Document:

EXHIBIT A

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
HAVE  BEEN  REGISTERED  WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION  OR THE
SECURITIES   COMMISSION  OF  ANY  STATE  IN  RELIANCE  UPON  AN  EXEMPTION  FROM
REGISTRATION  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED  (THE  "SECURITIES
ACT"),  AND,  ACCORDINGLY,  MAY NOT BE OFFERED  OR SOLD  EXCEPT  PURSUANT  TO AN
EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR PURSUANT TO AN
AVAILABLE  EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE  REGISTRATION
REQUIREMENTS  OF THE  SECURITIES  ACT AND IN ACCORDANCE  WITH  APPLICABLE  STATE
SECURITIES  LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH  EFFECT,  THE  SUBSTANCE  OF WHICH SHALL BE  REASONABLY  ACCEPTABLE  TO THE
COMPANY.  THIS  SECURITY AND THE  SECURITIES  ISSUABLE  UPON  CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION  WITH A BONA FIDE MARGIN  ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

Original Issue Date: May 31, 2006
Original Conversion Price (subject to adjustment herein): $0.60

                                                                      $2,000,000

                       10% SENIOR SECURED CONVERTIBLE NOTE
                                DUE MAY 31, 2009

      THIS NOTE is one of a series of duly  authorized  and  issued  10%  Senior
Secured Convertible Notes of Liska Biometry, inc., a Florida corporation, having
a  principal  place  of  business  at 100 Main  Street,  Dover,  NH  03820  (the
"Company"),  designated as its 10% Senior Secured  Convertible Note, due May 31,
2009 (the "Note(s)").

      FOR VALUE  RECEIVED,  the Company  promises to pay to CAMOFI Master LDC or
its registered  assigns (the  "Holder"),  the principal sum of $2,000,000 on May
31,  2009 or such  earlier  date as the Notes are  required or  permitted  to be
repaid as provided  hereunder (the "Maturity Date"),  and to pay interest to the
Holder on the aggregate  unconverted and then  outstanding  principal  amount of
this Note in accordance with the provisions hereof.  This Note is subject to the
following additional provisions:

      Section 1. Definitions.  For the purposes hereof, in addition to the terms
defined  elsewhere in this Note:  (a)  capitalized  terms not otherwise  defined
herein have the meanings given to such terms in the Purchase Agreement,  and (b)
the following terms shall have the following meanings:

            "Alternate  Consideration"  shall  have  the  meaning  set  forth in
      Section 5(e)(iii).

            "AMEX" shall mean the American Stock Exchange LLC.

            "Business  Day"  means any day except  Saturday,  Sunday and any day
      which shall be a federal  legal  holiday in the United  States 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.

            "Change of Control  Transaction"  means the occurrence of any of (i)
      an  acquisition  after the date hereof by an individual or legal entity or
      "group" (as described in Rule 13d-5(b)(1)  promulgated  under the Exchange
      Act) of effective  control (whether through legal or beneficial  ownership
      of capital stock of the Company, by contract or otherwise) of in excess of
      33% of the voting securities of the Company,  or (ii) a replacement at one
      time or within a three year period of more than one-half of the members of
      the  Company's  board of directors  which is not approved by a majority of
      those  individuals  who are members of the board of  directors on the date
      hereof (or by those individuals who are serving as members of the board of
      directors  on any date  whose  nomination  to the board of  directors  was
      approved by a majority of the  members of the board of  directors  who are
      members on the date hereof),  or (iii) Christopher LeClerc or Charles Benz
      shall no longer be employed by the Company as Chief Executive Officer on a
      full time basis,  or (iv) the  execution by the Company of an agreement to
      which the Company is a party or by which it is bound, providing for any of
      the events set forth above in (i) or (ii).
<PAGE>

            "Common Stock" means the common stock,  no par value, of the Company
      and stock of any other  class into which such  shares may  hereafter  have
      been reclassified or changed.

            "Conversion  Date" shall have the meaning set forth in Section  4(a)
      hereof.

            "Conversion Price" shall have the meaning set forth in Section 4(b).

            "Conversion  Shares" means the shares of Common Stock  issuable upon
      conversion of Notes or as payment of interest in accordance with the terms
      hereof.

            "Effectiveness  Date" shall have the  meaning  given to such term in
      the Registration Rights Agreement.

            "Effectiveness  Period" shall have the meaning given to such term in
      the Registration Rights Agreement.

            "Equity  Conditions" shall mean, during the period in question,  (i)
      the  Company  shall have duly  honored  all  conversions  and  redemptions
      scheduled  to  occur or  occurring  by  virtue  of one or more  Notice  of
      Conversions,  if any, (ii) all liquidated  damages and other amounts owing
      in respect of the Notes shall have been paid;  (iii) there is an effective
      Registration  Statement  (or,  in the  case of the  shares  issuable  upon
      conversion of the Notes,  the Holder may resell such shares without regard
      to the volume  limitations under Rule 144(k)) pursuant to which the Holder
      is permitted  to utilize the  prospectus  thereunder  to resell all of the
      shares  issuable  pursuant to the  Transaction  Documents (and the Company
      believes,   in  good  faith,   that  such   effectiveness   will  continue
      uninterrupted  for the  foreseeable  future),  (iv)  the  Common  Stock is
      trading on the Trading Market and all of the shares  issuable  pursuant to
      the Transaction  Documents are listed for trading on a Trading Market (and
      the Company believes, in good faith, that trading of the Common Stock on a
      Trading Market will continue  uninterrupted  for the foreseeable  future),
      (v) there is a sufficient  number of authorized but unissued and otherwise
      unreserved  shares of Common  Stock for the  issuance of all of the shares
      issuable  pursuant  to the  Transaction  Documents,  (vi)  there  is  then
      existing no Event of Default or event  which,  with the passage of time or
      the giving of notice,  would constitute an Event of Default,  (vii) all of
      the shares issued or issuable  pursuant to the transaction  proposed would
      not violate the  limitations  set forth in Section 4(c),  (viii) no public
      announcement of a pending or proposed Fundamental  Transaction,  Change of
      Control  Transaction or acquisition  transaction has occurred that has not
      been  consummated  and (ix) the closing  price for the Common  Stock is at
      least 115% of the Conversion Price (as adjusted).

            "Event of Default" shall have the meaning set forth in Section 8.

                                    2 of 22
<PAGE>

            "Exchange  Act"  means  the  Securities  Exchange  Act of  1934,  as
      amended.

            "Fundamental  Transaction"  shall  have  the  meaning  set  forth in
      Section 5(e)(iii) hereof.

            "Interest Conversion Rate" means 85% of the volume-weighted  average
      closing price for the 10 Trading Days immediately  prior to the applicable
      Interest Payment Date.

            "Late Fees" shall have the meaning set forth in the second paragraph
      to this Note.

            "Mandatory  Prepayment  Amount" for any Notes shall equal the sum of
      (i) 125% of the principal amount of Notes to be prepaid,  plus all accrued
      and unpaid interest thereon, and (ii) all other amounts,  costs,  expenses
      and liquidated damages due in respect of such Notes.

            "Monthly  Conversion  Price"  shall  have the  meaning  set forth in
      Section 6(a) hereof.

            "Monthly  Redemption" shall mean the redemption of the Note pursuant
      to Section 6(a) hereof.

            "Monthly  Redemption Amount" shall mean, as to a Monthly Redemption,
      1/27th of the original principal amount in the aggregate.

            "Monthly  Redemption  Date" means the 1st of each month,  commencing
      February 2007 and ending upon the full redemption of this Note.

            "Original  Issue Date" shall mean the date of the first  issuance of
      the Notes regardless of the number of transfers of any Note and regardless
      of the number of instruments which may be issued to evidence such Note.

            "Person"  means  a  corporation,   an  association,  a  partnership,
      organization,  a  business,  an  individual,  a  government  or  political
      subdivision thereof or a governmental agency.

            "Purchase Agreement" means the Securities Purchase Agreement,  dated
      as of May 31,  2006,  to which the  Company  and the  original  Holder are
      parties,  as  amended,  modified  or  supplemented  from  time  to time in
      accordance with its terms.

            "Registration   Rights  Agreement"  means  the  Registration  Rights
      Agreement,  dated as of the date of the Purchase  Agreement,  to which the
      Company and the  original  Holder are  parties,  as  amended,  modified or
      supplemented from time to time in accordance with its terms.

            "Registration  Statement" means a registration statement meeting the
      requirements  set forth in the  Registration  Rights  Agreement,  covering
      among  other  things  the resale of the  Conversion  Shares and naming the
      Holder as a "selling stockholder" thereunder.

            "Securities  Act" means the Securities Act of 1933, as amended,  and
      the rules and regulations promulgated thereunder.

            "Sogedex" means Sogedex, a French corporation.

            "Special Adjustment Provisions" means (i) the closing of the Sogedex
      transaction  by the  Company,  (ii) the sale of equity  securities  by the
      Company  with  proceeds  of at  least $4  million  at an  effective  price
      (pre-split, etc.) of at least $0.60 per share, (iii) the closing bid price
      for the  Common  Stock on the 320th day from the  Original  Issue  Date is
      greater than the then  applicable  Conversion  Price and (iv) the VWAP for
      the twenty days immediately prior to the 320th day from the Original Issue
      Date is greater than the then applicable Conversion Price.

                                    3 of 22
<PAGE>

            "Subsidiary"  shall  have  the  meaning  given  to such  term in the
      Purchase Agreement.

            "Trading  Day" means a day on which the Common  Stock is traded on a
      Trading Market.

            "Trading  Market" means the following  markets or exchanges on which
      the Common  Stock is listed or quoted for trading on the date in question:
      the Nasdaq  SmallCap  Market,  the American Stock  Exchange,  the New York
      Stock Exchange, the Nasdaq National Market or the OTC Bulletin Board.

            "Transaction  Documents"  shall  have the  meaning  set forth in the
      Purchase Agreement.

            "Qualified  Equity  Offering"  means  an  equity  financing  for the
      account of the Company in which  shares of common  stock,  or  securities,
      directly or indirectly,  convertible  into or  exchangeable or exercisable
      for  shares of  common  stock  are  issued,  which  financing  results  in
      cumulative aggregate proceeds to the Company of at least $15 million.

            "VWAP" means, for any date, the price determined by the first of the
      following clauses that applies:  (a) if the Common Stock is then listed or
      quoted on a Trading Market, the daily volume weighted average price of the
      Common Stock for such date (or the nearest  preceding date) on the primary
      Trading  Market  on which  the  Common  Stock is then  listed or quoted as
      reported by  Bloomberg  Financial  L.P.  (based on a Trading Day from 9:30
      a.m. EST to 4:02 p.m.  Eastern  Time) using the VAP  function;  (b) if the
      Common  Stock is not then  listed or quoted on the  Trading  Market 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 (c) in all other
      cases, the fair market value of a share of Common Stock as determined by a
      nationally  recognized-independent  appraiser  selected  in good  faith by
      Holders  holding  a  majority  of  the  principal  amount  of  Notes  then
      outstanding.

      Section 2. Interest.

            a)  Payment  of  Interest  in Cash or Kind.  The  Company  shall pay
      interest to the Holder on the aggregate  unconverted and then  outstanding
      principal  amount  of this  Note at the  rate  of 10% per  annum,  payable
      monthly in  arrears  beginning  on the first such date after the  Original
      Issue Date,  on each  Conversion  Date (as to that  principal  amount then
      being  converted),  on the Maturity Date (except that, if any such date is
      not a Business Day, then such payment shall be due on the next  succeeding
      Business Day) and on each Monthly  Redemption  Date (as to that  principal
      amount then being redeemed) (each such date, an "Interest  Payment Date"),
      in cash or shares of Common Stock at the Interest  Conversion  Rate,  or a
      combination thereof; provided,  however, payment in shares of Common Stock
      may only  occur if during  the 10 Trading  Days  immediately  prior to the
      applicable  Interest  Payment Date all of the Equity  Conditions have been
      met,  the  payment in shares of Common  Stock  would not exceed 25% of the
      volume for any of the previous 10 Trading Days and the Company  shall have
      given the Holder notice in  accordance  with the notice  requirements  set
      forth below.

                                    4 of 22
<PAGE>

            b) Company's  Election to Pay Interest in Kind. Subject to the terms
      and conditions  herein,  the decision whether to pay interest hereunder in
      shares of Common Stock or cash shall be at the  discretion of the Company.
      Should the  Company  elect to pay  interest  in kind,  it shall be paid in
      registered  shares of Common  Stock  valued at 85% of the  volume-weighted
      average closing price for the 10 days prior to the interest  payment date.
      Not less than 10 Trading Days prior to each  Interest  Payment  Date,  the
      Company  shall  provide the Holder with written  notice of its election to
      pay  interest  hereunder  either in cash or shares  of Common  Stock  (the
      Company may  indicate in such notice that the  election  contained in such
      notice shall continue for later periods until revised).  Within 10 Trading
      Days prior to an Interest  Payment Date, the Company's  election  (whether
      specific to an Interest  Payment Date or continuous)  shall be irrevocable
      as  to  such  Interest  Payment  Date.   Subject  to  the   aforementioned
      conditions,  failure to timely provide such written notice shall be deemed
      an election by the Company to pay the  interest on such  Interest  Payment
      Date in cash.

            c) Interest Calculations.  Interest shall be calculated on the basis
      of a 360-day year and shall accrue daily  commencing on the Original Issue
      Date until payment in full of the principal sum, together with all accrued
      and unpaid interest and other amounts which may become due hereunder,  has
      been made.  Interest shall be compounded  monthly.  Payment of interest in
      shares of Common Stock shall otherwise occur pursuant to Section  4(d)(ii)
      and only for  purposes of the payment of interest in shares,  the Interest
      Payment Date shall be deemed the Conversion Date.  Interest shall cease to
      accrue with respect to any principal amount  converted,  provided that the
      Company in fact  delivers  the  Conversion  Shares  within the time period
      required by Section 4(d)(ii) and if not so delivered, interest will accrue
      until delivery of the Conversion  Shares.  Interest hereunder will be paid
      to the Person in whose name this Note is  registered on the records of the
      Company   regarding   registration  and  transfers  of  Notes  (the  "Note
      Register").  Except  as  otherwise  provided  herein,  if at any  time the
      Company pays interest  partially in cash and partially in shares of Common
      Stock,  then such payment shall be  distributed  ratably among the Holders
      based upon the principal amount of Notes held by each Holder.

            d) Late Fee.  All  overdue  accrued  and unpaid  interest to be paid
      hereunder  shall  entail a late fee at the rate of 20% per  annum (or such
      lower maximum amount of interest  permitted to be charged under applicable
      law) ("Late Fee") which will accrue daily,  from the date such interest is
      due hereunder  through and including the date of payment.  Notwithstanding
      anything to the contrary contained herein, if on any Interest Payment Date
      the Company has elected to pay interest in Common Stock and is not able to
      pay accrued  interest in the form of Common Stock because it does not then
      satisfy the  conditions  for payment in the form of Common Stock set forth
      above, then, the Company shall pay cash.

            e) Optional Prepayment.  The Company shall have the right to prepay,
      in  cash,  all or a  portion  of the  Notes  at any  time  at  115% of the
      principal  amount thereof plus accrued  interest to the date of repayment.
      The Company  shall give the Holder at least ten (10) day's  prior  written
      notice of its  intention  to prepay all or a portion  of the Note,  during
      which time the Holder  shall have the right to convert  any portion of the
      Note into Common Stock.

            f)  Mandatory  Repayment.  If the Company (i) engages in a Qualified
      Equity  Offering,  (ii)  shall  be  a  party  to  any  Change  of  Control
      Transaction  or  Fundamental  Transaction  or (iii) shall agree to sell or
      dispose any of its assets in one or more transactions (whether or not such
      sale would constitute a Change of Control  Transaction),  the Company will
      be required to repay, in cash, the aggregate principal amount of the Notes
      not converted to Common Stock at 115% of the principal  amount  thereof to
      such date of repayment.

                                    5 of 22
<PAGE>

      Section 3. Registration of Transfers and Exchanges.

            a) Different  Denominations.  This Note is exchangeable for an equal
      aggregate principal amount of Notes of different authorized  denominations
      as requested by the Holder  surrendering  the same. No service charge will
      be made for such registration of transfer or exchange.

            b) Investment Representations.  This Note has been issued subject to
      certain investment representations of the original Holder set forth in the
      Purchase  Agreement and may be transferred or exchanged only in compliance
      with the Purchase  Agreement and applicable  federal and state  securities
      laws and regulations.

            c)  Reliance  on Note  Register.  Prior  to due  presentment  to the
      Company  for  transfer  of this  Note,  the  Company  and any agent of the
      Company may treat the Person in whose name this Note is duly registered on
      the Note Register as the owner hereof for the purpose of receiving payment
      as herein provided and for all other purposes, whether or not this Note is
      overdue,  and  neither the Company nor any such agent shall be affected by
      notice to the contrary.

      Section 4. Conversion.

            a) Voluntary  Conversion.  At any time after the Original Issue Date
      until this Note is no longer  outstanding,  this Note shall be convertible
      into shares of Common  Stock at the option of the  Holder,  in whole or in
      part at any time and from  time to time  (subject  to the  limitations  on
      conversion  set forth in Section  4(c)  hereof).  The Holder  shall effect
      conversions  by delivering to the Company the form of Notice of Conversion
      attached hereto as Annex A (a "Notice of Conversion"),  specifying therein
      the  principal  amount of Notes to be converted and the date on which such
      conversion is to be effected (a "Conversion  Date"). If no Conversion Date
      is specified in a Notice of Conversion,  the Conversion  Date shall be the
      date that such  Notice of  Conversion  is  provided  hereunder.  To effect
      conversions  hereunder,  the Holder  shall not be required  to  physically
      surrender Notes to the Company unless the entire  principal amount of this
      Note plus all accrued and unpaid  interest  thereon has been so converted.
      Conversions  hereunder  shall have the effect of lowering the  outstanding
      principal  amount  of  this  Note in an  amount  equal  to the  applicable
      conversion.  The Holder and the Company shall maintain records showing the
      principal amount converted and the date of such  conversions.  The Company
      shall deliver any objection to any Notice of Conversion  within 3 Business
      Days  of  receipt  of  such  notice.  In  the  event  of  any  dispute  or
      discrepancy,   the  records  of  the  Holder  shall  be  controlling   and
      determinative  in the  absence  of  manifest  error.  The  Holder  and any
      assignee,  by  acceptance  of this Note,  acknowledge  and agree that,  by
      reason of the  provisions  of this  paragraph,  following  conversion of a
      portion of this Note, the unpaid and unconverted  principal amount of this
      Note may be less than the amount  stated on the face hereof.  However,  at
      the Company's request,  the Holder shall surrender the Note to the Company
      within five (5) Trading  Days  following  such  request so that a new Note
      reflecting the correct principal amount may be issued to Holder.

            b)  Conversion   Price.  The  conversion  price  in  effect  on  any
      Conversion Date (subject to adjustment herein) shall be equal to $0.60 per
      share.

                                    6 of 22
<PAGE>

            c) Conversion Limitations;  Holder's Restriction on Conversion.  The
      Company shall not effect any conversion of this Note, and the Holder shall
      not have the right to  convert  any  portion  of this  Note,  pursuant  to
      Section 4(a) or otherwise,  to the extent that after giving effect to such
      conversion,  the Holder  (together with the Holder's  affiliates),  as set
      forth on the applicable  Notice of Conversion,  would  beneficially own in
      excess of 4.99% of the  number of shares of the Common  Stock  outstanding
      immediately  after giving effect to such  conversion.  For purposes of the
      foregoing  sentence,  the  number of shares of Common  Stock  beneficially
      owned by the Holder and its affiliates  shall include the number of shares
      of Common  Stock  issuable  upon  conversion  of this Note with respect to
      which the  determination of such sentence is being made, but shall exclude
      the number of shares of Common  Stock  which  would be  issuable  upon (A)
      conversion   of  the   remaining,   nonconverted   portion  of  this  Note
      beneficially owned by the Holder or any of its affiliates and (B) exercise
      or  conversion of the  unexercised  or  nonconverted  portion of any other
      securities of the Company (including,  without limitation, any other Notes
      or the  Warrants)  subject  to a  limitation  on  conversion  or  exercise
      analogous to the limitation  contained  herein  beneficially  owned by the
      Holder or any of its  affiliates.  Except  as set  forth in the  preceding
      sentence, for purposes of this Section 4(c), beneficial ownership shall be
      calculated  in  accordance  with Section 13(d) of the Exchange Act. To the
      extent  that  the  limitation  contained  in  this  section  applies,  the
      determination  of whether this Note is  convertible  (in relation to other
      securities  owned by the  Holder)  and of which a portion  of this Note is
      convertible  shall be in the sole  discretion  of such  Holder.  To ensure
      compliance with this  restriction,  the Holder will be deemed to represent
      to the  Company  each time it  delivers a Notice of  Conversion  that such
      Notice of Conversion has not violated the  restrictions  set forth in this
      paragraph  and the Company  shall have no  obligation to verify or confirm
      the accuracy of such determination.  For purposes of this Section 4(c), in
      determining the number of outstanding  shares of Common Stock,  the Holder
      may rely on the number of outstanding  shares of Common Stock as reflected
      in (x) the Company's  most recent Form 10-QSB or Form 10-KSB,  as the case
      may be, (y) a more recent  public  announcement  by the Company or (z) any
      other notice by the Company or the Company's  Transfer Agent setting forth
      the number of shares of Common Stock outstanding. Upon the written or oral
      request of the Holder,  the Company  shall within two Trading Days confirm
      orally and in  writing to the Holder the number of shares of Common  Stock
      then outstanding.  In any case, the number of outstanding shares of Common
      Stock  shall be  determined  after  giving  effect  to the  conversion  or
      exercise of securities of the Company,  including this Note, by the Holder
      or its  affiliates  since the date as of which such number of  outstanding
      shares of Common Stock was reported.  The  provisions of this Section 4(c)
      may be waived by the Holder upon, at the election of the Holder,  not less
      than 61 days' prior  notice to the  Company,  and the  provisions  of this
      Section  4(c) shall  continue  to apply until such 61st day (or such later
      date, as  determined by the Holder,  as may be specified in such notice of
      waiver).

            d) Mechanics of Conversion

                  i.  Conversion  Shares  Issuable Upon  Conversion of Principal
            Amount.  The  number  of  shares of  Common  Stock  issuable  upon a
            conversion hereunder shall be determined by the quotient obtained by
            dividing  (x) the  outstanding  principal  amount of this Note to be
            converted by (y) the Conversion Price. i.

                  ii. Delivery of Certificate  Upon  Conversion.  Not later than
            three  Trading  Days after any  Conversion  Date,  the Company  will
            deliver to the Holder (A) a certificate or certificates representing
            the Conversion Shares which shall be free of restrictive legends and
            trading  restrictions  (other than those  required  by the  Purchase
            Agreement)  representing  the number of shares of Common Stock being
            acquired  upon the  conversion  of Notes  (including,  if so  timely
            elected by the  Company,  shares of Common  Stock  representing  the
            payment of accrued  interest)  and (B) a bank check in the amount of
            accrued  and unpaid  interest  (if the  Company is  required  to pay
            accrued  interest in cash).  The Company shall,  if available and if
            allowed under  applicable  securities  laws, use its best efforts to
            deliver any certificate or certificates  required to be delivered by
            the Company under this Section electronically through the Depository
            Trust  Corporation  or  another  established   clearing  corporation
            performing similar functions.

                                    7 of 22
<PAGE>

                  iii.  Failure to Deliver  Certificates.  If in the case of any
            Notice  of  Conversion  such  certificate  or  certificates  are not
            delivered  to or as directed by the  applicable  Holder by the third
            Trading Day after a Conversion Date, the Holder shall be entitled by
            written  notice to the  Company at any time on or before its receipt
            of such  certificate  or  certificates  thereafter,  to rescind such
            conversion,  in which event the Company shall immediately return the
            certificates representing the principal amount of Notes tendered for
            conversion.

                  iv. Obligation  Absolute;  Partial Liquidated  Damages. If the
            Company  fails  for  any  reason  to  deliver  to  the  Holder  such
            certificate  or  certificates  pursuant  to Section  4(d)(ii) by the
            third Trading Day after the  Conversion  Date, the Company shall pay
            to such Holder, in cash, as liquidated damages and not as a penalty,
            for each $1000 of principal amount being  converted,  $5 per Trading
            Day  (increasing  to $10 per Trading Day after 5 Trading  Days after
            such damages  begin to accrue) for each Trading Day after such third
            Trading Day until such  certificates  are  delivered.  The Company's
            obligations  to  issue  and  deliver  the  Conversion   Shares  upon
            conversion  of this Note in  accordance  with the terms  hereof  are
            absolute and  unconditional,  irrespective of any action or inaction
            by the  Holder to  enforce  the same,  any  waiver or  consent  with
            respect  to any  provision  hereof,  the  recovery  of any  judgment
            against any Person or any action to enforce the same, or any setoff,
            counterclaim,  recoupment,  limitation or termination, or any breach
            or  alleged  breach  by  the  Holder  or  any  other  Person  of any
            obligation to the Company or any  violation or alleged  violation of
            law by the Holder or any other person, and irrespective of any other
            circumstance  which might  otherwise  limit such  obligation  of the
            Company  to the  Holder  in  connection  with the  issuance  of such
            Conversion  Shares;  provided,  however,  such  delivery  shall  not
            operate as a waiver by the  Company of any such  action the  Company
            may have  against  the  Holder.  In the  event a Holder of this Note
            shall  elect  to  convert  any or all of the  outstanding  principal
            amount hereof,  the Company may not refuse  conversion  based on any
            claim that the Holder or any one  associated or affiliated  with the
            Holder of has been engaged in any violation of law, agreement or for
            any other reason,  unless,  an injunction  from a court,  on notice,
            restraining and or enjoining  conversion of all or part of this Note
            shall have been sought and obtained  and the Company  posts a surety
            bond for the  benefit  of the  Holder  in the  amount of 150% of the
            principal amount of this Note  outstanding,  which is subject to the
            injunction,  which bond shall remain in effect until the  completion
            of  arbitration/litigation  of the dispute and the proceeds of which
            shall be payable to such  Holder to the extent it obtains  judgment.
            In the absence of an  injunction  precluding  the same,  the Company
            shall  issue  Conversion  Shares  or, if  applicable,  cash,  upon a
            properly noticed  conversion.  Nothing herein shall limit a Holder's
            right to  pursue  actual  damages  or  declare  an Event of  Default
            pursuant  to Section 8 herein for the  Company's  failure to deliver
            Conversion Shares 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.  The  exercise  of any such
            rights  shall not  prohibit  the  Holders  from  seeking  to enforce
            damages  pursuant to any other  Section  hereof or under  applicable
            law.

                                    8 of 22
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                  v.  Compensation  for  Buy-In on  Failure  to  Timely  Deliver
            Certificates  Upon  Conversion.  In  addition  to any  other  rights
            available  to the  Holder,  if the  Company  fails for any reason to
            deliver to the Holder such  certificate or certificates  pursuant to
            Section 4(d)(ii) by the third Trading Day after the Conversion Date,
            and if after such third  Trading  Day the Holder is  required by its
            brokerage  firm  to  purchase  (in an  open  market  transaction  or
            otherwise) Common Stock to deliver in satisfaction of a sale by such
            Holder  of  the  Conversion  Shares  which  the  Holder  anticipated
            receiving upon such conversion (a "Buy-In"),  then the Company shall
            (A) pay in cash to the Holder (in addition to any remedies available
            to or elected by the  Holder)  the amount by which (x) the  Holder's
            total purchase price (including brokerage  commissions,  if any) for
            the Common  Stock so  purchased  exceeds  (y) the product of (1) the
            aggregate  number  of  shares  of  Common  Stock  that  such  Holder
            anticipated receiving from the conversion at issue multiplied by (2)
            the actual  sale  price of the Common  Stock at the time of the sale
            (including  brokerage  commissions,  if  any)  giving  rise  to such
            purchase  obligation  and (B) at the  option of the  Holder,  either
            reissue Notes in principal  amount equal to the principal  amount of
            the  attempted  conversion  or  deliver  to the Holder the number of
            shares of Common  Stock that would have been  issued had the Company
            timely  complied  with  its  delivery   requirements  under  Section
            4(d)(ii). 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 Notes with respect to which the actual sale
            price of the  Conversion  Shares at the time of the sale  (including
            brokerage  commissions,   if  any)  giving  rise  to  such  purchase
            obligation   was  a  total  of  $10,000  under  clause  (A)  of  the
            immediately preceding sentence, the Company shall be required to pay
            the Holder  $1,000.  The Holder  shall  provide the Company  written
            notice  indicating  the amounts  payable to the Holder in respect of
            the  Buy-In.   Notwithstanding  anything  contained  herein  to  the
            contrary,  if a Holder  requires  the  Company  to make  payment  in
            respect of a Buy-In for the failure to timely  deliver  certificates
            hereunder  and the  Company  timely pays in full such  payment,  the
            Company shall not be required to pay such Holder liquidated  damages
            under Section 4(d)(iv) in respect of the  certificates  resulting in
            such Buy-In.

                  vi.  Reservation  of  Shares  Issuable  Upon  Conversion.  The
            Company  covenants  that it  will  at all  times  reserve  and  keep
            available out of its authorized and unissued  shares of Common Stock
            solely for the purpose of issuance upon  conversion of the Notes and
            payment of interest on the Note, each as herein provided,  free from
            preemptive rights or any other actual contingent  purchase rights of
            persons other than the Holders,  not less than such number of shares
            of the Common Stock as shall (subject to any additional requirements
            of the  Company as to  reservation  of such  shares set forth in the
            Purchase Agreement) be issuable (taking into account the adjustments
            and   restrictions   of  Section  5)  upon  the  conversion  of  the
            outstanding  principal  amount of the Notes and  payment of interest
            hereunder.  The Company  covenants  that all shares of Common  Stock
            that shall be so issuable  shall,  upon  issue,  be duly and validly
            authorized,  issued  and  fully  paid,  nonassessable  and,  if  the
            Registration  Statement is then effective  under the Securities Act,
            registered  for public  sale in  accordance  with such  Registration
            Statement.

                  vii.  Fractional  Shares.  Upon  a  conversion  hereunder  the
            Company   shall  not  be  required   to  issue  stock   certificates
            representing  fractions  of shares of the Common  Stock,  but may if
            otherwise  permitted,  make a cash  payment  in respect of any final
            fraction of a share  based on the VWAP at such time.  If the Company
            elects not, or is unable,  to make such a cash  payment,  the Holder
            shall be  entitled to  receive,  in lieu of the final  fraction of a
            share, one whole share of Common Stock.

                                    9 of 22
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                  viii.  Transfer Taxes. The issuance of certificates for shares
            of the Common Stock on conversion of the Notes shall be made without
            charge to the Holders thereof for any  documentary  stamp or similar
            taxes that may be payable  in  respect of the issue or  delivery  of
            such certificate, provided that the Company shall not be required to
            pay any tax that may be payable in respect of any transfer  involved
            in the issuance and delivery of any such certificate upon conversion
            in a name other  than that of the Holder of such Notes so  converted
            and the  Company  shall not be  required  to issue or  deliver  such
            certificates  unless or until the person or persons  requesting  the
            issuance  thereof  shall have paid to the Company the amount of such
            tax or shall have  established  to the  satisfaction  of the Company
            that such tax has been paid.

            e)  Forced  Conversion.   Notwithstanding  anything  herein  to  the
      contrary,  if the  Company has  satisfied  all AMEX  listing  requirements
      (other than the equity  requirement) and to satisfy the equity requirement
      the Company is required by the AMEX to convert a portion of the Notes into
      equity,  the Holders  shall convert only that portion of the Notes (not to
      exceed 50% of the aggregate  principal amount  outstanding) into preferred
      stock of the Company (the terms of such preferred stock to be satisfactory
      to the Holders, but, in any event, the terms shall include the issuance of
      additional seven year warrants) that is necessary to satisfy the AMEX. All
      other AMEX listing requirements shall be satisfied by the Company prior to
      the Forced  Conversion.  The Company may not affect a Forced Conversion if
      such Forced  Conversion  would  result in the  Holder's  violation  of the
      ownership  limitations  set  forth in  Section  4(c)  hereof.  Any  Forced
      Conversion  shall be applied ratably to all Holders based on their initial
      purchases of Notes pursuant to the Purchase Agreement.

      Section 5. Certain Adjustments.

            a) Stock  Dividends  and Stock Splits.  If the Company,  at any time
      while the  Notes  are  outstanding:  (A)  shall  pay a stock  dividend  or
      otherwise make a  distribution  or  distributions  on shares of its Common
      Stock or any other  equity  or equity  equivalent  securities  payable  in
      shares of Common Stock (which,  for avoidance of doubt,  shall not include
      any shares of Common  Stock  issued by the Company  pursuant to this Note,
      including as interest thereon), (B) subdivide outstanding shares of Common
      Stock into a larger  number of shares,  (C) combine  (including  by way of
      reverse  stock  split)  outstanding  shares of Common Stock into a smaller
      number of shares, or (D) issue by reclassification of shares of the Common
      Stock any  shares of capital  stock of the  Company,  then the  Conversion
      Price shall be multiplied  by a fraction of which the  numerator  shall be
      the number of shares of Common Stock (excluding  treasury shares,  if any)
      outstanding  before such event and of which the  denominator  shall be the
      number of shares  of  Common  Stock  outstanding  after  such  event.  Any
      adjustment   made  pursuant  to  this  Section   shall  become   effective
      immediately  after the record date for the  determination  of stockholders
      entitled  to  receive  such  dividend  or  distribution  and shall  become
      effective   immediately  after  the  effective  date  in  the  case  of  a
      subdivision, combination or re-classification.

                                    10 of 22
<PAGE>

            b)  Subsequent  Equity  Sales.  If the  Company  or  any  Subsidiary
      thereof,  as applicable,  at any time while this Note is  outstanding  and
      after June 30, 2006  (provided  that such  equity  sales prior to June 30,
      2006 are at then current  market  prices),  shall offer,  sell,  grant any
      option to  purchase  or offer,  sell or grant  any  right to  reprice  its
      securities, or otherwise dispose of or issue (or announce any offer, sale,
      grant or any option to purchase or other  disposition) any Common Stock or
      Common Stock Equivalents  entitling any Person to acquire shares of Common
      Stock, at an effective price per share less than the then Conversion Price
      (such lower price, the "Base Share Price" and such issuances collectively,
      a "Dilutive Issuance"), as adjusted hereunder (if the holder of the Common
      Stock or Common Stock Equivalents so issued shall at any time,  whether by
      operation  of  purchase  price  adjustments,  reset  provisions,  floating
      conversion,  exercise or exchange prices or otherwise, or due to warrants,
      options  or rights  per share  which is  issued  in  connection  with such
      issuance,  be entitled to receive  shares of Common  Stock at an effective
      price per share which is less than the  Conversion  Price,  such  issuance
      shall be deemed to have  occurred  for less  than the  Conversion  Price),
      then, the Conversion  Price shall be reduced to equal the Base Share Price
      and the number of Conversion Shares issuable hereunder shall be increased.
      Such  adjustment  shall be made whenever such Common Stock or Common Stock
      Equivalents are issued. The Company shall notify the Holder in writing, no
      later than the Trading Day  following  the issuance of any Common Stock or
      Common Stock Equivalents  subject to this section,  indicating therein the
      applicable  issuance price, or of applicable reset price,  exchange price,
      conversion  price and other  pricing  terms  (such  notice  the  "Dilutive
      Issuance  Notice").  For  purposes  of  clarification,  whether or not the
      Company provides a Dilutive Issuance Notice pursuant to this Section 3(b),
      upon the  occurrence  of any  Dilutive  Issuance,  after  the date of such
      Dilutive Issuance the Holder is entitled to receive a number of Conversion
      Shares  based upon the Base Share Price  regardless  of whether the Holder
      accurately refers to the Base Share Price in the Notice of Conversion.

            c) Pro Rata  Distributions.  If the Company, at any time while Notes
      are outstanding,  shall distribute to all holders of Common Stock (and not
      to Holders)  evidences of its indebtedness or assets or rights or warrants
      to  subscribe  for or purchase  any  security,  then in each such case the
      Conversion  Price shall be determined by multiplying such Conversion Price
      in effect  immediately prior to the record date fixed for determination of
      stockholders  entitled to receive such distribution by a fraction of which
      the  denominator  shall  be the  VWAP  determined  as of the  record  date
      mentioned  above,  and of which the  numerator  shall be such VWAP on such
      record  date less the then fair  market  value at such  record date of the
      portion  of  such  assets  or  evidence  of  indebtedness  so  distributed
      applicable to one  outstanding  share of the Common Stock as determined by
      the Board of Directors in good faith. In either case the adjustments shall
      be  described  in a  statement  provided  to the Holders of the portion of
      assets or evidences of  indebtedness  so distributed or such  subscription
      rights  applicable to one share of Common Stock.  Such adjustment shall be
      made  whenever any such  distribution  is made and shall become  effective
      immediately after the record date mentioned above.

            d) Other Adjustments. In addition to the other adjustments set forth
      in this  Section 5, in the event that the Company  fails to satisfy all of
      the Special Adjustment Provisions on or before the 320th day following the
      Closing Date (or the next Business Day if such 320th day is not a Business
      Day), on such 320th day the  Conversion  Price shall be reset to the lower
      of: (i) the initial  Conversion  Price;  (ii) the closing bid price of the
      Common Stock on the 320th day;  and (iii) the VWAP for the twenty  Trading
      Days immediately prior to the 320th day. The Company acknowledges that any
      reset of the Conversion  Price of the Note in accordance this Section 5(d)
      may  cause  a  reset  of  other  Notes  issued  pursuant  to the  Purchase
      Agreement.

            e) Calculations. All calculations under this Section 5 shall be made
      to the nearest cent or the nearest 1/100th of a share, as the case may be.
      The number of shares of Common Stock  outstanding  at any given time shall
      not includes shares of Common Stock owned or held by or for the account of
      the Company,  and the description of any such shares of Common Stock shall
      be  considered  on issue or sale of Common  Stock.  For  purposes  of this
      Section  5, the number of shares of Common  Stock  deemed to be issued and
      outstanding as of a given date shall be the sum of the number of shares of
      Common Stock (excluding treasury shares, if any) issued and outstanding.

                                    11 of 22
<PAGE>

            f) Notice to Holders.

                  i.  Adjustment to Conversion  Price.  Whenever the  Conversion
            Price is  adjusted  pursuant  to any of this  Section 5, the Company
            shall  promptly  mail to each  Holder a  notice  setting  forth  the
            Conversion  Price after such  adjustment  and setting  forth a brief
            statement of the facts  requiring  such  adjustment.  If the Company
            issues a variable rate security,  despite the prohibition thereon in
            the Purchase  Agreement,  the Company shall be deemed to have issued
            Common  Stock or Common  Stock  Equivalents  at the lowest  possible
            conversion  or  exercise  price  at  which  such  securities  may be
            converted or exercised  in the case of a Variable  Rate  Transaction
            (as  defined in the  Purchase  Agreement),  or the  lowest  possible
            adjustment  price in the case of an MFN  Transaction  (as defined in
            the Purchase Agreement).

                  ii. Notice to Allow  Conversion by Holder.  If (A) the Company
            shall declare a dividend (or any other  distribution)  on the Common
            Stock;  (B) the Company  shall declare a special  nonrecurring  cash
            dividend on or a  redemption  of the Common  Stock;  (C) the Company
            shall  authorize  the  granting to all  holders of the Common  Stock
            rights or  warrants  to  subscribe  for or  purchase  any  shares of
            capital stock of any class or of any rights; (D) the approval of any
            stockholders of the Company shall be required in connection with any
            reclassification of the Common Stock, any consolidation or merger to
            which  the  Company  is a  party,  any  sale or  transfer  of all or
            substantially  all of the assets of the Company,  of any  compulsory
            share  exchange  whereby the Common  Stock is  converted  into other
            securities,  cash or property;  (E) the Company shall  authorize the
            voluntary or involuntary  dissolution,  liquidation or winding up of
            the affairs of the Company;  then,  in each case,  the Company shall
            cause  to be filed  at each  office  or  agency  maintained  for the
            purpose of conversion of the Notes,  and shall cause to be mailed to
            the Holders at their last  addresses  as they shall  appear upon the
            stock books of the Company,  at least 20 calendar  days prior to the
            applicable record or effective date hereinafter  specified, a notice
            stating  (x) the  date on  which a  record  is to be  taken  for the
            purpose  of  such  dividend,  distribution,  redemption,  rights  or
            warrants,  or if a record is not to be  taken,  the date as of which
            the  holders of the Common  Stock of record to be  entitled  to such
            dividend,  distributions,  redemption,  rights or warrants are to be
            determined   or  (y)  the  date  on  which  such   reclassification,
            consolidation,  merger, sale, transfer or share exchange is expected
            to  become  effective  or  close,  and the  date as of  which  it is
            expected  that  holders  of the  Common  Stock  of  record  shall be
            entitled  to  exchange   their   shares  of  the  Common  Stock  for
            securities,   cash  or  other   property   deliverable   upon   such
            reclassification,  consolidation,  merger,  sale,  transfer or share
            exchange;  provided,  that the  failure  to mail such  notice or any
            defect  therein  or in the  mailing  thereof  shall not  affect  the
            validity of the  corporate  action  required to be specified in such
            notice.  Holders  are  entitled to convert  Notes  during the 20-day
            period  commencing  the date of such notice to the effective date of
            the event triggering such notice.

                                    12 of 22
<PAGE>

                  iii. Fundamental Transaction.  If, at any time while this Note
            is outstanding,  (A) the Company effects any merger or consolidation
            of the Company with or into another Person,  (B) the Company effects
            any  sale  of all or  substantially  all of its  assets  in one or a
            series of related  transactions,  (C) any tender  offer or  exchange
            offer  (whether  by the  Company  or another  Person)  is  completed
            pursuant to which holders of Common Stock are permitted to tender or
            exchange their shares for other securities, cash or property, or (D)
            the Company effects any  reclassification of the Common Stock or any
            compulsory  share  exchange  pursuant  to which the Common  Stock is
            effectively  converted into or exchanged for other securities,  cash
            or property (in any such case, a  "Fundamental  Transaction"),  then
            upon any  subsequent  conversion of this Note, the Holder shall have
            the right to receive, for each Conversion Share that would have been
            issuable upon such conversion  absent such Fundamental  Transaction,
            the same kind and amount of securities, cash or property as it would
            have  been   entitled  to  receive  upon  the   occurrence  of  such
            Fundamental  Transaction if it had been,  immediately  prior to such
            Fundamental  Transaction,  the  holder of one share of Common  Stock
            (the   "Alternate   Consideration").   For   purposes  of  any  such
            conversion,  the  determination  of the  Conversion  Price  shall be
            appropriately  adjusted  to  apply to such  Alternate  Consideration
            based on the amount of Alternate  Consideration  issuable in respect
            of one share of Common Stock in such  Fundamental  Transaction,  and
            the Company shall apportion the Conversion Price among the Alternate
            Consideration in a reasonable  manner  reflecting the relative value
            of any  different  components  of the  Alternate  Consideration.  If
            holders of Common  Stock are given any choice as to the  securities,
            cash or property to be received in a Fundamental  Transaction,  then
            the  Holder  shall be  given  the same  choice  as to the  Alternate
            Consideration it receives upon any conversion of this Note following
            such Fundamental Transaction.  To the extent necessary to effectuate
            the foregoing provisions,  any successor to the Company or surviving
            entity in such Fundamental  Transaction  shall issue to the Holder a
            new note consistent with the foregoing provisions and evidencing the
            Holder's  right to convert such note into  Alternate  Consideration.
            The  terms  of  any  agreement   pursuant  to  which  a  Fundamental
            Transaction  is effected  shall  include  terms  requiring  any such
            successor or surviving  entity to comply with the provisions of this
            paragraph (c) and insuring  that this Note (or any such  replacement
            security) will be similarly adjusted upon any subsequent transaction
            analogous to a Fundamental Transaction.

                  iv.  Exempt  Issuance.   Notwithstanding  the  foregoing,   no
            adjustment will be made under this Section 5 in respect of an Exempt
            Issuance.

      Section 6. Monthly Redemption

            a) Monthly  Redemption.  Beginning  February  2007,  on each Monthly
      Redemption Date the Company shall redeem the Holder's  Monthly  Redemption
      Amount plus accrued but unpaid interest, the sum of all liquidated damages
      and any other  amounts  then owing to such  Holder in respect of the Note.
      The Monthly Redemption Amount due on each Monthly Redemption Date shall be
      paid in cash; provided,  however, as to any Monthly Redemption and upon 10
      Trading  Days'  prior  written  irrevocable  notice,  in  lieu  of a  cash
      redemption  payment,  the  Company  may  elect  to pay  100% of a  Monthly
      Redemption in Conversion  Shares based on a conversion  price equal to 85%
      of the  average  of the 10  consecutive  VWAPs  immediately  prior  to the
      applicable  Monthly  Redemption  Date (subject to adjustment for any stock
      dividend,  stock split, stock combination or other similar event affecting
      the  Common  Stock  during  such 10  Trading  Day  period)  (the  "Monthly
      Conversion Price");  provided,  however,  that the Company may not pay the
      Monthly  Redemption  Amount in Conversion  Shares  unless,  on the Monthly
      Redemption Date and during the 20 Trading Day period  immediately prior to
      the Monthly Redemption Date, the Equity Conditions have been satisfied and
      the  payment in shares of Common  Stock would not exceed 25% of the volume
      for any of the previous 10 Trading Days. The Holder may convert,  pursuant
      to Section  4(a),  any  principal  amount of the Note subject to a Monthly
      Redemption  at any  time  prior to the date  that the  Monthly  Redemption
      Amount  and all  amounts  owing  thereon  are due and  paid in  full.  Any
      principal amount of Note converted during any 20 day period until the date
      the  Monthly  Redemption  Amount  is paid  shall be first  applied  to the
      principal amount subject to the Monthly  Redemption and such Holder's cash
      payment of the Monthly  Redemption Amount on such Monthly  Redemption Date
      shall be  reduced  accordingly,  and any  remaining  principal  amount  so
      converted  shall be applied  against the next  principal  scheduled  to be
      repaid.  The Company covenants and agrees that it will honor all Notice of
      Conversions tendered up until such amounts are paid in full. The Company's
      determination  to pay a  Monthly  Redemption  in cash or  shares of Common
      Stock  shall be applied  ratably  to all  Holders  based on their  initial
      purchases  of Notes  pursuant to the Purchase  Agreement.  Anything to the
      contrary notwithstanding, if the Company pays a Monthly Redemption in cash
      (whether by election or inability to satisfy the  conditions  necessary to
      pay in Conversion  Shares),  such Monthly Redemption shall be made at 102%
      of the amount due.

                                    13 of 22
<PAGE>

            b)  Redemption  Procedure.  The payment of cash  and/or  issuance of
      Common Stock, as the case may be, pursuant to a Monthly  Redemption  shall
      be made on the Monthly Redemption Date. If any portion of the cash payment
      for a  Monthly  Redemption  shall  not  be  paid  by  the  Company  by the
      respective due date,  interest shall accrue thereon at the rate of 18% per
      annum (or the maximum rate permitted by applicable law, whichever is less)
      until the payment of the Monthly Redemption Amount, plus all amounts owing
      thereon is paid in full.  Alternatively,  if any  portion  of the  Monthly
      Redemption  Amount remains unpaid after such date, the Holders  subject to
      such  redemption may elect,  by written notice to the Company given at any
      time thereafter, to invalidate ab initio such redemption,  notwithstanding
      anything herein contained to the contrary.

      Section  7.  Negative  Covenants.  So long as any  portion of this Note is
outstanding, the Company will not and will not permit any of its Subsidiaries to
directly or indirectly:

            a) enter  into,  create,  incur,  assume  or  suffer  to  exist  any
      indebtedness  or  liens  of any  kind,  on or with  respect  to any of its
      property or assets now owned or hereafter acquired or any interest therein
      or any income or profits  therefrom that is senior to,  subordinated to or
      pari passu with,  in any  respect,  the  Company's  obligations  under the
      Notes;

            b) amend its certificate of incorporation,  bylaws or to her charter
      documents so as to adversely affect any rights of the Holder;

            c) repay, repurchase or offer to repay, repurchase, make any payment
      in respect of or  otherwise  acquire  any of its Common  Stock,  Preferred
      Stock, or other equity  securities other than as to the Conversion  Shares
      to the extent permitted or required under the Transaction  Documents or as
      otherwise permitted by the Transaction Documents;

            d) engage in any transactions with any officer,  director,  employee
      or any  affiliate of the Company,  including  any  contract,  agreement or
      other  arrangement  providing  for the  furnishing  of  services to or by,
      providing for rental of real or personal property to or from, or otherwise
      requiring  payments to or from any officer,  director or such employee or,
      to the  knowledge  of the  Company,  any  entity  in  which  any  officer,
      director,  or  any  such  employee  has a  substantial  interest  or is an
      officer,  director,  trustee or partner, in each case in excess of $10,000
      other  than (i) for  payment  of salary or  consulting  fees for  services
      rendered,  (ii)  reimbursement  for  expenses  incurred  on  behalf of the
      Company and (iii) for other  employee  benefits,  including  stock  option
      agreements under any stock option plan of the Company; or

            e) create or acquire any Subsidiary after the date hereof unless (i)
      such Subsidiary is a wholly-owned  Subsidiary of the Company and (ii) such
      Subsidiary  becomes  party to the Security  Agreement  and the  Subsidiary
      Guaranty  (either by executing a  counterpart  thereof or an assumption or
      joinder  agreement in respect  thereof) and, to the extent required by the
      Purchaser,  satisfied each condition of this Agreement and the Transaction
      Documents as if such Subsidiary were a Subsidiary on the Closing Date;

                                    14 of 22
<PAGE>

            f)  enter  into  any  agreement  with any  holder  of the  Company's
      securities without the prior written consent of the Holder;

            g) authorize or approve any reverse stock split of the Common Stock;
      or

            h) enter into any agreement with respect to any of the foregoing.

      Section 8. Events of Default.

            a) "Event of Default",  wherever  used herein,  means any one of the
      following events (whatever the reason and whether it shall be voluntary or
      involuntary  or effected by operation of law or pursuant to any  judgment,
      decree or order of any court,  or any  order,  rule or  regulation  of any
      administrative or governmental body):

                  i. any default in the payment of (A) the  principal  of amount
            of any Note, or (B) interest (including Late Fees) on, or liquidated
            damages in respect  of, any Note,  in each case free of any claim of
            subordination,  as and when the same shall  become  due and  payable
            (whether  on  a  Conversion   Date  or  the  Maturity   Date  or  by
            acceleration or otherwise)  which default,  solely in the case of an
            interest  payment or other  default  under clause (B) above,  is not
            cured, within 3 Trading Days;

                  ii. the  Company  shall  fail to observe or perform  any other
            covenant  or  agreement  contained  in this Note or any of the other
            Transaction  Documents  (other  than a breach by the  Company of its
            obligations  to deliver  shares of Common  Stock to the Holder  upon
            conversion  which  breach is  addressed in clause (xii) below) which
            failure is not cured,  if  possible  to cure,  within the earlier to
            occur of (A) 5 Trading Days after notice of such default sent by the
            Holder or by any other  Holder  and (B) 10  Trading  Days  after the
            Company shall become or should have become aware of such failure;

                  iii. a default or event of  default  (subject  to any grace or
            cure period  provided for in the applicable  agreement,  document or
            instrument)  shall occur under (A) any of the Transaction  Documents
            other than the Notes,  or (B) any other material  agreement,  lease,
            document or  instrument  to which the Company or any  Subsidiary  is
            bound,  which default,  solely in the case of a default under clause
            (B) above, is not cured, within 10 Trading Days;

                  iv. any  representation  or warranty made herein, in any other
            Transaction  Document,  in any written statement  pursuant hereto or
            thereto, or in any other report,  financial statement or certificate
            made or  delivered  to the Holder or any other holder of Notes shall
            be untrue or incorrect  in any material  respect as of the date when
            made or deemed made;

                  v. (i) the Company or any of its Subsidiaries  shall commence,
            or  there  shall  be  commenced  against  the  Company  or any  such
            Subsidiary,  a case under any  applicable  bankruptcy  or insolvency
            laws as now or hereafter in effect or any successor thereto,  or the
            Company or any Subsidiary  commences any other  proceeding under any
            reorganization,  arrangement, adjustment of debt, relief of debtors,
            dissolution,  insolvency  or  liquidation  or  similar  law  of  any
            jurisdiction  whether  now or  hereafter  in effect  relating to the
            Company or any Subsidiary thereof or (ii) there is commenced against
            the  Company  or  any  Subsidiary   thereof  any  such   bankruptcy,
            insolvency  or other  proceeding  which  remains  undismissed  for a
            period of 60 days; or (iii) the Company or any Subsidiary thereof is
            adjudicated  by a  court  of  competent  jurisdiction  insolvent  or
            bankrupt;  or any order of relief or other order  approving any such
            case or proceeding is entered; or (iv) the Company or any Subsidiary
            thereof  suffers any appointment of any custodian or the like for it
            or any substantial part of its property which continues undischarged
            or  unstayed  for a period  of 60 days;  or (v) the  Company  or any
            Subsidiary  thereof  makes a general  assignment  for the benefit of
            creditors;  or (vi) the  Company  shall fail to pay,  or shall state
            that it is  unable  to pay,  or shall be  unable  to pay,  its debts
            generally as they become due; or (vii) the Company or any Subsidiary
            thereof  shall  call a  meeting  of  its  creditors  with a view  to
            arranging a composition,  adjustment or  restructuring of its debts;
            or (viii) the Company or any Subsidiary  thereof shall by any act or
            failure to act  expressly  indicate  its consent to,  approval of or
            acquiescence in any of the foregoing; or (ix) any corporate or other
            action is taken by the  Company or any  Subsidiary  thereof  for the
            purpose of effecting any of the foregoing;

                                    15 of 22
<PAGE>

                  vi. the Company or any Subsidiary  shall default in any of its
            obligations under any mortgage,  credit agreement or other facility,
            indenture  agreement,  factoring agreement or other instrument under
            which  there may be  issued,  or by which  there may be  secured  or
            evidenced any indebtedness for borrowed money or money due under any
            long term  leasing or  factoring  arrangement  of the  Company in an
            amount exceeding  $50,000,  whether such  indebtedness now exists or
            shall  hereafter  be created and such  default  shall result in such
            indebtedness becoming or being declared due and payable prior to the
            date on which it would otherwise become due and payable;

                  vii. the Common  Stock shall not be eligible for  quotation on
            or quoted  for  trading  on a Trading  Market and shall not again be
            eligible  for and quoted or listed for trading  thereon  within five
            Trading Days;

                  viii.  the Company shall redeem or  repurchase  more than a de
            minimis  number of its  outstanding  shares of Common Stock or other
            equity   securities  of  the  Company  (other  than  redemptions  of
            Conversion Shares and repurchases of shares of Common Stock or other
            equity  securities  of  departing  officers  and  directors  of  the
            Company;  provided such repurchases shall not exceed $50,000, in the
            aggregate,  for all officers and  directors  during the term of this
            Note);

                  ix. a  Registration  Statement  shall not have  been  declared
            effective by the  Commission  on or prior to the 210th  calendar day
            after the Closing Date;

                  x. if,  during the  Effectiveness  Period  (as  defined in the
            Registration   Rights   Agreement),   the   effectiveness   of   the
            Registration Statement lapses for any reason or the Holder shall not
            be permitted  to resell  Registrable  Securities  (as defined in the
            Registration Rights Agreement) under the Registration  Statement, in
            either  case,  for  more  than  10  consecutive  Trading  Days or 15
            non-consecutive  Trading Days during any 12 month period;  provided,
            however, that in the event that the Company is negotiating a merger,
            consolidation,  acquisition or sale of all or  substantially  all of
            its assets or a similar  transaction  and in the written  opinion of
            counsel  to  the  Company,  the  Registration  Statement,  would  be
            required  to be  amended  to  include  information  concerning  such
            transactions or the parties thereto that is not available or may not
            be publicly disclosed at the time, the Company shall be permitted an
            additional  10  consecutive  Trading  during  any  12  month  period
            relating to such an event;

                                    16 of 22
<PAGE>

                  xi. an Event (as defined in the Registration Rights Agreement)
            shall not have been cured to the satisfaction of the Holder prior to
            the expiration of thirty days from the Event Date (as defined in the
            Registration Rights Agreement) relating thereto (other than an Event
            resulting from a failure of an Registration Statement to be declared
            effective by the  Commission on or prior to the  Effectiveness  Date
            (as defined in the Registration  Rights  Agreement),  which shall be
            covered by Section 8(a)(ix);

                  xii.  the  Company  shall  fail  for  any  reason  to  deliver
            certificates  to a Holder  prior to the  fifth  Trading  Day after a
            Conversion  Date pursuant to and in accordance  with Section 4(d) or
            the Company shall provide notice to the Holder,  including by way of
            public  announcement,  at any time,  of its  intention not to comply
            with requests for  conversions  of any Notes in accordance  with the
            terms hereof; or

                  xiii. the Company shall fail for any reason to pay in full the
            amount of cash due pursuant to a Buy-In  within 5 Trading Days after
            notice  therefor  is  delivered  hereunder  or shall fail to pay all
            amounts  owed on account of an Event of Default  within five days of
            the date due. i.

            b) Remedies Upon Event of Default.  If any Event of Default  occurs,
      the full principal  amount of this Note,  together with interest and other
      amounts  owing  in  respect  thereof,  to the date of  acceleration  shall
      become, at the Holder's election, immediately due and payable in cash. The
      aggregate  amount  payable upon an Event of Default  shall be equal to the
      Mandatory Prepayment Amount. Commencing 5 days after the occurrence of any
      Event of Default that results in the eventual  acceleration  of this Note,
      the interest  rate on this Note shall accrue at the rate of 18% per annum,
      or such lower  maximum  amount of interest  permitted to be charged  under
      applicable law. All Notes for which the full Mandatory  Prepayment  Amount
      hereunder  shall have been paid in accordance  herewith  shall promptly be
      surrendered to or as directed by the Company.  The Holder need not provide
      and the Company hereby waives any  presentment,  demand,  protest or other
      notice of any kind, and the Holder may immediately and without  expiration
      of any  grace  period  enforce  any and  all of its  rights  and  remedies
      hereunder and all other  remedies  available to it under  applicable  law.
      Such declaration may be rescinded and annulled by Holder at any time prior
      to payment hereunder and the Holder shall have all rights as a Note holder
      until such time, if any, as the full payment under this Section shall have
      been  received by it. No such  rescission  or  annulment  shall affect any
      subsequent Event of Default or impair any right consequent thereon.

      Section 9. Miscellaneous.

            a)  Notices.   Any  and  all  notices  or  other  communications  or
      deliveries  to be provided by the Holders  hereunder,  including,  without
      limitation,  any Notice of  Conversion,  shall be in writing and delivered
      personally,  by  facsimile,  sent  by a  nationally  recognized  overnight
      courier service, addressed to the Company, at the address set forth above,
      facsimile number 603-742-0005,  Attn: Christopher LeClerc, Chief Executive
      Officer,  or such other  address or  facsimile  number as the  Company may
      specify for such purposes by notice to the Holders delivered in accordance
      with  this  Section.  Any and  all  notices  or  other  communications  or
      deliveries to be provided by the Company hereunder shall be in writing and
      delivered  personally,  by  facsimile,  sent  by a  nationally  recognized
      overnight  courier  service  addressed  to each  Holder  at the  facsimile
      telephone  number or address of such Holder  appearing on the books of the
      Company,  or if no such facsimile  telephone number or address appears, at
      the  principal  place of  business  of the  Holder.  Any  notice  or other
      communication or deliveries  hereunder shall be deemed given and effective
      on the  earliest  of (i) the  date of  transmission,  if  such  notice  or
      communication is delivered via facsimile at the facsimile telephone number
      specified in this Section  prior to 5:30 p.m.  (New York City time),  (ii)
      the date after the date of  transmission,  if such notice or communication
      is delivered via facsimile at the facsimile  telephone number specified in
      this  Section  later  than 5:30 p.m.  (New York City time) on any date and
      earlier  than  11:59 p.m.  (New York City  time) on such  date,  (iii) the
      second  Business Day following the date of mailing,  if sent by nationally
      recognized  overnight courier service,  or (iv) upon actual receipt by the
      party to whom such notice is required to be given.

                                    17 of 22
<PAGE>

            b) Absolute  Obligation.  Except as expressly  provided  herein,  no
      provision  of this  Note  shall  alter or  impair  the  obligation  of the
      Company,  which is absolute and  unconditional,  to pay the  principal of,
      interest and liquidated damages (if any) on, this Note at the time, place,
      and rate, and in the coin or currency,  herein prescribed.  This Note is a
      direct debt obligation of the Company. This Note ranks pari passu with all
      other Notes now or hereafter issued under the terms set forth herein

            c) Lost or Mutilated  Note. If this Note shall be  mutilated,  lost,
      stolen or destroyed,  the Company  shall execute and deliver,  in exchange
      and substitution for and upon cancellation of a mutilated Note, or in lieu
      of or in substitution for a lost, stolen or destroyed Note, a new Note for
      the principal amount of this Note so mutilated,  lost, stolen or destroyed
      but only upon receipt of evidence of such loss,  theft or  destruction  of
      such Note, and of the ownership hereof, and indemnity,  if requested,  all
      reasonably satisfactory to the Company.

            d) Security  Interest.  This Note is a direct debt obligation of the
      Company  and,  pursuant to the  Security  Agreement  is secured by a first
      priority  perfected  security interest in all of the assets of the Company
      for the benefit of the Holders.

            e)  Governing  Law.  All  questions   concerning  the  construction,
      validity, enforcement and interpretation of this Note shall be governed by
      and  construed  and enforced in  accordance  with the internal laws of the
      State of New York,  without  regard to the  principles of conflicts of law
      thereof.  Each party  agrees  that all legal  proceedings  concerning  the
      interpretations,  enforcement and defense of the transactions contemplated
      by any of the  Transaction  Documents  (whether  brought  against  a party
      hereto or its respective affiliates,  directors,  officers,  shareholders,
      employees or agents)  shall be  commenced in the state and federal  courts
      sitting  in the City of New  York,  Borough  of  Manhattan  (the "New York
      Courts").  Each party hereto hereby  irrevocably  submits to the exclusive
      jurisdiction  of the New York Courts for the  adjudication  of any dispute
      hereunder or in connection  herewith or with any transaction  contemplated
      hereby or discussed  herein  (including with respect to the enforcement of
      any of the Transaction  Documents),  and hereby  irrevocably  waives,  and
      agrees not to assert in any suit, action or proceeding,  any claim that it
      is not personally  subject to the  jurisdiction of any such court, or such
      New York Courts are improper or  inconvenient  venue for such  proceeding.
      Each party  hereby  irrevocably  waives  personal  service of process  and
      consents to process being served in any such suit, action or proceeding by
      mailing a copy  thereof via  registered  or  certified  mail or  overnight
      delivery  (with  evidence  of  delivery)  to such party at the  address in
      effect for  notices to it under  this Note and  agrees  that such  service
      shall  constitute  good and  sufficient  service  of  process  and  notice
      thereof.  Nothing contained herein shall be deemed to limit in any way any
      right to serve  process in any manner  permitted by law. Each party hereto
      hereby  irrevocably  waives, to the fullest extent permitted by applicable
      law,  any and all right to trial by jury in any legal  proceeding  arising
      out of or relating to this Note or the transactions  contemplated  hereby.
      If either  party  shall  commence an action or  proceeding  to enforce any
      provisions  of this  Note,  then the  prevailing  party in such  action or
      proceeding  shall be reimbursed by the other party for its attorneys  fees
      and other costs and expenses incurred with the investigation,  preparation
      and prosecution of such action or proceeding.

                                    18 of 22
<PAGE>

            f) Waiver.  Any  waiver by the  Company or the Holder of a breach of
      any  provision  of this Note shall not operate as or be  construed to be a
      waiver of any other breach of such provision or of any breach of any other
      provision of this Note. The failure of the Company or the Holder to insist
      upon strict  adherence  to any term of this Note on one or more  occasions
      shall  not be  considered  a waiver  or  deprive  that  party of the right
      thereafter to insist upon strict  adherence to that term or any other term
      of this Note. Any waiver must be in writing.

            g) Severability.  If any provision of this Note is invalid,  illegal
      or unenforceable,  the balance of this Note shall remain in effect, and if
      any  provision is  inapplicable  to any person or  circumstance,  it shall
      nevertheless remain applicable to all other persons and circumstances.  If
      it shall be found that any  interest or other amount  deemed  interest due
      hereunder violates applicable laws governing usury, the applicable rate of
      interest due hereunder shall automatically be lowered to equal the maximum
      permitted rate of interest.  The Company  covenants (to the extent that it
      may lawfully do so) that it shall not at any time insist upon,  plead,  or
      in any manner  whatsoever  claim or take the benefit or advantage  of, any
      stay,  extension or usury law or other law which would prohibit or forgive
      the Company from paying all or any portion of the principal of or interest
      on this Note as contemplated herein,  wherever enacted, now or at any time
      hereafter in force,  or which may affect the covenants or the  performance
      of this  indenture,  and the Company (to the extent it may lawfully do so)
      hereby  expressly  waives all  benefits or  advantage of any such law, and
      covenants  that it will not, by resort to any such law,  hinder,  delay or
      impeded the execution of any power herein granted to the Holder,  but will
      suffer and permit  the  execution  of every such as though no such law has
      been enacted.

            h) Next  Business  Day.  Whenever  any  payment or other  obligation
      hereunder  shall be due on a day other than a Business  Day,  such payment
      shall be made on the next succeeding Business Day.

            i) Headings. The headings contained herein are for convenience only,
      do not  constitute a part of this Note and shall not be deemed to limit or
      affect any of the provisions hereof.

            j) Seniority. This Note is senior in right of payment to any and all
      other indebtedness of the Company.

                              *********************

                                    19 of 22
<PAGE>

         IN  WITNESS  WHEREOF,  the  Company  has  caused  this  Note to be duly
executed by a duly authorized officer as of the date first above indicated.

                                          LISKA BIOMETRY, INC.

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

                                    20 of 22
<PAGE>

                                     ANNEX A

                              NOTICE OF CONVERSION

         The undersigned hereby elects to convert principal under the 10% Senior
Secured  Convertible  Note of Liska Biometry,  Inc., a Florida  corporation (the
"Company"),  due on May 31, 2009, into shares of common stock, no par value (the
"Common Stock"),  of the Company  according to the conditions  hereof, as of the
date  written  below.  If shares are to be issued in the name of a person  other
than the  undersigned,  the undersigned will pay all transfer taxes payable with
respect  thereto and is delivering  herewith such  certificates  and opinions as
reasonably  requested  by the Company in  accordance  therewith.  No fee will be
charged to the holder for any  conversion,  except for such transfer  taxes,  if
any.

         By the delivery of this Notice of Conversion the undersigned represents
and  warrants to the Company  that its  ownership  of the Common  Stock does not
exceed the amounts  determined in accordance  with Section 13(d) of the Exchange
Act, specified under Section 4 of this Note.

         The  undersigned   agrees  to  comply  with  the  prospectus   delivery
requirements  under  the  applicable  securities  laws in  connection  with  any
transfer of the aforesaid shares of Common Stock.

Conversion calculations:
                           Date to Effect Conversion:

                           Principal Amount of Notes to be Converted:

                           Payment of Interest in Common Stock __ yes  __ no
                              If yes,  $_____ of Interest  Accrued on Account of
                              Conversion at Issue.

                           Number of shares of Common  Stock to be issued:

                           Signature:

                           Name:

                           Address:

                                    21 of 22
<PAGE>

                                   Schedule 1

                               CONVERSION SCHEDULE

The 10% Senior Secured  Convertible  Notes due on May 31, 2009, in the aggregate
principal  amount of  $____________  issued by Liska  Biometry,  Inc., a Florida
corporation.  This Conversion Schedule reflects conversions made under Section 4
of the above referenced Note.

                                     Dated:

<TABLE>
<CAPTION>
=============================== ========================= ======================= ==============================

                                                           Aggregate Principal
                                                             Amount Remaining
      Date of Conversion                                      Subsequent to
(or for first entry, Original                                   Conversion
         Issue Date)              Amount of Conversion         (or original              Company Attest
                                                            Principal Amount)
------------------------------- ------------------------- ----------------------- ------------------------------
<S>                             <C>                       <C>                     <C>

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

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

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

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

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

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

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

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

=============================== ========================= ======================= ==============================
</TABLE>

                                    22 of 22EXHIBIT E

                               SECURITY AGREEMENT

      SECURITY  AGREEMENT,  dated as of May 31, 2006 (this  "Agreement"),  among
Liska  Biometry,  Inc., a Florida  corporation  (the  "Company")  and all of the
Subsidiaries of the Company (such  subsidiaries,  the "Guarantors") (the Company
and Guarantors are collectively  referred to as the "Debtors") and the holder or
holders of the Company's  Senior  Secured Notes due May 31, 2009 in the original
aggregate principal amount of $5,000,000 (the "Notes"),  signatory hereto, their
endorsees,  transferees and assigns  (collectively  referred to as, the "Secured
Parties").

                              W I T N E S S E T H:

      WHEREAS,  pursuant to the Notes, the Secured Parties have severally agreed
to extend the loans to the Company evidenced by the Notes;

      WHEREAS,  pursuant to a certain Subsidiary  Guarantee dated as of the date
hereof (the  "Guaranty"),  the Guarantors  have jointly and severally  agreed to
guaranty and act as surety for payment of such loans; and

      WHEREAS,  in order to induce  the  Secured  Parties  to  extend  the loans
evidenced  by the Notes,  each  Debtor has agreed to execute  and deliver to the
Secured Parties this Agreement and to grant the Secured Parties, pari passu with
each other Secured Party, a perfected  security  interest in all of the property
of such Debtor to secure the prompt  payment,  performance and discharge in full
of all of the  Company's  obligations  under the  Notes  and the other  Debtors'
obligations under the Guaranty.

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

      1. Certain  Definitions.  As used in this  Agreement,  the following terms
shall  have  the  meanings  set  forth in this  Section  1.  Terms  used but not
otherwise  defined in this  Agreement  that are  defined in Article 9 of the UCC
(such as "account", "chattel paper", "commercial tort claim", "deposit account",
"document",    "equipment",    "fixtures",   "general   intangibles",   "goods",
"instruments",  "inventory",  "investment property",  "letter-of-credit rights",
"proceeds" and  "supporting  obligations")  shall have the  respective  meanings
given such terms in Article 9 of the UCC.

            (a)  "Collateral"  means the collateral in which the Secured Parties
      are granted a security  interest by this Agreement and which shall include
      the following personal property of the Debtors, whether presently owned or
      existing  or  hereafter  acquired  or  coming  into  existence,   wherever
      situated,  and all additions and accessions  thereto and all substitutions
      and replacements thereof, and all proceeds, products and accounts thereof,
      including,  without limitation,  all proceeds from the sale or transfer of
      the Collateral  and of insurance  covering the same and of any tort claims
      in  connection  therewith,  and  all  dividends,  interest,  cash,  notes,
      securities, equity interest or other property at any time and from time to
      time  acquired,  receivable or otherwise  distributed in respect of, or in
      exchange for, any or all of the Pledged Securities (as defined below):

                  (i)  All  goods,  including,   without  limitations,  (A)  all
            machinery,  equipment,  computers,  motor vehicles,  trucks,  tanks,
            boats,  ships,  appliances,  furniture,  special and general  tools,
            fixtures,  test and quality  control  devices and other equipment of
            every kind and  nature  and  wherever  situated,  together  with all
            documents  of  title  and  documents   representing  the  same,  all
            additions and accessions thereto,  replacements  therefor, all parts
            therefor, and all substitutes for any of the foregoing and all other
            items used and useful in connection with any Debtor's businesses and
            all improvements thereto; and (B) all inventory;

<PAGE>

                  (ii)  All  contract  rights  and  other  general  intangibles,
            including, without limitation, all partnership interests, membership
            interests,  stock  or  other  securities,  rights  under  any of the
            Organizational   Documents,   agreements   related  to  the  Pledged
            Securities,  licenses,  distribution and other agreements,  computer
            software (whether "off-the-shelf",  licensed from any third party or
            developed  by any Debtor),  computer  software  development  rights,
            leases,  franchises,  customer lists,  quality  control  procedures,
            grants  and  rights,  goodwill,  trademarks,  service  marks,  trade
            styles,  trade  names,  patents,  patent  applications,  copyrights,
            Intellectual Property, and income tax refunds;

                  (iii)  All  accounts,  together  with  all  instruments,   all
            documents of title representing any of the foregoing,  all rights in
            any merchandising, goods, equipment, motor vehicles and trucks which
            any of the same may represent,  and all right,  title,  security and
            guaranties  with  respect to each  account,  including  any right of
            stoppage in transit;

                  (iv) All documents,  letter-of-credit rights,  instruments and
            chattel paper;

                  (v) All commercial tort claims;

                  (vi)  All  deposit  accounts  and  all  cash  (whether  or not
            deposited in such deposit accounts);

                  (vii) All investment property;

                  (viii) All supporting obligations; and

                  (ix) All files,  records,  books of account,  business papers,
            and computer programs; and

                  (x)  the  products  and  proceeds  of  all  of  the  foregoing
            Collateral set forth in clauses (i)-(ix) above.

                  Without   limiting  the  generality  of  the  foregoing,   the
            "Collateral"  shall  include  all  investment  property  and general
            intangibles  respecting  ownership  and/or other equity interests in
            each Guarantor, including, without limitation, the shares of capital
            stock and the other equity interests listed on Schedule H hereto (as
            the same may be  modified  from time to time  pursuant  to the terms
            hereof),  and any other shares of capital  stock and/or other equity
            interests of any other direct or indirect  subsidiary  of any Debtor
            obtained  in  the  future,  and,  in  each  case,  all  certificates
            representing  such shares and/or equity interests and, in each case,
            all rights, options, warrants, stock, other securities and/or equity
            interests that may hereafter be received,  receivable or distributed
            in respect of, or exchanged  for, any of the  foregoing  (all of the
            foregoing being referred to herein as the "Pledged  Securities") and
            all  rights  arising  under  or  in  connection   with  the  Pledged
            Securities,  including, but not limited to, all dividends,  interest
            and  cash.  Notwithstanding  the  foregoing,  the  Company  shall be
            permitted to sell all or a portion of its Philippines subsidiary, in
            which case the shares of such  subsidiary  shall not be  included as
            Collateral hereunder.

                                    2 of 31
<PAGE>

                  Notwithstanding the foregoing,  nothing herein shall be deemed
            to constitute  an assignment of any asset which,  in the event of an
            assignment,  becomes  void by  operation  of  applicable  law or the
            assignment of which is otherwise  prohibited  by applicable  law (in
            each case to the extent that such  applicable  law is not overridden
            by Sections  9-406,  9-407 and/or 9-408 of the UCC or other  similar
            applicable law); provided,  however, that to the extent permitted by
            applicable  law,  this  Agreement  shall  create  a  valid  security
            interest in such asset and, to the extent  permitted  by  applicable
            law, this Agreement  shall create a valid  security  interest in the
            proceeds of such asset.

            (b)  "Intellectual  Property" means the collective  reference to all
      rights,  priorities  and  privileges  relating to  intellectual  property,
      whether  arising  under United  States,  multinational  or foreign laws or
      otherwise, including, without limitation, (i) all copyrights arising under
      the  laws  of the  United  States,  any  other  country  or any  political
      subdivision  thereof,  whether  registered  or  unregistered  and  whether
      published or unpublished,  all registrations and recordings  thereof,  and
      all applications in connection therewith,  including,  without limitation,
      all  registrations,  recordings  and  applications  in the  United  States
      Copyright Office,  (ii) all letters patent of the United States, any other
      country or any political  subdivision thereof, all reissues and extensions
      thereof,  and all  applications for letters patent of the United States or
      any    other    country    and   all    divisions,    continuations    and
      continuations-in-part   thereof,   (iii)  all  trademarks,   trade  names,
      corporate names, company names, business names, fictitious business names,
      trade  dress,  service  marks,  logos,  domain  names and other  source or
      business identifiers,  and all goodwill associated therewith, now existing
      or  hereafter  adopted  or  acquired,  all  registrations  and  recordings
      thereof,  and all  applications  in connection  therewith,  whether in the
      United  States  Patent and  Trademark  Office or in any similar  office or
      agency of the United States, any State thereof or any other country or any
      political  subdivision  thereof,  or otherwise,  and all common law rights
      related  thereto,  (iv) all trade  secrets  arising  under the laws of the
      United States, any other country or any political subdivision thereof, (v)
      all  rights  to  obtain  any  reissues,  renewals  or  extensions  of  the
      foregoing,  (vi) all  licenses  for any of the  foregoing,  and  (vii) all
      causes of action for infringement of the foregoing.

            (c) "Majority in Interest" shall mean, at any time of determination,
      the majority in interest (based on  then-outstanding  principal amounts of
      Notes at the time of such determination) of the Secured Parties.

            (d) "Necessary Endorsement" shall mean undated stock powers endorsed
      in blank or other proper  instruments of assignment duly executed and such
      other  instruments  or  documents  as the Secured  Parties may  reasonably
      request.

            (e) "Obligations"  means all of the Debtors'  obligations under this
      Agreement,  the Notes, the Guaranty and any other instruments,  agreements
      or other  documents  executed and/or  delivered in connection  herewith or
      therewith,  in each case, whether now or hereafter existing,  voluntary or
      involuntary,  direct or indirect,  absolute or  contingent,  liquidated or
      unliquidated,  whether or not jointly owed with others, and whether or not
      from time to time decreased or extinguished and later  increased,  created
      or incurred,  and all or any portion of such  obligations  or  liabilities
      that are paid, to the extent all or any part of such payment is avoided or
      recovered  directly or  indirectly  from any of the  Secured  Parties as a
      preference,  fraudulent  transfer or otherwise as such  obligations may be
      amended, supplemented,  converted, extended or modified from time to time.
      Without limiting the generality of the foregoing,  the term  "Obligations"
      shall include,  without limitation:  (i) principal of, and interest on the
      Notes  and the loans  extended  pursuant  thereto;  (ii) any and all other
      fees, indemnities,  costs, obligations and liabilities of the Debtors from
      time to time under or in connection  with this Agreement,  the Notes,  the
      Guaranty and any other instruments, agreements or other documents executed
      and/or  delivered  in  connection  herewith  or  therewith;  and (iii) all
      amounts  (including but not limited to post-petition  interest) in respect
      of the  foregoing  that  would  be  payable  but for  the  fact  that  the
      obligations to pay such amounts are  unenforceable or not allowable due to
      the  existence  of a  bankruptcy,  reorganization  or  similar  proceeding
      involving any Debtor.

                                    3 of 31
<PAGE>

            (f) "Organizational Documents" means with respect to any Debtor, the
      documents by which such Debtor was  organized  (such as a  certificate  of
      incorporation,   certificate   of  limited   partnership  or  articles  of
      organization,  and including,  without  limitation,  any  certificates  of
      designation  for preferred  stock or other forms of preferred  equity) and
      which relate to the internal  governance of such Debtor (such as bylaws, a
      partnership  agreement  or an  operating,  limited  liability  or  members
      agreement).

            (g) "UCC" means the Uniform Commercial Code of the State of New York
      and  or any  other  applicable  law  of any  state  or  states  which  has
      jurisdiction  with  respect to all, or any portion of, the  Collateral  or
      this  Agreement,  from time to time.  It is the intent of the parties that
      defined  terms in the UCC should be construed in their  broadest  sense so
      that  the term  "Collateral"  will be  construed  in its  broadest  sense.
      Accordingly  if there are, from time to time,  changes to defined terms in
      the UCC that broaden the definitions,  they are incorporated herein and if
      existing  definitions in the UCC are broader than the amended definitions,
      the existing ones shall be controlling.

      2. Grant of Perfected Security Interest.  As an inducement for the Secured
Parties to extend the loans as evidenced by the Notes and to secure the complete
and timely  payment,  performance  and discharge in full, as the case may be, of
all of the  Obligations,  each Debtor  hereby  unconditionally  and  irrevocably
pledges,  grants  and  hypothecates  to the  Secured  Parties a  continuing  and
perfected  security  interest  in and to, a lien  upon  and a right  of  set-off
against all of their respective right, title and interest of whatsoever kind and
nature in and to, the Collateral (the "Security Interest").

      3.  Delivery  of  Certain  Collateral.  Contemporaneously  or prior to the
execution of this Agreement,  each Debtor shall deliver or cause to be delivered
to the  Secured  Parties  (a) any and all  certificates  and  other  instruments
representing  or  evidencing  the  Pledged  Securities,  and  (b)  any  and  all
certificates  and other  instruments or documents  representing any of the other
Collateral, in each case, together with all Necessary Endorsements.  The Debtors
are,  contemporaneously  with the  execution  hereof,  delivering to the Secured
Parties, or have previously delivered to the Secured Parties, a true and correct
copy of each Organizational Document governing any of the Pledged Securities.

      4. Representations,  Warranties,  Covenants and Agreements of the Debtors.
Each Debtor  represents  and warrants  to, and  covenants  and agrees with,  the
Secured Parties as follows:

            (a) Each Debtor has the requisite  corporate,  partnership,  limited
      liability  company  or  other  power  and  authority  to enter  into  this
      Agreement  and  otherwise  to carry  out its  obligations  hereunder.  The
      execution,  delivery and  performance by each Debtor of this Agreement and
      the  filings  contemplated  therein  have  been  duly  authorized  by  all
      necessary  action  on the part of such  Debtor  and no  further  action is
      required by such Debtor.  This  Agreement  has been duly  executed by each
      Debtor. This Agreement constitutes the legal, valid and binding obligation
      of each Debtor,  enforceable  against each Debtor in  accordance  with its
      terms  except  as  such   enforceability  may  be  limited  by  applicable
      bankruptcy,  insolvency,   reorganization  and  similar  laws  of  general
      application  relating to or affecting the rights and remedies of creditors
      and by general principles of equity.

                                    4 of 31
<PAGE>

            (b) The Debtors  have no place of  business  or offices  where their
      respective  books of account and records are kept (other than  temporarily
      at the offices of its attorneys or accountants) or places where Collateral
      is stored or located,  except as set forth on Schedule A attached  hereto.
      Except as specifically  set forth on Schedule A, each Debtor is the record
      owner of the real property  where such  Collateral  is located,  and there
      exist no  mortgages  or other liens on any such real  property.  Except as
      disclosed on Schedule A, none of such  Collateral is in the  possession of
      any consignee, bailee, warehouseman, agent or processor.

            (c) Except as set forth on Schedule B attached  hereto,  the Debtors
      are the sole owner of the Collateral  (except for  non-exclusive  licenses
      granted by any Debtor in the ordinary course of business),  free and clear
      of any liens, security interests,  encumbrances, rights or claims, and are
      fully authorized to grant the Security  Interest.  There is not on file in
      any  governmental or regulatory  authority,  agency or recording office an
      effective financing statement,  security agreement, license or transfer or
      any notice of any of the foregoing (other than those that will be filed in
      favor of the  Secured  Parties  pursuant  to this  Agreement)  covering or
      affecting any of the  Collateral.  So long as this  Agreement  shall be in
      effect, the Debtors shall not execute and shall not knowingly permit to be
      on file in any such office or agency any such financing statement or other
      document or instrument (except to the extent filed or recorded in favor of
      the Secured Parties pursuant to the terms of this Agreement).

            (d) No  written  claim  has been  received  that any  Collateral  or
      Debtor's  use of any  Collateral  violates  the rights of any third party.
      There has been no adverse  decision  to any  Debtor's  claim of  ownership
      rights in or exclusive rights to use the Collateral in any jurisdiction or
      to any Debtor's  right to keep and maintain such  Collateral in full force
      and effect,  and there is no proceeding  involving said rights pending or,
      to the best knowledge of any Debtor, threatened before any court, judicial
      body,   administrative   or   regulatory   agency,   arbitrator  or  other
      governmental authority.

            (e) Each Debtor shall at all times maintain its books of account and
      records  relating to the Collateral at its principal place of business and
      its  Collateral at the  locations set forth on Schedule A attached  hereto
      and may not  relocate  such  books of  account  and  records  or  tangible
      Collateral  (other than the  Company's  demonstration  trailer)  unless it
      delivers to the Secured  Parties at least 30 days prior to such relocation
      (i) written notice of such relocation and the new location  thereof (which
      must be within the  United  States)  and (ii)  evidence  that  appropriate
      financing statements under the UCC and other necessary documents have been
      filed and recorded and other steps have been taken to perfect the Security
      Interest to create in favor of the Secured Parties a valid,  perfected and
      continuing perfected first priority lien in the Collateral.

            (f) This Agreement  creates in favor of the Secured Parties a valid,
      security interest in the Collateral,  securing the payment and performance
      of the Obligations.  Upon making the filings  described in the immediately
      following  paragraph,  all  security  interests  created  hereunder in any
      Collateral  which may be  perfected  by  filing  Uniform  Commercial  Code
      financing statements shall have been duly perfected. Except for the filing
      of the Uniform  Commercial  Code financing  statements  referred to in the
      immediately  following  paragraph,  the  recordation  of the  Intellectual
      Property Security  Agreement (as defined below) with respect to copyrights
      and copyright  applications in the United States Copyright Office referred
      to in paragraph (p), the execution and delivery of deposit account control
      agreements  satisfying the requirements of Section  9-104(a)(2) of the UCC
      with respect to each deposit  account of the Debtors,  and the delivery of
      the certificates and other instruments provided in Section 3, no action is
      necessary  to create,  perfect or protect the security  interests  created
      hereunder.  Without  limiting the generality of the foregoing,  except for
      the  filing  of  said  financing  statements,   the  recordation  of  said
      Intellectual  Property Security Agreement,  and the execution and delivery
      of said  deposit  account  control  agreements,  no  consent  of any third
      parties and no  authorization,  approval or other action by, and no notice
      to or filing  with,  any  governmental  authority  or  regulatory  body is
      required  for  (i)  the  execution,   delivery  and  performance  of  this
      Agreement,  (ii) the  creation or  perfection  of the  Security  Interests
      created hereunder in the Collateral or (iii) the enforcement of the rights
      of the Secured Parties hereunder.

                                    5 of 31
<PAGE>

            (g) Each Debtor hereby  authorizes  the Secured  Parties,  or any of
      them, to file one or more financing statements under the UCC, with respect
      to the Security Interest with the proper filing and recording  agencies in
      any jurisdiction deemed proper by them.

            (h) The execution, delivery and performance of this Agreement by the
      Debtors does not (i) violate any of the  provisions of any  Organizational
      Documents  of any Debtor or any  judgment,  decree,  order or award of any
      court,  governmental  body or  arbitrator or any  applicable  law, rule or
      regulation applicable to any Debtor or (ii) conflict with, or constitute a
      default  (or an event  that  with  notice  or lapse of time or both  would
      become a default)  under,  or give to others  any  rights of  termination,
      amendment,  acceleration or cancellation (with or without notice, lapse of
      time or both) of, any agreement, credit facility, debt or other instrument
      (evidencing  any Debtor's  debt or otherwise)  or other  understanding  to
      which  any  Debtor  is a party or by which  any  property  or asset of any
      Debtor is bound or affected.  No consent  (including,  without limitation,
      from  stockholders  or creditors of any Debtor) is required for any Debtor
      to enter into and perform its obligations hereunder.

            (i) The capital stock and other equity  interests listed on Schedule
      H hereto  represent all of the capital stock and other equity interests of
      the Guarantors, and represent all capital stock and other equity interests
      owned,  directly  or  indirectly,  by the  Company.  All  of  the  Pledged
      Securities  are  validly  issued,  fully paid and  nonassessable,  and the
      Company is the legal and beneficial owner of the Pledged Securities,  free
      and clear of any lien,  security interest or other encumbrance  except for
      the security interests created by this Agreement.

            (j) The ownership  and other equity  interests in  partnerships  and
      limited  liability  companies  (if any)  included in the  Collateral  (the
      "Pledged  Interests")  by their express terms do not provide that they are
      securities  governed  by  Article  8 of the  UCC  and  are  not  held in a
      securities account or by any financial intermediary.

            (k) Each Debtor  shall at all times  maintain the liens and Security
      Interest  provided for  hereunder as valid and  perfected  first  priority
      liens and  security  interests in the  Collateral  in favor of the Secured
      Parties until this Agreement and the Security Interest  hereunder shall be
      terminated  pursuant to Section 11 hereof.  Each Debtor  hereby  agrees to
      defend the same  against the claims of any and all  persons and  entities.
      Each Debtor shall  safeguard and protect all Collateral for the account of
      the Secured Parties.  At the request of the Secured  Parties,  each Debtor
      will sign and deliver to the  Secured  Parties at any time or from time to
      time  one  or  more  financing  statements  pursuant  to the  UCC in  form
      reasonably  satisfactory  to the Secured  Parties and will pay the cost of
      filing the same in all public offices  wherever filing is, or is deemed by
      the Secured Parties to be, necessary or desirable to effect the rights and
      obligations  provided for herein.  Without  limiting the generality of the
      foregoing,  each  Debtor  shall  pay all fees,  taxes  and  other  amounts
      necessary to maintain the Collateral and the Security Interest  hereunder,
      and each Debtor shall obtain and furnish to the Secured  Parties from time
      to time, upon demand,  such releases and/or  subordinations  of claims and
      liens  which may be  required to  maintain  the  priority of the  Security
      Interest hereunder.

                                    6 of 31
<PAGE>

            (l) No Debtor will transfer, pledge, hypothecate, encumber, license,
      sell or  otherwise  dispose  of any of the  Collateral  without  the prior
      written consent of a Majority in Interest.

            (m) Each Debtor shall keep and preserve its equipment, inventory and
      other tangible  Collateral in good  condition,  repair and order and shall
      not  operate or locate any such  Collateral  (or cause to be  operated  or
      located) in any area excluded from insurance coverage.

            (n) Each Debtor shall maintain with financially  sound and reputable
      insurers,  insurance with respect to the Collateral against loss or damage
      of the kinds and in the amounts customarily insured against by entities of
      established reputation having similar properties similarly situated and in
      such amounts as are  customarily  carried under similar  circumstances  by
      other such  entities and  otherwise as is prudent for entities  engaged in
      similar  businesses  but  in  any  event  sufficient  to  cover  the  full
      replacement  cost thereof.  Each Debtor shall cause each insurance  policy
      issued in  connection  herewith to provide,  and the insurer  issuing such
      policy to certify to the Secured Parties that (a) the Secured Parties will
      be named as lender  loss  payee and  additional  insured  under  each such
      insurance  policy;  (b) if such  insurance  be proposed to be cancelled or
      materially changed for any reason  whatsoever,  such insurer will promptly
      notify the Secured  Parties and such  cancellation  or change shall not be
      effective  as to the Secured  Parties for at least  thirty (30) days after
      receipt by the Secured  Parties of such notice,  unless the effect of such
      change is to extend or increase  coverage  under the  policy;  and (c) the
      Secured Parties will have the right (but no obligation) at its election to
      remedy any default in the payment of premiums  within  thirty (30) days of
      notice  from the  insurer  of such  default.  If no Event of  Default  (as
      defined in the Note) exists and if the  proceeds  arising out of any claim
      or series of related claims do not exceed  $50,000,  loss payments in each
      instance  will be applied by the  applicable  Debtor to the repair  and/or
      replacement of property with respect to which the loss was incurred to the
      extent reasonably  feasible,  and any loss payments or the balance thereof
      remaining,  to  the  extent  not  so  applied,  shall  be  payable  to the
      applicable Debtor, provided, however, that payments received by any Debtor
      after an Event of Default occurs and is continuing or in excess of $50,000
      for any occurrence or series of related  occurrences  shall be paid to the
      Secured  Parties and, if received by such  Debtor,  shall be held in trust
      for and  immediately  paid over to the Secured  Parties  unless  otherwise
      directed in writing by the Secured Parties. Copies of such policies or the
      related  certificates,  in each case, naming the Secured Parties as lender
      loss  payee and  additional  insured  shall be  delivered  to the  Secured
      Parties at least  annually  and at the time any new policy of insurance is
      issued.

            (o) Each Debtor shall,  within ten (10) days of obtaining  knowledge
      thereof, advise the Secured Parties promptly, in sufficient detail, of any
      substantial  change in the Collateral,  and of the occurrence of any event
      which would have a material  adverse effect on the value of the Collateral
      or on the Secured Parties' security interest therein.

            (p) Each Debtor  shall  promptly  execute and deliver to the Secured
      Parties such further deeds, mortgages,  assignments,  security agreements,
      financing  statements or other  instruments,  documents,  certificates and
      assurances  and take such further  action as the Secured  Parties may from
      time to time  request and may in its sole  discretion  deem  necessary  to
      perfect,  protect or  enforce  its  security  interest  in the  Collateral
      including,  without limitation, if applicable,  the execution and delivery
      of  a  separate   security   agreement   with  respect  to  each  Debtor's
      Intellectual  Property  ("Intellectual  Property  Security  Agreement") in
      which the Secured Parties have been granted a security interest hereunder,
      substantially  in  a  form  acceptable  to  the  Secured  Parties,   which
      Intellectual  Property Security  Agreement,  other than as stated therein,
      shall be subject to all of the terms and conditions hereof.

                                    7 of 31
<PAGE>

            (q)  Each  Debtor  shall  permit  the  Secured   Parties  and  their
      representatives  and agents to inspect the  Collateral at any time, and to
      make copies of records pertaining to the Collateral as may be requested by
      a Secured Party from time to time.

            (r)  Each  Debtor  shall  take all  steps  reasonably  necessary  to
      diligently  pursue and seek to  preserve,  enforce and collect any rights,
      claims,  causes  of action  and  accounts  receivable  in  respect  of the
      Collateral.

            (s) Each  Debtor  shall  promptly  notify  the  Secured  Parties  in
      sufficient  detail upon  becoming  aware of any  attachment,  garnishment,
      execution or other legal process  levied against any Collateral and of any
      other  information  received by such Debtor that may materially affect the
      value of the Collateral,  the Security Interest or the rights and remedies
      of the Secured Parties hereunder.

            (t) All information heretofore,  herein or hereafter supplied to the
      Secured  Parties  by or on  behalf  of  any  Debtor  with  respect  to the
      Collateral  is accurate and  complete in all  material  respects as of the
      date furnished.

            (u) The Debtors  shall at all times  preserve and keep in full force
      and effect their  respective  valid  existence  and good  standing and any
      rights and franchises material to its business.

            (v)  No  Debtor  will  change  its  name,   type  of   organization,
      jurisdiction of organization,  organizational identification number (if it
      has  one),  legal or  corporate  structure,  or  identity,  or add any new
      fictitious  name unless it provides at least 30 days prior written  notice
      to the Secured  Parties of such  change  and, at the time of such  written
      notification,  such Debtor  provides any  financing  statements or fixture
      filings necessary to perfect and continue perfected the perfected security
      Interest granted and evidenced by this Agreement.

            (w) No Debtor may  consign any of its  Inventory  or sell any of its
      Inventory on bill and hold,  sale or return,  sale on  approval,  or other
      conditional  terms of sale  without  the consent of a Majority in Interest
      which  shall  not be  unreasonably  withheld,  except to the  extent  such
      consignment  or sale does not exceed 15% of the total  value of all of the
      Company's finished goods in Inventory.

            (x) No  Debtor  may  relocate  its chief  executive  office to a new
      location without providing 30 days prior written  notification  thereof to
      the  Secured  Parties  and  so  long  as,  at the  time  of  such  written
      notification,  such Debtor  provides any  financing  statements or fixture
      filings necessary to perfect and continue perfected the perfected security
      Interest granted and evidenced by this Agreement.

            (y) Each Debtor was organized and remains organized solely under the
      laws of the  state  set  forth  next to such  Debtor's  name in the  first
      paragraph of this  Agreement.  Schedule D attached  hereto sets forth each
      Debtor's  organizational  identification number or, if any Debtor does not
      have one, states that one does not exist.

                                    8 of 31
<PAGE>

            (z) (i) The actual  name of each Debtor is the name set forth in the
      preamble above;  (ii) no Debtor has any trade names except as set forth on
      Schedule E attached  hereto;  (iii) no Debtor has used any name other than
      that stated in the  preamble  hereto or as set forth on Schedule E for the
      preceding  five  years;  and (iv) no entity has merged  into any Debtor or
      been acquired by any Debtor within the past five years except as set forth
      on Schedule E.

            (aa) At any time and from time to time that any Collateral  consists
      of  instruments,  certificated  securities  or other items that require or
      permit  possession by the secured  party to perfect the security  interest
      created hereby, the applicable Debtor shall deliver such Collateral to the
      Secured Parties.

            (bb) Each Debtor, in its capacity as issuer, hereby agrees to comply
      with any and all orders and instructions of the Secured Parties  regarding
      the Pledged Interests  consistent with the terms of this Agreement without
      the further consent of any Debtor as contemplated by Section 8-106 (or any
      successor  section) of the UCC. Further,  each Debtor agrees that it shall
      not enter into a similar  agreement  (or one that would  confer  "control"
      within  the  meaning  of  Article 8 of the UCC)  with any other  person or
      entity.

            (cc) Each Debtor shall cause all tangible chattel paper constituting
      Collateral to be delivered to the Secured Parties, or, if such delivery is
      not  possible,  then to cause  such  tangible  chattel  paper to contain a
      legend noting that it is subject to the security  interest created by this
      Agreement.  To the  extent  that any  Collateral  consists  of  electronic
      chattel paper,  the applicable  Debtor shall cause the underlying  chattel
      paper to be "marked"  within the  meaning of Section  9-105 of the UCC (or
      successor section thereto).

            (dd) If there is any investment property or deposit account included
      as  Collateral  that can be  perfected  by  "control"  through  an account
      control  agreement,  the  applicable  Debtor  shall  cause such an account
      control agreement,  in form and substance in each case satisfactory to the
      Secured Parties, to be entered into and delivered to the Secured Parties.

            (ee) To the extent that any Collateral  consists of letter-of-credit
      rights,  the applicable  Debtor shall cause the issuer of each  underlying
      letter of credit to consent to an  assignment  of the proceeds  thereof to
      the Secured Parties.

            (ff) To the extent that any  Collateral is in the  possession of any
      third party, the applicable  Debtor shall join with the Secured Parties in
      notifying such third party of the Secured  Parties'  security  interest in
      such   Collateral   and   shall  use  its  best   efforts   to  obtain  an
      acknowledgement  and  agreement  from such third party with respect to the
      Collateral, in form and substance satisfactory to the Secured Parties.

            (gg) If any Debtor  shall at any time hold or  acquire a  commercial
      tort claim,  such Debtor shall  promptly  notify the Secured  Parties in a
      writing signed by such Debtor of the particulars  thereof and grant to the
      Secured  Parties in such  writing a security  interest  therein and in the
      proceeds thereof, all upon the terms of this Agreement,  with such writing
      to be in form and substance satisfactory to the Secured Parties.

            (hh) Each Debtor shall  immediately  provide  written  notice to the
      Secured  Parties of any and all accounts which arise out of contracts with
      any  governmental  authority  and, to the extent  necessary  to perfect or
      continue the  perfected  status of the Security  Interest in such accounts
      and proceeds thereof,  shall execute and deliver to the Secured Parties an
      assignment  of claims for such  accounts  and  cooperate  with the Secured
      Parties in taking any other steps required,  in their judgment,  under the
      Federal  Assignment of Claims Act or any similar  federal,  state or local
      statute  or rule to  perfect  or  continue  the  perfected  status  of the
      Security Interest in such accounts and proceeds thereof.

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            (ii) Each  Debtor  shall  cause each  subsidiary  of such  Debtor to
      immediately become a party hereto (an "Additional  Debtor"),  by executing
      and delivering an Additional  Debtor Joinder in substantially  the form of
      Annex A attached hereto and comply with the provisions  hereof  applicable
      to the Debtors.  Concurrent therewith, the Additional Debtor shall deliver
      replacement  schedules for, or  supplements to all other  Schedules to (or
      referred to in) this Agreement, as applicable, which replacement schedules
      shall  supersede,  or  supplements  shall modify,  the  Schedules  then in
      effect. The Additional Debtor shall also deliver such opinions of counsel,
      authorizing   resolutions,   good   standing   certificates,    incumbency
      certificates,  organizational  documents,  financing  statements and other
      information  and  documentation  as the  Secured  Parties  may  reasonably
      request.  Upon  delivery  of the  foregoing  to the Secured  Parties,  the
      Additional  Debtor shall be and become a party to this  Agreement with the
      same rights and  obligations  as the Debtors,  for all purposes  hereof as
      fully and to the same  extent as if it were an original  signatory  hereto
      and  shall be  deemed to have  made the  representations,  warranties  and
      covenants  set forth  herein as of the date of  execution  and delivery of
      such Additional Debtor Joinder, and all references herein to the "Debtors"
      shall be deemed to include each Additional Debtor.

            (jj) Each Debtor  shall vote the Pledged  Securities  to comply with
      the covenants and agreements set forth herein and in the Notes.

            (kk) Each Debtor shall register the pledge of the applicable Pledged
      Securities  on the books of such  Debtor.  Each Debtor  shall  notify each
      issuer of Pledged  Securities  to  register  the pledge of the  applicable
      Pledged Securities in the name of the Secured Parties on the books of such
      issuer.  Further, except with respect to certificated securities delivered
      to the Secured Parties, the applicable Debtor shall deliver to the Secured
      Parties an  acknowledgement  of pledge (which,  where  appropriate,  shall
      comply  with  the  requirements  of  the  relevant  UCC  with  respect  to
      perfection by registration) signed by the issuer of the applicable Pledged
      Securities,   which   acknowledgement  shall  confirm  that:  (a)  it  has
      registered  the  pledge  on its  books  and  records;  and (b) at any time
      directed by the Secured  Parties  during the  continuation  of an Event of
      Default,  such issuer will  transfer the record  ownership of such Pledged
      Securities into the name of any designee of the Secured Parties, will take
      such steps as may be  necessary  to effect the  transfer,  and will comply
      with all other  instructions of the Secured Parties regarding such Pledged
      Securities without the further consent of the applicable Debtor.

            (ll) In the event that,  upon an  occurrence of an Event of Default,
      the Secured  Parties  shall sell all or any of the Pledged  Securities  to
      another  party  or  parties  (herein  called  the  "Transferee")  or shall
      purchase  or retain  all or any of the  Pledged  Securities,  each  Debtor
      shall, to the extent applicable: (i) deliver to the Secured Parties or the
      Transferee,  as the case may be, the  articles of  incorporation,  bylaws,
      minute books, stock certificate  books,  corporate seals,  deeds,  leases,
      indentures,  agreements,  evidences  of  indebtedness,  books of  account,
      financial  records and all other  Organizational  Documents and records of
      the Debtors and their direct and indirect subsidiaries;  (ii) use its best
      efforts to obtain resignations of the persons then serving as officers and
      directors of the Debtors and their direct and indirect subsidiaries, if so
      requested; and (iii) use its best efforts to obtain any approvals that are
      required by any  governmental  or  regulatory  body in order to permit the
      sale of the  Pledged  Securities  to the  Transferee  or the  purchase  or
      retention of the Pledged  Securities by the Secured  Parties and allow the
      Transferee or the Secured  Parties to continue the business of the Debtors
      and their direct and indirect subsidiaries.

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            (mm) Without limiting the generality of the other obligations of the
      Debtors  hereunder,  each Debtor shall promptly (i) cause to be registered
      at the United States Copyright Office all of its material copyrights, (ii)
      cause the  security  interest  contemplated  hereby  with  respect  to all
      Intellectual  Property registered at the United States Copyright Office or
      United  States  Patent and  Trademark  Office to be duly  recorded  at the
      applicable  office,  and (iii) give the Secured Parties notice whenever it
      acquires  (whether  absolutely  or by license)  or creates any  additional
      material Intellectual Property.

            (nn) Each  Debtor  will from time to time,  at the joint and several
      expense of the  Debtors,  promptly  execute and  deliver all such  further
      instruments  and  documents,  and take all such  further  action as may be
      necessary or desirable,  or as the Secured Parties may reasonably request,
      in order to perfect and protect any security interest granted or purported
      to be granted  hereby or to enable the  Secured  Parties to  exercise  and
      enforce  their  rights  and  remedies  hereunder  and with  respect to any
      Collateral or to otherwise carry out the purposes of this Agreement.

            (oo)  Schedule F attached  hereto lists all of the  patents,  patent
      applications,  trademarks, trademark applications,  registered copyrights,
      and  domain  names  owned by any of the  Debtors  as of the  date  hereof.
      Schedule F lists all material  licenses in favor of any Debtor for the use
      of any  patents,  trademarks,  copyrights  and domain names as of the date
      hereof.  All material patents and trademarks of the Debtors have been duly
      recorded at the United States Patent and Trademark Office and all material
      copyrights  of the Debtors  have been duly  recorded at the United  States
      Copyright Office.

            (pp) Except as set forth on Schedule G attached hereto,  none of the
      account  debtors or other  persons  or  entities  obligated  on any of the
      Collateral is a governmental  authority covered by the Federal  Assignment
      of Claims Act or any similar  federal,  state or local  statute or rule in
      respect of such Collateral.

      5. Effect of Pledge on Certain Rights. If any of the Collateral subject to
this Agreement consists of nonvoting equity or ownership  interests  (regardless
of class,  designation,  preference or rights) that may be converted into voting
equity or ownership  interests upon the occurrence of certain events (including,
without limitation, upon the transfer of all or any of the other stock or assets
of the  issuer),  it is  agreed  that the  pledge of such  equity  or  ownership
interests  pursuant to this  Agreement or the  enforcement of any of the Secured
Parties'  rights  hereunder  shall not be  deemed to be the type of event  which
would  trigger such  conversion  rights  notwithstanding  any  provisions in the
Organizational  Documents  or  agreements  to which any  Debtor is subject or to
which any Debtor is party.

      6. Defaults. The following events shall be "Events of Default":

            (a) The  occurrence of an Event of Default (as defined in the Notes)
      under the Notes;

            (b) Any  representation  or warranty of any Debtor in this Agreement
      shall prove to have been incorrect in any material respect when made;

            (c) The  failure by any  Debtor to  observe  or  perform  any of its
      obligations  hereunder for five (5) days after  delivery to such Debtor of
      notice of such  failure  by or on behalf of a Secured  Party  unless  such
      default is capable of cure but cannot be cured  within such time frame and
      such Debtor is using best efforts to cure same in a timely fashion; or

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            (d) If any  provision  of this  Agreement  shall at any time for any
      reason be declared to be null and void, or the validity or  enforceability
      thereof  shall  be  contested  by any  Debtor,  or a  proceeding  shall be
      commenced  by  any  Debtor,  or  by  any  governmental   authority  having
      jurisdiction  over any Debtor,  seeking to  establish  the  invalidity  or
      unenforceability thereof, or any Debtor shall deny that any Debtor has any
      liability or obligation purported to be created under this Agreement.

      7. Duty To Hold In Trust.

            (a) Upon the  occurrence  of any  Event of  Default  and at any time
      thereafter,  each  Debtor  shall,  upon  receipt of any  revenue,  income,
      dividend, interest or other sums subject to the Security Interest, whether
      payable pursuant to the Notes or otherwise,  or of any check, draft, note,
      trade acceptance or other  instrument  evidencing an obligation to pay any
      such  sum,  hold the same in  trust  for the  Secured  Parties  and  shall
      forthwith  endorse and transfer any such sums or instruments,  or both, to
      the Secured Parties,  pro-rata in proportion to their initial purchases of
      Notes for application to the  satisfaction of the Obligations  (and if any
      Note is not outstanding,  pro-rata in proportion to the initial  purchases
      of the remaining Notes).

            (b) If any Debtor shall become  entitled to receive or shall receive
      any securities or other property (including, without limitation, shares of
      Pledged Securities or instruments representing Pledged Securities acquired
      after the date hereof, or any options,  warrants,  rights or other similar
      property or certificates  representing a dividend,  or any distribution in
      connection  with any  recapitalization,  reclassification  or  increase or
      reduction of capital,  or issued in connection with any  reorganization of
      such Debtor or any of its direct or indirect  subsidiaries)  in respect of
      the Pledged Securities  (whether as an addition to, in substitution of, or
      in exchange for, such Pledged Securities or otherwise), such Debtor agrees
      to (i) accept the same as the agent of the Secured Parties;  (ii) hold the
      same in trust on behalf of and for the benefit of the Secured Parties; and
      (iii) to deliver any and all  certificates  or instruments  evidencing the
      same to the  Secured  Parties  on or before the close of  business  on the
      fifth  business day following the receipt  thereof by such Debtor,  in the
      exact form received together with the Necessary  Endorsements,  to be held
      by the  Secured  Parties  subject  to  the  terms  of  this  Agreement  as
      Collateral.

      8. Rights and Remedies Upon Default.

            (a) Upon the  occurrence  of any  Event of  Default  and at any time
      thereafter,  the Secured  Parties,  acting through any agent  appointed by
      them for  such  purpose,  shall  have the  right  to  exercise  all of the
      remedies conferred  hereunder and under the Notes, and the Secured Parties
      shall have all the rights and  remedies of a secured  party under the UCC.
      Without  limitation,  the Secured Parties shall have the following  rights
      and powers:

                  (i)  The  Secured   Parties  shall  have  the  right  to  take
            possession of the Collateral and, for that purpose,  enter, with the
            aid and assistance of any person, any premises where the Collateral,
            or any part  thereof,  is or may be placed and remove the same,  and
            each Debtor shall  assemble the  Collateral and make it available to
            the  Secured  Parties  at places  which the  Secured  Parties  shall
            reasonably  select,  whether at such Debtor's premises or elsewhere,
            and make available to the Secured Parties, without rent, all of such
            Debtor's  respective  premises and facilities for the purpose of the
            Secured  Parties  taking  possession  of,  removing  or putting  the
            Collateral in saleable or disposable form.

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                  (ii) Upon notice to the Debtors by the  Secured  Parties,  all
            rights of each  Debtor to exercise  the voting and other  consensual
            rights  which it would  otherwise  be entitled  to exercise  and all
            rights of each Debtor to receive the dividends and interest which it
            would  otherwise be authorized  to receive and retain,  shall cease.
            Upon  such  notice,  the  Secured  Parties  shall  have the right to
            receive  any  interest,  cash  dividends  or other  payments  on the
            Collateral  and,  at the option oft, to exercise in such the Secured
            Parties'  discretion all voting rights pertaining  thereto.  Without
            limiting the generality of the foregoing,  the Secured Parties shall
            have the right (but not the  obligation) to exercise all rights with
            respect to the  Collateral  as it were the sole and absolute  owners
            thereof, including,  without limitation, to vote and/or to exchange,
            at its sole  discretion,  any or all of the Collateral in connection
            with a merger,  reorganization,  consolidation,  recapitalization or
            other  readjustment  concerning or involving  the  Collateral or any
            Debtor or any of its direct or indirect subsidiaries.

                  (iii) The Secured  Parties shall have the right to operate the
            business  of each  Debtor  using the  Collateral  and shall have the
            right to assign, sell, lease or otherwise dispose of and deliver all
            or any  part  of the  Collateral,  at  public  or  private  sale  or
            otherwise,   either   with  or   without   special   conditions   or
            stipulations,  for cash or on credit or for future delivery, in such
            parcel or  parcels  and at such  time or times and at such  place or
            places,  and upon such terms and  conditions as the Secured  Parties
            may deem  commercially  reasonable,  all without (except as shall be
            required by applicable  statute and cannot be waived)  advertisement
            or demand upon or notice to any Debtor or right of  redemption  of a
            Debtor,  which are  hereby  expressly  waived.  Upon each such sale,
            lease,  assignment  or other  transfer  of  Collateral,  the Secured
            Parties may,  unless  prohibited by  applicable  law which cannot be
            waived,  purchase all or any part of the Collateral being sold, free
            from and discharged of all trusts,  claims,  right of redemption and
            equities of any Debtor, which are hereby waived and released.

                  (iv) The  Secured  Parties  shall  have the right (but not the
            obligation)  to notify any account  debtors and any  obligors  under
            instruments  or  accounts to make  payments  directly to the Secured
            Parties and to enforce the  Debtors'  rights  against  such  account
            debtors and obligors.

                  (v) The Secured  Parties may (but are not obligated to) direct
            any financial intermediary or any other person or entity holding any
            investment  property to transfer the same to the Secured  Parties or
            their designee.

                  (vi)  The  Secured  Parties  may (but  are not  obligated  to)
            transfer any or all Intellectual  Property registered in the name of
            any Debtor at the United States  Patent and Trademark  Office and/or
            Copyright  Office  into  the  name  of the  Secured  Parties  or any
            designee or any purchaser of any Collateral.

            (b) The  Secured  Parties  may  comply  with any  applicable  law in
      connection  with a disposition of Collateral and such  compliance will not
      be considered  adversely to affect the  commercial  reasonableness  of any
      sale of the  Collateral.  The  Secured  Parties  may sell  the  Collateral
      without  giving  any  warranties  and  may   specifically   disclaim  such
      warranties.  If the Secured Parties sells any of the Collateral on credit,
      the  Debtors  will only be credited  with  payments  actually  made by the
      purchaser.  In addition, each Debtor waives any and all rights that it may
      have to a judicial  hearing in  advance of the  enforcement  of any of the
      Secured  Parties'  rights  and  remedies  hereunder,   including,  without
      limitation,  its right  following  an Event of Default  to take  immediate
      possession of the  Collateral and to exercise its rights and remedies with
      respect thereto.

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<PAGE>

            (c) For the  purpose  of  enabling  the  Secured  Parties to further
      exercise rights and remedies under this Section 8 or elsewhere provided by
      agreement or  applicable  law,  each Debtor  hereby  grants to the Secured
      Parties an irrevocable,  nonexclusive license (exercisable without payment
      of  royalty  or other  compensation  to such  Debtor)  to use,  license or
      sublicense  following an Event of Default,  any Intellectual  Property now
      owned or hereafter  acquired by such Debtor,  and wherever the same may be
      located, and including in such license 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.

      9. Applications of Proceeds. The proceeds of any such sale, lease or other
disposition of the Collateral  hereunder shall be applied first, to the expenses
of retaking,  holding, storing,  processing and preparing for sale, selling, and
the like  (including,  without  limitation,  any  taxes,  fees and  other  costs
incurred  in  connection  therewith)  of  the  Collateral,   to  the  reasonable
attorneys' fees and expenses  incurred by the Secured Parties in enforcing their
rights hereunder and in connection with collecting, storing and disposing of the
Collateral,  and then to  satisfaction  of the  Obligations  pro rata  among the
Secured  Parties (based on  then-outstanding  principal  amounts of Notes at the
time  of any  such  determination),  and to the  payment  of any  other  amounts
required by  applicable  law,  after which the Secured  Parties shall pay to the
applicable  Debtor any surplus  proceeds.  If,  upon the sale,  license or other
disposition of the Collateral,  the proceeds thereof are insufficient to pay all
amounts to which the Secured Parties are legally  entitled,  the Debtors will be
liable for the deficiency,  together with interest  thereon,  at the rate of 18%
per annum or the lesser amount permitted by applicable law (the "Default Rate"),
and the  reasonable  fees of any  attorneys  employed by the Secured  Parties to
collect such deficiency.  To the extent permitted by applicable law, each Debtor
waives all claims,  damages and demands  against the Secured Parties arising out
of the repossession,  removal,  retention or sale of the Collateral,  unless due
solely to the gross  negligence or willful  misconduct of the Secured Parties as
determined  by a final  judgment  (not subject to further  appeal) of a court of
competent jurisdiction.

      10.  Securities Law  Provision.  Each Debtor  recognizes  that the Secured
Parties  may be limited in its  ability to effect a sale to the public of all or
part  of the  Pledged  Securities  by  reason  of  certain  prohibitions  in the
Securities Act of 1933, as amended,  or other federal or state  securities  laws
(collectively,  the "Securities Laws"), and may be compelled to resort to one or
more sales to a restricted  group of purchasers  who may be required to agree to
acquire the Pledged  Securities  for their own account,  for  investment and not
with a view to the distribution or resale thereof. Each Debtor agrees that sales
so made  may be at  prices  and on  terms  less  favorable  than if the  Pledged
Securities  were  sold to the  public,  and  that  the  Secured  Parties  has no
obligation  to delay the sale of any Pledged  Securities  for the period of time
necessary  to register the Pledged  Securities  for sale to the public under the
Securities  Laws.  Each Debtor shall  cooperate with the Secured  Parties in its
attempt  to satisfy  any  requirements  under the  Securities  Laws  (including,
without limitation, registration thereunder if requested by the Secured Parties)
applicable to the sale of the Pledged Securities by the Secured Parties.

      11.  Costs  and  Expenses.  Each  Debtor  agrees  to  pay  all  reasonable
out-of-pocket  fees,  costs and expenses  incurred in connection with any filing
required  hereunder,  including  without  limitation,  any financing  statements
pursuant  to  the  UCC,   continuation   statements,   partial  releases  and/or
termination   statements  related  thereto  or  any  expenses  of  any  searches
reasonably required by the Secured Parties. The Debtors shall also pay all other
claims and charges which in the reasonable  opinion of the Secured Parties might
prejudice,  imperil or otherwise affect the Collateral or the Security  Interest
therein.  The Debtors  will also,  upon demand,  pay to the Secured  Parties the
amount of any and all reasonable  expenses,  including the  reasonable  fees and
expenses of its counsel and of any experts and agents, which the Secured Parties
may incur in connection  with (i) the  enforcement of this  Agreement,  (ii) the
custody  or  preservation  of,  or  the  sale  of,  collection  from,  or  other
realization upon, any of the Collateral, or (iii) the exercise or enforcement of
any of the rights of the Secured  Parties  under the Notes.  Until so paid,  any
fees payable  hereunder shall be added to the principal  amount of the Notes and
shall bear interest at the Default Rate.

                                    14 of 31
<PAGE>

      12. Responsibility for Collateral.  The Debtors assume all liabilities and
responsibility  in connection with all Collateral,  and the Obligations shall in
no way be affected or diminished by reason of the loss,  destruction,  damage or
theft of any of the  Collateral or its  unavailability  for any reason.  Without
limiting the generality of the foregoing,  (a) no Secured Party (i) has any duty
(either  before or after an Event of  Default) to collect any amounts in respect
of the Collateral or to preserve any rights relating to the Collateral,  or (ii)
has any obligation to clean-up or otherwise prepare the Collateral for sale, and
(b) each  Debtor  shall  remain  obligated  and liable  under each  contract  or
agreement  included in the Collateral to be observed or performed by such Debtor
thereunder.  No Secured Party shall have any  obligation or liability  under any
such contract or agreement by reason of or arising out of this  Agreement or the
receipt by any Secured Party of any payment  relating to any of the  Collateral,
nor shall the any Secured Party be obligated in any manner to perform any of the
obligations  of any Debtor under or pursuant to any such  contract or agreement,
to make inquiry as to the nature or sufficiency  of any payment  received by any
Secured  Party in  respect of the  Collateral  or as to the  sufficiency  of any
performance  by any party under any such  contract or  agreement,  to present or
file any claim,  to take any action to enforce any performance or to collect the
payment of any amounts  which may have been assigned to any Secured Party may be
entitled at any time or times.

      13. Security Interest Absolute.  All rights of the Secured Parties and all
obligations  of the  Debtors  hereunder,  shall be absolute  and  unconditional,
irrespective of: (a) any lack of validity or  enforceability  of this Agreement,
the Notes or any agreement entered into in connection with the foregoing, or any
portion  hereof or  thereof;  (b) any  change  in the  time,  manner or place of
payment  or  performance  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  Notes or any  other  agreement  entered  into in  connection  with the
foregoing; (c) any exchange,  release or nonperfection of any of the Collateral,
or any release or amendment or waiver of or consent to departure  from any other
collateral for, or any guaranty,  or any other  security,  for all or any of the
Obligations; (d) any action by the Secured Parties to obtain, adjust, settle and
cancel in its sole discretion any insurance claims or matters made or arising in
connection  with the  Collateral;  or (e) any  other  circumstance  which  might
otherwise  constitute any legal or equitable defense available to a Debtor, or a
discharge of all or any part of the Security Interest granted hereby.  Until the
Obligations  shall  have  been paid and  performed  in full,  the  rights of the
Secured  Parties  shall  continue  even if the  Obligations  are  barred for any
reason, including, without limitation, the running of the statute of limitations
or bankruptcy.  Each Debtor expressly  waives  presentment,  protest,  notice of
protest,  demand, notice of nonpayment and demand for performance.  In the event
that at any time any transfer of any  Collateral or any payment  received by the
Secured Parties hereunder shall be deemed by final order of a court of competent
jurisdiction to have been a voidable  preference or fraudulent  conveyance under
the bankruptcy or insolvency laws of the United States, or shall be deemed to be
otherwise  due to any party other than the Secured  Parties,  then,  in any such
event, each Debtor's  obligations  hereunder shall survive  cancellation of this
Agreement, and shall not be discharged or satisfied by any prior payment thereof
and/or  cancellation  of this  Agreement,  but shall  remain a valid and binding
obligation  enforceable in accordance with the terms and provisions hereof. Each
Debtor  waives all right to require the Secured  Parties to proceed  against any
other person or entity or to apply any Collateral  which the Secured Parties may
hold at any time,  or to marshal  assets,  or to pursue any other  remedy.  Each
Debtor waives any defense arising by reason of the application of the statute of
limitations to any obligation secured hereby.

      14. Term of  Agreement.  This  Agreement and the Security  Interest  shall
terminate  on the  date  on  which  all  payments  under  the  Notes  have  been
indefeasibly  paid  in  full  and  all  other  Obligations  have  been  paid  or
discharged;  provided, however, that all indemnities of the Debtors contained in
this Agreement  shall survive and remain  operative and in full force and effect
regardless of the termination of this Agreement.

                                    15 of 31
<PAGE>

      15. Power of Attorney; Further Assurances.

            (a) Each  Debtor  authorizes  the Secured  Parties,  and does hereby
      make,  constitute  and appoint the  Secured  Parties and their  respective
      officers,  agents,  successors or assigns with full power of substitution,
      as such Debtor's true and lawful attorney-in-fact, with power, in the name
      of the various  Secured  Parties or such Debtor,  to, after the occurrence
      and during the  continuance of an Event of Default,  (i) endorse any note,
      checks,  drafts,  money orders or other instruments of payment  (including
      payments  payable  under or in  respect  of any  policy of  insurance)  in
      respect of the  Collateral  that may come into  possession  of the Secured
      Parties;  (ii) to sign and endorse any financing statement pursuant to the
      UCC or any invoice,  freight or express bill,  bill of lading,  storage or
      warehouse receipts, drafts against debtors, assignments, verifications and
      notices in connection with accounts,  and other documents  relating to the
      Collateral;  (iii) to pay or discharge taxes, liens, security interests or
      other  encumbrances at any time levied or placed on or threatened  against
      the Collateral;  (iv) to demand, collect, receipt for, compromise,  settle
      and sue for monies due in respect of the  Collateral;  (v) to transfer any
      Intellectual  Property or provide  licenses  respecting  any  Intellectual
      Property; and (vi) generally, at the option of the Secured Parties, and at
      the expense of the Debtors,  at any time, or from time to time, to execute
      and deliver any and all documents and  instruments  and to do all acts and
      things which the Secured  Parties deem necessary to protect,  preserve and
      realize upon the Collateral and the Security  Interest  granted therein in
      order to effect  the intent of this  Agreement  and the Notes all as fully
      and  effectually  as the Debtors might or could do; and each Debtor hereby
      ratifies all that said attorney  shall  lawfully do or cause to be done by
      virtue  hereof.  This power of  attorney is coupled  with an interest  and
      shall be irrevocable for the term of this Agreement and thereafter as long
      as any of the Obligations shall be outstanding.  The designation set forth
      herein shall be deemed to amend and supersede any  inconsistent  provision
      in the Organizational  Documents or other documents or agreements to which
      any Debtor is subject or to which any Debtor is a party.  Without limiting
      the  generality  of the  foregoing,  after the  occurrence  and during the
      continuance  of an Event of Default,  each Secured  Party is  specifically
      authorized  to execute and file any  applications  for or  instruments  of
      transfer and  assignment of any patents,  trademarks,  copyrights or other
      Intellectual  Property with the United States Patent and Trademark  Office
      and the United States Copyright Office.

            (b)  On  a  continuing  basis,  each  Debtor  will  make,   execute,
      acknowledge, deliver, file and record, as the case may be, with the proper
      filing and  recording  agencies in any  jurisdiction,  including,  without
      limitation, the jurisdictions indicated on Schedule C attached hereto, all
      such  instruments,  and take all such action as may  reasonably  be deemed
      necessary or advisable, or as reasonably requested by the Secured Parties,
      to perfect the Security  Interest granted hereunder and otherwise to carry
      out the  intent  and  purposes  of this  Agreement,  or for  assuring  and
      confirming  to the Secured  Parties the grant or perfection of a perfected
      security interest in all the Collateral under the UCC.

            (c) Each Debtor hereby  irrevocably  appoints the Secured Parties as
      such  Debtor's  attorney-in-fact,  with  full  authority  in the place and
      instead of such Debtor and in the name of such  Debtor,  from time to time
      in the Secured Parties' discretion,  to take any action and to execute any
      instrument  which the Secured  Parties may deem  necessary or advisable to
      accomplish the purposes of this  Agreement,  including the filing,  in its
      sole discretion,  of one or more financing or continuation  statements and
      amendments  thereto,  relative  to  any  of  the  Collateral  without  the
      signature  of  such  Debtor  where   permitted  by  law,  which  financing
      statements  may (but need not) describe the  Collateral as "all assets" or
      "all  personal  property" or words of like  import,  and ratifies all such
      actions  taken by the Secured  Parties.  This power of attorney is coupled
      with an interest and shall be  irrevocable  for the term of this Agreement
      and thereafter as long as any of the Obligations shall be outstanding.

                                    16 of 31
<PAGE>

      16.  Notices.  All  notices,  requests,  demands and other  communications
hereunder shall be subject to the notice provision of the Purchase Agreement (as
such term is defined in the Notes).

      17.  Other  Security.  To the  extent  that  the  Obligations  are  now or
hereafter  secured by property  other than the  Collateral or by the  guarantee,
endorsement or property of any other person, firm,  corporation or other entity,
then the  Secured  Parties  shall have the  right,  in its sole  discretion,  to
pursue,  relinquish,  subordinate,  modify or take any other action with respect
thereto,  without in any way modifying or affecting any of the Secured  Parties'
rights and remedies hereunder.

      18. RESERVED.

      19. Miscellaneous.

            (a) No  course  of  dealing  between  the  Debtors  and the  Secured
      Parties, nor any failure to exercise, nor any delay in exercising,  on the
      part of the Secured Parties,  any right,  power or privilege  hereunder or
      under the Notes shall operate as a waiver thereof; nor shall any single or
      partial exercise of any right, power or privilege  hereunder or thereunder
      preclude  any other or further  exercise  thereof or the  exercise  of any
      other right, power or privilege.

            (b) All of the rights  and  remedies  of the  Secured  Parties  with
      respect to the Collateral,  whether  established hereby or by the Notes or
      by any  other  agreements,  instruments  or  documents  or by law shall be
      cumulative and may be exercised singly or concurrently.

            (c) This Agreement  constitutes the entire  agreement of the parties
      with respect to the subject matter hereof and is intended to supersede all
      prior  negotiations,  understandings  and agreements with respect thereto.
      Except as specifically  set forth in this Agreement,  no provision of this
      Agreement  may be  modified  or  amended  except  by a  written  agreement
      specifically referring to this Agreement and signed by the parties hereto.

            (d) In the  event  any  provision  of this  Agreement  is held to be
      invalid,  prohibited or  unenforceable in any jurisdiction for any reason,
      unless such provision is narrowed by judicial construction, this Agreement
      shall,  as  to  such  jurisdiction,  be  construed  as  if  such  invalid,
      prohibited or  unenforceable  provision had been more narrowly drawn so as
      not to be invalid,  prohibited or unenforceable.  If,  notwithstanding the
      foregoing,  any  provision  of  this  Agreement  is  held  to be  invalid,
      prohibited or unenforceable  in any  jurisdiction,  such provision,  as to
      such jurisdiction,  shall be ineffective to the extent of such invalidity,
      prohibition or unenforceability without invalidating the remaining portion
      of such  provision or the other  provisions of this  Agreement and without
      affecting the validity or  enforceability  of such  provision or the other
      provisions of this Agreement in any other jurisdiction.

            (e) No  waiver of any  breach or  default  or any right  under  this
      Agreement  shall be  considered  valid unless in writing and signed by the
      party giving such  waiver,  and no such waiver shall be deemed a waiver of
      any subsequent breach or default or right,  whether of the same or similar
      nature or otherwise.

                                    17 of 31
<PAGE>

            (f) This Agreement shall be binding upon and inure to the benefit of
      each party hereto and its successors and assigns.

            (g) Each  party  shall take such  further  action  and  execute  and
      deliver such further documents as may be necessary or appropriate in order
      to carry out the provisions and purposes of this Agreement.

            (h) All questions concerning the construction, validity, enforcement
      and  interpretation  of this Agreement  shall be governed by and construed
      and  enforced in  accordance  with the  internal  laws of the State of New
      York,  without regard to the principles of conflicts of law thereof.  Each
      Debtor  agrees  that  all  proceedings   concerning  the  interpretations,
      enforcement and defense of the transactions contemplated by this Agreement
      and the Notes  (whether  brought  against a party hereto or its respective
      affiliates,   directors,   officers,   shareholders,   partners,  members,
      employees  or  agents)  shall be  commenced  exclusively  in the state and
      federal courts sitting in the City of New York, Borough of Manhattan. Each
      Debtor hereby  irrevocably  submits to the exclusive  jurisdiction  of the
      state and  federal  courts  sitting  in the City of New York,  Borough  of
      Manhattan for the  adjudication of any dispute  hereunder or in connection
      herewith or with any transaction  contemplated hereby or discussed herein,
      and hereby irrevocably waives, and agrees not to assert in any proceeding,
      any claim that it is not  personally  subject to the  jurisdiction  of any
      such court,  that such  proceeding  is improper.  Each party hereto hereby
      irrevocably  waives  personal  service of process and  consents to process
      being  served  in any  such  proceeding  by  mailing  a copy  thereof  via
      registered  or certified  mail or  overnight  delivery  (with  evidence of
      delivery)  to such party at the  address in effect for notices to it under
      this  Agreement  and agrees that such service  shall  constitute  good and
      sufficient service of process and notice thereof. Nothing contained herein
      shall be  deemed  to limit in any way any  right to serve  process  in any
      manner permitted by law. Each party hereto hereby  irrevocably  waives, to
      the fullest extent permitted by applicable law, any and all right to trial
      by  jury  in any  legal  proceeding  arising  out of or  relating  to this
      Agreement  or the  transactions  contemplated  hereby.  If any party shall
      commence a proceeding to enforce any  provisions of this  Agreement,  then
      the prevailing  party in such proceeding  shall be reimbursed by the other
      party for its  reasonable  attorney's  fees and other  costs and  expenses
      incurred  with the  investigation,  preparation  and  prosecution  of such
      proceeding.

            (i) This  Agreement  may be executed in any number of  counterparts,
      each of which when so executed  shall be deemed to be an original and, all
      of which taken together shall  constitute one and the same  Agreement.  In
      the event that any signature is delivered by facsimile transmission,  such
      signature  shall create a valid binding  obligation of the party executing
      (or on whose behalf such  signature  is  executed)  the same with the same
      force and effect as if such facsimile signature were the original thereof.

            (j) All  Debtors  shall  jointly  and  severally  be liable  for the
      obligations of each Debtor to the Secured Parties hereunder.

                                    18 of 31
<PAGE>

            (k) Each Debtor shall  indemnify,  reimburse  and hold  harmless the
      Secured  Parties and their  respective  partners,  members,  shareholders,
      officers,  directors,  employees and agents (collectively,  "Indemnitees")
      from  and  against  any  and all  losses,  claims,  liabilities,  damages,
      penalties,  suits, costs and expenses,  of any kind or nature,  (including
      fees  relating  to the  cost of  investigating  and  defending  any of the
      foregoing)  imposed on, incurred by or asserted against such Indemnitee in
      any way related to or arising from or alleged to arise from this Agreement
      or the Collateral,  except any such losses, claims, liabilities,  damages,
      penalties,   suits,  costs  and  expenses  which  result  from  the  gross
      negligence  or willful  misconduct  of the  Indemnitee  as determined by a
      final,  nonappealable decision of a court of competent jurisdiction.  This
      indemnification provision is in addition to, and not in limitation of, any
      other  indemnification  provision in the Notes, the Purchase Agreement (as
      such term is defined in the Notes) or any other  agreement,  instrument or
      other document executed or delivered in connection herewith or therewith.

            (l)  Nothing in this  Agreement  shall be  construed  to subject any
      Secured Party to liability as a partner in any Debtor or any if its direct
      or  indirect  subsidiaries  that is a  partnership  or as a member  in any
      Debtor or any of its  direct or  indirect  subsidiaries  that is a limited
      liability  company,  nor any Secured  Party be deemed to have  assumed any
      obligations  under any partnership  agreement or limited liability company
      agreement,  as  applicable,  of any such  Debtor  or any if its  direct or
      indirect  subsidiaries  or  otherwise,  unless and until any such  Secured
      Party  exercises its right to be substituted  for such Debtor as a partner
      or member, as applicable, pursuant hereto.

            (m) To the extent  that the grant of the  security  interest  in the
      Collateral  and the  enforcement  of the terms hereof require the consent,
      approval or action of any partner or member, as applicable,  of any Debtor
      or any direct or indirect  subsidiary of any Debtor or compliance with any
      provisions  of any of the  Organizational  Documents,  the Debtors  hereby
      grant such consent and approval and waive any such  noncompliance with the
      terms of said documents.

                            [SIGNATURE PAGES FOLLOW]

                                    19 of 31
<PAGE>

            IN WITNESS  WHEREOF,  the parties  hereto have caused this  Security
Agreement to be duly executed on the day and year first above written.

Liska Biometry, Inc.

By:_________________________________
Name:
Title:

DCS Liska Inc.

By:_________________________________
Name:
Title:

DCS Liska Europe Inc.

By:_________________________________
Name:
Title:

Liska Imaging Inc.

By:_________________________________
Name:
Title:

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                    20 of 31
<PAGE>

                     [SIGNATURE PAGE OF HOLDERS TO LISKA SA]

Name of Investing Entity: __________________________
Signature of Authorized Signatory of Investing entity: _________________________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: __________________________

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                    21 of 31
<PAGE>

                                   SCHEDULE A

                             LOCATION OF COLLATERAL

Principal Place of Business of Debtors:

Locations Where Collateral is Located or Stored:

                                    22 of 31
<PAGE>

                                   SCHEDULE B

                          EXISTING LIENS ON COLLATERAL

                                    23 of 31
<PAGE>

                                   SCHEDULE C

                    JURISDICTIONS IN WHICH COLLATERAL LOCATED

                                    24 of 31
<PAGE>

                                   SCHEDULE D

                      ORGANIZATIONAL IDENTIFICATION NUMBERS

                                    25 of 31
<PAGE>

                                   SCHEDULE E

                         NAMES; MERGERS AND ACQUISITIONS

                                    26 of 31
<PAGE>

                                   SCHEDULE F

                              INTELLECTUAL PROPERTY

                                    27 of 31
<PAGE>

                                   SCHEDULE G

                                 ACCOUNT DEBTORS

                                    28 of 31
<PAGE>

                                   SCHEDULE H

                               PLEDGED SECURITIES

                                    29 of 31
<PAGE>

                                     ANNEX A
                                       to
                                    SECURITY
                                    AGREEMENT

                        FORM OF ADDITIONAL DEBTOR JOINDER

               Security Agreement dated as of May 31, 2006 made by
                              Liska Biometry, Inc.
        and its subsidiaries party thereto from time to time, as Debtors
                               to and in favor of
        the Secured Parties identified therein (the "Security Agreement")

      Reference is made to the Security Agreement as defined above;  capitalized
terms used herein and not otherwise defined herein shall have the meanings given
to such terms in, or by reference in, the Security Agreement.

      The undersigned hereby agrees that upon delivery of this Additional Debtor
Joinder to the Secured Parties referred to above,  the undersigned  shall (a) be
an Additional Debtor under the Security  Agreement,  (b) have all the rights and
obligations of the Debtors under the Security Agreement as fully and to the same
extent as if the undersigned was an original signatory thereto and (c) be deemed
to have made the representations and warranties set forth in Section ___ therein
as of the date of execution  and  delivery of this  Additional  Debtor  Joinder.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,  THE UNDERSIGNED  SPECIFICALLY
GRANTS TO THE  SECURED  PARTIES A SECURITY  INTEREST IN THE  COLLATERAL  AS MORE
FULLY SET FORTH IN THE SECURITY  AGREEMENT  AND  ACKNOWLEDGES  AND AGREES TO THE
WAIVER OF JURY TRIAL PROVISIONS SET FORTH THEREIN.

      Attached  hereto are  supplemental  and/or  replacement  Schedules  to the
Security Agreement, as applicable.

      An  executed  copy of this  Joinder  shall  be  delivered  to the  Secured
Parties,  and the Secured Parties may rely on the matters set forth herein on or
after the date hereof. This Joinder shall not be modified, amended or terminated
without the prior written consent of the Secured Parties.

                                    30 of 31
<PAGE>

      IN WITNESS WHEREOF, the undersigned has caused this Joinder to be executed
in the name and on behalf of the undersigned.

                                         [Name of Additional Debtor]

                                         By:
                                         Name:
                                         Title:

                                         Address:

Dated:

                                    31 of 31

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