Document:

SECURITY AGREEMENT

      SECURITY AGREEMENT (as amended, restated, supplemented or otherwise
modified from time to time in accordance herewith and including all attachments,
exhibits and schedules hereto, the "Agreement"), dated as of December 4, 2006,
made by Remote Dynamics, Inc., a Delaware corporation (the "Grantor"), in favor
of Bounce Mobile Systems, Inc., a Nevada corporation, and its permitted
successors and assigns (the "Secured Party").

      WHEREAS, the Grantor has issued or will issue a series B subordinated
secured convertible promissory notes and an original issue discount series B
subordinated secured convertible promissory notes (the "Notes") to the Secured
Party pursuant to a Share Exchange Agreement, dated as of November 30, 2006 (the
"Share Exchange Agreement"), by and among the Grantor and the Secured Party; and

      WHEREAS, the Secured Party and the Grantor agree that the Grantor execute
and deliver to the Secured Party a security agreement providing for the grant to
the Secured Party of a continuing security interest in all personal property and
assets of the Grantor, all in substantially the form hereof to secure all
Obligations (hereinafter defined).

      NOW, THEREFORE, the parties agree as follows:

                             ARTICLE I. DEFINITIONS

      Section 1.1. Definition of Terms Used Herein. All capitalized terms used
herein and not defined herein have the respective meanings provided therefor in
the Share Exchange Agreement or the Notes, as applicable. All terms defined in
the Uniform Commercial Code (hereinafter defined) as in effect from time to time
and used herein and not otherwise defined herein (whether or not such terms are
capitalized) have the same definitions herein as specified therein.

      Section 1.2. Definition of Certain Terms Used Herein. As used herein, the
following terms have the following meanings:

      "Collateral" means all accounts receivable of the Grantor and all personal
and fixed property of every kind and nature, including, without limitation, all
furniture, fixtures, equipment, raw materials, inventory, as extracted
collateral, or other goods, accounts, contract rights, rights to the payment of
money, insurance refund claims and all other insurance claims and proceeds, tort
claims, chattel paper, documents, instruments, securities and other investment
property, deposit accounts, rights to proceeds of letters of credit and all
general intangibles including, without limitation, all tax refund claims,
license fees, patents, patent licenses, patent applications, trademarks,
trademark licenses, trademark applications, trade names, copyrights, copyright
licenses, copyright applications, rights to sue and recover for past
infringement of patents, trademarks and copyrights, computer programs, computer
software, engineering drawings, service marks, customer lists, goodwill, and all
licenses, permits, agreements of any

<PAGE>
                                                                               2

kind or nature pursuant to which the Grantor possesses, uses or has authority to
possess or use property (whether tangible or intangible) of others or others
possess, use or have authority to possess or use property (whether tangible or
intangible) of the Grantor, and all recorded data of any kind or nature,
regardless of the medium of recording including, without limitation, all books
and records, software, writings, plans, specifications and schematics, whether
now owned or hereinafter acquired by the Grantor; and all proceeds and products
of each of the foregoing.

      "Default" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured, waived, or otherwise
remedied during such time) constitute an Event of Default.

      "Event of Default" has the meaning specified in the Notes.

      "Indemnitees" has the meaning specified in Section 7.5(b).

      "Lien" means: (i) any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute, or contract, and including a
security interest, charge, claim, or lien arising from a mortgage, deed of
trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement,
agreement, security agreement, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes; (ii) to the extent not included
under clause (i), any reservation, exception, encroachment, easement,
right-of-way, covenant, condition, restriction, lease or other title exception
or encumbrance affecting property; and (iii) any contingent or other agreement
to provide any of the foregoing.

      "Notes" has the meaning assigned to such term in the first recital of this
Agreement.

      "Obligations" means all indebtedness, liabilities, obligations, covenants
and duties of the Grantor to the Secured Parties of every kind, nature and
description, direct or indirect, absolute or contingent, due or not due,
contractual or tortious, liquidated or unliquidated, arising by operation of law
or otherwise, now existing of hereafter arising under or in connection with the
Notes, this Agreement or the other Transaction Documents.

      "Registered Organization" means an entity formed by filing a registration
document with a United States Governmental Authority, such as a corporation,
limited partnership or limited liability company.

      "Security Interest" has the meaning specified in Section 2.1 of this
Agreement.

      "Uniform Commercial Code" means the Uniform Commercial Code from time to
time in effect in the State of New York.

                          ARTICLE II. SECURITY INTEREST

      Section 2.1. Security Interest. As security for the payment and
performance, in full of the Obligations, and any extensions, renewals,
modifications or refinancings of the Obligations, the Grantor hereby bargains,
sells, conveys, assigns, sets over, mortgages, pledges, hypothecates and
transfers to the Secured Party, and hereby grants to the Secured Party, their
successors and

<PAGE>
                                                                               3

assigns, a security interest in, all of such Grantor's right, title and interest
in, to and under the Collateral and all hereinafter acquired Collateral (the
"Security Interest").

      Section 2.2. No Assumption of Liability. The Security Interest is granted
as security only and shall not subject the Secured Party to, or in any way alter
or modify, any obligation or liability of the Grantor with respect to or arising
out of the Collateral.

                   ARTICLE III. REPRESENTATIONS AND WARRANTIES

      The Grantor represents and warrants to the Secured Party that:

      Section 3.1. Title and Authority. The Grantor has good and valid rights in
and title to the Collateral with respect to which it has purported to grant a
security interest hereunder and has full power and authority to grant to the
Secured Party the Security Interest and to execute, deliver and perform its
obligations in accordance with the terms of this Agreement, without the consent
or approval of any other Person other than any consent or approval which has
been obtained.

      Section 3.2. Filings; Actions to Achieve Perfection. Fully executed
Uniform Commercial Code financing statements (including fixture filings, as
applicable) or other appropriate filings, recordings or registrations containing
a description of the Collateral have been delivered to the Secured Party for
filing in each United States governmental, municipal or other office specified
in Schedule A, which are all the filings, recordings and registrations that are
necessary to publish notice of and protect the validity of and to establish a
legal, valid and perfected security interest in favor of the Secured Party in
respect of all Collateral in which the Security Interest may be perfected by
filing, recording or registration in the United States (or any political
subdivision thereof) and its territories and possessions, and no further or
subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary in any such jurisdiction, except as provided under
applicable law with respect to the filing of continuation statements or with
respect to the filing of amendments or new filings to reflect the change of the
Grantor's name, location, identity or corporate structure. The Grantor's name is
listed in the preamble of this Agreement identically to how it appears on its
certificate of incorporation or other organizational documents.

      Section 3.3. Validity and Priority of Security Interest. The Security
Interest constitutes (a) a legal and valid security interest in all the
Collateral securing the payment and performance of the Obligations, (b) subject
only to the filings described in Section 3.2 above and other previously
perfected security interests in the Collateral listed on Schedule 3.3 to this
Agreement ("Existing Liens"), a perfected security interest in all Collateral in
which a security interest may be perfected by filing, recording or registration
in the United States pursuant to the Uniform Commercial Code or other applicable
law in the United States (or any political subdivision thereof) and its
territories and possessions or any other country, state or nation (or any
political subdivision thereof). The Security Interest is and shall be
subordinate to any other Existing Lien on any of the Collateral.

      Section 3.4. Absence of Other Liens. The Grantor's Collateral is owned by
the Grantor free and clear of any Lien other than Existing Liens. Without
limiting the foregoing and except as set forth on Schedule 3.4 to this
Agreement, the Grantor has not filed or consented to any filing of any financing
statement or similar filing in favor of any Person other than the Secured

<PAGE>
                                                                               4

Party, nor permitted the granting or assignment of a security interest or
permitted perfection of any security interest in the Collateral in favor of any
Person other than the Secured Party. The Grantor's having possession of all
instruments, certificates and cash constituting Collateral from time to time and
the filing of financing statements in the offices referred to in Schedule A
hereto results in the perfection of such security interest. Such Security
Interest is, or in the case of Collateral in which the Grantor obtain rights
after the date hereof, will be, a perfected security interest. Such notices,
filings and all other action necessary or desirable to perfect and protect such
security interest have been duly taken.

      Section 3.5. Valid and Binding Obligation. This Agreement constitutes the
legal, valid and binding obligation of the Grantor, enforceable against the
Grantor in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies, and (iii) to the extent the indemnification
provisions contained in this Agreement may be limited by applicable federal or
state securities laws.

                              ARTICLE IV. COVENANTS

      Section 4.1. Change of Name; Location of Collateral; Place of Business,
State of Formation or Organization.

            (a) The Grantor shall notify the Secured Party in writing at least
      eleven (11) days prior to any change (i) in its corporate name or in any
      trade name used to identify it in the conduct of its business or in the
      ownership of its properties, (ii) in the location of its chief executive
      office, its principal place of business, any office in which it maintains
      books or records relating to Collateral owned by it (including the
      establishment of any such new office or facility), (iii) in its identity
      or corporate structure such that a filed filing made under the Uniform
      Commercial Code becomes misleading or (iv) in its Federal Taxpayer
      Identification Number. Furthermore, the Grantor shall not effect or permit
      any change referred to in the preceding sentence unless all filings have
      been made under the Uniform Commercial Code or otherwise that are required
      in order for the Secured Party to continue at all times following such
      change to have a valid, legal and perfected security interest in all the
      Collateral subject to the Existing Liens.

            (b) Without limiting Section 4.1(a), without the prior written
      consent of the Secured Party in each instance, the Grantor shall not
      change its (i) principal residence, if it is an individual, (ii) place of
      business, if it has only one place of business and is not a Registered
      Organization, (iii) principal place of business, if it has more than one
      place of business and is not a Registered Organization, or (iv) state of
      incorporation, formation or organization, if it is a Registered
      Organization.

      Section 4.2. Records. The Grantor shall maintain, at its own cost and
expense, such complete and accurate records with respect to the Collateral owned
by it as is consistent with its current practices and in accordance with such
prudent and standard practices used in industries that are the same as or
similar to those in which the Grantor is engaged, but in any event to include
complete accounting records indicating all payments and proceeds received with
respect to any part of the Collateral, and, at such time or times as the Secured
Party may reasonably

<PAGE>
                                                                               5

request, promptly to prepare and deliver to the Secured Party a duly certified
schedule or schedules in form and detail satisfactory to the Secured Party
showing the identity, amount and location of any and all Collateral.

      Section 4.3. Periodic Certification; Notice of Changes. In the event there
should at any time be any change in the information represented and warranted
herein or in the documents and instruments executed and delivered in connection
herewith, the Grantor shall immediately notify the Secured Party in writing of
such change (this notice requirement shall be in extension of and shall not
limit or relieve the Grantor of any other covenants hereunder).

      Section 4.4. Protection of Security. The Grantor shall, at its own cost
and expense, take any and all actions reasonably necessary to defend title to
the Collateral against all persons and to defend the Security Interest of the
Secured Party in the Collateral and the priority thereof against any Lien other
than the Existing Liens.

      Section 4.5. Inspection and Verification. The Secured Party and such
persons as the Secured Party may reasonably designate shall, upon reasonable
advanced notice and during normal business hours, have the right to inspect the
Collateral, all records related thereto (and to make extracts and copies from
such records) and the premises upon which any of the Collateral is located, to
discuss the Grantor's affairs with the officers of the Grantor and its
independent accountants and to verify under reasonable procedures the validity,
amount, quality, quantity, value, condition and status of, or any other matter
relating to, the Collateral, including, in the case of collateral in the
possession of any third Person, by contacting any account debtor or third Person
possessing such Collateral for the purpose of making such a verification.
Out-of-pocket expenses in connection with any inspections by representatives of
the Secured Party shall be (a) the obligations of the Grantor with respect to
any inspection after the Secured Party's demand payment of the Notes or (b) the
obligation of the Secured Party in any other case.

      Section 4.6. Taxes; Encumbrances. At their option, the Secured Party may
discharge, Liens other than Existing Liens at any time levied or placed on the
Collateral and may pay for the maintenance and preservation of the Collateral to
the extent the Grantor fails to do so and the Grantor shall reimburse the
Secured Party on demand for any payment made or any expense incurred by the
Secured Party pursuant to the foregoing authorization; provided, however, that
nothing in this Section shall be interpreted as excusing the Grantor from the
performance of, or imposing any obligation on the Secured Party to cure or
perform, any covenants or other obligation of the Grantor with respect to any
Lien or maintenance or preservation of Collateral as set forth herein.

      Section 4.7. Use and Disposition of Collateral. The Grantor shall not make
or permit to be made an assignment, pledge or hypothecation of any Collateral or
shall grant any other Lien in respect of the Collateral without the prior
written consent of the Secured Party. The Grantor shall not make or permit to be
made any transfer of any Collateral other than with respect to Existing Liens
and other liens approved by the Secured Party and the Grantor shall remain at
all times in possession of the Collateral owned by it except in the ordinary
course of business.

      Section 4.8. Insurance/Notice of Loss. Within a reasonable period of time
following the date of this Agreement, Grantor, at its own expense, shall
maintain or cause to be maintained

<PAGE>
                                                                               6

insurance covering physical loss or damage to the Collateral as described on
Schedule 4.8 to this Agreement. In extension of the foregoing and without
limitation, such insurance shall be payable to the Secured Party as loss payee
under a "standard" loss payee clause, and the Secured Party shall be listed as
an "additional insured" on Grantor's general liability insurance. Such insurance
shall not be terminated, cancelled or not renewed for any reason, including
non-payment of insurance premiums, unless the insurer shall have provided the
Secured Party at least 30 days prior written notice. Grantor irrevocably makes,
constitutes and appoints the Secured Party (and all officers, employees or
agents designated by the Secured Party) as its true and lawful agent and
attorney-in-fact for the purpose, at any time following the Secured Party's
demand for payment of the Notes during the continuance of an Event of Default,
of making, settling and adjusting claims in respect of Collateral under policies
of insurance, endorsing the name of Grantor on any check, draft, instrument or
other item of payment for the proceeds of such policies of insurance and for
making all determinations and decisions with respect thereto. In the event that
Grantor at any time or times shall fail to obtain or maintain any of the
policies of insurance required hereby or to pay any premium in whole or part
relating thereto, the Secured Party may, without waiving or releasing any
obligation or liability of Grantor hereunder, in their sole discretion, obtain
and maintain such policies of insurance and pay such premium and take any other
actions with respect thereto as the Secured Party reasonably deems advisable.
All sums disbursed by the Secured Party in connection and in accordance with
this Section, including reasonable attorneys' fees, court costs, expenses and
other charges relating thereto, shall be payable upon demand, by Grantor to the
Secured Party and shall be additional Obligations secured hereby. Grantor shall
promptly notify the Secured Party if any material portion of the Collateral
owned or held by Grantor is damaged or destroyed. The proceeds of any casualty
insurance in respect of any casualty loss of any of the Collateral shall (i) so
long as the Secured Party has not demanded payment of the Notes during the
continuance of an Event of Default, be disbursed to Grantor for direct
application by Grantor solely to the repair or replacement of Grantor's property
so damaged or destroyed, and (ii) in all other circumstances, be held by the
Secured Party as cash collateral for the Obligations. The Secured Party may, at
its sole option, disburse from time to time all or any part of such proceeds so
held as cash collateral, upon such terms and conditions as the Secured Party may
reasonably prescribe, for direct application by the Secured Party solely to the
repair or replacement of Grantor's property so damaged or destroyed, or Grantor
may apply all or any part of such proceeds to the Obligations.

      Section 4.9. Legend. Grantor shall legend, in form and manner satisfactory
to the Secured Party, its accounts and its books, records and documents
evidencing or pertaining thereto with an appropriate reference to the fact that
such accounts have been assigned to the Secured Party and that the Secured Party
has a security interest therein.

                ARTICLE V. FURTHER ASSURANCES; POWER OF ATTORNEY

      Section 5.1. Further Assurances. Grantor shall, at its own expense,
execute, acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions as the Secured Party may
from time to time reasonably request to better assure, preserve, protect and
perfect the Security Interest and the rights and remedies created hereby,
including the payment of any fees and taxes required in connection with the
execution and delivery of this Agreement, the granting of the Security Interest
and the filing of any financing statements (including fixture filings) or other
documents in connection herewith or

<PAGE>
                                                                               7

therewith. If any amount payable under or in connection with any of the
Collateral shall be or become evidenced by any promissory note or other
instrument, such note or instrument shall be immediately pledged and delivered
to the Secured Party, duly endorsed in a manner satisfactory to the Secured
Party.

      Section 5.2. Power of Attorney.

            (a) Grantor hereby irrevocably (as a power coupled with an interest)
      constitutes and appoints the Secured Party and all officers, employees or
      agents designated by the Secured Party, its attorney-in-fact with full
      power of substitution, for the benefit of the Secured Party,

                  (i) to take all appropriate action and to execute all
            documents and instruments that may be necessary or desirable to
            accomplish the purposes of this Agreement, and without limiting the
            generality of the foregoing, Grantor hereby grants the power to file
            one or more financing statements (including fixture filings),
            continuation statements, filings with the United States Patent and
            Trademark Office or United States Copyright Office (or any successor
            office or any similar office in any other country) or other
            documents for the purpose of perfecting, confirming, continuing,
            enforcing or protecting the Security Interest granted by Grantor,
            without the signature of Grantor, and naming Grantor as debtor and
            the Collateral Agent and/or the Secured Party as secured party; and

                  (ii) at any time following the Secured Party's demand for
            payment of the Notes during the continuance of an Event of Default
            (i) to receive, endorse, assign and/or deliver any and all notes,
            acceptances, checks, drafts, money orders or other evidences of
            payment relating to the Collateral or any part thereof; (ii) to
            demand, collect, receive payment of, give receipt for and give
            discharges and releases of all or any of the Collateral; (iii) to
            sign the name of Grantor on any invoice or bill of lading relating
            to any of the Collateral; (iv) to send verifications of accounts to
            any account debtor or any other Person liable for an account; (v) to
            commence and prosecute any and all suits, actions or proceedings at
            law or in equity in any court of competent jurisdiction to collect
            or otherwise realize on all or any of the Collateral or to enforce
            any rights in respect of any Collateral; (vi) to settle, compromise,
            compound, adjust or defend any actions, suits or proceeding relating
            to all or any of the Collateral; and (vii) to use, sell, assign,
            transfer, pledge, make any agreement with respect to or otherwise
            deal with all or any of the Collateral, and to do all other acts and
            things necessary to carry out the purposes of this Agreement, as
            fully and completely as though the Secured Party was the absolute
            owner of the Collateral for all purposes; provided, however, that
            nothing herein contained shall be construed as requiring or
            obligating the Secured Party to make any commitment or to make any
            inquiry as to the nature or sufficiency of any payment received by
            the Secured Party, or to present or file any claim or notice, or to
            take any action with respect to the Collateral or any part thereof
            or the moneys due or to become due in respect thereof or any
            property covered thereby, and no action taken or omitted to be taken
            by the Secured Party with respect to the Collateral or any part
            thereof shall give rise to any defense, counterclaim or offset in
            favor of Grantor or to any claim or action against the Secured
            Party.

<PAGE>
                                                                               8

            (b) The provisions of this Article shall in no event relieve Grantor
      of any of its obligations hereunder with respect to the Collateral or any
      part thereof or impose any obligation on the Secured Party to proceed in
      any particular manner with respect to the Collateral or any part thereof,
      or in any way limit the exercise by the Secured Party of any other or
      further right which it may have on the date of this Agreement or
      hereafter, whether hereunder, by law or otherwise.

                              ARTICLE VI. REMEDIES

      Section 6.1. Remedies upon Default.

            (a) Upon the occurrence and during the continuance of an Event of
      Default, Grantor agrees to deliver each item of its Collateral to the
      Secured Party on demand, and it is agreed that the Secured Party shall
      have the right to take any of or all the following actions at the same or
      different times (but at all times subject to any Existing Liens): with or
      without legal process and with or without prior notice or demand for
      performance, to take possession of the Collateral and without liability
      for trespass to enter any premises where the Collateral may be located for
      the purpose of taking possession of or removing the Collateral, exercise
      Grantor's right to bill and receive payment for completed work and,
      generally, to exercise any and all rights afforded to a secured party
      under the Uniform Commercial Code or other applicable law. Without
      limiting the generality of the foregoing, Grantor agrees that the Secured
      Party shall have the right, subject to the mandatory requirements of
      applicable law, to sell or otherwise dispose of all or any part of the
      Collateral, at public or private sale or at any broker's board or on any
      securities exchange, for cash, upon credit or for future delivery as the
      Secured Party shall deem appropriate. The Secured Party shall be
      authorized at any such sale (if it deems it advisable to do so) to
      restrict the prospective bidders or purchasers to persons who will
      represent and agree that they are purchasing the Collateral for their own
      account for investment and not with a view to the distribution or sale
      thereof, and upon consummation of any such sale the Secured Party shall
      have the right to assign, transfer and deliver to the purchaser or
      purchasers thereof the Collateral so sold. Each such purchaser at any such
      sale shall hold the property sold absolutely, free from any claim or right
      on the part of Grantor, and Grantor hereby waives (to the extent permitted
      by law) all rights of redemption, stay and appraisal which Grantor now has
      or may at any time in the future have under any rule of law or statute now
      existing or hereafter enacted.

            (b) The Secured Party shall give Grantor ten (10) days' written
      notice (which Grantor agrees is reasonable notice within the meaning of
      Section 9-504(3) of the Uniform Commercial Code) of the Secured Party's
      intention to make any sale of Collateral. Such notice, in the case of a
      public sale, shall state the time and place for such sale and, in the case
      of a sale at a broker's board or on a securities exchange, shall state the
      board or exchange at which such sale is to be made and the day on which
      the Collateral, or portion thereof, will first be offered for sale at such
      board or exchange. Any such public sale shall be held at such time or
      times within ordinary business hours and at such place or places as the
      Secured Party may fix and state in the notice (if any) of such sale. At
      any such sale, the Collateral, or portion thereof, to be sold may be sold
      in one lot as an entirety or in separate parcels, as the Secured Party may
      (in its sole and absolute discretion) determine. The Secured Party shall
      not be obligated to make any

<PAGE>
                                                                               9

      sale of any Collateral if it shall determine not to do so, regardless of
      the fact that notice of sale of such Collateral shall have been given. The
      Secured Party may, without notice or publication, adjourn any public or
      private sale or cause the same to be adjourned from time to time by
      announcement at the time and place fixed for sale, and such sale may,
      without further notice, be made at the time and place to which the same
      was so adjourned. In case any sale of all or any part of the Collateral is
      made on credit or for future delivery, the Collateral so sold may be
      retained by the Secured Party until the sale price is paid by the
      purchaser or purchasers thereof, but the Secured Party shall not incur any
      liability in case any such purchaser or purchasers shall fail to take up
      and pay for the Collateral so sold and, in case of any such failure, such
      Collateral may be sold again upon like notice. At any public (or, to the
      extent permitted by law, private) sale made pursuant to this Section, the
      Secured Party may bid for or purchase, free (to the extent permitted by
      law) from any right of redemption, stay, valuation or appraisal on the
      part of Grantor (all said rights being also hereby waived and released to
      the extent permitted by law), the Collateral or any part thereof offered
      for sale and may make payment on account thereof by using any claim then
      due and payable to the Secured Party from Grantor as a credit against the
      purchase price, and the Secured Party may, upon compliance with the terms
      of sale, hold, retain and dispose of such property without further
      accountability to Grantor therefor. For purposes hereof, a written
      agreement to purchase the Collateral or any portion thereof shall be
      treated as a sale thereof; the Secured Party shall be free to carry out
      such sale pursuant to such agreement and Grantor shall not be entitled to
      the return of the Collateral or any portion thereof subject thereto,
      notwithstanding the fact that after the Secured Party shall have entered
      into such an agreement all Obligations have been paid in full. As an
      alternative to exercising the power of sale herein conferred upon it, the
      Secured Party may proceed by a suit or suits at law or in equity to
      foreclose this Agreement and to sell the Collateral or any portion thereof
      pursuant to a judgment or decree of a court or courts having competent
      jurisdiction or pursuant to a proceeding by a court-appointed receiver.

      Section 6.2. Application of Proceeds. The Secured Party shall apply the
proceeds of any collection or sale of the Collateral, as well as any Collateral
consisting of cash, as follows:

            (a) FIRST, to the payment of all reasonable costs and expenses
incurred by the Secured Party in connection with such collection or sale or
otherwise in connection with this Agreement or any of the Obligations, including
all court costs and the fees and expenses of its agents and legal counsel, and
any other costs or expenses incurred in connection with the exercise of any
right or remedy hereunder, under the Share Exchange Agreement, the Notes and the
other Transaction Documents;

            (b) SECOND, to the payment in full of the Obligations; and

            (c) THIRD, to Grantor, its successors or assigns, or to whomsoever
may be lawfully entitled to receive the same, or as a court of competent
jurisdiction may otherwise direct.

      Subject to the foregoing, the Secured Party shall have absolute discretion
as to the time of application of such proceeds, moneys or balances in accordance
with this Agreement. Upon any sale of the Collateral by the Secured Party
(including pursuant to a power of sale granted by

<PAGE>
                                                                              10

statute or under a judicial proceeding), the receipt of any such proceeds,
moneys or balances by the Secured Party or of the officer making the sale shall
be a sufficient discharge to the purchaser or purchasers of the Collateral so
sold and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Secured Party or
such officer or be answerable in any way for the misapplication thereof.

      Section 6.3. Grant of License to Use Intellectual Property. For the
purpose of enabling the Secured Party to exercise rights and remedies under this
Article at such time as the Secured Party shall be lawfully entitled to exercise
such rights and remedies, Grantor hereby grants to the Secured Party an
irrevocable, non-exclusive license (exercisable without payment of royalty or
other compensation to Grantor) to use, license or sub-license any of the
Collateral consisting of intellectual property now owned or hereafter acquired
by Grantor, and wherever the same may be located, and including in such license
reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer software and programs used for the
compilation or printout thereof. The use of such license by the Secured Party
may be exercised, at the option of the Secured Party, only following the Secured
Party's demand for payment of the Notes during the continuance of an Event of
Default.

                           ARTICLE VII. MISCELLANEOUS

      Section 7.1. Notices. All communications and notices hereunder to the
Grantor and to the Secured Party shall (except as otherwise expressly permitted
herein) be in writing and delivered to the Grantor or the Secured Party, as the
case may be, as provided in the Share Exchange Agreement.

      Section 7.2. Security Interest Absolute. All rights of the Secured Party
hereunder, the Security Interest and all obligations of Grantor hereunder shall
be absolute and unconditional irrespective of (a) any lack of validity or
enforceability of the Share Exchange Agreement, the Notes, any Transaction
Document or any agreement with respect to any of the Obligations or any other
agreement or instrument relating to any of the foregoing, (b) any change in the
time, manner or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Share Exchange Agreement, the Notes, any Transaction Document or any
other agreement or instrument, (c) any exchange, release or non-perfection of
any Lien on other collateral, or any release or amendment or waiver of or
consent under or departure from any guarantee, securing or guaranteeing all or
any of the Obligations, or (d) any other circumstance that might otherwise
constitute a defense available to, or a discharge of, Grantor in respect of the
Obligations or this Agreement.

      Section 7.3. Survival of Agreement. All covenants, agreements,
representations and warranties made by Grantor herein and in the certificates or
other instruments prepared or delivered in connection with or pursuant to this
Agreement shall be considered to have been relied upon by the Secured Party and
shall survive the making of the loan and the execution and delivery to the
Secured Party of the Notes, regardless of any investigation made by the Secured
Party or on their behalf; and shall continue in full force and effect until this
Agreement shall terminate.

      Section 7.4. Binding Effect; Several Agreement; Successors and Assigns.
This Agreement shall become effective as to Grantor when a counterpart hereof
executed on behalf of

<PAGE>
                                                                              11

Grantor shall have been delivered to the Secured Party and a counterpart hereof
shall have been executed on behalf of the Secured Party, and thereafter shall be
binding upon Grantor and the Secured Party and their respective successors and
assigns, and shall inure to the benefit of Grantor, the Secured Party and their
respective successors and assigns, except that Grantor shall not have the right
to assign or transfer its rights or obligations hereunder or any interest herein
or in the Collateral (and any such assignment or transfer shall be void) except
as expressly contemplated by this Agreement, the Share Exchange Agreement, the
Notes or the other Transaction Documents.

      Section 7.5. Secured Party's Fees and Expense; Indemnification.

            (a) Grantor agrees to pay upon demand to the Secured Party the
      amount of any and all reasonable expenses, including all reasonable fees,
      disbursements and other charges of its counsel and of any experts or
      agents, which the Secured Party may incur in connection with (i) the
      administration of this Agreement (including the customary fees and charges
      of the Secured Party for any audits conducted by them or on their behalf
      with respect to the accounts inventory), (ii) the custody or preservation
      of, or the sale of, collection from or other realization upon any of the
      Collateral, (iii) the exercise, enforcement or protection of any of the
      rights of the Secured Party hereunder or (iv) the failure of Grantor to
      perform or observe any of the provisions hereof.

            (b) Grantor agrees to indemnify the Secured Party and the agents,
      contractors and employees of the Secured Partiy (collectively, the
      "Indemnitees") against, and hold each of them harmless from, any and all
      losses, claims, damages, liabilities and related expenses, including
      reasonable fees, disbursements and other charges of counsel, incurred by
      or asserted against any of them arising out of, in any way connected with,
      or as a result of, the execution, delivery, or performance of this
      Agreement or any agreement or instrument contemplated hereby or any claim,
      litigation, investigation or proceeding relating hereto or to the
      Collateral, whether or not any Indemnitee is a party thereto; provided
      that such indemnity shall not, as to any Indemnitee, be available to the
      extent that such losses, claims, damages, liabilities or related expenses
      are determined by a court of competent jurisdiction by final and
      nonappealable judgment to have resulted from the gross negligence or
      willful misconduct of such Indemnitee.

            (c) Any such amounts payable as provided hereunder shall be
      additional Obligations secured hereby. The provisions of this Section
      shall remain operative and in full force and effect regardless of the
      termination of this Agreement, the Share Exchange Agreement, the Notes or
      the other Transaction Documents, the consummation of the transactions
      contemplated hereby, the repayment of any of the Obligations, the
      invalidity or unenforceability of any term or provision of this Agreement,
      the Share Exchange Agreement, the Notes or the other Transaction
      Documents, or any investigation made by or on behalf of the Secured Party.
      All amounts due under this Section shall be payable on written demand
      therefor.

      Section 7.6. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ANY OF THE CONFLICTS OF LAW

<PAGE>
                                                                              12

PRINCIPLES WHICH WOULD RESULT IN THE APPLICATION OF THE SUBSTANTIVE LAW OF
ANOTHER JURISDICTION. THIS AGREEMENT SHALL NOT BE INTERPRETED OR CONSTRUED WITH
ANY PRESUMPTION AGAINST THE PARTY CAUSING THIS AGREEMENT TO BE DRAFTED.

      Section 7.7. Waivers; Amendment.

            (a) No failure or delay of the Secured Party in exercising any power
or right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Secured Party hereunder and under the Share Exchange
Agreement are cumulative and are not exclusive of any rights or remedies that
they would otherwise have. No waiver of any provisions of this Agreement, the
Share Exchange Agreement, the Notes or the other Transaction Documents or
consent to any departure by Grantor therefrom shall in any event be effective
unless the same shall be permitted by paragraph (b) below, and then such waiver
or consent shall be effective only in the specific instance and for the purpose
for which given. No notice to or demand on Grantor in any case shall entitle
Grantor to any other or further notice or demand in similar or other
circumstances.

            (b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements, in writing
entered into by the Secured Partu and Grantor.

      Section 7.8. WAIVER OF JURY TRIAL. EACH PARTY HERETO 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 AGREEMENT, THE PURCHASE AGREEMENT OR THE NOTES. EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT, THE PURCHASE AGREEMENT AND THE NOTES, AS APPLICABLE, BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

      Section 7.9. Severability. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired thereby
(it being understood that the invalidity of a particular provision in a
particular jurisdiction shall not in and of itself affect the validity of such
provision in any other jurisdiction). The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.

      Section 7.10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall

<PAGE>
                                                                              13

constitute but one contract. Each party shall be entitled to rely on a facsimile
signature of any other party hereunder as if it were an original.

      Section 7.11. Jurisdiction; Consent to Service of Process.

            (a) Grantor hereby irrevocably and unconditionally submits, for
      itself and its property, to the nonexclusive jurisdiction of any New York
      State court or Federal court of the United States of America sitting in
      New York City, and any appellate court from any thereof, in any action or
      proceeding arising out of or relating to this Agreement, the Purchase
      Agreement or the Notes, or for recognition or enforcement of any judgment,
      and each of the parties hereto hereby irrevocably and unconditionally
      agrees that all claims in respect of any such action or proceeding may be
      heard and determined in such New York State or, to the extent permitted by
      law, in such Federal court. Each of the parties hereto agrees that a final
      judgment in any such action or proceeding shall be conclusive and may be
      enforced in other jurisdictions by suit on the judgment or in any other
      manner provided by law. Nothing in this Agreement shall affect any right
      that the Secured Party may otherwise have to bring any action or
      proceeding relating to this Agreement, the Share Exchange Agreement, the
      Notes or the other Transaction Documents against Grantor or its properties
      in the courts of any jurisdiction.

            (b) Grantor hereby irrevocably and unconditionally waives, to the
      fullest extent it may legally and effectively do so, any objection which
      it may now or hereafter have to the laying of venue of any suit, action or
      proceeding arising out of or relating to this Agreement, the Share
      Exchange Agreement, the Notes or the other Transaction Documents in any
      New York State or Federal court. Each of the parties hereto hereby
      irrevocably waives, to the fullest extent permitted by law, the defense of
      an inconvenient forum to the maintenance of such action or proceeding in
      any such court.

            (c) Each party to this Agreement irrevocably consents to service of
      process in the manner provided for notices in Section 7.1. Nothing in this
      Agreement will affect the right of any party to this Agreement to process
      in any other manner permitted by law.

      Section 7.12. Termination. This Agreement and the Security Interest shall
terminate when all the Obligations have been paid in full, at which time the
Secured Party shall execute and deliver to Grantor, at Grantor's expense, all
Uniform Commercial Code termination statements and similar documents which
Grantor shall reasonably request to evidence such termination. Any execution and
delivery of termination statements or documents pursuant to this Section shall
be without recourse to or warranty by the Secured Party.

      Section 7.13. Prejudgment Remedy Waiver. Grantor acknowledges that this
Agreement, the Share Agreement, the Notes and the other Transaction Documents
evidence a commercial transaction and that it could, under certain circumstances
have the right, to notice of and hearing on the right of the Secured Party to
obtain a prejudgment remedy, such as attachment, garnishment and/or replevin,
upon commencing any litigation against Grantor. Notwithstanding, Grantor hereby
waives all rights to notice, judicial hearing or prior court order to which it
might otherwise have the right under any state or federal statute or
constitution in connection with the obtaining by the Secured Party of any
prejudgment remedy by reason of this Agreement, the Share Exchange Agreement,
the Notes, the other Transaction Documents or by reason of the

<PAGE>
                                                                              14

Obligations or any renewals or extensions of the same. Grantor also waives any
and all objection which it might otherwise assert, now or in the future, to the
exercise or use by the Secured Party of any right of setoff, repossession or
self help as may presently exist under statute or common law.

                            [SIGNATURE PAGES FOLLOW]

<PAGE>
                                                                              15

      IN WITNESS WHEREOF, the parties have duly executed this Security Agreement
as of the day and year first written above.

                                            REMOTE DYNAMICS, INC.

                                            By:_________________________________
                                               Name:
                                               Title:

                                            SECURED PARTY:

                                            By:_________________________________
                                               Name:
                                               Title:

<PAGE>
                                                                              16

                                   SCHEDULE A
        STATE OF INCORPORATION; CHIEF EXECUTIVE OFFICE; FILING LOCATIONS

State of Incorporation:
Delaware

Chief Executive Office:
1155 Kas Drive, Suite 100
Richardson, Texas 75081

Filing Locations:
Secretary of State of the State of Delaware

<PAGE>
                                                                              17

                                  SCHEDULE 3.3
                                 EXISTING LIENS

<PAGE>
                                                                              18

                                  SCHEDULE 3.4
                             ABSENCE OF OTHER LIENS

<PAGE>
                                                                              19

                                  SCHEDULE 4.8
                                    INSURANCETHIS NOTE AND THE SHARES OF COMMON STOCK  ISSUABLE UPON  CONVERSION  HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED  OF IN THE ABSENCE OF SUCH  REGISTRATION  OR RECEIPT BY THE MAKER OF AN
OPINION OF COUNSEL IN THE FORM,  SUBSTANCE AND SCOPE REASONABLY  SATISFACTORY TO
THE MAKER THAT THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION
HEREOF MAY BE SOLD,  TRANSFERRED,  OR OTHERWISE  DISPOSED OF, UNDER AN EXEMPTION
FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.

                              REMOTE DYNAMICS, INC.

            Series B Subordinated Secured Convertible Promissory Note
                              due December 4, 2009

No. CN-A-06-__                                                       $660,000.00
Dated: December 4, 2006

         For value received,  Remote Dynamics, Inc., a Delaware corporation (the
"Maker"),  hereby  promises to pay to the order of Bounce Mobile  Systems,  Inc.
(together  with its  successors,  representatives,  and permitted  assigns,  the
"Holder"),  in accordance  with the terms  hereinafter  provided,  the principal
amount of Six Hundred, Sixty Thousand Dollars  ($660,000.00).  Concurrently with
the issuance of this Note, the Maker is issuing  separate  series B subordinated
secured convertible  promissory notes (the "Other Notes") to separate purchasers
pursuant  to a Note and Warrant  Purchase  Agreement,  dated as of November  30,
2006,  among  the  Maker  and  the  Purchasers  listed  therein  (the  "Purchase
Agreement").

         All  payments  under or  pursuant  to this Note shall be made in United
States  Dollars in immediately  available  funds to the Holder at the address of
the  Holder  first set forth  above or at such  other  place as the  Holder  may
designate from time to time in writing to the Maker or by wire transfer of funds
to the Holder's  account,  instructions for which are attached hereto as Exhibit
A. The  outstanding  principal  balance of this Note shall be due and payable on
December  4, 2009 (the  "Maturity  Date") or at such  earlier  time as  provided
herein.

                                    ARTICLE I

                  Section  1.1  Share  Exchange  Agreement.  This  Note has been
executed and  delivered  pursuant to the Share  Exchange  Agreement  dated as of
November 30, 2006 (the "Share Exchange  Agreement") by and between the Maker and
Bounce Mobile Systems,  Inc.  Capitalized  terms used and not otherwise  defined
herein shall have the  meanings  set forth for such terms in the Share  Exchange
Agreement.

<PAGE>

                  Section 1.2       Payment of Principal.

                  (a) Commencing on August 1, 2007, and continuing thereafter on
the  first  business  day of  each  three-month  period  or on such  other  date
specified by the Holder as provided in the penultimate  sentence of this Section
1.2(a) (a "Principal Payment Date"), the Maker shall pay an amount to the Holder
equal to one-ninth  (1/9th) of the original  principal  amount of this Note (the
"Principal Installment Amount");  provided, however, if on any Principal Payment
Date, the outstanding  principal  amount of this Note is less than the Principal
Installment  Amount,  then the Maker shall pay to the Holder such lesser amount.
The Maker may pay such Principal Installment Amount in cash or registered shares
of the Maker's common stock, par value $.01 per share (the "Common  Stock").  If
the Maker  elects to pay the  Principal  Installment  Amount in cash such amount
shall be wired in  immediately  available  funds on the Principal  Payment Date;
provided,  however,  that if the Holder has delivered a Conversion Notice to the
Maker or delivers a Conversion  Notice prior to the Principal  Payment Date, the
Holder shall indicate in such Conversion  Notice whether the principal amount of
this Note to be so  converted  shall be  applied  against  the  final  Principal
Installment Amount or some other Principal  Installment  Amount. The Maker shall
provide  irrevocable  written notice to the Holder of the form of payment of the
Principal  Installment Amount at least ten (10) days prior to the first business
day of each quarter for which a Principal  Installment  Amount is required to be
made by the  Maker.  Notwithstanding  the  terms of this  Section  1.2(a) to the
contrary, if the Maker provides notice to the Holder pursuant to the immediately
preceding sentence that the Maker elects to pay the Principal Installment Amount
in registered shares of Common Stock, the Holder shall respond to such notice in
writing (the "Holder  Notice") at least three (3) Trading Days prior to the date
in which the  Holder  elects to  receive  its  Principal  Installment  Amount in
registered  shares of Common  Stock,  as  specified  by the Holder in the Holder
Notice.  In addition,  the Holder may elect to defer any  Principal  Installment
Amount to a later Principal Payment Date.

                  (b) If the  Maker  elects  to pay  the  Principal  Installment
Amount in registered  shares of Common Stock, the number of registered shares of
Common  Stock to be issued to the Holder shall be an amount equal to the greater
of (i) $0.02,  subject to adjustment as provided in Section 3.6 hereof, and (ii)
an amount equal to the Principal  Installment  Amount  divided by ninety percent
(90%) of the average of the VWAP (as defined in Section  1.2(c)  hereof) for the
ten  (10)  Trading  Days  immediately  preceding  the  Principal  Payment  Date;
provided,  however,  that if the Holder has delivered a Conversion Notice to the
Maker or delivers a Conversion  Notice prior to the Principal  Payment Date, the
Holder shall indicate in such Conversion  Notice whether the principal amount of
this Note to be so  converted  shall be  applied  against  the  final  Principal
Installment Amount or some other Principal  Installment Amount.  Notwithstanding
the  foregoing  to the  contrary,  the  Maker  may  elect  to pay the  Principal
Installment Amount in registered shares of Common Stock on any Principal Payment
Date only if (A) the  registration  statement  providing  for the  resale of the
shares of Common Stock issuable upon conversion of this Note (the  "Registration
Statement") is effective and has been effective,  without lapse or suspension of
any kind, for a period of twenty (20) consecutive  calendar days, (B) trading in
the Common Stock shall not have been  suspended by the  Securities  and Exchange
Commission or the OTC Bulletin  Board (or other  exchange or market on which the
Common Stock is trading),

                                      -2-
<PAGE>

                  (C) the  Maker is in  material  compliance  with the terms and
conditions  of this Note and the  other  Transaction  Documents  and no Event of
Default exists and is continuing, and (D) the issuance of shares of Common Stock
on the  Principal  Payment Date does not violate the  provisions  of Section 3.4
hereof.

                  (c) The term "VWAP" means,  for any date, (i) the daily volume
weighted  average  price of the Common  Stock for such date on the OTC  Bulletin
Board as reported by Bloomberg  Financial L.P. (based on a Trading Day from 9:30
a.m.  Eastern Time to 4:02 p.m.  Eastern Time);  (ii) if the Common Stock is not
then  listed or quoted on the OTC  Bulletin  Board and if prices  for the Common
Stock are then reported in the "Pink Sheets"  published by the Pink Sheets,  LLC
(or a similar  organization  or agency  succeeding to its functions of reporting
prices), the most recent bid price per share of the Common Stock so reported; or
(iii) in all other  cases,  the fair market  value of a share of Common Stock as
determined by an independent  appraiser selected in good faith by the Holder and
reasonably acceptable to the Maker.

                  Section 1.3 Security  Agreement.  The obligations of the Maker
hereunder are secured by a continuing security interest in certain assets of the
Maker pursuant to the terms of a security agreement dated as of December 4, 2006
by and between the Maker, on the one hand, and the Holder, on the other hand.

                  Section 1.4  Subordination.  All  payments due under this Note
shall be subordinated and made junior, in all respects to the payment in full of
all  principal,  all interest  accrued  thereon and all other amounts due on any
indebtedness  outstanding  under that  certain  Purchase  Agreement  dated as of
February  23,  2006 among the Maker and the  purchasers  named  therein  and the
Security Agreement dated as of February 23, 2006 among the Maker and the secured
parties named therein.

                  Section 1.5 Payment on Non-Business Days. Whenever any payment
to be made shall be due on a Saturday, Sunday or a public holiday under the laws
of the  State  of New  York,  such  payment  may be due on the  next  succeeding
business day.

                  Section 1.6 Transfer.  This Note may be  transferred  or sold,
subject to the provisions of Section 4.8 of this Note, or pledged,  hypothecated
or otherwise granted as security by the Holder.

                  Section  1.7  Replacement.  Upon  receipt of a duly  executed,
notarized and unsecured  written  statement  from the Holder with respect to the
loss,  theft or  destruction  of this  Note (or any  replacement  hereof)  and a
standard indemnity, or, in the case of a mutilation of this Note, upon surrender
and  cancellation  of such Note, the Maker shall issue a new Note, of like tenor
and amount, in lieu of such lost, stolen, destroyed or mutilated Note.

                                      -3-
<PAGE>

                                   ARTICLE II

                           EVENTS OF DEFAULT; REMEDIES

                  Section 2.1 Events of Default.  The  occurrence  of any of the
following events shall be an "Event of Default" under this Note:

                  (a) the Maker  shall  fail to make the  Principal  Installment
Amount on a Principal  Payment  Date and such  default is not fully cured within
one (1) business day after the occurrence thereof; or

                  (b) the failure of the  Registration  Statement to be declared
effective  by the  Securities  and Exchange  Commission  on or prior to the date
which is one hundred eighty (180) days after the date of the initial issuance of
this Note (the "Issuance Date"); or

                  (c) the suspension from listing, without subsequent listing on
any one of, or the  failure of the Common  Stock to be listed on at least one of
the OTC Bulletin Board,  the American Stock Exchange,  the Nasdaq Global Market,
the Nasdaq Capital Market or The New York Stock  Exchange,  Inc. for a period of
five (5) consecutive Trading Days; or

                  (d) the  Maker's  notice to the  Holder,  including  by way of
public announcement,  at any time, of its inability to comply (including for any
of the reasons  described  in Section  3.8(a)  hereof) or its  intention  not to
comply with proper  requests for  conversion  of this Note into shares of Common
Stock; or

                  (e) the Maker  shall fail to (i) timely  deliver the shares of
Common Stock upon conversion of the Note, (ii) file the  Registration  Statement
in accordance with the terms of the Registration  Rights Agreement or (iii) make
the payment of any fees and/or  liquidated  damages  under this Note,  the Share
Exchange  Agreement or the Registration  Rights Agreement,  which failure in the
case of items (i) and (iii) of this Section  2.1(e) is not remedied  within five
(5) business days after the incurrence thereof; or

                  (f)  while  the  Registration  Statement  is  required  to  be
maintained effective pursuant to the terms of the Registration Rights Agreement,
the   effectiveness  of  the  Registration   Statement  lapses  for  any  reason
(including,  without limitation, the issuance of a stop order) or is unavailable
to the  Holder  for  sale  of the  Registrable  Securities  (as  defined  in the
Registration  Rights Agreement) in accordance with the terms of the Registration
Rights Agreement, and such lapse or unavailability continues for a period of ten
(10)  consecutive  Trading  Days,  provided that the Maker has not exercised its
rights  pursuant to Section 3(n) of the  Registration  Rights  Agreement  (which
exercise is not an Event of Default hereunder); or

                  (g) default shall be made in the  performance or observance of
(i) any material covenant,  condition or agreement contained in this Note (other
than as set forth in clause  (f) of this  Section  2.1) and such  default is not
fully cured within five (5) business days after the Maker  receives  notice from
the Holder of the occurrence thereof or (ii) any material covenant, condition or
agreement  contained  in the Share  Exchange  Agreement,  the Other  Notes,  the
Registration

                                      -4-
<PAGE>

Rights Agreement or any other  Transaction  Document which is not covered by any
other  provisions of this Section 2.1 and such default is not fully cured within
five (5) business  days after the Maker  receives  notice from the Holder of the
occurrence thereof; or

                  (h) any material  representation or warranty made by the Maker
herein or in the Share Exchange  Agreement,  the Registration Rights Agreement ,
the Other Notes or any other Transaction Document shall prove to have been false
or incorrect or breached in a material respect on the date as of which made; or

                  (i) the Maker  shall (A)  default in any payment of any amount
or amounts of  principal  of or  interest  on any  Indebtedness  (other than the
Indebtedness  hereunder) the aggregate principal amount of which Indebtedness is
in excess of $100,000 or (B) default in the  observance  or  performance  of any
other agreement or condition  relating to any Indebtedness in excess of $100,000
or contained in any  instrument  or agreement  evidencing,  securing or relating
thereto,  or any other event shall occur or condition exist, the effect of which
default  or other  event or  condition  is to cause,  or to permit the holder or
holders or beneficiary or beneficiaries  of such  Indebtedness to cause with the
giving of notice  if  required,  such  Indebtedness  to become  due prior to its
stated maturity; or

                  (j)  the  Maker   shall  (i)  apply  for  or  consent  to  the
appointment of, or the taking of possession by, a receiver,  custodian,  trustee
or  liquidator  of itself or of all or a  substantial  part of its  property  or
assets,  (ii) make a general assignment for the benefit of its creditors,  (iii)
commence a voluntary  case under the United  States  Bankruptcy  Code (as now or
hereafter in effect) or under the comparable laws of any  jurisdiction  (foreign
or domestic),  (iv) file a petition seeking to take advantage of any bankruptcy,
insolvency,  moratorium,  reorganization  or other  similar  law  affecting  the
enforcement  of creditors'  rights  generally  which is not dismissed  within 30
days,  (v)  acquiesce  in  writing  to  any  petition  filed  against  it  in an
involuntary  case under United  States  Bankruptcy  Code (as now or hereafter in
effect) or under the comparable laws of any  jurisdiction  (foreign or domestic)
which is not  dismissed  within 60 days,  (vi) issue a notice of  bankruptcy  or
winding down of its operations or issue a press release regarding same, or (vii)
take  any  action  under  the laws of any  jurisdiction  (foreign  or  domestic)
analogous to any of the foregoing; or

                  (k) a proceeding  or case shall be commenced in respect of the
Maker,   without  its  application  or  consent,   in  any  court  of  competent
jurisdiction,   seeking  (i)  the   liquidation,   reorganization,   moratorium,
dissolution,  winding up, or composition or readjustment of its debts,  (ii) the
appointment of a trustee, receiver,  custodian,  liquidator or the like of it or
of all or any substantial  part of its assets in connection with the liquidation
or  dissolution  of the Maker or (iii) similar relief in respect of it under any
law providing for the relief of debtors,  and such  proceeding or case described
in clause (i),  (ii) or (iii) shall  continue  undismissed,  or unstayed  and in
effect,  for a period of thirty  (30)  days or any  order  for  relief  shall be
entered in an involuntary  case under United States  Bankruptcy  Code (as now or
hereafter in effect) or under the comparable laws of any  jurisdiction  (foreign
or  domestic)  against  the Maker or action  under the laws of any  jurisdiction
(foreign or  domestic)  analogous  to any of the  foregoing  shall be taken with
respect to the Maker and shall continue  undismissed,  or unstayed and in effect
for a period of thirty (30) days; or

                                      -5-
<PAGE>

                  (l) the failure of the Maker to instruct its transfer agent to
remove any legends  from shares of Common  Stock  eligible to be sold under Rule
144 of the Securities Act and issue such  unlegended  certificates to the Holder
within three (3) business days of the Holder's request so long as the Holder has
complied with Section 2.02 of the Share Exchange Agreement; or

                  (m) the  failure  of the Maker to pay any  amounts  due to the
Holder  herein or in the Share  Exchange  Agreement or the  Registration  Rights
Agreement within three (3) business days of the date such payments are due; or

                  (n) the  occurrence  of an Event of  Default  under  the Other
Notes or the OID Note.

                  Section 2.2 Remedies Upon An Event of Default.  If an Event of
Default shall have occurred and shall be continuing, the Holder of this Note may
at any time at its option,  (a) pursuant to Section 3.7(a)  hereof,  declare the
entire unpaid principal balance of this Note due and payable, and thereupon, the
same shall be accelerated and so due and payable,  without presentment,  demand,
protest,  or  notice,  all of which are  hereby  expressly  unconditionally  and
irrevocably waived by the Maker; provided,  however, that upon the occurrence of
an Event of Default  described in (i)  Sections 2.1 (j) or (k), the  outstanding
principal  balance  hereunder  shall be  automatically  due and payable and (ii)
Sections 2.1 (b)-(i) and (l)-(n),  the Holder may demand the  prepayment of this
Note  pursuant to Section 3.7 hereof,  (b) demand that the  principal  amount of
this Note then  outstanding  shall be converted into shares of Common Stock at a
Conversion  Price per share  calculated  pursuant to Sections 3.1 and 3.4 hereof
assuming that the date that the Event of Default occurs is the  Conversion  Date
(as defined in Section 3.1 hereof), or (c) exercise or otherwise enforce any one
or more of the Holder's rights, powers, privileges, remedies and interests under
this Note, the Share Exchange  Agreement,  the Registration  Rights Agreement or
applicable  law. Upon the occurrence of an Event of Default,  the Maker will pay
interest to the Holder,  payable on demand, on the outstanding principal balance
of the Note  from  the date of the  Event of the  Default  until  such  Event of
Default is cured at the rate equal to the  lesser of ten  percent  (10%) and the
maximum  applicable  legal rate per annum. No course of delay on the part of the
Holder shall operate as a waiver thereof or otherwise prejudice the right of the
Holder.  No remedy  conferred  hereby  shall be  exclusive  of any other  remedy
referred to herein or now or hereafter  available at law, in equity,  by statute
or otherwise.

                                   ARTICLE III

                      CONVERSION; ANTIDILUTION; PREPAYMENT

                  Section 3.1      Conversion Option.

                  (a) At any time on or  after  the date  that is  fifteen  (15)
months  following the Issuance Date, this Note shall be convertible (in whole or
in part),  at the  option of the Holder  (the  "Conversion  Option"),  into such
number of fully paid and non-assessable  shares of Common Stock (the "Conversion
Rate")  as is  determined  by  dividing  (x)  that  portion  of the  outstanding
principal  balance  under  this Note as of such date that the  Holder  elects to
convert by (y) the  Conversion  Price (as defined in Section 3.2(a) hereof) then
in effect on the date on which the

                                      -6-
<PAGE>

Holder faxes a notice of conversion (the "Conversion Notice"), duly executed, to
the Maker (facsimile number (972) 301-2263, Attn.: Chief Executive Officer) (the
"Voluntary Conversion Date"), provided, however, that the Conversion Price shall
be subject to  adjustment  as described  in Section 3.6 below.  The Holder shall
deliver this Note to the Maker at the address  designated in the Share  Exchange
Agreement  at such  time  that this Note is fully  converted.  With  respect  to
partial  conversions of this Note,  the Maker shall keep written  records of the
amount of this Note converted as of each Conversion Date.

                  (b) On the Mandatory  Conversion Date (as defined below),  the
Maker may cause the  principal  amount of this Note to convert  into a number of
fully paid and nonassessable shares of Common Stock equal to the quotient of (i)
the principal amount of this Note  outstanding on the Mandatory  Conversion Date
divided by (ii) the Conversion Price in effect on the Mandatory  Conversion Date
by  providing  five (5) business  days prior  written  notice of such  Mandatory
Conversion Date. As used herein,  a "Mandatory  Conversion Date" shall be a date
following the effective date of the Registration  Statement in which the Closing
Bid Price (as defined in Section 3.1(c) below) exceeds two hundred fifty percent
(250%) of the Conversion Price for a period of twelve (12)  consecutive  Trading
Days  and the  average  daily  trading  volume  for  each of  such  twelve  (12)
consecutive Trading Days exceeds 750,000 shares of Common Stock; provided,  that
(A) the  Registration  Statement is effective  and has been  effective,  without
lapse or  suspension  of any  kind,  for a period  of  thirty  (30)  consecutive
calendar days immediately  preceding the Mandatory  Conversion Date, (B) trading
in the Common Stock shall not have been suspended by the Securities and Exchange
Commission or the OTC Bulletin  Board (or other  exchange or market on which the
Common Stock is trading), (C) the Maker is in material compliance with the terms
and conditions of this Note and the other Transaction  Documents and no Event of
Default exists and is continuing,  (D) the issuance of shares of Common Stock on
the Mandatory  Conversion  Date pursuant to such mandatory  conversion  does not
violate  the  provisions  of  Section  3.4  hereof,  and (E) the Maker is not in
possession of any material non-public information. Notwithstanding the foregoing
to the contrary,  the Mandatory Conversion Date shall be extended for as long as
a Triggering Event (as defined in Section 3.7(f) hereof) shall have occurred and
be continuing.  The Mandatory  Conversion Date and the Voluntary Conversion Date
collectively are referred to in this Note as the "Conversion Date."

                  (c) The term "Closing Bid Price" shall mean, on any particular
date (i) the last  trading  price per share of the Common  Stock on such date on
the OTC Bulletin  Board or another  registered  national stock exchange on which
the Common Stock is then listed, or if there is no such price on such date, then
the last trading price on such exchange or quotation  system on the date nearest
preceding  such date,  or (ii) if the Common Stock is not listed then on the OTC
Bulletin Board or any registered national stock exchange, the last trading price
for a share of Common Stock in the  over-the-counter  market, as reported by the
OTC Bulletin Board or in the National  Quotation Bureau  Incorporated or similar
organization or agency  succeeding to its functions of reporting  prices) at the
close  of  business  on such  date,  or (iii)  if the  Common  Stock is not then
reported by the OTC Bulletin Board or the National Quotation Bureau Incorporated
(or similar  organization  or agency  succeeding  to its  functions of reporting
prices), then the average of the "Pink Sheet" quotes for the relevant conversion
period,  as determined in good faith by the Holder,  or (iv) if the Common Stock
is not then publicly traded the fair market value

                                      -7-
<PAGE>

of a share of Common Stock as determined by the Holder and reasonably acceptable
to the Maker.

                  Section 3.2       Conversion Price.

                  (a) The term "Conversion Price" shall mean $0.016,  subject to
adjustment under Sections 3.2(b) and 3.6 hereof.

                  (b) In the event  that the Maker  does not (i)  achieve  gross
revenues equal to at least  $1,750,000 as determined in accordance with GAAP for
the calendar  quarter ended June 30, 2007, or (ii) increase its subscriber units
by a minimum of 5,000 net additional REDIview subscriber units by June 30, 2007,
or (iii) achieve  positive cash flow based on the Maker's EBITDA  (determined in
accordance with GAAP) by June 30, 2007, or (iv) execute binding agreements for a
minimum of two (2) new accounts  (with each such  account  ordering in excess of
1,000 REDIview units) by June 30, 2007 or a minimum of one (1) new account (with
such account  ordering in excess of 2,500 REDIview units) by June 30, 2007 (each
of the  foregoing  events  described  in  subclauses  (i) through  (iv) shall be
defined  herein as a  "Milestone"),  then in each such case in which the Company
fails to achieve any Milestone, the Conversion Price shall be reduced by fifteen
percent  (15%),  up to a maximum  reduction of sixty  percent (60%) in the event
none of the Milestones is achieved.

                  (c) Notwithstanding  any of the foregoing to the contrary,  if
during any period (a "Black-out Period"), a Holder is unable to trade any Common
Stock issued or issuable  upon  conversion of this Note  immediately  due to the
postponement  of  filing  or  delay  or  suspension  of   effectiveness  of  the
Registration  Statement or because the Maker has otherwise  informed such Holder
that an existing  prospectus cannot be used at that time in the sale or transfer
of such Common Stock (provided that such postponement, delay, suspension or fact
that the  prospectus  cannot be used is not due to  factors  solely  within  the
control  of the  Holder of this Note or due to the Maker  exercising  its rights
under Section 3(n) of the Registration Rights Agreement), such Holder shall have
the option but not the obligation on any Conversion Date within ten (10) Trading
Days  following the  expiration of the Black-out  Period of using the Conversion
Price  applicable on such  Conversion  Date or any Conversion  Price selected by
such Holder that would have been applicable had such Conversion Date been at any
earlier  time during the  Black-out  Period or within the ten (10)  Trading Days
thereafter.  In no event  shall  the  Black-out  Period  have any  effect on the
Maturity Date of this Note.

                  Section 3.3       Mechanics of Conversion.

                  (a) Not later than three (3) Trading Days after any Conversion
Date, the Maker or its designated transfer agent, as applicable, shall issue and
deliver to the Depository  Trust Company  ("DTC") account on the Holder's behalf
via the Deposit  Withdrawal Agent Commission System ("DWAC") as specified in the
Conversion Notice, registered in the name of the Holder or its designee, for the
number of shares of Common Stock to which the Holder  shall be entitled.  In the
alternative,  not later than three (3) Trading Days after any  Conversion  Date,
the  Maker  shall  deliver  to  the  applicable  Holder  by  express  courier  a
certificate  or  certificates  which  shall be free of  restrictive  legends and
trading restrictions (other than those required by

                                      -8-
<PAGE>

Section 2.02 of the Share Exchange Agreement)  representing the number of shares
of Common Stock being  acquired upon the  conversion of this Note (the "Delivery
Date"). Notwithstanding the foregoing to the contrary, the Maker or its transfer
agent shall only be  obligated to issue and deliver the shares to the DTC on the
Holder's behalf via DWAC (or certificates  free of restrictive  legends) if such
conversion  is in  connection  with a sale and the Holder has complied  with the
applicable  prospectus  delivery  requirements  (as  evidenced by  documentation
furnished to and reasonably  satisfactory  to the Maker).  If in the case of any
Conversion  Notice such  certificate or certificates  are not delivered to or as
directed by the  applicable  Holder by the  Delivery  Date,  the Holder shall be
entitled by written  notice to the Maker at any time on or before its receipt of
such  certificate or certificates  thereafter,  to rescind such  conversion,  in
which  event  the  Maker  shall  immediately   return  this  Note  tendered  for
conversion,  whereupon  the Maker and the Holder shall each be restored to their
respective  positions  immediately  prior  to the  delivery  of such  notice  of
revocation,  except that any amounts  described in Sections 3.3(b) and (c) shall
be payable through the date notice of rescission is given to the Maker.

                  (b) The Maker  understands that a delay in the delivery of the
shares of Common Stock upon  conversion  of this Note beyond the  Delivery  Date
could  result in economic  loss to the Holder.  If the Maker fails to deliver to
the Holder such shares via DWAC or a  certificate  or  certificates  pursuant to
this Section hereunder by the Delivery Date, the Maker shall pay to such Holder,
in cash,  an amount per Trading  Day for each  Trading Day until such shares are
delivered via DWAC or certificates are delivered, together with interest on such
amount at a rate of 10% per annum,  accruing  until such  amount and any accrued
interest  thereon  is paid in full,  equal to the  greater  of (A) (i) 1% of the
aggregate  principal amount of the Notes requested to be converted for the first
five (5)  Trading  Days  after the  Delivery  Date and (ii) 2% of the  aggregate
principal  amount of the Notes  requested to be  converted  for each Trading Day
thereafter  and (B)  $2,000 per day (which  amount  shall be paid as  liquidated
damages and not as a penalty).  Nothing  herein shall limit a Holder's  right to
pursue  actual  damages  for  the  Maker's   failure  to  deliver   certificates
representing  shares of Common Stock upon conversion within the period specified
herein and such Holder shall have the right to pursue all remedies  available to
it at law or in equity  (including,  without  limitation,  a decree of  specific
performance and/or injunctive relief).  Notwithstanding anything to the contrary
contained herein,  the Holder shall be entitled to withdraw a Conversion Notice,
and upon such withdrawal the Maker shall only be obligated to pay the liquidated
damages  accrued in  accordance  with this Section  3.3(b)  through the date the
Conversion Notice is withdrawn.

                  (c) In addition to any other  rights  available to the Holder,
if the Maker  fails to cause its  transfer  agent to  transmit  to the  Holder a
certificate  or  certificates  representing  the shares of Common Stock issuable
upon  conversion of this Note on or before the Delivery  Date, and if after such
date the  Holder is  required  by its  broker  to  purchase  (in an open  market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
sale by the Holder of the shares of Common Stock  issuable  upon  conversion  of
this  Note  which  the  Holder  anticipated  receiving  upon  such  exercise  (a
"Buy-In"),  then the Maker  shall (1) pay in cash to the  Holder  the  amount by
which (x) the Holder's total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased exceeds (y) the amount obtained
by multiplying (A) the number of shares of Common Stock issuable upon conversion
of

                                      -9-
<PAGE>

this Note that the Maker was  required  to deliver  to the Holder in  connection
with the  conversion at issue times (B) the price at which the sell order giving
rise to such  purchase  obligation  was  executed,  and (2) at the option of the
Holder, either reinstate the portion of the Note and equivalent number of shares
of Common  Stock for which  such  conversion  was not  honored or deliver to the
Holder the number of shares of Common  Stock that would have been issued had the
Maker timely  complied with its conversion and delivery  obligations  hereunder.
For example,  if the Holder purchases Common Stock having a total purchase price
of $11,000 to cover a Buy-In with respect to an attempted  conversion  of shares
of Common  Stock with an  aggregate  sale  price  giving  rise to such  purchase
obligation of $10,000,  under clause (1) of the immediately  preceding  sentence
the Maker shall be required to pay the Holder  $1,000.  The Holder shall provide
the Maker written notice indicating the amounts payable to the Holder in respect
of the  Buy-In,  together  with  applicable  confirmations  and  other  evidence
reasonably  requested by the Maker.  Nothing herein shall limit a Holder's right
to pursue any other  remedies  available  to it  hereunder,  at law or in equity
including,   without  limitation,   a  decree  of  specific  performance  and/or
injunctive  relief  with  respect  to the  Maker's  failure  to  timely  deliver
certificates representing shares of Common Stock upon conversion of this Note as
required pursuant to the terms hereof.

                  Section 3.4 Ownership Cap and Certain Conversion Restrictions.

                  (a)  Notwithstanding  anything  to the  contrary  set forth in
Section 3 of this Note,  at no time may the Holder  convert  all or a portion of
this Note if the number of shares of Common Stock to be issued  pursuant to such
conversion  would exceed,  when aggregated with all other shares of Common Stock
owned by the  Holder at such time  (including  pursuant  to the  Warrants),  the
number of shares of Common Stock which would  result in the Holder  beneficially
owning (as  determined in accordance  with Section 13(d) of the Exchange Act and
the rules  thereunder) more than 4.9% of all of the Common Stock  outstanding at
such time;  provided,  however,  that upon the Holder  providing  the Maker with
sixty-one  (61) days  notice  (pursuant  to Section  4.1  hereof)  (the  "Waiver
Notice") that the Holder would like to waive this Section  3.4(a) with regard to
any or all shares of Common Stock  issuable upon  conversion of this Note,  this
Section  3.4(a) will be of no force or effect with regard to all or a portion of
the Note referenced in the Waiver Notice.

                  (b)  Notwithstanding  anything  to the  contrary  set forth in
Section 3 of this Note,  at no time may the Holder  convert  all or a portion of
this Note if the number of shares of Common Stock to be issued  pursuant to such
conversion,  when  aggregated with all other shares of Common Stock owned by the
Holder  at such  time,  would  result  in the  Holder  beneficially  owning  (as
determined  in  accordance  with Section 13(d) of the Exchange Act and the rules
thereunder)  in  excess of 9.9% of the then  issued  and  outstanding  shares of
Common Stock  outstanding  at such time  (including  pursuant to the  Warrants);
provided, however, that upon the Holder providing the Maker with a Waiver Notice
that the Holder would like to waive  Section  3.4(b) of this Note with regard to
any or all shares of Common Stock  issuable upon  conversion of this Note,  this
Section 3.4(b) shall be of no force or effect with regard to all or a portion of
the Note referenced in the Waiver Notice.

                  Section 3.5       Intentionally Omitted.

                                      -10-
<PAGE>

                  Section 3.6       Adjustment of Conversion Price.

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

                           (i) Adjustments for Stock Splits and Combinations. If
the Maker shall at any time or from  time to time  after  the  Issuance  Date,
effect a stock split of the outstanding Common Stock, the applicable  Conversion
Price in effect  immediately  prior to the stock split shall be  proportionately
decreased.  If the  Maker  shall  at any  time or from  time to time  after  the
Issuance Date,  combine the outstanding  shares of Common Stock,  the applicable
Conversion  Price  in  effect  immediately  prior  to the  combination  shall be
proportionately increased. Any adjustments under this Section 3.6(a)(i) shall be
effective  at the close of business  on the date the stock split or  combination
occurs.

                           (ii)   Adjustments   for   Certain    Dividends   and
Distributions.  If the Maker  shall at any time or from  time to time  after the
Issuance  Date,  make or  issue or set a record  date for the  determination  of
holders of Common  Stock  entitled to receive a dividend  or other  distribution
payable in shares of Common  Stock,  then,  and in each  event,  the  applicable
Conversion Price in effect immediately prior to such event shall be decreased as
of the time of such  issuance  or, in the event such record date shall have been
fixed,  as of the close of business on such record  date,  by  multiplying,  the
applicable Conversion Price then in effect by a fraction:

                                    (1) the  numerator  of  which  shall  be 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

                                    (2) the  denominator  of which  shall be 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.

                           (iii)    Adjustment    for   Other    Dividends   and
Distributions.  If the Maker  shall at any time or from  time to time  after the
Issuance  Date,  make or  issue or set a record  date for the  determination  of
holders of Common  Stock  entitled to receive a dividend  or other  distribution
payable  in other than  shares of Common  Stock,  then,  and in each  event,  an
appropriate  revision  to the  applicable  Conversion  Price  shall  be made and
provision shall be made (by adjustments of the Conversion Price or otherwise) so
that the  holders  of this Note  shall  receive  upon  conversions  thereof,  in
addition to the number of shares of Common Stock receivable thereon,  the number
of  securities  of the Maker which they would have  received  had this Note been
converted into Common Stock on the date of such event and had thereafter, during
the period from the date of such event to and  including  the  Conversion  Date,
retained such securities (together with any distributions payable thereon during
such  period),  giving  application  to all  adjustments  called for during such
period under this Section  3.6(a)(iii) with respect to the rights of the holders
of this Note, the OID Note and the Other Notes; provided,  however, that if such
record date shall have been 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

                                      -11-
<PAGE>

adjusted  pursuant to this  paragraph  as of the time of actual  payment of such
dividends or distributions.

                           (iv)  Adjustments for  Reclassification,  Exchange or
Substitution.  If the Common Stock issuable upon  conversion of this Note at any
time or from time to time after the  Issuance  Date shall be changed to the same
or  different  number of shares of any class or  classes  of stock,  whether  by
reclassification,  exchange,  substitution or otherwise  (other than by way of a
stock split or combination of shares or stock dividends provided for in Sections
3.6(a)(i), (ii) and (iii), or a reorganization,  merger, consolidation,  or sale
of assets  provided  for in Section  3.6(a)(v)),  then,  and in each  event,  an
appropriate  revision to the Conversion Price shall be made and provisions shall
be made (by adjustments of the Conversion Price or otherwise) so that the Holder
shall have the right thereafter to convert this Note into the kind and amount of
shares of stock and other securities receivable upon reclassification, exchange,
substitution or other change, by holders of the number of shares of Common Stock
into  which  such Note  might  have  been  converted  immediately  prior to such
reclassification, exchange, substitution or other change, all subject to further
adjustment as provided herein.

                           (v)   Adjustments   for    Reorganization,    Merger,
Consolidation or Sales of Assets.  If at any time or from time to time after the
Issuance Date there shall be a capital  reorganization  of the Maker (other than
by way of a  stock  split  or  combination  of  shares  or  stock  dividends  or
distributions  provided  for  in  Section  3.6(a)(i),   (ii)  and  (iii),  or  a
reclassification,  exchange or  substitution  of shares  provided for in Section
3.6(a)(iv)),  or a merger or  consolidation  of the Maker  with or into  another
corporation  where the holders of outstanding  voting  securities  prior to such
merger or  consolidation  do not own over fifty percent (50%) of the outstanding
voting securities of the merged or consolidated  entity,  immediately after such
merger or consolidation,  or the sale of all or substantially all of the Maker's
properties or assets to any other person (an "Organic  Change"),  then as a part
of such Organic Change,  (A) if the surviving  entity in any such Organic Change
is a public company that is registered  pursuant to the Securities  Exchange Act
of 1934,  as  amended,  and its  common  stock is listed or quoted on a national
securities exchange or a national automated quotation system or the OTC Bulletin
Board,  an  appropriate  revision  to the  Conversion  Price  shall  be made and
provision shall be made (by adjustments of the Conversion Price or otherwise) so
that the Holder  shall have the right  thereafter  to convert such Note into the
kind and amount of shares of stock and other securities or property of the Maker
or any  successor  corporation  resulting  from Organic  Change,  and (B) if the
surviving  entity in any such  Organic  Change is not a public  company  that is
registered  pursuant to the Securities  Exchange Act of 1934, as amended, or its
common  stock is not listed or quoted on a  national  securities  exchange  or a
national automated  quotation system or the OTC Bulletin Board, the Holder shall
have the right to demand  prepayment  pursuant to Section 3.7(b) hereof.  In any
such  case,  appropriate  adjustment  shall  be made in the  application  of the
provisions  of this Section  3.6(a)(v)  with respect to the rights of the Holder
after  the  Organic  Change  to the end  that  the  provisions  of this  Section
3.6(a)(v)  (including any adjustment in the applicable  Conversion Price then in
effect and the number of shares of stock or other  securities  deliverable  upon
conversion  of this  Note,  the OID Note and the Other  Notes)  shall be applied
after that event in as nearly an equivalent manner as may be practicable.

                                      -12-
<PAGE>

                           (vi) Adjustments for Issuance of Additional Shares of
Common Stock.  In the event the Maker,  shall,  at any time,  from time to time,
issue or sell any additional  shares of common stock (otherwise than as provided
in the foregoing  subsections (i) through (v) of this Section 3.6(a) or pursuant
to Common Stock Equivalents  (hereafter  defined) granted or issued prior to the
Issuance Date) ("Additional  Shares of Common Stock"), at a price per share less
than the  Conversion  Price  then in effect or without  consideration,  then the
Conversion  Price upon each such  issuance  shall be reduced to a price equal to
the consideration per share paid for such Additional Shares of Common Stock.

                           (vii)  Issuance  of  Common  Stock  Equivalents.  The
provisions of this Section 3.6(a)(vii) shall apply if (a) the Maker, at any time
after  the  Issuance  Date,  shall  issue  any  securities  convertible  into or
exchangeable   for,   directly  or   indirectly,   Common  Stock   ("Convertible
Securities"),  other than the Notes, or (b) any rights or warrants or options to
purchase  any such Common Stock or  Convertible  Securities  (collectively,  the
"Common Stock  Equivalents") shall be issued or sold. If the price per share for
which  Additional  Shares of Common  Stock may be issuable  pursuant to any such
Common Stock Equivalent shall be less than the applicable  Conversion Price then
in effect, or if, after any such issuance of Common Stock Equivalents, the price
per share for which Additional Shares of Common Stock may be issuable thereafter
is amended  or  adjusted,  and such  price as so amended  shall be less than the
applicable  Conversion  Price  in  effect  at the  time  of  such  amendment  or
adjustment,  then the  applicable  Conversion  Price upon each such  issuance or
amendment shall be adjusted as provided in the first sentence of subsection (vi)
of this Section 3.6(a). No adjustment shall be made to the Conversion Price upon
the issuance of Common Stock pursuant to the exercise, conversion or exchange of
any Convertible  Security or Common Stock  Equivalent where an adjustment to the
Conversion  Price  was made as a  result  of the  issuance  or  purchase  of any
Convertible Security or Common Stock Equivalent.

                           (viii) Consideration for Stock. In case any shares of
Common Stock or any Common Stock Equivalents shall be issued or sold:

                                    (1)  in   connection   with  any  merger  or
consolidation  in which the Maker is the surviving  corporation  (other than any
consolidation  or merger in which the  previously  outstanding  shares of Common
Stock of the  Maker  shall be  changed  to or  exchanged  for the stock or other
securities of another corporation),  the amount of consideration  therefor shall
be, deemed to be the fair value,  as determined  reasonably and in good faith by
the Board of Directors of the Maker,  of such portion of the assets and business
of the  nonsurviving  corporation as such Board may determine to be attributable
to such shares of Common Stock,  Convertible  Securities,  rights or warrants or
options, as the case may be; or

                                    (2) in the  event  of any  consolidation  or
merger of the Maker in which the Maker is not the  surviving  corporation  or in
which the  previously  outstanding  shares of Common Stock of the Maker shall be
changed  into  or  exchanged  for the  stock  or  other  securities  of  another
corporation,  or in the  event  of any sale of all or  substantially  all of the
assets of the Maker for stock or other securities of any corporation,  the Maker
shall be deemed to have issued a number of shares of its Common  Stock for stock
or securities or other property of the other  corporation  computed on the basis
of the actual exchange ratio on which the transaction

                                      -13-
<PAGE>

was predicated,  and for a  consideration  equal to the fair market value on the
date of such  transaction  of all such stock or securities or other  property of
the other  corporation.  If any such  calculation  results in  adjustment of the
applicable  Conversion  Price,  or the number of shares of Common Stock issuable
upon conversion of the Notes,  the  determination  of the applicable  Conversion
Price or the number of shares of Common Stock  issuable  upon  conversion of the
Notes  immediately  prior to such merger,  consolidation  or sale, shall be made
after giving  effect to such  adjustment of the number of shares of Common Stock
issuable upon  conversion of the Notes. In the event Common Stock is issued with
other shares or securities or other assets of the Maker for consideration  which
covers both, the  consideration  computed as provided in this Section  3.6(viii)
shall be allocated  among such securities and assets as determined in good faith
by the Board of Directors of the Maker.

                  (b) Record  Date.  In case the Maker  shall take record of the
holders of its Common Stock for the purpose of entitling  them to subscribe  for
or purchase Common Stock or Convertible  Securities,  then the date of the issue
or sale of the shares of Common Stock shall be deemed to be such record date.

                  (c) Certain Issues  Excepted.  Anything herein to the contrary
notwithstanding,  the Maker shall not be required to make any  adjustment to the
Conversion Price in connection with (i) securities  issued (other than for cash)
in connection  with a merger,  acquisition,  or  consolidation,  (ii) securities
issued  pursuant to the  conversion or exercise of  convertible  or  exercisable
securities issued or outstanding on or prior to the date hereof or the Notes and
Warrants issued pursuant to the Purchase Agreement (so long as the conversion or
exercise  price in such  securities  are not amended to lower such price  and/or
adversely affect the Holders),  except for the securities issued pursuant to the
conversion or repayment of the series A senior  secured  convertible  promissory
notes issued by the Maker on February 23, 2006, (iii) the shares of Common Stock
issuable  upon the exercise of Warrants,  (iv)  securities  issued in connection
with strategic  license  agreements or other partnering  arrangements so long as
such  issuances  are not for the purpose of raising  capital,  (v) Common  Stock
issued or the issuance or grants of options to purchase Common Stock pursuant to
the Company's  stock option plans and employee  stock purchase plans as they now
exist on the date hereof,  (vi) any warrants  issued to the placement  agent and
its designees for the transactions contemplated by the Purchase Agreement, (vii)
Common Stock issued in connection  with  consulting or advisory  services not in
excess of 50,000,000  shares,  and (viii) the payment of any principal in shares
of Common Stock pursuant to this Note, the OID Note or the Other Notes.

                  (d) No  Impairment.  The Maker shall not, by  amendment of its
Certificate of Incorporation or through any reorganization,  transfer of assets,
consolidation,  merger,  dissolution,  issue or sale of  securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed  hereunder  by the Maker,  but will at all
times in good faith,  assist in the carrying out of all the  provisions  of this
Section  3.6  and in the  taking  of all  such  action  as may be  necessary  or
appropriate  in order to protect  the  Conversion  Rights of the Holder  against
impairment.  In the event a Holder  shall elect to convert any Notes as provided
herein,  the Maker cannot refuse  conversion based on any claim that such Holder
or any one  associated  or  affiliated  with such Holder has been engaged in any
violation  of law,  violation of an agreement to which such Holder is a party or
for any reason

                                      -14-
<PAGE>

whatsoever,  unless,  an injunction from a court, or notice,  restraining and or
adjoining  conversion  of all or of said Notes  shall have  issued and the Maker
posts a surety  bond for the  benefit of such  Holder in an amount  equal to one
hundred  thirty percent (130%) of the amount of the Notes the Holder has elected
to  convert,  which  bond  shall  remain  in  effect  until  the  completion  of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Holder (as liquidated damages) in the event it obtains judgment.

                  (e)  Certificates as to  Adjustments.  Upon occurrence of each
adjustment or readjustment of the Conversion Price or number of shares of Common
Stock  issuable  upon  conversion of this Note pursuant to this Section 3.6, the
Maker at its expense shall promptly  compute such  adjustment or readjustment in
accordance with the terms hereof and furnish to the Holder a certificate setting
forth such adjustment and  readjustment,  showing in detail the facts upon which
such adjustment or readjustment is based. The Maker shall,  upon written request
of the Holder,  at any time,  furnish or cause to be  furnished  to the Holder a
like  certificate   setting  forth  such  adjustments  and  readjustments,   the
applicable  Conversion  Price in effect at the time, and 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 the conversion of this Note. Notwithstanding the
foregoing, the Maker shall not be obligated to deliver a certificate unless such
certificate  would  reflect an increase or decrease of at least one percent (1%)
of such adjusted amount.

                  (f) Issue  Taxes.  The  Maker  shall pay any and all issue and
other taxes, excluding federal, state or local income taxes, that may be payable
in respect of any issue or delivery of shares of Common Stock on  conversion  of
this Note  pursuant  thereto;  provided,  however,  that the Maker  shall not be
obligated to pay any transfer taxes resulting from any transfer requested by the
Holder in connection with any such conversion.

                  (g) Fractional  Shares.  No fractional  shares of Common Stock
shall be issued upon  conversion of this Note. In lieu of any fractional  shares
to which the Holder would otherwise be entitled,  the Maker shall pay cash equal
to the  product of such  fraction  multiplied  by the average of the Closing Bid
Prices of the Common Stock for the five (5) consecutive Trading Days immediately
preceding the Conversion Date.

                  (h) Reservation of Common Stock.  The Maker shall at all times
when this Note  shall be  outstanding,  reserve  and keep  available  out of its
authorized but unissued Common Stock, such number of authorized shares of Common
Stock that are not issued or  reserved  for  issuance as of the  Issuance  Date;
provided,  however,  upon the Maker filing the Charter  Amendment (as defined in
the Share Exchange Agreement), the Company shall take all action necessary to at
all times have  authorized,  and reserved  for the purpose of issuance,  free of
preemptive rights and other similar contractual rights of stockholders, a number
of shares of Common  Stock  equal to one  hundred  fifty  percent  (150%) of the
number of shares of Common  Stock as shall  from time to time be  sufficient  to
effect  the  conversion  of this  Note.  The Maker  shall,  from time to time in
accordance with the Delaware General  Corporation  Law,  increase the authorized
number  of  shares  of  Common  Stock  if at any  time the  unissued  number  of
authorized  shares shall not be  sufficient  to satisfy the Maker's  obligations
under this Section 3.6(h).

                                      -15-
<PAGE>

                  (i) Regulatory Compliance. If any shares of Common Stock to be
reserved  for the purpose of  conversion  of this Note require  registration  or
listing with or approval of any governmental authority,  stock exchange or other
regulatory body under any federal or state law or regulation or otherwise before
such shares may be validly issued or delivered upon conversion, the Maker shall,
at its sole cost and expense,  in good faith and as  expeditiously  as possible,
endeavor to secure such registration, listing or approval, as the case may be.

                  Section 3.7       Prepayment.

                  (a)  Prepayment  Upon an  Event  of  Default.  Notwithstanding
anything to the contrary  contained  herein,  upon the occurrence of an Event of
Default  described  in Sections  2.1(b)-(k)  hereof,  the Holder  shall have the
right, at such Holder's option,  to require the Maker to prepay in cash all or a
portion of this Note at a price equal to one hundred  twenty  percent  (120%) of
the  aggregate  principal  amount  of this Note  applicable  at the time of such
request.  Nothing in this Section  3.7(a) shall limit the Holder's  rights under
Section 2.2 hereof.

                  (b) Prepayment Option Upon Major  Transaction.  In addition to
all  other  rights  of  the  Holder  contained  herein,  simultaneous  with  the
occurrence of a Major Transaction (as defined below),  the Holder shall have the
right, at the Holder's  option,  to require the Maker to prepay all or a portion
of the  Holder's  Notes at a price  equal to one hundred  percent  (100%) of the
aggregate  principal  amount  of this Note (the  "Major  Transaction  Prepayment
Price");  provided  that the Maker shall have the sole option to make payment of
the Major Transaction Prepayment Price in cash or shares of Common Stock. If the
Maker elects to make payment of the Major Transaction Prepayment Price in shares
of Common Stock,  the price per share shall be equal to eighty  percent (80%) of
the average of the Closing Bid Price for the ten (10) Trading  Days  immediately
preceding  the date of delivery of the Notice of  Prepayment at Option of Holder
Upon Major  Transaction (as hereafter  defined) and the Holder shall have demand
registration rights with respect to such shares.

                  (c) Prepayment  Option Upon  Triggering  Event. In addition to
all other rights of the Holder  contained  herein,  after a Triggering Event (as
defined  below),  the Holder shall have the right,  at the Holder's  option,  to
require  the  Maker to prepay  all or a portion  of this Note in cash at a price
equal  to the sum of (i) the  greater  of (A) one  hundred  twenty-five  percent
(125%) of the  aggregate  principal  amount of this Note and (B) in the event at
such time the Holder is unable to obtain the  benefit of its  conversion  rights
through  the  conversion  of this Note and resale of the shares of Common  Stock
issuable upon  conversion  hereof in accordance  with the terms of this Note and
the other  Transaction  Documents,  (a) the aggregate  principal  amount of this
Note,  divided by the Conversion  Price on (x) the date the Prepayment Price (as
defined below) is demanded or otherwise due or (y) the date the Prepayment Price
is paid in full,  whichever is less,  multiplied by (b) the VWAP on (x) the date
the  Prepayment  Price  is  demanded  or  otherwise  due,  and (y) the  date the
Prepayment  Price is paid in full,  whichever  is  greater,  and (ii) all  other
amounts,  costs, expenses and liquidated damages due in respect of this Note and
the other Transaction  Documents (the "Triggering Event Prepayment  Price," and,
collectively  with the  Major  Transaction  Prepayment  Price,  the  "Prepayment
Price").

                                      -16-
<PAGE>

                  (d)  Intentionally Omitted.

                  (e) "Major Transaction." A "Major Transaction" shall be deemed
to have occurred at such time as any of the following events:

                           (i)  the  consolidation,  merger  or  other  business
combination of the Maker with or into another Person (as defined in Section 4.13
hereof) (other than (A) pursuant to a migratory  merger  effected solely for the
purpose of changing  the  jurisdiction  of  incorporation  of the Maker or (B) a
consolidation,  merger or other  business  combination  in which  holders of the
Maker's voting power  immediately  prior to the  transaction  continue after the
transaction to hold,  directly or indirectly,  the voting power of the surviving
entity or entities  necessary to elect a majority of the members of the board of
directors (or their  equivalent if other than a  corporation)  of such entity or
entities).

                           (ii) the sale or transfer of more than fifty  percent
(50%) of the Maker's  assets  (based on the fair market value as  determined  in
good  faith by the  Maker's  Board of  Directors)  other than  inventory  in the
ordinary course of business in one or a related series of transactions; or

                           (iii) closing of a purchase, tender or exchange offer
made to the holders of more than fifty percent (50%) of the  outstanding  shares
of Common Stock in which more than fifty percent (50%) of the outstanding shares
of Common Stock were tendered and accepted.

                  (f) "Triggering  Event." A "Triggering  Event" shall be deemed
to have occurred at such time as any of the following events:

                          (i)  so  long  as  any  Notes  are  outstanding,   the
effectiveness of the Registration  Statement,  after it becomes  effective,  (i)
lapses for any reason  (including,  without  limitation,  the issuance of a stop
order) or (ii) is  unavailable  to the  Holder  for sale of the shares of Common
Stock at the time of any conversion  request,  and such lapse or  unavailability
continues for a period of twenty (20)  consecutive  Trading Days, and the shares
of Common Stock into which the Holder's Notes can be converted cannot be sold in
the public  securities  market pursuant to Rule 144(k) under the Securities Act,
provided  that the cause of such lapse or  unavailability  is not due to factors
primarily  within the control of the Holder of the Notes;  and provided  further
that a Triggering  Event shall not have  occurred if and to the extent the Maker
exercised  its  rights  set forth in  Section  3(n) of the  Registration  Rights
Agreement;

                          (ii) the suspension from listing,  without  subsequent
listing on any one of, or the  failure  of the  Common  Stock to be listed on at
least one of the OTC Bulletin  Board,  the American Stock  Exchange,  the Nasdaq
Global Market,  the Nasdaq Capital Market or The New York Stock Exchange,  Inc.,
for a period of five (5) consecutive Trading Days;

                          (iii) the  Maker's  notice to any holder of the Notes,
including by way of public announcement, at any time, of its inability to comply
(including for any of the reasons described in Section 3.8) or its intention not
to comply with proper requests for conversion of any Notes into shares of Common
Stock; or

                                      -17-
<PAGE>

                          (iv) the Maker's  failure to comply with a  Conversion
Notice  tendered in accordance  with the provisions of this Note within ten (10)
business days after the receipt by the Maker of the Conversion Notice; or

                          (v) the Maker  deregisters  its shares of Common Stock
and as a result such shares of Common Stock are no longer publicly traded; or

                          (vi)  the   Maker   consummates   a  "going   private"
transaction  and as a result  the  Common  Stock is no longer  registered  under
Sections 12(b) or 12(g) of the Exchange Act; or

                          (vii) the Maker breaches any representation, warranty,
covenant or other term or condition of the Share Exchange  Agreement,  this Note
or any other agreement,  document,  certificate or other instrument delivered in
connection with the transactions  contemplated thereby or hereby,  except to the
extent that such breach would not have a Material  Adverse Effect (as defined in
the Share  Exchange  Agreement)  of the Maker and its  Subsidiaries,  taken as a
whole, and except, in the case of a breach of a covenant which is curable,  only
if such breach continues for a period of a least ten (10) business days.

                  (g) Intentionally Omitted.

                  (h)  Mechanics  of  Prepayment  at Option of Holder Upon Major
Transaction. No sooner than fifteen (15) days nor later than ten (10) days prior
to the  consummation  of a  Major  Transaction,  but  not  prior  to the  public
announcement of such Major  Transaction,  the Maker shall deliver written notice
thereof via facsimile and overnight  courier ("Notice of Major  Transaction") to
the  Holder  of this  Note.  At any time  after  receipt  of a  Notice  of Major
Transaction (or, in the event a Notice of Major  Transaction is not delivered at
least ten (10) days prior to a Major  Transaction,  at any time  within ten (10)
days prior to a Major Transaction), any holder of the Notes then outstanding may
require the Maker to prepay,  effective immediately prior to the consummation of
such Major Transaction, all of the holder's Notes then outstanding by delivering
written  notice  thereof  via  facsimile  and  overnight   courier  ("Notice  of
Prepayment  at Option of Holder  Upon Major  Transaction")  to the Maker,  which
Notice of Prepayment at Option of Holder Upon Major  Transaction  shall indicate
(i) the  principal  amount of the Notes  that such  holder is  electing  to have
prepaid  and  (ii)  the  applicable  Major  Transaction   Prepayment  Price,  as
calculated pursuant to Section 3.7(b) above.

                  (i)   Mechanics  of   Prepayment  at  Option  of  Holder  Upon
Triggering  Event.  Within  one (1)  business  day  after  the  occurrence  of a
Triggering  Event,  the Maker shall deliver written notice thereof via facsimile
and  overnight  courier  ("Notice  of  Triggering  Event") to each holder of the
Notes.  At any time  after the  earlier  of a  holder's  receipt  of a Notice of
Triggering  Event and such holder  becoming  aware of a  Triggering  Event,  any
holder of this Note and the Other Notes then  outstanding  may require the Maker
to prepay  all of the Notes on a pro rata  basis by  delivering  written  notice
thereof via facsimile and overnight  courier ("Notice of Prepayment at Option of
Holder Upon  Triggering  Event") to the Maker,  which  Notice of  Prepayment  at
Option of Holder Upon Triggering Event shall indicate (i) the amount of the Note
that such holder is electing to have prepaid and (ii) the applicable  Triggering
Event Prepayment

                                      -18-
<PAGE>

Price,  as calculated  pursuant to Section  3.7(c) above. A holder shall only be
permitted to require the Maker to prepay the Note pursuant to Section 3.7 hereof
for the  greater of a period of ten (10) days after  receipt by such holder of a
Notice  of  Triggering  Event  or  for so  long  as  such  Triggering  Event  is
continuing.

                  (j) Payment of Prepayment Price. Upon the Maker's receipt of a
Notice(s) of Prepayment at Option of Holder Upon Triggering Event or a Notice(s)
of Prepayment at Option of Holder Upon Major  Transaction from any holder of the
Notes, the Maker shall immediately  notify each holder of the Notes by facsimile
of the Maker's  receipt of such Notice(s) of Prepayment at Option of Holder Upon
Triggering  Event or  Notice(s)  of  Prepayment  at Option of Holder  Upon Major
Transaction  and each holder which has sent such a notice shall promptly  submit
to the Maker such holder's certificates representing the Notes which such holder
has elected to have prepaid.  The Maker shall deliver the applicable  Triggering
Event Prepayment Price, in the case of a prepayment  pursuant to Section 3.7(i),
to such holder  within  five (5)  business  days after the Maker's  receipt of a
Notice of Prepayment at Option of Holder Upon Triggering  Event and, in the case
of a  prepayment  pursuant  to  Section  3.7(h),  the Maker  shall  deliver  the
applicable  Major   Transaction   Prepayment  Price  immediately  prior  to  the
consummation of the Major  Transaction;  provided that a holder's  original Note
shall have been so delivered to the Maker; provided further that if the Maker is
unable  to prepay  all of the Notes to be  prepaid,  the Maker  shall  prepay an
amount  from each  holder  of the Notes  being  prepaid  equal to such  holder's
pro-rata  amount  (based on the number of Notes held by such holder  relative to
the number of Notes outstanding) of all Notes being prepaid.  If the Maker shall
fail to prepay all of the Notes submitted for prepayment (other than pursuant to
a dispute as to the arithmetic calculation of the Prepayment Price), in addition
to any  remedy  such  holder of the Notes may have under this Note and the Share
Exchange Agreement,  the applicable  Prepayment Price payable in respect of such
Notes not prepaid  shall bear interest at the rate of two percent (2%) per month
(prorated  for  partial  months)  until paid in full.  Until the Maker pays such
unpaid  applicable  Prepayment  Price in full to a holder of the Notes submitted
for prepayment, such holder shall have the option (the "Void Optional Prepayment
Option") to, in lieu of prepayment, require the Maker to promptly return to such
holder(s) all of the Notes that were  submitted for prepayment by such holder(s)
under this  Section 3.7 and for which the  applicable  Prepayment  Price has not
been paid, by sending  written  notice  thereof to the Maker via facsimile  (the
"Void  Optional  Prepayment  Notice").  Upon the  Maker's  receipt  of such Void
Optional  Prepayment  Notice(s)  and  prior to  payment  of the full  applicable
Prepayment  Price to such holder,  (i) the  Notice(s) of Prepayment at Option of
Holder Upon Triggering  Event or the Notice(s) of Prepayment at Option of Holder
Upon Major Transaction,  as the case may be, shall be null and void with respect
to those Notes submitted for prepayment and for which the applicable  Prepayment
Price has not been  paid,  (ii) the Maker  shall  immediately  return  any Notes
submitted to the Maker by each holder for  prepayment  under this Section 3.7(j)
and for which the  applicable  Prepayment  Price has not been paid and (iii) the
Conversion  Price of such returned  Notes shall be adjusted to the lesser of (A)
the  Conversion  Price  as in  effect  on the date on  which  the Void  Optional
Prepayment  Notice(s) is  delivered to the Maker and (B) the lowest  Closing Bid
Price  during  the  period  beginning  on the date on  which  the  Notice(s)  of
Prepayment  of Option of Holder  Upon  Major  Transaction  or the  Notice(s)  of
Prepayment  at Option of Holder Upon  Triggering  Event,  as the case may be, is
delivered  to the  Maker  and  ending  on the  date on which  the Void  Optional
Prepayment Notice(s) is delivered to the Maker; provided that no

                                      -19-
<PAGE>

adjustment  shall be made if such adjustment  would result in an increase of the
Conversion  Price  then  in  effect.  A  holder's  delivery  of a Void  Optional
Prepayment  Notice and  exercise of its rights  following  such notice shall not
effect the Maker's  obligations to make any payments which have accrued prior to
the date of such  notice.  Payments  provided for in this Section 3.7 shall have
priority  to  payments  to  other   stockholders  in  connection  with  a  Major
Transaction.

                  (k)      Intentionally Omitted.

                  Section 3.8       Inability to Fully Convert.

                  (a) Holder's  Option if Maker Cannot Fully  Convert.  If, upon
the Maker's  receipt of a  Conversion  Notice,  the Maker cannot issue shares of
Common Stock  registered  for resale under the  Registration  Statement  for any
reason,  including,  without  limitation,  because the Maker (w) does not have a
sufficient  number of shares of Common Stock  authorized and  available,  (x) is
otherwise  prohibited by applicable  law or by the rules or  regulations  of any
stock  exchange,   interdealer   quotation   system  or  other   self-regulatory
organization  with  jurisdiction  over the Maker or any of its  securities  from
issuing all of the Common Stock which is to be issued to the Holder  pursuant to
a Conversion Notice or (y) fails to have a sufficient number of shares of Common
Stock  registered for resale under the  Registration  Statement,  then the Maker
shall issue as many shares of Common Stock as it is able to issue in  accordance
with the Holder's Conversion Notice and, with respect to the unconverted portion
of this Note, the Holder, solely at Holder's option, can elect to:

                           (i) require the Maker to prepay that  portion of this
Note for which the Maker is unable to issue Common Stock in accordance  with the
Holder's  Conversion  Notice (the  "Mandatory  Prepayment") at a price per share
equal to the Triggering  Event  Prepayment Price as of such Conversion Date (the
"Mandatory Prepayment Price");

                           (ii) if the  Maker's  inability  to fully  convert is
pursuant  to Section  3.8(a)(x)  above,  require  the Maker to issue  restricted
shares of Common Stock in accordance with such holder's Conversion Notice;

                           (iii) void its  Conversion  Notice and retain or have
returned, as the case may be, this Note that was to be converted pursuant to the
Conversion  Notice  (provided that the Holder's  voiding its  Conversion  Notice
shall not effect the Maker's obligations to make any payments which have accrued
prior to the date of such notice);

                           (iv)  exercise its Buy-In  rights  pursuant to and in
accordance with the terms and provisions of Section 3.3(c) of this Note.

In the  event a Holder  shall  elect to  convert  any  portion  of its  Notes as
provided herein, the Maker cannot refuse conversion based on any claim that such
Holder or any one associated or affiliated  with such Holder has been engaged in
any violation of law,  violation of an agreement to which such Holder is a party
or for any reason  whatsoever,  unless,  an injunction  from a court, on notice,
restraining and or adjoining  conversion of all or of said Notes shall have been
issued and

                                      -20-
<PAGE>

the Maker posts a surety bond for the benefit of such Holder in an amount  equal
to 130% of the principal  amount of the Notes the Holder has elected to convert,
which bond shall remain in effect until the completion of arbitration/litigation
of the dispute and the  proceeds of which shall be payable to such Holder in the
event it obtains judgment.

                  (b) Mechanics of Fulfilling Holder's Election. The Maker shall
immediately  send via facsimile to the Holder,  upon receipt of a facsimile copy
of a  Conversion  Notice  from the Holder  which  cannot be fully  satisfied  as
described in Section  3.8(a) above,  a notice of the Maker's  inability to fully
satisfy the Conversion  Notice (the "Inability to Fully Convert  Notice").  Such
Inability to Fully Convert Notice shall indicate (i) the reason why the Maker is
unable to fully satisfy such holder's Conversion Notice, (ii) the amount of this
Note which cannot be converted  and (iii) the  applicable  Mandatory  Prepayment
Price.  The Holder shall  notify the Maker of its  election  pursuant to Section
3.8(a) above by delivering written notice via facsimile to the Maker ("Notice in
Response to Inability to Convert").

                  (c) Payment of Prepayment  Price. If the Holder shall elect to
have its Notes prepaid pursuant to Section  3.8(a)(i) above, the Maker shall pay
the  Mandatory  Prepayment  Price to the Holder  within  thirty (30) days of the
Maker's  receipt of the  Holder's  Notice in Response to  Inability  to Convert,
provided that prior to the Maker's receipt of the Holder's Notice in Response to
Inability to Convert the Maker has not delivered a notice to the Holder stating,
to the satisfaction of the Holder,  that the event or condition resulting in the
Mandatory  Prepayment has been cured and all Conversion  Shares  issuable to the
Holder can and will be delivered to the Holder in  accordance  with the terms of
this Note. If the Maker shall fail to pay the  applicable  Mandatory  Prepayment
Price to the  Holder  on the date that is one (1)  business  day  following  the
Maker's  receipt of the  Holder's  Notice in  Response to  Inability  to Convert
(other than  pursuant  to a dispute as to the  determination  of the  arithmetic
calculation of the Prepayment  Price),  in addition to any remedy the Holder may
have under this Note and the Share Exchange Agreement,  such unpaid amount shall
bear  interest at the rate of two percent (2%) per month  (prorated  for partial
months) until paid in full. Until the full Mandatory Prepayment Price is paid in
full to the  Holder,  the  Holder  may (i) void the  Mandatory  Prepayment  with
respect  to that  portion  of the Note for which the full  Mandatory  Prepayment
Price has not been paid, (ii) receive back such Note, and (iii) require that the
Conversion  Price of such  returned  Note be  adjusted  to the lesser of (A) the
Conversion  Price as in  effect  on the  date on which  the  Holder  voided  the
Mandatory  Prepayment  and (B) the lowest  Closing  Bid Price  during the period
beginning on the  Conversion  Date and ending on the date the Holder  voided the
Mandatory Prepayment.

                  (d) Pro-rata Conversion and Prepayment. In the event the Maker
receives a Conversion  Notice from more than one holder of the Notes on the same
day and the  Maker  can  convert  and  prepay  some,  but not all,  of the Notes
pursuant  to this  Section  3.8,  the Maker  shall  convert and prepay from each
holder of the Notes  electing  to have its Notes  converted  and prepaid at such
time an amount equal to such  holder's  pro-rata  amount (based on the principal
amount of the Notes held by such holder relative to the principal  amount of the
Notes outstanding) of all the Notes being converted and prepaid at such time.

                  Section 3.9 No Rights as  Shareholder.  Nothing  contained  in
this  Note  shall be  construed  as  conferring  upon the  Holder,  prior to the
conversion of this Note, the right to vote or

                                      -21-
<PAGE>

to receive  dividends  or to consent or to receive  notice as a  shareholder  in
respect of any meeting of  shareholders  for the  election of  directors  of the
Maker or of any other matter, or any other rights as a shareholder of the Maker.

                                   ARTICLE IV

                                  MISCELLANEOUS

                  Section 4.1 Notices. Any notice,  demand,  request,  waiver or
other  communication  required or  permitted to be given  hereunder  shall be in
writing and shall be effective (a) upon hand delivery,  telecopy or facsimile at
the address or number  designated in the Share Exchange  Agreement (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 third  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 Maker will give
written  notice to the  Holder at least ten (10) days prior to the date on which
the Maker takes a record (x) with respect to any dividend or  distribution  upon
the Common Stock, (y) with respect to any pro rata subscription offer to holders
of  Common  Stock or (z) for  determining  rights to vote  with  respect  to any
Organic Change, dissolution, liquidation or winding-up provided, notwithstanding
the  foregoing in no event shall such notice be provided to such holder prior to
such  information  being  made  known to the  public.  The Maker  will also give
written  notice to the  Holder at least ten (10) days prior to the date on which
any Organic  Change,  dissolution,  liquidation  or  winding-up  will take place
provided,  notwithstanding  the  foregoing  in no event  shall  such  notice  be
provided to the Holder prior to such information being made known to the public.
The Maker shall  promptly  notify the Holder of this Note of any notices sent or
received, or any actions taken with respect to the Other Notes.

                  Section 4.2 Governing  Law. This Note shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving  effect to any of the conflicts of law  principles  which would result in
the application of the substantive law of another jurisdiction.  This Note shall
not be interpreted or construed with any  presumption  against the party causing
this Note to be drafted.

                  Section 4.3  Headings.  Article  and section  headings in this
Note are included herein for purposes of convenience of reference only and shall
not constitute a part of this Note for any other purpose.

                  Section 4.4 Remedies,  Characterizations,  Other  Obligations,
Breaches and  Injunctive  Relief.  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,   without  limitation,  a  decree  of  specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing  herein shall limit a holder's  right to pursue  actual  damages for any
failure by the Maker to comply with the terms of this Note. Amounts set forth or
provided for herein with respect to payments,  conversion  and the like (and the
computation thereof) shall be the amounts to be

                                      -22-
<PAGE>

received  by the holder  thereof  and shall not,  except as  expressly  provided
herein,  be subject  to any other  obligation  of the Maker (or the  performance
thereof).  The  Maker  acknowledges  that  a  breach  by it of  its  obligations
hereunder  will cause  irreparable  and material harm to the Holder and that the
remedy at law for any such breach may be inadequate.  Therefore the Maker agrees
that, in the event of any such breach or threatened  breach, the Holder shall be
entitled,  in addition to all other available rights and remedies,  at law or in
equity, to seek and obtain such equitable  relief,  including but not limited to
an  injunction  restraining  any such breach or threatened  breach,  without the
necessity of showing  economic loss and without any bond or other security being
required.

                  Section 4.5 Enforcement Expenses.  The Maker agrees to pay all
costs and expenses of enforcement of this Note,  including,  without limitation,
reasonable attorneys' fees and expenses.

                  Section 4.6 Binding  Effect.  The obligations of the Maker and
the Holder set forth herein shall be binding upon the  successors and assigns of
each such party,  whether or not such successors or assigns are permitted by the
terms hereof.

                  Section  4.7  Amendments.  This  Note may not be  modified  or
amended in any manner except in writing executed by the Maker and the Holder.

                  Section 4.8  Compliance  with  Securities  Laws. The Holder of
this Note  acknowledges that this Note is being acquired solely for the Holder's
own account and not as a nominee for any other party,  and for  investment,  and
that the Holder shall not offer,  sell or otherwise  dispose of this Note.  This
Note and any Note  issued  in  substitution  or  replacement  therefor  shall be
stamped or imprinted with a legend in substantially the following form:

                  "THIS  NOTE AND THE  SHARES  OF  COMMON  STOCK  ISSUABLE  UPON
                  CONVERSION   HEREOF  HAVE  NOT  BEEN   REGISTERED   UNDER  THE
                  SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),  OR APPLICABLE
                  STATE  SECURITIES  LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN
                  THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN
                  OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE REASONABLY
                  SATISFACTORY  TO THE MAKER  THAT  THIS NOTE AND THE  SHARES OF
                  COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE MAY BE SOLD,
                  TRANSFERRED,  HYPOTHECATED OR OTHERWISE  DISPOSED OF, UNDER AN
                  EXEMPTION  FROM  REGISTRATION  UNDER  THE ACT AND  SUCH  STATE
                  SECURITIES LAWS."

                  Section 4.9 Consent to Jurisdiction. Each of the Maker and the
Holder  (i) hereby  irrevocably  submits to the  exclusive  jurisdiction  of the
United States  District  Court sitting in the Southern  District of New York and
the courts of the State of New York located in New

                                      -23-
<PAGE>

York county for the purposes of any suit, action or proceeding arising out of or
relating  to this Note and (ii) 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.  Each of the Maker and the Holder  consents to process being served in
any such suit,  action or  proceeding by mailing a copy thereof to such party at
the address in effect for notices to it under the Share  Exchange  Agreement and
agrees that such service shall constitute good and sufficient service of process
and notice thereof.  Nothing in this Section 4.9 shall affect or limit any right
to serve process in any other manner permitted by law. Each of the Maker and the
Holder hereby agree that the prevailing party in any suit,  action or proceeding
arising out of or relating to this Note shall be entitled to  reimbursement  for
reasonable legal fees from the non-prevailing party.

                  Section 4.10  Parties in Interest.  This Note shall be binding
upon,  inure to the benefit of and be enforceable  by the Maker,  the Holder and
their respective successors and permitted assigns.

                  Section 4.11 Failure or Indulgence  Not Waiver.  No failure or
delay on the part of the Holder in the exercise of any power, right or privilege
hereunder  shall  operate as a waiver  thereof,  nor shall any single or partial
exercise  of any  such  power,  right or  privilege  preclude  other or  further
exercise thereof or of any other right, power or privilege.

                  Section 4.12 Maker Waivers.  Except as otherwise  specifically
provided herein,  the Maker and all others that may become liable for all or any
part of the  obligations  evidenced  by this  Note,  hereby  waive  presentment,
demand,  notice of  nonpayment,  protest and all other  demands'  and notices in
connection  with the delivery,  acceptance,  performance and enforcement of this
Note,  and do hereby consent to any number of renewals of extensions of the time
or payment  hereof and agree that any such  renewals or  extensions  may be made
without notice to any such persons and without  affecting their liability herein
and do further  consent to the release of any person liable hereon,  all without
affecting  the  liability  of the other  persons,  firms or Maker liable for the
payment of this Note, AND DO HEREBY WAIVE TRIAL BY JURY.

                  (a) No  delay  or  omission  on the  part  of  the  Holder  in
exercising  its rights under this Note,  or course of conduct  relating  hereto,
shall  operate as a waiver of such rights or any other right of the Holder,  nor
shall any waiver by the  Holder of any such right or rights on any one  occasion
be deemed a waiver of the same right or rights on any future occasion.

                  (b) THE MAKER  ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS
NOTE  IS A PART  IS A  COMMERCIAL  TRANSACTION,  AND TO THE  EXTENT  ALLOWED  BY
APPLICABLE  LAW,  HEREBY  WAIVES ITS RIGHT TO NOTICE AND HEARING WITH RESPECT TO
ANY PREJUDGMENT  REMEDY WHICH THE HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE
TO USE.

                  Section  4.13  Definitions.   For  the  purposes  hereof,  the
following terms shall have the following meanings:

                                      -24-
<PAGE>

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

         "Trading  Day" means (a) a day on which the  Common  Stock is traded on
the OTC  Bulletin  Board,  or (b) if the  Common  Stock is not traded on the OTC
Bulletin   Board,   a  day  on  which  the   Common   Stock  is  quoted  in  the
over-the-counter   market  as  reported  by  the   National   Quotation   Bureau
Incorporated (or any similar  organization or agency succeeding its functions of
reporting prices); provided, however, that in the event that the Common Stock is
not listed or quoted as set forth in (a) or (b) hereof,  then  Trading Day shall
mean any day except Saturday,  Sunday and any day which shall be a legal holiday
or a day on which banking  institutions  in the State of New York are authorized
or required by law or other government action to close.

                                             REMOTE DYNAMICS, INC.

                                             By:  ______________________________
                                                  Name:
                                                  Title:

                                      -25-
<PAGE>

                                    EXHIBIT A

                                WIRE INSTRUCTIONS

Payee: _______________________________________________________

Bank:  _______________________________________________________

Address: _____________________________________________________

         _____________________________________________________

Bank No.: ____________________________________________________

Account No.:  ________________________________________________

Account Name: ________________________________________________

                                      -26-
<PAGE>

                                     FORM OF

                              NOTICE OF CONVERSION

     (To be Executed by the Registered Holder in order to Convert the Note)

The undersigned hereby  irrevocably elects to convert $ ________________  of the
principal amount of the above Note No. ___ into shares of Common Stock of Remote
Dynamics,  Inc. (the "Maker") according to the conditions hereof, as of the date
written below.

Date of Conversion _________________________________________________________

Applicable Conversion Price __________________________________________________

Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the Date of Conversion: _________________________

Signature___________________________________________________________________

         [Name]

Address:__________________________________________________________________

        __________________________________________________________________

                                      -27-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00114-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00114-of-00352.parquet"}]]