<PAGE>
EXHIBIT 4.11
-------------



     (iii) If the Indemnifying Party notifies the Indemnified Party that it does
not dispute its  liability  or the amount of its  liability  to the  Indemnified
Party with respect to the Third Party Claim under Section 9.1 or fails to notify
the Indemnified  Party within the Dispute Period whether the Indemnifying  Party
disputes its liability or the amount of its liability to the  Indemnified  Party
with respect to such Third Party Claim,  the Damages in the amount  specified in
the Claim Notice shall be  conclusively  deemed a liability of the  Indemnifying
Party under Section 9.1 and the Indemnifying  Party shall pay the amount of such
Damages to the Indemnified Party on demand. If the Indemnifying Party has timely
disputed  its  liability  or the amount of its  liability  with  respect to such
claim,  the Indemnifying  Party and the Indemnified  Party shall proceed in good
faith to negotiate a resolution  of such  dispute,  and if not resolved  through
negotiations  within  the  period  of  thirty  (30)  calendar  days  immediately
following the Dispute  Period,  such dispute shall be resolved by arbitration in
accordance with Section 9.3.

     (b) In the event any  Indemnified  Party should have a claim under  Section
9.1 against the  Indemnifying  Party that does not involve a Third Party  Claim,
the  Indemnified  Party  shall  deliver  a written  notification  of a claim for
indemnity  under Section 9.1  specifying the nature of and basis for such claim,
together with the amount or, if not then reasonably ascertainable, the estimated
amount,  determined in good faith,  of such claim (an  "Indemnity  Notice") with
reasonable  promptness to the Indemnifying Party. The failure by any Indemnified
Party  to give the  Indemnity  Notice  shall  not  impair  such  party's  rights
hereunder except to the extent that the Indemnifying  Party demonstrates that it
has been irreparably  prejudiced thereby. If the Indemnifying Party notifies the
Indemnified  Party that it does not dispute the claim or the amount of the claim
described  in such  Indemnity  Notice or fails to notify the  Indemnified  Party
within the Dispute Period whether the  Indemnifying  Party disputes the claim or
the amount of the claim described in such Indemnity  Notice,  the Damages in the
amount specified in the Indemnity Notice will be conclusively deemed a liability
of the Indemnifying Party under Section 9.1 and the Indemnifying Party shall pay
the  amount  of  such  Damages  to  the  Indemnified  Party  on  demand.  If the
Indemnifying  Party has  timely  disputed  its  liability  or the  amount of its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party shall proceed in good faith to negotiate a resolution of such dispute, and
if not resolved through  negotiations  within the period of thirty (30) calendar
days immediately following the Dispute Period, such dispute shall be resolved by
arbitration in accordance with Section 9.3.

Section  9.3.......ARBITRATION.  Any dispute under or related to this  Agreement
(including,  without  limitation,  pursuant to Section 9.2) or the  Registration
Rights  Agreement  shall be  submitted to  arbitration  and shall be finally and
conclusively  determined by the decision of a board of arbitration consisting of
three (3) members (the "Board of Arbitration") selected as hereinafter provided.
Each of the  Company,  on the  one  hand,  and the  Investor  and/or  any  other
Indemnified  Party, on the other hand, shall select one (1) member and the third
member  shall be selected by mutual  agreement of the other  members,  or if the
other members fail to reach  agreement on a third member within twenty (20) days
after their  selection,  such third member shall  thereafter  be selected by the
American Arbitration Association upon application made to it for such purpose by
the other members.  The Board of Arbitration shall meet on consecutive  business
days in Los  Angeles or such other  place as a  majority  of the  members of the
Board of Arbitration  determines more appropriate,  and shall reach and render a
decision in writing  (concurred  in by a majority of the members of the Board of
Arbitration).   In  connection  with  rendering  its  decision,   the  Board  of
Arbitration  shall adopt and follow such rules and procedures,  as a majority of

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the members of the Board of Arbitration  deems necessary or appropriate.  To the
extent  practicable,  decisions of the Board of Arbitration shall be rendered no
more than thirty (30) calendar days following  commencement of proceedings  with
respect thereto. The Board of Arbitration shall cause its written decision to be
delivered to the Company and the Investor  and/or any other  Indemnified  Party.
Any  decision  made by the Board of  Arbitration  (either  prior to or after the
expiration of such thirty (30) calendar day period) shall be final,  binding and
conclusive on the Company and the Investor  and/or any other  Indemnified  Party
and entitled to be enforced to the fullest  extent  permitted by law and entered
in  any  court  of  competent  jurisdiction.  The  non-prevailing  party  to any
arbitration  shall  bear  the  expense  of both  parties  in  relation  thereto,
including  but not limited to the  parties'  attorneys'  fees,  if any,  and the
expenses and fees of the Board of Arbitration.

                            ARTICLE X: MISCELLANEOUS

Section  10.1......TRANSACTION  COSTS.  Each party shall bear its own legal fees
and other out of pocket costs in connecting  with the  negotiation and execution
of this  Agreement.  The Company agrees to pay its own expenses  incident to the
performance of its  obligations  hereunder,  including,  but not limited to, any
registration of securities or delivery of documentation.

Section  10.2......REPORTING  ENTITY FOR THE COMMON STOCK.  The reporting entity
relied upon for the  determination of the trading price or trading volume of the
Common Stock on the  Principal  Market on any given Trading Day for the purposes
of this Agreement shall be the OTC Bulletin Board/ Bloomberg. The written mutual
consent of the  Investor  and the Company  shall be required to employ any other
reporting entity.

Section  10.3......BROKERAGE.  Each of the parties hereto represents that it has
had no dealings in connection with this  transaction  with any finder or broker,
which would impose a legal obligation to pay any fee or commission.  The Company
on the one hand,  and the  Investor,  on the other hand,  agree to indemnify the
other against and hold the other  harmless from any and all  liabilities  to any
persons claiming  brokerage  commissions or finder's fees on account of services
purported  to  have  been  rendered  on  behalf  of the  indemnifying  party  in
connection with this Agreement or the transactions contemplated hereby.

Section 10.4......NOTICES.  All notices, demands, requests, consents, approvals,
and other  communications  required or permitted  hereunder  shall be in writing
and, unless otherwise  specified herein,  shall be (i) personally  served,  (ii)
deposited  in the mail,  registered  or  certified,  return  receipt  requested,
postage  prepaid,  (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other  address as such party shall have  specified
most  recently by written  notice given in  accordance  herewith.  Any notice or
other communication  required or permitted to be given hereunder shall be deemed
effective  (a) upon hand  delivery  or  delivery  by  facsimile,  with  accurate
confirmation  generated by the transmitting facsimile machine, at the address or
number  designated  below (if delivered on a business day during normal business
hours where such notice is to be received),  or the first business day following


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<PAGE>

such delivery (if delivered  other than on a business day during normal business
hours where such notice is to be  received)  or (b) on the second  business  day
following  the date of  mailing  by  express  courier  service,  fully  prepaid,
addressed to such address,  or upon actual  receipt of such  mailing,  whichever
shall first occur. The addresses for such communications shall be:

                  If to the Company:

                         FAMOUS  FIXINS,  INC.


                                                                       EXHIBIT A

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

                  No. 1                                                $500,000
                               FAMOUS FIXINS, INC.
                            10% CONVERTIBLE DEBENTURE
                              DUE DECEMBER 27, 2005

                  THIS  DEBENTURE is issued by Famous  Fixins,  Inc., a New York
                  Corporation,  with its  principal  place of  business  at 1325
                  Howard Avenue, Suite #422,  Burlingame,  California 94010 (the
                  "Company"),  designated as its 10% Convertible Debenture,  due
                  December 27, 2005, in the aggregate  principal  amount of Five
                  Hundred Thousand Dollars ($500,000) (the "Debenture").
                  FOR VALUE  RECEIVED,  the Company  promises to pay to MERCATOR
                  MOMENTUM FUND, L.P. or its registered  assigns (the "Holder"),
                  the  principal  sum of $500,000,  on December 27, 2005 or such
                  earlier  date as the  Debenture is required or permitted to be
                  repaid as provided  hereunder (the "Maturity Date") and to pay
                  interest to the Holder on the aggregate  unconverted  and then
                  outstanding  principal amount of this Debenture at the rate of
                  10% per annum, with interest  accruing  commencing on December
                  30, 2002 and payable on the first  business  day of each month
                  while the  Debenture  remains  outstanding  (each an "Interest
                  Payment Date'").  Subject to the terms and conditions  herein,
                  the Holder may elect to receive  interest  hereunder in shares
                  of  Common  Stock or cash.  If the  Company  in  shares of its
                  Common  Stock  pays  interest,  then the  number  of shares of
                  Common Stock  issuable on account of such interest shall equal
                  the cash amount of such interest on such Interest Payment Date
                  divided by the  Conversion  Price (as  defined  below) on such
                  date.  Interest  shall be calculated on the basis on a 360-day
                  year and shall accrue daily  commencing on the Original  Issue
                  Date (as  defined in  Section 5) until  payment in full of the
                  principal sum,  together with all accrued and unpaid  interest
                  and other amounts,  which may become due  hereunder,  has been
                  made.  Interest  hereunder  will  be paid  to the  Person  (as
                  defined  in  Section  5)  in  whose  name  this  Debenture  is


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<PAGE>

                  registered   on  the   records   of  the   Company   regarding
                  registration  and  transfers  of  Debentures  (the  "Debenture
                  Register"). All overdue accrued and unpaid interest to be paid
                  in cash  hereunder  shall entail a late fee at the rate of 10%
                  per  annum  ("Late  Fee")  (or such  lower  maximum  amount of
                  interest  permitted to be charged under  applicable law) which
                  will  accrue  daily,  from  the  date  such  interest  is  due
                  hereunder  through and including the date of payment,  payable
                  in cash or, at the option of the  Holder,  in shares of Common
                  Stock.  If the Company in shares of its Common Stock pays such
                  Late Fee,  then the number of shares of Common Stock  issuable
                  on  account  of such Late Fee shall  equal the cash  amount of
                  such Late Fee on such Late Fee  payment  date  divided  by the
                  Conversion Price on such date.
         This Debenture is subject to the following additional provisions:

         SECTION  1.  This  Debenture  is  exchangeable  for an equal  aggregate
principal  amount  of  Debentures  of  different  authorized  denominations,  as
requested by the Holder  surrendering  the same. No service  charge will be made
for such registration of transfer or exchange.

         SECTION 2. This Debenture has been issued subject to certain investment
representations  of the original Holder set forth in the Purchase  Agreement (as
defined in Section 5) and may be  transferred  or exchanged  only in  compliance
with  the  Purchase  Agreement.  Prior to due  presentment  to the  Company  for
transfer of this  Debenture,  the Company and any agent of the Company may treat
the Person (as  defined  in  Section  5) in whose  name this  Debenture  is duly
registered  on the  Debenture  Register  as the owner  hereof for the purpose of
receiving payment as herein provided and for all other purposes,  whether or not
this  Debenture is overdue,  and neither the Company nor any such agent shall be
affected by notice to the contrary.

         SECTION 3.        EVENTS OF DEFAULT.
         ---------         -----------------

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

(i) any default in the payment of the principal of, interest (including any Late
Fees) on or liquidated damages in respect of the Debenture, free of any claim of
subordination,  as and when the same shall become due and payable  (whether on a
Conversion Date or the Maturity Date or by acceleration or otherwise);

(ii) failure to file the Underlying Shares Registration Statement within 60 Days
with the Commission;

(iii) the Company shall fail to observe or perform any other covenant, agreement
or  warranty  contained  in,  or  otherwise  commit  any  breach  of  any of the
Transaction  Documents  (as  defined in Section  5), and such  failure or breach
shall not have been remedied  within five days after the date on which notice of
such failure or breach shall have been given;

(iv) the Company or any of its  subsidiaries  shall commence,  or there shall be
commenced against the Company or any such subsidiary a case under any applicable
bankruptcy  or  insolvency  laws as now or hereafter in effect or any  successor
thereto, or the Company commences any other proceeding under any reorganization,
arrangement,  adjustment of debt, relief of debtors, dissolution,  insolvency or
liquidation  or similar  law of any  jurisdiction  whether now or  hereafter  in
effect  relating to the Company or any subsidiary  thereof or there is commenced
against the Company or any subsidiary thereof any such bankruptcy, insolvency or
other  proceeding  which  remains  undismissed  for a period of 61 days;  or the
Company or any subsidiary thereof is adjudicated  insolvent or bankrupt;  or any
order of relief or other order approving any such case or proceeding is entered;
or  the  Company  or any  subsidiary  thereof  suffers  any  appointment  of any


                                       53
<PAGE>

custodian  or the  like for it or any  substantial  part of its  property  which
continues  undischarged  or unstayed for a period of 61 days;  or the Company or
any subsidiary  thereof makes a general assignment for the benefit of creditors;
or the  Company  shall fail to pay,  or shall state that it is unable to pay, or
shall be unable to pay,  its debts  generally as they become due; or the Company
or any  subsidiary  thereof shall call a meeting of its creditors with a view to
arranging  a  composition,  adjustment  or  restructuring  of its debts;  or the
Company or any  subsidiary  thereof shall by any act or failure to act expressly
indicate its consent to, approval of or acquiescence in any of the foregoing; or
any corporate or other action is taken by the Company or any subsidiary  thereof
for the purpose of effecting any of the foregoing;

(v)  the  Company  shall  default  in any of its  obligations  under  any  other
debenture or any mortgage, credit agreement or other facility, (which default is
not waived or otherwise  acquiesced to in writing within 30 of written notice of
such default),  indenture  agreement,  factoring  agreement or other  instrument
under which there may be issued,  or by which there may be secured or  evidenced
any  indebtedness for borrowed money or money due under any long term leasing or
factoring  arrangement of the Company in an amount exceeding  $100,000,  whether
such  indebtedness  now exists or shall  hereafter  be created and such  default
shall  result in such  indebtedness  becoming or being  declared due and payable
prior to the date on which it would otherwise become due and payable;

(vi) the Common  Stock  shall not be quoted for trading or listed for trading on
the OTC Bulletin Board ("OTC'), NASDAQ SmallCap Market, New York Stock Exchange,
American  Stock  Exchange or the NASDAQ  National  Market  (each,  a "Subsequent
Market") and shall not again be quoted or listed for trading thereon within five
Trading Days;

(vii) the  Company  shall be a party to any  Change of Control  Transaction  (as
defined in Section 5), shall agree to sell or dispose all or in excess of 33% of
its  assets  in  one or  more  transactions  (whether  or not  such  sale  would
constitute a Change of Control Transaction),  or shall redeem or repurchase more
than a de minimis number of shares of Common Stock or other equity securities of
the Company (other than redemptions of Underlying  Shares (as defined in Section
5));

(viii) an  Underlying  Shares  Registration  Statement (as defined in Section 5)
shall not have been declared  effective by the Commission (as defined in Section
5) on or prior to the 120th day after the Original Issue Date. The Company shall
use  all  available  resources  to  have  the  Registration  Statement  declared
effective by the SEC on or prior to the 120th day after the Original Issue Date;

(ix) if, during the Effectiveness  Period (as defined in the Registration Rights
Agreement (as defined in Section 5)), the effectiveness of the Underlying Shares
Registration  Statement  lapses  for  any  reason  or the  Holder  shall  not be
permitted  to resell  Registrable  Securities  (as  defined in the  Registration
Rights Agreement) under the Underlying Shares Registration  Statement, in either
case,  for more than five  consecutive  Trading  Days or an  aggregate  of eight
Trading Days (which need not be consecutive Trading Days);

(x) an Event (as defined in the  Registration  Rights  Agreement) shall not have
been cured to the  satisfaction  of the Holder prior to the expiration of thirty
days from the Event  Date (as  defined  in the  Registration  Rights  Agreement)
relating  thereto (other than an Event resulting from a failure of an Underlying
Shares Registration  Statement to be declared effective by the Commission on or,
prior to the 120th day after the Original Issue Date,  which shall be covered by
Section 3(a)(vii));



                                       54
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(xi) the Company shall fail for any reason to deliver common stock  certificates
to a Holder prior to the third  Trading Day after a Conversion  Date pursuant to
and in accordance  with Section 4(b) or the Company shall provide  notice to the
Holder,  including by way of public announcement,  at any time, of its intention
not to comply with requests for conversions of any Debentures in accordance with
the terms hereof; or

(xii) the  Company  shall  fail for any reason to  deliver  the  payment in cash
pursuant  to a Buy-In (as  defined  herein)  within  three days after  notice is
claimed delivered hereunder.

         (b) During the time that any portion of this Debenture is  outstanding,
if any Event of Default occurs and is continuing,  the full principal  amount of
this  Debenture,  together  with  interest  and other  amounts  owing in respect
thereof,  to the date of  acceleration  shall become at the  Holder's  election,
immediately  due and  payable in cash,  provided  however,  that if the  Company
informs the Holder  that it will be unable to pay the  amounts due in cash,  the
Holder  may  request  payment of such  amounts in stock.  If an Event of Default
occurs and remains  uncured,  the price at which the  Debenture may be converted
into shares of Common Stock shall be reduced from 80% of the Conversion Price to
60% 30 days after the  occurrence  of the Event of  Default,  from 60% to 50% 60
days after the  occurrence of the Event of Default,  and from 50% to 40% 90 days
after the  occurrence  of the Event of Default.  The Holder need not provide and
the Company hereby waives any  presentment,  demand,  protest or other notice of
any kind,  and the Holder may  immediately  and without  expiration of any grace
period  enforce any and all of its rights and remedies  hereunder  and all other
remedies available to it under applicable law. Such declaration may be rescinded
and  annulled  by  Holder  at any  time  prior  to  payment  hereunder.  No such
rescission or annulment  shall affect any subsequent  Event of Default or impair
any right consequent thereon.

         SECTION 4.        CONVERSION.
         ---------         ----------

         (a) (i) CONVERSION AT OPTION OF HOLDER.

(A) This  Debenture  shall be  convertible  into  shares of Common  Stock at the
option  of the  Holder,  in whole or in part at any time and from  time to time,
after the Original  Issue Date (subject to the  limitations  on  conversion  set
forth in Section 4(a)(ii) hereof). The number of shares of Common Stock issuable
upon a  conversion  hereunder  equals the sum of (i) the  quotient  obtained  by
dividing (x) the outstanding  principal amount of this Debenture to be converted
by (y) the Conversion  Price (see (c)(i) of this Section 4), and (ii) the amount
equal  to (1)  the  product  of (x) the  outstanding  principal  amount  of this
Debenture  to be converted  and (y) the product of (1) the quotient  obtained by
dividing .10 by 360 and (2) the number of days for which such  principal  amount
was  outstanding,  divided by (II) the Conversion  Price on the Conversion Date,
provided, that if the Holder shall have elected to receive the interest due on a
Conversion Date in cash, subsection (ii) shall not be used in the calculation of
the number of shares of Common Stock issuable upon a conversion hereunder.

(B)  Notwithstanding  anything  to  the  contrary  contained  herein,  if on any
Conversion  Date:  (1)  the  number  of  shares  of  Common  Stock  at the  time
authorized, unissued and unreserved for all purposes, or held as treasury stock,
is  insufficient  to pay  principal  and interest  hereunder in shares of Common


                                       55
<PAGE>

Stock; (2) the Common Stock is not listed or quoted for trading on the OTC or on
a  Subsequent  Market;  (3)  the  Company  has  failed  to  timely  satisfy  its
conversion; or (4) the issuance of such shares of Common Stock would result in a
violation of Section 4(a)(ii),  then, at the option of the Holder,  the Company,
in lieu of delivering shares of Common Stock pursuant to Section 4(a)(i),  shall
deliver, within three Trading Days of each applicable Conversion Date, an amount
in  cash  equal  to the  product  of the  outstanding  principal  amount  of the
Debentures  to be  converted  plus  any  interest  due  therein  divided  by the
Conversion  Price and multiplied by the highest  closing price of the stock from
date of the conversion notice till the date that such cash payment is made.

(C) The Holder shall effect  conversions  by  simultaneously  delivering  to the
Company  a  completed  notice  in the  form  attached  hereto  as  Exhibit  A (a
"Conversion  Notice"),  including a completed Conversion Schedule in the form of
Schedule I to the Conversion  Notice (on each  Conversion  Date, the "Conversion
Schedule").  The  Conversion  Schedule  shall set forth the remaining  principal
amount of this Debenture and all accrued and unpaid interest thereon  subsequent
to the conversion at issue.  The date on which a Conversion  Notice is delivered
is the "Conversion  Date." Unless the Holder is converting the entire  principal
amount  outstanding  under  this  Debenture,  the Holder is not be  required  to
physically   surrender  this  Debenture  to  the  Company  in  order  to  effect
conversions.  Subject to Section 4(b), each Conversion Notice, once given, shall
be  irrevocable.  Conversions  hereunder  shall have the effect of lowering  the
outstanding  principal  amount of this  Debenture  plus all  accrued  and unpaid
interest thereon in an amount equal to the applicable conversion, which shall be
evidenced by entries set forth in the  Conversion  Schedule.  The Holder and the
Company shall maintain  records showing the principal  amount  converted and the
date of such  conversions.  In the  event of any  dispute  or  discrepancy,  the
records of the Holder shall be controlling and  determinative  in the absence of
manifest error.

(ii) CERTAIN CONVERSION RESTRICTIONS.

                           (A) A Holder may not convert the Debenture or receive
shares of Common  Stock as  payment of  interest  hereunder  to the extent  such
conversion  or receipt of such  interest  payment  would  result in the  Holder,
together  with any  affiliate  thereof,  beneficially  owning (as  determined in
accordance  with Section  13(d) of the  Exchange  Act and the rules  promulgated
thereunder)  in excess of 9.999% of the then  issued and  outstanding  shares of
Common  Stock,  including  shares  issuable upon  conversion  of, and payment of
interest  on,  the  Debenture  held by such  Holder  after  application  of this
Section.  Since the Holder  will not be  obligated  to report to the Company the
number  of  shares  of  Common  Stock it may  hold at the  time of a  conversion
hereunder, unless the conversion at issue would result in the issuance of shares
of Common  Stock in excess  of 9.999% of the then  outstanding  shares of Common
Stock without regard to any other shares which may be beneficially  owned by the
Holder  or an  affiliate  thereof,  the  Holder  shall  have the  authority  and
obligation to determine  whether the restriction  contained in this Section will
limit any  particular  conversion  hereunder  and to the extent  that the Holder
determines  that  the  limitation   contained  in  this  Section  applies,   the
determination  of which  portion of the  principal  amount of the  Debenture  is
convertible  shall be the  responsibility  and obligation of the Holder.  If the
Holder has delivered a Conversion Notice for a principal amount of the Debenture
that,  without  regard to any other shares that the Holder or its affiliates may


                                       56
<PAGE>

beneficially own, would result in the issuance in excess of the permitted amount
hereunder,  the Company shall notify the Holder of this fact and shall honor the
conversion for the maximum  principal  amount  permitted to be converted on such
Conversion Date in accordance with the periods described in Section 4(b) and, at
the option of the  Holder,  either  retain any  principal  amount  tendered  for
conversion in excess of the permitted amount hereunder for future conversions or
return  such  excess  principal  amount to the Holder.  The  provisions  of this
Section  may be waived by a Holder  (but only as to itself  and not to any other
Holder) upon not less than 65 days prior notice to the  Company.  Other  Holders
shall be unaffected by any such waiver.

         (b) (i) On the  Original  Issue  Date,  the  Company  shall  provide an
authorization  for the  completion  of an  Issuance  Resolution  (Exhibit B) and
deliver such resolution to both the Holder and the Company's transfer agent.

(ii) Nothing  herein shall limit a Holder's  right to pursue  actual  damages or
declare an Event of  Default  pursuant  to  Section 3 herein  for the  Company's
failure  to  deliver  certificates  representing  shares  of Common  Stock  upon
conversion  within the period  specified  herein and such Holder  shall have the
right to pursue  all  remedies  available  to it at law or in equity  including,
without limitation,  a decree of specific  performance and/or injunctive relief.
The  exercise of any such rights  shall not  prohibit the Holder from seeking to
enforce  damages  pursuant to any other Section hereof or under  applicable law.
Further,  if the  Company  shall not have  delivered  any cash due in respect of
conversion  of the  Debenture  or as  payment of  interest  thereon by the third
Trading Day after the Conversion Date, the Holder may, by notice to the Company,
require the Company to issue  shares of Common Stock  pursuant to Section  4(c),
except that for such purpose the Conversion  Price  applicable  thereto shall be
the lesser of the  Conversion  Price on the  Conversion  Date and the Conversion
Price on the date of such Holder demand.  Any such shares will be subject to the
provisions of this Section.

(iii) In addition to any other rights  available  to the Holder,  if the Company
fails to deliver to the Holder  such  certificate  or  certificates  pursuant to
Section 4(b)(i) by the third Trading Day after the Conversion Date, and if after
such third Trading Day the Holder  purchases (in an open market  transaction  or
otherwise)  Common Stock to deliver in  satisfaction of a sale by such Holder of
the  Underlying  Shares  which  the  Holder  anticipated   receiving  upon  such
conversion  (a  "Buy-In"),  then the Company shall (A) pay in cash to the Holder
(in addition to any  remedies  available to or elected by the Holder) the amount
by which (x) the Holder's total purchase price (including brokerage commissions,
if any) for the Common  Stock so  purchased  exceeds  (y) the product of (1) the
aggregate  number  of  shares  of Common  Stock  that  such  Holder  anticipated
receiving from the conversion at issue multiplied by (2) the market price of the
Common Stock at the time of the sale giving rise to such purchase obligation and
(B) at the option of the Holder,  either  reissue a Debenture  in the  principal
amount equal to the principal  amount of the attempted  conversion or deliver to
the Holder the number of shares of Common  Stock that would have been issued had
the  Company  timely  complied  with its  delivery  requirements  under  Section
4(b)(i).  For  example,  if the Holder  purchases  Common  Stock  having a total
purchase  price of  $11,000  to  cover a Buy-In  with  respect  to an  attempted
conversion  of  Debentures  with  respect  to  which  the  market  price  of the
Underlying  Shares on the date of conversion was a total of $10,000 under clause
(A) of the immediately preceding sentence,  the Company shall be required to pay
the  Holder  $1,000.  The  Holder  shall  provide  the  Company  written  notice
indicating  the  amounts  payable  to the  Holder  in  respect  of  the  Buy-In.
Notwithstanding  anything contained herein to the contrary, if a Holder requires
the  Company to make  payment  in respect of a Buy-In for the  failure to timely
deliver certificates hereunder and the Company timely pays in full such payment,
the Company  shall not be required to pay such Holder  liquidated  damages under
Section 4(b)(ii) in respect of the certificates resulting in such Buy-In.


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<PAGE>

         (c) (i) The conversion price (the "Conversion  Price") in effect on any
Conversion  Date  shall be 85% of the  average  of the  lowest  three  inter-day
trading prices (which need not occur on consecutive  Trading Days) during the 20
Trading Days  immediately  preceding the applicable  Conversion  Date (which may
include Trading Days prior to the Original Issue Date),  provided,  that such 20
Trading Day period  shall be extended for the number of Trading Days during such
period in which (A) trading in the Common Stock is  suspended  by, or not traded
on, the OTC or a Subsequent  Market on which the Common Stock is then listed, or
(B) after the date, the  Underlying  Shares  Registration  Statement is declared
effective by the Commission,  the Prospectus  included in the Underlying  Shares
Registration  Statement  may  not be  used  by the  Holder  for  the  resale  of
Underlying Shares.

(ii) If the Company,  at any time while the Debenture is  outstanding  shall (a)
pay a stock dividend or otherwise make a distribution or distributions on shares
of its Common Stock or any other equity or equity equivalent  securities payable
in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into
a larger number of shares, (c) combine (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or (d) issue
by reclassification of shares of the Common Stock any shares of capital stock of
the Company, then the Initial Conversion Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock  (excluding
treasury  shares,  if any)  outstanding  before  such  event  and of  which  the
denominator shall be the number of shares of Common Stock outstanding after such
event.  Any  adjustment  made  pursuant to this Section  shall become  effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective  immediately
after  the  effective  date  in  the  case  of  a  subdivision,  combination  or
re-classification.

(iii) If the  Company,  at any time while the  Debenture is  outstanding,  shall
issue rights, options or warrants to all holders of Common Stock (and not to the
Holder)  entitling them to subscribe for or purchase shares of Common Stock at a
price  per  share  less  than the Per  Share  Market  Value at the  record  date
mentioned below, then the Conversion Price shall be multiplied by a fraction, of
which  the  denominator  shall be the  number  of  shares  of the  Common  Stock
(excluding  treasury shares, if any) outstanding on the date of issuance of such
rights or warrants (plus the number of additional shares of Common Stock offered
for subscription or purchase), and of which the numerator shall be the number of
shares of the Common Stock (excluding  treasury  shares,  if any) outstanding on
the date of issuance of such rights or warrants, plus the number of shares which
the  aggregate  offering  price of the total  number of shares so offered  would
purchase at such Per Share Market Value.  Such adjustment shall be made whenever
such rights or warrants are issued, and shall become effective immediately after
the record date for the  determination of stockholders  entitled to receive such
rights,  options or warrants.  However,  upon the  expiration of any such right,
option or warrant to purchase  shares of the Common  Stock the issuance of which
resulted in an adjustment in the Conversion  Price pursuant to this Section,  if
any such  right,  option  or  warrant  shall  expire  and  shall  not have  been
exercised,  the  Conversion  Price shall  immediately  upon such  expiration  be
recomputed and effective  immediately  upon such  expiration be increased to the
price  which it would have been (but  reflecting  any other  adjustments  in the


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<PAGE>

Conversion  Price made  pursuant to the  provisions  of this  Section  after the
issuance of such rights or warrants) had the adjustment of the Conversion  Price
made upon the  issuance of such  rights,  options or  warrants  been made on the
basis of offering for subscription or purchase only that number of shares of the
Common Stock  actually  purchased  upon the exercise of such rights,  options or
warrants actually exercised.

(iv) If the Company or any  subsidiary  thereof,  as applicable  with respect to
Common Stock  Equivalents (as defined below), at any time while the Debenture is
outstanding,  shall issue shares of Common Stock or rights, warrants, options or
other securities or debt that are convertible into or exchangeable for shares of
Common Stock ("Common Stock Equivalents") entitling any Person to acquire shares
of Common  Stock,  at a price per share less than the  Conversion  Price (if the
holder of the Common  Stock or Common  Stock  Equivalent  so issued shall at any
time,  whether by operation of purchase  price  adjustments,  reset  provisions,
floating  conversion,  exercise  or  exchange  prices  or  otherwise,  or due to
warrants,  options or rights per share which is issued in  connection  with such
issuance,  be  entitled to receive  shares of Common  Stock at a price per share
which is less than the Conversion  Price,  such issuance shall be deemed to have
occurred for less than the  Conversion  Price),  then, at the sole option of the
Holder,  the  Conversion  Price  shall be  adjusted  to mirror  the  conversion,
exchange or purchase  price for such Common  Stock or Common  Stock  Equivalents
(including any reset provisions thereof) at issue. Such adjustment shall be made
whenever such Common Stock or Common Stock  Equivalents are issued.  The Company
shall  notify  the Holder and the  Escrow  Agent in  writing,  no later than the
business  day  following  the  issuance  of any  Common  Stock or  Common  Stock
Equivalent subject to this section,  indicating therein the applicable  issuance
price, or of applicable reset price, exchange price,  conversion price and other
pricing  terms.  No  adjustment  under this Section shall be made as a result of
issuances and exercises of options to purchase shares of Common Stock issued for
compensatory  purposes  pursuant to any of the  Company's  stock option or stock
purchase plans.

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

(vi) In case of any reclassification of the Common Stock or any compulsory share
exchange  pursuant to which the Common Stock is converted into other securities,
cash or property,  the Holder shall have the right thereafter to, at its option,


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<PAGE>

(A) convert the then outstanding principal amount, together with all accrued but
unpaid  interest and any other  amounts then owing  hereunder in respect of this
Debenture only into the shares of stock and other securities,  cash and property
receivable  upon or deemed to be held by holders of the Common  Stock  following
such  reclassification or share exchange,  and the Holder of the Debenture shall
be  entitled  upon such  event to receive  such  amount of  securities,  cash or
property as the shares of the Common  Stock of the  Company  into which the then
outstanding principal amount,  together with all accrued but unpaid interest and
any other amounts then owing  hereunder in respect of this Debenture  could have
been  converted  immediately  prior to such  reclassification  or share exchange
would have been entitled,  or (B) require the Company to prepay the  outstanding
principal  amount of the Debenture,  plus all interest and other amounts due and
payable  thereon,  at a price  determined in accordance  with Section 3(b).  The
entire  prepayment  price shall be paid in cash.  This provision shall similarly
apply to successive reclassifications or share exchanges.

(vii) The Company  shall  maintain a share  reserve of not less than 200% of the
shares of Common Stock  issuable upon  conversion of the  Debenture;  and within
three  Business Days  following the receipt by the Company of a Holder's  notice
that such minimum  number of Underlying  Shares is not so reserved,  the Company
shall promptly  reserve a sufficient  number of shares of Common Stock to comply
with such requirement.

(viii) All  calculations  under this Section 4 shall be made to the nearest cent
or the nearest  1/100th of a share, as the case may be. No adjustments in either
the Conversion  Price or the Initial  Conversion Price shall be required if such
adjustment is less than $0.01, provided,  however, that any adjustments which by
reason of this Section are not required to be made shall be carried  forward and
taken into account in any subsequent adjustment.

(ix) Whenever  either the Initial  Conversion  Price or the Conversion  Price is
adjusted  pursuant to any of Section  4(c)(ii) - (v), the Company shall promptly
mail to the  Holder a notice  setting  forth  the  Initial  Conversion  Price or
Conversion Price (as applicable) after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.

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


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<PAGE>

or in the mailing thereof shall not affect the validity of the corporate  action
required to be specified  in such notice.  The Holder is entitled to convert the
Debenture  during the 20-day calendar period  commencing the date of such notice
to the effective date of the event triggering such notice.

(xi) In case of any (1)  merger or  consolidation  of the  Company  with or into
another  Person,  or (2) sale by the Company of more than one-half of the assets
of the Company in one or a series of related  transactions,  a Holder shall have
the right to (A)  exercise  any rights  under  Section  3(b),  (B)  convert  the
aggregate  principal amount of the Debenture then outstanding into the shares of
stock and other  securities,  cash and property  receivable upon or deemed to be
held by holders of Common Stock  following such merger,  consolidation  or sale,
and such Holder shall be entitled upon such event or series of related events to
receive  such amount of  securities,  cash and  property as the shares of Common
Stock into which such  aggregate  principal  amount of the Debenture  could have
been converted  immediately  prior to such merger,  consolidation or sales would
have been entitled, or (C) in the case of a merger or consolidation, require the
surviving entity to issue to the Holder a convertible debenture with a principal
amount equal to the aggregate  principal  amount of the  Debenture  then held by
such  Holder,  plus all  accrued and unpaid  interest  and other  amounts  owing
thereon,  which  such  newly  issued  convertible  debenture  shall  have  terms
identical (including with respect to conversion) to the terms of this Debenture,
and shall be entitled to all of the rights and  privileges  of the Holder of the
Debenture set forth herein and the  agreements  pursuant to which the Debentures
were issued.  In the case of clause (C), the conversion price applicable for the
newly issued shares of convertible  preferred  stock or  convertible  debentures
shall be based upon the amount of securities,  cash and property that each share
of Common Stock would receive in such  transaction  and the Conversion  Price in
effect  immediately  prior  to  the  effectiveness  or  closing  date  for  such
transaction.  The terms of any such merger,  sale or consolidation shall include
such  terms so as to  continue  to give the  Holder  the  right to  receive  the
securities,  cash and property set forth in this Section upon any  conversion or
redemption  following  such  event.  This  provision  shall  similarly  apply to
successive such events.

         (d) The Company  covenants  that it will at all times  reserve and keep
available out of its authorized  and unissued  shares of Common Stock solely for
the purpose of issuance upon conversion of the Debenture and payment of interest
on the Debenture,  each as herein provided,  free from preemptive  rights or any
other actual  contingent  purchase rights of persons other than the Holder,  not
less than such  number of shares of the Common  Stock as shall  (subject  to any
additional  requirements  of the  Company as to  reservation  of such shares set
forth in the  Debenture) be issuable  (taking into account the  adjustments  and
restrictions  of Section4(b))  upon the conversion of the outstanding  principal
amount of the Debenture and payment of interest hereunder. The Company covenants


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<PAGE>

that all shares of Common Stock that shall be so issuable shall,  upon issue, be
duly and validly  authorized,  issued and fully paid,  nonassessable and, if the
Underlying Shares  Registration  Statement has been declared effective under the
Securities  Act,  registered for public sale in accordance  with such Underlying
Shares Registration Statement.

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

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

         (g) Any and all notices or other  communications  or  deliveries  to be
provided by the Holder hereunder,  including, without limitation, any Conversion
Notice, shall be in writing and delivered  personally,  by facsimile,  sent by a
nationally  recognized  overnight  courier  service  or  sent  by  certified  or
registered  mail,  postage  prepaid,  addressed to the  Company,  at 1325 Howard
Avenue,  Suite #422,  Burlingame,  California  94010,  or such other  address or
facsimile  number as the Company may specify for such  purposes by notice to the
Holders  delivered in accordance  with this Section,  with a copy to (other than
for Conversion  Notices)  Naccarato & Associates,  19600  Fairchild,  Suite 260,
Irvine, CA 92618 Telephone No.: 949.851.9261,  Facsimile No.: 949.851.9262 Attn:
Owen Naccarato.  Any and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and delivered  personally,
by facsimile,  sent by a nationally recognized overnight courier service or sent
by certified or registered mail,  postage  prepaid,  addressed to each Holder at
the facsimile  telephone number or address of such Holder appearing on the books
of the Company,  or if no such facsimile telephone number or address appears, at
the principal place of business of the Holder. Any notice or other communication
or deliveries  hereunder  shall be deemed given and effective on the earliest of
(i) the date of  transmission,  if such notice or communication is delivered via
facsimile at the facsimile  telephone  number specified in this Section prior to
5:00 p.m. (New York City time), (ii) the date after the date of transmission, if
such  notice or  communication  is  delivered  via  facsimile  at the  facsimile
telephone  number  specified in this Section later than 5:00 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) four days after deposit in the United  States mail,  (iv) the Business Day
following  the  date of  mailing,  if sent by  nationally  recognized  overnight
courier service,  or (v) upon actual receipt by the party to whom such notice is
required to be given.

         SECTION 5.        DEFINITIONS.  For the purposes hereof, the
following terms shall have the following meanings:


         "Business Day" means any day except Saturday,  Sunday and any day which
shall be a federal  legal holiday in the United States or a day on which banking
institutions  are  authorized or required by law or other  government  action to
close.

         "Change  of  Control  Transaction"  means  the  occurrence  of  (a)  an
acquisition  after the date hereof by an  individual  or legal entity or "group"
(as  described  in Rule  13d-5(b)(1)  promulgated  under  the  Exchange  Act) of


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<PAGE>

effective  control  (whether  through legal or  beneficial  ownership of capital
stock of the  Company,  by  contract  or  otherwise)  of in excess of 33% of the
voting securities of the Company,  (b) a replacement at one time or over time of
more than one-half of the members of the Company's  board of directors  which is
not approved by a majority of those  individuals who are members of the board of
directors on the date hereof (or by those individuals who are serving as members
of the board of directors on any date whose nomination to the board of directors
was  approved  by a majority of the  members of the board of  directors  who are
members on the date  hereof),  (c) the merger,  consolidation  or sale of 50% or
more of the assets of the  Company  in one or a series of  related  transactions
with or into another entity that is not wholly-owned by the Company,  or (d) the
execution  by the Company of an  agreement to which the Company is a party or by
which it is bound,  providing  for any of the events set forth above in (a), (b)
or (c).

         "Commission" means the Securities and Exchange Commission.

         "Common Stock" means the common stock,  $0.001 par value per share,  of
the Company and stock of any other class into which such shares may hereafter be
changed or reclassified.

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

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

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

         "Purchase  Agreement"  means  this  Secured  Convertible  Debenture  in
combination  with the Term Sheet,  dated  December 27, 2002 to which the Company
and the original Holder are parties,  as amended,  modified or supplemented from
time to time in accordance with its terms.

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

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

         "Trading  Day" means (a) a day on which the shares of Common  Stock are
traded on the OTC or on such  Subsequent  Market  on which the  shares of Common
Stock are then  listed or quoted,  or (b) if the shares of Common  Stock are not
listed on a  Subsequent  Market,  a day on which the shares of Common  Stock are
traded in the  over-the-counter  market,  as  reported by the OTC, or (c) if the
shares of Common  Stock are not  quoted on the OTC, a day on which the shares of
Common  Stock are  quoted in the  over-the-counter  market  as  reported  by the
National  Quotation Bureau  Incorporated (or any similar  organization or agency
succeeding its functions of reporting prices);  provided, that in the event that


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<PAGE>

the shares of Common Stock are not listed or quoted as set forth in (a), (b) and
(c) hereof, then Trading Day shall mean any day except a Business Day.

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

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

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

         SECTION 6. Except as expressly  provided  herein,  no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional,  to pay the principal of, interest and liquidated damages (if
any) on,  this  Debenture  at the  time,  place,  and  rate,  and in the coin or
currency,  herein  prescribed.  This  Debenture  is a direct  obligation  of the
Company.  This  Debenture  ranks  pari passu  with all other  Debentures  now or
hereafter  issued under the terms set forth herein.  As long as the Debenture is
outstanding,  the  Company  shall not and shall  cause it  subsidiaries  not to,
without the consent of the Holder,  (i) amend its certificate of  incorporation,
bylaws or other  charter  documents so as to adversely  affect any rights of the
Holder;  (ii)  repay,  repurchase  or offer to repay,  repurchase  or  otherwise
acquire shares of its Common Stock or other equity  securities  other than as to
the Underlying  Shares to the extent permitted or required under the Transaction
Documents;  or  (iii)  enter  into  any  agreement  with  respect  to any of the
foregoing.  The Company may only  voluntarily  prepay the outstanding  principal
amount on the Debentures.

         SECTION 7. This  Debenture  shall not  entitle the Holder to any of the
rights of a stockholder of the Company,  including without limitation, the right
to vote, to receive dividends and other distributions,  or to receive any notice
of, or to attend,  meetings  of  stockholders  or any other  proceedings  of the
Company,  unless  and to the extent  converted  into  shares of Common  Stock in
accordance with the terms hereof.

         SECTION 8. If this Debenture is mutilated,  lost,  stolen or destroyed,
the Company shall execute and deliver, in exchange and substitution for and upon
cancellation of the mutilated Debenture,  or in lieu of or in substitution for a
lost, stolen or destroyed debenture, a new Debenture for the principal amount of
this Debenture so mutilated,  lost, stolen or destroyed but only upon receipt of
evidence  of such  loss,  theft or  destruction  of such  Debenture,  and of the
ownership hereof, and indemnity,  if requested,  all reasonably  satisfactory to
the Company.

         SECTION 9. No  indebtedness  of the Company is senior to this Debenture
in  right  of  payment,  whether  with  respect  to  interest,  damages  or upon
liquidation  or  dissolution  or  otherwise.  The Company  will not and will not
permit any of its subsidiaries to, directly or indirectly,  enter into,  create,
incur,  assume  or  suffer to exist  any  indebtedness  of any kind,  on or with
respect to any of its property or assets now owned or hereafter  acquired or any
interest  therein  or any  income or  profits  there  from that is senior in any


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<PAGE>

respect to the Company's obligations under the Debenture.

         SECTION  10. This  Debenture  shall be  governed  by and  construed  in
accordance  with the laws of the State of  California,  without giving effect to
conflicts of laws thereof.  The Company and the Holder hereby irrevocably submit
to the exclusive  jurisdiction  of the state and federal  courts  sitting in the
City of Los  Angeles,  for  the  adjudication  of any  dispute  hereunder  or in
connection  herewith or with any  transaction  contemplated  hereby or discussed
herein,  and  hereby  irrevocably  waive,  and  agree not to assert in any suit,
action  or  proceeding,  any  claim  that it is not  personally  subject  to the
jurisdiction  of any such  court,  or that such suit,  action or  proceeding  is
improper.  Each of the Company and the Holder hereby  irrevocably waive personal
service of process and consents to process being served in any such suit, action
or  proceeding by receiving a copy thereof sent to the Company at the address in
effect for  notices to it under this  instrument  and agrees  that such  service
shall  constitute  good and  sufficient  service of process and notice  thereof.
Nothing  contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. Nothing contained herein shall be deemed
to limit in any way any right to serve  process in any manner  permitted by law.
Each party  irrevocably  waives,  to the fullest extent  permitted by applicable
law, any and all right to trial by jury in any legal  proceeding  arising out of
or relating to this Agreement or the transactions contemplated hereby. If either
party shall  commence an action or  proceeding  to enforce any  provisions  of a
Transaction  Document,  then the  prevailing  party in such action or proceeding
shall be reimbursed by the other party for its'  attorneys  fees and other costs
and expenses  incurred with the  investigation,  preparation  and prosecution of
such action or proceeding.

         SECTION  11. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture  shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this  Debenture.  The failure of the Company or the Holder to insist upon strict
adherence to any term of this  Debenture on one or more  occasions  shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict  adherence to that term or any other term of this  Debenture.  Any waiver
must be in writing.

         SECTION 12. If any provision of this  Debenture is invalid,  illegal or
unenforceable,  the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance,  it shall  nevertheless
remain applicable to all other persons and  circumstances.  If it shall be found
that any interest or other amount deemed  interest due hereunder  should violate
applicable laws governing  usury,  the applicable rate of interest due hereunder
shall  automatically be lowered to equal the maximum permitted rate of interest.
The Company  covenants  (to the extent that it may lawfully do so) that it shall
not at any time insist upon,  plead, or in any manner  whatsoever  claim or take
the benefit or advantage of, any stay, extension or usury law or other law which
would  prohibit  or forgive  the  Company  from paying all or any portion of the
principal  of or interest on the  Debenture  as  contemplated  herein,  wherever
enacted,  now or at any time  hereafter  in  force,  or  which  may  affect  the
covenants or the performance of this  indenture,  and the Company (to the extent
it may lawfully do so) hereby  expressly waives all benefits or advantage of any


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<PAGE>

such law,  and  covenants  that it will not, by resort to any such law,  hinder,
delay or impeded the  execution of any power herein  granted to the Holder,  but
will  suffer and permit  the  execution  of every such as though no such law has
been enacted.

         SECTION 13. Whenever any payment or other obligation hereunder shall be
due on a day other than a Business  Day,  such payment shall be made on the next
succeeding Business Day.

         SECTION  14.  The  payment  obligations  under this  Debenture  and the
obligations  of the Company to the Holder  arising upon the conversion of all or
any of the  Debentures  in  accordance  with the  provisions  hereof are secured
pursuant to the Security Agreement (as defined in the Purchase Agreement).

         SECTION 15. The  contents of this  DEBENTURE  shall be kept in complete
confidence by the Holder,  the Company,  and each of the affiliates,  directors,
officers, employees and agents of the Company, and dissemination of the contents
of this  DEBENTURE or knowledge of its existence and related  information  shall
only  be to  those  persons  as  absolutely  necessary,  or as  required  by any
governmental agencies, including the Commission, pursuant to the Registration of
the Debenture.

         IN WITNESS WHEREOF, the Company has caused this 10% Secured Convertible
Debenture to be duly executed by a duly authorized  officer as of the date first
above indicated.

                                 By: The Company

                                   Famous Fixins, Inc.

                                       /s/ Michael Rudolph
                                   By:
                                        ---------------------------
                                   Name:  Michael Rudolph
                                   Title:   Chief Executive Officer



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<PAGE>


EXHIBIT A

                              NOTICE OF CONVERSION

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

The undersigned  hereby elects to convert the attached  Debenture into shares of
common stock, $0.001 par value per share (the "Common Stock"), of Famous Fixins,
Inc. (the "Company")  according to the conditions hereof, as of the date written
below.  If  shares  are to be  issued  in the  name of a person  other  than the
undersigned,  the  undersigned  will pay all transfer taxes payable with respect
thereto and is delivering  herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith.  No fee will be charged to the
holder for any conversion, except for such transfer taxes, if any.

Conversion calculations:            _______________________________________
                                            Date to Effect Conversion


                                    ---------------------------------------
                 Principal Amount of Debentures to be Converted

                       Payment of Interest in Kind |_| Yes
                                                   |_| No

         If yes, $ _______          of Interest Accrued on
                                    Account of Conversion at
                                    Issue

---------------------------------------
Number of shares of Common Stock to be Issued

---------------------------------------
Applicable Conversion Price

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

---------------------------------------
Name

---------------------------------------
Address


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<PAGE>


                                   SCHEDULE 1

                               CONVERSION SCHEDULE

                               FAMOUS FIXINS, INC.

                  10% Secured  Convertible  Debenture  due December 27, 2005, in
                  the aggregate  principal  amount of $500,000  issued by FAMOUS
                  FIXINS,  INC. This Conversion  Schedule  reflects  conversions
                  made under Section 4(a)(i) of the above referenced Debenture.
                                     Dated:
<TABLE>
<CAPTION>
<S>                            <C>                     <C>                    <C>                      <C>
======================== ====================== ====================== ====================== ======================
                                                 Aggregate Principal
                                                  Amount Remaining
  Date of Conversion                                Subsequent to
 (or for first entry,                                Conversion
 Original Issue Date)    Amount of Conversion       (or original          Company Attest
                                                  Principal Amount)
------------------------ ---------------------- ---------------------- ---------------------- ----------------------

</TABLE>



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