Document:

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                                                                     Exhibit 4.7

                          SECURITIES PURCHASE AGREEMENT

     This Securities Purchase Agreement (this "Agreement") is dated as of April
21, 2005, among Edentify, Inc., a Delaware corporation (the "Company" and after
a Public Liquidity Event, the term Company shall include the Public Liquidity
Company), and each purchaser identified on the signature pages hereto (each,
including its successors and assigns, a "Purchaser" and collectively the
"Purchasers").

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

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

                                   ARTICLE I.
                                   DEFINITIONS

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

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

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

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

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

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          "Closing Date" means the Business Day when all of the Transaction
     Documents have been executed and delivered by the applicable parties
     thereto, and all conditions precedent to (i) the Purchasers' obligations to
     pay the Subscription Amount and (ii) the Company's obligations to deliver
     the Securities have been satisfied or waived.

          "Commission" means the Securities and Exchange Commission.

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

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

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

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

          "Debentures" means, the 8% Senior Secured Convertible Debentures, in
     the form of Exhibit A, due, subject to the terms therein, upon the earlier
     of (a) the two year anniversary of the date hereof and (b) if a Public
     Liquidity Event has not occurred on or before the first anniversary of the
     date hereof, the one year anniversary of the date hereof.

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

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

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

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

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     Company receives benefits in addition to the investment of funds, but shall
     not include a transaction in which the Company is issuing securities
     primarily for the purpose of raising capital or to an entity whose primary
     business is investing in securities.

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

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

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

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

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

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

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

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

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

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

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

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

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

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          "Public Liquidity Company" shall mean (a) the Company, if after a
     Public Liquidity Event the Common Stock is registered pursuant to the
     Exchange Act or (b) the corporation whose common stock registered pursuant
     to the Exchange Act and is exchanged for Common Stock in the Public
     Liquidity Event.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                   ARTICLE II.
                                PURCHASE AND SALE

     2.1 Closing. On the Closing Date, upon the terms and subject to the
conditions set forth herein, concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and each Purchaser
agrees to purchase in the aggregate, severally and not jointly, $600,000
principal amount of the Debentures. Each Purchaser shall deliver to the Company
via wire transfer or a certified check immediately available funds equal to
their Subscription Amount and the Company shall deliver to each Purchaser their
respective Debenture and Warrants as determined pursuant to Section 2.2(a) and
the other items set forth in Section 2.2 issuable at the Closing. Upon
satisfaction of the conditions set forth in Section 2.2, the Closing shall occur
at the offices of FW, or such other location as the parties shall mutually
agree.

     2.2 Deliveries.

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

                    (i) this Agreement duly executed by the Company;

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                    (ii) a Debenture with a principal amount equal to such
               Purchaser's Subscription Amount, registered in the name of such
               Purchaser;

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

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

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

                    (i) this Agreement duly executed by such Purchaser;

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

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

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

     2.3 Closing Conditions.

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

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

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

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

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

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

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

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

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

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

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

          (p) Insurance. The Company and the Subsidiaries are insured by
     insurers of recognized financial responsibility against such losses and
     risks and in such amounts as are prudent and customary in the businesses in
     which the Company and the Subsidiaries are engaged, including, but not
     limited to, directors and officers insurance coverage at least equal to the
     aggregate principal amount of the Debentures. To the best of Company's
     knowledge, such insurance contracts and policies are accurate and complete.
     Neither the Company nor any Subsidiary has any reason to believe that it
     will not be able to renew its existing insurance coverage as and when such
     coverage expires or to obtain similar coverage from similar insurers as may
     be necessary to continue its business without a significant increase in
     cost.

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

          (r) Internal Accounting Controls. The Company and the Subsidiaries
     maintain a system of internal accounting controls sufficient to provide
     reasonable assurance that (i) transactions are executed in accordance with
     management's general or specific authorizations, (ii) transactions are
     recorded as necessary to permit preparation of financial statements in
     conformity with GAAP and to maintain asset accountability, (iii) access to
     assets is permitted only in accordance with management's general or
     specific authorization, and (iv) the recorded accountability for assets is
     compared with the existing assets at reasonable intervals and appropriate
     action is taken with respect to any differences.

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

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

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

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

                                      -12-

<PAGE>

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

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

          (x) No Integrated Offering. Assuming the accuracy of the Purchasers'
     representations and warranties set forth in Section 3.2, neither the
     Company, nor any of its affiliates, nor any Person acting on its or their
     behalf has, directly or indirectly, made any offers or sales of any
     security or solicited any offers to buy any security, under circumstances
     that would cause this offering of the Securities to be integrated with
     prior offerings by the Company for purposes of the Securities Act or any
     applicable shareholder approval provisions.

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

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

                                      -13-

<PAGE>

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

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

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

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

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

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

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

                                      -14-

<PAGE>

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

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

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

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

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

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

                                      -15-

<PAGE>

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

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

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

                                   ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

     4.1 Transfer Restrictions.

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

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

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

                                      -16-

<PAGE>

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

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

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

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

                                      -17-

<PAGE>

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

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

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

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

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

                                      -18-

<PAGE>

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

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

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

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

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

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

                                      -19-

<PAGE>

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

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

     4.11 Reservation and Listing of Securities.

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

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

                                      -20-

<PAGE>

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

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

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

                                      -21-

<PAGE>

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

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

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

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

                                      -22-

<PAGE>

                                   ARTICLE V.
                                  MISCELLANEOUS

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

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

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

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

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

                                      -23-

<PAGE>

     5.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.

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

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

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

                                      -24-

<PAGE>

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

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

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

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

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

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

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

                                      -25-

<PAGE>

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

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

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

                                      -26-

<PAGE>

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

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

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

                            (Signature Pages Follow)

                                      -27-

<PAGE>

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

EDENTIFY, INC.                          Address for Notice:

By:                                     109-22 Shearwater Court
    ---------------------------------   Jersey City, NU 07305
Name: Terrence DeFranco
Title: President

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

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

                                      -28-

<PAGE>

      [PURCHASER SIGNATURE PAGES TO EDENTIFY SECURITIES PURCHASE AGREEMENT]

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

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

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

Address for Notice of Investing Entity:

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

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

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

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

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

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

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

Subscription Amount:
                     -----------------------------------------------------------

                           [SIGNATURE PAGES CONTINUE]

                                      -29-

<PAGE>

                                                                         ANNEX A

                                CLOSING STATEMENT

Pursuant to the attached Securities Purchase Agreement, dated as of the date
hereto, the purchasers shall purchase up to $600,000 of Debentures and Warrants
from Edentify, Inc., (the "Company"). All funds will be wired into a trust
account maintained by ____________, counsel to the Company. All funds will be
disbursed in accordance with this Closing Statement.

DISBURSEMENT DATE: April 21, 2005

I. PURCHASE PRICE

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

II. DISBURSEMENTS

                                              $
                                              $
                                              $
                                              $
                                              $

TOTAL AMOUNT DISBURSED:                       $
</TABLE>

WIRE INSTRUCTIONS:

To: _________________________________

                                      -30-<PAGE>
                                                                     Exhibit 4.8

                                                                       EXHIBIT A

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

Original Issue Date: April 21, 2005

                                                                Amount: $600,000

                     8% SENIOR SECURED CONVERTIBLE DEBENTURE

     THIS DEBENTURE is one of a series of duly authorized and issued 8% Senior
Secured Convertible Debentures of Edentify, Inc., a Delaware corporation, having
a principal place of business at 109-22 Shearwater Court, Jersey City, NJ 07305
(the "Company"), designated as its 8% Senior Secured Convertible Debenture (the
"Debenture(s)").

     FOR VALUE RECEIVED, the Company promises to pay to _____________________ or
its registered assigns (the "Holder"), the principal sum of $600,000 on the
earlier of (a) the two year anniversary of the date hereof, (b) if a Public
Liquidity Event has not occurred on or before the first anniversary of the date
hereof, the one year anniversary of the date hereof and (c) 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 in accordance with the
provisions hereof. This Debenture is subject to the following additional
provisions:

     Section 1. Definitions. For the purposes hereof, in addition to the terms
defined elsewhere in this Debenture: (a) capitalized terms not otherwise defined
herein have the meanings given to such terms in the Purchase Agreement, and (b)
the following terms shall have the following meanings:

          "Alternate Consideration" shall have the meaning set forth in Section
     5(d).

                                       1

<PAGE>

          "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.

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

          "Change of Control Transaction" means the occurrence after the date
     hereof of any of (i) an acquisition after the date hereof by an individual
     or legal entity or "group" (as described in Rule 13d-5(b)(1) promulgated
     under the Exchange Act) of effective control (whether through legal or
     beneficial ownership of capital stock of the Company, by contract or
     otherwise) of in excess of 33% of the voting securities of the Company, or
     (ii) the Company merges into or consolidates with any other Person, or any
     Person merges into or consolidates with the Company and, after giving
     effect to such transaction, the stockholders of the Company immediately
     prior to such transaction own less than 33% of the aggregate voting power
     of the Company or the successor entity of such transaction, or (iii) the
     Company sells or transfers its assets, as an entirety or substantially as
     an entirety, to another Person and the stockholders of the Company
     immediately prior to such transaction own less than 33% of the aggregate
     voting power of the acquiring entity immediately after the transaction,
     (iv) a replacement at one time or within a three 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), or (v) the execution by the
     Company of an agreement to which the Company is a party or by which it is
     bound, providing for any of the events set forth above in (i) or (iv).

          "Common Stock" means the common stock, par value $0.001 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).

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

          Closing Price" means on any particular date (a) the last reported
     closing bid price per share of Common Stock on such date on the Trading
     Market (as reported by Bloomberg L.P. at 4:15 PM (New York time) as the
     last reported closing bid price for regular session trading on such day),
     or (b) if there is no such price on such date, then the closing bid price
     on the Trading Market on the date nearest preceding such date (as reported
     by Bloomberg L.P. at 4:15 PM (New York time) as the closing bid price for
     regular session trading on such day), or (c) if the Common Stock is not
     then listed or quoted on the Trading Market and if prices for the Common
     Stock are then reported in

                                       2

<PAGE>

     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 (d) if the shares of Common Stock are not then publicly
     traded the fair market value of a share of Common Stock as determined by an
     appraiser selected in good faith by the Purchasers of a majority in
     principal of the Debentures then outstanding.

          "Debenture Register" shall have the meaning set forth in Section 2(c).

          "Effectiveness Period" shall have the meaning given to such term in
     the Registration Rights Agreement.

          "Equity Conditions" shall mean, during the period in question, (i) the
     Company shall have duly honored all conversions and redemptions scheduled
     to occur or occurring by virtue of one or more Notice of Conversions, if
     any, (ii) all liquidated damages and other amounts owing in respect of the
     Debentures shall have been paid; (iii) there is an effective Registration
     Statement pursuant to which the Holder is permitted to utilize the
     prospectus thereunder to resell all of the shares issuable pursuant to the
     Transaction Documents (and the Company believes, in good faith, that such
     effectiveness will continue uninterrupted for the foreseeable future), (iv)
     the Common Stock is trading on the Trading Market and all of the shares
     issuable pursuant to the Transaction Documents are listed for trading on a
     Trading Market (and the Company believes, in good faith, that trading of
     the Common Stock on a Trading Market will continue uninterrupted for the
     foreseeable future), (v) there is a sufficient number of authorized but
     unissued and otherwise unreserved shares of Common Stock for the issuance
     of all of the shares issuable pursuant to the Transaction Documents, (vi)
     there is then existing no Event of Default or event which, with the passage
     of time or the giving of notice, would constitute an Event of Default,
     (vii) all of the shares issued or issuable pursuant to the transaction
     proposed would not violate the limitations set forth in Section 4(c) and
     (viii) no public announcement of a pending or proposed Fundamental
     Transaction, Change of Control Transaction or acquisition transaction has
     occurred that has not been consummated.

          "Event of Default" shall have the meaning set forth in Section 8.

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

          "Fundamental Transaction" shall have the meaning set forth in Section
     5(d).

          "Forced Conversion Notice" shall have the meaning set forth in Section
     6(d).

          "Force Conversion Notice Date" shall have the meaning set forth in
     Section 6(d).

          "Interest Conversion Rate" means 90% of the lesser of (a) the average
     of the 20 Closing Prices immediately prior to the applicable Interest
     Payment Date or (b) the average of the 20 Closing Prices immediately prior
     to the date the applicable interest payment shares are issued and delivered
     if after the Interest Payment Date.

                                       3

<PAGE>

          "Interest Payment Date" shall have the meaning set forth in Section
     2(a).

          "Late Fees" shall have the meaning set forth in Section 2(d).

          "Mandatory Prepayment Amount" for any Debentures shall equal the sum
     of (i) the greater of: (A) 250% of the principal amount of Debentures to be
     prepaid, plus all accrued and unpaid interest thereon, or (B) the number of
     shares issuable upon Conversion of this Debenture in full 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 Closing 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 greater, and (ii) all other
     amounts, costs, expenses and liquidated damages due in respect of such
     Debentures.

          "New York Courts" shall have the meaning set forth in Section 9(d).

          "Notice of Conversion" shall have the meaning set forth in Section
     4(a).

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

          "Optional Redemption Amount" shall mean the sum of (i) 125% of the
     principal amount of the Debenture then outstanding, (ii) accrued but unpaid
     interest and (iii) all liquidated damages and other amounts due in respect
     of the Debenture.

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

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

          "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 December 31, 2004, 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 date of the Purchase Agreement, to which the
     Company and the original Holder are parties, as amended, modified or
     supplemented from time to time in accordance with its terms.

                                       4

<PAGE>

          "Registration Statement" means a registration statement meeting the
     requirements set forth in the Registration Rights Agreement, covering among
     other things the resale of the Conversion Shares and naming the Holder as a
     "selling stockholder" thereunder.

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

          "Subsidiary" shall have the meaning given to such term in the Purchase
     Agreement.

          "Threshold Period" shall have the meaning given to such term in
     Section 6(d).

          "Trading Day" means a day on which the Common Stock is traded on a
     Trading Market.

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

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

     Section 2. Interest.

          a) Payment of Interest in Cash or Kind. The Company shall pay interest
     to the Holder on the aggregate unconverted and then outstanding principal
     amount of this Debenture at the rate of 8% per annum, payable quarterly on
     March 31, June 30, September 30 and December 31, beginning on the first
     such date after the Original Issue Date and on each Conversion Date (as to
     that principal amount then being converted) and on the Maturity Date
     (except that, if any such date is not a Business Day, then such payment
     shall be due on the next succeeding Business Day) (each such date, an
     "Interest Payment Date"), in cash or shares of Common Stock at the Interest
     Conversion Rate, or a combination thereof; provided, however, payment in
     shares of Common Stock may only occur if during the 10 Trading Days
     immediately prior to the applicable Interest Payment Date all of the Equity
     Conditions have been met and the Company shall have given the Holder notice
     in accordance with the notice requirements set forth below.

          b) Company's Election to Pay Interest in Kind. 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 10 Trading Days 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 10 Trading Days
     prior to an Interest

                                       5

<PAGE>

     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 Interest Payment Date in cash.

          c) Interest Calculations. Interest shall be calculated on the basis of
     a 360-day year and shall accrue daily commencing on the Original Issue Date
     until payment in full of the principal sum, together with all accrued and
     unpaid interest 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(d)(ii) 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
     Conversion Shares within the time period required by Section 4(d)(ii).
     Interest hereunder will be paid to the Person in whose name this Debenture
     is registered on the records of the Company regarding registration and
     transfers of Debentures (the "Debenture Register"). Except as otherwise
     provided herein, if at any time the Company pays interest partially in cash
     and partially in shares of Common Stock, then such payment shall be
     distributed ratably among the Holders based upon the principal amount of
     Debentures held by each Holder.

          d) Late Fee. All overdue accrued and unpaid interest to be paid
     hereunder shall entail a late fee at the rate of 18% per annum (or such
     lower maximum amount of interest permitted to be charged under applicable
     law) ("Late Fees") which will accrue daily, from the date such interest is
     due hereunder through and including the date of payment. Notwithstanding
     anything to the contrary contained herein, if on any Interest Payment Date
     the Company has elected to pay interest in Common Stock and is not able to
     pay accrued interest in the form of Common Stock because it does not then
     satisfy the conditions for payment in the form of Common Stock set forth
     above, then, at the option of the Holder, the Company, in lieu of
     delivering either shares of Common Stock pursuant to this Section 2 or
     paying the regularly scheduled cash interest payment, shall deliver, within
     three Trading Days of each applicable Interest Payment 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 the payment of interest due on
     such Interest Payment Date and the highest Closing Price during the period
     commencing on the Interest Payment Date and ending on the Trading Day prior
     to the date such payment is made.

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

     Section 3. Registration of Transfers and Exchanges.

          a) Different Denominations. This Debenture is exchangeable for an
     equal aggregate principal amount of Debentures of different authorized
     denominations, as

                                       6

<PAGE>

     requested by the Holder surrendering the same. No service charge will be
     made for such registration of transfer or exchange.

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

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

     Section 4. Conversion.

          a) Voluntary Conversion. At any time after the Original Issue Date
     until this Debenture is no longer outstanding, this Debenture shall be
     convertible 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(c) hereof). The Holder
     shall effect conversions by delivering to the Company the form of Notice of
     Conversion attached hereto as Annex A (a "Notice of Conversion"),
     specifying therein the principal amount of Debentures to be converted and
     the date on which such conversion is to be effected (a "Conversion Date").
     If no Conversion Date is specified in a Notice of Conversion, the
     Conversion Date shall be the date that such Notice of Conversion is
     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 plus all accrued and unpaid
     interest thereon has been so converted. Conversions hereunder shall have
     the effect of lowering the outstanding principal amount of this Debenture
     in an amount equal to the applicable conversion. The Holder and the Company
     shall maintain records showing the principal amount converted and the date
     of such conversions. The Company shall deliver any objection to any Notice
     of Conversion 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.

          b) Conversion Formula. Upon conversion of a principal amount of this
     Debenture, the Holder shall be entitled to a number of shares of Common
     Stock equal to (the principal amount converted/$600,000)*(10%)*(the number
     of shares of Common Stock of the Company outstanding on a fully diluted
     basis).

                                       7

<PAGE>

          c) Holder's Restriction on Conversion. The Company shall not effect
     any conversion of this Debenture, and the Holder shall not have the right
     to convert any portion of this Debenture, pursuant to Section 4(a) or
     otherwise, to the extent that after giving effect to such conversion, the
     Holder (together with the Holder's affiliates), as set forth on the
     applicable Notice of Conversion, would beneficially own in excess of 4.99%
     of the number of shares of the Common Stock outstanding immediately after
     giving effect to such conversion. For purposes of the foregoing sentence,
     the number of shares of Common Stock beneficially owned by the Holder and
     its affiliates shall include the number of shares of Common Stock issuable
     upon conversion of this Debenture with respect to which the determination
     of such sentence is being made, but shall exclude the number of shares of
     Common Stock which would be issuable upon (A) conversion of the remaining,
     nonconverted portion of this Debenture beneficially owned by the Holder or
     any of its affiliates and (B) exercise or conversion of the unexercised or
     nonconverted portion of any other securities of the Company (including,
     without limitation, any other Debentures or the Warrants) subject to a
     limitation on conversion or exercise analogous to the limitation contained
     herein beneficially owned by the Holder or any of its affiliates. Except as
     set forth in the preceding sentence, for purposes of this Section 4(c)(ii),
     beneficial ownership shall be calculated in accordance with Section 13(d)
     of the Exchange Act. To the extent that the limitation contained in this
     section applies, the determination of whether this Debenture is convertible
     (in relation to other securities owned by the Holder) and of which a
     portion of this Debenture is convertible shall be in the sole discretion of
     such Holder. To ensure compliance with this restriction, the Holder will be
     deemed to represent to the Company each time it delivers a Notice of
     Conversion that such Notice of Conversion has not violated the restrictions
     set forth in this paragraph and the Company shall have no obligation to
     verify or confirm the accuracy of such determination. For purposes of this
     Section 4(c)(ii), in determining the number of outstanding shares of Common
     Stock, the Holder may rely on the number of outstanding shares of Common
     Stock as reflected in (x) the Company's most recent Form 10-Q or Form 10-K,
     as the case may be, (y) a more recent public announcement by the Company or
     (z) any other notice by the Company or the Company's Transfer Agent setting
     forth the number of shares of Common Stock outstanding. Upon the written or
     oral request of the Holder, the Company shall within two Trading Days
     confirm orally and in writing to the Holder the number of shares of Common
     Stock then outstanding. In any case, the number of outstanding shares of
     Common Stock shall be determined after giving effect to the conversion or
     exercise of securities of the Company, including this Debenture, by the
     Holder or its affiliates since the date as of which such number of
     outstanding shares of Common Stock was reported. The provisions of this
     Section 4(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 4(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).

          d) Mechanics of Conversion

               i. Intentionally Omitted.

                                       8

<PAGE>

               ii. Delivery of Certificate Upon Conversion. Not later than three
          Trading Days after any Conversion Date, the Company will deliver to
          the Holder (A) a certificate or certificates representing the
          Conversion Shares 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 (including, if so timely
          elected by the Company, shares of Common Stock representing the
          payment of accrued interest) and (B) a bank check in the amount of
          accrued and unpaid interest (if the Company is required to pay accrued
          interest in cash). The Company shall, 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.

               iii. Failure to Deliver Certificates. If in the case of any
          Notice of Conversion such certificate or certificates are not
          delivered to or as directed by the applicable Holder by the third
          Trading Day after 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.

               iv. Obligation Absolute; Partial Liquidated Damages. If the
          Company fails for any reason to deliver to the Holder such certificate
          or certificates pursuant to Section 4(d)(ii) by the third Trading Day
          after the Conversion Date, the Company shall pay to such Holder, in
          cash, as liquidated damages and not as a penalty, for each $1000 of
          principal amount being converted, $10 per Trading Day (increasing to
          $20 per Trading Day after 5 Trading Days after such damages begin to
          accrue) for each Trading Day after such third Trading Day until such
          certificates are delivered. The Company's obligations to issue and
          deliver the Conversion Shares upon conversion of this Debenture in
          accordance with the terms hereof are absolute and unconditional,
          irrespective of any action or inaction by the Holder to enforce the
          same, any waiver or consent with respect to any provision hereof, the
          recovery of any judgment against any Person or any action to enforce
          the same, or any setoff, counterclaim, recoupment, limitation or
          termination, or any breach or alleged breach by the Holder or any
          other Person of any obligation to the Company or any violation or
          alleged violation of law by the Holder or any other person, and
          irrespective of any other circumstance which might otherwise limit
          such obligation of the Company to the Holder in connection with the
          issuance of such Conversion Shares; provided, however, such delivery
          shall not operate as a waiver by the Company of any such action the
          Company may have against the Holder. In the event a Holder of this
          Debenture shall elect to convert any or all of the outstanding
          principal amount hereof, the Company may not refuse conversion based
          on any claim that the Holder or any one associated or affiliated with
          the Holder of has been engaged in any violation of

                                       9

<PAGE>

          law, agreement or for any other reason, unless, an injunction from a
          court, on notice, restraining and or enjoining conversion of all or
          part of this Debenture shall have been sought and obtained and the
          Company posts a surety bond for the benefit of the Holder in the
          amount of 150% of the principal amount of this Debenture outstanding,
          which is subject to the injunction, which bond shall remain in effect
          until the completion of arbitration/litigation of the dispute and the
          proceeds of which shall be payable to such Holder to the extent it
          obtains judgment. In the absence of an injunction precluding the same,
          the Company shall issue Conversion Shares or, if applicable, cash,
          upon a properly noticed conversion. Nothing herein shall limit a
          Holder's right to pursue actual damages or declare an Event of Default
          pursuant to Section 8 herein for the Company's failure to deliver
          Conversion Shares within the period specified herein and such Holder
          shall have the right to pursue all remedies available to it 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.

               v. Compensation for Buy-In on Failure to Timely Deliver
          Certificates Upon Conversion. In addition to any other rights
          available to the Holder, if the Company fails for any reason to
          deliver to the Holder such certificate or certificates pursuant to
          Section 4(d)(ii) by the third 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 Conversion 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 actual
          sale price of the Common Stock at the time of the sale (including
          brokerage commissions, if any) 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(d)(ii). For example, if the
          Holder purchases Common Stock having a total purchase price of $11,000
          to cover a Buy-In with respect to an attempted conversion of
          Debentures with respect to which the actual sale price of the
          Conversion Shares at the time of the sale (including brokerage
          commissions, if any) giving rise to such purchase obligation was a
          total of $10,000 under clause (A) of the immediately preceding
          sentence, the Company shall be required to pay the Holder $1,000. The
          Holder shall provide the Company written notice indicating the amounts
          payable to the Holder in respect of the Buy-In. Notwithstanding
          anything contained herein to the contrary, if a Holder requires

                                       10

<PAGE>

          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(d)(iv) in respect of the
          certificates resulting in such Buy-In.

               vi. Reservation of Shares Issuable Upon Conversion. The Company
          covenants that it will at all times reserve and keep available out of
          its authorized and unissued shares of Common Stock solely for the
          purpose of issuance upon conversion of the Debentures and payment of
          interest on the Debenture, 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 5) 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 Registration Statement is then
          effective under the Securities Act, registered for public sale in
          accordance with such Registration Statement.

               vii. Fractional Shares. Upon a conversion hereunder the Company
          shall not be required to issue stock certificates representing
          fractions of shares of the Common Stock, but may if otherwise
          permitted, make a cash payment in respect of any final fraction of a
          share based on the Closing Price 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.

               viii. Transfer Taxes. 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 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.

     Section 5. Certain Adjustments.

                                       11

<PAGE>

          a) Fundamental Transaction. If, at any time while this Debenture is
     outstanding, (A) the Company effects any merger or consolidation of the
     Company with or into another Person, (B) the Company effects any sale of
     all or substantially all of its assets in one or a series of related
     transactions, (C) any tender offer or exchange offer (whether by the
     Company or another Person) is completed pursuant to which holders of Common
     Stock are permitted to tender or exchange their shares for other
     securities, cash or property, or (D) the Company effects any
     reclassification of the Common Stock or any compulsory share exchange
     pursuant to which the Common Stock is effectively converted into or
     exchanged for other securities, cash or property (in any such case, a
     "Fundamental Transaction"), then upon any subsequent conversion of this
     Debenture, the Holder shall have the right to receive, for each Conversion
     Share that would have been issuable upon such conversion 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"); except that, with respect to a Public Liquidity
     Event, the Holder shall be entitled to the number of Public Liquidity
     Shares provided for in Section 4(b). 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 with substantially the same form as this Debenture and
     consistent with the foregoing provisions and evidencing the Holder's right
     to convert such debenture into Alternate Consideration. In furtherance
     thereof, in the event a Public Liquidity Company is not the Company, the
     Public Liquidity Company shall issue a new debenture with substantially the
     same form as this Debenture. 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. Any Fundamental Transaction shall
     require the consent of the Holder.

          b) Notice to Holders.

               i. Adjustment. Whenever the Debenture is adjusted pursuant to any
          of this Section 5, the Company shall promptly mail to each Holder a
          notice setting forth the consideration to be given after such
          adjustment and setting forth a brief statement of the facts requiring
          such adjustment.

               ii. Notice to Allow Conversion by Holder. 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

                                       12

<PAGE>

          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.

     Section 6. Redemption and [Forced Conversion.

          a) Optional Redemption at Election of Company. Subject to the
     provisions of this Section 6, the Company may 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 20th 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
     during the period commencing on the Optional Redemption Notice Date through
     to the Optional Redemption Date, each of the Equity Conditions shall have
     been met. If any of the Equity Conditions shall cease to be satisfied at
     any time during the required period, then the Holder may elect to nullify
     the Optional Redemption Notice by notice to the Company within 3 Trading
     Days after the first day on which any such Equity Condition has not been
     met (provided that if, by a provision of the Transaction Documents the

                                       13

<PAGE>

     Company is obligated to notify the Holder of the non-existence of an Equity
     Condition, such notice period shall be extended to the third Trading Day
     after proper notice from the Company) in which case the Optional Redemption
     Notice shall be null and void, ab initio. The Company covenants and agrees
     that it will honor all Notice of Conversions tendered from the time of
     delivery of the Optional Redemption Notice through the date all amounts
     owing thereon are due and paid in full.

          b) Redemption Procedure. The payment of cash pursuant to an Optional
     Redemption shall be made on the Optional Redemption Date. If any portion of
     the cash payment for an Optional Redemption, as applicable 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, plus all amounts owing thereon is paid in full.
     Alternatively, 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, and, with respect the failure to honor the
     Optional Redemption, the Company shall have no further right to exercise
     such Optional Redemption. Notwithstanding anything to the contrary in this
     Section 6, the Company's determination to redeem in cash or its elections
     under Section 6(a) shall be applied among the Holders of Debentures
     ratably. The Holder may elect to convert the outstanding principal amount
     of the Debenture pursuant to Section 4 prior to actual payment in cash for
     any redemption under this Section 6 by fax delivery of a Notice of
     Conversion to the Corporation.

          c) Forced Conversion. Notwithstanding anything herein to the contrary,
     if after the 12 month anniversary of the Effective Date (i) each of the
     Closing Prices for any 30 consecutive Trading Days (such period commencing
     only after the 1 year anniversary of the Effective Price, such period the
     "Threshold Period")) exceeds $1.50, subject to adjustment for reverse and
     forward stock splits, stock dividends, stock combinations and other similar
     transactions of the Common Stock that occur after the date of the Purchase
     Agreement and (ii) the average daily dollar trading volume of the Common
     Stock during the Threshold Period is greater than or equal to $150,000, the
     Company may, within 1 Trading Day of the end of any such period, deliver a
     notice to the Holder (a "Forced Conversion Notice" and the date such notice
     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). The Company may
     only effect a Forced Conversion Notice if all of the Equity Conditions are
     met through the applicable Threshold Period until the date of the
     applicable Forced Conversion. Any Forced Conversion shall be applied
     ratably to all Holders based on their initial purchases of Debentures
     pursuant to the Purchase Agreement.

     Section 7. Negative Covenants. So long as any portion of this Debenture is
outstanding, the Company will not and will not permit any of its Subsidiaries to
directly or indirectly:

                                       14

<PAGE>

          a) enter into, create, incur, assume or suffer to exist any
     indebtedness or liens of any kind, on or with respect to any of its
     property or assets now owned or hereafter acquired or any interest therein
     or any income or profits therefrom that is senior to, or pari passu with,
     in any respect, the Company's obligations under the Debentures;

          b) amend its certificate of incorporation, bylaws or to her charter
     documents so as to adversely affect any rights of the Holder;

          c) repay, repurchase or offer to repay, repurchase or otherwise
     acquire more than a de minimis number of shares of its Common Stock or
     other equity securities other than as to the Conversion Shares to the
     extent permitted or required under the Transaction Documents or as
     otherwise permitted by the Transaction Documents;

          d) undertake an Change of Control Transaction or Fundamental
     Transaction (including any Public Liquidity Event); or

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

     Section 8. 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 (A) the principal amount of any
          Debenture, or (B) interest (including Late Fees) on, or liquidated
          damages in respect of, any Debenture, in each case free of any claim
          of subordination, as and when the same shall become due and payable
          (whether on a Conversion Date or the Maturity Date or by acceleration
          or otherwise) which default, solely in the case of an interest payment
          or other default under clause (B) above, is not cured, within 3
          Trading Days;

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

               iii. a default or event of default (subject to any grace or cure
          period provided for in the applicable agreement, document or
          instrument) shall occur under (A) any of the Transaction Documents
          other than the Debentures, or (B)

                                       15

<PAGE>

          any other material agreement, lease, document or instrument to which
          the Company or any Subsidiary is bound;

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

               v. (i) 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 or any
          Subsidiary 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 (ii) 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 (iii) the
          Company or any Subsidiary thereof is adjudicated by a court of
          competent jurisdiction insolvent or bankrupt; or any order of relief
          or other order approving any such case or proceeding is entered; or
          (iv) 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 (v) the Company or any Subsidiary thereof makes a general
          assignment for the benefit of creditors; or (vi) 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 (vii) 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 (viii) 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
          (ix) any corporate or other action is taken by the Company or any
          Subsidiary thereof for the purpose of effecting any of the foregoing;

               vi. the Company or any Subsidiary shall default in any of its
          obligations under any mortgage, credit agreement or other facility,
          indenture agreement, factoring agreement or other instrument under
          which there may be issued, or by which there may be secured or
          evidenced any indebtedness for borrowed money or money due under any
          long term leasing or factoring arrangement 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;

                                       16

<PAGE>

               vii. the Common Stock shall not be eligible for quotation on or
          quoted for trading on a Trading Market and shall not again be eligible
          for and quoted or listed for trading thereon within five Trading Days;

               viii. the Company shall be a party to any Change of Control
          Transaction, Fundamental Transaction (including any Public Liquidity
          Event), shall agree to sell or dispose of 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) or shall redeem or
          repurchase more than a de minimis number of its outstanding shares of
          Common Stock or other equity securities of the Company (other than
          redemptions of Conversion Shares and repurchases of shares of Common
          Stock or other equity securities of departing officers and directors
          of the Company; provided such repurchases shall not exceed $100,000,
          in the aggregate, for all officers and directors during the term of
          this Debenture);

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

               x. if, during the Effectiveness Period (as defined in the
          Registration Rights Agreement), the effectiveness of the 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 Registration Statement, in either case,
          for more than 10 consecutive Trading Days or 15 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 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 consecutive
          Trading during any 12 month period relating to such an event;

               xi. the Company shall fail for any reason to deliver certificates
          to a Holder prior to the fifth Trading Day after a Conversion Date
          pursuant to and in accordance with Section 4(d) 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;

               xii. any Person shall breach the agreements delivered to the
          initial Holders pursuant to Section 2.2(a)(iv) of the Purchase
          Agreement and the Company does not obtain [Shareholder Approval.

                                       17

<PAGE>

          b) Remedies Upon Event of Default. If any Event of Default occurs, the
     full principal amount of this Debenture, 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. Commencing 5 days after the occurrence of any
     Event of Default that results in the eventual acceleration of this
     Debenture, the interest rate on this Debenture shall accrue at the rate of
     18% per annum, or such lower maximum amount of interest permitted to be
     charged under applicable law. All Debentures for which the full Mandatory
     Prepayment Amount 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 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 9. Miscellaneous.

          a) Notices. Any and all notices or other communications or deliveries
     to be provided by the Holders hereunder, including, without limitation, any
     Notice of Conversion, shall be in writing and delivered personally, by
     facsimile, sent by a nationally recognized overnight courier service,
     addressed to the Company, at the address set forth above, facsimile number
     646-219-2729, Attn: Terrence DeFranco 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 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)
     the second Business Day following the date of mailing, if sent by
     nationally recognized overnight courier service, or (iv) upon actual
     receipt by the party to whom such notice is required to be given.

                                       18

<PAGE>

          b) Absolute Obligation. Except as expressly provided herein, no
     provision of this Debenture shall alter or impair the obligation of the
     Company, which is absolute and unconditional, to pay the principal of,
     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 debt obligation of the Company. This Debenture ranks
     pari passu with all other Debentures now or hereafter issued under the
     terms set forth herein.

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

          d) Governing Law. All questions concerning the construction, validity,
     enforcement and interpretation of this Debenture shall be governed by and
     construed and enforced in accordance with the internal laws of the State of
     New York, without regard to the principles of 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.

                                       19

<PAGE>

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

          f) Severability. If any provision of this Debenture is invalid,
     illegal or unenforceable, the balance of this Debenture shall remain in
     effect, and if any provision is inapplicable to any person or circumstance,
     it shall nevertheless remain applicable to all other persons and
     circumstances. If it shall be found that any interest or other amount
     deemed interest due hereunder violates 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 this Debenture as contemplated herein, wherever
     enacted, now or at any time hereafter in force, or which may affect the
     covenants or the performance of this indenture, and the Company (to the
     extent it may lawfully do so) hereby expressly waives all benefits or
     advantage of any such law, and covenants that it will not, by resort to any
     such law, hinder, delay or impeded the execution of any power herein
     granted to the Holder, but will suffer and permit the execution of every
     such as though no such law has been enacted.

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

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

          i) Security Interest. This Debenture is a direct debt obligation of
     the Company and pursuant to the Security Agreement is secured by a
     perfected security interest in all of the assets of the Company for the
     benefit of the Holders.

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

                                       20

<PAGE>

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

                                        EDENTIFY, INC.

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

                                       21

<PAGE>

                                     ANNEX A

                              NOTICE OF CONVERSION

     The undersigned hereby elects to convert principal under the 8% Convertible
Debenture of Edentify, Inc., a ____________ corporation (the "Company"), into
shares of common stock, 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 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 Common Stock
                                        ___ yes ___ no

                                           If yes, $_____ of Interest Accrued
                                           on Account of Conversion at Issue.

                                        Number of shares of Common Stock to
                                        be issued: __________________________

                                        Signature:
                                                   -----------------------------
                                        Name:
                                              ----------------------------------
                                        Address:
                                                 -------------------------------

                                       22

<PAGE>

                                   SCHEDULE 1

                               CONVERSION SCHEDULE

The 8% Convertible Debentures, in the aggregate principal amount of
$____________ issued by Edentify, Inc. This Conversion Schedule reflects
conversions made under Section 4 of the above referenced Debenture.

                                        Dated: _______________________

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

</TABLE>

                                       23

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