Document:

Exhibit 10.7

                             STOCK PLEDGE AGREEMENT

         This Stock Pledge  Agreement  (this  "Agreement"),  dated as of May 28,
2004, among Laurus Master Fund, Ltd. (the "Pledgee"),  Pacific Biometrics, Inc.,
a Delaware corporation (the "Pledgor").

                                   BACKGROUND

         The Company has entered into a Securities Purchase Agreement,  dated as
of May 28, 2004 (as amended,  modified,  restated or  supplemented  from time to
time,  the  "Securities  Purchase  Agreement"),  pursuant  to which the  Pledgee
provides or will provide certain financial accommodations to the Company.

         In order to induce the  Pledgee to provide or  continue  to provide the
financial  accommodations  described in the Securities Purchase Agreement,  each
Pledgor  has agreed to pledge and grant a security  interest  in the  collateral
described herein to the Pledgee on the terms and conditions set forth herein.

         NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration the receipt of which is hereby acknowledged,  the parties
hereto agree as follows:

         1.  Defined  Terms.  All  capitalized  terms used herein  which are not
defined  shall  have  the  meanings  given  to them in the  Securities  Purchase
Agreement.

         2.  Pledge  and Grant of  Security  Interest.  To  secure  the full and
punctual  payment  and  performance  of (the  following  clauses  (a)  and  (b),
collectively,  the  "Indebtedness")  (a) the  obligations  under the  Securities
Purchase  Agreement  and the Related  Agreements  referred to in the  Securities
Purchase   Agreement  (the  Securities   Purchase   Agreement  and  the  Related
Agreements, as each may be amended, restated,  modified and/or supplemented from
time to time,  collectively,  the "Documents")  and (b) all other  indebtedness,
obligations  and liabilities of each Pledgor to the Pledgee whether now existing
or hereafter arising, direct or indirect,  liquidated or unliquidated,  absolute
or contingent,  due or not due and whether under,  pursuant to or evidenced by a
note, agreement,  guaranty,  instrument or otherwise (in each case, irrespective
of the genuineness, validity, regularity or enforceability of such Indebtedness,
or of any  instrument  evidencing any of the  Indebtedness  or of any collateral
therefor or of the existence or extent of such  collateral,  and irrespective of
the  allowability,  allowance or  disallowance of any or all of such in any case
commenced  by or  against  any  Pledgor  under  Title 11,  United  States  Code,
including,  without limitation,  obligations or indebtedness of each Pledgor for
post-petition interest,  fees, costs and charges that would have accrued or been
added to the Indebtedness  but for the commencement of such case),  each Pledgor
hereby pledges, assigns, hypothecates,  transfers and grants a security interest
to Pledgee in all of the following (the "Collateral"):

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     (a)  the  shares of stock  set  forth on  Schedule  A  annexed  hereto  and
          expressly made a part hereof  (together with any additional  shares of
          stock or other  equity  interests  acquired  by  Pledgor in such named
          entities,  the "Pledged  Stock"),  the  certificates  representing the
          Pledged Stock and all dividends,  cash, instruments and other property
          or  proceeds  from  time to time  received,  receivable  or  otherwise
          distributed in respect of or in exchange for any or all of the Pledged
          Stock;

     (b)  all  additional  shares of stock of any issuer (each,  an "Issuer") of
          the Pledged Stock from time to time acquired by Pledgor in any manner,
          including,  without  limitation,  stock dividends or a distribution in
          connection    with   any    increase   or    reduction   of   capital,
          reclassification,  merger, consolidation,  sale of assets, combination
          of shares,  stock split,  spin-off or split-off (which shares shall be
          deemed  to  be  part  of  the   Collateral),   and  the   certificates
          representing  such  additional  shares,   and  all  dividends,   cash,
          instruments and other property or proceeds from time to time received,
          receivable or otherwise  distributed  in respect of or in exchange for
          any or all of such shares; and

     (c)  all options and rights,  whether as an addition to, in substitution of
          or in exchange for any shares of any Pledged Stock and all  dividends,
          cash,  instruments  and other  property or proceeds  from time to time
          received,  receivable  or  otherwise  distributed  in respect of or in
          exchange for any or all such options and rights.

     (d)  upon  the   irrevocable   payment  in  full  of  all  obligations  and
          liabilities  of the Company with respect to the Note,  this  Agreement
          shall  terminate and be of no further  force or effect.  Laurus hereby
          agrees to file the  appropriate  financing  statements  and take other
          reasonable  action  required  to effect such  termination  and release
          promptly after receipt of such payment.

     (e)  In  addition,  upon the  release of Laurus'  security  interest in the
          assets of PBI Technology  Inc.  pursuant to and in accordance with the
          terms of the Master Security  Agreement,  Laurus' security interest in
          the stock of PBI Technology Inc. shall also be automatically  released
          from the  Collateral  granted to Laurus  hereunder  and  Laurus  shall
          promptly  return to the Company the stock  certificate  (together with
          all stock  powers  and  endorsements)  and any other  Collateral  with
          respect to the stock of PBI Technology Inc.

         3. Delivery of Collateral.  All certificates representing or evidencing
the  Pledged  Stock  shall be  delivered  to and held by or on behalf of Pledgee
pursuant  hereto  and  shall be  accompanied  by duly  executed  instruments  of
transfer or  assignment  in blank,  all in form and  substance  satisfactory  to
Pledgee.  Pledgor  hereby  authorizes  the Issuer  upon demand by the Pledgee to
deliver  any  certificates,   instruments  or  other  distributions   issued  in
connection with the Collateral  directly to the Pledgee, in each case to be held
by the  Pledgee,  subject  to the terms  hereof.  Upon an Event of  Default  (as
defined  below) under the Note that has occurred  and is  continuing  beyond any
applicable grace period,  the Pledgee shall have the right,  during such time in

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its discretion and with seven (7) days prior notice to the Pledgor,  to transfer
to or to register in the name of the Pledgee or any of its  nominees  any or all
of the Pledged Stock. In addition, the Pledgee shall have the right at such time
to exchange certificates or instruments representing or evidencing Pledged Stock
for certificates or instruments of smaller or larger denominations.

         4.  Representations  and Warranties of Pledgor.  Pledgor represents and
warrants to the Pledgee (which representations and warranties shall be deemed to
continue to be made until all of the Indebtedness has been paid in full and each
Document and each agreement and instrument entered into in connection  therewith
has been irrevocably terminated) that:

     (a)  the execution,  delivery and  performance by Pledgor of this Agreement
          and the pledge of the Collateral  hereunder do not and will not result
          in any violation of any  agreement,  indenture,  instrument,  license,
          judgment, decree, order, law, statute, ordinance or other governmental
          rule or regulation applicable to Pledgor;

     (b)  this Agreement constitutes the legal, valid, and binding obligation of
          Pledgor  enforceable  against  Pledgor  in  accordance  with its terms
          except  as  limited   by   bankruptcy,   insolvency,   reorganization,
          moratorium or similar law relating to or affecting the  enforcement of
          creditors' rights generally;

     (c)  (i) all  Pledged  Stock  owned by Pledgor  is set forth on  Schedule A
          hereto and (ii)  Pledgor is the  direct and  beneficial  owner of each
          share of the Pledged Stock;

     (d)  all of the  shares of the  Pledged  Stock  have been duly  authorized,
          validly issued and are fully paid and nonassessable;

     (e)  no consent or approval of any person, corporation,  governmental body,
          regulatory  authority or other entity, is or will be necessary for (i)
          the execution,  delivery and performance of this  Agreement,  (ii) the
          exercise by the Pledgee of any rights with  respect to the  Collateral
          or (iii) the  pledge  and  assignment  of, and the grant of a security
          interest in, the Collateral hereunder;

     (f)  there  are  no  pending  or,  to  the  best  of  Pledgor's  knowledge,
          threatened  actions or  proceedings  before any court,  judicial body,
          administrative  agency or arbitrator  which may  materially  adversely
          affect the Collateral;

     (g)  Pledgor  has the  requisite  power and  authority  to enter  into this
          Agreement  and to pledge and assign the  Collateral  to the Pledgee in
          accordance with the terms of this Agreement.

     (h)  Subject to the Pledgors' disclosures on Schedule 4.9 of the Securities
          Purchase  Agreement  Pledgor  owns  each item of the  Collateral  and,
          except  for the  pledge  and  security  interest  granted  to  Pledgee
          hereunder,  the Collateral shall be, immediately following the closing
          of the transactions  contemplated by the Documents,  free and clear of
          any  other   security   interest,   pledge,   claim,   lien,   charge,
          hypothecation,    assignment,   offset   or   encumbrance   whatsoever
          (collectively, "Liens").

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     (i)  there are no  restrictions  on transfer of the Pledged Stock contained
          in  the  certificate  of   incorporation  or  by-laws  (or  equivalent
          organizational  documents)  of the Issuer or otherwise  which have not
          otherwise  been  enforceably  and  legally  waived  by  the  necessary
          parties.

     (j)  none of the Pledged Stock has been issued or  transferred in violation
          of the securities registration,  securities disclosure or similar laws
          of any jurisdiction to which such issuance or transfer may be subject.

     (k)  the  pledge  and  assignment  of the  Collateral  and the  grant  of a
          security  interest under this Agreement vest in the Pledgee all rights
          of Pledgor in the Collateral as contemplated by this Agreement.

     (l)  The Pledged Stock constitutes one hundred percent (100%) of the issued
          and outstanding shares of capital stock of each Issuer.

         5. Covenants.  Pledgor covenants that, until the Indebtedness  shall be
satisfied in full and each Document and each  agreement and  instrument  entered
into in connection therewith is irrevocably terminated:

     (a)  Pledgor will not sell, assign, transfer,  convey, or otherwise dispose
          of its rights in or to the  Collateral  or any interest  therein;  nor
          will any Pledgor create,  incur or permit to exist any Lien whatsoever
          with respect to any of the  Collateral  or the proceeds  thereof other
          than that created hereby.

     (b)  Pledgor  will,  at its  expense,  defend  Pledgee's  right,  title and
          security  interest in and to the Collateral  against the claims of any
          other party.

     (c)  Pledgor  shall at any time,  and from time to time,  upon the  written
          request of Pledgee,  execute and deliver such further documents and do
          such  further  acts and things as Pledgee  may  reasonably  request in
          order to effect the purposes of this Agreement including,  but without
          limitation,  delivering to Pledgee upon the  occurrence of an Event of
          Default  irrevocable  proxies  in respect  of the  Collateral  in form
          satisfactory  to  Pledgee.  Until  receipt  thereof,  upon an Event of
          Default  that has  occurred and is  continuing  beyond any  applicable
          grace period,  this  Agreement  shall  constitute  Pledgor's  proxy to
          Pledgee  or  its  nominee  to  vote  all  shares  of  Collateral  then
          registered in each Pledgor's name.

     (d)  No  Pledgor  will  consent  to or  approve  the  issuance  of (i)  any
          additional  shares  of any  class of  capital  stock  or other  equity
          interests of the Issuer;  or (ii) any  securities  convertible  either
          voluntarily by the holder thereof or automatically upon the occurrence
          or  nonoccurrence  of any event or condition  into, or any  securities
          exchangeable for, any such shares, unless, in either case, such shares
          are pledged as Collateral pursuant to this Agreement.

         6. Voting Rights and Dividends.

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     (a)  Prior to an Event of Default  (and the  expiration  of any  applicable
          cure period pertaining  thereto) Pledgor shall (i) be entitled to vote
          the  Collateral,  (ii) be  entitled  to  give  consents,  waivers  and
          ratification  in respect of the  Collateral,  and (iii) be entitled to
          collect and receive for its own use cash  dividends  legally  declared
          available for distribution, on the Collateral.

     (b)  In addition to the Pledgee's  rights and remedies set forth in Section
          8 hereof,  in case an Event of  Default  shall  have  occurred  and be
          continuing,  beyond any applicable cure period,  the Pledgee shall (i)
          be entitled to vote the Collateral, (ii) be entitled to give consents,
          waivers and  ratifications  in respect of the Collateral (each Pledgor
          hereby irrevocably  constituting and appointing the Pledgee, with full
          power of substitution,  the proxy and attorney-in-fact of each Pledgor
          for such  purposes)  and (iii) be  entitled to collect and receive for
          its own use cash dividends paid on the Collateral. No Pledgor shall be
          permitted to exercise or refrain from  exercising any voting rights or
          other  powers if, in the  reasonable  judgment  of the  Pledgee,  such
          action  would  have a  material  adverse  effect  on the  value of the
          Collateral  or any part thereof;  and,  provided,  further,  that each
          Pledgor  shall  give at least  five (5)  days'  written  notice of the
          manner in which such Pledgor  intends to exercise,  or the reasons for
          refraining  from  exercising,  any voting rights or other powers other
          than with respect to any election of directors and voting with respect
          to any  incidental  matters.  Following the  occurrence of an Event of
          Default,  all dividends and all other  distributions in respect of any
          of the  Collateral,  shall  be  delivered  to the  Pledgee  to hold as
          Collateral and shall, if received by any Pledgor, be received in trust
          for the benefit of the Pledgee,  be segregated from the other property
          or funds of any  other  Pledgor,  and be  forthwith  delivered  to the
          Pledgee  as  Collateral  in the same  form as so  received  (with  any
          necessary endorsement).

         7.  Event of  Default.  An Event of  Default  shall be  deemed  to have
occurred  and may be declared by the Pledgee  upon the  happening  of any of the
following events:

     (a)  An "Event of  Default"  under any  Document or any  agreement  or note
          related to any Document  shall have occurred and be continuing  beyond
          any applicable cure period;

     (b)  Any  portion of the  Collateral  is  subjected  to levy of  execution,
          attachment, distraint or other judicial process; or any portion of the
          Collateral  is the subject of a claim (other than by the Pledgee) of a
          Lien or other right or interest in or to the  Collateral and such levy
          or claim  shall not be cured,  disputed  or stayed  within a period of
          forty four (44) days after the occurrence thereof; or

         8.  Remedies.  In case an Event of Default  shall have  occurred and be
declared by the Pledgee, the Pledgee may:

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     (a)  Transfer any or all of the Collateral  into its name, or into the name
          of its nominee or nominees;

     (b)  Exercise  all  corporate   rights  with  respect  to  the   Collateral
          including,  without  limitation,  all rights of conversion,  exchange,
          subscription or any other rights,  privileges or options pertaining to
          any shares of the Collateral as if it were the absolute owner thereof,
          including,  but  without  limitation,  the right to  exchange,  at its
          discretion,   any  or  all  of  the   Collateral   upon  the   merger,
          consolidation, reorganization,  recapitalization or other readjustment
          of the  Issuer  thereof,  or upon the  exercise  by the  Issuer of any
          right,  privilege or option pertaining to any of the Collateral,  and,
          in  connection  therewith,  to deposit  and deliver any and all of the
          Collateral with any committee,  depository,  transfer agent, registrar
          or other  designated  agent upon such terms and  conditions  as it may
          determine,  all  without  liability  except to  account  for  property
          actually received by it; and

     (c)  Subject to any requirement of applicable law, sell, assign and deliver
          the whole or,  from time to time,  any part of the  Collateral  at the
          time held by the Pledgee,  at any private  sale or at public  auction,
          with or without demand,  advertisement  or notice of the time or place
          of sale or  adjournment  thereof or otherwise (all of which are hereby
          waived, except such notice as is required by applicable law and cannot
          be waived),  for cash or credit or for other property for immediate or
          future delivery, and for such price or prices and on such terms as the
          Pledgee in its sole discretion may determine, or as may be required by
          applicable law.

         Pledgor  hereby  waives  and  releases  any and all  right or equity of
redemption,  whether before or after sale  hereunder.  At any such sale,  unless
prohibited by applicable  law, the Pledgee may bid for and purchase the whole or
any  part of the  Collateral  so sold  free  from any such  right or  equity  of
redemption.  All moneys received by the Pledgee  hereunder  whether upon sale of
the Collateral or any part thereof or otherwise shall be held by the Pledgee and
applied by it as provided in Section 10 hereof.  No failure or delay on the part
of the Pledgee in exercising any rights  hereunder  shall operate as a waiver of
any such  rights  nor shall any single or partial  exercise  of any such  rights
preclude  any other or future  exercise  thereof  or the  exercise  of any other
rights  hereunder.  The  Pledgee  shall  have no duty  as to the  collection  or
protection  of  the  Collateral  or  any  income  thereon  nor  any  duty  as to
preservation  of any  rights  pertaining  thereto,  except to apply the funds in
accordance with the requirements of Section 10 hereof.  The Pledgee may exercise
its rights  with  respect to property  held  hereunder  without  resort to other
security for or sources of reimbursement  for the  Indebtedness.  In addition to
the foregoing,  Pledgee shall have all of the rights, remedies and privileges of
a secured party under the Uniform  Commercial Code of New York regardless of the
jurisdiction in which enforcement hereof is sought.

         9. Private Sale.  Pledgor  recognizes that the Pledgee may be unable to
effect (or to do so only after delay which would adversely affect the value that
might be  realized  from  the  Collateral)  a public  sale of all or part of the
Collateral by reason of certain  prohibitions  contained in the Securities  Act,
and may be  compelled  to resort to one or more  private  sales to a  restricted
group of purchasers who will be obliged to agree, among other things, to acquire
such Collateral for their own account, for investment and not with a view to the

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distribution or resale thereof. Pledgor agrees that any such private sale may be
at prices and on terms less favorable to the seller than if sold at public sales
and that such private sales shall be deemed to have been made in a  commercially
reasonable  manner.  Pledgor  agrees that the Pledgee has no obligation to delay
sale of any  Collateral for the period of time necessary to permit the Issuer to
register the Collateral for public sale under the Securities Act.

         10.  Proceeds  of  Sale.  The  proceeds  of any  collection,  recovery,
receipt,  appropriation,  realization or sale of the Collateral shall be applied
by the Pledgee as follows:

     (a)  First, to the payment of all costs, reasonable expenses and charges of
          the  Pledgee  and to the  reimbursement  of the  Pledgee for the prior
          payment of such costs,  reasonable  expenses  and charges  incurred in
          connection with the care and safekeeping of the Collateral (including,
          without  limitation,  the reasonable expenses of any sale or any other
          disposition  of any of the  Collateral),  the  expenses of any taking,
          attorneys' fees and reasonable  expenses,  court costs, any other fees
          or expenses  incurred or  expenditures  or advances made by Pledgee in
          the  protection,  enforcement  or exercise  of its  rights,  powers or
          remedies hereunder;

     (b)  Second,  to the payment of the  Indebtedness,  in whole or in part, in
          such order as the Pledgee may elect,  whether or not such Indebtedness
          is then due;

     (c)  Third,  to such  persons,  firms,  corporations  or other  entities as
          required by applicable  law  including,  without  limitation,  Section
          9-504(1)(c) of the UCC; and

     (d)  Fourth,  to the extent of any  surplus to the Pledgor or as a court of
          competent jurisdiction may direct.

         In the event that the proceeds of any  collection,  recovery,  receipt,
appropriation, realization or sale are insufficient to satisfy the Indebtedness,
Pledgor  shall be  liable  for the  deficiency  plus the  costs  and fees of any
attorneys employed by Pledgee to collect such deficiency.

         11. Waiver of Marshaling. Pledgor hereby waives any right to compel any
marshaling of any of the Collateral.

         12. No Waiver.  Any and all of the Pledgee's rights with respect to the
Liens granted under this Agreement shall continue unimpaired,  and Pledgor shall
be and remain obligated in accordance with the terms hereof, notwithstanding (a)
the bankruptcy,  insolvency or reorganization of any Pledgor, (b) the release or
substitution  of any item of the  Collateral  at any time,  or of any  rights or
interests therein, or (c) any delay,  extension of time, renewal,  compromise or
other indulgence granted by the Pledgee in reference to any of the Indebtedness.
Each Pledgor  hereby  waives all notice of any such delay,  extension,  release,
substitution, renewal, compromise or other indulgence, and hereby consents to be
bound hereby as fully and  effectively  as if such Pledgor had expressly  agreed
thereto in advance.  No delay or extension of time by the Pledgee in  exercising
any power of sale, option or other right or remedy hereunder,  and no failure by
the Pledgee to give notice or make demand, shall constitute a waiver thereof, or
limit,  impair or prejudice the Pledgee's  right to take any action  against any
Pledgor or to  exercise  any other  power of sale,  option or any other right or
remedy.

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<PAGE>

         13.  Expenses.  The Collateral  shall secure,  and Pledgor shall pay to
Pledgee  on  demand,  from time to time,  all  reasonable  costs  and  expenses,
(including but not limited to, reasonable  attorneys' fees and costs, taxes, and
all transfer,  recording,  filing and other  charges) of, or incidental  to, the
custody,  care,  transfer,   administration  of  the  Collateral  or  any  other
collateral,   or  in  any  way  relating  to  the  enforcement,   protection  or
preservation  of the rights or remedies of the Pledgee  under this  Agreement or
with respect to any of the Indebtedness.

         14. The  Pledgee  Appointed  Attorney-In-Fact  and  Performance  by the
Pledgee. Upon the occurrence of an Event of Default,  Pledgor hereby irrevocably
constitutes  and  appoints  the  Pledgee  as  such  Pledgor's  true  and  lawful
attorney-in-fact,  with full power of substitution,  to execute, acknowledge and
deliver any instruments and to do in such Pledgor's name,  place and stead,  all
such  acts,  things  and  deeds  for and on  behalf  of and in the  name of such
Pledgor,  which such  Pledgor  could or might do or which the  Pledgee  may deem
necessary, desirable or convenient to accomplish the purposes of this Agreement,
including,  without  limitation,  to execute such  instruments  of assignment or
transfer or orders and to register,  convey or otherwise  transfer  title to the
Collateral  into the Pledgee's  name.  Pledgor hereby  ratifies and confirms all
that said  attorney-in-fact may so do and hereby declares this power of attorney
to be coupled with an interest and irrevocable.  If Pledgor fails to perform any
agreement herein contained,  the Pledgee may itself perform or cause performance
thereof,  and any costs and  expenses  of the  Pledgee  incurred  in  connection
therewith shall be paid by the Pledgor as provided in Section 10 hereof.

         15. Waivers.

     (a)  EACH PARTY HERETO HEREBY  EXPRESSLY  WAIVES ANY RIGHT TO TRIAL BY JURY
          OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS
          AGREEMENT OR ANY OTHER INSTRUMENT,  DOCUMENT OR AGREEMENT  EXECUTED OR
          DELIVERED IN CONNECTION HEREWITH,  OR (B) IN ANY WAY CONNECTED WITH OR
          RELATED OR  INCIDENTAL  TO THE  DEALINGS OF THE PARTIES  HERETO OR ANY
          OTHER AGREEMENT EXECUTED OR DELIVERED BY THEM IN CONNECTION  HEREWITH,
          OR THE  TRANSACTIONS  RELATED HERETO OR THERETO,  IN EACH CASE WHETHER
          NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR
          TORT OR  OTHERWISE  AND EACH PARTY HERETO  HEREBY  AGREES AND CONSENTS
          THAT ANY CLAIM, DEMAND,  ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY
          COURT  TRIAL  WITHOUT A JURY,  AND THAT ANY PARTY MAY FILE AN ORIGINAL
          COUNTERPART  OR A COPY OF THIS  SECTION  WITH  ANY  COURT  AS  WRITTEN
          EVIDENCE  OF THE  CONSENT  OF EACH PARTY TO THE WAIVER OF ITS RIGHT TO
          TRIAL BY JURY.

         16.  Recapture.  Notwithstanding  anything  to  the  contrary  in  this
Agreement,  if the  Pledgee  receives  any payment or payments on account of the
Indebtedness,  which  payment or payments or any part  thereof are  subsequently
invalidated,  declared  to be  fraudulent  or  preferential,  set  aside  and/or
required  to be repaid to a  trustee,  receiver,  or any other  party  under the

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United  States  Bankruptcy  Code,  as  amended,  or any other  federal  or state
bankruptcy,  reorganization,   moratorium  or  insolvency  law  relating  to  or
affecting  the  enforcement  of  creditors'  rights  generally,  common  law  or
equitable  doctrine,  then to the extent of any sum not finally  retained by the
Pledgee,  each Pledgor's obligations to the Pledgee shall be reinstated and this
Agreement shall remain in full force and effect (or be reinstated) until payment
shall have been made to Pledgee, which payment shall be due on demand.

         17.  Captions.  All captions in this Agreement are included  herein for
convenience of reference  only and shall not  constitute  part of this Agreement
for any other purpose.

         18. Miscellaneous.

     (a)  This Agreement  constitutes  the entire and final  agreement among the
          parties  with  respect  to the  subject  matter  hereof and may not be
          changed,  terminated  or  otherwise  varied  except by a writing  duly
          executed by the parties hereto.

     (b)  No waiver  of any term or  condition  of this  Agreement,  whether  by
          delay, omission or otherwise, shall be effective unless in writing and
          signed by the party  sought to be charged,  and then such waiver shall
          be  effective  only in the  specific  instance and for the purpose for
          which given.

     (c)  In the event that any provision of this  Agreement or the  application
          thereof  to any  Pledgor  or  any  circumstance  in  any  jurisdiction
          governing  this  Agreement  shall,  to  any  extent,   be  invalid  or
          unenforceable  under any applicable  statute,  regulation,  or rule of
          law, such provision shall be deemed  inoperative to the extent that it
          may conflict therewith and shall be deemed modified to conform to such
          statute,  regulation  or  rule  of  law,  and  the  remainder  of this
          Agreement  and the  application  of any such invalid or  unenforceable
          provision to parties,  jurisdictions,  or circumstances  other than to
          whom or to which it is held  invalid  or  unenforceable  shall  not be
          affected thereby, nor shall same affect the validity or enforceability
          of any other provision of this Agreement.

     (d)  This Agreement shall be binding upon each Pledgor,  and each Pledgor's
          successors and assigns,  and shall inure to the benefit of the Pledgee
          and its successors and assigns.

     (e)  Any notice or other  communication  required or permitted  pursuant to
          this  Agreement  shall  be  given in  accordance  with the  Securities
          Purchase Agreement.

     (f)  This Agreement  shall be governed by and construed and enforced in all
          respects in accordance  with the laws of the State of New York applied
          to contracts to be performed wholly within the State of New York.

     (g)  EACH PLEDGOR EXPRESSLY  CONSENTS TO THE JURISDICTION AND VENUE OF EACH
          COURT OF COMPETENT  JURISDICTION  LOCATED IN THE STATE OF NEW YORK FOR
          ALL  PURPOSES  IN  CONNECTION  WITH  THIS   AGREEMENT.   ANY  JUDICIAL
          PROCEEDING  INVOLVING,  DIRECTLY OR INDIRECTLY  ANY MATTER OR CLAIM IN
          ANY WAY ARISING OUT OF,  RELATED TO OR CONNECTED  WITH THIS  AGREEMENT

                                      -9-
<PAGE>

          SHALL BE BROUGHT  ONLY IN A STATE  COURT  LOCATED IN THE COUNTY OF NEW
          YORK,  STATE OF NEW  YORK.  EACH  PLEDGOR  FURTHER  CONSENTS  THAT ANY
          SUMMONS,  SUBPOENA  OR OTHER  PROCESS  OR PAPERS  (INCLUDING,  WITHOUT
          LIMITATION, ANY NOTICE OR MOTION OR OTHER APPLICATION TO EITHER OF THE
          AFOREMENTIONED  COURTS OR A JUDGE THEREOF) OR ANY NOTICE IN CONNECTION
          WITH ANY PROCEEDINGS HEREUNDER, MAY BE SERVED INSIDE OR OUTSIDE OF THE
          STATE OF NEW YORK OR THE SOUTHERN  DISTRICT OF NEW YORK BY  REGISTERED
          OR CERTIFIED MAIL,  RETURN RECEIPT  REQUESTED,  OR BY PERSONAL SERVICE
          PROVIDED A REASONABLE  TIME FOR  APPEARANCE IS  PERMITTED,  OR IN SUCH
          OTHER  MANNER AS MAY BE  PERMISSIBLE  UNDER THE RULES OF SAID  COURTS.
          EACH PLEDGOR  WAIVES ANY  OBJECTION TO  JURISDICTION  AND VENUE OF ANY
          ACTION  INSTITUTED  HEREON AND SHALL NOT ASSERT ANY  DEFENSE  BASED ON
          LACK OF JURISDICTION OR VENUE OR BASED UPON FORUM NON CONVENIENS.

     (h)  This  Agreement may be executed in one or more  counterparts,  each of
          which shall be deemed an original and all of which when taken together
          shall constitute one and the same agreement.  Any signature  delivered
          by a party by  facsimile  transmission  shall be  deemed  an  original
          signature hereto.

         [Remainder of Page Intentionally Left Blank]

                                      -10-
<PAGE>

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

                                                 PACIFIC BIOMETRICS, INC.

                                                 By:   /s/ Ronald R. Helm
                                                     ---------------------------
                                                 Name:  Ronald Helm
                                                 Title:  Chief Executive Officer

                                                 LAURUS MASTER FUND, LTD.

                                                 By:  /s/
                                                     ---------------------------
                                                 Name:
                                                 Title:

                                      -11-
<PAGE>

                    SCHEDULE A to the Stock Pledge Agreement
                    ----------------------------------------

                                  Pledged Stock
                                  -------------

                                           Stock Certificate           Number of
      Pledgor        Issuer Class of Stock       Number      Par Value   Shares
-------------------- ------ -------------- ----------------- --------- ---------
   BioQuant, Inc.               Common
-------------------- ------ -------------- ----------------- --------- ---------
Pacific Biometrics,             Common
      Inc. (WA)
-------------------- ------ -------------- ----------------- --------- ---------
PBI Technology, Inc.            Common
-------------------- ------ -------------- ----------------- --------- ---------

                                      -12-Exhibit 10.8

                             FUNDS ESCROW AGREEMENT

         This Agreement  (this  "Agreement") is dated as of the 28th day of May,
2004 among Pacific  Biometrics,  Inc., a Delaware  corporation  (the "Company"),
Laurus  Master Fund,  Ltd. (the  "Purchaser"),  and Loeb & Loeb LLP (the "Escrow
Agent"):

                              W I T N E S S E T H:

         WHEREAS,  the  Purchaser  has  advised  the  Escrow  Agent that (a) the
Company and the Purchaser have entered into a Securities Purchase Agreement (the
"Purchase  Agreement") for the sale by the Company to the Purchaser of a secured
convertible  term note (the  "Term  Note"),  (b) the  Company  has issued to the
Purchaser  common  stock  purchase  warrants   (collectively,   the  "Term  Note
Warrants") in connection with the issuance of the Term Note, and (c) the Company
and the Purchaser have entered into a Registration Rights Agreement covering the
registration of the Company's common stock underlying the Term Note and the Term
Note Warrants (the "Term Note Registration Rights Agreement");

         WHEREAS, the Company and the Purchaser wish the Purchaser to deliver to
the Escrow Agent copies of the Documents (as hereafter defined) and the Escrowed
Payment  (as  hereafter  defined)  to be held and  released  by Escrow  Agent in
accordance with the terms and conditions of this Agreement; and

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

         NOW THEREFORE, the parties agree as follows:

                                   ARTICLE I

                                 INTERPRETATION

         1.1. Definitions.  Whenever used in this Agreement, the following terms
shall have the meanings set forth below.

     (a)  "Agreement"  means  this  Agreement,   as  amended,   modified  and/or
          supplemented  from time to time by written agreement among the parties
          hereto.

     (b)  "Closing  Payment"  means  the  closing  payment  to be paid to Laurus
          Capital Management,  LLC, the fund manager, as set forth on Schedule A
          hereto.

     (c)  "Disbursement  Letter"  means that  certain  letter  delivered  to the
          Escrow Agent by each of the  Purchaser  and the Company  setting forth
          wire instructions and amounts to be funded at the Closing.

<PAGE>

     (d)  "Documents"  means copies of the  Disbursement  Letter,  [the Purchase
          Agreement,  the Term Note, the Term Note  Warrants,  and the Term Note
          Registration Rights Agreement.

     (e)  "Escrowed Payment" means $2,500,000.

         1.2. Entire Agreement.  This Agreement constitutes the entire agreement
among the  parties  hereto  with  respect to the  matters  contained  herein and
supersedes all prior agreements, understandings, negotiations and discussions of
the parties,  whether oral or written. There are no warranties,  representations
and other  agreements  made by the parties in connection with the subject matter
hereof except as specifically set forth in this Agreement.

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

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

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

         1.6.  Law  Governing  this  Agreement;  Consent to  Jurisdiction.  This
Agreement  shall be governed by and construed in accordance with the laws of the
State of New York  without  regard to  principles  of  conflicts  of laws.  With
respect to any suit,  action or proceeding  relating to this Agreement or to the
transactions contemplated hereby ("Proceedings"),  each party hereto irrevocably
submits to the exclusive  jurisdiction  of the courts of the County of New York,
State of New York and the United States  District court located in the county of
New York in the State of New York.  Each party  hereto  hereby  irrevocably  and
unconditionally  (a) waives  trial by jury in any  Proceeding  relating  to this
Agreement and for any related counterclaim and (b) waives any objection which it
may have at any time to the  laying of venue of any  Proceeding  brought  in any
such  court,  waives any claim  that such  Proceedings  have been  brought in an
inconvenient forum and further waives the right to object,  with respect to such
Proceedings,  that such court does not have  jurisdiction  over such  party.  As
between the Company and the Purchaser, the prevailing party shall be entitled to
recover from the other party its reasonable  attorneys'  fees and costs.  In the
event that any provision of this Agreement is determined by a court of competent
jurisdiction  to be  invalid  or  unenforceable,  then  the  remainder  of  this
Agreement shall not be affected and shall remain in full force and effect.

                                       2
<PAGE>

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

                                   ARTICLE II

                APPOINTMENT OF AND DELIVERIES TO THE ESCROW AGENT

         2.1.  Appointment.  The Company and the  Purchaser  hereby  irrevocably
designate  and appoint the Escrow  Agent as their  escrow agent for the purposes
set forth  herein,  and the Escrow Agent by its  execution  and delivery of this
Agreement  hereby  accepts such  appointment  under the terms and conditions set
forth herein.

         2.2.  Copies of Documents to Escrow Agent. On or about the date hereof,
the Purchaser shall deliver to the Escrow Agent copies of the Documents executed
by the Company to the extent it is a party thereto.

         2.3. Delivery of Escrowed Payment to Escrow Agent. On or about the date
hereof, the Purchaser shall deliver to the Escrow Agent the Escrowed Payment.

         2.4.  Intention  to  Create  Escrow  Over  the  Escrowed  Payment.  The
Purchaser  and the Company  intend that the  Escrowed  Payment  shall be held in
escrow by the Escrow Agent and released  from escrow by the Escrow Agent only in
accordance with the terms and conditions of this Agreement.

                                  ARTICLE III

                                RELEASE OF ESCROW

         3.1.  Release of Escrow.  Subject to the provisions of Section 4.2, the
Escrow Agent shall release the Escrowed Payment from escrow as follows:

     (a)  Promptly  following  receipt by the Escrow  Agent of (i) copies of the
          fully executed Documents and this Agreement, (ii) the Escrowed Payment
          in  immediately  available  funds,  (iii) joint  written  instructions
          ("Joint  Instructions")  executed  by the  Company  and the  Purchaser
          setting forth the payment  direction  instructions with respect to the
          Escrowed  Payment and (iv) Escrow  Agent's  verbal  instructions  from
          David Grin  and/or  Eugene  Grin  (each of whom is a  director  of the
          Purchaser)  indicating  that all  closing  conditions  relating to the
          Documents have been satisfied and directing that the Escrowed  Payment
          be  disbursed  by the  Escrow  Agent  in  accordance  with  the  Joint
          Instructions,  then the Escrowed Payment shall be deemed released from
          escrow and shall be promptly  disbursed in  accordance  with the Joint

                                       3
<PAGE>

          Instructions.   The  Joint   Instructions   shall   include,   without
          limitation,  Escrow Agent's  authorization to retain from the Escrowed
          Payment  Escrow  Agent's fee for acting as Escrow Agent  hereunder and
          the Closing Payment for delivery to Laurus Capital Management,  LLC in
          accordance with the Joint Instructions.

     (b)  Upon  receipt  by the  Escrow  Agent  of a  final  and  non-appealable
          judgment,  order, decree or award of a court of competent jurisdiction
          (a "Court Order") relating to the Escrowed  Payment,  the Escrow Agent
          shall remit the Escrowed  Payment in accordance  with the Court Order.
          Any Court Order shall be  accompanied by an opinion of counsel for the
          party  presenting  the Court Order to the Escrow Agent (which  opinion
          shall be  satisfactory  to the Escrow  Agent) to the  effect  that the
          court issuing the Court Order is a court of competent jurisdiction and
          that the Court Order is final and non-appealable.

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

                                   ARTICLE IV

                           CONCERNING THE ESCROW AGENT

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

     (a)  The  Purchaser and the Company  acknowledge  and agree that the Escrow
          Agent (i) shall not be required to inquire into whether the Purchaser,
          the Company or any other party is entitled to receipt of any  Document
          or all or any  portion  of the  Escrowed  Payment;  (ii)  shall not be
          called upon to construe or review any Document or any other  document,
          instrument or agreement  entered into in connection  therewith;  (iii)
          shall be  obligated  only for the  performance  of such  duties as are
          specifically  assumed by the Escrow Agent pursuant to this  Agreement;
          (iv) may rely on and shall be protected in acting or  refraining  from
          acting upon any written notice,  instruction,  instrument,  statement,
          request or document  furnished  to it  hereunder  and  believed by the
          Escrow  Agent in good faith to be genuine  and to have been  signed or
          presented by the proper  person or party,  without  being  required to
          determine the  authenticity  or correctness of any fact stated therein
          or the  propriety or validity or the service  thereof;  (v) may assume
          that any person  purporting  to give notice or make any  statement  or
          execute any document in connection with the provisions hereof has been
          duly  authorized  to do so;  (vi)  shall  not be  responsible  for the
          identity, authority or rights of any person, firm or company executing
          or delivering  or  purporting to execute or deliver this  Agreement or
          any  Document  or any funds  deposited  hereunder  or any  endorsement

                                       4
<PAGE>

          thereon or  assignment  thereof;  (vii) shall not be under any duty to
          give the property held by Escrow Agent hereunder any greater degree of
          care than Escrow Agent gives its own similar property;  and (viii) may
          consult  counsel  satisfactory  to Escrow  Agent  (including,  without
          limitation,  Loeb & Loeb,  LLP or such other counsel of Escrow Agent's
          choosing),  the  opinion  of  such  counsel  to be full  and  complete
          authorization and protection in respect of any action taken,  suffered
          or omitted by Escrow Agent  hereunder in good faith and in  accordance
          with the opinion of such counsel.

     (b)  The  Purchaser  and the Company  acknowledge  that the Escrow Agent is
          acting  solely as a  stakeholder  at their request and that the Escrow
          Agent shall not be liable for any action taken by Escrow Agent in good
          faith and  believed  by Escrow  Agent to be  authorized  or within the
          rights or powers  conferred upon Escrow Agent by this  Agreement.  The
          Purchaser and the Company hereby, jointly and severally, indemnify and
          hold  harmless  the Escrow Agent and any of Escrow  Agent's  partners,
          employees,  agents and  representatives  from and  against any and all
          actions  taken or omitted  to be taken by Escrow  Agent or any of them
          hereunder and any and all claims, losses, liabilities,  costs, damages
          and expenses  suffered  and/or incurred by the Escrow Agent arising in
          any manner  whatsoever out of the  transactions  contemplated  by this
          Agreement and/or any transaction related in any way hereto,  including
          the fees of outside  counsel and other costs and expenses of defending
          itself against any claims,  losses,  liabilities,  costs,  damages and
          expenses  arising  in  any  manner  whatsoever  out  the  transactions
          contemplated by this Agreement  and/or any transaction  related in any
          way  hereto,  except  for such  claims,  losses,  liabilities,  costs,
          damages and expenses  incurred by reason of the Escrow  Agent's  gross
          negligence  or willful  misconduct.  The Escrow Agent shall owe a duty
          only to the Purchaser and Company under this Agreement and to no other
          person.

     (c)  The Purchaser  and the Company  shall jointly and severally  reimburse
          the Escrow Agent for its reasonable  out-of-pocket expenses (including
          counsel  fees  (which  counsel  may be Loeb & Loeb  LLP or such  other
          counsel of the Escrow Agent's  choosing)  incurred in connection  with
          the performance of its duties and  responsibilities  hereunder,  which
          shall not (subject to Section 4.1(b)) exceed $1,500.

     (d)  The Escrow Agent may at any time resign as Escrow  Agent  hereunder by
          giving five (5) business days prior written  notice of  resignation to
          the  Purchaser  and  the  Company.  Prior  to the  effective  date  of
          resignation  as specified in such notice,  the  Purchaser  and Company
          will  issue  to the  Escrow  Agent  a  Joint  Instruction  authorizing
          delivery of the  Documents  and the  Escrowed  Payment to a substitute
          Escrow  Agent  selected  by  the  Purchaser  and  the  Company.  If no
          successor Escrow Agent is named by the Purchaser and the Company,  the
          Escrow  Agent may apply to a court of  competent  jurisdiction  in the
          State of New York for  appointment  of a successor  Escrow Agent,  and
          deposit the Documents  and the Escrowed  Payment with the clerk of any
          such court and/or otherwise commence an interpleader or similar action
          for a determination of where to deposit the same.

                                       5
<PAGE>

     (e)  The Escrow  Agent does not have and will not have any  interest in the
          Documents  and the  Escrowed  Payment,  but is serving  only as escrow
          agent, having only possession thereof.

     (f)  The Escrow  Agent shall not be liable for any action  taken or omitted
          by it in good faith and  reasonably  believed  by it to be  authorized
          hereby or within the rights or powers conferred upon it hereunder, nor
          for action  taken or omitted by it in good  faith,  and in  accordance
          with advice of counsel  (which counsel may be Loeb & Loeb, LLP or such
          other counsel of the Escrow Agent's choosing), and shall not be liable
          for any  mistake  of fact or  error  of  judgment  or for any  acts or
          omissions  of any kind except to the extent any such  liability  arose
          from its own willful misconduct or gross negligence.

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

     (h)  The  Escrow  Agent  shall  be  permitted  to act as  counsel  for  the
          Purchaser or the Company, as the case may be, in any dispute as to the
          disposition  of the Documents and the Escrowed  Payment,  in any other
          dispute  between the  Purchaser  and the  Company,  whether or not the
          Escrow Agent is then holding the Documents and/or the Escrowed Payment
          and continues to act as the Escrow Agent hereunder.

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

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

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

                                       6
<PAGE>

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

                                   ARTICLE V

                                 GENERAL MATTERS

         5.1. Termination.  This escrow shall terminate upon disbursement of the
Escrowed  Payment in accordance with the terms of this Agreement or earlier upon
(i) the agreement in writing of the Purchaser and Company;  (ii) the resignation
of the Escrow Agent in accordance  with the terms hereof;  or (iii) the date ten
(10) days after the date hereof.

         5.2. Notices. All notices,  requests,  demands and other communications
required or permitted  hereunder shall be in writing and shall be deemed to have
been duly given one (1) day after being sent by telecopy (with copy delivered by
overnight courier, regular or certified mail):

(a)      If to the Company, to:

         Pacific Biometrics, Inc.
         220 W. Harrison Street
         Seattle, WA 98119

         Attention:        Ronald R. Helm
         Facsimile:        (206) 298 - 9838

         with a copy to:
         Cairncross & Hempelmann, P.S
         524 Second Avenue, Suite 500
         Seattle, Washington 9810

         Attention:        Tim Woodland, Esq.
         Facsimile:       (206) 254-4524

(b)      If to the Purchaser, to:

          LAURUS MASTER FUND, LTD.
          c/o Ironshore Corporate Services Ltd.
          P.O. Box 1234 G.T., Queensgate House, South Church Street
          Grand Cayman, Cayman Islands
          Fax: 212-541-4434
          Attention:  John Tucker, Esq.

                                       7
<PAGE>

(c)      If to the Escrow Agent, to:

          Loeb & Loeb LLP
          345 Park Avenue
          New York, New York 10154
          Fax:  (212) 407-4990
          Attention:  Scott J. Giordano, Esq.

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

         5.3.  Interest.  The Escrowed  Payment shall not be held in an interest
bearing account nor will interest be payable in connection therewith.

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

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

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

                                       8
<PAGE>

         IN WITNESS WHEREOF,  the parties hereto have executed this Funds Escrow
Agreement as of the date and year first above written.

                                       COMPANY:

                                       PACIFIC BIOMETRICS, INC.

                                       By:     /s/ Ronald R. Helm
                                              ----------------------------------
                                       Name:  Ronald Helm
                                       Title:  Chief Executive Officer

                                       PURCHASER:

                                       LAURUS MASTER FUND, LTD.

                                       By:     /s/
                                              ----------------------------------
                                       Name:
                                       Title:

                                       ESCROW AGENT:

                                       LOEB & LOEB LLP

                                       By:     /s/
                                              ----------------------------------
                                       Name:
                                       Title:

                                       9
<PAGE>

                      SCHEDULE A TO FUNDS ESCROW AGREEMENT
                      ------------------------------------

PURCHASER                          PRINCIPAL NOTE AMOUNT
----------------------------------------------------------------------
LAURUS MASTER FUND, LTD.,          Term Note in an aggregate principal
c/o Ironshore Corporate Services    amount of $2,500,000
 Ltd., P.O. Box 1234 G.T.,
 Queensgate House, South Church
 Street, Grand Cayman, Cayman
 Islands
Fax: 345-949-9877
----------------------------------------------------------------------
TOTAL                                                      $2,500,000
----------------------------------------------------------------------

FUND MANAGER                       CLOSING PAYMENT
----------------------------------------------------------------------
LAURUS CAPITAL MANAGEMENT, L.L.C.  Closing payment payable in
825 Third Avenue, 14th Floor        connection with investment by
New York, New York 10022            Laurus Master Fund, Ltd. for which
Fax: 212-541-4434                   Laurus Capital Management, L.L.C.
                                    is the Manager.
----------------------------------------------------------------------
TOTAL                                                         $87,500
----------------------------------------------------------------------

WARRANTS

WARRANT RECIPIENT                     WARRANTS IN CONNECTION WITH
                                       OFFERING
------------------------------------------------------------------------
LAURUS MASTER FUND, LTD.              Term Note Warrant exercisable into
A Cayman Island corporation           681,818 shares of common stock of
c/o Ironshore Corporate Services Ltd. the Company issuable in connection
P.O. Box 1234 G.T.                    with the Term Note.
Queensgate House, South Church
 Street
Grand Cayman, Cayman Islands
Fax: 345-949-9877
-------------------------------------------------------------------------
TOTAL                                 Warrants exercisable into 681,818
                                       shares of common stock of the
                                       Company
-------------------------------------------------------------------------

                                       10

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