Document:

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THIS DEBENTURE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS DEBENTURE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED FOR SALE
OR SOLD UNLESS A REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS SHALL BE EFFECTIVE WITH RESPECT THERETO OR AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER OR SALE. THIS DEBENTURE DOES NOT REQUIRE
PHYSICAL SURRENDER HEREOF IN ORDER TO EFFECT A PARTIAL PAYMENT, REDEMPTION OR
CONVERSION HEREOF. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS
DEBENTURE MAY BE LESS THAN THE PRINCIPAL AMOUNT SHOWN BELOW.

                         VYTERIS HOLDINGS (NEVADA), INC.

                      SENIOR SECURED CONVERTIBLE DEBENTURE

New York, New York                                                 $____________
Issue Date:  August 19, 2005

     FOR VALUE RECEIVED, VYTERIS HOLDINGS (NEVADA), INC., a Nevada corporation
(the "Company"), hereby promises to pay to the order of __________________ or
its permitted successors or assigns (the "Holder") the sum of __________________
($_______________) in same day funds, on or before the three (3) year
anniversary of the Initial Issue Date (as defined below)(the "Maturity Date").
The Holder may convert amounts of principal of this Debenture into shares
("Conversion Shares") of the Company's common stock, par value $0.001 per share
(the "Common Stock"), on the terms and subject to the conditions set forth
herein.

     The Company has issued this Debenture pursuant to a Securities Purchase
Agreement, dated as of August 19, 2005 (the "Securities Purchase Agreement").
The debentures issued by the Company pursuant to the Securities Purchase
Agreement, including this Debenture, are collectively referred to herein as the
"Debentures".

     The Company's obligations under the Debentures, including without
limitation its obligation to make payments of principal thereof and interest
thereon, are secured pursuant to the terms of a Security Agreement, dated as of
August 19, 2005 (the "Security Agreement").
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     The following terms shall apply to this Debenture:

1.   DEFINITIONS.

          "Amendment" means an amendment to the Company's charter consistent
with the provisions of Section 2(a)(i) of the Series B Waiver which would
preclude the redemption (but not the accrual of the redemption amount) of the
Company's Series B Preferred Stock from the date of such charter amendment until
the Termination Date.

          "Amortization Stock Option" has the meaning specified in Section 4A(a)
hereof.

          "Amortization Stock Option Share" means each share of Common Stock
issued pursuant to the Amortization Stock Option .

          "Applicable Interest Rate" means an annual rate equal to eight percent
(8%), computed on the basis of a 360-day year and calculated using the actual
number of days elapsed since the Issue Date or the date on which Interest was
most recently paid, as the case may be, and compounded quarterly; provided,
however, that if the average Daily Trading Volume for the period of ten (10)
consecutive Trading Days immediately preceding the one hundred and eightieth
(180th) day following the Issue Date is less than fifty percent (50%) of the
Liquidity Milestone during such period, the Applicable Interest Rate in effect
after such one hundred and eightieth day shall be equal to ten percent (10%);
and, provided, further, that if, at any time after the ninetieth (90th) day
following the effective date of such increase in the Applicable Interest Rate,
the average Daily Trading Volume for any period of ten (10) consecutive Trading
Days is equal to at least fifty percent (50%) of the Liquidity Milestone during
such period, the Applicable Interest Rate shall be decreased to eight percent
(8%), subject to further increase as provided herein if, at any time after the
ninetieth (90th) day following the effective date of such decrease in the
Applicable Interest Rate, the Daily Trading Volume for any period of ten (10)
consecutive Trading Days thereafter is less than fifty percent (50%) of the
Liquidity Milestone during such period.

          "Business Day" means any day other than a Saturday, a Sunday or a day
on which the New York Stock Exchange is closed or on which banks are authorized
by law to close in New York, New York.

          "Change of Control" means the existence or occurrence of any of the
following: (a) the sale, conveyance or disposition of all or substantially all
of the assets of the Company; (b) the effectuation of a transaction or series of
transactions in which more than fifty percent (50%) of the voting power of the
Company is disposed of; (c) the consolidation, merger or other business
combination of the Company with or into any other entity, immediately following
which the prior stockholders of the Company fail to own, directly or indirectly,
at least fifty percent (50%) of the surviving entity; (d) a transaction or
series of transactions in which any Person or group acquires more than fifty
percent (50%) of the voting equity of the Company; and (e) the Continuing
Directors do not at any time constitute at least a majority of the Board of
Directors of the Company.

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          "Continuing Director" means at any date a member of the Company's
Board of Directors (i) who was a member of such board on the date of the
Securities Purchase Agreement or (ii) who was nominated or elected by at least a
majority of the directors who were Continuing Directors at the time of such
nomination or election or whose election to the Company's Board of Directors was
recommended or endorsed by at least a majority of the directors who were
Continuing Directors at the time of such nomination or election or such lesser
number comprising a majority of a nominating committee if authority for such
nominations or elections has been delegated to a nominating committee whose
authority and composition have been approved by at least a majority of the
directors who were Continuing Directors at the time such committee was formed.

          "Conversion Price" means, (i) for an Initial Debenture, two dollars
and forty cents ($2.40) and (ii) for an Option Debenture, the lower of (i) $2.40
and (ii) the Market Price on the Issue Date for such Debenture (subject in each
case to adjustment as provided herein).

          "Convertible Securities" means securities or other instruments which
are convertible into or exercisable or exchangeable for Common Stock.

          "Current Price" means, as of a particular date, the average of the
daily VWAP for each of the five (5) consecutive Trading Days occurring
immediately prior to (but not including) such date.

          "Daily Trading Volume" means, as of any Trading Day, the trading
volume of the Common Stock, expressed as an aggregate dollar amount, on the
Principal Exchange as reported by the Principal Exchange.

          "Debt" means as to any Person at any time: (a) all indebtedness,
liabilities and obligations of such Person for borrowed money; (b) all
indebtedness, liabilities and obligations of such Person to pay the deferred
purchase price of Property or services, except trade accounts payable of such
Person arising in the ordinary course of business that are not past due by more
than 90 days; (c) all capital lease obligations of such Person; (d) all Debt of
others guaranteed by such Person; (e) all indebtedness, liabilities and
obligations secured by a Lien existing on Property owned by such Person, whether
or not the indebtedness, liabilities or obligations secured thereby have been
assumed by such Person or are non-recourse to such Person; (f) all reimbursement
obligations of such Person (whether contingent or otherwise) in respect of
letters of credit, bankers' acceptances, surety or other bonds and similar
instruments; and (g) all liabilities and obligations of such Person to redeem or
retire shares of capital stock of such Person.

          "Default Interest Rate" means the lower of twelve percent (12%) and
the maximum rate permitted by applicable law or by the applicable rules or
regulations of any Governmental Authority.

          "Excluded Securities" has the meaning described in Section 4(b)(iii)
hereof.

          "Fundamental Change" means each of the following:

          (i) a Liquidation Event occurs or is publicly announced;

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          (ii) the failure by the Company to effectuate the Amendment on or
prior to April 15, 2006;

          (iii) the Company breaches or provides notice of its intent to breach,
in a material respect, any covenant or other material term or condition of this
Debenture or any other Transaction Document, and such breach continues for a
period of three (3) Business Days following written notice thereof from the
Holder; or

          (iv) any material representation or warranty made by the Company in
this Debenture or any other Transaction Document was inaccurate or misleading in
any material respect as of the date such representation or warranty was made.

          "Governmental Authority" means any nation or government, any state,
provincial or political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including without limitation any stock exchange, securities
market or self-regulatory organization.

          "Initial Issue Date" means the first date on which Debentures are
issued pursuant to the Securities Purchase Agreement.

          "Interest Stock Option" has the meaning specified in Section 2(b)
hereof.

          "Interest Stock Option Share" means each share of Common Stock issued
pursuant to the Interest Stock Option.

          "Investment Amount" means the aggregate Purchase Price paid by the
Investors for all of the Debentures issued pursuant to the Securities Purchase
Agreement.

          "Issue Date" means the date on which this Debenture is issued pursuant
to the Securities Purchase Agreement.

          "Lien" and "Permitted Lien" shall have the respective meanings set
forth in the Securities Purchase Agreement.

          "Liquidation Event" means (x) the institution of any insolvency or
bankruptcy proceedings, or any receivership, liquidation, reorganization or
other similar proceedings in connection therewith, relative to the Company or
any Subsidiary or to its or their creditors, as such, or to its or their assets,
or (y) the dissolution or other winding up of the Company or any Subsidiary,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy proceedings, or (z) any assignment for the benefit of creditors or
any marshalling of the material assets or material liabilities of the Company or
any Subsidiary.

          "Major Transaction" means a merger, consolidation, business
combination, tender offer, exchange of shares, recapitalization, reorganization,
redemption or other similar event, as a result of which shares of Common Stock
shall be changed into the same or a different number of shares of the same or
another class or classes of stock or securities or other assets of the Company
or another entity or the Company shall sell all or substantially all of its
assets.

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          "Mandatory Redemption Price" means (A) with respect to a Fundamental
Change, one hundred and one percent (101%) of the unpaid principal amount of
this Debenture plus unpaid accrued interest on such principal amount and (B)
with respect to a Change of Control, (x) one hundred and twenty percent (120%)
of the unpaid principal amount of this Debenture if such Change of Control
occurs prior to the one-year anniversary of the Issue Date, (y) one hundred and
fifteen percent (115%) of the unpaid principal amount of this Debenture if such
Change of Control occurs on or after the one-year anniversary of the Issue Date
but prior to the two-year anniversary of the Issue Date and (z) one hundred and
ten percent (110%) of the unpaid principal amount of this Debenture if such
Change of Control occurs after the two-year anniversary of the Issue Date plus,
in the case of (x), (y) or (z), unpaid interest accrued on such principal
amount.

          "Market Price" means, as of a particular date, the average of daily
VWAP for each of the ten (10) consecutive Trading Days occurring immediately
prior to (but not including) such date, but in no event greater than the daily
VWAP for the day occurring immediately prior to such date.

          "Maturity Date" has the meaning set forth in the preamble to this
Agreement.

          "Milestones" means each of the following:

               (i) the Registration Statement shall have been declared
          effective, not be the subject of any stop order, be available to the
          Holder, and cover the number of Registrable Securities required by the
          Registration Rights Agreement;

               (ii) the Reserved Amount must be equal to or greater than the
          number of shares of Common Stock that the Company is required to
          reserve by the Securities Purchase Agreement;

               (iii) the Common Stock must be listed for trading on the New York
          Stock Exchange, the Nasdaq National Market or the Nasdaq SmallCap
          Market on or before the eighteen (18) month anniversary of the Issue
          Date, and trading in the Common Stock shall not have been suspended on
          any such exchange or market (the "Listing Milestone");

               (iv) the Daily Trading Volume must be equal to at least $750,000;
          provided, that if the Company effects an Optional Redemption with
          respect to at least five million dollars ($5,000,000) of principal
          amount of the Debentures (plus accrued interest), such amount shall be
          reduced from $750,000 to $375,000 (such Daily Trading Volume being
          referred to herein as the "Liquidity Milestone"); and

               (v) a Fundamental Change, or an event that with the passage of
          time or giving of notice, or both, would constitute a Fundamental
          Change, has not occurred and is continuing.

          "Optional Redemption" has the meaning specified in Section 7 hereof.

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          "Optional Redemption Price" means (i) with respect to the redemption
of up to five million dollars ($5,000,000) of principal amount of the
Debentures, 105% of the principal amount being redeemed, plus unpaid interest
accrued thereon, and (ii) with respect to the redemption of any amount following
the redemption of at least five million dollars ($5,000,000) of principal amount
of the Debentures, 110% of the principal amount being redeemed, plus unpaid
interest accrued thereon.

          "Person" means any individual, corporation, trust, association,
company, partnership, joint venture, limited liability company, joint stock
company, Governmental Authority or other entity.

          "Principal Market" means the principal securities exchange or market
on which the Common Stock is listed or traded.

          "Purchase Rights" means any options, warrants or other rights to
purchase or subscribe for Common Stock or Convertible Securities.

          "Registrable Securities" has the meaning set forth in the Registration
Rights Agreement.

          "Registration Rights Agreement" means the agreement between the Holder
and the Company pursuant to which the Company has agreed to register the shares
of Common Stock issuable under the Debentures and the Warrants.

          "Registration Statement" has the meaning set forth in the Registration
Rights Agreement.

          "Scheduled Interest Payment Date" means each February 28, May 31,
August 31 and November 30 following the Issue Date, with the first Scheduled
Interest Payment Date occurring on November 30, 2005, provided, that if any of
such days in any year is not a Business Day, then the Scheduled Interest Payment
Date shall be the Business Day immediately following such date.

          "Subsidiary" has the meaning set forth in the Securities Purchase
Agreement.

          "Trading Day" means a Business Day on which shares of Common Stock is
purchased and sold on the Principal Market.

          "Transaction Documents" means (i) the Securities Purchase Agreement,
(ii) the Debentures, (iii) the Warrants, (iv) the Cash Collateral Agreement, (v)
the Subsidiary Guaranty, (vi) the Security Agreement, (vii) the Registration
Rights Agreement, (viii) the Series B Preferred Waiver and Agreement, dated as
of the date hereof, by the Company, Spencer Trask Specialty Group, LLC, and The
Donald F. Farley Inter Vivos Trust, for the benefit of the Holders, and (ix) all
other agreements, documents and other instruments executed and delivered by or
on behalf of the Company any of its officers at the Closing.

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          "VWAP" on a Trading Day means the volume weighted average price of the
Common Stock for such Trading Day on the Principal Market as reported by
Bloomberg Financial Markets or, if Bloomberg Financial Markets is not then
reporting such prices, by a comparable reporting service of national reputation
selected by the Holder and reasonably satisfactory to the Company. If VWAP
cannot be calculated for the Common Stock on such Trading Day on any of the
foregoing bases, then the Company shall submit such calculation to an
independent investment banking firm of national reputation reasonably acceptable
to the Investors, and shall cause such investment banking firm to perform such
determination and notify the Company and the Investors of the results of
determination no later than two (2) Business Days from the time such calculation
was submitted to it by the Company. All such determinations shall be
appropriately adjusted for any stock dividend, stock split or other similar
transaction during such period.

          "Warrants" means the warrants issued pursuant to the Securities
Purchase Agreement.

          "Weighted Average Trigger Date" means the later of (i) the eighteen
(18) month anniversary of the Initial Issue Date and (ii) the completion of an
equity financing with net proceeds to the Company of at least fifteen million
dollars ($15,000,000).

     All definitions contained in this Debenture are equally applicable to the
singular and plural forms of the terms defined. The words "hereof", "herein" and
"hereunder" and words of similar import referring to this Debenture refer to
this Debenture as a whole and not to any particular provision of this Debenture.
Any capitalized term used but not defined herein has the meaning specified in
the Securities Purchase Agreement.

2.   INTEREST.

     (a) Interest Accrual. This Debenture shall bear interest on the unpaid
principal amount hereof ("Interest") at the Applicable Interest Rate. The
Company shall pay accrued and unpaid Interest (i) on each Scheduled Interest
Payment Date, (ii) on the Maturity Date and (iii) on any date on which the
entire principal amount of this Debenture is paid in full (whether through
conversion or otherwise) (each of (i), (ii) and (iii) being referred to herein
as an "Interest Payment Date").

     (b) Interest Payments. The Company shall pay Interest in cash by wire
transfer of immediately available funds; provided, however, that, subject to the
satisfaction of all of the Milestones as specified in paragraph (c) below, the
Company may elect to pay all or a portion of the Interest due on a Scheduled
Interest Payment Date in shares of Common Stock (the "Interest Stock Option").
Interest that is due in cash and which is not paid within five (5) Business Days
of the applicable Interest Payment Date shall bear interest until paid at the
Default Interest Rate.

     (c) Conditions to Interest Payment in Common Stock. The Company shall be
entitled to exercise the Interest Stock Option with respect to a Scheduled
Interest Payment Date only if, on each of the five (5) Trading Days immediately
preceding such date, all of the Milestones are satisfied in full. In the event
that any Milestone is not satisfied as of the applicable Scheduled Interest
Payment Date and each such Trading Day (and regardless of whether the Company
has

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delivered an Interest Stock Option Notice (as defined below)), the Company shall
not be permitted to exercise the Interest Stock Option and must pay all amounts
due on such Scheduled Interest Payment Date in cash by wire transfer of
immediately available funds. Notwithstanding the foregoing, in no event shall
the Company be permitted to exercise the Interest Stock Option to the extent
that, upon receipt of the shares of Common Stock deliverable thereby, the Holder
would beneficially own more than 4.99% of the number of shares of Common Stock
then outstanding.

     (d) Interest Stock Option Notice. In order to exercise the Interest Stock
Option with respect to a Scheduled Interest Payment Date, the Company must
deliver, on or before the fifteenth (15th) calendar day immediately prior to
such date, written notice to the Holder stating that the Company wishes to
exercise such option and the amount of Interest to be paid in shares of Common
Stock (an "Interest Stock Option Notice"). Subject to Section 2(c) above, an
Interest Stock Option Notice, once delivered by the Company, shall be
irrevocable. In the event that the Company does not deliver an Interest Stock
Option Notice on or before such fifteenth day, the Company will be deemed to
have elected to pay all Interest then due in cash.

     (e) Delivery of Shares. On or before the third (3rd) Business Day following
a Scheduled Interest Payment Date with respect to which the Company has validly
exercised the Interest Stock Option (each a "Interest Stock Option Delivery
Date"), the Company must deliver to the Holder a number of shares of Common
Stock equal to (A) the amount of Interest accrued and payable with respect to
this Debenture as of such Scheduled Interest Payment Date divided by (B) ninety
three percent (93%) of the Current Price in effect on such date. The Company
must deliver such shares of Common Stock to the Holder in accordance with the
provisions of paragraph 3(d) below, with the Interest Stock Option Delivery Date
being deemed the Delivery Date for purposes hereof, and in the event of the
Company's failure to effect such delivery on the applicable Delivery Date
therefor (calculated in accordance with paragraph 3(d)), the Holder shall have
the remedies specified in paragraph 3(e) below. If any fractional share would be
issuable upon exercise of the Interest Stock Option, such fractional share shall
be disregarded and the number of shares issuable shall, in the aggregate, be
equal to the nearest whole number of shares.

3.   CONVERSION.

          (a) Right to Convert. Subject to the conditions and limitations
specifically provided herein or in the Securities Purchase Agreement, the Holder
shall have the right to convert, at any time and from time to time after the
Issue Date, all or any part of the outstanding and unpaid principal amount of
this Debenture into such number of fully paid and non-assessable Conversion
Shares as is determined in accordance with the terms hereof (a "Conversion").

          (b) Conversion Notice. In order to convert principal of this
Debenture, the Holder shall send by facsimile transmission, at any time prior to
5:00 p.m., eastern time, on the Business Day on which the Holder wishes to
effect such Conversion (the "Conversion Date"), a properly completed notice of
conversion to the Company, in the form set forth on Annex I hereto, stating the
amount of principal (and, if the Holder so elects, Interest) to be converted and
a calculation of the number of shares of Common Stock issuable upon such
Conversion (a "Conversion Notice"). The Conversion Notice shall also state the
name or names (if not the Holder) in which the shares of Common Stock that are
issuable on such Conversion shall be issued. The Holder shall not be required to
physically surrender this Debenture to the Company in order to

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effect a Conversion. The Company shall maintain a record showing, at any given
time, the unpaid principal amount of this Debenture and the date of each
Conversion or other payment of principal hereof. The Holder shall amend Annex II
hereto upon any such Conversion or payment of principal to reflect the unpaid
principal amount hereof. In the case of a dispute as to the number of Conversion
Shares issuable upon a Conversion (including without limitation as a result of
adjustments to the Conversion Price made in accordance with Section 4 below),
the Company shall promptly issue to the Holder the number of Conversion Shares
that are not disputed and shall submit the disputed calculations to its
independent accountants within two (2) Business Days of receipt of the Holder's
Conversion Notice. The Company shall use its best efforts to cause such
accountants to calculate the Conversion Price as provided herein and to notify
the Company and the Holder of the results in writing no later than two (2)
Business Days following the day on which such accountant received the disputed
calculations (the "Dispute Procedure"). Such accountant's calculation shall be
deemed conclusive absent manifest error. The fees of any such accountant shall
be borne by the party whose calculations are most at variance with those of such
accountant.

          (c) Number of Conversion Shares; Conversion Price. The number of
Conversion Shares to be delivered by the Company pursuant to a Conversion shall
be equal to the principal amount of (and, if the Holder so elects, Interest
accrued on) this Debenture being converted divided by the Conversion Price.

          (d) Delivery of Common Stock Upon Conversion. Upon receipt of a
Conversion Notice, the Company shall, no later than the close of business on the
third (3rd) Business Day following the Conversion Date set forth in such
Conversion Notice (the "Delivery Date"), issue and deliver or cause to be
delivered to the Holder the number of Conversion Shares determined pursuant to
paragraph 3(c) above, provided, however, that any Conversion Shares that are the
subject of a Dispute Procedure shall be delivered no later than the close of
business on the third (3rd) Business Day following the determination made
pursuant thereto. The Company shall effect delivery of Conversion Shares to the
Holder, as long as the Company's designated transfer agent or co-transfer agent
in the United States for the Common Stock (the "Transfer Agent") participates in
the Depository Trust Company ("DTC") Fast Automated Securities Transfer program
("FAST") and no restrictive legend is required pursuant to the terms of this
Debenture or the Securities Purchase Agreement, by crediting the account of the
Holder or its nominee at DTC (as specified in the applicable Conversion Notice)
with the number of Conversion Shares required to be delivered, no later than the
close of business on such Delivery Date. In the event that the Transfer Agent is
not a participant in FAST or if the Holder so specifies in a Conversion Notice
or otherwise in writing on or before the Conversion Date, the Company shall
effect delivery of Conversion Shares by delivering to the Holder or its nominee
physical certificates representing such Conversion Shares, no later than the
close of business on such Delivery Date. If any Conversion would create a
fractional Conversion Share, such fractional Conversion Share shall be
disregarded and the number of Conversion Shares issuable upon such Conversion,
in the aggregate, shall be the nearest whole number of Conversion Shares.
Conversion Shares delivered to the Holder shall not contain any restrictive
legend unless such legend is required pursuant to the terms of the Securities
Purchase Agreement.

          (e) Failure to Deliver Conversion Shares.

               (i) In the event that the Company fails for any reason to deliver
to the Holder the number of Conversion Shares specified in a Conversion Notice
(without any restrictive

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legend to the extent permitted by the terms of the Securities Purchase
Agreement) on or before the second (2nd) Business Day following the Delivery
Date therefor (a "Conversion Default"), (A) the Company shall forfeit its right
to require a Forced Conversion (as defined in Section 5 below) of the Debentures
thereafter, and (B) the Holder shall have the right to receive from the Company
an amount equal to (i) (N/365) multiplied by (ii) the principal amount of this
Debenture represented by the Conversion Shares which remain the subject of such
Conversion Default multiplied by (iii) the Default Interest Rate, where "N"
equals the number of days elapsed between the original Delivery Date of such
Conversion Shares and the date on which such Conversion Default has been cured.
In the event that shares of Common Stock are purchased by or on behalf of the
Holder in order to make delivery on a sale effected in anticipation of receiving
Conversion Shares upon a Conversion, the Holder shall have the right to receive
from the Company, in addition to the foregoing amounts, (i) the aggregate amount
paid by or on behalf of the Holder for such shares of Common Stock minus (ii)
the aggregate amount of net proceeds, if any, received by the Holder from the
sale of the Conversion Shares issued by the Company pursuant to such Conversion.
Amounts payable under this paragraph 3(e)(i) shall be paid to the Holder in
immediately available funds on or before the fifth (5th) Business Day following
written notice from the Holder to the Company specifying the amount owed to it
by the Company pursuant to this paragraph 3(e)(i).

               (ii) In addition to its rights under paragraph 3(e)(i) above, the
Holder shall have the right to pursue all other remedies available to it at law
or in equity (including, without limitation, a decree of specific performance
and/or injunctive relief).

          (f) Limitations on Right to Convert. In no event shall the Holder be
permitted to convert principal of this Debenture if, upon such conversion, (x)
the number of Conversion Shares to be issued pursuant to such Conversion plus
(y) the number of shares of Common Stock beneficially owned by the Holder (other
than Common Stock which may be deemed beneficially owned except for being
subject to a limitation on conversion or exercise analogous to the limitation
contained in this paragraph 3(f)) would exceed 4.99% of the number of shares of
Common Stock then issued and outstanding, it being the intent of the Company and
the Holder that the Holder not be deemed at any time to have the power to vote
or dispose of greater than 4.99% of the number of shares of Common Stock issued
and outstanding at any time. Nothing contained herein shall be deemed to
restrict the right of the Holder to convert such excess principal amount at such
time as such Conversion will not violate the provisions of this paragraph 3(f).
As used herein, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act. To the extent that the limitation contained
in this paragraph 3(f) applies (and without limiting any rights the Company may
otherwise have), the Company may rely on the Holder's determination of whether
this Debenture is convertible pursuant to the terms hereof, the Company shall
have no obligation whatsoever to verify or confirm the accuracy of such
determination, and the submission of a Conversion Notice by the Holder shall be
deemed to be the Holder's representation that this Debenture is convertible
pursuant to the terms hereof. The holders of Common Stock are to be deemed
third-party beneficiaries of the limitation imposed hereby and, accordingly,
this paragraph may not be amended without the consent of the holders of a
majority of the shares of Common Stock then outstanding; provided, however, that
the Holder shall have the right, upon sixty (60) days' prior written notice to
the Company, to waive the provisions of this paragraph 3(f) in the event that
either a Change of Control or Major Transaction is announced or occurs, without
obtaining such consent.

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4.   ADJUSTMENTS TO CONVERSION PRICE.

          (a) Stock Splits, Stock Interests, Etc. If, at any time on or after
the Issue Date, the Company subdivides (by any stock split, stock dividend,
recapitalization, reorganization, reclassification or otherwise) its shares of
Common Stock into a greater number of shares, then after the date of record for
effecting such subdivision, the Conversion Price shall be proportionately
reduced, or if the Company combines (by reverse stock split, recapitalization,
reorganization, reclassification or otherwise) its shares of Common Stock into a
smaller number of shares, the Conversion Price shall be proportionately
increased.

          (b) Adjustment Upon Dilutive Issuance.

          (i) If, at any time after the Issue Date, the Company issues or sells,
or in accordance with subparagraph (ii) of this paragraph 4(b) is deemed to have
issued or sold, any shares of Common Stock for no consideration or for a
consideration per share less than the Conversion Price on the date of such
issuance or sale (or deemed issuance or sale) (a "Dilutive Issuance"), then
effective immediately upon the Dilutive Issuance, the Conversion Price shall be
adjusted as follows:

               (A) if such Dilutive Issuance occurs prior to the Weighted
     Average Trigger Date, then effective immediately upon such Dilutive
     Issuance, the Conversion Price shall be adjusted so as to equal the
     consideration received or receivable by the Corporation (on a per share
     basis) for the additional shares of Common Stock so issued, sold or deemed
     issued or sold in such Dilutive Issuance (which, in the case of a deemed
     issuance or sale, shall be calculated in accordance with subparagraph (ii)
     below). Notwithstanding the foregoing, prior to the Effective Date, the
     Corporation will not engage in any transaction that would result in the
     issuance or deemed issuance of shares of Common Stock for no consideration.

               (B) if such Dilutive Issuance occurs on or after the Weighted
     Average Trigger Date, then effective immediately upon such Dilutive
     Issuance, the Conversion Price shall be adjusted so as to equal an amount
     determined by multiplying such Conversion Price by the following fraction:

               N0 + N1
               -------
               N0 + N2

     where:

               N0 = the number of shares of Common Stock outstanding
                    immediately prior to the issuance, sale or deemed issuance
                    or sale of such additional shares of Common Stock in such
                    Dilutive Issuance (without taking into account any shares of
                    Common Stock issuable upon conversion, exchange or exercise
                    of any Convertible Securities or Purchase Rights, including
                    the Debentures and Warrants);

               N1 = the number of shares of Common Stock which the aggregate
                    consideration, if any, received or receivable by the
                    Corporation for the total number of such additional shares
                    of Common Stock so issued, sold or deemed issued or sold in
                    such Dilutive Issuance (which, in the

                                      -11-
<PAGE>

                    case of a deemed issuance or sale, shall be calculated in
                    accordance with subparagraph (ii) below) would purchase at
                    the Conversion Price in effect immediately prior to such
                    Dilutive Issuance; and

               N2 = the number of such additional shares of Common Stock so
                    issued, sold or deemed issued or sold in such Dilutive
                    Issuance.

               Notwithstanding the foregoing, no adjustment shall be made
     pursuant hereto if such adjustment would result in an increase in the
     Conversion Price.

          (ii) Effect On Conversion Price Of Certain Events. For purposes of
determining the adjusted Conversion Price under subparagraph (i) of this
paragraph 4(b), the following will be applicable:

          (A) Issuance Of Purchase Rights. If, at any time on or after the Issue
Date, the Company issues or sells any Purchase Rights, whether or not
immediately exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such Purchase Rights (or the price of any
conversion of Convertible Securities that may be acquired under such Purchase
Rights, if applicable) is less than the Conversion Price in effect on the date
of issuance or sale of such Purchase Rights, then the maximum total number of
shares of Common Stock issuable upon the exercise of all such Purchase Rights
(assuming full conversion, exercise or exchange of Convertible Securities, if
applicable) shall, as of the date of the issuance or sale of such Purchase
Rights, be deemed to be outstanding and to have been issued and sold by the
Company for such price per share. If the Purchase Rights so issued are not
Variable Rate Securities, then for purposes of the preceding sentence, the
"price per share for which Common Stock is issuable upon the exercise of such
Purchase Rights" shall be determined by dividing (x) the total amount, if any,
received or receivable by the Company as consideration for the issuance or sale
of all such Purchase Rights, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of all such
Purchase Rights, plus, in the case of Convertible Securities issuable upon the
exercise of such Purchase Rights, the minimum aggregate amount of additional
consideration payable upon the conversion, exercise or exchange thereof
(determined in accordance with the calculation method set forth in subparagraph
(ii)(B) below) at the time such Convertible Securities first become convertible,
exercisable or exchangeable, by (y) the maximum total number of shares of Common
Stock issuable upon the exercise of all such Purchase Rights (assuming full
conversion, exercise or exchange of Convertible Securities, if applicable). No
further adjustment to the Conversion Price shall be made upon the actual
issuance of such Common Stock upon the exercise of such Purchase Rights or upon
the conversion, exercise or exchange of Convertible Securities issuable upon
exercise of such Purchase Rights. To the extent that shares of Common Stock or
Convertible Securities are not delivered pursuant to such Purchase Rights, upon
the expiration or termination of such Purchase Rights, the Conversion Price
shall be readjusted to the Conversion Price that would then be in effect had the
adjustments made upon the issuance of such Purchase Rights been made on the
basis of delivery of only the number of shares of Common Stock actually
delivered.

          (B) Issuance Of Convertible Securities. If, at any time on or after
the Issue Date, the Company issues or sells any Convertible Securities, whether
or not immediately convertible, exercisable or exchangeable, and the price per
share for which Common Stock is issuable upon such

                                      -12-
<PAGE>

conversion, exercise or exchange is less than the Conversion Price in effect on
the date of issuance or sale of such Convertible Securities, then the maximum
total number of shares of Common Stock issuable upon the conversion, exercise or
exchange of all such Convertible Securities shall, as of the date of the
issuance or sale of such Convertible Securities, be deemed to be outstanding and
to have been issued and sold by the Company for such price per share. If the
Convertible Securities so issued or sold are not Variable Rate Securities, then
for the purposes of the immediately preceding sentence, the "price per share for
which Common Stock is issuable upon such conversion, exercise or exchange" shall
be determined by dividing (A) the total amount, if any, received or receivable
by the Company as consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion, exercise or exchange thereof
(determined in accordance with the calculation method set forth in this
subparagraph (ii)(B)) at the time such Convertible Securities first become
convertible, exercisable or exchangeable, by (B) the maximum total number of
shares of Common Stock issuable upon the exercise, conversion or exchange of all
such Convertible Securities. No further adjustment to the Conversion Price shall
be made upon the actual issuance of such Common Stock upon conversion, exercise
or exchange of such Convertible Securities. To the extent that shares of Common
Stock are not delivered pursuant to conversion of such Convertible Securities,
upon the expiration or termination of the right to convert such Convertible
Securities into Common Stock, the Conversion Price shall be readjusted to the
Conversion Price that would then be in effect had the adjustments made upon the
issuance of such Convertible Securities been made on the basis of delivery of
only the number of shares of Common Stock actually delivered.

          (C) Issuance of Variable Rate Securities. If any Purchase Rights or
Convertible Securities, including Convertible Securities issuable on exercise of
Purchase Rights, constitute Variable Rate Securities, then for purposes of the
first sentence of subparagraphs (ii)(A) and (ii)(B) of this paragraph 4(b), the
"price per share for which Common Stock is issuable upon such conversion,
exercise or exchange" shall be deemed to be the lowest price per share which
would be applicable (assuming all holding period and other conditions to any
discounts contained in such Variable Rate Security have been satisfied) if the
conversion price of such Variable Rate Security on the date of issuance or sale
thereof were seventy-five percent (75%) of the actual conversion price on such
date (the "Assumed Variable Market Price"), and, further, if such Variable Rate
Security at any time or times thereafter is exercised, purchased, or converted
at a price lower that the Assumed Variable Market Price, the Conversion Price in
effect at such time shall be readjusted to equal the actual conversion price of
such Variable Rate Convertible Security existing at the time of such exercise,
purchase or conversion. To the extent that shares of Common Stock are not
delivered pursuant to the exercise, purchase or conversion of such Variable Rate
Securities, upon the expiration or termination of the right to exercise,
purchase or convert such Variable Rate Securities into Common Stock, the
Conversion Price shall be readjusted to the Conversion Price that would then be
in effect had the adjustments made upon the issuance of such Variable Rate
Securities been made on the basis of delivery of only the number of shares of
Common Stock actually delivered.

          (D) Change In Option Price Or Conversion Rate. If there is a change at
any time in (x) the amount of additional consideration payable to the Company
upon the exercise of any Purchase Rights; (y) the amount of additional
consideration, if any, payable to the Company upon the conversion, exercise or
exchange of any Convertible Securities; or (z) the formula for determining the
number of shares issuable under a Variable Rate Security (in each such case,
other than under or by reason of provisions designed to protect against
dilution), the Conversion Price in

                                      -13-
<PAGE>

effect at the time of such change shall be readjusted to the Conversion Price
which would have been in effect at such time had such Purchase Rights,
Convertible Securities or Variable Securities still outstanding provided for
such changed additional consideration or changed conversion, exercise or
exchange rate, as the case may be, at the time initially issued or sold.

          (E) Calculation Of Consideration Received. If any Common Stock,
Purchase Rights or Convertible Securities are issued or sold for cash, the
consideration received therefor will be the amount received by the Company
therefor. In case any Common Stock, Purchase Rights or Convertible Securities
are issued or sold for a consideration part or all of which shall be other than
cash, including in the case of a strategic or similar arrangement in which the
other entity will provide services to the Company, purchase services from the
Company or otherwise provide intangible consideration to the Company, the amount
of the consideration other than cash received by the Company (including the net
present value of the consideration expected by the Company for the provided or
purchased services) shall be the fair market value of such consideration, except
where such consideration consists of securities, in which case the amount of
consideration received by the Company will be the average of the last sale
prices thereof on the principal market for such securities during the period of
ten Trading Days immediately preceding the date of receipt. In case any Common
Stock, Purchase Rights or Convertible Securities are issued in connection with
any merger or consolidation in which the Company is the surviving corporation,
the amount of consideration therefor will be deemed to be the fair market value
of such portion of the net assets and business of the non-surviving corporation
as is attributable to such Common Stock, Purchase Rights or Convertible
Securities, as the case may be. Notwithstanding anything else herein to the
contrary, if Common Stock, Purchase Rights or Convertible Securities are issued
or sold in conjunction with each other as part of a single transaction or in a
series of related transactions, the Holder may elect to determine the amount of
consideration deemed to be received by the Company therefor by deducting the
fair value of any type of securities (the "Disregarded Securities") issued or
sold in such transaction or series of transactions. If the holder makes an
election pursuant to the immediately preceding sentence, no adjustment to the
Conversion Price shall be made pursuant to this paragraph 4(b) for the issuance
of the Disregarded Securities or upon any conversion, exercise or exchange
thereof. The independent members of the Company's Board of Directors shall
calculate reasonably and in good faith, using standard commercial valuation
methods appropriate for valuing such assets, the fair market value of any
consideration other than cash or securities.

          (F) Issuances Pursuant To Existing Securities. If the Company issues
(or becomes obligated to issue) shares of Common Stock pursuant to any
anti-dilution or similar adjustments (other than as a result of stock splits,
stock dividends and the like) contained in any Convertible Securities or
Purchase Rights outstanding as of the date hereof but not specifically disclosed
in a schedule to the Securities Purchase Agreement, then all shares of Common
Stock so issued shall be deemed to have been issued for no consideration. If the
Company issues (or becomes obligated to issue) shares of Common Stock pursuant
to any anti-dilution or similar adjustments contained in any Convertible
Securities or Purchase Rights specifically disclosed in a schedule to the
Securities Purchase Agreement as a result of the issuance of the Debentures or
Warrants and the number of shares that the Company issues (or is obligated to
issue) as a result of such initial issuance exceeds the amount specified in such
schedule, such excess shares shall be deemed to have been issued for no
consideration.

                                      -14-
<PAGE>

          (iii) Exceptions To Adjustment Of Conversion Price. Notwithstanding
the foregoing, no adjustment to the Conversion Price shall be made pursuant to
this paragraph 4(b) upon the issuance of any Excluded Securities. For purposes
hereof, "Excluded Securities" means (I) securities purchased under the
Securities Purchase Agreement (including all securities issued to any finder or
broker for facilitating the purchase of the Debentures and the Warrants); (II)
securities issued upon conversion or exercise of the Debentures or the Warrants;
(III) shares of Common Stock issuable or issued to (x) employees, consultants or
directors from time to time upon the exercise of options, in such case granted
or to be granted in the discretion of the Board of Directors pursuant to one or
more stock option plans or restricted stock plans in effect as of the Issue Date
or adopted after the Issue Date by the independent members of the Board of
Directors with substantially the same terms as such plans in effect as of the
Issue Date, and (y) vendors pursuant to warrants to purchase Common Stock that
are outstanding on the date hereof or issued hereafter, provided such issuances
are approved by the Board of Directors; (IV) any borrowings, direct or indirect,
from financial institutions by the Company that are approved by the Board of
Directors, including any type of loan or payment evidenced by any type of Debt
instrument, provided the value of the equity portion of any such borrowings,
including warrants, options or other rights to purchase capital stock and other
interests convertible into capital stock of the Company, does not exceed ten
percent (10%) of such borrowing (or, in the case of a borrowing under the
existing working capital facility provided by Spencer Trask and the Related
Parties, does not exceed forty percent (40%) of such borrowing); (V) shares of
Common Stock issued in connection with any stock split, stock dividend or
recapitalization of the Company; (VI) shares of Common Stock issued in
connection with the acquisition by the Company of any corporation or other
entity occurring after the Effective Date and as long as a fairness opinion with
respect to such acquisition is rendered by an investment bank of national
recognition; (VII) shares of Common Stock issued in connection with any
Convertible Securities or Purchase Rights outstanding on the Issue Date and
disclosed in a schedule to the Securities Purchase Agreement; (VIII) shares of
Common Stock issued to Persons with whom the Company is entering into a joint
venture, strategic alliance or other commercial relationship in connection with
the operation of the Company's business and not in connection with a transaction
the purpose of which is to raise equity capital; (IX) shares of Common Stock
issued pursuant to a bona fide registered public offering underwritten on a best
efforts basis by Spencer Trask or a nationally-recognized investment bank with
net proceeds to the Company of at least fifteen million dollars ($15,000,000)
(provided, however, that if the offering price per share of such offering is
below the Conversion Price then in effect, then the Company shall, pursuant to
the Optional Redemption provisions of Section 7 hereof, redeem not less than
$5,000,000 of the Debentures (on a pro rata basis according to the outstanding
principal balance of each Debenture then outstanding) within one (1) Business
Day following the closing of such offering), and (X) the Additional Registrable
Securities (as defined in the Registration Rights Agreement).

          (iv) Notice Of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this paragraph 4(b) or any
change in the number or type of stock, securities and/or other property issuable
upon Conversion of this Debenture, the Company, at its expense, shall promptly
compute such adjustment, readjustment or change and prepare and furnish to the
Holder a certificate setting forth such adjustment, readjustment or change and
showing in detail the facts upon which such adjustment, readjustment or change
is based. The Company shall, upon the written request at any time of the Holder,
furnish to the Holder a certificate setting forth (i) such adjustment,
readjustment or change, (ii) the Conversion Price at the time in

                                      -15-
<PAGE>

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 this Debenture.

          (c) Major Transactions. If, at any time after the Issue Date, any
Major Transaction shall occur, then the Holder shall thereafter have the right
to receive upon Conversion, in lieu of the shares of Common Stock otherwise
issuable, such shares of stock, securities and/or other property as would have
been issued or payable upon such Major Transaction with respect to or in
exchange for the number of shares of Common Stock which would have been issuable
upon Conversion had such Major Transaction not taken place (without giving
effect to any limitations on such Conversion contained in this Debenture or the
Securities Purchase Agreement). The Company shall not effect any Major
Transaction unless (i) the Holder has received written notice of such
transaction at least twenty (20) days prior thereto (which period shall be
increased to sixty one (61) days if, at such time, without giving effect to the
limitation on conversion contained in paragraph 3(f) hereof, the Holder would,
upon conversion, beneficially own more than 4.99% of the Common Stock then
outstanding) but in no event later than fifteen (15) days prior to the record
date for the determination of stockholders entitled to vote with respect
thereto; provided, however, that the Company shall publicly disclose the
material terms of any such Major Transaction on or before the date on which it
delivers notice of a Major Transaction to the Holder, and (ii) the resulting
successor or acquiring entity (if not the Company) assumes by written instrument
(in form and substance reasonable satisfactory to the Holder) the obligations of
the Company under this Debenture (including, without limitation, the obligation
to make payments of Interest accrued but unpaid through the date of such
consolidation, merger or sale and accruing thereafter). The above provisions
shall apply regardless of whether or not there would have been a sufficient
number of shares of Common Stock authorized and available for issuance upon
conversion of this Debenture as of the date of such transaction, and shall
similarly apply to successive Major Transactions.

          (d) Distributions. If, at any time after the Issue Date, the Company
declares or makes any distribution of cash or any other assets (or rights to
acquire such assets) to holders of Common Stock, including without limitation
any dividend or distribution to the Company's stockholders in shares (or rights
to acquire shares) of capital stock of a subsidiary) (a "Distribution"), the
Company shall deliver written notice of such Distribution (a "Distribution
Notice") to the Holder at least fifteen (15) days prior to the earlier to occur
of (i) the record date for determining stockholders entitled to such
Distribution (the "Record Date") and (ii) the date on which such Distribution is
made (the "Distribution Date")(the earlier of such dates being referred to as
the "Determination Date"). In the Distribution Notice to the Holder, the Company
shall indicate whether the Company has elected (A) to deliver to the Holder, at
the same time that it makes such Distribution to its shareholders, the same
amount and type of assets (including, without limitation, cash) being
distributed as though the Holder were, on the Determination Date, a holder of a
number of shares of Common Stock into which this Debenture is convertible as of
such Determination Date (such number of shares to be determined without giving
effect to any limitations on such conversion) or (B) upon any Conversion of this
Debenture on or after the Distribution Date, to reduce the Conversion Price
applicable to such Conversion by reducing the Conversion Price in effect on the
Business Day immediately preceding the Record Date by an amount equal to the
fair market value of the assets to be distributed divided by the number of
shares of Common Stock as to which such Distribution is to be made, such fair
market value to be reasonably determined in good faith by the independent
members of the Company's Board of Directors. If the Company does not

                                      -16-
<PAGE>

notify the Holder of its election pursuant to the preceding sentence on or prior
to the Determination Date, the Company shall be deemed to have elected clause
(A) of the preceding sentence.

4A.  PRINCIPAL AMORTIZATION.

          (a) Monthly Amortization. Beginning on the two hundred and seventy
first (271st) day following the Issue Date (such two hundred and seventy first
day being referred to herein as the "Amortization Commencement Date"), the
Company shall pay to the Holder, in cash (subject to paragraph (b) below), on
the last day of each calendar quarter following the Amortization Commencement
Date (each, a "Principal Payment Date"), 11.11% of the original principal amount
of this Debenture (plus unpaid accrued interest thereon) (each, a "Principal
Payment"), with the first Principal Payment Date occurring on August 31, 2006;
provided, that if any Principal Payment Date is not a Business Day, such payment
shall be made on the next succeeding Business Day. A Principal Payment that is
due in cash and which is not paid on the applicable Principal Payment Date shall
bear interest until paid at the Default Interest Rate.

          (b) Payment of Principal in Stock. Subject to the terms and conditions
of this paragraph 4A, the Company may elect to pay all or a portion of a
Principal Payment in shares of Common Stock (the "Amortization Stock Option").
The Company shall be entitled to exercise the Amortization Stock Option with
respect to a Principal Payment Date only if on such Principal Payment Date and
on at least twenty (20) of the thirty (30) consecutive Trading Days immediately
preceding such Principal Payment Date, all of the Milestones are satisfied in
full; provided, however, that if each Milestone, other than the Liquidity
Milestone and the Listing Milestone, is satisfied on such Principal Payment Date
and on at least twenty (20) of the thirty (30) consecutive Trading Days
immediately preceding such Principal Payment Date, the Company shall be entitled
to exercise the Amortization Stock Option with respect to an amount of principal
equal to the lesser of (i) the Principal Payment due on such date and (ii) the
average Daily Trading Volume for the prior sixty (60) Trading Days multiplied by
the Market Price in effect on such Principal Payment Date divided by the amount
of the Liquidity Milestone. Notwithstanding the foregoing, in no event shall the
Company be permitted to exercise the Amortization Stock Option to the extent
that, upon receipt of the shares of Common Stock deliverable thereby, the Holder
would beneficially own more than 4.99% of the number of shares of Common Stock
then outstanding, and the balance of the Principal Payment then due shall be
paid in cash. In the event the Company is not permitted or chooses not to
exercise the Amortization Stock Option as of a Principal Payment Date with
respect to all or any part of the Principal Payment due on such date (and
regardless of whether the Company has delivered an Amortization Stock Option
Notice (as defined below)), the Company must pay the amount of such Principal
Payment that is not payable pursuant to the Amortization Stock Option in cash by
wire transfer of immediately available funds.

          (c) Amortization Stock Option Notice. In order to exercise the
Amortization Stock Option with respect to a Principal Payment Date, the Company
must deliver, on or before the fifteenth (15th) calendar day immediately prior
to such date (a "Notice Period"), written notice to the Holder stating that the
Company wishes to exercise such option and the amount of principal and Interest
to be paid in shares of Common Stock (an "Amortization Stock Option Notice").
Subject to Section 4(b) above, an Amortization Stock Option Notice, once
delivered by the Company, shall be irrevocable. In the event that the Company
does not deliver an Amortization Stock Option Notice on or before such fifteenth
day, the Company will be deemed to have elected to pay all principal then due in
cash.

                                      -17-
<PAGE>

          (d) Delivery of Shares. On or before the third (3rd) Business Day
following a Principal Payment Date with respect to which the Company has validly
exercised the Amortization Stock Option (each an "Amortization Stock Option
Delivery Date"), the Company must deliver to the Holder a number of shares of
Common Stock equal to (A) the amount of principal and Interest accrued and
payable with respect to this Debenture as of such Principal Payment Date divided
by (B) ninety-three percent (93%) of the Current Price in effect on such date
(the "Amortization Stock Option Price"). The Company must deliver such shares of
Common Stock to the Holder in accordance with the provisions of paragraph 3(d)
above, with the Amortization Stock Option Delivery Date being deemed the
Delivery Date, and in the event of the Company's failure to effect such delivery
on the applicable Delivery Date therefor (calculated in accordance with
paragraph 3(d)), the Holder shall have the remedies specified in paragraph 3(e)
above.

5.   FORCED CONVERSION.

          (a) Forced Conversion. Subject to the terms and conditions of this
paragraph 5(a), the Company shall have the right, exercisable at any time after
the thirtieth (30th) day following the Effective Date, to require Conversion of
this Debenture (a "Forced Conversion"). In order to effect a Forced Conversion,
(i) the daily VWAP must, on each of twenty (20) Trading Days occurring during
any period of thirty (30) consecutive Trading Days (such period of thirty
Trading Days, a "Forced Conversion Period"), be equal to or greater than two
hundred percent (200%) of the Conversion Price in effect on the Issue Date
(subject to adjustment for stock splits, stock dividends and similar events),
(ii) each Milestone (other than the Liquidity Milestone) must be satisfied on
each Trading Day occurring during the Forced Conversion Period, and (iii) the
Liquidity Milestone must be satisfied on any twenty (20) consecutive Trading
Days occurring during such Forced Conversion Period. Notwithstanding the
foregoing, in no event shall the Company be permitted to effect a Forced
Conversion to the extent that, upon receipt of the shares of Common Stock
deliverable thereby, the Holder would beneficially own more than 4.99% of the
number of shares of Common Stock then outstanding. In the event of a Forced
Conversion, the Company and the Holder shall follow the procedures for
Conversion set forth in Section 3 above, with the Forced Conversion Date (as
defined below) deemed to be the Conversion Date for purposes hereof.

          (b) Forced Conversion Notice; Number of Conversion Shares. In order to
effect a Forced Conversion hereunder, the Company must deliver to the Holder
written notice thereof (a "Forced Conversion Notice") at any time after the
fifth (5th) Business Day immediately following the last Trading Day of the
Forced Conversion Period but not later than the tenth (10th) Business Day
following such last Trading Day. A Forced Conversion shall be effected on the
date (the "Forced Conversion Date") that is the third (3rd) Trading Day
immediately following delivery of a Forced Conversion Notice to the Holder. A
Forced Conversion Notice shall specify the aggregate principal amount of the
Debentures that the Company elects to submit to a Forced Conversion.
Notwithstanding the delivery by the Company of a Forced Conversion Notice,
nothing contained herein shall be deemed to limit in any way (x) the right of
the Holder to convert this Debenture prior to the Forced Conversion Date or (y)
the availability of any and all remedies that are provided to the Holder
hereunder, including without limitation in the event that the Company fails to
deliver Conversion Shares upon a Forced Conversion as required by the terms of
Section 3 hereof, provided, that, in the event of such failure, the Forced
Conversion shall be terminated with respect to the Holder upon the delivery of
written notice thereof by the Holder to the Company, and the Company shall
forfeit its right to require a Forced

                                      -18-
<PAGE>

Conversion of the Debentures thereafter. In the event of multiple Forced
Conversions, at least sixty (60) days must elapse between Forced Conversion
Dates.

          (c) Upon any Forced Conversion occurring prior to the eighteen (18)
month anniversary of the Issue Date, the Company shall pay to the Holder on the
Forced Conversion Date (i) accrued and unpaid interest through the Forced
Conversion Date on the principal amount of the Debenture so converted and (ii)
interest that, but for such Forced Conversion, would have accrued on such
principal amount from the Forced Conversion Date through the eighteen (18) month
anniversary of the Issue Date. Upon any Forced Conversion occurring on or after
the eighteen (18) month anniversary of the Issue Date, the Company shall pay to
the Holder on the Forced Conversion Date (i) accrued and unpaid interest through
the Forced Conversion Date on the principal amount of the Debenture so converted
and (ii) interest that, but for such Forced Conversion, would have accrued on
such principal amount from the Forced Conversion Date through the Maturity Date.
Such interest shall be paid in cash or to the extent permitted by Section 2(c)
and in the manner set forth in Section 2(d) and 2(e) hereof, shares of Common
Stock.

6.   FUNDAMENTAL CHANGE; CHANGE OF CONTROL; MANDATORY REDEMPTION.

          (a) Mandatory Redemption. In the event that a Fundamental Change or a
Change of Control occurs, the Holder shall have the right, upon written notice
to the Company (a "Mandatory Redemption Notice"), to have all or any portion of
the unpaid principal amount of this Debenture, plus all accrued and unpaid
Interest thereon, redeemed by the Company (a "Mandatory Redemption") at the
Mandatory Redemption Price in same day funds. The Mandatory Redemption Notice
shall specify the effective date of such Mandatory Redemption (the "Mandatory
Redemption Date"), which date must be at least five (5) Business Days following
the Business Day on which the Mandatory Redemption Notice is delivered to the
Company, and the amount of principal and Interest to be redeemed. In order to
effect a Mandatory Redemption hereunder, the Holder must deliver a Mandatory
Redemption Notice no later than, in the case of a Fundamental Change, the close
of business on the Business Day immediately following the first Business Day on
which a Fundamental Change is no longer continuing and, with respect to a Change
of Control, the close of business on the third (3rd) Business Day following the
date on which the Change of Control is completed.

          (b) Payment of Mandatory Redemption Price.

               (i) The Company shall pay the Mandatory Redemption Price to the
Holder within five (5) Business Days of the Mandatory Redemption Date. In the
event that the Company redeems the entire remaining unpaid principal amount of
this Debenture, and pays to the Holder all Interest accrued thereon and all
other amounts due in connection therewith, the Holder shall return this
Debenture to the Company for cancellation.

               (ii) If the Company fails to pay the Mandatory Redemption Price
to the Holder within five (5) Business Days of the Mandatory Redemption Date,
the Holder shall be entitled to interest thereon at the Default Interest Rate
from the Mandatory Redemption Date until the date on which Mandatory Redemption
Price has been paid in full.

                                      -19-
<PAGE>

7.   OPTIONAL REDEMPTION.

          (a) Redemption. The Company shall have the right, at any time after
the Issue Date, to redeem all or any portion of the unpaid principal amount of
this Debenture, plus all accrued and unpaid Interest thereon (an "Optional
Redemption"), at the Optional Redemption Price. In order to effect an Optional
Redemption, the Company must deliver to the Holder written notice thereof (an
"Optional Redemption Notice"), specifying the effective date of such Optional
Redemption (the "Optional Redemption Date"), which date must be at least twenty
(20) Trading Days following delivery of the Optional Redemption Notice to the
Holder, and the amount of principal to be redeemed. In the event that the
Company effects an Optional Redemption with respect to this Debenture, it must
contemporaneously effect an Optional Redemption with respect to each other
Debenture on a pro rata basis (taking into account the principal amount of each
Debenture then outstanding). Notwithstanding the delivery by the Company of an
Optional Redemption Notice, nothing contained herein shall be deemed to limit in
any way (x) the right of the Holder to convert this Debenture prior to the
Optional Redemption Date or (y) the availability of any and all remedies that
are provided to the Holder hereunder in the event that the Company does not
satisfy its obligations with respect to any such conversion.

          (b) Payment of Optional Redemption Price.

               (i) The Company shall pay the Optional Redemption Price to the
Holder within five (5) Business Days of the Optional Redemption Date. In the
event that the Company redeems the entire remaining unpaid principal amount of
this Debenture, and pays to the Holder the Optional Redemption Price and all
other amounts due in connection therewith, the Holder shall return this
Debenture to the Company for cancellation.

               (ii) If the Company fails to pay the Optional Redemption Price to
the Holder within five (5) Business Days of the Optional Redemption Date, the
Holder shall be entitled to interest thereon at the Default Interest Rate from
the Optional Redemption Date until the date on which Optional Redemption Price
has been paid in full.

          (c) Prepayment. Except as specifically provided by the terms of this
Section 7, the Company shall not have the right to prepay principal of this
Debenture.

8.   MISCELLANEOUS.

          (a) Failure to Exercise Rights 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 any other or further exercise
thereof. All rights and remedies of the Holder hereunder are cumulative and not
exclusive of any rights or remedies otherwise available.

          (b) Notices. Any notice, demand or request required or permitted to be
given by the Company or the Holder pursuant to the terms of this Debenture shall
be in writing and shall be deemed delivered (i) when delivered personally or by
verifiable facsimile transmission, unless such delivery is made on a day that is
not a Business Day, in which case such delivery will be deemed to be made on the
next succeeding Business Day and (ii) on the next Business Day after timely
delivery to an overnight courier, addressed as follows:

                                      -20-
<PAGE>

                  If to the Company:

                  Vyteris Holdings (Nevada), Inc.
                  13-01 Pollitt Drive
                  Fair Lawn, NJ 07410
                  Attn:    Chief Financial Officer
                  Tel:     201-703-2299
                  Fax:     201-703-2295

                  with a copy to:

                  Lowenstein Sandler PC
                  65 Livingston Avenue
                  Roseland, New Jersey 07068
                  Attn: Peter H. Ehrenberg, Esq.
                  Tel:  973-597-2350
                  Fax: 973-597-2351

and if to the Holder, at such address as the Holder shall have furnished the
Company in writing.

          (c) Amendments. No amendment, modification or other change to, or
waiver of any provision of, this Debenture may be made unless such amendment,
modification or change is set forth in writing and is signed by the Company and
the Holder.

          (d) Transfer of Debenture. The Holder may sell, transfer or otherwise
dispose of all or any part of this Debenture (including without limitation
pursuant to a pledge) to any person or entity as long as such sale, transfer or
disposition is the subject of an effective registration statement under the
Securities Act and applicable state securities laws, or is exempt from
registration thereunder, and is otherwise made in accordance with the applicable
provisions of the Securities Purchase Agreement. From and after the date of any
such sale, transfer or disposition, the transferee hereof shall be deemed to be
the holder of a Debenture in the principal amount acquired by such transferee,
and the Company shall, as promptly as practicable, issue and deliver to such
transferee a new Debenture identical in all respects to this Debenture, in the
name of such transferee. The Company shall be entitled to treat the original
Holder as the holder of this entire Debenture unless and until it receives
written notice of the sale, transfer or disposition hereof.

          (e) Lost or Stolen Debenture. Upon receipt by the Company of evidence
of the loss, theft, destruction or mutilation of this Debenture, and (in the
case of loss, theft or destruction) of indemnity or security reasonably
satisfactory to the Company, and upon surrender and cancellation of the
Debenture, if mutilated, the Company shall execute and deliver to the Holder a
new Debenture identical in all respects to this Debenture.

          (f) Governing Law. This Debenture shall be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
made and to be performed entirely within the State of New York.

          (g) Successors and Assigns. The terms and conditions of this Debenture
shall inure to the benefit of and be binding upon the respective successors
(whether by merger or otherwise) and

                                      -21-
<PAGE>

permitted assigns of the Company and the Holder. The Company may not assign its
rights or obligations under this Debenture except as specifically required or
permitted pursuant to the terms hereof.

          (h) Usury. This Debenture is subject to the express condition that at
no time shall the Company be obligated or required to pay interest hereunder at
a rate which could subject the Holder to either civil or criminal liability as a
result of being in excess of the maximum interest rate which the Company is
permitted by applicable law to contract or agree to pay. If by the terms of this
Debenture, the Company is at any time required or obligated to pay interest
hereunder at a rate in excess of such maximum rate, the rate of interest under
this Debenture shall be deemed to be immediately reduced to such maximum rate
and the interest payable shall be computed at such maximum rate and all prior
interest payments in excess of such maximum rate shall be applied and shall be
deemed to have been payments in reduction of the principal balance of this
Debenture.

                           [Signature Page to Follow]

                                      -22-
<PAGE>

IN WITNESS WHEREOF, the Company has caused this Debenture to be signed in its
name by its duly authorized officer on the date first above written.

VYTERIS HOLDINGS (NEVADA), INC.

By:____________________________
   Name:
   Title:

                                      -23-
<PAGE>

                                                                         ANNEX I

                              NOTICE OF CONVERSION

The undersigned hereby elects to convert principal of and/or interest accrued on
the Senior Secured Convertible Debenture (the "Debenture") issued by VYTERIS
HOLDINGS (NEVADA), INC. (the "Corporation") into shares of common stock ("Common
Stock") of the Company according to the terms and conditions of the Debenture.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Debenture.

                              Date of Conversion:_______________________________

                              Principal Amount of
                              Debenture to be Converted:________________________

                              Amount of  Interest
                              to be Converted:__________________________________

                              Number of Shares of
                              Common Stock to be Issued:________________________

                              Name of Holder:___________________________________

                              Address:       ___________________________________

                                             ___________________________________

                                             ___________________________________

                              Signature:     ___________________________________
                                             Name:
                                             Title:

Holder Requests Delivery to be made: (check one)
-----------------------------------

[ ]      By Delivery of Physical Certificates to the Above Address

[ ]      Through Depository Trust Corporation
         (Account_____________________________________)
<PAGE>

                                                                        ANNEX II

                                   Schedule of
                                    Decreases
                               of Principal Amount

<TABLE>
<CAPTION>
     Principal                      Amount of
      Balance                        Decrease                        Date
     ---------                       --------                        -----
<S>                            <C>                             <C>
   $[  ],000,000
-------------------            -------------------             -----------------

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

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

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

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

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

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

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

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

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

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

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

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

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

-------------------            -------------------             -----------------
</TABLE><PAGE>

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED FOR SALE, SOLD OR
TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS SHALL BE EFFECTIVE WITH RESPECT THERETO, OR AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER. SUBJECT TO COMPLIANCE
WITH THE REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS, THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY
BE PLEDGED OR HYPOTHECATED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY THIS WARRANT OR ANY OF THE SECURITIES ISSUABLE UPON
EXERCISE OF THIS WARRANT.

                                     WARRANT

                            TO PURCHASE COMMON STOCK

                                       OF

                         VYTERIS HOLDINGS (NEVADA), INC.

Issue Date: August 19, 2005                                       Warrant No. __

     THIS CERTIFIES that _____________________ or any subsequent holder hereof
(the "Holder"), has the right to purchase from VYTERIS HOLDINGS (NEVADA), INC.,
a Nevada corporation (the "Company"), up to ______________ fully paid and
nonassessable shares of the Company's common stock, par value $0.001 per share
(the "Common Stock"), subject to adjustment as provided herein, at a price per
share equal to the Exercise Price (as defined below), at any time and from time
to time beginning on the date on which this Warrant is issued (the "Issue Date")
and ending at 5:00 p.m., eastern time, on the seventh (7th) anniversary of the
Issue Date or, if such day is not a Business Day, on the next succeeding
Business Day (the "Expiration Date"). This Warrant is issued pursuant to a
Securities Purchase Agreement, dated as of August 19, 2005 (the "Securities
Purchase Agreement"). Capitalized terms used herein and not otherwise defined
shall have the respective meanings set forth in the Securities Purchase
Agreement and the Debenture.
<PAGE>

     1.   Exercise.

     (a) Right to Exercise; Exercise Price. The Holder shall have the right to
exercise this Warrant at any time and from time to time during the period
beginning on the Issue Date and ending on the Expiration Date as to all or any
part of the shares of Common Stock covered hereby (the "Warrant Shares"). The
"Exercise Price" for each Warrant Share purchased by the Holder upon the
exercise of this Warrant shall be equal to $2.88, subject to adjustment for the
events specified in Section 6 below.

     (b) Exercise Notice. In order to exercise this Warrant, the Holder shall
(i) send by facsimile transmission, at any time prior to 5:00 p.m., eastern
time, on the Business Day on which the Holder wishes to effect such exercise
(the "Exercise Date"), to the Company an executed copy of the notice of exercise
in the form attached hereto as Exhibit A (the "Exercise Notice"), (ii) deliver
the original Warrant and, in the case of a Cash Exercise (as defined below), the
Exercise Price to the Company. The Exercise Notice shall also state the name or
names in which the Warrant Shares issuable on such exercise shall be issued. In
the case of a dispute as to the calculation of the Exercise Price or the number
of Warrant Shares issuable hereunder (including, without limitation, the
calculation of any adjustment pursuant to Section 6 below), the Company shall
promptly issue to the Holder the number of Warrant Shares that are not disputed
and shall submit the disputed calculations to a certified public accounting firm
of national recognition (other than the Company's independent accountants)
within two (2) Business Days following the date on which the Exercise Notice is
delivered to the Company. The Company shall cause such accountant to calculate
the Exercise Price and/or the number of Warrant Shares issuable hereunder and to
notify the Company and the Holder of the results in writing no later than three
(3) Business Days following the day on which such accountant received the
disputed calculations (the "Dispute Procedure"). Such accountant's calculation
shall be deemed conclusive absent manifest error. The fees of any such
accountant shall be borne by the party whose calculations were most at variance
with those of such accountant.

     (c) Holder of Record. The Holder shall, for all purposes, be deemed to have
become the holder of record of the Warrant Shares specified in an Exercise
Notice on the Exercise Date specified therein, irrespective of the date of
delivery of such Warrant Shares. Except as specifically provided herein, nothing
in this Warrant shall be construed as conferring upon the Holder hereof any
rights as a stockholder of the Company prior to the Exercise Date.

     (d) Cancellation of Warrant. This Warrant shall be canceled upon its
exercise and, if this Warrant is exercised in part, the Company shall, at the
time that it delivers Warrant Shares to the Holder pursuant to such exercise as
provided herein, issue a new warrant, and deliver to the Holder a certificate
representing such new warrant, with terms identical in all respects to this
Warrant (except that such new warrant shall be exercisable into the number of
shares of Common Stock with respect to which this Warrant shall remain
unexercised); provided, however, that the Holder shall be entitled to exercise
all or any portion of such new warrant at any time following the time at which
this Warrant is exercised, regardless of whether the Company has actually issued
such new warrant or delivered to the Holder a certificate therefor.

                                       2
<PAGE>

     2. Delivery of Warrant Shares Upon Exercise. Upon receipt of an Exercise
Notice pursuant to paragraph 1 above, the Company shall, (A) in the case of a
Cash Exercise (as defined below) no later than the close of business on the
later to occur of (i) the third (3rd) Business Day following the Exercise Date
set forth in such Exercise Notice and (ii) the date on which the Company has
received payment of the Exercise Price, (B) in the case of a Cashless Exercise
(as defined below), no later than the close of business on the third (3rd)
Business Day following the Exercise Date set forth in such Exercise Notice, and
(C) with respect to Warrant Shares that are the subject of a Dispute Procedure,
the close of business on the third (3rd) Business Day following the
determination made pursuant to paragraph 1(b) (each of the dates specified in
(A), (B) or (C) being referred to as a "Delivery Date"), issue and deliver or
cause to be delivered to the Holder the number of Warrant Shares as shall be
determined as provided herein. The Company shall effect delivery of Warrant
Shares to the Holder by, as long as the Transfer Agent participates in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program
("FAST"), crediting the account of the Holder or its nominee at DTC (as
specified in the applicable Exercise Notice) with the number of Warrant Shares
required to be delivered, no later than the close of business on such Delivery
Date. In the event that the Transfer Agent is not a participant in FAST, or if
the Warrant Shares are not otherwise eligible for delivery through FAST, or if
the Holder so specifies in an Exercise Notice or otherwise in writing on or
before the Exercise Date, the Company shall effect delivery of Warrant Shares by
delivering to the Holder or its nominee physical certificates representing such
Warrant Shares, no later than the close of business on such Delivery Date.

     3. Failure to Deliver Warrant Shares.

     (a) In the event that the Company fails for any reason (other than as a
result of the Holder's failure, in the case of a Cash Exercise (as defined
below), to pay the aggregate Exercise Price for the Warrant Shares being
purchased) to deliver to the Holder the number of Warrant Shares specified in
the applicable Exercise Notice on or before the Delivery Date therefor (an
"Exercise Default"), and such default continues for five (5) Business Days
following delivery of a written notice of such default by the Holder to the
Company, the Company shall pay to the Holder payments ("Exercise Default
Payments") in the amount of (i) (N/365) multiplied by (ii) the aggregate
Exercise Price of the Warrant Shares which are the subject of such Exercise
Default multiplied by (iii) the lower of twelve percent (12%) and the maximum
rate permitted by applicable law or by the applicable rules or regulations of
any Governmental Agency (the "Default Interest Rate"), where "N" equals the
number of days elapsed between the original Delivery Date of such Warrant Shares
and the date on which all of such Warrant Shares are issued and delivered to the
Holder. Cash amounts payable hereunder shall be paid on or before the fifth
(5th) Business Day of each calendar month following the calendar month in which
such amount has accrued.

     (b) The Holder's rights and remedies hereunder are cumulative, and no right
or remedy is exclusive of any other. In addition to the amounts specified
herein, the Holder shall have the right to pursue all other remedies available
to it at law or in equity (including, without limitation, a decree of specific
performance and/or injunctive relief). Nothing herein shall limit the Holder's
right to pursue actual damages for the Company's failure to issue and deliver
Warrant Shares on the applicable Delivery Date (including, without limitation,
damages relating

                                       3
<PAGE>

to any purchase of Common Stock by the Holder to make delivery on a sale
effected in anticipation of receiving Warrant Shares upon exercise, such damages
to be in an amount equal to (A) the aggregate amount paid by the Holder for the
Common Stock so purchased minus (B) the aggregate amount of net proceeds, if
any, received by the Holder from the sale of the Warrant Shares issued by the
Company pursuant to such exercise).

     4. Exercise Limitations. In no event shall the Holder be permitted to
exercise this Warrant, or part thereof, if, upon such exercise, the number of
shares of Common Stock beneficially owned by the Holder (other than shares which
would otherwise be deemed beneficially owned except for being subject to a
limitation on exercise or exercise analogous to the limitation contained in this
paragraph 4), would exceed 4.99% of the number of shares of Common Stock then
issued and outstanding. As used herein, beneficial ownership shall be determined
in accordance with Section 13(d) of the Exchange Act. To the extent that the
limitation contained in this paragraph 4 applies, the submission of an Exercise
Notice by the Holder shall be deemed to be the Holder's representation that this
Warrant is exercisable pursuant to the terms hereof and the Company shall be
entitled to rely on such representation without making any further inquiry as to
whether this Section 4 applies. Nothing contained herein shall be deemed to
restrict the right of a Holder to exercise this Warrant, or part thereof, at
such time as such exercise will not violate the provisions of this Section 4.
This Section 4 may not be amended unless such amendment is agreed to in writing
by the Holder and approved by the holders of a majority of the Common Stock then
outstanding; provided, however, that the Holder shall have the right to waive
the provisions of this Section 4 upon prior written notice to the Company
following the announcement of a Major Transaction (as defined below), or
otherwise upon sixty (60) days' prior written notice to the Company.

     5. Payment of the Exercise Price; Cashless Exercise. The Holder may pay the
Exercise Price in either of the following forms or, at the election of Holder, a
combination thereof:

     (a) through a cash exercise (a "Cash Exercise") by delivering immediately
available funds, or

     (b) if, following the one-year anniversary of the Issue Date, an effective
Registration Statement is not available for the resale of all of the Warrant
Shares issuable hereunder at the time an Exercise Notice is delivered to the
Company, or if the Company otherwise consents in writing, through a cashless
exercise (a "Cashless Exercise"). The Holder may effect a Cashless Exercise by
surrendering this Warrant to the Company and noting on the Exercise Notice that
the Holder wishes to effect a Cashless Exercise, upon which the Company shall
issue to the Holder a number of Warrant Shares determined as follows:

             X = Y x (A-B)/A

where:       X = the number of Warrant Shares to be issued to the Holder;

             Y = the number of Warrant Shares with respect to which this Warrant
             is being exercised;

                                       4
<PAGE>

             A = the Market Price as of the Exercise Date; and

             B = the Exercise Price.

     It is intended and acknowledged that the Warrant Shares issued in a
Cashless Exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares required by Rule 144 shall
be deemed to have been commenced, on the Issue Date. For purposes hereof, (A)
"Market Price" means, as of a particular date, the average of the Closing Bid
Prices for the Common Stock occurring during the ten (10) Trading Day period
ending on (and including) the Trading Day immediately preceding such date, and
(B) "Closing Bid Price" means, with respect to the Common Stock as of any
Trading Day, the Closing Bid Price on such date for the Common Stock on the
Principal Market as reported by Bloomberg Financial Markets ("Bloomberg"), or if
the Principal Market begins to operate on an extended hours basis, and does not
designate the Closing Bid Price, then the last price at 4:00 p.m. (eastern
time), as reported by Bloomberg, or if the foregoing do not apply, the last
Closing Bid Price of the Common Stock in the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or, if no
Closing Bid Price is reported for such security by Bloomberg, the last closing
trade price for such security as reported by Bloomberg, or, if no last closing
trade price is reported for such security by Bloomberg, the average of the
prices of any market makers for such security as reported in the "pink sheets"
by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the
Closing Bid Price cannot be calculated for the Common Stock on such date on any
of the foregoing bases, then the Company shall submit such calculation to an
independent investment banking firm of national reputation and reasonably
acceptable to the Holder, and shall cause such investment banking firm to
perform such determination and notify the Company and the Holder of the results
of determination no later than two (2) Business Days from the time such
calculation was submitted to it by the Company. Such investment banking firm's
determination shall be deemed conclusive absent manifest error. All such
determinations shall be appropriately adjusted for any stock dividend, stock
split or other similar transaction during such period.

     6. Anti-Dilution Adjustments; Distributions; Other Events. The Exercise
Price and the number of Warrant Shares issuable hereunder shall be subject to
adjustment from time to time as provided in this Section 6.

     (a) Subdivision or Combination of Common Stock. If the Company, at any time
after the Issue Date, subdivides (by any stock split, stock dividend,
recapitalization, reorganization, reclassification or otherwise) its shares of
Common Stock into a greater number of shares, then after the date of record for
effecting such subdivision, the Exercise Price in effect immediately prior to
such subdivision will be proportionately reduced. If the Company, at any time
after the Issue Date, combines (by reverse stock split, recapitalization,
reorganization, reclassification or otherwise) its shares of Common Stock into a
smaller number of shares, then, after the date of record for effecting such
combination, the Exercise Price in effect immediately prior to such combination
will be proportionally increased.

     (b) Distributions. If the Company shall declare or make any distribution of
its assets

                                       5
<PAGE>

(or rights to acquire its assets) to holders of Common Stock (including without
limitation any dividend or distribution to the Company's stockholders in cash or
shares (or rights to acquire shares) of capital stock of a subsidiary) (a
"Distribution"), the Company shall deliver written notice of such Distribution
(a "Distribution Notice") to the Holder at least ten (10) Business Days prior to
the earlier to occur of (i) the record date for determining stockholders
entitled to such Distribution (the "Record Date") and (ii) the date on which
such Distribution is made (the "Distribution Date"). In the Distribution Notice
to the Holder, the Company shall indicate whether the Company has elected (A)
upon any exercise of this Warrant on or after the Record Date, to deliver to the
Holder on the Distribution Date (for any exercise effected on or prior to the
Distribution Date) or the applicable Delivery Date (for any exercise effected
after the Distribution Date), the amount of such assets which would have been
payable to the Holder with respect to the shares of Common Stock issuable upon
such exercise (without giving effect to any limitations on such exercise
contained in this Warrant) had the Holder been the holder of such shares of
Common Stock on the Record Date or (B) upon any exercise of this Warrant on or
after the Record Date, to reduce the Exercise Price applicable to such exercise
by reducing the Exercise Price in effect on the Business Day immediately
preceding the Record Date by an amount equal to the fair market value of the
assets to be distributed divided by the number of shares of Common Stock as to
which such Distribution is to be made, such fair market value to be reasonably
determined in good faith by the independent members of the Board of Directors of
the Company. If the Company does not notify the Holder of its election pursuant
to the preceding sentence on or prior to the Determination Date, the Company
shall be deemed to have elected clause (A) of the preceding sentence.

     (c)  Dilutive Issuances.

          (i) Adjustment Upon Dilutive Issuance. If, at any time after the Issue
Date, the Company issues or sells, or in accordance with subparagraph (iii) of
this paragraph 6(c), is deemed to have issued or sold, any shares of Common
Stock for no consideration or for a consideration per share less than the
Exercise Price on the date of such issuance or sale (or deemed issuance or sale)
(a "Dilutive Issuance"), then the Exercise Price shall be adjusted as follows:

              (A) if such Dilutive Issuance occurs prior to the Weighted Average
          Trigger Date, then effective immediately upon such Dilutive Issuance,
          the Exercise Price shall be adjusted so as to equal the consideration
          received or receivable by the Company (on a per share basis) for the
          additional shares of Common Stock so issued, sold or deemed issued or
          sold in such Dilutive Issuance (which, in the case of a deemed
          issuance or sale, shall be calculated in accordance with subparagraph
          6(c)(iii) below).

              (B) if such Dilutive Issuance occurs on or after the Weighted
          Average Trigger Date, then effective immediately upon the Dilutive
          Issuance, the Exercise Price shall be adjusted so as to equal an
          amount determined by multiplying such Exercise Price by the following
          fraction:

              N  + N
               0    1
             ---------
              N  + N
               0    2

                                       6
<PAGE>

where:

          N  = the number of shares of Common Stock outstanding immediately
           0   prior to such Dilutive Issuance (without taking into account
               any Convertible Securities or Purchase Rights, including the
               Debentures and Warrants);

          N  = the number of shares of Common Stock which the aggregate
           1   consideration, if any, received or receivable by the Company for
               the total number of such additional shares of Common Stock so
               issued, sold or deemed issued or sold in such Dilutive Issuance
               (which, in the case of a deemed issuance or sale, shall be
               calculated in accordance with subparagraph 6(c)(iii) below) would
               purchase at the Exercise Price in effect immediately prior to
               such Dilutive Issuance; and

          N  = the number of such additional shares of Common Stock so issued,
           2   sold or deemed issued or sold in such Dilutive Issuance.

          Notwithstanding the foregoing, no adjustment shall be made pursuant
hereto if such adjustment would result in an increase in the Exercise Price.

          (ii) Adjustment Upon Below Market Issuance. If, at any time after the
Issue Date, the Company issues or sells, or in accordance with subparagraph
(iii) of this paragraph 6(c), is deemed to have issued or sold, any shares of
Common Stock for no consideration or for a consideration per share less than the
Market Price on the date of such issuance or sale (or deemed issuance or sale)
(a "Below Market Issuance"), then the Exercise Price shall be adjusted so as to
equal an amount determined by multiplying such Exercise Price by the following
fraction:

          N  + N
           0    1
         ---------
          N  + N
           0    2

where:

          N   = the number of shares of Common Stock outstanding immediately
           0    prior to the issuance, sale or deemed issuance or sale of such
                additional shares of Common Stock in such Below Market Issuance
                (without taking into account any shares of Common Stock issuable
                upon exercise, exchange or exercise of any Debentures or
                Warrants);

          N   = the number of shares of Common Stock which the aggregate
           1    consideration, if any, received or receivable by the Company for
                the total number of such additional shares of Common Stock so
                issued, sold or deemed issued or sold in such Below Market

                                       7
<PAGE>

                Issuance (which, in the case of a deemed issuance or sale, shall
                be calculated in accordance with subparagraph 6(c)(iii) below)
                would purchase at the Market Price in effect on the date of such
                Below Market Issuance; and

          N   = the number of such additional shares of Common Stock so issued,
           2    sold or deemed issued or sold in such Below Market Issuance.

          Notwithstanding the foregoing, no adjustment shall be made pursuant to
     this paragraph 6(c)(ii) if such adjustment would result in an increase in
     the Exercise Price or if such adjustment would lead to a higher exercise
     price than an adjustment pursuant to paragraph 6(c)(i), in which case the
     provisions of paragraph 6(c)(i) shall apply.

          (iii) Effect On Exercise Price Of Certain Events. For purposes of
determining the adjusted Exercise Price under subparagraph (i) or (ii) of this
paragraph 6(c), the following will be applicable:

                (A) Issuance Of Purchase Rights. If, at any time after the Issue
     Date, the Company issues or sells any Purchase Rights, whether or not
     immediately exercisable, and the price per share for which Common Stock is
     issuable upon the exercise of such Purchase Rights (or the price of any
     exercise of Convertible Securities that may be acquired under such Purchase
     Rights, if applicable) is less than the Market Price in effect on the date
     of issuance or sale of such Purchase Rights, then the maximum total number
     of shares of Common Stock issuable upon the exercise of all such Purchase
     Rights (assuming full exercise, exercise or exchange of Convertible
     Securities, if applicable) shall, as of the date of the issuance or sale of
     such Purchase Rights, be deemed to be outstanding and to have been issued
     and sold by the Company for such price per share. If the Purchase Rights so
     issued are not Variable Rate Securities, then for purposes of the preceding
     sentence, the "price per share for which Common Stock is issuable upon the
     exercise of such Purchase Rights" shall be determined by dividing (x) the
     total amount, if any, received or receivable by the Company as
     consideration for the issuance or sale of all such Purchase Rights, plus
     the minimum aggregate amount of additional consideration, if any, payable
     to the Company upon the exercise of all such Purchase Rights, plus, in the
     case of Convertible Securities issuable upon the exercise of such Purchase
     Rights, the minimum aggregate amount of additional consideration payable
     upon the exercise, exercise or exchange thereof (determined in accordance
     with the calculation method set forth in subparagraph (iii)(B) below) at
     the time such Convertible Securities first become convertible, exercisable
     or exchangeable, by (y) the maximum total number of shares of Common Stock
     issuable upon the exercise of all such Purchase Rights (assuming full
     exercise, exercise or exchange of Convertible Securities, if applicable).
     No further adjustment to the Exercise Price shall be made upon the actual
     issuance of such Common Stock upon the exercise of such Purchase Rights or
     upon the exercise, exercise or exchange of Convertible Securities issuable
     upon exercise of such Purchase Rights. To the extent that shares of Common
     Stock or Convertible Securities are not delivered pursuant to such Purchase
     Rights, upon the expiration or termination of such Purchase Rights, the
     Exercise Price shall be readjusted to the Exercise Price that would then be
     in effect had the adjustments made upon the issuance of such Purchase

                                       8
<PAGE>

     Rights been made on the basis of delivery of only the number of shares of
     Common Stock actually delivered.

                (B) Issuance Of Convertible Securities. If, at any time after
     the Issue Date, the Company issues or sells any Convertible Securities,
     whether or not immediately convertible, exercisable or exchangeable, and
     the price per share for which Common Stock is issuable upon such exercise,
     exercise or exchange is less than the Market Price in effect on the date of
     issuance or sale of such Convertible Securities, then the maximum total
     number of shares of Common Stock issuable upon the exercise, exercise or
     exchange of all such Convertible Securities shall, as of the date of the
     issuance or sale of such Convertible Securities, be deemed to be
     outstanding and to have been issued and sold by the Company for such price
     per share. If the Convertible Securities so issued or sold are not Variable
     Rate Securities, then for the purposes of the immediately preceding
     sentence, the "price per share for which Common Stock is issuable upon such
     exercise, exercise or exchange" shall be determined by dividing (x) the
     total amount, if any, received or receivable by the Company as
     consideration for the issuance or sale of all such Convertible Securities,
     plus the minimum aggregate amount of additional consideration, if any,
     payable to the Company upon the exercise, exercise or exchange thereof
     (determined in accordance with the calculation method set forth in this
     subparagraph (iii)(B)) at the time such Convertible Securities first become
     convertible, exercisable or exchangeable, by (y) the maximum total number
     of shares of Common Stock issuable upon the exercise, exercise or exchange
     of all such Convertible Securities. No further adjustment to the Exercise
     Price shall be made upon the actual issuance of such Common Stock upon
     conversion, exercise or exchange of such Convertible Securities. To the
     extent that shares of Common Stock are not delivered pursuant to conversion
     of such Convertible Securities, upon the expiration or termination of the
     right to convert such Convertible Securities into Common Stock, the
     Exercise Price shall be readjusted to the Exercise Price that would then be
     in effect had the adjustments made upon the issuance of such Convertible
     Securities been made on the basis of delivery of only the number of shares
     of Common Stock actually delivered.

                (C) Issuance of Variable Rate Securities. If any Purchase Rights
     or Convertible Securities, including Convertible Securities issuable on
     exercise of Purchase Rights, constitute Variable Rate Securities, then for
     purposes of the first sentence of subparagraphs (iii) (A) and (iii)(B) of
     this paragraph 6(c), the "price per share for which Common Stock is
     issuable upon such exercise, exercise or exchange" shall be deemed to be
     the lowest price per share which would be applicable (assuming all holding
     period and other conditions to any discounts contained in such Variable
     Rate Security have been satisfied) if the exercise price of such Variable
     Rate Security on the date of issuance or sale thereof were seventy-five
     percent (75%) of the actual exercise price on such date (the "Assumed
     Variable Market Price"), and, further, if such Variable Rate Security at
     any time or times thereafter is exercised, purchased or converted at a
     price lower that the Assumed Variable Market Price, the Exercise Price in
     effect at such time shall be readjusted to equal the Exercise Price
     existing at the time of such exercise, purchase or conversion. To the
     extent that shares of Common Stock are not delivered pursuant to the
     exercise, purchase, or exercise of such Variable Rate Securities, upon the
     expiration or termination of the right to exercise, purchase or convert
     such Variable Rate Securities

                                       9
<PAGE>

     into Common Stock, the Exercise Price shall be readjusted to the Exercise
     Price that would then be in effect had the adjustments made upon the
     issuance of such Variable Rate Securities been made on the basis of
     delivery of only the number of shares of Common Stock actually delivered.

                (D) Change In Option Price Or Exercise Rate. If, following an
     adjustment to the Exercise Price upon the issuance of Purchase Rights or
     Convertible Securities pursuant to a Below Market Issuance, there is a
     change at any time in (x) the amount of additional consideration payable to
     the Company upon the exercise of any Purchase Rights; (y) the amount of
     additional consideration, if any, payable to the Company upon the exercise,
     exercise or exchange of any Convertible Securities; or (z) formula for
     determining the number of shares issuable under a Variable Rate Security
     (in each such case, other than under or by reason of provisions designed to
     protect against dilution), then in any such case, the Exercise Price in
     effect at the time of such change shall be readjusted to the Exercise Price
     which would have been in effect at such time had such Purchase Rights or
     Convertible Securities still outstanding provided for such changed
     additional consideration or changed exercise, exercise or exchange rate, as
     the case may be, at the time initially issued or sold.

                (E) Calculation Of Consideration Received. If any Common Stock,
     Purchase Rights or Convertible Securities are issued or sold for cash, the
     consideration received therefor will be the amount received by the Company
     therefor. In case any Common Stock, Purchase Rights or Convertible
     Securities are issued or sold for a consideration part or all of which
     shall be other than cash, including in the case of a strategic or similar
     arrangement in which the other entity will provide services to the Company,
     purchase services from the Company or otherwise provide intangible
     consideration to the Company, the amount of the consideration other than
     cash received by the Company (including the net present value of the
     consideration expected by the Company for the provided or purchased
     services) shall be the fair market value of such consideration, except
     where such consideration consists of securities, in which case the amount
     of consideration received by the Company will be the average of the last
     sale prices thereof on the principal market for such securities during the
     period of ten Trading Days immediately preceding the date of receipt. In
     case any Common Stock, Purchase Rights or Convertible Securities are issued
     in connection with any merger or consolidation in which the Company is the
     surviving corporation, the amount of consideration therefor will be deemed
     to be the fair market value of such portion of the net assets and business
     of the non-surviving corporation as is attributable to such Common Stock,
     Purchase Rights or Convertible Securities, as the case may be.
     Notwithstanding anything else herein to the contrary, if Common Stock,
     Purchase Rights or Convertible Securities are issued or sold in conjunction
     with each other as part of a single transaction or in a series of related
     transactions, the Holder may elect to determine the amount of consideration
     deemed to be received by the Company therefor by deducting the fair value
     of any type of securities (the "Disregarded Securities") issued or sold in
     such transaction or series of transactions. If the holder makes an election
     pursuant to the immediately preceding sentence, no adjustment to the
     Exercise Price shall be made pursuant to this paragraph 6(c) for the
     issuance of the Disregarded Securities or upon any exercise, exercise or
     exchange thereof. The independent members of the Company's

                                       10
<PAGE>

     Board of Directors shall calculate reasonably and in good faith, using
     standard commercial valuation methods appropriate for valuing such assets,
     the fair market value of any consideration other than cash or securities.

                (F) Issuances Pursuant To Existing Securities. If the Company
     issues (or becomes obligated to issue) shares of Common Stock pursuant to
     any antidilution or similar adjustments (other than as a result of stock
     splits, stock dividends and the like) contained in any Convertible
     Securities or Purchase Rights outstanding as of the date hereof but not
     included in the Disclosure Schedule to the Securities Purchase Agreement,
     then all shares of Common Stock so issued shall be deemed to have been
     issued for no consideration. If the Company issues (or becomes obligated to
     issue) shares of Common Stock pursuant to any antidilution or similar
     adjustments contained in any Convertible Securities or Purchase Rights
     disclosed in a schedule to the Securities Purchase Agreement as a result of
     the issuance of the Debentures or Warrants and the number of shares that
     the Company issues (or is obligated to issue) as a result of such initial
     issuance exceeds the amount specified in such schedule, such excess shares
     shall be deemed to have been issued for no consideration.

          (iv) Exceptions To Adjustment Of Exercise Price. Notwithstanding the
foregoing, no adjustment to the Exercise Price shall be made pursuant to this
paragraph 6(c) upon the issuance of any Excluded Securities. For purposes
hereof, "Excluded Securities" means (I) securities purchased under the
Securities Purchase Agreement (including all securities issued to any finder or
broker for facilitating the purchase of the Debentures and the Warrants); (II)
securities issued upon exercise of the Debentures or Warrants; (III) shares of
Common Stock issuable or issued to (x) employees or directors from time to time
either directly or upon the exercise of options, in such case granted or to be
granted in the discretion of the Board of Directors (or a duly authorized
committee thereof) pursuant to one or more stock option plans or restricted
stock plans in effect as of the Closing Date or adopted after the Closing Date
by the Board of Directors (or a duly authorized committee thereof) or by the
Company's shareholders, or (y) vendors, either directly or pursuant to warrants
to purchase Common Stock that are outstanding on the date hereof or issued
hereafter, provided such issuances are approved by the Board of Directors (or a
duly authorized committee thereof) or by the Company's shareholders; (IV) any
borrowings, direct or indirect, from financial institutions by the Company that
are approved by the Board of Directors, including any type of loan or payment
evidenced by any type of Debt instrument, provided the value of the equity
portion of any such borrowings, including warrants, options or other rights to
purchase capital stock and other interests convertible into capital stock of the
Company, does not exceed ten percent (10%) of such borrowing (or, in the case of
a borrowing under the existing working capital facility provided by Spencer
Trask and the Related Parties, does not exceed forty percent (40%) of such
borrowing); (V) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization of the Company; (VI) shares of Common
Stock issued in connection with the acquisition by the Company of any
corporation or other entity occurring after the Initial Effective Date; (VII)
shares of Common Stock issued in connection with any Convertible Securities or
Purchase Rights outstanding on the date hereof; (VIII) shares of Common Stock
issued to Persons with whom the Company is entering into a joint venture,
strategic alliance or other commercial relationship in connection with the
operation of the Company's business and not in connection with a transaction the
primary purpose of which is to raise equity capital, (IX) shares

                                       11
<PAGE>

of Common Stock issued pursuant to a registered public offering underwritten on
a best efforts basis by Spencer Trask or a nationally-recognized investment bank
with net proceeds to the Company of at least fifteen million dollars
($15,000,000), and (X) the Additional Registrable Securities (as defined in the
Registration Rights Agreement).

     (d) Major Transactions. In the event of a merger, consolidation, business
combination, tender offer, exchange of shares, recapitalization, reorganization,
redemption or other similar event, as a result of which shares of Common Stock
shall be changed into the same or a different number of shares of the same or
another class or classes of stock or securities or other assets of the Company
or another entity or the Company shall sell all or substantially all of its
assets (each of the foregoing being a "Major Transaction"), the Company will
give the Holder at least ten (10) Trading Days' written notice prior to the
earlier of (I) the closing or effectiveness of such Major Transaction and (II)
the record date for the receipt of such shares of stock or securities or other
assets, and the Holder shall be permitted to either (i) where the consideration
received by the Company or its stockholders consists (in whole or in part) of
cash, require the Company to repurchase this Warrant for an amount to the value
of this Warrant calculated pursuant to the Black-Scholes pricing model or (ii)
exercise this Warrant in whole or in part at any time prior to the record date
for the receipt of such consideration and shall be entitled to receive, for each
share of Common Stock issuable to the Holder upon such exercise, the same per
share consideration payable to the other holders of Common Stock in connection
with such Major Transaction. If and to the extent that the Holder retains this
Warrant or any portion hereof following such record date, the Company will cause
the surviving or, in the event of a sale of assets, purchasing entity, as a
condition precedent to such Major Transaction, to assume the obligations of the
Company with respect to this Warrant, with such adjustments to the Exercise
Price and the securities covered hereby as may be necessary in order to preserve
the economic benefits of this Warrant to the Holder.

     (e) Notice Of Adjustments. Upon the occurrence of one or more adjustments
or readjustments of the Exercise Price pursuant to this paragraph 6 or any
change in the number or type of stock, securities and/or other property issuable
upon exercise of this Warrant, the Company, at its expense, shall promptly
compute such adjustment or readjustment or change and prepare and furnish to the
Holder a certificate setting forth such adjustment or readjustment or change and
showing in detail the facts upon which such adjustment or readjustment or change
is based. The Company shall, upon the written request at any time of the Holder,
furnish to the Holder a like certificate setting forth (i) such adjustment or
readjustment or change, (ii) the Exercise 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 exercise of this Warrant.

     (f) Adjustments; Additional Shares, Securities or Assets. In the event that
at any time, as a result of an adjustment made pursuant to this paragraph 6, the
Holder of this Warrant shall, upon exercise of this Warrant, become entitled to
receive securities or assets (other than Common Stock) then, wherever
appropriate, all references herein to shares of Common Stock shall be deemed to
refer to and include such shares and/or other securities or assets; and
thereafter the number of such shares and/or other securities or assets shall be
subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this paragraph 6. Any adjustment
made herein that results in a decrease in the

                                       12
<PAGE>

Exercise Price shall also effect a proportional increase in the number of shares
of Common Stock into which this Warrant is exercisable.

     7.   Fractional Interests.

          No fractional shares or scrip representing fractional shares shall be
issuable upon the exercise of this Warrant. If, on exercise of this Warrant, the
Holder hereof would be entitled to a fractional share of Common Stock or a right
to acquire a fractional share of Common Stock, the Company shall, in lieu of
issuing any such fractional share, pay to the Holder an amount in cash equal to
the product resulting from multiplying such fraction by the Market Price as of
the Exercise Date.

     8.   Transfer of this Warrant.

          The Holder may sell, transfer, assign, pledge or otherwise dispose of
this Warrant, in whole or in part, as long as such sale or other disposition is
made pursuant to an effective registration statement or an exemption from the
registration requirements of the Securities Act, and applicable state securities
laws, and is otherwise made in accordance with the applicable provisions of the
Securities Purchase Agreement. Upon such transfer or other disposition, the
Holder shall deliver this Warrant to the Company together with a written notice
to the Company, substantially in the form of the Transfer Notice attached hereto
as Exhibit B (the "Transfer Notice"), indicating the person or persons to whom
this Warrant shall be transferred and, if less than all of this Warrant is
transferred, the number of Warrant Shares to be covered by the part of this
Warrant to be transferred to each such person. Within ten (10) Business Days of
receiving a Transfer Notice and the original of this Warrant, the Company shall
deliver to the each transferee designated by the Holder a Warrant or Warrants of
like tenor and terms for the appropriate number of Warrant Shares and, if less
than all this Warrant is transferred, shall deliver to the Holder a Warrant for
the remaining number of Warrant Shares.

     9.   Benefits of this Warrant.

          This Warrant shall be for the sole and exclusive benefit of the Holder
of this Warrant and nothing in this Warrant shall be construed to confer upon
any person other than the Holder of this Warrant any legal or equitable right,
remedy or claim hereunder.

     10.  Loss, theft, destruction or mutilation of Warrant.

          Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity reasonably satisfactory to the Company, and upon
surrender of this Warrant, if mutilated, the Company shall execute and deliver a
new Warrant of like tenor and date in replacement for the lost, stolen,
destroyed or mutilated Warrant.

     11.  Notice or Demands.

          Any notice, demand or request required or permitted to be given by the
Company

                                       13
<PAGE>

or the Holder pursuant to the terms of this Warrant shall be in writing and
shall be deemed delivered (i) when delivered personally or by verifiable
facsimile transmission, unless such delivery is made on a day that is not a
Business Day, in which case such delivery will be deemed to be made on the next
succeeding Business Day and (ii) on the next Business Day after timely delivery
to an overnight courier, addressed as follows:

          If to the Company:

          Vyteris Holdings (Nevada), Inc.
          13-01 Pollitt Drive
          Fair Lawn, NJ 07410
          Attn: Chief Financial Officer
          Tel:  201-703-2299
          Fax:  201-703-2295

          with a copy to:

          Lowenstein Sandler PC
          65 Livingston Avenue
          Roseland, New Jersey 07068
          Attn: Peter H. Ehrenberg, Esq.
          Tel:  973-597-2350
          Fax:  973-597-2351

and if to the Holder, to such address as shall be designated by the Holder in
writing to the Company.

     12.  Taxes.

          The issue of stock certificates on exercises of this Warrant shall be
made without charge to the exercising Holder for any tax in respect of the issue
thereof. The Company shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery of stock
in any name other than that of the Holder of any Warrant exercised, and the
Company shall not be required to issue or deliver any such stock certificate
unless and until the person or persons requesting the issue thereof shall have
paid to the Company the amount of such tax or shall have established to the
reasonable satisfaction of the Company that such tax has been paid.

     13.  Applicable Law.

          This Warrant is issued under and shall for all purposes be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed entirely within the State of New York.

                                       14
<PAGE>

     14.  Amendments.

          No amendment, modification or other change to, or waiver of any
provision of, this Warrant may be made unless such amendment, modification or
change is set forth in writing and is signed by the Company and the Holder.

                           [Signature Page to Follow]

                                       15
<PAGE>

     IN WITNESS WHEREOF, the Company has duly executed and delivered this
Warrant as of the Issue Date.

                         VYTERIS HOLDINGS (NEVADA), INC.

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

                                       16
<PAGE>

                                                            EXHIBIT A to WARRANT

                                 EXERCISE NOTICE

     The undersigned Holder hereby irrevocably exercises the right to purchase
___________ of the shares of Common Stock ("Warrant Shares") of VYTERIS HOLDINGS
(NEVADA), INC. evidenced by the attached Warrant (the "Warrant"). Capitalized
terms used herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.

     1. Form of Exercise Price. The Holder intends that payment of the Exercise
Price shall be made as:

        ______ a Cash Exercise with respect to __________ Warrant Shares; and/or

        ______ a Cashless Exercise with respect to _________________ Warrant
Shares, as permitted by Section 5(b) of the attached Warrant.

     2. Payment of Exercise Price. In the event that the Holder has elected a
Cash Exercise with respect to some or all of the Warrant Shares to be issued
pursuant hereto, the Holder shall pay the sum of $________________ to the
Company in accordance with the terms of the Warrant.

Date:
      ------------------------------

------------------------------------
     Name of Registered Holder

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

     By tendering this Exercise Notice, the Holder represents to the Company
that it is an "accredited investor" as that term is defined in Rule 501 of
Regulation D, and that it is acquiring the Warrants Shares solely for its own
account, and not with a present view to the public resale or distribution of all
or any part thereof, except pursuant to sales that are registered under the
Securities Act or are exempt from the registration requirements of the
Securities Act; provided, however, that, in making such representation, the
Holder does not agree to hold the Warrants Shares for any minimum or specific
term and reserves the right to sell, transfer or otherwise dispose of the
Warrants Shares at any time in accordance with the provisions of the Warrant and
with Federal and state securities laws applicable to such sale, transfer or
disposition.

                                       17
<PAGE>

                                                            EXHIBIT B to WARRANT

                                 TRANSFER NOTICE

FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells,
assigns and transfers unto the person or persons named below the right to
purchase shares of the Common Stock of VYTERIS HOLDINGS (NEVADA), INC. evidenced
by the attached Warrant. By signing this Transfer Notice, the transferee agrees
to be legally bound by the terms of the attached Warrant and of the related
Securities Purchase Agreement and Registration Rights Agreement applicable to an
Investor.

Date:
      ------------------------------

-----------------------------------
    Name of Registered Holder

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

Accepted and Agreed:

------------------------------------
         Transferee Name

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

Address:

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

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

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

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