Document:

EXHIBIT 10.28

                          REGISTRATION RIGHTS AGREEMENT

         This  Registration  Rights  Agreement  (this  "AGREEMENT")  is made and
entered  into as of August 9, 2006,  among  Sonoma  College,  Inc., a California
corporation (the "COMPANY"),  and the several purchasers  signatory hereto (each
such purchaser is a "PURCHASER" and collectively, the "PURCHASERS").

         This Agreement is made pursuant to the Securities  Purchase  Agreement,
dated as of the  date  hereof  between  the  Company  and  each  Purchaser  (the
"PURCHASE AGREEMENT").

         The Company and each Purchaser hereby agrees as follows:

         1.       DEFINITIONS

         CAPITALIZED  TERMS  USED  AND NOT  OTHERWISE  DEFINED  HEREIN  THAT ARE
DEFINED IN THE PURCHASE  AGREEMENT  SHALL HAVE THE MEANINGS  GIVEN SUCH TERMS IN
THE PURCHASE  AGREEMENT.  As used in this  Agreement,  the following terms shall
have the following meanings:

                  "ADVICE" shall have the meaning set forth in Section 6(d).

                  "EFFECTIVENESS  DATE"  means,  with  respect  to  the  initial
         Registration  Statement  required  to be  filed  hereunder,  the  120th
         calendar  day  following  the date  hereof  and,  with  respect  to any
         additional  Registration  Statements which may be required  pursuant to
         Section  3(c),  the 90th  calendar day  following the date on which the
         Company  first  knows,  or  reasonably  should  have  known,  that such
         additional  Registration  Statement  is required  hereunder;  PROVIDED,
         HOWEVER,  in the event the Company is notified by the  Commission  that
         one of the above Registration  Statements will not be reviewed or is no
         longer subject to further review and comments,  the Effectiveness  Date
         as to such  Registration  Statement  shall  be the  fifth  Trading  Day
         following  the date on which the  Company is so  notified  if such date
         precedes the dates required above.

                  "EFFECTIVENESS  PERIOD"  shall have the  meaning  set forth in
         Section 2(a).

                  "EVENT" shall have the meaning set forth in Section 2(b).

                  "EVENT DATE" shall have the meaning set forth in Section 2(b).

                  "FILING DATE" means, with respect to the initial  Registration
         Statement required hereunder,  the 30th calendar day following the date
         hereof and,  with  respect to any  additional  Registration  Statements
         which may be required  pursuant to Section 3(c), the 30th day following
         the date on which the Company first knows,  or  reasonably  should have
         known  that  such   additional   Registration   Statement  is  required
         hereunder.

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                  "HOLDER" or "HOLDERS" means the holder or holders, as the case
         may be, from time to time of Registrable Securities.

                  "INDEMNIFIED  PARTY"  shall  have  the  meaning  set  forth in
         Section 5(c).

                  "INDEMNIFYING  PARTY"  shall  have the  meaning  set  forth in
         Section 5(c).

                  "LOSSES" shall have the meaning set forth in Section 5(a).

                  "PLAN OF  DISTRIBUTION"  shall have the  meaning  set forth in
         Section 2(a).

                  "PROSPECTUS"  means the prospectus  included in a Registration
         Statement  (including,  without limitation,  a prospectus that includes
         any information  previously  omitted from a prospectus filed as part of
         an  effective   registration  statement  in  reliance  upon  Rule  430A
         promulgated  under the Securities  Act), as amended or  supplemented by
         any prospectus supplement, with respect to the terms of the offering of
         any portion of the  Registrable  Securities  covered by a  Registration
         Statement,  and all other amendments and supplements to the Prospectus,
         including post-effective  amendments,  and all material incorporated by
         reference or deemed to be incorporated by reference in such Prospectus.

                  "REGISTRABLE  SECURITIES"  means:  (i)  all of the  shares  of
         Common Stock issuable upon conversion in full of the  Debentures,  (ii)
         all shares issuable as interest or principal on the Debentures assuming
         all permissible  interest and principal  payments are made in shares of
         Common  Stock and the  Debentures  are held until  maturity,  (iii) all
         Warrant Shares,  (iv) any additional shares issuable in connection with
         any anti-dilution provisions in the Debentures or the Warrants (in each
         case,  without giving effect to any limitations on conversion set forth
         in the Debenture or  limitations on exercise set forth in the Warrant),
         (v) shares of Common Stock underlying  warrants issued to the placement
         agent (or its  designees),  and (vi) any securities  issued or issuable
         upon any stock split, dividend or other distribution,  recapitalization
         or similar event with respect to the foregoing.

                  "REGISTRATION  STATEMENT"  means the  registration  statements
         required  to  be  filed  hereunder  and  any  additional   registration
         statements  contemplated by Section 3(c),  including (in each case) the
         Prospectus,  amendments and supplements to such registration  statement
         or  Prospectus,  including  pre-  and  post-effective  amendments,  all
         exhibits thereto, and all material  incorporated by reference or deemed
         to be incorporated by reference in such registration statement.

                   "RULE  415"  means  Rule 415  promulgated  by the  Commission
         pursuant to the  Securities  Act, as such Rule may be amended from time
         to time,  or any similar rule or  regulation  hereafter  adopted by the
         Commission  having  substantially  the same  purpose and effect as such
         Rule.

                  "RULE  424"  means  Rule  424  promulgated  by the  Commission
         pursuant to the  Securities  Act, as such Rule may be amended from time
         to time,  or any similar rule or

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         regulation hereafter adopted by the Commission having substantially the
         same purpose and effect as such Rule.

                  "SELLING SHAREHOLDER QUESTIONNAIRE" shall have the meaning set
         forth in Section 3(a).

         2.       SHELF REGISTRATION

                  (a)      On or prior to each Filing  Date,  the Company  shall
         prepare and file with the Commission a "Shelf"  Registration  Statement
         covering  the  resale  of 150% of the  Registrable  Securities  on such
         Filing Date for an offering to be made on a continuous  basis  pursuant
         to Rule 415. The Registration Statement shall be on Form S-3 (except if
         the Company is not then eligible to register for resale the Registrable
         Securities  on Form S-3,  in which case such  registration  shall be on
         another  appropriate  form in  accordance  herewith)  and shall contain
         (unless  otherwise  directed by at least an 85% majority in interest of
         the Holders)  substantially the "PLAN OF DISTRIBUTION"  attached hereto
         as ANNEX A. Subject to the terms of this  Agreement,  the Company shall
         use its best efforts to cause a  Registration  Statement to be declared
         effective  under the  Securities  Act as promptly as possible after the
         filing thereof, but in any event prior to the applicable  Effectiveness
         Date,  and  shall  use  its  best  efforts  to keep  such  Registration
         Statement  continuously  effective  under the  Securities Act until all
         Registrable Securities covered by such Registration Statement have been
         sold,  or may be sold  without  volume  restrictions  pursuant  to Rule
         144(k),  as  determined  by the  counsel to the  Company  pursuant to a
         written opinion letter to such effect,  addressed and acceptable to the
         Company's  transfer agent and the affected Holders (the  "EFFECTIVENESS
         PERIOD").  The Company shall telephonically  request effectiveness of a
         Registration Statement as of 5:00 pm Eastern Time on a Trading Day. The
         Company  shall  immediately  notify the  Holders via  facsimile  of the
         effectiveness of a Registration  Statement on the same Trading Day that
         the Company telephonically  confirms effectiveness with the Commission,
         which shall be the date requested for  effectiveness  of a Registration
         Statement.  The Company  shall,  by 9:30 am Eastern Time on the Trading
         Day after the  Effective  Date (as defined in the Purchase  Agreement),
         file a final  Prospectus  with the  Commission as required by Rule 424.
         Failure  to  so  notify  the  Holder  within  1  Trading  Day  of  such
         notification of  effectiveness or failure to file a final Prospectus as
         a foresaid shall be deemed an Event under Section 2(b).

                  (b)      If: (i) a  Registration  Statement is not filed on or
         prior to its Filing Date (if the Company files a Registration Statement
         without  affording the Holders the opportunity to review and comment on
         the same as required by Section  3(a),  the Company shall not be deemed
         to have  satisfied  this clause (i)), or (ii) the Company fails to file
         with the Commission a request for  acceleration in accordance with Rule
         461  promulgated  under the Securities Act, within five Trading Days of
         the date that the Company is notified (orally or in writing,  whichever
         is earlier) by the Commission that a Registration Statement will not be
         "reviewed,"  or not  subject to further  review,  or (iii) prior to its
         Effectiveness Date, the Company fails to file a pre-effective amendment
         and otherwise  respond in writing to comments made by the Commission in
         respect of such  Registration

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         Statement  within 20 calendar  days after the receipt of comments by or
         notice from the Commission that such amendment is required in order for
         a  Registration   Statement  to  be  declared  effective,   or  (iv)  a
         Registration  Statement  filed or required to be filed hereunder is not
         declared effective by the Commission by its Effectiveness  Date, or (v)
         after the Effectiveness  Date, a Registration  Statement ceases for any
         reason  to  remain   continuously   effective  as  to  all  Registrable
         Securities for which it is required to be effective, or the Holders are
         otherwise  not  permitted to utilize the  Prospectus  therein to resell
         such Registrable  Securities for more than 10 consecutive calendar days
         or more than an  aggregate  of 20  calendar  days  during any  12-month
         period (which need not be consecutive  calendar days) (any such failure
         or breach being  referred to as an "Event",  and for purposes of clause
         (i) or (iv) the date on which such Event  occurs,  or for  purposes  of
         clause (ii) the date on which such five Trading Day period is exceeded,
         or for  purposes of clause  (iii) the date which such 20  calendar  day
         period is  exceeded,  or for  purposes  of clause (v) the date on which
         such 10 or 20 calendar day period,  as  applicable,  is exceeded  being
         referred to as "EVENT DATE"),  then in addition to any other rights the
         Holders may have hereunder or under  applicable law, on each such Event
         Date and on each  monthly  anniversary  of each such Event Date (if the
         applicable  Event  shall not have been  cured by such  date)  until the
         applicable  Event is cured,  the  Company  shall pay to each  Holder an
         amount in cash,  as partial  liquidated  damages  and not as a penalty,
         equal  to 1.5% of the  aggregate  purchase  price  paid by such  Holder
         pursuant to the Purchase Agreement for any Registrable  Securities then
         held by such Holder, up to a maximum of 18% per Holder of the aggregate
         purchase price paid by such Holder pursuant to the Purchase  Agreement.
         If the Company fails to pay any partial  liquidated damages pursuant to
         this  Section in full  within  seven days after the date  payable,  the
         Company will pay  interest  thereon at a rate of 18% per annum (or such
         lesser maximum  amount that is permitted to be paid by applicable  law)
         to the Holder,  accruing  daily from the date such  partial  liquidated
         damages are due until such amounts, plus all such interest thereon, are
         paid in full.  The  partial  liquidated  damages  pursuant to the terms
         hereof shall apply on a daily pro-rata basis for any portion of a month
         prior to the cure of an Event.

         3.       REGISTRATION PROCEDURES.

               In  connection  with  the  Company's   registration   obligations
hereunder, the Company shall:

                  (a)      Not less than five  Trading  Days prior to the filing
         of each Registration Statement and not less than two Trading Days prior
         to the filing of any related  Prospectus or any amendment or supplement
         thereto (including any document that would be incorporated or deemed to
         be incorporated  therein by reference),  the Company shall, (i) furnish
         to each Holder copies of all such documents proposed to be filed, which
         documents  (other than those  incorporated or deemed to be incorporated
         by reference)  will be subject to the review of such Holders,  and (ii)
         cause its officers and  directors,  counsel and  independent  certified
         public  accountants to respond to such inquiries as shall be necessary,
         in the  reasonable  opinion of  respective  counsel  to each  Holder to
         conduct a reasonable investigation within the meaning of the Securities
         Act. The Company  shall not file a  Registration  Statement or any such
         Prospectus  or any  amendments  or  supplements

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         thereto  to  which  the  Holders  of  a  majority  of  the  Registrable
         Securities  shall reasonably  object in good faith,  provided that, the
         Company  is  notified  of such  objection  in  writing  no later than 5
         Trading  Days  after the  Holders  have been so  furnished  copies of a
         Registration  Statement or 1 Trading Day after the Holders have been so
         furnished copies of any related Prospectus or amendments or supplements
         thereto.  Each  Holder  agrees to  furnish to the  Company a  completed
         Questionnaire  in the form  attached  to this  Agreement  as Annex B (a
         "SELLING  SHAREHOLDER  QUESTIONNAIRE")  not less than two Trading  Days
         prior  to the  Filing  Date or by the  end of the  fourth  Trading  Day
         following  the date on which such Holder  receives  draft  materials in
         accordance with this Section.

                  (b)      (i)  Prepare  and  file  with  the  Commission   such
         amendments,  including  post-effective  amendments,  to a  Registration
         Statement and the  Prospectus  used in  connection  therewith as may be
         necessary to keep a Registration Statement continuously effective as to
         the applicable  Registrable Securities for the Effectiveness Period and
         prepare  and file  with the  Commission  such  additional  Registration
         Statements in order to register for resale under the Securities Act all
         of the Registrable Securities;  (ii) cause the related Prospectus to be
         amended or supplemented by any required Prospectus  supplement (subject
         to the terms of this  Agreement),  and as so supplemented or amended to
         be filed  pursuant to Rule 424; (iii) respond as promptly as reasonably
         possible to any comments received from the Commission with respect to a
         Registration  Statement  or any  amendment  thereto  and as promptly as
         reasonably possible provide the Holders true and complete copies of all
         correspondence  from and to the  Commission  relating to a Registration
         Statement  (provided  that  the  Company  may  excise  any  information
         contained   therein   which  would   constitute   material   non-public
         information  as to any Holder which has not executed a  confidentiality
         agreement with the Company);  and (iv) comply in all material  respects
         with the  provisions  of the  Securities  Act and the Exchange Act with
         respect to the disposition of all Registrable  Securities  covered by a
         Registration  Statement  during  the  applicable  period in  accordance
         (subject to the terms of this Agreement)  with the intended  methods of
         disposition  by the  Holders  thereof  set  forth in such  Registration
         Statement as so amended or in such Prospectus as so supplemented.

                  (c)      If during  the  Effectiveness  Period,  the number of
         Registrable  Securities at any time exceeds 75% of the number of shares
         of Common Stock then registered in a Registration  Statement,  then the
         Company  shall file as soon as reasonably  practicable  but in any case
         prior  to  the  applicable  Filing  Date,  an  additional  Registration
         Statement  covering  the resale by the Holders of not less than 150% of
         the number of such Registrable Securities.

                  (d)      Notify the Holders of  Registrable  Securities  to be
         sold (which  notice  shall,  pursuant  to clauses  (iii)  through  (vi)
         hereof,  be  accompanied  by an  instruction  to suspend the use of the
         Prospectus  until the requisite  changes have been made) as promptly as
         reasonably  possible  (and, in the case of (i)(A) below,  not less than
         one Trading Day prior to such  filing)  and (if  requested  by any such
         Person)  confirm  such  notice in writing no later than one Trading Day
         following the day (i)(A) when a Prospectus or any Prospectus supplement
         or post-effective  amendment to a Registration Statement is proposed to
         be filed;  (B) when the Commission  notifies the Company  whether there
         will be a "review"

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         of such Registration  Statement and whenever the Commission comments in
         writing  on such  Registration  Statement;  and (C) with  respect  to a
         Registration Statement or any post-effective  amendment,  when the same
         has become  effective;  (ii) of any  request by the  Commission  or any
         other  Federal  or  state  governmental  authority  for  amendments  or
         supplements to a Registration Statement or Prospectus or for additional
         information;  (iii) of the  issuance  by the  Commission  or any  other
         federal or state  governmental  authority of any stop order  suspending
         the  effectiveness of a Registration  Statement  covering any or all of
         the  Registrable  Securities or the initiation of any  Proceedings  for
         that  purpose;  (iv) of the receipt by the Company of any  notification
         with respect to the suspension of the  qualification  or exemption from
         qualification  of any of the  Registrable  Securities  for  sale in any
         jurisdiction,  or the  initiation or  threatening of any Proceeding for
         such  purpose;  (v) of the  occurrence  of any event or passage of time
         that  makes  the  financial   statements  included  in  a  Registration
         Statement  ineligible for inclusion  therein or any statement made in a
         Registration  Statement or Prospectus or any document  incorporated  or
         deemed to be incorporated  therein by reference  untrue in any material
         respect or that  requires any  revisions to a  Registration  Statement,
         Prospectus or other  documents so that,  in the case of a  Registration
         Statement  or the  Prospectus,  as the case may be, it will not contain
         any untrue  statement of a material  fact or omit to state any material
         fact required to be stated  therein or necessary to make the statements
         therein,  in light of the circumstances under which they were made, not
         misleading;  and  (vi)  the  occurrence  or  existence  of any  pending
         corporate  development  with  respect to the  Company  that the Company
         believes may be material and that, in the determination of the Company,
         makes it not in the best  interest  of the  Company to allow  continued
         availability of a Registration  Statement or Prospectus;  provided that
         any and all of  such  information  shall  remain  confidential  to each
         Holder  until  such  information   otherwise  becomes  public,   unless
         disclosure  by  a  Holder  is  required  by  law;  PROVIDED,   further,
         notwithstanding  each  Holder's  agreement  to  keep  such  information
         confidential,  the  Holders  make  no  acknowledgement  that  any  such
         information is material, non-public information.

                  (e)      Use its best efforts to avoid the issuance of, or, if
         issued,  obtain  the  withdrawal  of:  (i)  any  order  suspending  the
         effectiveness  of a Registration  Statement,  or (ii) any suspension of
         the  qualification  (or  exemption  from  qualification)  of any of the
         Registrable  Securities for sale in any  jurisdiction,  at the earliest
         practicable moment.

                  (f)      Furnish to each Holder,  without charge, at least one
         conformed copy of each such  Registration  Statement and each amendment
         thereto,  including financial  statements and schedules,  all documents
         incorporated or deemed to be  incorporated  therein by reference to the
         extent  requested  by such  Person,  and  all  exhibits  to the  extent
         requested  by such Person  (including  those  previously  furnished  or
         incorporated by reference)  promptly after the filing of such documents
         with the Commission.

                  (g)      Subject to the terms of this  Agreement,  the Company
         hereby  consents to the use of such  Prospectus  and each  amendment or
         supplement  thereto by each of the selling  Holders in connection  with
         the offering  and sale of the  Registrable  Securities  covered by such
         Prospectus  and any amendment or supplement  thereto,  except after the
         giving of any notice pursuant to Section 3(d).

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                  (h)      If NASDR Rule 2710 requires any broker-dealer to make
         a filing prior to executing a sale by a Holder,  the Company shall: (i)
         make  an  Issuer  Filing  with  the  NASDR,  Inc.  Corporate  Financing
         Department  pursuant to  proposed  NASDR Rule  2710(b)(10)(A)(i),  (ii)
         respond within five Trading Days to any comments received from NASDR in
         connection  therewith,  (iii)  and  pay  the  filing  fee  required  in
         connection therewith.

                  (i)      Prior to any resale of  Registrable  Securities  by a
         Holder, use its commercially  reasonable efforts to register or qualify
         or  cooperate  with  the  selling   Holders  in  connection   with  the
         registration or  qualification  (or exemption from the  Registration or
         qualification)  of such  Registrable  Securities  for the resale by the
         Holder  under  the  securities  or Blue Sky laws of such  jurisdictions
         within the United States as any Holder reasonably  requests in writing,
         to keep each  registration or  qualification  (or exemption  therefrom)
         effective during the  Effectiveness  Period and to do any and all other
         acts or things  reasonably  necessary to enable the disposition in such
         jurisdictions   of  the   Registrable   Securities   covered   by  each
         Registration  Statement;  provided,  that  the  Company  shall  not  be
         required to qualify generally to do business in any jurisdiction  where
         it is not then so qualified, subject the Company to any material tax in
         any such jurisdiction where it is not then so subject or file a general
         consent to service of process in any such jurisdiction.

                  (j)      If  requested  by the  Holders,  cooperate  with  the
         Holders  to  facilitate   the  timely   preparation   and  delivery  of
         certificates  representing  Registrable Securities to be delivered to a
         transferee  pursuant to a Registration  Statement,  which  certificates
         shall be free, to the extent  permitted by the Purchase  Agreement,  of
         all restrictive legends,  and to enable such Registrable  Securities to
         be in such  denominations  and  registered  in such  names  as any such
         Holders may request.

                  (k)      Upon the occurrence of any event contemplated by this
         Section 3, as promptly as reasonably  possible under the  circumstances
         taking into account the Company's good faith  assessment of any adverse
         consequences  to the  Company  and its  stockholders  of the  premature
         disclosure of such event, prepare a supplement or amendment,  including
         a post-effective amendment, to a Registration Statement or a supplement
         to the related Prospectus or any document  incorporated or deemed to be
         incorporated therein by reference, and file any other required document
         so that, as thereafter delivered,  neither a Registration Statement nor
         such Prospectus will contain an untrue  statement of a material fact or
         omit to  state  a  material  fact  required  to be  stated  therein  or
         necessary to make the statements therein, in light of the circumstances
         under which they were made, not misleading. If the Company notifies the
         Holders in  accordance  with clauses (iii) through (vi) of Section 3(d)
         above to suspend the use of any Prospectus until the requisite  changes
         to such  Prospectus  have been made, then the Holders shall suspend use
         of such  Prospectus.  The Company  will use its best  efforts to ensure
         that  the  use of the  Prospectus  may be  resumed  as  promptly  as is
         practicable.  The Company shall be entitled to exercise its right under
         this  Section  3(k)  to  suspend  the  availability  of a  Registration
         Statement and Prospectus,  subject to the payment of partial

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         liquidated damages pursuant to Section 2(b), for a period not to exceed
         60 calendar days (which need not be  consecutive  days) in any 12 month
         period.

                  (l)      Comply with all applicable  rules and  regulations of
         the Commission.

                  (m)      The  Company  may  require  each  selling  Holder  to
         furnish to the Company a certified statement as to the number of shares
         of Common Stock  beneficially  owned by such Holder and, if required by
         the  Commission,  the  natural  persons  thereof  that have  voting and
         dispositive  control  over the  Shares.  During  any  periods  that the
         Company is unable to meet its obligations hereunder with respect to the
         registration  of the Registrable  Securities  solely because any Holder
         fails to furnish  such  information  within  three  Trading Days of the
         Company's  request,  any  liquidated  damages that are accruing at such
         time as to such  Holder  only  shall be tolled  and any Event  that may
         otherwise  occur solely  because of such delay shall be suspended as to
         such Holder only, until such information is delivered to the Company.

         4.       REGISTRATION  EXPENSES.  All fees and expenses incident to the
performance  of or compliance  with this Agreement by the Company shall be borne
by the Company whether or not any Registrable  Securities are sold pursuant to a
Registration  Statement.  The fees and  expenses  referred  to in the  foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including,  without  limitation,  fees and expenses (A) with respect to filings
required  to be made with any Trading  Market on which the Common  Stock is then
listed for trading,  (B) in compliance with applicable  state securities or Blue
Sky laws  reasonably  agreed to by the  Company in writing  (including,  without
limitation, fees and disbursements of counsel for the Company in connection with
Blue Sky qualifications or exemptions of the Registrable Securities), and (C) if
not previously  paid by the Company in connection  with an Issuer  Filing,  with
respect  to any filing  that may be  required  to be made by any broker  through
which a  Holder  intends  to make  sales of  Registrable  Securities  with  NASD
Regulation,  Inc.  pursuant  to the NASD  Rule  2710,  so long as the  broker is
receiving no more than a customary brokerage  commission in connection with such
sale,  (ii)  printing  expenses  (including,  without  limitation,  expenses  of
printing certificates for Registrable  Securities),  (iii) messenger,  telephone
and delivery  expenses,  (iv) fees and disbursements of counsel for the Company,
(v)  Securities  Act  liability  insurance,  if  the  Company  so  desires  such
insurance,  and (vi) fees and  expenses  of all other  Persons  retained  by the
Company in connection with the consummation of the transactions  contemplated by
this  Agreement.  In addition,  the Company shall be responsible  for all of its
internal   expenses   incurred  in  connection  with  the  consummation  of  the
transactions contemplated by this Agreement (including,  without limitation, all
salaries  and  expenses  of its  officers  and  employees  performing  legal  or
accounting  duties),  the expense of any annual  audit and the fees and expenses
incurred in  connection  with the listing of the  Registrable  Securities on any
securities  exchange  as  required  hereunder.  In no event shall the Company be
responsible  for any broker or similar  commissions  of any Holder or, except to
the extent  provided for in the Transaction  Documents,  any legal fees or other
costs of the Holders.

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         5.       INDEMNIFICATION

                  (a)      INDEMNIFICATION  BY THE COMPANY.  The Company  shall,
         notwithstanding  any termination of this Agreement,  indemnify and hold
         harmless  each Holder,  the  officers,  directors,  members,  partners,
         agents,  brokers  (including  brokers  who offer  and sell  Registrable
         Securities  as  principal  as a result  of a pledge or any  failure  to
         perform under a margin call of Common Stock),  investment  advisors and
         employees (and any other Persons with a functionally equivalent role of
         a Person holding such titles,  notwithstanding  a lack of such title or
         any other  title) of each of them,  each Person who  controls  any such
         Holder  (within  the  meaning of Section  15 of the  Securities  Act or
         Section 20 of the Exchange Act) and the officers,  directors,  members,
         shareholders,  partners,  agents and  employees  (and any other Persons
         with a  functionally  equivalent  role of a Person holding such titles,
         notwithstanding  a lack of such title or any other  title) of each such
         controlling  Person, to the fullest extent permitted by applicable law,
         from and  against  any and all losses,  claims,  damages,  liabilities,
         costs (including,  without limitation,  reasonable attorneys' fees) and
         expenses  (collectively,  "LOSSES"),  as  incurred,  arising  out of or
         relating to: (1) any untrue or alleged  untrue  statement of a material
         fact contained in a Registration Statement,  any Prospectus or any form
         of  prospectus  or in any  amendment  or  supplement  thereto or in any
         preliminary  prospectus,  or arising out of or relating to any omission
         or alleged omission of a material fact required to be stated therein or
         necessary to make the statements therein (in the case of any Prospectus
         or  form  of  prospectus  or  supplement   thereto,  in  light  of  the
         circumstances  under which they were made) not  misleading,  or (2) any
         violation or alleged  violation by the Company of the  Securities  Act,
         the Exchange Act or any state securities law, or any rule or regulation
         thereunder, in connection with the performance of its obligations under
         this Agreement, except to the extent, but only to the extent, that: (i)
         such untrue  statements or omissions are based solely upon  information
         regarding  such  Holder  furnished  in writing  to the  Company by such
         Holder  expressly  for  use  therein,   or  to  the  extent  that  such
         information  relates to such Holder or such Holder's proposed method of
         distribution  of Registrable  Securities and was reviewed and expressly
         approved in writing by such Holder  expressly for use in a Registration
         Statement,  such  Prospectus  or  such  form  of  Prospectus  or in any
         amendment or supplement  thereto (it being  understood  that the Holder
         has approved Annex A hereto for this  purpose),  or (ii) in the case of
         an   occurrence   of  an  event  of  the  type   specified  in  Section
         3(d)(iii)-(vi),  the use by such  Holder of an  outdated  or  defective
         Prospectus  after the Company has notified  such Holder in writing that
         the  Prospectus  is outdated or  defective  and prior to the receipt by
         such Holder of the Advice  contemplated  in Section  6(d).  The Company
         shall  notify  the  Holders  promptly  of the  institution,  threat  or
         assertion  of any  Proceeding  arising from or in  connection  with the
         transactions  contemplated  by this  Agreement  of which the Company is
         aware.

                  (b)      INDEMNIFICATION   BY  HOLDERS.   Each  Holder  shall,
         severally and not jointly, indemnify and hold harmless the Company, its
         directors, officers, agents and employees, each Person who controls the
         Company  (within  the meaning of Section 15 of the  Securities  Act and
         Section 20 of the Exchange Act), and the directors, officers, agents or
         employees of such controlling  Persons, to the fullest extent permitted
         by  applicable  law, from and against all Losses,  as incurred,  to the
         extent arising out of or based solely upon:  (x) such Holder's  failure
         to comply with the prospectus  delivery  requirements of the Securities
         Act, or (y) any untrue or alleged  untrue  statement of a material fact
         contained

                                       9
<PAGE>

         in  any  Registration  Statement,  any  Prospectus,   or  any  form  of
         prospectus,  or in  any  amendment  or  supplement  thereto  or in  any
         preliminary  prospectus,  or arising out of or relating to any omission
         or alleged omission of a material fact required to be stated therein or
         necessary to make the  statements  therein not  misleading:  (i) to the
         extent, but only to the extent,  that such untrue statement or omission
         is contained in any  information so furnished in writing by such Holder
         to  the  Company   specifically  for  inclusion  in  such  Registration
         Statement  or  such  Prospectus,  or  (ii)  to  the  extent  that  such
         information relates to such Holder's proposed method of distribution of
         Registrable  Securities  and was  reviewed  and  expressly  approved in
         writing by such Holder  expressly for use in a  Registration  Statement
         (it being  understood  that the Holder has approved  Annex A hereto for
         this  purpose),  such  Prospectus  or such form of Prospectus or in any
         amendment or supplement thereto or (ii) in the case of an occurrence of
         an event of the type  specified in Section  3(d)(iii)-(vi),  the use by
         such Holder of an outdated or  defective  Prospectus  after the Company
         has notified such Holder in writing that the  Prospectus is outdated or
         defective  and  prior  to the  receipt  by such  Holder  of the  Advice
         contemplated  in Section  6(d).  In no event shall the liability of any
         selling Holder hereunder be greater in amount than the dollar amount of
         the  net  proceeds  received  by  such  Holder  upon  the  sale  of the
         Registrable Securities giving rise to such indemnification obligation.

                  (c)      CONDUCT  OF  INDEMNIFICATION   PROCEEDINGS.   If  any
         Proceeding  shall be brought or asserted against any Person entitled to
         indemnity  hereunder (an "INDEMNIFIED  PARTY"),  such Indemnified Party
         shall  promptly  notify the Person from whom  indemnity  is sought (the
         "INDEMNIFYING PARTY") in writing, and the Indemnifying Party shall have
         the right to assume the defense  thereof,  including the  employment of
         counsel  reasonably  satisfactory  to the  Indemnified  Party  and  the
         payment of all fees and expenses  incurred in  connection  with defense
         thereof;  provided,  that the failure of any Indemnified  Party to give
         such notice shall not relieve the Indemnifying Party of its obligations
         or  liabilities  pursuant to this  Agreement,  except (and only) to the
         extent  that it shall be  finally  determined  by a court of  competent
         jurisdiction  (which  determination is not subject to appeal or further
         review) that such failure shall have prejudiced the Indemnifying Party.

                        An  Indemnified  Party  shall  have the  right to employ
         separate  counsel  in any such  Proceeding  and to  participate  in the
         defense thereof,  but the fees and expenses of such counsel shall be at
         the  expense  of such  Indemnified  Party or  Parties  unless:  (1) the
         Indemnifying Party has agreed in writing to pay such fees and expenses;
         (2) the  Indemnifying  Party shall have  failed  promptly to assume the
         defense  of  such   Proceeding   and  to  employ   counsel   reasonably
         satisfactory to such Indemnified  Party in any such Proceeding;  or (3)
         the named  parties  to any such  Proceeding  (including  any  impleaded
         parties)  include  both such  Indemnified  Party  and the  Indemnifying
         Party, and counsel to the Indemnified  Party shall  reasonably  believe
         that a material  conflict  of  interest  is likely to exist if the same
         counsel were to represent such  Indemnified  Party and the Indemnifying
         Party  (in  which  case,  if  such   Indemnified   Party  notifies  the
         Indemnifying Party in writing that it elects to employ separate counsel
         at the expense of the Indemnifying  Party, the Indemnifying Party shall
         not have the right to assume the  defense  thereof  and the  reasonable
         fees and expenses of no more than one separate  counsel shall be at the
         expense of the Indemnifying Party). The Indemnifying Party shall not be
         liable

                                       10
<PAGE>

         for any settlement of any such Proceeding  effected without its written
         consent,  which consent shall not be unreasonably  withheld or delayed.
         No Indemnifying  Party shall,  without the prior written consent of the
         Indemnified  Party,  effect any settlement of any pending Proceeding in
         respect  of  which  any  Indemnified  Party  is a  party,  unless  such
         settlement includes an unconditional  release of such Indemnified Party
         from all  liability  on  claims  that are the  subject  matter  of such
         Proceeding.

                        Subject to the terms of this  Agreement,  all reasonable
         fees and expenses of the Indemnified  Party (including  reasonable fees
         and expenses to the extent incurred in connection with investigating or
         preparing to defend such Proceeding in a manner not  inconsistent  with
         this  Section)  shall be paid to the  Indemnified  Party,  as incurred,
         within ten Trading Days of written notice  thereof to the  Indemnifying
         Party;  provided,  that the Indemnified Party shall promptly  reimburse
         the  Indemnifying  Party for that  portion  of such  fees and  expenses
         applicable  to  such  actions  for  which  such  Indemnified  Party  is
         judicially determined to be not entitled to indemnification hereunder.

                  (d)      CONTRIBUTION.  If the  indemnification  under Section
         5(a) or 5(b) is unavailable to an Indemnified  Party or insufficient to
         hold  an  Indemnified   Party  harmless  for  any  Losses,   then  each
         Indemnifying  Party shall  contribute  to the amount paid or payable by
         such Indemnified Party, in such proportion as is appropriate to reflect
         the relative fault of the Indemnifying  Party and Indemnified  Party in
         connection  with the actions,  statements or omissions that resulted in
         such Losses as well as any other relevant equitable considerations. The
         relative fault of such  Indemnifying  Party and Indemnified Party shall
         be determined  by reference to, among other things,  whether any action
         in  question,  including  any untrue or alleged  untrue  statement of a
         material fact or omission or alleged  omission of a material  fact, has
         been taken or made by, or  relates to  information  supplied  by,  such
         Indemnifying  Party or  Indemnified  Party,  and the parties'  relative
         intent, knowledge,  access to information and opportunity to correct or
         prevent such action,  statement or omission. The amount paid or payable
         by a party as a  result  of any  Losses  shall be  deemed  to  include,
         subject to the limitations set forth in this Agreement,  any reasonable
         attorneys'  or  other  fees  or  expenses  incurred  by such  party  in
         connection with any Proceeding to the extent such party would have been
         indemnified for such fees or expenses if the  indemnification  provided
         for in this Section was available to such party in accordance  with its
         terms.

                        The parties  hereto  agree that it would not be just and
         equitable if contribution pursuant to this Section 5(d) were determined
         by pro rata  allocation or by any other method of allocation  that does
         not take into account the equitable  considerations  referred to in the
         immediately preceding paragraph. Notwithstanding the provisions of this
         Section  5(d),  no  Holder  shall be  required  to  contribute,  in the
         aggregate,  any  amount in excess of the  amount by which the  proceeds
         actually  received  by such  Holder  from the  sale of the  Registrable
         Securities  subject to the Proceeding exceeds the amount of any damages
         that such Holder has  otherwise  been required to pay by reason of such
         untrue or alleged  untrue  statement  or omission or alleged  omission,
         except in the case of fraud or willful misconduct by such Holder.

                                       11
<PAGE>

                  The indemnity and  contribution  agreements  contained in this
         Section are in addition to any liability that the Indemnifying  Parties
         may have to the Indemnified Parties.

         6.       MISCELLANEOUS

                  (a)      REMEDIES.  In the event of a breach by the Company or
         by a  Holder,  of  any  of  their  respective  obligations  under  this
         Agreement,  each Holder or the Company, as the case may be, in addition
         to being  entitled to exercise all rights granted by law and under this
         Agreement,  including recovery of damages, will be entitled to specific
         performance  of its rights under this  Agreement.  The Company and each
         Holder  agree  that  monetary   damages  would  not  provide   adequate
         compensation for any losses incurred by reason of a breach by it of any
         of the  provisions of this Agreement and hereby further agrees that, in
         the event of any action  for  specific  performance  in respect of such
         breach, it shall not assert or shall waive the defense that a remedy at
         law would be adequate.

                  (b)      NO PIGGYBACK ON REGISTRATIONS. Except as set forth on
         SCHEDULE  6(B)  attached  hereto,  neither  the  Company nor any of its
         security  holders  (other  than the Holders in such  capacity  pursuant
         hereto)  may  include   securities   of  the  Company  in  the  initial
         Registration  Statement  other  than the  Registrable  Securities.  The
         Company  shall not file any  other  registration  statements  until the
         initial Registration Statement required hereunder is declared effective
         by the  Commission,  provided that this Section 6(b) shall not prohibit
         the Company from filing amendments to registration  statements  already
         filed.

                  (c)      COMPLIANCE.  Each Holder covenants and agrees that it
         will comply with the prospectus delivery requirements of the Securities
         Act  as  applicable  to it in  connection  with  sales  of  Registrable
         Securities pursuant to a Registration Statement.

                  (d)      DISCONTINUED  DISPOSITION.  Each Holder agrees by its
         acquisition of Registrable  Securities  that,  upon receipt of a notice
         from the Company of the  occurrence of any event of the kind  described
         in  Section   3(d)(iii)   through  (vi),  such  Holder  will  forthwith
         discontinue   disposition  of  such  Registrable   Securities  under  a
         Registration Statement until it is advised in writing (the "ADVICE") by
         the Company that the use of the  applicable  Prospectus (as it may have
         been supplemented or amended) may be resumed.  The Company will use its
         best efforts to ensure that the use of the Prospectus may be resumed as
         promptly as it practicable.  The Company agrees and  acknowledges  that
         any periods  during  which the Holder is required  to  discontinue  the
         disposition of the Registrable Securities hereunder shall be subject to
         the provisions of Section 2(b).

                  (e)      PIGGY-BACK  REGISTRATIONS.  If at any time during the
         Effectiveness Period there is not an effective  Registration  Statement
         covering  all of the  Registrable  Securities  and  the  Company  shall
         determine  to  prepare  and file  with the  Commission  a  registration
         statement relating to an offering for its own account or the account of
         others under the Securities Act of any of its equity securities,  other
         than on Form S-4 or Form S-8 (each as promulgated  under the Securities
         Act) or their then  equivalents  relating  to equity  securities  to be
         issued  solely in  connection  with any  acquisition  of any  entity or
         business or equity  securities  issuable in

                                       12
<PAGE>

         connection with the stock option or other employee benefit plans,  then
         the  Company  shall  send to  each  Holder  a  written  notice  of such
         determination  and,  if  within  fifteen  days  after  the date of such
         notice, any such Holder shall so request in writing,  the Company shall
         include  in  such  registration  statement  all or  any  part  of  such
         Registrable Securities such Holder requests to be registered; PROVIDED,
         HOWEVER,  that,  the Company  shall not be  required  to  register  any
         Registrable  Securities pursuant to this Section 6(e) that are eligible
         for resale pursuant to Rule 144(k) promulgated under the Securities Act
         or that are the subject of a then effective Registration Statement.

                  (f)      AMENDMENTS  AND  WAIVERS.   The  provisions  of  this
         Agreement,  including  the  provisions  of  this  sentence,  may not be
         amended,   modified  or  supplemented,   and  waivers  or  consents  to
         departures from the provisions hereof may not be given, unless the same
         shall be in writing  and signed by the  Company  and each Holder of the
         then outstanding Registrable Securities. Notwithstanding the foregoing,
         a waiver or consent to depart from the  provisions  hereof with respect
         to a matter that relates  exclusively to the rights of Holders and that
         does not directly or indirectly  affect the rights of other Holders may
         be given by Holders of all of the Registrable  Securities to which such
         waiver or consent relates;  PROVIDED,  HOWEVER,  that the provisions of
         this sentence may not be amended,  modified,  or supplemented except in
         accordance with the provisions of the immediately preceding sentence.

                  (g)      NOTICES.  Any and all notices or other communications
         or deliveries  required or permitted to be provided  hereunder shall be
         delivered as set forth in the Purchase Agreement.

                  (h)      SUCCESSORS AND ASSIGNS. This Agreement shall inure to
         the benefit of and be binding upon the successors and permitted assigns
         of each of the parties  and shall inure to the benefit of each  Holder.
         The Company may not assign (except by merger) its rights or obligations
         hereunder  without the prior  written  consent of all of the Holders of
         the  then-outstanding  Registrable  Securities.  Each Holder may assign
         their  respective  rights hereunder in the manner and to the Persons as
         permitted under the Purchase Agreement.

                  (i)      NO INCONSISTENT  AGREEMENTS.  Neither the Company nor
         any of its Subsidiaries has entered,  as of the date hereof,  nor shall
         the  Company or any of its  Subsidiaries,  on or after the date of this
         Agreement,  enter into any  agreement  with respect to its  securities,
         that  would  have the effect of  impairing  the  rights  granted to the
         Holders in this  Agreement or otherwise  conflicts  with the provisions
         hereof.  Neither the Company nor any of its subsidiaries has previously
         entered  into any  agreement  granting  any  registration  rights  with
         respect  to any of its  securities  to any  Person  that  have not been
         satisfied in full.

                  (j)      EXECUTION  AND  COUNTERPARTS.  This  Agreement may be
         executed in two or more counterparts,  all of which when taken together
         shall  be  considered  one and the  same  agreement  and  shall  become
         effective  when  counterparts  have  been  signed  by  each  party  and
         delivered to the other  party,  it being  understood  that both parties
         need not sign the same counterpart.  In the event that any signature is
         delivered by facsimile  transmission  or by e-mail delivery of a ".pdf"
         format  data file,  such  signature  shall  create a valid and  binding
         obligation of the party executing (or on whose behalf such signature is
         executed) with the same force and effect as if such facsimile or ".pdf"
         signature page were an original thereof.

                                       13
<PAGE>

                  (k)      GOVERNING   LAW.   All   questions   concerning   the
         construction,   validity,   enforcement  and   interpretation  of  this
         Agreement  shall be determined in accordance with the provisions of the
         Purchase Agreement.

                  (l)      CUMULATIVE REMEDIES. The remedies provided herein are
         cumulative and not exclusive of any other remedies provided by law.

                  (m)      SEVERABILITY.  If any term,  provision,  covenant  or
         restriction  of  this  Agreement  is  held  by  a  court  of  competent
         jurisdiction  to  be  invalid,  illegal,  void  or  unenforceable,  the
         remainder of the terms,  provisions,  covenants  and  restrictions  set
         forth  herein shall remain in full force and effect and shall in no way
         be affected, impaired or invalidated,  and the parties hereto shall use
         their commercially reasonable efforts to find and employ an alternative
         means to  achieve  the same or  substantially  the same  result as that
         contemplated by such term,  provision,  covenant or restriction.  It is
         hereby  stipulated and declared to be the intention of the parties that
         they would have executed the remaining terms, provisions, covenants and
         restrictions  without  including  any of  such  that  may be  hereafter
         declared invalid, illegal, void or unenforceable.

                  (n)      HEADINGS.  The  headings  in this  Agreement  are for
         convenience  only, do not  constitute a part of the Agreement and shall
         not be deemed to limit or affect any of the provisions hereof.

                  (o)      INDEPENDENT   NATURE  OF  HOLDERS'   OBLIGATIONS  AND
         RIGHTS.  The  obligations of each Holder  hereunder are several and not
         joint with the obligations of any other Holder hereunder, and no Holder
         shall be responsible in any way for the  performance of the obligations
         of any other Holder hereunder. Nothing contained herein or in any other
         agreement or document delivered at any closing,  and no action taken by
         any Holder  pursuant  hereto or thereto,  shall be deemed to constitute
         the Holders as a partnership,  an  association,  a joint venture or any
         other kind of entity,  or create a presumption  that the Holders are in
         any way  acting in concert  with  respect  to such  obligations  or the
         transactions  contemplated  by this  Agreement.  Each  Holder  shall be
         entitled  to  protect  and  enforce  its  rights,   including   without
         limitation the rights arising out of this  Agreement,  and it shall not
         be necessary for any other Holder to be joined as an  additional  party
         in any proceeding for such purpose.

                              ********************

                                       14
<PAGE>

         IN WITNESS WHEREOF,  the parties have executed this Registration Rights
Agreement as of the date first written above.

                                          SONOMA COLLEGE, INC.

                                      By:    /s/
                                          --------------------------------------
                                          Name:  Charles Newman
                                          Title: CEO

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                       15
<PAGE>

                     [SIGNATURE PAGE OF HOLDERS TO SNMA RRA]

Name of Holder: ___Monarch Capital Fund Ltd._______________________
SIGNATURE OF AUTHORIZED SIGNATORY OF HOLDER: ___/s/_______________________
Name of Authorized Signatory: ____Navigator Management Ltd.______________
Title of Authorized Signatory: _________Director_________________

Name of Holder: ___Haborview Master Fund LP._______________________
SIGNATURE OF AUTHORIZED SIGNATORY OF HOLDER: ___/s/_______________________
Name of Authorized Signatory: ____Navigator Management Ltd.______________
Title of Authorized Signatory: _________Director_________________

                           [SIGNATURE PAGES CONTINUE]

                                       16
<PAGE>

                              PLAN OF DISTRIBUTION

         Each Selling  Stockholder  (the "SELLING  STOCKHOLDERS")  of the common
stock and any of their pledgees,  assignees and successors-in-interest may, from
time to  time,  sell  any or all of  their  shares  of  common  stock on the OTC
Bulletin Board or any other stock exchange,  market or trading facility on which
the shares are traded or in private transactions. These sales may be at fixed or
negotiated  prices.  A  Selling  Stockholder  may  use  any  one or  more of the
following methods when selling shares:

              o   ordinary brokerage  transactions and transactions in which the
                  broker-dealer solicits purchasers;

              o   block trades in which the  broker-dealer  will attempt to sell
                  the shares as agent but may  position  and resell a portion of
                  the block as principal to facilitate the transaction;

              o   purchases by a  broker-dealer  as principal  and resale by the
                  broker-dealer for its account;

              o   an exchange  distribution  in accordance with the rules of the
                  applicable exchange;

              o   privately negotiated transactions;

              o   settlement  of short sales  entered  into after the  effective
                  date of the registration statement of which this prospectus is
                  a part;

              o   broker-dealers may agree with the Selling Stockholders to sell
                  a specified  number of such shares at a  stipulated  price per
                  share;

              o   through the writing or  settlement of options or other hedging
                  transactions,   whether   through  an  options   exchange   or
                  otherwise;

              o   a combination of any such methods of sale; or

              o   any other method permitted pursuant to applicable law.

         The Selling  Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), if available,  rather
than under this prospectus.

         Broker-dealers  engaged by the  Selling  Stockholders  may  arrange for
other  brokers-dealers  to  participate  in sales.  Broker-dealers  may  receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares,  from the purchaser) in amounts to be
negotiated,  but, except as set forth in a supplement to this Prospectus, in the
case of an agency transaction not in excess of a customary brokerage  commission
in compliance with NASDR Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with NASDR IM-2440.

                                       17
<PAGE>

         In connection  with the sale of the common stock or interests  therein,
the Selling Stockholders may enter into hedging transactions with broker-dealers
or other financial institutions,  which may in turn engage in short sales of the
common stock in the course of hedging the  positions  they  assume.  The Selling
Stockholders  may also sell shares of the common  stock short and deliver  these
securities  to close out their  short  positions,  or loan or pledge  the common
stock to  broker-dealers  that in turn may sell these  securities.  The  Selling
Stockholders   may  also  enter   into   option  or  other   transactions   with
broker-dealers  or other  financial  institutions or the creation of one or more
derivative  securities which require the delivery to such broker-dealer or other
financial  institution of shares offered by this  prospectus,  which shares such
broker-dealer  or  other  financial  institution  may  resell  pursuant  to this
prospectus (as supplemented or amended to reflect such transaction).

         The  Selling  Stockholders  and any  broker-dealers  or agents that are
involved  in selling  the shares may be deemed to be  "underwriters"  within the
meaning of the Securities Act in connection with such sales. In such event,  any
commissions  received  by such  broker-dealers  or agents  and any profit on the
resale  of the  shares  purchased  by  them  may be  deemed  to be  underwriting
commissions or discounts under the Securities Act. Each Selling  Stockholder has
informed  the  Company  that it does not have any written or oral  agreement  or
understanding,  directly or indirectly, with any person to distribute the Common
Stock. In no event shall any broker-dealer receive fees, commissions and markups
which, in the aggregate, would exceed eight percent (8%).

         The Company is required to pay certain  fees and  expenses  incurred by
the Company incident to the  registration of the shares.  The Company has agreed
to indemnify the Selling  Stockholders against certain losses,  claims,  damages
and liabilities, including liabilities under the Securities Act.

         Because Selling Stockholders may be deemed to be "underwriters"  within
the  meaning of the  Securities  Act,  they will be  subject  to the  prospectus
delivery  requirements of the Securities Act including Rule 172  thereunder.  In
addition,  any  securities  covered by this  prospectus  which  qualify for sale
pursuant to Rule 144 under the  Securities Act may be sold under Rule 144 rather
than under this  prospectus.  There is no  underwriter  or  coordinating  broker
acting in connection  with the proposed sale of the resale shares by the Selling
Stockholders.

         We agreed to keep this  prospectus  effective  until the earlier of (i)
the date on which the shares may be resold by the Selling  Stockholders  without
registration  and  without  regard to any volume  limitations  by reason of Rule
144(k) under the  Securities Act or any other rule of similar effect or (ii) all
of the shares have been sold  pursuant to this  prospectus or Rule 144 under the
Securities  Act or any other rule of similar  effect.  The resale shares will be
sold only through  registered or licensed  brokers or dealers if required  under
applicable  state securities  laws. In addition,  in certain states,  the resale
shares may not be sold unless they have been registered or qualified for sale in
the applicable  state or an exemption  from the  registration  or  qualification
requirement is available and is complied with.

         Under  applicable  rules and  regulations  under the Exchange  Act, any
person engaged in the  distribution of the resale shares may not  simultaneously
engage in market  making  activities  with  respect to the common  stock for the
applicable  restricted  period,  as  defined  in  Regulation

                                       18
<PAGE>

M, prior to the  commencement  of the  distribution.  In  addition,  the Selling
Stockholders  will be subject to  applicable  provisions of the Exchange Act and
the rules and regulations  thereunder,  including  Regulation M, which may limit
the timing of  purchases  and sales of shares of the common stock by the Selling
Stockholders  or any  other  person.  We will  make  copies  of this  prospectus
available  to the Selling  Stockholders  and have  informed  them of the need to
deliver a copy of this  prospectus to each  purchaser at or prior to the time of
the sale (including by compliance with Rule 172 under the Securities Act).

                                       19
<PAGE>

                                                                         ANNEX B

                              SONOMA COLLEGE, INC.

                 SELLING SECURITYHOLDER NOTICE AND QUESTIONNAIRE

         The undersigned  beneficial owner of common stock, par value $.0001 per
share (the "COMMON STOCK"),  of Sonoma College,  Inc., a California  corporation
(the "COMPANY"), (the "REGISTRABLE SECURITIES") understands that the Company has
filed or  intends  to file with the  Securities  and  Exchange  Commission  (the
"COMMISSION")  a  registration   statement  on  Form  SB-2  (the   "REGISTRATION
STATEMENT") for the registration and resale under Rule 415 of the Securities Act
of 1933, as amended (the "SECURITIES  ACT"), of the Registrable  Securities,  in
accordance  with the terms of the  Registration  Rights  Agreement,  dated as of
August____,  2006 (the "REGISTRATION  RIGHTS AGREEMENT"),  among the Company and
the Purchasers  named therein.  A copy of the  Registration  Rights Agreement is
available  from the Company  upon  request at the address set forth  below.  All
capitalized  terms not otherwise defined herein shall have the meanings ascribed
thereto in the Registration Rights Agreement.

         Certain  legal  consequences  arise  from  being  named  as  a  selling
securityholder  in  the  Registration  Statement  and  the  related  prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel  regarding the consequences of being
named  or not  being  named  as a  selling  securityholder  in the  Registration
Statement and the related prospectus.

                                     NOTICE

         The  undersigned  beneficial  owner (the "SELLING  SECURITYHOLDER")  of
Registrable Securities hereby elects to include the Registrable Securities owned
by it and listed below in Item 3 (unless otherwise  specified under such Item 3)
in the Registration Statement.

                                       20EXHIBIT 10.29

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

Original Issue Date: August 9, 2006
Set Price (subject to adjustment herein): $0.08

                                                                     $500,000.00

                        9% SECURED CONVERTIBLE DEBENTURE
                              DUE FEBRUARY __ 2008

         THIS DEBENTURE is one of a series of duly authorized and validly issued
Secured   Convertible   Debentures  of  Sonoma   College,   Inc.,  a  California
corporation,     having    its     principal     place    of     business     at
_____________________________  (the  "COMPANY"),  designated  as its 9%  Secured
Convertible Debenture,  due February 8 2008 (this debenture, the "DEBENTURE" and
collectively with the other such series of debentures, the "Debentures").

         FOR VALUE RECEIVED,  the Company  promises to pay to Harborview  Master
Fund LP or its registered assigns (the "HOLDER"), or shall have paid pursuant to
the terms hereunder,  the principal sum of $500,000 by February 8, 2008, or such
earlier date as this Debenture is required or permitted to be repaid as provided
hereunder  (the  "MATURITY  DATE"),  and to pay  interest  to the  Holder on the
aggregate unconverted and then outstanding principal amount of this Debenture in
accordance  with  the  provisions  hereof.  This  Debenture  is  subject  to the
following additional provisions:

         SECTION 1.        DEFINITIONS. For the purposes hereof,  in addition to
the  terms  defined  elsewhere  in this  Debenture,  (a)  capitalized  terms not
otherwise  defined  herein  shall have the  meanings  set forth in the  Purchase
Agreement, and (b) the following terms shall have the following meanings:

                                       1
<PAGE>

                  "ALTERNATE  CONSIDERATION" shall have the meaning set forth in
         Section 5(e).

                  "BANKRUPTCY  EVENT" means any of the following events: (a) the
         Company or any Significant  Subsidiary (as such term is defined in Rule
         1-02(w) of Regulation S-X) thereof commences a case or other proceeding
         under any bankruptcy, reorganization,  arrangement, adjustment of debt,
         relief of debtors,  dissolution,  insolvency or  liquidation or similar
         law of any  jurisdiction  relating  to the  Company or any  Significant
         Subsidiary  thereof;  (b) there is commenced against the Company or any
         Significant  Subsidiary thereof any such case or proceeding that is not
         dismissed  within 60 days after  commencement;  (c) the  Company or any
         Significant  Subsidiary thereof is adjudicated insolvent or bankrupt or
         any  order  of  relief  or  other  order  approving  any  such  case or
         proceeding is entered;  (d) the Company or any  Significant  Subsidiary
         thereof  suffers any appointment of any custodian or the like for it or
         any  substantial  part of its property that is not discharged or stayed
         within 60 calendar days after such appointment;  (e) the Company or any
         Significant  Subsidiary  thereof  makes a  general  assignment  for the
         benefit of  creditors;  (f) the Company or any  Significant  Subsidiary
         thereof  calls a meeting of its  creditors  with a view to  arranging a
         composition,  adjustment  or  restructuring  of its  debts;  or (g) the
         Company or any Significant Subsidiary thereof, by any act or failure to
         act, expressly indicates its consent to, approval of or acquiescence in
         any of the  foregoing  or takes any  corporate  or other action for the
         purpose of effecting any of the foregoing.

                  "BASE  CONVERSION  PRICE"  shall have the meaning set forth in
         Section 5(b).

                  "BUSINESS DAY" means any day except Saturday,  Sunday, any day
         which shall be a federal  legal holiday in the United States or any day
         on which banking  institutions  in the State of New York are authorized
         or required by law or other governmental action to close.

                  "BUY-IN" shall have the meaning set forth in Section 4(d)(v).

                  "CHANGE OF CONTROL TRANSACTION" means the occurrence after the
         date hereof of any of: (i) an  acquisition  after the date hereof by an
         individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
         promulgated  under the  Exchange  Act) of  effective  control  (whether
         through legal or beneficial  ownership of capital stock of the Company,
         by contract or otherwise) of in excess of 50% of the voting  securities
         of the Company  (other than by means of  conversion  or exercise of the
         Debentures and the Securities issued together with the Debentures),  or
         (ii) the Company merges into or consolidates  with any other Person, or
         any Person  merges into or  consolidates  with the Company  and,  after
         giving  effect to such  transaction,  the  stockholders  of the Company
         immediately  prior  to  such  transaction  own  less  than  50%  of the
         aggregate  voting power of the Company or the successor  entity of such
         transaction,   or  (iii)  the  Company   sells  or  transfers   all  or
         substantially  all of its assets to another Person and the stockholders
         of the Company  immediately prior to such transaction own less than 50%
         of the aggregate voting power of the acquiring entity immediately after
         the  transaction,  or (iv) a replacement  at one time or within a three
         year period of more than one-half of the

                                       2
<PAGE>

         members of the Company's  board of directors which is not approved by a
         majority of those individuals who are members of the board of directors
         on the date hereof (or by those  individuals who are serving as members
         of the board of directors on any date whose  nomination to the board of
         directors  was  approved  by a majority  of the members of the board of
         directors who are members on the date hereof),  or (v) the execution by
         the Company of an agreement to which the Company is a party or by which
         it is bound,  providing  for any of the events set forth in clauses (i)
         through (iv) above.

                  "COMMON  STOCK" means the common  stock,  par value $.0001 per
         share,  of the Company and stock of any other class of securities  into
         which such securities may hereafter be reclassified or changed into.

                  "COMPANY OPTIONAL REDEMPTION" shall have the meaning set forth
         in Section 6(b).

                  "COMPANY OPTIONAL  REDEMPTION AMOUNT" means the sum of (i) (A)
         if all Equity  Conditions  have been met on each Trading Day during the
         period  commencing  on the  Company  Optional  Redemption  Notice  Date
         through  to the  Company  Optional  Redemption  Date  and  through  and
         including the date payment of the Company Optional Redemption Amount is
         actually  made,  130% of the  principal  amount of the  Debenture  then
         outstanding  or (B) if all Equity  Conditions  have not been met as set
         forth in the preceding  clause (A), 140% of the principal amount of the
         Debenture then outstanding, plus (ii) accrued but unpaid interest, plus
         (iii) all  liquidated  damages and other  amounts due in respect of the
         Debenture.

                  "COMPANY OPTIONAL  REDEMPTION DATE" shall have the meaning set
         forth in Section 6(b).

                  "COMPANY  OPTIONAL  REDEMPTION  NOTICE" shall have the meaning
         set forth in Section 6(b).

                  "COMPANY  OPTIONAL  REDEMPTION  NOTICE  DATE"  shall  have the
         meaning set forth in Section 6(b).

                  "CONVERSION  DATE" shall have the meaning set forth in Section
         4(a).

                  "CONVERSION PRICE" shall have the meaning set forth in Section
         4(b).

                  "CONVERSION SHARES" means, collectively,  the shares of Common
         Stock issuable upon conversion of this Debenture in accordance with the
         terms hereof.

                  "DEBENTURE  REGISTER"  shall  have the  meaning  set  forth in
         Section 2(c).

                  "DILUTIVE  ISSUANCE"  shall  have  the  meaning  set  forth in
         Section 5(b).

                  "DILUTIVE ISSUANCE NOTICE" shall have the meaning set forth in
         Section 5(b).

                                       3
<PAGE>

                  "EFFECTIVENESS PERIOD" shall have the meaning set forth in the
         Registration Rights Agreement.

                  "EQUITY CONDITIONS" shall mean, during the period in question,
         (i) the Company shall have duly honored all conversions and redemptions
         scheduled  to occur or  occurring  by virtue of one or more  Notices of
         Conversion of the Holder,  if any, (ii) the Company shall have paid all
         liquidated  damages and other amounts owing to the Holder in respect of
         this  Debenture,  (iii) there is an  effective  Registration  Statement
         pursuant to which the Holder is  permitted  to utilize  the  prospectus
         thereunder  to  resell  all  of the  shares  issuable  pursuant  to the
         Transaction  Documents (and the Company  believes,  in good faith, that
         such  effectiveness  will continue  uninterrupted  for the  foreseeable
         future),  (iv) the Common Stock is trading on a Trading  Market and all
         of the shares issuable pursuant to the Transaction Documents are listed
         for trading on such Trading Market (and the Company  believes,  in good
         faith,  that  trading  of the  Common  Stock on a Trading  Market  will
         continue  uninterrupted  for the  foreseeable  future),  (v) there is a
         sufficient  number of authorized but unissued and otherwise  unreserved
         shares of Common Stock for the  issuance of all of the shares  issuable
         pursuant to the Transaction Documents,  (vi) there is no existing Event
         of Default or no existing event which,  with the passage of time or the
         giving of  notice,  would  constitute  an Event of  Default,  (vii) the
         issuance  of the shares in  question  (or,  in the case of an  Optional
         Redemption, the shares issuable upon conversion in full of the Optional
         Redemption  Amount) to the Holder would not violate the limitations set
         forth  in  Section  4(c)  herein,  (viii)  there  has  been  no  public
         announcement of a pending or proposed Fundamental Transaction or Change
         of  Control  Transaction  that  has not been  consummated  and (ix) the
         Holder is not in possession of any information that constitutes, or may
         constitute, material non-public information.

                  "EVENT OF DEFAULT" shall have the meaning set forth in Section
         8.

                  "EXCHANGE ACT" means the  Securities  Exchange Act of 1934, as
         amended, and the rules and regulations promulgated thereunder.

                  "EXEMPT  ISSUANCE"  shall  have the  meaning  set forth in the
         Purchase Agreement.

                  "FORCED  CONVERSION"  shall  have  the  meaning  set  forth in
         Section 6(d).

                  "FORCED  CONVERSION  DATE" shall have the meaning set forth in
         Section 6(d).

                  "FORCED CONVERSION NOTICE" shall have the meaning set forth in
         Section 6(d).

                  "FORCED  CONVERSION  NOTICE  DATE"  shall have the meaning set
         forth in Section 6(d).

                  "FUNDAMENTAL  TRANSACTION" shall have the meaning set forth in
         Section 5(e).

                                       4
<PAGE>

                  "INTEREST  CONVERSION RATE" means the lesser of (i) 85% of the
         average of the VWAPs for the 5  consecutive  Trading Days ending on the
         Trading  Day  that is  immediately  prior  to the  applicable  Interest
         Payment  Date  or  (ii)  85% of the  average  of the  VWAPs  for  the 5
         consecutive  Trading Days ending on the Trading Day that is immediately
         prior to the date the applicable  Interest Conversion Shares are issued
         and delivered if after the Interest Payment Date.

                  "INTEREST  CONVERSION SHARES" shall have the meaning set forth
         in Section 2(a).

                  "INTEREST  NOTICE  PERIOD" shall have the meaning set forth in
         Section 2(a).

                  "INTEREST  PAYMENT  DATE"  shall have the meaning set forth in
         Section 2(a).

                  "INTEREST  SHARE  AMOUNT"  shall have the meaning set forth in
         Section 2(a).

                  "LATE FEES" shall have the meaning set forth in Section 2(d).

                  "MANDATORY DEFAULT AMOUNT" means the sum of (i) the greater of
         (A) 130% of the outstanding  principal  amount of this Debenture,  plus
         all  accrued  and  unpaid  interest  hereon,  or  (B)  the  outstanding
         principal  amount  of this  Debenture,  plus  all  accrued  and  unpaid
         interest  hereon,  divided  by the  Conversion  Price  on the  date the
         Mandatory Default Amount is either (a) demanded (if demand or notice is
         required to create an Event of Default) or otherwise due or (b) paid in
         full, whichever has a lower Conversion Price, multiplied by the VWAP on
         the date the  Mandatory  Default  Amount  is  either  (x)  demanded  or
         otherwise  due or (y) paid in full,  whichever  has a higher VWAP,  and
         (ii) all other amounts,  costs,  expenses and liquidated damages due in
         respect of this Debenture.

                  "NEW YORK COURTS"  shall have the meaning set forth in Section
         9(d).

                  "NOTICE OF  CONVERSION"  shall have the  meaning  set forth in
         Section 4(a).

                  "OPTIONAL  REDEMPTION"  shall  have the  meaning  set forth in
         Section 6(a).

                  "OPTIONAL  REDEMPTION AMOUNT" means the sum of (i) 120% of the
         principal  amount of the Debenture then  outstanding,  (ii) accrued but
         unpaid interest and (iii) all liquidated  damages and other amounts due
         in respect of the Debenture.

                  "OPTIONAL REDEMPTION DATE" shall have the meaning set forth in
         Section 6(a).

                  "OPTIONAL  REDEMPTION NOTICE" shall have the meaning set forth
         in Section 6(a).

                  "OPTIONAL  REDEMPTION  NOTICE DATE" shall have the meaning set
         forth in Section 6(a).

                                       5
<PAGE>

                  "ORIGINAL  ISSUE DATE" means the date of the first issuance of
         the  Debentures,  regardless  of any  transfers  of any  Debenture  and
         regardless of the number of instruments which may be issued to evidence
         such Debentures.

                  "PERMITTED  INDEBTEDNESS" means (a) the Indebtedness  existing
         on the Original Issue Date and set forth on SCHEDULE  3.1(AA)  attached
         to the Purchase  Agreement,  (b) lease  obligations  and purchase money
         indebtedness  of  up  to  $150,000,  in  the  aggregate,   incurred  in
         connection with the acquisition of capital assets and lease obligations
         with respect to newly  acquired or leased assets and (c) up to $408,275
         of additional  non-equity linked  Indebtedness  incurred by the Company
         for purposes of obtaining (or maintaining)  certification  for Title IV
         Programs from the US Department of Education,  under a letter of credit
         agreement  with a bank or other  nationally  recognized  and  regulated
         commercial   lender  whose   primary   business  is  not  investing  in
         securities.

                  "PERMITTED LIEN" means the individual and collective reference
         to  the  following:   (a)  Liens  for  taxes,   assessments  and  other
         governmental  charges  or  levies  not  yet  due or  Liens  for  taxes,
         assessments and other governmental charges or levies being contested in
         good faith and by appropriate  proceedings for which adequate  reserves
         (in the good faith judgment of the management of the Company) have been
         established in accordance with GAAP, and (b) Liens imposed by law which
         were incurred in the ordinary course of the Company's business, such as
         carriers',  warehousemen's and mechanics' Liens,  statutory  landlords'
         Liens,  and other similar  Liens arising in the ordinary  course of the
         Company's  business,  and  which:  (x)  do not  individually  or in the
         aggregate  materially detract from the value of such property or assets
         or  materially  impair the use thereof in the operation of the business
         of the  Company  and its  consolidated  Subsidiaries,  or (y) are being
         contested in good faith by appropriate  proceedings,  which proceedings
         have the effect of preventing for the foreseeable future the forfeiture
         or sale of the property or asset subject to such Lien.

                  "PERSON"  means an  individual  or  corporation,  partnership,
         trust,  incorporated  or  unincorporated  association,  joint  venture,
         limited  liability  company,  joint stock  company,  government  (or an
         agency or subdivision thereof) or other entity of any kind.

                  "PURCHASE  AGREEMENT" means the Securities  Purchase Agreement
         among the Company and the original Holders, dated as of August __, 2006
         as amended,  modified or  supplemented  from time to time in accordance
         with its terms.

                  "REGISTRATION  RIGHTS AGREEMENT" means the Registration Rights
         Agreement among the Company and the original  Holders,  dated as of the
         date of the Purchase  Agreement,  as amended,  modified or supplemented
         from time to time in accordance with its terms.

                  "REGISTRATION  STATEMENT" means a registration  statement that
         registers  the resale of all  Conversion  Shares,  Interest  Conversion
         Shares  and  Warrant  Shares  of the  Holder,  who  shall be named as a
         "selling  stockholder"  therein,  and  meets  the  requirements  of the
         Registration Rights Agreement.

                                       6
<PAGE>

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

                  "SHARE  DELIVERY  DATE"  shall have the  meaning  set forth in
         Section 4(d).

                  "SUBSIDIARY"  shall have the meaning set forth in the Purchase
         Agreement.

                  "THRESHOLD PERIOD" shall have the meaning set forth in Section
         6(c).

                  "TRADING  DAY"  means a day on  which  the  principal  Trading
         Market is open for business.

                  "TRADING  MARKET" means the following  markets or exchanges on
         which the Common  Stock is listed or quoted for  trading on the date in
         question:  the American Stock Exchange,  the Nasdaq Capital Market, the
         Nasdaq National Market, the New York Stock Exchange or the OTC Bulletin
         Board.

                  "TRANSACTION  DOCUMENTS"  shall have the  meaning set forth in
         the Purchase Agreement.

                  "VWAP" means,  for any date, the price determined by the first
         of the following clauses that applies:  (a) if the Common Stock is then
         listed or quoted on a Trading Market, the daily volume weighted average
         price of the Common Stock for such date (or the nearest preceding date)
         on the  Trading  Market on which  the  Common  Stock is then  listed or
         quoted for trading as reported by  Bloomberg  L.P.  (based on a Trading
         Day from 9:30 a.m.  (New  York City  time) to 4:02 p.m.  (New York City
         time);  (b) if the OTC  Bulletin  Board is not a  Trading  Market,  the
         volume weighted average price of the Common Stock for such date (or the
         nearest  preceding date) on the OTC Bulletin  Board;  (c) if the Common
         Stock is not then quoted for trading on the OTC  Bulletin  Board and if
         prices  for the Common  Stock are then  reported  in the "Pink  Sheets"
         published  by Pink  Sheets,  LLC (or a similar  organization  or agency
         succeeding to its functions of reporting  prices),  the most recent bid
         price per share of the Common  Stock so  reported;  or (d) in all other
         cases,  the fair market value of a share of Common Stock as  determined
         by an  independent  appraiser  selected in good faith by the Holder and
         reasonably acceptable to the Company.

         SECTION 2.        INTEREST.

                  a)       PAYMENT  OF  INTEREST  IN CASH OR KIND.  The  Company
         shall pay interest to the Holder on the aggregate  unconverted and then
         outstanding  principal  amount of this  Debenture at the rate of 9% per
         annum, payable annually on August __, 2007, on each Conversion Date (as
         to that  principal  amount  then  being  converted),  on each  Optional
         Redemption  Date (as to that principal  amount then being redeemed) and
         on the Maturity  Date (except  that, if any such date is not a Business
         Day,  then such payment  shall be due on the next  succeeding  Business
         Day) (each such date,  an  "INTEREST  PAYMENT  DATE"),  in

                                       7
<PAGE>

         cash or duly authorized,  validly issued, fully paid and non-assessable
         shares of Common Stock at the Interest  Conversion  Rate (the amount to
         be paid in shares,  the  "INTEREST  SHARE  AMOUNT"),  or a  combination
         thereof; PROVIDED,  HOWEVER, that (i) payment in shares of Common Stock
         may only occur if during the 20 Trading Days  immediately  prior to the
         applicable  Interest  Payment Date (the "INTEREST  NOTICE  PERIOD") and
         through and  including  the date such shares of Common Stock are issued
         to the Holder all of the Equity Conditions have been met (unless waived
         by the Holder in writing), (ii) the Company shall have given the Holder
         notice in accordance with the notice  requirements set forth below, and
         (iii) as to such Interest  Payment Date,  prior to such Interest Notice
         Period (but not more than 5 Trading Days prior to the  commencement  of
         such Interest Notice  Period),  the Company shall have delivered to the
         Holder's  account with The Depository  Trust Company a number of shares
         of Common Stock to be applied  against such Interest Share Amount equal
         to the quotient of (x) the applicable  Interest Share Amount divided by
         (y) the then Conversion Price (the "INTEREST CONVERSION SHARES").

                  b)       COMPANY'S  ELECTION TO PAY INTEREST IN KIND.  Subject
         to the  terms  and  conditions  herein,  the  decision  whether  to pay
         interest  hereunder  in cash or shares of Common  Stock shall be at the
         discretion of the Company.  Prior to the  commencement  of any Interest
         Notice Period, the Company shall deliver to the Holder a written notice
         of its election to pay interest  hereunder on the  applicable  Interest
         Payment Date either in cash,  shares of Common  Stock or a  combination
         thereof and the  Interest  Share Amount as to the  applicable  Interest
         Payment  Date,  provided  that the Company may  indicate in such notice
         that the  election  contained  in such  notice  shall  apply to  future
         Interest Payment Dates until revised by a subsequent notice. During any
         Interest Notice Period,  the Company's election (whether specific to an
         Interest  Payment Date or  continuous)  shall be irrevocable as to such
         Interest  Payment  Date.  Subject  to  the  aforementioned  conditions,
         failure  to  timely  provide  such  written  notice  shall be deemed an
         election by the Company to pay the  interest on such  Interest  Payment
         Date in cash.  At any time the Company  delivers a notice to the Holder
         of its  election  to pay the  interest in shares of Common  Stock,  the
         Company shall timely file a prospectus  supplement pursuant to Rule 424
         disclosing  such  election.  The  aggregate  number of shares of Common
         Stock  otherwise  issuable  to the Holder on an Interest  Payment  Date
         shall be reduced by the number of Interest Conversion Shares previously
         issued to the Holder in connection with such Interest Payment Date.

                  c)       INTEREST  CALCULATIONS.  Interest shall be calculated
         on the basis of a 360-day year and shall accrue daily commencing on the
         Original  Issue  Date  until  payment  in  full of the  principal  sum,
         together with all accrued and unpaid interest,  liquidated  damages and
         other amounts which may become due hereunder, has been made. Payment of
         interest in shares of Common Stock (other than the Interest  Conversion
         Shares issued prior to an Interest Notice Period) shall otherwise occur
         pursuant to Section  4(d)(ii)  herein and,  solely for  purposes of the
         payment of  interest  in shares,  the  Interest  Payment  Date shall be
         deemed the Conversion Date. Interest shall cease to accrue with respect
         to any principal amount  converted,  provided that the Company actually
         delivers  the  Conversion  Shares  within the time  period  required by
         Section  4(d)(ii).  Interest  hereunder  will be paid to the  Person in
         whose name this  Debenture is  registered on the records of

                                       8
<PAGE>

         the Company regarding registration and transfers of this Debenture (the
         "DEBENTURE  REGISTER").  Except as otherwise provided herein, if at any
         time the Company  pays  interest  partially  in cash and  partially  in
         shares of Common  Stock to the  holders  of the  Debentures,  then such
         payment  shall  be  distributed   ratably  among  the  holders  of  the
         then-outstanding  Debentures  based on their (or  their  predecessor's)
         initial purchases of Debentures pursuant to the Purchase Agreement.

                  d)       LATE FEE. All overdue  accrued and unpaid interest to
         be paid hereunder  shall entail a late fee at an interest rate equal to
         the lesser of 18% per annum or the maximum rate permitted by applicable
         law ("LATE  FEES") which shall accrue daily from the date such interest
         is due  hereunder  through and  including  the date of payment in full.
         Notwithstanding  anything to the contrary  contained  herein, if on any
         Interest  Payment Date the Company has elected to pay accrued  interest
         in the form of Common  Stock but the Company is not able to pay accrued
         interest in Common Stock because it fails to satisfy the conditions for
         payment in Common  Stock set forth  above,  then,  at the option of the
         Holder,  the Company,  in lieu of  delivering  either  shares of Common
         Stock  pursuant  to this  Section 2 or paying the  regularly  scheduled
         interest payment in cash,  shall deliver,  within three Trading Days of
         each applicable  Interest  Payment Date, an amount in cash equal to the
         product  of:  (x) the  number  of  shares  of  Common  Stock  otherwise
         deliverable  to the Holder in  connection  with the payment of interest
         due on such Interest  Payment Date,  multiplied by (y) the highest VWAP
         during the period commencing on the Interest Payment Date and ending on
         the Trading Day prior to the date such payment is made. If any Interest
         Conversion  Shares  are  issued  to the  Holder in  connection  with an
         Interest  Payment  Date and are not applied  against an Interest  Share
         Amount, then the Holder shall promptly return such excess shares to the
         Company.

                  e)       PREPAYMENT.  Except  as  otherwise  set forth in this
         Debenture,  the  Company  may not prepay any  portion of the  principal
         amount of this  Debenture  without  the prior  written  consent  of the
         Holder.

         SECTION 3.        REGISTRATION OF TRANSFERS AND EXCHANGES.

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

                  b)       INVESTMENT  REPRESENTATIONS.  This Debenture has been
         issued subject to certain  investment  representations  of the original
         Holder set forth in the Purchase  Agreement and may be  transferred  or
         exchanged only in compliance with the Purchase Agreement and applicable
         federal and state securities laws and regulations.

                  c)       RELIANCE  ON   DEBENTURE   REGISTER.   Prior  to  due
         presentment for transfer to the Company of this Debenture,  the Company
         and any agent of the  Company  may treat the  Person in whose name this
         Debenture is duly  registered  on the  Debenture  Register as the owner
         hereof for the purpose of receiving  payment as herein provided and for
         all

                                       9
<PAGE>

         other purposes,  whether or not this Debenture is overdue,  and neither
         the  Company  nor any such  agent  shall be  affected  by notice to the
         contrary.

         SECTION 4.        CONVERSION.

                  a)       VOLUNTARY CONVERSION.  At any time after the Original
         Issue  Date  until  this  Debenture  is  no  longer  outstanding,  this
         Debenture  shall be  convertible,  in whole or in part,  into shares of
         Common Stock at the option of the Holder,  at any time and from time to
         time (subject to the conversion  limitations  set forth in Section 4(c)
         hereof).  The Holder  shall effect  conversions  by  delivering  to the
         Company a Notice of Conversion, the form of which is attached hereto as
         ANNEX A (a "NOTICE OF  CONVERSION"),  specifying  therein the principal
         amount of this  Debenture  to be  converted  and the date on which such
         conversion  shall be effected (a "CONVERSION  DATE").  If no Conversion
         Date is specified in a Notice of Conversion,  the Conversion Date shall
         be the  date  that  such  Notice  of  Conversion  is  deemed  delivered
         hereunder.  To effect  conversions  hereunder,  the Holder shall not be
         required to physically  surrender  this Debenture to the Company unless
         the entire  principal  amount of this  Debenture  plus all  accrued and
         unpaid interest  thereon has been so converted.  Conversions  hereunder
         shall have the effect of lowering the outstanding  principal  amount of
         this  Debenture in an amount equal to the  applicable  conversion.  The
         Holder and the Company  shall  maintain  records  showing the principal
         amount(s) converted and the date of such conversion(s). The Company may
         deliver an objection to any Notice of Conversion within 2 Business Days
         of delivery of such Notice of  Conversion.  In the event of any dispute
         or  discrepancy,  the records of the Holder  shall be  controlling  and
         determinative  in the absence of manifest  error.  THE HOLDER,  AND ANY
         ASSIGNEE BY ACCEPTANCE OF THIS  DEBENTURE,  ACKNOWLEDGE AND AGREE THAT,
         BY REASON OF THE PROVISIONS OF THIS PARAGRAPH,  FOLLOWING CONVERSION OF
         A PORTION  OF THIS  DEBENTURE,  THE UNPAID  AND  UNCONVERTED  PRINCIPAL
         AMOUNT OF THIS DEBENTURE MAY BE LESS THAN THE AMOUNT STATED ON THE FACE
         HEREOF.

                  b)       CONVERSION  PRICE.  The conversion price in effect on
         any Conversion Date shall be equal to the lesser of (a) $0.08,  subject
         to  adjustment  herein (the "SET  PRICE") and (b) 75% of the average of
         the 3 lowest  Closing  Prices  during the 20 Trading  Days  immediately
         prior  to  the  applicable   Conversion  Date  (subject  to  adjustment
         herein)(the "CONVERSION PRICE").

                  As used herein,  "CLOSING  PRICE" means on any particular date
         (a) the last  reported  closing bid price per share of Common  Stock on
         such date on the Trading  Market (as reported by Bloomberg L.P. at 4:15
         PM (New York  time)),  or (b) if there is no such  price on such  date,
         then the closing bid price on the  Trading  Market on the date  nearest
         preceding such date (as reported by Bloomberg L.P. at 4:15 PM (New York
         time)),  or (c) if the Common Stock is not then listed or quoted on the
         Trading  Market and if prices for the Common Stock are then reported in
         the  "pink  sheets"   published  by  Pink  Sheets  LLC  (or  a  similar
         organization  or  agency  succeeding  to  its  functions  of  reporting
         prices),  the most  recent bid price per share of the  Common  Stock so
         reported,  or (d) if the shares of Common  Stock are not then  publicly
         traded the fair market value of a share of Common  Stock as  determined
         by an appraiser selected in good faith by the Holder.

                                       10
<PAGE>

                  c)       CONVERSION LIMITATIONS.

                           i.       HOLDER'S  RESTRICTION  ON  CONVERSION.   The
                  Company shall not effect any conversion of this Debenture, and
                  a Holder  shall not have the right to convert  any  portion of
                  this Debenture,  to the extent that after giving effect to the
                  conversion set forth on the  applicable  Notice of Conversion,
                  such Holder (together with such Holder's  Affiliates,  and any
                  other person or entity  acting as a group  together  with such
                  Holder or any of such Holder's  Affiliates) would beneficially
                  own in  excess  of the  Beneficial  Ownership  Limitation  (as
                  defined below).  For purposes of the foregoing  sentence,  the
                  number of shares of Common  Stock  beneficially  owned by such
                  Holder and its  Affiliates  shall include the number of shares
                  of Common Stock  issuable upon  conversion  of this  Debenture
                  with respect to which such  determination  is being made,  but
                  shall  exclude the number of shares of Common  Stock which are
                  issuable  upon (A)  conversion of the  remaining,  unconverted
                  principal amount of this Debenture  beneficially owned by such
                  Holder or any of its Affiliates and (B) exercise or conversion
                  of  the  unexercised  or  unconverted  portion  of  any  other
                  securities   of  the  Company   subject  to  a  limitation  on
                  conversion or exercise  analogous to the limitation  contained
                  herein (including, without limitation, any other Debentures or
                  the Warrants)  beneficially owned by such Holder or any of its
                  Affiliates. Except as set forth in the preceding sentence, for
                  purposes of this Section 4(c)(i),  beneficial  ownership shall
                  be calculated in accordance with Section 13(d) of the Exchange
                  Act and the rules and regulations promulgated  thereunder.  To
                  the  extent  that the  limitation  contained  in this  Section
                  4(c)(i) applies,  the  determination of whether this Debenture
                  is convertible (in relation to other  securities owned by such
                  Holder  together with any  Affiliates)  and of which principal
                  amount of this Debenture is  convertible  shall be in the sole
                  discretion of such Holder,  and the  submission of a Notice of
                  Conversion  shall be deemed to be such Holder's  determination
                  of whether this  Debenture  may be  converted  (in relation to
                  other  securities  owned  by such  Holder  together  with  any
                  Affiliates)  and which  principal  amount of this Debenture is
                  convertible, in each case subject to such aggregate percentage
                  limitations. To ensure compliance with this restriction,  each
                  Holder will be deemed to represent to the Company each time it
                  delivers a Notice of Conversion that such Notice of Conversion
                  has not violated the  restrictions set forth in this paragraph
                  and the Company  shall have no obligation to verify or confirm
                  the   accuracy  of  such   determination.   In   addition,   a
                  determination  as to any group  status as  contemplated  above
                  shall be determined  in  accordance  with Section 13(d) of the
                  Exchange  Act  and  the  rules  and  regulations   promulgated
                  thereunder.   For  purposes  of  this  Section   4(c)(i),   in
                  determining the number of outstanding  shares of Common Stock,
                  a Holder  may rely on the  number  of  outstanding  shares  of
                  Common  Stock as stated in the most  recent of the  following:
                  (A) the Company's  most recent Form 10-QSB or Form 10-KSB,  as
                  the case may be; (B) a more recent public  announcement by the
                  Company;  or (C) a more  recent  notice by the  Company or the
                  Company's transfer agent setting forth the number of shares of
                  Common Stock outstanding.  Upon the written or oral

                                       11
<PAGE>

                  request of a Holder, the Company shall within two Trading Days
                  confirm  orally and in  writing  to such  Holder the number of
                  shares of Common  Stock  then  outstanding.  In any case,  the
                  number  of  outstanding   shares  of  Common  Stock  shall  be
                  determined  after giving effect to the  conversion or exercise
                  of securities of the Company,  including  this  Debenture,  by
                  such Holder or its Affiliates  since the date as of which such
                  number of outstanding shares of Common Stock was reported. The
                  "Beneficial Ownership Limitation" shall be 4.99% of the number
                  of shares of the Common Stock  outstanding  immediately  after
                  giving  effect to the  issuance  of  shares  of  Common  Stock
                  issuable upon conversion of this Debenture held by the Holder.
                  The Beneficial Ownership Limitation provisions of this Section
                  4(c)(i) may be waived by such Holder,  at the election of such
                  Holder,  upon  not  less  than 61 days'  prior  notice  to the
                  Company,  to change the  Beneficial  Ownership  Limitation  to
                  9.99% of the number of shares of the Common Stock  outstanding
                  immediately  after giving  effect to the issuance of shares of
                  Common Stock upon  conversion  of this  Debenture  held by the
                  Holder  and the  provisions  of  this  Section  4(c)(i)  shall
                  continue  to  apply.  Upon  such a change  by a Holder  of the
                  Beneficial  Ownership Limitation from such 4.99% limitation to
                  such 9.99% limitation, the Beneficial Ownership Limitation may
                  not be further  waived by such Holder.  The provisions of this
                  paragraph  shall  be  construed  and  implemented  in a manner
                  otherwise  than in  strict  conformity  with the terms of this
                  Section  4(c)(i) to correct  this  paragraph  (or any  portion
                  hereof)  which  may be  defective  or  inconsistent  with  the
                  intended Beneficial  Ownership  Limitation herein contained or
                  to make  changes or  supplements  necessary  or  desirable  to
                  properly  give  effect  to such  limitation.  The  limitations
                  contained in this paragraph shall apply to a successor  holder
                  of this Debenture.

                  d)       MECHANICS OF CONVERSION.

                           i.       CONVERSION  SHARES  ISSUABLE UPON CONVERSION
                  OF  PRINCIPAL  AMOUNT.  The  number of shares of Common  Stock
                  issuable  upon a conversion  hereunder  shall be determined by
                  the  quotient   obtained  by  dividing  (x)  the   outstanding
                  principal  amount of this Debenture to be converted by (y) the
                  Conversion Price.

                           ii.      DELIVERY OF CERTIFICATE UPON CONVERSION. Not
                  later than three Trading Days after each  Conversion Date (the
                  "SHARE DELIVERY DATE"), the Company shall deliver, or cause to
                  be delivered,  to the Holder (A) a certificate or certificates
                  representing  the  Conversion  Shares  which,  on or after the
                  Effective  Date,  shall  be free of  restrictive  legends  and
                  trading  restrictions  (other  than  those  which  may then be
                  required by the Purchase Agreement) representing the number of
                  shares of Common Stock being  acquired upon the  conversion of
                  this Debenture (including, if the Company has given continuous
                  notice  pursuant  to Section  2(b) for  payment of interest in
                  shares of Common  Stock at least 20 Trading  Days prior to the
                  date on  which  the  Conversion  Notice  is  delivered  to the
                  Company,  shares of Common Stock  representing  the payment of
                  accrued interest otherwise determined pursuant to Section 2(a)
                  but  assuming  that  the  Interest  Payment  Period

                                       12
<PAGE>

                  is the 20 Trading Days period immediately prior to the date on
                  which the  Conversion  Notice is  delivered to the Company and
                  excluding  for such  issuance the  condition  that the Company
                  deliver  Interest   Conversion  Shares  as  to  such  interest
                  payment)  and (B) a bank check in the  amount of  accrued  and
                  unpaid  interest (if the Company has elected or is required to
                  pay accrued interest in cash). On or after the Effective Date,
                  the  Company  shall  use  its  best  efforts  to  deliver  any
                  certificate  or  certificates  required to be delivered by the
                  Company  under  this  Section  4  electronically  through  the
                  Depository  Trust  Company  or  another  established  clearing
                  corporation performing similar functions.

                           iii.     FAILURE TO DELIVER  CERTIFICATES.  If in the
                  case  of  any  Notice  of  Conversion   such   certificate  or
                  certificates  are  not  delivered  to or as  directed  by  the
                  applicable   Holder  by  the  third   Trading  Day  after  the
                  Conversion  Date,  the Holder  shall be  entitled  to elect by
                  written  notice to the  Company  at any time on or before  its
                  receipt of such certificate or  certificates,  to rescind such
                  Conversion,  in which event the Company shall promptly  return
                  to the Holder any original Debenture  delivered to the Company
                  and  the  Holder  shall  promptly   return  the  Common  Stock
                  certificates   representing   the  principal  amount  of  this
                  Debenture tendered for conversion to the Company.

                           iv.      OBLIGATION   ABSOLUTE;   PARTIAL  LIQUIDATED
                  DAMAGES.  The Company's  obligations  to issue and deliver the
                  Conversion   Shares  upon  conversion  of  this  Debenture  in
                  accordance   with  the   terms   hereof   are   absolute   and
                  unconditional,  irrespective  of any action or inaction by the
                  Holder to enforce the same, any waiver or consent with respect
                  to any provision hereof,  the recovery of any judgment against
                  any Person or any action to enforce  the same,  or any setoff,
                  counterclaim,  recoupment,  limitation or termination,  or any
                  breach or alleged  breach by the Holder or any other Person of
                  any  obligation  to the  Company or any  violation  or alleged
                  violation  of law by the  Holder  or  any  other  Person,  and
                  irrespective of any other  circumstance  which might otherwise
                  limit  such  obligation  of  the  Company  to  the  Holder  in
                  connection  with  the  issuance  of  such  Conversion  Shares;
                  PROVIDED,  HOWEVER,  that such delivery shall not operate as a
                  waiver by the  Company of any such action the Company may have
                  against the Holder.  In the event the Holder of this Debenture
                  shall elect to convert any or all of the outstanding principal
                  amount hereof,  the Company may not refuse conversion based on
                  any claim that the Holder or anyone  associated  or affiliated
                  with the Holder  has been  engaged  in any  violation  of law,
                  agreement or for any other reason, unless an injunction from a
                  court,  on  notice to  Holder,  restraining  and or  enjoining
                  conversion  of all or part of this  Debenture  shall have been
                  sought and  obtained,  and the Company posts a surety bond for
                  the  benefit  of the  Holder  in the  amount  of  150%  of the
                  outstanding  principal  amount  of this  Debenture,  which  is
                  subject to the  injunction,  which bond shall remain in effect
                  until  the   completion  of   arbitration/litigation   of  the
                  underlying  dispute and the proceeds of which shall be payable
                  to such  Holder to the  extent  it  obtains  judgment.  In the
                  absence of such injunction, the Company shall issue Conversion
                  Shares  or,  if

                                       13
<PAGE>

                  applicable,  cash, upon a properly noticed conversion.  If the
                  Company  fails for any reason to  deliver  to the Holder  such
                  certificate or  certificates  pursuant to Section  4(d)(ii) by
                  the fifth Trading Day after the  Conversion  Date, the Company
                  shall pay to such Holder,  in cash, as liquidated  damages and
                  not as a penalty,  for each $1000 of  principal  amount  being
                  converted,  $10 per Trading Day (increasing to $20 per Trading
                  Day on the fifth  Trading  Day after such  liquidated  damages
                  begin to accrue) for each Trading Day after such fifth Trading
                  Day until such  certificates  are  delivered.  Nothing  herein
                  shall  limit a  Holder's  right to pursue  actual  damages  or
                  declare an Event of Default  pursuant  to Section 8 hereof for
                  the Company's failure to deliver  Conversion Shares within the
                  period  specified  herein and such Holder shall have the right
                  to pursue all remedies available to it hereunder, at law or in
                  equity  including,  without  limitation,  a decree of specific
                  performance and/or injunctive relief. The exercise of any such
                  rights  shall not  prohibit the Holder from seeking to enforce
                  damages   pursuant  to  any  other  Section  hereof  or  under
                  applicable law.

                           v.       COMPENSATION FOR BUY-IN ON FAILURE TO TIMELY
                  DELIVER CERTIFICATES UPON CONVERSION. In addition to any other
                  rights  available to the Holder,  if the Company fails for any
                  reason  to  deliver  to  the  Holder   such   certificate   or
                  certificates  by the Share  Delivery  Date pursuant to Section
                  4(d)(ii),  and if after such Share Delivery Date the Holder is
                  required by its brokerage  firm to purchase (in an open market
                  transaction or otherwise) shares of Common Stock to deliver in
                  satisfaction of a sale by such Holder of the Conversion Shares
                  which the Holder was entitled to receive  upon the  conversion
                  relating to such Share  Delivery Date (a  "BUY-IN"),  then the
                  Company  shall:  (A) pay in cash to the Holder (in addition to
                  any other remedies  available to or elected by the Holder) the
                  amount  by  which  (x)  the  Holder's   total  purchase  price
                  (including any brokerage  commissions) for the Common Stock so
                  purchased exceeds (y) the product of: (1) the aggregate number
                  of shares of Common  Stock that such  Holder was  entitled  to
                  receive from the  conversion  at issue  multiplied  by (2) the
                  actual sale price at which the sell order  giving rise to such
                  purchase  obligation  was executed  (including  any  brokerage
                  commissions),  and (B) at the  option  of the  Holder,  either
                  reissue (if surrendered)  this Debenture in a principal amount
                  equal to the principal  amount of the attempted  conversion or
                  deliver to the  Holder  the  number of shares of Common  Stock
                  that would have been issued if the Company had timely complied
                  with its delivery  requirements  under Section  4(d)(ii).  For
                  example,  if the Holder  purchases Common Stock having a total
                  purchase price of $11,000 to cover a Buy-In with respect to an
                  attempted  conversion of this  Debenture with respect to which
                  the actual sale price of the Conversion  Shares (including any
                  brokerage commissions) giving rise to such purchase obligation
                  was a total of $10,000  under  clause  (A) of the  immediately
                  preceding  sentence,  the Company shall be required to pay the
                  Holder  $1,000.  The Holder shall provide the Company  written
                  notice indicating the amounts payable to the Holder in respect
                  of the Buy-In and,  upon request of the  Company,  evidence of
                  the amount of such loss. Nothing herein shall limit a Holder's
                  right to pursue any

                                       14
<PAGE>

                  other remedies available to it hereunder,  at law or in equity
                  including,   without   limitation,   a  decree   of   specific
                  performance  and/or  injunctive  relief  with  respect  to the
                  Company's failure to timely deliver certificates  representing
                  shares of Common Stock upon  conversion  of this  Debenture as
                  required pursuant to the terms hereof.

                           vi.      RESERVATION   OF   SHARES    ISSUABLE   UPON
                  CONVERSION.  The Company  covenants  that it will at all times
                  reserve and keep  available out of its authorized and unissued
                  shares of Common Stock for the sole  purpose of issuance  upon
                  conversion  of this  Debenture and payment of interest on this
                  Debenture,  each as  herein  provided,  free  from  preemptive
                  rights  or any  other  actual  contingent  purchase  rights of
                  Persons  other than the Holder  (and the other  holders of the
                  Debentures),  not less than such aggregate number of shares of
                  the Common Stock as shall (subject to the terms and conditions
                  set forth in the Purchase  Agreement) be issuable (taking into
                  account the  adjustments  and  restrictions of Section 5) upon
                  the  conversion of the  outstanding  principal  amount of this
                  Debenture  and  payment of  interest  hereunder.  The  Company
                  covenants  that all  shares of Common  Stock  that shall be so
                  issuable  shall,  upon  issue,  be  duly  authorized,  validly
                  issued,  fully paid and nonassessable and, if the Registration
                  Statement is then effective under the Securities Act, shall be
                  registered   for   public   sale  in   accordance   with  such
                  Registration Statement.

                           vii.     FRACTIONAL   SHARES.   Upon   a   conversion
                  hereunder,  the  Company  shall not be required to issue stock
                  certificates representing fractions of shares of Common Stock,
                  but may if otherwise permitted, make a cash payment in respect
                  of any  final  fraction  of a share  based on the VWAP at such
                  time. If the Company elects not, or is unable,  to make such a
                  cash payment, the Holder shall be entitled to receive, in lieu
                  of the  final  fraction  of a share,  1 whole  share of Common
                  Stock.

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

         SECTION 5.        CERTAIN ADJUSTMENTS.

                  a)       STOCK DIVIDENDS AND STOCK SPLITS. If the Company,  at
         any time while this Debenture is outstanding: (A) pays a stock dividend
         or otherwise makes a distribution or

                                       15
<PAGE>

         distributions  payable  in shares  of Common  Stock on shares of Common
         Stock or any Common Stock Equivalents  (which,  for avoidance of doubt,
         shall not include any shares of Common Stock issued by the Company upon
         conversion  of,  or  payment  of  interest  on,  this  Debenture);  (B)
         subdivides  outstanding  shares of Common Stock into a larger number of
         shares;  (C)  combines  (including  by way of a  reverse  stock  split)
         outstanding  shares of Common Stock into a smaller number of shares; or
         (D) issues, in the event of a reclassification  of shares of the Common
         Stock,  any shares of capital stock of the Company,  then the Set Price
         shall be multiplied  by a fraction of which the numerator  shall be the
         number of shares of Common Stock  (excluding any treasury shares of the
         Company)  outstanding  immediately  before  such event and of which the
         denominator  shall be the number of shares of Common Stock  outstanding
         immediately  after such event.  Any  adjustment  made  pursuant to this
         Section shall become  effective  immediately  after the record date for
         the determination of stockholders  entitled to receive such dividend or
         distribution and shall become effective immediately after the effective
         date in the case of a subdivision, combination or re-classification.

                  b)       SUBSEQUENT  EQUITY  SALES.  If  the  Company  or  any
         Subsidiary thereof, as applicable,  at any time while this Debenture is
         outstanding,  sells or grants any option to purchase or sells or grants
         any right to reprice its securities, or otherwise disposes of or issues
         (or  announces  any  sale,  grant or any  option to  purchase  or other
         disposition) any Common Stock or Common Stock Equivalents entitling any
         Person to  acquire  shares of Common  Stock at an  effective  price per
         share  that is lower than the then Set Price  (such  lower  price,  the
         "BASE CONVERSION  PRICE" and such issuances  collectively,  a "DILUTIVE
         ISSUANCE")  (if  the  holder  of  the  Common  Stock  or  Common  Stock
         Equivalents  so  issued  shall at any time,  whether  by  operation  of
         purchase price  adjustments,  reset  provisions,  floating  conversion,
         exercise or exchange prices or otherwise,  or due to warrants,  options
         or rights per share which are issued in connection  with such issuance,
         be entitled to receive shares of Common Stock at an effective price per
         share that is lower than the Set Price,  such issuance  shall be deemed
         to have  occurred  for  less  than the Set  Price  on such  date of the
         Dilutive  Issuance),  then the Set Price  shall be reduced to equal the
         Base  Conversion  Price.  Such  adjustment  shall be made whenever such
         Common Stock or Common Stock  Equivalents  are issued.  Notwithstanding
         the  foregoing,  no adjustment  will be made under this Section 5(b) in
         respect of an Exempt  Issuance.  The Company shall notify the Holder in
         writing,  no later than the Business Day  following the issuance of any
         Common Stock or Common Stock Equivalents  subject to this Section 5(b),
         indicating  therein the applicable  issuance price, or applicable reset
         price,  exchange price,  conversion price and other pricing terms (such
         notice, the "DILUTIVE ISSUANCE NOTICE"). For purposes of clarification,
         whether or not the Company provides a Dilutive Issuance Notice pursuant
         to this Section 5(b), upon the occurrence of any Dilutive Issuance, the
         Holder is entitled to receive a number of Conversion  Shares based upon
         the  Base  Conversion  Price  on or  after  the  date of such  Dilutive
         Issuance,  regardless  of whether the Holder  accurately  refers to the
         Base Conversion Price in the Notice of Conversion.

                  c)       SUBSEQUENT RIGHTS OFFERINGS.  If the Company,  at any
         time while the Debenture is outstanding, shall issue rights, options or
         warrants to all holders of Common

                                       16
<PAGE>

         Stock (and not to Holders)  entitling them to subscribe for or purchase
         shares of Common Stock at a price per share that is lower than the VWAP
         on the  record  date  referenced  below,  then the Set  Price  shall be
         multiplied by a fraction of which the  denominator  shall be the number
         of shares of the Common  Stock  outstanding  on the date of issuance of
         such rights or warrants plus the number of additional  shares of Common
         Stock offered for subscription or purchase,  and of which the numerator
         shall be the number of shares of the Common  Stock  outstanding  on the
         date of issuance  of such rights or warrants  plus the number of shares
         which the  aggregate  offering  price of the total  number of shares so
         offered (assuming  delivery to the Company in full of all consideration
         payable  upon  exercise  of such  rights,  options or  warrants)  would
         purchase at such VWAP.  Such  adjustment  shall be made  whenever  such
         rights or warrants are issued,  and shall become effective  immediately
         after the record date for the determination of stockholders entitled to
         receive such rights, options or warrants.

                  d)       PRO RATA  DISTRIBUTIONS.  If the Company, at any time
         while this  Debenture  is  outstanding,  distributes  to all holders of
         Common Stock (and not to the Holders)  evidences of its indebtedness or
         assets  (including  cash and cash  dividends)  or rights or warrants to
         subscribe  for or purchase any security  (other than the Common  Stock,
         which shall be subject to Section 5(b)), then in each such case the Set
         Price  shall  be  adjusted  by  multiplying  such Set  Price in  effect
         immediately  prior  to the  record  date  fixed  for  determination  of
         stockholders  entitled to receive  such  distribution  by a fraction of
         which the  denominator  shall be the VWAP  determined  as of the record
         date mentioned  above, and of which the numerator shall be such VWAP on
         such record date less the then fair market value at such record date of
         the portion of such assets or evidence of  indebtedness  so distributed
         applicable to 1 outstanding  share of the Common Stock as determined by
         the Board of Directors of the Company in good faith. In either case the
         adjustments  shall be described in a statement  delivered to the Holder
         describing  the  portion  of assets or  evidences  of  indebtedness  so
         distributed or such subscription rights applicable to 1 share of Common
         Stock.  Such adjustment shall be made whenever any such distribution is
         made and shall  become  effective  immediately  after the  record  date
         mentioned above.

                  e)       FUNDAMENTAL  TRANSACTION.  If, at any time while this
         Debenture  is  outstanding,  (A) the  Company  effects  any  merger  or
         consolidation  of the  Company  with or into  another  Person,  (B) the
         Company effects any sale of all or  substantially  all of its assets in
         one  transaction  or a series of related  transactions,  (C) any tender
         offer or exchange offer  (whether by the Company or another  Person) is
         completed  pursuant to which  holders of Common Stock are  permitted to
         tender or exchange their shares for other securities, cash or property,
         or (D) the Company effects any  reclassification of the Common Stock or
         any  compulsory  share  exchange  pursuant to which the Common Stock is
         effectively  converted into or exchanged for other securities,  cash or
         property (in any such case, a "FUNDAMENTAL  TRANSACTION"),  then,  upon
         any subsequent conversion of this Debenture,  the Holder shall have the
         right to  receive,  for each  Conversion  Share  that  would  have been
         issuable upon such  conversion  immediately  prior to the occurrence of
         such Fundamental  Transaction,  the same kind and amount of securities,
         cash or  property as it would have been  entitled  to receive  upon the
         occurrence of such Fundamental

                                       17
<PAGE>

         Transaction  if it had  been,  immediately  prior  to such  Fundamental
         Transaction,  the  holder of 1 share of Common  Stock  (the  "ALTERNATE
         CONSIDERATION"). For purposes of any such conversion, the determination
         of the Set  Price  shall  be  appropriately  adjusted  to apply to such
         Alternate  Consideration based on the amount of Alternate Consideration
         issuable  in  respect  of 1 share of Common  Stock in such  Fundamental
         Transaction,  and the Company  shall  apportion the Set Price among the
         Alternate  Consideration in a reasonable manner reflecting the relative
         value of any different  components of the Alternate  Consideration.  If
         holders of Common Stock are given any choice as to the securities, cash
         or  property  to be received  in a  Fundamental  Transaction,  then the
         Holder shall be given the same choice as to the Alternate Consideration
         it  receives  upon any  conversion  of this  Debenture  following  such
         Fundamental  Transaction.  To the extent  necessary to  effectuate  the
         foregoing provisions,  any successor to the Company or surviving entity
         in  such  Fundamental  Transaction  shall  issue  to the  Holder  a new
         debenture  consistent with the foregoing  provisions and evidencing the
         Holder's right to convert such debenture into Alternate  Consideration.
         The terms of any agreement pursuant to which a Fundamental  Transaction
         is  effected  shall  include  terms  requiring  any such  successor  or
         surviving entity to comply with the provisions of this Section 5(e) and
         insuring that this Debenture (or any such replacement security) will be
         similarly  adjusted  upon any  subsequent  transaction  analogous  to a
         Fundamental Transaction.

                  f)       CALCULATIONS.  All calculations  under this Section 5
         shall be made to the nearest cent or the nearest 1/100th of a share, as
         the case may be. For  purposes of this  Section 5, the number of shares
         of Common Stock deemed to be issued and  outstanding as of a given date
         shall be the sum of the number of shares of Common Stock (excluding any
         treasury shares of the Company) issued and outstanding.

                  g)       NOTICE TO THE HOLDER.

                           i.       ADJUSTMENT  TO SET PRICE.  Whenever  the Set
                  Price is adjusted pursuant to any provision of this Section 5,
                  the  Company  shall  promptly  mail to each  Holder  a  notice
                  setting forth the Set Price after such  adjustment and setting
                  forth  a  brief   statement  of  the  facts   requiring   such
                  adjustment.  If the Company  issues a variable rate  security,
                  despite the prohibition thereon in the Purchase Agreement, the
                  Company  shall be deemed to have issued Common Stock or Common
                  Stock  Equivalents  at  the  lowest  possible   conversion  or
                  exercise  price at which such  securities  may be converted or
                  exercised  in the  case of a  Variable  Rate  Transaction  (as
                  defined in the Purchase Agreement).

                           ii.      NOTICE TO ALLOW CONVERSION BY HOLDER. If (A)
                  the   Company   shall   declare  a  dividend   (or  any  other
                  distribution  in whatever  form) on the Common Stock,  (B) the
                  Company shall declare a special  nonrecurring cash dividend on
                  or a redemption  of the Common  Stock,  (C) the Company  shall
                  authorize  the  granting to all holders of the Common Stock of
                  rights or warrants to subscribe  for or purchase any shares of
                  capital stock of any class or of any rights,  (D) the approval
                  of any  stockholders  of the  Company  shall  be  required  in
                  connection with any

                                       18
<PAGE>

                  reclassification  of the Common Stock,  any  consolidation  or
                  merger to which the  Company is a party,  any sale or transfer
                  of all or substantially  all of the assets of the Company,  of
                  any  compulsory  share  exchange  whereby the Common  Stock is
                  converted into other securities,  cash or property, or (E) the
                  Company  shall   authorize   the   voluntary  or   involuntary
                  dissolution,  liquidation  or winding up of the affairs of the
                  Company,  then,  in each case,  the Company  shall cause to be
                  filed at each office or agency  maintained  for the purpose of
                  conversion of this Debenture,  and shall cause to be delivered
                  to the Holder at its last  address as it shall appear upon the
                  Debenture  Register,  at least 20  calendar  days prior to the
                  applicable record or effective date hereinafter  specified,  a
                  notice  stating  (x) the date on which a record is to be taken
                  for the purpose of such  dividend,  distribution,  redemption,
                  rights or  warrants,  or if a record  is not to be taken,  the
                  date as of which the holders of the Common  Stock of record to
                  be  entitled  to  such  dividend,  distributions,  redemption,
                  rights or  warrants  are to be  determined  or (y) the date on
                  which  such  reclassification,  consolidation,  merger,  sale,
                  transfer or share exchange is expected to become  effective or
                  close, and the date as of which it is expected that holders of
                  the Common Stock of record shall be entitled to exchange their
                  shares  of the  Common  Stock  for  securities,  cash or other
                  property     deliverable    upon    such     reclassification,
                  consolidation,  merger,  sale,  transfer  or  share  exchange,
                  provided that the failure to deliver such notice or any defect
                  therein  or in the  delivery  thereof  shall  not  affect  the
                  validity of the corporate  action  required to be specified in
                  such notice.  The Holder is entitled to convert this Debenture
                  during the 20-day period commencing on the date of such notice
                  through  the  effective  date  of the  event  triggering  such
                  notice.

         SECTION 6.        REDEMPTION AND FORCED CONVERSION.

                  a)       OPTIONAL   REDEMPTION  AT  ELECTION  OF  THE  HOLDER.
         Subject to the  provisions  of this Section 6(a), at any time after the
         date  hereof,  in the event of a Change  of  Control  Transaction  that
         results in an non-Affiliated third party acquiring more than 50% of the
         voting  securities  of the  Company in one  transaction  or a series of
         related  transactions,  in addition to any other rights hereunder,  the
         Holder may  deliver a notice to the Company  (an  "OPTIONAL  REDEMPTION
         NOTICE" and the date such  notice is deemed  delivered  hereunder,  the
         "OPTIONAL REDEMPTION NOTICE DATE") of its irrevocable election to cause
         the Company  redeem some or all of the then  outstanding  amounts  owed
         under  this  Debenture,  for an  amount,  in cash,  or,  subject to the
         conditions  set forth  below,  at the  Company's  option,  in shares of
         registered Common Stock, equal to the Optional Redemption Amount on the
         20th Trading Day  following the Optional  Redemption  Notice Date (such
         date, the "OPTIONAL REDEMPTION DATE" and such redemption, the "OPTIONAL
         REDEMPTION").  The Company shall deliver  notice of its election to pay
         the  Optional  Redemption  Amount in shares  of Common  Stock  within 1
         Trading Day of its receipt of an Optional Redemption Notice. Failure to
         so  deliver a notice to pay an  Option  Redemption  Amount in shares of
         Common  Stock  within 1 Trading  Day shall be deemed an election by the
         Company to pay such amount in cash. The Optional  Redemption  Amount is
         due in full on the Optional  Redemption  Date. If the Company elects to
         pay an

                                       19
<PAGE>

         Optional Redemption Amount in shares of Common Stock, such shares shall
         be based on a  conversion  price  equal to the  lesser  of (i) the then
         Conversion  Price  and (ii) 85% of the  average  of the VWAPs for the 5
         consecutive  Trading Days ending on the Trading Day that is immediately
         prior to the applicable  Optional Redemption Date. The Company may only
         elect to pay the Optional  Redemption  Amount in shares of Common Stock
         if during the period commencing on the Optional  Redemption Notice Date
         through to the Optional  Redemption  Date and through and including the
         date such shares of Common Stock are issued to the Holder,  each of the
         Equity  Conditions shall have been met. If any of the Equity Conditions
         shall cease to be  satisfied  at any time during the  required  period,
         then the Holder may elect to nullify the Optional  Redemption Notice by
         notice  to the  Company  within 3 Trading  Days  after the first day on
         which any such Equity  Condition has not been met (provided that if, by
         a provision of the Transaction  Documents,  the Company is obligated to
         notify the Holder of the  non-existence  of an Equity  Condition,  such
         notice  period shall be extended to the third  Trading Day after proper
         notice from the Company) in which case the Optional  Redemption  Notice
         shall be null and void,  ab initio or require  the  Company to pay such
         Optional  Redemption  Amount in cash. The Company  covenants and agrees
         that it will honor all Notices of  Conversion  tendered  in  accordance
         with  this  Debenture  from  the  time  of  delivery  of  the  Optional
         Redemption  Notice  through the date all amounts  owing thereon are due
         and paid in full.

                  b)       OPTIONAL  REDEMPTION AT ELECTION OF COMPANY.  Subject
         to the  provisions  of this  Section 6, at any time after the  Original
         Issue Date, the Company may deliver a notice to the Holder (an "COMPANY
         OPTIONAL  REDEMPTION  NOTICE"  and  the  date  such  notice  is  deemed
         delivered hereunder,  the "COMPANY OPTIONAL REDEMPTION NOTICE DATE") of
         its irrevocable election to redeem the Debentures for cash in an amount
         equal to the Company Optional Redemption Amount on the 10th Trading Day
         following the Company Optional  Redemption  Notice Date (such date, the
         "COMPANY  OPTIONAL  REDEMPTION DATE" and such redemption,  the "COMPANY
         OPTIONAL  REDEMPTION").  The  Company  Optional  Redemption  Amount  is
         payable in full on the Company  Optional  Redemption  Date. The Company
         covenants  and  agrees  that it will honor all  Notices  of  Conversion
         tendered from the time of delivery of the Company  Optional  Redemption
         Notice  through the date all amounts  owing thereon are due and paid in
         full. In addition,  if any portion of the Company  Optional  Redemption
         Amount remains unpaid after the Company  Optional  Redemption Date, the
         Holder may elect,  by written  notice to the Company  given at any time
         thereafter, to invalidate AB INITIO such redemption.

                  c)       REDEMPTION PROCEDURE. The payment of cash pursuant to
         an Optional  Redemption or Company Optional Redemption shall be made on
         the Optional  Redemption Date or Company  Optional  Redemption Date, as
         applicable.  If  any  portion  of the  cash  payment  for  an  Optional
         Redemption  or  Company  Optional  Redemption  shall not be paid by the
         Company by the  respective  due date,  interest shall accrue thereon at
         the rate of 18% per annum (or the maximum rate  permitted by applicable
         law, whichever is less) until the such payment,  plus all amounts owing
         thereon, is paid in full.

                                       20
<PAGE>

                  d)       FORCED CONVERSION. Notwithstanding anything herein to
         the contrary,  if after the Effective  Date, (i) the closing bid prices
         for each of any 10  consecutive  Trading Days,  which period shall have
         commenced  only after the Effective  Date,  such period the  "THRESHOLD
         PERIOD"))  exceeds  200% of the Set Price  (subject to  adjustment  for
         reverse and forward stock splits,  stock dividends,  stock combinations
         and other similar transactions of the Common Stock that occur after the
         Original  Issue  Date)  and  (ii) the  average  daily  volume  for such
         Threshold Period exceeds 100,000 shares of Common Stock per Trading Day
         (subject to  adjustment  for reverse and forward  stock  splits,  stock
         dividends,  stock  combinations  and other similar  transactions of the
         Common  Stock that occur after the Original  Issue  Date),  the Company
         may,  within 1 Trading Day after the end of any such Threshold  Period,
         deliver a written  notice to the Holder (a "FORCED  CONVERSION  NOTICE"
         and the date such  notice  is  delivered  to the  Holder,  the  "FORCED
         CONVERSION  NOTICE DATE") to cause the Holder to convert all or part of
         the  then  outstanding  principal  amount  of  Debentures  plus,  if so
         specified in the Forced Conversion Notice,  accrued but unpaid interest
         owing to the Holder  pursuant  to Section 4, it being  agreed  that the
         "Conversion Date" for purposes of Section 4 shall be deemed to occur on
         the third Trading Day following the Forced Conversion Notice Date (such
         third Trading Day, the "FORCED  CONVERSION  DATE"). The Company may not
         deliver a Forced  Conversion  Notice,  and any Forced Conversion Notice
         delivered  by the  Company  shall not be  effective,  unless all of the
         Equity  Conditions  are met on each  Trading Day  occurring  during the
         applicable  Threshold  Period  through and  including the later of each
         Forced  Conversion  Date and the  Trading  Day such  Conversion  Shares
         pursuant to such  conversion  are  delivered to the Holder.  Any Forced
         Conversion   Notices  shall  be  applied  ratably  to  all  Holders  in
         proportion to each Holder's initial  purchases of Debentures,  provided
         that any  voluntary  conversions  by a Holder shall be applied  against
         such Holder's  pro-rata  allocation,  thereby  decreasing the aggregate
         amount forcibly converted hereunder if only a portion of this Debenture
         is  forcibly  converted.  For  purposes  of  clarification,   a  Forced
         Conversion  shall be  subject  to all of the  provisions  of Section 4,
         including,  without  limitation,  the  provision  requiring  payment of
         liquidated damages and limitations on conversions.

         SECTION 7.        NEGATIVE COVENANTS.  As long  as 10% or  more of  the
original  principal amount of this Debenture  remains  outstanding,  the Company
shall  not,  and  shall not  permit  any of its  Subsidiaries  to,  directly  or
indirectly, without the prior written consent of the Holder:

                  a)       other  than  Permitted   Indebtedness,   enter  into,
         create,  incur,  assume,  guarantee or suffer to exist any indebtedness
         for  borrowed  money  of any  kind,  including  but not  limited  to, a
         guarantee,  on or with  respect  to any of its  property  or assets now
         owned or hereafter  acquired or any  interest  therein or any income or
         profits therefrom;

                  b)       other  than  Permitted  Liens,  enter  into,  create,
         incur,  assume or  suffer  to exist  any Liens of any kind,  on or with
         respect  to any of its  property  or  assets  now  owned  or  hereafter
         acquired or any interest therein or any income or profits therefrom;

                                       21
<PAGE>

                  c)       amend  its  charter   documents,   including  without
         limitation,  the certificate of incorporation and bylaws, in any manner
         that materially and adversely affects any rights of the Holder;

                  d)       repay,  repurchase  or offer to repay,  repurchase or
         otherwise acquire more than a DE MINIMIS number of shares of its Common
         Stock or Common Stock  Equivalents  other than as to (a) the Conversion
         Shares or Warrant Shares as permitted or required under the Transaction
         Documents  and  (b)   repurchases  of  Common  Stock  or  Common  Stock
         Equivalents  of  departing  officers  and  directors  of  the  Company,
         provided  that such  repurchases  shall  not  exceed  an  aggregate  of
         $100,000  for  all  officers  and  directors  during  the  term of this
         Debenture);

                  e)       enter into any  agreement  with respect to any of the
         foregoing; or

                  f)       pay cash  dividends  or  distributions  on any equity
         securities of the Company.

         SECTION 8.        EVENTS OF DEFAULT.

                  a)       "EVENT OF DEFAULT" means,  wherever used herein,  any
         of the following events (whatever the reason for such event and whether
         such event shall be voluntary or  involuntary  or effected by operation
         of law or pursuant to any  judgment,  decree or order of any court,  or
         any order,  rule or regulation of any  administrative  or  governmental
         body):

                           i.       any  default  in  the  payment  of  (A)  the
                  principal amount of any Debenture or (B) interest,  liquidated
                  damages and other amounts owing to a Holder on any  Debenture,
                  as and when the same shall become due and payable  (whether on
                  a Conversion  Date or the Maturity Date or by  acceleration or
                  otherwise)  which  default,  solely in the case of an interest
                  payment or other default under clause (B) above,  is not cured
                  within 5 Trading Days;

                           ii.      the Company shall fail to observe or perform
                  any other  covenant or agreement  contained in the  Debentures
                  (other  than a breach by the  Company  of its  obligations  to
                  deliver shares of Common Stock to the Holder upon  conversion,
                  which breach is addressed in clause (xi) below) which  failure
                  is not cured, if possible to cure, within the earlier to occur
                  of (A) 5 Trading Days after notice of such failure sent by the
                  Holder or by any other  Holder and (B) 10  Trading  Days after
                  the Company  has become or should  have  become  aware of such
                  failure;

                           iii.     a default  or event of default  (subject  to
                  any grace or cure period provided in the applicable agreement,
                  document  or  instrument)  shall  occur  under  (A) any of the
                  Transaction  Documents  or (B) any other  material  agreement,
                  lease,  document  or  instrument  to which the  Company or any
                  Subsidiary  is  obligated  (and not  covered  by  clause  (vi)
                  below);

                                       22
<PAGE>

                           iv.      any  representation or warranty made in this
                  Debenture,   any  other  Transaction  Documents,  any  written
                  statement  pursuant  hereto or  thereto  or any other  report,
                  financial  statement or  certificate  made or delivered to the
                  Holder or any other Holder shall be untrue or incorrect in any
                  material respect as of the date when made or deemed made;

                           v.       the  Company or any  Significant  Subsidiary
                  shall be subject to a Bankruptcy Event;

                           vi.      the Company or any Subsidiary  shall default
                  on any of its obligations under any mortgage, credit agreement
                  or other facility, indenture agreement, factoring agreement or
                  other instrument under which there may be issued,  or by which
                  there  may be  secured  or  evidenced,  any  indebtedness  for
                  borrowed  money or money due under  any long term  leasing  or
                  factoring  arrangement that (a) involves an obligation greater
                  than $150,000,  whether such  indebtedness now exists or shall
                  hereafter  be created,  and (b)  results in such  indebtedness
                  becoming or being  declared due and payable  prior to the date
                  on which it would otherwise become due and payable;

                           vii.     the Common  Stock shall not be eligible  for
                  listing or quotation for trading on a Trading Market and shall
                  not be eligible  to resume  listing or  quotation  for trading
                  thereon within five Trading Days;

                           viii.    the  Company  shall be a party to any Change
                  of Control  Transaction  or  Fundamental  Transaction or shall
                  agree to sell or  dispose  of all or in  excess  of 33% of its
                  assets in one transaction or a series of related  transactions
                  (whether or not such sale would constitute a Change of Control
                  Transaction);

                           ix.      a Registration Statement shall not have been
                  declared  effective by the Commission on or prior to the 180th
                  calendar day after the Closing Date;

                           x.       if,  during  the  Effectiveness  Period  (as
                  defined in the Registration Rights Agreement),  either (a) the
                  effectiveness  of the  Registration  Statement  lapses for any
                  reason  or (b) the  Holder  shall not be  permitted  to resell
                  Registrable  Securities (as defined in the Registration Rights
                  Agreement)  under the  Registration  Statement for a period of
                  more than 20  consecutive  Trading Days or 30  non-consecutive
                  Trading Days during any 12 month  period;  PROVIDED,  HOWEVER,
                  that if the Company is  negotiating  a merger,  consolidation,
                  acquisition or sale of all or substantially  all of its assets
                  or a  similar  transaction  and,  in the  written  opinion  of
                  counsel to the Company,  the  Registration  Statement would be
                  required to be amended to include information  concerning such
                  pending   transaction(s)   or  the   parties   thereto   which
                  information is not available or may not be publicly  disclosed
                  at the time,  the Company  shall be permitted an additional 10

                                       23
<PAGE>

                  consecutive  Trading Days during any 12 month period  pursuant
                  to this Section 8(a)(x);

                           xi.      the  Company  shall  fail for any  reason to
                  deliver  certificates  to a Holder prior to the fifth  Trading
                  Day after a  Conversion  Date or any  Forced  Conversion  Date
                  pursuant to Section 4(d) or the Company  shall  provide at any
                  time  notice  to  the  Holder,  including  by  way  of  public
                  announcement, of the Company's intention to not honor requests
                  for conversions of any Debentures in accordance with the terms
                  hereof; or

                           xii.     any monetary judgment, writ or similar final
                  process  shall be entered or filed  against the  Company,  any
                  Subsidiary or any of their respective property or other assets
                  for more than  $100,000,  and such  judgment,  writ or similar
                  final process shall remain unvacated, unbonded or unstayed for
                  a period of 45 calendar days.

                  b)       REMEDIES  UPON  EVENT  OF  DEFAULT.  If any  Event of
         Default  occurs,  the outstanding  principal  amount of this Debenture,
         plus accrued but unpaid interest,  liquidated damages and other amounts
         owing  in  respect  thereof  through  the date of  acceleration,  shall
         become, at the Holder's  election,  immediately due and payable in cash
         at the Mandatory Default Amount. Commencing 5 days after the occurrence
         of any Event of Default that results in the  eventual  acceleration  of
         this Debenture,  the interest rate on this Debenture shall accrue at an
         interest  rate equal to the lesser of 18% per annum or the maximum rate
         permitted  under  applicable  law.  Upon  the  payment  in  full of the
         Mandatory  Default  Amount,  the Holder shall  promptly  surrender this
         Debenture to or as directed by the  Company.  In  connection  with such
         acceleration  described  herein,  the Holder need not provide,  and the
         Company hereby waives, any presentment, demand, protest or other notice
         of any kind, and the Holder may immediately  and without  expiration of
         any  grace  period  enforce  any and  all of its  rights  and  remedies
         hereunder and all other remedies  available to it under applicable law.
         Such  acceleration  may be rescinded and annulled by Holder at any time
         prior to payment  hereunder  and the Holder  shall have all rights as a
         holder of the Debenture until such time, if any, as the Holder receives
         full  payment  pursuant to this Section  8(b).  No such  rescission  or
         annulment  shall affect any  subsequent  Event of Default or impair any
         right consequent thereon.

         SECTION 9.        MISCELLANEOUS.

                  a)       NOTICES.  Any and all notices or other communications
         or  deliveries  to be  provided  by the  Holder  hereunder,  including,
         without limitation,  any Notice of Conversion,  shall be in writing and
         delivered personally,  by facsimile, or sent by a nationally recognized
         overnight courier service, addressed to the Company, at the address set
         forth     above,     facsimile     number     ______________,     ATTN:
         ______________________________________or such other facsimile number or
         address as the Company  may  specify for such  purpose by notice to the
         Holder delivered in accordance with this Section 9. Any and all notices
         or other  communications  or

                                       24
<PAGE>

         deliveries to be provided by the Company  hereunder shall be in writing
         and  delivered  personally,  by  facsimile,  or  sent  by a  nationally
         recognized  overnight  courier service  addressed to each Holder at the
         facsimile  number or address of such Holder  appearing  on the books of
         the Company,  or if no such facsimile number or address appears, at the
         principal  place  of  business  of the  Holder.  Any  notice  or  other
         communication  or  deliveries  hereunder  shall  be  deemed  given  and
         effective  on the  earliest  of (i) the date of  transmission,  if such
         notice or  communication  is delivered  via  facsimile at the facsimile
         number  specified in this  Section 9 prior to 5:30 p.m.  (New York City
         time), (ii) the date immediately following the date of transmission, if
         such  notice  or  communication  is  delivered  via  facsimile  at  the
         facsimile  number  specified in this  Section 9 between 5:30 p.m.  (New
         York City time) and 11:59 p.m. (New York City time) on any date,  (iii)
         the second  Business  Day  following  the date of  mailing,  if sent by
         nationally  recognized  overnight courier service,  or (iv) upon actual
         receipt by the party to whom such notice is required to be given.

                  b)       ABSOLUTE  OBLIGATION.  Except as  expressly  provided
         herein,  no  provision  of this  Debenture  shall  alter or impair  the
         obligation of the Company, which is absolute and unconditional,  to pay
         the  principal  of,  liquidated   damages  and  accrued  interest,   as
         applicable,  on this Debenture at the time, place, and rate, and in the
         coin or currency,  herein  prescribed.  This Debenture is a direct debt
         obligation  of the Company.  This  Debenture  ranks PARI PASSU with all
         other  Debentures  now or  hereafter  issued  under the terms set forth
         herein.

                  c)       LOST OR MUTILATED DEBENTURE.  If this Debenture shall
         be mutilated,  lost, stolen or destroyed, the Company shall execute and
         deliver,  in exchange and substitution  for and upon  cancellation of a
         mutilated  Debenture,  or in  lieu  of or in  substitution  for a lost,
         stolen or destroyed Debenture, a new Debenture for the principal amount
         of this  Debenture so mutilated,  lost,  stolen or destroyed,  but only
         upon  receipt of evidence of such loss,  theft or  destruction  of such
         Debenture, and of the ownership hereof,  reasonably satisfactory to the
         Company.

                  d)       GOVERNING   LAW.   All   questions   concerning   the
         construction,   validity,   enforcement  and   interpretation  of  this
         Debenture shall be governed by and construed and enforced in accordance
         with the internal laws of the State of New York,  without regard to the
         principles  of conflict  of laws  thereof.  Each party  agrees that all
         legal  proceedings  concerning  the  interpretation,   enforcement  and
         defense  of the  transactions  contemplated  by any of the  Transaction
         Documents  (whether  brought  against a party hereto or its  respective
         Affiliates,  directors,  officers,  shareholders,  employees or agents)
         shall be commenced in the state and federal  courts sitting in the City
         of New York,  Borough of Manhattan (the "NEW YORK COURTS").  Each party
         hereto hereby irrevocably submits to the exclusive  jurisdiction of the
         New York Courts for the  adjudication  of any dispute  hereunder  or in
         connection  herewith  or with any  transaction  contemplated  hereby or
         discussed  herein  (including with respect to the enforcement of any of
         the Transaction  Documents),  and hereby irrevocably waives, and agrees
         not to assert in any suit,  action or proceeding,  any claim that it is
         not personally  subject to the jurisdiction of such New

                                       25
<PAGE>

         York Courts, or such New York Courts are improper or inconvenient venue
         for such  proceeding.  Each party hereby  irrevocably  waives  personal
         service of process  and  consents to process  being  served in any such
         suit,  action or proceeding by mailing a copy thereof via registered or
         certified  mail or overnight  delivery  (with  evidence of delivery) to
         such  party at the  address  in effect  for  notices  to it under  this
         Debenture  and  agrees  that such  service  shall  constitute  good and
         sufficient  service of process and notice  thereof.  Nothing  contained
         herein  shall be deemed to limit in any way any right to serve  process
         in any other manner  permitted  by  applicable  law.  Each party hereto
         hereby   irrevocably   waives,  to  the  fullest  extent  permitted  by
         applicable  law,  any and  all  right  to  trial  by jury in any  legal
         proceeding  arising  out  of or  relating  to  this  Debenture  or  the
         transactions  contemplated  hereby.  If either party shall  commence an
         action or proceeding to enforce any provisions of this Debenture,  then
         the prevailing  party in such action or proceeding  shall be reimbursed
         by the other party for its attorneys  fees and other costs and expenses
         incurred in the  investigation,  preparation  and  prosecution  of such
         action or proceeding.

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

                  f)       SEVERABILITY.  If any provision of this  Debenture is
         invalid, illegal or unenforceable,  the balance of this Debenture shall
         remain in effect, and if any provision is inapplicable to any Person or
         circumstance,  it shall  nevertheless  remain  applicable  to all other
         Persons and  circumstances.  If it shall be found that any  interest or
         other amount deemed interest due hereunder  violates the applicable law
         governing  usury,  the applicable  rate of interest due hereunder shall
         automatically  be  lowered  to  equal  the  maximum  rate  of  interest
         permitted under  applicable  law. The Company  covenants (to the extent
         that it may  lawfully do so) that it shall not at any time insist upon,
         plead,  or in any  manner  whatsoever  claim  or take  the  benefit  or
         advantage of, any stay, extension or usury law or other law which would
         prohibit or forgive  the Company  from paying all or any portion of the
         principal  of or interest on this  Debenture  as  contemplated  herein,
         wherever  enacted,  now or at any time hereafter in force, or which may
         affect the  covenants or the  performance  of this  indenture,  and the
         Company (to the extent it may lawfully do so) hereby  expressly  waives
         all benefits or advantage of any such law, and  covenants  that it will
         not, by resort to any such law, hinder,  delay or impeded the execution
         of any power herein  granted to the Holder,  but will suffer and permit
         the execution of every such as though no such law has been enacted.

                  g)       NEXT  BUSINESS  DAY.  Whenever  any  payment or other
         obligation  hereunder  shall be due on a day other than a Business Day,
         such payment shall be made on the next succeeding Business Day.

                                       26
<PAGE>

                  h)       HEADINGS.  The  headings  contained  herein  are  for
         convenience  only, do not constitute a part of this Debenture and shall
         not be deemed to limit or affect any of the provisions hereof.

                  i)       ASSUMPTION.  Any  successor  to  the  Company  or any
         surviving entity in a Fundamental  Transaction shall: (i) assume, prior
         to such Fundamental Transaction,  all of the obligations of the Company
         under this Debenture and the other  Transaction  Documents  pursuant to
         written  agreements  in form and substance  satisfactory  to the Holder
         (such  approval  not to be  unreasonably  withheld or delayed) and (ii)
         issue to the Holder a new debenture of such successor  entity evidenced
         by a written instrument  substantially similar in form and substance to
         this  Debenture,  including,  without  limitation,  having a  principal
         amount and interest rate equal to the principal amount and the interest
         rate of this  Debenture and having similar  ranking to this  Debenture,
         which shall be  satisfactory to the Holder (any such approval not to be
         unreasonably withheld or delayed).  The provisions of this Section 9(i)
         shall   apply   similarly   and  equally  to   successive   Fundamental
         Transactions  and shall be applied without regard to any limitations of
         this Debenture.

                              *********************

                                       27
<PAGE>

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

                                    SONOMA COLLEGE, INC.

                                    By:   /s/
                                       -----------------------------------------
                                       Name:  Charles Newman
                                       Title: CEO

                                       28

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