Document:

EXHIBIT 10(A)

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

                          SECURED CONVERTIBLE DEBENTURE

San  Diego,  California
January  22,  2002     $500,000

     FOR  VALUE  RECEIVED,  IMAGING  TECHNOLOGIES  CORPORATION,  a  Delaware
corporation  (hereinafter  called the "BORROWER"), hereby promises to pay to the
order  of BRISTOL INVESTMENT FUND, LTD. or registered assigns (the "HOLDER") the
sum  of  Five  Hundred  Thousand  Dollars  ($500,000),  on January 22, 2003 (the
"MATURITY  DATE"), and to pay interest on the unpaid principal balance hereof at
the  rate  of  eight  percent  (8%)  per annum from January 22, 2002 (the "ISSUE
DATE")  until  the  same  becomes  due  and payable, whether at maturity or upon
acceleration or by prepayment or otherwise.  Any amount of principal or interest
on  this Debenture which is not paid when due shall bear interest at the rate of
fifteen percent (15%) per annum from the due date thereof until the same is paid
("DEFAULT INTEREST").  Interest shall commence accruing on the issue date, shall
be computed on the basis of a 365-day year and the actual number of days elapsed
and shall be payable, at the option of the Holder, either quarterly on March 31,
June  30, September 30 and December 31 of each year beginning on March 31, 2002,
or  at the time of conversion of the principal to which such interest relates in
accordance  with Article I below.  All payments due hereunder (to the extent not
converted  into  common  stock, par value $0.005 per share, of the Borrower (the
"COMMON  STOCK")  in  accordance  with the terms hereof) shall be made in lawful
money  of the United States of America or, at the option of the Holder, in whole
or  in  part,  in  shares  of  Common  Stock  of the Borrower valued at the then
applicable  Conversion  Price (as defined herein). All payments shall be made at
such  address  as  the  Holder  shall  hereafter give to the Borrower by written
notice  made  in accordance with the provisions of this Debenture.  Whenever any
amount  expressed  to  be  due  by the terms of this Debenture is due on any day
which  is  not  a  business  day,  the  same  shall  instead  be due on the next
succeeding  day which is a business day and, in the case of any interest payment
date  which  is  not  the  date  on  which  this  Debenture is paid in full, the
extension  of  the due date thereof shall not be taken into account for purposes
of  determining  the  amount  of  interest  due  on  such date.  As used in this
Debenture,  the  term  "business  day" shall mean any day other than a Saturday,
Sunday or a day on which commercial banks in the city of Los Angeles, California
are  authorized  or  required  by law or executive order to remain closed.  Each
capitalized  term used herein, and not otherwise defined, shall have the meaning
ascribed  thereto  in  that certain Securities Purchase Agreement, dated January
22,  2002, pursuant to which this Debenture was originally issued (the "PURCHASE
AGREEMENT").

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

     The  following  terms  shall  apply  to  this  Debenture:

                          ARTICLE I.  CONVERSION RIGHTS

     1.1     CONVERSION  RIGHT.  The  Holder  shall  have the right from time to
             -----------------
time,  and  at  any time on or prior to the earlier of (i) the Maturity Date and
(ii)  the  date  of  payment  of  the Default Amount (as defined in Article III)
pursuant  to  Section  1.6(a) or Article III, the Optional Prepayment Amount (as
defined  in Section 5.1 or any payments pursuant to Section 1.7, each in respect
of  the  remaining outstanding principal amount of this Debenture to convert all
or  any  part  of  the outstanding and unpaid principal amount of this Debenture
into  fully paid and non-assessable shares of Common Stock, as such Common Stock
exists  on the Issue Date, or any shares of capital stock or other securities of
the  Borrower  into  which  such  Common  Stock  shall  hereafter  be changed or
reclassified  at  the  conversion  price  (the "CONVERSION PRICE") determined as
provided  herein (a "CONVERSION"); provided, however, that in no event shall the
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Holder  be  entitled  to convert any portion of this Debenture in excess of that
portion  of this Debenture upon conversion of which the sum of (1) the number of
shares  of  Common  Stock  beneficially  owned  by the Holder and its affiliates
(other  than  shares  of  Common  Stock  which  may be deemed beneficially owned
through  the  ownership  of  the  unconverted  portion  of the Debentures or the
unexercised  or  unconverted  portion  of  any  other  security  of the Borrower
(including,  without limitation, the warrants issued by the Borrower pursuant to
the  Purchase  Agreement)  subject  to  a  limitation  on conversion or exercise
analogous  to  the limitations contained herein) and (2) the number of shares of
Common  Stock issuable upon the conversion of the portion of this Debenture with
respect  to  which the determination of this proviso is being made, would result
in  beneficial  ownership  by the Holder and its affiliates of more than 4.9% of
the  outstanding  shares  of  Common  Stock.  For purposes of the proviso to the
immediately  preceding  sentence,  beneficial  ownership  shall be determined in
accordance  with  Section  13(d)  of  the  Securities  Exchange  Act of 1934, as
amended,  and  Regulations  13D-G  thereunder,  except  as otherwise provided in
clause  (1)  of  such  proviso.  The  Holder  of  this  Debenture  may waive the
limitations  set  forth  herein  by  sixty-one  (61)  days written notice to the
Borrower.  The  number  of  shares  of  Common  Stock  to  be  issued  upon each
conversion  of  this  Debenture  shall  be determined by dividing the Conversion
Amount  (as  defined below) by the applicable Conversion Price then in effect on
the  date  specified in the notice of conversion, in the form attached hereto as
Exhibit  A (the "NOTICE OF CONVERSION"), delivered to the Borrower by the Holder
in  accordance with Section 1.4 below; provided that the Notice of Conversion is
submitted  by  facsimile (or by other means resulting in, or reasonably expected
to  result in, notice) to the Borrower before 3:00 p.m., Los Angeles, California
time  on  such  conversion  date  (the "CONVERSION DATE").  The term "CONVERSION
AMOUNT"  means, with respect to any conversion of this Debenture, the sum of (1)
the  principal  amount of this Debenture to be converted in such conversion plus
                                                                            ----
(2)  accrued  and  unpaid  interest,  if  any,  on  such principal amount at the
interest  rates  provided  in  this  Debenture  to  the Conversion Date plus (3)
                                                                        ----
Default  Interest,  if  any,  on  the  amounts  referred  to  in the immediately
preceding  clauses  (1)  and/or (2) plus (4) at the Holder's option, any amounts
                                    ----
owed  to  the  Holder  pursuant to Sections 1.3 and 1.4(g) hereof or pursuant to
Section  2(c) of that certain Registration Rights Agreement, dated as of January
22, 2002, executed in connection with the initial issuance of this Debenture and
the  other Debentures issued on the Issue Date and the Additional Debentures (as
defined  in  the  Purchase  Agreement)  (the  "REGISTRATION  RIGHTS AGREEMENT").

     1.2     CONVERSION  PRICE.
             -----------------

     (A)     CALCULATION  OF CONVERSION PRICE.     The Conversion Price shall be
             --------------------------------
the lesser of (i) the Variable Conversion Price (as defined herein) and (ii) the
Fixed  Conversion Price (as defined herein) (subject, in each case, to equitable
adjustments  for  stock  splits,  stock  dividends  or  rights  offerings by the
Borrower  relating  to  the  Borrower's  securities  or  the  securities  of any
subsidiary  of  the Borrower, combinations, recapitalization, reclassifications,
extraordinary  distributions  and  similar  events).  The  "VARIABLE  CONVERSION
PRICE"  shall  mean  the Applicable Percentage (as defined herein) multiplied by
the  Market  Price (as defined herein).  "MARKET PRICE" means the average of the
lowest  three  (3) Trading Prices (as defined below) for the Common Stock during
the  thirty (30) Trading Day period ending one Trading Day prior to the date the
Conversion  Notice  is  sent  by  the  Holder to the Borrower via facsimile (the
"CONVERSION DATE").  "TRADING PRICE" means, for any security as of any date, the
intraday  trading  price on the Over-the-Counter Bulletin Board (the "OTCBB") as
reported  by  a  reliable reporting service mutually acceptable to and hereafter
designated  by  Holders  of  a  majority  in  interest of the Debentures and the
Borrower or, if the OTCBB is not the principal trading market for such security,
the intraday trading price of such security on the principal securities exchange
or  trading  market  where  such security is listed or traded or, if no intraday
trading price of such security is available in any of the foregoing manners, the
average  of  the  intraday trading prices of any market makers for such security
that  are listed in the "pink sheets" by the National Quotation Bureau, Inc.  If
the  Trading  Price  cannot  be calculated for such security on such date in the
manner  provided  above,  the  Trading  Price  shall be the fair market value as
mutually determined by the Borrower and the holders of a majority in interest of
the Debentures being converted for which the calculation of the Trading Price is
required  in  order  to  determine  the  Conversion  Price  of  such Debentures.
"TRADING  DAY"  shall  mean  any day on which the Common Stock is traded for any
period on the OTCBB, or on the principal securities exchange or other securities
market  on which the Common Stock is then being traded.  "APPLICABLE PERCENTAGE"
shall  mean  70%.  The  "FIXED  CONVERSION  PRICE"  shall  mean  $.0166.

     (B)     CONVERSION  PRICE  DURING  MAJOR  ANNOUNCEMENTS.  Notwithstanding
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anything  contained in Section 1.2(a) to the contrary, in the event the Borrower
(i) makes a public announcement that it intends to consolidate or merge with any
other corporation (other than a merger in which the Borrower is the surviving or
continuing  corporation  and its capital stock is unchanged) or sell or transfer
all or substantially all of the assets of the Borrower or (ii) any person, group
or entity (including the Borrower) publicly announces a tender offer to purchase
50%  or  more of the Borrower's Common Stock (or any other takeover scheme) (the
date  of  the  announcement  referred  to  in  clause (i) or (ii) is hereinafter
referred  to  as  the  "ANNOUNCEMENT  DATE"),  then  the Conversion Price shall,
effective  upon  the  Announcement  Date  and  continuing  through  the Adjusted
Conversion  Price  Termination Date (as defined below), be equal to the lower of
(x)  the  Conversion  Price  which  would  have been applicable for a Conversion
occurring  on  the  Announcement  Date  and  (y) the Conversion Price that would
otherwise be in effect. From and after the Adjusted Conversion Price Termination
Date,  the  Conversion  Price  shall  be determined as set forth in this Section
1.2(a).  For  purposes  hereof,  "ADJUSTED  CONVERSION  PRICE  TERMINATION DATE"
shall  mean,  with  respect  to  any  proposed  transaction  or tender offer (or
takeover scheme) for which a public announcement as contemplated by this Section
1.2(b)  has  been  made, the date upon which the Borrower (in the case of clause
(i)  above)  or  the  person, group or entity (in the case of clause (ii) above)
consummates or publicly announces the termination or abandonment of the proposed
transaction  or  tender  offer  (or  takeover  scheme) which caused this Section
1.2(b)  to  become  operative.

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

     If,  at any time a Holder of this Debenture submits a Notice of Conversion,
and  the  Borrower  does  not  have sufficient authorized but unissued shares of
Common  Stock  available  to  effect  such  conversion  in  accordance  with the
provisions  of  this Article I (a "CONVERSION DEFAULT"), subject to Section 4.8,
the  Borrower  shall issue to the Holder all of the shares of Common Stock which
are  then  available  to  effect such conversion.  The portion of this Debenture
which  the Holder included in its Conversion Notice and which exceeds the amount
which  is  then  convertible  into available shares of Common Stock (the "EXCESS
AMOUNT")  shall,  notwithstanding anything to the contrary contained herein, not
be  convertible into Common Stock in accordance with the terms hereof until (and
at  the  Holder's option at any time after) the date additional shares of Common
Stock  are  authorized  by the Borrower to permit such conversion, at which time
the  Conversion  Price  in  respect  thereof  shall  be  the  lesser  of (i) the
Conversion  Price on the Conversion Default Date (as defined below) and (ii) the
Conversion  Price  on  the  Conversion  Date thereafter elected by the Holder in
respect  thereof.  In  addition,  the  Borrower shall pay to the Holder payments
("CONVERSION  DEFAULT  PAYMENTS")  for a Conversion Default in the amount of (x)
the  sum of (1) the then outstanding principal amount of this Debenture plus (2)
     ------                                                             ----
accrued  and  unpaid  interest  on the unpaid principal amount of this Debenture
through  the Authorization Date (as defined below) plus (3) Default Interest, if
                                                   ----
any,  on  the  amounts  referred to in clauses (1) and/or (2), multiplied by (y)
                                                               -------------
 .24,  multiplied  by  (z) (N/365), where N = the number of days from the day the
      --------------
holder  submits  a Notice of Conversion giving rise to a Conversion Default (the
"CONVERSION  DEFAULT  DATE")  to  the  date  (the "AUTHORIZATION DATE") that the
Borrower  authorizes  a  sufficient  number  of shares of Common Stock to effect
conversion  of  the  full  outstanding principal balance of this Debenture.  The
Borrower  shall  use its best efforts to authorize a sufficient number of shares
of  Common  Stock  as soon as practicable following the earlier of (i) such time
that  the  Holder  notifies  the Borrower or that the Borrower otherwise becomes
aware  that  there  are  or  likely will be insufficient authorized and unissued
shares  to  allow  full  conversion  thereof and (ii) a Conversion Default.  The
Borrower  shall  send  notice  to  the Holder of the authorization of additional
shares  of  Common  Stock,  the  Authorization  Date  and the amount of Holder's
accrued  Conversion  Default  Payments.  The accrued Conversion Default Payments
for  each  calendar  month  shall  be  paid in cash or shall be convertible into
Common  Stock  (at such time as there are sufficient authorized shares of Common
Stock)  at  the applicable Conversion Price, at the Holder's option, as follows:

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

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

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

     1.4     METHOD  OF  CONVERSION.
             ----------------------

     (A)     MECHANICS OF CONVERSION.     Subject to Section 1.1, this Debenture
             -----------------------
may be converted by the Holder in whole or in part at any time from time to time
after  the  Issue Date, by (A) submitting to the Borrower a Notice of Conversion
(by  facsimile  or  other  reasonable  means  of communication dispatched on the
Conversion  Date  prior  to  3:00  p.m.,  Los  Angeles, California time) and (B)
subject  to  Section 1.4(b), surrendering this Debenture at the principal office
of  the  Borrower.

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

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

     (D)     DELIVERY  OF  COMMON  STOCK  UPON  CONVERSION.  Upon receipt by the
             ---------------------------------------------
Borrower  from the Holder of a facsimile transmission (or other reasonable means
of  communication)  of  a  Notice  of  Conversion  meeting  the requirements for
conversion  as  provided  in  this  Section  1.4,  the  Borrower shall cause its
transfer  agent  to  issue and deliver or cause to be issued and delivered to or
upon  the  order  of  the Holder certificates for the Common Stock issuable upon
such  conversion  within three (3) business days after such receipt (and, solely
in  the  case  of  conversion  of  the  entire  unpaid  principal amount hereof,
surrender of this Debenture) (such third business day being hereinafter referred
to  as  the  "DEADLINE")  in  accordance  with the terms hereof and the Purchase
Agreement (including, without limitation, in accordance with the requirements of
Section  2(g)  of  the Purchase Agreement that certificates for shares of Common
Stock  issued  on or after the effective date of the Registration Statement upon
conversion of this Debenture shall not bear any restrictive legend, as permitted
by  law).

     (E)     OBLIGATION  OF  BORROWER  TO DELIVER COMMON STOCK.  Upon receipt by
             -------------------------------------------------
the  Borrower  of  a  Notice of Conversion, the Holder shall be deemed to be the
holder  of  record  of  the  Common  Stock  issuable  upon  such conversion, the
outstanding  principal  amount  and the amount of accrued and unpaid interest on
this  Debenture  shall  be  reduced  to reflect such conversion, and, unless the
Borrower  defaults  on  its  obligations  under  this Article I, all rights with
respect  to  the  portion  of  this Debenture being so converted shall forthwith
terminate except the right to receive the Common Stock or other securities, cash
or  other  assets,  as herein provided, on such conversion.  If the Holder shall
have  given a Notice of Conversion as provided herein, the Borrower's obligation
to  issue  and  deliver  the certificates for Common Stock shall be absolute and
unconditional,  irrespective  of  the  absence  of  any  action by the Holder to
enforce  the  same, any waiver or consent with respect to any provision thereof,
the  recovery  of  any  judgment against any person or any action to enforce the
same,  any  failure  or  delay in the enforcement of any other obligation of the
Borrower  to  the  holder  of  record,  or any setoff, counterclaim, recoupment,
limitation  or termination, or any breach or alleged breach by the Holder of any
obligation  to  the  Borrower,  and irrespective of any other circumstance which
might  otherwise  limit  such  obligation  of  the  Borrower  to  the  Holder in
connection with such conversion.  The Conversion Date specified in the Notice of
Conversion  shall  be the Conversion Date so long as the Notice of Conversion is
received by the Borrower before 3:00 p.m., Los Angeles, California time, on such
date.

     (F)     DELIVERY  OF  COMMON  STOCK  BY  ELECTRONIC  TRANSFER.  In  lieu of
             -----------------------------------------------------
delivering  physical  certificates  representing  the Common Stock issuable upon
conversion,  provided  the  Borrower's  transfer  agent  is participating in the
Depository  Trust  Company  ("DTC")  Fast Automated Securities Transfer ("FAST")
program,  upon  request  of  the  Holder  and its compliance with the provisions
contained  in  Section  1.1  and in this Section 1.4, the Borrower shall use its
best  efforts  to cause its transfer agent to electronically transmit the Common
Stock  issuable  upon  conversion  to  the  Holder  by  crediting the account of
Holder's  Prime  Broker with DTC through its Deposit Withdrawal Agent Commission
("DWAC") system.  In the event that Borrower's transfer agent is not eligible or
is  not currently participating in the DTC FAST program, Borrower will cause its
transfer  agent  to  take  whatever  action  is  necessary to become eligible to
participate  in the DTC FAST program within ten (10) business days following the
Issue  Date.

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

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

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

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

     1.6     EFFECT  OF  CERTAIN  EVENTS.
             ---------------------------

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

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

     (C)     ADJUSTMENT  DUE  TO DISTRIBUTION.     If the Borrower shall declare
             --------------------------------
or  make  any  distribution  of  its assets (or rights to acquire its assets) to
holders  of  Common  Stock  as a dividend, stock repurchase, by way of return of
capital  or  otherwise (including any dividend or distribution to the Borrower's
shareholders in cash or shares (or rights to acquire shares) of capital stock of
a  subsidiary  (i.e.,  a  spin-off)) (a "DISTRIBUTION"), then the Holder of this
Debenture  shall  be  entitled,  upon any conversion of this Debenture after the
date  of  record  for determining shareholders entitled to such Distribution, to
receive  the  amount  of such assets which would have been payable to the Holder
with  respect  to  the  shares of Common Stock issuable upon such conversion had
such  Holder  been  the holder of such shares of Common Stock on the record date
for  the  determination  of  shareholders  entitled  to  such  Distribution.

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

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

     1.7     TRADING  MARKET LIMITATIONS.  Unless permitted or not prohibited by
             ---------------------------
the applicable rules and regulations of the principal securities market on which
the  Common Stock is then listed or traded, in no event shall the Borrower issue
upon  conversion  of  or  otherwise  pursuant  to  this  Debenture and the other
Debentures issued pursuant to the Purchase Agreement (including upon exercise of
the  Investment  Options) more than the maximum number of shares of Common Stock
that  the Borrower can issue pursuant to any rule of the principal United States
securities  market  on which the Common Stock is then traded (the "MAXIMUM SHARE
AMOUNT"),  which, as of the Issue Date shall be 48,505,682 shares (19.99% of the
total  shares  outstanding  on  the Issue Date), subject to equitable adjustment
from  time  to  time  for  stock  splits, stock dividends, combinations, capital
reorganizations  and similar events relating to the Common Stock occurring after
the  date  hereof.  Once  the  Maximum Share Amount has been issued (the date of
which  is  hereinafter  referred  to  as  the "MAXIMUM CONVERSION DATE"), if the
Borrower  fails  to eliminate any prohibitions under applicable law or the rules
or  regulations  of  any  stock  exchange, interdealer quotation system or other
self-regulatory  organization  with jurisdiction over the Borrower or any of its
securities  on  the Borrower's ability to issue shares of Common Stock in excess
of  the  Maximum  Share Amount (a "TRADING MARKET PREPAYMENT EVENT"), in lieu of
any  further  right  to  convert this Debenture, and in full satisfaction of the
Borrower's  obligations  under  this  Debenture,  the  Borrower shall pay to the
Holder,  within  fifteen  (15) business days of the Maximum Conversion Date (the
"TRADING  MARKET PREPAYMENT DATE"), an amount equal to 130% times the sum of (a)
                                                            -----     ---
the  then  outstanding  principal amount of this Debenture immediately following
the  Maximum Conversion Date, plus (b) accrued and unpaid interest on the unpaid
                              ----
principal  amount  of this Debenture to the Trading Market Prepayment Date, plus
                                                                            ----
(c)  Default  Interest,  if any, on the amounts referred to in clause (a) and/or
(b)  above,  plus  (d)  any  optional  amounts  that may be added thereto at the
             ----
Maximum  Conversion  Date by the Holder in accordance with the terms hereof (the
then  outstanding  principal  amount of this Debenture immediately following the
Maximum  Conversion  Date,  plus the amounts referred to in clauses (b), (c) and
                            ----
(d)  above  shall  collectively  be  referred  to  as the "REMAINING CONVERTIBLE
AMOUNT").  With  respect  to each Holder of Debentures, the Maximum Share Amount
shall  refer  to  such  Holder's pro rata share thereof determined in accordance
                                 --- ----
with  Section  4.8 below.  In the event that the sum of (x) the aggregate number
of shares of Common Stock issued upon conversion of this Debenture and the other
Debentures issued pursuant to the Purchase Agreement (including upon exercise of
the  Investment Options) plus (y) the aggregate number of shares of Common Stock
                         ----
that  remain issuable upon conversion of this Debenture and the other Debentures
issued  pursuant  to  the  Purchase  Agreement  (including  upon exercise of the
Investment  Options),  represents  at  least  one  hundred percent (100%) of the
Maximum  Share  Amount  (the "TRIGGERING EVENT"), the Borrower will use its best
efforts  to seek and obtain Stockholder Approval (or obtain such other relief as
will  allow conversions hereunder in excess of the Maximum Share Amount) as soon
as  practicable following the Triggering Event and before the Maximum Conversion
Date.  As used herein, "STOCKHOLDER APPROVAL" means approval by the stockholders
of the Borrower to authorize the issuance of the full number of shares of Common
Stock  which  would  be  issuable  upon  full conversion of the then outstanding
Debentures  (including  upon  exercise  of  the  Investment Options) but for the
Maximum  Share  Amount.

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

                         ARTICLE II.  CERTAIN COVENANTS

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

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

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

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

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

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

                         ARTICLE III.  EVENTS OF DEFAULT

     If  any  of  the  following events of default (each, an "EVENT OF DEFAULT")
shall  occur:

     3.1     FAILURE  TO  PAY  PRINCIPAL OR INTEREST.  The Borrower fails to pay
             ---------------------------------------
the  principal hereof or interest thereon when due on this Debenture, whether at
maturity,  upon  a Trading Market Prepayment Event pursuant to Section 1.7, upon
acceleration  or  otherwise.

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

     3.3     FAILURE  TO  TIMELY  FILE REGISTRATION OR EFFECT REGISTRATION.  The
             -------------------------------------------------------------
Borrower  fails  to  file the Registration Statement within forty-five (45) days
following  the  Filing Date (as defined in the Registration Rights Agreement) or
obtain  effectiveness  with  the  Securities  and  Exchange  Commission  of  the
Registration  Statement  within one hundred five (105) days following the Filing
Date  or such Registration Statement lapses in effect (or sales cannot otherwise
be  made  thereunder  effective,  whether by reason of the Borrower's failure to
amend  or  supplement  the  prospectus  included  therein in accordance with the
Registration  Rights  Agreement  or  otherwise)  for  more  than  thirty  (30)
consecutive  days  or  forty-five (45) days in any twelve month period after the
Registration  Statement  becomes  effective;

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

     3.5     BREACH  OF  REPRESENTATIONS  AND WARRANTIES.  Any representation or
             -------------------------------------------
warranty  of  the  Borrower  made  herein  or  in  any  agreement,  statement or
certificate  given  in  writing  pursuant  hereto  or  in  connection  herewith
(including,  without  limitation,  the  Purchase  Agreement and the Registration
Rights  Agreement),  shall  be  false or misleading in any material respect when
made  and  the  breach  of  which  has (or with the passage of time will have) a
material  adverse  effect  on  the  rights  of  the  Holder with respect to this
Debenture,  the  Purchase  Agreement  or  the  Registration  Rights  Agreement;

     3.6     RECEIVER  OR  TRUSTEE.  The  Borrower  or  any  subsidiary  of  the
             ---------------------
Borrower  shall make an assignment for the benefit of creditors, or apply for or
consent  to the appointment of a receiver or trustee for it or for a substantial
part  of its property or business, or such a receiver or trustee shall otherwise
be  appointed,  other  than  an  operational  receiver  appointed  pursuant  to
California  law, provided that such operational receiver does not serve for more
than  sixty  (60)  days;

     3.7     JUDGMENTS.  Any  money  judgment,  writ or similar process shall be
             ---------
entered  or  filed against the Borrower or any subsidiary of the Borrower or any
of  its  property  or  other  assets  for  more  than $100,000, and shall remain
unvacated,  unbonded  or  unstayed  for  a  period  of  thirty  (30) days unless
otherwise  consented  to  by  the Holder, which consent will not be unreasonably
withheld;

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

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

     3.10     DEFAULT  UNDER  OTHER  DEBENTURES  OR  SENIOR  DEBT.  An  Event of
              ---------------------------------------------------
Default  has occurred and is continuing under any of the other Debentures issued
pursuant  to  the  Purchase  Agreement,  including the Additional Debentures, or
under  the  Senior  Debt  (as  defined  in  the  Security  Agreement).

then,  upon  the  occurrence and during the continuation of any Event of Default
specified  in  Section 3.1, 3.2, 3.3, 3.4, 3.5, 3.7, 3.9, or 3.10, at the option
of  the  Holders  of  a  majority  of  the  aggregate  principal  amount  of the
outstanding  Debentures  issued  pursuant  to the Purchase Agreement exercisable
through  the  delivery  of  written  notice to the Borrower by such Holders (the
"DEFAULT  NOTICE"),  and upon the occurrence of an Event of Default specified in
Section  3.6 or 3.8, the Debentures shall become immediately due and payable and
the  Borrower  shall  pay to the Holder, in full satisfaction of its obligations
hereunder,  an  amount equal to the greater of (i) 135% times the sum of (w) the
                                                        -----     ---
then  outstanding principal amount of this Debenture plus (x) accrued and unpaid
                                                     ----
interest on the unpaid principal amount of this Debenture to the date of payment
(the  "MANDATORY  PREPAYMENT  DATE")  plus  (y) Default Interest, if any, on the
                                      ----
amounts  referred  to in clauses (w) and/or (x) plus (z) any amounts owed to the
                                                ----
Holder pursuant to Sections 1.3 and 1.4(g) hereof or pursuant to Section 2(c) of
the Registration Rights Agreement (the then outstanding principal amount of this
Debenture  to  the  date of payment plus the amounts referred to in clauses (x),
                                    ----
(y)  and  (z)  shall  collectively  be  known  as the "DEFAULT SUM") or (ii) the
"parity  value"  of  the Default Sum to be prepaid, where parity value means (a)
the  highest  number  of  shares  of Common Stock issuable upon conversion of or
otherwise  pursuant  to  such Default Sum in accordance with Article I, treating
the  Trading  Day  immediately  preceding  the  Mandatory Prepayment Date as the
"Conversion  Date"  for purposes of determining the lowest applicable Conversion
Price,  unless  the Default Event arises as a result of a breach in respect of a
specific  Conversion  Date  in  which  case  such  Conversion  Date shall be the
Conversion  Date),  multiplied  by  (b) the highest Closing Price for the Common
                    --------------
Stock  during  the period beginning on the date of first occurrence of the Event
of  Default  and  ending  one  day  prior  to the Mandatory Prepayment Date (the
"DEFAULT  AMOUNT")  and  all  other  amounts payable hereunder shall immediately
become  due and payable, all without demand, presentment or notice, all of which
hereby  are  expressly  waived,  together  with  all  costs,  including, without
limitation,  legal  fees  and  expenses,  of collection, and the Holder shall be
entitled  to  exercise  all  other  rights  and  remedies available at law or in
equity.  If  the  Borrower  fails  to  pay  the  Default  Amount within five (5)
business  days  of  written notice that such amount is due and payable, then the
Holder  shall  have  the  right  at any time, so long as the Borrower remains in
default  (and  so  long  and  to the extent that there are sufficient authorized
shares),  to require the Borrower, upon written notice, to immediately issue, in
lieu of the Default Amount, the number of shares of Common Stock of the Borrower
equal  to  the  Default  Amount  divided by the Conversion Price then in effect.

                           ARTICLE IV.  MISCELLANEOUS

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

     4.2     NOTICES.  Any notice herein required or permitted to be given shall
             -------
be  in  writing  and may be personally served or delivered by courier or sent by
United  States  mail  and  shall  be  deemed  to have been given upon receipt if
personally served (which shall include telephone line facsimile transmission) or
sent  by  courier  or  three (3) days after being deposited in the United States
mail,  certified, with postage pre-paid and properly addressed, if sent by mail.
For  the  purposes  hereof,  the  address of the Holder shall be as shown on the
records  of  the  Borrower;  and  the  address  of  the  Borrower shall be 15175
Innovation  Drive,  San Diego, California 92128, facsimile number: 858-207-6505.
Both  the  Holder and the Borrower may change the address for service by service
of  written  notice  to  the  other  as  herein  provided.

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

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

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

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

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

     4.8     ALLOCATIONS  OF  MAXIMUM  SHARE  AMOUNT  AND  RESERVED AMOUNT.  The
             -------------------------------------------------------------
Maximum  Share  Amount and Reserved Amount shall be allocated pro rata among the
Holders of Debentures based on the principal amount of such Debentures issued to
each  Holder.  Each  increase  to  the  Maximum Share Amount and Reserved Amount
shall  be  allocated  pro  rata  among  the  Holders  of Debentures based on the
principal  amount  of  such  Debentures  held  by each Holder at the time of the
increase  in the Maximum Share Amount or Reserved Amount.  In the event a Holder
shall  sell  or  otherwise  transfer  any  of  such  Holder's  Debentures,  each
transferee  shall  be  allocated a pro rata portion of such transferor's Maximum
Share  Amount  and  Reserved Amount.  Any portion of the Maximum Share Amount or
Reserved  Amount  which remains allocated to any person or entity which does not
hold  any  Debentures shall be allocated to the remaining Holders of Debentures,
pro  rata  based  on  the  principal amount of such Debentures then held by such
Holders.

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

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

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

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

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

                         ARTICLE V.  OPTIONAL PREPAYMENT

     5.1.     OPTIONAL  PREPAYMENT.  Notwithstanding  anything  to  the contrary
              --------------------
contained  in  this  Article  V,  so  long as (i) no Event of Default or Trading
Market  Prepayment  Event  shall  have  occurred and be continuing, and (ii) the
Borrower  has  a sufficient number of authorized shares of Common Stock reserved
for  issuance upon full conversion of the Debentures, then at any time after the
Issue  Date, the Borrower shall have the right, exercisable on not less than ten
(10)  Trading  Days prior written notice to the Holders of the Debentures (which
notice  may  not  be sent to the Holders of the Debentures until the Borrower is
permitted  to prepay the Debentures pursuant to this Section 5.1), to prepay all
of  the  outstanding Debentures in accordance with this Section 5.1.  Any notice
of  prepayment  hereunder  (an  "OPTIONAL PREPAYMENT") shall be delivered to the
Holders  of  the Debentures at their registered addresses appearing on the books
and  records of the Borrower and shall state (1) that the Borrower is exercising
its  right  to prepay all of the Debentures issued on the Issue Date and (2) the
date  of  prepayment  (the "OPTIONAL PREPAYMENT NOTICE").  On the date fixed for
prepayment  (the "OPTIONAL PREPAYMENT DATE"), the Borrower shall make payment of
the  Optional  Prepayment  Amount (as defined below) to or upon the order of the
Holders  as specified by the Holders in writing to the Borrower at least one (1)
business  day  prior to the Optional Prepayment Date.  If the Borrower exercises
its  right  to  prepay  the  Debentures,  the Borrower shall make payment to the
holders  of  an  amount in cash (the "OPTIONAL PREPAYMENT AMOUNT") equal to 135%
multiplied  by  the  sum  of  (w)  the then outstanding principal amount of this
Debenture plus (x) accrued and unpaid interest on the unpaid principal amount of
          ----
this  Debenture  to  the  Optional Prepayment Date plus (y) Default Interest, if
                                                   ----
any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed
                                                       ----
to  the Holder pursuant to Sections 1.3 and 1.4(g) hereof or pursuant to Section
2(c) of the Registration Rights Agreement (the then outstanding principal amount
of this Debenture to the date of payment plus the amounts referred to in clauses
                                         ----
(x),  (y) and (z) shall collectively be known as the "OPTIONAL PREPAYMENT SUM").
Notwithstanding notice of an Optional Prepayment, the Holders shall at all times
prior  to  the Optional Prepayment Date maintain the right to convert all or any
portion  of  the  Debentures  in  accordance  with  Article I and any portion of
Debentures so converted after receipt of an Optional Prepayment Notice and prior
to  the  Optional  Prepayment  Date  set forth in such notice and payment of the
aggregate Optional Prepayment Amount shall be deducted from the principal amount
of Debentures which are otherwise subject to prepayment pursuant to such notice.
If  the  Borrower  delivers  an  Optional Prepayment Notice and fails to pay the
Optional  Prepayment  Amount due to the Holders of the Debentures within two (2)
business days following the Optional Prepayment Date, the Borrower shall forever
forfeit  its  right  to  redeem  the  Debentures  pursuant  to this Section 5.1.

     IN  WITNESS WHEREOF, Borrower has caused this Debenture to be signed in its
name  by  its  duly  authorized  officer  this  22nd  day  of  January,  2002.

     IMAGING  TECHNOLOGIES  CORPORATION

By:     ______________________________
     Brian  Bonar
     President  and  Chief  Executive  Officer

<PAGE>
                                                                       EXHIBIT A

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

          The  undersigned  hereby  irrevocably  elects  to  convert
$________principal amount of the Debenture (defined below) into shares of common
stock,  par  value  $0.005  per  share ("COMMON STOCK"), of Imaging Technologies
Corporation, a Delaware corporation (the "BORROWER") according to the conditions
of  the convertible debentures of the Borrower dated as of January 22, 2002 (the
"Debentures"),  as of the date written below.  If securities are to be issued in
the  name  of  a person other than the undersigned, the undersigned will pay all
transfer  taxes  payable  with  respect  thereto and is delivering herewith such
certificates.  No  fee  will be charged to the Holder for any conversion, except
for  transfer  taxes,  if  any.  A copy of each Debenture is attached hereto (or
evidence  of  loss,  theft  or  destruction  thereof).

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

     Name  of  DTC  Prime  Broker:
     Account  Number:

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

     Name:
     Address:

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

          Date  of  Conversion:___________________________
          Applicable  Conversion  Price:____________________
          Number  of  Shares  of  Common  Stock  to  be  Issued  Pursuant  to
          conversion  of  the  Debentures:  ____________________
          Signature:___________________________________
     Name:______________________________________
Address:____________________________________

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

<PAGE>EXHIBIT 10(B)

                          SECURITIES PURCHASE AGREEMENT
SECURITIES  PURCHASE AGREEMENT (this "Agreement"), dated as of January 22, 2002,
by  and  among  Imaging  Technologies  Corporation, a Delaware corporation, with
headquarters  located  at  15175  Innovation Drive, San Diego, California  72128
(the  "Company"),  and  each  of the purchasers set forth on the signature pages
hereto  (the  "Buyers").
WHEREAS:
The  Company  and  the  Buyers  are  executing  and delivering this Agreement in
reliance  upon  the exemption from securities registration afforded by the rules
and  regulations  as  promulgated  by  the United States Securities and Exchange
Commission  (the  "SEC")  under  Section  4(2) of the Securities Act of 1933, as
amended  (the  "1933  Act")  and  pursuant  to  Regulation  D  and  Regulation S
promulgated  under  the  1933  Act;
Buyers  desire  to  purchase and the Company desires to issue and sell, upon the
terms  and  conditions set forth in this Agreement (i) 8% convertible debentures
of  the  Company,  in  the form attached hereto as Exhibit "A", in the aggregate
principal  amount  of  One  Million  Dollars  ($1,000,000)  (together  with  any
debenture(s) issued in replacement thereof or as a dividend thereon or otherwise
with  respect  thereto  in accordance with the terms thereof, the "Debentures"),
convertible  into  shares  of  common  stock, $0.005 par value per share, of the
Company  (the "Common Stock"), upon the terms and subject to the limitations and
conditions  set forth in such Debentures and (ii) warrants, in the form attached
hereto  as  Exhibit  "B", to purchase Sixty Million, Two Hundred Forty Thousand,
Nine  Hundred  Sixty-Four  (60,240,964) shares of Common Stock (the "Warrants");
Each  Buyer  wishes  to  purchase,  upon the terms and conditions stated in this
Agreement,  such principal amount of Debentures and number of Warrants as is set
forth  immediately  below  its  name  on  the  signature  pages  hereto;  and
Contemporaneous  with  the execution and delivery of this Agreement, the parties
hereto are executing and delivering a Registration Rights Agreement, in the form
attached  hereto  as Exhibit "C" (the "Registration Rights Agreement"), pursuant
to which the Company has agreed to provide certain registration rights under the
1933  Act  and  the rules and regulations promulgated thereunder, and applicable
state  securities  laws.
NOW,  THEREFORE,  the Company and each of the Buyers severally (and not jointly)
hereby  agree  as  follows:
PURCHASE  AND  SALE  OF  DEBENTURES  AND  WARRANTS.
--------------------------------------------------
Purchase  of  Debentures  and Warrants.  On the Closing Date (as defined below),
--------------------------------------
the  Company  shall issue and sell to each Buyer and each Buyer severally agrees
--
to  purchase  from the Company such principal amount of Debentures and number of
Warrants  as  is  set forth immediately below such Buyer's name on the signature
pages  hereto.
Form  of  Payment.  On the Closing Date (as defined below), (i) each Buyer shall
-----------------
pay the purchase price for the Debentures and the Warrants to be issued and sold
to  it at the Closing (as defined below) (the "Purchase Price") by wire transfer
of  immediately available funds to the Company, in accordance with the Company's
written wiring instructions, against delivery of the Debentures in the principal
amount  equal  to  the Purchase Price and the number of Warrants as is set forth
immediately  below such Buyer's name on the signature pages hereto, and (ii) the
Company  shall  deliver  such Debentures and Warrants duly executed on behalf of
the  Company,  to  such  Buyer,  against  delivery  of  such  Purchase  Price.
Closing Date.  Subject to the satisfaction (or written waiver) of the conditions
------------
thereto  set  forth  in  Section 6 and Section 7 below, the date and time of the
issuance  and sale of the Debentures and the Warrants pursuant to this Agreement
(the  "Closing  Date")  shall be 12:00 noon Pacific Standard Time on January 22,
2002  or  such other mutually agreed upon time.  The closing of the transactions
contemplated  by  this Agreement (the "Closing") shall occur on the Closing Date
at  such  location  as  may  be  agreed  to  by  the  parties.
BUYERS'  REPRESENTATIONS AND WARRANTIES.  Each Buyer severally (and not jointly)
---------------------------------------
represents  and  warrants  to  the  Company  solely  as  to  such  Buyer  that:
Investment  Purpose.  As  of  the  date  hereof,  the  Buyer  is  purchasing the
-------------------
Debentures  and  the  shares  of  Common  Stock  issuable  upon conversion of or
--------
otherwise  pursuant  to  the  Debentures  (including,  without  limitation, such
-------
additional  shares of Common Stock, if any, as are (i) on account of interest on
------
the  Debentures,  (ii)  as  a result of the events described in Sections 1.3 and
1.4(g)  of  the Debentures and Section 2(c) of the Registration Rights Agreement
or  (iii)  in  payment  of the Standard Liquidated Damages Amount (as defined in
Section  2(f)  below)  pursuant  to  this Agreement, such shares of Common Stock
being  collectively  referred  to  herein  as  the  "Conversion Shares") and the
Warrants  and  the  shares  of  Common Stock issuable upon exercise thereof (the
"Warrant  Shares" and, collectively with the Debentures, Warrants and Conversion
Shares,  the  "Securities")  for  its  own  account  and not with a present view
towards  the  public  sale  or  distribution  thereof,  except pursuant to sales
registered  or exempted from registration under the 1933 Act; provided, however,
                                                              --------  -------
that  by making the representations herein, the Buyer does not agree to hold any
of  the Securities for any minimum or other specific term and reserves the right
to  dispose  of  the  Securities at any time in accordance with or pursuant to a
registration  statement  or  an  exemption  under  the  1933  Act.
Accredited  Investor Status.  The Buyer is an "accredited investor" as that term
---------------------------
is  defined  in  Rule  501(a)  of  Regulation  D  (an  "Accredited  Investor").
Reliance  on  Exemptions.  The  Buyer  understands that the Securities are being
------------------------
offered  and  sold  to  it  in  reliance  upon  specific  exemptions  from  the
---
registration requirements of United States federal and state securities laws and
---
that  the  Company  is  relying  upon the truth and accuracy of, and the Buyer's
compliance  with,  the  representations, warranties, agreements, acknowledgments
and  understandings  of  the  Buyer  set  forth herein in order to determine the
availability  of such exemptions and the eligibility of the Buyer to acquire the
Securities.
Information.  The  Buyer and its advisors, if any, have been, and for so long as
-----------
the  Debentures  and  Warrants remain outstanding will continue to be, furnished
with  all  materials  relating  to  the business, finances and operations of the
Company  and  materials  relating  to the offer and sale of the Securities which
have  been  requested by the Buyer or its advisors.  The Buyer and its advisors,
if  any,  have  been,  and  for  so  long  as the Debentures and Warrants remain
outstanding  will  continue  to be, afforded the opportunity to ask questions of
the  Company.  Notwithstanding  the  foregoing, the Company has not disclosed to
the  Buyer  any  material  nonpublic  information  and  will  not  disclose such
information  unless  such  information  is  disclosed  to the public prior to or
promptly following such disclosure to the Buyer.  Neither such inquiries nor any
other  due  diligence investigation conducted by Buyer or any of its advisors or
representatives  shall  modify,  amend  or  affect  Buyer's right to rely on the
Company's  representations  and  warranties  contained  in Section 3 below.  The
Buyer  understands  that its investment in the Securities involves a significant
degree  of  risk.
Governmental  Review.  The  Buyer  understands  that no United States federal or
--------------------
state  agency  or any other government or governmental agency has passed upon or
---
made  any  recommendation  or  endorsement  of  the  Securities.
Transfer  or  Re-sale.  The Buyer understands that (i) except as provided in the
---------------------
Registration  Rights  Agreement,  the  sale or re-sale of the Securities has not
been  and  is  not  being  registered under the 1933 Act or any applicable state
securities  laws,  and  the  Securities  may  not  be transferred unless (a) the
Securities  are  sold  pursuant to an effective registration statement under the
1933  Act,  (b)  the  Buyer  shall  have  delivered to the Company an opinion of
counsel  that  shall  be  in form, substance and scope customary for opinions of
counsel  in comparable transactions to the effect that the Securities to be sold
or  transferred  may  be  sold or transferred pursuant to an exemption from such
registration, which opinion shall be accepted by the Company, (c) the Securities
are  sold  or  transferred to an "affiliate" (as defined in Rule 144 promulgated
under  the  1933 Act (or a successor rule) ("Rule 144")) of the Buyer who agrees
to  sell  or  otherwise  transfer  the  Securities  only in accordance with this
Section  2(f)  and  who  is  an Accredited Investor, (d) the Securities are sold
pursuant  to  Rule  144, or (e) the Securities are sold pursuant to Regulation S
under  the  1933 Act (or a successor rule) ("Regulation S"), and the Buyer shall
have  delivered  to  the  Company  an  opinion of counsel that shall be in form,
substance and scope customary for opinions of counsel in corporate transactions,
which opinion shall be accepted by the Company; (ii) any sale of such Securities
made  in  reliance  on Rule 144 may be made only in accordance with the terms of
said  Rule  and  further,  if  said  Rule is not applicable, any re-sale of such
Securities  under  circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the  1933  Act)  may require compliance with some other exemption under the 1933
Act  or  the  rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register such Securities
under  the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder (in each case, other than pursuant to the
Registration  Rights Agreement).  Notwithstanding the foregoing or anything else
contained herein to the contrary, the Securities may be pledged as collateral in
connection with a bona fide margin account or other lending arrangement.  In the
                  ---- ----
event that the Company does not accept the customary opinion of counsel provided
by the Buyer with respect to the transfer of Securities pursuant to an exemption
from  registration,  such as Rule 144 or Regulation S, within three (3) business
days  of  delivery  of  the opinion to the Company, the Company shall pay to the
Buyer  liquidated damages of three percent (3%) of the outstanding amount of the
Debentures  per  month  plus  accrued  and  unpaid  interest  on the Debentures,
prorated  for  partial  months,  in  cash  or  shares at the option of the Buyer
("Standard  Liquidated  Damages  Amount").  If  the  Buyer elects to be paid the
Standard  Liquidated Damages Amount in shares of Common Stock, such shares shall
be  issued at the Conversion Price (as defined in the Debentures) at the time of
payment.
Legends.  The  Buyer understands that the Debentures and the Warrants and, until
-------
such time as the Conversion Shares and Warrant Shares have been registered under
the  1933  Act as contemplated by the Registration Rights Agreement or otherwise
may  be  sold pursuant to Rule 144 or Regulation S without any restriction as to
the  number  of  securities as of a particular date that can then be immediately
sold,  as  permitted by law, the Conversion Shares and Warrant Shares may bear a
restrictive  legend  in  substantially  the  following form (and a stop-transfer
order  may  be placed against transfer of the certificates for such Securities):
"The  securities  represented by this certificate have not been registered under
the  Securities  Act  of  1933, as amended, or applicable state securities laws.
The  securities  may  not  be sold, transferred or assigned in the absence of an
effective  registration  statement  for  the  securities  under  said Act, or an
opinion  of  counsel,  in  form,  substance  and scope customary for opinions of
counsel in comparable transactions, that registration is not required under said
Act  or  unless  sold  pursuant  to  Rule  144  or Regulation S under said Act."
The  legend  set  forth  above  shall  be  removed and the Company shall issue a
certificate  without  such legend to the holder of any Security upon which it is
stamped,  as permitted by law, if, unless otherwise required by applicable state
securities  laws,  (a)  such  Security is registered for sale under an effective
registration  statement  filed  under  the  1933  Act  or  otherwise may be sold
pursuant to Rule 144 or Regulation S without any restriction as to the number of
securities  as  of  a  particular date that can then be immediately sold, or (b)
such  holder provides the Company with an opinion of counsel, in form, substance
and  scope  customary for opinions of counsel in comparable transactions, to the
effect  that  a  public  sale  or  transfer of such Security may be made without
registration  under the 1933 Act, which opinion shall be accepted by the Company
so that the sale or transfer is effected or (c) such holder provides the Company
with  reasonable  assurances that such Security can be sold pursuant to Rule 144
or  Regulation  S.  The  Buyer  agrees  to  sell all Securities, including those
represented  by  a  certificate(s)  from  which  the legend has been removed, in
compliance  with  applicable  prospectus  delivery  requirements,  if  any.
Authorization; Enforcement. This Agreement and the Registration Rights Agreement
--------------------------
have  been  duly  and validly authorized.  This Agreement has been duly executed
and  delivered  on behalf of the Buyer, and this Agreement constitutes, and upon
execution  and  delivery by the Buyer of the Registration Rights Agreement, such
agreement will constitute, valid and binding agreements of the Buyer enforceable
in  accordance with their terms, except as such enforceability may be limited by
applicable  bankruptcy,  insolvency,  reorganization, moratorium, liquidation or
similar  laws relating to, or affecting generally, the enforcement of creditors'
rights  and  remedies  or  by other equitable principles of general application.
Residency.  The  Buyer  is  a resident of the jurisdiction set forth immediately
---------
below  such  Buyer's  name  on  the  signature  pages  hereto.
--
Foreign Buyer.  The Buyer is not a "U.S. person" as defined under Rule 902(o) of
-------------
Regulation  S  under the 1933 Act.  The Buyer is not acquiring the Debenture and
Warrant  for  the  account  or  benefit  of  any  U.S.  person.
Offshore  Transaction.  The  document  effecting this purchase and sale has been
---------------------
executed  by the Buyer outside the "United States" (as defined in Rule 902(p) of
--
Regulation S).  The Buyer is acquiring the Debenture and Warrant in an "offshore
transaction"  (as  defined  in  Rule 902(i) of Regulation S).  The Debenture and
Warrant  were  not  offered to the Buyer in the United States and at the time of
execution  of  this Agreement and the time of any offer to the Buyer to purchase
the  Debenture  and  Warrant  hereunder, the Buyer was physically outside of the
United  States.
REPRESENTATIONS  AND  WARRANTIES  OF  THE  COMPANY.  The  Company represents and
--------------------------------------------------
warrants  to  each  Buyer  that:
-----
Organization  and  Qualification.  The  Company and each of its Subsidiaries (as
--------------------------------
defined below), if any, is a corporation duly organized, validly existing and in
--
good  standing  under  the laws of the jurisdiction in which it is incorporated,
with  full  power  and  authority  (corporate  and other) to own, lease, use and
operate  its  properties  and  to  carry on its business as and where now owned,
leased, used, operated and conducted.  Schedule 3(a) sets forth a list of all of
the  Subsidiaries  of  the  Company  and  the  jurisdiction  in  which  each  is
incorporated.  The  Company  and each of its Subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in  which  its  ownership  or  use  of  property  or  the nature of the business
conducted  by  it makes such qualification necessary except where the failure to
be  so  qualified  or in good standing would not have a Material Adverse Effect.
"Material  Adverse  Effect"  means  any material adverse effect on the business,
operations, assets or financial condition of the Company or its Subsidiaries, if
any,  taken  as  a  whole,  or on the transactions contemplated hereby or by the
agreements  or  instruments  to  be  entered  into  in  connection  herewith.
"Subsidiaries"  means  any  active  corporation  or  other organization, whether
incorporated  or  unincorporated,  in  which  the  Company  owns,  directly  or
indirectly,  any  equity  or  other  ownership  interest  or  is  otherwise  a
"significant  subsidiary"  as  defined  in  Rule  1-02  (w)  of  Regulation  S-X
promulgated  under  the  1933  Act.
Authorization;  Enforcement.  (i)  The Company has all requisite corporate power
---------------------------
and  authority to enter into and perform this Agreement, the Registration Rights
Agreement,  the  Debentures  and the Warrants and to consummate the transactions
contemplated  hereby and thereby and to issue the Securities, in accordance with
the terms hereof and thereof, (ii) the execution and delivery of this Agreement,
the  Registration  Rights  Agreement,  the  Debentures  and  the Warrants by the
Company  and  the consummation by it of the transactions contemplated hereby and
thereby  (including  without  limitation, the issuance of the Debentures and the
Warrants  and the issuance and reservation for issuance of the Conversion Shares
and  Warrant Shares issuable upon conversion or exercise thereof) have been duly
authorized  by  the  Company's  Board  of  Directors  and  no further consent or
authorization  of  the  Company,  its Board of Directors, or its shareholders is
required,  (iii)  this  Agreement  has  been  duly executed and delivered by the
Company  by its authorized representative, and such authorized representative is
the  true  and official representative with authority to sign this Agreement and
the  other  documents  executed  in  connection  herewith  and  bind the Company
accordingly,  and  (iv)  this  Agreement  constitutes,  and  upon  execution and
delivery by the Company of the Registration Rights Agreement, the Debentures and
the  Warrants,  each  of  such  instruments  will constitute, a legal, valid and
binding  obligation of the Company enforceable against the Company in accordance
with  its  terms,  except  as  such  enforceability may be limited by applicable
bankruptcy,  insolvency, reorganization, moratorium, liquidation or similar laws
relating  to,  or  affecting generally, the enforcement of creditors' rights and
remedies  or  by  other  equitable  principles  of  general  application.
Capitalization.  As  of  January  11,  2002, the authorized capital stock of the
--------------
Company  consisted  of  (i)  500,000,000  shares  of  Common  Stock,  of  which
---
242,649,737  shares  are  issued and outstanding, 7,500,000 shares were reserved
---
for  issuance  pursuant  to the Company's stock option and stock purchase plans,
--
203,937,134 shares were reserved for issuance pursuant to securities (other than
--
the  Debentures  and  the  Warrants)  exercisable  for,  or  convertible into or
exchangeable  for shares of Common Stock and, as of the date hereof, 240,963,856
shares  are  reserved  for  issuance, subject to the Company effecting the Share
Increase  (as  defined  below)  and  the  Stock  Split  (as defined below), upon
conversion  of  the  Debentures  and  the  Additional  Debentures (as defined in
Section  4(l))  and  exercise of the Warrants (subject to adjustment pursuant to
the  Company's  covenant set forth in Section 4(h) below); and (ii) 7,500 shares
of  preferred  stock,  of  which  7,500  shares have been designated as Series A
Preferred  Stock,  of  which 420 shares are issued and outstanding.  All of such
outstanding  shares  of  capital  stock  are,  or  upon  issuance  will be, duly
authorized,  validly issued, fully paid and nonassessable.  No shares of capital
stock  of  the  Company  are  subject  to preemptive rights or any other similar
rights  of  the stockholders of the Company or any liens or encumbrances imposed
through  the  actions  or failure to act of the Company.  Except as disclosed in
Schedule  3(c),  as  of  the  effective date of this Agreement, (i) there are no
outstanding  options,  warrants,  scrip,  rights  to subscribe for, puts, calls,
rights of first refusal, agreements, understandings, claims or other commitments
or  rights  of  any  character  whatsoever  relating to, or securities or rights
convertible  into or exchangeable for any shares of capital stock of the Company
or  any  of its Subsidiaries, or arrangements by which the Company or any of its
Subsidiaries  is or may become bound to issue additional shares of capital stock
of  the  Company  or  any  of  its Subsidiaries, (ii) there are no agreements or
arrangements  under which the Company or any of its Subsidiaries is obligated to
register  the  sale of any of its or their securities under the 1933 Act (except
the Registration Rights Agreement) and (iii) there are no anti-dilution or price
adjustment provisions contained in any security issued by the Company (or in any
agreement  providing  rights  to security holders) that will be triggered by the
issuance  of  the  Debentures,  the  Warrants,  the Conversion Shares or Warrant
Shares.  The  Company  has furnished to the Buyer true and correct copies of the
Company's  Certificate  of  Incorporation  as  in  effect  on  the  date  hereof
("Certificate  of  Incorporation"),  the  Company's By-laws, as in effect on the
date hereof (the "By-laws"), and the terms of all securities convertible into or
exercisable  for  Common  Stock  of  the  Company and the material rights of the
holders  thereof  in  respect  thereto.  On  September  28,  2001, the Company's
stockholders  voted  to  approve  an  amendment  to the Company's Certificate of
Incorporation  to  increase the number of shares of authorized Common Stock from
200,000,000  to  500,000,000  (the  "Share  Increase")  and  an amendment to the
Company's  Certificate  of  Incorporation to effect a stock combination (reverse
stock  split)  of  the Common Stock in a ratio to be determined by the Company's
board  of  directors,  ranging from one (1) newly issued share for each ten (10)
outstanding shares of Common Stock to one (1) newly issued share for each twenty
(20)  outstanding  shares  of  Common  Stock  (the  "Stock  Split").
Issuance of Shares.  Subject to the Company effecting the Share Increase and the
------------------
Stock  Split,  the  Conversion Shares and Warrant Shares are duly authorized and
reserved for issuance and, upon conversion of the Debentures and exercise of the
Warrants in accordance with their respective terms will be validly issued, fully
paid and non-assessable, and free from all taxes, liens, claims and encumbrances
with  respect to the issue thereof and shall not be subject to preemptive rights
or  other  similar  rights  of  stockholders  of the Company and will not impose
personal  liability  upon  the  holder  thereof.
Acknowledgment  of  Dilution.  The  Company  understands  and  acknowledges  the
----------------------------
potentially  dilutive  effect  to  the  Common  Stock  upon  the issuance of the
------
Conversion  Shares  and  Warrant  Shares  upon  conversion  of the Debenture, or
------
exercise  of the Warrants.  The Company further acknowledges that its obligation
------
to  issue Conversion Shares and Warrant Shares upon conversion of the Debentures
or  exercise  of  the Warrants in accordance with this Agreement, the Debentures
and the Warrants is absolute and unconditional regardless of the dilutive effect
that  such issuance may have on the ownership interests of other stockholders of
the  Company.
No Conflicts.  Except as set forth on Schedule 3(f), the execution, delivery and
------------
performance of this Agreement, the Registration Rights Agreement, the Debentures
and  the  Warrants  by  the  Company  and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance  and  reservation  for  issuance  of  the Conversion Shares and Warrant
Shares)  will not (i) conflict with or result in a violation of any provision of
the Certificate of Incorporation or By-laws or (ii) violate or conflict with, or
result  in  a  breach  of any provision of, or constitute a default (or an event
which  with  notice  or  lapse of time or both could become a default) under, or
give  to  others  any  rights  of  termination,  amendment,  acceleration  or
cancellation  of, any agreement, indenture, patent, patent license or instrument
to which the Company or any of its Subsidiaries is a party, or (iii) result in a
violation  of  any  law,  rule, regulation, order, judgment or decree (including
federal  and  state  securities  laws  and  regulations  and  regulations of any
self-regulatory  organizations  to  which  the  Company  or  its  securities are
subject)  applicable  to  the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or affected
(except  for  such conflicts, defaults, terminations, amendments, accelerations,
cancellations  and  violations  as  would not, individually or in the aggregate,
have  a Material Adverse Effect).  Except as set forth on Schedule 3(f), neither
the  Company  nor  any of its Subsidiaries is in violation of its Certificate of
Incorporation, By-laws or other organizational documents and neither the Company
nor  any of its Subsidiaries is in default (and no event has occurred which with
notice or lapse of time or both could put the Company or any of its Subsidiaries
in default) under, and neither the Company nor any of its Subsidiaries has taken
any  action or failed to take any action that would give to others any rights of
termination,  amendment,  acceleration  or  cancellation  of,  any  agreement,
indenture  or  instrument  to  which the Company or any of its Subsidiaries is a
party  or  by  which  any  property  or  assets  of  the  Company  or any of its
Subsidiaries  is  bound  or affected, except for possible defaults as would not,
individually or in the aggregate, have a Material Adverse Effect. The businesses
of  the Company and its Subsidiaries, if any, are not being conducted, and shall
not  be conducted so long as a Buyer owns any of the Securities, in violation of
any  law,  ordinance  or  regulation  of  any  governmental  entity.  Except  as
specifically  contemplated  by  this  Agreement  and  the  Registration  Rights
Agreement and as required under the 1933 Act and any applicable state securities
laws,  the Company is not required to obtain any consent, authorization or order
of,  or  make  any  filing or registration with, any court, governmental agency,
regulatory  agency,  self  regulatory  organization or stock market or any third
party  in  order  for  it  to execute, deliver or perform any of its obligations
under  this  Agreement, the Registration Rights Agreement, the Debentures or the
Warrants in accordance with the terms hereof or thereof or to issue and sell the
Debentures  and  Warrants  in  accordance with the terms hereof and to issue the
Conversion  Shares upon conversion of the Debentures and the Warrant Shares upon
exercise  of  the Warrants.  Except as disclosed in Schedule 3(f), all consents,
authorizations,  orders, filings and registrations which the Company is required
to  obtain  pursuant to the preceding sentence have been obtained or effected on
or  prior  to  the  date hereof.  The Company is not in violation of the listing
requirements  of  the  Over-the-Counter  Bulletin  Board  (the  "OTCBB").
SEC  Documents; Financial Statements.  Except as disclosed in Schedule 3(g), the
------------------------------------
Company  has  timely  filed  all reports, schedules, forms, statements and other
documents  required  to  be  filed  by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act")
(all  of  the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents (other than
exhibits to such documents) incorporated by reference therein, being hereinafter
referred  to  herein as the "SEC Documents").  The Company has delivered to each
Buyer  true  and  complete copies of the SEC Documents, except for such exhibits
and  incorporated  documents.  As  of  their respective dates, the SEC Documents
complied  in all material respects with the requirements of the 1934 Act and the
rules  and  regulations  of the SEC promulgated thereunder applicable to the SEC
Documents,  and  none of the SEC Documents, at the time they were filed with the
SEC,  contained  any  untrue  statement of a material fact or omitted to state a
material  fact  required  to be stated therein or necessary in order to make the
statements  therein,  in  light of the circumstances under which they were made,
not  misleading.  None  of  the statements made in any such SEC Documents is, or
has  been,  required  to  be amended or updated under applicable law (except for
such  statements as have been amended or updated in subsequent filings prior the
date  hereof).  As  of  their  respective dates, the financial statements of the
Company  included  in  the  SEC  Documents  complied  as to form in all material
respects  with  applicable  accounting  requirements and the published rules and
regulations  of  the  SEC  with respect thereto.  Such financial statements have
been  prepared  in  accordance  with United States generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be  otherwise  indicated  in  such financial statements or the notes thereto, or
(ii)  in  the  case  of unaudited interim statements, to the extent they may not
include  footnotes or may be condensed or summary statements) and fairly present
in  all material respects the consolidated financial position of the Company and
its  consolidated  Subsidiaries  as  of  the  dates thereof and the consolidated
results  of their operations and cash flows for the periods then ended (subject,
in  the  case  of  unaudited  statements, to normal year-end audit adjustments).
Except  as  set forth in the financial statements of the Company included in the
SEC  Documents,  the  Company has no liabilities, contingent or otherwise, other
than  (i)  liabilities incurred in the ordinary course of business subsequent to
June  30,  2001 and (ii) obligations under contracts and commitments incurred in
the  ordinary  course  of  business  and  not  required under generally accepted
accounting  principles  to  be  reflected  in  such financial statements, which,
individually or in the aggregate, are not material to the financial condition or
operating  results  of  the  Company.
Absence  of  Certain  Changes.  Since  June 30, 2001, there has been no material
-----------------------------
adverse  change  and no material adverse development in the assets, liabilities,
---
business,  properties,  operations, financial condition or results of operations
of  the  Company  or  any  of  its  Subsidiaries.
Absence  of Litigation.  There is no action, suit, claim, proceeding, inquiry or
----------------------
investigation  before  or  by  any  court,  public  board,  government  agency,
self-regulatory organization or body pending or, to the knowledge of the Company
or  any  of its Subsidiaries, threatened against or affecting the Company or any
of  its  Subsidiaries, or their officers or directors in their capacity as such,
that  could  have  a Material Adverse Effect.  Schedule 3(i) contains a complete
list  and summary description of any pending or threatened proceeding against or
affecting  the  Company  or  any of its Subsidiaries which would have a Material
Adverse  Effect.  The  Company  and its Subsidiaries are unaware of any facts or
circumstances  which  might  give  rise  to  any  of  the  foregoing.
Patents,  Copyrights,  etc.  The  Company  and  each of its Subsidiaries owns or
--------------------------
possesses  the  requisite  licenses  or  rights  to  use  all  patents,  patent
----
applications,  patent  rights,  inventions, know-how, trade secrets, trademarks,
----
trademark applications, service marks, service names, trade names and copyrights
--
("Intellectual  Property") necessary to enable it to conduct its business as now
operated  (and,  except as set forth in Schedule 3(j) hereof, to the best of the
Company's  knowledge,  as  presently contemplated to be operated in the future);
there  is no claim or action by any person pertaining to, or proceeding pending,
or  to  the  Company's  knowledge  threatened, which challenges the right of the
Company  or  of a Subsidiary with respect to any Intellectual Property necessary
to  enable  it to conduct its business as now operated (and, except as set forth
in  Schedule  3(j)  hereof, to the best of the Company's knowledge, as presently
contemplated  to  be  operated  in  the  future);  to  the best of the Company's
knowledge,  the  Company's  or  its Subsidiaries' current and intended products,
services  and  processes  do  not infringe on any Intellectual Property or other
rights  held  by  any  person;  and  the  Company  is  unaware  of  any facts or
circumstances  which  might  give rise to any of the foregoing.  The Company and
each  of its Subsidiaries have taken reasonable security measures to protect the
secrecy,  confidentiality  and  value  of  their  Intellectual  Property.
No  Materially  Adverse  Contracts,  Etc.  Except as set forth on Schedule 3(k),
----------------------------------------
neither  the  Company  nor  any  of  its Subsidiaries is subject to any charter,
---
corporate  or  other  legal restriction, or any judgment, decree, order, rule or
---
regulation which in the judgment of the Company's officers has or is expected in
--
the  future  to  have a Material Adverse Effect.  Neither the Company nor any of
its  Subsidiaries  is a party to any contract or agreement which in the judgment
of  the Company's officers has or is expected to have a Material Adverse Effect.
Tax  Status.  Except  as set forth on Schedule 3(l), the Company and each of its
-----------
Subsidiaries  has  made  or  filed all federal, state and foreign income and all
other  tax  returns,  reports  and  declarations required by any jurisdiction to
which  it is subject (unless and only to the extent that the Company and each of
its  Subsidiaries  has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental  assessments  and  charges  that  are  material in amount, shown or
determined  to  be  due  on such returns, reports and declarations, except those
being  contested  in  good  faith  and  has  set  aside  on its books provisions
reasonably  adequate  for the payment of all taxes for periods subsequent to the
periods  to  which  such  returns,  reports or declarations apply.  There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any  jurisdiction.  The  Company  has  not executed a waiver with respect to the
statute  of limitations relating to the assessment or collection of any foreign,
federal,  state or local tax.  Except as set forth on Schedule 3(l), none of the
Company's  tax  returns  is  presently  being  audited  by any taxing authority.
Certain Transactions.  Except as set forth on Schedule 3(m) and except for arm's
--------------------
length  transactions  pursuant  to  which the Company or any of its Subsidiaries
makes  payments  in the ordinary course of business upon terms no less favorable
than  the Company or any of its Subsidiaries could obtain from third parties and
other  than  the  grant of stock options disclosed on Schedule 3(c), none of the
officers,  directors,  or  employees  of the Company is presently a party to any
transaction with the Company or any of its Subsidiaries (other than for services
as  employees,  officers  and  directors),  including any contract, agreement or
other  arrangement  providing for the furnishing of services to or by, providing
for  rental  of  real  or  personal  property to or from, or otherwise requiring
payments  to or from any officer, director or such employee or, to the knowledge
of the Company, any corporation, partnership, trust or other entity in which any
officer,  director,  or  any  such  employee has a substantial interest or is an
officer,  director,  trustee  or  partner.
Disclosure.  All information relating to or concerning the Company or any of its
----------
Subsidiaries  set forth in this Agreement and provided to the Buyers pursuant to
Section  2(d)  hereof  and  otherwise  in  connection  with  the  transactions
contemplated hereby is true and correct in all material respects and the Company
has  not  omitted  to  state  any  material  fact necessary in order to make the
statements  made  herein  or  therein, in light of the circumstances under which
they were made, not misleading.  No event or circumstance has occurred or exists
with respect to the Company or any of its Subsidiaries or its or their business,
properties,  operations  or  financial  conditions, which, under applicable law,
rule  or  regulation,  requires public disclosure or announcement by the Company
but  which  has  not  been so publicly announced or disclosed (assuming for this
purpose  that  the  Company's  reports  filed  under  the  1934  Act  are  being
incorporated into an effective registration statement filed by the Company under
the  1933  Act).
Acknowledgment  Regarding  Buyers'  Purchase  of  Securities.  The  Company
------------------------------------------------------------
acknowledges  and  agrees  that  the Buyers are acting solely in the capacity of
----------
arm's  length  purchasers  with  respect  to this Agreement and the transactions
---
contemplated  hereby.  The  Company further acknowledges that no Buyer is acting
---
as  a financial advisor or fiduciary of the Company (or in any similar capacity)
with  respect to this Agreement and the transactions contemplated hereby and any
statement made by any Buyer or any of their respective representatives or agents
in  connection  with  this Agreement and the transactions contemplated hereby is
not  advice or a recommendation and is merely incidental to the Buyers' purchase
of  the  Securities.  The  Company  further  represents  to  each Buyer that the
Company's  decision  to  enter  into this Agreement has been based solely on the
independent  evaluation  of  the  Company  and  its  representatives.
No Integrated Offering.  Neither the Company, nor any of its affiliates, nor any
----------------------
person acting on its or their behalf, has directly or indirectly made any offers
or  sales  in  any  security  or  solicited any offers to buy any security under
circumstances that would require registration under the 1933 Act of the issuance
of  the  Securities to the Buyers.  The issuance of the Securities to the Buyers
will  not  be  integrated  with  any  other issuance of the Company's securities
(past,  current  or  future) for purposes of any stockholder approval provisions
applicable  to  the  Company  or  its  securities.
No  Brokers.  Except  as  disclosed  in  Schedule 3(q), the Company has taken no
-----------
action  which  would  give  rise  to  any  claim  by  any  person  for brokerage
----
commissions,  transaction fees or similar payments relating to this Agreement or
----
the  transactions  contemplated  hereby.
Permits;  Compliance.  The Company and each of its Subsidiaries is in possession
--------------------
of  all  franchises,  grants,  authorizations,  licenses,  permits,  easements,
variances, exemptions, consents, certificates, approvals and orders necessary to
own,  lease and operate its properties and to carry on its business as it is now
being  conducted  (collectively,  the "Company Permits"), and there is no action
pending  or, to the knowledge of the Company, threatened regarding suspension or
cancellation  of any of the Company Permits.  Neither the Company nor any of its
Subsidiaries  is  in  conflict  with,  or in default or violation of, any of the
Company  Permits,  except  for any such conflicts, defaults or violations which,
individually  or  in  the  aggregate, would not reasonably be expected to have a
Material  Adverse  Effect.  Since  June 30, 2001, neither the Company nor any of
its  Subsidiaries  has  received  any  notification  with  respect  to  possible
conflicts,  defaults  or  violations  of  applicable  laws,  except  for notices
relating  to  possible  conflicts,  defaults  or  violations,  which  conflicts,
defaults  or  violations  would  not  have  a  Material  Adverse  Effect.
Environmental  Matters.
----------------------
There are, to the Company's knowledge, with respect to the Company or any of its
Subsidiaries or any predecessor of the Company, no past or present violations of
Environmental  Laws  (as  defined  below),  releases  of  any  material into the
environment,  actions, activities, circumstances, conditions, events, incidents,
or  contractual  obligations which may give rise to any common law environmental
liability  or  any  liability  under  the  Comprehensive Environmental Response,
Compensation  and  Liability  Act  of  1980  or similar federal, state, local or
foreign  laws  and  neither the Company nor any of its Subsidiaries has received
any  notice  with respect to any of the foregoing, nor is any action pending or,
to  the Company's knowledge, threatened in connection with any of the foregoing.
The  term  "Environmental  Laws" means all federal, state, local or foreign laws
relating  to  pollution  or  protection  of  human  health  or  the  environment
(including,  without  limitation,  ambient air, surface water, groundwater, land
surface  or  subsurface strata), including, without limitation, laws relating to
emissions,  discharges, releases or threatened releases of chemicals, pollutants
contaminants,  or  toxic  or  hazardous  substances  or  wastes  (collectively,
"Hazardous  Materials")  into  the  environment,  or  otherwise  relating to the
manufacture,  processing,  distribution,  use,  treatment,  storage,  disposal,
transport  or  handling  of  Hazardous Materials, as well as all authorizations,
codes,  decrees,  demands  or  demand letters, injunctions, judgments, licenses,
notices  or  notice  letters,  orders,  permits,  plans  or  regulations issued,
entered,  promulgated  or  approved  thereunder.
Other than those that are or were stored, used or disposed of in compliance with
applicable  law,  no  Hazardous  Materials  are  contained  on or about any real
property  currently  owned,  leased  or  used  by  the  Company  or  any  of its
Subsidiaries,  and  no  Hazardous  Materials  were released on or about any real
property  previously  owned,  leased  or  used  by  the  Company  or  any of its
Subsidiaries  during  the  period  the property was owned, leased or used by the
Company or any of its Subsidiaries, except in the normal course of the Company's
or  any  of  its  Subsidiaries'  business.
There  are  no  underground  storage  tanks on or under any real property owned,
leased  or  used  by  the  Company  or  any  of its Subsidiaries that are not in
compliance  with  applicable  law.
Title  to  Property.  The  Company and its Subsidiaries have good and marketable
-------------------
title  in  fee  simple to all real property and good and marketable title to all
--
personal property owned by them which is material to the business of the Company
--
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects  except such as are described in Schedule 3(t) or such as would not have
a Material Adverse Effect.  Any real property and facilities held under lease by
the  Company  and  its Subsidiaries are held by them under valid, subsisting and
enforceable  leases  with  such  exceptions as would not have a Material Adverse
Effect.
Insurance.  The  Company and each of its Subsidiaries are insured by insurers of
---------
recognized  financial  responsibility  against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses  in  which the Company and its Subsidiaries are engaged.  Neither the
Company  nor  any  such Subsidiary has any reason to believe that it will not be
able  to renew its existing insurance coverage as and when such coverage expires
or  to  obtain  similar  coverage  from  similar insurers as may be necessary to
continue  its  business at a cost that would not have a Material Adverse Effect.
The  Company  shall  provide  to  Buyer  true and correct copies of all policies
relating  to  directors'  and officers' liability coverage, errors and omissions
coverage,  and  commercial  general  liability  coverage  requested  by  Buyer.
Internal Accounting Controls.  The Company and each of its Subsidiaries maintain
----------------------------
a  system  of  internal  accounting  controls sufficient, in the judgment of the
Company's  board  of  directors,  to  provide  reasonable  assurance  that  (i)
transactions  are  executed  in accordance with management's general or specific
authorizations,  (ii)  transactions  are  recorded  as  necessary  to  permit
preparation  of  financial  statements  in  conformity  with  generally accepted
accounting  principles  and  to  maintain  asset accountability, (iii) access to
assets  is  permitted  only  in accordance with management's general or specific
authorization  and  (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect  to  any  differences.
Foreign  Corrupt  Practices.  Neither  the Company, nor any of its Subsidiaries,
---------------------------
nor  any  director, officer, agent, employee or other person acting on behalf of
--
the  Company  or  any  Subsidiary  has,  in the course of his actions for, or on
behalf  of, the Company, used any corporate funds for any unlawful contribution,
gift,  entertainment  or other unlawful expenses relating to political activity;
made  any  direct  or  indirect  unlawful  payment  to  any  foreign or domestic
government  official  or  employee  from  corporate  funds;  violated  or  is in
violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended, or made any bribe, rebate, payoff, influence payment, kickback or other
unlawful  payment  to  any  foreign or domestic government official or employee.
No  Investment  Company.  The  Company is not, and upon the issuance and sale of
-----------------------
the  Securities  as  contemplated  by  this Agreement will not be an "investment
--
company"  required to be registered under the Investment Company Act of 1940 (an
--
"Investment  Company").  The Company is not controlled by an Investment Company.
Breach  of  Representations  and  Warranties  by  the  Company.  If  the Company
---------------------------------------------------------------
materially  breaches  any of the representations or warranties set forth in this
-------
Section  3,  and  in  addition  to  any  other  remedies available to the Buyers
pursuant  to  this  Agreement,  the  Company shall pay to the Buyer the Standard
Liquidated  Damages Amount in cash or in shares of Common Stock at the option of
the  Buyer,  until  such  breach  is  cured.  If the Buyers elect to be paid the
Standard Liquidated Damages Amounts in shares of Common Stock, such shares shall
be  issued  at  the  Conversion  Price  at  the  time  of  payment.
     4.     COVENANTS.
            ---------
     a.     Best  Efforts.  The  parties shall use their best efforts to satisfy
            -------------
timely  each  of  the conditions described in Section 6 and 7 of this Agreement.
b.     Blue  Sky  Laws.  The  Company shall, on or before the Closing Date, take
       ---------------
such  action  as  the Company shall reasonably determine is necessary to qualify
the Securities for sale to the Buyers at the applicable closing pursuant to this
Agreement  under  applicable  securities or "blue sky" laws of the states of the
United  States  (or  to  obtain an exemption from such qualification), and shall
provide  evidence  of  any such action so taken to each Buyer on or prior to the
Closing  Date.
     c.     Reporting Status; Eligibility to Use Form S-1.  The Company's Common
            ---------------------------------------------
Stock  is registered under Section 12(g) of the 1934 Act. The Company represents
and  warrants  that  it  meets  the  requirements for the use of Form S-1 (or if
Company  is  not  eligible  for  the  use  of Form S-1 as of the Filing Date (as
defined  in  the Registration Rights Agreement), the Company may use the form of
registration for which it is eligible at that time) for registration of the sale
by  the  Buyer  of  the  Registrable  Securities (as defined in the Registration
Rights  Agreement).  So  long  as  the  Buyer  beneficially  owns  any  of  the
Securities,  the Company shall timely file all reports required to be filed with
the SEC pursuant to the 1934 Act, and the Company shall not terminate its status
as an issuer required to file reports under the 1934 Act even if the 1934 Act or
the rules and regulations thereunder would permit such termination.  The Company
further  agrees to file all reports required to be filed by the Company with the
SEC  in a timely manner so as to become eligible, and thereafter to maintain its
eligibility,  for  the use of Form S-3.  The Company shall issue a press release
describing the materials terms of the transaction contemplated hereby as soon as
practicable  following  the  Closing  Date  but  in  no  event more than two (2)
business days of the Closing Date, which press release shall be subject to prior
review  by  the  Buyers.  The  Company  agrees that such press release shall not
disclose  the name of the Buyers unless expressly consented to in writing by the
Buyers  or unless required by applicable law or regulation, and then only to the
extent  of  such  requirement.
     d.     Use  of  Proceeds.  The Company shall use the proceeds from the sale
            -----------------
of  the  Debentures  and  the  exercise  of  the  Warrants for general corporate
purposes  and  shall not, directly or indirectly, use such proceeds for any loan
to  or  investment  in  any  other corporation, partnership, enterprise or other
person  (except  in  connection  with  its currently existing direct or indirect
Subsidiaries).
e.     Future Offerings.  Subject to the exceptions described below, the Company
       ----------------
will  not,  without  the  prior written consent of a majority-in-interest of the
Buyers, not to be unreasonably withheld, negotiate or contract with any party to
obtain  additional  equity  financing  (including  debt financing with an equity
component)  that  involves (A) the issuance of Common Stock at a discount to the
market  price  of  the Common Stock on the date of issuance (taking into account
the  value  of  any  warrants  or  options  to  acquire  Common  Stock issued in
connection  therewith)  or  (B)  the issuance of convertible securities that are
convertible  into  an  indeterminate number of shares of Common Stock or (C) the
issuance  of  warrants during the period (the "Lock-up Period") beginning on the
Closing  Date  and ending on the later of (i) two hundred twenty-five (225) days
from  the  Closing Date and (ii) one hundred eighty (180) days from the date the
Registration  Statement  (as  defined  in  the Registration Rights Agreement) is
declared effective (plus any days in which sales cannot be made thereunder).  In
addition,  subject  to  the  exceptions  described  below,  the Company will not
conduct  any equity financing (including debt with an equity component) ("Future
Offerings")  during the period beginning on the Closing Date and ending eighteen
(18)  months  after  the  end  of  the Lock-up Period unless it shall have first
delivered to each Buyer, at least twenty (20) business days prior to the closing
of such Future Offering, written notice describing the proposed Future Offering,
including the terms and conditions thereof and proposed definitive documentation
to  be  entered into in connection therewith, and providing each Buyer an option
during the fifteen (15) day period following delivery of such notice to purchase
its  pro  rata  share (based on the ratio that the aggregate principal amount of
Debentures  purchased by it hereunder bears to the aggregate principal amount of
Debentures  purchased  hereunder)  of the securities being offered in the Future
Offering  on  the  same  terms  as  contemplated  by  such  Future Offering (the
limitations  referred  to  in  this  sentence  and  the  preceding  sentence are
collectively  referred  to  as the "Capital Raising Limitations").  In the event
the  terms  and  conditions  of  a  proposed  Future Offering are amended in any
respect  after  delivery  of  the  notice  to the Buyers concerning the proposed
Future Offering, the Company shall deliver a new notice to each Buyer describing
the  amended terms and conditions of the proposed Future Offering and each Buyer
thereafter  shall  have  an  option during the fifteen (15) day period following
delivery  of  such  new  notice to purchase its pro rata share of the securities
being  offered  on  the  same  terms  as  contemplated  by  such proposed Future
Offering,  as  amended.  The  foregoing  sentence  shall  apply  to  successive
amendments  to  the  terms  and conditions of any proposed Future Offering.  The
Capital  Raising  Limitations  shall  not apply to any transaction involving (i)
issuances  of  securities  in  a  firm  commitment  underwritten public offering
(excluding  a continuous offering pursuant to Rule 415 under the 1933 Act), (ii)
issuances of securities as consideration for a merger, consolidation or purchase
of assets, or in connection with any strategic partnership or joint venture (the
primary  purpose of which is not to raise equity capital), or in connection with
the disposition or acquisition of a business, product or license by the Company,
(iii)  issuance  of  securities  upon  exercise  or  conversion of the Company's
options,  warrants  or  other  convertible securities outstanding as of the date
hereof  or  to  the  grant of additional options or warrants, or the issuance of
additional  securities,  under any Company stock option or restricted stock plan
approved  by  the  Stockholders  or a majority of the independent members of the
Board  of  Directors  of  the  Company, (iv) shares of Common Stock to be issued
pursuant to the Convertible Note Purchase Agreement, dated December 12, 2000, by
and  among  certain  investors and the Company, (v) shares of Common Stock to be
issued pursuant to the Convertible Note Purchase Agreement, dated July 26, 2001,
by  and  among certain investors and the Company, (vi) shares of Common Stock to
be  issued  pursuant to the Convertible Note Purchase Agreement, dated September
21, 2001, by and among certain investors and the Company, (vii) shares of Common
Stock  to  be  issued pursuant to the Convertible Note Purchase Agreement, dated
November  7, 2001, by and among certain investors and the Company, (viii) shares
of  Common Stock to be issued pursuant to the Agreement and Release, dated March
1,  2001,  by and among the Company, American Industries, Inc. and various other
parties  thereto  and  (ix)  shares of Common Stock to be issued pursuant to the
Second  OEM  Amendment,  dated October 25, 2000, between the Company and Artifex
Software,  Inc.  In  the  event  that the Company completes a Future Offering on
terms  more  favorable  to  another  investor  than the transaction contemplated
hereby,  the terms of the Debentures and the Warrants will be amended to reflect
such  more favorable terms.  Notwithstanding anything contained in the foregoing
                           -----------------------------------------------------
to  the  contrary,  in  the event that the Company enters into a Future Offering
--------------------------------------------------------------------------------
during  the Lock-up Period, the Buyer shall have the right to purchase up to 35%
--------------------------------------------------------------------------------
of  such Future Offering and Balmore Funds, S.A shall have the right to purchase
--------------------------------------------------------------------------------
up to 65% of such Future Offering; provided that, in the event that either party
--------------------------------------------------------------------------------
elects not to purchase its pro rata portion as set forth herein, the other party
--------------------------------------------------------------------------------
may  purchase  such  non-electing  party's  pro  rata  portion.
---------------------------------------------------------------
f.     Expenses.  At  the  Closing,  the  Company  shall  reimburse  Buyers  for
       --------
reasonable  expenses  incurred  by  it  in  connection  with  the  negotiation,
preparation, execution, delivery and performance of this Agreement and the other
agreements  to  be  executed  in  connection  herewith ("Documents"), including,
without  limitation,  reasonable  attorneys' and consultants' fees and expenses,
transfer  agent  fees,  fees  for stock quotation services, fees relating to any
amendments  or  modifications  of  the  Documents  or any consents or waivers of
provisions  in  the  Documents, fees for the preparation of opinions of counsel,
escrow  fees,  and  costs  of restructuring the transactions contemplated by the
Documents.  When  possible,  the Company must pay these fees directly, otherwise
the  Company must make immediate payment for reimbursement to the Buyers for all
fees and expenses immediately upon written notice by the Buyer or the submission
of an invoice by the Buyer.  If the Company fails to reimburse the Buyer in full
within three (3) business days of the written notice or submission of invoice by
the  Buyer,  the  Company  shall  pay interest on the total amount of fees to be
reimbursed  at  a  rate  of  15%  per  annum.
g.     Financial  Information.  The Company agrees to send the following reports
       ----------------------
to  each  Buyer  until  such  Buyer  transfers,  assigns,  or  sells  all of the
Securities:  (i)  within  ten (10) days after the filing with the SEC, a copy of
its  Annual  Report on Form 10-KSB, its Quarterly Reports on Form 10-QSB and any
Current  Reports  on  Form 8-K; (ii) within one (1) day after release, copies of
all  press  releases issued by the Company or any of its Subsidiaries; and (iii)
contemporaneously with the making available or giving to the stockholders of the
Company,  copies of any notices or other information the Company makes available
or  gives  to  such  stockholders.
h.     Authorization  and  Reservation  of  Shares.  Subject  to  the  Company
       -------------------------------------------
effecting the Share Increase and the Stock Split, the Company shall at all times
       -
have  authorized,  and reserved for the purpose of issuance, a sufficient number
of  shares of Common Stock to provide for the full conversion or exercise of the
outstanding  Debentures  and  Warrants and issuance of the Conversion Shares and
Warrant  Shares  in  connection  therewith (based on the Conversion Price of the
Debentures or Exercise Price of the Warrants in effect from time to time) and as
otherwise  required  by the Debentures.  The Company shall not reduce the number
of  shares  of  Common Stock reserved for issuance upon conversion of Debentures
and  exercise of the Warrants without the consent of each Buyer.  Subject to the
Company  effecting  the Share Increase and the Stock Split, the Company shall at
all times maintain the number of shares of Common Stock so reserved for issuance
at  an amount ("Reserved Amount") equal to no less than two (2) times the number
that  is  then  actually  issuable  upon  full  conversion of the Debentures and
Additional Debentures and upon exercise of the Warrants (based on the Conversion
Price  of  the  Debentures  or the Exercise Price of the Warrants in effect from
time  to time).  If at any time after February 28, 2002, the number of shares of
Common  Stock  authorized  and  reserved  for issuance ("Authorized and Reserved
Shares")  is  below  the  Reserved  Amount,  the  Company will promptly take all
corporate  action  necessary  to  authorize  and  reserve a sufficient number of
shares, including, without limitation, calling a special meeting of stockholders
to  authorize  additional  shares  to  meet the Company's obligations under this
Section 4(h), in the case of an insufficient number of authorized shares, obtain
stockholder  approval  of  an  increase in such authorized number of shares, and
voting  the  management  shares  of  the  Company in favor of an increase in the
authorized  shares of the Company to ensure that the number of authorized shares
is  sufficient to meet the Reserved Amount.  If the Company fails to obtain such
shareholder approval within forty-five (45) days following the date on which the
number  of  Authorized  and  Reserved  Shares  exceeds  the Reserved Amount, the
Company  shall  pay to the Buyer the Standard Liquidated Damages Amount, in cash
or in shares of Common Stock at the option of the Buyer.  If the Buyer elects to
be  paid  the Standard Liquidated Damages Amount in shares of Common Stock, such
shares shall be issued at the Conversion Price at the time of payment.  In order
to  ensure that the Company has authorized a sufficient amount of shares to meet
the  Reserved  Amount at all times, the Company must deliver to the Buyer at the
end  of  every  quarter  a  list  detailing  (1)  the  current  amount of shares
authorized  by  the  Company  and  reserved for the Buyer; and (2) the amount of
shares  issuable  upon  conversion  of  the  Debentures and upon exercise of the
Warrants  and as payment of interest accrued on the Debentures for one year.  If
the  Company fails to provide such list within five (5) business days of the end
of  each  quarter, the Company shall pay the Standard Liquidated Damages Amount,
in  cash or in shares of Common Stock at the option of the Buyer, until the list
is  delivered; provided, however, that if the Company fails to provide such list
               --------  -------
with  five (5) business days of the end of each quarter, the Buyer shall provide
written  notice  to the Company of such failure and the Company shall have three
(3)  business  days  from  the date of such notice to cure such failure.  If the
Buyer  elects  to  be  paid  the Standard Liquidated Damages Amount in shares of
Common Stock, such shares shall be issued at the Conversion Price at the time of
payment.
i.     Listing.  The Company shall promptly secure the listing of the Conversion
       -------
Shares  and  Warrant  Shares upon each national securities exchange or automated
quotation  system,  if  any,  upon  which shares of Common Stock are then listed
(subject  to  official notice of issuance) and, so long as any Buyer owns any of
the  Securities,  shall  maintain,  so  long as any other shares of Common Stock
shall  be  so  listed,  such listing of all Conversion Shares and Warrant Shares
from  time  to  time  issuable upon conversion of the Debentures (including upon
exercise  of  the  Investment Options) or exercise of the Warrants.  The Company
will  obtain  and, so long as any Buyer owns any of the Securities, maintain the
listing and trading of its Common Stock on the OTCBB, the Nasdaq National Market
("Nasdaq"),  the  Nasdaq SmallCap Market ("Nasdaq SmallCap"), the New York Stock
Exchange  ("NYSE"),  or  the American Stock Exchange ("AMEX") and will comply in
all  respects  with  the Company's reporting, filing and other obligations under
the  bylaws  or rules of the National Association of Securities Dealers ("NASD")
and  such  exchanges, as applicable.  The Company shall promptly provide to each
Buyer  copies  of any notices it receives from the OTCBB and any other exchanges
or  quotation  systems  on  which  the Common Stock is then listed regarding the
continued  eligibility  of  the  Common  Stock for listing on such exchanges and
quotation  systems.
j.     Corporate Existence.  So long as a Buyer beneficially owns any Debentures
       -------------------
or  Warrants,  the  Company shall maintain its corporate existence and shall not
sell  all or substantially all of the Company's assets, except in the event of a
merger  or  consolidation  or  sale of all or substantially all of the Company's
assets,  where the surviving or successor entity in such transaction (i) assumes
the  Company's  obligations  hereunder  and under the agreements and instruments
entered  into  in  connection herewith and (ii) is a publicly traded corporation
whose  Common Stock is listed for trading on the OTCBB, Nasdaq, Nasdaq SmallCap,
NYSE  or  AMEX.
k.     No  Integration.  The  Company  shall not make any offers or sales of any
       ---------------
security  (other  than  the  Securities)  under circumstances that would require
registration  of  the  Securities being offered or sold hereunder under the 1933
Act  or  cause  the  offering  of the Securities to be integrated with any other
offering  of  securities  by  the  Company  for  the  purpose of any stockholder
approval  provision  applicable  to  the  Company  or  its  securities.
l.     Subsequent  Investment.  The  Company and the Buyers agree that, upon the
       ----------------------
declaration  of effectiveness of the Registration Statement to be filed pursuant
to  the  Registration  Rights Agreement (the "Effective Date"), the Buyers shall
purchase  additional  debentures  ("Additional  Debentures")  in  the  aggregate
principal  amount  of  Five Hundred Thousand Dollars ($500,000) for an aggregate
purchase  price of Five Hundred Thousand Dollars ($500,000), with the closing of
such  purchase  to  occur  within  five (5) business days of the Effective Date;
provided,  however, that the obligation of each Buyer to purchase the Additional
    ----   -------
Debentures  is  subject  to  the  satisfaction, at or before the closing of such
purchase  and  sale,  of  the  conditions set forth in Section 7; and, provided,
                                                                       --------
further,  that  there  shall  not  have been a Material Adverse Effect as of the
    ---
Effective  Date.  The  terms  of the Additional Debentures shall be identical to
the  terms of the Debentures to be issued on the Closing Date.  The Common Stock
underlying the Additional Debentures shall be Registrable Securities (as defined
in  the Registration Rights Agreement) and shall be included in the Registration
Statement  to  be  filed  pursuant  to  the  Registration  Rights  Agreement.
m.     Regulation S.  The Company covenants and agrees that if the Company fails
       ------------
to  register  the Conversion Shares and Warrant Shares by the Effective Date (as
defined  in  the  Registration  Rights  Agreement),  then  for  so  long as such
registration  statement  is not effective and as any of the Conversion Shares or
Warrant  Shares  remain  outstanding  and continue to be "restricted securities"
within  the  meaning of Rule 144 under the 1933 Act, the Company shall, in order
to  permit resales of any of the Conversion Shares or Warrant Shares pursuant to
Regulation  S  under the 1933 Act, (a) continue to file all material required to
be  filed  pursuant  to  Section  13(a)  or  15(d)  of the 1934 Act, and (b) not
knowingly  engage  in  directed selling efforts in connection with the resale of
securities  by  any  Buyer  under  Regulation  S.
n.     Amendments  to  Certificate  of  Incorporation.  The  Company  shall file
       ----------------------------------------------
amendments  to  the  Certificate of Incorporation with the Secretary of State of
the  State of Delaware and take whatever other action is necessary to effect the
Share  Increase  and  the  Stock  Split no later than February 28, 2002.  If the
Company  fails  to  effect the Share Increase and the Stock Split on or prior to
February  28,  2002,  the Company shall pay to the Buyer the Standard Liquidated
Damages  Amount,  in  cash  or  in  shares of Common Stock, at the option of the
Buyer.
o.     Breach  of  Covenants.  If  the  Company  materially  breaches any of the
       ---------------------
covenants  set  forth  in  this Section 4, and in addition to any other remedies
available to the Buyers pursuant to this Agreement, the Company shall pay to the
Buyers  the  Standard  Liquidated Damages Amount, in cash or in shares of Common
Stock at the option of the Buyer, until such breach is cured; provided, however,
                                                              --------  -------
that  the  Buyer  shall provide written notice to the Company of such breach and
the  Company  shall  have ten (10) business days from the date of such notice to
cure  such breachIf the Buyers elect to be paid the Standard Liquidated Damages
Amount  in  shares,  such  shares shall be issued at the Conversion Price at the
time  of  payment.
5.     TRANSFER  AGENT  INSTRUCTIONS.  The  Company  shall  issue  irrevocable
       -----------------------------
instructions to its transfer agent to issue certificates, registered in the name
of  each  Buyer  or its nominee, for the Conversion Shares and Warrant Shares in
such  amounts  as  specified from time to time by each Buyer to the Company upon
conversion  of the Debentures or exercise of the Warrants in accordance with the
terms  thereof  (the  "Irrevocable  Transfer  Agent  Instructions").  Prior  to
registration  of  the Conversion Shares and Warrant Shares under the 1933 Act or
the  date  on  which  the  Conversion  Shares and the Warrant Shares may be sold
pursuant  to  Rule 144 without any restriction as to the number of Securities as
of  a  particular  date that can then be immediately sold, all such certificates
shall  bear  the restrictive legend specified in Section 2(g) of this Agreement.
Solely with respect to the Conversion Shares and the Warrant Shares, the Company
warrants  that  no  instruction  other  than  the  Irrevocable  Transfer  Agent
Instructions  referred  to  in this Section 5, and stop transfer instructions to
give  effect  to  Section  2(f) hereof (in the case of the Conversion Shares and
Warrant  Shares,  prior  to  registration  of  the Conversion Shares and Warrant
Shares under the 1933 Act or the date on which the Conversion Shares and Warrant
Shares may be sold pursuant to Rule 144 without any restriction as to the number
of  Securities  as of a particular date that can then be immediately sold), will
be given by the Company to its transfer agent and that the Conversion Shares and
the  Warrant  Shares  shall  otherwise  be  freely transferable on the books and
records  of  the Company as and to the extent provided in this Agreement and the
Registration  Rights Agreement.  Nothing in this Section shall affect in any way
the Buyer's obligations and agreement set forth in Section 2(g) hereof to comply
with  all  applicable  prospectus delivery requirements, if any, upon re-sale of
the  Securities.  If a Buyer provides the Company with (i) an opinion of counsel
in  form, substance and scope customary for opinions in comparable transactions,
to  the  effect  that  a  public sale or transfer of such Securities may be made
without registration under the 1933 Act and such sale or transfer is effected or
(ii)  the  Buyer  provides reasonable assurances that the Securities can be sold
pursuant to Rule 144, the Company shall permit the transfer, and, in the case of
the  Conversion  Shares and Warrant Shares, promptly instruct its transfer agent
to  issue  one  or more certificates, free from restrictive legend, in such name
and  in such denominations as specified by such Buyer.  The Company acknowledges
that  a breach by it of its obligations hereunder will cause irreparable harm to
the Buyers, by vitiating the intent and purpose of the transactions contemplated
hereby.  Accordingly,  the  Company  acknowledges  that  the remedy at law for a
breach  of its obligations under this Section 5 may be inadequate and agrees, in
the  event  of a breach or threatened breach by the Company of the provisions of
this  Section,  that  the  Buyers  shall  be  entitled, in addition to all other
available  remedies,  to  an  injunction  restraining  any  breach and requiring
immediate  transfer,  without the necessity of showing economic loss and without
any  bond  or  other  security  being  required.
     6.     CONDITIONS  TO  THE COMPANY'S OBLIGATION TO SELL.  The obligation of
            ------------------------------------------------
the  Company  hereunder to issue and sell the Debentures and Warrants to a Buyer
at  the Closing is subject to the satisfaction, at or before the Closing Date of
each of the following conditions thereto, provided that these conditions are for
the  Company's  sole benefit and may be waived by the Company at any time in its
sole  discretion:
     a.     The  applicable  Buyer  shall  have  executed this Agreement and the
Registration  Rights  Agreement,  and  delivered  the  same  to  the  Company.
b.     The  applicable  Buyer  shall  have  delivered  the  Purchase  Price  in
accordance  with  Section  1(b)  above.
c.     The  representations and warranties of the applicable Buyer shall be true
and  correct  in  all  material  respects as of the date when made and as of the
Closing  Date  as  though  made  at  that  time  (except for representations and
warranties  that  speak  as  of a specific date), and the applicable Buyer shall
have  performed,  satisfied  and  complied  in  all  material  respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied  or  complied  with by the applicable Buyer at or prior to the Closing
Date.
d.     No litigation, statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by or in
any  court  or  governmental  authority  of  competent  jurisdiction  or  any
self-regulatory  organization  having  authority  over  the matters contemplated
hereby  which prohibits the consummation of any of the transactions contemplated
by  this  Agreement.
     7.     CONDITIONS  TO  EACH BUYER'S OBLIGATION TO PURCHASE.  The obligation
            ---------------------------------------------------
of  each  Buyer hereunder to purchase the Debentures and Warrants at the Closing
is  subject  to  the  satisfaction, at or before the Closing Date of each of the
following  conditions,  provided that these conditions are for such Buyer's sole
benefit  and  may  be  waived  by such Buyer at any time in its sole discretion:
     a.     The  Company shall have executed this Agreement and the Registration
Rights  Agreement,  and  delivered  the  same  to  the  Buyer.
b.     The  Company  shall have delivered to such Buyer duly executed Debentures
(in  such  denominations  as the Buyer shall request) and Warrants in accordance
with  Section  1(b)  above.
c.     The  Transfer Agent Instructions, in form and substance satisfactory to a
majority-in-interest  of  the Buyers, shall have been delivered to the Company's
Transfer  Agent.
d.     The  representations  and  warranties  of  the  Company shall be true and
correct  in all material respects as of the date when made and as of the Closing
Date as though made at such time (except for representations and warranties that
speak as of a specific date) and the Company shall have performed, satisfied and
complied  in all material respects with the covenants, agreements and conditions
required  by  this  Agreement to be performed, satisfied or complied with by the
Company  at  or  prior  to  the  Closing  Date.  The Buyer shall have received a
certificate  or  certificates,  executed by an executive officer of the Company,
dated  as  of  the  Closing  Date,  to the foregoing effect and as to such other
matters  as may be reasonably requested by such Buyer including, but not limited
to  certificates  with  respect  to  the Company's Certificate of Incorporation,
By-laws  and  Board  of  Directors'  resolutions  relating  to  the transactions
contemplated  hereby.
e.     No litigation, statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by or in
any  court  or  governmental  authority  of  competent  jurisdiction  or  any
self-regulatory  organization  having  authority  over  the matters contemplated
hereby  which prohibits the consummation of any of the transactions contemplated
by  this  Agreement.
f.     No event shall have occurred which could reasonably be expected to have a
Material  Adverse  Effect  on  the  Company.
g.     Trading in the Common Stock on the OTCBB shall not have been suspended by
the  SEC  or  the  OTCBB.
h.     The  Buyer shall have received an opinion of the Company's counsel, dated
as  of the Closing Date, in form, scope and substance reasonably satisfactory to
the  Buyer  and  in  substantially the same form as Exhibit "D" attached hereto.
     8.     GOVERNING  LAW;  MISCELLANEOUS.
            ------------------------------
     a.     Governing  Law.  THIS  AGREEMENT  SHALL BE ENFORCED, GOVERNED BY AND
            --------------
CONSTRUED  IN  ACCORDANCE  WITH  THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS  MADE AND TO BE PERFORMED ENTIRELY WITH SUCH STATE, WITHOUT REGARD TO
THE  PRINCIPLES  OF  CONFLICT  OF LAWS.  THE PARTIES HERETO HEREBY SUBMIT TO THE
EXCLUSIVE  JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
NEW  YORK  WITH  RESPECT  TO  ANY  DISPUTE  ARISING  UNDER  THIS  AGREEMENT, THE
AGREEMENTS  ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING.  BOTH PARTIES FURTHER AGREE
THAT  SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED
IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING.  NOTHING  HEREIN  SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS
IN  ANY  OTHER  MANNER  PERMITTED  BY  LAW.  BOTH  PARTIES  AGREE  THAT  A FINAL
NON-APPEALABLE  JUDGMENT  IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY  BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL  MANNER.  THE  PARTY  WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS  AGREEMENT  SHALL  BE  RESPONSIBLE  FOR  ALL  REASONABLE FEES AND EXPENSES,
INCLUDING  REASONABLE  ATTORNEYS'  FEES,  INCURRED  BY  THE  PREVAILING PARTY IN
CONNECTION  WITH  SUCH  DISPUTE.
b.     Counterparts; Signatures by Facsimile.  This Agreement may be executed in
       -------------------------------------
one  or  more counterparts, each of which shall be deemed an original but all of
which  shall  constitute  one  and the same agreement and shall become effective
when  counterparts  have  been  signed  by each party and delivered to the other
party.  This  Agreement, once executed by a party, may be delivered to the other
party  hereto  by facsimile transmission of a copy of this Agreement bearing the
signature  of  the  party  so  delivering  this  Agreement.
c.     Headings.  The  headings  of  this  Agreement  are  for  convenience  of
       --------
reference only and shall not form part of, or affect the interpretation of, this
       -
Agreement.
d.     Severability.  In  the  event  that  any  provision  of this Agreement is
       ------------
invalid  or  enforceable  under any applicable statute or rule of law, then such
provision  shall  be  deemed  inoperative  to  the  extent  that it may conflict
therewith  and  shall be deemed modified to conform with such statute or rule of
law.  Any  provision  hereof  which may prove invalid or unenforceable under any
law  shall  not  affect  the  validity  or enforceability of any other provision
hereof.
e.     Entire  Agreement;  Amendments.  This  Agreement  and  the  instruments
       ------------------------------
referenced  herein  contain the entire understanding of the parties with respect
to  the matters covered herein and therein and, except as specifically set forth
herein  or  therein, neither the Company nor the Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters.  No provision of
this  Agreement  may be waived or amended other than by an instrument in writing
signed  by  the  party  to  be  charged  with  enforcement.
f.     Notices.  Any  notices  required or permitted to be given under the terms
       -------
of  this Agreement shall be sent by certified or registered mail (return receipt
requested)  or  delivered  personally  or  by  courier  (including  a recognized
overnight  delivery  service)  or  by facsimile and shall be effective five days
after being placed in the mail, if mailed by regular United States mail, or upon
receipt, if delivered personally or by courier (including a recognized overnight
delivery  service)  or  by  facsimile,  in  each case addressed to a party.  The
addresses  for  such  communications  shall  be:
     If  to  the  Company:
     Imaging  Technologies  Corporation
15175  Innovation  Drive
     San  Diego,  California  92128
     Attention:  President  and  Chief  Executive  Officer
Telephone:  858-613-1300
Facsimile:   858-207-6505
Email:  bbonar@itec.net

     With  copy  to:

     Jenkens  &  Gilchrist  Parker  Chapin,  LLP
The  Chrysler  Building
405  Lexington  Avenue
New  York,  NY  10174
Attention:  Christopher  S.  Auguste,  Esq.
Telephone:  212-704-6000
Facsimile:  212-704-6288

If  to a Buyer:  To the address set forth immediately below such Buyer's name on
the  signature  pages  hereto.
     With  copy  to:

     Bristol  DLP,  LLC
Investment  Manager
6363  Sunset  Blvd.,  Fifth  Floor
Hollywood,  CA  90028
Attention:  Amy  Wang
Telephone:  323-769-2852
Facsimile:  323-468-8307
Email:  amy@bristolcompanies.net

Each  party  shall  provide  notice to the other party of any change in address.
     g.     Successors  and  Assigns.  This  Agreement shall be binding upon and
            ------------------------
inure  to  the benefit of the parties and their successors and assigns.  Neither
the  Company  nor  any  Buyer  shall  assign  this  Agreement  or  any rights or
obligations  hereunder  without  the  prior  written  consent  of  the  other.
Notwithstanding the foregoing, subject to Section 2(f), any Buyer may assign its
rights  hereunder  to any of its "affiliates," as that term is defined under the
1934  Act,  without  the  consent  of  the  Company.
h.     Third Party Beneficiaries.  This Agreement is intended for the benefit of
       -------------------------
the parties hereto and their respective permitted successors and assigns, and is
not  for  the benefit of, nor may any provision hereof be enforced by, any other
person.
i.     Survival.  The  representations  and  warranties  of  the Company and the
       --------
agreements  and  covenants set forth in Sections 3, 4, 5 and 8 shall survive the
closing  hereunder  notwithstanding any due diligence investigation conducted by
or  on  behalf of the Buyers.  The Company agrees to indemnify and hold harmless
each  of  the Buyers and all their officers, directors, employees and agents for
loss  or  damage arising as a result of or related to any material breach by the
Company  of  any  of  its representations, warranties and covenants set forth in
Sections  3  and  4  hereof  or  any of its covenants and obligations under this
Agreement  or  the  Registration  Rights  Agreement,  including  advancement  of
expenses  as  they  are  incurred.
j.     Publicity.  The  Company  and  each of the Buyers shall have the right to
       ---------
review  a  reasonable period of time before issuance of any press releases, SEC,
OTCBB  or  NASD  filings,  or  any  other  public statements with respect to the
transactions  contemplated  hereby; provided, however, that the Company shall be
                                    --------  -------
entitled,  without  the  prior approval of each of the Buyers, to make any press
release  or SEC, OTCBB (or other applicable trading market) or NASD filings with
respect  to  such  transactions as is required by applicable law and regulations
(although  each  of  the  Buyers shall be consulted by the Company in connection
with  any  such  press release prior to its release and shall be provided with a
copy  thereof  and  be  given  an  opportunity  to  comment  thereon).
k.     Further Assurances.  Each party shall do and perform, or cause to be done
       ------------------
and  performed,  all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
l.     No  Strict  Construction.  The  language  used  in this Agreement will be
       ------------------------
deemed  to be the language chosen by the parties to express their mutual intent,
and  no  rules  of  strict  construction  will  be  applied  against  any party.
m.     Remedies.  The  Company  acknowledges  that  a  breach  by  it  of  its
       --------
obligations hereunder will cause irreparable harm to the Buyers by vitiating the
       ---
intent  and  purpose  of  the transaction contemplated hereby.  Accordingly, the
Company  acknowledges  that  the  remedy  at law for a breach of its obligations
under  this Agreement will be inadequate and agrees, in the event of a breach or
threatened  breach  by the Company of the provisions of this Agreement, that the
Buyers  shall be entitled, in addition to all other available remedies at law or
in  equity, and in addition to the penalties assessable herein, to an injunction
or  injunctions  restraining,  preventing or curing any breach of this Agreement
and  to  enforce  specifically  the  terms  and  provisions  hereof, without the
necessity  of showing economic loss and without any bond or other security being
required.

<PAGE>
IN  WITNESS  WHEREOF,  the  undersigned  Buyers and the Company have caused this
Agreement  to  be  duly  executed  as  of  the  date  first  above  written.
IMAGING  TECHNOLOGIES  CORPORATION
By:     ________________________________
     Brian  Bonar
President  and  Chief  Executive  Officer

BRISTOL  INVESTMENT  FUND,  LTD.

By:
     Diana  Derycz  Kessler
Director

RESIDENCE:  Cayman  Islands

ADDRESS:     Caledonian  House
     Jennett  Street
     George  Town
          Grand  Cayman,  Cayman  Islands
     Facsimile:     441-295-2305
     Telephone:     441-298-5067

AGGREGATE  SUBSCRIPTION  AMOUNT:

     Aggregate  Principal  Amount  of  Debentures:                         $
500,000
     Number  of  Warrants:                                   60,240,964
     Aggregate  Purchase  Price:                                   $  500,000

<PAGE>

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