COMMODORE APPLIED TECHNOLOGIES INC
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>7
<FILENAME>cxiexh10153.txt
<TEXT>
                                 Exhibit 10.153
                                 --------------


                               EXCHANGE AGREEMENT


         THIS EXCHANGE AGREEMENT,  dated April 12, 2005 (this  "Agreement"),  by
and between Commodore Applied  Technologies,  Inc., a Delaware  corporation with
its principal executive offices located at 150 East 58th Street, Suite 3400, New
York, New York 10155 (the "Company") and The Shaar Fund, Ltd. ("Shaar").

         WHEREAS,  Shaar is the record and beneficial  owner of 77,500 shares of
the Company's  Series E Convertible  Preferred Stock, par value $0.001 per share
(the "Series E Preferred Shares");

         WHEREAS,  Shaar is the record and beneficial owner of 118,200 shares of
the Company's  Series F Convertible  Preferred Stock, par value $0.001 per share
(the  "Series F  Preferred  Shares"  and,  together  with the Series E Preferred
Shares, the "Preferred Shares");

         WHEREAS,  Shaar is the record and  beneficial  owner of an Amended  and
Restated  Secured  Promissory  Note  of the  Company,  which  such  Note  has an
outstanding principal balance as of the date hereof of Three Million Two Hundred
Seventy-Nine  Thousand Five Hundred Eighty Five Dollars  ($3,279,585)  (the "Old
Note ");

         WHEREAS,  concurrently with the issuance of the Old Note, Shaar and the
Company entered into that certain Security Agreement (the "Security Agreement"),
Patent Collateral  Assignment ("Patent Collateral  Assignment") and Guaranty and
Suretyship Agreement ("Guaranty");

         WHEREAS,  pursuant to that certain Purchase Agreement,  dated March 23,
2005, Shaar purchased a Secured Promissory Note of the Company, initially issued
to Milford  Capital & Management  ("Milford")  on June 13, 2001, in the original
principal amount of Five Hundred Thousand Dollars ($500,000), which such Secured
Promissory  Note has an outstanding  principal  balance as of the date hereof of
One Hundred Eight-Eight  Thousand One Hundred Forty-Nine Dollars ($188,149) (the
"Milford  Note"),  together  with  (x)  all  interest,  additional  obligations,
forbearance  fees,  exit fees,  penalties and other amounts due and payable from
time to time under or in connection  with the Secured  Promissory  Note, (y) all
other claims, actions, rights and demands of Milford now existing or hereinafter
arising under the Secured  Promissory Note and certain documents entered into in
connection therewith and (z) the Forbearance Amount (defined below);

         WHEREAS, in connection with that certain Forbearance  Agreement,  dated
January 30, 2004,  between Milford and the Company,  Shaar (x) agreed to forgive
payment to it of Three Hundred Thousand ($300,000) Dollars of accrued and unpaid
dividends on shares of the Company's  Series E Convertible  Preferred Stock held
by Shaar (the "Dividends") and (y) consented to the transfer of the dollar value
of the  Dividends to Milford as part of the  forbearance  fee payable to Milford
under the Forbearance Agreement (the "Forbearance Amount");

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         WHEREAS, upon the closing of the Purchase Agreement and the acquisition
of the right to the Forbearance  Amount by Shaar, such Forbearance  Amount shall
be  included  in the  principal  amount  of the  Convertible  Note  (hereinafter
defined);

         WHEREAS, pursuant to a Certificate of Designation, substantially in the
form of  Exhibit A hereto  (the  "Series I  Certificate  of  Designation"),  the
Company has created its Series I Convertible  Preferred  Stock, par value $0.001
per share (collectively, the "Series I Preferred Stock");

         WHEREAS, Shaar and the Company have agreed that Shaar will exchange all
of its right,  title and interest in and to the Preferred Shares  (including all
accrued and unpaid dividends thereon) for 395,302 shares of the Company's Series
I Preferred Stock; and

         WHEREAS, Shaar and the Company have agreed (i) that Shaar will exchange
the outstanding principal amount of the Old Note and the Milford Note (including
the Forbearance Amount, all accrued and unpaid interest and unpaid fees thereon)
for the  Company's  10%  Convertible  Secured  Note  (the  "Convertible  Note"),
substantially  in the form of Exhibit B hereto and (ii)  amend and  restate  the
Security Agreement, Patent Collateral Assignment and Guaranty.

         NOW,  THEREFORE,  in  consideration  of the  premises  and  the  mutual
covenants  contained herein, the parties hereto,  intending to be legally bound,
hereby agree as follows:

                                   I. EXCHANGE

         Subject to the terms and  conditions of this Agreement and the Series I
Certificate of Designation, Shaar and the Company hereby agree to exchange, in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act of 1933, as amended (the "Securities  Act") (i) the Preferred
Shares  (including all accrued and unpaid dividends  thereon)  currently held by
Shaar for 395,302  shares of Series I Preferred  Stock and (ii) the Old Note and
the Milford  Note  (including  the  Forbearance  Amount,  all accrued and unpaid
interest and unpaid fees thereon) for the Convertible Note.  Simultaneously with
the  execution  of this  Agreement,  Shaar  shall  deliver  to the  Company  (x)
certificates  representing 77,500 Series E Preferred Shares and 118,200 Series F
Preferred  Shares,  respectively,  duly endorsed for transfer or an affidavit of
loss with respect to any  certificates  not accounted  for, (y) the Old Note and
the Milford Note for cancellation  and (z) a general  release,  substantially in
the  form  of  Exhibit  C  hereto  to  the  Company   (the   "Shaar   Release").
Simultaneously  with the execution of this Agreement,  the Company shall deliver
(a) the Convertible  Note and one or more duly  authorized,  issued and executed
certificates  as designated  by Shaar (I/N/O Shaar or, if the Company  otherwise
has been  notified,  I/N/O Shaar's  nominee)  evidencing  the Series I Preferred
Stock to Shaar, (b) irrevocable  instructions to the Company's transfer agent to
reserve  75,000,000 shares of Common Stock for issuance of the Conversion Shares
(hereinafter  defined) and (c) a general  release,  substantially in the form of
Exhibit D hereto to Shaar (the "Commodore Release").

              II. SHAAR'S REPRESENTATIONS, WARRANTIES AND COVENANTS

         Shaar  represents  and  warrants to and  covenants  with the Company as
follows:

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         A. Shaar is acquiring  the Series I Preferred  Stock,  the  Convertible
Note (together,  the  "Securities") and the shares of Common Stock issuable upon
conversion of the Securities (the "Conversion  Shares") for its own account, for
investment  purposes only and not with a view towards or in connection  with the
public sale or distribution thereof in violation of the Securities Act.

         B. Shaar is (i) an "accredited investor" within the meaning of Rule 501
of Regulation D under the Securities Act, (ii) experienced in making investments
of the kind  contemplated  by this  Agreement,  (iii) capable,  by reason of its
business and financial  experience,  of evaluation the relative merits and risks
of an  investment  in the  Securities,  and (iv) able to afford  the loss of its
investment in the Securities.

         C.  Shaar  understands  that the  Securities  are being  offered by the
Company in reliance on an exemption from the  registration  requirements  of the
Securities Act and equivalent state securities and "blue sky" laws, and that the
Company is relying upon the accuracy of, and Shaar's  compliance  with,  Shaar's
representations,  warranties  and  covenants  set  forth  in this  Agreement  to
determine the  availability  of such  exemption and the  eligibility of Shaar to
acquire the Securities.

         D. Shaar  understands  that the  Securities  have not been  approved or
disapproved by the Securities and Exchange  Commission (the "Commission") or any
state securities commission.

         E. This  Agreement has been duly and validly  authorized,  executed and
delivered  by Shaar and is a valid and binding  agreement  of Shaar  enforceable
against it in  accordance  with its terms,  subject  to  applicable  bankruptcy,
insolvency, fraudulent conveyance,  reorganization,  moratorium and similar laws
affecting  creditors'  rights  and  remedies  generally  and except as rights to
indemnity and contribution may be limited by federal or state securities laws or
the public policy underlying such laws.

                       III. THE COMPANY'S REPRESENTATIONS

         The Company represents and warrants to Shaar that:

         A. Capitalization.

              (i)  Except  as  set  forth  in the  Company's  filings  with  the
Commission  (the  "SEC  Filings"),  there  has been no  material  change  in the
capitalization,  assets, or liabilities of the Company since the issuance of the
financial  statements  for the period  ending  September  30,  2004,  nor is the
Company in default under, or to the Company's knowledge, has an event of default
occurred in respect of any prior agreement between the Company and Shaar.

              (ii) The Conversion  Shares have been duly and validly  authorized
and reserved  for  issuance by the Company,  and when issued by the Company upon
conversion of the  Securities  will be duly and validly  issued,  fully paid and
nonassessable  and will not subject the holder thereof to personal  liability by
reason of being such holder.

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              (iii) Other than any such rights or  obligations  disclosed in the
Company's SEC Filings, there are no preemptive,  subscription,  "call," right of
first  refusal or other  similar  rights to  acquire  any  capital  stock of the
Company or other  voting  securities  of the  Company  that have been  issued or
granted to any person or any other  obligations of the Company to issue,  grant,
extend or enter into any security,  option, warrant,  "call," right, commitment,
agreement, arrangement or undertaking with respect to any of its capital stock.

         B.  Reporting  Company  Status.  The Company has  registered the Common
Stock pursuant to section 12 of the Securities  Exchange Act of 1934, as amended
(the  "Exchange  Act").  The Common  Stock is  eligible  for  trading on the OTC
Bulletin Board (the "OTCBB"). The Company has not received notices regarding the
eligibility of the Common Stock for such trading on the OTCBB.

         C.  Authorization.  The Company (i) has duly and validly authorized and
reserved for issuance  75,000,000  shares of Common Stock, the maximum allowable
under the current issued and authorized limitations of the Company, which may be
modified  in the future  subsequent  to a  contemplated  reverse  split or other
corporate  action  which  would  make more  shares of  Common  Stock  available,
sufficient  in number for the  conversion  of the  Securities  and all  warrants
exercisable for shares of Common Stock that are held by Shaar (the  "Warrants").
The Company  acknowledges  that its  obligation  to issue  Conversion  Shares in
accordance  with  this  Agreement,   the  Convertible  Note  and  the  Series  I
Certificate  of  Designation  is absolute and  unconditional  regardless  of the
dilutive effect that such issuance may have on the ownership  interests of other
stockholders  of the Company and  notwithstanding  the  commencement of any case
under 11 U.S.C.  ss.ss.101 et seq.  (the  "Bankruptcy  Code").  In the event the
Company is a debtor under the Bankruptcy  Code, the Company hereby waives to the
fullest extent permitted any rights to relief it may have under 11 U.S.C. ss.362
in respect of the conversion of the Securities. The Company agrees, without cost
or expense to Shaar,  to take or  consent  to any and all  action  necessary  to
effectuate relief under 11 U.S.C. ss.362.

         D.  Authority;  Validity  and  Enforceability.   The  Company  has  the
requisite  corporate  power and authority to perform its  obligations  under the
Series I  Certificate  of  Designation  and to  enter  into  the  Documents  (as
hereinafter  defined),  and to  perform  all of its  obligations  hereunder  and
thereunder (including the issuance and delivery to Shaar of the Securities). The
execution,  delivery and  performance by the Company of the  Documents,  and the
consummation by the Company of the transactions  contemplated hereby and thereby
(including,  without  limitation  the issuance of the  Convertible  Note and the
Series I Preferred  Stock and the issuance and  reservation  for issuance of the
Conversion Shares),  have been duly authorized by all necessary corporate action
on the part of the  Company.  Each of the  Documents  has been duly and  validly
executed  and  delivered  by  the  Company  and  the  Series  I  Certificate  of
Designation has been duly filed with the Delaware Secretary of State's office by
the Company and each Document  constitutes a valid and binding obligation of the
Company  enforceable  against  it in  accordance  with  its  terms,  subject  to
applicable  bankruptcy,   insolvency,  fraudulent  conveyance,   reorganization,
moratorium and similar laws affecting  creditors' rights and remedies  generally
and except as rights to indemnity and  contribution may be limited by federal or
state securities laws or the public policy  underlying such laws. The Securities
have been duly and validly  authorized  for  issuance by the Company  and,  when
executed and delivered by the Company,  will be valid and binding obligations of
the Company  enforceable  against it in accordance with their terms,  subject to

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applicable  bankruptcy,   insolvency,  fraudulent  conveyance,   reorganization,
moratorium and similar laws affecting  creditors' rights and remedies generally.
For purposes of this Agreement,  the term "Documents"  means (i) this Agreement;
(ii) the Series I Certificate of Designation;  (iii) the Convertible  Note; (iv)
the Amended and Restated Security Agreement; (v) the Amended and Restated Patent
Collateral  Assignment;  (vi) the Amended and Restated  Guaranty and  Suretyship
Agreement and the (vii) the Commodore Release.

         E.  Validity of Issuance of  Securities.  As of the Closing  Date,  the
Series I Preferred Stock and, upon their issuance,  the Conversion Shares,  will
be validly issued and outstanding, fully paid and nonassessable, and not subject
to any preemptive rights, rights of first refusal,  tag-along rights, drag-along
rights or other similar rights.

         F. Non-contravention. Except for such notice filings as may be required
under  applicable  federal and state securities laws, the execution and delivery
by the  Company  of the  Documents,  the  issuance  of the  Securities,  and the
consummation by the Company of the other  transactions  contemplated  hereby and
thereby,  do not, and compliance with the provisions of this Agreement and other
Documents  will not,  conflict  with,  or result in any violation of, or default
(with or  without  notice or lapse of time,  or both)  under,  or give rise to a
right of termination,  cancellation or acceleration of any obligation or loss of
a material  benefit under, or result in the creation of any lien upon any of the
properties or assets of the Company under,  or result in the  termination of, or
require that any consent be obtained or any notice be given with respect to, (i)
the  Certificate of  Incorporation  or By-Laws of the Company,  (ii) any loan or
credit agreement,  note, bond,  mortgage,  indenture,  lease,  contract or other
agreement,  instrument or permit  applicable to the Company or its properties or
assets, or (iii) any law applicable to the Company or its respective  properties
or assets.

         G.  Approvals.  No  authorization,  approval or consent of any court or
public or  governmental  authority is required to be obtained by the Company for
execution and delivery of the Documents and the issuance of the  Securities  and
the Conversion  Shares to Shaar as contemplated  by this Agreement,  except such
authorizations,  approvals  and consents  that have been obtained by the Company
prior to the date hereof.

         H. Litigation. There is no pending, or to the knowledge of the Company,
threatened, judicial, administrative or arbitral action, claim, suit, proceeding
or  investigation  against or  involving  the  Company,  which might  affect the
validity or  enforceability of this Agreement or the Documents or which involves
the Company and which if adversely  determined,  could reasonably be expected to
have a material adverse effect on the Company.

         I. Commission  Filings.  The Company has properly and timely filed with
the Commission all reports, proxy statements, forms and other documents required
to be filed with the  Commission  under the  Securities Act and the Exchange Act
since January 1, 2002 (the "Commission Filings").  As of their respective dates,
(i)  the  Commission   Filings  complied  in  all  material  respects  with  the
requirements of the Securities Act, or the Exchange Act, as the case may be, and
the rules and regulations of the Commission promulgated thereunder applicable to
such Commission  Filings,  and (ii) none of the Commission  Filings contained at
the time of their filing any untrue  statement of a material  fact or omitted to
state a material  fact  required to be stated  therein or  necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.  The financial  statements of the Company  included in the
Commission Filings, as of the dates of such documents, were true and complete in
all material respects and complied with applicable  accounting  requirements and
the published rules and regulations of the Commission with respect thereto, have

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been prepared in accordance with generally accepted accounting principles in the
United  States  ("GAAP")  (except in the case of the  unaudited  statements,  as
permitted  by Form 10-Q under the Exchange  Act)  applied on a consistent  basis
during the periods  involved  (except as may be indicated in the notes  thereto)
and fairly presented the consolidated  financial position of the Company and its
material  subsidiaries as of the dates thereof and the  consolidated  results of
their operations and cash flows for the periods then ended (subject, in the case
of  unaudited  statements,  to normal  year-end  audit  adjustments  that in the
aggregate are not material and to any other adjustment described therein).

         J. Securities Law Matters. Assuming the accuracy of the representations
and  warranties of Shaar set forth in Section II hereof,  the Exchange is exempt
from (i) the registration and prospectus delivery requirements of the Securities
Act and the rules and  regulations  of the  Commission  thereunder  and (ii) the
registration and/or qualification  provisions of all applicable state securities
and "blue sky" laws. The Company acknowledges and agrees that, based upon advice
received  from its  legal  counsel  after  such  counsel  reviewed  certain  SEC
"No-Action" letters which it deemed relevant,  the Securities acquired by Shaar,
for the  purposes of and  pursuant  to Rule  144(d)(3)(i)  of the Act,  shall be
deemed to have been  acquired at the same time as the  securities  exchanged  by
Shaar in connection with the transactions contemplated hereby were acquired, and
that the Conversion Shares shall be deemed,  by reason of Rule  144(d)(3)(ii) of
the Act, to have been acquired at the same time as the securities surrendered by
Shaar in connection with the transactions  contemplated hereby were acquired and
that upon  issuance  of such  Conversion  Shares,  Shaar  shall be  entitled  to
immediately  sell such  Conversion  Shares under Rule 144. In the event Shaar is
prohibited  from  publicly  selling any  Conversion  Shares,  the Company  shall
promptly use its  commercially  reasonable  efforts to register such  Conversion
Shares pursuant to an effective  registration  statement permitting their resale
under the Act. The Company shall not directly or indirectly  take, and shall not
permit any of its  directors,  officers or Affiliates  directly or indirectly to
take, any action  (including,  without  limitation,  any offering or sale to any
person or entity of the Securities) so as to make unavailable the exemption from
Securities Act  registration  being relied upon by the Company for the offer and
sale to Shaar of the Securities  (and the Conversion  Shares) as contemplated by
this Agreement.  No form of general solicitation or advertising has been used or
authorized  by the Company or any of its  officers,  directors or  affiliates in
connection with the offer or sale of the Securities (and the Conversion  Shares)
as contemplated by this Agreement or any other agreement to which the Company is
a party.

         K.  Dividends.  The  timely  payment of (i)  dividends  on the Series I
Preferred Stock as specified in the Series I Certificate of Designation and (ii)
interest on the outstanding  principal  amount of the  Convertible  Note, is not
prohibited by the Certificate of  Incorporation or By-Laws of the Company or any
agreement,  contract,  documents or other  undertaking to which the Company is a
party.

         L. No  Misrepresentation.  No representation or warranty of the Company
contained  in this  Agreement,  any  schedule,  annex or  exhibit  hereto or any
agreement,  instrument or certificate furnished by the Company to Shaar pursuant
to this Agreement,  contains any untrue statement of a material fact or omits to
state a material  fact  required to be stated  therein or  necessary to make the
statements therein, not misleading.

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         M. Finder's Fee. There is no finder's fee, brokerage commission or like
payment incurred by the Company in connection with the transactions contemplated
by this Agreement for which Shaar is liable or responsible.


                    IV. CERTAIN COVENANTS AND ACKNOWLEDGMENTS

         A.  Restrictive  Legend.  Shaar  acknowledges  and  agrees  that,  upon
issuance pursuant to this Agreement, the certificates  representing the Series I
Preferred  Stock  shall  have  endorsed  thereon a legend in  substantially  the
following form (and a stop-transfer  order may be placed against transfer of the
Series I Preferred Stock until such legend has been removed):

         "THESE  SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
         1933, AS AMENDED (THE "SECURITIES  ACT"), OR THE SECURITIES LAWS OF ANY
         STATE, AND ARE BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE
         REGISTRATION  REQUIREMENTS  OF THE SECURITIES ACT AND SUCH LAWS.  THESE
         SECURITIES  MAY  NOT BE  SOLD  OR  TRANSFERRED  EXCEPT  PURSUANT  TO AN
         EFFECTIVE  REGISTRATION  STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
         TO AN AVAILABLE  EXEMPTION FROM THE  REGISTRATION  REQUIREMENTS  OF THE
         SECURITIES ACT OR SUCH OTHER LAWS."

         B. Filings. The Company shall make all necessary Commission Filings and
"blue sky"  filings  required to be made by the Company in  connection  with the
sale of the  Securities to Shaar as required by all  applicable  laws, and shall
provide a copy thereof to Shaar promptly after such filing.

         C.  Reporting  Status.  So long as Shaar  beneficially  owns any of the
Securities, the Company shall timely file all reports required to be filed by it
with the Commission  pursuant to Section 13 or 15(d) of the Securities  Exchange
Act of 1934, as amended.

         D. Listing.  Except to the extent the Company lists its Common Stock on
The New York Stock  Exchange,  the Nasdaq National Market System or the American
Stock Exchange (in which case it will use its commercially reasonable efforts to
maintain  such  listing),  the  Company  shall use its  commercially  reasonable
efforts to maintain the  eligibility  of the Common  Stock on the OTCBB.  If the
Common Stock is no longer  eligible to be traded on the OTCBB,  the Company will
use its  commercially  reasonable  efforts to list the Common  Stock on the most
liquid national securities exchange or quotation system that the Common Stock is
qualified to be listed or traded on.

         E. Information. Each of the parties hereto acknowledges and agrees that
Shaar  shall  not be  provided  with,  nor be  given  access  to,  any  material
non-public information relating to the Company.

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         F.  Accounting and Reserves.  The Company shall maintain a standard and
uniform  system of  accounting  and shall  keep  proper  books and  records  and
accounts  in  which  full,  true  and  correct  entries  shall  be  made  of its
transactions,  all in accordance with GAAP applied on a consistent basis through
all  periods,  and shall set aside on such books for each  fiscal  year all such
proper  reserves for  depreciation,  obsolescence,  amortization,  bad debts and
other  purposes  in  connection  with its  operations  as are  required  by such
principles so applied.

         G.  Press  Release.  Following  the  consummation  of the  transactions
contemplated  hereby,  if the  Company  determines  that  disclosure  thereof is
required by law, the Company shall,  with the prior review and consent of Shaar,
which  consent  shall  not be  unreasonably  withheld,  issue  a  press  release
concerning said transactions.

         H. Fees. The Company shall pay all legal fees and expenses  incurred by
Shaar in  connection  with  preparation  and  negotiation  of all  documents and
instruments for the transactions contemplated hereby.

         I. Reserved  Shares.  The Company shall at all times from and after the
date hereof shall maintain a sufficient  number of shares of Common Stock,  duly
and validly  authorized  and reserved for issuance to satisfy the  conversion of
the Securities and the Warrants; provided, that, in no event shall the number of
shares reserved for such issuance be less than the greater of (a) 75,000,000 and
(b) 115% of the  number  of  shares  necessary  for the full  conversion  of the
Securities  and the  Warrants.  In addition  to such other  remedies as shall be
available to Shaar  hereunder,  the Company will take such  corporate  action as
may, in the  opinion of its  counsel,  be  necessary  to increase  the number of
authorized but unissued  shares of Common Stock to the number of shares required
hereby,  including  without  limitation,  using its best  efforts  to obtain the
requisite  stockholder  approval  necessary to increase the number of authorized
shares of the Company's Common Stock.

                 V. SURVIVAL; INDEMNIFICATION; OTHER AGREEMENTS

         A. The  representations  and warranties made by each of the Company and
Shaar in this Agreement, the annexes,  schedules and exhibits hereto and in each
instrument,  agreement  and  certificate  entered  into  and  delivered  by them
pursuant to this Agreement,  shall survive the  consummation of the transactions
contemplated  hereby for a period of three (3) years after the full execution of
this  Agreement  and all  documents or  instruments  entered into in  connection
therewith. The covenants of the Company and Shaar shall survive the consummation
of the transactions  contemplated  hereby. In the event of a breach or violation
of any of such representations,  warranties or covenants, the party to whom such
representations,  warranties  or covenants  have been made shall have all rights
and remedies for such breach or violation  available to it under the  provisions
of this Agreement or otherwise, whether at law or in equity, irrespective of any
investigation made by or on behalf of such party on or prior to the consummation
of the transactions contemplated hereby.

         B.  If (i)  Shaar  becomes  involved  in any  capacity  in any  action,
proceeding  or  investigation  brought by any  stockholder  of the  Company,  in
connection  with  or  as a  result  of  the  consummation  of  the  transactions
contemplated  by this Agreement or the Documents or if Shaar is impleaded in any
such action,  proceeding or investigation  by any Person,  or (ii) Shaar becomes
involved in any capacity in any action,  proceeding or investigation  brought by
the  Commission,   any   self-regulatory   organization  or  other  body  having
jurisdiction,  against or involving  the Company or in  connection  with or as a

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result of the consummation of the transactions contemplated by this Agreement or
the  Documents  or if  Shaar is  impleaded  in any such  action,  proceeding  or
investigation by any Person, then in any such case, the Company hereby agrees to
indemnify, defend and hold harmless Shaar from and against and in respect of all
losses, claims, liabilities, damages or expenses resulting from, imposed upon or
incurred  by  Shaar,  directly  or  indirectly,  and  reimburse  Shaar  for  its
reasonable legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith, as such expenses are incurred. In
addition,  the Company will reimburse Shaar for reasonable internal and overhead
costs for the time of any officers or  employees  of Shaar  devoted to appearing
and preparing to appear as  witnesses,  assisting in  preparation  for hearings,
trials or pretrial  matters,  or otherwise  with respect to inquiries,  hearing,
trials,  and other proceedings  relating to the subject matter of this Agreement
or the  Documents.  The  indemnification  and  reimbursement  obligations of the
Company under this  paragraph  shall be in addition to any  liability  which the
Company may otherwise incur,  shall extend upon the same terms and conditions to
any  Affiliates  of Shaar who are actually  named in such action,  proceeding or
investigation,  and  partners,  directors,  agents,  employees  and  controlling
persons (if any), as the case may be, of Shaar and any such Affiliate, and shall
be binding upon and inure to the benefit of any successors,  assigns,  heirs and
personal  representatives of the Company, Shaar, any such affiliate and any such
person.  The  Company  also agrees that  neither  Shaar nor any such  Affiliate,
partner,  director,  agent,  employee  or  controlling  person  shall  have  any
liability to the Company or any person asserting claims on behalf of or in right
of the Company in  connection  with or as a result of the  consummation  of this
Agreement  or the  Documents.  Notwithstanding  the  foregoing,  the  provisions
contained  within this Section V shall not apply (i) to any action,  proceeding,
or  investigation  which  is  based  on  or  relating  to  (A)  Shaar's  trading
activities;  (B) Shaar's  violation of the Securities Act, the Exchange Act, any
state securities laws or any rule or regulation there under, including,  but not
limited to, Shaar's use of material  non-public  information;  (C) actions which
are not in compliance  with any  obligation of Shaar under this Agreement or the
Documents,  (D) any  misrepresentation  or fraud by Shaar in connection with the
consummation  of  the  transactions   contemplated  by  this  Agreement  or  the
Documents,  or (ii) to any  indemnity  or  undertaking  by Shaar in favor of the
Company in connection  with any lost,  stolen,  or missing notes or certificates
evidencing other securities.

         C. Notwithstanding anything contained herein to the contrary, except as
specifically  amended  pursuant to this  Agreement,  the Series I Certificate of
Designation,  and the Convertible  Note, the rights of Shaar and the obligations
of the Company set forth in the Loan  Documents  (as such term is defined in the
Convertible Note) shall continue in full force and effect.

         D. Commodore Advanced Sciences,  Inc. ("CASI") hereby  acknowledges and
agrees that that certain Guaranty and Suretyship Agreement, dated June 13, 2001,
between CASI and Shaar (the "Guaranty"), whereby CASI unconditionally guaranteed
the prompt and timely payment by the Company of all of the Company's obligations
under the Old Note as such  Guaranty  is  amended  and  restated  as of the date
hereof to include the Convertible Note, remains in full force and effect and all
obligations  of  the  Company  under  the  Convertible   Note  shall  constitute
"Obligations" under the Guaranty.

                                       9
<PAGE>

                                VI. GOVERNING LAW

         This Agreement  shall be governed by and interpreted in accordance with
the laws of the  State of New  York,  without  regard  to the  conflicts  of law
principles of such state.

                         VII. SUBMISSION TO JURISDICTION

         Each of the parties hereto  consents to the exclusive  jurisdiction  of
the federal courts whose districts encompass any part of the City of New York or
the state  courts of the  State of New York  sitting  in the City of New York in
connection  with  any  dispute  arising  under  this  Agreement  and  the  other
Documents.  Each party hereto hereby irrevocably and unconditionally  waives, to
the fullest  extent it may  effectively  do so, any  defense of an  inconvenient
forum or improper  venue to the  maintenance of such action or proceeding in any
such court and any right of jurisdiction on account of its place of residence or
domicile.  Each party hereto  irrevocably  and  unconditionally  consents to the
service of any and all process in any such action or  proceeding  in such courts
by the mailing of copies of such process by certified or  registered  airmail at
its address  specified in Section  XIII.  Each party hereto  agrees that a final
judgment  in any  such  action  or  proceeding  shall be  conclusive  and may be
enforced in other  jurisdictions  by suit on the judgment or in any other manner
provided by law.

                           VIII. WAIVER OF JURY TRIAL

         TO THE FULLEST  EXTENT  PERMITTED  BY LAW,  EACH OF THE PARTIES  HERETO
HEREBY KNOWINGLY,  VOLUNTARILY AND INTENTIONALLY WAIVES ITS RESPECTIVE RIGHTS TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION  BASED UPON OR ARISING  OUT OF THIS
AGREEMENT  OR ANY OTHER  DOCUMENT OR ANY DEALINGS  BETWEEN THEM  RELATING TO THE
SUBJECT  MATTER OF THIS  AGREEMENT  AND OTHER  DOCUMENTS.  EACH PARTY HERETO (i)
CERTIFIES THAT NEITHER OF THEIR RESPECTIVE REPRESENTATIVES,  AGENTS OR ATTORNEYS
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT
OF LITIGATION,  SEEK TO ENFORCE THE FOREGOING WAIVERS AND (ii) ACKNOWLEDGES THAT
IT HAS BEEN INDUCED TO ENTER INTO THIS  AGREEMENT  BY, AMONG OTHER  THINGS,  THE
MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.

                           IX. COUNTERPARTS; EXECUTION

         This Agreement may be executed in any number of counterparts and by the
different  parties  hereto  on  separate  counterparts,  each of  which  when so
executed and  delivered  shall be an original,  but all the  counterparts  shall
together  constitute one and the same  instrument.  A facsimile  transmission of
this signed Agreement shall be legal and binding on all parties hereto.

                                   X. HEADINGS

         The headings of this  Agreement  are for  convenience  of reference and
shall not form part of, or affect the interpretation of, this Agreement.



                                       10
<PAGE>

                                XI. SEVERABILITY

         In the  event  any  one or  more of the  provisions  contained  in this
Agreement  or in  the  other  Documents  should  be  held  invalid,  illegal  or
unenforceable in any respect,  the validity,  legality and enforceability of the
remaining  provisions  contained  herein  or  therein  shall  not in any  way be
affected  or  impaired  thereby.   The  parties  shall  endeavor  in  good-faith
negotiations to replace the invalid,  illegal or  unenforceable  provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.


             XII. ENTIRE AGREEMENT; REMEDIES, AMENDMENTS AND WAIVERS

         This Agreement and the Documents  constitute the entire agreement among
the parties  pertaining to the subject  matter hereof and  supersedes  all prior
agreements,  understandings,  negotiations  and  discussions,  whether  oral  or
written, of the parties. No supplement, modification or waiver of this Agreement
shall be binding unless executed in writing, by all parties. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other  provision  hereof  (whether  or not  similar),  nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.

                                  XIII. NOTICES

         Except  as may be  otherwise  provided  herein,  any  notice  or  other
communication  or delivery  required or permitted  hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by  a  nationally   recognized   overnight   courier  service  or  by  facsimile
transmission,  and shall be deemed given when so delivered personally or one (1)
day after deposit with an overnight  courier service,  or, if mailed,  three (3)
days after the date of deposit in the  United  States  mails or upon  receipt if
sent by facsimile, as follows:

                  A. if to the Company, to:

                           Commodore Applied Technologies, Inc.
                           150 East 58th Street, Suite 3238
                           New York, NY 10155
                           Attention: James M. DeAngelis
                           (212) 308-5800
                           (212) 753-0731 (Fax)

                           with a copy to:

                           McGuireWoods LLP
                           Bank of America Tower
                           50 North Laura Street, Suite 3300
                           Jacksonville, Florida 32202
                           Attention: Daniel Nunn, Esq.
                           (904) 798-2654
                           (904) 360-6339 (Fax)

                                       11
<PAGE>


                  B. if to Shaar, to:

                           The Shaar Fund, Ltd.
                           c/o SS&C Fund Services N.V.
                           Pareraweg 45
                           Curacao, Netherlands Antilles
                           Attention: Maarten Robberts
                           (599-9) 434-3562
                           (599-9) 434-3560 (fax)

                           with copies to:

                           Meltzer, Lippe, Goldstein & Breitstone, LLP
                           190 Willis Avenue
                           Mineola, NY 11501
                           Attention: Ira Halperin, Esq.
                           (516) 747-0300
                           (516) 747-0653 (Fax)

                           and:

                           Levinson Capital Management
                           350 Fifth Avenue, Suite 2210
                           New York, NY 10018
                           Attention: Samuel D. Levinson
                           (212) 244-3576
                           (212) 395-0059


         Any party may change the foregoing  address by notice given pursuant to
this Section XIII.

                                 XIV. ASSIGNMENT

         This Agreement  shall not be assignable by either of the parties hereto
prior to the Closing without the prior written  consent of the other party,  and
any attempted  assignment  contrary to the  provisions  hereby shall be null and
void;  provided,  however,  that Shaar may  assign  its  rights and  obligations
hereunder, in whole or in part, to any Affiliate of Shaar.

                            [SIGNATURE PAGE FOLLOWS.]


                                       12
<PAGE>

         In Witness  Whereof,  the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.

                                 COMMODORE APPLIED TECHNOLOGIES, INC.



                                 By: /s/ James M. DeAngelis
                                    -----------------------
                                 Name: James M. DeAngelis
                                 Title: Chief Financial Officer



                                 THE SHAAR FUND, LTD.

                                 By: SS&C Fund Services BVI


                                 By: /s/ Maarten Robberts
                                     --------------------
                                 Name:  Maarten Robberts
                                 Title:    Director


                                 By: /s/ Peter Ijsseling
                                     -------------------
                                 Name: Peter Ijsseling
                                 Title:   Director



ACKNOWLEDGED AND AGREED TO
FOR PURPOSES OF ARTICLE V., SECTION D ONLY

Commodore Advanced Sciences, Inc.

By: /s/ James M. DeAngelis
    ----------------------
Name: James M. DeAngelis

Title: Treasurer


                                       13
<PAGE>
                                                                       EXHIBIT A

                           CERTIFICATE OF DESIGNATION


                                       14
<PAGE>

                           CERTIFICATE OF DESIGNATION
                                       OF
                      SERIES I CONVERTIBLE PREFERRED STOCK
                                       OF
                      COMMODORE APPLIED TECHNOLOGIES, INC.

--------------------------------------------------------------------------------
                         Pursuant to Section 151 of the
                         General Corporation Law of the
                                State of Delaware
--------------------------------------------------------------------------------


         Commodore  Applied  Technologies,  Inc., a  corporation  organized  and
existing  under  the  General  Corporation  Law of the  State of  Delaware  (the
"Corporation"),  hereby certifies that the following resolutions were adopted by
the Board of  Directors  of the  Corporation  on  February  4, 2005  pursuant to
authority  of the Board of  Directors  as required by Section 151 of the General
Corporation Law of the State of Delaware:

         RESOLVED,  that pursuant to the authority  granted to and vested in the
Board of Directors of this Corporation (the "Board of Directors" or the "Board")
in accordance with the provisions of its Certificate of Incorporation, the Board
of  Directors  hereby  authorizes  a  series  of  the  Corporation's  previously
authorized  Preferred Stock, par value $0.001 per share (the "Preferred Stock"),
and hereby states the designation  and number of shares,  and fixes the relative
rights, preferences, privileges, powers and restrictions thereof as follows:

         Series I Convertible Preferred Stock:

                                    ARTICLE 1
                                   DEFINITIONS

         The terms defined in this Article  whenever used in this Certificate of
Designation have the following respective meanings:

         (a)  "Additional  Capital  Shares" has the meaning set forth in Section
6.1(c).

         (b)  "Affiliate"  has the  meaning  ascribed to such term in Rule 12b-2
under the Securities Exchange Act of 1934, as amended.

         (c) [reserved]

         (d) "Business Day" means a day other than  Saturday,  Sunday or any day
on which banks  located in the State of New York are  authorized or obligated to
close.

         (e) "Capital  Shares"  means the Common  Shares and any other shares of
any other class or series of capital stock,  whether now or hereafter authorized
and however designated,  which have the right to participate in the distribution
of earnings and assets (upon  dissolution,  liquidation  or  winding-up)  of the
Corporation.

                                       15
<PAGE>

         (f) [reserved]

         (g) "Common Shares" or "Common Stock" means shares of common stock, par
value $ 0.001 per share, of the Corporation.

         (h) "Common Stock Issued at  Conversion",  when used with  reference to
the securities  issuable upon conversion of the Series I Preferred Stock,  means
all Common Shares now or hereafter Outstanding and securities of any other class
or series  into which the Series I  Preferred  Stock  hereafter  shall have been
changed or substituted, whether now or hereafter created and however designated.

         (i)  "Conversion  Date"  means any day on which all or any  portion  of
shares of the Series I  Preferred  Stock is  converted  in  accordance  with the
provisions hereof.

         (j)   "Conversion   Notice"  means  a  written   notice  of  conversion
substantially in the form annexed hereto as Annex I.

         (k) "Conversion Price" has the meaning set forth in Section 6.1.

         (l)  "Corporation"  means  Commodore  Applied  Technologies,   Inc.,  a
Delaware  corporation,  and any  successor  or resulting  corporation  by way of
merger,  consolidation,  sale or  exchange  of all or  substantially  all of the
Corporation's assets, or otherwise.

         (m)  "Current  Market  Price"  means on any date of  determination  the
closing bid price of a Common  Share on such day as reported on the OTC Bulletin
Board ("OTCBB"); provided, if such security is not listed or admitted to trading
on the OTCBB,  as  reported  on the  principal  national  security  exchange  or
quotation  system on which  such  security  is quoted or listed or  admitted  to
trading,  or, if not quoted or listed or  admitted  to  trading on any  national
securities  exchange or quotation system, the closing bid price of such security
on the  over-the-counter  market on the day in question as reported by Bloomberg
LP, or a similar generally accepted reporting service, as the case may be.

         (n)  "Default  Dividend  Rate" is equal to the Dividend  Rate,  plus an
additional 4% per annum.

         (o)  "Dividend  Period" means the  quarterly  period  commencing on and
including  the Issue Date or, if a dividend has  previously  been paid,  the day
after the  immediately  preceding  Dividend  Payment  Due Date and ending on and
including the immediately subsequent Dividend Payment Due Date.

         (p)  "Dividend  Payment Due Date" means  February 15, May 15, August 15
and November 15 of each year.

         (q)  "Dividend  Rate"  means 10% per annum,  computed on the basis of a
360-day year.

         (r) [reserved]

                                       16
<PAGE>

         (s) "Holder" means The Shaar Fund Ltd., any successor  thereto,  or any
Person  or  Persons  to whom  the  Series  I  Preferred  Stock  is  subsequently
transferred in accordance with the provisions hereof.

         (t) "Issue  Date" means,  as to any share of Series I Preferred  Stock,
the date of issuance of such share.

         (u)  "Junior  Securities"  means all capital  stock of the  Corporation
except for the Series I Preferred Stock.

         (v)  "Liquidation  Preference"  means,  with  respect to a share of the
Series I Preferred  Stock,  an amount  equal to the sum of (i) the Stated  Value
thereof,  plus (ii) an amount equal to 30% of such Stated Value,  plus (iii) the
aggregate of all accrued and unpaid dividends (whether or not declared,  whether
or not there were funds  legally  available  for the  payment of  dividends  and
whether or not a Dividend  Payment Due Date has occurred since the last dividend
payment)  on such  share of Series I  Preferred  Stock  through  the date of the
payment of the Liquidation Preference;  provided that, in the event of an actual
liquidation,  dissolution or winding up of the Corporation,  the amount referred
to in clause (iii) above shall be  calculated  by  including  accrued and unpaid
dividends  to the actual date of such  liquidation,  dissolution  or winding up,
rather than the Dividend Payment Due Date referred to above.

         (w) [reserved]

         (x) "Market  Price"  means the average of the closing bid prices of one
Common  Share,  as  reported  on the OTCBB or the  principal  national  security
exchange  or  quotation  system on which  such  security  is quoted or listed or
admitted  to  trading,  for the ten  Trading  Days prior to a  Conversion  Date;
provided, if such security is not quoted or listed or admitted to trading on any
national  securities exchange or quotation system, the Market Price shall be the
average closing bid prices of such security on the  over-the-counter  market, as
reported by Bloomberg LP, or a similar generally accepted reporting service, for
the ten Trading Days prior to a Conversion Date.

         (y) [reserved]

         (z) "Outstanding", when used with reference to Common Shares or Capital
Shares (collectively, "Shares"), means, on any date of determination, all issued
and  outstanding  Shares,  and includes  all such Shares  issuable in respect of
outstanding scrip or any certificates  representing fractional interests in such
Shares; provided,  however, that any such Shares directly or indirectly owned or
held  by or  for  the  account  of the  Corporation  or  any  Subsidiary  of the
Corporation shall not be deemed "Outstanding" for purposes hereof.

         (aa) "Person" means an individual,  a  corporation,  a partnership,  an
association,   a  limited  liability   company,   an   unincorporated   business
organization,  a trust or other entity or  organization,  and any  government or
political subdivision or any agency or instrumentality thereof.

         (bb) [reserved]

                                       17
<PAGE>

         (cc)  "Registration  Rights Agreement" means that certain  Registration
Rights  Agreement,  dated as of March 15, 2000,  between the Corporation and The
Shaar Fund Ltd. as amended.

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

         (ee) "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the SEC thereunder, all as in effect at the time.

         (ff)  "Series I Preferred  Shares" or "Series I Preferred  Stock" means
the shares of Series I Convertible  Preferred  Stock of the  Corporation or such
other  convertible  preferred  stock  of the  Corporation  as  may be  exchanged
therefor.

         (gg) "Stated Value" has the meaning set forth in Article 2.

         (hh)  "Subsidiary"  means  any  entity  of  which  securities  or other
ownership  interests  having  ordinary  voting  power to elect a majority of the
board of directors  or other  persons  performing  similar  functions  are owned
directly or indirectly by the Corporation.

         (ii)  "Trading  Day" means any day on which (a)  purchases and sales of
securities  authorized for quotation on the OTCBB or the over the counter market
are reported  thereon,  (b) no event which  results in a material  suspension or
limitation  of trading of the Common Shares on the OTCBB or the over the counter
market has occurred and (c) at least one bid for the trading of Common Shares is
reported on the OTCBB or the over the counter market.

         (jj) "Valuation Event" has the meaning set forth in Section 6.1.

         (kk)   "Valuation   Period"  means  the  period  of  ten  Trading  Days
immediately  preceding the (a) Conversion Date or (b) in the case of a Valuation
Period utilized for the purpose of Section 4(a)(iii) hereof, the date of payment
of a dividend in Common  Stock;  provided,  however,  that if a Valuation  Event
occurs  during a Valuation  Period on a date less than five  Trading Days before
the Conversion  Date, the Valuation Period shall be extended until the date five
Trading Days after the occurrence of the Valuation Event.

         All  references  to "cash" or "$" herein  mean  currency  of the United
States of America.

                                    ARTICLE 2
                             DESIGNATION AND AMOUNT

         The  designation  of this series,  which  consists of 550,000 shares of
Preferred  Stock,  shall be Series I Convertible  Preferred Stock (the "Series I
Preferred  Stock")  and the stated  value  shall be $10 per share  (the  "Stated
Value").

                                    ARTICLE 3
                                      RANK

         The Series I  Preferred  Stock  shall  rank prior to any other  capital
stock of the Corporation.

                                       18
<PAGE>

                                    ARTICLE 4
                                    DIVIDENDS

         (a) (i) The Holder shall be entitled to receive,  out of funds  legally
available  for the payment of  dividends,  dividends at the Dividend Rate on the
Stated  Value  of each  share  of  Series  I  Preferred  Stock on and as of each
Dividend  Payment  Due Date with  respect  to each  Dividend  Period;  provided,
however,  that if any dividend is not paid in full on any  Dividend  Payment Due
Date,  dividends shall thereafter  accrue and be payable at the Default Dividend
Rate on the Stated  Value of each share of Series I  Preferred  Stock  until all
accrued  dividends are paid in full.  Dividends on the Series I Preferred  Stock
shall be  cumulative  from the date of issue,  whether or not  declared  for any
reason,  including  if such  declaration  is  prohibited  under any  outstanding
indebtedness or borrowings of the Corporation or any of its Subsidiaries, or any
other   contractual   provision  binding  on  the  Corporation  or  any  of  its
Subsidiaries,  and whether or not there shall be funds legally available for the
payment thereof.

         (ii) Each dividend shall be payable in equal quarterly  amounts on each
Dividend Payment Due Date,  commencing May 15, 2005, to the Holders of record of
shares of the Series I Preferred  Stock,  as they appear on the stock records of
the  Corporation  at the close of business on such record date, not more than 60
days or less than 10 days preceding the payment dates thereof, as shall be fixed
by the Board of Directors; provided, however, until February 14, 2006, dividends
shall  accrue but shall not be payable  until  February  15,  2006.  Accrued and
unpaid  dividends for any past  Dividend  Period may be declared and paid at any
time,  without reference to any Dividend Payment Due Date, to Holders of record,
not more than 15 days preceding the payment date thereof, as may be fixed by the
Board of Directors.

         (iii)  Dividends  due  hereunder  shall be payable  in cash;  provided,
however,  that at the option of the  Corporation,  such dividends  shall be paid
either (x) in cash or (y)  through the  issuance of duly and validly  authorized
and issued,  fully paid and nonassessable,  freely tradable shares of the Common
Stock  valued at the Market Price and  registered  for resale in the open market
transactions  on the  Registration  Statement  (as  defined in the  Registration
Rights Agreement),  which  Registration  Statement shall then be effective under
the Securities Act;  provided,  further,  that if no funds are legally available
for the payment of cash  dividends  on the Series I Preferred  Stock,  dividends
shall be paid as provided in clause (y) above.

         (b) Except as provided in Section 4(d) hereof,  the Holder shall not be
entitled  to any  dividends  in excess of the  cumulative  dividends,  as herein
provided, on the Series I Preferred Stock.

         (c) So  long  as any  shares  of  the  Series  I  Preferred  Stock  are
outstanding,  no dividends shall be declared or paid or set apart for payment or
other distribution  declared or made upon any Junior  Securities,  nor shall any
Junior  Securities be redeemed,  purchased or otherwise  acquired  (other than a
redemption,  purchase or other  acquisition  of shares of Common  Stock made for
purposes of an employee  incentive  or benefit  plan  (including  a stock option
plan)  of the  Corporation  or any  Subsidiary)  for  any  consideration  by the
Corporation,  directly  or  indirectly,  nor shall any moneys be paid to or made
available  for a sinking  fund for the  redemption  of any  shares of any Junior
Securities, unless in each case (i) the full cumulative dividends required to be
paid in cash on all  outstanding  shares of the Series I  Preferred  Stock shall
have been  paid or set apart for  payment  for all past  Dividend  Periods  with
respect to the Series I  Preferred  Stock and (ii)  sufficient  funds shall have
been paid or set apart for the payment of the dividend for the current  Dividend
Period with respect to the Series I Preferred Stock.

                                       19
<PAGE>

         (d) If the Corporation shall at any time or from time to time after the
Issue  Date  declare,  order,  pay or  make a  dividend  or  other  distribution
(including, without limitation, any distribution of stock or other securities or
property or rights or warrants to subscribe for securities of the Corporation or
any of its  Subsidiaries by way of dividend or spin-off) on shares of its Common
Stock,  then,  and in each such case, in addition to the dividend  obligation of
the Corporation specified in Section 4(a) hereof, the Corporation shall declare,
order, pay and make the same dividend or distribution to each Holder of Series I
Preferred  Stock as would  have been made with  respect  to the number of Common
Shares  the Holder  would have  received  had it  converted  all of its Series I
Preferred Shares.

                                    ARTICLE 5
              LIQUIDATION PREFERENCE; MERGERS, CONSOLIDATIONS, ETC.

         (a) If the  Corporation  shall  commence  a  voluntary  case  under the
Federal  bankruptcy laws or any other  applicable  Federal or state  bankruptcy,
insolvency  or similar law, or consent to the entry of an order for relief in an
involuntary case under any law or to the appointment of a receiver,  liquidator,
assignee,  custodian, trustee or sequestrator (or other similar official) of the
Corporation or of any  substantial  part of its property,  or make an assignment
for the benefit of its  creditors,  or admit in writing its inability to pay its
debts  generally  as they  become  due,  or if a decree or order  for  relief in
respect of the  Corporation  shall be entered by a court having  jurisdiction in
the premises in an  involuntary  case under the Federal  bankruptcy  laws or any
other  applicable  Federal  or  state  bankruptcy,  insolvency  or  similar  law
resulting in the  appointment of a receiver,  liquidator,  assignee,  custodian,
trustee or sequestrator (or other similar official) of the Corporation or of any
substantial  part of its property,  or ordering the winding up or liquidation of
its affairs,  and any such decree or order shall be unstayed and in effect for a
period of 30 consecutive days and, on account of any such event, the Corporation
shall  liquidate,  dissolve or wind up, or if the  Corporation  shall  otherwise
liquidate,  dissolve or wind up, no distribution shall be made to the holders of
any shares of capital stock of the Corporation upon liquidation,  dissolution or
winding-up  unless  prior  thereto,  the Holders of shares of Series I Preferred
Stock, subject to this Article 5, shall have received the Liquidation Preference
with respect to each share.

         (b) In case the Corporation  shall  reorganize its capital,  reclassify
its capital  stock,  consolidate or merge with or into another Person (where the
Corporation  is not the  survivor or where there is a change in or  distribution
with respect to the Common Stock of the Corporation),  sell, convey, transfer or
otherwise dispose of all or substantially  all its property,  assets or business
to another Person, or effectuate a transaction or series of related transactions
in which more than 50% of the voting  power of the  Corporation  is  disposed of
(each,  a  "Fundamental  Corporate  Change") and,  pursuant to the terms of such
Fundamental  Corporate  Change,  shares  of  common  stock of the  successor  or
acquiring  corporation,  or any  cash,  shares of stock or other  securities  or
property of any nature whatsoever  (including  warrants or other subscription or

                                       20
<PAGE>

purchase  rights) in addition to or in lieu of common stock of the  successor or
acquiring  corporation ("Other Property"),  are to be received by or distributed
to the holders of Common Stock of the Corporation,  then each Holder of Series I
Preferred Stock shall have the right thereafter,  at its sole option, either (x)
to require the  Corporation to deem such  Fundamental  Corporate  Change to be a
liquidation,  dissolution or winding up of the Corporation pursuant to which the
Corporation  shall be  required to  distribute,  upon  consummation  of and as a
condition to, such  Fundamental  Corporate Change an amount equal to 105% of the
Liquidation  Preference  with  respect  to each  outstanding  share of  Series I
Preferred  Stock,  (y) to receive  the  number of shares of common  stock of the
successor or acquiring corporation or of the Corporation, if it is the surviving
corporation,  and Other  Property as is  receivable  upon or as a result of such
Fundamental Corporate Change by a holder of the number of shares of Common Stock
into which such  Series I Preferred  Stock may be  converted  at the  Conversion
Price applicable  immediately prior to such Fundamental  Corporate Change or (z)
require the Corporation, or such successor, resulting or purchasing corporation,
as the  case  may  be,  to,  without  benefit  of any  additional  consideration
therefore,  to execute and deliver to the Holder shares of its  Preferred  Stock
with substantial identical rights, preferences, privileges, powers, restrictions
and other terms as the Series I Preferred Stock equal to the number of shares of
Series  I  Preferred  Stock  held  by  such  Holder  immediately  prior  to such
Fundamental Corporate Change;  provided,  that all Holders of Series I Preferred
Stock  shall be deemed to elect the  option  set forth in clause (x) above if at
least a majority in interest of such Holders elect such option.  For purposes of
this Section  5(b),  "common  stock of the  successor or acquiring  corporation"
shall include stock of such  corporation  of any class which is not preferred as
to  dividends  or assets over any other class of stock of such  corporation  and
which is not  subject to  redemption  and shall also  include any  evidences  of
indebtedness,  shares of stock or other securities which are convertible into or
exchangeable  for any such stock,  either  immediately  or upon the arrival of a
specified  date or the happening of a specified  event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing  provisions of
this Section 5(b) shall  similarly  apply to  successive  Fundamental  Corporate
Changes.

                                    ARTICLE 6
                          CONVERSION OF PREFERRED STOCK

         Section 6.1 Conversion; Conversion Price

         At the option of the Holder, the shares of Series I Preferred Stock may
be converted,  either in whole or in part, into Common Shares  (calculated as to
each such  conversion  to the  nearest  1/100th of a share) at any time and from
time to time at a conversion  price per share of Common  Stock (the  "Conversion
Price")  equal to the  lesser  of (i)  $.0285  (subject  to  adjustment  for any
stock-split  or stock  combination  to occur after the date  hereof) or (ii) the
Market Price;  provided, if such security is not quoted or listed or admitted to
trading on the OTCBB or any national  securities  exchange for any reason,  then
any remaining unconverted Series I Preferred Stock may be converted, at the sole
option of the Holder,  at a Conversion  Price per share of Common Stock equal to
50% of the Market Price. At the Corporation's  option, the amount of accrued and
unpaid  dividends as of the  Conversion  Date shall not be subject to conversion
but instead may be paid in cash as of the  Conversion  Date; if the  Corporation
elects to convert the amount of accrued and unpaid  dividends at the  Conversion
Date into Common Stock, the Common Stock issued to the Holder shall be valued at
the applicable Conversion Price.

         The number of shares of Common  Stock due upon  conversion  of Series I
Preferred Stock shall be (i) the number of shares of Series I Preferred Stock to
be  converted,  multiplied  by (ii) the  Stated  Value plus  accrued  and unpaid
dividends  (whether  or not  declared,  whether or not there were funds  legally
available for the payment of dividends and whether or not a Dividend Payment Due
Date  has  occurred  since  the  last  dividend  payment),  to  the  extent  the
Corporation  does not elect to pay,  and pay,  accrued and unpaid  dividends  in
cash, and divided by (iii) the applicable Conversion Price.

                                       21
<PAGE>

         Within two Business Days of the  occurrence of a Valuation  Event,  the
Corporation shall send notice thereof to each Holder.  Notwithstanding  anything
to the  contrary  contained  herein,  if a  Valuation  Event  occurs  during any
Valuation  Period,  the Holder may convert some or all of its Series I Preferred
Stock,  at its sole option,  at a Conversion  Price equal to the Current  Market
Price on any Trading Day during the Valuation Period.

         For purposes of this  Section  6.1, a  "Valuation  Event" shall mean an
event in which the Corporation takes any of the following actions:

         (a) subdivides or combines its Capital Shares;

         (b) makes any distribution on its Capital Shares;

         (c) issues any  additional  Capital  Shares  (the  "Additional  Capital
Shares"), otherwise than as provided in the foregoing Sections 6.1(a) and 6.1(b)
above,  at a price per share less, or for other  consideration  lower,  than the
Current Market Price in effect  immediately prior to such issuances,  or without
consideration,  except for issuances under (A) employee benefit plans consistent
with those presently in effect, (B) presently outstanding  warrants,  options or
convertible securities and (C) in connection with an acquisition or merger where
the Board of Directors  of the  Corporation  determines  in good faith that such
Additional Capital Shares are not being issued for consideration  lower than the
Current Market Price on the date of such issuance;

         (d) issues any  warrants,  options or other rights to subscribe  for or
purchase  any  Additional  Capital  Shares  if the  price  per  share  for which
Additional  Capital  Shares may at any time  thereafter be issuable  pursuant to
such  warrants,  options or other rights  shall be less than the Current  Market
Price on the date of such issuance;

         (e)  issues  any  securities   convertible   into  or  exchangeable  or
exercisable  for Additional  Capital Shares if the  consideration  per share for
which Additional  Capital Shares may at any time thereafter be issuable pursuant
to the terms of such convertible,  exchangeable or exercisable  securities shall
be less than the Current Market Price on the date of such issuance;

         (f) announces or effects a Fundamental Corporate Change;

         (g) makes any  distribution  of its assets or evidences of indebtedness
to the holders of its Capital  Shares as a dividend in  liquidation or by way of
return of capital or other than as a dividend payable out of earnings or surplus
legally  available  for the payment of  dividends  under  applicable  law or any
distribution to such holders made in respect of the sale of all or substantially
all of the Corporation's assets (other than under the circumstances provided for
in the foregoing Sections 6.1(a) through 6.1(e)); or

         (h) takes any  action  affecting  the  number  of  Outstanding  Capital
Shares,  other than an action described in any of the foregoing  Sections 6.1(a)
through 6.1(g) hereof, inclusive, which in the opinion of the Holder, determined
in good  faith,  would have a  material  adverse  effect  upon the rights of the
Holder  at the time of a  conversion  of the  Preferred  Stock or is  reasonably
likely to result in a decrease in the Market Price.

                                       22
<PAGE>

         Section 6.2 Exercise of Conversion Privilege

         (a)  Conversion of the Series I Preferred  Stock may be  exercised,  in
whole or in part,  by the Holder by  transmitting  via facsimile an executed and
completed Conversion Notice to the Corporation.  Each date on which a Conversion
Notice is transmitted  via facsimile to the  Corporation in accordance  with the
provisions  of  this  Section  6.2  shall  constitute  a  Conversion  Date.  The
Corporation  shall convert the Preferred Stock and issue the Common Stock Issued
at Conversion,  and all voting and other rights  associated  with the beneficial
ownership of the Common Stock Issued at  Conversion  shall vest with the Holder,
effective as of the  Conversion  Date at the time  specified  in the  Conversion
Notice.  The  Conversion  Notice  also  shall  state  the  name or  names  (with
addresses)  of the  Persons  who are to become the  holders of the Common  Stock
Issued  at  Conversion  in  connection  with such  conversion.  As  promptly  as
practicable after the receipt of the Conversion Notice as aforesaid,  but in any
event not more than five Business Days after the  Corporation's  receipt of such
Conversion  Notice,  the Corporation  shall (i) issue the Common Stock issued at
Conversion in accordance with the provisions of this Article 6, and (ii) utilize
the DWAC system or cause to be mailed for delivery by  overnight  courier to the
Holder (x) a certificate  or  certificate(s)  representing  the number of Common
Shares to which the Holder is entitled by virtue of such  conversion,  (y) cash,
as  provided  in  Section  6.3,  in respect of any  fraction  of a Common  Share
issuable upon such conversion and (z) if the Corporation  chooses to pay accrued
and unpaid dividends in cash, cash in the amount of accrued and unpaid dividends
as of the Conversion Date. Such conversion shall be deemed to have been effected
at the time at which the Conversion Notice indicates and at such time the rights
of the Holder of the Preferred Stock with regard to the Series I Preferred Stock
so  converted,  as such,  shall cease and the Person or Persons in whose name or
names the Common Stock Issued at Conversion shall be issuable shall be deemed to
have  become the holder or  holders of record of the Common  Shares  represented
thereby and all voting and other rights associated with the beneficial ownership
of such Common  Shares shall at such time vest with such Person or Persons.  The
Conversion  Notice  shall  constitute  a  contract  between  the  Holder and the
Corporation,  whereby the Holder shall be deemed to subscribe  for the number of
Common Shares which it will be entitled to receive upon such  conversion and, in
payment and  satisfaction of such  subscription  (and for any cash adjustment to
which it is  entitled  pursuant  to  Section  6.3),  to  surrender  the Series I
Preferred Stock and to release the Corporation  from all liability  thereon.  No
cash  payment  aggregating  less than $1.00 shall be required to be given unless
specifically requested by the Holder.

         (b) If, at any time (i) the Corporation challenges,  disputes or denies
the  right of the  Holder  hereof  to  effect  the  conversion  of the  Series I
Preferred  Stock into  Common  Shares or  otherwise  dishonors  or  rejects  any
Conversion  Notice  delivered  in  accordance  with this Section 6.2 or (ii) any
third party  commences any lawsuit or proceeding or otherwise  asserts any claim
before any court or public or  governmental  authority which seeks to challenge,
deny, enjoin,  limit, modify, delay or dispute the right of the Holder hereof to
effect the  conversion  of the Series I Preferred  Stock into  Common  Shares (a
"Blockage  Claim"),  and such  Blockage  Claim shall remain in effect and not be
resolved  for a period  of more than 90 days,  then the  Holder  shall  have the

                                       23
<PAGE>

right, by written notice to the Corporation, to require the Corporation promptly
to redeem the Series I Preferred  Stock for cash at a redemption  price equal to
100% of the Stated Value thereof  together with all accrued and unpaid dividends
(whether or not declared,  whether or not there were funds legally available for
the  payment of  dividends  and  whether or not a Dividend  Payment Due Date has
occurred  since the last  dividend  payment)  thereon (the  "Mandatory  Purchase
Amount").  Under any of the circumstances set forth above, the Corporation shall
be  responsible  for the  payment  of all  costs  and  expenses  of the  Holder,
including reasonable legal fees and expenses,  as and when incurred in disputing
any such  action or  pursuing  its rights  hereunder  (in  addition to any other
rights of the Holder).

         (c) The Holder shall be entitled to exercise its  conversion  privilege
notwithstanding  the  commencement  of any case under 11 U.S.C.  ss. 101 et seq.
(the  "Bankruptcy  Code").  In the event the  Corporation  is a debtor under the
Bankruptcy  Code, the Corporation  hereby waives to the fullest extent permitted
any  rights to relief it may have  under 11 U.S.C.  ss.  362 in  respect  of the
Holder's conversion privilege.  The Corporation agrees,  without cost or expense
to the Holder,  to take or consent to any and all action necessary to effectuate
relief under 11 U.S.C. ss. 362.

         Section 6.3 Fractional Shares

         No fractional  Common Shares or scrip  representing  fractional  Common
Shares shall be issued upon conversion of the Series I Preferred Stock.  Instead
of  any  fractional  Common  Shares  which  otherwise  would  be  issuable  upon
conversion of the Series I Preferred  Stock,  the  Corporation  shall pay a cash
adjustment in respect of such fraction in an amount equal to the same fraction.

         Section 6.4 Adjustments to Conversion Price

         Except with respect to issuances of Capital  Shares in connection  with
an  acquisition  or  merger  where  the Board of  Directors  of the  Corporation
determines  in good faith  that such  Capital  Shares  are not being  issued for
consideration  lower than the Current Market Price on the date of such issuance,
for so long as any shares of the Series I Preferred  Stock are  outstanding,  if
the  Corporation  issues and sells (A) Common Shares at a purchase  price on the
date of issuance  thereof that is lower than the Conversion  Price, (B) warrants
or options with an exercise price on the date of issuance  thereof that is lower
than the  Conversion  Price for the Holder on such date,  except for warrants or
options  issued  pursuant  to  employee  benefit  plans  consistent  with  those
presently  in  effect,  employee  stock  option  agreements  or stock  incentive
agreements of the Corporation,  or (C) convertible,  exchangeable or exercisable
securities  with a right to exchange at lower than the Current  Market  Price on
the  date of  issuance  or  conversion,  as  applicable,  of  such  convertible,
exchangeable or exercisable  securities,  except for stock option  agreements or
stock incentive agreements, then on any date on which the Conversion Price shall
be determined,  the Conversion  Price shall be reduced by an amount equal to the
amount by which  the  purchase  price,  exercise  price or  exchange  price,  as
applicable,  is lower than the  Conversion  Price or Current  Market  Price,  as
applicable,  multiplied by a fraction the  denominator of which is $3,953,020 or
such lesser amount equal to (A) the number of shares of Series I Preferred Stock
outstanding  at the time of the  adjustment,  multiplied by (B) the Stated Value
and the numerator of which is the sum of (A) the aggregate  number of (i) Common
Shares,  in the case of (A) above, (ii) Common Shares into which the warrants or
options  are  exchangeable  into,  in the case of (B)  above,  or  (iii)  equity
securities into which the convertible or exchangeable securities are exercisable
into, in the case of (C) above,  multiplied by (B) the Conversion Price, in each
case, with a maximum adjustment equal to the applicable discount triggering such
adjustment pursuant to this Section 6.4.

         Section 6.5 [reserved]

                                       24
<PAGE>

         Section 6.6 [reserved]

         Section 6.7 [reserved]

         Section 6.8 [reserved]

         Section 6.9 Certain Conversion Limitations

         (a) Notwithstanding  anything herein to the contrary,  the Holder shall
not have the  right,  and the  Corporation  shall  not have the  obligation,  to
convert all or any portion of the Series I Preferred  Stock (and the Corporation
shall not have the right to pay  dividends  on the Series I  Preferred  Stock in
shares of Common  Stock,  but such  dividends  shall  continue  to accrue  until
payment  thereof in shares of Common Stock will not violate the terms hereof) if
and to the extent that the issuance to the Holder of shares of Common Stock upon
such  conversion  (or payment of  dividends)  would  result in the Holder  being
deemed the "beneficial  owner" of more than 5% of the then Outstanding shares of
Common Stock within the meaning of Section 13(d) of the Securities  Exchange Act
of 1934,  as  amended,  and the rules  promulgated  thereunder.  If any court of
competent   jurisdiction  shall  determine  that  the  foregoing  limitation  is
ineffective to prevent a Holder from being deemed the  beneficial  owner of more
than 5% of the then  Outstanding  shares of Common Stock,  then the  Corporation
shall redeem so many of such Holder's shares (the "Redemption Shares") of Series
I  Preferred  Stock as are  necessary  to cause  such  Holder to be  deemed  the
beneficial  owner of not more than 5% of the then  Outstanding  shares of Common
Stock.  Upon  such  determination  by a court  of  competent  jurisdiction,  the
Redemption  Shares  shall  immediately  and  without  further  action  be deemed
returned to the status of authorized  but unissued  shares of Series I Preferred
Stock,  and the Holder shall have no interest in or rights under such Redemption
Shares. Any and all dividends paid on or prior to the date of such determination
shall be deemed  dividends  paid on the  remaining  shares of Series I Preferred
Stock held by the  Holder.  Such  redemption  shall be for cash at a  redemption
price equal to the sum of (i) 100% of the Stated Value of the Redemption  Shares
and (ii) any accrued and unpaid dividends  (whether or not declared,  whether or
not there were funds legally  available for the payment of dividends and whether
or not a Dividend Payment Due Date has occurred since the last dividend payment)
to the date of such redemption.

         (b)  Notwithstanding  anything  herein to the  contrary,  if and to the
extent that, on any date (the "Section 16 Determination  Date"),  the holding by
the  Holder  of shares  of the  Series I  Preferred  Stock  would  result in the
Holder's becoming subject to the provisions of Section 16(b) of the Exchange Act
in virtue of being  deemed the  "beneficial  owner" of more than 10% of the then
Outstanding  shares of Common  Stock,  then the Holder shall not have the right,
and the Corporation  shall not have the  obligation,  to convert so many of such
Holder's shares of Series I Preferred Stock (the "Section 16 Redemption Shares")
as shall cause such Holder to be deemed the beneficial owner of more than 10% of
the then  Outstanding  shares of Common Stock  during the period  ending 60 days
after the Section 16 Determination Date. If any court of competent  jurisdiction
shall determine that the foregoing limitation is ineffective to prevent a Holder
from being deemed the beneficial  owner of more than 10% of the then Outstanding
shares  of  Common  Stock  for the  purposes  of such  Section  16(b),  then the
Corporation   shall  redeem  the  Section  16  Redemption   Shares.   Upon  such
determination  by a court of competent  jurisdiction,  the Section 16 Redemption

                                       25
<PAGE>

Shares shall  immediately  and without  further action be deemed returned to the
status of authorized but unissued  shares of Series I Preferred  Stock,  and the
Holder  shall have no interest  in or rights  under such  Section 16  Redemption
Shares. Any and all dividends paid on or prior to the date of such determination
shall be deemed  dividends  paid on the  remaining  shares of Series I Preferred
Stock held by the  Holder.  Such  redemption  shall be for cash at a  redemption
price  equal  to the sum of (i)  100% of the  Stated  Value  of the  Section  16
Redemption Shares and (ii) any declared and unpaid dividends to the date of such
redemption.

                                    ARTICLE 7
                                  VOTING RIGHTS

         The  Holders of the  Series I  Preferred  Stock  have no voting  power,
except as  otherwise  provided  by the General  Corporation  Law of the State of
Delaware (the "DGCL"), in this Article 7, and in Article 8 below.

         Notwithstanding the above, the Corporation shall provide each Holder of
Series  I  Preferred  Stock  with  prior  notification  of  any  meeting  of the
shareholders  (and copies of all proxy materials and other  information  sent to
shareholders).  In the event of any taking by the Corporation of a record of its
shareholders  for the purpose of  determining  shareholders  who are entitled to
receive  payment of any dividend or other  distribution,  any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining  shareholders  who
are entitled to vote in connection with any proposed liquidation, dissolution or
winding up of the  Corporation,  the Corporation  shall mail a notice thereof to
each Holder at least 30 days prior to the date on which any such record is to be
taken for the  purpose of such  dividend,  distribution,  right or other  event,
together  with a brief  statement  regarding  the amount and  character  of such
dividend, distribution, right or other event to the extent known at such time.

         To the extent that under the DGCL the vote of the Holders of the Series
I Preferred  Stock,  voting  separately as a class or series as  applicable,  is
required to authorize a given action of the Corporation, the affirmative vote or
consent  of the  Holders  of at least a majority  of the  outstanding  shares of
Series I Preferred Stock represented at a duly held meeting at which a quorum is
present or by written consent of a majority of the outstanding  shares of Series
I Preferred  Stock  (except as otherwise  may be required  under the DGCL) shall
constitute  the  approval of such action by the class.  To the extent that under
the DGCL  Holders  of the Series I  Preferred  Stock are  entitled  to vote on a
matter with holders of Common Stock, voting together as one class, each share of
Series I  Preferred  Stock  shall be  entitled to a number of votes equal to the
number of shares of Common  Stock  into which it is then  convertible  using the
record date for the taking of such vote of  shareholders as the date as of which
the  Conversion  Price is  calculated.  Holders of the Series I Preferred  Stock
shall be entitled to notice of all shareholder meetings or written consents (and
copies of all proxy materials and other  information sent to shareholders)  with
respect to which they would be entitled to vote,  which notice would be provided
pursuant to the Corporation's bylaws and the DGCL.

                                    ARTICLE 8
                              PROTECTIVE PROVISIONS

                                       26
<PAGE>

         So long as shares  of Series I  Preferred  Stock are  outstanding,  the
Corporation  shall not, without first obtaining the approval (by vote or written
consent,  as  provided in the DGCL) of the Holders of at least a majority of the
then outstanding shares of Series I Preferred Stock:

         (a) alter or change the rights, preferences or privileges of the Series
I Preferred Stock;

         (b) create any new class or series of capital stock having a preference
over the Series I Preferred Stock as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation  ("Senior  Securities") or alter or
change the rights,  preferences or privileges of any Senior  Securities so as to
affect adversely the Series I Preferred Stock;

         (c)  increase  the  authorized  number of shares of Series I  Preferred
Stock; or

         (d)  do any  act or  thing  not  authorized  or  contemplated  by  this
Certificate  of  Designation  which  would  result in taxation of the Holders of
shares of the Series I Preferred Stock under Section 305 of the Internal Revenue
Code of 1986, as amended (or any  comparable  provision of the Internal  Revenue
Code of 1986, as hereafter from time to time amended).

         In the event Holders of least a majority of the then outstanding shares
of Series I Preferred  Stock agree to allow the  Corporation  to alter or change
the rights,  preferences or privileges of the shares of Series  Preferred Stock,
pursuant to subsection (a) above, so as to affect the Series I Preferred  Stock,
then the Corporation  will deliver notice of such approved change to the Holders
of the Series  Preferred  Stock that did not agree to such  alteration or change
(the  "Dissenting  Holders") and  Dissenting  Holders shall have the right for a
period  of 30 days to  convert  pursuant  to the  terms of this  Certificate  of
Designation  as in effect prior to such  alteration  or change or to continue to
hold their shares of Series I Preferred Stock.

         Notwithstanding  anything to the  contrary  herein,  if at any time the
Corporation   shall   "spin-off"   certain  of  its  assets  or   businesses  by
transferring,  directly or indirectly, such assets or businesses to a Subsidiary
of the Corporation ("Spinco") and making a dividend (the "Spin-off Dividend") to
the  Corporation's  stockholders of the shares of capital stock of Spinco,  then
prior to making the Spin-off  Dividend,  the  Corporation  shall cause Spinco to
issue to each  Holder that  number of shares of  preferred  stock of Spinco with
substantially identical rights,  preferences,  privileges,  powers, restrictions
and other terms as the Series I Preferred Stock equal to the number of shares of
Series I Preferred Shares held by such Holder  immediately prior to the Spin-off
Dividend.

                                    ARTICLE 9
                                  MISCELLANEOUS

         Section 9.1 Loss, Theft, Destruction of Preferred Stock

         Upon receipt of evidence  satisfactory  to the Corporation of the loss,
theft,  destruction or mutilation of shares of Series I Preferred  Stock and, in
the case of any such loss,  theft or  destruction,  upon receipt of indemnity or
security reasonably satisfactory to the Corporation, or, in the case of any such
mutilation, upon surrender and cancellation of the Series I Preferred Stock, the
Corporation  shall  make,  issue  and  deliver,  in lieu of such  lost,  stolen,
destroyed or mutilated  shares of Series I Preferred Stock, new shares of Series
I Preferred Stock of like tenor.  The Series I Preferred Stock shall be held and

                                       27
<PAGE>

owned upon the express  condition  that the  provisions  of this Section 9.1 are
exclusive  with respect to the  replacement  of  mutilated,  destroyed,  lost or
stolen shares of Series I Preferred  Stock and shall  preclude any and all other
rights and  remedies  notwithstanding  any law or statute  existing or hereafter
enacted  to  the  contrary  with  respect  to  the   replacement  of  negotiable
instruments or other securities without the surrender thereof.

         Section 9.2 Who Deemed Absolute Owner

         The  Corporation  may  deem the  Person  in  whose  name  the  Series I
Preferred  Stock shall be registered  upon the registry books of the Corporation
to be, and may treat it as, the absolute  owner of the Series I Preferred  Stock
for the  purpose of  receiving  payment of  dividends  on the Series I Preferred
Stock,  for the  conversion  of the Series I  Preferred  Stock and for all other
purposes,  and the  Corporation  shall  not be  affected  by any  notice  to the
contrary.  All such payments and such conversion shall be valid and effectual to
satisfy and  discharge the  liability  upon the Series I Preferred  Stock to the
extent of the sum or sums so paid or the conversion so made.

         Section 9.3 Fundamental Corporate Change

         In the  case of the  occurrence  of any  Fundamental  Corporate  Change
described  in Section  5(b),  the  Corporation  shall  cause to be mailed to the
Holder of the Series I Preferred  Stock at its last address as it appears in the
Corporation's  security  registry,  at  least 20 days  prior  to the  applicable
record,  effective or expiration date specified in connection  therewith (or, if
such 20 days notice is not possible,  at the earliest possible date prior to any
such record,  effective or expiration  date),  a notice  stating (x) the date on
which a record is to be taken for the purpose of such corporate  action, or if a
record is not to be taken,  the date as of which the Holders of record of Series
I  Preferred  Stock to be entitled to any  dividend,  distribution,  issuance or
granting of rights,  options or  warrants  are to be  determined  or the date on
which such Fundamental Corporate Change is expected to become effective, and (y)
the date as of which it is expected that Holders of record of Series I Preferred
Stock will be entitled to exchange  their shares for  securities,  cash or other
property deliverable upon such Fundamental Corporate Change.

         Section 9.4 Register

         The Corporation  shall keep at its principal office a register in which
the  Corporation  shall provide for the  registration  of the Series I Preferred
Stock.  Upon any transfer of the Series I Preferred Stock in accordance with the
provisions  hereof, the Corporation shall register such transfer on the register
of Series I Preferred Stock.

         Section 9.5 Withholding

         To the extent  required by applicable law, the Corporation may withhold
amounts for or on account of any taxes  imposed or levied by or on behalf of any
taxing authority in the United States having  jurisdiction  over the Corporation
from any payments made pursuant to the Series I Preferred Stock.

         Section 9.6 Headings

                                       28
<PAGE>

         The  headings  of the  Articles  and  Sections of this  Certificate  of
Designation  are inserted for  convenience  only and do not constitute a part of
this Certificate of Designation.

         Section 9.7 Severability

         If any provision of this Certificate of Designation, or the application
thereof   to  any  person  or  entity  or  any   circumstance,   is  invalid  or
unenforceable,  (i) a suitable  and  equitable  provision  shall be  substituted
therefor  in order to carry  out,  so far as may be valid and  enforceable,  the
intent and  purpose of such  invalid or  unenforceable  provision,  and (ii) the
remainder  of  this  Certificate  of  Designation  and the  application  of such
provision to other persons,  entities or circumstances  shall not be affected by
such   invalidity   or   unenforceability,   nor  shall   such   invalidity   or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.

         IN WITNESS  WHEREOF,  the  Corporation  has caused this  Certificate of
Designation to be signed by its duly authorized officers on April 12, 2005.


                                  COMMODORE APPLIED TECHNOLOGIES, INC.


                                  By: /s/ Shelby T. Brewer
                                      --------------------
                                  Name:  Shelby T. Brewer
                                  Title: Chairman and Chief Executive Officer

                                  By: /s/ James M. DeAngelis
                                      ----------------------
                                  Name:  James M. DeAngelis
                                  Title:   Senior V.P.,
                                  Chief Financial Officer



                                       29
<PAGE>

                                     ANNEX I

                            FORM OF CONVERSION NOTICE



 TO: Commodore Applied Technologies, Inc.
        150 East 58th Street
        Suite 3238
        New York, NY 10155

         The undersigned owner of this Series I Convertible Preferred Stock (the
"Series I Preferred Stock") issued by Commodore Applied Technologies,  Inc. (the
"Corporation")  hereby  irrevocably  exercises its option to convert  __________
shares of the Series I  Preferred  Stock into  shares of the common  stock,  par
value $0.001 per share ("Common  Stock"),  of the Corporation in accordance with
the terms of the Certificate of Designation.  The undersigned  hereby  instructs
the  Corporation to convert the number of shares of the Series I Preferred Stock
specified  above into Shares of Common Stock Issued at  Conversion in accordance
with  the  provisions  of  Article  6 of the  Certificate  of  Designation.  The
undersigned  directs that the Common Stock issuable and  certificates  therefore
deliverable upon conversion and the recertificated  Series I Preferred Stock, if
any, not being  surrendered  for conversion  hereby,  together with any check in
payment for fractional  Common Stock,  be issued in the name of and delivered to
the  undersigned   unless  a  different  name  has  been  indicated  below.  All
capitalized  terms used and not  defined  herein  have the  respective  meanings
assigned  to them in the  Certificate  of  Designation.  So long as the Series I
Preferred  Stock  shall  have  been  surrendered  for  conversion   hereby,  the
conversion pursuant hereto shall be deemed to have been effected at the date and
time specified below, and at such time the rights of the undersigned as a Holder
of the Series I  Preferred  Stock shall cease and the Person or Persons in whose
name or names the Common Stock Issued at Conversion  shall be issuable  shall be
deemed to have  become the  holder or  holders  of record of the  Common  Shares
represented  thereby  and all  voting  and  other  rights  associated  with  the
beneficial  ownership  of such Common  Shares  shall at such time vest with such
Person or Persons.

Date and time:_________________________


-------------------------------
            Signature

Fill in for registration of Series I Preferred Stock:

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

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

----------------------------------------
Please print name and address (including zip code number)



                                       30
<PAGE>

                                                                       EXHIBIT B

                            SECURED CONVERTIBLE NOTE


                                       31
<PAGE>


THESE  SECURITIES HAVE NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS
AMENDED,  OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR
AN OPINION OF COUNSEL OR OTHER  EVIDENCE  ACCEPTABLE  TO THE BORROWER  THAT SUCH
REGISTRATION IS NOT REQUIRED.

Issue Date: April 12, 2005                       Principal Amount: US $5,100,733

                      COMMODORE APPLIED TECHNOLOGIES, INC.

                            CONVERTIBLE SECURED NOTE

         THIS  CONVERTIBLE  SECURED NOTE (this "Note") is issued in favor of The
Shaar Fund, Ltd. (the "Holder")  pursuant to the terms of that certain  Exchange
Agreement,   dated  as  of  April  12,  2005  (together  with  all   amendments,
supplements, extensions, renewals, substitutions or other modifications thereof,
and also together with all  schedules,  exhibits and  attachments  thereto,  the
"Exchange Agreement") by and between Commodore Applied  Technologies,  Inc. (the
"Borrower") and the Holder. This Note is issued in exchange for that certain (i)
note issued by the Borrower on June 13, 2001, in the original  principal  amount
of  $500,000  (as  amended  and  restated),  which such note has an  outstanding
principal  balance as of the date hereof of $3,279,585  ("Original Shaar Note"),
in  conjunction  with a Security  Agreement,  as amended  and  restated  ("Shaar
Security  Agreement"),  by and among the Borrower,  Commodore Advanced Sciences,
Inc.  ("CASI") and Holder,  a Warrant  ("Shaar  Warrant"),  issued to Holder,  a
Registration Rights Agreement ("Shaar  Registration  Rights agreement"),  by and
between the Borrower and Holder, and a Guaranty, as amended and restated ("Shaar
Guaranty")  by CASI in  favor  of  Holder  and  (ii)  Secured  Promissory  Note,
initially  issued  by the  Borrower  on June  13,  2001  to  Milford  Capital  &
Management  (or an  affiliate  thereof)("Milford"),  in the  original  principal
amount  of  Five  Hundred  Thousand  Dollars  ($500,000),   which  such  Secured
Promissory  Note has an outstanding  principal  balance as of the date hereof of
One Hundred Eight-Eight  Thousand One Hundred Forty-Nine Dollars  ($188,149)(the
"Milford  Note"),  together with all accrued and unpaid interest and unpaid fees
and  forbearance  amounts on the Original  Shaar Note and the Milford Note.  The
Milford  Note was  acquired by Holder  from  Milford  pursuant  to that  certain
Purchase  Agreement,  dated March 23, 2005.  The Shaar Security  Agreement,  the
Shaar Warrant,  the Shaar Registration Rights Agreement,  and the Shaar Guaranty
are sometimes hereinafter collectively referred to as the "Loan Documents."

         FOR VALUE RECEIVED, the Borrower hereby promises to pay to the order of
the Holder,  its  successors  and assigns,  at the office of the Holder c/o SS&C
Fund Services  N.V.,  Pareraweg 45,  Curacao,  Netherlands  Antilles (or at such
other  address as the holder  hereof  may  specify  from time to time by written
notice to the Borrower) on April 12, 2009 (the "Maturity  Date"),  the principal
sum of Five Million One Hundred Thousand Seven Hundred Thirty-Three ($5,100,733)
Dollars, or so much thereof as shall constitute the entire outstanding principal
balance of the loans hereunder (the "Principal Balance"), together with interest
on the unpaid Principal Balance outstanding from time to time at the rate of 10%

                                       32
<PAGE>

per annum,  compounded  monthly.  Interest shall be calculated on the basis of a
360 day year and paid for the  actual  number of days  elapsed  for any whole or
partial  month in which  interest  is being  calculated.  So long as any uncured
Event of Default (hereinafter  defined) exists hereunder,  regardless of whether
or not there has been an acceleration of the indebtedness  evidenced hereby, and
at all times after maturity of the  indebtedness  evidenced  hereby  (whether by
acceleration or otherwise),  interest shall accrue on the outstanding  principal
balance of this Note at a rate per annum equal to fourteen  (14.0%)  percent per
annum,  or if  such  increased  rate of  interest  may  not be  collected  under
applicable  law,  then at the maximum  rate of  interest,  if any,  which may be
collected from Borrower under applicable law

         On the Issue  Date of this  Note,  the  Principal  Balance of this Note
shall  be  Four  Million  Six  Hundred   Thousand  Seven  Hundred   Thirty-Three
($4,600,733)  Dollars.  During the six (6) month period following the Issue Date
of this Note, if both parties consent,  which consent can be withheld by a party
for any reason whatsoever,  Holder will, from time to time, make advances to the
Borrower  under this Note in an  aggregate  principal  amount of up to $500,000;
provided,  that at no time shall this Note have an outstanding Principal Balance
more than $5,100,733.  Disbursements of advances hereunder shall be made by wire
transfer to an account designated in writing by Borrower to Holder, or otherwise
in a manner agreed upon by Holder and the Borrower.

         Beginning  on the  Issue  Date and for the  twelve  (12)  month  period
thereafter  (the  "Deferral  Period"),  interest  shall accrue on the  principal
amount  of the Note  outstanding  from  time to time.  On April  12,  2006,  the
Borrower  shall make a single lump sum payment to the Holder in an amount  equal
to all interest that accrued during the Deferral Period. Beginning May 15, 2006,
and monthly  thereafter  on the 15th day of each month until the Maturity  Date,
the  Borrower  shall pay to the Holder all  accrued  and unpaid  interest on the
Principal  Balance  of the Note  outstanding  during  the  prior  month.  On the
Maturity  Date,  the Borrower shall make a single lump sum payment to the Holder
equal to the  outstanding  Principal  Balance  of the  Note,  together  with all
accrued and unpaid interest  thereon.  Each date that a payment hereunder is due
shall be  referred to as  "Payment  Date".  All  payments  of  principal  and/or
interest  shall be paid no later than 3:00 p.m., New York City time on the dates
set forth Above;  provided,  however,  that the Borrower  shall be entitled to a
fifteen (15) day period ("Grace Period") in which to make each such payment (and
interest shall accrue during such Grace Period at the rates per annum  specified
herein).

         Interest on the outstanding  Principal Balance shall be payable in cash
or shares of Common  Stock,  par value $0.001 per share,  of the  Borrower  (the
"Common  Stock"  or  "Common  Shares")  at the  Borrower's  option  at the  then
applicable  Conversion  Price (as such term is  defined  in Section 5 below) and
shall accrue  commencing on the date hereof and shall  continue until payment in
full of the outstanding Principal Balance has been made. The Borrower shall only
be permitted to issue shares of its Common Stock in payment of accrued  interest
if the shares to be issued  are, as of the date of such  issuance,  are duly and
validly  authorized and issued,  fully paid and  nonassessable,  freely tradable
shares  of  the  Common  Stock,   registered  for  resale  in  the  open  market
transactions on a registration  statement,  which  registration  statement shall
then be  effective  under the  Securities  Act of 1933,  as amended (the "Act").

                                       33
<PAGE>

Notwithstanding  the  foregoing,  at least ten (10) days  prior to each  Payment
Date,  the  Borrower  will send  written  notice to the Holder of the  estimated
interest amount to be paid on the Payment Date and the manner (cash or shares of
Common Stock) in which such interest shall be paid. The interest so payable will
be paid to the person in whose name this Note (or one or more predecessor Notes)
is registered on the records of the Borrower regarding  registration of the Note
(the "Note  Register").  Each such payment  shall be made in lawful money of the
United States of America by wire transfer of immediately  available funds of the
Borrower payable to Holder as follows:

Bank:             Bank of New York
Address:          350 5th Avenue, New York City, NY
ABA no.:          021-000-018
Account name:     Krieger and Prager LLP
Account no.:      637-1657965
Reference:        Shaar Fund - escrow


         or at such other address as the Holder shall from time to time indicate
by written notice to the Borrower.

         This  Note  may not be  prepaid,  in  whole  or in  part,  prior to the
Maturity Date.

         By  acceptance  of this Note,  the Holder  agrees that it will promptly
deliver  and  surrender  this Note to the  Borrower  upon full  payment  thereof
(including  interest and fees), and that it will promptly notify the Borrower of
any  disposition  of the Note and of the name and address of the  transferee  of
this Note. All of the agreements of the Borrower and the other terms of the Loan
Documents and the Exchange Agreement are incorporated  herein by reference as if
the same were  fully set forth in this Note.  Terms  used in this Note,  but not
otherwise defined shall have the meanings given to such terms in the Certificate
of Designation of Series I Convertible  Preferred Stock of the Borrower ("Series
I Preferred Stock").

         This Note is subject to the following additional provisions:

         1. Events of Default.  Any of the following  events which occur and are
continuing shall constitute an "Event of Default":  (a) if the Borrower fails to
make any payment of any principal or interest under this Note on a Payment Date,
including  the allowance  for the Grace  Period;  (b) if a receiver,  trustee or
other such  official is appointed for the Borrower,  or if any  proceedings  are
commenced  by or against  the  Borrower  under any  bankruptcy,  reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law or
statute  of the  federal  government  or  any  state  government  and,  if  such
proceedings  are  instituted  against the Borrower,  and (i) the Borrower by any
action or failure to act indicates his approval of,  consent to or  acquiescence
therein;  (ii) an order  shall be entered  approving  the  petition  or granting
relief  in  such  proceeding  or  (iii)  such  proceeding  remains  undismissed,
undischarged  or unbonded for a period of  forty-five  (45) days;  (c) except as
hereinafter  provided,  if the Borrower  breaches any covenant set forth in this
Note or any of the Loan  Documents  and such breach is not cured  within  thirty

                                       34
<PAGE>

(30) days; (d) if Borrower voluntarily files for protection under any applicable
bankruptcy  or  insolvency  statutes;  (e) if Borrower  shall  default under any
obligations relating to (i) the Exchange Agreement,  (ii) the shares of Series I
Preferred Stock,  (iii) the Securities  Purchase Agreement entered into on March
15, 2000 with  Holder,  (iv) any  warrants  exercisable  for Common Stock of the
Borrower issued to or held by Holder,  or (v) any existing  Registration  Rights
Agreement to which Holder is a party; (f) any representation or warranty made or
deemed made by a Borrower or any subsidiary of Borrower (a  "Subsidiary") in any
agreement  between or among the Borrower and/or such  Subsidiary and Holder,  or
which is contained in any  certificate,  document,  opinion,  financial or other
statement furnished at any time under or in connection therewith, shall prove to
have been incorrect in any material  respect on or as of the date made or deemed
made; (g) either Borrower or any Subsidiary  shall: (i) fail to pay any material
indebtedness,  as the case may be, or any interest or premium thereon,  when due
(whether by scheduled maturity,  required  prepayment,  acceleration,  demand or
otherwise);  or (ii) fail to perform or observe any material  term,  covenant or
condition  on its part to be  performed  or  observed  under  any  agreement  or
instrument  relating to any such indebtedness,  when required to be performed or
observed,  if the effect of such failure to perform or observe is to accelerate,
or to permit the acceleration of, after the giving of notice or passage of time,
or both, the maturity of such  indebtedness;  or any such indebtedness  shall be
declared  to be due and  payable,  or  required  to be prepaid  (other than by a
regularly scheduled required prepayment),  prior to the stated maturity thereof;
or (iii)  fail to make any  payment  due under or  otherwise  fail to perform or
observe any covenant or obligation contained in the Shaar Guaranty; (h) Borrower
or any  Subsidiary  shall  generally  not,  or be unable  to, or shall  admit in
writing its  inability  to, pay its debts as such debts  become  due;  (i) there
shall occur a loss, theft,  damage or destruction of any material portion of the
tangible  assets of a  Borrower  or a  Subsidiary  for which  there is either no
insurance coverage or for which, in the reasonable  opinion of Holder,  there is
insufficient  insurance  coverage;  (j) other than as a result of or inaction on
the part of the Holder,  Holder  shall fail to have a perfected  first  priority
security  interest  in,  except for the  Patents in foreign  jurisdictions,  the
Collateral (as defined in the Shaar Security Agreement); or (k) (i) the Borrower
challenges,  disputes  or denies  the right of the  Holder  hereof to effect the
conversion  of the  Principal  Balance or shares of Series I Preferred  Stock or
dividends  thereon  into Common  Shares or  otherwise  dishonors  or rejects any
Conversion Notice delivered in accordance with Section 6 or (ii) any third party
commences any lawsuit or  proceeding  or otherwise  asserts any claim before any
court or  public or  governmental  authority  which  seeks to  challenge,  deny,
enjoin, limit, modify, delay or dispute the right of the Holder hereof to effect
the  conversion of the Principal  Balance or any accrued  interest  thereon,  or
shares of Series I Preferred Stock or dividends  thereon,  into Common Shares (a
"Blockage  Claim"),  and such  Blockage  Claim shall remain in effect and not be
resolved for a period of more than 90 days.  Upon the  occurrence of an Event of
Default,  the entire  Principal  Balance and all unpaid accrued interest of this
Note shall,  at the Holder's  option,  become  immediately  due and payable upon
written notice thereof (other than in the case of an Event of Default  described
in  clauses  (b) and (d) above in which case the entire  Principal  Balance  and
accrued  interest shall become  immediately due and payable without any required
written notice to the Borrower. Notwithstanding the foregoing, in the event of a
violation of Section  1(g)(i) or (ii) above,  such violation shall not result in
an Event of Default hereunder and the Holder shall have no right to exercise the
remedies  set  forth  herein  if (1) the  Borrower  has  entered  into a written
agreement with the party to whom it is indebted,  pursuant to which,  such party
agrees  to  forbear  from  exercising  any  remedy  available  to it under  such
indebtedness  and (ii) such  agreement  remains in effect.  The  Borrower  shall
promptly  provide the Holder with a copy of any such  Forbearance  Agreement and
all amendments or modifications thereto.

                                       35
<PAGE>

         2. [Reserved]

         3. Covenants of Borrower.  Borrower hereby covenants and agrees that it
will  promptly,  upon becoming  aware of the existence of any condition or event
which  constitutes  an Event of  Default  hereunder,  deliver a  written  notice
specifying the nature and period of existence  thereof and what action  Borrower
is taking (and proposes to take) with respect thereto.

         4.   Representations   and   Warranties   of  Borrower.   The  Borrower
acknowledges  and agrees that, based upon advice received from its legal counsel
after  such  counsel  reviewed  certain  "No-Action"  letters  which  it  deemed
relevant,  this Note,  for the  purposes of and  pursuant to Rule  144(d)(3)(i),
promulgated  under the Act,  shall be deemed to have been  acquired  at the same
time as the Original  Shaar Note,  and that the shares of Common Stock  issuable
upon conversion hereof shall be deemed,  by reason of Rule  144(d)(3)(ii) of the
Act to have been  acquired at the same time as the Original  Shaar Note and that
upon issuance of such shares,  the Holder shall be entitled to immediately  sell
such shares under Rule 144. In the event the Holder is prohibited  from publicly
selling any shares of Common  Stock  issued  upon  conversion  of the  Principal
Balance, the Borrower shall promptly use its commercially  reasonable efforts to
register such shares pursuant to an effective  registration statement permitting
their resale under the Act.

         5.  Conversion;   Conversion  Price.  At  the  option  of  the  Holder,
outstanding Principal Balance may be converted, either in whole or in part, into
Common Shares (calculated as to each such conversion to the nearest 1/100th of a
share)  at any time and from  time to time at a  conversion  price  per share of
Common Stock (the "Conversion Price") equal to the lesser of (i) $.0285 (subject
to adjustment for any  stock-split or stock  combination to occur after the date
hereof) or (ii) the average of the closing  bid prices of one Common  Share,  as
reported on the OTC Bulletin Board ("OTCBB") or the principal  national security
exchange  or  quotation  system on which  such  security  is quoted or listed or
admitted to trading,  for the ten Trading Days prior to a  Conversion  Date (the
"Market Price");  provided, if such security is not quoted or listed or admitted
to trading on the OTCBB or any national  securities  exchange,  the Market Price
shall be the 50% of the  average  closing  bid  prices of such  security  on the
over-the-counter  market,  as reported by Bloomberg  LP, or a similar  generally
accepted reporting service, for the ten Trading Days prior to a Conversion Date.
For purposes  hereof,  "Trading  Day" means any day on which (a)  purchases  and
sales  of  securities  authorized  for  quotation  on the  OTCBB or the over the
counter  market are reported  thereon,  (b) no event which results in a material
suspension  or  limitation  of trading of the Common  Shares on the OTCBB or the
over the counter market has occurred and (c) at least one bid for the trading of
Common Shares is reported on the OTCBB or the over the counter market .

         The number of shares of Common  Stock due upon  conversion  of all or a
portion of the  Principal  Balance  shall be (i) the  portion  of the  Principal
Balance divided by (ii) the applicable Conversion Price.

         Within  two  Business  Days  of the  occurrence  of a  Valuation  Event
(hereinafter  defined),  the Borrower  shall send notice  thereof to the Holder.
Notwithstanding  anything to the contrary contained herein, if a Valuation Event

                                       36
<PAGE>

occurs  during any Valuation  Period,  the Holder may convert some or all of the
Principal  Balance,  at its sole  option,  at a  Conversion  Price  equal to the
Current Market Price on any Trading Day during the Valuation Period.

         For purposes of this Section 5, a "Valuation Event" shall mean an event
in which the Borrower takes any of the following actions:

         (a) subdivides or combines its Capital Shares;

         (b) makes any distribution on its Capital Shares;

         (c) issues any  additional  Capital  Shares  (the  "Additional  Capital
Shares"),  otherwise  than as provided in the  foregoing  Sections 5(a) and 5(b)
above,  at a price per share  less,  or for other  consideration  lower than the
Current Market Price in effect  immediately prior to such issuances,  or without
consideration,  except for issuances under (A) employee benefit plans consistent
with those presently in effect, (B) presently outstanding  warrants,  options or
convertible securities and (C) in connection with an acquisition or merger where
the Board of  Directors  of the  Borrower  determines  in good  faith  that such
Additional Capital Shares are not being issued for consideration  lower than the
Current Market Price on the date of such issuance;

         (d) issues any  warrants,  options or other rights to subscribe  for or
purchase  any  Additional  Capital  Shares  if the  price  per  share  for which
Additional  Capital  Shares may at any time  thereafter be issuable  pursuant to
such  warrants,  options or other rights  shall be less than the Current  Market
Price on the date of such issuance;

         (e)  issues  any  securities   convertible   into  or  exchangeable  or
exercisable  for Additional  Capital Shares if the  consideration  per share for
which Additional  Capital Shares may at any time thereafter be issuable pursuant
to the terms of such convertible,  exchangeable or exercisable  securities shall
be less than the Current Market Price on the date of such issuance;

         (f) announces or effects a Fundamental Corporate Change;

         (g) makes any  distribution  of its assets or evidences of indebtedness
to the holders of its Capital  Shares as a dividend in  liquidation or by way of
return of capital or other than as a dividend payable out of earnings or surplus
legally  available  for the payment of  dividends  under  applicable  law or any
distribution to such holders made in respect of the sale of all or substantially
all of the Borrower's assets (other than under the circumstances provided for in
the foregoing Sections 5(a) through 5(e)); or

         (h) takes any  action  affecting  the  number  of  Outstanding  Capital
Shares,  other than an action  described in any of the  foregoing  Sections 5(a)
through 5(g) hereof,  inclusive,  which in the opinion of the Holder, determined
in good  faith,  would have a  material  adverse  effect  upon the rights of the
Holder at the time of a conversion  of the  Principal  Balance or is  reasonably
likely to result in a decrease in the Market Price.

         6. Exercise of Conversion Privilege.

                                       37
<PAGE>

         (a) Conversion of the Principal  Balance may be exercised,  in whole or
in part, by the Holder by  transmitting  via facsimile an executed and completed
Conversion  Notice,  in the form attached  hereto as Exhibit A, to the Borrower.
Each date on which a  Conversion  Notice is  transmitted  via  facsimile  to the
Borrower in accordance with the provisions of this Section 6 shall  constitute a
"Conversion  Date".  The Borrower  shall  convert  such amount of the  Principal
Balance and issue the Common Stock,  and all voting and other rights  associated
with the  beneficial  ownership  of the Common Stock shall vest with the Holder,
effective as of the  Conversion  Date at the time  specified  in the  Conversion
Notice.  The  Conversion  Notice  also  shall  state  the  name or  names  (with
addresses)  of the Persons who are to become the holders of the Common  Stock in
connection with such  conversion.  If such  conversion  would convert the entire
remaining  Principal  Balance of this  Note,  the  Holder  shall  deliver to the
Borrower the original Note being  converted no later than five (5) business days
after the delivery of the Conversion  Notice.  As promptly as practicable  after
the receipt of the  Conversion  Notice as  aforesaid,  but in any event not more
than five Business Days after the Borrower's  receipt of such Conversion Notice,
the Borrower shall (i) issue the Common Stock in accordance  with the provisions
of this  Agreement,  and (ii)  utilize the DWAC system or cause to be mailed for
delivery by overnight  courier to the Holder (x) a certificate or certificate(s)
representing  the  number of Common  Shares to which the Holder is  entitled  by
virtue of such  conversion and (y) cash, as provided in Section 7, in respect of
any fraction of a Common Share issuable upon such  conversion.  Such  conversion
shall be deemed to have been effected at the time at which the Conversion Notice
indicates and at such time the rights of the Holder of the Note, as such,  shall
cease and the Person or Persons in whose name or names the Common Stock shall be
issuable  shall be deemed to have  become the holder or holders of record of the
Common  Shares  represented  thereby and all voting and other rights  associated
with the beneficial ownership of such Common Shares shall at such time vest with
such  Person or Persons.  The  Conversion  Notice  shall  constitute  a contract
between  the  Holder and the  Borrower,  whereby  the Holder  shall be deemed to
subscribe  for the number of Common  Shares which it will be entitled to receive
upon such conversion and, in payment and satisfaction of such  subscription (and
for any cash  adjustment  to which it is  entitled  pursuant  to Section  7), to
surrender  that  portion  of the  Note  and to  release  the  Borrower  from all
liability thereon. No cash payment aggregating less than $1.00 shall be required
to be given unless specifically requested by the Holder.

         (b) The Holder shall be entitled to exercise its  conversion  privilege
notwithstanding  the  commencement  of any case under 11 U.S.C.  ss. 101 et seq.
(the  "Bankruptcy  Code").  The  Borrower  hereby  waives to the fullest  extent
permitted any rights to relief it may have under 11 U.S.C. ss. 362 in respect of
the conversion of the Note. The Borrower agrees,  without cost or expense to the
Holder,  to take or consent to any and all action necessary to effectuate relief
under 11 U.S.C. ss. 362.

         7. Fractional Shares. No fractional Common Shares or scrip representing
fractional Common Shares shall be issued upon conversion of the Note. Instead of
any fractional  Common Shares which  otherwise would be issuable upon conversion
of the  Note,  the  Borrower  shall pay a cash  adjustment  in  respect  of such
fraction in an amount equal to the same fraction.

         8. Adjustments to Conversion Price. Except with respect to issuances of
Capital  Shares in connection  with an  acquisition or merger where the Board of
Directors of the Borrower  determines in good faith that such Capital Shares are
not being issued for  consideration  lower than the Current  Market Price on the
date of  such  issuance,  for so long as the  obligations  under  the  Note  are
outstanding,  if the Borrower  issues and sells  pursuant to an  exemption  from

                                       38
<PAGE>

registration  under the  Securities Act (A) Common Shares at a purchase price on
the date of  issuance  thereof  that is lower  than the  Conversion  Price,  (B)
warrants or options with an exercise price on the date of issuance  thereof that
is lower  than the  Conversion  Price for the  Holder on such  date,  except for
warrants or options issued  pursuant to employee  benefit plans  consistent with
those presently in effect,  employee stock option  agreements or stock incentive
agreements of the Borrower,  or (C)  convertible,  exchangeable  or  exercisable
securities  with a right to exchange at lower than the Current  Market  Price on
the  date of  issuance  or  conversion,  as  applicable,  of  such  convertible,
exchangeable or exercisable  securities,  except for stock option  agreements or
stock incentive agreements, then on any date on which the Conversion Price shall
be determined,  the Conversion  Price shall be reduced by an amount equal to the
amount by which  the  purchase  price,  exercise  price or  exchange  price,  as
applicable,  is lower than the  Conversion  Price or Current  Market  Price,  as
applicable, multiplied by a fraction the denominator of which is the outstanding
principal amount of this Note at the time of the adjustment and the numerator of
which is the sum of (A) the aggregate  number of (i) Common Shares,  in the case
of (A) above,  (ii)  Common  Shares  into  which the  warrants  or  options  are
exchangeable  into, in the case of (B) above,  or (iii) equity  securities  into
which the  convertible or exchangeable  securities are exercisable  into, in the
case of (C) above,  multiplied by (B) the Conversion Price, in each case, with a
maximum adjustment equal to the applicable  discount  triggering such adjustment
pursuant to this Section 8.

         9. Certain Conversion Limitations.

         (a) Notwithstanding  anything herein to the contrary,  the Holder shall
not have the right,  and the Borrower shall not have the obligation,  to convert
all or any portion of the Principal Balance (and the Borrower shall not have the
right to pay interest on the Principal  Balance in shares of Common  Stock,  but
such interest shall continue to accrue until payment thereof in shares of Common
Stock will not violate the terms  hereof) if and to the extent that the issuance
to the Holder of shares of Common  Stock  upon such  conversion  (or  payment of
interest) would result in the Holder being deemed the "beneficial owner" of more
than 5% of the then  Outstanding  shares of Common  Stock  within the meaning of
Section 13(d) of the Securities Exchange Act of 1934, as amended,  and the rules
promulgated thereunder.

         (b)  Notwithstanding  anything  herein to the  contrary,  if and to the
extent that, on any date (the "Section 16 Determination  Date"),  the holding by
the  Holder of the Note would  result in the  Holder's  becoming  subject to the
provisions  of Section  16(b) of the  Exchange Act in virtue of being deemed the
"beneficial  owner"  of more than 10% of the then  Outstanding  shares of Common
Stock, then the Holder shall not have the right, and the Borrower shall not have
the obligation,  to convert all or any portion of the Principal Balance (and the
Borrower  shall not have the right to pay interest on the  Principal  Balance in
shares of Common Stock, but such interest shall continue to accrue until payment
thereof in shares of Common  Stock will not violate  the terms  hereof) as shall
cause such Holder to be deemed the beneficial owner of more than 10% of the then
Outstanding  shares of Common Stock  during the period  ending 60 days after the
Section 16 Determination Date.

                                       39
<PAGE>

         10.  Merger;  Consolidation.  If,  for as  long as  this  Note  remains
outstanding, the Borrower enters into a merger (other than where the Borrower is
the surviving entity) or consolidation with another  corporation or other entity
or a sale or transfer of all or substantially  all of the assets of the Borrower
to another person  (collectively,  a "Sale"),  the Borrower will require, in the
agreements  reflecting such  transaction,  that the surviving  entity  expressly
assume the obligations of the Borrower hereunder.

         11. Adjustments.

         (a) In case of any stock split or reverse stock split,  stock dividend,
reclassification of the Common Stock, recapitalization, merger or consolidation,
or like capital adjustment  affecting the Common Stock of the Borrower (each, an
"Adjustment"),  the Conversion  Rate in effect at the time of the effective date
for such Adjustment shall be  proportionally  adjusted so that the Holder of the
Note  which is  converted  after  such date shall be  entitled  to  receive  the
aggregate  number and kind of shares which,  if this Note had been  converted by
the Holder immediately prior to such date, the Holder would have owned upon such
conversion  and been  entitled  to receive  upon such  Adjustment  (and for such
purposes the Holder shall, to the extent  relevant,  be deemed to have converted
this Note  immediately  prior to the record date or the  effective  date, as the
case may, for the Adjustment). For example, if the Borrower declares a 2:1 stock
dividend or stock split and the Conversion Price immediately prior to the record
date for such  Adjustment  was $1.00 per share,  the adjusted  Conversion  Price
immediately after the Adjustment would be $.50 per share. Such adjustment may be
made  successively if there is more than one  Adjustment.  In all other respects
the  provisions  of this  Section  shall be  applied  in a fair,  equitable  and
reasonable  manner so as to give  effect,  as nearly as may be, to the  purposes
hereof.  A rights offering to  stockholders  shall be deemed a stock dividend to
the extent of the bargain purchase element of the rights. The provisions of this
Section  11 shall  similarly  apply to  successive  reclassifications,  changes,
consolidations, mergers, mandatory share exchanges and sales and transfers.

         (b) In the event the Borrower  shall  propose to take any action of the
type described in Section 5, 8, 10, 11 and 12, the Borrower shall give notice to
Holder,  which notice shall specify the record date, if any, with respect to any
such action and the approximate date on which such action is to take place. Such
notice  shall  also set  forth  such  facts  with  respect  thereto  as shall be
reasonably  necessary  to indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the Conversion  Price and the
number,  kind or class of shares or other  securities or property which shall be
deliverable  upon  conversion of the Note. In the case of any action which would
require the fixing of a record date,  such notice shall be given at least twenty
(20) days  prior to the date so fixed,  and in case of all  other  action,  such
notice  shall be given at least  fifteen  (15) days  prior to the taking of such
proposed action.  Failure to give such notice, or any defect therein,  shall not
affect the legality or validity of any such action.

         12. Spin-Offs.  If, for any reason,  prior to payment in full hereunder
or the  conversion  of this Note in full,  the  Borrower  spins off or otherwise
divests  itself of a part of its business or  operations or disposes all or of a
part of its assets in a transaction  (the "Spin Off") in which the Borrower does
not receive  compensation  for such business,  operations or assets,  but causes
securities  of  another  entity  (the  "Spin  Off  Securities")  to be issued to
security  holders  of the  Borrower,  then the  Borrower  shall  cause (i) to be
reserved Spin Off  Securities  equal to the number thereof which would have been
issued to the Holder had all of the Holder's unconverted Note outstanding on the

                                       40
<PAGE>

record date (the "Record  Date") for  determining  the amount and number of Spin
Off  Securities  to  be  issued  to  security   holders  of  the  Borrower  (the
"Outstanding  Note") been  converted  as of the close of business on the trading
day  immediately  before the Record Date (the "Reserved  Spin Off Shares"),  and
(ii) to be issued to the  Holder  on the  conversion  of all or any of the Note,
such amount of the Reserved  Spin Off Shares equal to (x) the Reserved  Spin Off
Shares multiplied by (y) a fraction, of which (I) the numerator is the amount of
the Note then being  converted,  and (II) the  denominator  is the amount of the
Note.

         13. Costs. The Borrower shall pay all documentary,  stamp,  transfer or
other  transactional taxes attributable to the issuance or delivery of shares of
Common Stock upon  conversion of the Note;  provided that the Borrower shall not
be  required  to pay any taxes  which may be payable in respect of any  transfer
involved in the  issuance or  delivery of any  certificate  for such shares in a
name other  than that of the  Holder in  respect of which such  shares are being
issued.

         14.  Reservation  of Shares.  The Borrower  shall at all times from and
after the date hereof  shall  maintain a  sufficient  number of shares of Common
Stock,  duly and validly  authorized  and  reserved  for issuance to satisfy the
conversion of this Note, the Series I Preferred Stock, the Shaar Warrant and all
other  warrants held by the Holder  (collectively,  the  "Warrants");  provided,
that, in no event shall the number of shares  reserved for such issuance be less
than  the  greater  of (a)  75,000,000  and (b)  115% of the  number  of  shares
necessary for the full conversion of this Note, the Series I Preferred Stock and
the Warrants. In addition to such other remedies as shall be available to Holder
hereunder,  the Borrower will take such corporate  action as may, in the opinion
of its counsel,  be necessary to increase the number of authorized  but unissued
shares  of Common  Stock to the  number of  shares  required  hereby,  including
without limitation,  using its best efforts to obtain the requisite  stockholder
approval necessary to increase the number of authorized shares of the Borrower's
Common Stock.

         15.  Representations  of Holder.Upon  conversion of all or a portion of
this  Note,  the  Holder  shall  confirm  in  writing,   in  a  form  reasonably
satisfactory  to the Borrower,  that the shares of Common Stock so purchased are
being acquired  solely for the Holder's own account and not as a nominee for any
other party, and that such Holder is an Accredited  Investor (as defined in Rule
501(a)  of  Regulation  D  promulgated   under  the  1933  Act).   The  Borrower
acknowledges  that  Holder's  duly  executed  certification  on  the  Notice  of
Conversion  is  satisfactory   confirmation  of  the  facts  set  forth  in  the
immediately  preceding sentence. If such Holder cannot make such representations
because  they would be  factually  incorrect,  it shall be a  condition  to such
Holder's  conversion  of all or a portion of the Note that the Borrower  receive
such other  representations  as the Borrower considers  reasonably  necessary to
assure the Borrower that the issuance of its securities  upon  conversion of the
Note shall not violate any United States or state securities laws.

         16.  Communications  and  Notices.  Except  as  otherwise  specifically
provided herein,  all communications and notices provided for in this Note shall
be sent by facsimile to:

                  If to the Holder, to:

                  The Shaar Fund Ltd.
                  c/o Maarten Robberts
                  SS&C Fund Services N.V.
                  Pareraweg 45
                  Curacao, Netherlands Antilles
                  Phone: (599-9) 434-3562
                  Fax: (599-9) 434-3560

                                       41
<PAGE>

                  with copies to:

                  Meltzer, Lippe, Goldstein & Breitstone, LLP
                  Attn:  Ira Halperin, Esq.
                  190 Willis Avenue
                  Mineola, NY 11501
                  Phone: (516) 747-0300
                  Fax: (516) 747-0653

                  and:

                  Levinson Capital Management
                  350 Fifth Avenue, Suite 2210
                  New York, NY 10018
                  Attention: Samuel D. Levinson
                  (212) 244-3576
                  (212) 395-0059

                  If to the Borrower, to:

                  Commodore Applied Technologies, Inc.
                  Attn: James DeAngelis
                  Chief Financial Officer
                  150 East 58th Street
                  Suite 3238
                  New York, New York 10155
                  Phone: (212) 308-5800
                  Fax: (212) 753-0731

         Notices sent by facsimile shall be deemed  received upon delivery.  The
Borrower and the Holder may from time to time change their respective addresses,
for  purposes  of this  Section  16, by  written  notice  to the other  parties;
provided,  however,  that notice of such  change  shall be  effective  only upon
receipt.

         17.  Governing  Law;  Jurisdiction.  This Note  shall be  construed  in
accordance  with and governed by the laws of the State of New York.  Each of the
parties  hereto  consents to the exclusive  jurisdiction  of the federal  courts
whose  districts  encompass any part of the City of New York or the state courts
of the State of New York sitting in the City of New York in connection  with any
dispute  arising  under this Note.  Each party  hereto  hereby  irrevocably  and
unconditionally  waives,  to the fullest  extent it may  effectively  do so, any
defense of an  inconvenient  forum or improper venue to the  maintenance of such
action or proceeding in any such court and any right of  jurisdiction on account
of its place of  residence  or  domicile.  Each  party  hereto  irrevocably  and

                                       42
<PAGE>

unconditionally  consents  to the  service  of any and all  process  in any such
action or  proceeding in such courts by the mailing of copies of such process by
certified or  registered  airmail at its address  specified  herein.  Each party
hereto agrees that a final  judgment in any such action or  proceeding  shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.

         18.  Assignment.  This Note shall bind and inure to the  benefit of the
respective successors and assigns of the parties hereto;  provided that Borrower
shall not be permitted to assign its obligations hereunder.

         19.  Security.  This Note is  secured  inter  alia,  (i) by a  security
interest in certain  assets of the  Borrower  and CASI as set forth in the Shaar
Security  Agreement and (ii) by a certain Patent Collateral  Assignment dated as
of June 13, 2001 from Borrower to Holder, as amended and restated as of the date
hereof. Borrower agrees and acknowledges that all of its payment and performance
obligations under this Note constitute "Obligations", as such term is defined in
the Shaar  Security  Agreement.  Subject  to the  consent of the  Holder,  which
consent shall not be unreasonably withheld, the Borrower shall, upon at not less
than fifteen (15) days prior written  notice to the Holder,  be permitted to (x)
amend the  "Collateral"  described on Security  Agreement and Patent  Collateral
Assignment to reflect  patents  abandoned by the Borrower in the ordinary course
of its  business  and (y)  grant  a  first  priority  security  interest  on new
equipment  obtained by the  Borrower  or CASI in  connection  with an  equipment
leasing arrangement entered into after the date hereof in a transaction approved
by the Board of Directors of the Borrower or CASI, as the case may be.

         20.  Enforcement and Waiver.  No failure or delay on the part of Holder
in exercising any of its rights, powers or privileges hereunder shall operate as
a waiver thereof,  nor shall a single or partial  exercise  thereof preclude any
other or further  exercise of any right,  power or  privilege.  Borrower  hereby
waives  diligence,  presentment,  demand  for  payment,  notice of  non-payment,
presentment,  notice of dishonor, protest, notice of protest or any other notice
in connection with the delivery, acceptance,  performance or enforcement of this
Note.

         21.  Modification.  This Note may not be changed or terminated  orally,
nor may any of its  provisions  be  waived,  except by an  agreement  in writing
signed by the party against whom  enforcement  of such change or  termination is
sought.

         22. Remedies. In case any one or more Events of Default shall occur and
be continuing, Holder may proceed to protect and enforce its rights by an action
at law, suit in equity or other appropriate  proceeding.  Borrower shall pay all
reasonable costs of collection when incurred,  including  reasonable  attorneys'
fees.

         23.  Collection  Costs.  In the event that the Holder  shall place this
Note in the hands of an attorney for  collection  during the  continuance of any
Event of Default,  the  Borrower  shall  further be liable to the Holder for all
costs and expenses (including  reasonable attorneys' fees) which may be incurred
by the Holder in enforcing this Note, which amounts may, at the Holder's option,
be added to the principal hereof.

                                       43
<PAGE>

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

         25.  Prior  Notes.  The  Borrower  agrees  and  acknowledges  that  the
indebtedness  of the  Borrower  evidenced  by the  Original  Shaar  Note and the
Milford Note (together,  the "Prior Notes")  remains  outstanding as of the date
hereof, and this Convertible Secured Note: (a) is exchanged for and re-evidences
the indebtedness evidenced by the Prior Notes; (b) is given in substitution for,
and not in payment of the Prior  Notes;  and (c) is not intended to discharge or
constitute a novation of the Prior Notes.

                            [Signature Page Follows]


                                       44
<PAGE>

         IN WITNESS  WHEREOF,  the Borrower  has executed  this Note on the date
first above written.


                                 COMMODORE APPLIED TECHNOLOGIES, INC.



                                 By: /s/ James M. DeAngelis
                                     ----------------------
                                 James M. DeAngelis, Chief Financial Officer



                                       45
<PAGE>

                                    EXHIBIT A


                         [FORM OF NOTICE OF CONVERSION]

                                                              _________ __, 200_
Commodore Applied Technologies, Inc.
150 East 58th Street
Suite 3238
New York, New York 10155

Attn: Chief Financial Officer

         The undersigned,  owner of Commodore Applied Technologies,  Inc.'s (the
"Borrower")  Convertible  Secured Note, due April 12, 2009 (the "Note"),  hereby
exercises its option to convert  $___________  principal amount of the Note into
shares of the common stock,  $.001 par value per share, of the Borrower ("Common
Stock"), in accordance with the terms of the Note.

         The undersigned hereby instructs the Borrower to convert the portion of
the Note  specified  above into shares of Common  Stock at  Conversion  Price in
accordance with the provisions of Section 5 of the Note. The undersigned directs
that (i) the Common Stock issuable and  certificates  therefor  deliverable upon
conversion,  and (ii) if so delivered by the Holder, the Note, recertificated in
the principal  amount,  if any, not being  surrendered  for  conversion  hereby,
together with any check in payment for fractional Common Stock, be issued in the
name of and  delivered  to the  undersigned  unless  a  different  name has been
indicated  below.  All  capitalized  terms used and not defined  herein have the
respective meanings assigned to them in the Note.

         By delivering this conversion  notice, the undersigned owner represents
and  warrants to the Borrower  that the shares of Common Stock so purchased  are
being acquired  solely for the Holder's own account and not as a nominee for any
other party, and that such Holder is an Accredited  Investor (as defined in Rule
501(a) of Regulation D promulgated under the 1933 Act).

                                                     HOLDER:




                                       46
<PAGE>

                                                                       EXHIBIT C
                                     RELEASE

         For  and in  consideration  of the  obligations  of  COMMODORE  APPLIED
TECHNOLOGIES,   INC.  ("COMMODORE")  in  connection  with  exchange  of  certain
securities of COMMODORE  pursuant to that certain  Exchange  Agreement,  of even
date  herewith  (the  "Exchange  Agreement"),  and the  issuance by COMMODORE of
shares of its Series I Convertible  Preferred Stock and its Secured  Convertible
Note, and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged,  THE SHAAR FUND, LTD. ("SHAAR"),  individually
and  derivatively  and on behalf of its  predecessors,  successors,  affiliates,
subsidiaries,  heirs, trustees, officers,  directors,  agents,  representatives,
consultants,   administrators   and  assigns   (hereinafter   individually   and
collectively  referred to as the "Shaar  Releasing  Parties"),  hereby  release,
acquit, and discharge individually and collectively Commodore, its subsidiaries,
affiliates   and  advisors,   and  all  of  Commodore's   officers,   directors,
shareholders,  employees,  consultants,  attorneys,   representatives,   agents,
predecessors,  successors,  assigns, heirs, executors,  administrators and other
personal representatives  (hereinafter individually and collectively referred to
as the "Commodore Released Parties") of and from any and all actions,  causes of
action,  suits, debts, dues, accounts,  reckonings,  specialties,  bonds, bills,
covenants,  contracts,  agreements,  promises,  damages, judgments, debts, dues,
sums  of  money,  obligations,  liabilities,   controversies,  costs,  expenses,

                                       47
<PAGE>

attorneys' fees,  executions,  claims,  rights and demands  whatsoever,  whether
known or unknown,  asserted or  unasserted,  actual or potential,  individual or
joint, direct or indirect, fixed or contingent,  in law, admiralty or equity, of
every kind and nature  whatsoever,  which the Shaar Releasing  Parties ever had,
now have, or hereafter can,  shall,  or may have, or claim to have,  against the
Commodore  Released  Parties,  for,  upon, or by reason of any matter,  cause of
action, or thing,  whatsoever from the beginning of the world to the date hereof
(collectively,  the "Commodore  Released Claims") provided,  however,  that this
RELEASE shall not apply to, or limit the Shaar  Releasing  Parties'  rights with
respect to, claims,  cross-claims,  or other claims, rights,  actions, causes of
action, suits, actions, debts, dues, sums of money, accounts, reckonings, bonds,
bills, specialties, covenants, contracts,  controversies,  agreements, promises,
damages,  judgments,  executions,  claims,  and demands  against  the  Commodore
Released Parties relating to the terms,  conditions and obligations set forth in
the (i) Exchange Agreement and all other documents and instruments  entered into
or delivered in connection therewith including, but not limited to, the Series I
Certificate of Designation creating  COMMODORE'S Series I Convertible  Preferred
Stock and  COMMODORE'S  10%  Convertible  Secured Note issued in favor of SHAAR,
(ii) all documents and instruments  entered into or delivered in connection with
that certain Amended and Restated Secured  Promissory Note of COMMODORE,  issued
June 13,  2001,  in favor of SHAAR,  including,  but not limited to the Security
Agreement by and among COMMODORE, Commodore Advanced Sciences, Inc. ("CASI") and
SHAAR and a Guaranty  by CASI in favor of SHAAR,  (iii) all  warrants  issued to
SHAAR and  exercisable  for shares of common stock of  COMMODORE.  The Commodore
Released Claims include, without limitation, any claims for breach of express or
implied contract,  breach of implied  misrepresentation,  negligence,  negligent
misrepresentation,  breach of  fiduciary  duty,  actual or  constructive  fraud,
including,  without  limitation,  common  law  fraud or  fraud  or  manipulation
asserted  under  any  statutory  theory  under  any  federal  or  state  law and
including, without limitation, under any theory of primary, secondary or control
person  liability,  estoppel,  defamation,   conspiracy,  business  or  economic
interference,  violation  of any  federal  or  state  securities  law,  rule  or
administrative  regulation,   violation  of  public  policy  and  including  for
attorneys' or other  professional  fees.



                                       48
<PAGE>

         This RELEASE may not be changed orally.

         IN WITNESS  WHEREOF,  SHAAR, as RELEASOR has duly executed this Release
as of the 12th day of April, 2005.

                                 THE SHAAR FUND, LTD.

                                 By: SS&C Fund Services N.V.


                                 By: /s/ Maarten Robberts
                                     --------------------
                                 Name:  Maarten Robberts
                                 Title:    Director


                                 By: /s/ Peter Ijsseling
                                     -------------------
                                 Name: Peter Ijsseling
                                 Title:   Director

                                       49
<PAGE>

                                                                       EXHIBIT D

                                     RELEASE

         For and in  consideration  of the  obligations of THE SHAAR FUND,  LTD.
("SHAAR") in connection with exchange of certain securities of COMMODORE APPLIED
TECHNOLOGIES, INC. ("COMMODORE") pursuant to that certain Exchange Agreement, of
even date  herewith,  and the  issuance by  COMMODORE  of shares of its Series I
Convertible Preferred Stock and its Secured Convertible Note, and for other good
and  valuable  consideration,  the receipt and  sufficiency  of which are hereby
acknowledged,  COMMODORE,  individually  and  derivatively  and on behalf of its
predecessors,  successors, affiliates,  subsidiaries, heirs, trustees, officers,
directors,  agents,  representatives,  consultants,  administrators  and assigns
(hereinafter  individually  and  collectively  referred  to  as  the  "Commodore
Releasing  Parties"),  hereby release,  acquit,  and discharge  individually and
collectively SHAAR, its subsidiaries,  affiliates,  advisors, including, without
limitation, Shaar Advisory Services, N.V., Levinson Capital Management LLC, Cita
Investments  Israel  Ltd.,  and all of Shaar's  officers,  directors,  partners,
members,  shareholders,   employees,  consultants,  attorneys,  representatives,
agents, predecessors,  successors, assigns, heirs, executors, administrators and
personal representatives,  including,  without limitation,  Sam Levinson and Uri
Wolfson  (hereinafter  individually and  collectively  referred to as the "Shaar
Released  Parties")  of and from any and all actions,  causes of action,  suits,
debts, dues, sums of money,  accounts,  reckonings,  specialties,  bonds, bills,
covenants,  contracts,  agreements,  promises,  damages, judgments, debts, dues,
obligations,  liabilities,  controversies,  costs,  expenses,  attorneys'  fees,
executions,  claims,  rights and demands  whatsoever,  whether known or unknown,
asserted or  unasserted,  actual or potential,  individual  or joint,  direct or
indirect,  fixed or contingent,  in law,  admiralty or equity, of every kind and
nature whatsoever,  which the Commodore Releasing Parties ever had, now have, or
hereafter can, shall, or may have, or claim to have,  against the Shaar Released
Parties,  for,  upon,  or by reason of any  matter,  cause of action,  or thing,

                                       50
<PAGE>

whatsoever from the beginning of the world to the date hereof (collectively, the
"Shaar Released Claims"). The Shaar Released Claims include, without limitation,
any  claims  for  breach of  express  or  implied  contract,  breach of  implied
misrepresentation,  negligence, negligent misrepresentation, breach of fiduciary
duty, actual or constructive fraud,  including,  without limitation,  common law
fraud or fraud or  manipulation  asserted  under any statutory  theory under any
federal  or state law and  including,  without  limitation,  under any theory of
primary,   secondary  or  control  person   liability,   estoppel,   defamation,
conspiracy, business or economic interference, violation of any federal or state
securities law, rule or  administrative  regulation,  violation of public policy
and including for attorneys' or other professional fees.

         This RELEASE may not be changed orally.

         IN WITNESS  WHEREOF,  COMMODORE,  as RELEASOR  has duly  executed  this
Release as of the 12th day of April, 2005.

                                 COMMODORE APPLIED TECHNOLOGIES, INC.


                                 By: /s/ James M. DeAngelis
                                     ----------------------
                                 Name:  James M. DeAngelis
                                 Title:    Chief Financial Officer


                                       51


</TEXT>
</DOCUMENT>
