideration for the issuance or
granting of all such Options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Borrower upon the exercise of all such
Options, plus, in the case of Convertible Securities issuable upon the exercise
of such Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such Convertible
Securities first become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise of all such Options
(assuming full conversion of Convertible Securities, if applicable). No further
adjustment to the Conversion Price will be made upon the actual issuance of such
Common Stock upon the exercise of such Options or upon the conversion or
exchange of Convertible Securities issuable upon exercise of such Options.

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

                                       10
<PAGE>

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

                  (F) NOTICE OF ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Price as a result of the events
described in this Section 1.6, the Borrower, at its expense, shall promptly
compute such adjustment or readjustment and prepare and furnish to the Holder of
a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Borrower shall, upon the written request at any time of the Holder, furnish to
such Holder a like certificate setting forth (i) such adjustment or
readjustment, (ii) the Conversion Price at the time in effect and (iii) the
number of shares of Common Stock and the amount, if any, of other securities or
property which at the time would be received upon conversion of the Note.

            1.7 TRADING MARKET LIMITATIONS. Unless permitted by the applicable
rules and regulations of the principal securities market on which the Common
Stock is then listed or traded, in no event shall the Borrower issue upon
conversion of or otherwise pursuant to this Note and the other Notes issued
pursuant to the Purchase Agreement more than the maximum number of shares of
Common Stock that the Borrower can issue pursuant to any rule of the principal
United States securities market on which the Common Stock is then traded (the
"MAXIMUM SHARE AMOUNT"), which shall be 19.99% of the total shares outstanding
on the Closing Date (as defined in the Purchase Agreement), subject to equitable
adjustment from time to time for stock splits, stock dividends, combinations,
capital reorganizations and similar events relating to the Common Stock
occurring after the date hereof. Once the Maximum Share Amount has been issued
(the date of which is hereinafter referred to as the "MAXIMUM CONVERSION DATE"),
if the Borrower fails to eliminate any prohibitions under applicable law or the
rules or regulations of any stock exchange, interdealer quotation system or
other self-regulatory organization with jurisdiction over the Borrower or any of
its securities on the Borrower's ability to issue shares of Common Stock in
excess of the Maximum Share Amount (a "TRADING MARKET PREPAYMENT EVENT"), in
lieu of any further right to convert this Note, and in full satisfaction of the
Borrower's obligations under this Note, the Borrower shall pay to the Holder,
within fifteen (15) business days of the Maximum Conversion Date (the "TRADING
MARKET PREPAYMENT DATE"), an amount equal to 130% times the sum of (a) the then

                                       11
<PAGE>

outstanding principal amount of this Note immediately following the Maximum
Conversion Date, plus (b) accrued and unpaid interest on the unpaid principal
amount of this Note to the Trading Market Prepayment Date, plus (c) Default
Interest, if any, on the amounts referred to in clause (a) and/or (b) above,
plus (d) any optional amounts that may be added thereto at the Maximum
Conversion Date by the Holder in accordance with the terms hereof (the then
outstanding principal amount of this Note immediately following the Maximum
Conversion Date, plus the amounts referred to in clauses (b), (c) and (d) above
shall collectively be referred to as the "REMAINING CONVERTIBLE AMOUNT"). With
respect to each Holder of Notes, the Maximum Share Amount shall refer to such
Holder's pro rata share thereof determined in accordance with Section 4.8 below.
In the event that the sum of (x) the aggregate number of shares of Common Stock
issued upon conversion of this Note and the other Notes issued pursuant to the
Purchase Agreement plus (y) the aggregate number of shares of Common Stock that
remain issuable upon conversion of this Note and the other Notes issued pursuant
to the Purchase Agreement, represents at least one hundred percent (100%) of the
Maximum Share Amount (the "TRIGGERING EVENT"), the Borrower will use its best
efforts to seek and obtain Shareholder Approval (or obtain such other relief as
will allow conversions hereunder in excess of the Maximum Share Amount) as soon
as practicable following the Triggering Event and before the Maximum Conversion
Date. As used herein, "SHAREHOLDER APPROVAL" means approval by the shareholders
of the Borrower to authorize the issuance of the full number of shares of Common
Stock which would be issuable upon full conversion of the then outstanding Notes
but for the Maximum Share Amount.

            1.8 STATUS AS SHAREHOLDER. Upon submission of a Notice of Conversion
by a Holder, (i) the shares covered thereby (other than the shares, if any,
which cannot be issued because their issuance would exceed such Holder's
allocated portion of the Reserved Amount or Maximum Share Amount) shall be
deemed converted into shares of Common Stock and (ii) the Holder's rights as a
Holder of such converted portion of this Note shall cease and terminate,
excepting only the right to receive certificates for such shares of Common Stock
and to any remedies provided herein or otherwise available at law or in equity
to such Holder because of a failure by the Borrower to comply with the terms of
this Note. Notwithstanding the foregoing, if a Holder has not received
certificates for all shares of Common Stock prior to the tenth (10th) business
day after the expiration of the Deadline with respect to a conversion of any
portion of this Note for any reason, then (unless the Holder otherwise elects to
retain its status as a holder of Common Stock by so notifying the Borrower) the
Holder shall regain the rights of a Holder of this Note with respect to such
unconverted portions of this Note and the Borrower shall, as soon as
practicable, return such unconverted Note to the Holder or, if the Note has not
been surrendered, adjust its records to reflect that such portion of this Note
has not been converted. In all cases, the Holder shall retain all of its rights
and remedies (including, without limitation, (i) the right to receive Conversion
Default Payments pursuant to Section 1.3 to the extent required thereby for such
Conversion Default and any subsequent Conversion Default and (ii) the right to
have the Conversion Price with respect to subsequent conversions determined in
accordance with Section 1.3) for the Borrower's failure to convert this Note.

                         ARTICLE II. CERTAIN COVENANTS

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

                                       12
<PAGE>

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

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

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

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

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

                         ARTICLE III. EVENTS OF DEFAULT

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

                                       13
<PAGE>

            3.1 FAILURE TO PAY PRINCIPAL OR INTEREST. The Borrower fails to pay
the principal hereof or interest thereon when due on this Note, whether at
maturity, upon a Trading Market Prepayment Event pursuant to Section 1.7, upon
acceleration or otherwise;

            3.2 CONVERSION AND THE SHARES. The Borrower fails to issue shares of
Common Stock to the Holder (or announces or threatens that it will not honor its
obligation to do so) upon exercise by the Holder of the conversion rights of the
Holder in accordance with the terms of this Note (for a period of at least sixty
(60) days, if such failure is solely as a result of the circumstances governed
by Section 1.3 and the Borrower is using its best efforts to authorize a
sufficient number of shares of Common Stock as soon as practicable), fails to
transfer or cause its transfer agent to transfer (electronically or in
certificated form) any certificate for shares of Common Stock issued to the
Holder upon conversion of or otherwise pursuant to this Note as and when
required by this Note or the Registration Rights Agreement, or fails to remove
any restrictive legend (or to withdraw any stop transfer instructions in respect
thereof) on any certificate for any shares of Common Stock issued to the Holder
upon conversion of or otherwise pursuant to this Note as and when required by
this Note or the Registration Rights Agreement (or makes any announcement,
statement or threat that it does not intend to honor the obligations described
in this paragraph) and any such failure shall continue uncured (or any
announcement, statement or threat not to honor its obligations shall not be
rescinded in writing) for ten (10) days after the Borrower shall have been
notified thereof in writing by the Holder;

            3.3 FAILURE TO TIMELY FILE REGISTRATION OR EFFECT REGISTRATION. The
Borrower fails to file the Registration Statement within thirty (30) days
following the Closing Date (as defined in the Purchase Agreement) or obtain
effectiveness with the Securities and Exchange Commission of the Registration
Statement within one hundred and twenty (120) days following the Closing Date
(as defined in the Purchase Agreement) or such Registration Statement lapses in
effect (or sales cannot otherwise be made thereunder effective, whether by
reason of the Borrower's failure to amend or supplement the prospectus included
therein in accordance with the Registration Rights Agreement or otherwise) for
more than ten (10) consecutive days or twenty (20) days in any twelve month
period after the Registration Statement becomes effective;

            3.4 BREACH OF COVENANTS. The Borrower breaches any material covenant
or other material term or condition contained in Sections 1.3, 1.6 or 1.7 of
this Note, or Sections 4(c), 4(e), 4(h), 4(i), 4(j) or 5 of the Purchase
Agreement and such breach continues for a period of ten (10) days after written
notice thereof to the Borrower from the Holder;

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

                                       14
<PAGE>

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

            3.7 JUDGMENTS. Any money judgment, writ or similar process shall be
entered or filed against the Borrower or any subsidiary of the Borrower or any
of its property or other assets for more than $50,000, and shall remain
unvacated, unbonded or unstayed for a period of twenty (20) days unless
otherwise consented to by the Holder, which consent will not be unreasonably
withheld;

            3.8 BANKRUPTCY. Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings for relief under any bankruptcy law
or any law for the relief of debtors shall be instituted by or against the
Borrower or any subsidiary of the Borrower, unless such proceeding shall be
stayed within thirty (30) days;

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

            3.10 DEFAULT UNDER OTHER NOTES. An Event of Default has occurred and
is continuing under any of the other Notes issued pursuant to the Purchase
Agreement,

then, upon the occurrence and during the continuation of any Event of Default
specified in Section 3.1, 3.2, 3.3, 3.4, 3.5, 3.7, 3.9, or 3.10, at the option
of the Holders of a majority of the aggregate principal amount of the
outstanding Notes issued pursuant to the Purchase Agreement exercisable through
the delivery of written notice to the Borrower by such Holders (the "DEFAULT
NOTICE"), and upon the occurrence of an Event of Default specified in Section
3.6 or 3.8 (unless, under Section 3.8, such proceeding shall be stayed within 30
days), the Notes shall become immediately due and payable and the Borrower shall
pay to the Holder, in full satisfaction of its obligations hereunder, an amount
equal to the greater of (i) 130% times the sum of (w) the then outstanding
principal amount of this Note plus (x) accrued and unpaid interest on the unpaid
principal amount of this Note to the date of payment (the "MANDATORY PREPAYMENT
DATE") plus (y) Default Interest, if any, on the amounts referred to in clauses
(w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3
and 1.4(g) hereof or pursuant to Section 2(c) of the Registration Rights
Agreement (the then outstanding principal amount of this Note to the date of
payment plus the amounts referred to in clauses (x), (y) and (z) shall
collectively be known as the "DEFAULT SUM") or (ii) the "parity value" of the
Default Sum to be prepaid, where parity value means (a) the highest number of
shares of Common Stock issuable upon conversion of or otherwise pursuant to such
Default Sum in accordance with Article I, treating the Trading Day immediately
preceding the Mandatory Prepayment Date as the "Conversion Date" for purposes of
determining the lowest applicable Conversion Price, unless the Default Event
arises as a result of a breach in respect of a specific Conversion Date in which
case such Conversion Date shall be the Conversion Date), multiplied by (b) the
highest Closing Price for the Common Stock during the period beginning on the
date of first occurrence of the Event of Default and ending one day prior to the
Mandatory Prepayment Date (the "DEFAULT AMOUNT") and all other amounts payable
hereunder shall immediately become due and payable, all without demand,
presentment or notice, all of which hereby are expressly waived, together with
all costs, including, without limitation, legal fees and expenses, of
collection, and the Holder shall be entitled to exercise all other rights and
remedies available at law or in equity. If the Borrower fails to pay the Default
Amount within five (5) business days of written notice that such amount is due
and payable, then the Holder shall have the right at any time, so long as the
Borrower remains in default (and so long and to the extent that there are
sufficient authorized shares), to require the Borrower, upon written notice, to
immediately issue, in lieu of the Default Amount, the number of shares of Common
Stock of the Borrower equal to the Default Amount divided by the Conversion
Price then in effect.

                                       15
<PAGE>

                           ARTICLE IV. MISCELLANEOUS

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

            4.2 NOTICES. Any notice herein required or permitted to be given
shall be in writing and may be personally served or delivered by courier or sent
by United States mail and shall be deemed to have been given upon receipt if
personally served (which shall include telephone line facsimile transmission) or
sent by courier or three (3) days after being deposited in the United States
mail, certified, with postage pre-paid and properly addressed, if sent by mail.
For the purposes hereof, the address of the Holder shall be as shown on the
records of the Borrower; and the address of the Borrower shall be 23 Aminadav
St, Tel Aviv, Israel, 67898, facsimile number: 972-3-5613465. Both the Holder
and the Borrower may change the address for service by service of written notice
to the other as herein provided.

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

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

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

                                       16
<PAGE>

            4.6 GOVERNING LAW. THIS NOTE SHALL BE ENFORCED, GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS. THE BORROWER HEREBY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS NOTE, THE AGREEMENTS
ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO
THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT
SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS NOTE SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING ATTORNEYS'
FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH DISPUTE.

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

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

                                       17
<PAGE>

            4.9 DAMAGES SHARES. The shares of Common Stock that may be issuable
to the Holder pursuant to Sections 1.3 and 1.4(g) hereof and pursuant to Section
2(c) of the Registration Rights Agreement ("DAMAGES SHARES") shall be treated as
Common Stock issuable upon conversion of this Note for all purposes hereof and
shall be subject to all of the limitations and afforded all of the rights of the
other shares of Common Stock issuable hereunder, including without limitation,
the right to be included in the Registration Statement filed pursuant to the
Registration Rights Agreement. For purposes of calculating interest payable on
the outstanding principal amount hereof, except as otherwise provided herein,
amounts convertible into Damages Shares ("DAMAGES AMOUNTS") shall not bear
interest but must be converted prior to the conversion of any outstanding
principal amount hereof, until the outstanding Damages Amounts is zero.

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

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

            4.12 NOTICE OF CORPORATE EVENTS. Except as otherwise provided below,
the Holder of this Note shall have no rights as a Holder of Common Stock unless
and only to the extent that it converts this Note into Common Stock. The
Borrower shall provide the Holder with prior notification of any meeting of the
Borrower's shareholders (and copies of proxy materials and other information
sent to shareholders). In the event of any taking by the Borrower of a record of
its shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation,
reclassification or recapitalization) any share of any class or any other
securities or property, or to receive any other right, or for the purpose of
determining shareholders who are entitled to vote in connection with any
proposed sale, lease or conveyance of all or substantially all of the assets of
the Borrower or any proposed liquidation, dissolution or winding up of the
Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20)
days prior to the record date specified therein (or thirty (30) days prior to
the consummation of the transaction or event, whichever is earlier), of the date
on which any such record is to be taken for the purpose of such dividend,
distribution, right or other event, and a brief statement regarding the amount
and character of such dividend, distribution, right or other event to the extent
known at such time. The Borrower shall make a public announcement of any event
requiring notification to the Holder hereunder substantially simultaneously with
the notification to the Holder in accordance with the terms of this Section
4.12.

                                       18
<PAGE>

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

                             ARTICLE V. CALL OPTION

            5.1 CALL OPTION. Notwithstanding anything to the contrary contained
in this Article V, so long as (i) no Event of Default or Trading Market
Prepayment Event shall have occurred and be continuing, (ii) the Borrower has a
sufficient number of authorized shares of Common Stock reserved for issuance
upon full conversion of the Notes, then at any time after the Issue Date, and
(iii) the Common Stock is trading at or below $.17 per share, the Borrower shall
have the right, exercisable on not less than ten (10) Trading Days prior written
notice to the Holders of the Notes (which notice may not be sent to the Holders
of the Notes until the Borrower is permitted to prepay the Notes pursuant to
this Section 5.1), to prepay all of the outstanding Notes in accordance with
this Section 5.1. Any notice of prepayment hereunder (an "OPTIONAL PREPAYMENT")
shall be delivered to the Holders of the Notes at their registered addresses
appearing on the books and records of the Borrower and shall state (1) that the
Borrower is exercising its right to prepay all of the Notes issued on the Issue
Date and (2) the date of prepayment (the "OPTIONAL PREPAYMENT NOTICE"). On the
date fixed for prepayment (the "OPTIONAL PREPAYMENT DATE"), the Borrower shall
make payment of the Optional Prepayment Amount (as defined below) to or upon the
order of the Holders as specified by the Holders in writing to the Borrower at
least one (1) business day prior to the Optional Prepayment Date. If the
Borrower exercises its right to prepay the Notes, the Borrower shall make
payment to the holders of an amount in cash (the "OPTIONAL PREPAYMENT Amount")
equal to either (i) 125% (for prepayments occurring within thirty (30) days of
the Issue Date), (ii) 135% for prepayments occurring between thirty-one (31) and
sixty (60) days of the Issue Date, or (iii) 150% (for prepayments occurring
after the sixtieth (60th) day following the Issue Date), multiplied by the sum
of (w) the then outstanding principal amount of this Note plus (x) accrued and
unpaid interest on the unpaid principal amount of this Note to the Optional
Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in
clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections
1.3 and 1.4(g) hereof or pursuant to Section 2(c) of the Registration Rights
Agreement (the then outstanding principal amount of this Note to the date of
payment plus the amounts referred to in clauses (x), (y) and (z) shall
collectively be known as the "OPTIONAL PREPAYMENT SUM"). Notwithstanding notice
of an Optional Prepayment, the Holders shall at all times prior to the Optional
Prepayment Date maintain the right to convert all or any portion of the Notes in
accordance with Article I and any portion of Notes so converted after receipt of
an Optional Prepayment Notice and prior to the Optional Prepayment Date set
forth in such notice and payment of the aggregate Optional Prepayment Amount
shall be deducted from the principal amount of Notes which are otherwise subject
to prepayment pursuant to such notice. If the Borrower delivers an Optional
Prepayment Notice and fails to pay the Optional Prepayment Amount due to the
Holders of the Notes within two (2) business days following the Optional
Prepayment Date, the Borrower shall forever forfeit its right to redeem the
Notes pursuant to this Section 5.1.

                                       19
<PAGE>

            5.2 PARTIAL CALL OPTION. Notwithstanding anything to the contrary
contained in this Article V, in the event that the Average Daily Price of the
Common Stock, as reported by the Reporting Service, for each day of the month
ending on any Determination Date is below the Initial Market Price, the Borrower
may, at its option, prepay a portion of the outstanding principal amount of the
Notes equal to 104% of the principal amount hereof divided by thirty-six (36)
plus one month's interest. The term "INITIAL MARKET PRICE" means shall mean the
volume weighted average price of the Common Stock for the five (5) Trading Days
immediately preceding the Closing which is $.14.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       20
<PAGE>

      IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name
by its duly authorized officer this 16th day of May, 2006.

                                             SAFETEK INTERNATIONAL, INC.

                                             By:      /s/ Amnon Presler
                                                      Amnon Presler
                                                      Chief Executive Officer

                                       21
<PAGE>

                                    EXHIBIT A

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

            The undersigned hereby irrevocably elects to convert $__________
principal amount of the Note (defined below) into shares of common stock, par
value $.0001 per share ("COMMON STOCK"), of Safetek International, Inc., a
Delaware corporation (the "BORROWER") according to the conditions of the
convertible Notes of the Borrower dated as of May 16, 2006 (the "NOTES"), as of
the date written below. If securities are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto and is delivering herewith such certificates. No fee will
be charged to the Holder for any conversion, except for transfer taxes, if any.
A copy of each Note is attached hereto (or evidence of loss, theft or
destruction thereof).

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

         Name of DTC Prime Broker:
                                  ----------------------------------------------
         Account Number:
                        --------------------------------------------------------

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

         Name:
              ------------------------------------------------------------------
         Address:
                 ---------------------------------------------------------------

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

                  Date of Conversion:_____________________________
                  Applicable Conversion Price:____________________
                  Number of Shares of Common Stock to be Issued Pursuant to
                  Conversion of the Notes:________________________
                  Signature:______________________________________
                  Name:___________________________________________
                  Address:________________________________________

                                       22
<PAGE>

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

                                       23

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