Document:

Ex - 10.14

                            CHANGE IN TERMS AGREEMENT

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
 Principal     Loan Date    Maturity     Loan No    Call / Coll  Account  Officer  Initials
<S>            <C>         <C>         <C>          <C>          <C>      <C>      <C>
$300,000.00    01-05-2006  01-15-2007  0412821880           98    128218    601
-------------------------------------------------------------------------------------------
</TABLE>

  References in the shaded area are for Lender's use only and do not limit the
         applicability of this document to any particular loan or item.
Any item above containing "***" has been omitted due to text length limitations.
--------------------------------------------------------------------------------

<TABLE>
<S>                                                  <C>
Borrower: SHEER VISION, INC.                         Lender: Vineyard Bank
          4030 Palos Verdes Drive North, Suite 104           Diamond Bar
          Rolling Hills, CA 90274                            1200 S. Diamond Bar Boulevard
                                                             Diamond Bar, CA 91765
</TABLE>

================================================================================

<TABLE>
<S>                              <C>                     <C>
Principal Amount: $300,000.00    Initial Rate: 8.500%    Date of Agreement: January 5, 2006
</TABLE>

DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note in the original amount of
$300,000.00 dated December 7, 2005 and all subsequent modifications and renewals
thereof.

DESCRIPTION OF COLLATERAL. Security interest in certain assets of Borrower,
described in that certain Commercial Security Agreement dated December 7, 2005,
and executed by Borrower in favor of Lender.

DESCRIPTION OF CHANGE IN TERMS. The Line of Credit has been changed from a Draw
Down Line of Credit to a Revolving Line of Credit.

PROMISE TO PAY. SHEER VISION, INC. ("Borrower") promises to pay to Vineyard Bank
("Lender"), or Order, in lawful money of the United States of America, the
principal amount of Three Hundred Thousand & 00/100 Dollars ($300,000.00) Or so
much as may be outstanding, together with interest on the unpaid outstanding
principal balance of each advance. Interest shall be calculated from the date of
each advance until repayment of each advance.

PAYMENT. Borrower will pay this loan in full immediately upon Lender's demand.
If no demand is made, Borrower will pay this loan in one payment of all
outstanding principal plus all accrued unpaid interest on January 15, 2007. In
addition, Borrower will pay regular monthly payments of all accrued unpaid
interest due as of each payment date, beginning January 15,2006, with all
subsequent interest payments to be due on the same day of each month after that.
Unless otherwise agreed or required by applicable law, payments will be applied
first to any accrued unpaid interest; then to principal; then to any unpaid
collection costs; and then to any late charges. Interest on this Agreement is
computed on a 365/360 simple interest basis; that is, by applying the ratio of
the annual interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal balance
is outstanding. Borrower will pay Lender at Lender's address shown above or at
such other place as Lender may designate in writing.

VARIABLE INTEREST RATE. The interest rate on this Agreement is subject to change
from time to time based on changes in an independent index which is the Prime
rate as published in the Wall Street Journal. When a range of rates is
published, the higher of the rates will be used (the "Index"). The Index is not
necessarily the lowest rate charged by Lender on its loans. If the Index becomes
unavailable during the term of this loan, Lender may designate a substitute
index after notice to Borrower. Lender will tell Borrower the current Index rate
upon Borrower's request. The interest rate change will not occur more often than
each Day. Borrower understands that Lender may make loans based on other rates
as well. The Index currently is 7.250% per annum. The interest rate to be
applied to the unpaid principal balance of the Note will be at a rate of 1.250
percentage points over the index, resulting in an initial rate of 8.500% per
annum. NOTICE: Under no circumstances will the interest rate on the Note be more
than the maximum rate allowed by applicable law.

PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of
this Agreement, Borrower understands that Lender is entitled to a Minimum
interest charge of $100.00. Other than Borrower's obligation to pay any minimum
interest charge, Borrower may pay without penalty all or a portion of the amount
owed earlier than it is due. Early payments will not, unless agreed to by Lender
in writing, relieve Borrower of Borrower's obligation to continue to make
payments of accrued unpaid interest. Rather, early payments will reduce the
principal balance due. Borrower agrees not to send Lender payments marked "paid
in full", "without recourse", or similar language. If Borrower sends such a
payment, Lender may accept it without losing any of Lender's rights under this
Agreement, and Borrower will remain obligated to pay any further amount owed to
Lender. All written communications concerning disputed amounts, including any
check or other payment instrument that indicates that the payment constitutes
"payment in full" of the amount owed or that is tendered with other conditions
or limitations or as full satisfaction of a disputed amount must be mailed or
delivered to: Vineyard Bank, Credit Administration, P. O. Box 2319 Corona, CA
92878-2319.

LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% Of the unpaid portion of the regularly scheduled payment or $5.00,
Whichever is greater.

INTEREST AFTER DEFAULT. Upon default, the variable interest rate on this
Agreement shall immediately increase to 6.250 percentage points over the Index,
if permitted under applicable law.

DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:

      PAYMENT DEFAULT. Borrower fails to make any payment when due under the
      Indebtedness.

      OTHER DEFAULTS. Borrower fails to comply with or to perform any other
      term, obligation, covenant or condition contained in this Agreement or in
      any of the Related Documents or to comply with or to perform any term,
      obligation, covenant or condition contained in any other agreement between
      Lender and Borrower.

      DEFAULT IN FAVOR OF THIRD PARTIES. Borrower defaults under any loan,
      extension of credit, security agreement, purchase or sales agreement, or
      any other agreement, in favor of any other creditor or person that may
      materially affect any of Borrower's property or Borrower's ability to
      perform Borrower's obligations under this Agreement or any of the Related
      Documents.

      FALSE STATEMENTS. Any warranty, representation or statement made or
      furnished to Lender by Borrower or on Borrower's behalf under this
      Agreement or the Related Documents is false or misleading in any material
      respect, either now or at the time made or furnished or becomes false or
      misleading at any time thereafter.

      INSOLVENCY. The dissolution or termination of Borrower's existence as a
      going business, the insolvency of Borrower, the appointment of a receiver
      for any part of Borrower's property, any assignment for the benefit of
      creditors, any type of creditor workout, or the commencement of any
      proceeding under any bankruptcy or insolvency laws by or against Borrower.

      CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
      forfeiture proceedings, whether by judicial proceeding, self-help,
      repossassion or any other method, by any creditor of Borrower or by any
      governmental agency against any collateral securing the Indebtedness. This
      includes a garnishment of any of Borrower's accounts, including deposit
      accounts, with Lender. However, this Event of Default shall not apply if
      there is a good faith dispute by Borrower as to the validity or
      reasonableness of the claim which is the basis of the creditor or
      forfeiture proceeding and if Borrower gives Lender written notice of the
      creditor or forfeiture proceeding and deposits with Lender monies or a
      surety bond for the creditor or forfeiture proceeding, in an amount
      determined by Lender, in its sole discretion, as being an adequate reserve
      or bond for the dispute.

<PAGE>

                            CHANGE IN TERMS AGREEMENT
Loan No. 0412821880               (Continued)                             Page 2
================================================================================

      EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
      respect to any Guarantor of any of the Indebtedness or any Guarantor dies
      or becomes incompetent, or revokes or disputes the validity of, or
      liability under, any Guaranty of the Indebtedness evidenced by this Note.
      In the event of a death, Lender, at its option, may, but shall not be
      required to, permit the Guarantor's estate to assume unconditionally the
      obligations arising under the guaranty in a manner satisfactory to Lender,
      and, in doing so, cure any Event of Default.

      CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent (25%)
      or more of the common stock of Borrower.

      ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
      condition, or Lender believes the prospect of payment or performance of
      the Indebtedness is impaired.

      CURE PROVISIONS. If any default, other than a default in payment is
      curable and if Borrower has not been given a notice of a breach of the
      same provision of this Agreement within the preceding twelve (12) months,
      it may be cured if Borrower, after receiving written notice from Lender
      demanding cure of such default: (1) cures the default within fifteen (15)
      days; or (2) if the cure requires more than fifteen (15) days, immediately
      initiates steps which Lender deems in Lender's sole discretion to be
      sufficient to cure the default and thereafter continues and completes all
      reasonable and necessary steps sufficient to produce compliance as soon as
      reasonably practical.

LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Agreement and all accrued unpaid interest immediately due, and
then Borrower will pay that amount.

ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect
this Agreement if Borrower does not pay. Borrower will pay Lender that amount.
This includes, subject to any limits under applicable law, Lender's attorneys'
fees and Lender's legal expenses, whether or not there is a lawsuit, including
attorneys' fees, expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), and appeals. Borrower also
will pay any court costs, in addition to all other sums provided by law.

JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any
action, proceeding, or counterclaim brought by either Lender or Borrower against
the other.

GOVERNING LAW. This Agreement will be governed by federal law applicable to
Lender and, to the extent not preempted by federal law, the laws of the State of
California without regard to its conflicts of law provisions. This Agreement has
been accepted by Lender in the State of California.

DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $27.50 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
indebtedness against any and all such accounts.

COLLATERAL. Borrower acknowledges this Agreement is secured by the following
collateral described in the security instrument listed herein: inventory,
chattel paper, accounts, equipment and general intangibles described in a
Commercial Security Agreement dated January 5, 2006.

LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances
under this Agreement may be requested either orally or in writing by Borrower or
as provided in this paragraph. Lender may, but need not, require that all oral
requests be confirmed in writing. All communications, instructions, or
directions by telephone or otherwise to Lender are to be directed to Lender's
office shown above. Borrower agrees to be liable for all sums either: (A)
advanced in accordance with the instructions of an authorized person or (B)
credited to any of Borrower's accounts with Lender. The unpaid principal balance
owing on this Agreement at any time may be evidenced by endorsements on this
Agreement or by Lender's internal records, including daily computer print-outs.
Lender will have no obligation to advance funds under this Agreement if: (A)
Borrower or any guarantor is in default under the terms of this Agreement or any
agreement that Borrower or any guarantor has with Lender, including any
agreement made in connection with the signing of this Agreement; (B) Borrower or
any guarantor ceases doing business or is insolvent; (C) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor's
guarantee of this Agreement or any other loan with Lender; or (D) Borrower has
applied funds provided pursuant to this Agreement for purposes other than those
authorized by Lender.

ARBITRATION. Lender and Borrower agree that all disputes, claims and
controversies between them whether individual, joint, or class in nature,
arising from this Agreement or otherwise, including without limitation contract
and tort disputes, shall be arbitrated pursuant to the financial services rules
of Endispute, Inc., d/b/a J.A.M.S./ENDISPUTE or its successor in effect at the
time the claim is filed, upon request of either party. No act to take or dispose
of any Collateral shall constitute a waiver of this arbitration agreement or be
prohibited by this arbitration agreement. This includes, without limitation,
obtaining injunctive relief or a temporary restraining order; invoking a power
of sale under any deed of trust or mortgage; obtaining a writ of attachment or
imposition of a receiver; or exercising any rights relating to personal
property, including taking or disposing of such property with or without
judicial process pursuant Article 9 of the Uniform Commercial Code. Any
disputes, claims, or controversies concerning the lawfulness or reasonableness
of any act, or exercise of any right, concerning any Collateral, including any
claim to rescind, reform, or otherwise modify any agreement relating to the
Collateral, shall also be arbitrated, provided however that no arbitrator shall
have the right or the power to enjoin or restrain any act of any party. Borrower
and Lender agree that in the event of an action for judicial foreclosure
pursuant to California Code of Civil Procedure Section 726, or any similar
provision in any other state, the commencement of such an action will not
constitute a waiver of the right to arbitrate and the court shall refer to
arbitration as much of such action, including counterclaims, as lawfully may be
referred to arbitration. Judgment upon any award rendered by any arbitrator may
be entered in any court having jurisdiction. Nothing in this Agreement shall
preclude any party from seeking equitable relief from a court of competent
jurisdiction. The statute of limitations, estoppel, waiver, laches, and similar
doctrines which would otherwise be applicable in an action brought by a party
shall be applicable in any arbitration proceeding, and the commencement of an
arbitration proceeding shall be deemed the commencement of an action for these
purposes. The Federal Arbitration Act shall apply to the construction,
interpretation, and enforcement of this arbitration provision.

CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of
the original obligation or obligations, including all agreements evidenced or
securing the obligation(s), remain unchanged and in full force and effect.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a satisfaction
of the obligation(s). It is the intention of Lender to retain as liable parties
all makers and endorsers of the original obligation(s), including accommodation
parties, unless a party is expressly released by Lender in writing. Any maker or
endorser, including accommodation makers, will not be released by virtue of this
Agreement. If any person who signed the original obligation does not sign this
Agreement below, then all persons signing below acknowledge that this Agreement
is given conditionally, based on the representation to Lender that the
non-signing party consents to the changes and provisions of this Agreement or
otherwise will not be released by it. This waiver applies not only to any
initial extension, modification or release, but also to all such subsequent
actions.

LINE OF CREDIT, CLEARANCE PROVISION. As a condition of providing Borrower with a
revolving line of credit ("RLC"), Lender requires that the amount outstanding on
said RLC will be zero dollars and zero cents ($0.00) for at least thirty (30)
consecutive days during the term of this Note ("Clearance Provision"). Borrower
further agrees and understands that if said RLC is not maintained as outlined
under the Clearance Provision, Lender

<PAGE>

                            CHANGE IN TERMS AGREEMENT
Loan No: 0412821880                (Continued)                            Page 3
================================================================================

at its sole option may demand payment in full on said RLC or take whatever
action may be deemed necessary to protect the interest of the Lender.

SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Agreement on
transfer of Borrower's interest, this Agreement shall be binding upon and inure
to the benefit of the parties, their successors and assigns. If ownership of the
Collateral becomes vested in a person other than Borrower, Lender, without
notice to Borrower, may deal with Borrower's successors with reference to this
Agreement and the Indebtedness by way of forbearance or extension without
releasing Borrower from the obligations of this Agreement or liability under the
Indebtedness.

MISCELLANEOUS PROVISIONS. This Agreement is payable on demand. The inclusion of
specific default provisions or rights of Lender shall not preclude Lender's
right to declare payment of this Agreement on its demand. Lender may delay or
forgo enforcing any of its rights or remedies under this Agreement without
losing them. Borrower and any other person who signs, guarantees or endorses
this Agreement, to the extent allowed by law waive any applicable statute of
limitations, presentment, demand for payment, and notice of dishonor. Upon any
change in the terms of this Agreement, and unless otherwise expressly stated in
writing, no party who signs this Agreement, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability. All such
parties agree that Lender may renew or extend (repeatedly and for any length of
time) this loan on release any party or guarantor or collateral; or impair, fail
to realize upon or perfect Lender's security interest in the collateral; and
take any other action deemed necessary by Lender without the consent of or
notice to anyone. All such parties also agree that Lender may modify this loan
without the consent of or notice to anyone other than the party with whom the
modification is made. The obligations under this Agreement are joint and
several.

PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER
AGREES TO THE TERMS OF THE AGREEMENT.

BORROWER:

SHEER VISION, INC.

By: /s/ Suzanne Lewsadder
    --------------------------------------------------
    Suzanne Lewsadder, President of SHEER VISION,
    INC.

================================================================================
   LASER PRO Lending, Ver. 5.25.30 001 Copr. Harland Financial Solutions, Inc.
   1997, 2005. All Rights Reserved. - CA F:\LPRO\CFI\LPL\D20C.FC TR-4637 PR-26

<PAGE>

                     DISBURSEMENT REQUEST AND AUTHORIZATION

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
 Principal              Loan Date   Maturity     Loan No    Call/Coll    Account  Officer  Initials
<S>                    <C>         <C>         <C>          <C>          <C>      <C>      <C>
$300,000.00            01-05-2006  01-15-2007  0412821880          98     128218    601
--------------------------------------------------------------------------------------------------
</TABLE>

  References in the shaded area are for Lender's use only and do not limit the
         applicability of this document to any particular loan or item.
Any item above containing "***" has been omitted due to text length limitations.
--------------------------------------------------------------------------------

<TABLE>
<S>                                                  <C>
Borrower: SHEER VISION, INC.                         Lender: Vineyard Bank
          4030 Palos Verdes Drive North, Suite 104           Diamond Bar
          Rolling Hills, CA 90274                            1200 S. Diamond Bar Boulevard
                                                             Diamond Bar, CA 91765
</TABLE>

================================================================================

LOAN TYPE. This is a Variable Rate Nondisclosable Revolving Line of Credit Loan
to a Corporation for $300,000.00 due on January 15, 2007. The reference rate
(Prime rate as published in the Wall Street Journal. When a range of rates is
published, the higher of the rates will be used, currently 7.250%) is added to
the margin of 1.250%, resulting in an initial rate of 8.500.

PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:

      [ ] Personal, Family, or Household Purposes or Personal Investment.

      [x] Business (Including Real Estate Investment).

SPECIFIC PURPOSE. The specific purpose of this loan is: To finance short term
working capital.

DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $300,000.00 as follows:

           UNDISBURSED FUNDS:                               $250,000.00

           OTHER DISBURSEMENTS:                             $ 50,000.00
              $50,000.00 Modification of Loan #0412821880
                                                            -----------

           NOTE PRINCIPAL:                                  $300,000.00

FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION
AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS
AUTHORIZATION IS DATED JANUARY 5, 2006.

BORROWER:

SHEER VISION, INC.

By: /s/ Suzanne Lewsadder
    -------------------------------------------------
    Suzanne Lewsadder, President of SHEER VISION,
    INC.

================================================================================
    LASER PRO Lending, Ver. 5.25.30.001 Copr. Harland Financial Solutions, Inc.
  1997, 2005. All Rights Reserved. - CA F:\LPRO\CFI\LPL\I20.FC TR-4637 PR-26EX-10.15

                                  FORM OF NOTE

NEITHER THIS SECURED CONVERTIBLE PROMISSORY NOTE (THE "NOTE") NOR THE SECURITIES
INTO WHICH THIS NOTE IS CONVERTIBLE  HAVE BEEN  REGISTERED  UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES  ACT"), OR ANY OTHER APPLICABLE FEDERAL
OR STATE  SECURITIES LAWS, AND HAVE BEEN ISSUED AND SOLD, OR WILL BE ISSUED UPON
CONVERSION,  IN RELIANCE UPON EXEMPTIONS FROM THE  REGISTRATION  REQUIREMENTS OF
SUCH LAWS,  INCLUDING,  WITHOUT  LIMITATION,  THE EXEMPTION CONTAINED IN SECTION
4(2) OF THE SECURITIES ACT. NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS
NOTE IS  CONVERTIBLE  MAY BE  SOLD  OR  TRANSFERRED  UNLESS  (1) A  REGISTRATION
STATEMENT HAS BECOME AND IS THEN EFFECTIVE WITH RESPECT TO SUCH SECURITIES,  (2)
THIS NOTE OR THE SECURITIES  INTO WHICH THIS NOTE IS CONVERTIBLE ARE TRANSFERRED
PURSUANT TO RULE 144  PROMULGATED  UNDER THE  SECURITIES  ACT (OR ANY  SUCCESSOR
RULE)  OR (3)  THE  COMPANY  HAS  RECEIVED  AN  OPINION  OF  COUNSEL  REASONABLY
SATISFACTORY  TO IT, TO THE EFFECT  THAT THE  PROPOSED  SALE OR TRANSFER OF SUCH
SECURITIES IS EXEMPT FROM  REGISTRATION  UNDER THE  SECURITIES ACT AND ALL OTHER
APPLICABLE FEDERAL OR STATE SECURITIES LAWS.

                      12% SECURED CONVERTIBLE NOTE DUE 2006
                                       OF
                                SHEERVISION, INC.

$_____________                                                New York, New York
                                                              September 13, 2005

         SHEERVISION,  INC., a California corporation (the "COMPANY"), for value
received,   hereby   promises   unconditionally   to  pay  to   the   order   of
____________________,  a _____________,  or such person's assigns (collectively,
the "HOLDER"), at the address set forth in Section 12 hereof, in lawful money of
the United  States of America  ("DOLLARS" or "$") and in  immediately  available
funds,   the   principal   amount  of   ___________________   THOUSAND   DOLLARS
($_____,000.00)  (the  "PRINCIPAL"),  plus any accrued and unpaid  Interest  (as
defined below), in full, on the Maturity Date (as defined below).

         The  following  is a  statement  of the  rights of the  Holder  and the
conditions to which this Note is subject, and to which the Holder hereof, by the
acceptance of this Note, agrees:

<PAGE>

         1.       DEFINITIONS. For the purposes of this Note:

                  "AFFILIATE(S)"  means,  with respect to any given Person other
than a partnership or limited  liability  company,  any other Person directly or
indirectly  controlling,  controlled by or under common control with such Person
and with respect to a  partnership,  the partners of such  partnership  and with
respect to a limited  liability  company,  the members of such limited liability
company.

                  "BUSINESS DAY" means any day that is not a Saturday, Sunday or
a legal holiday in the State of New York.

                  "COLLATERAL" means all the Company's right, title and interest
in, to and under all assets, properties, accounts receivable,  accounts, chattel
paper, all claims,  causes of action,  choices in action, rights of recovery and
rights of setoff of any kind, deposit accounts,  documents,  equipment,  general
intangibles (including,  without limitation,  patents,  trademarks,  tradenames,
domain names,  service marks,  copyrights,  trade secrets,  software (including,
without  limitation,  object and source code), any applications or registrations
therefor and  continuations  thereof,  and any good will associated  therewith),
goods, instruments, inventory, investment property, letter of credit rights, all
books  and  records  pertaining  to any of the  foregoing  collateral,  and  all
proceeds and products of, and accessions to, any of the foregoing collateral, in
each case,  whether now owned or hereafter  acquired and wherever  located.  For
purposes of this Note,  each category of the  above-described  Collateral  shall
have the meaning ascribed to it in Article 9 of the UCC, as amended,  if defined
therein.

                  "COMMON STOCK" means the common stock,  no par value share, of
the Company.

                  "CONVERSION  PRICE"  means  $2.70,  subject to  adjustment  as
provided herein.

                  "EVENT OF  DEFAULT"  shall have the  meaning  assigned to such
term in Section 4.

                  "FAMILY MEMBER" means, with respect to any Person, any parent,
spouse,  child,  brother,  sister or any other relative with a relationship  (by
blood, marriage or adoption) not more remote than first cousin to such Person.

                  "GOVERNMENTAL  AUTHORITY"  means any  Federal,  state,  local,
foreign or other court,  governmental  department,  commission,  board,  bureau,
agency or instrumentality.

                  "HOLDER MAJORITY" means the holders of a majority in principal
amount of the Notes.

                  "INTERCREDITOR  AGREEMENT" means the Intercreditor  Agreement,
dated as of the Issue Date, among the Company,  the Holder and the other holders
of Notes (as defined herein).

                  "INTEREST"  shall have the  meaning  assigned  to such term in
Section 2(b).

                                     - 2 -
<PAGE>

                  "ISSUE DATE" means September 13, 2005.

                  "LIEN" means any mortgage,  pledge, lien, security interest or
other charge or encumbrance of any kind.

                  "MATERIAL  ADVERSE EFFECT" shall have the meaning  assigned to
such term in Section 3(a).

                  "MATURITY DATE" means the earlier of (i) August 31, 2006, (ii)
upon the consummation by the Company of a merger, business combination,  sale of
all or  substantially  all of the Company's assets or other change of control or
(iii) on the  closing  of an  equity  or debt  financing  in which  the  Company
receives at least $3,000,000 in gross proceeds.

                  "MEMORANDUM"   means  the   Confidential   Private   Placement
Memorandum,  dated  August 24,  2005,  of the  Company,  relating to the private
offering and sale of the Notes.

                  "NOTE  SHARES" means the shares of Common Stock into which the
Principal of this Note may be converted in accordance with Section 7.

                  "NOTES" means this Note and the other notes issued pursuant to
the Memorandum.

                  "PERSON" means any individual,  corporation, limited liability
company,  partnership,  firm, joint venture,  association,  joint stock company,
trust or other  entity or  organization,  including a  government  or  political
subdivision or an agency or instrumentality thereof.

                  "PROCEEDS"  means all  proceeds  of,  and all  other  profits,
products,  rents or receipts, in whatever form, arising from the sale, exchange,
assignment or other disposition of Collateral.

                  "QUALIFIED  FACILITY" means a single  revolving credit line or
term loan  entered by the Company  and one  commercial  lender into  between the
Issue  Date  and  the  Maturity  Date  with a  principal  amount  not to  exceed
$1,000,000.

                  "SECURED  OBLIGATIONS"  means the  obligations  of the Company
under  this  Note,  and  the  other  Transaction  Documents,  including  (i) all
Principal of, and Interest  (including,  without limitation,  any Interest which
accrues after the commencement of any case, proceeding or other actions relating
to the  bankruptcy,  insolvency or  reorganization  of the Company and any other
amounts owing  hereunder)  on, the Note,  (ii) all other amounts  payable by the
Company under this Note and the other Transaction  Documents (including expenses
incurred  in  connection  with  the  enforcement  of  each  of  the  Transaction
Documents) and (iii) any renewals or extensions of any of the foregoing.

                  "SECURITY   INTEREST"  means  the  security  interest  in  the
Collateral granted hereunder securing the Secured Obligations.

                                     - 3 -
<PAGE>

                  "TRANSACTION  DOCUMENTS"  means  this  Note the  Intercreditor
Agreement, the Registration Rights Letter between the Company and each Holder.

                  "UCC"  means the Uniform  Commercial  Code as in effect on the
date hereof in the State of New York;  PROVIDED,  THAT if by reason of mandatory
provisions of law, the perfection or the effect of perfection or  non-perfection
of the Security Interest in any Collateral is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than New York, "UCC" means the Uniform
Commercial  Code as in effect in such other  jurisdiction  for  purposes  of the
provisions  hereof  relating  to such  perfection  or  effect of  perfection  or
non-perfection.

         2.       PRINCIPAL; INTEREST; AND PREPAYMENT.

                  (a)      PRINCIPAL;   PRINCIPAL   INCREASE.   Unless   earlier
converted in accordance with the provisions  hereof, the entire unpaid Principal
shall be paid in Dollars on the Maturity Date. Promptly following the payment in
full of this Note,  including  all  accrued  and unpaid  Interest  and any other
amounts owing hereunder, the Holder shall surrender this Note to the Company for
cancellation.

                  (b)      INTEREST.  Interest on the Note ("INTEREST"),  during
the period from the Issue Date through the Maturity Date, shall accrue at a rate
equal to 12% per annum.  Interest  shall be  computed  on the basis of a 360-day
year  consisting  of 12 equal months of 30 days applied to actual days  elapsed.
Unless the  Interest  on this Note is earlier  converted  in part into shares of
Common Stock in accordance  with the provisions  hereof,  all accrued and unpaid
interest on this Note shall be due and payable in cash on the Maturity Date. The
rate of  interest  payable  under the Note  from time to time  shall in no event
exceed the maximum rate, if any,  permissible  under applicable law. If the rate
of interest  payable under the Note is ever reduced as a result of the preceding
sentence and at any time thereafter the maximum rate permitted by applicable law
shall exceed the rate of interest provided hereunder, then the rate provided for
hereunder shall be increased to the maximum rate permitted by applicable law for
such  period as required  so that the total  amount of interest  received by the
Holder  is that  which  would  have  been  received  by the  Holder  but for the
operation of the preceding sentence.

                  (c)      PREPAYMENT.  The  Principal  may  be  prepaid  by the
Company at any time without penalty, with Interest accrued hereunder to the date
of such prepayment without the consent of the Holder.

         3.       COVENANTS.

                  (a)      USE OF PROCEEDS. Without the prior written consent of
a Holder  Majority,  the proceeds of this Note shall be used as described in the
Memorandum.

                  (b)      INCURRENCE OF INDEBTEDNESS.  Except for the Qualified
Facility,  neither  the Company nor any  subsidiary  shall,  without the written
consent of a Holder  Majority,  (i) incur any  indebtedness  pari passu with, or
senior to, the Notes for money borrowed or services performed,

                                     - 4 -
<PAGE>

except for trade payables,  or taxes,  fees,  levies or charges  incurred in the
ordinary course of business,  leases or subleases or licenses granted or entered
into in the  ordinary  course of  business,  or  equipment  leases  or  purchase
financing incurred in the ordinary course of business,  or (ii) grant, or permit
to be created any Lien.

                  (c)      RELATED PARTY  TRANSACTIONS.  Neither the Company nor
any  subsidiary  shall (i) enter into  directly or  indirectly  any  transaction
(including  without  limitation  the  purchase,   lease,  sale  or  exchange  of
properties  of any kind or the  rendering  of any  service)  with  any  officer,
director,  employee,  or  stockholder,  or any Affiliate or Family Member of any
officer, director,  employee or stockholder without the prior written consent of
a Holder  Majority or (ii)  increase  the  compensation  payable (in the form of
salary,  options,  equity or otherwise) to any executive  officer or director of
the Company without the written consent of a Holder Majority.

                  (d)      RESTRICTED  PAYMENTS.  The Company will not, directly
or indirectly (i) purchase, redeem, retire or otherwise acquire for value any of
its capital stock or other securities now or hereafter  outstanding,  return any
capital to its stockholders, or distribute any of its assets to its stockholders
or (ii) make any payment or declare any dividend on any of its capital  stock or
other  securities,  in either  case,  without the prior  written  consent of the
Holder.

                  (e)      INSURANCE.  The  Company  and its  subsidiaries  will
maintain  customary  insurance for general  liabilities and other risks on terms
and in amounts  customarily carried by businesses similar to that of the Company
and  the  subsidiaries,  respectively,  and  reasonably  sufficient  to  avoid a
material  adverse  change in the financial  condition or results of operation of
the Company and the Subsidiaries.

                  (f)      COMPLIANCE  WITH  LAWS,  ETC.  The  Company  and  its
subsidiaries  will comply  with all  applicable  laws,  rules,  regulations  and
orders,  such  compliance  to include,  without  limitation,  paying before they
become delinquent all taxes,  assessments and governmental charges imposed on it
or upon its property, except to the extent contested in good faith.

                  (g)      NO CHANGE IN  BUSINESS.  Neither  the Company nor any
subsidiary will, without the prior written consent of a Holder Majority,  change
its respective line of business from that conducted by it as of the Issue Date.

                  (h)      ACCESS TO  FACILITIES.  The  Company  will permit the
Holder (or any  successor  thereof),  upon  reasonable  notice and during normal
business hours, at such person's expense and accompanied by a representative  of
the Company, to:

                           (i)      visit and inspect any of the  properties  of
the Company;

                           (ii)     examine the corporate and financial  records
of the Company  (unless such  examination is not permitted by federal,  state or
local law) and make copies thereof or extracts therefrom; and

                                     - 5 -
<PAGE>

                           (iii)    discuss the  affairs,  finances and accounts
of the Company with the directors,  officers and independent  accountants of the
Company.

                  (i)      TAXES.  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 therefor.

                  (j)      FINANCIAL   REPORTING.   At  all  times   during  the
continuance  of the Company,  the Company  shall  prepare and maintain  separate
books of account for the Company that shall show a true and  accurate  record of
all costs and expenses incurred, all charges made, all credits made and received
and all  income  derived  in  connection  with the  operation  of the  Company's
business in accordance with US GAAP consistently  applied. The Company shall (A)
prepare quarterly unaudited financial statements in accordance with US GAAP (the
"QUARTERLY FINANCIALS") and shall deliver the Quarterly Financials to the Holder
as  soon  as  practicable  after  their  preparation  and  in any  event  within
forty-five  (45) days after the end of each  three-month  period and (B) prepare
annual  audited  financial  statements in  accordance  with US GAAP (the "ANNUAL
FINANCIALS")  and shall  deliver the Annual  Financials to the Holder as soon as
practicable  after their  preparation  and in any event within  ninety (90) days
after the end of each annual period.

         4.       EVENTS  OF  DEFAULT.  If one or more of the  following  events
("EVENTS OF DEFAULT") shall have occurred and be continuing:

                  (a)      the Company  shall fail to pay when due any Principal
of,  or  Interest  on,  this  Note,  or any  fees or any  other  amount  payable
hereunder;

                  (b)      the  Company  shall fail to  observe  or perform  any
covenant or  agreement  of this Note or any of the other  Transaction  Documents
within ten (10) days following the receipt of written notice thereof from, or on
behalf of, the Holder;

                  (c)      any   representation,   warranty,   certification  or
statement made by the Company in any  Transaction  Document,  or in any document
delivered  pursuant  to any  Transaction  Document  shall  prove  to  have  been
incorrect in any material respect when made (or deemed made);

                  (d)      a  judgment  or  order  for the  payment  of money in
excess of $300,000  shall be rendered  against the Company and such  judgment or
order shall continue unsatisfied and unstayed for a period of ten (10) days;

                                     - 6 -
<PAGE>

                  (e)      the Company shall  commence a voluntary case or other
proceeding seeking  liquidation,  reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter  in  effect  or  seeking  the  appointment  of  a  trustee,  receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property,  or shall consent to any such relief or to the  appointment  of or
taking  possession  by  any  such  official  in an  involuntary  case  or  other
proceeding  commenced  against  it, or shall make a general  assignment  for the
benefit of  creditors,  or shall fail  generally to pay its debts as they become
due, or shall take any corporate action to authorize any of the foregoing;

                  (f)      an  involuntary  case or  other  proceeding  shall be
commenced  against  the Company  seeking  liquidation,  reorganization  or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the  appointment of a trustee,
receiver,  liquidator,  custodian  or  other  similar  official  of  it  or  any
substantial part of its property,  and such involuntary case or other proceeding
shall remain  undismissed  for a period of 60 days; or an order for relief shall
be entered  against the  Company  under the  federal  bankruptcy  laws as now or
hereafter in effect; or

                  (g)      the Security  Interest  shall,  for any reason (other
than (i) the Holder's failure to renew the filing of any Uniform Commercial Code
financing statement or (ii) pursuant to the Subordination Agreement in the event
the  Company  issues  Future  Notes),  cease to be a first  priority,  perfected
security interest in and to any Collateral and such event is not remedied within
ten (10) days  following  receipt of written  notice from,  or on behalf of, the
Holder;

then, and in every such event, the Holder may, by written notice to the Company,
declare the  Principal  (together  with accrued  Interest  thereon and all other
amounts  owing  hereunder)  to be,  and the  Principal  (together  with  accrued
Interest thereon and all other amounts owing hereunder) shall thereupon  become,
immediately due and payable without presentment, demand, protest or other notice
of any kind,  all of which are hereby waived by the Company;  PROVIDED,  THAT in
the case of any of the Events of Default  specified  in clause (e) or (f) above,
without any notice to the Company or any other act by the Holder,  the Principal
(together with accrued  Interest  thereon and all other amounts owing hereunder)
shall become immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Company.

         5.       PAYMENTS; EXTENSION OF MATURITY. Unless otherwise converted in
accordance  with the terms of this Note,  all payments of Principal and Interest
(and all other amounts owing  hereunder) to be made by the Company in respect of
this Note shall be made in Dollars by wire transfer to an account  designated by
the Holder by written notice to the Company. All amounts payable under this Note
shall be paid  free and clear of,  and  without  reduction  by  reason  of,  any
deduction,  setoff,  or  counterclaim.  If the  Principal and accrued and unpaid
Interest  become  due and  payable on any day other  than a  Business  Day,  the
Maturity Date shall be extended to the next succeeding Business Day, and to such
payable amounts shall be added the Interest which shall have accrued during such
extension period at the rate per annum herein specified.

                                     - 7 -
<PAGE>

         6.       REPLACEMENT  OF NOTE.  Upon receipt by the Company of evidence
satisfactory to it of the loss,  theft,  destruction or mutilation of this Note,
and (in case of loss, theft or destruction) of indemnity reasonably satisfactory
to it,  and  upon  reimbursement  to the  Company  of  all  reasonable  expenses
incidental  thereto,  and (if mutilated) upon surrender and cancellation of this
Note,  the Company shall make and deliver to the Holder a new note of like tenor
in lieu of this Note. Any replacement note made and delivered in accordance with
this Section 6 shall be dated as of the date hereof.

         7.       CONVERSION.

                  (a)      CONVERSION OF THE NOTE. At any time, and from time to
time, the Holder may, at its sole and exclusive  option,  convert up to 22.5% of
the  outstanding  Principal  of this  Note into  shares  of Common  Stock at the
conversion price of $2.70 per share, subject to adjustment as provided for below
in subsection (f).

                  (b)      MECHANICS OF CONVERSION.  If the Holder determines to
convert a portion of this Note,  the Holder  shall  provide  ten (10) days prior
written  notice  thereof  to the  Company  of the  Principal  of the  Note to be
converted and the name or names in which the Holder wishes the Note Shares to be
issued,  and (ii)  surrender  this  Note,  duly  endorsed,  at the office of the
Company, or at such other place designated by the Company. Such conversion shall
be deemed to have been made  immediately  prior to the close of  business on the
date of the  surrender  of this Note as  provided in the  immediately  preceding
sentence.  On or after the date of conversion  and subject to the Company having
received the  certificate or  certificates  representing  this Note, the Company
shall issue and deliver to or upon the order of such Holder (i)  evidence of the
issuance of the number of shares of Common  Stock to which such Holder  shall be
entitled  (as  provided  below  in  subsection  (d))  and  (ii)  a  new  secured
convertible promissory note having identical terms to this Note, except that the
principal  amount thereof shall equal the excess of (A) the principal  amount of
this Note  immediately  prior to such  conversion  over (B) the  portion of such
principal amount converted into Note Shares.

                  (c)      NO FRACTIONAL  SHARES;  RELEASE OF OBLIGATIONS  UNDER
NOTE. No fractional  Note Shares shall be issued upon  conversion of the portion
of the  Principal  of this  Note as the case may be,  in  accordance  with  this
Section 7. Upon  conversion  of the  Principal  of this Note and the issuance of
Note  Shares,  the  Company  shall be forever  released  from the portion of its
obligations, undertakings and liabilities under this Note so converted.

                  (d)      ISSUANCE OF CERTIFICATES; ISSUANCE TAX. Promptly upon
conversion  of  the  Principal  of  this  Note  (and  all  other  amounts  owing
hereunder),  as the case may be, in accordance  with this Section 8, the Company
shall issue to the Holder  certificates  representing  the number of Note Shares
into which the  Principal  so  converted  have been  converted.  The issuance of
certificates for Note Shares upon conversion of the Principal in accordance with
this Section 7 shall be made  without  charge to the Holder for any issuance tax
in respect thereof, if any.

                  (e)      RESERVATION OF NOTE SHARES.  The Company agrees to at
all times reserve and keep available out of its  authorized but unissued  shares
of capital stock of the Company,

                                     - 8 -
<PAGE>

solely for the purpose of effecting the conversion of this Note,  such number of
its  shares  of  capital  stock of the  Company  as shall  from  time to time be
sufficient to effect the  conversion of this Note; and if at any time the number
of authorized  but unissued  shares of capital stock of the Company shall not be
sufficient to effect the conversion of this Note,  the Company hereby  covenants
and agrees to take such corporate  action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued  shares of capital stock to
such number of shares as shall be sufficient  for such purpose.  Upon  issuance,
sale and delivery of any Note Shares,  such Note Shares shall be validly  issued
and  outstanding,  fully  paid and  nonassessable,  and shall not be  subject to
preemptive or any similar rights of any person or entity.

                  (f)      CONVERSION PRICE ADJUSTMENTS.

                           (i)      ADJUSTMENT     FOR    STOCK    SPLITS    AND
COMBINATIONS.  If the  Company  shall at any time or from time to time after the
date of Issue Date effect a stock split or subdivision of the outstanding Common
Stock, the Conversion Price in effect  immediately before that subdivision shall
be proportionately  decreased, and, conversely, if the Company shall at any time
or from time to time  after the Issue Date  combine  the  outstanding  shares of
Common Stock  (including by way of reverse stock split) into a smaller number of
shares,  the Conversion Price in effect immediately before the combination shall
be  proportionately  increased.  Any  adjustment  under this  Section 7(a) shall
become  effective  at the  close  of  business  on the  date  the  stock  split,
subdivision or combination becomes effective.

                           (ii)     ADJUSTMENT  FOR COMMON STOCK  DIVIDENDS  AND
DISTRIBUTIONS.  If the  Company at any time or from time to time after the Issue
Date issues,  or fixes a record date for the  determination of holders of Common
Stock entitled to receive,  a dividend or other  distribution  payable solely in
additional  shares of Common Stock,  the Conversion Price that is then in effect
shall be decreased as of the time of such  issuance or, in the event such record
date is fixed,  as of the close of business on such record date, by  multiplying
the  Conversion  Price by a  fraction  (i) the  numerator  of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date, and (ii) the
denominator  of which is the sum of the total  number of shares of Common  Stock
issued and  outstanding  immediately  prior to the time of such  issuance or the
close of business on such record date plus the number of shares of Common  Stock
issuable in payment of such dividend or distribution; provided, however, that if
such  record  date is  fixed  and such  dividend  is not  fully  paid or if such
distribution is not fully made on the date fixed therefor,  the Conversion Price
shall be recomputed  accordingly as of the close of business on such record date
and thereafter the Conversion  Price shall be adjusted  pursuant to this Section
7(b) to reflect the actual payment of such dividend or distribution.

                           (iii)    ADJUSTMENTS    FOR   OTHER   DIVIDENDS   AND
DISTRIBUTIONS.  If the  Company at any time or from time to time after the Issue
Date issues,  or fixes a record date for the  determination of holders of Common
Stock  entitled  to  receive,  a  dividend  or  other  distribution  payable  in
securities  of the  Company  other  than  shares  of  Common  Stock  or in other
property,  in each such event  provision  shall be made so that the Holder shall
receive upon  conversion  hereof,  in addition to the number of shares of Common
Stock  receivable  hereupon,  the amount of  securities  of the Company or other
property which such Holder would have

                                     - 9 -
<PAGE>

received  had this Note been  converted  into  Common  Stock on the date of such
event and had it  thereafter,  during the period  from the date of such event to
and including the conversion  date,  retained such  securities or other property
receivable  by  it as  aforesaid  during  such  period,  subject  to  all  other
adjustments  called for during such period  under this Section 7 with respect to
the rights of the  Holder or with  respect  to such  other  securities  or other
property by their terms.  As used  herein,  the term "other  property"  does not
include cash.

                           (iv)     ADJUSTMENT  FOR  RECLASSIFICATION,  EXCHANGE
AND SUBSTITUTION.  If at any time or from time to time after the Issue Date, the
Common Stock  issuable upon the conversion of this Note is changed into the same
or a  different  number of shares  of any class or series of stock,  whether  by
recapitalization,  reclassification  or otherwise  (other than a subdivision  or
combination   of  shares  or  stock  dividend  or  a   reorganization,   merger,
consolidation  or sale of assets provided for elsewhere in this Section 7), then
in any such event the Holder  shall have the right  thereafter  to convert  this
Note  into the kind and  amount  of stock  and  other  securities  and  property
receivable  upon  such  recapitalization,  reclassification  or other  change by
holders of the number of shares of Common  Stock into which this Note could have
been converted immediately prior to such  recapitalization,  reclassification or
change,  all subject to further adjustment as provided herein or with respect to
such other securities or property by the terms thereof.

                           (v)      SALE OF SHARES BELOW CONVERSION PRICE.

                                    (A)      If at any time or from time to time
after the Issue Date, the Company  issues or sells,  or is deemed by the express
provisions of this subsection (v) to have issued or sold,  Additional  Shares of
Common Stock (as defined in subsection  (e)(iv)  below),  other than as a result
of, or in  connection  with,  any action  referenced in Section  7(f)(i),  (ii),
(iii),  or (iv)  hereof,  for an  Effective  Price  (as  defined  in  subsection
(f)(v)(D)  below) less than the then effective  Conversion  Price,  then in each
such case the then existing Conversion Price shall be reduced, as of the opening
of  business  on the  date of such  issue  or  sale,  to a price  determined  by
multiplying the then effective  Conversion Price by a fraction (i) the numerator
of which shall be (X) the number of shares of Common  Stock  deemed  outstanding
(as defined below)  immediately prior to such issue or sale, plus (Y) the number
of shares of Common Stock which the aggregate consideration received (as defined
in  subsection  (f)(v)(B))  by the  Company for the total  number of  Additional
Shares of Common Stock so issued  would  purchase at such  Conversion  Price and
(ii) the  denominator  of which  shall be the  number of shares of Common  Stock
deemed  outstanding (as defined below)  immediately  prior to such issue or sale
plus the total number of  Additional  Shares of Common Stock so issued.  For the
purposes of the preceding sentence,  the number of shares of Common Stock deemed
to be  outstanding  as of a given  date  shall be the number of shares of Common
Stock  actually  outstanding  and No adjustment  shall be made to the Conversion
Price in an  amount  less  than one cent per  share.  Any  adjustment  otherwise
required  by this  Section  7(f)(v)  that is not  required to be made due to the
preceding  sentence  shall  be  included  in any  subsequent  adjustment  to the
Conversion Price.

                                    (B)      For  the   purpose  of  making  any
adjustment  required under this Section 7(f)(v),  the consideration  received by
the  Company  for any issue or sale of  securities  shall  (X) to the  extent it
consists of cash,  be computed at the net amount of cash received by the Company
after  deduction of any  underwriting  or similar  commissions,  compensation or

                                     - 10 -
<PAGE>

concessions paid or allowed by the Company in connection with such issue or sale
but without deduction of any expenses payable by the Company,  (Y) to the extent
it consists of property  other than cash,  be computed at the fair value of that
property  as  determined  in good  faith by the Board of  Directors,  and (Z) if
Additional  Shares  of Common  Stock,  Convertible  Securities  (as  defined  in
subsection  (f)(v)(C)) or rights or options to purchase either Additional Shares
of Common Stock or Convertible Securities are issued or sold together with other
stock or  securities  or other assets of the Company for a  consideration  which
covers both,  be computed as the portion of the  consideration  so received that
may be  reasonably  determined  in good  faith by the Board of  Directors  to be
allocable to such Additional Shares of Common Stock,  Convertible  Securities or
rights or options.

                                    (C)      For the  purpose of the  adjustment
required under this Section 7(f)(v)(A), if the Company issues or sells (i) stock
or other securities  convertible  into,  Additional Shares of Common Stock (such
convertible  stock  or  securities  being  herein  referred  to as  "CONVERTIBLE
SECURITIES") or (ii) rights or options for the purchase of Additional  Shares of
Common  Stock  or  Convertible  Securities  and if the  Effective  Price of such
Additional  Shares of Common Stock is less than the Conversion Price the Company
shall be deemed to have  issued at the time of the  issuance  of such  rights or
options or Convertible  Securities  the maximum  number of Additional  Shares of
Common Stock  issuable upon exercise or conversion  thereof and to have received
as  consideration  for the  issuance of such shares an amount equal to the total
amount of the consideration, if any, received by the Company for the issuance of
such  rights or options or  Convertible  Securities,  plus,  in the case of such
rights or options, the minimum amounts of consideration,  if any, payable to the
Company  upon the  exercise  of such  rights or  options,  plus,  in the case of
Convertible Securities, the minimum amounts of consideration, if any, payable to
the Company (other than by cancellation of liabilities or obligations  evidenced
by such Convertible Securities) upon the conversion thereof; PROVIDED that if in
the case of  Convertible  Securities the minimum  amounts of such  consideration
cannot be ascertained,  but are a function of antidilution or similar protective
clauses,  the Company  shall be deemed to have  received the minimum  amounts of
consideration  without  reference to such clauses;  PROVIDED FURTHER that if the
minimum  amount of  consideration  payable to the Company  upon the  exercise or
conversion of rights,  options or Convertible Securities is reduced over time or
on the occurrence or  non-occurrence of specified events other than by reason of
antidilution  adjustments,  the Effective Price shall be recalculated  using the
figure to which  such  minimum  amount of  consideration  is  reduced;  PROVIDED
FURTHER that if the minimum amount of consideration  payable to the Company upon
the exercise or conversion of such rights,  options or Convertible Securities is
subsequently  increased,  the Effective Price shall be again  recalculated using
the increased  minimum amount of  consideration  payable to the Company upon the
exercise or conversion of such rights,  options or  Convertible  Securities.  No
further  adjustment of the  Conversion  Price,  as adjusted upon the issuance of
such rights, options or Convertible Securities, shall be made as a result of the
actual issuance of Additional Shares of Common Stock on the exercise of any such
rights or options or the conversion of any such Convertible  Securities.  If any
such  rights or  options or the  conversion  privilege  represented  by any such
Convertible   Securities  shall  expire  without  having  been  exercised,   the
Conversion  Price as  adjusted  upon the  issuance  of such  rights,  options or
Convertible  Securities  shall be readjusted to the Conversion Price which would
have  been in effect  had an  adjustment  been  made on the basis  that the only
Additional Shares of Common

                                     - 11 -
<PAGE>

Stock so issued were the  Additional  Shares of Common Stock,  if any,  actually
issued or sold on the exercise of such rights or options or rights of conversion
of such Convertible  Securities,  and such Additional Shares of Common Stock, if
any, were issued or sold for the consideration  actually received by the Company
upon such exercise,  plus the  consideration,  if any,  actually received by the
Company  for  the  granting  of all  such  rights  or  options,  whether  or not
exercised,   plus  the  consideration   received  for  issuing  or  selling  the
Convertible  Securities  actually  converted,  plus the  consideration,  if any,
actually  received by the Company (other than by  cancellation of liabilities or
obligations evidenced by such Convertible  Securities) on the conversion of such
Convertible Securities, PROVIDED that such readjustment shall not apply to prior
conversions of Notes or Warrants.

                                    (D)      "ADDITIONAL SHARES OF COMMON STOCK"
shall  mean all  shares of Common  Stock  issued by the  Company or deemed to be
issued  pursuant  to this  Section  7(f)(v)(A),  other than (X) shares of Common
Stock issued upon conversion of the Notes or the Warrants,  (Y) shares of Common
Stock issued as a result of, or in  connection  with,  any action  referenced in
Section  7(f)(i),  (ii),  (iii),  or (iv)  hereof,  and (Z)  issuances of equity
securities  to  employees  or   consultants  of  the  Company  in  one  or  more
transaction(s)  approved  by Board of  Directors  or in mergers or  acquisitions
approved  by  the  Board  of  Directors.  References  to  Common  Stock  in  the
subsections  of this  clause (D) above  shall  mean all  shares of Common  Stock
issued  by  the  Company  or  deemed  to be  issued  pursuant  to  this  Section
7(f)(v)(A).  The  "EFFECTIVE  PRICE" of Additional  Shares of Common Stock shall
mean the quotient  determined by dividing the total number of Additional  Shares
of Common  Stock  issued or sold,  or deemed to have been  issued or sold by the
Company  under  this  Section  7(f)(c)(D),   into  the  aggregate  consideration
received,  or deemed to have been  received  by the Company for such issue under
this Section 7(f)(v)(D), for such Additional Shares of Common Stock.

         8.       SECURITY INTEREST; RANKING AND SUBORDINATION.

                  (a)      GRANT OF  SECURITY  INTEREST.  In order to secure the
full and punctual  payment of the Secured  Obligations  in  accordance  with the
terms thereof,  and to secure the  performance of the obligations of the Company
hereunder,  subject to paragraph  8(g) hereof,  the Company hereby grants to the
Holder a continuing  security  interest in and to all of the  Collateral and all
Proceeds of all or any of the Collateral.

                  (b)      COVENANTS,  REPRESENTATIONS AND WARRANTIES  REGARDING
SECURITY INTEREST.

                           (i)      The Company  hereby  represents and warrants
that (A) the Security  Interest  constitutes a valid security interest under the
UCC  securing the Secured  Obligations;  and (B) when UCC  financing  statements
shall have been filed in the  appropriate UCC filing office for a debtor that is
a registered  organization  in the State of  California,  the Security  Interest
shall constitute a perfected  security interest in the Collateral,  prior to all
other Liens and rights of others  therein  and (C) the Company has valid  rights
in, and good and marketable title to, the Collateral.

                           (ii)     The  Company   will  not  change  its  name,
identity or  corporate  structure  in any manner  unless it shall have given the
Holder prior notice thereof and delivered an

                                     - 12 -
<PAGE>

opinion  of Company  legal  counsel  with  respect  to the  continued  perfected
Security  Interest.  The  Company  will  not  change  the  location  of (i)  its
jurisdiction of organization, (ii) its chief executive office or principal place
of business,  PROVIDED, HOWEVER, that the Company may change its chief executive
office and/or  principal  placement of business to any location  within ten (10)
miles of its  current  location  within  the State of  California,  or (iii) the
locations where it keeps or holds any Collateral or any records relating thereto
unless it shall have given the Holder  prior  notice  thereof and  delivered  an
opinion of counsel with respect to the continued  perfected  Security  Interest.
The Company shall not in any event change the location of any Collateral, change
the  jurisdiction  of  incorporation  or transfer any assets (to a subsidiary or
otherwise) if such change would cause the Security  Interest in such  Collateral
to lapse or cease to be perfected.

                           (iii)    The Company will,  from time to time, at its
expense,   execute,   deliver,  file  and  record  any  statement,   assignment,
instrument,  document,  agreement  or other  paper  and take  any  other  action
(including,  without  limitation,  any  filings of  financings  or  continuation
statements  under the UCC) that from time to time may be necessary or desirable,
or that the  Holder  may  reasonably  request,  in order  to  create,  preserve,
perfect,  confirm or validate the Security Interest,  or to enable the Holder to
exercise  or enforce  any of its  rights,  powers and  remedies  hereunder  with
respect to any of the Collateral. To the extent permitted by applicable law, the
Company hereby authorizes the Holder to execute and file financing statements or
continuation  statements without the Company's signature appearing thereon.  The
Company agrees that a carbon, photographic, photostatic or other reproduction of
this Note or of a financing statement is sufficient as a financing statement.

                  (c)      REMEDIES.  In case of the  occurrence of any Event of
Default  and at any time  thereafter  during  the  continuance  of such Event of
Default,  the Holder may  exercise  all rights of a secured  party under the UCC
(whether or not in effect in the jurisdiction  where such rights are exercised).
The Holder may be the  purchaser of any or all of the  Collateral so sold at any
public sale.  The Company will execute and deliver such  documents and take such
other action as the Holder  deems  necessary or advisable in order that any such
sale may be made in compliance with law. Upon any such sale the Collateral shall
be delivered,  assigned and  transferred  to the Holder.  At any such sale,  the
Holder shall hold the Collateral absolutely and free and clear from any claim or
right of  whatsoever  kind,  including  any equity or right of redemption of the
Company which may be waived,  and the Company,  to the extent  permitted by law,
hereby specifically waives all rights of redemption,  stay or appraisal which it
has or may have under any law now existing or hereafter adopted.

                  (d)      POWER OF  ATTORNEY.  The Company  hereby  irrevocably
appoints  the  Holder  its  true  and  lawful  attorney,   with  full  power  of
substitution,  in the name of the  Company  for the sole use and  benefit of the
Holder,  but  at  the  Company's  expense,  to the  extent  permitted  by law to
exercise,  at any time  and from  time to time  while  an Event of  Default  has
occurred and is continuing,  all or any of the following  powers with respect to
all or any of the Collateral:  (i) to demand, sue for, collect, receive and give
acquittance  for any and all monies  due or to become  due  thereon or by virtue
thereof; (ii) to settle, compromise, compound, prosecute or defend any action or
proceeding with respect thereto;  (iii) to sell,  transfer,  assign or otherwise
deal in or with  the same or the  Proceeds  or  avails  thereof,  as  fully  and
effectually as if the Holder were the

                                     - 13 -
<PAGE>

absolute  owner  thereof,  and (iv) to extend  the time of payment of any or all
thereof and to make any allowance and other adjustments with reference  thereto;
PROVIDED  THAT the Holder  shall give the  Company  not less than ten (10) days'
prior  written  notice  of the  time and  place  of any  sale or other  intended
disposition of any of the Collateral,  except any Collateral which is perishable
or threatens to decline  speedily in value or is of a type customarily sold on a
recognized market.  The Company agrees that such notice constitutes  "reasonable
notification" within the meaning of Section 9-610(b) of the UCC.

                  (e)      TERMINATION OF SECURITY INTEREST.  Upon the repayment
in full of all Secured  Obligations and the termination of any obligations under
the Note, the Security Interest shall terminate and all rights to the Collateral
shall  revert to the Company.  The Holder  agrees that it will take all actions,
including filing termination statements, evidencing the same.

                  (f)      EXCULPATION.  The  Holder  shall  have no  duties  or
responsibilities  except those expressly set forth in the Transaction Documents,
and the Holder shall not by reason of the Transaction Documents be a trustee for
the Company or have any fiduciary obligation to the Company.  Neither the Holder
nor any of its  directors,  officers,  employees  or agents  (collectively,  the
"RELATED  PARTIES")  shall be  liable to the  Company  for any  action  taken or
omitted to be taken by it under the  Transaction  Documents,  except for its own
willful misconduct or gross negligence.

                  (g)      RANKING  AND  SUBORDINATION.  This  Note is a secured
general obligation of the Company.  The Note ranks senior in right of payment to
all of the Company's other existing and future  indebtedness  whether secured or
unsecured and will be senior in right of payment any future  indebtedness of the
Company;  PROVIDED,  HOWEVER,  that the  Secured  Obligations  and the  Security
Interest  shall be  expressly  subordinated  as set  forth in the  Intercreditor
Agreement.

         9.       COSTS AND EXPENSES.  The Company shall be responsible  for all
expenses  incurred  by any  Holder  in  connection  with the  conversion  of the
Principal and accrued and unpaid Interest under this Note.

         10.      NO  WAIVERS  BY DELAY  OR  PARTIAL  EXERCISE.  No delay by the
Holder in exercising any powers or rights hereunder shall operate as a waiver of
such power or right,  nor shall any single or partial  exercise  of any power or
right preclude other or further exercise  thereof,  or the exercise of any other
power or right hereunder or otherwise.

         11.      FURTHER  ASSURANCES.  Each party  agrees to execute such other
documents, instruments,  agreements and consents, and take such other actions as
may be  reasonably  requested  by the other  parties  hereto to  effectuate  the
purposes of this Note.

         12.      NOTICES.  All notices required or permitted hereunder shall be
in writing and shall be deemed  effectively given: (a) upon personal delivery to
the party to be notified,  (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next Business
Day, (c) five (5) days after having been sent by registered  or certified  mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally

                                     - 14 -
<PAGE>

recognized  overnight  courier,  specifying  next  day  delivery,  with  written
verification of receipt. All communications shall be sent as follows:

                  IF TO THE COMPANY:    SheerVision, Inc.
                                        4040 Palos Verdes North
                                        Suite 105
                                        Rolling Hills Estates, California 90274
                                        Attention: Suzanne Lewsadder
                                        Telecopy:  (877) 678-4274

                  WITH A COPY TO:       Reitler Brown & Rosenblatt LLC
                                        800 Third Avenue
                                        21st Floor
                                        New York, New York 10022
                                        Attention: Robert Steven Brown
                                        Telecopy:  (212) 371-5500

                  IF TO THE HOLDER:     At the address set forth on the
                                        signature page hereto.

or to such other address or telecopy number as the party to whom notice is to be
given may have furnished to the other party in writing in accordance herewith.

         13.      AMENDMENTS AND WAIVERS.  No modification,  amendment or waiver
of any provision of, or consent  required by, this Note,  nor any consent to any
departure  herefrom,  shall be  effective  unless it is in writing and signed by
each of the Company  and the Holder.  Such  modification,  amendment,  waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.

         14.      EXCLUSIVITY  AND WAIVER OF RIGHTS.  No failure to exercise and
no delay in exercising on the part of any party,  any right,  power or privilege
hereunder  shall  operate as a waiver  thereof,  nor shall any single or partial
exercise of any right,  power or privilege  preclude  any other right,  power or
privilege.  The rights and remedies  herein  provided are cumulative and are not
exclusive of any other rights or remedies provided by law.

         15.      INVALIDITY.  Any  term or  provision  of this  Note  shall  be
ineffective  to the  extent it is  declared  invalid or  unenforceable,  without
rendering  invalid or  enforceable  the remaining  terms and  provisions of this
Note.

         16.      HEADINGS.   Headings  used  in  this  Note  are  inserted  for
convenience  only and shall not affect the meaning of any term or  provision  of
this Note.

         17.      COUNTERPARTS.  This  Note  may be  executed  in  one  or  more
counterparts,  each of which shall be deemed an original instrument,  but all of
which collectively shall constitute one and the same agreement.

                                     - 15 -
<PAGE>

         18.      ASSIGNMENT. This Note and the rights and obligations hereunder
shall not be assignable or transferable by the Company without the prior written
consent  of the  Holder.  The  Holder  may  assign  this Note and the rights and
obligations  hereunder  without  the  prior  written  consent  of  the  Company;
PROVIDED,  HOWEVER,  THAT any such transferee  agrees to be bound to he terms of
the Subordination  Agreement. Any instrument purporting to make an assignment in
violation of this Section 18 shall be void.

         19.      SURVIVAL.  Unless otherwise  expressly  provided  herein,  all
agreements  and  covenants  contained in this Note shall  survive the  execution
hereof and shall  remain in full force and effect until the earliest to occur of
(i) the payment in full of all Principal and accrued and unpaid Interest and all
other  amounts  owing  under this Note,  and (ii) the  conversion  of all of the
Principal and accrued and unpaid Interest and all other amounts owing under this
Note, if applicable, into Note Shares in accordance with Section 7.

         20.      MISCELLANEOUS.  This Note  shall  inure to the  benefit of the
Company  and the  Holder  and all  their  respective  successors  and  permitted
assigns.  Nothing in this Note is intended or shall be  construed to give to any
other person,  firm or corporation any legal or equitable right, remedy or claim
under  or in  respect  of  this  Note or any  provision  herein  contained.  The
obligations  of the Company  under this Note shall not be subject to  reduction,
limitation,   impairment,   termination,   defense,  set-off,   counterclaim  or
recoupment for any reason

         21.      GOVERNING  LAW.  THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE  WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO
ANY CHOICE OR CONFLICT OF LAWS PROVISIONS).

         23.      CONSENT TO  JURISDICTION.  THE COMPANY HEREBY  IRREVOCABLY AND
UNCONDITIONALLY  SUBMITS TO THE  JURISDICTION  OF THE COURTS OF THE STATE OF NEW
YORK AND OF THE  FEDERAL  COURTS  SITTING IN THE STATE OF NEW YORK.  THE COMPANY
AGREES THAT ALL ACTIONS OR  PROCEEDINGS  ARISING OUT OF OR RELATING TO THIS NOTE
OR THE  TRANSACTIONS  CONTEMPLATED  HEREBY MUST BE LITIGATED  EXCLUSIVELY IN ANY
SUCH STATE OR FEDERAL COURT THAT SITS IN THE CITY OF NEW YORK, AND  ACCORDINGLY,
THE COMPANY  IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE
TO THE LAYING OF THE VENUE OF ANY SUCH LITIGATION IN ANY SUCH COURT.

         24.      WAIVER  OF JURY  TRIAL.  THE  COMPANY  HEREBY  WAIVES,  TO THE
FULLEST EXTENT  PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION  DIRECTLY OR INDIRECTLY  ARISING OUT OF, UNDER
OR  IN  CONNECTION   WITH  THIS  NOTE.   THE  COMPANY  (A)  CERTIFIES   THAT  NO
REPRESENTATIVE,  AGENT OR ATTORNEY OF THE HOLDER HAS  REPRESENTED,  EXPRESSLY OR
OTHERWISE, THAT THE HOLDER WOULD NOT, IN THE EVENT OF

                                     - 16 -
<PAGE>

LITIGATION,  SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)  ACKNOWLEDGES  THAT IT
AND THE HOLDER HAS BEEN INDUCED TO ENTER INTO THIS NOTE, BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 24.

         25.      ATTORNEYS'  FEES.  In the  event  that any suit or  action  is
instituted to enforce any provision in this Note, the  prevailing  party in such
dispute  shall be entitled to recover from the losing party all fees,  costs and
expenses of enforcing any right of such  prevailing  party under or with respect
to this Note, including without limitation, such reasonable fees and expenses of
attorneys and accountants,  which shall include,  without limitation,  all fees,
costs and expenses of appeals.

              [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                     - 17 -
<PAGE>

         IN WITNESS  WHEREOF,  the  undersigned has executed this Note as of the
date first above written.

                                          SHEERVISION, INC.

                                          By:___________________________________
                                             Name:
                                             Title:

--------------------------------------------------------------------------------
Note No.
--------------------------------------------------------------------------------
Amount:
--------------------------------------------------------------------------------
Holder Name:
--------------------------------------------------------------------------------
Address:
--------------------------------------------------------------------------------
Telephone:
--------------------------------------------------------------------------------
Facsimile:
--------------------------------------------------------------------------------

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00100-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00100-of-00352.parquet"}]]