Exhibit 10.40

         THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
         UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE
         SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
         AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT,
         OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR
         OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS THAT REGISTRATION IS NOT
         REQUIRED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144 OR
         REGULATION S UNDER SAID ACT.



                          SECURED CONVERTIBLE DEBENTURE

Hempstead, New York
July 18, 2003                                                           $50,000

               FOR VALUE RECEIVED, TORBAY HOLDINGS, INC., a Delaware corporation
(hereinafter called the "Borrower"),  hereby promises to pay to the order of AJW
Partners,  LLC or registered  assigns (the  "Holder") the sum of Fifty  Thousand
Dollars  ($50,000),  on July 18, 2004 (the "Maturity Date"), and to pay interest
on the unpaid  principal  balance hereof at the rate of twelve percent (12%) per
annum from July 18,  2003 (the  "Issue  Date")  until the same  becomes  due and
payable, whether at maturity or upon acceleration or by prepayment or otherwise.
Any amount of principal or interest on this Debenture which is not paid when due
shall bear interest at the rate of fifteen  percent (15%) per annum from the due
date  thereof  until  the  same is paid  ("Default  Interest").  Interest  shall
commence accruing on the issue date, shall be computed on the basis of a 365-day
year and the actual  number of days elapsed and shall be payable,  at the option
of the Holder,  either quarterly on March 31, June 30, September 30 and December
31 of each year beginning on September 30, 2003, or at the time of conversion of
the principal to which such interest relates in accordance with Article I below.
All payments  due  hereunder  (to the extent not  converted  into common  stock,
$.0001 par value per share,  of the Borrower (the "Common  Stock") in accordance
with the terms  hereof)  shall be made in lawful  money of the United  States of
America  or, at the  option  of the  Holder,  in whole or in part,  in shares of
Common Stock of the Borrower valued at the then applicable  Conversion Price (as
defined herein).  All payments shall be made at such address as the Holder shall
hereafter  give to the Borrower by written  notice made in  accordance  with the
provisions  of this  Debenture.  Whenever any amount  expressed to be due by the
terms of this  Debenture is due on any day which is not a business day, the same
shall instead be due on the next  succeeding day which is a business day and, in
the case of any  interest  payment  date  which  is not the  date on which  this
Debenture is paid in full,  the  extension of the due date thereof  shall not be
taken into  account for  purposes of  determining  the amount of interest due on
such date. As used in this Debenture, the term "business day" shall mean any day
other than a Saturday,  Sunday or a day on which



<PAGE>


commercial banks in the city of New York, New York are authorized or required by
law or executive order to remain closed.  Each capitalized term used herein, and
not otherwise  defined,  shall have the meaning ascribed thereto in that certain
Securities  Purchase  Agreement,  dated April 16,  2003,  pursuant to which this
Debenture was originally issued (the "Purchase Agreement").

               This  Debenture  is  free  from  all  taxes,  liens,  claims  and
encumbrances  with  respect  to the issue  thereof  and shall not be  subject to
preemptive  rights or other similar rights of  stockholders  of the Borrower and
will not impose personal  liability upon the holder thereof.  The obligations of
the Borrower  under this  Debenture  shall be secured by that  certain  Security
Agreement  dated  by and  between  the  Borrower  and the  Holder  of even  date
herewith.

               The following terms shall apply to this Debenture:

                          ARTICLE I. CONVERSION RIGHTS

               1.1 Conversion  Right.  Subject to the  Stockholder  Approval (as
defined in Section  4(1) of the Purchase  Agreement),  the Holder shall have the
right from time to time,  and at any time on or prior to the  earlier of (i) the
Maturity Date and (ii) the date of payment of the Default  Amount (as defined in
Article III) pursuant to Section 1.6(a) or Article III, the Optional  Prepayment
Amount (as defined in Section 5.1 or any payments  pursuant to Section 1.7, each
in respect of the remaining  outstanding  principal  amount of this Debenture to
convert all or any part of the outstanding and unpaid  principal  amount of this
Debenture  into fully paid and  non-assessable  shares of Common Stock,  as such
Common Stock exists on the Issue Date,  or any shares of capital  stock or other
securities  of the  Borrower  into which such Common  Stock shall  hereafter  be
changed  or  reclassified  at the  conversion  price  (the  "Conversion  Price")
determined as provided herein (a "Conversion");  provided,  however,  that in no
event shall the Holder be entitled to convert any portion of this  Debenture  in
excess of that portion of this Debenture upon conversion of which the sum of (1)
the number of shares of Common  Stock  beneficially  owned by the Holder and its
affiliates  (other than shares of Common Stock which may be deemed  beneficially
owned through the ownership of the unconverted  portion of the Debentures or the
unexercised  or  unconverted  portion  of any  other  security  of the  Borrower
(including,  without limitation, the warrants issued by the Borrower pursuant to
the  Purchase  Agreement)  subject to a  limitation  on  conversion  or exercise
analogous to the limitations  contained  herein) and (2) the number of shares of
Common Stock  issuable upon the conversion of the portion of this Debenture with
respect to which the  determination  of this proviso is being made, would result
in  beneficial  ownership by the Holder and its  affiliates of more than 4.9% of
the  outstanding  shares of Common  Stock.  For  purposes  of the proviso to the
immediately  preceding  sentence,  beneficial  ownership  shall be determined in
accordance  with  Section  13(d) of the  Securities  Exchange  Act of  1934,  as
amended,  and  Regulations  13D-G  thereunder,  except as otherwise  provided in
clause  (1) of  such  proviso.  The  Holder  of this  Debenture  may  waive  the
limitations  set forth  herein by  sixty-one  (61)  days  written  notice to the
Company.  The number of shares of Common Stock to be issued upon each conversion
of this  Debenture  shall be  determined by dividing the  Conversion  Amount (as
defined  below) by the  applicable  Conversion  Price then in effect on the date
specified in the notice of conversion,  in the form attached hereto as Exhibit A
(the  "Notice  of  Conversion"),  delivered  to the  Borrower  by the  Holder in




                                       2
<PAGE>


accordance  with Section 1.4 below;  provided  that the Notice of  Conversion is
submitted by facsimile (or by other means  resulting in, or reasonably  expected
to result in, notice) to the Borrower  before 6:00 p.m., New York, New York time
on such conversion date (the "Conversion  Date").  The term "Conversion  Amount"
means,  with respect to any  conversion  of this  Debenture,  the sum of (1) the
principal  amount of this Debenture to be converted in such  conversion plus (2)
accrued and unpaid  interest,  if any, on such principal  amount at the interest
rates  provided  in this  Debenture  to the  Conversion  Date  plus (3)  Default
Interest,  if any,  on the  amounts  referred  to in the  immediately  preceding
clauses (1) and/or (2) plus (4) at the Holder's option,  any amounts owed to the
Holder pursuant to Sections 1.3 and 1.4(g) hereof or pursuant to Section 2(c) of
that certain Registration Rights Agreement, dated as of April 16, 2003, executed
in  connection  with  the  initial  issuance  of this  Debenture  and the  other
Debentures issued on the Issue Date (the "Registration Rights Agreement").

               1.2 CONVERSION PRICE.

               (a) Calculation of Conversion  Price.  The Conversion Price shall
be the lesser of (i) the Variable  Conversion Price (as defined herein) and (ii)
the Fixed  Conversion  Price (as  defined  herein)  (subject,  in each case,  to
equitable  adjustments for stock splits,  stock dividends or rights offerings by
the Borrower  relating to the  Borrower's  securities  or the  securities of any
subsidiary of the Borrower, combinations,  recapitalization,  reclassifications,
extraordinary distributions and similar events). The "Variable Conversion Price"
shall mean the  Applicable  Percentage  (as defined  herein)  multiplied  by the
Market Price (as defined herein). "Market Price" means the average of the lowest
three (3) Trading  Prices (as  defined  below) for the Common  Stock  during the
twenty  (20)  Trading  Day period  ending one  Trading Day prior to the date the
Conversion  Notice is sent by the  Holder to the  Borrower  via  facsimile  (the
"Conversion Date").  "Trading Price" means, for any security as of any date, the
intraday trading price on the  Over-the-Counter  Bulletin Board (the "OTCBB") as
reported by a reliable  reporting  service mutually  acceptable to and hereafter
designated  by Holders of a  majority  in  interest  of the  Debentures  and the
Borrower or, if the OTCBB is not the principal trading market for such security,
the intraday trading price of such security on the principal securities exchange
or trading  market  where such  security  is listed or traded or, if no intraday
trading price of such security is available in any of the foregoing manners, the
average of the intraday  trading  prices of any market  makers for such security
that are listed in the "pink sheets" by the National  Quotation Bureau,  Inc. If
the Trading  Price cannot be  calculated  for such  security on such date in the
manner  provided  above,  the Trading  Price  shall be the fair market  value as
mutually determined by the Borrower and the holders of a majority in interest of
the Debentures being converted for which the calculation of the Trading Price is
required in order to determine the Conversion Price of such Debentures. "Trading
Day"  shall mean any day on which the Common  Stock is  actually  traded for any
period on the OTCBB, or on the principal securities exchange or other securities
market on which the Common Stock is then being traded.  "Applicable  Percentage"
shall mean 50.0%. The "Fixed Conversion Price" shall mean $.05.

               (b) Conversion Price During Major Announcements.  Notwithstanding
anything contained in Section 1.2(a) to the contrary,  in the event the Borrower
(i) makes a public announcement that it intends to consolidate or merge with any
other corporation (other than a merger in which the Borrower is the surviving or
continuing  corporation  and its capital stock is unchanged) or sell or transfer
all or substantially all of the



                                        3
<PAGE>



assets  of the  Borrower  or (ii) any  person,  group or entity  (including  the
Borrower)  publicly  announces  a tender  offer to  purchase  50% or more of the
Borrower's  Common  Stock  (or  any  other  takeover  scheme)  (the  date of the
announcement referred to in clause (i) or (ii) is hereinafter referred to as the
"Announcement  Date"),  then the  Conversion  Price  shall,  effective  upon the
Announcement  Date  and  continuing   through  the  Adjusted   Conversion  Price
Termination Date (as defined below), be equal to the lower of (x) the Conversion
Price  which  would  have been  applicable  for a  Conversion  occurring  on the
Announcement  Date and (y) the  Conversion  Price  that  would  otherwise  be in
effect.  From and after the Adjusted  Conversion  Price  Termination  Date,  the
Conversion  Price shall be determined as set forth in this Section  1.2(a).  For
purposes hereof,  "Adjusted  Conversion Price Termination Date" shall mean, with
respect to any proposed  transaction  or tender  offer (or takeover  scheme) for
which a public  announcement  as  contemplated  by this Section  1.2(b) has been
made,  the date upon which the Borrower (in the case of clause (i) above) or the
person,  group or  entity  (in the case of clause  (ii)  above)  consummates  or
publicly announces the termination or abandonment of the proposed transaction or
tender offer (or  takeover  scheme)  which caused this Section  1.2(b) to become
operative.

               1.3 Authorized  Shares.  Subject to the Stockholder  Approval (as
defined in Section 4(1) of the Purchase Agreement),  the Borrower covenants that
during the period the  conversion  right exists,  the Borrower will reserve from
its authorized  and unissued  Common Stock a sufficient  number of shares,  free
from  preemptive  rights,  to provide for the  issuance of Common Stock upon the
full  conversion of this Debenture and the other  Debentures  issued pursuant to
the Purchase Agreement. The Borrower is required at all times to have authorized
and reserved two times the number of shares that is actually  issuable upon full
conversion of the Debentures (based on the Conversion Price of the Debentures or
the Exercise  Price of the Warrants in effect from time to time) (the  "Reserved
Amount"). The Reserved Amount shall be increased from time to time in accordance
with  the  Borrower's  obligations  pursuant  to  Section  4(h) of the  Purchase
Agreement.  The Borrower represents that upon issuance, such shares will be duly
and validly issued, fully paid and non-assessable.  In addition, if the Borrower
shall issue any  securities  or make any change to its capital  structure  which
would  change  the number of shares of Common  Stock  into which the  Debentures
shall be convertible at the then current Conversion Price, the Borrower shall at
the  same  time  make  proper  provision  so that  thereafter  there  shall be a
sufficient  number of shares of Common Stock authorized and reserved,  free from
preemptive  rights, for conversion of the outstanding  Debentures.  The Borrower
(i) acknowledges that it has irrevocably  instructed its transfer agent to issue
certificates  for the Common Stock issuable upon  conversion of this  Debenture,
and (ii)  agrees that its  issuance  of this  Debenture  shall  constitute  full
authority  to its officers and agents who are charged with the duty of executing
stock certificates to execute and issue the necessary certificates for shares of
Common Stock in accordance with the terms and conditions of this Debenture.

               If,  at any time a Holder of this  Debenture  submits a Notice of
Conversion,  and the Borrower does not have  sufficient  authorized but unissued
shares of Common Stock  available to effect such  conversion in accordance  with
the  provisions of this Article I (a "Conversion  Default"),  subject to Section
4.8,  the  Borrower  shall issue to the Holder all of the shares of Common Stock
which  are then  available  to  effect  such  conversion.  The  portion  of this
Debenture which the Holder  included in its Conversion  Notice and which exceeds
the amount which is then  convertible into available shares of Common Stock (the
"Excess  Amount")  shall,



                                       4
<PAGE>



notwithstanding  anything to the contrary  contained herein,  not be convertible
into Common Stock in accordance with the terms hereof until (and at the Holder's
option  at any time  after)  the date  additional  shares  of  Common  Stock are
authorized  by the  Borrower  to  permit  such  conversion,  at  which  time the
Conversion  Price in respect  thereof shall be the lesser of (i) the  Conversion
Price on the Conversion  Default Date (as defined below) and (ii) the Conversion
Price on the Conversion Date thereafter elected by the Holder in


respect  thereof.  In addition,  the Borrower  shall pay to the Holder  payments
("Conversion  Default  Payments") for a Conversion  Default in the amount of (x)
the sum of (1) the then outstanding  principal amount of this Debenture plus (2)
accrued and unpaid  interest on the unpaid  principal  amount of this  Debenture
through the Authorization Date (as defined below) plus (3) Default Interest,  if
any, on the amounts  referred  to in clauses (1) and/or (2),  multiplied  by (y)
..24,  multiplied  by (z) (N/365),  where N = the number of days from the day the
holder submits a Notice of Conversion  giving rise to a Conversion  Default (the
"Conversion  Default  Date") to the date  (the  "Authorization  Date")  that the
Borrower  authorizes  a  sufficient  number of shares of Common  Stock to effect
conversion of the full  outstanding  principal  balance of this  Debenture.  The
Borrower  shall use its best efforts to authorize a sufficient  number of shares
of Common Stock as soon as  practicable  following  the earlier of (i) such time
that the Holder  notifies the Borrower or that the  Borrower  otherwise  becomes
aware that there are or likely  will be  insufficient  authorized  and  unissued
shares to allow full  conversion  thereof  and (ii) a  Conversion  Default.  The
Borrower  shall send  notice to the Holder of the  authorization  of  additional
shares  of Common  Stock,  the  Authorization  Date and the  amount of  Holder's
accrued Conversion Default Payments. The accrued Conversion Default Payments for
each calendar  month shall be paid in cash or shall be  convertible  into Common
Stock (at such time as there are sufficient  authorized  shares of Common Stock)
at the applicable Conversion Price, at the Holder's option, as follows:

               (a) In the event Holder elects to take such payment in cash, cash
payment  shall be made to Holder by the fifth  (5th) day of the month  following
the month in which it has accrued; and

               (b) In the event  Holder  elects to take such  payment  in Common
Stock,  the Holder may convert  such  payment  amount  into Common  Stock at the
Conversion  Price (as in effect at the time of conversion) at any time after the
fifth day of the month following the month in which it has accrued in accordance
with the terms of this Article I (so long as there is then a  sufficient  number
of authorized shares of Common Stock).

               The Holder's election shall be made in writing to the Borrower at
any time prior to 6:00 p.m.,  New York,  New York time,  on the third day of the
month following the month in which Conversion Default payments have accrued.  If
no election is made, the Holder shall be deemed to have elected to receive cash.
Nothing  herein shall limit the Holder's  right to pursue actual damages (to the
extent in excess of the Conversion  Default Payments) for the Borrower's failure
to maintain a sufficient  number of authorized  shares of Common Stock, and each
holder shall have the right to pursue all remedies available at law or in equity
(including degree of specific performance and/or injunctive relief).




                                       5
<PAGE>



               1.4 METHOD OF CONVERSION.

               (a)  Mechanics  of  Conversion.  Subject  to  Section  1.1,  this
Debenture  may be  converted  by the Holder in whole or in part at any time from
time to time after the Issue Date, by (A) submitting to the Borrower a Notice of
Conversion (by facsimile or other reasonable  means of communication  dispatched
on the  Conversion  Date  prior to 6:00 p.m.,  New York,  New York time) and (B)
subject to Section 1.4(b),  surrendering  this Debenture at the principal office
of the Borrower.

               (b)  Surrender  of  Debenture  Upon  Conversion.  Notwithstanding
anything to the contrary set forth herein,  upon conversion of this Debenture in
accordance with the terms hereof, the Holder shall not be required to physically
surrender  this  Debenture to the Borrower  unless the entire  unpaid  principal
amount of this  Debenture is so  converted.  The Holder and the  Borrower  shall
maintain records showing the principal amount so converted and the dates of such
conversions  or shall use such  other  method,  reasonably  satisfactory  to the
Holder  and  the  Borrower,  so as not to  require  physical  surrender  of this
Debenture upon each such conversion. In the event of any dispute or discrepancy,
such records of the  Borrower  shall be  controlling  and  determinative  in the
absence of manifest error. Notwithstanding the foregoing, if any portion of this
Debenture is converted as aforesaid,  the Holder may not transfer this Debenture
unless the Holder first  physically  surrenders  this Debenture to the Borrower,
whereupon  the Borrower will  forthwith  issue and deliver upon the order of the
Holder a new Debenture of like tenor,  registered as the Holder (upon payment by
the Holder of any applicable  transfer  taxes) may request,  representing in the
aggregate the remaining unpaid  principal  amount of this Debenture.  The Holder
and any assignee,  by acceptance of this Debenture,  acknowledge and agree that,
by reason of the provisions of this paragraph, following conversion of a portion
of this Debenture, the unpaid and unconverted principal amount of this Debenture
represented  by this  Debenture  may be less than the amount  stated on the face
hereof.

               (c) Payment of Taxes.  The Borrower  shall not be required to pay
any tax which may be payable in respect of any  transfer  involved  in the issue
and  delivery  of shares of Common  Stock or other  securities  or  property  on
conversion  of this  Debenture  in a name  other  than that of the Holder (or in
street  name),  and the  Borrower  shall not be required to issue or deliver any
such  shares or other  securities  or  property  unless  and until the person or
persons (other than the Holder or the custodian in whose street name such shares
are to be held for the Holder's  account)  requesting the issuance thereof shall
have paid to the Borrower  the amount of any such tax or shall have  established
to the satisfaction of the Borrower that such tax has been paid.

               (d) Delivery of Common Stock Upon Conversion. Upon receipt by the
Borrower from the Holder of a facsimile  transmission (or other reasonable means
of  communication)  of a Notice  of  Conversion  meeting  the  requirements  for
conversion as provided in this Section 1.4, the Borrower shall issue and deliver
or  cause  to be  issued  and  delivered  to or upon  the  order  of the  Holder
certificates  for the Common Stock issuable upon such conversion  within two (2)
business days after such receipt  (and,  solely in the case of conversion of the
entire unpaid principal amount hereof, surrender of this Debenture) (such second
business day being hereinafter referred to as the "Deadline") in accordance with
the terms hereof and the Purchase Agreement (including,  without limitation,  in
accordance with the requirements of Section 2(g) of



                                       6
<PAGE>


the Purchase Agreement that certificates for shares of Common Stock issued on or
after the effective date of the  Registration  Statement upon conversion of this
Debenture shall not bear any restrictive legend).

               (e) Obligation of Borrower to Deliver Common Stock.  Upon receipt
by the Borrower of a Notice of Conversion,  the Holder shall be deemed to be the
holder  of  record of the  Common  Stock  issuable  upon  such  conversion,  the
outstanding  principal  amount and the amount of accrued and unpaid  interest on
this  Debenture  shall be reduced to reflect such  conversion,  and,  unless the
Borrower  defaults  on its  obligations  under this  Article I, all rights  with
respect to the portion of this  Debenture  being so  converted  shall  forthwith
terminate except the right to receive the Common Stock or other securities, cash
or other assets,  as herein provided,  on such  conversion.  If the Holder shall
have given a Notice of Conversion as provided herein, the Borrower's  obligation
to issue and deliver the  certificates  for Common  Stock shall be absolute  and
unconditional,  irrespective  of the  absence  of any  action  by the  Holder to
enforce the same,  any waiver or consent with respect to any provision  thereof,
the  recovery  of any  judgment  against any person or any action to enforce the
same,  any failure or delay in the  enforcement  of any other  obligation of the
Borrower  to the  holder of record,  or any  setoff,  counterclaim,  recoupment,
limitation or termination,  or any breach or alleged breach by the Holder of any
obligation to the Borrower,  and  irrespective of any other  circumstance  which
might  otherwise  limit  such  obligation  of  the  Borrower  to the  Holder  in
connection with such conversion.  The Conversion Date specified in the Notice of
Conversion  shall be the Conversion  Date so long as the Notice of Conversion is
received by the  Borrower  before 6:00 p.m.,  New York,  New York time,  on such
date.

               (f) Delivery of Common Stock by Electronic  Transfer.  In lieu of
delivering  physical  certificates  representing  the Common Stock issuable upon
conversion,  provided the  Borrower's  transfer  agent is  participating  in the
Depository  Trust Company ("DTC") Fast Automated  Securities  Transfer  ("FAST")
program,  upon  request  of the Holder and its  compliance  with the  provisions
contained in Section 1.1 and in this  Section  1.4,  the Borrower  shall use its
best efforts to cause its transfer agent to  electronically  transmit the Common
Stock  issuable  upon  conversion  to the  Holder by  crediting  the  account of
Holder's Prime Broker with DTC through its Deposit  Withdrawal  Agent Commission
("DWAC") system.

               (g) Failure to Deliver Common Stock Prior to Deadline. Without in
any way limiting the Holder's right to pursue other remedies,  including  actual
damages  and/or  equitable  relief,  the  parties  agree that if delivery of the
Common Stock  issuable upon  conversion  of this  Debenture is more than two (2)
days after the Deadline (other than a failure due to the circumstances described
in Section 1.3 above,  which  failure  shall be governed  by such  Section)  the
Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the
Deadline that the Borrower fails to deliver such Common Stock.  Such cash amount
shall be paid to Holder by the  fifth  day of the month  following  the month in
which it has accrued  or, at the option of the Holder (by written  notice to the
Borrower  by the  first  day of the  month  following  the month in which it has
accrued),  shall be added to the principal  amount of this  Debenture,  in which
event  interest  shall  accrue  thereon  in  accordance  with the  terms of this
Debenture and such additional  principal amount shall be convertible into Common
Stock in accordance with the terms of this Debenture.




                                       7
<PAGE>


               1.5  Concerning  the Shares.  The shares of Common Stock issuable
upon conversion of this Debenture may not be sold or transferred unless (i) such
shares are sold pursuant to an effective registration statement under the Act or
(ii) the  Borrower  or its  transfer  agent  shall have been  furnished  with an
opinion  of  counsel  (which  opinion  shall be in  form,  substance  and  scope
customary for opinions of counsel in comparable transactions) to the effect that
the shares to be sold or transferred  may be sold or transferred  pursuant to an
exemption  from such  registration  or (iii) such shares are sold or transferred
pursuant to Rule 144 under the Act (or a successor  rule)  ("Rule  144") or (iv)
such shares are  transferred to an  "affiliate"  (as defined in Rule 144) of the
Borrower who agrees to sell or otherwise  transfer the shares only in accordance
with this  Section  1.5 and who is an  Accredited  Investor  (as  defined in the
Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and
subject  to the  removal  provisions  set forth  below),  until such time as the
shares of Common Stock  issuable  upon  conversion of this  Debenture  have been
registered under the Act as contemplated by the Registration Rights Agreement or
otherwise  may be sold  pursuant to Rule 144 without any  restriction  as to the
number of securities as of a particular date that can then be immediately  sold,
each  certificate  for shares of Common Stock  issuable upon  conversion of this
Debenture that has not been so included in an effective  registration  statement
or that has not been sold pursuant to an effective  registration statement or an
exemption that permits removal of the legend,  shall bear a legend substantially
in the following form, as appropriate:

         "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
         REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES
         MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
         REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION
         OF COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF
         COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED
         UNDER SAID ACT UNLESS SOLD PURSUANT TO RULE 144 OR REGULATION S UNDER
         SAID ACT."

               The legend set forth  above  shall be  removed  and the  Borrower
shall issue to the Holder a new certificate therefor free of any transfer legend
if (i) the  Borrower or its  transfer  agent  shall have  received an opinion of
counsel,  in form,  substance  and scope  customary  for  opinions of counsel in
comparable  transactions,  to the effect  that a public sale or transfer of such
Common Stock may be made without  registration  under the Act and the shares are
so sold or  transferred,  (ii) such Holder provides the Borrower or its transfer
agent with reasonable  assurances that the Common Stock issuable upon conversion
of this  Debenture  (to the  extent  such  securities  are  deemed  to have been
acquired on the same date) can be sold pursuant to Rule 144 or (iii) in the case
of the Common Stock issuable upon conversion of this Debenture, such security is
registered  for sale by the Holder  under an  effective  registration  statement
filed under the Act or  otherwise  may be sold  pursuant to Rule 144 without any
restriction as to the number of securities as of a particular date that can then
be immediately  sold.  Nothing in this Debenture  shall (i) limit the Borrower's
obligation under the Registration Rights Agreement or (ii) affect in any way the
Holder's obligations to comply with applicable  prospectus delivery requirements
upon the resale of the securities referred to herein.



                                       8
<PAGE>



               1.6 EFFECT OF CERTAIN EVENTS.

               (a) Effect of Merger,  Consolidation,  Etc.  At the option of the
Holder,  the sale,  conveyance or disposition of all or substantially all of the
assets of the Borrower,  the  effectuation  by the Borrower of a transaction  or
series of related transactions in which more than 50% of the voting power of the
Borrower  is  disposed  of,  or the  consolidation,  merger  or  other  business
combination  of the Borrower with or into any other Person (as defined below) or
Persons when the Borrower is not the survivor shall either:  (i) be deemed to be
an Event of Default (as defined in Article  III)  pursuant to which the Borrower
shall  be  required  to pay to the  Holder  upon  the  consummation  of and as a
condition to such  transaction an amount equal to the Default Amount (as defined
in Article III) or (ii) be treated  pursuant to Section 1.6(b) hereof.  "Person"
shall mean any individual,  corporation, limited liability company, partnership,
association, trust or other entity or organization.

               (b) Adjustment Due to Merger, Consolidation, Etc. If, at any time
when this Debenture is issued and  outstanding and prior to conversion of all of
the Debentures,  there shall be any merger,  consolidation,  exchange of shares,
recapitalization,  reorganization,  or other similar event, as a result of which
shares of  Common  Stock of the  Borrower  shall be  changed  into the same or a
different number of shares of another class or classes of stock or securities of
the Borrower or another  entity,  or in case of any sale or conveyance of all or
substantially  all of the assets of the Borrower other than in connection with a
plan of complete liquidation of the Borrower,  then the Holder of this Debenture
shall  thereafter  have the right to receive upon  conversion of this Debenture,
upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock  immediately  theretofore  issuable upon  conversion,
such stock,  securities  or assets which the Holder would have been  entitled to
receive  in  such   transaction  had  this  Debenture  been  converted  in  full
immediately  prior to such  transaction  (without  regard to any  limitations on
conversion set forth herein), and in any such case appropriate  provisions shall
be made with respect to the rights and interests of the Holder of this Debenture
to the end that the provisions hereof (including, without limitation, provisions
for adjustment of the Conversion Price and of the number of shares issuable upon
conversion of the Debenture) shall thereafter be applicable, as nearly as may be
practicable in relation to any securities or assets thereafter  deliverable upon
the conversion hereof.  The Borrower shall not effect any transaction  described
in this Section  1.6(b)  unless (a) it first gives,  to the extent  practicable,
thirty (30) days prior  written  notice (but in any event at least  fifteen (15)
days  prior  written  notice)  of the  record  date of the  special  meeting  of
stockholders  to approve,  or if there is no such record date, the  consummation
of,  such   merger,   consolidation,   exchange  of  shares,   recapitalization,
reorganization  or other similar event or sale of assets  (during which time the
Holder  shall be  entitled  to convert  this  Debenture)  and (b) the  resulting
successor  or  acquiring  entity  (if  not  the  Borrower)  assumes  by  written
instrument the obligations of this Section 1.6(b).  The above  provisions  shall
similarly apply to successive consolidations, mergers, sales, transfers or share
exchanges.

               (c) Adjustment Due to Distribution. If the Borrower shall declare
or make any  distribution  of its assets (or  rights to acquire  its  assets) to
holders of Common  Stock as a dividend,  stock  repurchase,  by way of return of
capital or otherwise  (including any dividend or  distribution to the Borrower's
stockholders in cash or shares (or rights to acquire shares) of capital stock of
a subsidiary  (i.e.,  a spin-off)) (a  "Distribution"),  then the Holder of this

                                       9

<PAGE>



Debenture  shall be entitled,  upon any conversion of this  Debenture  after the
date of record for determining  stockholders  entitled to such Distribution,  to
receive  the amount of such assets  which would have been  payable to the Holder
with respect to the shares of Common Stock  issuable  upon such  conversion  had
such Holder  been the holder of such  shares of Common  Stock on the record date
for the determination of stockholders entitled to such Distribution.

               (d) Adjustment Due to Dilutive Issuance. If, at any time when any
Debentures  are issued and  outstanding,  the  Borrower  issues or sells,  or in
accordance with this Section 1.6(d) hereof is deemed to have issued or sold, any
shares of Common Stock for no  consideration  or for a  consideration  per share
(before  deduction  of  reasonable   expenses  or  commissions  or  underwriting
discounts or allowances in connection  therewith) less than the Fixed Conversion
Price in effect on the date of such issuance (or deemed issuance) of such shares
of Common  Stock (a "Dilutive  Issuance"),  then  immediately  upon the Dilutive
Issuance,  the Fixed  Conversion  Price  will be  reduced  to the  amount of the
consideration  per share  received by the  Borrower in such  Dilutive  Issuance;
provided that only one adjustment will be made for each Dilutive Issuance.

               The  Borrower  shall be deemed to have  issued or sold  shares of
Common Stock if the Borrower in any manner issues or grants any warrants, rights
or options,  whether or not  immediately  exercisable,  to  subscribe  for or to
purchase Common Stock or other  securities  convertible into or exchangeable for
Common Stock  ("Convertible  Securities") (such warrants,  rights and options to
purchase Common Stock or Convertible  Securities are hereinafter  referred to as
"Options")  and the price per share for which Common Stock is issuable  upon the
exercise of such Options is less than the Fixed Conversion Price then in effect,
then the Fixed  Conversion  Price  shall be equal to such price per  share.  For
purposes of the preceding sentence,  the "price per share for which Common Stock
is issuable upon the exercise of such Options" is determined by dividing (i) the
total amount,  if any,  received or receivable by the Borrower as  consideration
for the  issuance or granting of all such  Options,  plus the minimum  aggregate
amount of  additional  consideration,  if any,  payable to the Borrower upon the
exercise  of all  such  Options,  plus,  in the case of  Convertible  Securities
issuable  upon the exercise of such  Options,  the minimum  aggregate  amount of
additional  consideration payable upon the conversion or exchange thereof at the
time such Convertible  Securities first become  convertible or exchangeable,  by
(ii) the  maximum  total  number of shares of  Common  Stock  issuable  upon the
exercise  of  all  such  Options   (assuming  full   conversion  of  Convertible
Securities,  if applicable).  No further adjustment to the Conversion Price will
be made upon the actual  issuance of such Common Stock upon the exercise of such
Options or upon the  conversion or exchange of Convertible  Securities  issuable
upon exercise of such Options.

               Additionally, the Borrower shall be deemed to have issued or sold
shares  of  Common  Stock if the  Borrower  in any  manner  issues  or sells any
Convertible Securities, whether or not immediately convertible (other than where
the same are issuable upon the exercise of Options), and the price per share for
which Common Stock is issuable upon such conversion or exchange is less than the
Fixed Conversion Price then in effect,  then the Fixed Conversion Price shall be
equal to such price per share. For the purposes of the preceding  sentence,  the
"price per share for which  Common  Stock is issuable  upon such  conversion  or
exchange" is determined by dividing (i) the total  amount,  if any,  received or
receivable by the Borrower as consideration for the issuance or sale of all such
Convertible  Securities,   plus  the  minimum  aggregate  amount  of


                                       10
<PAGE>



additional consideration, if any, payable to the Borrower upon the conversion or
exchange  thereof  at  the  time  such   Convertible   Securities  first  become
convertible  or  exchangeable,  by (ii) the  maximum  total  number of shares of
Common Stock  issuable upon the  conversion or exchange of all such  Convertible
Securities.  No further  adjustment to the Fixed  Conversion  Price will be made
upon the actual  issuance of such Common  Stock upon  conversion  or exchange of
such Convertible Securities.

               (e)  Purchase  Rights.  If, at any time when any  Debentures  are
issued and outstanding, the Borrower issues any convertible securities or rights
to  purchase  stock,  warrants,  securities  or other  property  (the  "Purchase
Rights") pro rata to the record  holders of any class of Common Stock,  then the
Holder of this Debenture will be entitled to acquire,  upon the terms applicable
to such Purchase Rights,  the aggregate  Purchase Rights which such Holder could
have  acquired  if such  Holder  had held the  number of shares of Common  Stock
acquirable  upon complete  conversion of this Debenture  (without  regard to any
limitations on conversion contained herein) immediately before the date on which
a record is taken for the grant, issuance or sale of such Purchase Rights or, if
no such record is taken, the date as of which the record holders of Common Stock
are to be determined for the grant, issue or sale of such Purchase Rights.

               (f) Notice of Adjustments. Upon the occurrence of each adjustment
or readjustment of the Conversion  Price as a result of the events  described in
this Section 1.6, the  Borrower,  at its expense,  shall  promptly  compute such
adjustment  or  readjustment  and  prepare  and  furnish  to  the  Holder  of  a
certificate  setting forth such adjustment or readjustment and showing in detail
the facts upon which such  adjustment  or  readjustment  is based.  The Borrower
shall,  upon the  written  request  at any time of the  Holder,  furnish to such
Holder a like  certificate  setting forth (i) such  adjustment or  readjustment,
(ii) the  Conversion  Price at the time in effect and (iii) the number of shares
of Common Stock and the amount, if any, of other securities or property which at
the time would be received upon conversion of the Debenture.

               1.7  Trading  Market   Limitations.   Unless   permitted  by  the
applicable rules and regulations of the principal securities market on which the
Common Stock is then listed or traded, in no event shall the Borrower issue upon
conversion of or otherwise  pursuant to this Debenture and the other  Debentures
issued pursuant to the Purchase Agreement more than the maximum number of shares
of  Common  Stock  that  the  Borrower  can  issue  pursuant  to any rule of the
principal  United  States  securities  market on which the Common  Stock is then
traded  (the  "Maximum  Share  Amount"),  which,  as of the Issue  Date shall be
5,940,949  shares  (19.99% of the total shares  outstanding  on the Issue Date),
subject  to  equitable  adjustment  from  time to time for stock  splits,  stock
dividends,  combinations, capital reorganizations and similar events relating to
the Common Stock occurring after the date hereof.  Once the Maximum Share Amount
has been issued (the date of which is  hereinafter  referred to as the  "Maximum
Conversion  Date"),  if the Borrower fails to eliminate any  prohibitions  under
applicable law or the rules or regulations  of any stock  exchange,  interdealer
quotation system or other  self-regulatory  organization  with jurisdiction over
the Borrower or any of its securities on the Borrower's  ability to issue shares
of Common  Stock in excess  of the  Maximum  Share  Amount  (a  "Trading

                                       11

<PAGE>



Market  Prepayment  Event"),  in lieu  of any  further  right  to  convert  this
Debenture,  and in full  satisfaction of the Borrower's  obligations  under this
Debenture,  the Borrower  shall pay to the Holder,  within fifteen (15) business
days of the Maximum  Conversion Date (the "Trading Market Prepayment  Date"), an
amount equal to 130% times the sum of (a) the then outstanding  principal amount
of this Debenture  immediately  following the Maximum  Conversion Date, plus (b)
accrued and unpaid interest on the unpaid  principal amount of this Debenture to
the Trading Market  Prepayment Date, plus (c) Default  Interest,  if any, on the
amounts  referred  to in clause  (a) and/or  (b)  above,  plus (d) any  optional
amounts that may be added thereto at the Maximum  Conversion  Date by the Holder
in accordance with the terms hereof (the then  outstanding  principal  amount of
this  Debenture  immediately  following the Maximum  Conversion  Date,  plus the
amounts  referred to in clauses  (b),  (c) and (d) above shall  collectively  be
referred to as the "Remaining Convertible Amount").  With respect to each Holder
of  Debentures,  the Maximum  Share Amount shall refer to such Holder's pro rata
share thereof determined in accordance with Section 4.8 below. In the event that
the sum of (x) the  aggregate  number  of shares of  Common  Stock  issued  upon
conversion of this  Debenture and the other  Debentures  issued  pursuant to the
Purchase  Agreement plus (y) the aggregate number of shares of Common Stock that
remain  issuable  upon  conversion of this  Debenture  and the other  Debentures
issued  pursuant  to the  Purchase  Agreement,  represents  at least one hundred
percent  (100%) of the  Maximum  Share  Amount  (the  "Triggering  Event"),  the
Borrower will use its best efforts to seek and obtain  Stockholder  Approval (or
obtain such other  relief as will allow  conversions  hereunder in excess of the
Maximum Share Amount) as soon as practicable  following the Triggering Event and
before the Maximum Conversion Date. As used herein, "Stockholder Approval" means
approval by the  stockholders  of the Borrower to authorize  the issuance of the
full  number of  shares  of  Common  Stock  which  would be  issuable  upon full
conversion of the then outstanding Debentures but for the Maximum Share Amount.

               1.8  Status  as  Stockholder.  Upon  submission  of a  Notice  of
Conversion by a Holder,  (i) the shares covered  thereby (other than the shares,
if any, which cannot be issued because their issuance would exceed such Holder's
allocated  portion of the  Reserved  Amount or Maximum  Share  Amount)  shall be
deemed  converted into shares of Common Stock and (ii) the Holder's  rights as a
Holder of such converted  portion of this  Debenture  shall cease and terminate,
excepting only the right to receive certificates for such shares of Common Stock
and to any remedies  provided herein or otherwise  available at law or in equity
to such Holder  because of a failure by the Borrower to comply with the terms of
this  Debenture.  Notwithstanding  the  foregoing,  if a Holder has not received
certificates  for all shares of Common Stock prior to the tenth (10th)  business
day after the  expiration  of the Deadline  with respect to a conversion  of any
portion of this  Debenture  for any reason,  then  (unless the Holder  otherwise
elects to retain  its  status as a holder of Common  Stock by so  notifying  the
Borrower) the Holder shall regain the rights of a Holder of this  Debenture with
respect to such  unconverted  portions of this Debenture and the Borrower shall,
as soon as practicable,  return such unconverted  Debenture to the Holder or, if
the Debenture has not been surrendered,  adjust its records to reflect that such
portion of this Debenture has not been converted. In all cases, the Holder shall
retain all of its rights and remedies  (including,  without limitation,  (i) the
right to receive  Conversion  Default  Payments  pursuant  to Section 1.3 to the
extent  required  thereby  for  such  Conversion   Default  and  any  subsequent
Conversion  Default and (ii) the right to have the Conversion Price with respect
to subsequent  conversions  determined  in accordance  with Section 1.3) for the
Borrower's failure to convert this Debenture.

                                       12
<PAGE>


                         ARTICLE II. CERTAIN COVENANTS

               2.1 Distributions on Capital Stock. So long as the Borrower shall
have any  obligation  under this  Debenture,  the Borrower shall not without the
Holder's  written  consent (a) pay,  declare or set apart for such payment,  any
dividend or other distribution  (whether in cash,  property or other securities)
on shares of capital stock other than dividends on shares of Common Stock solely
in the form of  additional  shares of Common Stock or (b) directly or indirectly
or through any subsidiary  make any other payment or  distribution in respect of
its capital stock except for distributions  pursuant to any shareholders' rights
plan which is approved by a majority of the Borrower's disinterested directors.

               2.2  Restriction  on Stock  Repurchases.  So long as the Borrower
shall have any obligation  under this Debenture,  the Borrower shall not without
the Holder's  written consent redeem,  repurchase or otherwise  acquire (whether
for cash or in exchange for property or other  securities  or  otherwise) in any
one transaction or series of related transactions any shares of capital stock of
the Borrower or any warrants,  rights or options to purchase or acquire any such
shares.

               2.3 Borrowings. So long as the Borrower shall have any obligation
under this  Debenture,  the Borrower  shall not,  without the  Holder's  written
consent,  create,  incur,  assume or suffer to exist any  liability for borrowed
money, except (a) borrowings in existence or committed on the date hereof and of
which the Borrower has informed Holder in writing prior to the date hereof,  (b)
indebtedness  to trade  creditors  or  financial  institutions  incurred  in the
ordinary  course of business or (c)  borrowings,  the proceeds of which shall be
used to repay this Debenture.

               2.4  Sale of  Assets.  So long as the  Borrower  shall  have  any
obligation  under this Debenture,  the Borrower shall not,  without the Holder's
written consent,  sell, lease or otherwise dispose of any significant portion of
its  assets  outside  the  ordinary  course  of  business.  Any  consent  to the
disposition  of any assets may be conditioned on a specified use of the proceeds
of disposition.

               2.5  Advances and Loans.  So long as the Borrower  shall have any
obligation  under this Debenture,  the Borrower shall not,  without the Holder's
written consent,  lend money, give credit or make advances to any person,  firm,
joint  venture  or  corporation,   including,   without  limitation,   officers,
directors, employees, subsidiaries and affiliates of the Borrower, except loans,
credits or advances  (a) in  existence or committed on the date hereof and which
the Borrower has informed  Holder in writing prior to the date hereof,  (b) made
in the ordinary course of business or (c) not in excess of $50,000.

               2.6  Contingent  Liabilities.  So long as the Borrower shall have
any  obligation  under this  Debenture,  the  Borrower  shall not,  without  the
Holder's written consent,  assume,  guarantee,  endorse,  contingently  agree to
purchase or otherwise  become liable upon the  obligation  of any person,  firm,
partnership,  joint  venture  or  corporation,  except  by  the  endorsement  of
negotiable  instruments  for  deposit  or  collection  and  except  assumptions,
guarantees,  endorsements and contingencies (a) in existence or committed on the
date hereof and which the Borrower has informed  Holder in writing  prior to the
date hereof, and (b) similar transactions in the ordinary course of business.
                                       13

<PAGE>


                         ARTICLE III. EVENTS OF DEFAULT

               If any of the  following  events of default  (each,  an "Event of
Default") shall occur:

               3.1 Failure to Pay Principal or Interest.  The Borrower  fails to
pay the principal hereof or interest thereon when due on this Debenture, whether
at maturity,  upon a Trading  Market  Prepayment  Event pursuant to Section 1.7,
upon acceleration or otherwise;

               3.2 Conversion and the Shares. The Borrower fails to issue shares
of Common Stock to the Holder (or announces or threatens  that it will not honor
its obligation to do so) upon exercise by the Holder of the conversion rights of
the Holder in accordance  with the terms of this  Debenture  (for a period of at
least  sixty  (60)  days,  if  such  failure  is  solely  as  a  result  of  the
circumstances governed by Section 1.3 and the Borrower is using its best efforts
to  authorize  a  sufficient  number  of  shares  of  Common  Stock  as  soon as
practicable),  fails  to  transfer  or cause  its  transfer  agent  to  transfer
(electronically  or in  certificated  form) any certificate for shares of Common
Stock  issued to the Holder upon  conversion  of or  otherwise  pursuant to this
Debenture  as and when  required by this  Debenture or the  Registration  Rights
Agreement,  or fails to remove any  restrictive  legend (or to withdraw any stop
transfer  instructions in respect  thereof) on any certificate for any shares of
Common Stock issued to the Holder upon  conversion  of or otherwise  pursuant to
this Debenture as and when required by this Debenture or the Registration Rights
Agreement  (or  makes any  announcement,  statement  or threat  that it does not
intend  to honor  the  obligations  described  in this  paragraph)  and any such
failure shall continue uncured (or any announcement,  statement or threat not to
honor its obligations shall not be rescinded in writing) for ten (10) days after
the Borrower shall have been notified thereof in writing by the Holder;

               3.3 Failure to Timely File  Registration or Effect  Registration.
The Borrower fails to file the  Registration  Statement  within  forty-five (45)
days following the Filing Date (as defined in the Registration Rights Agreement)
or obtain  effectiveness  with the  Securities  and Exchange  Commission  of the
Registration  Statement  within one hundred five (105) days following the Filing
Date or such Registration  Statement lapses in effect (or sales cannot otherwise
be made  thereunder  effective,  whether by reason of the Borrower's  failure to
amend or supplement  the  prospectus  included  therein in  accordance  with the
Registration   Rights   Agreement  or  otherwise)  for  more  than  twenty  (20)
consecutive  days or forty  (40)  days in any  twelve  month  period  after  the
Registration Statement becomes effective;

               3.4 Breach of  Covenants.  The  Borrower  breaches  any  material
covenant or other  material term or condition  contained in Sections 1.3, 1.6 or
1.7 of this Debenture, or Sections 4(c), 4(e), 4(h), 4(i), 4(j), 4(l), 4(m) or 5
of the Purchase  Agreement  and such breach  continues  for a period of ten (10)
days after written notice thereof to the Borrower from the Holder;

               3.5 Breach of Representations and Warranties.  Any representation
or  warranty  of the  Borrower  made herein or in any  agreement,  statement  or
certificate  given  in  writing  pursuant  hereto  or  in  connection   herewith
(including,  without  limitation,  the Purchase  Agreement and the  Registration
Rights  Agreement),  shall be false or misleading  in any material


                                       14
<PAGE>



respect  when made and the breach of which has (or with the passage of time will
have) a material adverse effect on the rights of the Holder with respect to this
Debenture, the Purchase Agreement or the Registration Rights Agreement;

               3.6 Receiver or Trustee.  The Borrower or any  subsidiary  of the
Borrower shall make an assignment for the benefit of creditors,  or apply for or
consent to the  appointment of a receiver or trustee for it or for a substantial
part of its property or business,  or such a receiver or trustee shall otherwise
be appointed;

               3.7 Judgments.  Any money judgment, writ or similar process shall
be entered or filed  against the Borrower or any  subsidiary  of the Borrower or
any of its  property or other  assets for more than  $50,000,  and shall  remain
unvacated,  unbonded  or  unstayed  for a period  of  twenty  (20)  days  unless
otherwise  consented to by the Holder,  which  consent will not be  unreasonably
withheld;

               3.8  Bankruptcy.   Bankruptcy,   insolvency,   reorganization  or
liquidation proceedings or other proceedings for relief under any bankruptcy law
or any law for the  relief of debtors  shall be  instituted  by or  against  the
Borrower or any subsidiary of the Borrower;

               3.9  Delisting  of  Common  Stock.  The  Borrower  shall  fail to
maintain  the  listing  of the Common  Stock on at least one of the  OTCBB,  the
Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange,
or the American Stock Exchange; or

               3.10  Default  Under  Other  Debentures.  An Event of Default has
occurred and is continuing under any of the other Debentures  issued pursuant to
the Purchase Agreement,

then,  upon the occurrence and during the  continuation  of any Event of Default
specified in Section 3.1,  3.2,  3.3, 3.4, 3.5, 3.7, 3.9, or 3.10, at the option
of  the  Holders  of a  majority  of  the  aggregate  principal  amount  of  the
outstanding  Debentures  issued pursuant to the Purchase  Agreement  exercisable
through the  delivery of written  notice to the  Borrower by such  Holders  (the
"Default  Notice"),  and upon the occurrence of an Event of Default specified in
Section 3.6 or 3.8, the Debentures shall become  immediately due and payable and
the Borrower shall pay to the Holder,  in full  satisfaction  of its obligations
hereunder,  an amount  equal to the greater of (i) 130% times the sum of (w) the
then outstanding  principal amount of this Debenture plus (x) accrued and unpaid
interest on the unpaid principal amount of this Debenture to the date of payment
(the  "Mandatory  Prepayment  Date") plus (y) Default  Interest,  if any, on the
amounts  referred to in clauses (w) and/or (x) plus (z) any amounts  owed to the
Holder pursuant to Sections 1.3 and 1.4(g) hereof or pursuant to Section 2(c) of
the Registration Rights Agreement (the then outstanding principal amount of this
Debenture  to the date of payment  plus the amounts  referred to in clauses (x),
(y) and (z)  shall  collectively  be  known  as the  "Default  Sum") or (ii) the
"parity  value" of the Default Sum to be prepaid,  where  parity value means (a)
the highest  number of shares of Common Stock  issuable  upon  conversion  of or
otherwise  pursuant to such Default Sum in  accordance  with Article I, treating
the Trading Day  immediately  preceding  the  Mandatory  Prepayment  Date as the
"Conversion Date" for purposes of determining the lowest  applicable  Conversion
Price,  unless the Default  Event arises as a result of a breach in respect of a
specific  Conversion  Date in  which  case  such  Conversion  Date  shall be the
Conversion  Date),  multiplied  by (b) the highest  Closing Price for the Common
Stock during the period  beginning



                                       15
<PAGE>



on the date of first occurrence of the Event of Default and ending one day prior
to the Mandatory  Prepayment  Date (the "Default  Amount") and all other amounts
payable hereunder shall immediately become due and payable,  all without demand,
presentment or notice,  all of which hereby are expressly waived,  together with
all  costs,  including,   without  limitation,   legal  fees  and  expenses,  of
collection,  and the Holder  shall be entitled to exercise  all other rights and
remedies available at law or in equity. If the Borrower fails to pay the Default
Amount within five (5) business  days of written  notice that such amount is due
and payable,  then the Holder  shall have the right at any time,  so long as the
Borrower  remains  in  default  (and so long and to the  extent  that  there are
sufficient authorized shares), to require the Borrower,  upon written notice, to
immediately issue, in lieu of the Default Amount, the number of shares of Common
Stock of the  Borrower  equal to the Default  Amount  divided by the  Conversion
Price then in effect.

                           ARTICLE IV. MISCELLANEOUS

               4.1 Failure or Indulgence Not Waiver.  No failure or delay on the
part of the Holder in the exercise of any power,  right or  privilege  hereunder
shall operate as a waiver thereof,  nor shall any single or partial  exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other  right,  power or  privileges.  All  rights and  remedies  existing
hereunder  are  cumulative  to, and not  exclusive  of,  any rights or  remedies
otherwise available.

               4.2 Notices.  Any notice herein required or permitted to be given
shall be in writing and may be personally served or delivered by courier or sent
by United  States  mail and shall be deemed to have been given  upon  receipt if
personally served (which shall include telephone line facsimile transmission) or
sent by courier or three (3) days after  being  deposited  in the United  States
mail, certified,  with postage pre-paid and properly addressed, if sent by mail.
For the  purposes  hereof,  the  address of the Holder  shall be as shown on the
records of the  Borrower;  and the  address of the  Borrower  shall be 4 Mulford
Place, Suite 2G, Hempstead, New York 11550, facsimile number: 509-472-4654. Both
the Holder and the  Borrower  may change the  address  for service by service of
written notice to the other as herein provided.

               4.3 Amendments.  This Debenture and any provision hereof may only
be amended by an  instrument  in writing  signed by the Borrower and the Holder.
The  term  "Debenture"  and  all  reference  thereto,  as used  throughout  this
instrument, shall mean this instrument (and the other Debentures issued pursuant
to the  Purchase  Agreement)  as  originally  executed,  or if later  amended or
supplemented, then as so amended or supplemented.

               4.4  Assignability.  This  Debenture  shall be  binding  upon the
Borrower and its  successors  and assigns,  and shall inure to be the benefit of
the Holder and its  successors  and assigns.  Each  transferee of this Debenture
must be an  "accredited  investor"  (as defined in Rule 501(a) of the 1933 Act).
Notwithstanding  anything in this Debenture to the contrary,  this Debenture may
be pledged as collateral in connection  with a bona fide margin account or other
lending arrangement.



                                       16
<PAGE>




               4.5 Cost of Collection. If default is made in the payment of this
Debenture,  the  Borrower  shall  pay the  Holder  hereof  costs of  collection,
including reasonable attorneys' fees.

               4.6 Governing Law. THIS DEBENTURE SHALL BE ENFORCED,  GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED  ENTIRELY WITHIN SUCH STATE,  WITHOUT REGARD
TO THE  PRINCIPLES  OF  CONFLICT OF LAWS.  THE  BORROWER  HEREBY  SUBMITS TO THE
EXCLUSIVE  JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
NEW  YORK  WITH  RESPECT  TO ANY  DISPUTE  ARISING  UNDER  THIS  DEBENTURE,  THE
AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS  CONTEMPLATED
HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING.  BOTH PARTIES FURTHER AGREE
THAT  SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED
IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY  OTHER  MANNER   PERMITTED  BY  LAW.   BOTH  PARTIES   AGREE  THAT  A  FINAL
NON-APPEALABLE  JUDGMENT IN ANY SUCH SUIT OR PROCEEDING  SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER  JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL  MANNER.  THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE  ARISING  UNDER
THIS  DEBENTURE  SHALL  BE  RESPONSIBLE  FOR ALL FEES  AND  EXPENSES,  INCLUDING
ATTORNEYS'  FEES,  INCURRED  BY THE  PREVAILING  PARTY IN  CONNECTION  WITH SUCH
DISPUTE.

               4.7 Certain  Amounts.  Whenever  pursuant to this  Debenture  the
Borrower  is required  to pay an amount in excess of the  outstanding  principal
amount (or the portion  thereof  required to be paid at that time) plus  accrued
and unpaid interest plus Default Interest on such interest, the Borrower and the
Holder  agree that the actual  damages  to the Holder  from the  receipt of cash
payment on this  Debenture may be difficult to determine and the amount to be so
paid by the  Borrower  represents  stipulated  damages  and not a penalty and is
intended to compensate the Holder in part for loss of the opportunity to convert
this  Debenture  and to earn a return  from the sale of shares  of Common  Stock
acquired  upon  conversion  of this  Debenture at a price in excess of the price
paid for such shares  pursuant to this  Debenture.  The  Borrower and the Holder
hereby   agree  that  such   amount  of   stipulated   damages  is  not  plainly
disproportionate  to the possible  loss to the Holder from the receipt of a cash
payment  without the opportunity to convert this Debenture into shares of Common
Stock.

               4.8 Allocations of Maximum Share Amount and Reserved Amount.  The
Maximum  Share Amount and Reserved  Amount shall be allocated pro rata among the
Holders of Debentures based on the principal amount of such Debentures issued to
each Holder. Each increase to the Maximum Share Amount and Reserved Amount shall
be allocated  pro rata among the Holders of  Debentures  based on the  principal
amount of such Debentures held by each Holder at the time of the increase in the
Maximum  Share  Amount or Reserved  Amount.  In the event a Holder shall sell or
otherwise  transfer any of such Holder's  Debentures,  each transferee


                                       17

<PAGE>



shall be allocated a pro rata portion of such transferor's  Maximum Share Amount
and Reserved Amount.  Any portion of the Maximum Share Amount or Reserved Amount
which  remains  allocated  to any  person  or  entity  which  does  not hold any
Debentures shall be allocated to the remaining  Holders of Debentures,  pro rata
based on the principal amount of such Debentures then held by such Holders.

               4.9  Damages  Shares.  The  shares  of Common  Stock  that may be
issuable to the Holder  pursuant to Sections 1.3 and 1.4(g)  hereof and pursuant
to Section 2(c) of the Registration Rights Agreement ("Damages Shares") shall be
treated as Common Stock  issuable  upon  conversion  of this  Debenture  for all
purposes  hereof and shall be subject to all of the limitations and afforded all
of the rights of the other shares of Common Stock issuable hereunder,  including
without limitation, the right to be included in the Registration Statement filed
pursuant to the  Registration  Rights  Agreement.  For  purposes of  calculating
interest payable on the outstanding principal amount hereof, except as otherwise
provided herein,  amounts  convertible  into Damages Shares ("Damages  Amounts")
shall not bear  interest but must be converted  prior to the  conversion  of any
outstanding  principal amount hereof,  until the outstanding  Damages Amounts is
zero.

               4.10 Denominations.  At the request of the Holder, upon surrender
of this  Debenture,  the Borrower  shall  promptly  issue new  Debentures in the
aggregate  outstanding  principal  amount  hereof,  in the form hereof,  in such
denominations of at least $50,000 as the Holder shall request.

               4.11 Purchase  Agreement.  By its  acceptance of this  Debenture,
each  Holder  agrees  to be  bound  by the  applicable  terms  of  the  Purchase
Agreement.

               4.12 Notice of Corporate  Events.  Except as  otherwise  provided
below,  the Holder of this Debenture  shall have no rights as a Holder of Common
Stock unless and only to the extent that it converts this  Debenture into Common
Stock.  The Borrower  shall  provide the Holder with prior  notification  of any
meeting of the Borrower's  stockholders (and copies of proxy materials and other
information sent to stockholders). In the event of any taking by the Borrower of
a record of its stockholders for the purpose of determining stockholders 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,  reclassification 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  stockholders who are entitled to vote in connection with
any proposed sale, lease or conveyance of all or substantially all of the assets
of the Borrower or any proposed  liquidation,  dissolution  or winding up of the
Borrower,  the Borrower shall mail a notice to the Holder,  at least twenty (20)
days prior to the record  date  specified  therein (or thirty (30) days prior to
the consummation of the transaction or event, whichever is earlier), of the date
on which  any such  record  is to be taken  for the  purpose  of such  dividend,
distribution,  right or other event, and a brief statement  regarding the amount
and character of such dividend, distribution, right or other event to the extent
known at such time. The Borrower shall make a public  announcement  of any event
requiring notification to the Holder hereunder substantially simultaneously with
the  notification  to the Holder in  accordance  with the terms of this  Section
4.12.

                                       18
<PAGE>


               4.13 Remedies.  The Borrower  acknowledges that a breach by it of
its  obligations  hereunder  will  cause  irreparable  harm  to the  Holder,  by
vitiating  the  intent  and  purpose  of the  transaction  contemplated  hereby.
Accordingly,  the Borrower  acknowledges  that the remedy at law for a breach of
its obligations under this Debenture will be inadequate and agrees, in the event
of a breach or  threatened  breach by the  Borrower  of the  provisions  of this
Debenture, that the Holder shall be entitled, in addition to all other available
remedies  at law or in  equity,  and in  addition  to the  penalties  assessable
herein,  to an injunction or injunctions  restraining,  preventing or curing any
breach of this  Debenture and to enforce  specifically  the terms and provisions
thereof,  without the necessity of showing economic loss and without any bond or
other security being required.

                         ARTICLE V. OPTIONAL PREPAYMENT

               5.1 Optional Prepayment. Notwithstanding anything to the contrary
contained  in this  Article V, for not more than  thirty (30) days from the date
hereof,  so long as (i) no Event of Default or Trading Market  Prepayment  Event
shall have  occurred and be  continuing,  and (ii) the Borrower has a sufficient
number of  authorized  shares of Common Stock  reserved  for issuance  upon full
conversion  of the  Debentures,  then at any time  after  the  Issue  Date,  the
Borrower  shall have the right,  exercisable  on not less than ten (10)  Trading
Days prior written notice to the Holders of the Debentures (which notice may not
be sent to the Holders of the  Debentures  until the  Borrower is  permitted  to
prepay  the  Debentures  pursuant  to this  Section  5.1),  to prepay all of the
outstanding  Debentures  in  accordance  with this  Section  5.1.  Any notice of
prepayment  hereunder  (an  "Optional  Prepayment")  shall be  delivered  to the
Holders of the Debentures at their registered  addresses  appearing on the books
and records of the Borrower and shall state (1) that the Borrower is  exercising
its right to prepay all of the  Debentures  issued on the Issue Date and (2) the
date of prepayment  (the "Optional  Prepayment  Notice").  On the date fixed for
prepayment (the "Optional  Prepayment Date"), the Borrower shall make payment of
the Optional



                                       19

<PAGE>



Prepayment  Amount  (as  defined  below) to or upon the order of the  Holders as
specified  by the Holders in writing to the  Borrower at least one (1)  business
day prior to the Optional  Prepayment Date. If the Borrower  exercises its right
to prepay the  Debentures,  the Borrower shall make payment to the holders of an
amount in cash (the "Optional  Prepayment  Amount") equal to 150%  multiplied by
the sum of (w) the then outstanding  principal amount of this Debenture plus (x)
accrued and unpaid interest on the unpaid  principal amount of this Debenture to
the Optional  Prepayment Date plus (y) Default Interest,  if any, on the amounts
referred  to in  clauses  (w) and (x) plus (z) any  amounts  owed to the  Holder
pursuant to Sections  1.3 and 1.4(g)  hereof or pursuant to Section  2(c) of the
Registration  Rights  Agreement (the then  outstanding  principal amount of this
Debenture  to the date of payment  plus the amounts  referred to in clauses (x),
(y) and (z)  shall  collectively  be known as the  "Optional  Prepayment  Sum").
Notwithstanding notice of an Optional Prepayment, the Holders shall at all times
prior to the Optional  Prepayment  Date maintain the right to convert all or any
portion  of the  Debentures  in  accordance  with  Article I and any  portion of
Debentures so converted after receipt of an Optional Prepayment Notice and prior
to the  Optional  Prepayment  Date set forth in such  notice and  payment of the
aggregate Optional Prepayment Amount shall be deducted from the principal amount
of Debentures which are otherwise subject to prepayment pursuant to such notice.
If the  Borrower  delivers  an Optional  Prepayment  Notice and fails to pay the
Optional  Prepayment  Amount due to the Holders of the Debentures within two (2)
business days following the Optional Prepayment Date, the Borrower shall forever
forfeit its right to redeem the Debentures pursuant to this Section 5.1.



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                                       20

<PAGE>


                  IN WITNESS WHEREOF, Borrower has caused this Debenture to be
signed in its name by its duly authorized officer this 18th day of July, 2003.


                                   TORBAY HOLDINGS, INC.


                                   By:    ______________________________
                                          William Thomas Large
                                          President and Chief Executive Officer




<PAGE>

                                                                       EXHIBIT A

                              NOTICE OF CONVERSION
                    (To be Executed by the Registered Holder
                       in order to Convert the Debentures)

                  The undersigned hereby irrevocably elects to convert
$________principal amount of the Debenture (defined below) into shares of common
stock, par value $.0001 per share ("Common Stock"), of Torbay Holdings, Inc., a
Delaware corporation (the "Borrower") according to the conditions of the
convertible debentures of the Borrower dated as of July 18, 2003 (the
"Debentures"), as of the date written below. If securities 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. No fee will be charged to the Holder for any conversion, except
for transfer taxes, if any. A copy of each Debenture is attached hereto (or
evidence of loss, theft or destruction thereof).

                  The Borrower shall electronically transmit the Common Stock
issuable pursuant to this Notice of Conversion to the account of the undersigned
or its nominee with DTC through its Deposit Withdrawal Agent Commission system (
"DWAC Transfer").

              Name of DTC Prime Broker:_________________________________________

              Account Number:___________________________________________________

                  In lieu of receiving shares of Common Stock issuable pursuant
to this Notice of Conversion by way of a DWAC Transfer, the undersigned hereby
requests that the Borrower issue a certificate or certificates for the number of
shares of Common Stock set forth below (which numbers are based on the Holder's
calculation attached hereto) in the name(s) specified immediately below or, if
additional space is necessary, on an attachment hereto:

              Name:_____________________________________________________________

              Address:__________________________________________________________

                  The undersigned represents and warrants that all offers and
sales by the undersigned of the securities issuable to the undersigned upon
conversion of the Debentures shall be made pursuant to registration of the
securities under the Securities Act of 1933, as amended (the "Act"), or pursuant
to an exemption from registration under the Act.

                   Date of Conversion:__________________________________________
                   Applicable Conversion Price:_________________________________
                   Number of Shares of Common Stock to be Issued Pursuant to
                   Conversion of the Debentures:________________________________
                   Signature:___________________________________________________
                   Name:________________________________________________________
                   Address:_____________________________________________________

                  The Borrower shall issue and deliver shares of Common Stock to
an overnight courier not later than three business days following receipt of the
original Debenture(s) to be converted, and shall make payments pursuant to the
Debentures for the number of business days such issuance and delivery is late.



                                      A-1