Document:

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                                                                     EXHIBIT 4.1

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

                                                  Date of Issuance: May __, 2003

                                                                      $_____,000

                            7% CONVERTIBLE DEBENTURE
                                DUE MAY ___, 2006

THIS DEBENTURE is one of a series of duly authorized and issued debentures of
Authentidate Holding Corp., a Delaware corporation, having a principal place of
business at 2165 Technology Drive, Schenectady, New York 12308 (the "Company"),
designated as its 7% Convertible Debentures, due May 21, 2006 in the aggregate
principal amount of up to $2,725,300 (the "Debentures").

      FOR VALUE RECEIVED, the Company promises to pay to _______________ or its
registered assigns (the "Holder"), the principal sum of $___,000 on May 21, 2006
or such earlier date as the Debentures are required or permitted to be repaid as
provided hereunder (the "Maturity Date") and to pay interest to the Holder on
the aggregate unconverted and then outstanding principal amount of this
Debenture at the rate of 7% per annum, payable quarterly on March 1, June 1,
September 1 and December 1, beginning on September 1, 2003 and on each
Conversion Date (as defined herein) and on the Maturity Date (each such date, an
"Interest Payment Date"), in cash or shares of Common Stock (as defined in
Section 5) at the Interest Conversion Rate; provided, however, payment in shares
of Common Stock may only occur if: (i) there is an effective Underlying Shares
Registration Statement pursuant to which the Holder is permitted to utilize the
prospectus thereunder to resell all of the shares of Common Stock to be issued
in lieu of cash (and the Company believes, in good faith, that such
effectiveness will continue uninterrupted for the foreseeable future), (ii) the
Common Stock
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is listed for trading on a Principal Market (and the Company believes, in good
faith, that trading of the Common Stock on a Principal Market will continue
uninterrupted for the foreseeable future), (iii) there is a sufficient number of
authorized but unissued and otherwise unreserved shares of Common Stock for the
issuance of all of the share issuable pursuant to the Transaction Documents,
including the shares to be issued for interest in lieu of cash and (iv) such
issuance would be permitted in full without violating the limitations set forth
in clauses (A) of Section 4(a)(ii) and such issuance and the issuance of all
Underlying Shares, assuming conversion or exercise in full, as the case may be,
of the Debenture and Warrants would be permitted in full without violating the
limitations set forth in clause (B) of section 4(a)(ii). Except as provided in
Section 6 hereof, the Company may not prepay any portion of the principal amount
or interest on this Debenture without the prior written consent of the Holder.
Subject to the terms and conditions herein, the decision whether to pay interest
hereunder in shares of Common Stock or cash shall be at the discretion of the
Company. Not less than 20 Trading Days (as defined in Section 5) prior to each
Interest Payment Date, the Company shall provide the Holder with written notice
of its election to pay interest hereunder either in cash or shares of Common
Stock (the Company may indicate in such notice that the election contained in
such notice shall continue for later periods until revised). Within 20 Trading
Days prior to an Interest Payment Date, the Company's election (whether specific
to an Interest Payment Date or continuous) shall be irrevocable as to such
Interest Payment Date. Subject to the aforementioned conditions, failure to
timely provide such written notice shall be deemed an election by the Company to
pay the interest on such Conversion Date in cash. Interest shall be calculated
on the basis of a 360-day year and shall accrue daily commencing on the Original
Issue Date (as defined in Section 5) until payment in full of the principal sum,
together with all accrued and unpaid interest and other amounts which may become
due hereunder, has been made. Payment of interest in shares of Common Stock
shall otherwise occur pursuant to Section 4(b) and only for purposes of the
payment of interest in shares, the Interest Payment Date shall be deemed the
Conversion Date. Interest shall cease to accrue with respect to any principal
amount converted, provided that the Company in fact delivers the Underlying
Shares within the time period required by Section 4(b)(i). Interest hereunder
will be paid to the Person (as defined in Section 5) in whose name this
Debenture is registered on the records of the Company regarding registration and
transfers of Debentures (the "Debenture Register"). All overdue accrued and
unpaid interest to be paid hereunder shall entail a late fee at the rate of 8%
per annum (or such lower maximum amount of interest permitted to be charged
under applicable law) ("Late Fee") which will accrue daily, from the date such
interest is due hereunder through and including the date of payment.

      This Debenture is subject to the following additional provisions:

      Section 1. This Debenture is exchangeable for an equal aggregate principal
amount of Debentures of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such
registration of transfer or exchange.

      Section 2. This Debenture has been issued subject to certain investment
representations of the original Holder set forth in the Purchase Agreement (as
defined in Section 5) and may be transferred or exchanged only in compliance
with the Purchase Agreement and applicable federal

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and state securities laws and regulations. Prior to due presentment to the
Company for transfer of this Debenture, the Company and any agent of the Company
may treat the Person (as defined in Section 5) in whose name this Debenture is
duly registered on the Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Debenture is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.

      Section 3. Events of Default.

            (a) "Event of Default", wherever used herein, means any one of the
      following events (whatever the reason and whether it shall be voluntary or
      involuntary or effected by operation of law or pursuant to any judgment,
      decree or order of any court, or any order, rule or regulation of any
      administrative or governmental body):

                  (i) any default in the payment of the principal of, interest
            (including any Late Fees) on or liquidated damages in respect of,
            any Debentures, as and when the same shall become due and payable
            (whether on a Conversion Date or the Maturity Date or by
            acceleration or otherwise) which default is not cured, if possible
            to cure, within 3 days of notice of such default sent by the Holder;

                  (ii) the Company shall fail to observe or perform any other
            covenant, agreement or warranty contained in, or otherwise commit
            any breach of any of the Transaction Documents (as defined in
            Section 5)(other than a breach by the Company of its obligations to
            deliver shares of Common Stock to the Holder upon conversion or
            interest payment which breach is addressed in clause (x) below)
            which is not cured, if possible to cure, within 5 days of notice of
            such default sent by the Holder (except with respect to breaches
            pursuant to Sections 4.1, 4.8 and 4.9 of the Purchase Agreement and
            Section 3(a) of the Warrant);

                  (iii) the Company or any of its subsidiaries shall commence,
            or there shall be commenced against the Company or any such
            subsidiary a case under any applicable bankruptcy or insolvency laws
            as now or hereafter in effect or any successor thereto, or the
            Company commences any other proceeding under any reorganization,
            arrangement, adjustment of debt, relief of debtors, dissolution,
            insolvency or liquidation or similar law of any jurisdiction whether
            now or hereafter in effect relating to the Company or any subsidiary
            thereof or there is commenced against the Company or any subsidiary
            thereof any such bankruptcy, insolvency or other proceeding which
            remains undismissed for a period of 60 days; or the Company or any
            subsidiary thereof is adjudicated insolvent or bankrupt; or any
            order of relief or other order approving any such case or proceeding
            is entered; or the Company or any subsidiary thereof suffers any
            appointment of any custodian or the like for it or any substantial
            part of its property which continues undischarged or unstayed for a
            period of 60 days; or the Company or any subsidiary thereof makes a
            general

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            assignment for the benefit of creditors; or the Company shall fail
            to pay, or shall state that it is unable to pay, or shall be unable
            to pay, its debts generally as they become due; or the Company or
            any subsidiary thereof shall call a meeting of its creditors with a
            view to arranging a composition, adjustment or restructuring of its
            debts; or the Company or any subsidiary thereof shall by any act or
            failure to act expressly indicate its consent to, approval of or
            acquiescence in any of the foregoing; or any corporate or other
            action is taken by the Company or any subsidiary thereof for the
            purpose of effecting any of the foregoing;

                  (iv) the Company shall default in any of its obligations under
            any other Debenture or any mortgage, credit agreement or other
            facility, indenture agreement, factoring agreement or other
            instrument under which there may be issued, or by which there may be
            secured or evidenced any indebtedness for borrowed money or money
            due under any long term leasing or factoring arrangement of the
            Company in an amount exceeding $150,000, whether such indebtedness
            now exists or shall hereafter be created and such default shall
            result in such indebtedness becoming or being declared due and
            payable prior to the date on which it would otherwise become due and
            payable;

                  (v) the Common Stock shall not be eligible for quotation on or
            quoted for trading on the Nasdaq SmallCap Market, New York Stock
            Exchange, American Stock Exchange or the Nasdaq National Market
            (each, a "Principal Market") and shall not again be eligible for and
            quoted or listed for trading thereon within five Trading Days;

                  (vi) the Company shall be a party to any Change of Control
            Transaction (as defined in Section 5), shall agree to sell or
            dispose all or in excess of 33% of its assets in one or more
            transactions (whether or not such sale would constitute a Change of
            Control Transaction)(other than a sale of stock or assets of DJS
            Marketing Group, Inc.), or shall redeem or repurchase more than 2%
            of its outstanding shares of Common Stock or other equity securities
            of the Company (other than redemptions of Underlying Shares (as
            defined in Section 5) and as provided for in Section 4.15 of the
            Purchase Agreement);

                  (vii) an Underlying Shares Registration Statement (as defined
            in Section 5) shall not have been declared effective by the
            Commission (as defined in Section 5) on or prior to the 180th
            calendar day after the Original Issue Date;

                  (viii) if, during the Effectiveness Period (as defined in the
            Registration Rights Agreement (as defined in Section 5)), the
            effectiveness of the Underlying Shares Registration Statement lapses
            for any reason or the Holder shall not be permitted to resell
            Registrable Securities (as defined in the Registration Rights
            Agreement) under the Underlying Shares Registration Statement, in
            either case, for

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            more than 10 consecutive Trading Days or 20 non-consecutive Trading
            Days during any 12 month period; provided, however, that in the
            event that the Company is negotiating a merger, consolidation,
            acquisition or sale of all or substantially all of its assets or a
            similar transaction and in the written opinion of counsel to the
            Company, the underlying Shares Registration Statement, would be
            required to be amended to include information concerning such
            transactions or the parties thereto that is not available or may not
            be publicly disclosed at the time, the Company shall be permitted an
            additional 10 non-consecutive Trading Days during any 12 month
            period relating to such an event;

                  (ix) an Event (as defined in the Registration Rights
            Agreement) shall not have been cured to the satisfaction of the
            Holder prior to the expiration of thirty days from the Event Date
            (as defined in the Registration Rights Agreement) relating thereto
            (other than an Event resulting from a failure of an Underlying
            Shares Registration Statement to be declared effective by the
            Commission on or prior to the 180th calendar day after the Original
            Issue Date, which shall be covered by Section 3(a)(vii));

                  (x) the Company shall fail for any reason to deliver
            certificates to a Holder prior to the seventh Trading Day after a
            Conversion Date pursuant to and in accordance with Section 4(b) or
            the Company shall provide notice to the Holder, including by way of
            public announcement, at any time, of its intention not to comply
            with requests for conversions of any Debentures in accordance with
            the terms hereof; or

                  (xi) the Company shall fail for any reason to deliver the
            payment in cash pursuant to a Buy-In (as defined herein) within
            seven days after notice thereof is delivered hereunder.

            (b) If any Event of Default occurs and is continuing, the full
principal amount of this Debenture (and, at the Holder's option, all other
Debentures then held by such Holder), together with interest and other amounts
owing in respect thereof, to the date of acceleration shall become at the
Holder's election, immediately due and payable in cash. The aggregate amount
payable upon an Event of Default shall be equal to the Mandatory Prepayment
Amount (as defined in Section 5). Interest shall accrue on the Mandatory
Prepayment Amount hereunder from the 5th day after such amount is due (being the
date of an Event of Default) through the date of prepayment in full thereof in
an amount equal to the Late Fee, to accrue daily from the date such payment is
due hereunder through and including the date of payment. All Debentures for
which the full prepayment price hereunder shall have been paid in accordance
herewith shall promptly be surrendered to or as directed by the Company. The
Holder need not provide and the Company hereby waives any presentment, demand,
protest or other notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under applicable law. Such
declaration may be rescinded and

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annulled by Holder at any time prior to payment hereunder and the Holder shall
have all rights as a Debenture holder until such time, if any, as the full
payment under this Section shall have been received by it. No such rescission or
annulment shall affect any subsequent Event of Default or impair any right
consequent thereon.

      Section 4. Conversion.

            (a) (i) At any time after the Closing Date, this Debenture shall be
            convertible into shares of Common Stock at the option of the Holder,
            in whole or in part at any time and from time to time (subject to
            the limitations on conversion set forth in Section 4(a)(ii) hereof).
            The Holder shall effect conversions by delivering to the Company the
            form of conversion notice attached hereto as Annex A (a "Conversion
            Notice"), specifying therein the principal amount of Debentures to
            be converted and the date on which such conversion is to be effected
            (a "Conversion Date") and shall contain a completed schedule in the
            form of Schedule 1 to the Conversion Notice (as amended on each
            Conversion Date, the "Conversion Schedule") reflecting the remaining
            principal amount of this Debenture and all accrued and unpaid
            interest thereon subsequent to the conversion at issue. If no
            Conversion Date is specified in a Conversion Notice, the Conversion
            Date shall be the date that such Conversion Notice is provided
            hereunder. To effect conversions hereunder, the Holder shall not be
            required to physically surrender Debentures to the Company unless
            the entire principal amount of this Debenture has been so converted.
            Conversions hereunder shall have the effect of lowering the
            outstanding principal amount of this Debenture plus all accrued and
            unpaid interest thereon in an amount equal to the applicable
            conversion, which shall be evidenced by entries set forth in the
            Conversion Schedule. The Holder and the Company shall maintain
            records showing the principal amount converted and the date of such
            conversions. The Company shall deliver any objection to the figures
            represented in the Conversion Schedules within 1 Business Day of
            receipt of such notice. In the event of any dispute or discrepancy,
            the records of the Holder shall be controlling and determinative in
            the absence of manifest error. The Holder and any assignee, by
            acceptance of this Debenture, acknowledge and agree that, by reason
            of the provisions of this paragraph, following conversion of a
            portion of this Debenture, the unpaid and unconverted principal
            amount of this Debenture may be less than the amount stated on the
            face hereof. The Holder shall provide to each and any assignee a
            copy of the Conversion Schedule and shall provide the Company with
            proof of delivery of such Conversion Schedule.

                  (ii) Certain Conversion Restrictions.

                        (A)   A Holder may not convert Debentures or receive
                              shares of Common Stock as payment of interest
                              hereunder to the extent such conversion or receipt
                              of such interest payment would result in the
                              Holder, together with its affiliates, beneficially

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                              owning (as determined in accordance with Section
                              13(d) of the Exchange Act and the rules
                              promulgated thereunder) in excess of 4.999% of the
                              then issued and outstanding shares of Common
                              Stock, including shares issuable upon conversion
                              of, and payment of interest on, the Debentures
                              held by such Holder after application of this
                              Section. The Holder shall be entitled to rely on
                              the Company's public filing with respect to the
                              number of shares of Common Stock which are then
                              issued and outstanding, and the Holder may inquire
                              of the Company's Chief Financial Officer to obtain
                              a more current number, which shall be provided
                              within 2 Business Days of written request
                              therefor. To ensure compliance with this
                              restriction, the Holder will be deemed to
                              represent to the Company each time it delivers a
                              Conversion Notice that such Conversion Notice has
                              not violated the restrictions set forth in this
                              paragraph. If the Holder has delivered a
                              Conversion Notice for a principal amount of
                              Debentures that, without regard to any other
                              shares that the Holder or its affiliates may
                              beneficially own, would result in the issuance in
                              excess of the permitted amount hereunder, the
                              Company shall notify the Holder of this fact and
                              shall honor the conversion for the maximum
                              principal amount permitted to be converted on such
                              Conversion Date in accordance with the periods
                              described in Section 4(b) and, at the option of
                              the Holder, either retain any principal amount
                              tendered for conversion in excess of the permitted
                              amount hereunder for future conversions or return
                              such excess principal amount to the Holder. In the
                              event of a merger or consolidation of the Company
                              with or into another Person, this paragraph shall
                              not apply with respect to a determination of the
                              number of shares of common stock issuable upon
                              conversion in full of the Debentures if such
                              determination is necessary to establish the
                              Securities or other assets which the holder of
                              Common Stock shall be entitled to receive upon the
                              effectiveness of such merger or consolidation.
                              Notwithstanding the foregoing, the Company shall
                              be allowed to complete a Forced Conversion as
                              contemplated in Section 4a.(iv) hereof regardless
                              of the number of shares owned by Purchaser. The
                              provisions of this Section 4(a)(ii)(A) may be
                              waived by the Holder at the election of the Holder
                              upon not less than 61 days' prior notice to the
                              Company, and the provisions of this Section
                              4(a)(ii)(A) shall continue to apply until such
                              61st day (or such later date, as determined by the
                              Holder, as may be specified in such

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                              notice of waiver). No conversion of this Debenture
                              in violation of this Section 4(a)(ii)(A) but
                              otherwise in accordance with this Debenture shall
                              affect the status of the Underlying Shares as
                              validly issued, fully-paid and nonassessable.

                        (B)   If the Company has not obtained Shareholder
                              Approval (as defined below), then the Company may
                              not issue upon conversion of the Debentures, in
                              the aggregate, in excess of 19.999% of the number
                              of shares of Common Stock outstanding on the
                              Trading Day immediately preceding the Original
                              Issue Date, less any shares of Common Stock issued
                              as payment of interest or to be issued upon
                              exercise of the Warrants issued to Holders of the
                              Debentures on the Original Issue Date pursuant to
                              the Purchase Agreement (such number of shares, the
                              "Issuable Maximum"). Each Holder shall be entitled
                              to a portion of the Issuable Maximum equal to the
                              quotient obtained by dividing (x) the aggregate
                              principal amount of the Debenture(s) issued and
                              sold to such Holder on the Original Issue Date by
                              (y) the number of the Debenture aggregate
                              principal amount of all Debentures issued and sold
                              by the Company on the Original Issue Date. If any
                              Holder shall no longer hold the Debenture(s), then
                              such Holder's remaining portion of the Issuable
                              Maximum shall be allocated pro-rata among the
                              remaining Holders. If on any Conversion Date: (A)
                              the applicable conversion price then in effect is
                              such that the shares issuable under this Debenture
                              on any Conversion Date together with the aggregate
                              number of shares of Common Stock that would then
                              be issuable upon conversion in full of all then
                              outstanding Debentures, together with any shares
                              of Common Stock previously issued upon conversion
                              of the Debenture theretofore issuable under the
                              Debentures and Warrants would exceed the Issuable
                              Maximum, and (B) the Company shall not have
                              previously obtained the vote of shareholders (the
                              "Shareholder Approval"), if any, as may be
                              required by the applicable rules and regulations
                              of the Nasdaq National Stock Market (or any
                              successor entity) applicable to approve the
                              issuance of shares of Common Stock in excess of
                              the Issuable Maximum pursuant to the terms hereof,
                              then the Company shall issue to the Holder
                              requesting a conversion a number of shares of
                              Common Stock equal to such Holder's pro-rata
                              portion (which shall be calculated pursuant to the
                              terms hereof) of the Issuable Maximum and, with
                              respect to the remainder of the aggregate
                              principal amount of the Debentures (including any
                              interest that shall have been added to the
                              principal amount pursuant to and in accordance
                              with Section 6(c)) then held by such Holder for
                              which a conversion in accordance with the
                              applicable conversion price would result in an
                              issuance of shares of Common Stock in excess of
                              such Holder's pro-rata portion (which shall be
                              calculated pursuant to the terms hereof) of the

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                              Issuable Maximum (the "Excess Principal"), the
                              converting Holder may require the Company to elect
                              to either: (1) use its best efforts to obtain the
                              Shareholder Approval applicable to such issuance
                              as soon as is possible, but in any event not later
                              than the 90th day after the date in which the
                              Company determines (or is notified by the Holder)
                              that the Issuable Maximum would be exceeded, or
                              (2) by the tenth Trading Day following such
                              election or failure to timely elect, as the case
                              may be, pay cash to the converting Holder in an
                              amount equal to 100% of the principal amount for
                              the Excess Principal. The Company must make its
                              election by written notice to the Holders by the
                              fifth Trading Day after the date that the Company
                              determines (or is notified by the Holder) that the
                              Issuable Maximum would be exceeded. Failure to
                              timely elect to seek Shareholder Approval under
                              this Section shall be deemed an election by the
                              Company to pay the Mandatory Prepayment Amount for
                              the Excess Principal in cash. If the Company shall
                              have elected the first option pursuant to the
                              immediately preceding sentence and the Company
                              shall have failed to obtain the Shareholder
                              Approval on or prior to the 90th day after the
                              date in which the Company determines (or is
                              notified by a Holder) that the Issuable Maximum
                              would be exceeded, then within three days of such
                              90th day, the Company shall pay cash to the
                              converting Holder an amount equal to 100% of the
                              principal amount for the Excess Principal. If the
                              Company fails to pay the Prepayment Amount for the
                              Excess Principal in full pursuant to this Section
                              after the date payable, the Company will pay
                              interest thereon at a rate of 7% per annum or such
                              lesser maximum amount that is permitted to be paid
                              by applicable law, to the converting Holder,
                              accruing daily from the date such payment is due
                              until such amount, plus all such interest thereon,
                              is paid in full. The Company and the Holder
                              understand and agree that shares of Common Stock
                              issued to and then held by the Holder as a result
                              of conversions of

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                              Debentures shall not be entitled to cast votes on
                              any resolution to obtain Shareholder Approval
                              pursuant hereto.

                  (iii) Underlying Shares Issuable Upon Conversion and Pursuant
                        to Interest.

                        (A)   Conversion of Principal Amount. The number of
                              shares of Common Stock issuable upon a conversion
                              shall be determined by the quotient obtained by
                              dividing (x) the outstanding principal amount of
                              this Debenture to be converted and (y) the
                              Conversion Price, and

                        (B)   Payment of Interest in Underlying Shares. The
                              number of shares of Common Stock issuable upon
                              payment of interest under this Debenture shall be
                              the number determined by (x) the product of (I)
                              the outstanding principal amount of this Debenture
                              to be converted and (II) the product of (aa) the
                              quotient obtained by dividing 7% by 360 and (bb)
                              the number of days for which such principal amount
                              was outstanding, divided by (y) the applicable
                              Interest Conversion Rate, provided, that if the
                              Company shall have elected to pay the interest due
                              on an Interest Payment Date in cash pursuant to
                              the terms hereof, subsection (2) shall not be used
                              in the calculation of the number of shares of
                              Common Stock issuable upon a conversion hereunder.

                        (B) Notwithstanding anything to the contrary contained
                  herein, if on any Conversion Date:

                              (1) the number of shares of Common Stock at the
                        time authorized, unissued and unreserved for all
                        purposes, or held as treasury stock, is insufficient to
                        pay interest hereunder in shares of Common Stock, unless
                        the Company pays interest in cash;

                              (2) such shares of Common Stock to be paid as
                        interest: (x) are not registered for resale pursuant to
                        an effective Underlying Shares Registration Statement
                        and (y) may not be sold immediately pursuant to Rule 144
                        promulgated under the Securities Act;

                              (3) the Common Stock shall fail to be listed or
                        quoted for trading on a Principal Market; or

                              (4) the Company has failed to timely satisfy its
                        conversion obligations hereunder.

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                              then, at the option of the Holder, the Company, in
                        lieu of delivering shares of Common Stock pursuant to
                        this Section 4, shall deliver, within seven Trading Days
                        of each applicable Conversion Date, an amount in cash
                        equal to the product of the number of shares of Common
                        Stock otherwise deliverable to the Holder in connection
                        with such Conversion Date and the highest VWAP during
                        the period commencing on the Conversion Date and ending
                        on the Trading Day prior to the date such payment is
                        made.

                  (b) (i) Not later than seven Trading Days after any Conversion
                  Date, the Company will deliver to the Holder (A) a certificate
                  or certificates for the Shares of Common Stock which shall be
                  free of restrictive legends and trading restrictions (other
                  than those required by the Purchase Agreement) representing
                  the number of shares of Common Stock being acquired upon the
                  conversion of Debentures and (B) a bank check in the amount of
                  accrued and unpaid interest (if the Company has timely elected
                  or is required to pay accrued interest in cash). The Company
                  shall, upon request of the Holder, if available and if allowed
                  under applicable securities laws, use its best efforts to
                  deliver any certificate or certificates required to be
                  delivered by the Company under this Section electronically
                  through the Depository Trust Corporation or another
                  established clearing corporation performing similar functions.
                  If in the case of any Conversion Notice such certificate or
                  certificates are not delivered to or as directed by the
                  applicable Holder by the seventh Trading Day after a
                  Conversion Date, the Holder shall be entitled by written
                  notice to the Company at any time on or before its receipt of
                  such certificate or certificates thereafter, to rescind such
                  conversion, in which event the Company shall immediately
                  return the certificates representing the principal amount of
                  Debentures tendered for conversion.

                  (ii) If the Company fails for any reason to deliver to the
                  Holder such certificate or certificates pursuant to Section
                  4(b)(i) by the seventh Trading Day after the Conversion Date,
                  the Company shall pay to such Holder, in cash, as liquidated
                  damages and not as a penalty, for each $5,000 of principal
                  amount being converted, $50 per Trading Day (increasing to
                  $100 per Trading Day after 3 Trading Days and increasing to
                  $200 per Trading Day 6 Trading Days after such damages begin
                  to accrue) for each Trading Day after such seventh Trading Day
                  until such certificates are delivered. Nothing herein shall
                  limit a Holder's right to pursue actual damages or declare an
                  Event of Default pursuant to Section 3 herein for the
                  Company's failure to deliver certificates representing shares
                  of Common Stock upon conversion within the period specified
                  herein and such Holder 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. The exercise of any such rights shall not
                  prohibit the Holders from seeking to enforce damages pursuant
                  to any other Section hereof or under applicable law.
                  Notwithstanding anything herein to the contrary, in

                                       11
<PAGE>
                  the event a Holder is entitled to collect liquidated damages
                  hereunder and liquidated damages pursuant to Section 4.1(c) of
                  the Purchase Agreement and/or Section 4(b)(iii) below, the
                  Holder shall be limited to collect, at its option, of such
                  remedies, only one such remedy on any given occasion.

                  (iii) In addition to any other rights available to the Holder,
                  if the Company fails for any reason to deliver to the Holder
                  such certificate or certificates pursuant to Section 4(b)(i)
                  by the seventh Trading Day after the Conversion Date, and if
                  after such third Trading Day the Holder is required by its
                  brokerage firm to purchase (in an open market transaction or
                  otherwise) Common Stock to deliver in satisfaction of a sale
                  by such Holder of the Underlying Shares which the Holder
                  anticipated receiving upon such conversion (a "Buy-In"), then
                  the Company shall (A) pay in cash to the Holder (in addition
                  to any remedies available to or elected by the Holder) the
                  amount by which (x) the Holder's total purchase price
                  (including brokerage commissions, if any) for the Common Stock
                  so purchased exceeds (y) the product of (1) the aggregate
                  number of shares of Common Stock that such Holder anticipated
                  receiving from the conversion at issue multiplied by (2) the
                  market price of the Common Stock at the time of the sale
                  giving rise to such purchase obligation and (B) at the option
                  of the Holder, either reissue Debentures in principal amount
                  equal to the principal amount of the attempted conversion or
                  deliver to the Holder the number of shares of Common Stock
                  that would have been issued had the Company timely complied
                  with its delivery requirements under Section 4(b)(i). For
                  example, if the Holder purchases Common Stock having a total
                  purchase price of $11,000 to cover a Buy-In with respect to an
                  attempted conversion of Debentures with respect to which the
                  market price of the Underlying Shares on the date of
                  conversion was a total of $10,000 under clause (A) of the
                  immediately preceding sentence, the Company shall be required
                  to pay the Holder $1,000. The Holder shall provide the Company
                  written notice indicating the amounts payable to the Holder in
                  respect of the Buy-In. Notwithstanding anything contained
                  herein to the contrary, if a Holder requires the Company to
                  make payment in respect of a Buy-In for the failure to timely
                  deliver certificates hereunder and the Company timely pays in
                  full such payment, the Company shall not be required to pay
                  such Holder liquidated damages under Section 4(b)(ii) in
                  respect of the certificates resulting in such Buy-In.
                  Notwithstanding anything to the contrary herein, in the event
                  a Holder is entitled to collect liquidated damages hereunder
                  and liquidated damages pursuant to Section 4.1(d) of the
                  Purchase Agreement and/or Section 4(b)(ii) above, the Holder
                  shall be limited to collect, at its option, of such remedies,
                  only one such remedy on any given occasion.

                  (iv) Notwithstanding anything herein to the contrary, if after
                  the Effective Date the VWAP for any 15 consecutive Trading
                  Days, which 15 Trading Day period shall not be deemed to have
                  begun prior to the Effective Date, exceeds 150% of the then
                  effective Set Price, the Company may, within 2 Trading Days of
                  any such period, deliver a notice to the Holder (a "Forced
                  Conversion Notice" and the date such notice

                                       12
<PAGE>
                  is received by the Holder, the "Forced Conversion Notice
                  Date") to cause the Holder to immediately convert all or part
                  of the then outstanding principal amount of Debentures
                  pursuant to Section 4(a)(i) and the Holder shall surrender (if
                  the entire Debenture is converted) this Debenture to the
                  Company for conversion within 5 Trading Days of the Forced
                  Conversion Notice Date. The Company may only effect a Forced
                  Conversion Notice if each of the following shall be true: (i)
                  the Company shall have duly honored all conversions occurring
                  by virtue of one or more Conversion Notices prior to the
                  Forced Conversion Date, (ii) there is an effective Underlying
                  Shares Registration Statement pursuant to which the Holder is
                  permitted to utilize the prospectus thereunder to resell all
                  of the Underlying Shares issued to the Holder and all of the
                  Underlying Shares as are issuable to the Holder upon
                  conversion in full of this Debenture subject to the Forced
                  Conversion Notice (and the Company believes, in good faith,
                  that such effectiveness will continue uninterrupted for the
                  foreseeable future), (iii) the Common Stock is listed for
                  trading on a Principal Market (and the Company believes, in
                  good faith, that trading of the Common Stock on a Principal
                  Market will continue uninterrupted for the foreseeable
                  future), (iv) all liquidated damages and other amounts owing
                  in respect of the Debentures and Underlying Shares shall have
                  been paid or will, concurrently with the issuance of the
                  Underlying Shares, be paid in cash; (v) there is a sufficient
                  number of authorized but unissued and otherwise unreserved
                  shares of Common Stock for the issuance of all the Underlying
                  Shares as are issuable to the Holder upon conversion in full
                  of the Debentures subject to the Forced Conversion Notice;
                  (vi) no Event of Default nor any event that with the passage
                  of time would constitute an Event of Default has occurred and
                  is continuing; and (vii) no public announcement of a pending
                  or proposed Change of Control Transaction or Fundamental
                  Transaction has occurred that has not been consummated.

                  (c) (i) The conversion price in effect on any Conversion Date
                  shall be equal to $2.60 (subject to adjustment herein)(the
                  "Set Price").

                  (ii) If the Company, at any time while the Debentures are
                  outstanding: (A) shall pay a stock dividend or otherwise make
                  a distribution or distributions on shares of its Common Stock
                  or any other equity or equity equivalent securities payable in
                  shares of Common Stock, (B) subdivide outstanding shares of
                  Common Stock into a larger number of shares, (C) combine
                  (including by way of reverse stock split) outstanding shares
                  of Common Stock into a smaller number of shares, or (D) issue
                  by reclassification of shares of the Common Stock any shares
                  of capital stock of the Company, then the Set Price shall be
                  multiplied by a fraction of which the numerator shall be the
                  number of shares of Common Stock (excluding treasury shares,
                  if any) outstanding before such event and of which the
                  denominator shall be the number of shares of Common Stock
                  outstanding after such event. Any adjustment made pursuant to
                  this Section shall become effective immediately after the
                  record date for the determination of stockholders entitled to
                  receive such dividend or distribution and

                                       13
<PAGE>
                  shall become effective immediately after the effective date in
                  the case of a subdivision, combination or re-classification.

                  (iii) If the Company, at any time while Debentures are
                  outstanding, shall issue rights, options or warrants to all
                  holders of Common Stock (and not to Holders) entitling them to
                  subscribe for or purchase shares of Common Stock or Common
                  Stock Equivalents at a price per share less than the VWAP at
                  the record date mentioned below, then the Set Price shall be
                  multiplied by a fraction, of which the denominator shall be
                  the number of shares of the Common Stock (excluding treasury
                  shares, if any) outstanding on the date of issuance of such
                  rights or warrants plus the number of additional shares of
                  Common Stock offered for subscription or purchase, and of
                  which the numerator shall be the number of shares of the
                  Common Stock (excluding treasury shares, if any) outstanding
                  on the date of issuance of such rights or warrants plus the
                  number of shares which the aggregate offering price of the
                  total number of shares so offered would purchase at such VWAP.
                  Such adjustment shall be made whenever such rights or warrants
                  are issued, and shall become effective immediately after the
                  record date for the determination of stockholders entitled to
                  receive such rights, options or warrants.

                  (iv) If the Company or any subsidiary thereof, as applicable,
                  at any time while Debentures are outstanding, shall offer,
                  sell, grant any option to purchase or offer, sell or grant any
                  right to reprice its securities, or otherwise dispose of or
                  issue (or announce any offer, sale, grant or any option to
                  purchase or other disposition) any Common Stock or any equity
                  or equity equivalent securities (including any equity, debt,
                  warrant, option or other instrument that is at any time over
                  the life thereof convertible into or exchangeable for Common
                  Stock) (collectively, "Common Stock Equivalents") entitling
                  any Person to acquire shares of Common Stock, at a price per
                  share less than the Set Price ("Dilutive Issuance"), as
                  adjusted hereunder (if the holder of the Common Stock or
                  Common Stock Equivalent so issued shall at any time, whether
                  by operation of purchase price adjustments, reset provisions,
                  floating conversion, exercise or exchange prices or otherwise,
                  or due to warrants, options or rights per share which is
                  issued in connection with such issuance, be entitled to
                  receive shares of Common Stock at a price per share which is
                  less than the Set Price, such issuance shall be deemed to have
                  occurred for less than the Set Price), then, the Set Price
                  shall be reduced by multiplying the Set Price by a fraction,
                  the numerator of which is the number of shares of Common Stock
                  outstanding immediately prior to the Dilutive Issuance plus
                  the number of shares of Common Stock which the offering price
                  for such Dilutive Issuance would purchase at the Set Price,
                  and the denominator of which shall be the sum of the number of
                  shares of Common Stock outstanding immediately prior to the
                  Dilutive Issuance plus the number of shares of Common Stock so
                  issued or issuable in connection with the Dilutive Issuance.
                  Such adjustment shall be made whenever such Common Stock or
                  Common Stock Equivalents are issued. The Company shall notify
                  the Holder in writing, no later than

                                       14
<PAGE>
                  the business day following the issuance of any Common Stock or
                  Common Stock Equivalent subject to this section, indicating
                  therein the applicable issuance price, or of applicable reset
                  price, exchange price, conversion price and other pricing
                  terms. Notwithstanding the foregoing, no adjustment will be
                  made under this sub section (iv) in respect of (A) the
                  granting of options to employees, officers and directors of
                  the Company pursuant to any stock option plan duly adopted by
                  the Company or to the issuance of Common Stock upon exercise
                  of such options or (B) the issuance of up to 100,000 shares of
                  Common Stock, in the aggregate, to consultants or advisors to
                  the Company for services to be rendered to the Company by such
                  consultants or advisors or (C) Convertible Securities
                  outstanding as of the date of the Purchase Agreement.
                  Notwithstanding anything to the contrary herein, in the event
                  of an adjustment under either subsections (iii) or (iv) under
                  this Section 4(c), a duplicative adjustment shall not be made
                  with respect to the other subsection.

                  (v) If the Company, at any time while Debentures are
                  outstanding, shall distribute to all holders of Common Stock
                  (and not to Holders) evidences of its indebtedness or assets,
                  then in each such case the Set Price shall be determined by
                  multiplying such price in effect immediately prior to the
                  record date fixed for determination of stockholders entitled
                  to receive such distribution by a fraction of which the
                  denominator shall be the VWAP determined as of the record date
                  mentioned above, and of which the numerator shall be such VWAP
                  on such record date less the then fair market value at such
                  record date of the portion of such assets or evidence of
                  indebtedness so distributed applicable to one outstanding
                  share of the Common Stock as determined by the Board of
                  Directors in good faith. In either case the adjustments shall
                  be described in a statement provided to the Holders of the
                  portion of assets or evidences of indebtedness so distributed
                  or such subscription rights applicable to one share of Common
                  Stock. Such adjustment shall be made whenever any such
                  distribution is made and shall become effective immediately
                  after the record date mentioned above.

                  (vi) In case of any reclassification of the Common Stock or
                  any compulsory share exchange pursuant to which the Common
                  Stock is converted into other securities, cash or property,
                  the Holders shall have the right thereafter to, at their
                  option, (A) convert the then outstanding principal amount,
                  together with all accrued but unpaid interest and any other
                  amounts then owing hereunder in respect of this Debenture only
                  into the shares of stock and other securities, cash and
                  property receivable upon or deemed to be held by holders of
                  the Common Stock following such reclassification or share
                  exchange, and the Holders of the Debentures shall be entitled
                  upon such event to receive such amount of securities, cash or
                  property as the shares of the Common Stock of the Company into
                  which the then outstanding principal amount, together with all
                  accrued but unpaid interest and any other amounts then owing
                  hereunder in respect of this Debenture could have been
                  converted immediately prior to such reclassification or share
                  exchange would have been entitled or (B)

                                       15
<PAGE>
                  require the Company to prepay the aggregate of its outstanding
                  principal amount of Debentures, plus all interest and other
                  amounts due and payable thereon, at a price determined in
                  accordance with Section 3(b). The entire prepayment price
                  shall be paid in cash. This provision shall similarly apply to
                  successive reclassifications or share exchanges.

                  (vii) All calculations under this Section 4 shall be made to
                  the nearest cent or the nearest 1/100th of a share, as the
                  case may be.

                  (viii) Whenever the Set Price is adjusted pursuant to any of
                  Section 4(c)(ii) - (v), the Company shall promptly mail to
                  each Holder a notice setting forth the Set Price after such
                  adjustment and setting forth a brief statement of the facts
                  requiring such adjustment.

                  (ix) If (A) the Company shall declare a dividend (or any other
                  distribution) on the Common Stock; (B) the Company shall
                  declare a special nonrecurring cash dividend on or a
                  redemption of the Common Stock; (C) the Company shall
                  authorize the granting to all holders of the Common Stock
                  rights or warrants to subscribe for or purchase any shares of
                  capital stock of any class or of any rights; (D) the approval
                  of any stockholders of the Company shall be required in
                  connection with any reclassification of the Common Stock, any
                  consolidation or merger to which the Company is a party, any
                  sale or transfer of all or substantially all of the assets of
                  the Company, of any compulsory share exchange whereby the
                  Common Stock is converted into other securities, cash or
                  property; (E) the Company shall authorize the voluntary or
                  involuntary dissolution, liquidation or winding up of the
                  affairs of the Company; then, in each case, the Company shall
                  cause to be filed at each office or agency maintained for the
                  purpose of conversion of the Debentures, and shall cause to be
                  mailed to the Holders at their last addresses as they shall
                  appear upon the stock books of the Company, at least 20
                  calendar days prior to the applicable record or effective date
                  hereinafter specified, a notice stating (x) the date on which
                  a record is to be taken for the purpose of such dividend,
                  distribution, redemption, rights or warrants, or if a record
                  is not to be taken, the date as of which the holders of the
                  Common Stock of record to be entitled to such dividend,
                  distributions, redemption, rights or warrants are to be
                  determined or (y) the date on which such reclassification,
                  consolidation, merger, sale, transfer or share exchange is
                  expected to become effective or close, and the date as of
                  which it is expected that holders of the Common Stock of
                  record shall be entitled to exchange their shares of the
                  Common Stock for securities, cash or other property
                  deliverable upon such reclassification, consolidation, merger,
                  sale, transfer or share exchange; provided, that the failure
                  to mail such notice or any defect therein or in the mailing
                  thereof shall not affect the validity of the corporate action
                  required to be specified in such notice. Holders are entitled
                  to convert Debentures during the 20-day period commencing the
                  date of such notice to the effective date of the event
                  triggering such notice.

                                       16
<PAGE>
                  (x) Fundamental Transactions. If, at any time while this
                  Debenture is outstanding, (A) the Company effects any merger
                  or consolidation of the Company with or into another Person,
                  (B) the Company effects any sale of all or substantially all
                  of its assets in one or a series of related transactions
                  (other than the sale of capital stock or assets of DJS
                  Marketing Group, Inc.), (C) any tender offer or exchange offer
                  (whether by the Company or another Person) is completed
                  pursuant to which holders of Common Stock are permitted to
                  tender or exchange their shares for other securities, cash or
                  property, or (D) the Company effects any reclassification of
                  the Common Stock or any compulsory share exchange pursuant to
                  which the Common Stock is effectively converted into or
                  exchanged for other securities, cash or property (in any such
                  case, a "Fundamental Transaction"), then upon any subsequent
                  conversion of this Debenture, the Holder shall have the right
                  to receive, for each Underlying Share that would have been
                  issuable upon such conversion absent such Fundamental
                  Transaction, the same kind and amount of securities, cash or
                  property as it would have been entitled to receive upon the
                  occurrence of such Fundamental Transaction if it had been,
                  immediately prior to such Fundamental Transaction, the holder
                  of one share of Common Stock (the "Alternate Consideration").
                  For purposes of any such conversion, the determination of the
                  Conversion Price shall be appropriately adjusted to apply to
                  such Alternate Consideration based on the amount of Alternate
                  Consideration issuable in respect of one share of Common Stock
                  in such Fundamental Transaction, and the Company shall
                  apportion the Conversion Price among the Alternate
                  Consideration in a reasonable manner reflecting the relative
                  value of any different components of the Alternate
                  Consideration. If holders of Common Stock are given any choice
                  as to the securities, cash or property to be received in a
                  Fundamental Transaction, then the Holder shall be given the
                  same choice as to the Alternate Consideration it receives upon
                  any conversion of this Debenture following such Fundamental
                  Transaction. To the extent necessary to effectuate the
                  foregoing provisions, any successor to the Company or
                  surviving entity in such Fundamental Transaction shall issue
                  to the Holder a new debenture consistent with the foregoing
                  provisions and evidencing the Holder's right to convert such
                  debenture into Alternate Consideration. The terms of any
                  agreement pursuant to which a Fundamental Transaction is
                  effected shall include terms requiring any such successor or
                  surviving entity to comply with the provisions of this
                  paragraph (c) and insuring that this Debenture (or any such
                  replacement security) will be similarly adjusted upon any
                  subsequent transaction analogous to a Fundamental Transaction.
                  If any Fundamental Transaction constitutes or results in a
                  Change of Control Transaction, then at the request of the
                  Holder delivered before the 90th day after such Fundamental
                  Transaction, the Company (or any such successor or surviving
                  entity) will purchase the Debenture from the Holder for a
                  purchase price, payable in cash within five Trading Days after
                  such request (or, if later, on the effective date of the
                  Fundamental Transaction), equal to the 120% of the remaining
                  unconverted principal

                                       17
<PAGE>
                  amount of this Debenture on the date of such request, plus all
                  accrued and unpaid interest thereon, plus all other accrued
                  and unpaid amounts due hereunder.

                  (xi) Notwithstanding the foregoing, no adjustment will be made
                  under this paragraph (c) in respect of (A) the granting of
                  options to employees, officers and directors of the Company
                  pursuant to any stock 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) the
                  issuance of up to 100,000 shares of Common Stock, in the
                  aggregate, to consultants or advisors to the Company for
                  services to be rendered to the Company by such consultants or
                  advisors, (C) the exercise of this Debenture or any other
                  Debenture of this series or of any other series or security
                  issued by the Company in connection with the offer and sale of
                  this Company's securities pursuant to the Purchase Agreement,
                  or (D) the exercise of or conversion of any Convertible
                  Securities, options or warrants issued and outstanding on the
                  Original Issue Date, provided such securities have not been
                  materially amended to provide for an increase in the number of
                  shares of Common Stock issuable upon conversion or reduction
                  in the effective consideration to be paid per share of Common
                  Stock since the date of the Purchase Agreement.

                  (e) The Company covenants that it will at all times reserve
            and keep available out of its authorized and unissued shares of
            Common Stock solely for the purpose of issuance upon conversion of
            the Debentures and payment of interest on the Debentures, each as
            herein provided, free from preemptive rights or any other actual
            contingent purchase rights of persons other than the Holders, not
            less than such number of shares of the Common Stock as shall
            (subject to any additional requirements of the Company as to
            reservation of such shares set forth in the Purchase Agreement) be
            issuable (taking into account the adjustments and restrictions of
            Section 4(b)) upon the conversion of the outstanding principal
            amount of the Debentures and payment of interest hereunder. The
            Company covenants that all shares of Common Stock that shall be so
            issuable shall, upon issue, be duly and validly authorized, issued
            and fully paid, nonassessable and, if the Underlying Shares
            Registration Statement has been declared effective under the
            Securities Act, registered for public sale in accordance with such
            Underlying Shares Registration Statement.

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

                  (g) The issuance of certificates for shares of the Common
            Stock on conversion of the Debentures shall be made without charge
            to the Holders thereof for any documentary

                                       18
<PAGE>
      stamp or similar taxes that may be payable in respect of the issue or
      delivery of such certificate, provided that the Company shall not be
      required to pay any tax that may be payable in respect of any transfer
      involved in the issuance and delivery of any such certificate upon
      conversion in a name other than that of the Holder of such Debentures so
      converted and the Company shall not be required to issue or deliver such
      certificates unless or until the person or persons requesting the issuance
      thereof shall have paid to the Company the amount of such tax or shall
      have established to the satisfaction of the Company that such tax has been
      paid.

            (h) Any and all notices or other communications or deliveries to be
      provided by the Holders hereunder, including, without limitation, any
      Conversion Notice, shall be in writing and delivered personally, by
      facsimile, sent by a nationally recognized overnight courier service or
      sent by certified or registered mail, postage prepaid, addressed to the
      Company, at the address set forth above, facsimile number (518) 346-3644,
      Attn: Dennis Bunt or such other address or facsimile number as the Company
      may specify for such purposes by notice to the Holders delivered in
      accordance with this Section. Any and all notices or other communications
      or deliveries to be provided by the Company hereunder shall be in writing
      and delivered personally, by facsimile, sent by a nationally recognized
      overnight courier service or sent by certified or registered mail, postage
      prepaid, addressed to each Holder at the facsimile telephone number or
      address of such Holder appearing on the books of the Company, or if no
      such facsimile telephone number or address appears, at the principal place
      of business of the Holder. Any notice or other communication or deliveries
      hereunder shall be deemed given and effective on the earliest of (i) the
      date of transmission, if such notice or communication is delivered via
      facsimile at the facsimile telephone number specified in this Section
      prior to 5:30 p.m. (New York City time), (ii) the date after the date of
      transmission, if such notice or communication is delivered via facsimile
      at the facsimile telephone number specified in this Section later than
      5:30 p.m. (New York City time) on any date and earlier than 11:59 p.m.
      (New York City time) on such date, (iii) four days after deposit in the
      United States mail, (iv) the Business Day following the date of mailing,
      if sent by nationally recognized overnight courier service, or (v) upon
      actual receipt by the party to whom such notice is required to be given.
      All notices or other communications or deliveries given hereunder, if
      delivered via facsimile, shall be followed with a copy delivered by a U.S.
      nationally recognized overnight courier service.

      Section 5. Definitions. For the purposes hereof, the following terms shall
have the following meanings:

            "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.

            "Change of Control Transaction" means the occurrence after the date
      hereof of any of (i) an acquisition after the date hereof by an individual
      or legal entity or "group" (as

                                       19
<PAGE>
      described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
      effective control (whether through legal or beneficial ownership of
      capital stock of the Company, by contract or otherwise) of in excess of
      33% of the voting securities of the Company, (ii) a replacement at one
      time or within a one year period of more than one-half of the members of
      the Company's board of directors which is not approved by a majority of
      those individuals who are members of the board of directors on the date
      hereof (or by those individuals who are serving as members of the board of
      directors on any date whose nomination to the board of directors was
      approved by a majority of the members of the board of directors who are
      members on the date hereof), (iii) the merger of the Company with or into
      another entity that is not wholly-owned by the Company, consolidation or
      sale of 50% or more of the assets of the Company in one or a series of
      related transactions, or (iv) the execution by the Company of an agreement
      to which the Company is a party or by which it is bound, providing for any
      of the events set forth above in (i), (ii) or (iii). Notwithstanding the
      foregoing, a "Change of Control Transaction" shall not include a sale by
      the Company of the Company's DJS Marketing Group, Inc. subsidiary, whether
      by way of merger, sale or stock or sale of assets.

            "Commission" means the Securities and Exchange Commission.

            "Common Stock" means the common stock, $0.001 par value per share,
      of the Company and stock of any other class into which such shares may
      hereafter have been reclassified or changed.

            "Conversion Date" shall have the meaning set forth in Section
      4(a)(i).

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

            "Interest Conversion Rate" means 93% of the lesser of (i) the
      average of the 15 VWAPs immediately prior to the applicable Interest
      Payment Date or (ii) the average of the 15 VWAPs immediately prior to the
      date the applicable interest payment shares are issued and delivered if
      after the Interest Payment Date.

            "Mandatory Prepayment Amount" for any Debentures shall equal the sum
      of (i) the greater of: (A) 120% of the principal amount of Debentures to
      be prepaid, plus all accrued and unpaid interest thereon, plus all other
      accrued and unpaid amounts due hereunder, or (B) the principal amount of
      Debentures to be prepaid, plus all accrued and unpaid interest thereon,
      plus all other accrued and unpaid amounts due hereunder, divided by the
      Conversion Price on (x) the date the Mandatory Prepayment Amount is
      demanded or otherwise due or (y) the date the Mandatory Prepayment Amount
      is paid in full, whichever is less, multiplied by the VWAP on (x) the date
      the Mandatory Prepayment Amount is demanded or otherwise due or (y) the
      date the Mandatory Prepayment Amount is paid in full, whichever is
      greater, and (ii) all other amounts, costs, expenses and liquidated
      damages due in respect of such Debentures.

                                       20
<PAGE>
            "Optional Redemption Amount" shall mean the sum of (i) 100% of the
      principal amount of the Debenture then outstanding, (ii) accrued but
      unpaid interest and (iii) all liquidated damages and other amounts due in
      respect of the Debentures.

            "Optional Redemption Date" shall have the meaning set forth in
      Section 6(a).

            "Original Issue Date" shall mean the date of the first issuance of
      the Debentures regardless of the number of transfers of any Debenture and
      regardless of the number of instruments which may be issued to evidence
      such Debenture.

            "Person" means a corporation, an association, a partnership,
      organization, a business, an individual, a government or political
      subdivision thereof or a governmental agency.

            "Purchase Agreement" means the Securities Purchase Agreement, dated
      as of the Original Issue Date, to which the Company and the original
      Holder are parties, as amended, modified or supplemented from time to time
      in accordance with its terms.

            "Registration Rights Agreement" means the Registration Rights
      Agreement, dated as of the Original Issue Date, to which the Company and
      the original Holder are parties, as amended, modified or supplemented from
      time to time in accordance with its terms.

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

            "Set Price" shall have the meaning set forth in Section 4(c)(i).

            "Trading Day" means (a) a day on which the shares of Common Stock
      are traded on the Principal Market on which the shares of Common Stock are
      then listed or quoted, or (b) if the shares of Common Stock are not quoted
      on a Principal Market, a day on which the shares of Common Stock are
      quoted in the over-the-counter market as reported by the National
      Quotation Bureau Incorporated (or any similar organization or agency
      succeeding its functions of reporting prices); provided, that in the event
      that the shares of Common Stock are not listed or quoted as set forth in
      (a), (b) and (c) hereof, then Trading Day shall mean a Business Day.

            "Transaction Documents" shall have the meaning set forth in the
      Purchase Agreement.

            "Underlying Shares" means the shares of Common Stock issuable upon
      conversion of Debentures or as payment of interest in accordance with the
      terms hereof.

            "Underlying Shares Registration Statement" means a registration
      statement meeting the requirements set forth in the Registration Rights
      Agreement, covering among other things

                                       21
<PAGE>
      the resale of the Underlying Shares and naming the Holder as a "selling
      stockholder" thereunder.

            "VWAP" means, for any date, the price determined by the first of the
      following clauses that applies: (a) if the Common Stock is then listed or
      quoted on a Principal Market or the OTC Bulletin Board, the daily volume
      weighted average price of the Common Stock for such date (or the nearest
      preceding date) on the Principal Market (or OTC Bulletin Board) on which
      the Common Stock is then listed or quoted as reported by Bloomberg
      Financial L.P. (based on a trading day from 9:30 a.m. ET to 4:02 p.m.
      Eastern Time) using the VAP function; (b) if the Common Stock is not then
      listed or quoted on a Principal Market or the OTC Bulletin Board and if
      prices for the Common Stock are then reported in the "pink sheets"
      published by the National Quotation Bureau Incorporated (or a similar
      organization or agency succeeding to its functions of reporting prices),
      the most recent bid price per share of the Common Stock so reported; or
      (c) in all other cases, the fair market value of a share of Common Stock
      as determined by a nationally recognized independent appraiser selected in
      good faith by Purchasers holding a majority of the outstanding principal
      amount of Debentures.

            Section 6. Redemption

            (a) Optional Redemption at Election of Company. Subject to the
      provisions of this Section 6, the Company may, at any time prior to the
      60th calendar day after the Closing Date, deliver a notice to the Holders
      (an "Optional Redemption Notice" and the date such notice is deemed
      delivered hereunder, the "Optional Redemption Notice Date") of its
      irrevocable election to redeem some or all of the then outstanding
      Debentures, for an amount, in cash, equal to the Optional Redemption
      Amount on the 30th Trading Day following the Optional Redemption Notice
      Date (such date, the "Optional Redemption Date" and such redemption, the
      "Optional Redemption"). The Optional Redemption Amount is due in full on
      the Optional Redemption Date. The Company may only effect an Optional
      Redemption if from the Optional Redemption Notice Date through to the
      Optional Redemption Date, each of the following shall be true: (i) the
      Company shall have duly honored all conversions and redemptions scheduled
      to occur or occurring by virtue of one or more Conversion Notices prior to
      the Optional Redemption Date, (ii) all liquidated damages and other
      amounts owing in respect of the Debentures shall have been paid or will,
      concurrently with the issuance of the Underlying Shares, be paid in cash;
      (iii), no Event of Default has occurred and is continuing; and (iv) no
      public announcement of a pending or proposed Fundamental Transaction or
      acquisition transaction has occurred that has not been consummated. If any
      of the foregoing conditions shall cease to be satisfied at any time during
      the required period, then the Holder may elect to nullify the Optional
      Redemption Notice in which case the Option Redemption Notice shall be null
      and void, ab initio. The Company covenants and agrees that it will honor
      all Conversion Notices tendered prior to the time of delivery of the
      Optional Redemption Notice through the date all amounts owing thereon are
      due and paid in full.

                                       22
<PAGE>
            (b) Redemption Procedure. The payment of cash shall be made on the
      Optional Redemption Date. If any portion of the cash payment for an
      Optional Redemption shall not be paid by the Company by the respective due
      date, interest shall accrue thereon at the rate of 18% per annum (or the
      maximum rate permitted by applicable law, whichever is less) until the
      payment of the Optional Redemption Amount, as applicable, plus all amounts
      owing thereon is paid in full. In addition, if any portion of the Optional
      Redemption Amount remains unpaid after such date, the Holders subject to
      such redemption may elect, by written notice to the Company given at any
      time thereafter, to invalidate ab initio such redemption, notwithstanding
      anything herein contained to the contrary. Notwithstanding anything to the
      contrary in this Section 6, the Company's determination to redeem in cash
      shall be applied ratably among the Holders based upon the principal amount
      of Debentures initially purchased by each Holder, adjusted upward ratably
      in the event all of the shares of Debentures of any Holder are no longer
      outstanding.

      Section 7. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, interest and liquidated damages (if
any) on, this Debenture at the time, place, and rate, and in the coin or
currency, herein prescribed. This Debenture is a direct obligation of the
Company. This Debenture ranks pari passu with all other Debentures now or
hereafter issued under the terms set forth herein. As long as there are
Debentures outstanding, the Company shall not and shall cause it subsidiaries
not to, without the consent of the Holders, (a) amend its certificate of
incorporation, bylaws or other charter documents so as to adversely affect any
rights of the Holders; (b) except as provided in Section 4.15 of the Purchase
Agreement, repay, repurchase or offer to repay, repurchase or otherwise acquire
shares of its Common Stock or other equity securities other than as to the
Underlying Shares to the extent permitted or required under the Transaction
Documents; or (c) enter into any agreement with respect to any of the foregoing.

      Section 8. If this Debenture shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Debenture, or in lieu of or in
substitution for a lost, stolen or destroyed debenture, a new Debenture for the
principal amount of this Debenture so mutilated, lost, stolen or destroyed but
only upon receipt of evidence of such loss, theft or destruction of such
Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.

      Section 9. No indebtedness of the Company is senior to this Debenture in
right of payment, whether with respect to interest, damages or upon liquidation
or dissolution or otherwise. The Company will not and will not permit any of its
subsidiaries to, directly or indirectly, enter into, create, incur, assume or
suffer to exist any indebtedness of any kind, on or with respect to any of its
property or assets now owned or hereafter acquired or any interest therein or
any income or profits therefrom that is senior in any respect to the Company's
obligations under the Debentures.

                                       23
<PAGE>
      Section 10. All questions concerning the construction, validity,
enforcement and interpretation of this Debenture shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by any of the Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the "New
York Courts"). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, or such New York Courts are improper or
inconvenient venue for such proceeding. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Debenture and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any 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 Debenture or the transactions contemplated hereby. If either party shall
commence an action or proceeding to enforce any provisions of this Debenture,
then the prevailing party in such action or proceeding shall be reimbursed by
the other party for its attorneys fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.

      Section 11. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Debenture. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Debenture on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Debenture. Any waiver
must be in writing.

      Section 12. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder shall violate
applicable laws governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.
The Company covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law or other law which
would prohibit or forgive the Company from paying all or any portion of the
principal of or interest on the Debentures as contemplated herein, wherever
enacted, now or at any time hereafter in force, or

                                       24
<PAGE>
which may affect the covenants or the performance of this indenture, and the
Company (to the extent it may lawfully do so) hereby expressly waives all
benefits or advantage of any such law, and covenants that it will not, by resort
to any such law, hinder, delay or impeded the execution of any power herein
granted to the Holder, but will suffer and permit the execution of every such as
though no such law has been enacted.

      Section 13. Whenever any payment or other obligation hereunder shall be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day.

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

                                       25
<PAGE>
      IN WITNESS WHEREOF, the Company has caused this Convertible Debenture to
be duly executed by a duly authorized officer as of the date first above
indicated.

                                    AUTHENTIDATE HOLDING CORP.

                                    By:_____________________________________
                                       Name:
                                       Title:
<PAGE>
                                     ANNEX A

                              NOTICE OF CONVERSION

The undersigned hereby elects to convert principal and, if specified, interest
under the 7% Convertible Debenture of Authentidate Holding Corp., (the
"Company") due on May ___, 2006, into shares of common stock, $0.001 par value
per share (the "Common Stock"), of the Company according to the conditions
hereof, as of the date written below. If shares are to be issued in the name of
a person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Company in accordance therewith. No fee
will be charged to the holder for any conversion, except for such transfer
taxes, if any.

By the delivery of this Notice of Conversion the undersigned represents and
warrants to the Company that its ownership of the Company's Common Stock does
not exceed the amounts determined in accordance with Section 13(d) of the
Exchange Act, specified under Section 4 of this Debenture.

The undersigned agrees to comply with the prospectus delivery requirements under
the applicable securities laws in connection with any transfer of the aforesaid
shares of Common Stock.

Conversion calculations:
                           Date to Effect Conversion:

                           Principal Amount of Debentures to be Converted

                           Payment of Interest in Kind        [ ] Yes   [ ] No
                             If yes, $ _______ of Interest Accrued on Account of
                             Conversion at Issue

                           Number of shares of Common Stock to be Issued:

                           Applicable Conversion Price:

                           Signature:

                           Name:

                           Address:
<PAGE>
                                   SCHEDULE 1

                               CONVERSION SCHEDULE

7% Convertible Debentures due on May __, 2006, in the aggregate principal amount
of $____________ issued by Authentidate Holding Corp. This Conversion Schedule
reflects conversions made under Section 4 of the above referenced Debenture.

                                     Dated:

<TABLE>
<CAPTION>
                                                 Aggregate Principal
                                                  Amount Remaining
  Date of Conversion                                Subsequent to
 (or for first entry,                                Conversion
 Original Issue Date)    Amount of Conversion       (or original          Company Attest
                                                  Principal Amount)
<S>                      <C>                     <C>                      <C>

</TABLE>

                                       28<PAGE>

                                                                     EXHIBIT 4.2

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS 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 SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES

                             STOCK PURCHASE WARRANT

                To Purchase __________ Shares of Common Stock of

                           AUTHENTIDATE HOLDING CORP.

            THIS CERTIFIES that, for value received, _____________ (the
"Holder"), is entitled, upon the terms and subject to the limitations on
exercise and the conditions hereinafter set forth, at any time on or after May
___, 2003 (the "Initial Exercise Date") and on or prior to the close of business
on the fifth anniversary of the Initial Exercise Date (the "Termination Date")
but not thereafter, to subscribe for and purchase from Authentidate Holding
Corp., a corporation incorporated in the State of Delaware (the "Company"), up
to ____________ shares (the "Warrant Shares") of Common Stock, par value $0.001
per share, of the Company (the "Common Stock"). The purchase price of one share
of Common Stock (the "Exercise Price") under this Warrant shall be $_____,
subject to adjustment hereunder. The Exercise Price and the number of Warrant
Shares for which the Warrant is exercisable shall be subject to adjustment as
provided herein. CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED HEREIN SHALL
HAVE THE MEANINGS SET FORTH IN THAT CERTAIN SECURITIES PURCHASE AGREEMENT (THE
"PURCHASE AGREEMENT"), DATED MAY __, 2003, BETWEEN THE COMPANY AND THE INVESTORS
SIGNATORY THERETO.

                                       1
<PAGE>
            1. Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
Holder in person or by duly authorized attorney, upon surrender of this Warrant
together with the Assignment Form annexed hereto properly endorsed.

            2. Authorization of Shares. The Company covenants that all Warrant
Shares which may be issued upon the exercise of the purchase rights represented
by this Warrant will, upon exercise of the purchase rights represented by this
Warrant, be duly authorized, validly issued, fully paid and nonassessable and
free from all taxes, liens and charges in respect of the issue thereof (other
than taxes in respect of any transfer occurring contemporaneously with such
issue).

            3. Exercise of Warrant.

            Except as provided in Section 4 herein, exercise of the purchase
            rights represented by this Warrant may be made at any time or times
            on or after the Initial Exercise Date and on or before the
            Termination Date by the surrender of this Warrant and the Notice of
            Exercise Form annexed hereto duly executed, at the office of the
            Company (or such other office or agency of the Company as it may
            designate by notice in writing to the registered Holder at the
            address of such Holder appearing on the books of the Company) and
            upon payment of the Exercise Price of the shares thereby purchased
            by wire transfer or cashier's check drawn on a United States bank or
            by means of a cashless exercise, the Holder shall be entitled to
            receive a certificate for the number of Warrant Shares so purchased.
            Certificates for shares purchased hereunder shall be delivered to
            the Holder within seven (7) Trading Days after the date on which
            this Warrant shall have been exercised as aforesaid. This Warrant
            shall be deemed to have been exercised and such certificate or
            certificates shall be deemed to have been issued, and Holder or any
            other person so designated to be named therein shall be deemed to
            have become a holder of record of such shares for all purposes, as
            of the date the Warrant has been exercised by payment to the Company
            of the Exercise Price and all taxes required to be paid by the
            Holder, if any, pursuant to Section 5 prior to the issuance of such
            shares, have been paid. If the Company fails to deliver to the
            Holder a certificate or certificates representing the Warrant Shares
            pursuant to this Section 3(a) by the seventh Trading Day after the
            date of exercise, then the Holder will have the right to rescind
            such exercise. In addition to any other rights available to the
            Holder, if the Company fails to deliver to the Holder a certificate
            or certificates representing the Warrant Shares pursuant to an
            exercise by the seventh Trading Day after the date of exercise, and
            if after such seventh Trading Day the Holder is required by its
            broker to purchase (in an open market transaction or otherwise)
            shares of Common Stock to deliver in satisfaction of a sale by the
            Holder of the Warrant Shares which the Holder anticipated receiving
            upon such exercise (a "Buy-In"), then the Company shall (1) pay in
            cash to the Holder the amount by which (x) the Holder's total
            purchase price (including

                                       2
<PAGE>
            brokerage commissions, if any) for the shares of Common Stock so
            purchased exceeds (y) the amount obtained by multiplying (A) the
            number of Warrant Shares that the Company was required to deliver to
            the Holder in connection with the exercise at issue times (B) the
            closing bid price of the Common Stock at the time of the obligation
            giving rise to such purchase obligation, and (2) at the option of
            the Holder, either reinstate the portion of the Warrant and
            equivalent number of Warrant Shares for which such exercise was not
            honored or deliver to the Holder the number of shares of Common
            Stock that would have been issued had the Company timely complied
            with its exercise and delivery obligations hereunder. For example,
            if the Holder purchases Common Stock having a total purchase price
            of $11,000 to cover a Buy-In with respect to an attempted exercise
            of shares of Common Stock with a market price on the date of
            exercise totaled $10,000, under clause (1) of the immediately
            preceding sentence the Company shall be required to pay the Holder
            $1,000. The Holder shall provide the Company written notice
            indicating the amounts payable to the Holder in respect of the
            Buy-In. Nothing herein shall limit a Holder's right to pursue any
            other remedies available to it hereunder, at law or in equity
            including, without limitation, a decree of specific performance
            and/or injunctive relief with respect to the Company's failure to
            timely deliver certificates representing shares of Common Stock upon
            exercise of the Warrant as required pursuant to the terms hereof.
            Notwithstanding anything to the contrary herein, in the event a
            Holder is entitled to collect liquidated damages hereunder and
            liquidated damages pursuant to Section 4.1(a) of the Purchase
            Agreement, the Holder shall be limited to collect, at its option, of
            such remedies, only one such remedy on any given occasion.

                  (b) If this Warrant shall have been exercised in part, the
      Company shall, at the time of delivery of the certificate or certificates
      representing Warrant Shares, deliver to Holder a new Warrant evidencing
      the rights of Holder to purchase the unpurchased Warrant Shares called for
      by this Warrant, which new Warrant shall in all other respects be
      identical with this Warrant.

                  (c) Notwithstanding anything herein to the contrary, in no
      event shall the Holder be permitted to exercise this Warrant for Warrant
      Shares to the extent that (i) the number of shares of Common Stock owned
      by such Holder (other than Warrant Shares issuable upon exercise of this
      Warrant) plus (ii) the number of Warrant Shares issuable upon exercise of
      this Warrant, would be equal to or exceed 4.9999% of the number of shares
      of Common Stock then issued and outstanding, including shares issuable
      upon exercise of this Warrant held by such Holder after application of
      this Section 3(c). As used herein, beneficial ownership shall be
      determined in accordance with Section 13(d) of the Exchange Act. To the
      extent that the limitation contained in this Section 3(c) applies, the
      determination of whether this Warrant is exercisable (in relation to other
      securities owned by the Holder) and of which a portion of this Warrant is
      exercisable shall be in the sole discretion of such Holder, and the
      submission of a Notice of Exercise shall be deemed to be such Holder's
      determination of whether this Warrant is exercisable (in relation to other
      securities owned by such Holder) and of which portion of this Warrant is
      exercisable, in each case subject to such aggregate percentage limitation,
      and the Company shall have no obligation to verify or confirm the accuracy
      of such

                                       3
<PAGE>
      determination. Nothing contained herein shall be deemed to restrict the
      right of a Holder to exercise this Warrant into Warrant Shares at such
      time as such exercise will not violate the provisions of this Section
      3(c). The provisions of this Section 3(c) may be waived by the Holder
      upon, at the election of the Holder, not less than 61 days' prior notice
      to the Company, and the provisions of this Section 3(c) shall continue to
      apply until such 61st day (or such later date, as determined by the
      Holder, as may be specified in such notice of waiver). No exercise of this
      Warrant in violation of this Section 3(c) but otherwise in accordance with
      this Warrant shall affect the status of the Warrant Shares as validly
      issued, fully-paid and nonassessable.

                  (d) This Warrant may also be exercised by means of a "cashless
      exercise" in which the Holder shall be entitled to receive a certificate
      for the number of Warrant Shares equal to the quotient obtained by
      dividing [(A-B) (X)] by (A), where:

            (A) = the average of the high and low trading prices per share of
                  Common Stock on the Trading Day preceding the date of such
                  election;

            (B) = the Exercise Price of the Warrants; and

            (X) = the number of Warrant Shares issuable upon exercise of the
                  Warrants in accordance with the terms of this Warrant.

            4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction multiplied by
the Exercise Price.

            5. Charges, Taxes and Expenses. Issuance of certificates for Warrant
Shares shall be made without charge to the Holder for any issue or transfer tax
or other incidental expense in respect of the issuance of such certificate, all
of which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be
directed by the Holder; provided, however, that in the event certificates for
Warrant Shares are to be issued in a name other than the name of the Holder,
this Warrant when surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the Holder; and the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.

            6. Closing of Books. The Company will not close its stockholder
books or records in any manner which prevents the timely exercise of this
Warrant.

            7. Transfer, Division and Combination.

                  (a) Subject to compliance with any applicable securities laws,
      transfer of this Warrant and all rights hereunder, in whole or in part,
      shall be registered on the books of the Company to be maintained for such
      purpose, upon surrender of this Warrant at the principal office of the
      Company, together with a written assignment of this Warrant

                                       4
<PAGE>
      substantially in the form attached hereto duly executed by the Holder or
      its agent or attorney and funds sufficient to pay any transfer taxes
      payable upon the making of such transfer. Upon such surrender and, if
      required, such payment, the Company shall execute and deliver a new
      Warrant or Warrants in the name of the assignee or assignees and in the
      denomination or denominations specified in such instrument of assignment,
      and shall issue to the assignor a new Warrant evidencing the portion of
      this Warrant not so assigned, and this Warrant shall promptly be
      cancelled. A Warrant, if properly assigned, may be exercised by a new
      holder for the purchase of Warrant Shares without having a new Warrant
      issued.

                  (b) This Warrant may be divided or combined with other
      Warrants upon presentation hereof at the aforesaid office of the Company,
      together with a written notice specifying the names and denominations in
      which new Warrants are to be issued, signed by the Holder or its agent or
      attorney. Subject to compliance with Section 7(a), as to any transfer
      which may be involved in such division or combination, the Company shall
      execute and deliver a new Warrant or Warrants in exchange for the Warrant
      or Warrants to be divided or combined in accordance with such notice.

                  (c) The Company shall prepare, issue and deliver at its own
      expense (other than transfer taxes) the new Warrant or Warrants under this
      Section 7.

                  (d) The Company agrees to maintain, at its aforesaid office,
      books for the registration and the registration of transfer of the
      Warrants.

            8. No Rights as Shareholder until Exercise. This Warrant does not
entitle the Holder to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof. Upon the surrender of this Warrant and the
payment of the aggregate Exercise Price (or by means of a cashless exercise),
the Warrant Shares so purchased shall be and be deemed to be issued to such
Holder as the record owner of such shares as of the close of business on the
later of the date of such surrender or payment.

            9. Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which shall
not include the posting of any bond), and upon surrender and cancellation of
such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.

            10. Saturdays, Sundays, Holidays, etc. If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a Saturday,
Sunday or legal holiday.

            11. Adjustments of Exercise Price and Number of Warrant Shares.

                                       5
<PAGE>
                  (a) Stock Splits, etc. The number and kind of securities
      purchasable upon the exercise of this Warrant and the Exercise Price shall
      be subject to adjustment from time to time upon the happening of any of
      the following. In case the Company shall (i) pay a dividend in shares of
      Common Stock or make a distribution in shares of Common Stock to holders
      of its outstanding Common Stock, (ii) subdivide its outstanding shares of
      Common Stock into a greater number of shares, (iii) combine its
      outstanding shares of Common Stock into a smaller number of shares of
      Common Stock, or (iv) issue any shares of its capital stock in a
      reclassification of the Common Stock, then the number of Warrant Shares
      purchasable upon exercise of this Warrant immediately prior thereto shall
      be adjusted so that the Holder shall be entitled to receive the kind and
      number of Warrant Shares or other securities of the Company which it would
      have owned or have been entitled to receive had such Warrant been
      exercised in advance thereof. Upon each such adjustment of the kind and
      number of Warrant Shares or other securities of the Company which are
      purchasable hereunder, the Holder shall thereafter be entitled to purchase
      the number of Warrant Shares or other securities resulting from such
      adjustment at an Exercise Price per Warrant Share or other security
      obtained by multiplying the Exercise Price in effect immediately prior to
      such adjustment by the number of Warrant Shares purchasable pursuant
      hereto immediately prior to such adjustment and dividing by the number of
      Warrant Shares or other securities of the Company resulting from such
      adjustment. An adjustment made pursuant to this paragraph shall become
      effective immediately after the effective date of such event retroactive
      to the record date, if any, for such event.

                  (b) Anti-Dilution Provisions. During the Exercise Period, the
      Exercise Price shall be subject to adjustment from time to time as
      provided in this Section 11(b). In the event that any adjustment of the
      Exercise Price as required herein results in a fraction of a cent, such
      Exercise Price shall be rounded up or down to the nearest cent.

                  (i) Adjustment of Exercise Price. If and whenever the Company
            issues or sells, or in accordance with Section 11(b)(ii)(B) hereof
            is deemed to have issued or sold, any shares of Common Stock for a
            consideration per share of less than the then the Exercise Price or
            for no consideration (such lower price, the "Base Share Price" and
            such issuances collectively, a "Dilutive Issuance"), then, the
            Exercise Price shall be reduced to a price determined by dividing
            (i) an amount equal to the sum of (a) the total number of shares of
            Common Stock outstanding immediately prior to such issuance or sale
            multiplied by the Exercise Price then in effect, plus (b) the
            consideration, if any, received by the Company upon such issuance or
            sale, by (ii) the total number of shares of Common Stock outstanding
            immediately after such issuance or sale, provided, that for purposes
            hereof, all shares of Common Stock that are issuable upon
            conversion, exercise or exchange of Capital Share Equivalents shall
            be deemed outstanding immediately after the issuance of such Common
            Stock. Such adjustment shall be made whenever such shares of Common
            Stock or Capital Share Equivalents are issued.

                  (ii) Effect on Exercise Price of Certain Events. For purposes
            of determining the adjusted Exercise Price under Section 11(b)
            hereof, the following will be applicable:

                                       6
<PAGE>
                        (A) Issuance of Rights or Options. If the Company in any
            manner issues or grants any warrants, rights or options, whether or
            not immediately exercisable, to subscribe for or to purchase Common
            Stock or other securities exercisable, convertible into or
            exchangeable for Common Stock ("Convertible Securities") (such
            warrants, rights and options to purchase Common Stock or Convertible
            Securities are hereinafter referred to as "Options") and the price
            per share for which Common Stock is issuable upon the exercise of
            such Options is less than the Exercise Price ("Below Base Price
            Options"), then the maximum total number of shares of Common Stock
            issuable upon the exercise of all such Below Base Price Options
            (assuming full exercise, conversion or exchange of Convertible
            Securities, if applicable) will, as of the date of the issuance or
            grant of such Below Base Price Options, be deemed to be outstanding
            and to have been issued and sold by the Company for such price per
            share. For purposes of the preceding sentence, the "price per share
            for which Common Stock is issuable upon the exercise of such Below
            Base Price Options" is determined by dividing (i) the total amount,
            if any, received or receivable by the Company as consideration for
            the issuance or granting of all such Below Base Price Options, plus
            the minimum aggregate amount of additional consideration, if any,
            payable to the Company upon the exercise of all such Below Base
            Price Options, plus, in the case of Convertible Securities issuable
            upon the exercise of such Below Base Price Options, the minimum
            aggregate amount of additional consideration payable upon the
            exercise, conversion or exchange thereof at the time such
            Convertible Securities first become exercisable, convertible or
            exchangeable, by (ii) the maximum total number of shares of Common
            Stock issuable upon the exercise of all such Below Base Price
            Options (assuming full conversion of Convertible Securities, if
            applicable). No further adjustment to the Exercise Price will be
            made upon the actual issuance of such Common Stock upon the exercise
            of such Below Base Price Options or upon the exercise, conversion or
            exchange of Convertible Securities issuable upon exercise of such
            Below Base Price Options.

                        (B) Issuance of Convertible Securities. If the Company
            in any manner issues or sells any Convertible Securities, whether or
            not immediately convertible (other than where the same are issuable
            upon the exercise of Options) and the price per share for which
            Common Stock is issuable upon such exercise, conversion or exchange
            is less than the Exercise Price, then the maximum total number of
            shares of Common Stock issuable upon the exercise, conversion or
            exchange of all such Convertible Securities will, as of the date of
            the issuance of such Convertible Securities, be deemed to be
            outstanding and to have been issued and sold by the Company for such
            price per share. For the purposes of the preceding sentence, the
            "price per share for which Common Stock is issuable upon such
            exercise, conversion or exchange" is determined by dividing (i) the
            total amount, if any, received or receivable

                                       7
<PAGE>
            by the Company as consideration for the issuance or sale of all such
            Convertible Securities, plus the minimum aggregate amount of
            additional consideration, if any, payable to the Company upon the
            exercise, conversion or exchange thereof at the time such
            Convertible Securities first become exercisable, convertible or
            exchangeable, by (ii) the maximum total number of shares of Common
            Stock issuable upon the exercise, conversion or exchange of all such
            Convertible Securities. No further adjustment to the Exercise Price
            will be made upon the actual issuance of such Common Stock upon
            exercise, conversion or exchange of such Convertible Securities.

                        (C) Change in Option Price or Conversion Rate. If there
            is a change at any time in (i) the amount of additional
            consideration payable to the Company upon the exercise of any
            Options; (ii) the amount of additional consideration, if any,
            payable to the Company upon the exercise, conversion or exchange of
            any Convertible Securities; or (iii) the rate at which any
            Convertible Securities are convertible into or exchangeable for
            Common Stock (in each such case, other than under or by reason of
            provisions designed to protect against dilution), the Exercise Price
            in effect at the time of such change will be readjusted to the
            Exercise Price which would have been in effect at such time had such
            Options or Convertible Securities still outstanding provided for
            such changed additional consideration or changed conversion rate, as
            the case may be, at the time initially granted, issued or sold.

                        (D) Calculation of Consideration Received. If any Common
            Stock, Options or Convertible Securities are issued, granted or sold
            for cash, the consideration received therefor for purposes of this
            Warrant will be the amount received by the Company therefor, before
            deduction of reasonable commissions, underwriting discounts or
            allowances or other reasonable expenses paid or incurred by the
            Company in connection with such issuance, grant or sale. In case any
            Common Stock, Options or Convertible Securities are issued or sold
            for a consideration part or all of which shall be other than cash,
            the amount of the consideration other than cash received by the
            Company will be the fair market value of such consideration, except
            where such consideration consists of securities, in which case the
            amount of consideration received by the Company will be the Market
            Price thereof as of the date of receipt. In case any Common Stock,
            Options or Convertible Securities are issued in connection with any
            merger or consolidation in which the Company is the surviving
            corporation, the amount of consideration therefor will be deemed to
            be the fair market value of such portion of the net assets and
            business of the non-surviving corporation as is attributable to such
            Common Stock, Options or Convertible Securities, as the case may be.
            The fair market value of any consideration other than cash or
            securities will be determined in good faith by an investment banker
            or other

                                       8
<PAGE>
            appropriate expert of national reputation selected by the Company
            and reasonably acceptable to the holder hereof, with the costs of
            such appraisal to be borne by the Company.

                        (E) Exceptions to Adjustment of Exercise Price. No
            adjustment to the Exercise Price will be made upon (i) the grant or
            exercise of any Convertible Securities which may hereafter be
            granted or exercised under any employee benefit plan of the Company
            now existing or to be implemented in the future, so long as the
            issuance of such Convertible Securities is approved 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, (ii) the issuance of up to 100,000
            shares of Common Stock, in the aggregate, to consultants or advisors
            to the Company for services to be rendered to the Company by such
            consultants or advisors, (iii) upon the exercise of this Warrant or
            any other warrant of this series or of any other series or security
            issued by the Company in connection with the offer and sale of this
            Company's securities pursuant to the Purchase Agreement; or (iv)
            upon the exercise of or conversion of any Convertible Securities,
            options or warrants issued and outstanding on the initial issuance
            date of this Warrant.

            (iii) Minimum Adjustment of Exercise Price. No adjustment of the
      Exercise Price shall be made in an amount of less than 1% of the Exercise
      Price in effect at the time such adjustment is otherwise required to be
      made, but any such lesser adjustment shall be carried forward and shall be
      made at the time and together with the next subsequent adjustment which,
      together with any adjustments so carried forward, shall amount to not less
      than 1% of such Exercise Price.

            12. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then the Holder shall have the right thereafter to receive, at
their option, (a) upon exercise of this Warrant, the number of shares of Common
Stock of the successor or acquiring corporation or of the Company, if it is the
surviving corporation, and Other Property receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of assets
by a Holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such event,

                                       9
<PAGE>
or (b) cash equal to the value of this Warrant as determined in accordance with
the Black-Sholes option pricing formula. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of Warrant Shares
for which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 12. For purposes of
this Section 12, "common stock of the successor or acquiring corporation" shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 12 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.

            13. Voluntary Adjustment by the Company. The Company may at any time
during the term of this Warrant reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of Directors
of the Company.

            14. Notice of Adjustment. Whenever the number of Warrant Shares or
number or kind of securities or other property purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall promptly mail by registered or certified mail, return receipt requested,
to the Holder notice of such adjustment or adjustments setting forth the number
of Warrant Shares (and other securities or property) purchasable upon the
exercise of this Warrant and the Exercise Price of such Warrant Shares (and
other securities or property) after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made. Such notice, in the absence of
manifest error, shall be conclusive evidence of the correctness of such
adjustment.

            15. Notice of Corporate Action. If at any time:

                  (a) the Company shall take a record of the holders of its
      Common Stock for the purpose of entitling them to receive a dividend or
      other distribution, or any right to subscribe for or purchase any
      evidences of its indebtedness, any shares of stock of any class or any
      other securities or property, or to receive any other right, or

                  (b) there shall be any capital reorganization of the Company,
      any reclassification or recapitalization of the capital stock of the
      Company or any consolidation or merger of the Company with, or any sale,
      transfer or other disposition of all or substantially all the property,
      assets or business of the Company to, another corporation or,

                                       10
<PAGE>
                  (c) there shall be a voluntary or involuntary dissolution,
      liquidation or winding up of the Company;

then, in any one or more of such cases, the Company shall give to Holder (i) at
least 20 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)
in the case of any such reorganization, reclassification, merger, consolidation,
sale, transfer, disposition, dissolution, liquidation or winding up, at least 20
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause also shall specify (i) the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, the date on which the holders of Common Stock shall be
entitled to any such dividend, distribution or right, and the amount and
character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their Warrant Shares for securities or other property
deliverable upon such disposition, dissolution, liquidation or winding up. Each
such written notice shall be sufficiently given if addressed to Holder at the
last address of Holder appearing on the books of the Company and delivered in
accordance with Section 17(d).

            16. Authorized Shares. The Company covenants that during the period
the Warrant is outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of the
Warrant Shares upon the exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Principal Market
upon which the Common Stock may be listed.

                  The Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any Warrant Shares
above the amount payable therefor upon such exercise immediately prior to such
increase in par value, (b) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use
commercially reasonable efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.

                                       11
<PAGE>
                  Before taking any action which would result in an adjustment
in the number of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.

            17. Miscellaneous.

                  (a) Jurisdiction. This Warrant shall constitute a contract
      under the laws of New York, without regard to its conflict of law,
      principles or rules.

                  (b) Restrictions. The Holder acknowledges that the Warrant
      Shares acquired upon the exercise of this Warrant, if not registered, will
      have restrictions upon resale imposed by state and federal securities
      laws.

                  (c) Nonwaiver and Expenses. No course of dealing or any delay
      or failure to exercise any right hereunder on the part of Holder shall
      operate as a waiver of such right or otherwise prejudice Holder's rights,
      powers or remedies, notwithstanding all rights hereunder terminate on the
      Termination Date. If the Company willfully and knowingly fails to comply
      with any provision of this Warrant, which results in any material damages
      to the Holder, the Company shall pay to Holder such amounts as shall be
      sufficient to cover any costs and expenses including, but not limited to,
      reasonable attorneys' fees, including those of appellate proceedings,
      incurred by Holder in collecting any amounts due pursuant hereto or in
      otherwise enforcing any of its rights, powers or remedies hereunder.

                  (d) Notices. Any notice, request or other document required or
      permitted to be given or delivered to the Holder by the Company shall be
      delivered in accordance with the notice provisions of the Purchase
      Agreement.

                  (e) Limitation of Liability. No provision hereof, in the
      absence of affirmative action by Holder to purchase Warrant Shares, and no
      enumeration herein of the rights or privileges of Holder, shall give rise
      to any liability of Holder for the purchase price of any Common Stock or
      as a stockholder of the Company, whether such liability is asserted by the
      Company or by creditors of the Company.

                  (f) Remedies. Holder, in addition to being entitled to
      exercise all rights granted by law, including recovery of damages, will be
      entitled to specific performance of its rights under this Warrant. The
      Company agrees that monetary damages would not be adequate compensation
      for any loss incurred by reason of a breach by it of the provisions of
      this Warrant and hereby agrees to waive the defense in any action for
      specific performance that a remedy at law would be adequate.

                  (g) Successors and Assigns. Subject to applicable securities
      laws, this Warrant and the rights and obligations evidenced hereby shall
      inure to the benefit of and be binding upon the successors of the Company
      and the successors and permitted assigns of Holder. The provisions of this
      Warrant are intended to be for the benefit of all Holders

                                       12
<PAGE>
      from time to time of this Warrant and shall be enforceable by any such
      Holder or holder of Warrant Shares.

                   (h) Amendment. This Warrant may be modified or amended or the
      provisions hereof waived with the written consent of the Company and the
      Holder.

                  (i) Severability. Wherever possible, each provision of this
      Warrant shall be interpreted in such manner as to be effective and valid
      under applicable law, but if any provision of this Warrant shall be
      prohibited by or invalid under applicable law, such provision shall be
      ineffective to the extent of such prohibition or invalidity, without
      invalidating the remainder of such provisions or the remaining provisions
      of this Warrant.

                  (j) Headings. The headings used in this Warrant are for the
      convenience of reference only and shall not, for any purpose, be deemed a
      part of this Warrant.

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

                                       13
<PAGE>
            IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officer thereunto duly authorized.

Dated:  May __, 2003

                                   AUTHENTIDATE HOLDING CORP.

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

                                       14
<PAGE>
                               NOTICE OF EXERCISE

To:   Authentidate Holding Corp.

            (1) The undersigned hereby elects to purchase ________ Warrant
Shares (the "Common Stock"), of Authentidate Holding Corp., pursuant to the
terms of the attached Warrant, and tenders herewith payment of the exercise
price in full, together with all applicable transfer taxes, if any.

            (2) Please issue a certificate or certificates representing said
Warrant Shares in the name of the undersigned or in such other name as is
specified below:

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

The Warrant Shares shall be delivered to the following:

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

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

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

            (3) The undersigned agrees to comply with the prospectus delivery
requirements under the applicable securities laws in connection with any
transfer of the aforesaid Warrant Shares.

                                    [PURCHASER]

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

                          Dated:
                                ---------------------------
<PAGE>
                                 ASSIGNMENT FORM

                   (To assign the foregoing warrant, execute
                   this form and supply required information.
                 Do not use this form to exercise the warrant.)

            FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to

                                                 whose address is
------------------------------------------------
                                                               .
---------------------------------------------------------------

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

                                                Dated:                ,
                                                      ---------------- ---------

               Holder's Signature:
                                  --------------------------------
               Holder's Address:
                                  --------------------------------

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

Signature Guaranteed:
                     -------------------------------------------

NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
<PAGE>
                   NOTICE OF EXERCISE OF COMMON STOCK WARRANT
                    PURSUANT TO CASHLESS EXERCISE PROVISIONS

To: Authentidate Holding Corp.

Aggregate Price of Warrant Before Exercise:  $_______
Aggregate Price Being Exercised:  $______
Exercise Price:  $______ per share
Number of Shares of Common Stock to be Issued Under this Notice:  ________
Remaining Aggregate Price (if any) After Issuance:  $_______

Gentlemen:

      The undersigned, registered Holder of the Warrant delivered herewith,
hereby irrevocably exercises such Warrant for, and purchases thereunder, shares
of the Common Stock of Authentidate Holding Corp., as provided below.
Capitalized terms used herein, unless otherwise defined herein, shall have the
meanings given in the Warrant. The portion of the Exercise Price (as defined in
the Warrant) to be applied toward the purchase of Common Stock pursuant to this
Notice of Exercise is $_______, thereby leaving a remaining Exercise Price (if
any) equal to $________. Such exercise shall be pursuant to the cashless
exercise provisions of Section 3 of the Warrant; therefore, Holder makes no
payment with this Notice of Exercise. The number of shares to be issued pursuant
to this exercise shall be determined by reference to the formula in Section 3 of
the Warrant which, by reference to Section 3, requires the use of the high and
low trading price of the Company's Common Stock on the Trading Day preceding the
date of such election. The high and low trading price of the Company's Common
Stock has been determined by Holder to be $______ and $_________, respectively,
which figure is acceptable to Holder for calculations of the number of shares of
Common Stock issuable pursuant to this Notice of Exercise. Holder requests that
the certificates for the purchased shares of Common Stock be issued in the name
of _________________________ and delivered to _________________________________.
To the extent the foregoing exercise is for less than the full Aggregate Price
of the Warrant, a replacement Warrant representing the remainder of the
Aggregate Price (and otherwise of like form, tenor and effect) shall be
delivered to Holder along with the share certificate evidencing the Common Stock
issued in response to this Notice of Exercise.

                                   [Purchaser]

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

                                   Date:

                                      NOTE

      The execution to the foregoing Notice of Exercise must exactly correspond
to the name of the Holder on the Warrant.

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