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<SEC-DOCUMENT>0001013762-05-000099.txt : 20050128
<SEC-HEADER>0001013762-05-000099.hdr.sgml : 20050128
<ACCEPTANCE-DATETIME>20050128170225
ACCESSION NUMBER:		0001013762-05-000099
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20050128
ITEM INFORMATION:		Entry into a Material Definitive Agreement
ITEM INFORMATION:		Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
ITEM INFORMATION:		Unregistered Sales of Equity Securities
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20050128
DATE AS OF CHANGE:		20050128

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			APPLIED DNA SCIENCES INC
		CENTRAL INDEX KEY:			0000744452
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374]
		IRS NUMBER:				592262718
		STATE OF INCORPORATION:			NV
		FISCAL YEAR END:			0930

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	002-90539
		FILM NUMBER:		05558990

	BUSINESS ADDRESS:	
		STREET 1:		9229 WEST SUNSET BOULEVARD, SUITE 830
		CITY:			LOS ANGELES
		STATE:			CA
		ZIP:			90069
		BUSINESS PHONE:		3108601362

	MAIL ADDRESS:	
		STREET 1:		9229 WEST SUNSET BLVD, SUITE 830
		CITY:			LOS ANGELES
		STATE:			CA
		ZIP:			90069

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	PROHEALTH MEDICAL TECHNOLOGIES INC
		DATE OF NAME CHANGE:	20010504

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	DCC ACQUISITION CORP
		DATE OF NAME CHANGE:	19990211

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	DATALINK CAPITAL CORP/TX/
		DATE OF NAME CHANGE:	19980306
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>jan2820058k.txt
<TEXT>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT
     Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

       Date of Report (Date of earliest event reported): January 28, 2005

                           Applied DNA Sciences, Inc.
             (Exact name of registrant as specified in its charter)



          Nevada                       002-90539               59-2262718
- --------------------------------------------------------------------------------
(State or other jurisdiction     (Commission File Number)      (IRS Employer
     of incorporation)                                       Identification No.)


             9229 Sunset Boulevard, Suite 83, Los Angeles, CA 90069
              (Address of principal executive offices and Zip Code)

        Registrant's telephone number, including area code (310) 860-1362

                                   Copies to:
                              Andrea Cataneo, Esq.
                       Sichenzia Ross Friedman Ference LLP
                           1065 Avenue of the Americas
                            New York, New York 10018
                              Phone: (212) 930-9700
                               Fax: (212) 930-9725

Check  the  appropriate  box  below  if the  Form  8-K  filing  is  intended  to
simultaneously  satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting  material  pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))

<PAGE>

Item 1.01 Entry into a Material Definitive Agreement.

     On January 28, 2005,  Applied DNA Sciences,  Inc. (the "Company"),  sold an
aggregate of $5,970,000 in secured convertible promissory notes (the "Notes") to
43 investors. The investors received 5,970,000 warrants (the "Warrants"), or one
warrant  for each dollar of Notes  purchased.  The Notes and the  Warrants  were
issued in a private  placement  transaction  pursuant to Section  4(2) under the
Securities Act of 1933.

     The Notes bear interest at 10% per annum,  mature one year from the date of
issuance,  and are convertible:  into shares of common stock of the Company at a
price of $0.50 per share (i) at the holder's option; or (ii)  automatically upon
the  Company's  filing  of  a  registration  statement  registering  the  shares
underlying the Notes and Warrants.  In the event that Company fails to repay the
Notes and accrued  interest when due, the Notes shall be convertible into shares
of the  Company's  common stock at the  holder's  option at a price of $0.33 per
share.

     The full  principal  amount of the Notes,  plus a default  interest rate of
12%, is due upon a default under the terms of the Notes. In addition, we granted
the  investors  a  security  interest  in  substantially  all of our  assets and
intellectual property. We are required to file a registration statement with the
Securities and Exchange  Commission on of before  February 15, 2005,  which will
include the common stock underlying the Notes and Warrants.  If the registration
statement is not declared  effective within 120 days from February 15, 2005, the
Company is required to pay liquidated  damages to the investors in the amount of
3.5% per month of the face amount of the Notes,  which liquidated  damages shall
be paid in  shares of  Company  common  stock or cash,  at the  election  of the
Company.

     Each Warrant is exercisable  for a period of five years at a price of $0.75
per share, subject to certain adjustments. The exercise price of the Warrants is
subject to adjustment for subsequent  lower price  issuances by the Company,  as
well  as  customary  adjustment  provisions  for  stock  splits,   combinations,
dividends  and the like.  The  investors may exercise the warrants on a cashless
basis if the shares of common  stock  underlying  the  Warrants  are  registered
pursuant  to  an  effective  registration  statement.  At  any  time  after  the
registration  statement is effective,  the Warrants are callable by the Company,
upon 10 days written notice, should the common stock trade at or above $1.25 per
share for 20 consecutive trading days.

     The Company paid the  placement  agent of the  offering,  Vertical  Capital
Partners, Inc., a commission fee of 10% of the proceeds of the offering and a 3%
non-accountable  expense  allowance.  In  addition,  Vertical  Capital  Partners
received 1,194,000 shares of common stock.

Item 2.03 Creation of a Direct Financial Obligation.

         See Item 1.01 above.

Item 3.02 Unregistered Sales of Equity Securities.

         See Item 1.01 above.

                                       2
<PAGE>
Item 9.01 Financial Statements and Exhibits.

(a)      Financial statements of business acquired.

         Not applicable.

(b)      Pro forma financial information.

         Not applicable.

(c)      Exhibits.

Exhibit Number
                               Description
- -------------- -----------------------------------------------------------------
4.1            Form of Subscription Agreement

4.2            Form of 10% Secured Convertible Promissory Note

4.3            Form of Warrant Agreement

4.4            Registration  Rights Agreement,  dated January 28, 2005,  between
               the Company and Vertical Capital Partners, Inc., on behalf of the
               investors

4.5            Security  Agreement,  dated January 28, 2005, between the Company
               and Vertical Capital Partners, Inc., on behalf of the investors

                                       3
<PAGE>

                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.

                                                   Applied DNA Sciences, Inc.


Date: January 28, 2005                              /s/ PETER BROCKLESBY
                                                   ---------------------
                                                   Peter Brocklesby
                                                   President





</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>2
<FILENAME>jan2820058kex41.txt
<TEXT>


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

Exhibit 4.1




                             SUBSCRIPTION AGREEMENT


                        Investor Financial Questionnaire
- --------------------------------------------------------------------------------



     Before you make an investment, you must complete this questionnaire. Please
     check  the  appropriate  box below  and sign  this  questionnaire  before a
     notary. We require that this be returned with your  Subscription  Agreement
     for your  purchase of Common  Shares of Applied  DNA  Sciences,  Inc.  (the
     "Company").  Information will be held in strict  confidence and used solely
     to ensure that all  prospective  investors are qualified under the relevant
     sections of the Securities Act of 1933.

     [ ] I am a natural  person who has had  individual  income of more than Two
     Hundred Thousand US Dollars (US $200,000.00) in each of the most recent two
     years,  or joint income with my spouse in excess of Three Hundred  Thousand
     US  Dollars  (US  $300,000.00)  in each of the most  recent  two  years and
     reasonably  expect to reach that same  income  level for the  current  year
     ("income"  for purposes  hereof  should be computed as follows:  individual
     adjusted gross income as reported,  or to be reported,  on a federal income
     tax return, increased by (i) any deduction of long-term capital gains under
     section 1202 of the Internal Code of 1936 (the "Code"),  (ii) any deduction
     or depletion  under  Section 611 et. seq. of the Code,  (iii) any exclusion
     for  interest  under  Section  103 of the Code and  (iv)  any  losses  of a
     partnership as reported in Schedule E of Form 1040;

     [ ] The  Subscriber is a natural  person whose  individual  net worth (i.e.
     total  assets in excess of total  liabilities),  or joint net worth with my
     spouse,  will at the time of purchase of the Common  Shares be in excess of
     One Million US Dollars (US $1,000,000.00);

     [ ] The Subscriber is an investor  satisfying the  requirements  of Section
     501(a)(1)(2) or (3) of Regulation D promulgated under the Securities Act of
     1933,  which  includes,  but is not  limited to, a  self-directed  employee
     benefit plan where investment  decisions are made solely by persons who are
     "accredited investors" as otherwise defined in Regulation D;

     [ ] The  Subscriber  is a trust,  which trust has total assets in excess of
     Five  Million US Dollars  (US  $5,000,000.00)  which was not formed for the
     specific  purpose of acquiring the Common Shares  offered  hereby and whose
     purchase  is  directed  by a  sophisticated  person  as  described  in Rule
     506(b)(ii)  of Regulation D and who has such  knowledge  and  experience in
     financial and business  matters that he is capable of evaluating  the risks
     and merits of an investment in the Common Shares;

     [ ] The Subscriber is a director or executive officer of the Company;

     [ ] The  Subscriber  is an entity  (other than a trust) in which all of the
     equity  owners  meet  the  requirements  of  at  least  one  of  the  above
     paragraphs; or

     [ ] The  Subscriber  is not a resident of the United State of America,  but
     acknowledges  he/she meets or exceeds at least one of the minimum financial
     requirements set forth above.

     I represent  that I have reviewed the Company's  information  as filed with
     the US Securities and Exchange Commission, and that I understand the merits
     and the risks involved in this offering,  that I have sufficient  knowledge
     and  experience in similar  programs or  investments to evaluate the merits
     and risks of an  investment  in the  Company  (or that I have  retained  an
     attorney,  accountant,  financial  advisor or  consultant  as my  purchaser
     representative);  that  because of my  background,  employment  experience,
     family or financial situation or economic bargaining power,

                                        1

     I have  received and have had access to material  and relevant  information
     enabling  me  to  make  an  informed  investment  decision,  and  that  all
     information I have  requested has been  furnished to me; and that I am able
     to bear the economic risk of loss of the entire investment which I may make
     in the Company.



     By,_______________________________________

     PRINT NAME
     ________________________________________
     Investor Signature

     With a current address of__________________________________________________

     In the City of____________________________, State/Province of ____________,

     Country of_______________

     DATE:_____, December, 2004


     IN WITNESS WHEREOF, I have hereunto witnessed the signature of the
     above Investor;

     By,___________________________________________

     ______________________________________________
     Witness Signature

     Date:___________________

                                       2
<PAGE>

- --------------------------------------------------------------------------------
                APPLIED DNA SCIENCES, INC. SUBSCRIPTION AGREEMENT
- --------------------------------------------------------------------------------


          1.   Subscription.   Subject  to  the  terms  and  conditions  hereof,
     __________________  __________________________,  the  undersigned  Investor
     ("Investor")  hereby  subscribes  to  purchase  _____  units of the Private
     Placement  offering by Applied DNA Sciences Inc.,  dated December 30, 2004.
     to which the terms and conditions of the offer are:

     Applied DNA  Sciences,  Inc.,  a Nevada  corporation  (the  "Company"),  is
     offering up to One Hundred and twenty (120 units (the  "Units") for sale to
     accredited   investors  at  a  price  of  US  Dollars  Fifty   Thousand  US
     ($50,000.00) per Unit (the "Offering") on a "best efforts" no minimum, with
     a maximum offering basis of Six Million US Dollars (US $6,000,000.00). Each
     Unit consists of (i) a US Dollars Fifty Thousand US ($50,000.00)  Principal
     Amount Ten Percent (10.0%) Secured  Convertible  Promissory Note ("Note" or
     "Notes")  and (ii)  warrants to purchase  One  Hundred  Thousand  (100,000)
     shares of the Company's common stock,  exercisable for a period of five (5)
     years  at  a  price  of  US  Seventy   Five  Cents  (US  $0.75)  per  share
     ("Warrants"). The warrants are callable anytime after the underlying shares
     are  registered  if the stock  trades above $1.25 per share for twenty (20)
     trading days. The Notes are convertible  into shares of common stock of the
     Company  at a price of US Fifty  Cents  (US  $0.50)  per  share,  and shall
     automatically convert on the filing of the registration statement indicated
     below.

          2. Private Placement.  The parties  acknowledge that this offering has
     been  made and this  Subscription  Agreement  has  been  entered  into as a
     private placement negotiated between the parties dated December 30, 2004.

          3.  Registration  Rights. By accepting this  subscription,  and as set
     forth in greater detail in the Registration  Rights Agreement,  the Company
     hereby  agrees to include  any shares  purchased  in its next  registration
     statement  filed with the  Securities  and  Exchange  Commission  under the
     Securities  Act of 1933,  as amended and which  registration  statement the
     Company  commits  to file on Form  S-1,  SB2 or other  required  form on or
     before February 15th, 2005. The Company will pay liquidated  damages in the
     amount of Three and a Half Percent  (3.5%) per month for each month or part
     thereof that the  registration  statement is delayed beyond  February 15th,
     2005 and said  penalty  will also take effect if the company  does not have
     the Registration  statement  declared effective within 120 days of February
     15, 2005.

          4.  Knowledge of Financial  and Business  Status of Company.  Investor
     acknowledges  that he has been  involved  with the  Company for a period of
     time, has met in person or telephonically with management immediately prior
     to this investment, and has reviewed the current financial condition of the
     Company and its business  plan.  Investor is aware that the Company and the
     Company's  subsidiary  requires  net capital and the  Company,  as a whole,
     needs operating capital without which it may become insolvent.

          5.  Representations  and Warranties.  In  consideration of the sale of
     such common shares, intending to be legally bound and intending the Company
     to rely thereupon, Investor hereby represents,  warrants, and covenants, to
     the Company as follows:

     Neither  the  Company  nor any person  acting on behalf of the  Company has
     offered to sell,  offered  for sale or sold the Units,  Notes,  Warrants or
     Underlying  Common  Stock  (collectively,  the  "Securities")  by  means of
     general  solicitation  or general  advertising.  Investor has not received,
     paid or given,  directly or indirectly,  any commission or remuneration for
     or because of any sale or the solicitation of any sale of the Securities.

                                       3
<PAGE>

     Company  represents and warrants that the Common Shares being issued herein
     are restricted under SEC Rule 144, and Investor is aware of restricted sale
     provisions that make up Rule 144.

     Investor  has been  offered  full  access to all  underlying  documents  in
     connection  with this  transaction  as well as such  other  information  as
     Investor   has  deemed   necessary  or   appropriate   for  a  prudent  and
     knowledgeable  investor to  evaluate  the  purchase  of the Common  Shares.
     Investor  acknowledges  that the Company has made available to Investor the
     opportunity to obtain additional information from, to ask questions of, and
     receive  satisfactory  answers from the officers of the Company  concerning
     the  terms and  conditions  of the  private  placement  and to  verify  the
     information  given.  Investor  is  satisfied  that  there  is  no  material
     information concerning the condition, properties,  operations and prospects
     of  the  Company  of  which  Investor  is  unaware.  In  making  his or her
     investment decision, Investor has relied solely upon his or her independent
     investigation of the investment.

     Investor  is  aware  that  an  investment  in the  Securities  is a  highly
     speculative investment that involves a substantial degree of risk. Investor
     warrants that he/she has such sufficient requisite knowledge and experience
     in business and  financial  matters that  Investor is capable of evaluating
     the merits and risks of an  investment  in the  Company,  which is an early
     stage  business.  Investor  understands  that the  Company  is  relying  on
     Investor's  representations  for  the  purposes  of  confirming  Investor's
     suitability as an investor in the Company.

     Investor is aware that the Securities  have not been  registered  under the
     Securities  Act of 1933 (the "Act"),  and that Investor must therefore bear
     the economic risk of the  investment  indefinitely  because the  Securities
     cannot be sold  unless  subsequently  registered  under the Act or under an
     available  exemption  from  registration.  Investor  agrees not to sell his
     Common  Shares  without  registration  under the Act and  applicable  state
     securities laws unless in a transaction exempt therefrom.

     The Units for which  Investor  hereby  subscribes  are being  acquired  for
     investment purposes, solely for Investor's own account and not on behalf of
     other  persons,  and not  with a view to or for the  resale,  distribution,
     subdivision, or fractionalization thereof; Investor has no present plans to
     enter into any contract,  undertaking,  agreement,  or arrangement  for any
     such  resale,  distribution,  subdivision,  or  fractionalization  thereof.
     Investor  agrees  that he or she  will  not  sell,  assign,  pledge,  give,
     transfer  or  otherwise  dispose of any or all of the Common  Shares or any
     interest therein unless and until Investor has complied with all applicable
     provisions of federal and state securities laws.

     Investor has reviewed his or her financial condition and commitments. Based
     upon such review,  Investor is satisfied  that he or she has adequate means
     of providing for his or her financial needs and possible  contingencies  as
     well as  those  of any  dependents,  and  that he or she  does not have any
     current  or  foreseeable  future  need for  liquidity  of the  funds  being
     utilized  in the  purchase  of the Common  Shares.  Investor  is capable of
     bearing the economic  risk of the  investment  in the Common Shares for the
     indefinite  future. At this time,  Investor has assets or sources of income
     that, if taken  together,  are more than  sufficient so that Investor could
     bear the risk of loss of its,  his or her entire  investment  in the Common
     Shares.


                                    4
<PAGE>

     Investor is aware that this  transaction  is a "private  placement" and has
     not been reviewed by the United States  Securities and Exchange  Commission
     or by any state securities  authorities.  No agency,  federal or state, has
     passed upon the fairness or merits of this investment.

     Investor is aware that the assets of the Company are  presently  encumbered
     by the Bridge  Note  investors  and that up to US Dollars  One  Million Six
     Hundred Thousand (US  $1,600,000.00) of this investment may be allocated to
     pay back the Bridge Note holders.  On December 10th 2004 the Company signed
     a letter agreement with Vertical Capital Partners to act on a non-exclusive
     basis as a Placement Agent for all or part of this Placement.  Further, the
     Investor acknowledges as does the Company that a pre-existing  relationship
     exists  between  the  parties  that dates back prior to the  engagement  of
     Vertical. As part of the Agreement,  Vertical has committed to use its best
     efforts  to raise Two  Million  US Dollars  (US  $2,000,000.00)  of the Six
     Million US Dollars (US  $6,000,000.00)  contemplated  in this  Subscription
     Agreement. Vertical has also committed to use its best efforts to cause its
     Bridge Note Holders to convert on or about  December  31st,  2004,  thereby
     removing the need to repay the Bridge Note holders referred to herein.

     Neither this Subscription Agreement nor Investor's rights hereunder, may be
     assigned, sold or transferred in any manner and this Subscription Agreement
     may not be altered, amended or revoked without the prior written consent of
     the President of the Company.

     Investor is a bona fide resident as set forth next to Investor's signature,
     such location is Investor's principal  residence,  and Investor is at least
     18 years of age.

     Investor  understands  and  agrees  that  if  Investor's   subscription  is
     accepted, Investor will be required to execute such additional documents as
     may be  necessary  to effect the issuance of the  Company's  Common  Shares
     which Investor has purchased.

     The  foregoing  representations,  warranties  and  covenants  are  true and
     accurate  as of the date  hereof and shall be true and  accurate  as of the
     date of completion of the Private Placement.  If such  representations  and
     warranties  shall  not be  true  and  accurate  in  any  respect  prior  to
     completion of the Private Placement,  Investor shall give written notice of
     such fact to the Company,  specifying which  representations and warranties
     are not true and accurate and the reasons therefore.


          6.  Escrow  Account.  Funds  should  be sent by wire  transfer  to the
     following  escrow  account:  Bank: Bank of New York, Mt. Freedom New Jersey
     Name:  Escrow Account Applied DNA Sciences Inc. Account # 2 Routing number:
     021000018 Account Number: 6175822540

          7. Miscellaneous.

     This  Subscription  Agreement  constitutes the entire agreement between the
     parties with respect to the subject  matter hereof and supersedes all prior
     negotiations  and  understandings  which are  deemed  to have  been  merged
     herein. No representations  were made or relied upon by either party, other
     than those expressly set forth herein.  The investor has been provided with
     a copy of the Private  Placement  Memorandum  outlining the business of the
     Company along with the terms of the offering.

                                       5
<PAGE>
     This  writing  shall  be  amended  only by a  further  writing.  No  agent,
     employee, or other representative of any party is empowered to alter any of
     the terms hereof,  including  specifically  this Paragraph,  unless done in
     writing and signed by both parties.

     Whenever  required by the context  hereof:  the  masculine  gender shall be
     deemed to include the feminine and neuter; and the singular member shall be
     deemed to include  the  plural.  Time is  expressly  declared  to be of the
     essence  of this  Agreement.  This  Agreement  shall be deemed to have been
     mutually  prepared by all parties  and shall not be  construed  against any
     particular party as the draftsman. The invalidity of any one or more of the
     words, phrases,  sentences,  clauses,  sections or subsections contained in
     this  Agreement  shall  not  affect  the  enforceability  of the  remaining
     portions of this  Agreement or any part  hereof,  all of which are inserted
     conditionally  on their being valid in law,  and, in the event that any one
     or more of the words, phrases, sentences,  clauses, sections or subsections
     contained  in this  Agreement  shall  be  declared  invalid  by a court  of
     competent  jurisdiction,  this  Agreement  shall  be  construed  as if such
     invalid word or words, phrase or phrases, sentence or sentences,  clause or
     clauses,  section or sections,  or subsection or  subsections  had not been
     inserted.

     The validity,  interpretation,  and  performance of this Agreement shall be
     controlled  by and construed  under the laws of the State of Nevada.  Venue
     and jurisdiction of any controversy or claim arising out of, or relating to
     this Subscription Agreement, or the breach thereof, that cannot be resolved
     by negotiation,  shall be in the County of Las Vegas,  State of Nevada.  In
     any legal action or other  proceeding  involving,  arising out of or in any
     way relating to this Agreement,  the prevailing  party shall be entitled to
     recover reasonable attorneys' fees, costs, and expenses of litigation.

     The failure of any party to object to, or to take  affirmative  action with
     respect to, any conduct of any other  party  which is in  violation  of the
     terms  of  this  Agreement  shall  not be  construed  as a  waiver  of such
     violation  or  breach,  or of any future  breach,  violation,  or  wrongful
     conduct.  No delay or failure by any party to exercise any right under this
     Agreement,  and  no  partial  or  single  exercise  of  that  right,  shall
     constitute  a waiver  or  exhaustion  of that or any  other  right,  unless
     otherwise expressly provided herein.

     Headings in this Subscription  Agreement are for convenience only and shall
     not be used to interpret or construe its provisions.

     This  Subscription  Agreement may be executed in two or more  counterparts,
     each of which shall be deemed an original but all of which  together  shall
     constitute one and the same instrument. The provisions of this Subscription
     Agreement  shall be  binding  upon and inure to the  benefit of each of the
     parties and their respective successors and assigns.

          8. Company Contact Details.

     Applied DNA Sciences, 9229 West Sunset Boulevard,  Suite #830, Los Angeles,
     CA 90069

     Facsimile: 818-860-1303
     Tel: 310-860-1362
     President: Peter Brocklesby, ext 123 or
     COO & Secretary: Ms. Karin Klemm, ext 124

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
                                       6
<PAGE>

     IN WITNESS  WHEREOF,  the  undersigned  has  executed  and  delivered  this
     Subscription Agreement dated this day of December, in the year 2004.

     By, _______________________________________
         PRINT NAME:

     __________________________
     (Signature of INVESTOR)

     With a current address of _________________________________________________

     In the City of_________________________, State/Province of _______________,
     Country of_______________

     ACCEPTED: APPLIED DNA SCIENCES, INC.

     By, __________________                 Title:____________________________
         Signature of Officer

     ________________________
     Name:

     DATE,__________ __, December, 200__


                                       7
<PAGE>
- --------------------------------------------------------------------------------

                        Securities Issuance Instructions
- --------------------------------------------------------------------------------


     THE   UNDERSIGNED,   AS  A  CONDITION  TO  PURCHASE   ________  UNITS  (THE
     "SECURITIES")  OF APPLIED DNA  SCIENCES,  INC., A NEVADA  CORPORATION  (THE
     "COMPANY"), HEREBY CERTIFIES TO THE COMPANY AS FOLLOWS:

     1. I,  __________________________  (Purchaser Name) am purchasing the Units
     (the "Securities") on this ________day of ____________, in the year 20____,
     in my own name and for my own  account  (or for a trust  account  if I am a
     trustee),  and no other person has any interest in or right with respect to
     the  Securities,  nor have I agreed to give any person any such interest or
     right in the future.

     2. I am acquiring the  Securities  for investment and not with a view to or
     for sale in connection with any distribution of the Securities. I recognize
     that the Securities have not been registered  under the Federal  Securities
     Act  of  1933,  that  any  disposition  of the  Securities  is  subject  to
     restrictions  imposed  by federal  and state law and that the  certificates
     representing  the  Securities  will  bear  a  restrictive  legend.  I  also
     recognize that I cannot dispose of the Securities  absent  registration and
     qualification,   or  an   available   exemption   from   registration   and
     qualification.  I understand  that the  availability of an exemption in the
     future will depend in part on  circumstances  outside my control and that I
     may be  required  to  hold  the  Securities  for a  substantial  period.  I
     understand  that the United States  Securities and Exchange  Commission has
     made no finding or determination relating to the fairness for investment of
     the  Securities  offered by the Company and that the Commission has not and
     will not recommend or endorse the Securities.

     3. I have not seen or received any  advertisement  or general  solicitation
     with respect to the sale of the Securities.

     4. I believe,  by reason of my business or financial  experience  that I am
     capable  of  evaluating  the  merits  and risks of this  investment  and of
     protecting my own interests in connection with this investment.

     5. I acknowledge  that during the course of this  transaction  and prior to
     purchasing  the  Securities I have been provided  with  financial and other
     written information about the Company, I have been given the opportunity by
     the Company to obtain such  information  and ask such questions  concerning
     the Company, the Securities,  and my investment as I felt necessary, and to
     the extent I availed myself of such  opportunity,  I received  satisfactory
     information and answers. If I requested any additional  information,  which
     the Company  possessed  or could  acquire  without  unreasonable  effort or
     expense and which was necessary to verify the accuracy of the financial and
     other written information  furnished to me by the Company,  that additional
     information  was  provided to me. In reaching the decision to invest in the
     Securities,   I  have  carefully   evaluated  my  financial  resources  and
     investment  position and the risks associated with this  investment,  and I
     acknowledge that I am able to bear the economic risks of this investment. I
     further acknowledge that my financial condition is such that I am not under
     any present necessity or constraint to dispose of the Securities to satisfy
     any existent or contemplated debt or undertaking.

                                       8
<PAGE>
     Please PRINT below the exact information regarding the Purchaser:

     INDIVIDUAL

     ___________________________________________________________________________
     Individual Name(s)

     ___________________________________________________________________________
     Citizenship

     ___________________________________________________________________________
     Street Address, City, State/Province/Country and Postal Code

     ___________________________________________________________________________
     Signature (All record holders should sign)

     Telephone Number: ______________      Fax Number:__________________________

     E-Mail Address: ___________________________________________________________

     I wish to receive news announcements and information about the company

     YES ____  NO ______ (check one)

     If yes to the above, Applied DNA, Inc. may contact me via:

     Fax: _____e-mail ____Telephone ___ (check one or more)


     CORPORATION, PARTNERSHIP, TRUST, OR OTHER ENTITY

     ___________________________________________________________________________
     Name of Entity

     Name,  Address(es),  and Country of  Citizenship  of each of the beneficial
     Owners of the Entity:
     ___________________________________________________________________________

     ___________________________________________________________________________
     ___________________________________________________________________________
      Address(es) to Which Correspondence should be Directed

     ___________________________________________________________________________

     ___________________________________________________________________________
     Type of Entity (i.e., corporation, partnership etc)

     ___________________________________________________________________________
     State/Province/ Country of Formation of Entity

     By:____________________________________ Printed Name:______________________

     Its:____________________________________

     Title: _________________________________

     Telephone Number: ____________________Fax Number:__________________________

     E-Mail Address: ___________________________________________________________

     I wish to receive news announcements and information about the company

     YES ____  NO ______ (check one)

     If yes to the above, Applied DNA, Inc. may contact me via:

     Fax: _____e-mail ____ Telephone ______(check one or more)

     If Securities  are being  subscribed for by an entity,  the  Certificate of
     Signatory below must be completed.

     CERTIFICATE OF SIGNATORY

     To be completed if Securities are being subscribed for by an entity.

     I,________________________________, am the ________________________________

     of_________________________________________________________(the "Entity ").

     I certify that I am empowered and duly  authorized by the Entity to execute
     and  carry  out the  terms of the  Subscription  Agreement  and  Securities
     Issuance Instructions to purchase and hold the Securities, and certify that
     the Subscription  Agreement and Securities Issuance  Instructions have been
     duly and validly  executed on behalf of the Entity and constitute legal and
     binding obligations of the Entity.

     IN WITNESS WHEREOF, I have hereto set my hand this ____day of______, 20___.

     __________________________________
     Signature

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>3
<FILENAME>jan2820058kex42.txt
<TEXT>

EXHIBIT 4.2

THIS NOTE AND THE COMMON STOCK REFERENCED  HEREIN HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR UNDER THE PROVISIONS
OF ANY APPLICABLE STATE SECURITIES LAWS, BUT HAS BEEN ACQUIRED BY THE REGISTERED
HOLDER HEREOF FOR PURPOSES OF INVESTMENT AND IN RELIANCE ON STATUTORY EXEMPTIONS
UNDER THE 1933 ACT, AND UNDER ANY APPLICABLE STATE SECURITIES LAWS.  NEITHER THE
NOTE NOR THE COMMON STOCK MAY BE SOLD,  PLEDGED,  TRANSFERRED OR ASSIGNED EXCEPT
IN A  TRANSACTION  WHICH  IS  EXEMPT  UNDER  PROVISIONS  OF THE 1933 ACT AND ANY
APPLICABLE  STATE  SECURITIES  LAWS OR  PURSUANT  TO AN  EFFECTIVE  REGISTRATION
STATEMENT; AND IN THE CASE OF AN EXEMPTION,  ONLY IF THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL  SATISFACTORY TO THE COMPANY THAT SUCH  TRANSACTION  DOES NOT
REQUIRE REGISTRATION OF THIS NOTE.

This  note is one of a  series  issued  in the  aggregate  principal  amount  of
$_________.

                           APPLIED DNA SCIENCES, INC.


___________ __, 2005                                                     $50,000

                     10% SECURED CONVERTIBLE PROMISSORY NOTE

Applied DNA Sciences, Inc. (the "Company"),  for value received, hereby promises
to pay to  _________________  or registered assigns (the "Holder") twelve months
from the date hereof on  _______________,  2006,  the "Maturity  Date"),  at the
principal  offices of the Holder,  the principal sum of FIFTY  THOUSAND  DOLLARS
($50,000)  in such coin or  currency  of the United  States of America as at the
time of  payment  shall be legal  tender for the  payment of public and  private
debts,  and to pay interest on the outstanding  principal sum hereof at the rate
of ten percent (10%) per annum. Any principal payment or interest payment on the
unpaid  principal amount of this Note not paid when due, whether at the Maturity
Date, on the effective date of an Early  Termination  Event,  by acceleration or
otherwise,  shall bear  interest at twelve  percent  (12%) or the  maximum  rate
permissible  by law,  whichever  is  less.  Payment  of  Principal  and  accrued
interest, if any, shall be payable on the Maturity Date in like coin or currency
to the Holder  hereof at the address of the Holder  designated  above or at such
other place as the Holder  shall have  notified  the Company in writing at least
five (5) days before the Maturity Date,  provided that any payment otherwise due
on a  Saturday,  Sunday  or  legal  Bank  holiday  may be paid on the  following
business day.

          This Note is secured by all the assets of the  Company  including  but
not limited to patents, licenses,  equipment,  fixtures,  inventory and accounts
receivable,  for the benefit of the Holder  pursuant to a Security  Agreement of
even date  herewith  ("Security  Agreement").  Reference  herein to the Security
Agreement  shall in no way impair the absolute and  unconditional  obligation of
the Company to pay both principal and interest hereon as provided herein.

          The rights and  remedies  of the Holder  hereunder  are subject to the
terms and conditions of the Security Agreement  including,  without  limitation,
powers with respect to the  enforceability and collectibility of all amounts due
hereunder.   Reference  to  the  Security  Agreement  is  made  for  a  complete
description of the rights, powers and obligations of the Holder.

                                       1
<PAGE>

          1. Transfers of Note to Comply with the 1933 Act

          The  Holder  agrees  that  this  Note  may not be  sold,  transferred,
pledged,  hypothecated  or  otherwise  disposed of except as  follows:  (1) to a
person whom the Note may legally be transferred without registration and without
delivery of a current  prospectus  under the 1933 Act with  respect  thereto and
then only  against  receipt of an  agreement  of such  person to comply with the
provisions of this Section 1 with respect to any resale or other  disposition of
the Note;  or (2) to any person upon  delivery of a prospectus  then meeting the
requirements  of the 1933  Act  relating  to such  securities  and the  offering
thereof  for  such  sale  or  disposition,  and  thereafter  to  all  successive
assignees.

          2. Prepayment; Repayment Upon Consolidation or Merger.

          (a) The  principal  amount of this Note may be prepaid by the Company,
in whole or in part without premium or penalty, at any time. Upon any prepayment
of the entire principal amount of this Note, all accrued,  but unpaid,  interest
shall be paid to the Holder on the date of  prepayment.  The date upon which the
Company  prepays the principal plus all accrued and unpaid  interest due on this
Note shall be hereinafter referred to as the "Prepayment Date."

          (b) This Note shall be paid in full, without premium, in the event the
Company consolidates or merges with another corporation,  unless (i) the Company
shall be the surviving  corporation in such  consolidation or merger or (ii) the
other corporation controls, is under common control with or is controlled by the
Company  immediately  prior to the  consolidation  or merger  whether or not the
Company shall be the surviving  corporation in such  consolidation or merger, in
which  event  this  Note  shall  remain  outstanding  as an  obligation  of  the
consolidated or surviving corporation.

          3. Conversion of Note

          (a) This Note shall automatically  convert into shares of Common Stock
of the Company upon the filing of a  registration  statement with the Securities
and Exchange  Commission for Common Stock of the Company.  The  conversion  rate
shall be $.50 per  share,  and the  entirety  of the debt  shall be  applied  to
purchase of Common Stock at such price.

          (b) The Holder shall have the right from time to time, and at any time
on or prior to the Maturity  Date, to convert all or any part of the entirety of
the debt then  outstanding  under this Note into  fully paid and  non-assessable
shares of Common  Stock,  as such Common Stock exists on the issue date,  or any
shares of  capital  stock or other  securities  of the  Company  into which such
Common Stock shall hereafter be changed or  reclassified  at a conversion  price
equal to $.50 per share;

                                       2
<PAGE>
          (c)  Notwithstanding  the  foregoing,  in the event  that any sums due
under this Note are not repaid on the  Maturity  Date,  the Holder will have the
option to convert the entirety of the debt then outstanding under this Note into
fully paid and  non-assessable  shares of Common  Stock,  as such  Common  Stock
exists on the issue date, or any shares of capital stock or other  securities of
the  Company  into  which  such  Common  Stock  shall  hereafter  be  changed or
reclassified  at a  conversion  price  equal to the number of Shares  derived by
dividing  the sum of such debt by the dollar  value  equal to 80% of the closing
ask price of the  Shares  on the last  trading  day  immediately  preceding  the
Maturity  Date as  reported  on the market  upon which the Shares  shall then be
trading,  provided,  however, that the conversion price shall never be less than
$0.33 per share. .

          4. Covenants of Company

          The Company covenants and agrees that, so long as any principal of, or
interest on, this Note shall remain  unpaid,  unless the Holder shall  otherwise
consent in writing, it will comply with the following terms:

          (a) Reporting Requirements. The Company will furnish to the Holder:

               (i) as soon as  possible,  and in any event  within ten (10) days
after  obtaining  knowledge  of the  occurrence  of (A) an Event of Default,  as
hereinafter  defined, (B) an event which, with the giving of notice or the lapse
of time or both, would constitute an Event of Default, or (C) a material adverse
change in the condition or operations,  financial or otherwise,  of the Company,
taken as whole,  the written  statement  of the Chief  Executive  Officer or the
Chief Financial Officer of the Company,  setting forth the details of such Event
of Default,  event or material  adverse  change and the action which the Company
proposes to take with respect thereto;

               (ii) promptly after the sending or filing thereof,  copies of all
financial  statements,  reports,  certificates of its Chief  Executive  Officer,
Chief Financial  Officer or accountants and other  information which the Company
or any subsidiary sends to any holders (other than the Notes) of its securities;

               (iii) promptly  after the  commencement  thereof,  notice of each
action,  suit or proceeding before any court or other governmental  authority or
other  regulatory  body or any  arbitrator  as to which  there  is a  reasonable
possibility of a determination  that would (A) materially  impact the ability of
the  Company or any  subsidiary  to conduct its  business,  (B)  materially  and
adversely affect the business,  operations or financial condition of the Company
taken as a whole, or (C) impair the validity or  enforceability  of the Notes or
the ability of the Company to perform its obligations under the Notes;

               (iv) promptly upon request, such other information concerning the
condition or  operations,  financial or otherwise,  of the Company as the Holder
from time to time may reasonably request.

                                       3
<PAGE>
          (b) Taxes.  The Company has filed or will file all federal,  state and
local  tax  returns  required  to be  filed or sent or has  obtained  extensions
thereof.  Except as  otherwise  disclosed,  the  Company has timely paid or made
provision for all taxes shown as due and payable on its tax returns  required to
be filed  prior to the date hereof and all  assessments  received by the Company
and will  timely pay all taxes that will be shown as due and  payable on its tax
returns  required to be filed after the date  hereof,  except to the extent that
the Company  shall be  contesting  such taxes and  assessments  in good faith by
appropriate proceedings.

          (c)  Compliance  with Laws.  The Company will comply,  in all material
respects with all applicable laws, rules,  regulations and orders, except to the
extent  that  noncompliance  would not have a material  adverse  effect upon the
business, operations or financial condition of the Company taken as a whole.

          (d)  Keeping of Records and Books of  Account.  The Company  will keep
adequate records and books of account,  with complete entries made in accordance
with generally accepted accounting  principles,  reflecting all of its financial
and other business transactions.

          (e) Negative  Covenants.  The Company  covenants and agrees that while
this Note is outstanding it will not directly or indirectly:

               (i) Incur any indebtedness  (other than in the ordinary course of
its business) or grant any liens with respect to any of its assets,  without the
written consent of the Holder (which shall not be unreasonably withheld);

               (ii)  Guaranty or otherwise  in any way become or be  responsible
for indebtedness  for borrowed money, or for obligations,  in either case of any
of its officers, directors or principal stockholders or any of their affiliates,
contingently or otherwise,  other than such  guaranties  existing as of the date
hereof,  or in any way fail to comply with the provisions of the  Sarbanes-Oxley
Act of 2002;

               (iii) Declare or pay cash dividends;

               (iv) Sell,  transfer or dispose of, any of its assets  other than
in the ordinary course of its business and for fair value;

               (v) Purchase,  redeem,  retire or otherwise acquire for value any
of its capital stock now or hereafter outstanding; or

               (vi) Repay out of the proceeds of this Note any  indebtedness for
borrowed  funds or any related  party  obligations  except for Notes  heretofore
issued to persons to  investors  through  offerings  in which  Vertical  Capital
Partners, Inc acted as placement agent.

          (f)  Security  Interest.  Except  with  respect to prior  Notes of the
Company sold through offerings in which Vertical Capital Partners, Inc. acted as
placement  agent and which the Company intends either to repay with the proceeds
of these Notes or effect a conversion into Common Stock, the Company  represents

                                       4
<PAGE>
and warrants that it has not granted any other party a security  interest in any
of its (or its subsidiaries) patents, licenses,  equipment,  fixtures, inventory
or accounts receivable.  The Company certifies under penalty of perjury that the
security  interest in the collateral is not pledged and the Holder will assume a
senior security position on such collateral.

          5. Events of Default and Remedies

          (a) Any one or more of the following  events which shall have occurred
and be continuing shall constitute an event of default (Event of Default):

               (i) Default in the payment of the  principal or accrued  interest
on this Note or upon any other indebtedness of the Company after the date hereof
that is greater than $100,000, as and when the same shall become due, whether by
default or otherwise,  which  Default shall have  continued for a period of five
(5) business days; or

               (ii) Any  representation  or warranty  made by the Company or any
officer of the Company in the Notes, or in any agreement, report, certificate or
other  document  delivered  to the Holder  pursuant to the Notes shall have been
incorrect in any material  respect when made which shall not have been  remedied
ten (10) days after written  notice thereof shall have been given by the Holder;
or

               (iii)  The   Company   shall  fail  to  perform  or  observe  any
affirmative covenant contained in Section 4 of this Note or any of the Notes and
such  Default,  if capable of being  remedied,  shall not have been remedied ten
(10) days after written notice thereof shall have been given by the Holder; or

               (iv) The  Company  or any  subsidiary  (A)  shall  institute  any
proceeding or voluntary case seeking to adjudicate it bankrupt or insolvent,  or
seeking  dissolution,  liquidation,  winding  up,  reorganization,  arrangement,
adjustment,  protection,  relief or composition of it or its debts under any law
relating to bankruptcy,  insolvency or reorganization  or relief of debtors,  or
seeking  the entry of any order for  relief or the  appointment  of a  receiver,
trustee,  custodian  or other  similar  official  for such  the  Company  or any
subsidiary or for any substantial part of its property,  or shall consent to the
commencement against it of such a proceeding or case, or shall file an answer in
any such case or proceeding commenced against it consenting to or acquiescing in
the commencement of such case or proceeding, or shall consent to or acquiesce in
the appointment of such a receiver,  trustee, custodian or similar official; (B)
shall be unable to pay its debts as such debts  become  due,  or shall  admit in
writing its  inability  to apply its debts  generally;  (C) shall make a general
assignment  for the  benefit  of  creditors;  or (D)  shall  take any  action to
authorize  or  effect  any of the  actions  set forth  above in this  subsection
5(a)(iv); or

               (v) Any  proceeding  shall  be  instituted  against  the  Company
seeking  to  adjudicate  it a bankrupt  or  insolvent,  or seeking  dissolution,
liquidation, winding up, reorganization,  arrangement,  adjustment,  protection,
relief  of  debtors,  or  seeking  the  entry  of an  order  for  relief  or the
appointment of a receiver,  trustee, custodian or other similar official for the
Company or for any substantial part of its property,  and either such proceeding
shall not have been  dismissed  or shall  not have been  stayed  for a period of


                                       5
<PAGE>
sixty  (60) days or any of the  actions  sought in such  proceeding  (including,
without  limitation,  the  entry  of any  order  for  relief  against  it or the
appointment of a receiver,  trustee,  custodian or other similar official for it
or for any substantial part of its property) shall occur; or

               (vi) One or more final  judgments,  arbitration  awards or orders
for the  payment  of money in  excess  of  $100,000  in the  aggregate  shall be
rendered against the Company, which judgment remains unsatisfied for thirty (30)
days after the date of such entry.

               (vii) Delisting of the Common Stock from the principal  market or
exchange on which the Common Stock is listed for trading;  Company's  failure to
comply with the conditions for listing;  or notification that the Company is not
in compliance with the conditions for such continued listing.

               (viii)  The  issuance  of an SEC  stop  trade  order  or an order
suspending  trading of the Common Stock from the principal market or exchange on
which the Common  Stock is listed for  trading  for longer than five (5) trading
days.

               (ix) The failure by the Company to issue  shares of Common  Stock
to the Holder upon exercise by the Holder of the conversion rights of the Holder
in  accordance  with the terms of this Note, or the failure to transfer or cause
its transfer  agent to transfer  (electronically  or in  certificated  form) any
certificate  for shares of Common Stock issued to the Holder upon  conversion of
or  otherwise  pursuant to this Note as and when  required by this Note,  or the
failure  to remove any  restrictive  legend (or to  withdraw  any stop  transfer
instructions  in respect  thereof) on any  certificate  for any shares of Common
Stock issued to the Holder upon conversion of or otherwise pursuant to this Note
as and when required by this Note, and any such failure shall  continue  uncured
for ten (10) days after the Company shall have been notified  thereof in writing
by the Holder;

               (x) The failure by the Company to file the Registration Statement
on or about February 15, 2005, or obtain  effectiveness  with the Securities and
Exchange Commission of the Registration Statement within 120 days from that date
or such  Registration  Statement  lapses in effect (or sales cannot otherwise be
made there under effective,  whether by reason of the Company's failure to amend
or  supplement  the  prospectus  included  therein)  for more than  thirty  (30)
consecutive days after the Registration  Statement becomes effective which shall
include Common Stock into which this Note may be converted; or

               (xi) The Company shall  encumber or  hypothecate  the  collateral
subject to the Security Agreement to any party;

               (xii) A default  by the  Company of a  material  term,  covenant,
warranty or undertaking  of any other  agreement to which the Company and Holder
are  parties,  or the  occurrence  of an event of  default  under any such other
agreement; or

               (xiii) A default by the Company under its license  agreement with
Biowell Technology, Inc.

                                       6
<PAGE>
          (b) In the event of and immediately upon the occurrence of an Event of
Default, the Note shall become immediately due and payable without any action by
the Holder and the Note  shall bear  interest  until paid at the rate of 12% per
annum or such amount as shall be allowed by law (the "Default  Interest  Rate").
If an Event of Default occurs and is continuing, Holder may pursue any available
remedy to collect  the  payment of all  amounts due under the Note or to enforce
the performance of any provision of the Note. No waiver of any default under the
Note shall be construed as a waiver of any subsequent  default,  and the failure
to exercise any right or remedy thereunder shall not waive the right to exercise
such right or remedy thereafter.


          (c) The Company  covenants  that in case the principal of, and accrued
interest on, the Note becomes due and payable by declaration or otherwise,  then
the Company  will pay in cash to the Holder of this Note,  the whole amount that
then shall have become due and payable on this Note for  principal  or interest,
as the case may be, and in addition  thereto,  such  further  amount as shall be
sufficient to cover the costs and expenses of collection,  including  reasonable
fees and disbursements of the Holder's legal counsel.  In case the Company shall
fail  forthwith  to pay such  amount,  the  Holder  may  commence  an  action or
proceeding at law or in equity for the collection of the sums so due and unpaid,
and may  prosecute  any such action or  proceeding  to judgment or final  decree
against Company or other obligor upon this Note,  wherever situated,  the monies
adjudicated or decreed to be payable.

          (d) The Company  agrees that it shall give notice to the Holder at its
registered address by facsimile,  confirmed by certified mail, of the occurrence
of any Event of Default  within ten (10) days after such Event of Default  shall
have occurred.

          6. Waiver of Automatic Stay

          The Company acknowledges and agrees that should a proceeding under any
bankruptcy or insolvency  law be commenced by or against the Company,  or if any
of the  Collateral  (as defined in the  Security  Agreement)  should  become the
subject of any  bankruptcy or insolvency  proceeding,  then the Holder should be
entitled to,  among other  relief to which the Holder may be entitled  under the
Note,  Security  Agreement,  Subscription  Agreement and any other  agreement to
which the Company and Holder are parties, (collectively "Loan Documents") and/or
applicable  law,  an order from the court  granting  immediate  relief  from the
automatic  stay  pursuant  to 11  U.S.C.  Section  362 to permit  the  Holder to
exercise all of its rights and remedies  pursuant to the Loan  Documents  and/or
applicable law. THE COMPANY  EXPRESSLY  WAIVES THE BENEFIT OF THE AUTOMATIC STAY
IMPOSED  BY  11  U.S.C.   SECTION  362.   FURTHERMORE,   THE  COMPANY  EXPRESSLY
ACKNOWLEDGES AND AGREES THAT NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION
OF THE BANKRUPTCY CODE OR OTHER STATUTE OR RULE (INCLUDING,  WITHOUT LIMITATION,
11 U.S.C. SECTION 105) SHALL STAY,  INTERDICT,  CONDITION,  REDUCE OR INHIBIT IN
ANY WAY THE  ABILITY  OF THE HOLDER TO  ENFORCE  ANY OF ITS RIGHTS AND  REMEDIES
UNDER THE LOAN DOCUMENTS  AND/OR  APPLICABLE LAW. The Company hereby consents to
any  motion  for  relief  from  stay  which  may be filed by the  Holder  in any
bankruptcy  or  insolvency  proceeding  initiated by or against the Company and,

                                       7
<PAGE>
further,  agrees not to file any  opposition  to any motion for relief from stay
filed by the Holder. The Company  represents,  acknowledges and agrees that this
provision is a specific and material aspect of the Loan Documents,  and that the
Holder  would not agree to the terms of the Loan  Documents  if this waiver were
not a part of this Note. The Company further represents, acknowledges and agrees
that this waiver is knowingly,  intelligently and voluntarily made, that neither
the  Holder  nor any  person  acting  on  behalf  of the  Holder  has  made  any
representations to induce this waiver, that the Company has been represented (or
has had the  opportunity to be  represented) in the signing of this Note and the
Loan  Documents  and in the making of this waiver by  independent  legal counsel
selected by the Company and that the Company has had the  opportunity to discuss
this waiver with  counsel.  The Company  further  agrees that any  bankruptcy or
insolvency  proceeding  initiated  by the Company will only be brought in courts
within the geographic boundaries of New York State.

          7. Failure to Pay Upon Maturity

          In the  event  that the sum due  under  the Note is not  repaid on the
Maturity  Date,  the Holder  will have the option to either have the Note accrue
interest at 12% or such amount as legally  allowed until paid, or to convert the
entirety of the debt then  outstanding  under the Note into the number of Shares
derived by dividing the sum of such debt by the dollar value equal to 80% of the
closing ask price of the Shares on the last  trading day  immediately  preceding
the Maturity  Date as reported on the market upon which the Shares shall then be
trading,  provided,  however, that the conversion price shall never be less than
$0.33 per share.  Any Shares  acquired  thereby shall carry with them the demand
and piggy back registration rights granted to the Holder hereby.



          8. Unconditional Obligation; Fees, Waivers, Other.

          (a) The obligations to make the payments provided for in this Note are
absolute  and   unconditional   and  not  subject  to  any   defense,   set-off,
counterclaim, rescission, recoupment or adjustment whatsoever.

          (b) If, following the occurrence of an Event of Default,  Holder shall
seek to enforce the collection of any amount of principal of and/or  interest on
this Note,  there shall be  immediately  due and payable  from the  Company,  in
addition to the then unpaid  principal of, and accrued unpaid  interest on, this
Note,  all costs and  expenses  incurred  by  Holder  in  connection  therewith,
including, without limitation, reasonable attorneys' fees and disbursements.

          (c) No forbearance, indulgence, delay or failure to exercise any right
or  remedy  with  respect  to this  Note  shall  operate  as a  waiver  or as an
acquiescence  in any  default,  nor shall any single or partial  exercise of any
right or remedy preclude any other or further  exercise  thereof or the exercise
of any other right or remedy.

          (d) This Note may not be modified or discharged (other than by payment
or conversion) except by a writing duly executed by the Company and Holder.

                                       8
<PAGE>
          (e) Holder hereby expressly waives demand and presentment for payment,
notice of nonpayment,  notice of dishonor,  protest, notice of protest, bringing
of suit,  and  diligence  in taking  any action to  collect  amounts  called for
hereunder,  and shall be directly  and  primarily  liable for the payment of all
sums  owing  and to be owing  hereon,  regardless  of and  without  any  notice,
diligence,  act or omission with respect to the  collection of any amount called
for hereunder or in connection with any right, lien, interest or property at any
and all times which the  Company  had or is existing as security  for any amount
called for hereunder.


                                       9
<PAGE>
          9. Miscellaneous

          (a) The  headings  of the  various  paragraphs  of this  Note  are for
convenience  of  reference  only and shall in no way  modify any of the terms or
provisions of this Note.

          (b) This Note has been issued by the Company pursuant to authorization
of the Board of Directors of the Company.

          All notices  required or permitted to be given  hereunder  shall be in
writing and shall be deemed to have been duly given when personally delivered or
sent  by  registered  or  certified  mail  (return  receipt  requested,  postage
prepaid),  facsimile  transmission  or  overnight  courier to the address of the
intended  recipient  as set forth in the  preamble to this Note or at such other
address as the intended  recipient shall have hereafter given to the other party
hereto  pursuant to the provisions of this Note.(c) The Company may consider and
treat the  entity in whose name this Note shall be  registered  as the  absolute
owner  thereof for all  purposes  whatsoever  (whether or not this Note shall be
overdue)  and the Company  shall not be affected by any notice to the  contrary.
Subject to the  limitations  herein stated,  the  registered  owner of this Note
shall have the right to transfer  this Note by  assignment,  and the  transferee
thereof shall,  upon his registration as owner of this Note,  become vested with
all the  powers  and rights of the  transferor.  Registration  of any new owners
shall take place upon  presentation of this Note to the Company at its principal
offices,  together with a duly authenticated  assignment. In case of transfer by
operation of law, the  transferee  agrees to notify the Company of such transfer
and of his address, and to submit appropriate evidence regarding the transfer so
that this Note may be  registered  in the name of the  transferee.  This Note is
transferable only on the books of the Company by the holder hereof, in person or
by attorney, on the surrender hereof, duly endorsed.  Communications sent to any
registered owner shall be effective as against all holders or transferees of the
Note not registered at the time of sending the communication.

          (d)  Payments of  principal  and  interest  shall be made as specified
above to the  registered  owner of this Note.  No interest  shall be due on this
Note for such period of time that may elapse  between the  maturity of this Note
and its presentation for payment.

          (e) The Holder shall not, by virtue, hereof, be entitled to any rights
of a shareholder in the Company,  whether at law or in equity, and the rights of
the Holder are limited to those expressed in this Note.

          (f) Upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft,  destruction or mutilation of this Note, and (in the case
of loss, theft or destruction) of reasonably satisfactory  indemnification,  and
upon surrender and  cancellation  of this Note, if mutilated,  the Company shall
execute and deliver a new Note of like tenor and date.

          (g) This Note shall be construed and enforced in  accordance  with the
laws of the State of New York,  without  giving  effect to the  conflicts of law
principles  thereof or the actual domiciles of the parties.  The Company and the
Holder hereby consent to the jurisdiction of the Courts of the State of New York
and the United States District  Courts  situated  therein in connection with any
action  concerning the provisions of this Note  instituted by the Holder against
the Company.

                                       10
<PAGE>
          (h) The Company (i) agrees that any legal suit,  action or  proceeding
arising out of or relating to this Note shall be instituted  exclusively  in the
New  York  State  Supreme  Court,  County  of New York or in the  United  States
District Court for the Southern  District of New York, (ii) waives any objection
which the Company may have now or hereafter  based upon forum non  conveniens or
to the venue of any such  suit,  action  or  proceeding,  and (iii)  irrevocably
consents to the jurisdiction of the New York State Supreme Court,  County of New
York and the United States District Court for the Southern  District of New York
in any such suit, action or proceeding. The Company further agrees to accept and
acknowledge service of any and all process which may be served in any such suit,
action or proceeding in the New York State Supreme Court,  County of New York or
in the United States  District  Court for the Southern  District of New York and
agrees that service of process upon the Company, mailed by certified mail to the
Company's address,  will be deemed in every respect effective service of process
upon Payor,  in any suit,  action or  proceeding.  FURTHER,  THE COMPANY  HEREBY
WAIVES TRIAL BY JURY IN ANY ACTION TO ENFORCE THIS NOTE AND IN  CONNECTION  WITH
ANY DEFENSE, COUNTERCLAIM OR CROSSCLAIM ASSERTED IN ANY SUCH ACTION.

          (i) No  recourse  shall be had for the  payment  of the  principal  or
interest of this Note against any  incorporator  or any past,  present or future
stockholder  officer,  director,  agent or  attorney of the  Company,  or of any
successor  corporation,  either directly or through the Company or any successor
corporation,  otherwise, all such liability of the incorporators,  stockholders,
officers, directors, attorneys and agents being waived, released and surrendered
by the Holder hereof by the acceptance of this Note.

          (j) This Note shall bind the Company and its successors and assigns.


                      [THIS SPACE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Note as
of the day and year first above written.

                                            APPLIED DNA SCIENCES, INC.


                                       By:  ________________________________
                                            Name:
                                            Title:

                                       11

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>4
<FILENAME>jan2820058kex44.txt
<TEXT>



Exhibit 4.4



                          REGISTRATION RIGHTS AGREEMENT


          THIS REGISTRATION RIGHTS AGREEMENT (this  "Agreement"),  is made as of
January 28, 2005, by and among APPLIED DNA SCIENCES,  INC. (the  "Company")  and
VERTICAL CAPITAL PARTNERS, INC. (the "Investor Representative") on behalf of the
holders of Registrable  Securities (as  hereinafter  defined)  including but not
limited to the Note Holders listed or Schedule A herein (the "Note Holders").

          The Company has agreed to provide  certain  registration  rights under
the  Securities  Act  of  1933,  as  amended,  and  the  rules  and  regulations
thereunder,  or any similar successor statute as each may be in effect from time
to time  (collectively,  the "Securities  Act"), and applicable state securities
laws for holders of Registrable Securities.

          NOW,  THEREFORE,  in  consideration  of the  premises  and the  mutual
covenants  contained  herein  and other  good and  valuable  consideration,  the
receipt and  sufficiency of which are hereby  acknowledged,  the Company and the
Investor Representative agree as follows:

                            ARTICLE 1 - DEFINITIONS

          1.1. Definitions. As used in this Agreement, the following terms shall
have the following meanings:

               (a) "Agreement" has the meaning set forth in the preamble hereto.

               (b) "Business Day" means any day other than a Saturday, Sunday or
          holiday  on  which  banking  institutions  in New  York,  New York are
          closed.

               (c) "Company" has the meaning set forth in the preamble hereto.

               (d) "Common Stock" shall mean the common stock of the Company.

               (e) "Exchange Act" means the Securities and Exchange Act of 1934,
          as amended, and the rules and regulations promulgated  thereunder,  or
          any similar successor  statute,  as each may be in effect from time to
          time.

               (f)  "Investor  Representative"  has the meaning set forth in the
          preamble hereto.

               (g) "Investors" means,  collectively,  the persons represented by
          the Investor Representative  including,  without limitation,  the Note
          Holders  and  any  of  their   transferees   or  assignees   who  have
          registration  rights under this Agreement in accordance with the terms
          hereof. "Investor" means any such persons, individually.
<PAGE>
               (h)  "register,"  "registered,"  and  "registration"  refer  to a
          registration effected by preparing and filing a Registration Statement
          or  Statements  in  compliance   with  the   Securities  Act  and  the
          declaration  or  ordering  of  effectiveness   of  such   Registration
          Statement or Statements by the SEC.

               (i) "Registrable  Securities" means (i) the Warrant Shares,  (ii)
          any Common Stock or other securities of the Company issued or issuable
          in respect of any Convertible  Note of the Company or other securities
          issued or  issuable  in  respect of such  Common  Stock upon any stock
          split, stock dividend,  recapitalization,  or similar event; (iii) any
          Warrant, Convertible Notes or Common Stock Issued under the conversion
          of any notes or exercise of any Warrants,  Bridge Notes or other notes
          sold  through  the  Investor  Representative,  (iv) any and all Common
          Stock,   Warrants  or  other   Securities   issued  to  the   Investor
          Representative,  Affiliates  of  the  Investor  Representative  or any
          assignee or designee of the  Investor  Representative  (v) any capital
          stock or other securities otherwise issued or issuable with respect to
          the Warrant  Shares or such other  securities;  (vi) any Common  Stock
          acquired  by a Note  Holder  by  reason  of  conversion  of a Note  or
          exercise  of any  Warrant;  provided,  however,  that shares of Common
          Stock  or  other  securities  shall  only be  treated  as  Registrable
          Securities  if and for so long as they  have  not  been (A) sold to or
          through a broker or dealer or underwriter in a public distribution, or
          (B) sold in a transaction  exempt from the registration and prospectus
          delivery  requirements  of  the  Securities  Act  under  Section  4(l)
          thereof,  in the case of either  clause  (A) or  clause  (B) in such a
          manner  that,  upon  the  consummation  of  such  sale,  all  transfer
          restrictions  and restrictive  legends with respect to such shares are
          removed  upon the  consummation  of such sale.  For the  avoidance  of
          doubt,  "Registrable  Securities"  does not  include  any  unexercised
          option(s) or  warrant(s)  for the purchase of any capital stock of the
          Company.

               (j) "Registration  Statement" means any registration statement of
          the Company under the Securities Act subject to or pursuant to Article
          2 or another provision of this Agreement, as applicable.

               (k)  "SEC"  means  the  United  States  Securities  and  Exchange
          Commission.

               (l) "Selling  Securityholder" means any Investor participating in
          any registration of Registrable Securities pursuant to this Agreement.

               (m)  "Convertible  Note" has the  meaning  set forth in the first
          recital hereof.

               (n) "Warrant  Shares"  means the shares of Common Stock issued or
          issuable upon  exercise or  conversion  of the warrants  issued by the
          Company  from time to time in  connection  with  sales of  Registrible
          Securities.

          1.2.  Capitalized  Terms.   Capitalized  terms  used  herein  and  not
otherwise  defined  herein shall have the  respective  meanings set forth in the
agreements with respect to sale of Registirable Securities.



                                       2
<PAGE>



                            ARTICLE 2 - REGISTRATION

          2.1.  "Registration".  The Company has contractually committed to file
with the SEC an S-1, SB-2 or other registration  statement on or before February
15, 2005 with respect to the Registratible  Securities (as defined herein) in an
offering of up to  $6,000,000  of Units in December 2004 and January 2005 shares
underlying the Notes and Warrants includes in Units and by the Company.

          2.2  Penalty for Not Going  Effective.  If within 120 days of February
15,  2005,  the  Registration   Statement  referenced  herein  is  not  declared
effective,  the Company will pay each investor a penalty equal to 3.5% per month
to the  holders  of the  2003  Bridge  Note,  the  $1,000,000  Convertible  Note
referenced  herein and all the  investors  who  subscribe to the  December  2004
Convertible  Note offering.  Said penalty can be paid in cash or stock solely at
the discretion of the company.

                     ARTICLE 3 - OBLIGATIONS OF THE COMPANY

          In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:

          3.1. Availability of Registration Statement. The Company shall prepare
promptly and file with the SEC any Registration Statement required by Article 2,
and use commercially  reasonable  efforts to cause such  Registration  Statement
relating to  Registrable  Securities to become  effective  within 120 days after
such filing,  and keep the  Registration  Statement  continuously  effective and
available for use at all times,  except as set forth herein,  until such date as
all of the Registrable  Securities have been sold pursuant to such  Registration
Statement (the "Registration Period").

          3.2. Amendments to Registration  Statement.  The Company shall prepare
and file with the SEC such amendments (including post-effective  amendments) and
supplements  to a Registration  Statement and the prospectus  used in connection
with the  Registration  Statement as may be  necessary to keep the  Registration
Statement  effective and such  prospectus  available for use at all times during
the  Registration  Period  (including,   without   limitation,   amendments  and
supplements  necessary in connection with a change in the "Plan of Distribution"
section in any  Registration  Statement or prospectus)  and, during such period,
comply with the provisions of the Securities Act with respect to the disposition
of all Registrable  Securities  covered by the Registration  Statement until the
termination  of the  Registration  Period.  The  Company  shall  cause  any such
amendment  and/or new  Registration  Statement  to become  effective  as soon as
practicable following the filing thereof.

          3.3.  Information.  Upon written request, the Company shall furnish to
any Selling  Securityholder  and its legal  counsel,  promptly after the same is
prepared  and  publicly  distributed,  filed with the SEC,  or  received  by the
Company,  one copy of the Registration  Statement and any amendment thereto, and
such number of copies of each prospectus, including each preliminary prospectus,
and all amendments and  supplements  thereto,  and such other  documents as such
Selling  Securityholder  may  reasonably  request  in  order to  facilitate  the
disposition of the Registrable Securities. The Company shall promptly notify all
Selling  Securityholders  of the effectiveness of any Registration  Statement or
post-effective amendments thereto.

                                       3
<PAGE>
          3.4.  Blue  Sky.  The  Company  shall (a)  register  and  qualify  the
Registrable   Securities  covered  by  any  Registration   Statement  under  the
securities  laws of such  jurisdictions  in the  United  States as each  Selling
Securityholder who holds any such Registrable  Securities  reasonably  requests,
(b)  prepare  and  file  in  those  jurisdictions  such  amendments   (including
post-effective   amendments)   and   supplements  to  such   registrations   and
qualifications  as may be necessary to maintain  the  effectiveness  thereof and
availability for use during the Registration Period, (c) take such other actions
as may be reasonably necessary to maintain such registrations and qualifications
in effect at all times during the  Registration  Period,  and (d) take all other
actions reasonably necessary or advisable to qualify the Registrable  Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection  therewith or as a condition thereto to (i) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3.4,  (ii) subject  itself to general  taxation in any such
jurisdiction,  or (iii) file a general consent to service of process in any such
jurisdiction.

          3.5. Limitations on Subsequent Registration Rights. From and after the
date of this Agreement,  the Company shall not enter into any agreement granting
any holder or prospective  holder of any securities of the Company  registration
rights with respect to such securities without the prior written consent of more
than 50% of the number of Registrable  Securities then outstanding,  unless such
new registration rights, including standoff obligations,  are subordinate to the
rights of the Investors hereunder.

          3.6.  Correction of Statements  or Omissions.  As soon as  practicable
after  becoming  aware of such event,  the Company  shall  publicly  announce or
notify all Selling  Securityholders  of the happening of any event, of which the
Company has actual knowledge,  as a result of which the prospectus included in a
Registration  Statement,  as then in effect,  includes an untrue  statement of a
material fact or fails to state a material fact required to be stated therein or
necessary to make the statements  therein not misleading,  and use  commercially
reasonable efforts as soon as possible to (but in any event it shall within five
Business  Days or three  Business  Days of the receipt by the  Company  from its
accountants of financial  information  required to correct such untrue statement
or  omission,   as  applicable)   prepare  a  supplement  or  amendment  to  the
Registration  Statement  (and  make all  required  filings  with the SEC and all
applicable  state  securities  or blue sky  commissions)  to correct such untrue
statement or omission if not otherwise  satisfied through the filing of a report
to the SEC or  otherwise  pursuant  to  applicable  securities  laws (but such a
supplement   or   amendment   or  other   filing   shall  not  be  required  if,
notwithstanding the Company's commercially  reasonable efforts to so prepare and
file such supplement, amendment or other filing, such a supplement, amendment or
other  filing is no longer  required by  applicable  law to correct  such untrue
statement  or  omission  because  such  untrue  statement  or omission no longer
exists) and the Company  shall  simultaneously  (and  thereafter  as  requested)
deliver such number of copies of such  supplement  or amendment to each Investor
(or other applicable document) as such Investor may request in writing.

          3.7.  Stop  Orders.  The  Company  shall use  commercially  reasonable
efforts  to  prevent  the  issuance  of any stop  order or other  suspension  of
effectiveness of a Registration  Statement,  and, if such an order is issued, to
obtain the  withdrawal of such order at the earliest  practicable  time, and the
Company shall immediately notify all Selling  Securityholders  and, in the event
of an underwritten  offering,  the managing  underwriter(s),  of the issuance of
such order and the resolution thereof.

                                       4
<PAGE>
          3.8.  Inspection  of Records.  The Company  shall provide each Selling
Securityholder,  and any underwriter who may participate in the  distribution of
Registrable Securities, and their respective representatives, the opportunity to
conduct a reasonable inquiry of the Company's financial and other records during
normal  business hours and make available its officers,  directors and employees
for questions  regarding  information which the Selling  Securityholders and any
such  underwriter  may reasonably  request in connection  with the  Registration
Statement;   provided,   however,  the  Selling  Securityholders  and  any  such
underwriter  shall hold in confidence  and shall not make any  disclosure of any
record or other  information  which the Company  determines  in good faith to be
confidential,  and of which  determination  the  inspectors  are so  notified in
writing,  unless (a) the  disclosure  of such  records is  necessary to avoid or
correct a  misstatement  or  omission  in any  Registration  Statement,  (b) the
release of such records is ordered  pursuant to a subpoena or other order from a
court or government body of competent jurisdiction,  or is otherwise required by
applicable law or legal process, or (c) the information in such records has been
made generally  available to the public other than by disclosure in violation of
this or any other agreement (to the knowledge of the relevant inspector).

          3.9.  Investor  Information.  The Company shall hold in confidence and
not make any  disclosure  of  non-public  information  concerning  any  Investor
provided  to the  Company  by  such  Investor  unless  (a)  disclosure  of  such
information is necessary to comply with federal or state securities laws, rules,
statutes or regulations,  (b) the disclosure of such information is necessary to
avoid or correct a  misstatement  or omission in any  Registration  Statement or
other  public  filing by the  Company,  (c) the release of such  information  is
ordered pursuant to a subpoena or other order from a court or governmental  body
of competent  jurisdiction  or is otherwise  required by applicable law or legal
process,  (d) such  information has been made generally  available to the public
other than by  disclosure  in violation of this or any other  agreement,  or (e)
such  Investor  consents  to the form and  content of any such  disclosure.  The
Company agrees that it shall,  upon learning that disclosure of such information
concerning  any  Investor  is  sought in or by a court or  governmental  body of
competent  jurisdiction  in or through  other means,  give prompt notice to such
Investor  prior to making  such  disclosure,  and allow  such  Investor,  at its
expense, to undertake  appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.  3.10. Listing.  The Company shall use
commercially  reasonable  efforts to cause the listing and the  continuation  of
listing of all the Registrable  Securities covered by any Registration Statement
on each securities  exchange or quotation system upon which any other securities
of the Company is then listed or quoted.

          3.11.  Transfer Agent.  The Company shall provide a transfer agent and
registrar,  which may be a single  entity,  for the  Registrable  Securities not
later than the effective date of the Registration Statement.

          3.12. Delivery of Certificates; Opinions of Counsel. The Company shall
cooperate  with  any  and  all  Selling  Securityholders  who  hold  Registrable
Securities being offered and the managing  underwriter or underwriters,  if any,
to facilitate the timely  preparation and delivery of certificates  (not bearing
any  restrictive  legends)  representing  Registrable  Securities  to be offered
pursuant to the  Registration  Statement and enable such  certificates  to be in
such   denominations   or  amounts,   as  the  case  may  be,  as  such  Selling


                                       5
<PAGE>
Securityholders  or the  managing  underwriter  or  underwriters,  if  any,  may
reasonably request and registered in such names as such Selling  Securityholders
or the managing underwriter or underwriters,  if any, may request, and, upon the
written  request  of  the  transfer  agent  for  the  Company  or  the  managing
underwriter or  underwriters,  as  applicable,  within two Business Days of such
request,  the  Company  shall  cause  legal  counsel  selected by the Company to
deliver to the transfer agent or the managing  underwriter or  underwriters,  as
applicable, and the Selling Securityholders an opinion (a "Transfer Opinion") of
such counsel in a form  reasonably  acceptable to the transfer agent or managing
underwriter or  underwriters,  as applicable,  and the Selling  Securityholders.
Such opinion shall include, without limitation,  opinions to the effect that (i)
the Registration  Statement has become effective under the Securities Act and no
order suspending the effectiveness of the Registration Statement,  preventing or
suspending the use of the Registration  Statement,  any preliminary  prospectus,
any final  prospectus,  or any amendment or supplement  thereto has been issued,
nor has the SEC or any  securities  or blue sky  authority  of any  jurisdiction
instituted or threatened  to institute any  proceedings  with respect to such an
order,  (ii) all of the  Registrable  Securities  covered  by such  Registration
Statement  may  be  sold  or  otherwise  transferred  pursuant  to the  Plan  of
Distribution  set forth in the  prospectus  forming  a part of the  Registration
Statement,  and (iii) the Registration  Statement and each prospectus  forming a
part thereof  (including  each  preliminary  prospectus),  and any  amendment or
supplement  thereto,  complies as to form with the Securities Act. Such Transfer
Opinion shall also state the  jurisdictions in which the Registrable  Securities
have been registered or qualified for sale.

          3.13.  Compliance  with  Laws.  The  Company  shall  comply  with  all
applicable  laws related to a  Registration  Statement  and offering and sale of
securities  covered by the  Registration  Statement and all applicable rules and
regulations  of  governmental  authorities in connection  therewith  (including,
without limitation, the Securities Act and the Exchange Act).

                    ARTICLE 4 - OBLIGATIONS OF THE INVESTORS

          4.1.   Obligations  of  the  Investors.   Each  Investor  electing  to
participate  in  any  registration  of  Registrable   Securities  as  a  Selling
Securityholder generally agrees as follows:

               (a) Information Concerning Investors;  Cooperation.  Each Selling
          Securityholder agrees to cooperate with the Company in connection with
          the preparation and filing of any  Registration  Statement  hereunder,
          and  for so  long  as the  Company  is  obligated  to  keep  any  such
          Registration  Statement  effective,  such Selling  Securityholder will
          provide  to the  Company,  in  writing,  for  use in the  Registration
          Statement, all information regarding such Selling Securityholder,  the
          Registrable  Securities held by him, her or it, the intended method of
          distribution of such Registrable Securities and such other information
          as may be necessary to enable the Company to prepare the  Registration
          and prospectus covering the Registrable Securities and to maintain the
          currency  and  effectiveness  thereof.  At least 30 days  prior to the
          first anticipated filing date of a Registration Statement, the Company
          shall  notify  each  Selling  Securityholder  of the  information  the


                                       6
<PAGE>
          Company so requires  from each such  Selling  Securityholder  and each
          Selling  Securityholder  shall  deliver to the Company such  requested
          information  within 20 days of request  therefor  or shall be excluded
          from such registration.

               (b) SEC.  Each Selling  Securityholder  agrees to use  reasonable
          efforts to cooperate  with the Company (at the  Company's  expense) in
          responding  to  comments  of the  staff  of the SEC  relating  to such
          Investor.

               (c)  Suspension of Offering or  Distribution.  On notice from the
          Company of the  happening  of any of the events  specified in Sections
          3.6 or 3.7,  the  Company  requires  the  suspension  by such  Selling
          Securityholder   of  the   distribution  of  any  of  the  Registrable
          Securities,  then such Selling  Securityholder shall cease offering or
          distributing the Registrable Securities until such time as the Company
          notifies such Selling Securityholder that offering and distribution of
          the Registrable Securities may recommence.

                      ARTICLE 5 - EXPENSES OF REGISTRATION

          5.1.  Expenses.  With  respect  to each  registration  of  Registrable
Securities  hereunder,  all  expenses  (other than  underwriting  discounts  and
commissions and transfer taxes), including,  without limitation,  the reasonable
fees and  disbursements  of one  counsel  to the  Selling  Securityholders,  all
registration,  listing and qualification fees, printers and accounting fees, and
the fees and  disbursements  of counsel for the  Company,  shall be borne by the
Company.

                          ARTICLE 6 - INDEMNIFICATION

          In the event any Registrable Securities are included in a Registration
Statement under this Agreement:

          6.1. Indemnification by the Company. The Company will indemnify,  hold
harmless and defend (a) each Selling  Securityholder,  (b) each  underwriter  of
Registrable  Securities,  and (c) the directors,  officers,  partners,  members,
employees,  agents and persons who control each such Selling  Securityholder and
any such  underwriter  within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, if any (each, a "Investor  Indemnified Person"),
against any losses,  claims,  damages,  liabilities  or expenses  (collectively,
together with  actions,  proceedings  or inquiries  whether or not in any court,
before  any  administrative   body  or  by  any  regulatory  or  self-regulatory
organization,  whether commenced or threatened, in respect thereof, "Claims") to
which any of them may become subject  insofar as such Claims arise out of or are
based upon: (i) any untrue  statement or alleged untrue  statement of a material
fact in a  Registration  Statement or the omission or alleged  omission to state
therein  a  material  fact  required  to be  stated  or  necessary  to make  the
statements  therein not misleading,  (ii) any untrue statement or alleged untrue
statement of a material  fact  contained in any  preliminary  prospectus if used
prior to the effective date of such Registration  Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement  thereto with the SEC) or the omission or alleged omission


                                       7
<PAGE>
to state  therein  any  material  fact  necessary  to make the  statements  made
therein,  in light of the circumstances  under which the statements therein were
made, not misleading, or (iii) any violation or alleged violation by the Company
of the  Securities  Act, the Exchange  Act,  any other law,  including,  without
limitation,  any state  securities  law,  or any rule or  regulation  thereunder
relating to the offer or sale of the Registrable  Securities (the matters in the
foregoing  clauses (i) through  (iii) being,  collectively,  "Violations").  The
Company shall reimburse each such Investor Indemnified Person,  promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees and
other reasonable  expenses incurred by them in connection with  investigating or
defending  any such Claim.  Notwithstanding  anything to the contrary  contained
herein,  the  Company  shall not be  required to  indemnify  or hold  harmless a
Investor  Indemnified Person (A) with respect to a Claim arising out of or based
upon (1) any violation of federal or state securities laws, rules or regulations
committed by such Investor  Indemnified  Persons (or any person who controls any
of them or any agent,  broker-dealer  or underwriter  engaged by them) or in the
case of a non-underwritten  offering,  any failure by such Investor  Indemnified
Person  to give  any  purchaser  of  Registrable  Securities  at or prior to the
written confirmation of such sale, a copy of the most recent prospectus,  (2) an
untrue  statement  or  omission  contained  in  any  Registration  Statement  or
prospectus  which  statement  or  omission  was  made in  reliance  upon  and in
conformity  with written  information  provided by or on behalf of such Investor
Indemnified  Person  specifically  for  use or  inclusion  in  the  Registration
Statement  or any  prospectus,  (3) any  prospectus  used after such time as the
Company  advised  such  Investor  Indemnified  Person  that the filing of a post
effective amendment or supplement thereto was required, except the prospectus as
so amended or  supplemented,  or (4) any prospectus  used after such time as the
Company's  obligation to keep the Registration  Statement  effective and current
has  expired or been  suspended  hereunder,  provided,  that the  Company has so
advised such Investor Indemnified Person; (B) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company,  which consent shall not be unreasonably  withheld;  and
(C) with respect to any preliminary  prospectus,  shall not inure to the benefit
of a Investor Indemnified Person if the untrue statement or omission of material
fact contained in the preliminary  prospectus was corrected on a timely basis in
the prospectus,  as then amended or supplemented,  if such corrected  prospectus
was timely made  available  by the Company  pursuant to Section 3.6 hereof,  and
such Investor  Indemnified Person was promptly advised in writing not to use the
incorrect  prospectus  prior to the use giving rise to a Claim and such Investor
Indemnified Person,  notwithstanding  such advice, used it. Such indemnity shall
remain in full force and effect  regardless of any  investigation  made by or on
behalf of the Investor  Indemnified Person and shall survive the transfer of the
Registrable Securities by a Investor pursuant to Article 9.

          6.2.  Indemnification by Investors. An Investor shall indemnify,  hold
harmless  and  defend,  to the same  extent and in the same  manner set forth in
Section 6.1, the Company, each of its directors,  each of its officers who signs
the  Registration  Statement,  its  employees,  agents and persons,  if any, who
control the Company  within the meaning of Section 15 of the  Securities  Act or
Section 20 of the Exchange Act, and any other securityholder  selling securities
pursuant to the Registration Statement and any underwriter of securities covered
by such  Registration  Statement,  together  with its  directors,  officers  and
members,  and any person who controls such  securityholder or underwriter within
the  meaning  of the  Securities  Act or the  Exchange  Act  (each,  a  "Company
Indemnified Person"), against any Claim to which any of them may become subject,
under the Securities  Act, the Exchange Act or otherwise,  insofar as such Claim
arises out of or is based upon any  Violation,  in each case to the extent  (and
only  to the  extent)  that  such  Violation  occurs  in  reliance  upon  and in
conformity  with written  information  furnished to the Company by such Investor
expressly  for use in  connection  with such  Registration  Statement;  and such
Investor will reimburse any legal or other  expenses  (promptly as such expenses
are incurred and are due and payable)  reasonably incurred by them in connection
with  investigating  or defending any such Claim;  provided,  however,  that the
indemnity  agreement  contained  in this  Section 6.2 shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior

                                       8
<PAGE>
written  consent  of such  Investor,  which  consent  shall not be  unreasonably
withheld;  and provided,  further,  however,  that such Investor shall be liable
under this  Agreement  (including  this Section 6.2 and Article 7) for only that
amount as does not exceed the net proceeds actually received by such Investor as
a result of the sale of  Registrable  Securities  pursuant to such  Registration
Statement.  Such indemnity  shall remain in full force and effect  regardless of
any investigation  made by or on behalf of such Company  Indemnified  Person and
shall  survive  the  transfer of the  Registrable  Securities  by such  Investor
pursuant  to Article  9.  Notwithstanding  anything  to the  contrary  contained
herein, the indemnification agreement contained in this Section 6.2 with respect
to any  preliminary  prospectus  shall not inure to the  benefit of any  Company
Indemnified  Person  if the  untrue  statement  or  omission  of  material  fact
contained in the  preliminary  prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented,  and the Company Indemnified Person
failed to utilize such corrected prospectus.

          6.3. Notices.  Promptly after receipt by a Investor Indemnified Person
or Company Indemnified Person under this Article 6 of notice of the commencement
of any action  (including any governmental  action),  such Investor  Indemnified
Person or Company  Indemnified Person shall, if a Claim in respect thereof is to
be made  against any  indemnifying  party under this  Article 6,  deliver to the
indemnifying  party  a  written  notice  of the  commencement  thereof,  and the
indemnifying party shall have the right (at its expense) to participate in, and,
to the  extent  the  indemnifying  party so  desires,  jointly  with  any  other
indemnifying  party  similarly  noticed,  to assume and continue  control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Investor  Indemnified Person or the Company  Indemnified Person, as the case
may be; provided,  however, that such indemnifying party shall diligently pursue
such  defense  and an  indemnifying  party  shall not be  entitled to assume (or
continue)  such  defense if the  representation  by such counsel of the Investor
Indemnified  Person or Company  Indemnified  Person and the  indemnifying  party
would be inappropriate due to actual or potential  conflicts of interest between
such Investor  Indemnified  Person or Company  Indemnified  Person and any other
party  represented by such counsel in such proceeding or the actual or potential
defendants  in,  or  targets  of,  any such  action  include  both the  Investor
Indemnified Person or the Company Indemnified Person and the indemnifying party,
and  any  such  Investor   Indemnified  Person  or  Company  Indemnified  Person
reasonably  determines  that  there  may be  legal  defenses  available  to such
Investor  Indemnified  Person or Company  Indemnified Person which are different
from  or  in  addition  to  those   available   to  such   indemnifying   party.
Notwithstanding  any  assumption  of  such  defense  and  without  limiting  any
indemnification  obligation  provided  for in Section  6.1 or 6.2,  the  Company
Indemnified Person or Investor  Indemnified Person, as the case may be, shall be
entitled to be  represented  by counsel (at its own expense if the  indemnifying
party is permitted to assume and continue  control of the defense and  otherwise
at the expense of the indemnifying  party) and such counsel shall be entitled to
participate  in such  defense.  The  failure  to deliver  written  notice to the
indemnifying  party within a  reasonable  time of the  commencement  of any such
action  shall  not  relieve  such  indemnifying  party of any  liability  to the
Investor Indemnified Person or Company Indemnified Person under this Article VI,
except  to the  extent  that  the  indemnifying  party  is  actually  materially
prejudiced in its ability to defend such action. The indemnification required by
this Article 6 shall be made by periodic  payments of the amount  thereof during
the course of the  investigation or defense,  as such expense,  loss,  damage or
liability is incurred and is due and payable.

                            ARTICLE 7 - CONTRIBUTION

          7.1.  To  provide  for  just  and  equitable  contribution,  if (i) an
indemnified party makes a claim for  indemnification  pursuant to Section 6.1 or
6.2 (subject to the  limitations  thereof)  but it is found in a final  judicial
determination,  not subject to further appeal, that such indemnification may not
be enforced in such case,  even though this  Agreement  expressly  provides  for
indemnification  in such case, or (ii) any  indemnified  or  indemnifying  party
seeks contribution under the Securities Act, the Exchange Act or otherwise, then
the Company (including for this purpose any contribution made by or on behalf of
any  director  of the  Company,  any  officer of the Company who signed any such
registration  statement,  and any  controlling  person of the Company within the
meaning of Section 15 of the  Securities  Act or Section  20(a) of the  Exchange
Act),  as  one  entity,  and  the  Selling   Securityholders  whose  Registrable
Securities  are included in such  registration  in the aggregate  (including for
this purpose any  contribution  by or on behalf of an indemnified  party),  as a
second entity, shall contribute to the losses, liabilities, claims, damages, and
expenses  whatsoever  to  which  any of them  may be  subject,  on the  basis of
relevant equitable  considerations such as the relative fault of the Company and
such Selling Securityholders in connection with the facts which resulted in such
losses,  liabilities,  claims, damages, and expenses. The relative fault, in the
case of an untrue  statement,  alleged untrue  statement,  omission,  or alleged
omission,  shall be determined by, among other things,  whether such  statement,
alleged statement, omission, or alleged omission relates to information supplied
by the Company or by such Selling  Securityholders,  and the  parties'  relative
intent, knowledge, access to information,  and opportunity to correct or prevent
such statement, alleged statement, omission, or alleged omission. Subject to the
following sentence,  the Company and Investors agree that it would be unjust and
inequitable  if the  respective  obligations  of the  Company  and  the  Selling
Securityholders  for  contribution  were  determined  by pro rata or per  capita
allocation of the aggregate losses,  liabilities,  claims, damages, and expenses
(even if the Selling  Securityholders  and the other  indemnified  parties  were
treated as one entity for such  purpose)  or by any other  method of  allocation
that does not reflect the equitable  considerations  referred to in this Section
7.1. In no case shall any Selling Securityholder be responsible for a portion of
the contribution  obligation imposed on all Selling Securityholders in excess of
the net proceeds actually received by such Selling Securityholder as a result of
the sale of Registrable Securities pursuant to such Registration  Statement.  No
person guilty of a fraudulent  misrepresentation  (within the meaning of Section
11(f) of the Securities Act) shall be entitled to  contribution  from any person
who is not guilty of such  fraudulent  misrepresentation.  For  purposes of this
Section 7.1, each person, if any, who controls any Selling Securityholder within
the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange
Act and each officer,  director,  partner,  employee, agent, and counsel of each
such  Selling  Securityholder  or control  person  shall have the same rights to
contribution as such Selling  Securityholder  or control person and each person,
if any,  who  controls  the  Company  within  the  meaning  of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act, each officer of the Company
who signs the Registration  Statement,  each director of the Company, and its or
their  respective  counsel  shall have the same  rights to  contribution  as the
Company, subject in each case to the provisions of this Section 7.1. Anything in
this Section 7.1 to the contrary  notwithstanding,  no party shall be liable for
contribution  with  respect to the  settlement  of any claim or action  effected
without its written consent. This Section 7.1 is intended to supersede any right
to contribution under the Securities Act, the Exchange Act or otherwise.

                          ARTICLE 8 - MARKET STAND-OFF

          8.1. "Market Stand-Off".  Each Investor hereby agrees that, during the
period  specified  by the Company and any  underwriter  of Common Stock or other
securities  of the  Company  following  the  effective  date  of a  Registration
Statement of the Company  filed under the  Securities  Act, it shall not, to the
extent  requested by the Company and such  underwriter,  directly or  indirectly
sell, offer to sell, contract to sell (including,  without limitation, any short
sale),  grant any option to purchase or otherwise  transfer or dispose of (other
than to donees who agree to be similarly  bound) any  securities  of the Company
held by it at any time during such period except  Common Stock  included in such
registration;  provided,  that (i) such market  stand-off  time period shall not
exceed  180 days  following  the  effective  date of such  registration  if such
registration relates to the Company's initial public offering of securities, and
shall not exceed 90 days  following the effective date of such  registration  in
all other cases; (ii) the directors, officers and holders of more than 2% of the
Company's  then  outstanding  capital  stock  (each such  director,  officer and
stockholder,  a "Lockup  Party")  shall have agreed to be at least as restricted
with respect to the offer, sale or other transfer of such persons' securities in
the Company (a "lockup"); and (iii) the Company shall promptly provide notice to
each Investor of any discretionary waiver or early termination by the Company or
its  underwriter  of the lockup of any Lockup Party,  and cause each Investor to
receive,  on  a  proportionate   basis,  the  benefit  of  any  such  waiver  or
termination.

                   ARTICLE 9 - REPORTS UNDER THE EXCHANGE ACT

          9.1. Rule 144 Reporting.  With a view to making available the benefits
of certain  rules and  regulations  of the SEC which may at any time  permit the
sale of the Registrable Securities to the public without registration after such
time as a public market exists for the Common Stock of the Company,  the Company
agrees to:

               (a) Make and keep public  information  available,  as those terms
          are understood  and defined in Rule 144 under the  Securities  Act, at
          all times  after  the date that the  Company  becomes  subject  to the
          reporting requirements of the Securities Act or the Exchange Act;

               (b) File with the  Commission  in a timely manner all reports and
          other  documents  required of the Company under the Securities Act and
          the  Exchange  Act (at any time  after it has  become  subject to such
          reporting requirements); and

               (c) So long as any Investor owns any Registrable  Securities,  to
          furnish to such  Investor  forthwith  upon  written  request a written
          statement  by the  Company  as to its  compliance  with the  reporting
          requirements  of said  Rule 144 (at any time  after 90 days  after the
          effective  date  of the  first  registration  statement  filed  by the
          Company for an offering of its securities to the general public),  and
          of the  Securities  Act and the Exchange Act (at any time after it has
          become  subject to such  reporting  requirements),  a copy of the most
          recent  annual or  quarterly  report of the  Company,  and such  other
          reports and  documents  of the Company  and other  information  in the
          possession  of or  reasonably  obtainable  by the  Company as any such
          Investor  may  reasonably  request in  availing  itself of any rule or
          regulation  of the  SEC  allowing  such  Investor  to  sell  any  such
          securities without registration.

                                       9
<PAGE>
          ARTICLE 10 - AMENDMENT AND ASSIGNMENT OF REGISTRATION RIGHTS

          10.1.  Assignment of Registration  Rights.  The rights of any Investor
hereunder as to Registrable Securities  transferred by such Investor,  including
the right to have the Company register  Registrable  Securities pursuant to this
Agreement,  shall be automatically assigned by the Investor to any transferee of
all or any portion of the Registrable  Securities,  whether such transfer occurs
before  or after the  Registration  Statement  becomes  effective,  if:  (a) the
transferring  Investor  agrees in writing  with the  transferee  or  assignee to
assign such  rights,  and a copy of such  agreement  is furnished to the Company
within 10 days after such  assignment,  (b) the Company is, within 10 days after
such transfer or  assignment,  furnished with written notice of (i) the name and
address of such transferee or assignee,  and (ii) the securities with respect to
which such registration rights are being transferred or assigned,  (c) following
such transfer or assignment,  the further  disposition of such securities by the
transferee  or assignee is  restricted  under the  Securities  Act or applicable
state  securities  laws, and (d) at or before the time the Company  receives the
written notice  contemplated  by clause (b) of this sentence,  the transferee or
assignee  agrees in writing for the benefit of the Company to be bound by all of
the  provisions  contained  herein.  The rights of any Investor  hereunder  with
respect to any  Registrable  Securities  retained by such Investor  shall not be
assigned by virtue of the transfer of other Registrable Securities.

          10.2. Amendment of Registration  Rights.  Except as expressly provided
in this  Agreement,  neither this  Agreement nor any term hereof may be amended,
waived,  discharged or terminated other than by a written  instrument  signed by
the party against whom enforcement of any such amendment,  waiver,  discharge or
termination is sought;  provided,  however, that holders of more than 50% of the
Registrable  Securities  may,  with the written  consent of the Company,  waive,
modify or amend on behalf of all holders, any provisions hereof benefitting such
holders,  so long as the effect  thereof  will be that all such  holders will be
treated equally.

                           ARTICLE 11 - MISCELLANEOUS

          11.1.  Registered Holders. A person or entity is deemed to be a holder
(or a holder in  interest) of  Registrable  Securities  whenever  such person or
entity  owns of record such  Registrable  Securities.  If the  Company  receives
conflicting  instructions,  notices  or  elections  from two or more  persons or
entities with respect to the same Registrable Securities,  the Company shall act
upon the basis of instructions,  notice or election received from the registered
owner of such Registrable Securities.

          11.2. Notices,  etc. All notices and other communications  required or
permitted  under this Agreement  shall be sent by registered or certified  mail,
postage  prepaid,  overnight  courier,  confirmed  facsimile or other electronic
transmission or otherwise delivered by hand or by messenger, addressed (a) if to
a Investor, at such Investor's address set forth on the signature page hereto or
at such other  address as such Investor  shall have  furnished to the Company in


                                       10
<PAGE>
writing,  (b) if to the Company at its offices to the attention of the President
or at such other address as the Company shall have furnished to the Investors in
writing,  or (c) if any transferee or assignee of a Investor pursuant to Section
10.1, at such address as such transferee or assignee shall have furnished to the
Company  in  writing.  Each  such  notice or other  communication  shall for all
purposes of this  Agreement be treated as  effective or having been  received or
given, as applicable,  (i) when delivered if delivered personally,  (ii) if sent
by mail,  at the  earlier  of its  receipt  or three  Business  Days  after  the
registration or certification  thereof,  (iii) if sent by overnight courier, one
Business  Day after the same has been  deposited  with a  nationally  recognized
courier  service,  or (iv) when sent by confirmed  facsimile or other electronic
transmission, on the day sent (if a Business Day) if sent during normal business
hours of the  recipient,  and if not, then on the next  Business Day  (provided,
that such facsimile or other electronic transmission is followed by delivery via
another method permitted by this Section 11.2).

          11.3.  Delays or  Omissions.  Except  as  expressly  provided  in this
Agreement,  no delay or omission to exercise any right, power or remedy accruing
to any Investor upon any breach or default of the Company  under this  Agreement
shall  impair any such right,  power or remedy of such  Investor nor shall it be
construed  to be a waiver of any such  breach  or  default,  or an  acquiescence
therein,  or of or in any similar breach or default  thereafter  occurring;  nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default  theretofore  or  thereafter  occurring.  Any waiver,  permit,
consent or approval of any kind or  character on the part of any Investor of any
breach  or  default  under  this  Agreement,  or any  waiver  on the part of any
Investor of any provisions or conditions of this  Agreement,  must be in writing
and  shall  be  effective  only to the  extent  specifically  set  forth in such
writing.  All  remedies,  either  under this  Agreement  or by law or  otherwise
afforded to any Investor shall be cumulative and not alternative.

          11.4. Governing Law; Jurisdiction. This Agreement shall be governed in
all respects by the laws of the State of New York without  giving  effect to the
conflicts of laws principles thereof.  All suits, actions or proceedings arising
out of, or in connection with, this Agreement or the  transactions  contemplated
by this  Agreement  shall be brought in any federal or state court of  competent
subject  matter  jurisdiction  sitting in New York, New York Each of the parties
hereto by execution and delivery of this  Agreement,  expressly and  irrevocably
(i) consents and submits to the personal  jurisdiction of any such courts in any
such  action or  proceeding;  (ii)  consents  to the  service of any  complaint,
summons,  notice or other  process  relating to any such action or proceeding by
delivery  thereof to such party as set forth in Section 11.2  hereof;  and (iii)
waives  any  claim or  defense  in any such  action or  proceeding  based on any
alleged lack of personal  jurisdiction,  improper venue, forum non conveniens or
any similar basis.

          11.5.  Entire  Agreement;  Amendment.  This  Agreement  and the  other
documents  delivered  pursuant to this  Agreement at the Closing  constitute the
full and entire  understanding  and agreement between the parties with regard to
the subject  matter hereof and thereof and supersede  all prior  agreements  and
merge all prior  discussions,  negotiations,  proposals  and offers  (written or
oral) between them,  and no party shall be liable or bound to any other party in
any manner by any representations, warranties, covenants or agreements except as
specifically set forth herein or therein.  Except as expressly  provided in this
Agreement,  neither this  Agreement nor any term hereof may be amended,  waived,
discharged or terminated other than by a written  instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge or termination
is sought.

                                       11
<PAGE>
          11.6.  Successors  and  Assigns.  Subject to  Article  10 hereof,  the
provisions of this Agreement shall inure to the benefit of, and be binding upon,
the permitted successors,  assigns,  heirs,  executors and administrators of the
parties to this Agreement, except that the Company may not assign this Agreement
without  the  written  consent  of the  Holders  of at  least  50%  of the  then
outstanding Registrable Securities.

          11.7.  Titles and  Subtitles.  The headings in this Agreement are used
for  convenience  of reference only and shall not be considered in construing or
interpreting this Agreement.

          11.8.  Counterparts.  This  Agreement may be executed in any number of
counterparts,  each of which shall be enforceable  against the parties  actually
executing such  counterparts,  and all of which  together  shall  constitute one
instrument.  This  Agreement  may  be  delivered  by  facsimile,  and  facsimile
signatures shall be treated as original signatures for all applicable purposes.

          11.9. Further Assurances. Each party shall do and perform, or cause to
be done and performed,  all such further acts and things,  and shall execute and
deliver all such other agreements,  certificates,  instruments and documents, as
the other  party may  reasonably  request  in order to carry out the  intent and
accomplish  the  purposes  of  this  Agreement  and  the   consummation  of  the
transactions contemplated hereby.

          11.10.  Consents.  Unless otherwise  provided herein, all consents and
other  determinations to be made pursuant to this Agreement shall be made on the
basis of a  majority  in  interest  (determined  by number of  securities)  with
respect to the Registrable Securities.

          11.11. Severability. In the event that any provision of this Agreement
becomes or is  declared  by a court of  competent  jurisdiction  to be  illegal,
unenforceable  or void,  this Agreement  shall continue in full force and effect
without said provision.

          11.12. No Third Party  Beneficiaries.  This Agreement shall not confer
any rights or  remedies  upon any person  other than the  parties  hereto,  each
investor,  their  permitted  successors  and assigns and  parties  eligible  for
indemnification  under Article 6, and only in accordance  with the express terms
of this Agreement.

          11.13.   Confidentiality  of  Agreement,  Press  Releases  and  Public
Announcements.  Except as set forth below,  the parties  shall,  and shall cause
their officers, employees and representatives to, treat and hold as confidential
the existence and terms of this Agreement at all times. No party shall issue any
press release or make any public announcement  relating to the subject matter of
this Agreement without the prior written approval of the Company and the holders
of at least 50% of the number of Registrable Securities; provided, however, that
any party may make any public  disclosure  it believes in good faith is required
by  applicable  law  (including  applicable  securities  laws) or any listing or
trading  agreement  concerning  its  publicly-traded  securities  to  make  such
disclosure (in which case the disclosing  party will use its reasonable  efforts
to advise the other parties in writing prior to making the disclosure).

                                       12
<PAGE>
          11.14.  Construction.  The parties  have  participated  jointly in the
negotiation  and  drafting  of this  Agreement.  In the  event an  ambiguity  or
question of intent or interpretation  arises,  this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise  favoring or  disfavoring  any party by virtue of the authorship of any of
the provisions of this Agreement.  Any reference to any federal, state, local or
foreign  statute  or law  shall  be  deemed  also  to  refer  to all  rules  and
regulations  promulgated  thereunder and any applicable  common law,  unless the
context requires  otherwise.  The word "including"  shall mean including without
limitation and is used in an  illustrative  sense rather than a limiting  sense.
Terms  used with  initial  capital  letters  will have the  meanings  specified,
applicable  to singular and plural  forms,  for all purposes of this  Agreement.
Reference  to any gender  will be deemed to include  all genders and the neutral
form.

          11.15. Incorporation of Exhibits, Annexes and Schedules. The Exhibits,
Annexes and Schedules  identified in this  Agreement,  if any, are  incorporated
herein by reference and made a part hereof.

   [Remainder of page left intentionally blank. Signature page(s) to follow.]


                                       13
<PAGE>
          IN WITNESS WHEREOF,  the parties have caused this Registration  Rights
Agreement to be duly executed as of the date first above written.

COMPANY:                                       APPLIED DNA SCIENCES, INC.


                                               By:/S/ Peter Brockelsby
                                                  --------------------
                                                  Name: Peter Brockelsby
                                                  Title: President


INVESTOR REPRESENTATIVE:                       VERTICAL CAPITAL PARTNERS, INC.


                                               By:/S/ Robert DePalo
                                                  Name:Robert DePalo
                                                  Title:Chairman

                                                 Address for Notice Purposes:

                                                 VERTICAL CAPITAL PARTNERS, INC.
                                                 488 Madison Avenue, 8th Floor
                                                 New York, New York 10022
                                                 Fax:  (212) 446-0020



<PAGE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>5
<FILENAME>jan2820058kex43.txt
<TEXT>

Exhibit 4.3



                           APPLIED DNA SCIENCES, INC.

          WARRANT AGREEMENT,  dated _________,  2005 (the  "Agreement"),  by and
between Applied DNA Sciences,  Inc., a Nevada  corporation (the "Company"),  and
__________________  the holder of one (1) unit of the Company sold in connection
with the Company's Private Placement (as defined below) (individually a "Holder"
and collectively with the holders of other Units, the "Holders").

          WHEREAS, the Company has proposed to offer,  pursuant to the Company's
private placement offering (the "Private Placement"),  a maximum of 120 units of
the Company  (the  "Units"),  each Unit  consisting  of (i) a $50,000  principal
amount Secured  Convertible  10% Promissory  Note, and (ii) warrants to purchase
100,000 shares of the Company's  common stock,  exercisable for a period of five
years at a price of $0.75 per share;

          WHEREAS, purchasers of the Units have been issued Warrant Certificates
evidencing the Warrants; and

          WHEREAS, the Warrant  Certificates  incorporate by reference the terms
of this Warrant Agreement.

          NOW,  THEREFORE,  in  consideration  of the  premises  and the  mutual
covenants contained herein, the Company and the Holder hereby agree as follows:

          1. Exercise of Warrant. This warrant (the "Warrant") shall entitle the
Holder  thereof to purchase an aggregate of 100,000 shares of Common Stock at an
exercise  price of $0.75 (the "Exercise  Price") per share.  The Warrants may be
exercised in whole or in part at any time or from time to time during the period
commencing on 2005 and expiring at 5:00 p.m., New York City time, on , 2010 (the
"Exercise Term"),  or if such day is a day on which banking  institutions in the
State of New York are  authorized by law to close,  then on the next  succeeding
day which shall not be such a day, by presentation  and surrender of the Warrant
Certificate  evidencing  the  Warrant  to be  exercised  to the  Company  at its
principal  office or at the office of its stock transfer agent, if any, with the
Exercise  Form annexed  hereto duly executed and  accompanied  by payment of the
Exercise Price for the number of shares specified in such form. . If any Warrant
should be  exercised  in part only,  the Company  shall,  upon  surrender of the
Warrant  Certificates  for  cancellation  and  presentment of the Exercise Form,
execute and deliver new a Warrant  Certificate or Certificates,  as the case may
be,  evidencing  the rights of the Holder thereof to purchase the balance of the
shares  purchasable  thereunder.  Upon  receipt  by  the  Company  of a  Warrant
Certificate at its office,  or by the stock transfer agent of the Company at its
office,  in proper form for exercise and accompanied by the appropriate  payment
for the shares of Common Stock  underlying the Warrants (the "Warrant  Shares"),
the Holder  shall be deemed to be the holder of record of such  Warrant  Shares,
notwithstanding  that the stock  transfer  books of the  Company  shall  then be
closed or that  certificates  representing such Warrant Shares shall not then be
actually  delivered to the Holder.  Certificates for the Warrant Shares shall be
delivered to the Holder within a reasonable  time  following the exercise of the
Warrants in accordance with the foregoing.
<PAGE>

          2. Alternative Exercise  Provisions.  Anything contained herein to the
contrary notwithstanding,  provided that the shares underlying this Warrant have
been registered,  the Holder, at his option, may exercise the Warrants, in whole
or in part, during the Exercise Term by delivering to the Company a confirmation
slip issued by a brokerage firm that is a member of the National  Association of
Securities  Dealers,  Inc.  with  respect to the sale of those number of Warrant
Shares for which the  Warrants  are being  exercised,  and,  in such  case,  the
Company  shall  deliver   certificates   representing  such  Warrant  Shares  on
settlement  date at the office of the  Company's  stock  transfer  agent against
payment for such Warrant Shares by such  brokerage firm or its clearing  broker,
made  payable  to the  Company  or made  payable  to the order of the Holder and
endorsed by the Holder to the Company.

          3.  Reservation and Listing of Shares.  The Company hereby agrees that
at all times there shall be reserved for issuance and delivery  upon exercise of
the Warrants, such number of shares of its Common Stock as shall be required for
issuance and delivery  upon  exercise of the  Warrants.  As long as the Warrants
shall be outstanding, the Company shall use its best efforts to cause all shares
of Common Stock  issuable  upon the exercise of the Warrants to be listed on the
Over The Counter Bulletin Board or on Nasdaq or a national securities  exchange,
if such shares of Common Stock, as a class, are theretofore so listed.

          4.  Fractional  Shares.  No  tractional  shares or scrip  representing
fractional  shares  shall be  issued  upon the  exercise  of the  Warrants.  Any
fraction of a share called for upon any exercise  hereof shall be canceled.  The
Holder,  by his  acceptance  hereof,  expressly  waives any right to receive any
fractional share of stock or fractional Warrant upon exercise of the Warrants.

          5. Exchange. Transfer. Assignment or Loss of Warrant. The Warrants are
exchangeable,  without expense,  at the option of the Holder,  upon presentation
and  surrender  of the  Warrant  Certificates  evidencing  such  Warrants to the
Company at its office or at the office of its stock transfer  agent, if any, for
other  Warrants  of  different  denominations  entitling  the Holder  thereof to
purchase  in the  aggregate  the same  number of  shares of Common  Stock as are
purchasable thereunder at the same respective Exercise Price. Subject to Section
10 hereof,  upon  surrender  of the Warrant  Certificates  to the Company at its
principal  office or at the office of its stock transfer  agent,  if any, with a
duly executed  Assignment  Form which is annexed hereto and funds  sufficient to
pay the  applicable  transfer tax, if any, the Company  shall,  without  charge,
execute and deliver new Warrant  Certificates  in the name of the assignee named
in such  instrument of assignment  and the original  Warrant  Certificate  shall
promptly  be  canceled.  The  Warrants  may be  divided or  combined  with other
Warrants  which  carry  the  same  rights  upon   presentation  of  the  Warrant
Certificate  evidencing  such  Warrants  at the office of the  Company or at the
office of its stock  transfer  agent,  if any,  together  with a written  notice
signed by the Holder hereof  specifying the names and denominations in which new
Warrant  Certificates are to be issued.  Upon receipt by the Company of evidence
satisfactory  to it of  the  loss,  theft,  destruction  or  mutilation  of  the
Warrants,  and,  in the  case of  loss,  theft  or  destruction,  of  reasonably
satisfactory  indemnification,  and  upon  surrender  and  cancellation  of  the
Warrants,  if  mutilated,  the  Company  will  execute  and  deliver new Warrant
Certificates  of like tenor and date.  Any such new Warrant  Certificates,  when
executed and delivered, shall constitute an additional contractual obligation on
the  part of the  Company,  whether  or not the  Warrant  Certificates  so lost,
stolen, destroyed, or mutilated shall be at any time enforceable by anyone

                                       2
<PAGE>
          6. Rights of the Holder.  The Holder shall not, by virtue  hereof,  be
entitled to any rights of a  shareholder  of the Company  until  exercise of any
Warrants.

          7. Adjustments of Purchase Price and Number of Shares.

          (a) Subdivision and Combination. In case the Company shall at any time
subdivide  or combine  the  outstanding  shares of Common  Stock by way of stock
split,  reverse stock split or the like, the Exercise  Prices shall forthwith be
proportionately increased or decreased.

          (b)  Adjustment  in Number of  Shares.  Upon  each  adjustment  of the
Exercise  Price  pursuant  to the  provisions  of this  Section 7, the number of
Shares  issuable  upon the  exercise  of each  Warrant  shall be adjusted to the
nearest full Share by multiplying a number equal to the Exercise Price in effect
immediately  prior to such  adjustment  by the  number of Shares  issuable  upon
exercise of the Warrants  immediately  prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.

          (c)  Reclassification.  Consolidation.  Merger.  etc.  In  case of any
reclassification or change of the outstanding shares of Common Stock (other than
a change in par value to no par value,  or from no par value to par value, or as
a result of a subdivision or combination),  or in the case of any  consolidation
of the Company with, or merger of the Company into,  another  corporation (other
than a consolidation or merger in which the Company is the surviving corporation
and which does not result in any  reclassification  or change of the outstanding
shares  of  Common  Stock,  except a  change  as a result  of a  subdivision  or
combination of such shares or a change in par value,  as  aforesaid),  or in the
case of a sale or conveyance to another corporation of all or a substantial part
of the property of the Company,  the Holder shall  thereafter  have the right to
purchase  the kind and  number  of shares  of stock  and  other  securities  and
property receivable upon such reclassification,  change, consolidation,  merger,
sale or conveyance as if the Holder were the owner of the shares of Common Stock
underlying the Warrants immediately prior to any such events at a price equal to
the product of (x) the number of shares  issuable  upon exercise of the Warrants
and (y) the Exercise  Price in effect  immediately  prior to the record date for
such reclassification,  change, consolidation,  merger, sale or conveyance as if
such Holder had exercised the Warrants.

          (d)  Dividends  and Other  Distributions  with Respect to  Outstanding
Securities.  In the  event  that the  Company  shall  at any  time  prior to the
exercise of all Warrants  declare a dividend  (other than a dividend  consisting
solely of shares of Common Stock or a cash dividend or distribution  payable out
of current or retained earnings) or otherwise distribute to its shareholders any
monies, assets, property,  rights, evidences of indebtedness,  securities (other
than shares of Common Stock), whether issued by the Company or by another person
or entity,  or any other thing of value, the Holder of the unexercised  Warrants
shall thereafter be entitled, in addition to the shares of Common Stock or other
securities  receivable upon the exercise thereof, to receive,  upon the exercise
of such  Warrants,  the same  monies,  property,  assets,  rights,  evidences of
indebtedness,  securities  or any other thing of value that they would have been
entitled to receive at the time of such dividend or distribution. At the time of
any such dividend or distribution,  the Company shall make appropriate  reserves
to ensure the timely performance of the provisions of this Subsection 7(d).

                                       3
<PAGE>
          (e) Warrant  Certificate After Adjustment.  Irrespective of any change
pursuant to this Section 7 in the Exercise Price or in the number, kind or class
of shares or other securities or other property  obtainable upon exercise of the
Warrants,  the Warrants may continue to express as the Exercise Price and as the
number of shares  obtainable upon exercise,  the same price and number of shares
as are stated herein.

          (f)  Statement of  Calculation.  Whenever the Exercise  Price shall be
adjusted  pursuant  to the  provisions  of this  Section  7, the  Company  shall
forthwith  file at its  principal  office,  a statement  signed by an  executive
officer of the Company  specifying  the adjusted  Exercise  Price  determined as
above provided in such section.  Such statement shall show in reasonable  detail
the  method  of  calculation  of such  adjustment  and the facts  requiring  the
adjustment and upon which the calculation is based.  The Company shall forthwith
cause a notice setting forth the adjusted Exercise Price to be sent by certified
mail, return receipt requested, postage prepaid, to the Holder.

          8. Call Rights of Company. Upon 10 days written notice the Company may
call the Warrant for  redemption by the Company at any time after the underlying
Common Stock (i) has been  registered  for public sale and (ii) has traded at or
above $1.25 per share on 20  consecutive  trading  days and  providing  that the
underlying Registration has and is effective during such time period.

          9. Definition of "Common Stock." For the purpose of the Warrants,  the
term "Common Stock" shall mean, in addition to the class of stock  designated as
the Common Stock,  $.001 par value, of the Company on the date hereof, any class
of stock resulting from successive  changes or  reclassifications  of the Common
Stock  consisting  solely of changes  in par value,  or from par value to no par
value,  or from no par value to par  value.  If at any  time,  as a result of an
adjustment  made pursuant to one or more of the  provisions of Section 7 hereof,
the shares of stock or other securities or property  obtainable upon exercise of
the Warrants shall include securities of the Company other than shares of Common
Stock or securities of another  corporation,  then thereafter the amount of such
other  securities so obtainable shall be subject to adjustment from time to time
in a manner and upon terms as nearly equivalent as practicable to the provisions
with  respect  to Common  Stock  contained  in  Section  7 hereof  and all other
provisions  of the  Warrants  with  respect to Common  Stock shall apply on like
terms to any such other shares or other securities.

          10.  Registration Under the Securities Act of 1933. The Warrant Shares
issuable upon exercise of the Warrants are subject to the Company's registration
obligations  as set  forth  in a  Registration  Rights  Agreement  of even  date
herewith,  the terms of which are  incorporated  by reference  into this Warrant
Agreement as if such terms are set forth at length herein.

          11. Transfer to Comply with the Act.  Neither Warrants nor the Warrant
Shares nor any other  security  issued or issuable upon exercise of the Warrants
may be sold or otherwise disposed of except as follows:

                                       4
<PAGE>
          (a) to a person who, in the opinion of counsel for the  Company,  is a
person to whom the Warrants or Warrant Shares may legally be transferred without
registration and without the delivery of a current prospectus under the Act with
respect  thereto and then only  against  receipt of a letter from such person in
which such person represents that he is acquiring the Warrants or Warrant Shares
for his own account for investment  purposes and not with a view to distribution
and provides any other information and representations  required by the Company,
and in which such person agrees to comply with the provisions of this Section 10
with respect to any resale or other disposition of such securities; or

          (b) to any person  upon  delivery  of a  prospectus  then  meeting the
requirements of the Act relating to such securities and the offering thereof for
such sale or disposition.

          12. Notices to Warrant  Holders.  Nothing  contained in this Agreement
shall be construed as conferring upon the Holder or Holders the right to vote or
to consent or to receive  notice as a shareholder  in respect of any meetings of
shareholders for the election of directors or any other matter, or as having any
rights  whatsoever as a shareholder  of the Company.  If,  however,  at any time
prior to the expiration of the Warrants and their exercise, any of the following
events shall occur:

          (a) The  Company  shall take a record of the  holders of its shares of
Common  Stock  for the  purpose  of  entitling  them to  receive a  dividend  or
distribution  payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings,  as indicated by the
accounting  treatment  of such  dividend  or  distribution  on the  books of the
Company; or

          (b) The Company shall offer to all the holders of its Common Stock any
additional shares of capital stock of the Company or securities convertible into
or  exchangeable  for shares of capital  stock of the  Company,  or any warrant,
right or option to subscribe therefor; or

          (c) A  dissolution,  liquidation  or winding up of the Company  (other
than  in  connection  with  a  consolidation  or  merger)  or a  sale  of all or
substantially all of its property, assets and business shall be proposed; or

          (d) There shall be any capital  reorganization or  reclassification of
the capital stock of the Company, or consolidation or merger of the Company with
another entity,  then, in anyone or more of said events,  the Company shall give
written  notice of such event at least fifteen (15) days prior to the date fixed
as a record date or the date of closing the transfer books for the determination
of the  shareholders  entitled to such  dividend,  distribution,  convertible or
exchangeable securities or subscription rights, warrants or options, or entitled
to vote on such  proposed  dissolution,  liquidation,  winding up or sale.  Such
notice shall specify such record date or the date of closing the transfer books,
as the case may be.  Failure to give such notice or any defect therein shall not
affect the validity of any action taken in connection  with the  declaration  or
payment of any such dividend or distribution, or the issuance of any convertible
or exchangeable  securities or subscription rights,  warrants or options, or any
proposed dissolution, liquidation, winding up or sale.

                                       5
<PAGE>

          13. Notices.

          (a) All  communications  under this Agreement  shall be in writing and
shall be mailed by certified mail, postage prepaid, return receipt requested, or
telecopied  with  confirmation  of receipt or  delivered by hand or by overnight
delivery service:

                       If to the Company, at:

                       Applied DNA Sciences, Inc.
                       9255 West Sunset Blvd., Suite 805
                       Los Angeles, CA 90069
                       Attn:  Peter Brocklesby, President

                       If to the  Holder,  to the   address  of such  Holder as
                       it appears in the stock or warrant ledger of the Company.

          (b) Any notice so  addressed,  when mailed by  registered or certified
mail shall be deemed to be given  three days  after so mailed,  when  telecopied
shall be deemed  to be given  when  transmitted,  or when  delivered  by hand or
overnight  shall  be  deemed  to be  given  when  hand  delivered  or on the day
following deposit with the overnight delivery service.

          14.  Successors.  All the  covenants  and  provisions  of this Warrant
Agreement  by or for the benefit of the Holder shall inure to the benefit of his
successors and assigns hereunder.

          15. Termination.  This Warrant Agreement will terminate on the earlier
of (a) the  expiration  date of the Warrants or (b) the date all of the Warrants
shall have been exercised.

          16.  Governing Law. This Warrant  Agreement shall be deemed to be made
under the laws of the State of New York and for all purposes  shall be construed
in accordance  with the laws of said State,  excluding  choice of law principles
thereof.

                     [THIS SPACE INTENTIONALL Y LEFT BLANK]
<PAGE>

          16. Entire Agreement:  Amendment:  Waiver.  This Warrant Agreement and
all attachments hereto and all incorporation by references set forth herein, set
forth the entire  agreement  and  understanding  between  the  parties as to the
subject  matter  hereof  and  merges  and  supersedes  all  prior   discussions,
agreements and  understandings  of any and every nature among them. This Warrant
Agreement may be amended,  the Company may take any action herein  prohibited or
omit to take any action herein required to be performed by it, and any breach of
any covenant,  agreement,  warranty or representation may be waived, only if the
Company has obtained the written  consent or waiver of the Holder.  No course of
dealing  between  or among any  persons  having  any  interest  in this  Warrant
Agreement  will be deemed  effective to modify,  amend or discharge  any part of
this Warrant  Agreement or any rights or  obligations  of any person under or by
reason of this Warrant Agreement.

                                               APPLIED DNA SCIENCES, INC.



                                               By:  ___________________________
                                                    Name:
                                                    Title:

Dated:            , 2005

Attest:


______________________________

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>6
<FILENAME>jan2820058kex45.txt
<TEXT>
Exhibit 4.5



                               SECURITY AGREEMENT



          SECURITY  AGREEMENT dated January 28, 2005,  between  Vertical Capital
Partners,  Inc., a Delaware corporation,  as agent (the "Agent") for the benefit
of the  individuals or entities  listed on Schedule A hereto  ("Creditor"),  and
Applied DNA Sciences, Inc., a Nevada corporation (collectively, "Obligor").

          1. GENERAL DEFINITIONS.

          1.1 As used  herein,  "UCC"  means the Uniform  Commercial  Code as in
effect from time to time in the State of New York.

          1.2  All  capitalized  terms  contained  in  this  Agreement,  but not
specifically defined in this Agreement,  shall have the meanings provided by the
UCC to the extent the same are used or defined therein. Without limitation,  the
following terms are used herein as defined in the UCC:  Account,  Chattel Paper,
Deposit Accounts, Documents, Equipment, General Intangibles, Goods, Instruments,
Inventory,  Investment Property,  Letter of Credit Rights,  Payment Intangibles,
Proceeds, and Supporting Obligations.

          1.3 As used herein:

               a.  "Person"  means  any  individual,  corporation,  partnership,
limited liability  company,  trust,  unincorporated  organization,  or any other
entity or organization.

               b.  "Other Obligor" means any other person obligated as direct or
indirect  obligor  or  guarantor  of any  Obligations,  or of any  indebtedness,
obligations and liabilities guaranteed by Obligor.

               c.   "Receivable"   means any  right to  payment,  including  any
Account,  whether or not evidenced by an Instrument or Chattel Paper and whether
or not it has been earned by performance.

          (2)  OBLIGATIONS  SECURED.  The  Collateral  (as defined  below) shall
secure  any and all  indebtedness,  obligations  and  liabilities  of Obligor to
Creditor, including:

               a.  all  unpaid  principal  of and  interest  on,  and all  other
obligations  or  liabilities  of Obligor  which may arise under or in connection
with the 10% Secured  Convertible  Promissory  Notes in the aggregate  principal
amount of $5,970,000 issued on January  28, 2005 by Obligor.

               b.   all   interest,   fees,   costs,   expenses,   reimbursement
obligations, indemnities and other liabilities relating to any of the foregoing,
including  attorneys'  fees and costs or expenses  incurred in  connection  with
collection  and  enforcement  and sums  advanced  by  Creditor  to  protect  the
Collateral  or  otherwise  as  permitted  to be  made  by  Creditor  under  this
Agreement; and

               c.  all  indebtedness,  obligations and  liabilities  under this
Agreement;  in each case,  whether now existing or hereafter  arising,  joint or
several, absolute or contingent, liquidated or unliquidated, and however arising
(all such indebtedness,  obligations and liabilities being collectively referred
to herein as the "Obligations"; and any agreement, instrument, guaranty or other
document now or hereafter  evidencing or securing any of the Obligations,  being
collectively referred to herein as the "Financing Documents").
<PAGE>

          3.  GRANT OF SECURITY  INTEREST.  To secure the  punctual  payment and
performance  of the  Obligations  when due  whether at the stated  maturity,  by
acceleration or otherwise  Obligor hereby grants to Creditor a security interest
in and to,  and a lien upon (the  "Security  Interest"),  all  right,  title and
interest  of Obligor in and to the  following  property,  whether  now owned and
existing or hereafter acquired or arising,  and wherever located  (collectively,
the "Collateral"):

               (a) All  now  owned  and  hereafter  acquired  right,  title  and
interest of Obligor in, to and in respect of all:  accounts,  interests in goods
represented by accounts,  returned,  reclaimed or repossessed goods with respect
thereto  and  rights  as an  unpaid  vendor;  contract  rights;  chattel  paper;
investment property;  general intangibles (including but not limited to, tax and
duty  claims and  refunds,  registered  and  unregistered  patents,  trademarks,
service marks,  copyrights trade names,  applications  for the foregoing,  trade
secrets, goodwill, processes,  drawings,  blueprints,  customer lists, licenses,
whether as licensor or licensee, choses in action and other claims, and existing
and  future  leasehold  interests  in  equipment,   real  estate  and  fixtures)
(collectively,  the "General Intangibles");  documents;  instruments; letters of
credit, bankers' acceptances or guaranties;  cash moneys, deposits;  securities,
bank  accounts,  deposit  accounts,  credits and other property now or hereafter
held in any capacity by Lender, its affiliates or any entity which, at any time,
participates in Lender's  financing of Obligor at any other  depository or other
institution;  agreements  or  property  securing or relating to any of the items
referred to above;

               (b) All  now  owned  and  hereafter  acquired  right,  title  and
interest of Obligor in, to and in respect of goods,  including,  but not limited
to:

                    (i) All inventory,  wherever  located,  whether now owned or
hereafter acquired,  of whatever kind, nature or description,  including all raw
materials, work-in-process, finished goods, and materials to be used or consumed
in  Obligor's  business;  and all  names or marks  affixed  to or to be  affixed
thereto for  purposes of selling  same by the  seller,  manufacturer,  lessor or
licensor  thereof  and all  inventory  which may be  returned  to Obligor by its
customers  or  repossessed  by Obligor  and all of  Obligor's  right,  title and
interest in and to the foregoing  (including all of Obligor's rights as a seller
of goods);

                    (ii) All equipment and fixtures,  wherever located,  whether
now owned or hereafter acquired,  including,  without limitation, all machinery,
equipment,  motor vehicles,  furniture and fixtures,  and any and all additions,
substitutions,  replacements (including spare parts), and accessions thereof and
thereto  (including,  but not limited to Obligor's  rights to acquire any of the
foregoing, whether by exercise of a purchase option or otherwise);

                    (iii) All consumer  goods,  farm  products,  crops,  timber,
minerals or the like  (including  oil and gas),  wherever  located,  whether now
owned or hereafter acquired, of whatever kind, nature or description;

               (c) All  now  owned  and  hereafter  acquired  right,  title  and
interests  of  Obligor  in,  to and in  respect  of any real or  other  personal
property in or upon which Obligor has or may hereafter have a security interest,
lien or right of setoff;

               (d) All present and future  books and records  relating to any of
the above including,  without limitation,  all computer programs, printed output
and computer  readable  data in the  possession  or control of the Obligor,  any
computer service bureau or other third party; and

               (e)  All  Proceeds  of any of such  property  in  whatever  form,
whether derived from voluntary or involuntary  disposition,  all products of any
of  such  property,  all  renewals,  replacements,   substitutions,   additions,
accessions,  rents,  issues,  royalties  and  profits  of,  to or from  any such
property and all dividends or other income from Investment Property, collections
thereon or distributions or payments with respect thereto.

                                       2
<PAGE>
The Security Interest created herein is subject to any applicable restriction to
the creation of a Security  Interest to the extent that such  restriction is not
made ineffective by UCC Sections 9-406, 9-407, 9-408, or 9-409.


          4. PERFECTION OF SECURITY INTEREST.  Obligor shall execute and deliver
to the Agent UCC-1 Financing Statements  ("Financing  Statements")  assigning to
the Agent security  interests in Obligor's  right,  title and interest in and to
the  Collateral.  Obligor  hereby  authorize  the Agent to file  such  Financing
Statements at the Obligor's expense, in such filing locations as the Agent deems
appropriate.

          5.  REPRESENTATIONS AND WARRANTIES. Obligor represents and warrants to
Agent and Creditor that:

               5.1  Authority.  Obligor  has full power and  authority  to grant
security  interests in the Collateral and to execute,  deliver,  and perform its
obligations in accordance with the terms of this Agreement,  without the consent
or approval of any other person except as may have been  specifically  disclosed
to Creditor in writing.

               5.2 Absence of Other  Encumbrances.  The  Collateral  is free and
clear of all liens and adverse  claims other than the Security  Interest,  which
shall be a first lien on the  Collateral  except for (i) purchase money security
interests on Inventory or Equipment not financed by Creditor, (ii) liens imposed
by law such as materialmen's,  suppliers', mechanics', carriers', repairmen's or
other like liens imposed in the ordinary course of business, and (iii) liens for
taxes, assessments or governmental charges not yet due or delinquent.

               5.3 Information  Regarding Names.  Obligor has disclosed to Agent
and Creditor on Exhibit 5.3 hereto  complete and correct  information  regarding
Obligor's  exact legal name and all prior or current  names and trade names used
by Obligor.  Exhibit 5.3 also lists the names of all Persons  from whom  Obligor
acquired any assets during the period of five (5) years ended on the date hereof
(other than acquisitions in the ordinary course of business of Obligor).

               5.4 Location of Collateral and Principal  Place of Business.  All
Collateral  which is tangible and all related  books and records  related to the
Collateral  are located  solely in the states  listed in Exhibit 5.4 hereto (the
"Collateral  States"),  except for  Inventory  in transit to Obligor and, in the
case of other Collateral  which is movable,  as required in the operation of the
Obligor's  business  consistent with past practices.  No inventory of any Person
other  than  Obligor  is located  on any  premises  owned or leased by  Obligor.
Obligor's  principal  place of  business is located in the state  identified  in
Exhibit 5.4.

               5.5 Jurisdiction of Incorporation. Obligor has disclosed to Agent
and Creditor in Exhibit 5.5 hereto  complete and correct  information  regarding
the Obligor's jurisdiction of incorporation and its identification number in the
records of such jurisdiction.

          6. COVENANTS AND AGREEMENTS OF OBLIGOR.  Obligor  covenants and agrees
as follows:

               6.1  Restriction  on  Further  Encumbrances.  Obligor  shall not,
without the prior written consent of Creditor,  create, grant or suffer to exist
any other liens in or to any of the Collateral except for Permitted Liens.

               6.2 Records and  Inspection.  Obligor  shall keep and cause to be
kept  accurate and complete  records of the  Collateral  and its proceeds at its
principal place of business, which Collateral and records will be made available
for inspection and copying upon such premises by Agent at any reasonable time.

                                        3
<PAGE>
               6.3  Restrictions  on Removal of  Collateral.  Obligor  shall not
remove  Collateral or any related books and records from the  Collateral  States
except for removal of incidental  items of Collateral in the ordinary  course of
Obligor's business, consistent with past practice.

               6.4 Restriction on Changing State of Organization.  Obligor shall
not change the state of its  incorporation  or its  jurisdiction of organization
(as applicable) or convert into a different type of entity.

               6.5 Information Regarding Names. At least 30 days before changing
its name or adopting a new name,  Obligor shall give written  notice to Agent of
any new name or trade name of Obligor.

               6.6 Information on Collateral and Business. Obligor shall deliver
to Agent such other data and information (financial and otherwise) as Agent from
time to time may reasonably request bearing upon or related to the Collateral or
Obligor's business operations or financial condition.

               6.7 Duty of Care. Obligor shall be responsible for preserving and
maintaining  the Collateral and Agent shall have no duty of care with respect to
the  Collateral,  except  that  Agent  shall  have  an  obligation  to  exercise
reasonable care with respect to Collateral in its possession;  provided that (i)
Agent shall be deemed to have  exercised  reasonable  care if  Collateral in its
possession is accorded  treatment  substantially  comparable to that which Agent
accords its own property or treatment  substantially  in accordance with actions
requested by Obligor in writing, although Agent shall not be obligated to comply
with any such  requests  and (ii) Agent shall not be  obligated to take steps to
preserve rights against any other parties or property.

               6.8 Taxes.  Obligor  shall pay when due all  governmental  taxes,
assessments or charges upon the Collateral.

               6.9 Further  Assurances and Authority of Creditor.  Obligor shall
from time to time execute, deliver, file and record all such further agreements,
instruments,  financing statements,  notices and other documents  (collectively,
"Supplemental  Documentation")  as may be  requested  by  Agent  to  perfect  or
preserve the Security  Interest,  to enable Agent to notify any third parties of
the existence of the Creditor's Security Interest, or otherwise to carry out the
intent of this Agreement.  Obligor authorizes Agent to file financing statements
where  desirable in Agent 's judgment to perfect the Security  Interest  without
the signature of Obligor.  If any amount payable under or in connection with any
of the Collateral shall be or become  evidenced by any Instrument,  Certificated
Security or Chattel Paper,  such  Instrument,  Certificated  Security or Chattel
Paper  shall be  immediately  delivered  to  Agent,  duly  indorsed  in a manner
satisfactory to Agent, to be held as Collateral pursuant to this Agreement.

               6.10  Power  of  Attorney.   Obligor  hereby  irrevocably  makes,
constitutes and appoints Agent (and all persons  designated by Creditor for that
purpose) as Obligor's true and lawful attorney (and  agent-in-fact)  to (i) sign
the  name of  Obligor  on any  Supplemental  Documentation  and to  deliver  any
Supplemental Documentation to such persons as Agent, in its sole discretion, may
elect and (ii) to obtain  hold,  direct or  redirect  delivery  of or  otherwise
administer,  and control any  agreement,  instrument or document  evidencing any
portion of the Collateral or Obligor's  rights with respect  thereto,  including
documents of title,  warehouse  receipts and security  agreements  (collectively
"Special Collateral"), as Agent, in its sole discretion, may elect.

               6.11 Insurance.  Obligor shall, at its sole expense, maintain the
Collateral  insured  against  such  risks and in such  amounts,  subject to such
deductibles,  and for such periods as is customarily  carried by other owners or
users of such properties comparable to Obligor in similar businesses.  Within 30
days  after the date of this  Agreement,  such  policies  shall be  endorsed  to

                                        4
<PAGE>
provide that: (i) the insurance carrier shall give at least 30 days prior notice
to Agent  before any such policy  shall be altered or  canceled,  (ii) no act or
default of Obligor  shall affect the right of Agent to recover under such policy
in case of loss or damage,  and (iii) from and after the date,  if any, on which
the insurance  carrier receives notice from Agent that an "Event of Default" has
occurred under this Agreement,  all proceeds  payable under such policy shall be
payable directly to Agent (subject to the rights of holders of Permitted Liens).
Any  amounts  received  under  such  policies  may be  applied  by  Agent to the
Obligations  in such order and at such times as Agent may  determine  or, at the
option of Agent,  released  to Obligor,  provided  that no such  application  or
release shall cure or waive any Event of Default and no amount released shall be
deemed a payment of any  obligations.  In the event Obligor at any time fails to
maintain  any  of  the  policies  of  insurance  required  above  or  equivalent
replacement  policies  or fails  to pay any  premium  in whole or in part,  then
Agent,  without  waiving or  releasing  any of the  Obligations  or any Event of
Default,  may (but shall be under no  obligation  to) obtain and  maintain  such
policies  of  insurance  and pay such  premiums  and take any other  action with
respect thereto that Agent deems advisable.

               6.12  Performance  by the Agent.  If Obligor fails to perform any
material  covenant,   agreement,  duty  or  obligation  of  Obligor  under  this
Agreement, the Agent may, at any time or times in its discretion, take action to
effect  performance of such  obligation.  All  reasonable  expenses of the Agent
incurred in  connection  with the  foregoing  authorization  shall be payable by
Obligor. No discretionary  right, remedy or power granted to the Agent under any
part of this Agreement  shall be deemed to impose any  obligation  whatsoever on
the Agent with respect  thereto,  such rights,  remedies and powers being solely
for the protection of the Agent.

          7. REMEDIAL PROVISIONS.

               7.1 Right to Satisfy Other Claims and Taxes.  If Obligor fails to
pay any governmental  taxes,  assessments or other charges when due, or fails to
pay any claims  secured by any lien  against any  Collateral  when due,  Obligor
shall so advise  Creditor  in  writing  and  Creditor  may,  without  waiving or
releasing  any  obligations  of  Obligor  or any Event of  Default,  in its sole
discretion  (and without any obligation to do so), make such payment or any part
thereof or obtain such discharge and take any other action with respect  thereto
that the Creditor deems advisable.

               7.2 Certain Matters Relating to Receivables.  Creditor shall have
the  right to make test  verifications  of the  Receivables  in any  manner  and
through any medium that it  reasonably  considers  advisable,  and Obligor shall
furnish  all  such  assistance  and  information  as  Creditor  may  require  in
connection with such test verifications. At any time and from time to time, upon
Creditor's  request, at any time after the occurrence and during the continuance
of an Event of  Default  and at the  expense of  Obligor,  Obligor  shall  cause
independent public accountants or others  satisfactory to Creditor to furnish to
the Creditor  statements showing  reconciliations,  aging and test verifications
of, and trial  balances for, the  Receivables.  At Creditor's  request,  Obligor
shall  deliver to Creditor  all  original and other  documents  evidencing,  and
relating to, the agreements and transactions which gave rise to the Receivables,
including,  without  limitation,  all  original  orders,  invoices  and shipping
receipts.  Creditor  in its own  name or in the name of  others  may at any time
communicate  with  obligors  under  the  Receivables  to  verify  with  them  to
Creditor's  satisfaction  the  existence,  amount and terms of any  Receivables,
provided that Creditor  will not make  communications  in its own name unless an
Event of Default has occurred and is continuing. Anything herein to the contrary
notwithstanding,  Obligor shall remain liable under each of the  Receivables  to
observe  and perform  all the  conditions  and  obligations  to be observed  and
performed by it  thereunder,  all in accordance  with the terms of any agreement
giving rise thereto.  Creditor shall not have any obligation or liability  under
any Receivable (or any agreement  giving rise thereto),  by reason of or arising
out of this  Agreement  or the  receipt  by  Creditor  of any  payment  relating
thereto,  nor shall  Creditor be  obligated  in any manner to perform any of the
obligations  of Obligor  under or pursuant to any  Receivable  (or any agreement
giving rise  thereto) to make any payment,  to make any inquiry as to the nature
or the sufficiency of any payment received by it or as to the sufficiency of any
performance  by any party  thereunder,  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 it or to which  it may be  entitled  at any time or
times.

                                        5
<PAGE>
          8. RELEASE OF COLLATERAL.  Except for (i) sales or other  dispositions
of Inventory made prior to the occurrence of an Event of Default that are in the
ordinary  course of  Obligor's  business  and not  prohibited  by any  provision
contained in the  Financing  Documents and (ii) sales or other  dispositions  of
Collateral  for  which  Obligor  obtains  the  prior  written  consent  of Agent
(collectively,  "Permitted  Sales"),  Obligor shall not sell, lease,  license or
otherwise  dispose  of the  Collateral,  or any  part  thereof  or any  interest
therein.  Concurrently with any Permitted Sale, the Security shall automatically
be released  from the  property  so  disposed  of;  provided  however,  that the
Security Interest shall continue in the proceeds thereof.

          9. EVENTS OF DEFAULT.  Each of the following shall constitute an Event
of Default by Obligor:

               a. The occurrence of any event of default as defined in the Notes
or Subscription Agreement.

               b. The  failure of Obligor  to pay any  Obligation  of Obligor to
Creditor when due;

               c.  The  failure  of any  Other  Obligor  to pay any  obligation,
liability or indebtedness of such Other Obligor to Creditor when due;

               d. Any other  failure to observe or perform any of the  covenants
or obligations imposed upon Obligor or any Other Obligor by any of the Financing
Documents,  which failure is  unremedied  for more than 10 days after receipt of
notice thereof from Agent;

               e. The  occurrence  or existence of any other default or Event of
Default under any Financing Document;

               f. Any  representation  or warranty  contained  in any  Financing
Document  or  any  financial  statements,   certificates,   schedules  or  other
information  now or hereafter  furnished by Obligor or any Other Obligor  proves
false or misleading in any material respect;

               g. The  termination  of  existence  or  cessation  of business by
Obligor or any Other Obligor;

               h. The making of an  assignment  for the benefit of  creditors by
Obligor or any Other Obligor;

               i. The  commencement  of any  case or  proceeding  by or  against
Obligor  or  any  Other  Obligor  under  Title  11 of  the  United  States  Code
(Bankruptcy) or of any other  proceeding,  suit or action (at law, in equity, in
Bankruptcy  or  otherwise)  for  adjudication  as  a  bankrupt,  reorganization,
composition,  extension, arrangement,  receivership,  liquidation or dissolution
by, of, or against Obligor or any Other Obligor;

               j. The appointment of a receiver,  trustee,  custodian or similar
officer for or over Obligor or any Other Obligor or any of its  property,  which
is not vacated within 10 days thereafter;

               k. The levy of any writ of  execution or other  judicial  process
upon any of the property of Obligor or any Other  Obligor  which is not released
within 10 days thereafter;

               l. The  uninsured  damage to or  material  decline  in the market
value of the Collateral unless immediately replaced or supplemented by Obligor;

                                       6
<PAGE>

               m. The  failure  by  Obligor  or any  Other  Obligor  to make any
payment  when  due  (subject  to  any  applicable  grace  period),   whether  by
acceleration or otherwise,  of any other  indebtedness for borrowed money of, or
guaranteed by, Obligor or any Other Obligor,  or default by Obligor or any Other
Obligor in the  performance  or observance of any  obligation or condition  with
respect  to any such  other  indebtedness  if the  effect of such  default is to
accelerate  the  maturity  of any such  indebtedness  or to permit the holder or
holders  thereof,  or any  trustee  or agent  for such  holders,  to cause  such
indebtedness to become due and payable prior to its expressed maturity.

          10. RIGHTS AND REMEDIES OF THE CREDITOR UPON EVENT OF DEFAULT.

               10.1  Disposition  of  Collateral.  Upon and  after  any Event of
Default which is then continuing:

                    (a) The Agent may  exercise  its rights with respect to each
and every  component of the  Collateral,  without regard to the existence of any
other  security or source of payment for the  Obligations.  In addition to other
rights and remedies provided for herein or otherwise  available to it, the Agent
shall  have all of the  rights and  remedies  of a lender on  default  under the
Uniform Commercial Code ("Code") then in effect in the State of New York;

                    (b)  If  any   notice  to  Obligor  of  the  sale  or  other
disposition  of  Collateral is required by then  applicable  law, five (5) days'
prior  notice (or, if longer,  the  shortest  period of time  permitted  by then
applicable  law)  to  Obligor  of the  time  and  place  of any  public  sale of
Collateral  or of the time after  which any private  sale or any other  intended
disposition is to be made, shall constitute reasonable notification; and

                    (c) The Agent is authorized,  at any such sale, if the Agent
deems it advisable to do so, in order to comply with any  applicable  securities
laws,  to restrict the  prospective  bidders or  purchasers  to persons who will
represent and agree, among other things, that they are purchasing the Collateral
for their own account for investment, and not with a view to the distribution or
resale  thereof,  or otherwise to restrict such sale in such other manner as the
Agent deems  advisable  to ensure such  compliance.  Sales made  subject to such
restrictions  shall be deemed to have  been  made in a  commercially  reasonable
manner.

          10.2 Application of Proceeds.  Subject to the rights of any holders of
Permitted  Liens,  any  proceeds  received  by Agent in  respect  of any sale of
collection  from or other  realization  upon  all or any part of the  Collateral
following the occurrence of an Event of Default may, in the discretion of Agent,
be held by Agent  as  collateral  for,  and/or  then or at any  time  thereafter
applied by Agent as follows:  (i) first, to pay all costs,  expenses and charges
of every kind  (including  attorneys'  fees and costs) for pursuing,  searching,
protecting, taking, removing, storing, safekeeping,  caring, preparing for sale,
advertising,  selling and delivering the Collateral and otherwise enforcing this
Agreement and the other Financing Documents; (ii) second, to pay the Obligations
in order determined by Agent in its sole discretion; and (iii) third, to pay the
remaining  funds,  if any,  after  payment of all the  Obligations  in full,  to
Obligor  or to  whomever  may be  lawfully  entitled  to receive  such  surplus.
Payments  received from any third party on account of  disposition of Collateral
shall not reduce the Obligations until paid in cash to Agent. The application of
proceeds  by Agent  shall be  without  prejudice  to Agent 's rights as  against
Obligor  or other  persons  with  respect  to any  Obligations  which may remain
unpaid. Any such deficiency shall be paid forthwith to Agent by Obligor.

          10.3  Notice.  Any  notice  required  to be  given by Agent of a sale,
lease,  or other  disposition  of Collateral,  or any other  intended  action by
Agent,  which is sent at least five (5) days prior to such proposed  action,  or
such longer period as shall be specified by  applicable  law,  shall  constitute
commercially reasonable and fair notice thereof to Obligor.

          10.4 Appointment of Agent as Lawful Attorney:  Other Rights Upon Event
of Default. Obligor hereby irrevocably makes, constitutes and appoints Agent and
all persons  designated by Agent true and lawful  attorney  (and  agent-in-fact)
upon and after the  occurrence of an Event of Default for the purposes set forth

                                       7
<PAGE>
in the following sentences of this Section.  Upon and after the occurrence of an
Event of Default,  Agent or its agent may, without notice to Obligor and at such
time or  times  thereafter  as Agent or said  agent in its sole  discretion  may
determine, in Obligor's or Agent 's name: (i) give notice to account debtors and
Other Obligors and demand payment of Accounts or other  obligations  included in
the Collateral;  (ii) enforce  payment and exercise all of Obligor's  rights and
remedies with respect to the collection of Accounts,  any Special Collateral and
any other obligations by legal proceedings or otherwise;  (iii) settle,  adjust,
compromise,  discharge, release, extend or renew Accounts and other obligations;
(iv)  prepare,  file and sign  Obligor's  name on any proof of claim or  similar
document in any  insolvency  or similar case  against any Account  debtor or any
person  indebted  to Obligor;  (v) endorse or sign the name of Obligor  upon any
checks, drafts, chattel paper, document, instrument, invoice, freight bill, bill
of lading, or similar document or agreement relating to Accounts,  Inventory, or
Special Collateral;  (vi) use Obligor's  stationery and sign the name of Obligor
to verifications of Accounts and other  obligations to Account debtors and Other
Obligors;  (vii)  use the  information  recorded  on or  contained  in any  data
processing  equipment  and computer  hardware and software to which  Obligor has
access relating to Accounts,  Inventory, or Special Collateral;  (viii) open any
lock box;  (ix) transfer into the name of Agent or the name of Agent 's agent or
nominee any of the Collateral; (x) make, settle and adjust claims under policies
of insurance,  endorse or sign the name of Obligor on any check or other item of
payment  for  the  proceeds  of  such  policies  of  insurance,   and  make  all
determinations  and decisions with respect thereto and (xiii) receive and direct
the disposition of any proceeds of any Collateral.

          11. AGENT'S  EXPENSES,  INCLUDING  ATTORNEYS  FEES.  Regardless of the
occurrence or existence of an Event of Default,  Obligor shall pay to Agent,  on
demand,  the  amount of any costs or  expenses  (including  attorneys'  fees and
expenses)  paid or incurred  at any time or times in  connection  with:  (i) any
attempts to defend,  protect or enforce the  Security  Interest or the  priority
thereof,  including the  discharging of any prior or subsequent  lien or adverse
claim against any Collateral thereof which is not permitted hereunder;  (ii) any
attempt to collect the Obligations or enforce any rights of Agent, whether under
this Agreement or other Financing  Documents,  or otherwise,  against Obligor or
any other person under the Financing Documents; (iii) any litigation, dispute or
proceeding (whether instituted by Agent or any other person) in any way relating
to  Collateral,  this  Agreement,  the other  Financing  Documents  or Obligor's
affairs; or (iv) any amounts expended by Agent under this Agreement;  or (v) the
inspection,  verification,  protection,  collection,  sale, liquidation or other
disposition  of  Collateral.  Additionally,  if any  taxes or  charges  shall be
payable on account of the  execution  or delivery of this  Agreement,  any other
Financing  Documents or the creation of any of the  Obligations by reason of any
existing or hereafter  enacted  federal,  state or other  regulation  or statute
(including any foreign country's regulations or statutes),  Obligor will pay all
such taxes and charges,  including any interest and/or penalty thereon, and will
indemnify  and hold Agent  harmless  from and against  liability  in  connection
therewith.  All obligations  under this Section 11 shall  constitute  additional
Obligations  secured by the  Collateral and shall bear interest at the same rate
as provided for the largest amount of other Obligations.

          12. ASSIGNMENT BY CREDITOR. Obligor agrees that Creditor may assign or
otherwise transfer this Agreement, or any of other Financing Documents,  and may
deliver all or any of the Collateral to the  transferee(s),  who shall thereupon
become  vested  with all the powers and rights in respect  thereto  given to the
Creditor herein or in the Financing  Documents  transferred,  and Creditor shall
thereafter be fully discharged from any liability or responsibility with respect
thereto,  all without  prejudice to the  retention by Creditor of all rights and
powers hereby given with respect to any Financing Documents, instruments, rights
or property not so transferred.

          13. REMEDIES NOT EXCLUSIVE: FORECLOSURES. No right or remedy hereunder
is exclusive of any other right or remedy. Each and every right and remedy shall
be cumulative  and shall be in addition to and without  prejudice to every other
remedy given hereunder,  under any other agreement  between Obligor and Creditor
or now or hereafter existing at law or in equity, and may be exercised from time
to time as often as deemed  expedient,  separately or concurrently.  The giving,


                                       8
<PAGE>
taking or enforcement of or execution against any other or additional  security,
collateral,  or guaranty for the payment of the Obligations shall not operate to
prejudice,  waive or affect any rights, powers or remedies hereunder,  nor shall
Creditor be required to first look to, enforce,  exhaust or execute against such
other or  additional  security,  or  guarantees  prior to so acting  against the
Collateral. Creditor may foreclose on or execute against the items of Collateral
in such order as Creditor may, in its sole and unfettered discretion, determine.

          14. WAIVERS.  The failure or delay of Agent to insist in any instances
upon the  performance  of any of the  terms,  covenants  or  conditions  of this
Agreement or other  Financing  Documents,  or to exercise  any right,  remedy or
privilege  herein or  therein  conferred,  shall not impair or be  construed  as
thereafter waiving any such covenants,  remedies,  conditions or provisions, but
every such term,  condition and covenant shall continue and remain in full force
and effect; nor shall any waiver of an Event of Default suspend, waive or affect
any other Event of Default,  whether the same is prior or subsequent thereto and
whether of the same or of a different type.

          15. SEVERABILITY.  Wherever possible, each provision of this Agreement
shall be  interpreted  in such a manner as to be effective.  If any provision of
this  Agreement  shall be held to be prohibited  by or invalid under  applicable
law, such provision shall be ineffective  only to the extent of such prohibition
or  invalidity,  without  invalidating  the remainder of such  provisions or the
remaining provisions of this Agreement.

          16.  TERMINATION.   Upon  payment  in  full  and  performance  of  all
Obligations  owed by Obligor to  Creditor  pursuant to the  Financing  Documents
(including payment in full and performance of all indebtedness,  obligations and
liabilities of other persons  guaranteed by the Obligor) and the  termination of
all obligations of Creditor to extend credit under the Financing Documents, this
Agreement  shall be  terminated;  otherwise  it shall  remain in full  force and
effect.

          17. NOTICE. All notices, demands and communications hereunder shall be
in writing and shall be deemed to be duly  delivered when  personally  delivered
(including by courier or  messenger),  or two (2) business days after deposit in
the United States mail by registered or certified mail, postage prepaid,  return
receipt  requested,  addressed to the parties at the  addresses set forth on the
signature  page  hereof,  or at such  other  address  as any  party  shall  have
furnished to the other parties in writing.

          18. GOVERNING LAW. To the extent  applicable,  this Agreement shall be
governed  by the  Uniform  Commercial  Code of the State of New York (or, to the
extent applicable to the attachment,  perfection, priority or enforcement of the
Security  Interest in any Collateral,  the Uniform  Commercial Code of any other
state).  With  respect to any matters not so covered by the  applicable  Uniform
Commercial Code, this Agreement shall otherwise be governed by the internal laws
of the State of New York.

          19.  ATTORNEYS'  FEES AND OTHER  COSTS.  Should  either  party  hereto
institute any action or proceeding to enforce this  Agreement or any  provisions
hereof or for a declaration of rights under this  Agreement,  or for arbitration
of any dispute  arising under this Agreement,  the prevailing  party in any such
action,  proceeding or  arbitration  shall be entitled to receive from the other
party all costs and expenses, including without limitation reasonable attorneys'
fees,  incurred  by  the  prevailing  party  in  connection  with  such  action,
proceeding or arbitration.

          20.  INDEMNIFICATION.  Obligor  hereby  agrees to  indemnify  and hold
harmless Creditor and Agent and their directors,  officers, employees and agents
against and from any and all claims, actions, liabilities, costs and expenses of
any kind or nature  whatsoever  (including  reasonable fees and disbursements of
counsel) that may be imposed on,  incurred by, or asserted  against any of them,
in any way  relating  to or  arising  out of this  Agreement,  any  exercise  of
remedies  hereunder  or any other  action  taken or omitted  by them  hereunder,
except to the extent a court holds in final and nonappealable judgment that such
claims,  actions,  liabilities,  costs and expenses  directly  resulted from the
gross negligence or willful misconduct of such indemnified Persons.

                                       9
<PAGE>
          21. WAIVERS BY THE OBLIGOR.  Except as otherwise expressly provided in
this  Agreement  or the other  Financing  Documents,  the  Obligor  waives:  (i)
presentment,  demand, and protest and notice of presentment,  protest,  default,
non-payment, maturity, release, compromise, settlement, extension, or renewal of
any or all Financing Documents under or pursuant to which Obligor may in any way
be liable and hereby  ratifies  and  confirms  whatever  Creditor may do in this
regard;  (ii) notice prior to taking  possession or control of Collateral or any
bond or security that might be required by any court prior to allowing  Creditor
to exercise  any of  Creditor's  remedies;  (iii) the benefit of all  valuation,
appraisement,  and exemption laws; (iv) any right to require Creditor to proceed
against any other person or collateral held from any other person; (v) any right
to require Creditor to pursue any other remedy in Creditor's  power  whatsoever;
or (vi) any defense  arising out of any  election by Creditor to exercise or not
exercise  any right or remedy it may have against  Obligor,  any other person or
any  security  held by it,  even  though  such  election  operates  to impair or
extinguish any right of reimbursement to subrogation or other right or remedy of
Obligor against any other person or any such security.

          22. MISCELLANEOUS.  Obligor agrees that the following shall govern the
interpretation and enforcement of this Agreement:

               22.1 Binding; on Successors. This Agreement shall be binding upon
Obligor,  the  heirs,  executors,  administrators,  successors  and  assigns  of
Obligor,  and shall inure to the benefit of and be enforceable by Creditor,  its
successors, transferees and assigns.

               22.2  "Obligor."  If this  Agreement  is  executed by two or more
parties  (other  than  Creditor),  they shall be jointly  and  severally  liable
hereunder,  and the word  "Obligor"  wherever  used herein shall be construed to
refer to each of the parties  separately,  all in the same manner,  and with the
same effect as if each of them had signed separate instruments,  and in any such
case,  this Agreement  shall not be revoked or impaired as to any one or more of
such  parties  by the  death  or  dissolution  of any  of the  others  or by the
revocation  or release of any  obligations  hereunder of any one or more of such
parties.

               22.3  Partnerships.  If any party hereto is a  partnership,  this
Agreement shall remain in force and applicable notwithstanding any change in the
individuals  comprising  the  partnership  and  shall  include  any  altered  or
successor partnership, but the predecessor partnerships and their partners shall
not thereby be released from any liability.

               22.4 No Oral  Modifications.  None of the terms or  provisions of
this Agreement may be waived,  altered,  modified,  limited or amended except in
writing.

              22.5 Execution by the Obligor  Sufficient.  This  Agreement  shall
take effect upon the execution  solely by the Obligor but this Agreement may, at
the option of Agent,  be executed by Creditor if execution by Creditor is deemed
desirable by Creditor or is required by the laws of any  jurisdiction to create,
perfect,  preserve,  validate or otherwise protect any security interest granted
pursuant  hereto or to  enable  Creditor  to  exercise  or  enforce  its  rights
hereunder with respect to any such security interest.

               22.6  Section  Titles.  The  section  titles  contained  in  this
Agreement are merely for convenience and shall be without substantive meaning or
content.

               22.7 Construction.  The word "including" shall have the inclusive
meaning  represented by the phrase "including  without  limitation."  Unless the
context of this Agreement clearly otherwise  requires,  the word "or" shall have
the meaning represented by the phrase "and/or," references to the plural include
the singular and references to the singular include the plural.

          23. WAIVER OF JURY TRIAL.  Obligor and Creditor each  irrevocably  and
unconditionally waive trial by jury in any action or proceeding relating to this
Agreement or any other Financing Document and for any counterclaim therein.


                                       10
<PAGE>
          IN WITNESS WHEREOF, this Agreement is executed and delivered as of the
date first set forth above.

CREDITOR:                                          OBLIGOR:

VERTICAL CAPITAL PARTNERS, INC., as Agent          APPLIED DNA SCIENCES, INC.

By:/S/Robert DePalo                               By:/S/ Peter Brockelsby
   ----------------                               -------------------
   Printed Name: Robert DePalo                    Printed Name: Peter Brockelsby
   Title: Chairman                                Title: President

Mailing Address:                                   Mailing Address:



Facsimile:
Telephone:                                         Facsimile:
                                                   Telephone:
AGENT:

VERTICAL CAPITAL PARTNERS, INC.


By:/S/Robert DePalo
   ----------------
   Printed Name: Robert DePalo
   Title: President


Mailing Address:



Facsimile:
Telephone:


                                       11
<PAGE>












</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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