Document:

EXHIBIT 10.15

                             SUBSCRIPTION AGREEMENT

      THIS SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of May ___, 2004,
by and among iSECUREtrac, Corp., a Delaware corporation (the "Company"), and the
subscribers identified on the signature page hereto (each a "Subscriber" and
collectively "Subscribers").

      WHEREAS, the Company and the Subscribers are executing and delivering this
Agreement in reliance upon an exemption from securities registration afforded by
the provisions of Section 4(2), Section 4(6) and/or Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "1933 Act").

      WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the
Subscribers, as provided herein, and the Subscribers, in the aggregate, shall
purchase a minimum of $1,000,000 and up to a maximum of $2,500,000 (the
"Purchase Price") of principal amount of 4% promissory notes of the Company
("Note" or "Notes") convertible into shares of the Company's common stock, $.001
par value (the "Common Stock") at a per share conversion price equal to $0.23
("Conversion Price"); and share purchase warrants in the forms annexed hereto as
Exhibit A and Exhibit B (the "Warrants") to purchase shares of Common Stock (the
"Warrant Shares"). The Conversion Price is subject to adjustment as described in
the Note and this Agreement. The Notes, shares of Common Stock issuable upon
conversion of the Notes (the "Shares"), the Warrants and the Warrant Shares are
collectively referred to herein as the "Securities"; and

      WHEREAS, the aggregate proceeds of the sale of the Notes and the Warrants
contemplated hereby may be held in escrow pursuant to the terms of a Funds
Escrow Agreement which will be executed by the parties substantially in the form
attached hereto as Exhibit C (the "Escrow Agreement").

      NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement, the Company and the Subscribers hereby
agree as follows:

            1. Purchase and Sale of Notes and Warrants. Subject to the
satisfaction (or waiver) of the conditions to Closing set forth in this
Agreement and the Escrow Agreement, each Subscriber shall purchase the Notes and
Warrants for the portion of the Purchase Price indicated on the signature page
hereto, and the Company shall sell such Notes and Warrants to the Subscriber.
The Purchase Price for the Notes and Warrants shall be paid in cash. The entire
Purchase Price shall be allocated to the Notes.

            2. Escrow Arrangements; Form of Payment. Upon execution hereof by
the parties and pursuant to the terms of the Escrow Agreement, each Subscriber
agrees to make the deliveries required of such Subscriber as set forth in the
Escrow Agreement and the Company agrees to make the deliveries required of the
Company as set forth in the Escrow Agreement.

            3. Warrants.

                  (a) A Warrants. On the Closing Date the Company will issue A
Warrants to the Subscribers. One (1) A Warrant will be issued for each two (2)
Shares which would be issued on the Closing Date assuming the complete
conversion of the Notes at the Conversion Price. The per Warrant Share exercise
price to acquire a Warrant Share upon exercise of an A Warrant shall be the
average fo the daily volume weighted average prices of the Common Stock as
reported by Bloomberg L.P. for the OTC Bulletin Board ("Bulletin Board") using
the AQR function ("VWAP") for the ten (10) trading days ending the second
trading day preceding the Closing Date. The A Warrants shall be exercisable
until five (5) years after the Closing Date. The Warrants will be subject to
Call by the Company as described in Exhibit A.

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                  (b) B Warrants. On the Closing Date the Company will issue B
Warrants to the Subscribers. One (1) B Warrant will be issued for each two
dollars ($2.00) of Purchase Price paid by each Subscriber divided by the
Conversion Price. The per Warrant Share exercise price to acquire a Warrant
Share upon exercise of a B Warrant shall be equal to the Per Share Purchase
Price. The B Warrants shall be exercisable until the registration statement
described in Section 11.1(iv) hereof has been effective for one hundred and
twenty (120) days. The B Warrants will be subject to Call as described in
Exhibit B hereto. The B Warrants will be exercisable only if the shareholders of
the Company approve the resolution to increase the authorize Common Stock of the
Company as described in the Pre-14A filing made with the Commission on April 27,
2004, at the proposed June 4, 2004 meeting or any adjournment thereof (the
"Approval").

            4. Subscriber's Representations and Warranties. Each Subscriber
hereby represents and warrants to and agrees with the Company only as to such
Subscriber that:

                  (a) Information on Company. The Subscriber has been furnished
with or has had access at the EDGAR Website of the Commission to the Company's
Form 10-KSB for the year ended December 31, 2003 as filed with the Commission,
together with all subsequently filed Forms 10-QSB, 8-K, and filings made with
the Commission available at the EDGAR website (hereinafter referred to
collectively as the "Reports"). In addition, the Subscriber has received in
writing from the Company such other information concerning its operations,
financial condition and other matters as the Subscriber has requested in writing
(such other information is collectively, the "Other Written Information"), and
considered all factors the Subscriber deems material in deciding on the
advisability of investing in the Securities. (b) Information on Subscriber. The
Subscriber is, and will be at the time of the conversion of the Notes and
exercise of any of the Warrants, an "accredited investor", as such term is
defined in Regulation D promulgated by the Commission under the 1933 Act, is
experienced in investments and business matters, has made investments of a
speculative nature and has purchased securities of United States publicly-owned
companies in private placements in the past and, with its representatives, has
such knowledge and experience in financial, tax and other business matters as to
enable the Subscriber to utilize the information made available by the Company
to evaluate the merits and risks of and to make an informed investment decision
with respect to the proposed purchase, which represents a speculative
investment. The Subscriber has the authority and is duly and legally qualified
to purchase and own the Securities. The Subscriber is able to bear the risk of
such investment for an indefinite period and to afford a complete loss thereof.
The information set forth on the signature page hereto regarding the Subscriber
is accurate.

                  (c) Purchase of Common Stock and Warrants. On the closing
date, the Subscriber will purchase the Notes and Warrants as principal for its
own account for investment only and not with a view toward, or for resale in
connection with, the public sale or any distribution thereof.

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                  (d) Compliance with Securities Act. The Subscriber understands
and agrees that the Securities have not been registered under the 1933 Act or
any applicable state securities laws, by reason of their issuance in a
transaction that does not require registration under the 1933 Act (based in part
on the accuracy of the representations and warranties of Subscriber contained
herein), and that such Securities must be held indefinitely unless a subsequent
disposition is registered under the 1933 Act or any applicable state securities
laws or is exempt from such registration. In any event, and subject to
compliance with applicable securities laws, the Subscriber may enter into
hedging transactions with third parties, which may in turn engage in short sales
of the Securities in the course of hedging the position they assume and the
Subscriber may also enter into short positions or other derivative transactions
relating to the Securities, or interests in the Securities, and deliver the
Securities, or interests in the Securities, to close out their short or other
positions or otherwise settle short sales or other transactions, or loan or
pledge the Securities, or interests in the Securities, to third parties that in
turn may dispose of these Securities.

                  (e) Shares Legend. The Shares and the Warrant Shares shall
bear the following or similar legend:

                  "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
                  REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE
                  SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
                  HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
                  STATEMENT UNDER SUCH SECURITIES ACT OR ANY APPLICABLE STATE
                  SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY
                  SATISFACTORY TO ISECURETRAC, CORP. THAT SUCH REGISTRATION IS
                  NOT REQUIRED."

                  (f) Warrants Legend. The Warrants shall bear the following
                  or similar legend:

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

                  (g) Note Legend. The Note shall bear the following legend:

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

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                  (h) Communication of Offer. The offer to sell the Securities
was directly communicated to the Subscriber by the Company. At no time was the
Subscriber presented with or solicited by any leaflet, newspaper or magazine
article, radio or television advertisement, or any other form of general
advertising or solicited or invited to attend a promotional meeting otherwise
than in connection and concurrently with such communicated offer.

                  (i) Authority; Enforceability. This Agreement and other
agreements delivered together with this Agreement or in connection herewith have
been duly authorized, executed and delivered by the Subscriber and are valid and
binding agreements enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity; and Subscriber has full corporate
power and authority necessary to enter into this Agreement and such other
agreements and to perform its obligations hereunder and under all other
agreements entered into by the Subscriber relating hereto.

                  (j) Restricted Securities. Subscriber understands that the
Securities have not been registered under the 1933 Act and such Subscriber will
not sell, offer to sell, assign, pledge, hypothecate or otherwise transfer any
of the Securities unless (i) pursuant to an effective registration statement
under the 1933 Act, (ii) such Subscriber provides the Company with an opinion of
counsel, in a form reasonably acceptable to the Company, to the effect that a
sale, assignment or transfer of the Securities may be made without registration
under the 1933 Act, or (iii) Subscriber provides the Company with reasonable
assurances (in the form of seller and broker representation letters) that the
Shares or the Warrant Shares, as the case may be, can be sold pursuant to (A)
Rule 144 promulgated under the 1933 Act, or (B) Rule 144(k) promulgated under
the 1933 Act, in each case following the applicable holding period set forth
therein. Notwithstanding anything to the contrary contained in this Agreement,
such Subscriber may transfer (without restriction and without the need for an
opinion of counsel) the Securities to its Affiliates (as defined below) provided
that each such Affiliate is an "accredited investor" under Regulation D and such
Affiliate agrees to be bound by the terms and conditions of this Agreement.

                  For the purposes of this Agreement, an "Affiliate" of any
specified Subscriber means any other person or entity directly or indirectly
controlling, controlled by or under direct or indirect common control with such
specified Subscriber. For purposes of this definition, "control" means the power
to direct the management and policies of such person or firm, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise.

                  (k) No Governmental Review. Each Subscriber understands that
no United States federal or state agency or any other governmental or state
agency has passed on or made recommendations or endorsement of the Securities or
the suitability of the investment in the Securities nor have such authorities
passed upon or endorsed the merits of the offering of the Securities.

                  (l) No Prior Short Selling. Each Subscriber represents and
warrants to the Company that as of the date of this Agreement and the Closing
Date, such Subscriber, Subscriber's agents, representatives and affiliates will
not, directly or indirectly, have any (i) "short" position (as such term is
employed in Rule 3b-3 of the 1934 Act) in the Common Stock, or (ii) a hedged
position which would establish a net short position with respect to the Common
Stock.

                  (m) Correctness of Representations. Each Subscriber represents
as to such Subscriber that the foregoing representations and warranties are true
and correct as of the date hereof and, unless a Subscriber otherwise notifies
the Company prior to the Closing Date (as hereinafter defined), shall be true
and correct as of the Closing Date.

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<PAGE>

                  (n) Survival. The foregoing representations and warranties
shall survive the Closing Date for a period of two years.

            5. Company Representations and Warranties. The Company represents
and warrants to and agrees with each Subscriber that:

                  (a) Due Incorporation. The Company and each of its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the respective jurisdictions of their incorporation
and have the requisite corporate power to own their properties and to carry on
their business as now being conducted. The Company and each of its subsidiaries
is duly qualified as a foreign corporation to do business and is in good
standing in each jurisdiction where the nature of the business conducted or
property owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a material
adverse effect on the business, operations or financial condition of the
Company.

                  (b) Outstanding Stock. All issued and outstanding shares of
capital stock of the Company and each of its subsidiaries have been duly
authorized and validly issued and are fully paid and nonassessable.

                  (c) Authority; Enforceability. This Agreement, the Note, the
Warrants, the Escrow Agreement and any other agreements delivered together with
this Agreement or in connection herewith (collectively "Transaction Documents")
have been duly authorized, executed and delivered by the Company and are valid
and binding agreements enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity. The Company has full corporate
power and authority necessary to enter into and deliver the Transaction
Documents and to perform its obligations thereunder.

                  (d) Additional Issuances. There are no outstanding agreements
or preemptive or similar rights affecting the Company's common stock or equity
and no outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, or agreements or understandings with
respect to the sale or issuance of any shares of common stock or equity of the
Company or other equity interest in any of the subsidiaries of the Company
except as described on Schedule 5(d).

                  (e) Consents. No consent, approval, authorization or order of
any court, governmental agency or body or arbitrator having jurisdiction over
the Company, or any of its affiliates, the American Stock Exchange, the National
Association of Securities Dealers, Inc., Nasdaq, SmallCap Market, the Bulletin
Board nor the Company's shareholders is required for the execution by the
Company of the Transaction Documents and compliance and performance by the
Company of its obligations under the Transaction Documents, including, without
limitation, the issuance and sale of the Securities.

                  (f) No Violation or Conflict. Assuming the representations and
warranties of the Subscribers in Section 4 are true and correct, neither the
issuance and sale of the Securities nor the performance of the Company's
obligations under this Agreement and all other agreements entered into by the
Company relating thereto by the Company will:

      (i) violate, conflict with, result in a breach of, or constitute a default
(or an event which with the giving of notice or the lapse of time or both would
be reasonably likely to constitute a default) under (A) the articles or
certificate of incorporation, charter or bylaws of the Company, (B) to the
Company's knowledge, any decree, judgment, order, law, treaty, rule, regulation
or determination applicable to the Company of any court, governmental agency or
body, or arbitrator having jurisdiction over the Company or any of its
subsidiaries or over the properties or assets of the Company or any of its
affiliates, (C) the terms of any bond, debenture, note or any other evidence of
indebtedness, or any agreement, stock option or other similar plan, indenture,
lease, mortgage, deed of trust or other instrument to which the Company or any
of its affiliates or subsidiaries is a party, by which the Company or any of its
affiliates or subsidiaries is bound, or to which any of the properties of the
Company or any of its affiliates or subsidiaries is subject, or (D) the terms of
any "lock-up" or similar provision of any underwriting or similar agreement to
which the Company, or any of its affiliates or subsidiaries is a party except
the violation, conflict, breach, or default of which would not have a material
adverse effect on the Company; or

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<PAGE>

                  (ii) result in the creation or imposition of any lien, charge
or encumbrance upon the Securities or any of the assets of the Company, its
subsidiaries or any of its affiliates; or

      (iii) result in the activation of any anti-dilution rights or a reset or
repricing of any debt or security instrument of any other creditor or equity
holder of the Company, nor result in the acceleration of the due date of any
obligation of the Company; or

                  (iv) result in the activation of any piggy-back registration
rights of any person or entity holding securities of the Company or having the
right to receive securities of the Company.

            (g) The Securities. The Securities upon issuance:

                  (i) are, or will be, free and clear of any security interests,
liens, claims or other encumbrances, subject to restrictions upon transfer under
the 1933 Act and any applicable state securities laws;

                  (ii) have been, or will be, duly and validly authorized and on
the date of conversion of the Notes and upon exercise of the Warrants, the
Shares and Warrant Shares will be duly and validly issued, fully paid and
nonassessable (and if registered pursuant to the 1933 Act, and resold pursuant
to an effective registration statement will be free trading and unrestricted,
provided that each Subscriber complies with the prospectus delivery requirements
of the 1933 Act);

                  (iii) will not have been issued or sold in violation of any
preemptive or other similar rights of the holders of any securities of the
Company; and

                  (iv) will not subject the holders thereof to personal
liability by reason of being such holders.

            (h) Litigation. There is no pending or, to the best knowledge of the
Company, threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its affiliates that would affect the execution by the Company or the
performance by the Company of its obligations under the Transaction Documents.
Except as disclosed in the Reports, there is no pending or, to the best
knowledge of the Company, basis for or threatened action, suit, proceeding or
investigation before any court, governmental agency or body, or arbitrator
having jurisdiction over the Company, or any of its affiliates which litigation
if adversely determined would have a material adverse effect on the Company.

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                  (i) Reporting Company. The Company is a publicly-held company
subject to reporting obligations pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended (the "1934 Act") and has a class of common
shares registered pursuant to Section 12(g) of the 1934 Act. Pursuant to the
provisions of the 1934 Act, the Company has timely filed all reports and other
materials required to be filed thereunder with the Commission during the
preceding twelve months.

                  (j) No Market Manipulation. The Company has not taken, and
will not take, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or manipulation of
the price of the Common Stock of the Company to facilitate the sale or resale of
the Securities or affect the price at which the Securities may be issued or
resold.

                  (k) Information Concerning Company. The Reports contain all
material information relating to the Company and its operations and financial
condition as of their respective dates which information is required to be
disclosed therein. Since the date of the financial statements included in the
Reports, and except as modified in the Other Written Information or in the
Schedules hereto, there has been no material adverse change in the Company's
business, financial condition or affairs not disclosed in the Reports. The
Reports do not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances when made.

                  (l) Stop Transfer. The Securities, when issued, will be
restricted securities. The Company will not issue any stop transfer order or
other order impeding the sale, resale or delivery of any of the Securities,
except as may be required by any applicable federal or state securities laws and
unless contemporaneous notice of such instruction is given to the Subscriber.

                  (m) Defaults. Except as described on Schedule 5(m), the
Company is not in violation of its articles of incorporation or bylaws. The
Company is (i) not in default under or in violation of any other material
agreement or instrument to which it is a party or by which it or any of its
properties are bound or affected, which default or violation would have a
material adverse effect on the Company, (ii) not in default with respect to any
order of any court, arbitrator or governmental body or subject to or party to
any order of any court or governmental authority arising out of any action, suit
or proceeding under any statute or other law respecting antitrust, monopoly,
restraint of trade, unfair competition or similar matters, or (iii) to its
knowledge not in violation of any statute, rule or regulation of any
governmental authority which violation would have a material adverse effect on
the Company.

                  (n) No Integrated Offering. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offer of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
the Bulletin Board. Nor will the Company or any of its affiliates or
subsidiaries take any action or steps that would cause the offer of the
Securities to be integrated with other offerings. The Company will not conduct
any offering other than the transactions contemplated hereby that will be
integrated with the offer or issuance of the Securities.

                  (o) No General Solicitation. Neither the Company, nor any of
its affiliates, nor to its knowledge, any person acting on its or their behalf,
has engaged in any form of general solicitation or general advertising (within
the meaning of Regulation D under the 1933 Act) in connection with the offer or
sale of the Securities.

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                  (p) Listing. The Company's common stock is quoted on the
Bulletin Board. The Company has not received any oral or written notice that its
common stock is not eligible nor will become ineligible for quotation on the
Bulletin Board nor that its common stock does not meet all requirements for the
continuation of such quotation and the Company satisfies and as of the Closing
Date, the Company will satisfy all the requirements for the continued quotation
of its common stock on the Bulletin Board.

                  (q) No Undisclosed Liabilities. The Company has no liabilities
or obligations which are material, individually or in the aggregate, which are
not disclosed in the Reports and Other Written Information, other than those
incurred in the ordinary course of the Company's businesses since December 31,
2003 and which, individually or in the aggregate, would reasonably be expected
to have a material adverse effect on the Company's financial condition, other
than as set forth in Schedule 5(q).

                  (r) No Undisclosed Events or Circumstances. Since December 31,
2003, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the Reports.

                  (s) Capitalization. The authorized and outstanding capital
stock of the Company as of the date of this Agreement and the Closing Date are
set forth on Schedule 5(s). Except as set forth in the Reports and Other Written
Information and Schedule 5(d), there are no options, warrants, or rights to
subscribe to, securities, rights or obligations convertible into or exchangeable
for or giving any right to subscribe for any shares of capital stock of the
Company. All of the outstanding shares of Common Stock of the Company have been
duly and validly authorized and issued and are fully paid and nonassessable.

                  (t) Dilution. The Company's executive officers and directors
understand the nature of the Securities being sold hereby and recognize that the
issuance of the Securities will have a potential dilutive effect on the equity
holdings of other holders of the Company's equity or rights to receive equity of
the Company. The board of directors of the Company has concluded, in its good
faith business judgment, that the issuance of the Securities is in the best
interests of the Company. The Company specifically acknowledges that its
obligation to issue the Shares upon conversion of the Notes, and the Warrant
Shares upon exercise of the Warrants is binding upon the Company and enforceable
regardless of the dilution such issuance may have on the ownership interests of
other shareholders of the Company or parties entitled to receive equity of the
Company.

                  (u) No Disagreements with Accountants and Lawyers. There are
no disagreements of any kind presently existing, or reasonably anticipated by
the Company to arise, between the Company and the accountants and lawyers
formerly or presently employed by the Company, including but not limited to
disputes or conflicts over payment owed to such accountants and lawyers.

                  (v) Investment Company. The Company is not, and is not an
Affiliate (as defined in Rule 405 under the 1933 Act) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.

                  (w) Correctness of Representations. The Company represents
that the foregoing representations and warranties are true and correct as of the
date hereof in all material respects, and, unless the Company otherwise notifies
the Subscribers prior to the Closing Date, shall be true and correct in all
material respects as of the Closing Date.

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                  (x) Survival. The foregoing representations and warranties
shall survive the Closing Date for a period of two years.

            6. Regulation D Offering. The offer and issuance of the Securities
to the Subscribers is being made pursuant to the exemption from the registration
provisions of the 1933 Act afforded by Section 4(2) or Section 4(6) of the 1933
Act and/or Rule 506 of Regulation D promulgated thereunder. On the Closing Date,
the Company will provide an opinion reasonably acceptable to Subscriber from the
Company's legal counsel opining on the availability of an exemption from
registration under the 1933 Act as it relates to the offer and issuance of the
Securities and other matters reasonably requested by Subscribers. A form of the
legal opinion is annexed hereto as Exhibit D. The Company will provide, at the
Company's expense, such other legal opinions in the future as are reasonably
necessary for the issuance and resale of the Common Stock issuable upon
conversion of the Notes and exercise of the Warrants.

            7.1. Conversion of Note.

                  (a) Upon the conversion of the Note or part thereof, the
Company shall, at its own cost and expense, take all necessary action, including
obtaining and delivering, an opinion of counsel to assure that the Company's
transfer agent shall issue stock certificates in the name of Subscriber (or its
nominee) or such other persons as designated by Subscriber and in such
denominations to be specified at conversion representing the number of shares of
common stock issuable upon such conversion. The Company warrants that no
instructions other than these instructions have been or will be given to the
transfer agent of the Company's Common Stock and that, unless waived by the
Subscriber, the Shares will be free-trading, and freely transferable, and will
not contain a legend restricting the resale or transferability of the Shares
provided the Shares are being sold pursuant to an effective registration
statement covering the Shares or are otherwise exempt from registration.

                  (b) Subscriber will give notice of its decision to exercise
its right to convert the Note or part thereof by telecopying an executed and
completed Notice of Conversion (a form of which is annexed as Exhibit A to the
Note) to the Company via confirmed telecopier transmission or otherwise pursuant
to Section 13(a) of this Agreement. The Subscriber will not be required to
surrender the Note until the Note has been fully converted or satisfied. Each
date on which a Notice of Conversion is telecopied to the Company in accordance
with the provisions hereof shall be deemed a Conversion Date. The Company will
itself or cause the Company's transfer agent to transmit the Company's Common
Stock certificates representing the Shares issuable upon conversion of the Note
to the Subscriber via express courier for receipt by such Subscriber within five
(5) business days after receipt by the Company of the Notice of Conversion (such
fifth day being the "Delivery Date"). In the event the Shares are electronically
transferable, then delivery of the Shares must be made by electronic transfer
provided request for such electronic transfer has been made by the Subscriber. A
Note representing the balance of the Note not so converted will be provided by
the Company to the Subscriber if requested by Subscriber, provided the
Subscriber delivers an original Note to the Company. To the extent that a
Subscriber elects not to surrender a Note for reissuance upon partial payment or
conversion, the Subscriber hereby indemnifies the Company against any and all
loss or damage attributable to a third-party claim in an amount in excess of the
actual amount then due under the Note.

                  (c) The Company understands that a delay in the delivery of
the Shares in the form required pursuant to Section 7 hereof, or the Mandatory
Redemption Amount described in Section 7.2 hereof, later than two business days
after the Delivery Date or later than the Mandatory Redemption Payment Date (as
hereinafter defined) could result in economic loss to the Subscriber. As
compensation to the Subscriber for such loss, the Company agrees to pay (as
liquidated damages and not as a penalty) to the Subscriber for late issuance of
Shares in the form required pursuant to Section 7 hereof upon Conversion of the
Note in the amount of $100 per business day after the Delivery Date for each
$10,000 of Note principal amount being converted, of the corresponding Shares
which are not timely delivered. The Company shall pay any payments incurred
under this Section in immediately available funds upon demand. Furthermore, in
addition to any other remedies which may be available to the Subscriber, in the
event that the Company fails for any reason to effect delivery of the Shares by
the Delivery Date or make payment by the Mandatory Redemption Payment Date, the
Subscriber will be entitled to revoke all or part of the relevant Notice of
Conversion or rescind all or part of the notice of Mandatory Redemption by
delivery of a notice to such effect to the Company whereupon the Company and the
Subscriber shall each be restored to their respective positions immediately
prior to the delivery of such notice, except that late payment charges described
above shall be payable through the date notice of revocation or rescission is
given to the Company.

                                       9
<PAGE>

                  (d) Nothing contained herein or in any document referred to
herein or delivered in connection herewith shall be deemed to establish or
require the payment of a rate of interest or other charges in excess of the
maximum permitted by applicable law. In the event that the rate of interest or
dividends required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Company to the Subscriber and thus refunded to the
Company.

            7.2. Mandatory Redemption at Subscriber's Election. In the event the
Company is prohibited from issuing Shares, or fails to timely deliver Shares on
a Delivery Date, or upon the occurrence of any other Event of Default (as
defined in the Note or in this Agreement) or for any reason other than pursuant
to the limitations set forth in Section 7.3 hereof, then at the Subscriber's
election, the Company must pay to the Subscriber ten (10) business days after
request by the Subscriber, at the Subscriber's election, a sum of money
determined by (i) multiplying up to the outstanding principal amount of the Note
designated by the Subscriber by 130%, or (ii) multiplying the number of Shares
otherwise deliverable upon conversion of an amount of Note principal and/or
interest designated by the Subscriber (with the date of giving of such
designation being a Deemed Conversion Date) at the then Conversion Price that
would be in effect on the Deemed Conversion Date by the highest closing price of
the Common Stock on the principal market for the period commencing on the Deemed
Conversion Date until the day prior to the receipt of the Mandatory Redemption
Payment, whichever is greater, together with accrued but unpaid interest thereon
("Mandatory Redemption Payment"). The Mandatory Redemption Payment must be
received by the Subscriber on the same date as the Company Shares otherwise
deliverable or within ten (10) business days after request, whichever is sooner
("Mandatory Redemption Payment Date"). Upon receipt of the Mandatory Redemption
Payment, the corresponding Note principal and interest will be deemed paid and
no longer outstanding. Liquidated damages calculated pursuant to Section 7.1(c)
hereof, that have been paid or accrued for the thirty day period prior to the
actual receipt of the Mandatory Redemption Payment by the Subscriber shall be
credited against the Mandatory Redemption Payment.

            7.3. Maximum Conversion. The Subscriber shall not be entitled to
convert on a Conversion Date that amount of the Note in connection with that
number of shares of Common Stock which would be in excess of the sum of (i) the
number of shares of common stock beneficially owned by the Subscriber and its
affiliates on a Conversion Date, and (ii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of this provision is being made on a Conversion Date, which would result in
beneficial ownership by the Subscriber and its affiliates of more than 9.99% of
the outstanding shares of common stock of the Company on such Conversion Date.
For the purposes of the provision 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 Regulation 13d-3 thereunder.
Subject to the foregoing, the Subscriber shall not be limited to aggregate
conversions of only 9.99% and aggregate conversions by the Subscriber may exceed
9.99%. The Subscriber may void the conversion limitation described in this
Section 7.3 upon and effective after 61 days prior written notice to the
Company. The Subscriber may allocate which of the equity of the Company deemed
beneficially owned by the Subscriber shall be included in the 9.99% amount
described above and which shall be allocated to the excess above 9.99%.

                                       10
<PAGE>

            7.4. Injunction - Posting of Bond. In the event a Subscriber shall
elect to convert a Note or part thereof or exercise the Warrant in whole or in
part, the Company may not refuse conversion or exercise based on any claim that
such Subscriber or any one associated or affiliated with such Subscriber has
been engaged in any violation of law, or for any other reason, unless, an
injunction from a court, on notice, restraining and or enjoining conversion of
all or part of said Note or exercise of all or part of said Warrant shall have
been sought and obtained by the Company and the Company has posted a surety bond
for the benefit of such Subscriber in the amount of 130% of the amount of the
Note, or aggregate purchase price of the Warrant Shares which are subject to the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Subscriber to the extent Subscriber obtains judgment.

            7.5. Buy-In. In addition to any other rights available to the
Subscriber, if the Company fails to deliver to the Subscriber such shares
issuable upon conversion of a Note by the Delivery Date and if seven (7)
business days after the Delivery Date the Subscriber purchases (in an open
market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by such Subscriber of the Common Stock which the
Subscriber was entitled to receive upon such conversion (a "Buy-In"), then the
Company shall pay in cash to the Subscriber (in addition to any remedies
available to or elected by the Subscriber) the amount by which (A) the
Subscriber's total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased exceeds (B) the aggregate principal
and/or interest amount of the Note for which such conversion was not timely
honored, together with interest thereon at a rate of 15% per annum, accruing
until such amount and any accrued interest thereon is paid in full (which amount
shall be paid as liquidated damages and not as a penalty). For example, if the
Subscriber purchases shares of Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted conversion of $10,000 of
note principal and/or interest, the Company shall be required to pay the
Subscriber $1,000, plus interest. The Subscriber shall provide the Company
written notice indicating the amounts payable to the Subscriber in respect of
the Buy-In. The delivery date by which Common Stock must be delivered pursuant
to this Section 7.5 shall be tolled for the amount of days that the Subscriber
does not deliver information reasonably requested by the Company's transfer
agent.

            7.6 Adjustments. The Conversion Price and amount of Shares issuable
upon conversion of the Notes and exercise of the Warrants shall be adjusted to
offset the effect of stock splits, stock dividends, pro rata distributions of
property or equity interests to the Company's shareholders.

            7.7. Redemption. The Company may not redeem or call the Note without
the consent of the holder of the Note except as set forth in the Note.

            8. Broker/Legal Fees.

                  (a) Broker's Fee. The Company on the one hand, and each
Subscriber (for himself only) on the other hand, agree to indemnify the other
against and hold the other harmless from any and all liabilities to any persons
claiming brokerage commissions or broker's fees other than Corpfin.com, Inc.
("Broker") on account of services purported to have been rendered on behalf of
the indemnifying party in connection with this Agreement or the transactions
contemplated hereby and arising out of such party's actions. The Company agrees
that it will pay the Broker a cash broker's fee of eight percent (8%) of the
Purchase Price ("Broker's Fees") directly out of the funds held pursuant to the
Escrow Agreement. The Company represents that there are no other parties
entitled to receive fees, commissions, or similar payments in connection with
the Offering except the Broker. The Broker will also be paid by the Company four
percent (4%) of the cash proceeds received by the Company from exercise of the A
Warrants and eight percent (8%) of the cash proceeds received by the Company
from exercise of the B Warrants (collectively "Warrant Exercise Compensation").
The Warrant Exercise Compensation must be paid by the Company to the Broker
within five (5) days after each receipt by the Company of Warrant Exercise cash
proceeds.

                                       11
<PAGE>

                  (b) Broker's Warrants. On the Closing Date, the Company will
issue to the Broker Warrants identical to and carrying the same rights as the A
Warrants issuable to the Subscribers except that the exercise price to purchase
one Warrant Share shall be equal to the Per Share Purchase Price and the
Warrants shall not be subject to be Called by the Company. A form of Broker's
Warrant is annexed hereto as Exhibit E. The Broker will receive one (1) Warrant
for each five (5) A Warrants issued to the Subscribers on the Closing Date. All
the representations, covenants, warranties, undertakings, remedies, liquidated
damages, indemnification, and other rights including but not limited to
registration rights made or granted to or for the benefit of the Subscribers are
hereby also made by and granted to the Broker in respect of the Broker's
Warrants.

                  (c) Legal Fees. The Company shall pay to Grushko & Mittman,
P.C., a fee of $25,000 ("Legal Fees") of which $5,000 has already been paid, as
reimbursement for services rendered to the Subscribers in connection with this
Agreement and the purchase and sale of the Notes and Warrants (the "Offering")
and acting as Escrow Agent for the Offering. The Legal Fees will be payable on
the Closing Date out of funds held pursuant to the Escrow Agreement.

            9. Covenants of the Company. The Company covenants and agrees with
the Subscribers as follows:

                  (a) Stop Orders. The Company will advise the Subscribers,
promptly after it receives notice of issuance by the Commission, any state
securities commission or any other regulatory authority of any stop order or of
any order preventing or suspending any offering of any securities of the
Company, or of the suspension of the qualification of the Common Stock of the
Company for offering or sale in any jurisdiction, or the initiation of any
proceeding for any such purpose.

                  (b) Listing. The Company shall promptly secure the listing of
the shares of Common Stock and the Warrant Shares upon each national securities
exchange, or automated quotation system upon which they are or become eligible
for listing (subject to official notice of issuance) and shall maintain such
listing so long as any Warrants are outstanding. The Company will maintain the
listing of its Common Stock on the American Stock Exchange, Nasdaq SmallCap
Market, Nasdaq National Market System, Bulletin Board, or New York Stock
Exchange (whichever of the foregoing is at the time the principal trading
exchange or market for the Common Stock (the "Principal Market")), and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market, as applicable.
The Company will provide the Subscribers copies of all notices it receives
notifying the Company of the threatened and actual delisting of the Common Stock
from any Principal Market. As of the date of this Agreement and the Closing
Date, the Bulletin Board is and will be the Principal Market.

                  (c) Market Regulations. The Company shall notify the
Commission, the Principal Market and applicable state authorities, in accordance
with their requirements, of the transactions contemplated by this Agreement, and
shall take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Securities to the Subscribers and promptly provide copies
thereof to Subscriber.

                                       12
<PAGE>

                  (d) Reporting Requirements. From the date of this Agreement
and until the sooner of (i) two (2) years after the Closing Date, or (ii) until
all the Shares and Warrant Shares have been resold or transferred by all the
Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitation, the Company will (v) cause its Common Stock
to continue to be registered under Section 12(b) or 12(g) of the 1934 Act, (x)
comply in all respects with its reporting and filing obligations under the 1934
Act, (y) comply with all reporting requirements that are applicable to an issuer
with a class of shares registered pursuant to Section 12(b) or 12(g) of the 1934
Act, as applicable, and (z) comply with all requirements related to any
registration statement filed pursuant to this Agreement. The Company will use
its best efforts not to take any action or file any document (whether or not
permitted by the 1933 Act or the 1934 Act or the rules thereunder) to terminate
or suspend such registration or to terminate or suspend its reporting and filing
obligations under said acts until two (2) years after the Closing Date. Until
the earlier of the resale of the Common Stock and the Warrant Shares by each
Subscriber or at least two (2) years after the Warrants have been exercised, the
Company will use its best efforts to continue the listing or quotation of the
Common Stock on the Principal Market or other market with the reasonable consent
of Subscribers holding a majority of the Shares and Warrant Shares, and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market. The Company
agrees to timely file a Form D with respect to the Securities if required under
Regulation D and to provide a copy thereof to each Subscriber promptly after
such filing.

                  (e) Use of Proceeds. The Company undertakes to use the
proceeds of the Subscribers' funds for the purposes set forth on Schedule 9(e)
hereto. A deviation from the use of proceeds set forth on Schedule 9(e) of more
than 10% per item or more than 20% in the aggregate shall be deemed a material
breach of the Company's obligations hereunder. Except as set forth on Schedule
9(e), the Purchase Price may not and will not be used for accrued and unpaid
officer and director salaries, payment of financing related debt, redemption of
outstanding redeemable notes or equity instruments of the Company nor non-trade
obligations outstanding on the Closing Date.

                  (f) Reservation. Prior to the Closing Date, the Company
undertakes to and through June 4, 2004, the Company shall reserve, pro rata, on
behalf of each holder of a Note or Warrant, from its authorized but unissued
common stock, a number of common shares equal to 100% of the amount of Common
Stock necessary to allow each holder of a Note to be able to convert all such
outstanding Notes, and reserve the amount of Warrant Shares issuable upon
exercise of the A Warrants. From and after June 5, 2004, the Company undertakes
to reserve, pro rata, on behalf of each holder of a Note or Warrant, from its
authorized but unissued common stock, a number of common shares equal to 120% of
the amount of Common Stock necessary to allow each holder of a Note to be able
to convert all such outstanding Notes and interest and reserve the amount of
Warrant Shares issuable upon exercise of the A Warrants and B Warrants. Subject
to obtaining the Approval, the Company undertakes to reserve, pro rata, on
behalf of each Subscriber and holder of a Warrant, from its authorized but
unissued common stock, a number of common shares equal to the amount of Warrant
Shares issuable upon exercise of the B Warrants, not later than ten days after
the Approval is obtained. Failure to have sufficient shares reserved pursuant to
this Section 9(f) for three (3) consecutive business days or ten (10) days in
the aggregate shall be a material default of the Company's obligations under
this Agreement.

                  (g) Taxes. From the date of this Agreement and until the
sooner of (i) two (2) years after the Closing Date, or (ii) until all the Shares
and Warrant Shares have been resold or transferred by all the Subscribers
pursuant to the Registration Statement or pursuant to Rule 144, without regard
to volume limitations, the Company will promptly pay and discharge, or cause to
be paid and discharged, when due and payable, all lawful taxes, assessments and
governmental charges or levies imposed upon the income, profits, property or
business of the Company; provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if the Company shall have
set aside on its books adequate reserves with respect thereto, and provided,
further, that the Company will pay all such taxes, assessments, charges or
levies forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefore.

                                       13
<PAGE>

                  (h) Insurance. From the date of this Agreement and until the
sooner of (i) two (2) years after the Closing Date, or (ii) until all the Shares
and Warrant Shares have been resold or transferred by all the Subscribers
pursuant to the Registration Statement or pursuant to Rule 144, without regard
to volume limitations, the Company will keep its assets which are of an
insurable character insured by financially sound and reputable insurers against
loss or damage by fire, explosion and other risks customarily insured against by
companies in the Company's line of business, in amounts sufficient to prevent
the Company from becoming a co-insurer and not in any event less than one
hundred percent (100%) of the insurable value of the property insured; and the
Company will maintain, with financially sound and reputable insurers, insurance
against other hazards and risks and liability to persons and property to the
extent and in the manner customary for companies in similar businesses similarly
situated and to the extent available on commercially reasonable terms.

                  (i) Books and Records. From the date of this Agreement and
until the sooner of (i) two (2) years after the Closing Date, or (ii) until all
the Shares and Warrant Shares have been resold or transferred by all the
Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitations, the Company will keep true records and
books of account in which full, true and correct entries will be made of all
dealings or transactions in relation to its business and affairs in accordance
with generally accepted accounting principles applied on a consistent basis.

                  (j) Governmental Authorities. From the date of this Agreement
and until the sooner of (i) two (2) years after the Closing Date, or (ii) until
all the Shares and Warrant Shares have been resold or transferred by all the
Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitations, the Company shall duly observe and conform
in all material respects to all valid requirements of governmental authorities
relating to the conduct of its business or to its properties or assets.

                  (k) Intellectual Property. From the date of this Agreement and
until the sooner of (i) two (2) years after the Closing Date, or (ii) until all
the Shares and Warrant Shares have been resold or transferred by all the
Subscribers pursuant to the Registration Statement or pursuant to Rule 144,
without regard to volume limitations, the Company shall maintain in full force
and effect its corporate existence, rights and franchises and all licenses and
other rights to use intellectual property owned or possessed by it and
reasonably deemed to be necessary to the conduct of its business.

                  (l) Properties. From the date of this Agreement and until the
sooner of (i) two (2) years after the Closing Date, or (ii) until all the Shares
and Warrant Shares have been resold or transferred by all the Subscribers
pursuant to the Registration Statement or pursuant to Rule 144, without regard
to volume limitation, the Company will keep its properties in good repair,
working order and condition, reasonable wear and tear excepted, and from time to
time make all necessary and proper repairs, renewals, replacements, additions
and improvements thereto; and the Company will at all times comply with each
provision of all leases to which it is a party or under which it occupies
property if the breach of such provision could reasonably be expected to have a
material adverse effect.

                                       14
<PAGE>

                  (m) Confidentiality/Public Announcement. From the date of this
Agreement and until the sooner of (i) two (2) years after the Closing Date, or
(ii) until all the Shares and Warrant Shares have been resold or transferred by
all the Subscribers pursuant to the Registration Statement or pursuant to Rule
144, without regard to volume limitations, the Company agrees that except in
connection with a Form 8-K or the Registration Statement, it will not disclose
publicly or privately the identity of the Subscribers unless expressly agreed to
in writing by a Subscriber or only to the extent required by law and then only
upon two days prior notice to Subscriber. In any event and subject to the
foregoing, the Company undertakes to file a Form 8-K or make a public
announcement describing the Offering not later than the second business day
after the Closing Date. In the Form 8-K or public announcement, the Company will
specifically disclose the amount of common stock outstanding immediately after
the Closing.

                  (n) Further Registration Statements. Except for a registration
statement filed on behalf of the Subscribers pursuant to Section 11 of this
Agreement or in connection with the securities identified on Schedule 11.1
hereto, the Company will not file any registration statements, including but not
limited to Form S-8, with the Commission or with state regulatory authorities
without the consent of the Subscriber until ninety (90) days after the actual
effective date of the registration statement described in Section 11.1(iv) of
this Agreement ("Actual Effective Date") during which such Registration
Statement shall be current and available for use in connection with the public
resale of the Shares and Warrant Shares ("Exclusion Period").

                  (o) Blackout. The Company undertakes and covenants that until
the first to occur of (i) the end of the Exclusion Period, or (ii) until all the
Shares and Warrant Shares have been resold pursuant to such registration
statement, the Company will not enter into any acquisition, merger, exchange or
sale or other transaction that could have the effect of delaying the
effectiveness of any pending registration statement or causing an already
effective registration statement to no longer be effective or current for a
period of ten (10) or more days.

                  (p) Non-Public Information. The Company covenants and agrees
that neither it nor any other Person acting on its behalf will provide any
Subscriber or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto such
Subscriber shall have agreed in writing to receive such information. The Company
understands and confirms that each Subscriber shall be relying on the foregoing
representations in effecting transactions in securities of the Company.

            10. Covenants of the Company and Subscriber Regarding
Indemnification.

                  (a) The Company agrees to indemnify, hold harmless, reimburse
and defend the Subscribers, the Subscribers' officers, directors, agents,
affiliates, control persons, and principal shareholders, against any claim,
cost, expense, liability, obligation, loss or damage (including reasonable legal
fees) of any nature, incurred by or imposed upon the Subscriber or any such
person which results, arises out of or is based upon (i) any material
misrepresentation by Company or breach of any warranty by Company in this
Agreement or in any Exhibits or Schedules attached hereto, or other agreement
delivered pursuant hereto; or (ii) after any applicable notice and/or cure
periods, any breach or default in performance by the Company of any covenant or
undertaking to be performed by the Company hereunder, or any other agreement
entered into by the Company and Subscriber relating hereto.

                  (b) Each Subscriber agrees to indemnify, hold harmless,
reimburse and defend the Company and each of the Company's officers, directors,
agents, affiliates, control persons against any claim, cost, expense, liability,
obligation, loss or damage (including reasonable legal fees) of any nature,
incurred by or imposed upon the Company or any such person which results, arises
out of or is based upon (i) any material misrepresentation by such Subscriber in
this Agreement or in any Exhibits or Schedules attached hereto, or other
agreement delivered pursuant hereto; or (ii) after any applicable notice and/or
cure periods, any breach or default in performance by such Subscriber of any
covenant or undertaking to be performed by such Subscriber hereunder, or any
other agreement entered into by the Company and Subscribers, relating hereto.

                  (c) In no event shall the liability of any Subscriber or
permitted successor hereunder or under any other agreement delivered in
connection herewith be greater in amount than the dollar amount of the net
proceeds actually received by such Subscriber upon the sale of Registrable
Securities (as defined herein).

                  (d) The procedures set forth in Section 11.6 shall apply to
the indemnifications set forth in Sections 10(a) and 10(b) above.

                                       15
<PAGE>

            11.1. Registration Rights. The Company hereby grants the following
registration rights to holders of the Securities.

                  (i) On one occasion, for a period commencing one hundred
twenty-one (121) days after the Closing Date, but not later than two (2) years
after the Closing Date ("Request Date"), upon a written request therefor from
any record holder or holders of more than 50% of the Shares issued and issuable
upon conversion of the Notes and Warrant Shares actually issued upon exercise of
the Warrants, the Company shall prepare and file with the Commission a
registration statement under the 1933 Act registering the Shares and Warrant
Shares including Warrant Shares issuable upon exercise of the Broker's Warrants
(collectively "Registrable Securities") which are the subject of such request
for unrestricted public resale by the holder thereof. For purposes of Sections
11.1(i) and 11.1(ii), Registrable Securities shall not include Securities which
are registered for resale in an effective registration statement or included for
registration in a pending registration statement, or which have been issued
without further transfer restrictions after a sale or transfer pursuant to Rule
144 under the 1933 Act. Upon the receipt of such request, the Company shall
promptly give written notice to all other record holders of the Registrable
Securities that such registration statement is to be filed and shall include in
such registration statement Registrable Securities for which it has received
written requests within ten (10) days after the Company gives such written
notice. Such other requesting record holders shall be deemed to have exercised
their demand registration right under this Section 11.1(i).

                  (ii) If the Company at any time proposes to register any of
its securities under the 1933 Act for sale to the public, whether for its own
account or for the account of other security holders or both, except with
respect to registration statements on Forms S-4, S-8 or another form not
available for registering the Registrable Securities for sale to the public,
provided the Registrable Securities are not otherwise registered for resale by
the Subscribers or Holder pursuant to an effective registration statement, each
such time it will give at least fifteen (15) days' prior written notice to the
record holder of the Registrable Securities of its intention so to do. Upon the
written request of the holder, received by the Company within ten (10) days
after the giving of any such notice by the Company, to register any of the
Registrable Securities not previously registered, the Company will cause such
Registrable Securities as to which registration shall have been so requested to
be included with the securities to be covered by the registration statement
proposed to be filed by the Company, all to the extent required to permit the
sale or other disposition of the Registrable Securities so registered by the
holder of such Registrable Securities (the "Seller" or "Sellers"). In the event
that any registration pursuant to this Section 11.1(ii) shall be, in whole or in
part, an underwritten public offering of common stock of the Company, the number
of shares of Registrable Securities to be included in such an underwriting may
be reduced by the managing underwriter if and to the extent that the Company and
the underwriter shall reasonably be of the opinion that such inclusion would
adversely affect the marketing of the securities to be sold by the Company
therein; provided, however, that the Company shall notify the Seller in writing
of any such reduction. Notwithstanding the foregoing provisions, or Section 11.4
hereof, the Company may withdraw or delay or suffer a delay of any registration
statement referred to in this Section 11.1(ii) without thereby incurring any
liability to the Seller.

                                       16
<PAGE>

                  (iii) If, at the time any written request for registration is
received by the Company pursuant to Section 11.1(i), the Company has determined
to proceed with the actual preparation and filing of a registration statement
under the 1933 Act in connection with the proposed offer and sale for cash of
any of its securities for the Company's own account and the Company actually
does file such other registration statement, such written request shall be
deemed to have been given pursuant to Section 11.1(ii) rather than Section
11.1(i), and the rights of the holders of Registrable Securities covered by such
written request shall be governed by Section 11.1(ii).

                  (iv) The Company shall file with the Commission not later than
thirty (30) days after the Closing Date (the "Filing Date"), and cause to be
declared effective within one hundred and twenty (120) days after the Closing
Date (the "Effective Date"), a Form SB-2 registration statement (the
"Registration Statement") (or such other form that it is eligible to use) in
order to register the Registrable Securities for resale and distribution under
the 1933 Act. The Company will register not less than a number of shares of
common stock in the aforedescribed registration statement that is equal to 120%
of the Shares issuable upon conversion of the Notes and all of the Warrant
Shares issuable pursuant to this Agreement. The Registrable Securities shall be
reserved and set aside exclusively for the benefit of each Subscriber and
Warrant holder, pro rata, and not issued, employed or reserved for anyone other
than each such Subscriber and Warrant holder. The Registration Statement will
immediately be amended or additional registration statements will be immediately
filed by the Company as necessary to register additional shares of Common Stock
to allow the public resale of all Common Stock included in and issuable by
virtue of the Registrable Securities. Without the written consent of the
Subscriber, no securities of the Company other than the Registrable Securities
will be included in the Registration Statement except as disclosed on Schedule
11.1. It shall be deemed a Non-Registration Event if at any time after the
Effective Date the Company has registered for unrestricted resale on behalf of
the Subscriber fewer than 120% of the amount of Common Shares issuable upon full
conversion of all sums due under the Notes and 100% of the Warrant Shares
issuable upon exercise of the Warrants.

            11.2. Registration Procedures. If and whenever the Company is
required by the provisions of Section 11.1(i), 11.1(ii), or (iv) to effect the
registration of any Registrable Securities under the 1933 Act, the Company will,
as expeditiously as possible:

                  (a) subject to the timelines provided in this Agreement,
prepare and file with the Commission a registration statement required by
Section 11, with respect to such securities and use its best efforts to cause
such registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as herein provided), and promptly
provide to the holders of the Registrable Securities copies of all filings and
Commission letters of comment and notify Subscribers and Grushko & Mittman, P.C.
within twenty-four (24) hours of (i) notice that the Commission has no (further)
comments on the Registration Statement, and (ii) the declaration of
effectiveness of the registration statement;

                  (b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
until such registration statement has been effective for a period of two (2)
years, and comply with the provisions of the 1933 Act with respect to the
disposition of all of the Registrable Securities covered by such registration
statement in accordance with the Sellers' intended method of disposition set
forth in such registration statement for such period;

                                       17
<PAGE>

                  (c) furnish to the Sellers, at the Company's expense, such
number of copies of the registration statement and the prospectus included
therein (including each preliminary prospectus) as such persons reasonably may
request in order to facilitate the public sale or their disposition of the
securities covered by such registration statement;

                  (d) use its best efforts to register or qualify the Sellers'
Registrable Securities covered by such registration statement under the
securities or "blue sky" laws of such jurisdictions as the Sellers shall request
in writing, provided, however, that the Company shall not for any such purpose
be required to qualify generally to transact business as a foreign corporation
in any jurisdiction where it is not so qualified or to consent to general
service of process in any such jurisdiction;

                  (e) if applicable, list the Registrable Securities covered by
such registration statement with any securities exchange on which the Common
Stock of the Company is then listed;

                  (f) immediately notify the Sellers when a prospectus relating
thereto is required to be delivered under the 1933 Act, of the happening of any
event of which the Company has knowledge as a result of which the prospectus
contained in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing; and

                  (g) provided same would not be in violation of the provision
of Regulation FD under the 1934 Act, make available for inspection by the
Sellers, and any attorney, accountant or other agent retained by the Seller or
underwriter, all publicly available, non-confidential financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply all publicly
available, non-confidential information reasonably requested by the seller,
attorney, accountant or agent in connection with such registration statement.

            11.3. Provision of Documents. In connection with each registration
described in this Section 11, each Seller will furnish to the Company in writing
such information and representation letters with respect to itself and the
proposed distribution by it as reasonably shall be necessary in order to assure
compliance with federal and applicable state securities laws.

            11.4. Non-Registration Events. The Company and the Subscribers agree
that the Sellers will suffer damages if the Registration Statement is not filed
by the Filing Date and not declared effective by the Commission by the Effective
Date, and any registration statement required under Section 11.1(i) or 11.1(ii)
is not filed within 60 days after written request and declared effective by the
Commission within 120 days after such request, and maintained in the manner and
within the time periods contemplated by Section 11 hereof, and it would not be
feasible to ascertain the extent of such damages with precision. Accordingly, if
(i) the Registration Statement is not filed on or before the Filing Date or is
not declared effective on or before the sooner of the Effective Date, or within
three (3) business days of receipt by the Company of a written or oral
communication from the Commission that the Registration Statement will not be
reviewed or that the Commission has no further comments, (ii) if the
registration statement described in Sections 11.1(i) or 11.1(ii) is not filed
within 60 days after such written request, or is not declared effective within
120 days after such written request, or (iii) any registration statement
described in Sections 11.1(i), 11.1(ii) or 11.1(iv) is filed and declared
effective but shall thereafter cease to be effective (without being succeeded
within ten (10) business days by an effective replacement or amended
registration statement) for a period of time which shall exceed 30 days in the
aggregate per year (defined as a period of 365 days commencing on the date the
Registration Statement is declared effective) or more than 20 consecutive days
(each such event referred to in clauses (i), (ii) and (iii) of this Section 11.4
is referred to herein as a "Non-Registration Event"), then the Company shall
deliver to the holder of Registrable Securities, as Liquidated Damages, an
amount equal to two percent (2%) for each thirty days or part thereof of the
Purchase Price of the Notes remaining unconverted and purchase price of Shares
issued upon conversion of the Notes owned of record by such holder as of and
during the pendency of such Non-Registration Event which are subject to such
Non-Registration Event. The maximum aggregate amount of Liquidated Damages
payable in connection with a Non-Registration Event shall be eight percent (8%)
of the Purchase Price. The Company must pay the Liquidated Damages in cash
within ten (10) days after the end of each thirty (30) day period or shorter
part thereof for which Liquidated Damages are payable. In the event a
Registration Statement is filed by the Filing Date but is withdrawn prior to
being declared effective by the Commission, then such Registration Statement
will be deemed to have not been filed.

                                       18
<PAGE>

            11.5. Expenses. All expenses incurred by the Company in complying
with Section 11, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including reasonable
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, fees of the National Association of Securities Dealers, Inc.,
transfer taxes, fees of transfer agents and registrars, costs of insurance and
fee of one counsel for all Sellers (in an amount not to exceed $5,000) are
called "Registration Expenses." All underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, including any fees
and disbursements of any additional counsel to the Seller, are called "Selling
Expenses." The Company will pay all Registration Expenses in connection with the
registration statement under Section 11. Selling Expenses in connection with
each registration statement under Section 11 shall be borne by the Seller and
may be apportioned among the Sellers in proportion to the number of shares sold
by the Seller relative to the number of shares sold under such registration
statement or as all Sellers thereunder may agree.

            11.6. Indemnification and Contribution.

                  (a) In the event of a registration of any Registrable
Securities under the 1933 Act pursuant to Section 11, the Company will, to the
extent permitted by law, indemnify and hold harmless the Seller, each officer of
the Seller, each director of the Seller, each underwriter of such Registrable
Securities thereunder and each other person, if any, who controls such Seller or
underwriter within the meaning of the 1933 Act, against any losses, claims,
damages or liabilities, joint or several, to which the Seller, or such
underwriter or controlling person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Registrable Securities was registered under the 1933 Act
pursuant to Section 11, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
in light of the circumstances when made, and will subject to the provisions of
Section 11.6(c) reimburse the Seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable to
the Seller to the extent that any such damages arise out of or are based upon an
untrue statement or omission made in any preliminary prospectus if (i) the
Seller failed to send or deliver a copy of the final prospectus delivered by the
Company to the Seller with or prior to the delivery of written confirmation of
the sale by the Seller to the person asserting the claim from which such damages
arise, (ii) the final prospectus would have corrected such untrue statement or
alleged untrue statement or such omission or alleged omission, or (iii) to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by any such Seller, or
any such controlling person in writing specifically for use in such registration
statement or prospectus.

                                       19
<PAGE>

                  (b) In the event of a registration of any of the Registrable
Securities under the 1933 Act pursuant to Section 11, each Seller severally but
not jointly will, to the extent permitted by law, indemnify and hold harmless
the Company, and each person, if any, who controls the Company within the
meaning of the 1933 Act, each officer of the Company who signs the registration
statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of the 1933 Act, against all losses,
claims, damages or liabilities, joint or several, to which the Company or such
officer, director, underwriter or controlling person may become subject under
the 1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the registration statement under which such Registrable Securities were
registered under the 1933 Act pursuant to Section 11, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and each such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
that the Seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
such Seller, as such, furnished in writing to the Company by such Seller
specifically for use in such registration statement or prospectus, and provided,
further, however, that the liability of the Seller hereunder shall be limited to
the net proceeds actually received by the Seller from the sale of Registrable
Securities covered by such registration statement.

                  (c) Promptly after receipt by an indemnified party hereunder
of notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 11.6(c) and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 11.6(c), except and only if and to the extent the indemnifying
party is prejudiced by such omission. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Section 11.6(c) for any legal expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected, provided, however, that, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified parties, as a group, shall have the right to select one
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the reasonable expenses and fees of such
separate counsel and other expenses related to such participation to be
reimbursed by the indemnifying party as incurred.

                                       20
<PAGE>

                  (d) In order to provide for just and equitable contribution in
the event of joint liability under the 1933 Act in any case in which either (i)
a Seller, or any controlling person of a Seller, makes a claim for
indemnification pursuant to this Section 11.6 but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case notwithstanding the
fact that this Section 11.6 provides for indemnification in such case, or (ii)
contribution under the 1933 Act may be required on the part of the Seller or
controlling person of the Seller in circumstances for which indemnification is
not provided under this Section 11.6; then, and in each such case, the Company
and the Seller will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that the Seller is responsible only for the portion
represented by the percentage that the public offering price of its securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, provided, however, that, in
any such case, (y) the Seller will not be required to contribute any amount in
excess of the public offering price of all such securities offered by it
pursuant to such registration statement; and (z) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 10(f) of the 1933
Act) will be entitled to contribution from any person or entity who was not
guilty of such fraudulent misrepresentation.

            11.7. Delivery of Unlegended Shares.

                  (a) Within five (5) business days (such fifth (5th) business
day being the "Unlegended Shares Delivery Date") after the business day on which
the Company has received (i) a notice that Registrable Securities have been sold
either pursuant to the Registration Statement or Rule 144 under the 1933 Act,
(ii) a representation that the prospectus delivery requirements, or the
requirements of Rule 144, as applicable, have been satisfied, and (iii) the
original share certificates representing the shares of Common Stock that have
been sold, and (iv) in the case of sales under Rule 144, customary
representation letters of the Subscriber and/or Subscriber's broker regarding
compliance with the requirements of Rule 144, the Company at its expense, (y)
shall deliver, and shall cause legal counsel selected by the Company to deliver,
to its transfer agent (with copies to Subscriber) an appropriate instruction and
opinion of such counsel, directing the delivery of shares of Common Stock
without any legends including the legends set forth in Sections 4(e) and 4(f)
above, issuable pursuant to any effective and current Registration Statement
described in Section 11 of this Agreement or pursuant to Rule 144 under the 1933
Act (the "Unlegended Shares"); and (z) cause the transmission of the
certificates representing the Unlegended Shares together with a legended
certificate representing the balance of the unsold shares of Common Stock, if
any, to the Subscriber at the address specified in the notice of sale, via
express courier, by electronic transfer or otherwise on or before the Unlegended
Shares Delivery Date. Transfer fees shall be the responsibility of the Seller.

                  (b) In lieu of delivering physical certificates representing
the Unlegended Shares, if the Company's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program,
upon request of a Subscriber, so long as the certificates therefor do not bear a
legend and the Subscriber is not obligated to return such certificate for the
placement of a legend thereon, the Company shall cause its transfer agent to
electronically transmit the Unlegended Shares by crediting the account of
Subscriber's prime Broker with DTC through its Deposit Withdrawal Agent
Commission system. Such delivery must be made on or before the Unlegended Shares
Delivery Date.

                  (c) The Company understands that a delay in the delivery of
the Unlegended Shares pursuant to Section 11 hereof later than two business days
after the Unlegended Shares Delivery Date could result in economic loss to a
Subscriber. As compensation to a Subscriber for such loss, the Company agrees to
pay late payment fees (as liquidated damages and not as a penalty) to the
Subscriber for late delivery of Unlegended Shares in the amount of $100 per
business day after the Delivery Date for each $10,000 of purchase price of the
Unlegended Shares subject to the delivery default. If during any 360 day period,
the Company fails to deliver Unlegended Shares as required by this Section 11.7
for an aggregate of thirty (30) days, then each Subscriber or assignee holding
Securities subject to such default may, at its option, require the Company to
redeem all or any portion of the Shares and Warrant Shares subject to such
default at a price per share equal to 130% of the Purchase Price of such Common
Stock and Warrant Shares. Upon payment of the aforementioned redemption amount,
the Company shall receive a credit against the daily liquidated damages actually
paid or accrued under this Section 11.7 (c) for the thirty days prior to actual
receipt by the Subscriber of the redemption payment. The Company shall pay any
payments incurred under this Section in immediately available funds upon demand.

                                       21
<PAGE>

                  (d)In addition to any other rights available to a Subscriber,
if the Company fails to deliver to a Subscriber Unlegended Shares as required
pursuant to this Agreement, within seven (7) business days after the Unlegended
Shares Delivery Date and the Subscriber purchases (in an open market transaction
or otherwise) shares of common stock to deliver in satisfaction of a sale by
such Subscriber of the shares of Common Stock which the Subscriber was entitled
to receive from the Company (a "Buy-In"), then the Company shall pay in cash to
the Subscriber (in addition to any remedies available to or elected by the
Subscriber) the amount by which (A) the Subscriber's total purchase price
(including brokerage commissions, if any) for the shares of common stock so
purchased exceeds (B) the aggregate purchase price of the shares of Common Stock
delivered to the Company for reissuance as Unlegended Shares, together with
interest thereon at a rate of 15% per annum, accruing until such amount and any
accrued interest thereon is paid in full (which amount shall be paid as
liquidated damages and not as a penalty). For example, if a Subscriber purchases
shares of Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to $10,000 of purchase price of shares of Common Stock
delivered to the Company for reissuance as Unlegended Shares, the Company shall
be required to pay the Subscriber $1,000, plus interest. The Subscriber shall
provide the Company written notice indicating the amounts payable to the
Subscriber in respect of the Buy-In.

                  (e) In the event a Subscriber shall request delivery of
Unlegended Shares as described in Section 11.7(e) and the Company is required to
deliver such Unlegended Shares pursuant to Section 11.7(e), the Company may not
refuse to deliver Unlegended Shares based on any claim that such Subscriber or
any one associated or affiliated with such Subscriber has been engaged in any
violation of law, or for any other reason, unless, an injunction or temporary
restraining order from a court, on notice, restraining and or enjoining delivery
of such Unlegended Shares or exercise of all or part of said Warrant shall have
been sought and obtained and the Company has posted a surety bond for the
benefit of such Subscriber in the amount of 130% of the amount of the aggregate
purchase price of the Common Stock and Warrant Shares which are subject to the
injunction or temporary restraining order, which bond shall remain in effect
until the completion of arbitration/litigation of the dispute and the proceeds
of which shall be payable to such Subscriber to the extent Subscriber obtains
judgment in Subscriber's favor.

            12. (a) Right of First Refusal. Until one year after the Closing
Date, the Subscribers shall be given not less than seven (7) business days prior
written notice of any proposed sale by the Company of its common stock or other
securities or debt obligations, except in connection with (i) employee stock
options or compensation plans, (ii) as full or partial consideration in
connection with any merger, consolidation or purchase of substantially all of
the securities or assets of any corporation or other entity, or (iii) as has
been described in the Reports or Other Written Information filed with the
Commission or delivered to the Subscribers prior to the Closing Date
(collectively "Excepted Issuances"). The Subscribers who exercise their rights
pursuant to this Section 12(a) shall have the right during the seven (7)
business days following receipt of the notice to purchase all of such offered
common stock, debt or other securities in accordance with the terms and
conditions set forth in the notice of sale in the same proportion to each other
as their purchase of Notes in the Offering. In the event such terms and
conditions are modified during the notice period, the Subscribers shall be given
prompt notice of such modification and shall have the right during the original
notice period or for a period of seven (7) business days following the notice of
modification, whichever is longer, to exercise such right.

                                       22
<PAGE>

                  (b) Offering Restrictions. Until the Actual Effective Date,
except in connection with the Excepted Issuances, or the unsold portion of the
Offering, the Company will not enter into any agreement to, nor issue any
equity, convertible debt or other securities convertible into common stock
without the prior written consent of the Subscribers, which consent may be
withheld for any reason.

                  (c) Favored Nations Provision. Other than the Excepted
Issuances, if at any time until one year after the Actual Effective Date, if the
Company shall offer, issue or agree to issue any common stock or securities
convertible into or exercisable for shares of common stock (or modify any of the
foregoing which may be outstanding at any time prior to the Closing Date) to any
person or entity at a price per share or conversion or exercise price per share
which shall be less than the Conversion Price, without the consent of each
Subscriber holding Notes and/or Shares, then the Company shall issue, for each
such occasion, additional shares of Common Stock to each Subscriber so that the
average per share purchase price of the shares of Common Stock issued to the
Subscriber (of only the Common Stock or Warrant Shares still owned by the
Subscriber) is equal to such other lower price per share and the Conversion
Price shall be reduced to such other lower price per share. The delivery to the
Subscriber of the additional shares of Common Stock shall be not later than the
closing date of the transaction giving rise to the requirement to issue
additional shares of Common Stock. The Subscriber is granted the registration
rights described in Section 11 hereof in relation to such additional shares of
Common Stock except that the Filing Date and Effective Date vis-a-vis such
additional common shares shall be, respectively, the sixtieth (60th) and one
hundred and twentieth (120th) date after the closing date giving rise to the
requirement to issue the additional shares of Common Stock. For purposes of the
issuance and adjustment described in this paragraph, the issuance of any
security of the Company carrying the right to convert such security into shares
of Common Stock or of any warrant, right or option to purchase Common Stock
shall result in the issuance of the additional shares of Common Stock upon the
issuance of such convertible security, warrant, right or option and again upon
any subsequent issuances of shares of Common Stock upon exercise of such
conversion or purchase rights if such issuance is at a price lower than the then
Conversion Price. The rights of the Subscriber set forth in this Section 12 are
in addition to any other rights the Subscriber has pursuant to this Agreement
and any other agreement referred to or entered into in connection herewith.

                  (d) Maximum Exercise of Rights. In the event the exercise of
the rights described in Sections 12(a) and 12(c) would result in the issuance of
an amount of common stock of the Company that would exceed the maximum amount
that may be issued to a Subscriber calculated in the manner described in Section
7.3 of this Agreement, then the issuance of such additional shares of common
stock of the Company to such Subscriber will be deferred in whole or in part
until such time as such Subscriber is able to beneficially own such common stock
without exceeding the maximum amount set forth calculated in the manner
described in Section 7.3 of this Agreement. The determination of when such
common stock may be issued shall be made by each Subscriber as to only such
Subscriber.

            13. Miscellaneous.

                  (a) Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Company, to: iSECUREtrac, Corp.,
5022 South 114th Street, Suite 103, Omaha, NE 68137, Attn: Thomas E. Wharton,
Jr., CEO and President, telecopier: (402) 537-9847, with a copy by telecopier
only to: John Heida, Esq., c/o iSECUREtrac, Corp., 5022 South 114th Street,
Suite 103, Omaha, NE 68137, telecopier: (402) 537-9847, (ii) if to the
Subscribers, to: the one or more addresses and telecopier numbers indicated on
the signature pages hereto, with an additional copy by telecopier only to:
Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176,
telecopier number: (212) 697-3575, and (iii) if to the Broker, to: Corpfin.com,
Inc., 555 North Point Center East, 4th Floor, Alpharetta, GA 30022, Attn: John
C. Canouse, telecopier: (678) 366-4424.

                                       23
<PAGE>

                  (b) Closing. The consummation of the transactions contemplated
herein shall take place at the offices of Grushko & Mittman, P.C., 551 Fifth
Avenue, Suite 1601, New York, New York 10176, upon the satisfaction of all
conditions to Closing set forth in this Agreement ("Closing Date").

                  (c) Entire Agreement; Assignment. This Agreement and other
documents delivered in connection herewith represent the entire agreement
between the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by both parties. Neither the Company nor the
Subscribers have relied on any representations not contained or referred to in
this Agreement and the documents delivered herewith. No right or obligation of
either party shall be assigned by that party without prior notice to and the
written consent of the other party.

                  (d) Counterparts/Execution. This Agreement may be executed in
any number of counterparts and by the different signatories hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument. This
Agreement may be executed by facsimile signature and delivered by facsimile
transmission.

                  (e) Law Governing this Agreement. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without regard to principles of conflicts of laws. Any action brought by either
party against the other concerning the transactions contemplated by this
Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York. The parties and the individuals
executing this Agreement and other agreements referred to herein or delivered in
connection herewith on behalf of the Company agree to submit to the jurisdiction
of such courts and waive trial by jury. The prevailing party shall be entitled
to recover from the other party its reasonable attorney's fees and costs. In the
event that any provision of this Agreement or any other agreement delivered in
connection herewith is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of any agreement.

                  (f) Specific Enforcement, Consent to Jurisdiction. The Company
and Subscriber acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof, this being in addition
to any other remedy to which any of them may be entitled by law or equity.
Subject to Section 13(e) hereof, each of the Company, Subscriber and any
signator hereto in his personal capacity hereby waives, and agrees not to assert
in any such suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction in New York of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. Nothing in this Section shall affect or limit
any right to serve process in any other manner permitted by law.

                                       24
<PAGE>

                  (g) Independent Nature of Subscribers. The Company
acknowledges that the obligations of each Subscriber under the Transaction
Documents are several and not joint with the obligations of any other
Subscriber, and no Subscriber shall be responsible in any way for the
performance of the obligations of any other Subscriber under the Transaction
Documents. The Company acknowledges that the decision of each Subscriber to
purchase Securities has been made by such Subscriber independently of any other
Subscriber and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company which may have been made or given by any other
Subscriber or by any agent or employee of any other Subscriber, and no
Subscriber or any of its agents or employees shall have any liability to any
Subscriber (or any other person) relating to or arising from any such
information, materials, statements or opinions. The Company acknowledges that
nothing contained in any Transaction Document, and no action taken by any
Subscriber pursuant hereto or thereto (including, but not limited to, the (i)
inclusion of a Subscriber in the SB-2 Registration Statement and (ii) review by,
and consent to, such Registration Statement by a Subscriber) shall be deemed to
constitute the Subscribers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Subscribers are in
any way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. The Company acknowledges
that each Subscriber shall be entitled to independently protect and enforce its
rights, including without limitation, the rights arising out of the Transaction
Documents, and it shall not be necessary for any other Subscriber to be joined
as an additional party in any proceeding for such purpose. The Company
acknowledges that it has elected to provide all Subscribers with the same terms
and Transaction Documents for the convenience of the Company and not because
Company was required or requested to do so by the Subscribers. The Company
acknowledges that such procedure with respect to the Transaction Documents in no
way creates a presumption that the Subscribers are in any way acting in concert
or as a group with respect to the Transaction Documents or the transactions
contemplated thereby.

                  (h) Equitable Adjustment. The Securities and the purchase
prices of Securities shall be equitably adjusted to offset the effect of stock
splits, stock dividends, and distributions of property or equity interests of
the Company to its shareholders.

                      [THIS SPACE INTENTIONALLY LEFT BLANK]

                                       25
<PAGE>

                    SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

      Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.

                                               iSECUREtrac, Corp.
                                               a Delaware corporation

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

                                               Dated: May     , 2004
                                                          ----
<TABLE>
<CAPTION>
----------------------------------------------------- --------------------------- -------------------- ---------------------
SUBSCRIBER                                            PURCHASE PRICE and          A WARRANTS           B WARRANTS
                                                      PRINCIPAL AMOUNT OF NOTE
----------------------------------------------------- --------------------------- -------------------- ---------------------
<S>                                                   <C>                         <C>                   <C>
                                                      $500,000.00
ALPHA CAPITAL AKTIENGESELLSCHAFT

Pradafant 7
9490 Furstentums
                                 Vaduz, Lichtenstein
Fax: 011-42-32323196

----------------------------------
(Signature)

----------------------------------
Print Name and Title
----------------------------------------------------- --------------------------- -------------------- ---------------------
</TABLE>

                                       26
<PAGE>

                    SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT

      Please acknowledge your acceptance of the foregoing Subscription Agreement
by signing and returning a copy to the undersigned whereupon it shall become a
binding agreement between us.

                                              iSECUREtrac, Corp.
                                              a Delaware corporation

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

                                              Dated: May     , 2004
                                                         ----

<TABLE>
<CAPTION>
----------------------------------------------------- --------------------------- -------------------- ---------------------
SUBSCRIBER                                            PURCHASE PRICE and          A WARRANTS           B WARRANTS
                                                      PRINCIPAL AMOUNT OF NOTE
----------------------------------------------------- --------------------------- -------------------- ---------------------
<S>                                                   <C>                         <C>                   <C>

</TABLE>

----------------------------------
Print Name of Subscriber

----------------------------------
(Signature)

----------------------------------
Print Name and Title

Address:___________________________
----------------------------------
Fax: ______________________________
Tax ID Number:_____________________
(if any)

                                       27
<PAGE>

                         LIST OF EXHIBITS AND SCHEDULES

Exhibit A                                Form of A Warrant

Exhibit B                                Form of B Warrant

Exhibit C                                Escrow Agreement

Exhibit D                                Form of Legal Opinion

Exhibit E                                Form of Broker's Warrant

Schedule 5(d)                            Additional Issuances

Schedule 5(m)                            Agreements  Under  Which
                                         the  Company is in Possible Default

Schedule 5(q)                            Undisclosed Liabilities

Schedule 5(s)                            Capitalization

Schedule 9(e)                            Use of Proceeds

Schedule 11.1                            Other Securities to be Registered

                                       28
<PAGE>

                      Schedule 5(d) - Additional Issuances

      Outstanding agreements or preemptive or similar rights affecting the
Company's common stock or equity and outstanding rights, warrants or options to
acquire, or instruments convertible into or exchange for, or agreements or
understandings with respect to the sale or issuance of any shares of common
stock or equity of the Company or other equity interest in any of the
subsidiaries of the Company on or about the date of Closing consists of:

Stock Options

In 2001 the Company issued options to purchase in the aggregate of 5,000,000
shares of common stock at an exercise price 85% of the average daily closing
price of common stock for the week prior to when the options were granted to the
Chairman of the Board of Directors. As of December 31, 2003, all of these
options had vested. The President was also issued options to purchase in the
aggregate of 1,000,000 shares of common stock at an exercise price 85% of the
average daily closing price of the Company's common stock for the week prior to
when the options were granted. As of December 31, 2003, all of these options had
vested. Zero and 91,000 options were exercised during the years ended 2003 and
2002.

In November 2001, the Company granted options to purchase in the aggregate of
600,000 shares of common stock at an exercise price 85% of the average daily
closing price of the common stock for the week prior to when the options were
granted to the Senior Vice President of Technology, Senior Vice President of
Sales and Marketing, and Senior Vice President of Projects and Product
Development. As of December 31, 2003, all of these options had vested.

In January 2002, the Company granted options to purchase in the aggregate of
150,000 shares of common stock at an exercise price 85% of the average daily
closing price of the common stock for the week prior to when the options were
granted to the Senior Vice President Corporate Development and General Counsel.
As of January 1, 2004, all of these options had vested.

In June 2001, the shareholders of the Company approved the 2001 Omnibus Equity
Incentive Plan. The 2001 Omnibus Equity Incentive Plan provides for the granting
of stock options and other equity incentives for up to 1,000,000 shares of the
Company's Common Stock to the Company's officers, directors, consultants or
advisers who provide services to the Company and key employees at an exercise
price 85% of the average daily closing price of the Company's common stock for
the week prior to when the options were granted. As of January 1st of each year,
commencing with the year 2002, the aggregate number of options that may be
awarded under the Plan will automatically increase by a number equal to the
lesser of 1% of the total number of Common Shares then outstanding or 200,000.
During the years ended 2003 and 2002, grants for 715,000 and 702,500 shares of
Common Stock have been made, respectively. 120,000 and 71,250 of those options
were made to the Company's directors or executive officers. Options exercised
under the Omnibus plan during the years ended December 31, 2003, and 2002, were
none and 13,333, respectively. Options forfeited for the same time periods were
182,499 and 50,417, respectively. As of December 31, 2003, 50,416 shares of
Common Stock remain available for new option grants under this plan. The options
are to vest on a monthly basis over a one month to a 36-month period of time
from the date of grant.

In February 2003, the Company granted options to purchase in the aggregate of
400,000 shares of common stock at an exercise price 85% of the daily closing
price of the common stock on the date when the options were granted to the
Senior Vice President Corporate Development and General Counsel, Chief Financial
Officer, Senior Vice President of Product and Project Development and Senior
Vice President of Technology. The options are to vest on a monthly basis over a
two year period of time which began February 3, 2003.

                                       29
<PAGE>

In August 2003, the Company granted options to purchase in the aggregate of
500,000 shares of common stock at an exercise price 85% of the daily closing
price of the common stock on the date when the options were granted to the
Senior Vice President of Sales. The options are to vest on a monthly basis over
a two year period of time which began August 4, 2003.

In August 2003, the Company granted options to purchase in the aggregate of
250,000 shares of common stock at an exercise price 85% of the daily closing
price of the common stock on the date when the options were granted to the
President of Tracking Systems Corporation. The options are to vest on a monthly
basis over a two year period of time which began August 28, 2003.

In 2003, 140,825 stock options that had previously been issued to a former
stockholder were forfeited. In 2002, 1,333,333 stock options that had previously
been issued to an employee were exercised.

A further summary about options outstanding at December 31, 2003, is as follows:

<TABLE>
<CAPTION>
                                        OPTIONS OUTSTANDING                      OPTIONS EXERCISABLE
                                        -------------------                      -------------------
                              NUMBER      WEIGHTED AVERAGE     WEIGHTED AVERAGE         NUMBER           WEIGHTED AVERAGE
RANGE OF EXERCISE PRICES   OUTSTANDING     REMAINING LIFE       EXERCISE PRICE        EXERCISABLE         EXERCISE PRICE
--------------------------------------------------------------------------------------------------------------------------
<C>                          <C>              <C>                  <C>                <C>                     <C>
$0.01 to 0.25                   71,250        2 years              $ 0.23                38,385               $0.23
$0.26 to 0.50                7,595,667        2 years                0.31             6,324,834                0.29
$0.51 to 0.75                  271,667        2 years                0.60               207,500                0.60
$0.76 to 1.00                1,096,667        2 years                0.80             1,054,861                0.80
$1.01 to 1.50                  110,000        2 years                1.35                85,417                1.35
--------------------------------------------------------------------------------------------------------------------------
Totals                       9,145,251                                                7,710,997
==========================================================================================================================
</TABLE>

During the quarter ended March 31, 2004, we granted options to purchase
2,947,750 shares of common stock to fifteen employees and one outside consultant
pursuant to their stock option agreements. The exercise prices are at 85% of
fair value of the Company's common stock and vest ratably over one month to two
years. We had 685,109 options forfeited and 157,495 options exercised during the
quarter ended March 31, 2004.

iSECUREtrac Corp., at March 31, 2004, had 11,250,397 outstanding stock options,
9,403,561 outstanding warrants, 9,125,470 shares issuable upon the conversion of
Series A Convertible Preferred Stock, 500,100 shares issuable upon the
conversion of Series B Convertible Preferred Stock, 2,000,000 shares issuable
upon conversion of a Subordinated Convertible Note and 4,950 shares issuable
upon conversion of a convertible subordinated debenture, that could potentially
dilute basic EPS in the future that were not included in the computation of
diluted EPS because to do so would have been anti-dilutive for the period
presented.

Common Stock Warrants

The Company issues warrants to stockholders and non-employees in connection with
various services these individuals provide the Company. The Company accounts for
the fair value of the warrants in accordance with SFAS No. 123.

                                       30
<PAGE>

The fair value of each warrant is estimated at the grant date using the
Black-Scholes option-pricing model with the following weighted-average
assumptions for warrants in 2003 and 2002: dividend rate of 0%; price volatility
of 94.99% and 56.82%; risk-free interest rate of 5%; and expected lives of three
years.

A summary of all warrants outstanding on July 1, 2004, is as follows:

<TABLE>
<CAPTION>
                                                                 Total
                                                                Warrants
                                        Issue      Expiration   Outstanding            Reason           Exercise
Last Name            First Name          Date         Date       7/1/2004              Issued             Price
---------            ----------          ----         ----       --------              ------             -----
<S>                  <C>                  <C>         <C>         <C>                  <C>                 <C>
Kanne                Roger             11/20/01     11/20/04     50,100                Direct Loan         $  0.998

Kanne                Roger             11/30/01     11/30/04     151,899               Direct Loan         $  0.9875

Kanne                Roger             01/03/02     01/03/05     77,429                Direct Loan         $  0.64575

Kanne                Roger             01/04/02     01/04/05     77,429                Direct Loan         $  0.64575

Kanne                Roger             01/07/02     01/07/05     77,851                Direct Loan         $  0.64225

Kanne                Roger             01/16/02     01/16/05     40,492                Direct Loan         $  0.6174

Kanne                Roger             01/27/02     01/27/05     40,038                Direct Loan         $  0.6244

Macke Partners                         02/04/02     02/04/05     236,518               Direct Loan         $  0.6342

Kanne                Roger             02/22/02     02/22/05     401,284               Direct Loan         $  0.623

GUNDYCO                                06/27/02     06/30/06     62,500                Consulting          $  1.65

Buckshot Capital (Macke)               08/07/03     08/07/08     200,000               Direct Loan         $  0.510

Herrig               Speed & Judy      08/18/03     08/18/05     20,000                Capital Lease        $  0.425

AHK Leasing, LLC                       09/01/03     09/01/06     355,114               Capital Lease        $  0.352

AHK Leasing, LLC                       09/01/03     09/01/06     217,014               Capital Lease        $  0.288

AHK Leasing, LLC                       09/01/03     09/01/06     139,509               Capital Lease        $  0.448

AHK Leasing, LLC                       09/01/03     09/01/06     97,656                Capital Lease        $  0.64

AHK Leasing, LLC                       09/01/03     09/01/06     105,574               Capital Lease        $  0.592

AHK Leasing, LLC                       09/01/03     09/01/06     111,607               Capital Lease        $  0.56

AHK Leasing, LLC                       09/01/03     09/01/06     375,000               Capital Lease        $  0.48

Altron, Inc.                           09/09/03     09/09/05     10,000                Consulting           $  1.00

Smith                Daniel            10/14/03     10/14/06     432,000               Equity Financing     $  0.60

Kanne                Roger             11/21/03     11/21/06     255,102               Direct Loan          $  0.392

Bucks Corp                             12/17/03     12/17/08     425,000              Equity Financing      $  0.48

Walker               Curt D            12/17/03     12/17/08     158,500              Equity Financing      $  0.48

John & Helen         Backlund          12/17/03     12/17/08     41,500               Equity Financing      $  0.48

Gray                 Charles & Anne    01/05/04     01/05/09     25,000               Equity Financing      $  0.48

Genack & Wixon       Ab & Kathy        01/05/04     01/05/09     38,500               Equity Financing      $  0.48

The Harner Living Trust                01/05/04     01/05/09     362,500              Equity Financing      $  0.48

Gerber 111 IRA       Joseph            01/05/04     01/05/09     87,500               Equity Financing      $  0.48

Dewitt Montgomery 111 IRA              01/05/04     01/05/09     11,500               Equity Financing      $  0.48

Mitchell             Terry             01/05/04     01/05/09     50,000               Equity Financing      $  0.48

Nancy Nita Macy Rev Trust              01/05/04     01/05/09     50,000               Equity Financing      $  0.48

Walker               Curt D            01/15/04     01/15/09     318,500              Equity Financing      $  0.48

Metolius Fund                          01/15/04     01/15/09     300,000              Equity Financing      $  0.48

Webb                 Laura             01/15/04     01/15/09     6,500                Equity Financing      $  0.48

Victor Hackenschmidt IRA               01/28/04     01/28/09     21,000               Equity Financing      $  0.48
</TABLE>

                                       31
<PAGE>

<TABLE>
<S>                  <C>                  <C>         <C>         <C>                  <C>                 <C>
Flaxel               John              01/28/04     01/28/09     27,500               Equity Financing      $  0.48

Manning              Ronald & Kelly    01/28/04     01/28/09     80,000               Equity Financing      $  0.48

Roosevelt            Christopher       01/28/04     01/28/09     25,000               Equity Financing      $  0.48

Webb                 Laura             01/28/04     01/28/09     447,500              Equity Financing      $  0.48

Montgomery           Dewitt JR         01/28/04     01/28/09     24,000               Equity Financing      $  0.48

Webb                 Laura             02/17/04     02/17/09     2,500,000            Equity Financing      $  0.48

Walker               Curt D            03/17/04     03/17/09     694,445              Equity Financing      $  0.432

Walker               Curt D            03/22/04     03/22/09     125,000              Equity Financing      $  0.432

Webb                 Laura A           05/13/04     05/13/07     300,000              Equity Financing      $  0.35

Webb                 Laura A           05/18/04     05/18/07     150,000              Equity Financing      $  0.35

Wright               Keith M.          05/18/04     05/18/07     300,000              Equity Financing      $  0.35

Chicoine             Brad              05/27/04     05/27/07     525,937              Equity Financing      $  0.37852

Herrig               Speed & Judy      05/27/04     05/27/07     172,403              Equity Financing      $  0.37852

Corpfin                                05/28/04     05/28/09     521,739              Convertible Debt      $  0.23

Alpha Capital Aktiengesellschaft       05/28/04     05/28/09     1,086,957            Convertible Debt      $  0.3698

Bristol Investment Fund, Ltd.          05/28/04     05/28/09     652,174              Convertible Debt      $  0.3698

JM Investors                           05/28/04     05/28/09     434,783              Convertible Debt      $  0.3698
|
Enable Growth Partners L.P.            05/28/04     05/28/09     217,391              Convertible Debt      $  0.3698

SRG Capital LLC                        05/28/04     05/28/09     217,391              Convertible Debt      $  0.3698

Alpha Capital Aktiengesellschaft       05/28/04     120 days     1,086,957            Convertible Debt      $  0.23

Bristol Investment Fund, Ltd.          05/28/04     120 days     652,174              Convertible Debt      $  0.23

JM Investors                           05/28/04     120 days     434,783              Convertible Debt      $  0.23

Enable Growth Partners L.P.            05/28/04     120 days     217,391              Convertible Debt      $  0.23

SRG Capital LLC                        05/28/04     120 days     217,391              Convertible Debt      $  0.23

Merriman Curhan Ford & Co              06/01/04     06/01/09     25,000               Consulting            $  0.64

Stonestreet Limited Partnership        06/30/04     06/30/09     543,478              Convertible Debt      $  0.3698

Whalehaven Funds Limited               06/30/04     06/30/09     217,391              Convertible Debt      $  0.3698

Republic Aggressive Growth, Inc.       06/30/04     06/30/09     434,783              Convertible Debt      $  0.3698

Stonestreet Limited Partnership        06/30/04     120 days     543,478              Convertible Debt      $  0.23

Whalehaven Funds Limited               06/30/04     120 days     217,391              Convertible Debt      $  0.23

Republic Aggressive Growth, Inc.       06/30/04     120 days     434,783              Convertible Debt      $  0.23

HEZA Holdings, Inc.                    06/30/04     06/30/09     239,130              Convertible Debt      $  0.23

Sonz Partners LP                       07/01/04     07/01/09     326,087              Convertible Debt      $  0.3698

Sonz Partners LP                       07/01/04     120 days     326,087              Convertible Debt      $  0.23

                                                                    19,848,640
                                                                 ==================
</TABLE>

----------

*On December 17, 2003, the Company entered into an agreement with Eugene L.
Webb, as a financial consultant, for raising from $2,000,000 to $5,000,000 in
equity capital through the sale of common stock with 100% warrant coverage. The
term of the agreement was for 90 days with a 90 day extension if the Company
raised at least $2,500,000 during that period. Under the terms of the Agreement,
the Company raised $2,400,000, by selling 5,000,000 shares of registered common
stock at $0.48 per share, through Fusion Capital Fund II, LLC (Fusion), a
Chicago-based institutional investor. Accordingly, the Company issued 5,000,000
warrants with an exercise price of $0.48 each, expiring five (5) years from the
date of issuance. The Company will have the option to redeem unexercised
warrants for a redemption price of $0.15 on 30 days notice to the warrant
holders, which it may do at any time after the common stock price closes at or
above $1.50 for ten or more consecutive trading days. The Company must provide
piggy back registration rights for the stock underlying the warrants.

                                       32
<PAGE>

Series A Convertible Preferred Stock

The Board of Directors has the authority, without any further vote or action by
the stockholders, to provide for the issuance of up to 1,000,000 shares of
Preferred Stock from time to time in one or more series with such designations,
rights, preferences and limitations as the Board of Directors may determine,
including the consideration received therefore. The Board also has the authority
to determine the number of shares comprising each series, dividend rates,
redemption provisions, liquidation preferences, sinking fund provisions,
conversion rights and voting rights without approval by the holders of Common
Stock. Although it is not possible to state the effect that any issuance of
Preferred Stock might have on the rights of holders of Common Stock, the
issuance of Preferred Stock may have one or more of the following effects: (i)
to restrict Common Stock dividends if Preferred Stock dividends have not been
paid; (ii) to dilute the voting power and equity interest of holders of Common
Stock to the extent that any Preferred Stock series has voting rights or is
convertible into Common Stock; or (iii) to prevent current holders of Common
Stock from participating in the Company's assets upon liquidation until any
liquidation preferences granted to holders of Preferred Stock are satisfied. In
addition, the issuance of Preferred Stock may, under certain circumstances, have
the effect of discouraging a change in control of the Company by, for example,
granting voting rights to holders of Preferred Stock that require approval by
the separate vote of the holders of Preferred Stock for any amendment to the
Certificate of Incorporation or any reorganization, consolidation, merger or
other similar transaction involving the Company. As a result, the issuance of
such Preferred Stock may discourage bids for the Company's Common Stock at a
premium over the market price therefore, and could have a materially adverse
effect on the market value of the Common Stock. The Board of Directors has
designated 10,000 shares of the Company's Preferred Stock as "Series A
Convertible Preferred Stock" (Series A Stock). Each share of Series A Stock is
convertible into 1,000 shares of Common Stock, subject to adjustment for stock
splits and similar events. The Series A Stock has a liquidation preference of
$1,000 per share (the "Stated Value") and a dividend preference equal to 9.5%
per annum of the Stated Value. Dividends are payable at the option of the Board
of Directors, in cash or in additional shares of Series A Stock (valued at
$1,000 per share). Holders of Series A Stock have no voting rights except with
respect to any action which (i) alters or changes the rights, preferences or
privileges of the Series A Stock materially and adversely, (ii) increases the
authorized number of shares of Series A Stock, (iii) creates any new class of
shares having preference over or being on a parity with the Series A Stock or
(iv) involves sales by the Company of a substantial portion of its assets, any
merger of the Company with another entity, or any amendment of the Company's
certificate of incorporation. The Company may redeem all or any part of the
Series A Stock at any time or from time to time. The base redemption price is
calculated as follows:

<TABLE>
<CAPTION>
REDEMPTION DATE                                                       BASE REDEMPTION PRICE
-----------------------------------------------------------------------------------------------
<S>                                                                   <C>
If prior to September 30, 2002                                        103% of Stated Value
If on or after September 30, 2002, but before September 30, 2003      102% of Stated Value
If on or after September 30, 2003, but before September 30, 2004      101% of Stated Value
After September 30, 2004                                              100% of Stated Value
</TABLE>

                                       33
<PAGE>

Holders of Series A Stock have been granted certain registration rights. The
Series A Stock is subject to mandatory conversion after September 30, 2004, at
the election of the Board of Directors.

310 shares of Series A Stock were issued in December 2002 to one company that
converted them into common shares. An additional 800 shares were converted to
common shares by Total Tech, LLC, during 2002. In 2003, 605 shares of Series A
Stock was issued to various individuals and companies that converted them into
common shares.

Series A Stockholders have received payment-in-kind dividends of $642,808 and
cash dividends of $190,000 during the year ended December 31, 2003, and
payment-in-kind dividends of $672,872 during the year ended December 31, 2002.

Series B Convertible Preferred Stock

The Board of Directors approved the Company's proposed private placement
offering of 3,500 shares of Series B Convertible Preferred Stock (Series B
Stock, $0.01 par value) as described in the Offering Memorandum dated December
1, 2002. The price per Share is $1,000 and will be paid in cash by each
subscriber at the time of subscription. Each share of Series B Stock being
offered is convertible to 1,667 shares of Common Stock. Each share so converted
would be priced at $0.60.

In 2002, 150 shares of Series B Stock were issued valued at $145,000, net of
offering costs of $5,000. During the year ended 2003, an additional 150 shares
of Series B Stock have been issued valued at $150,000.

The holders of Series B Stock will be entitled to receive cumulative, fixed-rate
dividends per annum at the following rates:

                               10.0% months 1 - 6

                                11.0% months 7-12

                               12.0% months 13-24

                               13.0% months 25-60

Dividends are payable quarterly and shall be payable in cash or in additional
shares of Series B Stock at the sole discretion of the Board of Directors. If
dividends are paid in Stock, each share shall be valued for this purpose at an
amount equal to the Original Purchase Price.

In the event of any liquidation or winding up of the Company, the holders of
Series B Stock will be entitled to receive in preference to the holders of
Common an amount equal to the Original Purchase Price plus any dividends
cumulated but not paid. A consolidation or merger of the Company, in which the
Company does not survive, or a sale of all or substantially all of its assets
shall be deemed to be a liquidation or winding up for purposes of the
liquidation preference. At any time, and from time to time prior to the
Mandatory Conversion date, the Company may call and/or retire in part or all
preferred shares outstanding. If Series B Stock is called prior to the Mandatory
Conversion date, the following premium would apply:

                                       34
<PAGE>

                        Prior to October 31, 2003 - 115%

                        Prior to October 31, 2004 - 110%

                        Prior to October 31, 2005 - 105%

At any time, and from time to time, after October 31, 2005, all or any part of
the Series B Stock may be converted into Common Stock at the then applicable
common stock equivalents, at the option of the Company. The common stock
equivalents, will be subject to adjustment to reflect any subdivisions or
combinations of Common Stock. The Series B Stock shall not be redeemable by the
holder. The holders of Series B Stock shall have no voting rights, except as
indicated herein.

Consent of the holders of at least a two-thirds majority of Series B Stock will
be required for any action which (i) alters or changes the rights, preferences
or privileges materially and adversely, (ii) increases the authorized number of
shares of Series B Stock, (iii) creates any new class of shares having
preference over or being on a parity with the Series B Stock, or (iv) involves
sale by the Company of a substantial portion of its assets, any merger of the
Company with another entity, or any amendment of the Company's certificate of
incorporation.

If the Company at any time grants, issues or sells any options, warrants,
convertible securities or rights to purchase stock pro rata to the record
holders of Common, the holders of Series B Stock shall be granted the same
rights on an as-converted basis.

                                       35
<PAGE>

Convertible Notes

On October 9, 2003, the Company borrowed $1,000,000 from Micro Capital Fund LP
(Micro Capital) under the terms of two Notes, both bearing an interest rate of
10% on the unpaid principal balance up to the scheduled maturity date of October
9, 2008. One Note, in the principal amount of $700,000 was made with Micro
Capital Fund LP, a Delaware limited partnership, and the second Note, in the
principal amount of $300,000 was made with a related entity, Micro Capital Fund,
Ltd., a Cayman Islands corporation. The entire principal and accrued interest of
the Notes are convertible into common stock at an exercise price of $0.50, upon
demand of the Note holder.

The Company may convert the Notes into its common stock upon the occurrence of
both of the following: (i) approval under the Securities Act of 1933 of a
registration statement allowing resale of the common stock underlying the Note
and (ii) the volume-weighted average price of the common stock underlying the
Note trades at or above $2.00 per share for 60 consecutive trading days.

Concurrent with execution of the Notes, the Company entered into a Registration
Rights Agreement with Micro Capital under which the Company agreed to provide
piggy back registration for 120% of the common stock underlying the Notes if it
files a registration statement with respect to any of its other securities. If
the Company has not filed a registration statement prior to October 9, 2005,
Micro Capital may demand the filing of a registration statement within 60 days
of the Company's receipt of its demand.

Other Registration Rights

On February 17, 2003, the Company entered into a Consulting Agreement with
Salzwedel Financial Communications, Inc. ("Salzwedel"), an Oregon corporation,
for investor communications and assistance in raising equity capital. Under the
terms of the Agreement, Salzwedel received 700,000 shares of unregistered common
stock. Under similar agreements prior to said Consulting Agreement, Salzwedel
received another 828,963 shares of unregistered common stock. The Company agreed
in the Consulting Agreement to provide Salzwedel with piggy back registration
rights for all unregistered stock received by Salzwedel as compensation for its
services, to be included in the next registration statement filed by the
Company. Salzwedel has agreed that it will not be included in the registration
statement to be filed by the Company on behalf of the former stockholders of
Tracking Systems Corporation (described below), but that it will be included in
the subsequent registration statement to be filed by the Company.

Required S-1 Filing

On August 12, 2003, the Company entered into a share exchange agreement with
Tracking Systems Corporation (TSC), headquartered in Harrisburg, Pennsylvania, a
privately held provider of criminal offender monitoring equipment services.
Under the terms of the agreement, the Company exchanged 4,423,077 shares its
common stock (valued at $2.3 million based upon the average of the bid and asked
prices for 20 trading days preceding the closing) for 100% of the common stock
of TSC and assumed $4,152,239 of TSC debt. The transaction was approved by the
stockholders of TSC on August 21, 2003, and was closed on August 28, 2003. TSC
is now a wholly owned subsidiary of the Company. The share exchange agreement
required the Company to register the 4,423,077 shares exchanged for the TSC
stock. The Company filed a registration statement with the SEC on Form S-4 on
November 26, 2003. In late December, the SEC notified the Company that the S-4
registration should more appropriately be refiled on Form S-1. The Company is
currently awaiting a decision on whether to include the registration of other
securities with such filing.

                                       36
<PAGE>

    Schedule 5(m) - Agreements Under Which the Company is in Possible Default

o A note payable from U.S. Bank N.A. of Omaha, Nebraska. This note calls for
monthly payments of $16,557, including interest, through March 15, 2005, when
all remaining principal and interest are due. The interest rate is a variable
rate based on the U.S. Bank N.A. Reference Rate (the "Index Rate") plus 1%. As
of June 15, 2004, the Index Rate was 4% and the outstanding loan balance was
$219,003. This loan is secured by a security interest in the Company's tangible
and intangible assets and the personal guarantees of various stockholders. The
Company has not made one payment of $16,557, due June 15, 2004, for principal
and interest.

o An unsecured note payable from Merrill Corporation resulting from the
conversion of accounts payable. This short-term note carries an interest rate of
5% and matured on March 31, 2004. As of June 15, 2004, the outstanding loan
balance was $52,210. The Company is currently negotiating a mutually acceptable
pay-off schedule.

o A 6% Promissory Note to a stock holder in the principal amount of $1,000,000
plus accrued interest, due February 29, 2004. The Company has not paid any part
of the principal and interest. No demand for payment has yet been received by
the Company.

o A 10% Promissory Note to a stock holder in the principal amount of $400,000
plus accrued interest, due February 7, 2004. The Company has not paid any part
of the principal and interest. No demand for payment has yet been received by
the Company.

o The Share Exchange Agreement between the Company and Tracking Systems
Corporation (TSC), dated August 14, 2004 (the "Share Exchange Agreement"), under
which the Company agreed to file a registration statement with the SEC for
4,423,077 shares of the Company's common stock exchanged for all outstanding
stock in TSC ("TSC Stock"). The Company filed a registration statement on Form
S-4 on November 26, 2003. The Company was notified by the SEC in December of
2003, that the proposed registration was more appropriate on Form S-1. To date,
the Company has not yet filed such registration statement for TSC Stock on Form
S-1.

o Executive Employment Agreement, dated August 28, 2003, between John A.
Sciortino, the former Chairman and CEO of TSC, and the Company, under which the
Company agreed to continue to pay Mr. Sciortino's annual salary of $170,000 in
monthly installments through August 28, 2004. Mr. Sciortino was terminated on
March 23, 2004 and has not been paid since.

o Consulting Agreement, dated September 1, 2003, between Donna Reynolds and TSC,
under which TSC, a wholly owned subsidiary of the Company, agreed to pay Ms.
Reynolds consulting fees in the amount of $4,167 per month, for certain
consulting services to be rendered, for a period of 12 months. The Company
terminated Ms. Reynold's services on April 5, 2004 and she has received no
further consulting fees.

                                       37
<PAGE>

                     Schedule 5(q) - Undisclosed Liabilities

None.

                                       38
<PAGE>

                         Schedule 5(s) - Capitalization

The current authorized capital stock of the Company is 150,000,000 shares of
common stock and 1,000,000 shares of preferred stock. As of June 11, 2004,
57,153,078 shares of common stock and 9,425.47 shares of preferred stock were
outstanding.

                                       39
<PAGE>

                         Schedule 9(e) - Use of Proceeds

The Company will use the proceeds of the Notes, in the aggregate amount between
$1,000,000 and $2,500,000 to be executed with each Subscriber to (i) pay its
accounts payables and other debt service as are necessary; (ii) fund the
manufacturing of production Model 2100 Series personal tracking units, including
the purchase of necessary transmitters and other components, (iii) working
capital to pay for general operating costs, and (v) such items and services as
are necessary to assure the quality delivery of products to the Company's
customers.

                                       40
<PAGE>

THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ISECURETRAC, CORP. THAT SUCH REGISTRATION IS NOT REQUIRED.

                                                  Right to Purchase ___________
                                                  shares of Common Stock of
                                                  iSECUREtrac, Corp. (subject to
                                                  adjustment as provided herein)

                         COMMON STOCK PURCHASE WARRANT B
No. 2004-B-MAY-001                                    Issue Date: May ___, 2004

      iSECURETRAC, CORP., a corporation organized under the laws of the State of
Delaware (the "Company"), hereby certifies that, for value received,
___________________, ___________________________________________________, Fax:
_____________, or its assigns (the "Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company at any time after the Company
obtains the Approval (as defined in Section 3(b) of the Subscription Agreement)
until 5:00 p.m., E.S.T on the one hundred and twentieth (120th) day after the
Actual Effective Date during which period a Registration Statement has been
continuously effective for the public sale of the Registrable Securities (the
"Expiration Date"), up to __________ fully paid and nonassessable shares of the
common stock of the Company (the "Common Stock"), $.001 par value per share at a
per share purchase price of $_____. The aforedescribed purchase price per share,
as adjusted from time to time as herein provided, is referred to herein as the
"Purchase Price." The number and character of such shares of Common Stock and
the Purchase Price are subject to adjustment as provided herein. The Company may
reduce the Purchase Price without the consent of the Holder. Capitalized terms
used and not otherwise defined herein shall have the meanings set forth in that
certain Subscription Agreement (the "Subscription Agreement"), dated May ___,
2004, entered into by the Company and the Holder.

      As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:

      (a) The term "Company" shall include iSECUREtrac, Corp. and any
corporation which shall succeed or assume the obligations of iSECUREtrac, Corp.
hereunder.

      (b) The term "Common Stock" includes (a) the Company's Common Stock, $.001
par value per share, as authorized on the date of the Subscription Agreement,
and (b) any other securities into which or for which any of the securities
described in (a) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.

      (c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.

                                       41
<PAGE>

      1.    Exercise of Warrant.

            1.1. Number of Shares Issuable upon Exercise. From and after the
Issue Date through and including the Expiration Date, the Holder hereof shall be
entitled to receive, upon exercise of this Warrant in whole in accordance with
the terms of subsection 1.2 or upon exercise of this Warrant in part in
accordance with subsection 1.3, shares of Common Stock of the Company, subject
to adjustment pursuant to Section 4.

            1.2. Full Exercise. This Warrant may be exercised in full by the
Holder hereof by delivery of an original or facsimile copy of the form of
subscription attached as Exhibit A hereto (the "Subscription Form") duly
executed by such Holder and surrender of the original Warrant to the Company at
its principal office or at the office of its Warrant Agent (as provided
hereinafter), accompanied by payment, in cash, wire transfer or by certified or
official bank check payable to the order of the Company, in the amount obtained
by multiplying the number of shares of Common Stock for which this Warrant is
then exercisable by the Purchase Price then in effect.

            1.3. Partial Exercise. This Warrant may be exercised in part (but
not for a fractional share) by surrender of this Warrant in the manner and at
the place provided in subsection 1.2 except that the amount payable by the
Holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of whole shares of Common Stock designated by the Holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the Holder hereof a new Warrant of like tenor, in the name of
the Holder hereof or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may request, the whole number of shares of Common
Stock for which such Warrant may still be exercised.

            1.4. Fair Market Value. Fair Market Value of a share of Common Stock
as of a particular date (the "Determination Date") shall mean:

                  (a) If the Company's Common Stock is traded on an exchange or
is quoted on the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ"), National Market System, the NASDAQ SmallCap Market or the
American Stock Exchange, LLC, then the average of the closing or last sale
price, respectively, reported for the five business days immediately preceding
the Determination Date;

                  (b) If the Company's Common Stock is not traded on an exchange
or on the NASDAQ National Market System, the NASDAQ SmallCap Market or the
American Stock Exchange, Inc., but is traded in the over-the-counter market,
then the average of the closing bid and ask prices reported for the last
business day immediately preceding the Determination Date;

                  (c) Except as provided in clause (d) below, if the Company's
Common Stock is not publicly traded, then as the Holder and the Company agree,
or in the absence of such an agreement, by arbitration in accordance with the
rules then standing of the American Arbitration Association, before a single
arbitrator to be chosen from a panel of persons qualified by education and
training to pass on the matter to be decided; or

                  (d) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation, dissolution
or winding up pursuant to the Company's charter, then all amounts to be payable
per share to holders of the Common Stock pursuant to the charter in the event of
such liquidation, dissolution or winding up, plus all other amounts to be
payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of all of the Warrants are outstanding
at the Determination Date.

                                       42
<PAGE>

            1.5. Company Acknowledgment. The Company will, at the time of the
exercise of the Warrant, upon the request of the Holder hereof acknowledge in
writing its continuing obligation to afford to such Holder any rights to which
such Holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the Holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such Holder any such rights.

            1.6. Trustee for Warrant Holders. In the event that a bank or trust
company shall have been appointed as trustee for the Holder of the Warrants
pursuant to Subsection 3.2, such bank or trust company shall have all the powers
and duties of a warrant agent (as hereinafter described) and shall accept, in
its own name for the account of the Company or such successor person as may be
entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.

         2. Delivery of Stock Certificates, etc. on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the Holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within five (5) days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Holder hereof, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct in compliance with
applicable securities laws, a certificate or certificates for the number of duly
and validly issued, fully paid and nonassessable shares of Common Stock (or
Other Securities) to which such Holder shall be entitled on such exercise,
together with any other stock or other securities and property (including cash,
where applicable) to which such Holder is entitled upon such exercise pursuant
to Section 1 or otherwise.

      3. Adjustment for Reorganization, Consolidation, Merger, etc.

            3.1. Reorganization, Consolidation, Merger, etc. In case at any time
or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 1, at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 4.

            3.2. Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be delivered the stock and other securities and property (including cash, where
applicable) receivable by the Holder of the Warrants after the effective date of
such dissolution pursuant to this Section 3 to a bank or trust company (a
"Trustee") having its principal office in New York, NY, as trustee for the
Holder of the Warrants.

                                       43
<PAGE>

            3.3. Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the Other Securities and property receivable
on the exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of any Other
Securities, including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the Company, whether or
not such person shall have expressly assumed the terms of this Warrant as
provided in Section 4. In the event this Warrant does not continue in full force
and effect after the consummation of the transaction described in this Section
3, then only in such event will the Company's securities and property (including
cash, where applicable) receivable by the Holder of the Warrants be delivered to
the Trustee as contemplated by Section 3.2.

            3.4 Share Issuance. Until the Expiration Date, if the Company shall
issue any Common Stock except for the Excepted Issuances (as defined in the
Subscription Agreement), prior to the complete exercise of this Warrant for a
consideration less than the Purchase Price that would be in effect at the time
of such issue, then, and thereafter successively upon each such issue, the
Purchase Price shall be reduced to such other lower issue price. For purposes of
this adjustment, the issuance of any security or debt instrument of the Company
carrying the right to convert such security or debt instrument into Common Stock
or of any warrant, right or option to purchase Common Stock shall result in an
adjustment to the Purchase Price upon the issuance of the above-described
security, debt instrument, warrant, right, or option. The reduction of the
Purchase Price described in this Section 3.4 is in addition to the other rights
of the Holder described in the Subscription Agreement.

      4. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect. The
Purchase Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 4.
The number of shares of Common Stock that the Holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be adjusted to a number determined by multiplying the number of
shares of Common Stock that would otherwise (but for the provisions of this
Section 4) be issuable on such exercise by a fraction of which (a) the numerator
is the Purchase Price that would otherwise (but for the provisions of this
Section 4) be in effect, and (b) the denominator is the Purchase Price in effect
on the date of such exercise.

      5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrants, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the Holder of the Warrant and any
Warrant Agent of the Company (appointed pursuant to Section 11 hereof).

                                       44
<PAGE>

      6. Reservation of Stock, etc. Issuable on Exercise of Warrant; Financial
Statements. From and after the date the Approval is obtained, the Company will
at all times reserve and keep available, solely for issuance and delivery on the
exercise of the Warrants, all shares of Common Stock (or Other Securities) from
time to time issuable on the exercise of the Warrant. This Warrant entitles the
Holder hereof to receive copies of all financial and other information
distributed or required to be distributed to the holders of the Company's Common
Stock.

      7. Assignment; Exchange of Warrant. This Warrant has not been registered
under the Securities Act of 1933, as amended (the "1933 Act"), or any applicable
state securities laws, and has been issued to the Holder for investment and not
with a view to the distribution of either the Warrant or the shares underlying
the Warrant ("Warrant Shares"). Neither this Warrant nor any of the Warrant
Shares or any other security issued or issuable upon exercise of this Warrant
may be sold, transferred, pledged or hypothecated in the absence of an effective
registration statement under the Act relating to such security or an opinion of
counsel satisfactory to the Company that registration is not required under the
Act. Each certificate for the Warrant, the Warrant Shares and any other security
issued or issuable upon exercise of this Warrant shall contain a legend on the
face thereof, in form and substance satisfactory to counsel for the Company,
setting forth the restrictions on transfer contained in this Section. Subject to
compliance with applicable securities laws, this Warrant, and the rights
evidenced hereby, may be transferred by any registered holder hereof (a
"Transferor"). On the surrender for exchange of this Warrant, with the
Transferor's endorsement in the form of Exhibit B attached hereto (the
"Transferor Endorsement Form") and together with an opinion of counsel
reasonably satisfactory to the Company that the transfer of this Warrant will be
in compliance with applicable securities laws, the Company at its expense,
twice, only, but with payment by the Transferor of any applicable transfer
taxes, will issue and deliver to or on the order of the Transferor thereof a new
Warrant or Warrants of like tenor, in the name of the Transferor and/or the
transferee(s) specified in such Transferor Endorsement Form (each a
"Transferee"), calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the Warrant
so surrendered by the Transferor. No such transfers shall result in a public
distribution of the Warrant; and the Company shall only be responsible for "blue
sky" compliance expenses for resales under any registration statement filed in
accordance with Section 11 of the Subscription Agreement for two (2) such
transfers to two (2) applicable states of the United States only.

      8. Replacement of Warrant. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense, twice only, will
execute and deliver, in lieu thereof, a new Warrant of like tenor.

      9. Registration Rights. The Holder of this Warrant has been granted
certain registration rights by the Company. These registration rights are set
forth in the Subscription Agreement. The terms of the Subscription Agreement are
incorporated herein by this reference.

                                       45
<PAGE>

      10. Maximum Exercise. The Holder shall not be entitled to exercise this
Warrant on an exercise date nor may the Company exercise its right to give a
Call Notice (as defined in Section 11) in connection with that number of Common
Stock which would be in excess of the sum of (i) the number of Common Stock
beneficially owned by the Holder and its affiliates on an exercise date or Call
Date, and (ii) the number of Common Stock issuable upon the exercise of this
Warrant with respect to which the determination of this limitation is being made
on an exercise date or Call Date, which would result in beneficial ownership by
the Holder and its affiliates of more than 9.99% of the outstanding Common Stock
on such date. For the purposes of 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 Regulation 13d-3 thereunder. Subject to
the foregoing, the Holder shall not be limited to aggregate exercises which
would result in the issuance of more than 9.99%. The restriction described in
this paragraph may be revoked upon sixty-one (61) days prior notice from the
Holder to the Company. The Holder may allocate which of the equity of the
Company deemed beneficially owned by the Subscriber shall be included in the
9.99% amount described above and which shall be allocated to the excess above
9.99%.

      11. Call. The Company shall have the option to "call" the Warrants (the
"Warrant Call"), one or more times, in accordance with and governed by the
following:

            (a) The Company shall exercise the Warrant Call by giving to the
Warrant Holder a written notice of call (the "Call Notice") during the period in
which the Warrant Call may be exercised. The effective date of each Call Notice
(the "Call Date") is the date on which notice is effective under the notice
provision of Section 15 of this Warrant.

            (b) The Company's right to exercise the Warrant Call shall commence
thirty trading days after the Actual Effective Date as defined in the
Subscription Agreement.

            (c) The number of shares of Common Stock to be issued upon exercise
of the Warrant which are subject to a Call Notice must be registered in a
registration statement effective from twenty-two trading days prior to the Call
Date and through the Delivery Date.

            (d) A Call Notice may be given not sooner than ten (10) trading days
after the prior Call Date.

            (e) A Call Notice may be given by the Company only within ten
trading days after the Common Stock has had a closing price as reported for the
Principal Market (as defined in the Subscription Agreement) of not less than one
hundred and fifty percent (150%) of the Purchase Price for twenty (20)
consecutive trading days ("Lookback Period").

            (f) The Common Stock must be listed on the Principal Market for the
Lookback Period and through the Delivery Date.

            (g) The Company shall not have received a notice from the Principal
Market during the sixty (60) calendar days prior to the Call Date that the
Company or the Common Stock does not meet the requirements for continued
quotation, listing or trading on the Principal Market.

            (h) The Company and the Common Stock shall meet the requirements for
continued quotation, listing or trading on the Principal Market for the Lookback
Period and through the Delivery Date.

                                       46
<PAGE>

            (i) Unless otherwise agreed to by the Holder of this Warrant, a Call
Notice must be given to all Warrant Holders who receive Warrants similar to this
Warrant (in terms of exercise price and other principal terms) issued on or
about the same Issue Date as this Warrant, in proportion to the amounts of
Common Stock which may be purchased by the respective Warrant Holders in
accordance with the respective Warrants held by each.

            (j) The Warrant Holder shall exercise his Warrant rights and
purchase the Called Common Stock and pay for same within thirty (30) days after
the Call Date. If the Warrant Holder fails to timely pay the amount required by
the Warrant Call, the Company's sole remedy shall be to cancel a corresponding
amount of this Warrant.

            (k) The Company may not exercise the right to Call this Warrant
after the occurrence of a default by the Company of a material term of this
Warrant or the Subscription Agreement.

      12. Warrant Agent. The Company may, by written notice to the Holder of the
Warrant, appoint an agent (a "Warrant Agent") for the purpose of issuing Common
Stock (or Other Securities) on the exercise of this Warrant pursuant to Section
1, exchanging this Warrant pursuant to Section 7, and replacing this Warrant
pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such Warrant Agent.

      13. Transfer on the Company's Books. Until this Warrant is transferred on
the books of the Company, the Company may treat the registered holder hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.

      14. Warrant Exercise Compensation. The Company has agreed to pay
Corpfin.com, Inc. ("Broker") Warrant Exercise Compensation as described in the
Subscription Agreement which is equal to eight percent (8%) of the cash proceeds
payable to the Company upon exercise of the Warrant.

      15. Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Company to: iSECUREtrac, Corp., 5022
South 114th Street, Suite 103, Omaha, NE 68137, Attn: Thomas E. Wharton, Jr.,
CEO and President, telecopier: (402) 537-9847, with a copy by telecopier only
to: John Heida, Esq., c/o iSECUREtrac, Corp., 5022 South 114th Street, Suite
103, Omaha, NE 68137, telecopier: (402) 537-9847, (ii) if to the Holder, to the
address and telecopier number listed on the first paragraph of this Warrant,
with a copy by telecopier only to: Grushko & Mittman, P.C., 551 Fifth Avenue,
Suite 1601, New York, New York 10176, telecopier number: (212) 697-3575, and
(iii) if to the Broker, to: Corpfin.com, Inc., 555 North Point Center East, 4th
Floor, Alpharetta, GA 30022, Attn: John C. Canouse, telecopier: (678) 366-4424.

                                       47
<PAGE>

      16. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of New York. Any dispute relating to this Warrant shall be
adjudicated in New York County in the State of New York. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.

                                       48
<PAGE>

      IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.

                               ISECURETRAC, CORP.

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

Witness:
-----------

                                       49
<PAGE>

                                    Exhibit A

                              FORM OF SUBSCRIPTION
                   (To be signed only on exercise of Warrant)

TO: ISECURETRAC, CORP.

The undersigned, the holder of the within Warrant, hereby irrevocably elects to
exercise this Warrant for, and to purchase thereunder, shares of Common Stock of
iSECUREtrac, Corp. and herewith makes payment of --------------- $ therefor, and
requests that the certificates for such shares be issued in the name of, and
---------------- delivered to whose address is
------------------------------------------------------------
-------------------------------------------------------------.
--------------------------

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

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

                                       -----------------------------------------
                                       (Signature must conform to name of holder
                                        as specified on the face of the Warrant)

                                       -----------------------------------------
                                      (Address)

                                       50
<PAGE>

                                    Exhibit B

                         FORM OF TRANSFEROR ENDORSEMENT

                   (To be signed only on transfer of Warrant)

      For value received, the undersigned hereby sells, assigns, and transfers
unto the person(s) named below under the heading "Transferees" the right
represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of ISECURETRAC, CORP. to which the within Warrant relates
specified under the headings "Percentage Transferred" and "Number Transferred,"
respectively, opposite the name(s) of such person(s) and appoints each such
person Attorney to transfer its respective right on the books of ISECURETRAC,
CORP. with full power of substitution in the premises.

---------------------- -------------------------- -----------------------------
Transferees            Percentage Transferred     Number Transferred
---------------------- -------------------------- -----------------------------

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

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

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

Dated:
      ------------ ------------------         ----------------------------------
                                              (Signature must conform to name of
                                               holder as specified on the
                                               face of the warrant)

Signed in the presence of:

---------------------------------             ---------------------------------
         (Name)                               ---------------------------------
                                                     (address)

ACCEPTED AND AGREED:
[TRANSFEREE]

                                              ---------------------------------
                                              ---------------------------------
                                                       (address)
---------------------------------

         (Name)

                                       51
<PAGE>

THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ISECURETRAC, CORP. THAT SUCH REGISTRATION IS NOT REQUIRED.

                                                  Right to Purchase ___________
                                                  shares of Common Stock of
                                                  iSECUREtrac, Corp. (subject to
                                                  adjustment as provided herein)

                         COMMON STOCK PURCHASE WARRANT A
No. 2004-A-MAY-001                                    Issue Date: May ___, 2004

      iSECURETRAC, CORP., a corporation organized under the laws of the State of
Delaware (the "Company"), hereby certifies that, for value received,
___________________, ___________________________________________________, Fax:
_____________, or its assigns (the "Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company at any time after the Issue Date
until 5:00 p.m., E.S.T on the fifth anniversary of the Issue Date (the
"Expiration Date"), up to __________ fully paid and nonassessable shares of the
common stock of the Company (the "Common Stock"), $.001 par value per share at a
per share purchase price of $_____. The aforedescribed purchase price per share,
as adjusted from time to time as herein provided, is referred to herein as the
"Purchase Price." The number and character of such shares of Common Stock and
the Purchase Price are subject to adjustment as provided herein. The Company may
reduce the Purchase Price without the consent of the Holder. Capitalized terms
used and not otherwise defined herein shall have the meanings set forth in that
certain Subscription Agreement (the "Subscription Agreement"), dated May ___,
2004, entered into by the Company and the Holder.

      As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:

      (a) The term "Company" shall include iSECUREtrac, Corp. and any
corporation which shall succeed or assume the obligations of iSECUREtrac, Corp.
hereunder.

      (b) The term "Common Stock" includes (a) the Company's Common Stock, $.001
par value per share, as authorized on the date of the Subscription Agreement,
and (b) any other securities into which or for which any of the securities
described in (a) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.

      (c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.

                                       52
<PAGE>

      1. Exercise of Warrant.

            1.1. Number of Shares Issuable upon Exercise. From and after the
Issue Date through and including the Expiration Date, the Holder hereof shall be
entitled to receive, upon exercise of this Warrant in whole in accordance with
the terms of subsection 1.2 or upon exercise of this Warrant in part in
accordance with subsection 1.3, shares of Common Stock of the Company, subject
to adjustment pursuant to Section 4.

            1.2. Full Exercise. This Warrant may be exercised in full by the
Holder hereof by delivery of an original or facsimile copy of the form of
subscription attached as Exhibit A hereto (the "Subscription Form") duly
executed by such Holder and surrender of the original Warrant to the Company at
its principal office or at the office of its Warrant Agent (as provided
hereinafter), accompanied by payment, in cash, wire transfer or by certified or
official bank check payable to the order of the Company, in the amount obtained
by multiplying the number of shares of Common Stock for which this Warrant is
then exercisable by the Purchase Price then in effect.

            1.3. Partial Exercise. This Warrant may be exercised in part (but
not for a fractional share) by surrender of this Warrant in the manner and at
the place provided in subsection 1.2 except that the amount payable by the
Holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of whole shares of Common Stock designated by the Holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the Holder hereof a new Warrant of like tenor, in the name of
the Holder hereof or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may request, the whole number of shares of Common
Stock for which such Warrant may still be exercised.

            1.4. Fair Market Value. Fair Market Value of a share of Common Stock
as of a particular date (the "Determination Date") shall mean:

                  (a) If the Company's Common Stock is traded on an exchange or
is quoted on the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ"), National Market System, the NASDAQ SmallCap Market or the
American Stock Exchange, LLC, then the average of the closing or last sale
price, respectively, reported for the five business days immediately preceding
the Determination Date;

                  (b) If the Company's Common Stock is not traded on an exchange
or on the NASDAQ National Market System, the NASDAQ SmallCap Market or the
American Stock Exchange, Inc., but is traded in the over-the-counter market,
then the average of the closing bid and ask prices reported for the last
business day immediately preceding the Determination Date;

                  (c) Except as provided in clause (d) below, if the Company's
Common Stock is not publicly traded, then as the Holder and the Company agree,
or in the absence of such an agreement, by arbitration in accordance with the
rules then standing of the American Arbitration Association, before a single
arbitrator to be chosen from a panel of persons qualified by education and
training to pass on the matter to be decided; or

                  (d) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation, dissolution
or winding up pursuant to the Company's charter, then all amounts to be payable
per share to holders of the Common Stock pursuant to the charter in the event of
such liquidation, dissolution or winding up, plus all other amounts to be
payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of all of the Warrants are outstanding
at the Determination Date.

                                       53
<PAGE>

            1.5. Company Acknowledgment. The Company will, at the time of the
exercise of the Warrant, upon the request of the Holder hereof acknowledge in
writing its continuing obligation to afford to such Holder any rights to which
such Holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the Holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such Holder any such rights.

            1.6. Trustee for Warrant Holders. In the event that a bank or trust
company shall have been appointed as trustee for the Holder of the Warrants
pursuant to Subsection 3.2, such bank or trust company shall have all the powers
and duties of a warrant agent (as hereinafter described) and shall accept, in
its own name for the account of the Company or such successor person as may be
entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.

            1.7 Delivery of Stock Certificates, etc. on Exercise. The Company
agrees that the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the Holder hereof as the record owner of such
shares as of the close of business on the date on which this Warrant shall have
been surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within five (5) days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Holder hereof, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct in compliance with
applicable securities laws, a certificate or certificates for the number of duly
and validly issued, fully paid and nonassessable shares of Common Stock (or
Other Securities) to which such Holder shall be entitled on such exercise,
together with any other stock or other securities and property (including cash,
where applicable) to which such Holder is entitled upon such exercise pursuant
to Section 1 or otherwise.

      2. Cashless Exercise.

            (a) If a Registration Statement as defined in the Subscription
Agreement ("Registration Statement") is effective and the Holder may sell its
shares of Common Stock upon exercise hereof, this Warrant may be exercisable in
whole or in part for cash only as set forth in Section 1 above. If no such
Registration Statement is available, payment upon exercise may be made at the
option of the Holder either in (i) cash, wire transfer or by certified or
official bank check payable to the order of the Company equal to the applicable
aggregate Purchase Price, (ii) by delivery of Common Stock issuable upon
exercise of the Warrants in accordance with Section (b) below ("Cashless
Exercise") or (iii) by a combination of any of the foregoing methods, for the
number of Common Stock specified in such form (as such exercise number shall be
adjusted to reflect any adjustment in the total number of shares of Common Stock
issuable to the holder per the terms of this Warrant) and the holder shall
thereupon be entitled to receive the number of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock (or Other Securities)
determined as provided herein.

            (b) If the Fair Market Value of one share of Common Stock is greater
than the Purchase Price (at the date of calculation as set forth below) and no
Registration Statement relating to the shares of Common Stock underlying this
Warrant is effective, in lieu of exercising this Warrant for cash, the holder
may elect to receive shares equal to the value (as determined below) of this
Warrant (or the portion thereof being cancelled) by surrender of this Warrant at
the principal office of the Company together with the properly endorsed
Subscription Form in which event the Company shall issue to the holder a number
of shares of Common Stock computed using the following formula:

                                       54
<PAGE>

                           X = Y (A-B)
                               -------
                                 A

  Where    X=    the number of shares of Common Stock to be issued to the holder

           Y=    the number of shares of Common Stock
                 purchasable under the Warrant or, if only a
                 portion of the Warrant is being exercised,
                 the portion of the Warrant being exercised
                 (at the date of such calculation)

           A=    the Fair Market Value of one share of the
                 Company's Common Stock (at the date of such
                 calculation)

           B=    Purchase Price (as adjusted to the date of such calculation)

            (c) The Holder may employ the cashless exercise feature described
above only during the pendency of a Non-Registration Event as described in
Section 11 of the Subscription Agreement.

            (d) For purposes of Rule 144 promulgated under the 1933 Act, it is
intended, understood and acknowledged that the Commission currently has
interpreted Rule 144 to mean that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have commenced, on
the date this Warrant was originally issued pursuant to the Subscription
Agreement.

      3. Adjustment for Reorganization, Consolidation, Merger, etc.

            3.1. Reorganization, Consolidation, Merger, etc. In case at any time
or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 1, at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 4.

            3.2. Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be delivered the stock and other securities and property (including cash, where
applicable) receivable by the Holder of the Warrants after the effective date of
such dissolution pursuant to this Section 3 to a bank or trust company (a
"Trustee") having its principal office in New York, NY, as trustee for the
Holder of the Warrants.

                                       55
<PAGE>

            3.3. Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the Other Securities and property receivable
on the exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of any Other
Securities, including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the Company, whether or
not such person shall have expressly assumed the terms of this Warrant as
provided in Section 4. In the event this Warrant does not continue in full force
and effect after the consummation of the transaction described in this Section
3, then only in such event will the Company's securities and property (including
cash, where applicable) receivable by the Holder of the Warrants be delivered to
the Trustee as contemplated by Section 3.2.

            3.4 Share Issuance. Until the Expiration Date, if the Company shall
issue any Common Stock except for the Excepted Issuances (as defined in the
Subscription Agreement), prior to the complete exercise of this Warrant for a
consideration less than the Purchase Price that would be in effect at the time
of such issue, then, and thereafter successively upon each such issue, the
Purchase Price shall be reduced to such other lower issue price. For purposes of
this adjustment, the issuance of any security or debt instrument of the Company
carrying the right to convert such security or debt instrument into Common Stock
or of any warrant, right or option to purchase Common Stock shall result in an
adjustment to the Purchase Price upon the issuance of the above-described
security, debt instrument, warrant, right, or option. The reduction of the
Purchase Price described in this Section 3.4 is in addition to the other rights
of the Holder described in the Subscription Agreement.

      4. Extraordinary Events Regarding Common Stock. In the event that the
Company shall (a) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect. The
Purchase Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 4.
The number of shares of Common Stock that the Holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be adjusted to a number determined by multiplying the number of
shares of Common Stock that would otherwise (but for the provisions of this
Section 4) be issuable on such exercise by a fraction of which (a) the numerator
is the Purchase Price that would otherwise (but for the provisions of this
Section 4) be in effect, and (b) the denominator is the Purchase Price in effect
on the date of such exercise.

      5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrants, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the Holder of the Warrant and any
Warrant Agent of the Company (appointed pursuant to Section 11 hereof).

                                       56
<PAGE>

      6. Reservation of Stock, etc. Issuable on Exercise of Warrant; Financial
Statements. The Company will at all times reserve and keep available, solely for
issuance and delivery on the exercise of the Warrants, all shares of Common
Stock (or Other Securities) from time to time issuable on the exercise of the
Warrant. This Warrant entitles the Holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.

      7. Assignment; Exchange of Warrant. This Warrant has not been registered
under the Securities Act of 1933, as amended (the "1933 Act"), or any applicable
state securities laws, and has been issued to the Holder for investment and not
with a view to the distribution of either the Warrant or the shares underlying
the Warrant ("Warrant Shares"). Neither this Warrant nor any of the Warrant
Shares or any other security issued or issuable upon exercise of this Warrant
may be sold, transferred, pledged or hypothecated in the absence of an effective
registration statement under the Act relating to such security or an opinion of
counsel satisfactory to the Company that registration is not required under the
Act. Each certificate for the Warrant, the Warrant Shares and any other security
issued or issuable upon exercise of this Warrant shall contain a legend on the
face thereof, in form and substance satisfactory to counsel for the Company,
setting forth the restrictions on transfer contained in this Section. Subject to
compliance with applicable securities laws, this Warrant, and the rights
evidenced hereby, may be transferred by any registered holder hereof (a
"Transferor"). On the surrender for exchange of this Warrant, with the
Transferor's endorsement in the form of Exhibit B attached hereto (the
"Transferor Endorsement Form") and together with an opinion of counsel
reasonably satisfactory to the Company that the transfer of this Warrant will be
in compliance with applicable securities laws, the Company at its expense,
twice, only, but with payment by the Transferor of any applicable transfer
taxes, will issue and deliver to or on the order of the Transferor thereof a new
Warrant or Warrants of like tenor, in the name of the Transferor and/or the
transferee(s) specified in such Transferor Endorsement Form (each a
"Transferee"), calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the Warrant
so surrendered by the Transferor. No such transfers shall result in a public
distribution of the Warrant; and the Company shall only be responsible for "blue
sky" compliance expenses for resales under any registration statement filed in
accordance with Section 11 of the Subscription Agreement for two (2) such
transfers to two (2) applicable states of the United States only.

      8. Replacement of Warrant. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of any such loss, theft or destruction of this Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in form
and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense, twice only, will
execute and deliver, in lieu thereof, a new Warrant of like tenor.

      9. Registration Rights. The Holder of this Warrant has been granted
certain registration rights by the Company. These registration rights are set
forth in the Subscription Agreement. The terms of the Subscription Agreement are
incorporated herein by this reference.

      10. Maximum Exercise. The Holder shall not be entitled to exercise this
Warrant on an exercise date nor may the Company exercise its right to give a
Call Notice (as defined in Section 11) in connection with that number of Common
Stock which would be in excess of the sum of (i) the number of Common Stock
beneficially owned by the Holder and its affiliates on an exercise date or Call
Date, and (ii) the number of Common Stock issuable upon the exercise of this
Warrant with respect to which the determination of this limitation is being made
on an exercise date or Call Date, which would result in beneficial ownership by
the Holder and its affiliates of more than 9.99% of the outstanding Common Stock
on such date. For the purposes of 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 Regulation 13d-3 thereunder. Subject to
the foregoing, the Holder shall not be limited to aggregate exercises which
would result in the issuance of more than 9.99%. The restriction described in
this paragraph may be revoked upon sixty-one (61) days prior notice from the
Holder to the Company. The Holder may allocate which of the equity of the
Company deemed beneficially owned by the Subscriber shall be included in the
9.99% amount described above and which shall be allocated to the excess above
9.99%.

                                       57
<PAGE>

      11. Call. The Company shall have the option to "call" the Warrants (the
"Warrant Call"), one or more times, in accordance with and governed by the
following:

            (a) The Company shall exercise the Warrant Call by giving to the
Warrant Holder a written notice of call (the "Call Notice") during the period in
which the Warrant Call may be exercised. The effective date of each Call Notice
(the "Call Date") is the date on which notice is effective under the notice
provision of Section 15 of this Warrant.

            (b) The Company's right to exercise the Warrant Call shall commence
thirty trading days after the Actual Effective Date as defined in the
Subscription Agreement.

            (c) The number of shares of Common Stock to be issued upon exercise
of the Warrant which are subject to a Call Notice must be registered in a
registration statement effective from twenty-two trading days prior to the Call
Date and through the Delivery Date.

            (d) A Call Notice may be given not sooner than ten (10) trading days
after the prior Call Date.

            (e) A Call Notice may be given by the Company only within ten
trading days after the Common Stock has had a closing price as reported for the
Principal Market (as defined in the Subscription Agreement) of not less than two
hundred percent (200%) of the Purchase Price for fifteen (15) consecutive
trading days ("Lookback Period").

            (f) The Common Stock must be listed on the Principal Market for the
Lookback Period and through the Delivery Date.

            (g) The Company shall not have received a notice from the Principal
Market during the sixty (60) calendar days prior to the Call Date that the
Company or the Common Stock does not meet the requirements for continued
quotation, listing or trading on the Principal Market.

            (h) The Company and the Common Stock shall meet the requirements for
continued quotation, listing or trading on the Principal Market for the Lookback
Period and through the Delivery Date.

            (i) Unless otherwise agreed to by the Holder of this Warrant, a Call
Notice must be given to all Warrant Holders who receive Warrants similar to this
Warrant (in terms of exercise price and other principal terms) issued on or
about the same Issue Date as this Warrant, in proportion to the amounts of
Common Stock which may be purchased by the respective Warrant Holders in
accordance with the respective Warrants held by each.

                                       58
<PAGE>

            (j) The Warrant Holder shall exercise his Warrant rights and
purchase the Called Common Stock and pay for same within thirty (30) days after
the Call Date. If the Warrant Holder fails to timely pay the amount required by
the Warrant Call, the Company's sole remedy shall be to cancel a corresponding
amount of this Warrant.

            (k) The Company may not exercise the right to Call this Warrant
after the occurrence of a default by the Company of a material term of this
Warrant or the Subscription Agreement.

      12. Warrant Agent. The Company may, by written notice to the Holder of the
Warrant, appoint an agent (a "Warrant Agent") for the purpose of issuing Common
Stock (or Other Securities) on the exercise of this Warrant pursuant to Section
1, exchanging this Warrant pursuant to Section 7, and replacing this Warrant
pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such Warrant Agent.

      13. Transfer on the Company's Books. Until this Warrant is transferred on
the books of the Company, the Company may treat the registered holder hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary.

      14. Warrant Exercise Compensation. The Company has agreed to pay
Corpfin.com, Inc. ("Broker") Warrant Exercise Compensation as described in the
Subscription Agreement which is equal to four percent (4%) of the cash proceeds
payable to the Company upon exercise of the Warrant.

      15. Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Company to: iSECUREtrac, Corp., 5022
South 114th Street, Suite 103, Omaha, NE 68137, Attn: Thomas E. Wharton, Jr.,
CEO and President, telecopier: (402) 537-9847, with a copy by telecopier only
to: John Heida, Esq., c/o iSECUREtrac, Corp., 5022 South 114th Street, Suite
103, Omaha, NE 68137, telecopier: (402) 537-9847, (ii) if to the Holder, to the
address and telecopier number listed on the first paragraph of this Warrant,
with a copy by telecopier only to: Grushko & Mittman, P.C., 551 Fifth Avenue,
Suite 1601, New York, New York 10176, telecopier number: (212) 697-3575, and
(iii) if to the Broker, to: Corpfin.com, Inc., 555 North Point Center East, 4th
Floor, Alpharetta, GA 30022, Attn: John C. Canouse, telecopier: (678) 366-4424.

                                       59
<PAGE>

      16. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of New York. Any dispute relating to this Warrant shall be
adjudicated in New York County in the State of New York. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.

                                       60
<PAGE>

      IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.

                                        ISECURETRAC, CORP.

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

Witness:

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

                                       61
<PAGE>

                                    Exhibit A

                              FORM OF SUBSCRIPTION
                   (to be signed only on exercise of Warrant)

TO: ISECURETRAC, CORP.

The undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable box):

___      ________ shares of the Common Stock covered by such Warrant; or
___ the maximum number of shares of Common Stock covered by such Warrant
pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned herewith makes payment of the full purchase price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):

___ $__________ in lawful money of the United States; and/or ___ the
cancellation of such portion of the attached Warrant as is exercisable for a
total of _______ shares of Common Stock (using a Fair Market Value of $_______
per share for purposes of this calculation); and/or

___ the cancellation of such number of shares of Common Stock as is necessary,
in accordance with the formula set forth in Section 2, to exercise this Warrant
with respect to the maximum number of shares of Common Stock purchasable
pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned requests that the certificates for such shares be issued in the
name of, and delivered to
_____________________________________________________ whose address is
_________________________________________________
______________________________________ .

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

Dated:
      ------------------------                ----------------------------------
                                              (Signature must conform to name of
                                               holder as specified on the face
                                               of the Warrant)

                                               ---------------------------------
                                               ---------------------------------
                                               (Address)

                                       62
<PAGE>

                                    Exhibit B

                         FORM OF TRANSFEROR ENDORSEMENT
                   (To be signed only on transfer of Warrant)

      For value received, the undersigned hereby sells, assigns, and transfers
unto the person(s) named below under the heading "Transferees" the right
represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of ISECURETRAC, CORP. to which the within Warrant relates
specified under the headings "Percentage Transferred" and "Number Transferred,"
respectively, opposite the name(s) of such person(s) and appoints each such
person Attorney to transfer its respective right on the books of ISECURETRAC,
CORP. with full power of substitution in the premises.

-------------------- ----------------------- -----------------------
Transferees          Percentage Transferred   Number Transferred
-------------------- ----------------------- -----------------------
-------------------- ----------------------- -----------------------

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

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

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

Dated:              ,
        -----------  ---------          ----------------------------------------
                                        (Signature must conform to name of
                                         holder as specified on the
                                         face of the warrant)

Signed in the presence of:

-------------------------------          ---------------------------------------
         (Name)
                                         ---------------------------------------
                                         (address)

ACCEPTED AND AGREED:
[TRANSFEREE]
                                         ---------------------------------------

                                         ---------------------------------------
                                                               (address)
-------------------------------
         (Name)

                                       63
<PAGE>

Schedule 11.1 - Other Securities to be Registered

The Company intends to register 19,848,640 shares of common stock underlying the
warrants identified in Schedule 5(d); the 1,528,963 shares of common stock
issued to Salzwedel Financial Communications, Inc, as described in Schedule
5(d); the 2,631,579 shares of common stock underlying the Notes and accrued
interest of Micro Capital Fund, LP, as described in Schedule 5(d); and, the
4,423,077 shares of common stock exchanged with the former Tracking Systems
Corporation shareholders as described in Schedule 5(d).

In addition, the Company intends to register such stock as necessary to raise
such equity capital as the aggregate amount of the Notes are short a total of
$2,500,000.

                                       64
<PAGE>

THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ISECURETRAC, CORP. THAT SUCH REGISTRATION IS NOT REQUIRED.

                                                  Right to Purchase ___________
                                                  shares of Common Stock of
                                                  iSECUREtrac, Corp. (subject to
                                                  adjustment as provided herein)

                     COMMON STOCK PURCHASE WARRANT (finder)

No. 2004-F-MAY-001                                    Issue Date: May ___, 2004

      iSECURETRAC, CORP., a corporation organized under the laws of the State of
Delaware (the "Company"), hereby certifies that, for value received,
___________________, ___________________________________________________, Fax:
_____________, or its assigns (the "Holder"), is entitled, subject to the terms
set forth below, to purchase from the Company at any time after the Issue Date
until 5:00 p.m., E.S.T on the fifth anniversary of the Issue Date (the
"Expiration Date"), up to __________ fully paid and nonassessable shares of the
common stock of the Company (the "Common Stock"), $.001 par value per share at a
per share purchase price of $_____. The aforedescribed purchase price per share,
as adjusted from time to time as herein provided, is referred to herein as the
"Purchase Price." The number and character of such shares of Common Stock and
the Purchase Price are subject to adjustment as provided herein. The Company may
reduce the Purchase Price without the consent of the Holder. Capitalized terms
used and not otherwise defined herein shall have the meanings set forth in that
certain Subscription Agreement (the "Subscription Agreement"), dated May ___,
2004, entered into by the Company and the Subscribers of the Company's Common
Stock and Warrants.

      As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:

      (a) The term "Company" shall include iSECUREtrac, Corp. and any
corporation which shall succeed or assume the obligations of iSECUREtrac, Corp.
hereunder.

      (b) The term "Common Stock" includes (a) the Company's Common Stock, $.001
par value per share, as authorized on the date of the Subscription Agreement,
and (b) any other securities into which or for which any of the securities
described in (a) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.

      (c) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person (corporate or
otherwise) which the holder of the Warrant at any time shall be entitled to
receive, or shall have received, on the exercise of the Warrant, in lieu of or
in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.

                                       65
<PAGE>

      1. Exercise of Warrant.

            1.1. Number of Shares Issuable upon Exercise. From and after the
Issue Date through and including the Expiration Date, the Holder hereof shall be
entitled to receive, upon exercise of this Warrant in whole in accordance with
the terms of subsection 1.2 or upon exercise of this Warrant in part in
accordance with subsection 1.3, shares of Common Stock of the Company, subject
to adjustment pursuant to Section 4.

            1.2. Full Exercise. This Warrant may be exercised in full by the
Holder hereof by delivery of an original or facsimile copy of the form of
subscription attached as Exhibit A hereto (the "Subscription Form") duly
executed by such Holder and surrender of the original Warrant to the Company at
its principal office or at the office of its Warrant Agent (as provided
hereinafter), accompanied by payment, in cash, wire transfer or by certified or
official bank check payable to the order of the Company, in the amount obtained
by multiplying the number of shares of Common Stock for which this Warrant is
then exercisable by the Purchase Price then in effect.

            1.3. Partial Exercise. This Warrant may be exercised in part (but
not for a fractional share) by surrender of this Warrant in the manner and at
the place provided in subsection 1.2 except that the amount payable by the
Holder on such partial exercise shall be the amount obtained by multiplying (a)
the number of whole shares of Common Stock designated by the Holder in the
Subscription Form by (b) the Purchase Price then in effect. On any such partial
exercise, the Company, at its expense, will forthwith issue and deliver to or
upon the order of the Holder hereof a new Warrant of like tenor, in the name of
the Holder hereof or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may request, the whole number of shares of Common
Stock for which such Warrant may still be exercised.

            1.4. Fair Market Value. Fair Market Value of a share of Common Stock
as of a particular date (the "Determination Date") shall mean:

                  (a) If the Company's Common Stock is traded on an exchange or
is quoted on the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ"), National Market System, the NASDAQ SmallCap Market or the
American Stock Exchange, LLC, then the average of the closing or last sale
price, respectively, reported for the five business days immediately preceding
the Determination Date;

                  (b) If the Company's Common Stock is not traded on an exchange
or on the NASDAQ National Market System, the NASDAQ SmallCap Market or the
American Stock Exchange, Inc., but is traded in the over-the-counter market,
then the average of the closing bid and ask prices reported for the last
business day immediately preceding the Determination Date;

                  (c) Except as provided in clause (d) below, if the Company's
Common Stock is not publicly traded, then as the Holder and the Company agree,
or in the absence of such an agreement, by arbitration in accordance with the
rules then standing of the American Arbitration Association, before a single
arbitrator to be chosen from a panel of persons qualified by education and
training to pass on the matter to be decided; or

                  (d) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation, dissolution
or winding up pursuant to the Company's charter, then all amounts to be payable
per share to holders of the Common Stock pursuant to the charter in the event of
such liquidation, dissolution or winding up, plus all other amounts to be
payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (d) that all of the shares of
Common Stock then issuable upon exercise of all of the Warrants are outstanding
at the Determination Date.

                                       66
<PAGE>

      1.5. Company Acknowledgment. The Company will, at the time of the exercise
of the Warrant, upon the request of the Holder hereof acknowledge in writing its
continuing obligation to afford to such Holder any rights to which such Holder
shall continue to be entitled after such exercise in accordance with the
provisions of this Warrant. If the Holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
to such Holder any such rights.

      1.6. Trustee for Warrant Holders. In the event that a bank or trust
company shall have been appointed as trustee for the Holder of the Warrants
pursuant to Subsection 3.2, such bank or trust company shall have all the powers
and duties of a warrant agent (as hereinafter described) and shall accept, in
its own name for the account of the Company or such successor person as may be
entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.

      1.7 Delivery of Stock Certificates, etc. on Exercise. The Company agrees
that the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the Holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within five (5) days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Holder hereof, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct in compliance with
applicable securities laws, a certificate or certificates for the number of duly
and validly issued, fully paid and nonassessable shares of Common Stock (or
Other Securities) to which such Holder shall be entitled on such exercise,
together with any other stock or other securities and property (including cash,
where applicable) to which such Holder is entitled upon such exercise pursuant
to Section 1 or otherwise.

      2. Cashless Exercise.

            (a) If a Registration Statement as defined in the Subscription
Agreement ("Registration Statement") is effective and the Holder may sell its
shares of Common Stock upon exercise hereof, this Warrant may be exercisable in
whole or in part for cash only as set forth in Section 1 above. If no such
Registration Statement is available, payment upon exercise may be made at the
option of the Holder either in (i) cash, wire transfer or by certified or
official bank check payable to the order of the Company equal to the applicable
aggregate Purchase Price, (ii) by delivery of Common Stock issuable upon
exercise of the Warrants in accordance with Section (b) below ("Cashless
Exercise") or (iii) by a combination of any of the foregoing methods, for the
number of Common Stock specified in such form (as such exercise number shall be
adjusted to reflect any adjustment in the total number of shares of Common Stock
issuable to the holder per the terms of this Warrant) and the holder shall
thereupon be entitled to receive the number of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock (or Other Securities)
determined as provided herein.

            (b) If the Fair Market Value of one share of Common Stock is greater
than the Purchase Price (at the date of calculation as set forth below) and no
Registration Statement relating to the shares of Common Stock underlying this
Warrant is effective, in lieu of exercising this Warrant for cash, the holder
may elect to receive shares equal to the value (as determined below) of this
Warrant (or the portion thereof being cancelled) by surrender of this Warrant at
the principal office of the Company together with the properly endorsed
Subscription Form in which event the Company shall issue to the holder a number
of shares of Common Stock computed using the following formula:

                                       67
<PAGE>

                               X = Y (A-B)
                                   -------
                                     A

 Where  X=       the number of shares of Common Stock to be issued to the holder

        Y=       the number of shares of Common Stock
                 purchasable under the Warrant or, if only a
                 portion of the Warrant is being exercised,
                 the portion of the Warrant being exercised
                 (at the date of such calculation)

        A=       the Fair Market Value of one share of the
                 Company's Common Stock (at the date of such
                 calculation)

        B=       Purchase Price (as adjusted to the date of such calculation)

            (e) The Holder may employ the cashless exercise feature described
above only during the pendency of a Non-Registration Event as described in
Section 11 of the Subscription Agreement.

            (f) For purposes of Rule 144 promulgated under the 1933 Act, it is
intended, understood and acknowledged that the Commission currently has
interpreted Rule 144 to mean that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have commenced, on
the date this Warrant was originally issued pursuant to the Subscription
Agreement.

         3.       Adjustment for Reorganization, Consolidation, Merger, etc.

            3.1. Reorganization, Consolidation, Merger, etc. In case at any time
or from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Warrant, on the exercise hereof as provided in Section 1, at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Warrant, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 4.

            3.2. Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be delivered the stock and other securities and property (including cash, where
applicable) receivable by the Holder of the Warrants after the effective date of
such dissolution pursuant to this Section 3 to a bank or trust company (a
"Trustee") having its principal office in New York, NY, as trustee for the
Holder of the Warrants.

                                       68
<PAGE>

            3.3. Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the Other Securities and property receivable
on the exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of any Other
Securities, including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the Company, whether or
not such person shall have expressly assumed the terms of this Warrant as
provided in Section 4. In the event this Warrant does not continue in full force
and effect after the consummation of the transaction described in this Section
3, then only in such event will the Company's securities and property (including
cash, where applicable) receivable by the Holder of the Warrants be delivered to
the Trustee as contemplated by Section 3.2.

            3.4 Share Issuance. Until the Expiration Date, if the Company shall
issue any Common Stock except for the Excepted Issuances (as defined in the
Subscription Agreement), prior to the complete exercise of this Warrant for a
consideration less than the Purchase Price that would be in effect at the time
of such issue, then, and thereafter successively upon each such issue, the
Purchase Price shall be reduced to such other lower issue price. For purposes of
this adjustment, the issuance of any security or debt instrument of the Company
carrying the right to convert such security or debt instrument into Common Stock
or of any warrant, right or option to purchase Common Stock shall result in an
adjustment to the Purchase Price upon the issuance of the above-described
security, debt instrument, warrant, right, or option. The reduction of the
Purchase Price described in this Section 3.4 is in addition to the other rights
of the Holder described in the Subscription Agreement.

            4. Extraordinary Events Regarding Common Stock. In the event that
the Company shall (a) issue additional shares of the Common Stock as a dividend
or other distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect. The
Purchase Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 4.
The number of shares of Common Stock that the Holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled to
receive shall be adjusted to a number determined by multiplying the number of
shares of Common Stock that would otherwise (but for the provisions of this
Section 4) be issuable on such exercise by a fraction of which (a) the numerator
is the Purchase Price that would otherwise (but for the provisions of this
Section 4) be in effect, and (b) the denominator is the Purchase Price in effect
on the date of such exercise.

            5. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise of the Warrants, the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or readjustment in accordance with the terms of the Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will forthwith
mail a copy of each such certificate to the Holder of the Warrant and any
Warrant Agent of the Company (appointed pursuant to Section 11 hereof).

                                       69
<PAGE>

            6. Reservation of Stock, etc. Issuable on Exercise of Warrant;
Financial Statements. The Company will at all times reserve and keep available,
solely for issuance and delivery on the exercise of the Warrants, all shares of
Common Stock (or Other Securities) from time to time issuable on the exercise of
the Warrant. This Warrant entitles the Holder hereof to receive copies of all
financial and other information distributed or required to be distributed to the
holders of the Company's Common Stock.

            7. Assignment; Exchange of Warrant. This Warrant has not been
registered under the Securities Act of 1933, as amended (the "1933 Act"), or any
applicable state securities laws, and has been issued to the Holder for
investment and not with a view to the distribution of either the Warrant or the
shares underlying the Warrant ("Warrant Shares"). Neither this Warrant nor any
of the Warrant Shares or any other security issued or issuable upon exercise of
this Warrant may be sold, transferred, pledged or hypothecated in the absence of
an effective registration statement under the Act relating to such security or
an opinion of counsel satisfactory to the Company that registration is not
required under the Act. Each certificate for the Warrant, the Warrant Shares and
any other security issued or issuable upon exercise of this Warrant shall
contain a legend on the face thereof, in form and substance satisfactory to
counsel for the Company, setting forth the restrictions on transfer contained in
this Section. Subject to compliance with applicable securities laws, this
Warrant, and the rights evidenced hereby, may be transferred by any registered
holder hereof (a "Transferor"). On the surrender for exchange of this Warrant,
with the Transferor's endorsement in the form of Exhibit B attached hereto (the
"Transferor Endorsement Form") and together with an opinion of counsel
reasonably satisfactory to the Company that the transfer of this Warrant will be
in compliance with applicable securities laws, the Company at its expense,
twice, only, but with payment by the Transferor of any applicable transfer
taxes, will issue and deliver to or on the order of the Transferor thereof a new
Warrant or Warrants of like tenor, in the name of the Transferor and/or the
transferee(s) specified in such Transferor Endorsement Form (each a
"Transferee"), calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the Warrant
so surrendered by the Transferor. No such transfers shall result in a public
distribution of the Warrant; and the Company shall only be responsible for "blue
sky" compliance expenses for resales under any registration statement filed in
accordance with Section 11 of the Subscription Agreement for two (2) such
transfers to two (2) applicable states of the United States only.

            8. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense, twice only, will execute and deliver, in lieu thereof, a new Warrant of
like tenor.

            9. Registration Rights. The Holder of this Warrant has been granted
certain registration rights by the Company. These registration rights are set
forth in the Subscription Agreement. The terms of the Subscription Agreement are
incorporated herein by this reference.

            10. Maximum Exercise. The Holder shall not be entitled to exercise
this Warrant on an exercise date in connection with that number of shares of
Common Stock which would be in excess of the sum of (i) the number of shares of
Common Stock beneficially owned by the Holder and its affiliates on an exercise
date, and (ii) the number of shares of Common Stock issuable upon the exercise
of this Warrant with respect to which the determination of this limitation is
being made on an exercise date, which would result in beneficial ownership by
the Holder and its affiliates of more than 4.99% of the outstanding shares of
Common Stock on such date. For the purposes of 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 Regulation 13d-3
thereunder. Subject to the foregoing, the Holder shall not be limited to
aggregate exercises which would result in the issuance of more than 4.99%. The
restriction described in this paragraph may be revoked upon sixty-one (61) days
prior notice from the Holder to the Company. The Holder may allocate which of
the equity of the Company deemed beneficially owned by the Subscriber shall be
included in the 4.99% amount described above and which shall be allocated to the
excess above 4.99%.

                                       70
<PAGE>

            11. Warrant Agent. The Company may, by written notice to the Holder
of the Warrant, appoint an agent (a "Warrant Agent") for the purpose of issuing
Common Stock (or Other Securities) on the exercise of this Warrant pursuant to
Section 1, exchanging this Warrant pursuant to Section 7, and replacing this
Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such Warrant Agent.

            12. Transfer on the Company's Books. Until this Warrant is
transferred on the books of the Company, the Company may treat the registered
holder hereof as the absolute owner hereof for all purposes, notwithstanding any
notice to the contrary.

            13. Notices. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Company to: iSECUREtrac, Corp., 5022
South 114th Street, Suite 103, Omaha, NE 68137, Attn: Thomas E. Wharton, Jr.,
CEO and President, telecopier: (402) 537-9847, with a copy by telecopier only
to: John Heida, Esq., c/o iSECUREtrac, Corp., 5022 South 114th Street, Suite
103, Omaha, NE 68137, telecopier: (402) 537-9847, and (ii) if to the Holder, to
the address and telecopier number listed on the first paragraph of this Warrant,
with a copy by telecopier only to: Grushko & Mittman, P.C., 551 Fifth Avenue,
Suite 1601, New York, New York 10176, telecopier number: (212) 697-3575.

            14. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of New York. Any dispute relating to this Warrant shall be
adjudicated in New York County in the State of New York. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.

                                       71
<PAGE>

      IN WITNESS WHEREOF, the Company has executed this Warrant as of the date
first written above.

                                             ISECURETRAC, CORP.

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

Witness:
--------------

                                       72
<PAGE>

                                    Exhibit A

                              FORM OF SUBSCRIPTION
                   (to be signed only on exercise of Warrant)

TO: ISECURETRAC, CORP.

The undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable box):

___ ________ shares of the Common Stock covered by such Warrant; or ___ the
maximum number of shares of Common Stock covered by such Warrant pursuant to the
cashless exercise procedure set forth in Section 2.

The undersigned herewith makes payment of the full purchase price for such
shares at the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or boxes):

___ $__________ in lawful money of the United States; and/or ___ the
cancellation of such portion of the attached Warrant as is exercisable for a
total of _______ shares of Common Stock (using a Fair Market Value of $_______
per share for purposes of this calculation); and/or

___ the cancellation of such number of shares of Common Stock as is necessary,
in accordance with the formula set forth in Section 2, to exercise this Warrant
with respect to the maximum number of shares of Common Stock purchasable
pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned requests that the certificates for such shares be issued in the
name of, and delivered to _____________________________________________________
whose address is _________________________________________________
______________________________________ .

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

Dated:
      ------------
                                  ----------------------------------------------
                                  (Signature must conform to name of holder as
                                   specified on the face of the Warrant)

                                  ----------------------------------------------
                                  ----------------------------------------------
                                  (Address)

                                       73
<PAGE>

                                    Exhibit B

                         FORM OF TRANSFEROR ENDORSEMENT
                   (To be signed only on transfer of Warrant)

      For value received, the undersigned hereby sells, assigns, and transfers
unto the person(s) named below under the heading "Transferees" the right
represented by the within Warrant to purchase the percentage and number of
shares of Common Stock of ISECURETRAC, CORP. to which the within Warrant relates
specified under the headings "Percentage Transferred" and "Number Transferred,"
respectively, opposite the name(s) of such person(s) and appoints each such
person Attorney to transfer its respective right on the books of ISECURETRAC,
CORP. with full power of substitution in the premises.

---------------------- ------------------------- -----------------------------
Transferees            Percentage Transferred    Number Transferred
---------------------- ------------------------- -----------------------------
---------------------- ------------------------- -----------------------------

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

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

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

Dated:        ,
      -------   --------
                                   ---------------------------------------------
                                   (Signature must conform to name of holder as
                                   specified on the face of the warrant)

Signed in the presence of:

--------------------------
         (Name)
                                   ---------------------------------------------

                                   ---------------------------------------------
                                        (address)

ACCEPTED AND AGREED:
[TRANSFEREE]
                                   ---------------------------------------------

                                   ---------------------------------------------
                                        (address)

--------------------------
         (Name)

                                       74
<PAGE>

                             FUNDS ESCROW AGREEMENT

This Agreement is dated as of the ____ day of May, 2004 among iSECUREtrac,
Corp., a Delaware corporation (the "Company"), the Subscribers identified on
Schedule A hereto (each a "Subscriber" and collectively "Subscribers"), and
Grushko & Mittman, P.C. (the "Escrow Agent"):

                              W I T N E S S E T H:

      WHEREAS, the Company and Subscribers have entered into a Subscription
Agreement calling for the sale by the Company to the Subscriber of convertible
promissory notes ("Notes") for an aggregate purchase price of up to $2,500,000
and the issuance of Warrants in the amounts set forth on Schedule A hereto; and

      WHEREAS, the parties hereto require the Company to deliver the Notes and
Warrants against payment therefor, with such Notes, Warrants and the Escrowed
Funds to be delivered to the Escrow Agent to be held in escrow and released by
the Escrow Agent in accordance with the terms and conditions of this Agreement;
and

      WHEREAS, the Escrow Agent is willing to serve as escrow agent pursuant to
the terms and conditions of this Agreement;

      NOW THEREFORE, the parties agree as follows:

                                    ARTICLE I

                                 INTERPRETATION

      1.1. Definitions. Capitalized terms used and not otherwise defined herein
that are defined in the Subscription Agreement shall have the meanings given to
such terms in the Subscription Agreement. Whenever used in this Agreement, the
following terms shall have the following respective meanings:

            (a) "Agreement" means this Agreement and all amendments made hereto
and thereto by written agreement between the parties;

            (b) "A Warrants" shall have the meaning set forth in Section 3(a) of
the Subscription Agreement;

            (c) "B Warrants" shall have the meaning set forth in Section 3(b) of
the Subscription Agreement;

                  (d) "Broker" shall have the meaning set forth in Section 8 of
the Subscription Agreement;

                  (e) "Broker's Fee" shall have the meaning set forth in Section
8(a) of the Subscription Agreement;

            (f) "Broker's Warrants" shall have the meaning set forth in Section
8(b) of the Subscription Agreement;

            (g) "Closing Date" shall have the meaning set forth in Section 13(b)
of the Subscription Agreement;

                                       75
<PAGE>

            (h) "Escrowed Payment" means an aggregate cash payment of up to
$2,500,000 which is the Purchase Price as defined in the Subscription Agreement;

                  (i) "Legal Fees" shall have the meaning set forth in Section 8
of the Subscription Agreement;

                  (j) "Legal Opinion" means the original signed legal opinion
referred to in Section 6 of the Subscription Agreement;

                  (k) "Note" shall have the meaning set forth in the
Subscription Agreement;

                  (l) "Subscription Agreement" means the Subscription Agreement
(and the exhibits thereto) entered into or to be entered into by the parties in
reference to the sale and purchase of the Notes and Warrants;

                  (m) "Warrants" shall mean collectively the A Warrants and B
Warrants.

                  (n) Collectively, the executed Subscription Agreement executed
by the Company, the Notes, Warrants, Legal Opinion, and Broker's Warrants are
referred to as "Company Documents"; and

            (o) Collectively, the Escrowed Payment and the Subscription
Agreement executed by the Subscribers are referred to as "Subscriber Documents".

      1.2. Entire Agreement. This Agreement along with the Company Documents and
the Subscriber Documents constitute the entire agreement between the parties
hereto pertaining to the Company Documents and Subscriber Documents and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties. There are no warranties,
representations and other agreements made by the parties in connection with the
subject matter hereof except as specifically set forth in this Agreement, the
Company Documents and the Subscriber Documents.

      1.3. Extended Meanings. In this Agreement words importing the singular
number include the plural and vice versa; words importing the masculine gender
include the feminine and neuter genders. The word "person" includes an
individual, body corporate, partnership, trustee or trust or unincorporated
association, executor, administrator or legal representative.

      1.4. Waivers and Amendments. This Agreement may be amended, modified,
superseded, cancelled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by all parties, or, in the
case of a waiver, by the party waiving compliance. Except as expressly stated
herein, no delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any right, power or privilege hereunder preclude any
other or future exercise of any other right, power or privilege hereunder.

      1.5. Headings. The division of this Agreement into articles, sections,
subsections and paragraphs and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Agreement.

                                       76
<PAGE>

      1.6. Law Governing this Agreement. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
principles of conflicts of laws. Any action brought by either party against the
other concerning the transactions contemplated by this Agreement shall be
brought only in the state courts of New York or in the federal courts located in
the state of New York. Both parties and the individuals executing this Agreement
and other agreements on behalf of the Company agree to submit to the
jurisdiction of such courts and waive trial by jury. The prevailing party (which
shall be the party which receives an award most closely resembling the remedy or
action sought) shall be entitled to recover from the other party its reasonable
attorney's fees and costs. In the event that any provision of this Agreement or
any other agreement delivered in connection herewith is invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision of any agreement.

      1.7. Specific Enforcement, Consent to Jurisdiction. The Company and
Subscriber acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injuction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof or thereof, this being
in addition to any other remedy to which any of them may be entitled by law or
equity. Subject to Section 1.6 hereof, each of the Company and Subscriber hereby
waives, and agrees not to assert in any such suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction of such court, that
the suit, action or proceeding is brought in an inconvenient forum or that the
venue of the suit, action or proceeding is improper. Nothing in this Section
shall affect or limit any right to serve process in any other manner permitted
by law.

                                   ARTICLE II

                         DELIVERIES TO THE ESCROW AGENT

      2.1. Company Deliveries. Prior to the Closing Date, the Company shall
deliver to the Escrow Agent the executed Subscription Agreement, the Notes,
Warrants, Broker's Warrants, and Legal Opinion (collectively, the "Company
Documents").

      2.2. Subscriber Deliveries. On or before the Closing Date, each Subscriber
shall deliver to the Escrow Agent its portion of the Purchase Price, and the
executed Subscription Agreement. The Escrowed Payment will be delivered pursuant
to the following wire transfer instructions:

                                 Citibank, N.A.
                                 1155 6th Avenue
                             New York, NY 10036, USA
                             ABA Number: 0210-00089
              For Credit to: Grushko & Mittman, IOLA Trust Account
                            Account Number: 45208884

      2.3. Intention to Create Escrow Over Company Documents and Subscriber
Documents. The Subscriber and Company intend that the Company Documents and
Subscriber Documents shall be held in escrow by the Escrow Agent pursuant to
this Agreement for their benefit as set forth herein.

                                       77
<PAGE>

      2.4. Escrow Agent to Deliver Company Documents and Subscriber Documents.
The Escrow Agent shall hold and release the Company Documents and Subscriber
Documents only in accordance with the terms and conditions of this Agreement.

                                   ARTICLE III

              RELEASE OF COMPANY DOCUMENTS AND SUBSCRIBER DOCUMENTS

      3.1. Release of Escrow. Subject to the provisions of Section 4.2, the
Escrow Agent shall release the Company Documents and Subscriber Documents as
follows:

                  (a) On the Closing Date, the Escrow Agent will simultaneously
release the Company Documents to the Subscriber and release the Subscription
Agreement, and the Purchase Price to or for the benefit of the Company except
that the Legal Fees will be released to the Subscriber's attorneys, and the
Broker's Fee and Broker's Warrants will be released to or for the benefit of the
Broker.

            (b) All funds to be delivered to the Company shall be delivered
pursuant to the wire instructions to be provided in writing by the Company to
the Escrow Agent.

            (c) Notwithstanding the above, upon receipt by the Escrow Agent of
joint written instructions ("Joint Instructions") signed by the Company and the
Subscriber, it shall deliver the Company Documents and Subscriber Documents in
accordance with the terms of the Joint Instructions.

                  (d) Notwithstanding the above, upon receipt by the Escrow
Agent of a final and non-appealable judgment, order, decree or award of a court
of competent jurisdiction (a "Court Order"), the Escrow Agent shall deliver the
Company Documents and Subscriber Documents in accordance with the Court Order.
Any Court Order shall be accompanied by an opinion of counsel for the party
presenting the Court Order to the Escrow Agent (which opinion shall be
satisfactory to the Escrow Agent) to the effect that the court issuing the Court
Order has competent jurisdiction and that the Court Order is final and
non-appealable.

                  (e) In the event executed Subscription Agreements executed by
Subscribers for an aggregate Purchase Price of not less than $1,000,000 and
corresponding Escrowed Payments for an aggregate of not less than $1,000,000
have not been received by the Escrow Agent on or before June 30, 2004, then the
Escrow Agent shall immediately release the Company Documents to the Company and
release the Subscriber Documents and Escrowed Payments to the Subscribers.

      3.2. Acknowledgement of Company and Subscriber; Disputes. The Company and
the Subscriber acknowledge that the only terms and conditions upon which the
Company Documents and Subscriber Documents are to be released are set forth in
Sections 3 and 4 of this Agreement. The Company and the Subscriber reaffirm
their agreement to abide by the terms and conditions of this Agreement with
respect to the release of the Company Documents and Subscriber Documents. Any
dispute with respect to the release of the Company Documents and Subscriber
Documents shall be resolved pursuant to Section 4.2 or by agreement between the
Company and Subscriber.

                                   ARTICLE IV

                           CONCERNING THE ESCROW AGENT

                                       78
<PAGE>

      4.1. Duties and Responsibilities of the Escrow Agent. The Escrow Agent's
duties and responsibilities shall be subject to the following terms and
conditions:

      (a) The Subscriber and Company acknowledge and agree that the Escrow Agent
(i) shall not be responsible for or bound by, and shall not be required to
inquire into whether either the Subscriber or Company is entitled to receipt of
the Company Documents and Subscriber Documents pursuant to, any other agreement
or otherwise; (ii) shall be obligated only for the performance of such duties as
are specifically assumed by the Escrow Agent pursuant to this Agreement; (iii)
may rely on and shall be protected in acting or refraining from acting upon any
written notice, instruction, instrument, statement, request or document
furnished to it hereunder and believed by the Escrow Agent in good faith to be
genuine and to have been signed or presented by the proper person or party,
without being required to determine the authenticity or correctness of any fact
stated therein or the propriety or validity or the service thereof; (iv) may
assume that any person believed by the Escrow Agent in good faith to be
authorized to give notice or make any statement or execute any document in
connection with the provisions hereof is so authorized; (v) shall not be under
any duty to give the property held by Escrow Agent hereunder any greater degree
of care than Escrow Agent gives its own similar property; and (vi) may consult
counsel satisfactory to Escrow Agent, the opinion of such counsel to be full and
complete authorization and protection in respect of any action taken, suffered
or omitted by Escrow Agent hereunder in good faith and in accordance with the
opinion of such counsel.

      (b) The Subscriber and Company acknowledge that the Escrow Agent is acting
solely as a stakeholder at their request and that the Escrow Agent shall not be
liable for any action taken by Escrow Agent in good faith and believed by Escrow
Agent to be authorized or within the rights or powers conferred upon Escrow
Agent by this Agreement. The Subscriber and Company, jointly and severally,
agree to indemnify and hold harmless the Escrow Agent and any of Escrow Agent's
partners, employees, agents and representatives for any action taken or omitted
to be taken by Escrow Agent or any of them hereunder, including the fees of
outside counsel and other costs and expenses of defending itself against any
claim or liability under this Agreement, except in the case of gross negligence
or willful misconduct on Escrow Agent's part committed in its capacity as Escrow
Agent under this Agreement. The Escrow Agent shall owe a duty only to the
Subscriber and Company under this Agreement and to no other person.

      (c) The Subscriber and Company jointly and severally agree to reimburse
the Escrow Agent for outside counsel fees, to the extent authorized hereunder
and incurred in connection with the performance of its duties and
responsibilities hereunder.

      (d) The Escrow Agent may at any time resign as Escrow Agent hereunder by
giving five (5) days prior written notice of resignation to the Subscriber and
the Company. Prior to the effective date of the resignation as specified in such
notice, the Subscriber and Company will issue to the Escrow Agent a Joint
Instruction authorizing delivery of the Company Documents and Subscriber
Documents to a substitute Escrow Agent selected by the Subscriber and Company.
If no successor Escrow Agent is named by the Subscriber and Company, the Escrow
Agent may apply to a court of competent jurisdiction in the State of New York
for appointment of a successor Escrow Agent, and to deposit the Company
Documents and Subscriber Documents with the clerk of any such court.

      (e) The Escrow Agent does not have and will not have any interest in the
Company Documents and Subscriber Documents, but is serving only as escrow agent,
having only possession thereof. The Escrow Agent shall not be liable for any
loss resulting from the making or retention of any investment in accordance with
this Escrow Agreement.

                                       79
<PAGE>

      (f) This Agreement sets forth exclusively the duties of the Escrow Agent
with respect to any and all matters pertinent thereto and no implied duties or
obligations shall be read into this Agreement.

      (g) The Escrow Agent shall be permitted to act as counsel for the
Subscriber in any dispute as to the disposition of the Company Documents and
Subscriber Documents, in any other dispute between the Subscriber and Company,
whether or not the Escrow Agent is then holding the Company Documents and
Subscriber Documents and continues to act as the Escrow Agent hereunder.

      (h) The provisions of this Section 4.1 shall survive the resignation of
the Escrow Agent or the termination of this Agreement.

      4.2. Dispute Resolution: Judgments. Resolution of disputes arising under
this Agreement shall be subject to the following terms and conditions:

      (a) If any dispute shall arise with respect to the delivery, ownership,
right of possession or disposition of the Company Documents and Subscriber
Documents, or if the Escrow Agent shall in good faith be uncertain as to its
duties or rights hereunder, the Escrow Agent shall be authorized, without
liability to anyone, to (i) refrain from taking any action other than to
continue to hold the Company Documents and Subscriber Documents pending receipt
of a Joint Instruction from the Subscriber and Company, or (ii) deposit the
Company Documents and Subscriber Documents with any court of competent
jurisdiction in the State of New York, in which event the Escrow Agent shall
give written notice thereof to the Subscriber and the Company and shall
thereupon be relieved and discharged from all further obligations pursuant to
this Agreement. The Escrow Agent may, but shall be under no duty to, institute
or defend any legal proceedings which relate to the Company Documents and
Subscriber Documents. The Escrow Agent shall have the right to retain counsel if
it becomes involved in any disagreement, dispute or litigation on account of
this Agreement or otherwise determines that it is necessary to consult counsel.

      (b) The Escrow Agent is hereby expressly authorized to comply with and
obey any Court Order. In case the Escrow Agent obeys or complies with a Court
Order, the Escrow Agent shall not be liable to the Subscriber and Company or to
any other person, firm, corporation or entity by reason of such compliance.

                                    ARTICLE V

                                 GENERAL MATTERS

      5.1. Termination. This escrow shall terminate upon the release of all of
the Company Documents and Subscriber Documents or at any time upon the agreement
in writing of the Subscriber and Company.

      5.2. Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:

                                       80
<PAGE>

(a) If to the Company, to:

                           iSECUREtrac, Corp.
                           5022 South 114th Street, Suite 103
                           Omaha, NE 68137
                           Attn: Thomas E. Wharton, Jr., CEO and President
                           Fax: (402) 537-9847

         With a copy by telecopier only to:

                           John Heida, Esq.
                           c/o iSECUREtrac, Corp.
                           5022 South 114th Street, Suite 103
                           Omaha, NE 68137
                           Fax: (402) 537-9847

(b) If to the Subscribers, to: the addresses and fax numbers listed on Schedule
A hereto

(c) If to the Broker, to:

                           Corpfin.com, Inc.
                           555 North Point Center East, 4th Floor
                           Alpharetta, GA 30022
                           Attn: John C. Canouse
                           Fax: (678) 366-4424

(d) If to the Escrow Agent, to:

                           Grushko & Mittman, P.C.
                           551 Fifth Avenue, Suite 1601
                           New York, New York 10176
                           Fax: 212-697-3575

or to such other address as any of them shall give to the others by notice made
pursuant to this Section 5.2.

      5.3. Interest. The Escrowed Payment shall not be held in an interest
bearing account nor will interest be payable in connection therewith. In the
event the Escrowed Payment is deposited in an interest bearing account, each
Subscriber shall be entitled to receive its pro rata portion of any accrued
interest thereon, but only if the Escrow Agent receives from such Subscriber the
Subscriber's United States taxpayer identification number and other requested
information and forms.

      5.4. Assignment; Binding Agreement. Neither this Agreement nor any right
or obligation hereunder shall be assignable by any party without the prior
written consent of the other parties hereto. This Agreement shall enure to the
benefit of and be binding upon the parties hereto and their respective legal
representatives, successors and assigns.

                                       81
<PAGE>

      5.5. Invalidity. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal, or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.

      5.6. Counterparts/Execution. This Agreement may be executed in any number
of counterparts and by different signatories hereto on separate counterparts,
each of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument. This Agreement
may be executed by facsimile transmission and delivered by facsimile
transmission.

      5.7. Agreement. Each of the undersigned states that he has read the
foregoing Funds Escrow Agreement and understands and agrees to it.

                                                    iSECUREtrac, Corp.
                                                    the "Company"

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

                                                    ----------------------------
                                                    (Print Name of Subscriber)

                                                    ----------------------------
                                                    (Signature of Subscriber)

                                                     ESCROW AGENT:

                                                     ---------------------------
                                                     GRUSHKO & MITTMAN, P.C.

                                       82
<PAGE>

                      SCHEDULE A TO FUNDS ESCROW AGREEMENT

------------------------ --------------------------- -------------- ------------
SUBSCRIBER               PURCHASE PRICE and          A WARRANTS     B WARRANTS
                         PRINCIPAL AMOUNT OF NOTE
------------------------ --------------------------- -------------- ------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                       83
<PAGE>

                             [FORM OF LEGAL OPINION]

May , 2004 ---- TO THE SUBSCRIBERS LISTED ON SCHEDULE A HERETO:

      We have acted as counsel to iSECUREtrac, Corp., a Delaware corporation
(the "Company") in connection with the offer and sale by the Company of shares
of the Company's $.001 par value common stock ("Common Stock") and issuance of A
and B common stock purchase warrants to purchase shares of Common Stock
(collectively "Warrants") in the amounts set forth on Schedule A, to the
Subscribers identified thereto, pursuant to the exemption from registration
under the Securities Act of 1933, as amended (the "Act) as set forth in
Regulation D ("Regulation D") promulgated thereunder. Capitalized terms used
herein and not otherwise defined shall have the meaning assigned to them in the
subscription agreement (the "Agreement") by and between the Company and
(Subscriber) (the "Purchaser") entered into at or about the date hereof. The
Agreement, and the agreements described below are sometimes hereinafter referred
to collectively as the "Documents".

      In connection with the opinions expressed herein, we have made such
examination of law as we considered appropriate or advisable for purposes
hereof. As to matters of fact material to the opinions expressed herein, we have
relied, with your permission, upon the representations and warranties as to
factual matters contained in and made by the Company and the Purchaser pursuant
to the Documents and upon certificates and statements of certain government
officials and of officers of the Company as described below. We have also
examined originals or copies of certain corporate documents or records of the
Company as described below:

         (a)      Form of Agreement
         (b)      Form of Common Stock Certificate
         (c)      Form of A Warrant
         (d)      Form of B Warrant
         (e)      Form of Broker's Warrant
         (f)      Funds Escrow Agreement
         (h)      Certificate of Incorporation of the Company (i) Bylaws of the
                  Company
         (j)      Minutes of the action of the Company's Board of Directors,
                  including unanimous Board of Directors approval of the
                  Documents, a copy of which is annexed hereto.

      In rendering this opinion, we have, with your permission, assumed: (a) the
authenticity of all documents submitted to us as originals; (b) the conformity
to the originals of all documents submitted to us as copies; (c) the genuiness
of all signatures; (d) the legal capacity of natural persons; (e) the truth,
accuracy and completeness of the information, factual matters, representations
and warranties contained in all of such documents; (f) the due authorization,
execution and delivery of all such documents by Subscribers, and the legal,
valid and binding effect thereof on Subscribers; and (g) that the Company and
the Purchasers will act in accordance with their respective representations and
warranties as set forth in the Documents.

      We are members of the bar of the State of Delaware and New York. We
express no opinion as to the laws of any jurisdiction other than Delaware, New
York and the federal laws of the United States of America. We express no opinion
with respect to the effect or application of any other laws. Special rulings of
authorities administering any of such laws or opinions of other counsel have not
been sought or obtained by us in connection with rendering the opinions
expressed herein.

                                       84
<PAGE>

      1. The Company and each of its subsidiaries is duly incorporated, validly
existing and in good standing in the states of their incorporation; have
qualified to do business in each state where required unless the failure to do
so would not have a material impact in the Company's operations; and have the
requisite corporate power and authority to conduct their business, and to own,
lease and operate their properties.

      2. The Company has the requisite corporate power and authority to execute,
deliver and perform its obligations under the Documents. The Documents, and the
issuance of the Common Stock and Warrants and the reservation and issuance of
Common Stock issuable upon exercise of the Warrants ("Warrant Shares") have been
duly approved by the Board of Directors of the Company, and no further consent
or authorization of the Company or Board of Directors or stockholders is
required.

      3. The execution, delivery and performance of the Documents by the Company
and the consummation of the transactions contemplated thereby, will not, with or
without the giving of notice or the passage of time or both:

            (a) Violate the provisions of the Certificate of Incorporation or
bylaws of the Company; or

            (b) Conflict with, or constitute a material default (or an event
that with notice or lapse of time or both would become a default) under, require
a consent under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture, instrument
or any "lock-up", refusal or similar provision of any underwriting or similar
agreement to which the Company is a party; or

            (c) Result in a violation of any federal or state law, rule or
regulation or any rule or regulation of the Principal Market applicable to the
Company or by which any property or asset of the Company is bound or affected,
except for such violations as would not, individually or in the aggregate, have
a material adverse effect.

      4. The Documents constitute the valid and legally binding obligations of
the Company and are enforceable against the Company in accordance with their
respective terms.

      5. The issuance of the Common Shares, the Warrants (and Warrant Shares
upon exercise thereof) in accordance with the Subscription Agreement will be
exempt from registration under the Securities Act of 1933, as amended. When so
issued, the Warrants, Warrant Shares and Common Shares will be duly and validly
issued, fully paid and nonassessable, and free of any liens, encumbrances and
preemptive or similar rights contained in the Company's Certificate of
Incorporation or Bylaws or, to our knowledge, in any agreement to which the
Company is party.

      6. The Company has either obtained the approval of the transactions
described in the Documents from the OTC Bulletin Board or no such approval is
required.

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

                                       85
<PAGE>

      8. The authorized capital stock of the Company consists of ___________
shares of Common Stock, $_____ par value, of which ________ shares are issued
and outstanding and _________ shares of Preferred Stock, $______ par value, of
which _______ shares are issued and outstanding.

      9. To our knowledge, the Company is not a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality.

      Our opinions expressed above are specifically subject to the following
limitations, exceptions, qualifications and assumptions:

      A. The effect of bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting the relief of debtors or the rights
and remedies of creditors generally, including without limitation the effect of
statutory or other law regarding fraudulent conveyances and preferential
transfers.

      B. Limitations imposed by state law, federal law or general equitable
principles upon the specific enforceability of any of the remedies, covenants or
other provisions of any applicable agreement and upon the availability of
injunctive relief or other equitable remedies, regardless of whether enforcement
of any such agreement is considered in a proceeding in equity or at law.

      C. This opinion letter is governed by, and shall be interpreted in
accordance with, the Legal Opinion Accord (the "Accord") of the ABA Section of
Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, including the
General Qualifications and the Equitable Principles Limitation, and this opinion
letter should be read in conjunction therewith.

      This opinion is rendered as of the date first written above, is solely for
your benefit in connection with the Agreement and may not be relief upon or used
by, circulated, quoted, or referred to nor may any copies hereof by delivered to
any other person without our prior written consent. We disclaim any obligation
to update this opinion letter or to advise you of facts, circumstances, events
or developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinions expressed herein.

                                                               Very truly yours,

                                       86
<PAGE>

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

                                CONVERTIBLE NOTE

      FOR VALUE RECEIVED, ISECURETRAC, CORP., a Delaware corporation
      (hereinafter called "Borrower"), hereby promises to pay to
      ___________________________________________,
      _________________________________________________________ (the "Holder")
      or order, without demand, the sum of __________________________________
      Dollars ($___________), with simple interest accruing at the annual rate
      of 4%, on May ____, 2006 (the "Maturity Date").

      This Note has been entered into pursuant to the terms of a subscription
agreement between the Borrower and the Holder, dated of even date herewith (the
"Subscription Agreement"), and shall be governed by the terms of such
Subscription Agreement. Unless otherwise separately defined herein, all
capitalized terms used in this Note shall have the same meaning as is set forth
in the Subscription Agreement. The following terms shall apply to this Note:

                                    ARTICLE I

                               GENERAL PROVISIONS

      1.1 Payment Grace Period. The Borrower shall have a ten (10) day grace
period to pay any monetary amounts due under this Note, after which grace period
a default interest rate of fifteen percent (15%) per annum shall apply to the
amounts owed hereunder.

      1.2 Conversion Privileges. The Conversion Privileges set forth in Article
II shall remain in full force and effect immediately from the date hereof and
until the Note is paid in full regardless of the occurrence of an Event of
Default. The Note shall be payable in full on the Maturity Date, unless
previously converted into Common Stock in accordance with Article II hereof;
provided, that if an Event of Default has occurred (whether or not such Event of
Default is continuing), the Borrower may not pay this Note on or after the
Maturity Date, without the consent of the Holder.

      1.3 Interest Rate. Simple interest payable on this Note shall accrue at
the annual rate of four percent (4%) and be payable upon each Conversion,
January 1, 2005 and semi-annually thereafter, and on the Maturity Date,
accelerated or otherwise, when the principal and remaining accrued but unpaid
interest shall be due and payable, or sooner as described below.

                                       87
<PAGE>

                                   ARTICLE II

                                CONVERSION RIGHTS

      The Holder shall have the right to convert the principal due under this
Note into Shares of the Borrower's Common Stock, $.001 par value per share
("Common Stock") as set forth below.

      2.1. Conversion into the Borrower's Common Stock.

      (a) The Holder shall have the right from and after the date of the
issuance of this Note and then at any time until this Note is fully paid, to
convert any outstanding and unpaid principal portion of this Note, and accrued
interest, at the election of the Holder (the date of giving of such notice of
conversion being a "Conversion Date") into fully paid and nonassessable shares
of Common Stock as such stock exists on the date of issuance of this Note, or
any shares of capital stock of Borrower into which such Common Stock shall
hereafter be changed or reclassified, at the conversion price as defined in
Section 2.1(b) hereof (the "Conversion Price"), determined as provided herein.
Upon delivery to the Borrower of a Notice of Conversion as described in Section
7 of the Subscription Agreement of the Holder's written request for conversion,
Borrower shall issue and deliver to the Holder within five (5) business days
from the Conversion Date ("Delivery Date") that number of shares of Common Stock
for the portion of the Note converted in accordance with the foregoing. At the
election of the Holder, the Borrower will deliver accrued but unpaid interest on
the Note in the manner provided in Section 1.3 through the Conversion Date
directly to the Holder on or before the Delivery Date (as defined in the
Subscription Agreement). The number of shares of Common Stock to be issued upon
each conversion of this Note shall be determined by dividing that portion of the
principal of the Note and interest to be converted, by the Conversion Price.

      (b) Subject to adjustment as provided in Section 2.1(c) hereof, the
Conversion Price per share shall be $0.22 ("Maximum Base Price").

      (c) The Maximum Base Price and number and kind of shares or other
securities to be issued upon conversion determined pursuant to Section 2.1(a),
shall be subject to adjustment from time to time upon the happening of certain
events while this conversion right remains outstanding, as follows:

                  A. Merger, Sale of Assets, etc. If the Borrower at any time
shall consolidate with or merge into or sell or convey all or substantially all
its assets to any other corporation, this Note, as to the unpaid principal
portion thereof and accrued interest thereon, shall thereafter be deemed to
evidence the right to purchase such number and kind of shares or other
securities and property as would have been issuable or distributable on account
of such consolidation, merger, sale or conveyance, upon or with respect to the
securities subject to the conversion or purchase right immediately prior to such
consolidation, merger, sale or conveyance. The foregoing provision shall
similarly apply to successive transactions of a similar nature by any such
successor or purchaser. Without limiting the generality of the foregoing, the
anti-dilution provisions of this Section shall apply to such securities of such
successor or purchaser after any such consolidation, merger, sale or conveyance.

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

                                       88
<PAGE>

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

      D. Share Issuance. So long as this Note is outstanding, if the Borrower
shall issue any Common Stock except for the Excepted Issuances (as defined in
the Subscription Agreement), prior to the complete conversion of this Note for a
consideration less than the Conversion Price that would be in effect at the time
of such issue, then, and thereafter successively upon each such issue, the
Conversion Price shall be reduced to such other lower issue price. For purposes
of this adjustment, the issuance of any security or debt instrument of the
Borrower carrying the right to convert such security or debt instrument into
Common Stock or of any warrant, right or option to purchase Common Stock shall
result in an adjustment to the Conversion Price upon the issuance of the
above-described security, debt instrument, warrant, right, or option. The
reduction of the Conversion Price described in this paragraph is in addition to
the other rights of the Holder described in the Subscription Agreement.

      E. For purposes of Section 2.1(c)(D) above, Fair Market Value of a share
of Common Stock as of a particular date (the "Determination Date") shall mean
the Fair Market Value of a share of the Borrower's Common Stock. Fair Market
Value of a share of Common Stock as of a Determination Date shall mean:

                  (i) If the Borrower's Common Stock is traded on an exchange or
is quoted on the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") National Market System, the NASDAQ SmallCap Market or the
American Stock Exchange, Inc., then the closing or last sale price,
respectively, reported for the last business day immediately preceding the
Determination Date.

                  (ii) If the Borrower's Common Stock is not traded on an
exchange or on the NASDAQ National Market System, the NASDAQ SmallCap Market or
the American Stock Exchange, Inc., but is traded in the over-the-counter market,
then the mean of the closing bid and asked prices reported for the last business
day immediately preceding the Determination Date.

                  (iii) Except as provided in clause (iv) below, if the
Borrower's Common Stock is not publicly traded, then as the Holder and the
Borrower agree or in the absence of agreement by arbitration in accordance with
the rules then standing of the American Arbitration Association, before a single
arbitrator to be chosen from a panel of persons qualified by education and
training to pass on the matter to be decided.

                                       89
<PAGE>

                  (iv) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation, dissolution
or winding up pursuant to the Borrower's charter, then all amounts to be payable
per share to holders of the Common Stock pursuant to the charter in the event of
such liquidation, dissolution or winding up, plus all other amounts to be
payable per share in respect of the Common Stock in liquidation under the
charter, assuming for the purposes of this clause (iv) that all of the shares of
Common Stock then issuable upon exercise of all of the Warrants are outstanding
at the Determination Date.

      (d) Whenever the Conversion Price is adjusted pursuant to Section 2.1(c)
above, the Borrower shall promptly deliver to the Holder a notice setting forth
the Conversion Price after such adjustment and setting forth a brief statement
of the facts requiring such adjustment.

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

      (f) The terms of this Note are modifiable by the Holder pursuant to but
not limited to Section 12(c) of the Subscription Agreement.

      2.2 Method of Conversion. This Note may be converted by the Holder in
whole or in part as described in Section 2.1(a) hereof and the Subscription
Agreement. Upon partial conversion of this Note, a new Note containing the same
date and provisions of this Note shall, at the request of the Holder, be issued
by the Borrower to the Holder for the principal balance of this Note and
interest which shall not have been converted or paid.

      2.3 Maximum Conversion. The Holder shall not be entitled to convert on a
Conversion Date that amount of the Note in connection with that number of shares
of Common Stock which would be in excess of the sum of (i) the number of shares
of Common Stock beneficially owned by the Holder and its affiliates on a
Conversion Date, (ii) any Common Stock issuable in connection with the
unconverted portion of the Note, and (iii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of this provision is being made on a Conversion Date, which would result in
beneficial ownership by the Holder and its affiliates of more than 9.99% of the
outstanding shares of Common Stock of the Borrower on such Conversion Date. For
the purposes of the provision 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 Regulation 13d-3 thereunder. Subject to
the foregoing, the Holder shall not be limited to aggregate conversions of only
9.99% and aggregate conversion by the Holder may exceed 9.99%. The Holder shall
have the authority and obligation to determine whether the restriction contained
in this Section 2.3 will limit any conversion hereunder and to the extent that
the Holder determines that the limitation contained in this Section applies, the
determination of which portion of the Notes are convertible shall be the
responsibility and obligation of the Holder. The Holder may void the conversion
limitation described in this Section 2.3 upon and effective after 61 days prior
written notice to the Borrower. The Holder may allocate which of the equity of
the Borrower deemed beneficially owned by the Holder shall be included in the
9.99% amount described above and which shall be allocated to the excess above
9.99%.

                                       90
<PAGE>

      2.4 Mandatory Conversion. Provided an Event of Default as described in
this Note has not occurred, then the Borrower shall have the option to
mandatorily convert the outstanding principal amount of this Note upon ten (10)
days notice (such tenth day being the "Mandatory Conversion Date") to the Holder
of this Note ("Mandatory Conversion Notice"). A Mandatory Conversion Notice may
be given by the Borrower only within ten trading days after the Common Stock has
had a closing price as reported for the Principal Market (as defined in the
Subscription Agreement) of not less than one hundred and seventy-five percent
(175%) of the Conversion Price for ten (10) consecutive trading days. Unless
otherwise agreed to by the Holder of this Note, a Mandatory Redemption Notice
must be given to all Holders who hold Notes similar to this Note (in terms of
Conversion Price and other principal terms) issued on or about the same date as
this Note, in proportion to the amounts of Common Stock which may be purchased
by the respective Holders in accordance with the respective Notes held by each.
The Mandatory Conversion Date shall be deemed the Delivery Date and the Holder
shall have all of the rights of the Holder vis-a-vis the Mandatory Conversion
Date as if such date were the Delivery Date.

                                   ARTICLE III

                                EVENT OF DEFAULT

      The occurrence of any of the following events of default ("Event of
Default") shall, at the option of the Holder hereof, make all sums of principal
and interest then remaining unpaid hereon and all other amounts payable
hereunder immediately due and payable, upon demand, without presentment, or
grace period, all of which hereby are expressly waived, except as set forth
below:

      3.1 Failure to Pay Principal or Interest. The Borrower fails to pay any
installment of principal, interest or other sum due under this Note when due and
such failure continues for a period of ten (10) days after the due date. The ten
(10) day period described in this Section 3.1 is the same ten (10) day period
described in Section 1.1 hereof.

      3.2 Breach of Covenant. The Borrower breaches any material covenant or
other term or condition of the Subscription Agreement or this Note in any
material respect and such breach, if subject to cure, continues for a period of
ten (10) business days after written notice to the Borrower from the Holder.

      3.3 Breach of Representations and Warranties. Any material representation
or warranty of the Borrower made herein, in the Subscription Agreement, or in
any agreement, statement or certificate given in writing pursuant hereto or in
connection therewith shall be false or misleading in any material respect as of
the date made and the Closing Date.

      3.4 Receiver or Trustee. 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.

      3.5 Judgments. Any money judgment, writ or similar final process shall be
entered or filed against 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 forty-five (45) days.

      3.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or any law,
or the issuance of any notice in relation to such event, for the relief of
debtors shall be instituted by or against the Borrower and if instituted against
Borrower are not dismissed within 45 days of initiation.

                                       91
<PAGE>

      3.7 Delisting. Delisting of the Common Stock from the OTC Bulletin Board
("OTCBB") or such other principal exchange on which the Common Stock is listed
for trading; failure to comply with the requirements for continued listing on
the OTCBB for a period of three consecutive trading days; or notification from
the OTCBB or any Principal Market that the Borrower is not in compliance with
the conditions for such continued listing on the OTCBB or other Principal
Market.

      3.8 Stop Trade. An SEC or judicial stop trade order or Principal Market
trading ---------- suspension that lasts for five or more consecutive trading
days.

      3.9 Failure to Deliver Common Stock or Replacement Note. Borrower's
failure to timely deliver Common Stock to the Holder pursuant to and in the form
required by this Note and Sections 7 and 11 of the Subscription Agreement, or,
if required, a replacement Note.

      3.10 Non-Registration Event. The occurrence of a Non-Registration Event as
described in Section 11.4 of the Subscription Agreement.

      3.11 Cross Default. A default by the Borrower of a material term,
covenant, warranty or undertaking of any other agreement to which the Borrower
and Holder are parties, or the occurrence of a material event of default under
any such other agreement, in each case, which is not cured after any required
notice and/or cure period.

                                   ARTICLE IV

                                  MISCELLANEOUS

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

      4.2 Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Borrower to: iSECUREtrac, Corp.,
5022 South 114th Street, Suite 103, Omaha, NE 68137, Attn: Thomas E. Wharton,
Jr., CEO and President, telecopier: (402) 537-9847, with a copy by telecopier
only to: John Heida, Esq., c/o iSECUREtrac, Corp., 5022 South 114th Street,
Suite 103, Omaha, NE 68137, telecopier: (402) 537-9847, and (ii) if to the
Holder, to the name, address and telecopy number set forth on the front page of
this Note, with a copy by telecopier only to Grushko & Mittman, P.C., 551 Fifth
Avenue, Suite 1601, New York, New York 10176, telecopier number: (212) 697-3575.

                                       92
<PAGE>

      4.3 Amendment Provision. The term "Note" and all reference thereto, as
used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented.

      4.4 Assignability. This Note shall be binding upon the Borrower and its
successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns.

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

      4.6 Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York. Any action brought by either
party against the other concerning the transactions contemplated by this
Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state of New York. Both parties and the individual
signing this Agreement on behalf of the Borrower agree to submit to the
jurisdiction of such courts. The prevailing party shall be entitled to recover
from the other party its reasonable attorney's fees and costs.

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

      4.8 Redemption. This Note may not be redeemed or paid without the consent
of the Holder.

      4.9 Shareholder Status. The Holder shall not have rights as a shareholder
of the Borrower with respect to unconverted portions of this Note. However, the
Holder will have the right of a shareholder of the Borrower with respect to the
Shares of Common Stock to be received after delivery by the Holder of a
Conversion Notice to the Borrower.

                      [THIS SPACE INTENTIONALLY LEFT BLANK]

                                       93
<PAGE>

      IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name
by an authorized officer as of the ____ day of May, 2004.

                                                    ISECURETRAC, CORP.

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

WITNESS:

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

                                       94
<PAGE>

                              NOTICE OF CONVERSION

(To be executed by the Registered Holder in order to convert the Note)

      The undersigned hereby elects to convert $_________ of the principal and
$_________ of the interest due on the Note issued by ISECURETRAC, CORP. on May
____, 2004 into Shares of Common Stock of ISECURETRAC, CORP. (the "Borrower")
according to the conditions set forth in such Note, as of the date written
below.

Date of Conversion:_____________________________________________________________

Conversion Price:_______________________________________________________________

Shares To Be Delivered:_________________________________________________________

Signature:______________________________________________________________________

Print Name:_____________________________________________________________________

Address:________________________________________________________________________

                                       95EXHIBIT 10.16

THIS NOTE AND THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR IN ANY OTHER JURISDICTION. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES
LAWS UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THOSE LAWS.

                  10% SUBORDINATED CONVERTIBLE PROMISSORY NOTE

Date: October 9, 2003                                                $300,000.00

      FOR VALUE RECEIVED, iSECUREtrac, Corp. a corporation organized under the
laws of Delaware (the "Borrower"), hereby promises to pay to the order of
MicroCapital Fund Ltd., a Cayman Islands corporation, or its registered assigns
(the "Holder"), the sum of three hundred thousand dollars ($300,000.00) on
October 9, 2008 (the "Scheduled Maturity Date"), and to pay interest on the
unpaid principal balance hereof at the rate of ten percent (10%), as provided in
Article I below.

      The term "Note" and all references thereto, as used throughout this
instrument, shall mean this instrument as originally executed, or if later
amended or supplemented, then as so amended or supplemented, issued in respect
hereof pursuant to that certain Securities Purchase Agreement, of even date
herewith, between Borrower and Holder thereto (the "Securities Purchase
Agreement"). The Note, the Securities Purchase Agreement and the Registration
Rights Agreement, of even date herewith, between Borrower and Holder (the
"Registration Rights Agreement") are collectively referred to herein as the
"Transaction Documents." All capitalized terms used but not otherwise defined
herein shall have the respective meanings assigned to such terms in the
Securities Purchase Agreement.

                                   ARTICLE I
                        PAYMENT OF PRINCIPAL AND INTEREST

      A. Payment of Interest. Interest shall accrue on the unpaid principal
balance hereof from the Issuance Date until the same is paid, whether at
maturity, or upon prepayment, repayment, conversion or otherwise. Interest shall
be calculated based on a 365-day year and shall be payable quarterly in arrears
on March 31, June 30, September 30, and December 31 of each year (each, an
"Interest Payment Date"), commencing on December 31, 2003. Payment of each
installment of interest due hereunder shall be made in cash.

      B. Payment of Principal. The principal amount hereof, together with all
accrued and unpaid interest thereon, shall be due and payable on the Scheduled
Maturity Date. Payment of principal and accrued interest on the Scheduled
Maturity Date shall be made in cash.

<PAGE>

      C. Prepayment. Except as and to the extent otherwise provided herein, no
amounts of principal or interest due hereunder may be prepaid by Borrower
without the prior written consent of Holder.

      D. Manner of Payments. All cash payments of principal and interest shall
be made in, and all references herein to monetary denominations shall refer to,
lawful money of the United States of America. All payments shall be made at such
address as Holder shall have given or shall hereafter give to Borrower by
written notice made in accordance with the provisions of this Note. If any cash
payment to be made hereunder shall be due on a day other than a business day,
such payment shall be made on the next succeeding business day and such
extension of time shall be included in computing interest in connection with
such payment. If any payment due hereunder is not made when due, Holder shall
thereafter be entitled to interest on the amount of such delinquent payment at a
per annum rate equal to the lower of eighteen percent (18%) and the highest
interest rate permitted by applicable law until such amount is paid in full.

                                   ARTICLE II
                                   CONVERSION

      E. Conversion at the Option of Holder. Subject to the limitations on
conversions contained in Article VIII, Holder may, following ninety (90) days
after Closing Date, at any time and from time to time, convert (an "Optional
Conversion") all or any portion of the unpaid principal amount hereof and any
accrued interest thereon into a number of fully paid and non-assessable shares
of Common Stock as is equal to the quotient obtained by dividing (x) the amount
of principal and interest being so converted by (y) the Conversion Price then in
effect.

      F. Mechanics of Conversion. In order to effect an Optional Conversion,
Holder shall: (x) fax (or otherwise deliver) a copy of the fully executed Notice
of Conversion to Borrower (Attention: Secretary) and (y) surrender or cause to
be surrendered this Note, duly endorsed, along with a copy of the Notice of
Conversion as soon as practicable thereafter to Borrower. Upon receipt by
Borrower of a facsimile copy of a Notice of Conversion from Holder, Borrower
shall promptly send, via facsimile, a confirmation to Holder stating that the
Notice of Conversion has been received, the date upon which Borrower expects to
deliver the Common Stock issuable upon such conversion and the name and
telephone number of a contact person at Borrower regarding the conversion.
Borrower shall not be obligated to issue shares of Common Stock upon a
conversion unless this Note is delivered to Borrower as provided above, or
Holder notifies Borrower that this Note has been lost, stolen or destroyed and
delivers the documentation to Borrower required by Article X.B hereof.

            (i) Delivery of Common Stock Upon Conversion. Upon the surrender of
this Note accompanied by a Notice of Conversion, Borrower (itself, or through
its transfer agent) shall, no later than the later of (a) the second business
day following the Conversion Date and (b) the business day following the date of
such surrender (or, in the case of lost, stolen or destroyed certificates, after
provision of indemnity pursuant to Article X.B) (the "Delivery Period"), issue
and deliver (i.e., deposit with a nationally recognized overnight courier
service postage prepaid) to Holder or its nominee (x) that number of shares of
Common Stock issuable upon conversion of that portion of this Note being
converted and (y) a new Note representing the principal balance of this Note not
being converted, if any. Notwithstanding the foregoing, if Borrower's transfer
agent is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer program, and so long as the certificates therefor do not
bear a legend (pursuant to the terms of the Securities Purchase Agreement) and
Holder thereof is not then required to return such certificate for the placement
of a legend thereon (pursuant to the terms of the Securities Purchase
Agreement), Borrower shall cause its transfer agent to promptly electronically
transmit the Common Stock issuable upon conversion to Holder by crediting the
account of Holder or its nominee with DTC through its Deposit Withdrawal Agent
Commission system ("DTC Transfer"). If the aforementioned conditions to a DTC
Transfer are not satisfied, Borrower shall deliver as provided above to Holder
physical certificates representing the Common Stock issuable upon conversion.
Further, Holder may instruct Borrower to deliver to Holder physical certificates
representing the Common Stock issuable upon conversion in lieu of delivering
such shares by way of DTC Transfer.

<PAGE>

            (ii) Taxes. Borrower shall pay any and all taxes that may be imposed
upon it with respect to the issuance and delivery of the shares of Common Stock
upon the conversion of this Note.

            (iii) No Fractional Shares. If any conversion of this Note would
result in the issuance of a fractional share of Common Stock (aggregating the
entire amount of principal and interest being converted pursuant to a given
Notice of Conversion), such fractional share shall be payable in cash based upon
the Closing Sales Price of the Common Stock at such time, and the number of
shares of Common Stock issuable upon conversion of this Note shall be the next
lower whole number of shares.

            (iv) Conversion Disputes. In the case of any dispute with respect to
a conversion, Borrower shall promptly issue such number of shares of Common
Stock as are not disputed in accordance with subparagraph (i) above. If such
dispute involves the calculation of the Conversion Price, and such dispute is
not promptly resolved by discussion between Holder and Borrower, Borrower shall
submit the disputed calculations to an independent outside accountant (which
accountant shall be subject to the reasonable approval of Holder) via facsimile
within three business days of receipt of the Notice of Conversion. The
accountant shall promptly audit the calculations and notify Borrower and Holder
of the results no later than three business days from the date it receives the
disputed calculations. The accountant's calculation shall be deemed conclusive,
absent manifest error, and the party whose proposed calculation is further from
the calculation determined by the accountant shall bear all of the accountant's
expenses. Borrower shall then issue the appropriate number of shares of Common
Stock in accordance with subparagraph (i) above.

            (v) Payment of Accrued Amounts. Upon conversion of any unpaid
principal amount of this Note, all accrued interest on such amount through and
including the Conversion Date shall be paid on the Conversion Date in accordance
with one of the permitted payment methods set forth in Article I.A above.

      G. Mandatory Conversion into Common Stock. Subject to the limitations on
conversion contained in Article VIII, if at any time following the second
anniversary of the Issuance Date all of the Required Conditions are satisfied,
then, at the option of Borrower exercisable by the delivery of written notice to
Holder, delivered at least ten (10) days prior to the Conversion Date stated in
such notice, convert all, but not less than all, of the Notes originally issued
by Borrower and any of its related entities into a number of fully paid and
non-assessable shares of Common Stock determined in accordance with the formula
set forth in Paragraph A of this Article II (a "Mandatory Conversion").
Thereafter, Borrower and Holder shall follow the applicable conversion
procedures set forth in Article II.B; provided, however, Holder shall not be
required to deliver a Notice of Conversion to Borrower in order for Borrower to
effect a Mandatory Conversion. In the event that Borrower is prohibited from
issuing shares of Common Stock upon a Mandatory Conversion pursuant to this
Article II.C as a result of the operation of the limitations set forth in
Article VIII, Borrower shall pay to each Holder an amount of cash equal to the
Closing Sales Price of the Common Stock on the Conversion Date multiplied by the
number of shares of Common Stock that Borrower is prohibited from issuing to
such Holder as a result of the operation of the limitations set forth in Article
VIII.

<PAGE>

                                  ARTICLE III
                      RESERVATION OF SHARES OF COMMON STOCK

      H. Reserved Amount. On or prior to the Issuance Date, Borrower shall
reserve a minimum of 2,000,000 shares of its authorized but unissued shares of
Common Stock for issuance upon conversion of the Notes pursuant to Article II,
and, thereafter, the number of authorized but unissued shares of Common Stock so
reserved (the "Reserved Amount") shall at all times be sufficient to provide for
the full conversion of the Notes at the then current Conversion Price thereof
(without giving effect to the limitations contained in Article VIII).

      I. Increases to Reserved Amount. If the Reserved Amount for any three
consecutive trading days (the last of such three trading days being the
"Authorization Trigger Date") shall be less than one hundred percent (100%) of
the number of shares of Common Stock issuable upon full conversion of all then
outstanding Notes (without giving effect to the limitations contained in Article
VIII), Borrower shall immediately notify Holder of such occurrence and shall
take immediate action (including, if necessary, seeking stockholder approval to
authorize the issuance of additional shares of Common Stock) to increase the
Reserved Amount to one hundred percent (100%) of the number of shares of Common
Stock then issuable upon full conversion of the Notes at the then current
Conversion Price (without giving effect to the limitations contained in Article
VIII). In the event Borrower fails to so increase the Reserved Amount within 90
days after an Authorization Trigger Date, Holder shall thereafter have the
option, exercisable in whole or in part at any time and from time to time, by
delivery of a Default Notice to Borrower, to require Borrower to prepay in cash,
for an amount equal to the Default Amount (as defined in Article V.B), that
portion of the unpaid principal amount hereof and accrued interest thereon such
that, after giving effect to such prepayment, the then unissued portion of
Holder's Reserved Amount is at least equal to one hundred percent (100%) of the
total number of shares of Common Stock issuable upon conversion of this Note by
Holder. If Borrower fails to prepay any portion of this Note as required hereby
within five business days after its receipt of such Default Notice, then Holder
shall be entitled to the remedies provided in Article V.C.

                                   ARTICLE IV
                         FAILURE TO SATISFY CONVERSIONS

      J. Conversion Defaults. If, at any time, (i) Holder submits a Notice of
Conversion and Borrower fails for any reason to deliver, on or prior to the
fifth business day following the expiration of the Delivery Period for such
conversion, such number of freely tradable shares of Common Stock to which
Holder is entitled upon such conversion, or (ii) Borrower provides written
notice to Holder (or makes a public announcement via press release) at any time
of its intention not to issue freely tradable shares of Common Stock upon
exercise by Holder of their conversion rights in accordance with the terms of
the Note (each of (i) and (ii) being a "Conversion Default"), then Holder may
elect, at any time and from time to time prior to the Default Cure Date for such
Conversion Default, by delivery of a Default Notice to Borrower, to have all or
any portion of the unpaid principal amount hereof and accrued interest thereto
prepaid by Borrower in cash, for an amount per share equal to the Default Amount
(as defined in Article V.B). If Borrower fails to prepay any portion of this
Note as required hereby within five business days after its receipt of such
Default Notice, then Holder shall be entitled to the remedies provided in
Article V.C.

<PAGE>

      K. Buy-In Cure. Unless Borrower has notified Holder in writing prior to
the delivery by Holder of a Notice of Conversion that Borrower is unable to
honor conversions, if (i) (a) Borrower fails to promptly deliver during the
Delivery Period shares of Common Stock to Holder upon a conversion of all or any
portion of this Note or (b) there shall occur a Legend Removal Failure (as
defined in Article V.A(iv) below) and (ii) thereafter, Holder purchases (in an
open market transaction or otherwise) shares of Common Stock to make delivery in
satisfaction of a sale by Holder of the unlegended shares of Common Stock (the
"Sold Shares") which Holder anticipated receiving upon such conversion (a
"Buy-In"), Borrower shall pay Holder, in addition to any other remedies
available to Holder, the amount by which (x) Holder's total purchase price
(including brokerage commissions, if any) for the unlegended shares of Common
Stock so purchased exceeds (y) the net proceeds received by Holder from the sale
of the Sold Shares. For example, if Holder purchases unlegended shares of Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
shares of Common Stock it sold for $10,000, Borrower will be required to pay
Holder $1,000. Holder shall provide Borrower written notification and supporting
documentation indicating any amounts payable to Holder pursuant to this Article
IV.B.

                                   ARTICLE V
                                EVENTS OF DEFAULT

      L. Events of Default. In the event (each of the events described in
clauses (ii)-(ix) below after expiration of the applicable cure period (if any)
being an "Event of Default"):

            (i) Borrower fails to pay in full an interest payment within fifteen
(15) days after a scheduled Interest Payment Date (each a "Conversion Price
Event of Default").

            (ii) Borrower fails to pay in full an interest payment within twenty
(20) days after a scheduled Interest Payment Date, or fails to pay in full the
principal hereof, and/or the accrued and unpaid interest thereon, when due,
whether at maturity, upon acceleration or otherwise;

            (iii) the Common Stock (including any of the shares of Common Stock
issuable upon conversion of this Note) is suspended from trading on any of, or
is not listed (and authorized) for trading on at least one of, the New York
Stock Exchange, the American Stock Exchange, the Nasdaq National Market, the
Nasdaq SmallCap Market or the OTC Bulletin Board for an aggregate of ten or more
trading days in any twelve month period;

            (iv) the registration statement required to be filed by Borrower
pursuant to the Registration Rights Agreement has not been declared effective by
the Registration Deadline (as defined in the Registration Rights Agreement) or
such registration statement, after being declared effective, cannot be utilized
by Holders for the resale of all of their Registrable Securities (as defined in
the Registration Rights Agreement) for an aggregate of more than 60 days;

<PAGE>

            (v) Borrower fails to remove any restrictive legend on any
certificate or any shares of Common Stock issued to Holder upon conversion of
this Note as and when required by the terms hereof and of the Securities
Purchase Agreement or the Registration Rights Agreement (a "Legend Removal
Failure"), and any such failure continues uncured for ten business days after
Borrower has been notified thereof in writing by Holder;

            (vi) Borrower provides written notice (or otherwise indicates) to
Holder, or states by way of public announcement distributed via a press release,
at any time, of its intention not to issue, or otherwise refuses to issue,
shares of Common Stock to Holder upon conversion in accordance with the terms of
this Note (other than because such issuance would exceed Holder's allocated
portion of the Reserved Amount, for which failures Holder shall have the
remedies set forth in Article III);

            (vii) Borrower or any subsidiary of 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;

            (viii) bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for the relief of debtors shall be instituted
by or against Borrower or any subsidiary of Borrower and if instituted against
Borrower or any subsidiary of Borrower by a third party, shall not be dismissed
within 60 days of their initiation;

            (ix) Borrower shall:

                  (a) sell, convey or dispose of all or substantially all of its
assets (the presentation of any such transaction for stockholder approval being
conclusive evidence that such transaction involves the sale of all or
substantially all of the assets of Borrower), unless Holder has approved such
transaction pursuant to Article VII.B below;

                  (b) merge or consolidate with or into any person or entity,
which results in either (i) Holder of the voting securities of Borrower
immediately prior to such transaction holding or having the right to direct the
voting of fifty percent (50%) or less of the total outstanding voting securities
of Borrower or such other surviving or acquiring person or entity immediately
following such transaction or (ii) the members of the board of directors or
other governing body of Borrower comprising fifty percent (50%) or less of the
members of the board of directors or other governing body of Borrower or such
other surviving or acquiring person or entity immediately following such
transaction, unless Holder has approved such transaction pursuant to Article
VII.B below;

                  (c) either (i) fail to pay, when due, or within any applicable
grace period, any payment with respect to any indebtedness of Borrower in excess
of $250,000 due to any third party, other than payments contested by Borrower in
good faith, or otherwise be in breach or violation of any agreement for monies
owed or owing in an amount in excess of $250,000 which breach or violation
permits the other party thereto to declare a default or otherwise accelerate
amounts due thereunder, or (ii) suffer to exist any other default or event of
default under any agreement binding Borrower which default or event of default
would or is likely to have a material adverse effect on the business,
operations, properties, prospects or financial condition of Borrower;

<PAGE>

                  (d) have thirty-five percent (35%) or more of the voting power
of its capital stock owned beneficially by one person, entity or "group" (as
such term is used under Section 13(d) of the Securities Exchange Act of 1934, as
amended); or

            (x) except with respect to matters covered by subparagraph (ii) -
(ix) above, as to which such applicable subparagraphs shall apply, Borrower
otherwise shall breach any material term hereunder or under the other
Transaction Documents, including, without limitation, the representations and
warranties contained therein (i.e., in the event of a material breach as of the
date such representation and warranty was made) and if such breach is curable,
shall fail to cure such breach within ten business days after Borrower has been
notified thereof in writing by Holder;

then, upon the occurrence of any such Event of Default, at the option of Holder,
exercisable in whole or in part at any time and from time to time by delivery of
a written notice to such effect (a "Default Notice") to Borrower while such
Event of Default continues, Borrower shall prepay, in satisfaction of its
obligation to pay the outstanding principal amount of this Note and accrued and
unpaid interest thereon, an amount equal to the Default Amount (as defined in
Section V.B below); provided, however, that (a) in the case of an Event of
Default described in clauses (vii) and (viii) of this Article V.A, Borrower's
prepayment obligation hereunder shall be automatic and shall not require the
delivery of a Default Notice by Holder, (b) in the case of an Event of Default
resulting from a Legend Removal Failure, Borrower's prepayment obligation
hereunder shall only apply to that portion of the Note affected by such Legend
Removal Failure, and (c) in the case of a Conversion Price Event of Default, the
Conversion Price then in effect shall be reduced by 10% of the original
Conversion Price specified herein. Except in the case of a Conversion Price
Event of Default, such Default Amount, together with all other ancillary amounts
payable hereunder, shall immediately become due and payable, all without demand,
presentment or notice, all of which are hereby expressly waived, together with
all costs, including, without limitation, legal fees and expenses of collection,
and Holder shall be entitled to exercise all other rights and remedies available
at law or in equity. For the avoidance of doubt, the occurrence of any event
described in clauses (ii), (iii), (iv), (vii), (viii) and (ix) above shall
immediately constitute an Event of Default and there shall be no cure period.
Further, the occurrence of any event described in clause (i) above shall
immediately constitute a Conversion Price Event of Default and there shall be no
cure period; provided, however, that in the case that Borrower pays in full an
interest payment between fifteen (15) days and twenty (20) days after a
scheduled Interest Payment Date, Borrower shall be subject to the penalty for a
Conversion Price Event of Default only and not also subject to the additional
Default Amount provided in clause (ii) above for such payments greater than
twenty (20) days late. Upon Borrower's receipt of any Default Notice hereunder,
Borrower shall immediately (and in any event within one business day following
such receipt) deliver a written notice (a "Default Announcement") to Holder
stating the date upon which Borrower received such Default Notice and the amount
of the Note covered thereby. Following the delivery of a Default Announcement
hereunder, at any time and from time to time, Holder may request (either orally
or in writing) information from Borrower with respect to the instant default and
Borrower shall furnish (either orally or in writing) as soon as practicable such
requested information to Holder.

      M. Definition of Default Amount. The "Default Amount" with respect to this
Note means an amount equal to the greater of:

<PAGE>

                  (i)   V
                       ----  x M
                       C P

         and      (ii)  V    x R

      where:

            "V" means the aggregate principal amount outstanding of the Note
required to be prepaid plus all accrued and unpaid interest thereon through the
date of payment of the Default Amount hereunder;

            "CP" means the Conversion Price in effect on the date on which
Borrower receives the Default Notice;

            "M" means (i) with respect to all Events of Default other than
Events of Default described in subparagraph (a) or (b) of Article V.A(ix)
hereof, the highest Closing Sales Price of Borrower's Common Stock during the
period beginning on the date on which Borrower receives the Default Notice and
ending on the date immediately preceding the date of payment of the Default
Amount hereunder, and (ii) with respect to an Event of Default described in
subparagraph (a) or (b) of Article V.A(ix) hereof, the greater of (a) the amount
determined pursuant to clause (i) of this definition or (b) the fair market
value, as of the date on which Borrower receives the Default Notice, of the
consideration payable to Holder of a share of Common Stock pursuant to the
transaction which triggers the Event of Default. For purposes of this
definition, "fair market value" shall be determined by the mutual agreement of
Borrower and the Holder, or if such agreement cannot be reached within five
business days prior to the date of the Event of Default, by an investment
banking firm selected by Borrower and reasonably acceptable to the Holder, with
the costs of such appraisal to be borne by Borrower; and

            "R" means 115%.

      N. Failure to Pay Default Amounts. If Borrower fails to pay Holder the
Default Amount with respect to the Note within five business days after its
receipt of a Default Notice (the "Prepayment Date"), then Holder shall be
entitled to interest on the Default Amount at a per annum rate equal to the
lower of eighteen percent (18%) and the highest interest rate permitted by
applicable law from the date on which Borrower receives the Default Notice until
the date of payment of the Default Amount hereunder. In the event Borrower is
unable to prepay all of the outstanding Notes required to be prepaid hereunder,
Borrower shall prepay the outstanding Notes from each Holder pro rata, based on
the total amounts due on the Not5es at the time of prepayment and required on
Prepayment Date relative to the total amounts due under the Notes on the
Prepayment Date.

                                   ARTICLE VI
                       ADJUSTMENTS TO THE CONVERSION PRICE

      The Conversion Price shall be subject to adjustment from time to time as
follows:

      O. Stock Splits, Stock Dividends, Etc. If, at any time on or after the
Issuance Date, the number of outstanding shares of Common Stock is increased by
a stock split, stock dividend, combination, reclassification or other similar
event, the Conversion Price shall be proportionately reduced, or if the number
of outstanding shares of Common Stock is decreased by a reverse stock split,
combination, reclassification or other similar event, the Conversion Price shall
be proportionately increased. In such event, Borrower shall notify Borrower's
transfer agent of such change on or before the effective date thereof.

<PAGE>

      P. Merger, Consolidation, Etc. If, at any time after the Issuance Date,
there shall be (i) any reclassification or change of the outstanding shares of
Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination), (ii) any consolidation or merger of Borrower with any other entity
(other than a merger in which Borrower is the surviving or continuing entity and
its capital stock is unchanged), (iii) any sale or transfer of all or
substantially all of the assets of Borrower or (iv) any share exchange or other
transaction pursuant to which all of the outstanding shares of Common Stock are
converted into other securities or property (each of (i) - (iv) above being a
"Corporate Change"), then Holder shall thereafter have the right to receive upon
conversion, in lieu of the shares of Common Stock otherwise issuable, such
shares of stock, securities and/or other property as would have been issued or
payable in such Corporate Change with respect to or in exchange for the number
of shares of Common Stock which would have been issuable upon conversion had
such Corporate Change not taken place (without giving effect to the limitations
contained in Article VIII), and in any such case, appropriate provisions (in
form and substance reasonably satisfactory to the Holder) shall be made with
respect to the rights and interests of Holder hereunder to the end that the
economic value of this Note is in no way diminished by such Corporate Change and
that the provisions hereof (including, without limitation, in the case of any
such consolidation, merger or sale in which the successor entity or purchasing
entity is not Borrower, an immediate adjustment of the Conversion Price so that
the Conversion Price immediately after the Corporate Change reflects the same
relative value as compared to the value of the surviving entity's common stock
that existed between the Conversion Price and the value of Borrower's Common
Stock immediately prior to such Corporate Change) shall thereafter be
applicable, as nearly as may be practicable in relation to any shares of stock
or securities thereafter deliverable upon the conversion thereof. Borrower shall
not effect any Corporate Change unless (i) each Holder has received written
notice of such transaction at least 45 days prior thereto, but in no event later
than 15 days prior to the record date for the determination of stockholders
entitled to vote with respect thereto, and (ii) the resulting successor or
acquiring entity (if not Borrower) assumes by written instrument (in form and
substance reasonable satisfactory to Holder) the obligations under this Note
(including, without limitation, the obligation to make interest payments accrued
but unpaid through the date of such consolidation, merger or sale and accruing
thereafter). The above provisions shall apply regardless of whether or not there
would have been a sufficient number of shares of Common Stock authorized and
available for issuance upon conversion of this Note as of the date of such
transaction, and shall similarly apply to successive reclassifications,
consolidations, mergers, sales, transfers or share exchanges.

      Q. Distributions. If, at any time after the Issuance Date, Borrower shall
declare or make any distribution of its assets (or rights to acquire its assets)
to the holders of Common Stock as a partial liquidating dividend, by way of
return of capital or otherwise (including any dividend or distribution to
Borrower's stockholders in cash or shares (or rights to acquire shares) of
capital stock of a subsidiary (i.e., a spin-off)) (a "Distribution"), then
Holder shall be entitled, upon any conversion of this Note after the date of
record for determining the stockholders entitled to such Distribution (or if no
such record is taken, the date on which such Distribution is declared or made),
to receive the amount of such assets which would have been payable to Holder
with respect to the shares of Common Stock issuable upon such conversion
(without giving effect to the limitations contained in Article VIII) had Holder
been the holder of such shares of Common Stock on the record date for the
determination of stockholders entitled to such Distribution (or if no such
record is taken, the date on which such Distribution is declared or made).

<PAGE>

      R. Convertible Securities and Purchase Rights. If, at any time after the
Issuance Date, Borrower issues any securities or other instruments which are
convertible into or exercisable or exchangeable for Common Stock ("Convertible
Securities") or options, warrants or other rights to purchase or subscribe for
Common Stock or Convertible Securities ("Purchase Rights") pro rata to the
record holders of the Common Stock, whether or not such Convertible Securities
or Purchase Rights are immediately convertible, exercisable or exchangeable,
then Holder shall be entitled, upon any conversion of this Note after the date
of record for determining stockholder entitled to receive such Convertible
Securities or Purchase Rights (or if no such record is taken, the date on which
such Convertible Securities or Purchase Rights are issued), to receive the
aggregate number of Convertible Securities or Purchase Rights which Holder would
have received with respect to the shares of Common Stock issuable upon such
conversion (without giving effect to the limitations contained in Article VIII)
had Holder been the holder of such shares of Common Stock on the record date for
the determination of stockholders entitled to receive such Convertible
Securities or Purchase Rights (or if no such record is taken, the date on which
such Convertible Securities or Purchase Rights were issued). If the right to
exercise or convert any such Convertible Securities or Purchase Rights would
expire in accordance with their terms prior to the conversion of this Note, then
the terms of such Convertible Securities or Purchase Rights shall provide that
such exercise or convertibility right shall remain in effect until thirty (30)
days after the date Holder receives such Convertible Securities or Purchase
Rights pursuant to the conversion hereof.

      S. Dilutive Issuances.

            (i) Adjustment Upon Dilutive Issuance. If, at any time after the
Issuance Date, Borrower issues or sells, or in accordance with subparagraph (ii)
of this Article VI.E is deemed to have issued or sold, any shares of Common
Stock for no consideration or for a consideration per share less than the
Conversion Price on the date of issuance or sale (or deemed issuance or sale) (a
"Dilutive Issuance"), then effective immediately upon the Dilutive Issuance, the
Conversion Price shall be adjusted so as to equal an amount determined by
multiplying such Conversion Price by the following fraction:

                                     N0 + N1
                                   ------------
                                     N0 + N2

                  where:

                  N0 = the number of shares of Common Stock outstanding
immediately prior to the issuance, sale or deemed issuance or sale of such
additional shares of Common Stock in such Dilutive Issuance (without taking into
account any shares of Common Stock issuable upon conversion, exchange or
exercise of any Convertible Securities or Purchase Rights, including the Note);

                  N1 = the number of shares of Common Stock which the aggregate
consideration, if any, received or receivable by Borrower for the total number
of such additional shares of Common Stock so issued, sold or deemed issued or
sold in such Dilutive Issuance (which, in the case of a deemed issuance or sale,
shall be calculated in accordance with subparagraph (ii) below) would purchase
at the Conversion Price in effect immediately prior to such Dilutive Issuance;
and

<PAGE>

                  N2 = the number of such additional shares of Common Stock so
issued, sold or deemed issued or sold in such Dilutive Issuance.

Notwithstanding the foregoing, no adjustment shall be made pursuant to this
Paragraph E if such adjustment would result in an increase in the Conversion
Price.

            (ii) Effect on Conversion Price of Certain Events. For purposes of
determining the adjusted Conversion Price under subparagraph (i) of this Article
VI.E, the following will be applicable:

                  (a) Issuance of Purchase Rights. If Borrower issues or sells
any Purchase Rights, whether or not immediately exercisable, and the price per
share for which Common Stock is issuable upon the exercise of such Purchase
Rights (and the price of any conversion of Convertible Securities, if
applicable) is less than the Conversion Price in effect on the date of issuance
or sale of such Purchase Rights, then the maximum total number of shares of
Common Stock issuable upon the exercise of all such Purchase Rights (assuming
full conversion, exercise or exchange of Convertible Securities, if applicable)
shall, as of the date of the issuance or sale of such Purchase Rights, be deemed
to be outstanding and to have been issued and sold by Borrower for 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 Purchase Rights" shall
be determined by dividing (A) the total amount, if any, received or receivable
by Borrower as consideration for the issuance or sale of all such Purchase
Rights, plus the minimum aggregate amount of additional consideration, if any,
payable to Borrower upon the exercise of all such Purchase Rights, plus, in the
case of Convertible Securities issuable upon the exercise of such Purchase
Rights, the minimum aggregate amount of additional consideration payable upon
the conversion, exercise or exchange thereof (determined in accordance with the
calculation method set forth in subparagraph (ii)(b) of this Article VI.E) at
the time such Convertible Securities first become convertible, exercisable or
exchangeable, by (B) the maximum total number of shares of Common Stock issuable
upon the exercise of all such Purchase Rights (assuming full conversion,
exercise or exchange of Convertible Securities, if applicable). No further
adjustment to the Conversion Price shall be made upon the actual issuance of
such Common Stock upon the exercise of such Purchase Rights or upon the
conversion, exercise or exchange of Convertible Securities issuable upon
exercise of such Purchase Rights.

                  (b) Issuance of Convertible Securities. If Borrower issues or
sells any Convertible Securities, whether or not immediately convertible,
exercisable or exchangeable, and the price per share for which Common Stock is
issuable upon such conversion, exercise or exchange is less than the Conversion
Price in effect on the date of issuance or sale of such Convertible Securities,
then the maximum total number of shares of Common Stock issuable upon the
conversion, exercise or exchange of all such Convertible Securities shall, as of
the date of the issuance or sale of such Convertible Securities, be deemed to be
outstanding and to have been issued and sold by Borrower for such price per
share. If the Convertible Securities so issued or sold do not have a fluctuating
conversion or exercise price or exchange ratio, then for the purposes of the
preceding sentence, the "price per share for which Common Stock is issuable upon
such conversion, exercise or exchange" shall be determined by dividing (A) the
total amount, if any, received or receivable by 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 Borrower upon
the conversion, exercise or exchange thereof (determined in accordance with the
calculation method set forth in this subparagraph (ii)(b) of this Article VI.E)
at the time such Convertible Securities first become convertible, exercisable or
exchangeable, by (B) the maximum total number of shares of Common Stock issuable
upon the exercise, conversion or exchange of all such Convertible Securities. If
the Convertible Securities so issued or sold have a fluctuating conversion or
exercise price or exchange ratio (a "Variable Rate Convertible Security"), then
for purposes of the next preceding sentence, the "price per share for which
Common Stock is issuable upon such conversion, exercise or exchange" shall be
deemed to be the lowest price per share which would be applicable (assuming all
holding period and other conditions to any discounts contained in such Variable
Rate Convertible Security have been satisfied) if the conversion price of such
Variable Rate Convertible Security on the date of issuance or sale thereof was
seventy-five percent (75%) of the actual conversion price on such date (the
"Assumed Variable Market Price"), and, further, if the conversion price of such
Variable Rate Convertible Security at any time or times thereafter is less than
or equal to the Assumed Variable Market Price last used for making any
adjustment under this Article VI.E with respect to any Variable Rate Convertible
Security, the Conversion Price in effect at such time shall be readjusted to
equal the Conversion Price which would have resulted if the Assumed Variable
Market Price at the time of issuance of the Variable Rate Convertible Security
had been seventy-five percent (75%) of the actual conversion price of such
Variable Rate Convertible Security existing at the time of the adjustment
required by this sentence. No further adjustment to the Conversion Price shall
be made upon the actual issuance of such Common Stock upon conversion, exercise
or exchange of such Convertible Securities.

<PAGE>

                  (c) Change in Option Price or Conversion Rate. If there is a
change at any time in (A) the amount of additional consideration payable to
Borrower upon the exercise of any Purchase Rights; (B) the amount of additional
consideration, if any, payable to Borrower upon the conversion, exercise or
exchange of any Convertible Securities; or (C) the rate at which any Convertible
Securities are convertible into or exercisable or exchangeable for Common Stock
(in each such case, other than under or by reason of provisions designed to
protect against dilution), the Conversion Price in effect at the time of such
change shall be readjusted to the Conversion Price which would have been in
effect at such time had such Purchase Rights or Convertible Securities still
outstanding provided for such changed additional consideration or changed
conversion, exercise or exchange rate, as the case may be, at the time initially
issued or sold.

                  (d) Calculation of Consideration Received. If any Common
Stock, Purchase Rights or Convertible Securities are issued or sold for cash,
the consideration received therefor will be the amount received by Borrower
therefor. In case any Common Stock, Purchase Rights or Convertible Securities
are issued or sold for a consideration part or all of which shall be other than
cash, including in the case of a strategic or similar arrangement in which the
other entity will provide services to Borrower, purchase services from Borrower
or otherwise provide intangible consideration to Borrower, the amount of the
consideration other than cash received by Borrower (including the net present
value of the consideration expected by Borrower for the provided or purchased
services) shall be the fair market value of such consideration, except where
such consideration consists of securities, in which case the amount of
consideration received by Borrower will be the Closing Sales Price thereof as of
the date of receipt. In case any Common Stock, Purchase Rights or Convertible
Securities are issued in connection with any merger or consolidation in which
Borrower is the surviving corporation, the amount of consideration therefor will
be deemed to be the fair market value of such portion of the net assets and
business, including a reasonable value ascribed to "good will" as approved by a
majority of the outside Directors of the Company of the non-surviving Borrower
as is attributable to such Common Stock, Purchase Rights or Convertible
Securities, as the case may be. Notwithstanding anything else herein to the
contrary, if Common Stock, Purchase Rights or Convertible Securities are issued
or sold in conjunction with each other as part of a single transaction or in a
series of related transactions, Holder may elect to determine the amount of
consideration deemed to be received by Borrower therefor by deducting the fair
value of any type of securities (the "Disregarded Securities") issued or sold in
such transaction or series of transactions. If Holder makes an election pursuant
to the immediately preceding sentence, no adjustment to the Conversion Price
shall be made pursuant to this Article VI.E for the issuance of the Disregarded
Securities or upon any conversion, exercise or exchange thereof. For example, if
Borrower were to issue convertible notes having a face value of $1,000,000 and
warrants to purchase shares of Common Stock at an exercise price equal to the
market price of the Common Stock on the date of issuance of such warrants in
exchange for $1,000,000 of consideration, the fair value of the warrants would
be subtracted from the $1,000,000 of consideration received by Borrower for the
purposes of determining whether the shares of Common Stock issuable upon
conversion of the convertible notes shall be deemed to be issued at a price per
share below the Conversion Price then in effect and, if so, for purposes of
determining any adjustment to the Conversion Price hereunder as a result of the
issuance of the convertible notes. Borrower shall calculate, using standard
commercial valuation methods appropriate for valuing such assets, the fair
market value of any consideration other than cash or securities; provided,
however, that if Holder does not agree to such fair market value calculation
within three business days after receipt thereof from Borrower, then such fair
market value shall be determined in good faith by an investment banker or other
appropriate expert of national reputation selected by Borrower and reasonably
acceptable to Holder, with the costs of such appraisal to be borne by Borrower.

<PAGE>

                  (iii) Limitation on Adjustments for Dilutive Issuances.
Notwithstanding the foregoing or any other provision of this Note to the
contrary, in no event shall the Conversion Price be adjusted as a result of a
Dilutive Issuance to the extent (but only to the extent) that such adjustment
would result in this Note, (together with any portions of the Note that have
already been converted into Common Stock) being convertible into and exercisable
for more than an aggregate of 9.9% of the then-outstanding shares of Common
Stock.

      T. Exceptions to Adjustment of Conversion Price. Notwithstanding the
foregoing, no adjustment to the Conversion Price shall be made upon (i) the
issuance of Common Stock upon the exercise or conversion of any Convertible
Securities or Purchase Rights outstanding on the Issuance Date and disclosed in
the Disclosure Schedule to the Securities Purchase Agreement in accordance with
the terms of such Convertible Securities and Purchase Rights as of such date;
(ii) the grant of options to purchase Common Stock, with exercise prices not
less than the market price of the Common Stock on the date of grant, or the
grant of restricted shares of Common Stock, in each case which are issued to
employees, officers, directors or consultants of Borrower for the primary
purpose of soliciting or retaining their employment or service pursuant to an
equity compensation plan approved by Borrower's Board of Directors, and the
issuance of shares of Common Stock upon the exercise thereof; (iii) the issuance
of securities pursuant to a bona fide underwritten public offering; or (iv) the
issuance of shares of Common Stock upon conversion of the Notes; or (v) the
issuance of securities in a bona fide business acquisition.

      U. Other Action Affecting Conversion Price. If, at any time after the
Issuance Date, Borrower takes any action affecting the Common Stock that would
be covered by Article VI.A through E, but for the manner in which such action is
taken or structured, which would in any way diminish the value of the Note, then
the Conversion Price shall be adjusted in such manner as the Board of Directors
of Borrower shall in good faith determine to be equitable under the
circumstances.

      V. Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Article VI amounting to a
more than one percent (1%) change in such Conversion Price, or any change in the
number or type of stock, securities and/or other property issuable upon
conversion of the Note, Borrower, at its expense, shall promptly compute such
adjustment or readjustment or change and prepare and furnish to Holder a
certificate setting forth such adjustment or readjustment or change and showing
in detail the facts upon which such adjustment or readjustment or change is
based. Borrower shall, upon the written request at any time of Holder, furnish
to Holder a like certificate setting forth (i) such adjustment or readjustment
or change, (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.

                                  ARTICLE VII
                    CONSENT RIGHTS; NOTICE of certain actions

      W. Consent Rights. So long as the Note is outstanding, Borrower shall not
take any of the following corporate actions (whether by merger, consolidation or
otherwise) without first obtaining the approval (by vote or written consent) of
Holder, which consent shall not be unreasonably withheld:

            (i) alter or change the rights, preferences or privileges of the
Note;

            (ii) issue any additional notes, other than bank notes, operating
leases and similar instruments issued in the ordinary course of business;

            (iii) redeem, repurchase or otherwise acquire, or declare or pay any
cash dividend or distribution on, any securities of Borrower, except pursuant to
any equity compensation plan approved by Borrower's Board of Directors;

            (iv) issue any debt securities or incur any indebtedness that would
have priority over the Note upon liquidation of Borrower, or redeem, repurchase,
prepay or otherwise acquire any outstanding debt securities or indebtedness of
Borrower, except as expressly required by the terms of such securities or
indebtedness, and except for operating leases and bank notes executed in the
ordinary course of business;

            (v) enter into any agreement, commitment, understanding or other
arrangement to take any of the foregoing actions; or

            (vi) cause or authorize any subsidiary of Borrower to engage in any
of the foregoing actions.

Notwithstanding the foregoing, no change pursuant to this Article VII shall be
effective e to the extent that, by its terms, it applies to less than all of the
Holders of the Notes then outstanding.

<PAGE>

      X. Approval of Certain Transactions. In the event that Borrower desires to
enter into any transaction that would result in (i) the sale, conveyance or
disposition of all or substantially all of its assets (the presentation of any
such transaction for stockholder approval being conclusive evidence that such
transaction involves the sale of all or substantially all of the assets of
Borrower), or (ii) the merger or consolidation of Borrower with or into any
person or entity, which results in either (a) holders of the voting securities
of Borrower immediately prior to such transaction holding or having the right to
direct the voting of fifty percent (50%) or less of the total outstanding voting
securities of Borrower or such other surviving or acquiring person or entity
immediately following such transaction or (b) the members of the board of
directors or other governing body of Borrower comprising fifty percent (50%) or
less of the members of the board of directors or other governing body of
Borrower or such other surviving or acquiring person or entity immediately
following such transaction, then Borrower shall be permitted to seek the
approval of Holder for such transaction in advance of its entering into such
transaction, and if Holder so approves the transaction and Borrower enters into
and consummates such transaction within ninety (90) days following such approval
on terms no less favorable to Borrower than those presented to Holder for
purposes of obtaining such approval, then such transaction shall not constitute
an Event of Default under Section V.A(ix).

      Y. Notice Rights. In addition to the foregoing consent rights, Borrower
shall provide Holder with prior notification of any meeting of the stockholders
(and copies of proxy materials and other information sent to stockholders). If
Borrower takes a record of its stockholders for the purpose of determining
stockholders entitled to (i) receive payment of any dividend or other
distribution, any right to subscribe for, purchase or otherwise acquire
(including by way of merger, consolidation or recapitalization) any share of any
class or any other securities or property, or to receive any other right, or
(ii) to vote in connection with any proposed sale, lease or conveyance of all or
substantially all of the assets of Borrower, or any proposed merger,
consolidation, liquidation, dissolution or winding up of Borrower, Borrower
shall mail a notice to Holder, at least 15 days prior to the record date
specified therein (or 45 days prior to the consummation of the transaction or
event, whichever is earlier, but in no event earlier than public announcement of
such proposed transaction), of the date on which any such record is to be taken
for the purpose of such vote, dividend, distribution, right or other event, and
a brief statement regarding the amount and character of such vote, dividend,
distribution, right or other event to the extent known at such time.

                                  ARTICLE VIII
          LIMITATIONS ON CERTAIN CONVERSIONS, REDEMPTIONS AND TRANSFERS

In no event shall Borrower issue Common Stock to Holder in connection with the
repayment of this Note pursuant to Article I.B or Mandatory Conversion of this
Note pursuant to Article II.C, and in no event shall Holder have the right to
effect an Optional Conversion of this Note into shares of Common Stock or to
dispose of this Note to the extent that such repayment, conversion or right to
effect such conversion or disposition would result in Holder and its affiliates
together beneficially owning more than 9.9% of the outstanding shares of Common
Stock. For purposes of this Article VIII, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13D-G thereunder. The restriction contained in
this Article VIII may not be altered, amended, deleted or changed in any manner
whatsoever unless Holder of a majority of the outstanding shares of Common Stock
and Holder shall approve, in writing, such alteration, amendment, deletion or
change. In the event that Borrower is prohibited from issuing shares of Common
Stock in connection with the repayment of this Note pursuant to Article I.B as a
result of the operation of this Article VIII, Borrower shall make such repayment
in cash. In the event that Borrower is prohibited from issuing shares of Common
Stock upon a Mandatory Conversion pursuant to Article II.C as a result of the
operation of this Article VIII, Borrower shall pay to Holder an amount of cash
equal to the Closing Sales Price of the Common Stock on the Conversion Date
multiplied by the number of shares of Common Stock that Borrower is prohibited
from issuing as a result of the operation of this Article VIII.

<PAGE>

                                   ARTICLE IX
                                  SUBORDINATION

      Borrower's obligation for payment of this Note is subordinated to all
indebtedness as set forth on the Indebtedness Schedule attached hereto as
Exhibit "B" as of the execution of this Note.

                                    ARTICLE X
                               CERTAIN DEFINITIONS

      For purposes of this Note, in addition to the other terms defined herein,
the following terms shall have the following meanings:

      Z. "business day" means any day, other than a Saturday or Sunday or a day
on which banking institutions in the State of New York are authorized or
obligated by law, regulation or executive order to close.

      AA. "Closing Sales Price" means, for any security as of any date, the last
sales price of such security on the principal trading market where such security
is listed or traded as reported by Bloomberg Financial Markets (or a comparable
reporting service of national reputation selected by Borrower and reasonably
acceptable to the Holder if Bloomberg Financial Markets is not then reporting
closing bid prices of such security) (in any case, "Bloomberg"), or if the
foregoing does not apply, the last reported sales price of such security on a
national exchange or in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg, or, if no such price is
reported for such security by Bloomberg, the average of the bid prices of all
market makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc., in each case for such date or, if such date was not a
trading day for such security, on the next preceding date which was a trading
day. If the Closing Sales Price cannot be calculated for such security as of
either of such dates on any of the foregoing bases, the Closing Sales Price of
such security on such date shall be the fair market value as reasonably
determined by an investment banking firm selected by Borrower and reasonably
acceptable to the Holder, with the costs of such appraisal to be borne by
Borrower.

      BB. "Common Stock" means the common stock of Borrower, no par value per
share.

      CC. "Conversion Date" means, as applicable, (i) for any Optional
Conversion (as defined in Article II.A), the date specified in the notice of
conversion in the form attached hereto (the "Notice of Conversion"), so long as
a copy of the Notice of Conversion is faxed (or delivered by other means
resulting in notice) to Borrower before 11:59 p.m., Omaha time, on the
Conversion Date indicated in the Notice of Conversion; provided, however, that
if the Notice of Conversion is not so faxed or otherwise delivered before such
time, then the Conversion Date shall be the date Holder faxes or otherwise
delivers the Notice of Conversion to Borrower; and (ii) for any Mandatory
Conversion (as defined in Article II.C), that date specified in the notice
delivered to Holder in the event that such Mandatory Conversion occurs.

<PAGE>

      DD. "Conversion Price" means fifty cents ($0.50), and shall be subject to
adjustment as provided herein.

      EE. "Default Cure Date" means, as applicable, (i) with respect to a
Conversion Default described in clause (i) of Article IV.A, the date Borrower
effects the conversion of the full amount of this Note being converted, (ii)
with respect to a Conversion Default described in clause (ii) of Article IV.A,
the date Borrower issues freely tradable shares of Common Stock in satisfaction
of the conversion of the full amount of this Note being converted in accordance
with Article II, or (iii) with respect to either type of a Conversion Default,
the date on which Borrower prepay this Note pursuant to Article IV.A.

      FF. "Issuance Date" means the date of the closing under the Securities
Purchase Agreement, pursuant to which Borrower issued, and such purchasers
purchased, the Notes.

      GG. "Required Conditions" means all of the following: (i) the registration
statement required to be filed by Borrower pursuant to the Registration Rights
Agreement shall have been declared effective by the Securities and Exchange
Commission (and is not the subject of any stop order or other suspension of
effectiveness); (ii) the Closing Sales Price of the Common Stock is greater
$2.00 per share (subject to price adjustments, if any, as provided herein) for
sixty (60) consecutive trading days; (iii) all shares of Common Stock issuable
upon conversion of the Notes are then (a) authorized and reserved for issuance,
(b) registered under the Securities Act for resale by Holder and (c) listed or
traded on any of the New York Stock Exchange, the American Stock Exchange, the
Nasdaq National Market, the Nasdaq SmallCap Market or the OTC Bulletin Board (or
the successor to any of them); (iv) no Event of Default (as defined in Article
V.A) shall have occurred without having been cured; and (v) all amounts, if any,
then accrued or payable under the Note (including, without limitation, all
interest) or the Registration Rights Agreement shall have been paid.

      HH. "trading day" means any day on which the principal United States
securities exchange or trading market where the Common Stock is then listed or
traded, is open for trading.

                                   ARTICLE XI
                                  MISCELLANEOUS

      II. Failure or Indulgency Not Waiver. No failure or delay on the part of
any Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.

      JJ. Lost or Stolen Notes. Upon receipt by Borrower of (i) evidence of the
loss, theft, destruction or mutilation of any Note and (ii) (y) in the case of
loss, theft or destruction, of indemnity (without any bond or other security)
reasonably satisfactory to Borrower, or (z) in the case of mutilation, the Notes
(surrendered for cancellation), Borrower shall execute and deliver a new Note of
like tenor and date. However, Borrower shall not be obligated to reissue such
lost, stolen, destroyed or mutilated Note if Holder contemporaneously requests
Borrower to convert such Note.

      KK. Allocation of Reserved Amount. The initial Reserved Amount shall be
allocated pro rata among Holders of the Notes based on the principal amount of
Notes issued to each Holder. Each increase to the Reserved Amount shall be
allocated pro rata among Holders of the Notes based on the principal amount of
Notes held by each Holder at the time of the increase in the 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
Reserved Amount. Any portion of the Reserved Amount that remains allocated to
any person or entity that does not hold any Notes shall be allocated to the
remaining Holder of the Notes, pro rata based on the principal balance of Notes
then held by such Holder.

<PAGE>

      LL. Quarterly Statements of Available Shares. For each calendar quarter
beginning in the quarter in which the initial registration statement required to
be filed pursuant to the Registration Rights Agreement is declared effective and
thereafter for so long as any Notes are outstanding, Borrower shall deliver (or
cause its transfer agent to deliver) to Holder a written report notifying Holder
of any occurrence that prohibits Borrower from issuing Common Stock upon any
conversion. The report shall also specify (i) the total principal amount of
Notes outstanding as of the end of such quarter, (ii) the total number of shares
of Common Stock issued upon all conversions of Notes prior to the end of such
quarter, (iii) the total number of shares of Common Stock which are reserved for
issuance upon conversion of the Notes as of the end of such quarter and (iv) the
total number of shares of Common Stock which may thereafter be issued by
Borrower upon conversion of the Notes before Borrower would exceed the Reserved
Amount. Borrower (or its transfer agent) shall use its best efforts to deliver
the report for each quarter to Holder prior to the tenth day of the calendar
month following the quarter to which such report relates. In addition, Borrower
(or its transfer agent) shall provide, as promptly as practicable following
delivery to Borrower of a written request by Holder, any of the information
enumerated in clauses (i) - (iv) of this Paragraph D as of the date of such
request.

      MM. Status as Stockholder. Upon submission of a Notice of Conversion by
Holder, (i) the shares covered thereby (other than the shares, if any, which
cannot be issued because their issuance would exceed Holder's allocated portion
of the Reserved Amount) shall be deemed converted into shares of Common Stock
and (ii) Holder's rights as a holder of such converted 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 Holder because of a failure by Borrower to comply with the terms
of this Note. Notwithstanding the foregoing, if Holder has not received
certificates for all shares of Common Stock prior to the sixth business day
after the expiration of the Delivery Period with respect to a conversion of this
Note for any reason, then (unless Holder otherwise elects to retain its status
as a holder of Common Stock by so notifying Borrower within five business days
after the expiration of such six business day period after expiration of the
Delivery Period) Holder shall regain the rights of a holder of this Note and
Borrower shall, as soon as practicable, return such unconverted Note to Holder.
In all cases, Holder shall retain all of its rights and remedies for Borrower's
failure to convert this Note.

      NN. Remedies Cumulative. The remedies provided in this Note shall be
cumulative and in addition to all other remedies available under this Note, at
law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit Holder's right to pursue
actual damages for any failure by Borrower to comply with the terms of this
Note. Borrower acknowledges that a breach by it of its obligations hereunder
will cause irreparable harm to Holder and that the remedy at law for any such
breach may be inadequate. Borrower therefore agrees, in the event of any such
breach or threatened breach that Holder shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.

<PAGE>

      OO. Waiver. Notwithstanding any provision in this Note to the contrary,
any provision contained herein and any right of the Holders granted hereunder
may be waived as to all Notes (and Holders thereof) only upon the written
consent of all of the Holders.

      PP. Notices. Any notices required or permitted to be given under the terms
hereof shall be sent by certified or registered mail (return receipt requested)
or delivered personally, by responsible overnight carrier or by confirmed
facsimile, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
responsible overnight carrier or confirmed facsimile, in each case addressed to
a party. The addresses for such communications are:

                  (i) if to Borrower, to:

                                            iSECUREtrac, CORP.
     5022 South 114th Street, Suite 103
     Omaha, NE 68137
     Telephone: (402) 537-0022
     Facsimile: (402) 537-9847
                                             Attention:  Michael  May,  Chairman
                                             & Chief Executive Officer

                  (ii) if to Holder, to the address set forth under Holder's
name on the execution page to the Securities Purchase Agreement, or such other
address as may be designated in writing hereafter, in the same manner, by such
person.

      QQ. Amendment Provision. This Note and any provision hereof may be amended
only by an instrument in writing signed by Borrower and Holder.

      RR. Assignability. This Note shall be binding upon Borrower and its
successors and assigns and shall inure to the benefit of Holder and its
successors and assigns. Notwithstanding anything to the contrary contained in
this Note or the Transaction Documents, this Note may be pledged and all rights
of Holder under this Note may be assigned to any affiliate or to any other
person or entity without the consent of Borrower.

      SS. Cost of Collection. If an Event of Default occurs hereunder, Borrower
shall pay Holder hereof costs of collection, including reasonable attorneys'
fees.

      TT. Governing Law; Jurisdiction. This Note shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. Borrower
irrevocably consents to the jurisdiction of the United States federal courts and
the state courts located in the City and County of San Francisco, California, in
any suit or proceeding based on or arising under this Note and irrevocably
agrees that all claims in respect of such suit or proceeding may be determined
in such courts. Borrower irrevocably waives the defense of an inconvenient forum
to the maintenance of such suit or proceeding in such forum. Borrower further
agrees that service of process upon Borrower mailed by first class mail shall be
deemed in every respect effective service of process upon Borrower in any such
suit or proceeding. Nothing herein shall affect the right of Holder to serve
process in any other manner permitted by law. Borrower agrees 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.

<PAGE>

      UU. Denominations. At the request of the Holders, upon surrender of this
Note, Borrower shall promptly issue new Notes in the aggregate outstanding
principal amount hereof, in the form hereof, in such denominations of at least
$25,000 as Holder shall request.

      VV. Certain Waivers. Borrower and each endorser hereby waive presentment,
notice of nonpayment or dishonor, protest, notice of protest and all other
notices in connection with the delivery, acceptance, performance, default or
enforcement of payment of this Note, and hereby waive all notice or right of
approval of any extensions, renewals, modifications or forbearances which may be
allowed.

      WW. Severability. If any provision of this Note shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Note or the
validity or enforceability of this Note in any other jurisdiction.

      XX. Maximum Interest Rate. If the effective interest rate on this Note
would otherwise violate any applicable usury law, then the interest rate shall
be reduced to the maximum permissible rate and any payment received by Holder in
excess of the maximum permissible rate shall be treated as a prepayment of the
principal of this Note.

<PAGE>

IN WITNESS WHEREOF, Borrower has caused this Note to be executed by its duly
authorized officer as of the date first written above.

                                   iSECUREtrac, CORP.

                                   By:
                                      --------------------------------
                                   Name:     Michael May
                                   Title:    Chairman & Chief Executive Officer

              [SIGNATURE PAGE TO CONVERTIBLE PROMISSORY NOTE - LTD]

<PAGE>

                                                                       Exhibit A

                          NOTICE OF OPTIONAL CONVERSION

                           iSECUREtrac, Corp.
                           5022 South 114th Street, Suite 103
                           Omaha, NE 68137
                           Facsimile: (402) 537-9847

                                                Attention: Michael May, Chairman

The undersigned hereby irrevocably elects to convert $____________ of the
outstanding principal balance of, and accrued interest on, the Note (the
"Conversion"), into shares of common stock ("Common Stock") of iSECUREtrac,
Corp. (the "Corporation") according to the conditions of the 10% Convertible
Promissory Note dated October ____, 2003 (the "Note"), 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. No fee will be charged to Holder for any conversion, except for
transfer taxes, if any. A copy of the Note is attached hereto (or evidence of
loss, theft or destruction thereof).

Except as may be provided below, the Corporation shall electronically transmit
the Common Stock issuable pursuant to this Notice of Conversion to the account
of the undersigned or its nominee (which is ________________) with DTC through
its Deposit Withdrawal Agent Commission System ("DTC Transfer").

In the event of partial exercise, please reissue an appropriate Note(s) for the
principal balance that shall not have been converted.

The undersigned acknowledges and agrees that all offers and sales by the
undersigned of the securities issuable to the undersigned upon conversion of the
Note have been or will be made only pursuant to an effective registration of the
transfer of the Common Stock under the Securities Act of 1933, as amended (the
"Act"), or pursuant to an exemption from registration under the Act.

Check Box if Applicable:

|_|   In lieu of receiving the shares of Common Stock issuable pursuant to this
      Notice of Conversion by way of DTC Transfer, the undersigned hereby
      requests that the Corporation issue and deliver to the undersigned or its
      nominee (if applicable) physical certificates representing such shares of
      Common Stock.

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

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

                                    Number of Shares of
                                    Common Stock to be Issued:
                                                               -----------------

                                    Signature:
                                               ---------------------------------

                                    Name:
                                          --------------------------------------

                                    Address:
                                             -----------------------------------

<PAGE>

                                                                       Exhibit B

                              INDEBTEDNESS SCHEDULE

                      Senior Debt As of September 30, 2003

Westburg Media Capital Loan                                        3,451,602.00

Various Ongoing Capital Lease Obligations                          1,349,382.00

Note Payable-- US Bank                                               301,159.84
Note Payable-- Nebraska State Bank                                    73,366.01
Note Payable-- Wells Fargo Bank                                    1,000,000.00

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00070-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00070-of-00352.parquet"}]]