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                                                                    Exhibit 4.11

                                                                       EXHIBIT E

                               SECURITY AGREEMENT

     SECURITY AGREEMENT, dated as of April 21, 2005 (this "Agreement"), among
Edentify, Inc., a Delaware corporation (the "Debtor") and the holder or holders
of the 8% Debtor's Secured Convertible Debenture in the original principal
amount of $600,000 (the "Debenture"), signatory hereto, their endorsees,
transferees and assigns (collectively referred to as, the "Secured Parties").
[IF SUBSIDIARIES EXIST, ALSO REQUIRE A SECURITY AGREEMENT AND GUARANTEE FOR EACH
SUBSIDIARY MODIFIED ACCORDINGLY]

                                   WITNESSETH:

     WHEREAS, pursuant to the Debenture, the Secured Parties have severally
agreed to extend the loans to the Debtor evidenced by the Debenture; and

     WHEREAS, in order to induce the Secured Parties to extend the loans
evidenced by the Debentures, the Debtor has agreed to execute and deliver to the
Secured Parties this Agreement and to grant the Secured Parties, pari passu with
each other Secured Party, a perfected first priority security interest in
certain property of the Debtor to secure the prompt payment, performance and
discharge in full of all of the Debtor's obligations under the Debenture.

     NOW, THEREFORE, in consideration of the agreements herein contained and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:

     1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth in this Section 1. Terms used but not
otherwise defined in this Agreement that are defined in Article 9 of the UCC
(such as "general intangibles" and "proceeds") shall have the respective
meanings given such terms in Article 9 of the UCC.

          (a) "Collateral" means the collateral in which the Secured Parties are
     granted a security interest by this Agreement and which shall include the
     following, whether presently owned or existing or hereafter acquired or
     coming into existence, and all additions and accessions thereto and all
     substitutions and replacements thereof, and all proceeds, products and
     accounts thereof, including, without limitation, all proceeds from the sale
     or transfer of the Collateral and of insurance covering the same and of any
     tort claims in connection therewith:

               (i) All Goods of the Debtor, including, without limitations, all
          machinery, equipment, computers, motor vehicles, trucks, tanks, boats,
          ships, appliances, furniture, special and general tools, fixtures,
          test and quality control devices and other equipment of every kind and
          nature and wherever situated, together with all documents of title and
          documents representing the same, all additions and accessions thereto,
          replacements therefor, all parts therefor, and all substitutes for

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          any of the foregoing and all other items used and useful in connection
          with the Debtor's businesses and all improvements thereto
          (collectively, the "Equipment"); and

               (ii) All Inventory of the Debtor; and

               (iii) All of the Debtor's contract rights and general
          intangibles, including, without limitation, all partnership interests,
          stock or other securities, licenses, distribution and other
          agreements, computer software (whether "off-the-shelf", licensed from
          any third party or developed by Debtor) computer software development
          rights, leases, franchises, customer lists, quality control
          procedures, grants and rights, goodwill, trademarks, service marks,
          trade styles, trade names, patents, patent applications, copyrights,
          deposit accounts and income tax refunds (collectively, the "General
          Intangibles"); and

               (iv) All Receivables of the Debtor including all insurance
          proceeds, and rights to refunds or indemnification whatsoever owing,
          together with all instruments, all documents of title representing any
          of the foregoing, all rights in any merchandising, goods, equipment,
          motor vehicles and trucks which any of the same may represent, and all
          right, title, security and guaranties with respect to each Receivable,
          including any right of stoppage in transit; and

               (v) All of the Debtor's documents, instruments and chattel paper,
          files, records, books of account, business papers, computer programs
          and the products and proceeds of all of the foregoing Collateral set
          forth in clauses (i)-(iv) above.

          (b) "Obligations" means all of the Debtor's obligations under this
     Agreement and the Debentures, in each case, whether now or hereafter
     existing, voluntary or involuntary, direct or indirect, absolute or
     contingent, liquidated or unliquidated, whether or not jointly owed with
     others, and whether or not from time to time decreased or extinguished and
     later increased, created or incurred, and all or any portion of such
     obligations or liabilities that are paid, to the extent all or any part of
     such payment is avoided or recovered directly or indirectly from any of the
     Secured Parties as a preference, fraudulent transfer or otherwise as such
     obligations may be amended, supplemented, converted, extended or modified
     from time to time.

          (c) "UCC" means the Uniform Commercial Code and or any other
     applicable law of any jurisdiction (including, without limitation, the
     state of California) as to any Collateral located therein.

     2. GRANT OF PERFECTED FIRST PRIORITY SECURITY INTEREST. As an inducement
for the Secured Parties to extend the loans as evidenced by the Debentures and
to secure the complete and timely payment, performance and discharge in full, as
the case may be, of all of the Obligations, the Debtor hereby unconditionally
and irrevocably pledges, grants and hypothecates to the Secured Parties a
continuing and perfected first priority security interest in and to, a lien

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upon and a right of set-off against all of their respective right, title and
interest of whatsoever kind and nature in and to, the Collateral (the "Security
Interest").

     3. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE DEBTOR. The
Debtor represents and warrants to, and covenants and agrees with, the Secured
Parties as follows:

          (a) The Debtor has the requisite corporate power and authority to
     enter into this Agreement and otherwise to carry out its obligations
     hereunder. The execution, delivery and performance by the Debtor of this
     Agreement and the filings contemplated therein have been duly authorized by
     all necessary action on the part of the Debtor and no further action is
     required by the Debtor.

          (b) The Debtor represents and warrants that they have no place of
     business or offices where their respective books of account and records are
     kept (other than temporarily at the offices of its attorneys or
     accountants) or places where Collateral is stored or located, except as set
     forth on Schedule A attached hereto.

          (c) Except as set forth on Schedule B attached hereto, the Debtor is
     the sole owner of the Collateral (except for non-exclusive licenses granted
     by the Debtor in the ordinary course of business), free and clear of any
     liens, security interests, encumbrances, rights or claims, and are fully
     authorized to grant the Security Interest in and to pledge the Collateral.
     There is not on file in any governmental or regulatory authority, agency or
     recording office an effective financing statement, security agreement,
     license or transfer or any notice of any of the foregoing (other than those
     that will be filed in favor of the Secured Parties pursuant to this
     Agreement) covering or affecting any of the Collateral. So long as this
     Agreement shall be in effect, Debtor shall not execute and shall not
     knowingly permit to be on file in any such office or agency any such
     financing statement or other document or instrument (except to the extent
     filed or recorded in favor of the Secured Parties pursuant to the terms of
     this Agreement).

          (d) No part of the Collateral has been judged invalid or
     unenforceable. No written claim has been received that any Collateral or
     Debtor's use of any Collateral violates the rights of any third party.
     There has been no adverse decision to Debtor's claim of ownership rights in
     or exclusive rights to use the Collateral in any jurisdiction or to
     Debtor's right to keep and maintain such Collateral in full force and
     effect, and there is no proceeding involving said rights pending or, to the
     best knowledge of the Debtor, threatened before any court, judicial body,
     administrative or regulatory agency, arbitrator or other governmental
     authority.

          (e) The Debtor shall at all times maintain its books of account and
     records relating to the Collateral at its principal place of business and
     its Collateral at the locations set forth on Schedule A attached hereto and
     may not relocate such books of account and records or tangible Collateral
     unless it delivers to the Secured Parties at least 30 days prior to such
     relocation (i) written notice of such relocation and the new location
     thereof (which must be within the United States) and (ii) evidence that
     appropriate financing statements under the UCC and other necessary
     documents have been filed and

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     recorded and other steps have been taken to perfect the Security Interest
     to create in favor of the Secured Parties a valid, perfected and continuing
     perfected first priority lien in the Collateral.

          (f) This Agreement creates in favor of the Secured Parties a valid
     security interest in the Collateral securing the payment and performance of
     the Obligations and, upon making the filings described in the immediately
     following sentence, a perfected first priority security interest in such
     Collateral.

          (g) The Debtor hereby authorizes the Secured Parties, or any of them,
     to file one or more financing statements under the UCC, with respect to the
     Security Interest with the proper filing and recording agencies in any
     jurisdiction deemed proper by them.

          (h) The execution, delivery and performance of this Agreement by the
     Debtor does not conflict with, or constitute a default (or an event that
     with notice or lapse of time or both would become a default) under, or give
     to others any rights of termination, amendment, acceleration or
     cancellation (with or without notice, lapse of time or both) of, any
     agreement, credit facility, debt or other instrument (evidencing Debtor's
     debt or otherwise) or other understanding to which Debtor is a party or by
     which any property or asset of the Debtor is bound or affected. No consent
     (including, without limitation, from stockholders or creditors of the
     Debtor) is required for the Debtor to enter into and perform its
     obligations hereunder.

          (i) The Debtor shall at all times maintain the liens and Security
     Interest provided for hereunder as valid and perfected first priority liens
     and security interests in the Collateral in favor of the Secured Parties
     until this Agreement and the Security Interest hereunder shall be
     terminated pursuant to Section 11 hereof. The Debtor hereby agrees to
     defend the same against any and all persons. The Debtor shall safeguard and
     protect all Collateral for the account of the Secured Parties. At the
     request of the Secured Parties, the Debtor will sign and deliver to the
     Secured Parties at any time or from time to time one or more financing
     statements pursuant to the UCC in form reasonably satisfactory to the
     Secured Parties and will pay the cost of filing the same in all public
     offices wherever filing is, or is deemed by the Secured Parties to be,
     necessary or desirable to effect the rights and obligations provided for
     herein. Without limiting the generality of the foregoing, the Debtor shall
     pay all fees, taxes and other amounts necessary to maintain the Collateral
     and the Security Interest hereunder, and the Debtor shall obtain and
     furnish to the Secured Parties from time to time, upon demand, such
     releases and/or subordinations of claims and liens which may be required to
     maintain the priority of the Security Interest hereunder.

          (j) The Debtor will not transfer, pledge, hypothecate, encumber,
     license (except for non-exclusive licenses granted by a Debtor in its
     ordinary course of business and sales of inventory), sell or otherwise
     dispose of any of the Collateral without the prior written consent of a
     majority in interest of the Secured Parties.

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          (k) The Debtor shall keep and preserve its Equipment, Inventory and
     other tangible Collateral in good condition, repair and order and shall not
     operate or locate any such Collateral (or cause to be operated or located)
     in any area excluded from insurance coverage.

          (l) The Debtor shall, within ten (10) days of obtaining knowledge
     thereof, advise the Secured Parties promptly, in sufficient detail, of any
     substantial change in the Collateral, and of the occurrence of any event
     which would have a material adverse effect on the value of the Collateral
     or on the Secured Parties' security interest therein.

          (m) The Debtor shall promptly execute and deliver to the Secured
     Parties such further deeds, mortgages, assignments, security agreements,
     financing statements or other instruments, documents, certificates and
     assurances and take such further action as the Secured Parties may from
     time to time request and may in its sole discretion deem necessary to
     perfect, protect or enforce its security interest in the Collateral
     including, without limitation, if applicable, the execution and delivery of
     a separate security agreement with respect to each Debtor's intellectual
     property ("Intellectual Property Security Agreement") in which the Secured
     Parties have been granted a security interest hereunder, substantially in a
     form acceptable to the Secured Parties, which Intellectual Property
     Security Agreement, other than as stated therein, shall be subject to all
     of the terms and conditions hereof.

          (n) The Debtor shall permit the Secured Parties and their
     representatives and agents to inspect the Collateral at any time, and to
     make copies of records pertaining to the Collateral as may be requested by
     a Secured Party from time to time.

          (o) The Debtor shall take all steps reasonably necessary to diligently
     pursue and seek to preserve, enforce and collect any rights, claims, causes
     of action and accounts receivable in respect of the Collateral.

          (p) The Debtor shall promptly notify the Secured Parties in sufficient
     detail upon becoming aware of any attachment, garnishment, execution or
     other legal process levied against any Collateral and of any other
     information received by the Debtor that may materially affect the value of
     the Collateral, the Security Interest or the rights and remedies of the
     Secured Parties hereunder.

          (q) All information heretofore, herein or hereafter supplied to the
     Secured Parties by or on behalf of the Debtor with respect to the
     Collateral is accurate and complete in all material respects as of the date
     furnished.

          (r) The Debtor shall at all times preserve and keep in full force and
     effect their respective valid existence and good standing and any rights
     and franchises material to its business.

          (s) The Debtor will not change its name, corporate structure, or
     identity, or add any new fictitious name unless it provides at least 30
     days prior written notice to the

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     Secured Parties of such change and, at the time of such written
     notification, such Debtor provides any financing statements or fixture
     filings necessary to perfect and continue perfected the perfected first
     priority Security Interest granted and evidenced by this Agreement.

          (t) The Debtor may not consign any of its Inventory or sell any of its
     Inventory on bill and hold, sale or return, sale on approval, or other
     conditional terms of sale without the consent of a majority in interest of
     the Secured Parties which shall not be unreasonably withheld..

          (u) The Debtor may not relocate its chief executive office to a new
     location without providing 30 days prior written notification thereof to
     the Secured Parties and so long as, at the time of such written
     notification, the Debtor provides any financing statements or fixture
     filings necessary to perfect and continue perfected the perfected first
     priority Security Interest granted and evidenced by this Agreement.

     4. DEFAULTS. The following events shall be "Events of Default":

          (a) The occurrence of an Event of Default (as defined in the
     Debenture) under the Debenture;

          (b) Any representation or warranty of Debtor in this Agreement shall
     prove to have been incorrect in any material respect when made;

          (c) The failure by Debtor to observe or perform any of its obligations
     hereunder for five (5) days after delivery to Debtor of notice of such
     failure by or on behalf of a Secured Party;

          (c) If any provision of this Agreement shall at any time for any
     reason be declared to be null and void, or the validity or enforceability
     thereof shall be contested by Debtor, or a proceeding shall be commenced by
     Debtor, or by any governmental authority having jurisdiction over Debtor,
     seeking to establish the invalidity or unenforceability thereof, or Debtor
     shall deny that Debtor has any liability or obligation purported to be
     created under this Agreement; or

     5. Duty To Hold In Trust. Upon the occurrence of any Event of Default and
at any time thereafter, the Debtor shall, upon receipt of any revenue, income or
other sums subject to the Security Interest, whether payable pursuant to the
Debenture or otherwise, or of any check, draft, note, trade acceptance or other
instrument evidencing an obligation to pay any such sum, hold the same in trust
for the Secured Parties and shall forthwith endorse and transfer any such sums
or instruments, or both, to the Secured Parties, pro-rata in proportion to their
initial purchases of Debentures for application to the satisfaction of the
Obligations (and if any Debenture is not outstanding, pro-rata in proportion to
the initial purchases of the remaining Debentures).

     6. Rights and Remedies Upon Default. Upon the occurrence of any Event of
Default and at any time thereafter, the Secured Parties shall have the right to
exercise all of the remedies

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conferred hereunder and under the Debentures, and the Secured Parties shall have
all the rights and remedies of a secured party under the UCC. Without
limitation, the Secured Parties shall have the following rights and powers:

          (a) The Secured Parties shall have the right to take possession of the
     Collateral and, for that purpose, enter, with the aid and assistance of any
     person, any premises where the Collateral, or any part thereof, is or may
     be placed and remove the same, and the Debtor shall assemble the Collateral
     and make it available to the Secured Parties at places which the Secured
     Parties shall reasonably select, whether at the Debtor's premises or
     elsewhere, and make available to the Secured Parties, without rent, all of
     the Debtor's respective premises and facilities for the purpose of the
     Secured Parties taking possession of, removing or putting the Collateral in
     saleable or disposable form.

          (b) The Secured Parties shall have the right to operate the business
     of the Debtor using the Collateral and shall have the right to assign,
     sell, lease or otherwise dispose of and deliver all or any part of the
     Collateral, at public or private sale or otherwise, either with or without
     special conditions or stipulations, for cash or on credit or for future
     delivery, in such parcel or parcels and at such time or times and at such
     place or places, and upon such terms and conditions as the Secured Parties
     may deem commercially reasonable, all without (except as shall be required
     by applicable statute and cannot be waived) advertisement or demand upon or
     notice to the Debtor or right of redemption of a Debtor, which are hereby
     expressly waived. Upon each such sale, lease, assignment or other transfer
     of Collateral, the Secured Parties may, unless prohibited by applicable law
     which cannot be waived, purchase all or any part of the Collateral being
     sold, free from and discharged of all trusts, claims, right of redemption
     and equities of the Debtor, which are hereby waived and released.

     7. Applications of Proceeds. The proceeds of any such sale, lease or other
disposition of the Collateral hereunder shall be applied first, to the expenses
of retaking, holding, storing, processing and preparing for sale, selling, and
the like (including, without limitation, any taxes, fees and other costs
incurred in connection therewith) of the Collateral, to the reasonable
attorneys' fees and expenses incurred by the Secured Parties in enforcing their
rights hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations pro rata among the
Secured Parties, and to the payment of any other amounts required by applicable
law, after which the Secured Parties shall pay to the applicable Debtor any
surplus proceeds. If, upon the sale, license or other disposition of the
Collateral, the proceeds thereof are insufficient to pay all amounts to which
the Secured Parties are legally entitled, the Debtor will be liable for the
deficiency, together with interest thereon, at the rate of 10% per annum or the
lesser amount permitted by applicable law (the "Default Rate"), and the
reasonable fees of any attorneys employed by the Secured Parties to collect such
deficiency. To the extent permitted by applicable law, the Debtor waives all
claims, damages and demands against the Secured Parties arising out of the
repossession, removal, retention or sale of the Collateral, unless due to the
gross negligence or willful misconduct of the Secured Parties.

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     8. Costs and Expenses. The Debtor agrees to pay all reasonable
out-of-pocket fees, costs and expenses incurred in connection with any filing
required hereunder, including without limitation, any financing statements
pursuant to the UCC, continuation statements, partial releases and/or
termination statements related thereto or any expenses of any searches
reasonably required by the Secured Parties. The Debtor shall also pay all other
claims and charges which in the reasonable opinion of the Secured Parties might
prejudice, imperil or otherwise affect the Collateral or the Security Interest
therein. The Debtor will also, upon demand, pay to the Secured Parties the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, which the Secured Parties
may incur in connection with (i) the enforcement of this Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, or (iii) the exercise or enforcement of
any of the rights of the Secured Parties under the Debentures. Until so paid,
any fees payable hereunder shall be added to the principal amount of the
Debentures and shall bear interest at the Default Rate.

     9. Responsibility for Collateral. The Debtor assumes all liabilities and
responsibility in connection with all Collateral, and the Obligations in no way
be affected or diminished by reason of the loss, destruction, damage or theft of
any of the Collateral or its unavailability for any reason.

     10. Security Interest Absolute. All rights of the Secured Parties and all
Obligations of the Debtor hereunder, shall be absolute and unconditional,
irrespective of: (a) any lack of validity or enforceability of this Agreement,
the Debentures or any agreement entered into in connection with the foregoing,
or any portion hereof or thereof; (b) any change in the time, manner or place of
payment or performance of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Debentures or any other agreement entered into in connection with the
foregoing; (c) any exchange, release or nonperfection of any of the Collateral,
or any release or amendment or waiver of or consent to departure from any other
collateral for, or any guaranty, or any other security, for all or any of the
Obligations; (d) any action by the Secured Parties to obtain, adjust, settle and
cancel in its sole discretion any insurance claims or matters made or arising in
connection with the Collateral; or (e) any other circumstance which might
otherwise constitute any legal or equitable defense available to a Debtor, or a
discharge of all or any part of the Security Interest granted hereby. Until the
Obligations shall have been paid and performed in full, the rights of the
Secured Parties shall continue even if the Obligations are barred for any
reason, including, without limitation, the running of the statute of limitations
or bankruptcy. The Debtor expressly waives presentment, protest, notice of
protest, demand, notice of nonpayment and demand for performance. In the event
that at any time any transfer of any Collateral or any payment received by the
Secured Parties hereunder shall be deemed by final order of a court of competent
jurisdiction to have been a voidable preference or fraudulent conveyance under
the bankruptcy or insolvency laws of the United States, or shall be deemed to be
otherwise due to any party other than the Secured Parties, then, in any such
event, the Debtor's obligations hereunder shall survive cancellation of this
Agreement, and shall not be discharged or satisfied by any prior payment thereof
and/or cancellation of this Agreement, but shall remain a valid and binding
obligation enforceable in accordance with the terms and provisions hereof. The
Debtor waives all right to require the Secured Parties to proceed against any
other person or to apply any Collateral which the Secured

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Parties may hold at any time, or to marshal assets, or to pursue any other
remedy. The Debtor waives any defense arising by reason of the application of
the statute of limitations to any obligation secured hereby.

     11. Term of Agreement. This Agreement and the Security Interest shall
terminate on the date on which all payments under the Debentures have been made
in full or have been satisfied and all other Obligations have been paid or
discharged. Upon such termination, the Secured Parties, at the request and at
the expense of the Debtor, will join in executing any termination statement with
respect to any financing statement executed and filed pursuant to this
Agreement.

     12. Power of Attorney; Further Assurances.

          (a) The Debtor authorizes the Secured Parties, and does hereby make,
     constitute and appoint the Secured Parties and their respective officers,
     agents, successors or assigns with full power of substitution, as the
     Debtor's true and lawful attorney-in-fact, with power, in the name of the
     various Secured Parties or the Debtor, to, after the occurrence and during
     the continuance of an Event of Default, (i) endorse any note, checks,
     drafts, money orders or other instruments of payment (including payments
     payable under or in respect of any policy of insurance) in respect of the
     Collateral that may come into possession of the Secured Parties; (ii) to
     sign and endorse any financing statement pursuant to the UCC or any
     invoice, freight or express bill, bill of lading, storage or warehouse
     receipts, drafts against debtors, assignments, verifications and notices in
     connection with accounts, and other documents relating to the Collateral;
     (iii) to pay or discharge taxes, liens, security interests or other
     encumbrances at any time levied or placed on or threatened against the
     Collateral; (iv) to demand, collect, receipt for, compromise, settle and
     sue for monies due in respect of the Collateral; and (v) generally, to do,
     at the option of the Secured Parties, and at the expense of the Debtor, at
     any time, or from time to time, all acts and things which the Secured
     Parties deem necessary to protect, preserve and realize upon the Collateral
     and the Security Interest granted therein in order to effect the intent of
     this Agreement and the Debentures all as fully and effectually as the
     Debtor might or could do; and the Debtor hereby ratifies all that said
     attorney shall lawfully do or cause to be done by virtue hereof. This power
     of attorney is coupled with an interest and shall be irrevocable for the
     term of this Agreement and thereafter as long as any of the Obligations
     shall be outstanding.

          (b) On a continuing basis, the Debtor will make, execute, acknowledge,
     deliver, file and record, as the case may be, with the proper filing and
     recording agencies in any jurisdiction, including, without limitation, the
     jurisdictions indicated on Schedule C attached hereto, all such
     instruments, and take all such action as may reasonably be deemed necessary
     or advisable, or as reasonably requested by the Secured Parties, to perfect
     the Security Interest granted hereunder and otherwise to carry out the
     intent and purposes of this Agreement, or for assuring and confirming to
     the Secured Parties the grant or perfection of a perfected first priority
     security interest in all the Collateral under the UCC.

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          (c) The Debtor hereby irrevocably appoints the Secured Parties as the
     Debtor's attorney-in-fact, with full authority in the place and instead of
     the Debtor and in the name of the Debtor, from time to time in the Secured
     Parties' discretion, to take any action and to execute any instrument which
     the Secured Parties may deem necessary or advisable to accomplish the
     purposes of this Agreement, including the filing, in its sole discretion,
     of one or more financing or continuation statements and amendments thereto,
     relative to any of the Collateral without the signature of the Debtor where
     permitted by law.

     13. Notices. All notices, requests, demands and other communications
hereunder shall be subject to the notice provision of the Purchase Agreement.

     14. Other Security. To the extent that the Obligations are now or hereafter
secured by property other than the Collateral or by the guarantee, endorsement
or property of any other person, firm, corporation or other entity, then the
Secured Parties shall have the right, in its sole discretion, to pursue,
relinquish, subordinate, modify or take any other action with respect thereto,
without in any way modifying or affecting any of the Secured Parties' rights and
remedies hereunder.

     15. Miscellaneous.

          (a) No course of dealing between the Debtor and the Secured Parties,
     nor any failure to exercise, nor any delay in exercising, on the part of
     the Secured Parties, any right, power or privilege hereunder or under the
     Debentures shall operate as a waiver thereof; nor shall any single or
     partial exercise of any right, power or privilege hereunder or thereunder
     preclude any other or further exercise thereof or the exercise of any other
     right, power or privilege.

          (b) All of the rights and remedies of the Secured Parties with respect
     to the Collateral, whether established hereby or by the Debentures or by
     any other agreements, instruments or documents or by law shall be
     cumulative and may be exercised singly or concurrently.

          (c) This Agreement constitutes the entire agreement of the parties
     with respect to the subject matter hereof and is intended to supersede all
     prior negotiations, understandings and agreements with respect thereto.
     Except as specifically set forth in this Agreement, no provision of this
     Agreement may be modified or amended except by a written agreement
     specifically referring to this Agreement and signed by the parties hereto.

          (d) In the event any provision of this Agreement is held to be
     invalid, prohibited or unenforceable in any jurisdiction for any reason,
     unless such provision is narrowed by judicial construction, this Agreement
     shall, as to such jurisdiction, be construed as if such invalid, prohibited
     or unenforceable provision had been more narrowly drawn so as not to be
     invalid, prohibited or unenforceable. If, notwithstanding the foregoing,
     any provision of this Agreement is held to be invalid, prohibited or
     unenforceable in any jurisdiction, such provision, as to such jurisdiction,
     shall be ineffective to the extent of such invalidity,

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     prohibition or unenforceability without invalidating the remaining portion
     of such provision or the other provisions of this Agreement and without
     affecting the validity or enforceability of such provision or the other
     provisions of this Agreement in any other jurisdiction.

          (e) No waiver of any breach or default or any right under this
     Agreement shall be considered valid unless in writing and signed by the
     party giving such waiver, and no such waiver shall be deemed a waiver of
     any subsequent breach or default or right, whether of the same or similar
     nature or otherwise.

          (f) This Agreement shall be binding upon and inure to the benefit of
     each party hereto and its successors and assigns.

          (g) Each party shall take such further action and execute and deliver
     such further documents as may be necessary or appropriate in order to carry
     out the provisions and purposes of this Agreement.

          (h) All questions concerning the construction, validity, enforcement
     and interpretation of this Agreement shall be governed by and construed and
     enforced in accordance with the internal laws of the State of New York,
     without regard to the principles of conflicts of law thereof. Each party
     agrees that all proceedings concerning the interpretations, enforcement and
     defense of the transactions contemplated by this Agreement and the
     Debenture (whether brought against a party hereto or its respective
     affiliates, directors, officers, shareholders, employees or agents) shall
     be commenced exclusively in the state and federal courts sitting in the
     City of New York, Borough of Manhattan. Each party hereto hereby
     irrevocably submits to the exclusive jurisdiction of the state and federal
     courts sitting in the City of New York, Borough of Manhattan for the
     adjudication of any dispute hereunder or in connection herewith or with any
     transaction contemplated hereby or discussed herein, and hereby irrevocably
     waives, and agrees not to assert in any proceeding, any claim that it is
     not personally subject to the jurisdiction of any such court, that such
     proceeding is improper. Each party hereto hereby irrevocably waives
     personal service of process and consents to process being served in any
     such proceeding by mailing a copy thereof via registered or certified mail
     or overnight delivery (with evidence of delivery) to such party at the
     address in effect for notices to it under this Agreement and agrees that
     such service shall constitute good and sufficient service of process and
     notice thereof. Nothing contained herein shall be deemed to limit in any
     way any right to serve process in any manner permitted by law. Each party
     hereto hereby irrevocably waives, to the fullest extent permitted by
     applicable law, any and all right to trial by jury in any legal proceeding
     arising out of or relating to this Agreement or the transactions
     contemplated hereby. If either party shall commence a proceeding to enforce
     any provisions of this Agreement, then the prevailing party in such
     proceeding shall be reimbursed by the other party for its reasonable
     attorneys fees and other costs and expenses incurred with the
     investigation, preparation and prosecution of such proceeding.

                                       11

<PAGE>

          (i) This Agreement may be executed in any number of counterparts, each
     of which when so executed shall be deemed to be an original and, all of
     which taken together shall constitute one and the same Agreement. In the
     event that any signature is delivered by facsimile transmission, such
     signature shall create a valid binding obligation of the party executing
     (or on whose behalf such signature is executed) the same with the same
     force and effect as if such facsimile signature were the original thereof.

                            [SIGNATURE PAGES FOLLOW]

                                       12

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed on the day and year first above written.

                                        EDENTIFY, INC.

                                        By:
                                            ------------------------------------
                                        Name: Terrence DeFranco
                                        Title: President

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                       13

<PAGE>

                   [SIGNATURE PAGE OF HOLDERS TO EDENTIFY SA]

Name of Investing Entity:
                          --------------------------

Signature of Authorized Signatory of Investing entity:
                                                       -------------------------
Name of Authorized Signatory:
                              --------------------------
Title of Authorized Signatory:
                               -------------------------

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                       14

<PAGE>

                                   SCHEDULE A

Principal Place of Business of Debtor:

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

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

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

Locations Where Collateral is Located or Stored:

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

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

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

                                       15

<PAGE>

                                   SCHEDULE B

                                       16

<PAGE>

                                   SCHEDULE C

                                       17<PAGE>
                                                                    Exhibit 4.12

                          SECURITIES PURCHASE AGREEMENT

     This Securities Purchase Agreement (this "Agreement") is dated as of August
29, 2005, among Edentify, Inc., a Nevada corporation (the "Company"), and each
purchaser identified on the signature pages hereto (each, including its
successors and assigns, a "Purchaser" and collectively the "Purchasers").

     WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act") and Rule 506 promulgated thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, securities of the Company as more fully
described in this Agreement.

     NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:

                                   ARTICLE I.
                                   DEFINITIONS

     1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement: (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Debentures (as defined herein), and (b) the
following terms have the meanings indicated in this Section 1.1:

          "Action" shall have the meaning ascribed to such term in Section
     3.1(j).

          "Affiliate" means any Person that, directly or indirectly through one
     or more intermediaries, controls or is controlled by or is under common
     control with a Person, as such terms are used in and construed under Rule
     144 under the Securities Act. With respect to a Purchaser, any investment
     fund or managed account that is managed on a discretionary basis by the
     same investment manager as such Purchaser will be deemed to be an Affiliate
     of such Purchaser.

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

          "Closing" means the closing of the purchase and sale of the Securities
     pursuant to Section 2.1.

          "Closing Date" means the Business Day when all of the Transaction
     Documents have been executed and delivered by the applicable parties
     thereto, and all conditions

<PAGE>

     precedent to (i) the Purchasers' obligations to pay the Subscription Amount
     and (ii) the Company's obligations to deliver the Securities have been
     satisfied or waived.

          "Commission" means the Securities and Exchange Commission.

          "Common Stock" means the common stock of the Company, par value $0.001
     per share and any securities into which such common stock shall hereinafter
     have been reclassified into.

          "Common Stock Equivalents" means any securities of the Company or the
     Subsidiaries which would entitle the holder thereof to acquire at any time
     Common Stock, including without limitation, any debt, preferred stock,
     rights, options, warrants or other instrument that is at any time
     convertible into or exchangeable for, or otherwise entitles the holder
     thereof to receive, Common Stock.

          "Company Counsel" means Flamm Boroff & Bacine, PC.

          "Conversion Shares" shall mean the shares of Common Stock and, after a
     Public Liquidity Event, the Public Liquidity Shares issuable upon
     conversion of the Debentures.

          "Debentures" means, the 6% Senior Secured Convertible Debentures, in
     the form of Exhibit A, due, subject to the terms therein, upon the earlier
     of (a) the two year anniversary of the date hereof and (b) if a Public
     Liquidity Event has not occurred on or before the first anniversary of the
     date hereof, the one year anniversary of the date hereof.

          "Disclosure Schedules" shall have the meaning ascribed to such term in
     Section 3.1 hereof.

          "Effective Date" means the date that the initial registration
     statement filed by the Company pursuant to the Registration Rights
     Agreement is first declared effective by the Commission.

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

          "Exempt Issuance" means the issuance of (a) shares of Common Stock or
     options to employees, officers or directors of the Company pursuant to any
     stock or option plan duly adopted by a majority of the non-employee members
     of the Board of Directors of the Company or a majority of the members of a
     committee of non-employee directors established for such purpose, (b)
     securities upon the exercise of or conversion of any securities issued
     hereunder, convertible securities, options or warrants issued and
     outstanding on the date of this Agreement, provided that such securities
     have not been amended since the date of this Agreement to increase the
     number of such securities and (c) securities issued pursuant to
     acquisitions or strategic transactions, provided any such issuance shall
     only be to a Person which is, itself or through its subsidiaries, an
     operating company in a business synergistic with the business of the
     Company and in which the Company receives benefits in addition to the
     investment of funds, but shall not include a

                                       -2-

<PAGE>

     transaction in which the Company is issuing securities primarily for the
     purpose of raising capital or to an entity whose primary business is
     investing in securities.

          "FW" means Feldman Weinstein LLP with offices at 420 Lexington Avenue,
     Suite 2620, New York, New York 10170-0002.

          "GAAP" shall have the meaning ascribed to such term in Section 3.1(h)
     hereof.

          "Intellectual Property Rights" shall have the meaning ascribed to such
     term in Section 3.1(o).

          "Legend Removal Date" shall have the meaning ascribed to such term in
     Section 4.1(c).

          "Liens" means a lien, charge, security interest, encumbrance, right of
     first refusal, preemptive right or other restriction.

          "Material Adverse Effect" shall have the meaning assigned to such term
     in Section 3.1(b) hereof.

          "Material Permits" shall have the meaning ascribed to such term in
     Section 3.1(m).

          "Maximum Rate" shall have the meaning ascribed to such term in Section
     5.17.

          "Participation Maximum" shall have the meaning ascribed to such term
     in Section 4.13.

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

          "Pre-Notice" shall have the meaning ascribed to such term in Section
     4.13.

          "Proceeding" means an action, claim, suit, investigation or proceeding
     (including, without limitation, an investigation or partial proceeding,
     such as a deposition), whether commenced or threatened.

          "Public Liquidity Event" shall mean an acquisition, merger, offering
     or other occurrence which results in either (a) the Common Stock being
     registered pursuant to the Exchange Act or Securities Act or (b) the
     holders of the Common Stock receiving, in exchange for their Common Stock,
     common stock of another corporation whereby such common stock is registered
     or, as part of an agreement, will be registered, under the Exchange Act or
     Securities Act.

          "Public Liquidity Company" shall mean (a) the Company, if after a
     Public Liquidity Event the Common Stock is registered pursuant to the
     Exchange Act or (b) the

                                       -3-

<PAGE>

     corporation whose common stock registered pursuant to the Exchange Act and
     is exchanged for Common Stock in the Public Liquidity Event.

          "Public Liquidity Shares" shall mean, after the Public Liquidity
     Event, the shares of common stock of the Public Liquidity Company.

          "Purchaser Party" shall have the meaning ascribed to such term in
     Section 4.11.

          "Registration Rights Agreement" means the Registration rights
     Agreement, dated the date hereof, among the Company and the Purchasers, in
     the form of Exhibit B attached hereto.

          "Registration Statement" means a registration statement meeting the
     requirements set forth in the Registration Rights Agreement and covering
     the resale of the Underlying Shares by each Purchaser.

          "Required Minimum" means, as of any date, the maximum aggregate number
     of shares of Common Stock then issued or potentially issuable in the future
     pursuant to the Transaction Documents, including any Underlying Shares
     issuable upon exercise of all Debentures and Warrants, ignoring any
     exercise limits set forth therein.

          "Rule 144" means Rule 144 promulgated by the Commission pursuant to
     the Securities Act, as such Rule may be amended from time to time, or any
     similar rule or regulation hereafter adopted by the Commission having
     substantially the same effect as such Rule.

          "Securities" means the Debentures, the Conversion Shares, the Warrants
     and the Underlying Shares.

          "Securities Act" means the Securities Act of 1933, as amended.

          "Security Agreement" means the Security Agreement, dated the date
     hereof, among the Company and the Purchasers, in the form of Exhibit E
     attached hereto.

          "Security Documents" shall mean the Security Agreement and any other
     documents and filing required thereunder in order to grant the Purchasers a
     first priority security interest in all of the assets of the Company,
     including all UCC-1 filing receipts.

          "Subscription Amount" means, as to each Purchaser, the aggregate
     amount to be paid for Debentures and Warrants purchased hereunder as
     specified below such Purchaser's name on the signature page of this
     Agreement and next to the heading "Subscription Amount", in United States
     Dollars and in immediately available funds.

          "Subsequent Financing" shall have the meaning ascribed to such term in
     Section 4.13.

                                       -4-

<PAGE>

          "Subsequent Financing Notice" shall have the meaning ascribed to such
     term in Section 4.13.

          "Subsidiary" means any subsidiary of the Company as set forth on
     Schedule 3.1(a).

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

          "Transaction Documents" means this Agreement, the Debentures, the
     Registration Rights Agreement, the Security Agreement, the Warrants and any
     other documents or agreements executed in connection with the transactions
     contemplated hereunder.

          "Underlying Shares" means the Conversion Shares, the Warrant Shares
     and the shares issuable pursuant to the Debentures in lieu of cash payments
     for interest.

          "Warrants" means collectively the Common Stock purchase warrants, in
     the form of Exhibit C delivered to the Purchasers at the Closing in
     accordance with Section 2.2 hereof, which Warrants shall be exercisable
     immediately and have a term of exercise equal to 5 years.

          "Warrant Shares" means the shares of Common Stock, and after a Public
     Liquidity Event, the Public Liquidity Shares, issuable upon exercise of the
     Warrants.

                                  ARTICLE II.
                                PURCHASE AND SALE

     2.1 Closing. On the Closing Date, upon the terms and subject to the
conditions set forth herein, concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and each Purchaser
agrees to purchase in the aggregate, severally and not jointly, $1,000,000
principal amount of the Debentures. Each Purchaser shall deliver to the Company
via wire transfer or a certified check immediately available funds equal to
their Subscription Amount and the Company shall deliver to each Purchaser their
respective Debenture and Warrants as determined pursuant to Section 2.2(a) and
the other items set forth in Section 2.2 issuable at the Closing. Upon
satisfaction of the conditions set forth in Section 2.2, the Closing shall occur
at the offices of FW, or such other location as the parties shall mutually
agree.

     2.2 Deliveries

               a) On the Closing Date, the Company shall deliver or cause to be
          delivered to each Purchaser the following:

                    (i) this Agreement duly executed by the Company;

                    (ii) a Debenture with a principal amount equal to such

                                       -5-

<PAGE>

               Purchaser's Subscription Amount, registered in the name of such
               Purchaser;

                    (iii) a Warrant registered in the name of such Purchaser to
               purchase up to a number of shares of Common Stock or, after a
               Public Liquidity Event, Public Liquidity Shares, equal to, in the
               aggregate, such Purchaser's pro-rata share of 10% of the
               outstanding shares of Common Stock on a fully diluted basis or,
               after a Public Liquidity Event, outstanding Public Liquidity
               Shares on a fully diluted basis ("10% Amount"), with an exercise
               price equal to the Purchaser's Subscription Amount divided by the
               10% Amount, subject to adjustment therein;

                    (iv) the Security Agreement along with all Security
               Documents.

               b) On the Closing Date, each Purchaser shall deliver or cause to
          be delivered to the Company the following:

                    (i) this Agreement duly executed by such Purchaser;

                    (ii) such Purchaser's Subscription Amount by wire transfer
               to the account as specified in writing by the Company;

                    (iii) the Registration rights Agreement, duly executed by
               such Purchaser; and

                    (iv) the Security Agreement, duly executed by such
               Purchaser.

     2.3 Closing Conditions.

               a) The obligations of the Company hereunder in connection with
          the Closing are subject to the following conditions being met:

                    (i) the accuracy in all material respects when made and on
               the Closing Date of the representations and warranties of the
               Purchasers contained herein;

                    (ii) all obligations, covenants and agreements of the
               Purchasers required to be performed at or prior to the Closing
               Date shall have been performed;

                    (iii) the Registration rights Agreement, duly executed by
               such Purchaser; and

                                       -6-

<PAGE>

                    (iv) the delivery by the Purchasers of the items set forth
               in Section 2.2(b) of this Agreement.

               b) The respective obligations of the Purchasers hereunder in
          connection with the Closing are subject to the following conditions
          being met:

                    (i) the accuracy in all material respects on the Closing
               Date of the representations and warranties of the Company
               contained herein;

                    (ii) all obligations, covenants and agreements of the
               Company required to be performed at or prior to the Closing Date
               shall have been performed;

                    (iii) the delivery by the Company of the items set forth in
               Section 2.2(a) of this Agreement; and

                    (iv) there shall have been no Material Adverse Effect with
               respect to the Company since the date hereof.

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

     3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the disclosure schedules delivered to the
Purchasers concurrently herewith (the "Disclosure Schedules") which Disclosure
Schedules shall be deemed a part hereof, the Company hereby makes the
representations and warranties set forth below to each Purchaser.

          (a) Subsidiaries. All of the direct and indirect subsidiaries of the
     Company are set forth on Schedule 3.1(a). The Company owns, directly or
     indirectly, all of the capital stock or other equity interests of each
     Subsidiary free and clear of any Liens, and all the issued and outstanding
     shares of capital stock of each Subsidiary are validly issued and are fully
     paid, non-assessable and free of preemptive and similar rights to subscribe
     for or purchase securities. If the Company has no subsidiaries, then
     references in the Transaction Documents to the Subsidiaries will be
     disregarded.

          (b) Organization and Qualification. Each of the Company and the
     Subsidiaries is an entity duly incorporated or otherwise organized, validly
     existing and in good standing under the laws of the jurisdiction of its
     incorporation or organization (as applicable), with the requisite power and
     authority to own and use its properties and assets and to carry on its
     business as currently conducted. Neither the Company nor any Subsidiary is
     in violation or default of any of the provisions of its respective
     certificate or articles of incorporation, bylaws or other organizational or
     charter documents. Each of the Company and the Subsidiaries is duly
     qualified to conduct business and is in good standing as a foreign
     corporation or other entity in each jurisdiction in which the nature of the
     business conducted or property owned by it makes such qualification
     necessary,

                                       -7-

<PAGE>

     except where the failure to be so qualified or in good standing, as the
     case may be, could not have or reasonably be expected to result in (i) a
     material adverse effect on the legality, validity or enforceability of any
     Transaction Documents, (ii) a material adverse effect on the results of
     operations, assets, business, prospects or financial condition of the
     Company and the Subsidiaries, taken as a whole, or (iii) a material adverse
     effect on the Company's ability to perform in any material respect on a
     timely basis its obligations under any Transaction Documents (any of (i),
     (ii) or (iii), a "Material Adverse Effect") and no Proceeding has been
     instituted in any such jurisdiction revoking, limiting or curtailing or
     seeking to revoke, limit or curtail such power and authority or
     qualification.

          (c) Authorization; Enforcement. The Company has the requisite
     corporate power and authority to enter into and to consummate the
     transactions contemplated by each of the Transaction Documents and
     otherwise to carry out its obligations thereunder. The execution and
     delivery of each of the Transaction Documents by the Company and the
     consummation by it of the transactions contemplated thereby have been duly
     authorized by all necessary action on the part of the Company. Each
     Transaction Documents has been (or upon delivery will have been) duly
     executed by the Company and, when delivered in accordance with the terms
     hereof, will constitute the valid and binding obligation of the Company
     enforceable against the Company in accordance with its terms except (i) as
     limited by applicable bankruptcy, insolvency, reorganization, moratorium
     and other laws of general application affecting enforcement of creditors'
     rights generally and (ii) as limited by laws relating to the availability
     of specific performance, injunctive relief or other equitable remedies.

          (d) No Conflicts. The execution, delivery and performance of the
     Transaction Documents by the Company and the consummation by the Company of
     the other transactions contemplated thereby do not and will not: (i)
     conflict with or violate any provision of the Company's or any Subsidiary's
     certificate or articles of incorporation, bylaws or other organizational or
     charter documents, or (ii) conflict with, or constitute a default (or an
     event that with notice or lapse of time or both would become a default)
     under, result in the creation of any Lien upon any of the properties or
     assets of the Company or any Subsidiary, or give to others any rights of
     termination, amendment, acceleration or cancellation (with or without
     notice, lapse of time or both) of, any agreement, credit facility, debt or
     other instrument (evidencing a Company or Subsidiary debt or otherwise) or
     other understanding to which the Company or any Subsidiary is a party or by
     which any property or asset of the Company or any Subsidiary is bound or
     affected, or (iii) conflict with or result in a violation of any law, rule,
     regulation, order, judgment, injunction, decree or other restriction of any
     court or governmental authority to which the Company or a Subsidiary is
     subject (including federal and state securities laws and regulations), or
     by which any property or asset of the Company or a Subsidiary is bound or
     affected; except in the case of each of clauses (ii) and (iii), such as
     could not have or reasonably be expected to result in a Material Adverse
     Effect.

          (e) Filings, Consents and Approvals. The Company is not required to
     obtain any consent, waiver, authorization or order of, give any notice to,
     or make any filing or registration with, any court or other federal, state,
     local or other governmental authority

                                       -8-

<PAGE>

     or other Person in connection with the execution, delivery and performance
     by the Company of the Transaction Documents.

          (f) Issuance of the Securities. The Securities are duly authorized
     and, when issued and paid for in accordance with the applicable Transaction
     Documents, will be duly and validly issued, fully paid and nonassessable,
     free and clear of all Liens imposed by the Company other than restrictions
     on transfer provided for in the Transaction Documents. The Underlying
     Shares, when issued in accordance with the terms of the Transaction
     Documents, will be validly issued, fully paid and nonassessable, free and
     clear of all Liens imposed by the Company. The Company has reserved from
     its duly authorized capital stock a number of shares of Common Stock for
     issuance of the Underlying Shares at least equal to the Required Minimum on
     the date hereof.

          (g) Capitalization. The capitalization of the Company is as described
     in Schedule 3.1(g). The Company has not issued any capital stock other than
     as set forth on Schedule 3.1(g). No Person has any right of first refusal,
     preemptive right, right of participation, or any similar right to
     participate in the transactions contemplated by the Transaction Documents.
     Except as a result of the purchase and sale of the Securities or as set
     forth on Schedule 3.1(g), there are no outstanding options, warrants,
     script rights to subscribe to, calls or commitments of any character
     whatsoever relating to, or securities, rights or obligations convertible
     into or exchangeable for, or giving any Person any right to subscribe for
     or acquire, any shares of Common Stock, or contracts, commitments,
     understandings or arrangements by which the Company or any Subsidiary is or
     may become bound to issue additional shares of Common Stock, or securities
     or rights convertible or exchangeable into shares of Common Stock. The
     issuance and sale of the Securities will not obligate the Company to issue
     shares of Common Stock or other securities to any Person (other than the
     Purchasers) and will not result in a right of any holder of Company
     securities to adjust the exercise, conversion, exchange or reset price
     under such securities. All of the outstanding shares of capital stock of
     the Company are validly issued, fully paid and nonassessable, have been
     issued in compliance with all federal and state securities laws, and none
     of such outstanding shares was issued in violation of any preemptive rights
     or similar rights to subscribe for or purchase securities. No further
     approval or authorization of any stockholder, the Board of Directors of the
     Company or others is required for the issuance and sale of the Securities.
     Except as disclosed in Schedule 3.1(g), there are no stockholders
     agreements, voting agreements or other similar agreements with respect to
     the Company's capital stock to which the Company is a party or, to the
     knowledge of the Company, between or among any of the Company's
     stockholders. A complete list of stockholders of record, with their
     shareholdings as of ______________, is included in Schedule 3.1(g).

          (h) Financial Statements. The audited financial statements of the
     Company for its last three fiscal years are unaudited statements for the
     most recent fiscal quarter, are attached hereto as Schedule 3.1(h). Such
     financial statements have been prepared in accordance with United States
     generally accepted accounting principles applied on a consistent basis
     during the periods involved ("GAAP"), except as may be otherwise specified
     in such financial statements or the notes thereto and except that unaudited

                                       -9-

<PAGE>

     financial statements may not contain all footnotes required by GAAP, and
     fairly present in all material respects the financial position of the
     Company and its consolidated subsidiaries as of and for the dates thereof
     and the results of operations and cash flows for the periods then ended,
     subject, in the case of unaudited statements, to normal, immaterial,
     year-end audit adjustments.

          (i) Material Changes. Since the date of the Company's most recent
     financial statements, attached hereto as Schedule 3.1(h), (i) there has
     been no event, occurrence or development that has had or that could
     reasonably be expected to result in a Material Adverse Effect, (ii) the
     Company has not incurred any liabilities (contingent or otherwise) other
     than (A) trade payables and accrued expenses incurred in the ordinary
     course of business consistent with past practice and (B) liabilities not
     required to be reflected in the Company's financial statements pursuant to
     GAAP or required to be disclosed in filings made with the Commission, (iii)
     the Company has not altered its method of accounting, (iv) the Company has
     not declared or made any dividend or distribution of cash or other property
     to its stockholders or purchased, redeemed or made any agreements to
     purchase or redeem any shares of its capital stock and (v) the Company has
     not issued any equity securities to any officer, director or Affiliate,
     except pursuant to existing Company stock option plans. The Company does
     not have pending before the Commission any request for confidential
     treatment of information.

          (j) Litigation. There is no action, suit, inquiry, notice of
     violation, proceeding or investigation pending or, to the knowledge of the
     Company, threatened against or affecting the Company, any Subsidiary or any
     of their respective properties before or by any court, arbitrator,
     governmental or administrative agency or regulatory authority (federal,
     state, county, local or foreign) (collectively, an "Action") which (i)
     adversely affects or challenges the legality, validity or enforceability of
     any of the Transaction Documents or the Securities or (ii) could, if there
     were an unfavorable decision, have or reasonably be expected to result in a
     Material Adverse Effect. Neither the Company nor any Subsidiary, nor any
     director or officer thereof, is or has been the subject of any Action
     involving a claim of violation of or liability under federal or state
     securities laws or a claim of breach of fiduciary duty. There has not been,
     and to the knowledge of the Company, there is not pending or contemplated,
     any investigation by the Commission involving the Company or any current or
     former director or officer of the Company.

          (k) Labor Relations. No material labor dispute exists or, to the
     knowledge of the Company, is imminent with respect to any of the employees
     of the Company which could reasonably be expected to result in a Material
     Adverse Effect.

          (l) Compliance. Neither the Company nor any Subsidiary (i) is in
     default under or in violation of (and no event has occurred that has not
     been waived that, with notice or lapse of time or both, would result in a
     default by the Company or any Subsidiary under), nor has the Company or any
     Subsidiary received notice of a claim that it is in default under or that
     it is in violation of, any indenture, loan or credit agreement or any other
     agreement or instrument to which it is a party or by which it or any of its
     properties is bound (whether or not such default or violation has been
     waived), (ii) is in

                                      -10-

<PAGE>

     violation of any order of any court, arbitrator or governmental body, or
     (iii) is or has been in violation of any statute, rule or regulation of any
     governmental authority, including without limitation all foreign, federal,
     state and local laws applicable to its business except in each case as
     could not have a Material Adverse Effect.

          (m) Regulatory Permits. The Company and the Subsidiaries possess all
     certificates, authorizations and permits issued by the appropriate federal,
     state, local or foreign regulatory authorities necessary to conduct their
     respective businesses as described in Schedule 3.1(m), except where the
     failure to possess such permits could not have or reasonably be expected to
     result in a Material Adverse Effect ("Material Permits"), and neither the
     Company nor any Subsidiary has received any notice of proceedings relating
     to the revocation or modification of any Material Permit.

          (n) Title to Assets. The Company and the Subsidiaries have good and
     marketable title to all mineral rights, interests that, individually or in
     the aggregate, are material to the business of the Company and the
     Subsidiaries and good and marketable title in fee simple to all real
     property owned by them that is material to the business of the Company and
     the Subsidiaries and good and marketable title in all personal property
     owned by them that is material to the business of the Company and the
     Subsidiaries, in each case free and clear of all Liens. Any real property
     and facilities held under lease by the Company and the Subsidiaries are
     held by them under valid, subsisting and enforceable leases of which the
     Company and the Subsidiaries are in compliance.

          (o) Patents and Trademarks. The Company and the Subsidiaries have, or
     have rights to use, all patents, patent applications, trademarks, trademark
     applications, service marks, trade names, copyrights, licenses and other
     similar rights necessary or material for use in connection with their
     respective businesses as described in Schedule 3.1(o) and which the failure
     to so have could have a Material Adverse Effect (collectively, the
     "Intellectual Property Rights"). Neither the Company nor any Subsidiary has
     received a written notice that the Intellectual Property Rights used by the
     Company or any Subsidiary violates or infringes upon the rights of any
     Person. To the knowledge of the Company, all such Intellectual Property
     Rights are enforceable and there is no existing infringement by another
     Person of any of the Intellectual Property Rights of others.

          (p) Insurance. The Company and the Subsidiaries are insured by
     insurers of recognized financial responsibility against such losses and
     risks and in such amounts as are prudent and customary in the businesses in
     which the Company and the Subsidiaries are engaged, including, but not
     limited to, directors and officers insurance coverage at least equal to the
     aggregate principal amount of the Debentures. To the best of Company's
     knowledge, such insurance contracts and policies are accurate and complete.
     Neither the Company nor any 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 without a significant increase in
     cost.

                                      -11-

<PAGE>

          (q) Transactions With Affiliates and Employees. Except as set forth in
     Schedule 3.1(q), none of the officers or directors of the Company and, to
     the knowledge of the Company, none of the employees of the Company are
     presently a party to any transaction with the Company or any Subsidiary
     (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 entity in which
     any officer, director, or any such employee has a substantial interest or
     is an officer, director, trustee or partner, in each case in excess of
     $60,000 other than (i) for payment of salary or consulting fees for
     services rendered, (ii) reimbursement for expenses incurred on behalf of
     the Company and (iii) for other employee benefits, including stock option
     agreements under any stock option plan of the Company.

          (r) Internal Accounting Controls. The Company and the Subsidiaries
     maintain a system of internal accounting controls sufficient 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 GAAP 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.

          (s) Certain Fees. No brokerage or finder's fees or commissions are or
     will be payable by the Company to any broker, financial advisor or
     consultant, finder, placement agent, investment banker, bank or other
     Person with respect to the transactions contemplated by this Agreement. The
     Purchasers shall have no obligation with respect to any fees or with
     respect to any claims made by or on behalf of other Persons for fees of a
     type contemplated in this Section that may be due in connection with the
     transactions contemplated by this Agreement.

          (t) Private Placement. Assuming the accuracy of the Purchasers
     representations and warranties set forth in Section 3.2, no registration
     under the Securities Act is required for the offer and sale of the
     Securities by the Company to the Purchasers as contemplated hereby.

          (u) Investment Company. The Company is not, and is not an Affiliate
     of, and immediately after receipt of payment for the Securities, will not
     be or be an Affiliate of, an "investment company" within the meaning of the
     Investment Company Act of 1940, as amended. The Company shall conduct its
     business in a manner so that it will not become subject to the Investment
     Company Act.

          (v) Application of Takeover Protections. The Company and its Board of
     Directors have taken all necessary action, if any, in order to render
     inapplicable any control share acquisition, business combination, poison
     pill (including any distribution

                                      -12-

<PAGE>

     under a rights agreement) or other similar anti-takeover provision under
     the Company's Certificate of Incorporation (or similar charter documents)
     or the laws of its state of incorporation that is or could become
     applicable to the Purchasers as a result of the Purchasers and the Company
     fulfilling their obligations or exercising their rights under the
     Transaction Documents, including without limitation as a result of the
     Company's issuance of the Securities and the Purchasers' ownership of the
     Securities.

          (w) Disclosure. The Company understands and confirms that the
     Purchasers will rely on the foregoing representations and covenants in
     effecting transactions in securities of the Company. All written statements
     provided to the Purchasers regarding the Company, its business and the
     transactions contemplated hereby, including the Disclosure Schedules to
     this Agreement, furnished by or on behalf of the Company with respect to
     the representations and warranties made herein are true and correct with
     respect to such representations and warranties and do not contain any
     untrue statement of a material fact or omit to state any material fact
     necessary in order to make the statements made therein, in light of the
     circumstances under which they were made, not misleading. The Company
     acknowledges and agrees that no Purchaser makes or has made any
     representations or warranties with respect to the transactions contemplated
     hereby other than those specifically set forth in Section 3.2 hereof.

          (x) No Integrated Offering. Assuming the accuracy of the Purchasers'
     representations and warranties set forth in Section 3.2, 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 of any
     security or solicited any offers to buy any security, under circumstances
     that would cause this offering of the Securities to be integrated with
     prior offerings by the Company for purposes of the Securities Act or any
     applicable shareholder approval provisions.

          (y) Solvency. Based on the financial condition of the Company as of
     the Closing Date after giving effect to the receipt by the Company of the
     proceeds from the sale of the Securities hereunder, (i) the Company's fair
     saleable value of its assets exceeds the amount that will be required to be
     paid on or in respect of the Company's existing debts and other liabilities
     (including known contingent liabilities) as they mature; (ii) the Company's
     assets do not constitute unreasonably small capital to carry on its
     business for the current fiscal year as now conducted and as proposed to be
     conducted including its capital needs taking into account the particular
     capital requirements of the business conducted by the Company, and
     projected capital requirements and capital availability thereof; and (iii)
     the current cash flow of the Company, together with the proceeds the
     Company would receive, were it to liquidate all of its assets, after taking
     into account all anticipated uses of the cash, would be sufficient to pay
     all amounts on or in respect of its debt when such amounts are required to
     be paid. The Company does not intend to incur debts beyond its ability to
     pay such debts as they mature (taking into account the timing and amounts
     of cash to be payable on or in respect of its debt).

          (z) Tax Status. Except for matters that would not, individually or in
     the aggregate, have or reasonably be expected to result in a Material
     Adverse Effect, the

                                      -13-

<PAGE>

     Company and each Subsidiary has filed all necessary federal, state and
     foreign income and franchise tax returns and has paid or accrued all taxes
     shown as due thereon, and the Company has no knowledge of a tax deficiency
     which has been asserted or threatened against the Company or any
     Subsidiary.

          (aa) No General Solicitation. Neither the Company nor any person
     acting on behalf of the Company has offered or sold any of the Securities
     by any form of general solicitation or general advertising. The Company has
     offered the Securities for sale only to the Purchasers and certain other
     "accredited investors" within the meaning of Rule 501 under the Securities
     Act.

          (bb) Foreign Corrupt Practices. Neither the Company, nor to the
     knowledge of the Company, any agent or other person acting on behalf of the
     Company, has (i) directly or indirectly, used any corrupt funds for
     unlawful contributions, gifts, entertainment or other unlawful expenses
     related to foreign or domestic political activity, (ii) made any unlawful
     payment to foreign or domestic government officials or employees or to any
     foreign or domestic political parties or campaigns from corporate funds,
     (iii) failed to disclose fully any contribution made by the Company (or
     made by any person acting on its behalf of which the Company is aware)
     which is in violation of law, or (iv) violated in any material respect any
     provision of the Foreign Corrupt Practices Act of 1977, as amended

          (cc) Accountants. The Company's accountants are set forth on Schedule
     3.1(cc) of the Disclosure Schedule. To the Company's knowledge, such
     accountants, who the Company expects will express their opinion with
     respect to the financial statements to be included in the Company's
     upcoming financial statements, are a registered public accounting firm as
     required by the Securities Act.

          (dd) Indebtedness. As of the Closing Date, the Company has no
     indebtedness.

          (ee) No Disagreements with Accountants and Lawyers. There are no
     disagreements of any kind presently existing, or reasonably anticipated by
     the Company to arise, between the accountants and lawyers formerly or
     presently employed by the Company and the Company is current with respect
     to any fees owed to its accountants and lawyers.

          (ff) Acknowledgment Regarding Purchasers' Purchase of Securities. The
     Company acknowledges and agrees that each of the Purchasers is acting
     solely in the capacity of an arm's length purchaser with respect to the
     Transaction Documents and the transactions contemplated hereby. The Company
     further acknowledges that no Purchaser 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 advice given by
     any Purchaser or any of their respective representatives or agents in
     connection with this Agreement and the transactions contemplated hereby is
     merely incidental to the Purchasers' purchase of the Securities. The
     Company further represents to each Purchaser that the Company's decision to
     enter into this Agreement has been based solely

                                      -14-

<PAGE>

     on the independent evaluation of the transactions contemplated hereby by
     the Company and its representatives.

     3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:

          (a) Organization; Authority. Such Purchaser is an entity duly
     organized, validly existing and in good standing under the laws of the
     jurisdiction of its organization with full right, corporate or partnership
     power and authority to enter into and to consummate the transactions
     contemplated by the Transaction Documents and otherwise to carry out its
     obligations thereunder. The execution, delivery and performance by such
     Purchaser of the transactions contemplated by this Agreement have been duly
     authorized by all necessary corporate or similar action on the part of such
     Purchaser. Each Transaction Documents to which it is a party has been duly
     executed by such Purchaser, and when delivered by such Purchaser in
     accordance with the terms hereof, will constitute the valid and legally
     binding obligation of such Purchaser, enforceable against it in accordance
     with its terms, except (i) as limited by general equitable principles and
     applicable bankruptcy, insolvency, reorganization, moratorium and other
     laws of general application affecting enforcement of creditors' rights
     generally, (ii) as limited by laws relating to the availability of specific
     performance, injunctive relief or other equitable remedies and (iii)
     insofar as indemnification and contribution provisions may be limited by
     applicable law.

          (b) Purchaser Representation. Such Purchaser understands that the
     Securities are "restricted securities" and have not been registered under
     the Securities Act or any applicable state securities law and is acquiring
     the Securities as principal for its own account and not with a view to or
     for distributing or reselling such Securities or any part thereof, has no
     present intention of distributing any of such Securities and has no
     arrangement or understanding with any other persons regarding the
     distribution of such Securities (this representation and warranty not
     limiting such Purchaser's right to sell the Securities pursuant to a
     Registration Statement or otherwise in compliance with applicable federal
     and state securities laws). Such Purchaser is acquiring the Securities
     hereunder in the ordinary course of its business. Such Purchaser does not
     have any agreement or understanding, directly or indirectly, with any
     Person to distribute any of the Securities.

          (c) Purchaser Status. At the time such Purchaser was offered the
     Securities, it was, and at the date hereof it is, and on each date on which
     it exercises any Warrants it will be an "accredited investor" as defined in
     Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act.
     Such Purchaser is not required to be registered as a broker-dealer under
     Section 15 of the Exchange Act.

          (d) Experience of Such Purchaser. Such Purchaser, either alone or
     together with its representatives, has such knowledge, sophistication and
     experience in business and financial matters so as to be capable of
     evaluating the merits and risks of the

                                      -15-

<PAGE>

     prospective investment in the Securities, and has so evaluated the merits
     and risks of such investment. Such Purchaser is able to bear the economic
     risk of an investment in the Securities and, at the present time, is able
     to afford a complete loss of such investment.

          (e) General Solicitation. Such Purchaser is not purchasing the
     Securities as a result of any advertisement, article, notice or other
     communication regarding the Securities published in any newspaper, magazine
     or similar media or broadcast over television or radio or presented at any
     seminar or any other general solicitation or general advertisement.

     The Company acknowledges and agrees that each Purchaser does not make or
has not made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.

                                  ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

     4.1 Transfer Restrictions.

          (a) The Securities may only be disposed of in compliance with state
     and federal securities laws. In connection with any transfer of Securities
     other than pursuant to an effective registration statement or Rule 144, to
     the Company or to an Affiliate of a Purchaser or in connection with a
     pledge as contemplated in Section 4.1(b), the Company may require the
     transferor thereof to provide to the Company an opinion of counsel selected
     by the transferor and reasonably acceptable to the Company, the form and
     substance of which opinion shall be reasonably satisfactory to the Company,
     to the effect that such transfer does not require registration of such
     transferred Securities under the Securities Act. As a condition of
     transfer, any such transferee shall agree in writing to be bound by the
     terms of this Agreement and shall have the rights of a Purchaser under this
     Agreement.

          (b) The Purchasers agree to the imprinting, so long as is required by
     this Section 4.1(b), of a legend on any of the Securities in the following
     form:

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

                                      -16-

<PAGE>

     SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE
     SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES
     MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
     SECURED BY SUCH SECURITIES.

          The Company acknowledges and agrees that a Purchaser may from time to
     time pledge pursuant to a bona fide margin agreement with a registered
     broker-dealer or grant a security interest in some or all of the Securities
     to a financial institution that is an "accredited investor" as defined in
     Rule 501(a) under the Securities Act and who agrees to be bound by the
     provisions of this Agreement and, if required under the terms of such
     arrangement, such Purchaser may transfer pledged or secured Securities to
     the pledgees or secured parties. Such a pledge or transfer would not be
     subject to approval of the Company and no legal opinion of legal counsel of
     the pledgee, secured party or pledgor shall be required in connection
     therewith. Further, no notice shall be required of such pledge. At the
     appropriate Purchaser's expense, the Company will execute and deliver such
     reasonable documentation as a pledgee or secured party of Securities may
     reasonably request in connection with a pledge or transfer of the
     Securities.

          (c) Certificates evidencing the Underlying Shares shall not contain
     any legend (including the legend set forth in Section 4.1(b) hereof): (i)
     while a registration statement covering the resale of such security is
     effective under the Securities Act, or (ii) following any sale of such
     Underlying Shares pursuant to Rule 144, or (iii) if such Underlying Shares
     are eligible for sale under Rule 144(k), or (iv) if such legend is not
     required under applicable requirements of the Securities Act (including
     judicial interpretations and pronouncements issued by the staff of the
     Commission). The Company shall cause its counsel to issue a legal opinion
     to the Company's transfer agent promptly after the Effective Date if
     required by the Company's transfer agent to effect the removal of the
     legend hereunder. If all or any portion of a Debenture is converted or a
     Warrant is exercised at a time when there is an effective registration
     statement to cover the resale of the Underlying Shares, or if such
     Underlying Shares may be sold under Rule 144(k) or if such legend is not
     otherwise required under applicable requirements of the Securities Act
     (including judicial interpretations thereof) then such Underlying Shares
     shall be issued free of all legends. The Company agrees that following the
     Effective Date or at such time as such legend is no longer required under
     this Section 4.1(c), it will, no later than three Business Days following
     the delivery by a Purchaser to the Company or the Company's transfer agent
     of a certificate representing Underlying Shares, as applicable, issued with
     a restrictive legend (such third Business Day, the "Legend Removal Date"),
     deliver or cause to be delivered to such Purchaser a certificate
     representing such shares that is free from all restrictive and other
     legends. The Company may not make any notation on its records or give
     instructions to any transfer agent of the Company that enlarge the
     restrictions on transfer set forth in this Section.

          (d) In addition to such Purchaser's other available remedies, the
     Company shall pay to a Purchaser, in cash, as partial liquidated damages
     and not as a penalty, for each $500 of Underlying Shares (based on the
     closing bid price of the Common Stock on

                                      -17-

<PAGE>

     the then principal Trading Market on the date such Securities are submitted
     to the Company's transfer agent) delivered for removal of the restrictive
     legend and subject to this Section 4.1(c), $5 per Business Day (increasing
     to $10 per Business Day 5 Business Days after such damages have begun to
     accrue) for each Business Day after the Legend Removal Date until such
     certificate is delivered without a legend. Nothing herein shall limit such
     Purchaser's right to pursue actual damages for the Company's failure to
     deliver certificates representing any Securities as required by the
     Transaction Documents, and such Purchaser shall have the right to pursue
     all remedies available to it at law or in equity including, without
     limitation, a decree of specific performance and/or injunctive relief.

          (e) Each Purchaser, severally and not jointly with the other
     Purchasers, agrees that the removal of the restrictive legend from
     certificates representing Securities as set forth in this Section 4.1 is
     predicated upon the Company's reliance that the Purchaser will sell any
     Securities pursuant to either the registration requirements of the
     Securities Act, including any applicable prospectus delivery requirements,
     or an exemption therefrom.

          (f) Until the date that each Purchaser holds less than 20% of the
     Debentures initially purchased hereunder by such Purchaser, the Company
     shall not undertake a reverse or forward stock split or reclassification of
     the Common Stock without the prior written consent of the Purchasers
     holding a majority in principal amount outstanding of the Debentures.

     4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of the Warrant Shares may result in dilution of the outstanding shares of Common
Stock, which dilution may be substantial under certain market conditions. The
Company further acknowledges that its obligations under the Transaction
Documents, including without limitation its obligation to issue the Underlying
Shares pursuant to the Transaction Documents, are unconditional and absolute and
not subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim the Company may have
against any Purchaser and regardless of the dilutive effect that such issuance
may have on the ownership of the other stockholders of the Company.

     4.3 Furnishing of Information. If after the date hereof the Company becomes
subject to the rules and regulations of the Exchange Act and as long as any
Purchaser owns Securities, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
the Exchange Act. As long as any Purchaser owns Securities, if the Company is
not required to file reports pursuant to the Exchange Act, it will prepare and
furnish to the Purchasers and make publicly available in accordance with Rule
144(c) such information as is required for the Purchasers to sell the Securities
under Rule 144. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell such Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.

                                      -18-

<PAGE>

     4.4 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market.

     4.5 Exercise Procedures. The form of Notice of Exercise included in the
Warrants sets forth the totality of the procedures required of the Purchasers in
order to exercise the Warrants. No additional legal opinion or other information
or instructions shall be required of the Purchasers to exercise their Warrants.
The Company shall honor exercises of the Warrants and shall deliver Underlying
Shares in accordance with the terms, conditions and time periods set forth in
the Transaction Documents.

     4.6 Shareholders Rights Plan. No claim will be made or enforced by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring Person" under any shareholders rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the provisions of any such plan or arrangement, by
virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers. The Company shall
conduct its business in a manner so that it will not become subject to the
Investment Company Act.

     4.7 Non-Public Information. If at any time the Company becomes subject to
the reporting provisions of the Exchange Act, the Company covenants and agrees
that neither it nor any other Person acting on its behalf will provide any
Purchaser or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto such
Purchaser shall have executed a written agreement regarding the confidentiality
and use of such information. The Company understands and confirms that each
Purchaser shall be relying on the foregoing representations in effecting
transactions in securities of the Company.

     4.8 Use of Proceeds. The Company shall use the net proceeds from the sale
of Securities hereunder as set forth on Schedule 4.8 attached hereto.

     4.9 Reimbursement. If any Purchaser becomes involved in any capacity in any
Proceeding by or against any Person who is a stockholder of the Company (except
as a result of sales, pledges, margin sales and similar transactions by such
Purchaser to or with any current stockholder), solely as a result of such
Purchaser's acquisition of the Securities under this Agreement, the Company will
reimburse such Purchaser for its reasonable legal and other expenses (including
the cost of any investigation preparation and travel in connection therewith)
incurred in connection therewith, as such expenses are incurred. The
reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliates of the Purchasers who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of the Purchasers and any such Affiliate, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any

                                      -19-

<PAGE>

such Affiliate and any such Person. The Company also agrees that neither the
Purchasers nor any such Affiliates, partners, directors, agents, employees or
controlling persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company solely as a result of
acquiring the Securities under this Agreement.

     4.10 Indemnification of Purchasers. Subject to the provisions of this
Section 4.10, the Company will indemnify and hold the Purchasers and their
directors, officers, shareholders, partners, employees and agents (each, a
"Purchaser Party") harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a
Purchaser, or any of them or their respective Affiliates, by any stockholder of
the Company who is not an Affiliate of such Purchaser, with respect to any of
the transactions contemplated by the Transaction Documents (unless such action
is based upon a breach of such Purchaser's representation, warranties or
covenants under the Transaction Documents or any agreements or understandings
such Purchaser may have with any such stockholder or any violations by the
Purchaser of state or federal securities laws or any conduct by such Purchaser
which constitutes fraud, gross negligence, willful misconduct or malfeasance).
If any action shall be brought against any Purchaser Party in respect of which
indemnity may be sought pursuant to this Agreement, such Purchaser Party shall
promptly notify the Company in writing, and the Company shall have the right to
assume the defense thereof with counsel of its own choosing. Any Purchaser Party
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Purchaser Party except to the extent that (i)
the employment thereof has been specifically authorized by the Company in
writing, (ii) the Company has failed after a reasonable period of time to assume
such defense and to employ counsel or (iii) in such action there is, in the
reasonable opinion of such separate counsel, a material conflict on any material
issue between the position of the Company and the position of such Purchaser
Party. The Company will not be liable to any Purchaser Party under this
Agreement (i) for any settlement by a Purchaser Party effected without the
Company's prior written consent, which shall not be unreasonably withheld or
delayed; or (ii) to the extent, but only to the extent that a loss, claim,
damage or liability is attributable to any Purchaser Party's breach of any of
the representations, warranties, covenants or agreements made by the Purchasers
in this Agreement or in the other Transaction Documents.

     4.11 Reservation and Listing of Securities.

          (a) The Company shall maintain a reserve from its duly authorized
     shares of Common Stock for issuance pursuant to the Transaction Documents
     in such amount as may be required to fulfill its obligations in full under
     the Transaction Documents.

          (b) If, on any date, the number of authorized but unissued (and
     otherwise unreserved) shares of Common Stock is less than the Required
     Minimum on such date, then the Board of Directors of the Company shall use
     commercially reasonable efforts to

                                      -20-

<PAGE>

     amend the Company's certificate or articles of incorporation to increase
     the number of authorized but unissued shares of Common Stock to at least
     the Required Minimum at such time, as soon as possible and in any event not
     later than the 75th day after such date.

          (c) The Company shall, if then applicable: (i) in the time and manner
     required by the Trading Market or if the Common Stock is listed on another
     Trading Market, promptly prepare and file with such Trading Market an
     additional shares listing application covering a number of shares of Common
     Stock at least equal to the Required Minimum on the date of such
     application, (ii) take all steps necessary to cause such shares of Common
     Stock to be approved for listing on the Trading Market as soon as possible
     thereafter, (iii) provide to the Purchasers evidence of such listing, and
     (iv) maintain the listing of such Common Stock on any date at least equal
     to the Required Minimum on such date on such Trading Market or another
     Trading Market.

     4.12 Participation in Future Financing. From the date hereof until the one
year anniversary of the Effective Date, upon any financing by the Company or any
of its Subsidiaries of Common Stock or Common Stock Equivalents (a "Subsequent
Financing"), each Purchaser shall have the right to participate in up to 50% of
the Subsequent Financing (the "Participation Maximum"). At least 5 Business Days
prior to the closing of the Subsequent Financing, the Company shall deliver to
each Purchaser a written notice of its intention to effect a Subsequent
Financing ("Pre-Notice"), which Pre-Notice shall ask such Purchaser if it wants
to review the details of such financing (such additional notice, a "Subsequent
Financing Notice"). Upon the request of a Purchaser, and only upon a request by
such Purchaser, for a Subsequent Financing Notice, the Company shall promptly,
but no later than 1 Business Day after such request, deliver a Subsequent
Financing Notice to such Purchaser. The Subsequent Financing Notice shall
describe in reasonable detail the proposed terms of such Subsequent Financing,
the amount of proceeds intended to be raised thereunder, the Person with whom
such Subsequent Financing is proposed to be effected, and attached to which
shall be a term sheet or similar document relating thereto. If by 5:30 p.m. (New
York City time) on the 5th Business Day after all of the Purchasers have
received the Pre-Notice, notifications by the Purchasers of their willingness to
participate in the Subsequent Financing (or to cause their designees to
participate) is, in the aggregate, less than the total amount of the Subsequent
Financing, then the Company may effect the remaining portion of such Subsequent
Financing on the terms and to the Persons set forth in the Subsequent Financing
Notice. If the Company receives no notice from a Purchaser as of such 5th
Business Day, such Purchaser shall be deemed to have notified the Company that
it does not elect to participate. The Company must provide the Purchasers with a
second Subsequent Financing Notice, and the Purchasers will again have the right
of participation set forth above in this Section 4.12, if the Subsequent
Financing subject to the initial Subsequent Financing Notice is not consummated
for any reason on the terms set forth in such Subsequent Financing Notice within
15 Business Days after the date of the initial Subsequent Financing Notice. In
the event the Company receives responses to Subsequent Financing Notices from
Purchasers seeking to purchase more than the aggregate amount of the Subsequent
Financing, each such Purchaser shall have the right to purchase their Pro Rata
Portion (as defined below) of the Participation Maximum. "Pro Rata Portion" is
the ratio of (x) the Subscription Amount of Securities purchased by a
participating Purchaser and (y) the sum of the aggregate Subscription Amount of
all participating Purchasers. Notwithstanding the foregoing, this Section 4.12
shall not apply in

                                      -21-

<PAGE>

respect of an Exempt Issuance (not including subsection (d) within the
definition of Exempt Issuance).

     4.13 Future Priced Securities. From the date hereof until such time as no
Purchaser holds any of the Securities, the Company shall be prohibited from
effecting or entering into an agreement to effect any Subsequent Financing
involving a "Variable Rate Transaction" or an "MFN Transaction" (each as defined
below). The term "Variable Rate Transaction" shall mean a transaction in which
the Company issues or sells (i) any debt or equity securities that are
convertible into, exchangeable or exercisable for, or include the right to
receive additional shares of Common Stock either (A) at a conversion, exercise
or exchange rate or other price that is based upon and/or varies with the
trading prices of or quotations for the shares of Common Stock at any time after
the initial issuance of such debt or equity securities, or (B) with a
conversion, exercise or exchange price that is subject to being reset at some
future date after the initial issuance of such debt or equity security or upon
the occurrence of specified or contingent events directly or indirectly related
to the business of the Company or the market for the Common Stock. The term "MFN
Transaction" shall mean a transaction in which the Company issues or sells any
securities in a capital raising transaction or series of related transactions
which grants to an investor the right to receive additional shares based upon
future transactions of the Company on terms more favorable than those granted to
such investor in such offering Any Purchaser shall be entitled to obtain
injunctive relief against the Company to preclude any such issuance, which
remedy shall be in addition to any right to collect damages. Notwithstanding the
foregoing, this Section 4.14 shall not apply in respect of an Exempt Issuance
(not including subsection (d) within the definition of Exempt Issuance), except
that no Variable Rate Transaction or MFN Transaction shall be an Exempt
Issuance.

     4.14 Equal Treatment of Purchasers. No consideration shall be offered or
paid to any person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. Further, the
Company shall not make any payment of principal or interest on the Debentures in
amounts which are disproportionate to the respective principal amounts
outstanding on the Debentures at any applicable time. For clarification
purposes, this provision constitutes a separate right granted to each Purchaser
by the Company and negotiated separately by each Purchaser, and is intended to
treat for the Company the Debenture holders as a class and shall not in any way
be construed as the Purchasers acting in concert or as a group with respect to
the purchase, disposition or voting of Securities or otherwise.

     4.15 Public Liquidity Event. Notwithstanding anything to the contrary in
the Transaction Documents, the parties agree and acknowledge that upon and after
the occurrence of a Public Liquidity Event, the Debentures and Warrants will be
convertible or exercisable, as the case may be, into Public Liquidity Shares
equal in number to, in the aggregate and upon a full conversion of the
Debentures and exercise of the Warrant, 20% of the Public Liquidity Company's
common stock outstanding at such time on a fully diluted basis. Further, no
Public Liquidity Event shall occur without the consent of all of the Purchasers
and the Company shall ensure that the foregoing is provided for as part of the
Public Liquidity Event.

                                      -22-

<PAGE>

                                   ARTICLE V.
                                  MISCELLANEOUS

     5.1 Termination. This Agreement may be terminated by any Purchaser, by
written notice to the other parties, if the Closing has not been consummated on
or before January 15, 2005; provided that no such termination will affect the
right of any party to sue for any breach by the other party (or parties).

     5.2 Fees and Expenses. At the Closing, the Company has agreed to reimburse
[BUSHIDO] ("Bushido") for $25,000, for its actual, reasonable, out-of-pocket
legal fees and expenses. The Company shall deliver, prior to the Closing, a
completed and executed copy of the Closing Statement, attached hereto as Annex
A. Except as expressly set forth in the Transaction Documents to the contrary,
each party shall pay the fees and expenses of its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement. The Company shall pay all transfer agent fees, stamp taxes and
other taxes and duties levied in connection with the issuance of any Securities.

     5.3 Entire Agreement. The Transaction Documents, together with the exhibits
and schedules thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

     5.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 5:30 p.m. (New York
City time) on a Business Day, (b) the next Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Business Day or later than 5:30 p.m. (New York City time) on any
Business Day, (c) the second Business Day following the date of mailing, if sent
by U.S. nationally recognized overnight courier service, or (d) upon actual
receipt by the party to whom such notice is required to be given. The address
for such notices and communications shall be as set forth on the signature pages
attached hereto.

     5.5 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each Purchaser or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.

                                      -23-

<PAGE>

     5.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. 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.

     5.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser. Any Purchaser may assign
any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities, provided such transferee agrees
in writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the "Purchasers". Any Public Liquidity Company
that is not the Company shall, as a condition to any Public Liquidity Event,
agree to, and be bound by, all the terms, conditions and obligations set forth
hereunder and under the other Transaction Documents.

     5.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.10.

     5.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
borough of Manhattan for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is improper
or inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. The parties hereby waive all
rights to a trial by jury. If either party shall commence an action or
proceeding to enforce any provisions of the Transaction Documents, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its attorneys' fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.

                                      -24-

<PAGE>

     5.10 Survival. The representations and warranties contained herein shall
survive the Closing and the delivery and/or exercise of the Securities, as
applicable for the applicable statue of limitations.

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

     5.12 Severability. If any provision of this Agreement is held to be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

     5.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Documents and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.

     5.14 Replacement of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.

     5.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.

     5.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Documents or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such

                                      -25-

<PAGE>

enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.

     5.17 Usury. To the extent it may lawfully do so, the Company hereby agrees
not to insist upon or plead or in any manner whatsoever claim, and will resist
any and all efforts to be compelled to take the benefit or advantage of, usury
laws wherever enacted, now or at any time hereafter in force, in connection with
any claim, action or proceeding that may be brought by any Purchaser in order to
enforce any right or remedy under any Transaction Documents. Notwithstanding any
provision to the contrary contained in any Transaction Documents, it is
expressly agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the "Maximum Rate"),
and, without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
contract rate of interest allowed by law and applicable to the Transaction
Documents is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the Transaction Documents
from the effective date forward, unless such application is precluded by
applicable law. If under any circumstances whatsoever, interest in excess of the
Maximum Rate is paid by the Company to any Purchaser with respect to
indebtedness evidenced by the Transaction Documents, such excess shall be
applied by such Purchaser to the unpaid principal balance of any such
indebtedness or be refunded to the Company, the manner of handling such excess
to be at such Purchaser's election.

     5.18 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Documents are several and
not joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Documents. Nothing contained herein or in any
Transaction Documents, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through FW. FW does not represent all of
the Purchasers but only Bushido. The Company has elected to provide all
Purchasers with the same terms and

                                      -26-

<PAGE>

Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by the Purchasers.

     5.19 Liquidated Damages. The Company's obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.

     5.20 Construction. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.

                            (Signature Pages Follow)

                                      -27-

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

EDENTIFY, INC.                          Address for Notice:

By:                                     74 W. Broad St.
    ---------------------------------   Suite 350
Name: Terrence DeFranco                 Bethlehem, PA 18018
Title: President

With a copy to (which shall not
constitute notice):

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]

                                      -28-

<PAGE>

      [PURCHASER SIGNATURE PAGES TO EDENTIFY SECURITIES PURCHASE AGREEMENT]

     IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

Name of Investing Entity:
                          ------------------------------------------------------

Signature of Authorized Signatory of Investing Entity:
                                                       -------------------------
Name of Authorized Signatory:
                              --------------------------------------------------
Title of Authorized Signatory:
                               -------------------------------------------------
Email Address of Authorized Entity:
                                    --------------------------------------------

Address for Notice of Investing Entity:

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

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

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

Address for Delivery of Securities for Investing Entity (if not same as above):

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

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

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

Subscription Amount:

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

                           [SIGNATURE PAGES CONTINUE]

                                      -29-

<PAGE>

                                                                         ANNEX A

                                CLOSING STATEMENT

Pursuant to the attached Securities Purchase Agreement, dated as of the date
hereto, the purchasers shall purchase up to $1,000,000 of Debentures and
Warrants from Edentify, Inc., (the "Company"). All funds will be wired into a
trust account maintained by ____________, counsel to the Company. All funds will
be disbursed in accordance with this Closing Statement.

DISBURSEMENT DATE: August 29, 2005

I. PURCHASE PRICE

<TABLE>
<S>                                           <C>
     GROSS PROCEEDS TO BE RECEIVED IN TRUST   $

II. DISBURSEMENTS

                                              $
                                              $
                                              $
                                              $
                                              $

TOTAL AMOUNT DISBURSED:                       $
</TABLE>

WIRE INSTRUCTIONS:

To: ____________________________________

                                      -30-

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