Document:

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                                   EXHIBIT 4.1

                                                                        ANNEX IV
                                                                              TO
                                                             SECURITIES PURCHASE
                                                                       AGREEMENT

                          REGISTRATION RIGHTS AGREEMENT

                  THIS REGISTRATION RIGHTS AGREEMENT, dated as of December 20,
2001 (this "Agreement"), is made by and between COMPUTERIZED THERMAL IMAGING,
INC., a Nevada corporation, with headquarters located at Two Centerpointe Drive,
Suite 450, Lake Oswego, Oregon 97035 (the "Company"), and each entity named on a
signature page hereto (each, an "Initial Investor") (each agreement with an
Initial Investor being deemed a separate and independent agreement between the
Company and such Initial Investor, except that each Initial Investor
acknowledges and consents to the rights granted to each other Initial Investor
under such agreement).

                              W I T N E S S E T H:

                  WHEREAS, upon the terms and subject to the conditions of the
Securities Purchase Agreement, dated as of December 31, 2001, between the
Initial Investor and the Company (the "Securities Purchase Agreement;"
capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in the Securities Purchase Agreement), the Company has agreed to issue
and sell to the Initial Investors the Debentures; and

                  WHEREAS, the Debentures are convertible into shares of Common
Stock (the "Conversion Shares"; which term, for purposes of this Agreement,
shall include shares of Common Stock of the Company issuable in lieu of accrued
interest through the Maturity Date of the Debentures, as that term is defined in
and as contemplated by the Debentures) upon the terms and subject to the
conditions contained in the Debentures; and

                  WHEREAS, the Company has agreed to issue the Warrants to the
Initial Lender in connection with the issuance of the Debentures, and the
Warrants may be exercised for the purchase of shares of Common Stock (the
"Warrant Shares") upon the terms and conditions of the Warrants; and

                  WHEREAS, to induce the Initial Investor to execute and deliver
the Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), with respect to the Registrable Securities;

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                  NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:

                  1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:

                  (a) "Effective Date" means the date the SEC declares a
Registration Statement covering Registrable Securities and otherwise meeting the
conditions contemplated hereby to be effective.

                  (b) "Held Shares Value" means, for shares of Common Stock
acquired by the Investor upon a conversion of a Debenture within the thirty (30)
days preceding the Restricted Sale Date, but not yet sold by the Investor, the
principal amount of the Debentures converted into such Conversion Shares;
provided, however, that if the Investor effected more than one such conversion
during such thirty (30) day period and sold less than all of such shares, the
sold shares shall be deemed to be derived first from the conversions in the
sequence of such conversions (that is, for example, until the number of shares
from the first of such conversions have been sold, all shares shall be deemed to
be from the first conversion; thereafter, from the second conversion until all
such shares are sold).

                  (c) "Investor" means the Initial Investor and any permitted
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof and who holds Debentures, Warrants
or Registrable Securities.

                  (d) "Periodic Amount Shares" means shares of Common Stock
issuable in payment of any Periodic Amount due, as provided in Section 2(b)
below.

                  (e) "Potential Material Event" means any of the following: (i)
the possession by the Company of material information not ripe for disclosure in
a registration statement, which shall be evidenced by a determination in good
faith by the Board of Directors of the Company that disclosure of such
information in the registration statement would be detrimental to the business
and affairs of the Company or (ii) any material engagement or activity by the
Company which would, in the good faith determination of the Board of Directors
of the Company, be adversely affected by disclosure in a registration statement
at such time; in each case where such determination shall be accompanied by a
good faith determination by the Board of Directors of the Company that the
registration statement would be materially misleading absent the inclusion of
such information.

                  (f) "Register," "Registered," and "Registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").

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                  (g) "Registrable Securities" means the Conversion Shares, the
Warrant Shares and the Periodic Amount Shares.

                  (h) "Registration Statement" means a registration statement of
the Company under the Securities Act covering Registrable Securities on Form
S-3, if the Company is then eligible to file using such form, and if not
eligible, on Form S-3 or other appropriate form.

                  (i) "Required Effective Date" means the relevant Initial
Required Effective Date or Increased Required Effective Date (as those terms are
defined below).

                  (j) "Restricted Sale Date" means the first date, other than a
date during a Permitted Suspension Period (as defined below), on which the
Investor is restricted from making sales of Registrable Securities covered by
any previously effective Registration Statement.

                  2. REGISTRATION.

                           (a) MANDATORY REGISTRATION.

                  (i) The Company shall prepare and file with the SEC, as soon
as possible after the Closing Date but no later than thirty (30) days after the
Closing Date (the "Required Filing Date"), either a Registration Statement or an
amendment to an existing Registration Statement, in either event registering for
resale by the Investor a sufficient number of shares of Common Stock for the
Initial Investors to sell the Registrable Securities, but in no event less than
the number of shares equal to two hundred percent (200%) of the aggregate of (x)
the number of shares into which the Debentures and all interest thereon through
the Maturity Date would be convertible at the time of filing of such
Registration Statement (assuming for such purposes that all Debentures had been
issued, had been eligible to be converted, and had been converted, into
Conversion Shares in accordance with their terms, whether or not such issuance,
eligibility, accrual of interest or conversion had in fact occurred as of such
date) and (y) the number of Warrant Shares which would be issuable on exercise
of the Warrants (assuming for such purposes that Warrants for the twice the
number of shares as are covered by the Warrants actually issued on the Initial
Closing Date had been issued, had been eligible for exercise and had been
exercised for Warrant Shares in accordance with their terms, whether or not such
issuance, eligibility or exercise had in fact occurred as of such date). Unless
otherwise specifically agreed to in writing in advance by the Lender, the
Registration Statement (W) shall include only the Registrable Securities and (X)
shall also state that, in accordance with Rule 416 and 457 under the Securities
Act, it also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon conversion of the Debentures or exercise of
the Warrants to prevent dilution resulting from stock splits, or stock
dividends. The Company will use its reasonable best efforts to cause such
Registration Statement to be declared effective on a date (the "Initial Required
Effective Date") which is no later than the earlier of (Y) five (5) days after
oral or written notice by the SEC that it may be declared effective or (Z)
ninety (90) days after the Closing Date.

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                  (ii) If at any time (an "Increased Registered Shares Date"),
the number of shares of Common Stock represented by the Registrable Shares,
issued or to be issued as contemplated by the Transaction Agreements, exceeds
seventy percent (70%) of the aggregate number of shares of Common Stock then
registered, the Company shall either

         (X) amend the relevant Registration Statement filed by the Company
         pursuant to the preceding provisions of this Section 2, if such
         Registration Statement has not been declared effective by the SEC at
         that time, to register, in the aggregate, at least the number of shares
         (the "Increased Shares Amount") equal to (A) the number of shares
         theretofore issued on conversion of the Debentures (including any
         interest paid on conversion by the issuance of Conversion Shares) ,
         plus (B) the number of shares theretofore issued on exercise of the
         Warrants, plus (C) two hundred percent (200%) of

                           (I) the number of shares into which the unconverted
                  Debentures and all interest thereon through the Maturity Date
                  would be convertible at the date of such filing (assuming for
                  such purposes that all such Debentures had been issued, had
                  been eligible to be converted, and had been converted, into
                  Conversion Shares in accordance with their terms, whether or
                  not such issuance eligibility, accrual of interest, or
                  conversion had in fact occurred as of such date), and

                           (II) the number of Warrant Shares which would be
                  issuable on exercise of the unexercised Warrants (assuming for
                  such purposes, as of such date, (x) for all Warrants which had
                  previously been issued, the unexercised portion of such
                  Warrants and (y) for all Warrants which had not yet been
                  issued, the number of shares equal to 15% of the fraction, the
                  numerator of which is $2,500,000 and denominator of which is
                  the Conversion Price applicable on the Increased Shares
                  Registration Date, and, (z) in all events, that all such
                  Warrants had been eligible for exercise and had been exercised
                  for Warrant Shares in accordance with their terms, whether or
                  not such issuance, eligibility or exercise had in fact
                  occurred as of such date), or

         (Y) if such Registration Statement has been declared effective by the
         SEC at that time, file with the SEC an additional Registration
         Statement (an "Additional Registration Statement") to register the
         number of shares equal to the excess of the Increased Shares Amount
         over the aggregate number of shares of Common Stock already registered.

The Company will use its reasonable best efforts to cause such Registration
Statement to be declared effective on a date (each, an "Increased Required
Effective Date") which is no later than (Q) with respect to a Registration
Statement under clause (X) of this subparagraph (ii), the Initial Required
Effective Date and (R) with respect to an Additional Registration Statement, the
earlier of (I) five (5) days after notice by the SEC that it may be declared
effective or (II) ninety (90) days after the Increased Registered Shares Date.

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                  (iii) The aggregate number of shares registered for the
Investors in each Registration Statement or amendment thereto shall be allocated
among the Investors on a pro rata basis among them according to their relative
Registrable Shares included in such Registration Statement.

                           (b) PAYMENTS BY THE COMPANY.

                  (i) If the Registration Statement covering the Registrable
Securities is not filed in proper form with the SEC by the Required Filing Date,
the Company will make payment to the Initial Investor in such amounts and at
such times as shall be determined pursuant to this Section 2(b).

                  (ii) If the Registration Statement covering the Registrable
Securities is not effective by the relevant Required Effective Date or if there
is a Restricted Sale Date, then the Company will make payments to the Initial
Investor in such amounts and at such times as shall be determined pursuant to
this Section 2(b).

                  (iii) The amount (the "Periodic Amount") to be paid by the
Company to the Initial Investor shall be determined as of each Computation Date
(as defined below) and such amount shall be equal to the Periodic Amount
Percentage (as defined below) of the Purchase Price for all Debentures for the
period from the date following the relevant Required Filing Date or the Required
Effective Date or a Restricted Sale Date, as the case may be, to the first
relevant Computation Date, and thereafter to each subsequent Computation Date.
The "Periodic Amount Percentage" means (A) one percent (1%) of the Purchase
Price of all Debentures for the first Computation Date after the relevant
Required Filing Date, Required Effective Date or Restricted Sale Date, as the
case may be: and (B) two percent (2%) of the Purchase Price of all Debentures to
each Computation Date thereafter. Anything in the preceding provisions of this
paragraph (iii) to the contrary notwithstanding, after the relevant Effective
Date the Purchase Price shall be deemed to refer to the sum of (X) the principal
amount of all Debentures not yet converted and (Y) the Held Shares Value. By way
of illustration and not in limitation of the foregoing, if the Registration
Statement is filed on or before the Required Filing Date, but is not declared
effective until one hundred sixty-five (165) days after the Closing Date, the
Periodic Amount will aggregate five percent (5%) of the Purchase Price of the
Debentures theretofore issued (1% for days 91-120, plus 2% for days 121-150,
plus 2% for days 151-175).

                  (iv) Each Periodic Amount will be payable by the Company,
except as provided in the other provisions of this subparagraph (iv), in cash or
other immediately available funds to the Investor (1) on the day after the
Required Filing Date, the Required Effective Date or a Restricted Sale Date, as
the case may be, and (2) on the earlier of (A) each thirtieth day thereafter,
(B) the third business day after the date the Registration Statement is filed or
is declared effective, or (C) the third business day after the Registration
Statement has its restrictions removed after the relevant Effective Date, in
each case without requiring demand therefor by the Investor. Notwithstanding the
provisions of the first sentence of this subparagraph (iv), at the option of the

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Investor, exercisable in its sole and absolute discretion by written notice to
the Company at any time before the Periodic Amount is paid, all or a portion of
the Periodic Amount shall be paid by the issuance of additional shares of Common
Stock to the Investor ("Periodic Amount Shares") in an amount equal to the
Periodic Amount being paid thereby divided by the then applicable Conversion
Price.

                  (v) The parties acknowledge that the damages which may be
incurred by the Investor if the Registration Statement is not filed by the
Required Filing Date or the Registration Statement has not been declared
effective by a Required Effective Date, including if the right to sell
Registrable Securities under a previously effective Registration Statement is
suspended or the shares of the Company's stock are not listed on the Principal
Trading Market, may be difficult to ascertain. The parties agree that the
Periodic Amounts represent a reasonable estimate on the part of the parties, as
of the date of this Agreement, of the amount of such damages.

                  (vi) Notwithstanding the foregoing, the amounts payable by the
Company pursuant to this provision shall not be payable to the extent any delay
in the effectiveness of the Registration Statement occurs because of an act of,
or a failure to act or to act timely by the Initial Investor or its counsel.

                  (vii) "Computation Date" means (A) the date which is the
earlier of (1) thirty (30) days after the Required Filing Date, any relevant
Required Effective Date or a Restricted Sale Date, as the case may be, or (2)
the date after the Required Filing Date, such Required Effective Date or
Restricted Sale Date on which the Registration Statement is filed (with respect
to payments due as contemplated by Section 2(b)(i) hereof) or is declared
effective or has its restrictions removed or the shares of the Company's stock
are listed on the Principal Trading Market (with respect to payments due as
contemplated by Section 2(b)(ii) hereof), as the case may be, and (B) each date
which is the earlier of (1) thirty (30) days after the previous Computation Date
or (2) the date after the previous Computation Date on which the Registration
Statement is filed (with respect to payments due as contemplated by Section
2(b)(i) hereof) or is declared effective or has its restrictions removed or the
shares of the Company's stock are listed on the Principal Trading Market (with
respect to payments due as contemplated by Section 2(b)(ii) hereof), as the case
may be.

                  3. OBLIGATIONS OF THE COMPANY. In connection with the
registration of the Registrable Securities, the Company shall do each of the
following:

                           (a)      Prepare promptly, and file with the SEC by
                                    the Required Filing Date a Registration
                                    Statement with respect to not less than the
                                    number of Registrable Securities provided in
                                    Section 2(a) above, and thereafter use its
                                    reasonable best efforts to cause such
                                    Registration Statement relating to
                                    Registrable Securities to become effective
                                    by the Required Effective Date and keep the
                                    Registration Statement effective at all
                                    times during the period (the "Registration

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                                    Period") continuing until the earlier of (i)
                                    the date when the Investors may sell all
                                    Registrable Securities under Rule 144
                                    without volume or other restrictions or
                                    limits or (ii) the date the Investors no
                                    longer own any of the Registrable
                                    Securities, which Registration Statement
                                    (including any amendments or supplements
                                    thereto and prospectuses contained therein)
                                    shall not contain any untrue statement of a
                                    material fact or omit to state a material
                                    fact required to be stated therein or
                                    necessary to make the statements therein, in
                                    light of the circumstances in which they
                                    were made, not misleading;

                  (b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;

                  (c) Permit a single firm of counsel designated by the Initial
Investors (which, until further notice, shall be deemed to be Krieger & Prager
LLP, Attn: Samuel Krieger, Esq., which firm has requested to receive such
notification; each, an "Investor's Counsel") to review the Registration
Statement and all amendments and supplements thereto a reasonable period of time
(but not less than three (3) business days) prior to their filing with the SEC,
and not file any document in a form to which such counsel reasonably objects;

                  (d) Notify each Investor and the Investor's Counsel and any
managing underwriters immediately (and, in the case of (i)(A) below, not less
than three (3) business days prior to such filing) and (if requested by any such
person) confirm such notice in writing no later than one (1) business day
following the day (i)(A) when a Prospectus or any Prospectus supplement or
post-effective amendment to the Registration Statement is proposed to be filed;
(B) whenever the SEC notifies the Company whether there will be a "review" of
such Registration Statement; (C) whenever the Company receives (or a
representative of the Company receives on its behalf) any oral or written
comments from the SEC in respect of a Registration Statement (copies or, in the
case of oral comments, summaries of such comments shall be promptly furnished by
the Company to the Investors); and (D) with respect to the Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the SEC or any other Federal or state governmental
authority for amendments or supplements to the Registration Statement or
Prospectus or for additional information; (iii) of the issuance by the SEC of
any stop order suspending the effectiveness of the Registration Statement
covering any or all of the Registrable Securities or the initiation of any
proceedings for that purpose; (iv) if at any time any of the representations or
warranties of the Company contained in any agreement (including any underwriting

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agreement) contemplated hereby ceases to be true and correct in all material
respects; (v) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose; and (vi) of the occurrence of
any event that to the best knowledge of the Company makes any statement made in
the Registration Statement or Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. In addition, the Company shall furnish the Investor's
Counsel with copies of all intended written responses to the comments
contemplated in clause (C) of this Section 3(d) not later than one (1) business
day in advance of the filing of such responses with the SEC so that the
Investors shall have the opportunity to comment thereon;

                  (e) Furnish to each Investor and to Investor's Counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one (1) copy of the Registration Statement,
each preliminary prospectus and prospectus, and each amendment or supplement
thereto, and (ii) such number of copies of a prospectus, and all amendments and
supplements thereto and such other documents, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor;

                  (f) As promptly as practicable after becoming aware thereof,
notify each Investor of the happening of any event of which the Company has
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to each Investor as such Investor may reasonably
request;

                  (g) As promptly as practicable after becoming aware thereof,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the SEC of a Notice of Effectiveness or any notice of effectiveness or any stop
order or other suspension of the effectiveness of the Registration Statement at
the earliest possible time;

                  (h) Notwithstanding the foregoing, if at any time or from time
to time after the date of effectiveness of the Registration Statement, the
Company notifies the Investors in writing of the existence of a Potential
Material Event, the Investors shall not offer or sell any Registrable
Securities, or engage in any other transaction involving or relating to the
Registrable Securities, from the time of the giving of notice with respect to a
Potential Material Event until such Investor receives written notice from the
Company that such Potential Material Event either has been disclosed to the

<PAGE>

public or no longer constitutes a Potential Material Event; provided, however,
that the Company may not so suspend the right to such holders of Registrable
Securities during the periods the Registration Statement is required to be in
effect other than during a Permitted Suspension Period (and the applicable
provisions of Section 2(b) shall apply with respect to any such suspension other
than during a Permitted Suspension Period) . The term "Permitted Suspension
Period" means up to three such suspension periods during any consecutive
12-month period, each of which suspension period shall not either (i) be for
more than five (5) days or (ii) begin less than ten (10) business days after the
last day of the preceding suspension (whether or not such last day was during or
after a Permitted Suspension Period); provided further that the Company shall,
if lawful to do so, provide the Investor with at least two (2) business days'
notice of the existence (but not the substance of) a Potential Material Event;

                  (i) Use its reasonable efforts to secure and maintain the
designation of all the Registrable Securities covered by the Registration
Statement on the Principal Trading Market within the meaning of Rule 11Aa2-1 of
the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the quotation of the Registrable Securities on the Principal Trading
Market.

                  (j) Provide a transfer agent ("Transfer Agent") and registrar,
which may be a single entity, for the Registrable Securities not later than the
initial Effective Date.

                  (k) Cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates for the Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts as the case may be, as the
Investors may reasonably request, and, within five (5) business days after a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the Transfer Agent for the Registrable
Securities (with copies to the Investors whose Registrable Securities are
included in such Registration Statement) an appropriate instruction and opinion
of such counsel, which shall include, without limitation, directions to the
Transfer Agent to issue certificates of Registrable Securities(including
certificates for Registrable Securities to be issued after the Effective Date
and replacement certificates for Registrable Securities previously issued)
without legends or other restrictions; and

                  (l) Take all other reasonable actions necessary to expedite
and facilitate disposition by the Investor of the Registrable Securities
pursuant to the Registration Statement.

                  4. OBLIGATIONS OF THE INVESTORS. In connection with the
registration of the Registrable Securities, the Investors shall have the
following obligations:

                           (a)      Each Investor, by such Investor's acceptance
                                    of the Registrable Securities, agrees to
                                    cooperate with the Company as reasonably
                                    requested by the Company in connection with

<PAGE>

                                    the preparation and filing of the
                                    Registration Statement hereunder, unless
                                    such Investor has notified the Company in
                                    writing of such Investor's election to
                                    exclude all of such Investor's Registrable
                                    Securities from the Registration Statement;
                                    and

                           (b)      Each Investor agrees that, upon receipt of
                                    any notice from the Company of the happening
                                    of any event of the kind described in
                                    Section 3(f) or 3(g), above, such Investor
                                    will immediately discontinue disposition of
                                    Registrable Securities pursuant to the
                                    Registration Statement covering such
                                    Registrable Securities until such Investor's
                                    receipt of the copies of the supplemented or
                                    amended prospectus contemplated by Section
                                    3(f) or 3(g) and, if so directed by the
                                    Company, such Investor shall deliver to the
                                    Company (at the expense of the Company) or
                                    destroy (and deliver to the Company a
                                    certificate of destruction) all copies in
                                    such Investor's possession, of the
                                    prospectus covering such Registrable
                                    Securities current at the time of receipt of
                                    such notice.

                  5. EXPENSES OF REGISTRATION. All reasonable expenses (other
than underwriting discounts and commissions of the Investor) incurred in
connection with registrations, filings or qualifications pursuant to Section 3,
but including, without limitation, all registration, listing, and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company shall be borne by the Company. In addition, a fee for a single
counsel for the Investors (as a group and not individually) equal to $4,500 for
the review of each Registration Statement and $2,000 for each post-effective
amendment to a Registration Statement, shall be borne by the Company.

                  6. INDEMNIFICATION. After Registrable Securities are included
in a Registration Statement under this Agreement:

                  (a) To the extent permitted by law, the Company will indemnify
and hold harmless, the Investor, the directors, if any, of such Investor, the
officers, if any, of such Investor, and each Lender Control Person (each, an
"Indemnified Party"), against any losses, claims, damages, liabilities or
expenses (joint or several) incurred (collectively, "Claims") to which any of
them may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced in respect
thereof) arise out of or are based upon: (i) any untrue statement or untrue
statement of a material fact contained in the Registration Statement or any
post-effective amendment thereof or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) any untrue statement or untrue statement
of a material fact contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto

<PAGE>

with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in the light of the
circumstances under which the statements therein were made, not misleading or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation under the
Securities Act, the Exchange Act or any state securities law (the matters in the
foregoing clauses (i) through (iii) being collectively referred to as
"Violations"). The Company shall reimburse the Investor, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a) shall not
(i) apply to any Claims arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of any Indemnified Party expressly for use in connection
with the preparation of the Registration Statement or any such amendment thereof
or supplement thereto, if such prospectus was timely made available by the
Company pursuant to Section 3(b) hereof; (ii) be available to the extent such
Claim is based on a failure of the Investor to deliver or cause to be delivered
the prospectus made available by the Company; or (iii) apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld. The
Investor will indemnify the Company, its officers, directors and agents
(including legal counsel) (each an "Indemnified Party") against any claims
arising out of or based upon a Violation which occurs in reliance upon and in
conformity with information furnished in writing to the Company, by or on behalf
of such Investor, expressly for use in connection with the preparation of the
Registration Statement, subject to such limitations and conditions set forth in
this Section 6. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Indemnified Party, and shall
survive the offering and transfer of the Registrable Securities by the Investor.

                  (b) Promptly after receipt by an Indemnified Party under this
Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Party, as
the case may be; PROVIDED, HOWEVER, that an Indemnified Party shall have the
right to retain its own counsel with the reasonable fees and expenses to be paid
by the indemnifying party, if, in the reasonable opinion of counsel retained by
the indemnifying party, the representation by such counsel of the Indemnified
Party and the indemnifying party would be inappropriate due to actual or
potential differing interests between such Indemnified Party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action shall not relieve such indemnifying party of any liability to
the Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action. The
indemnification required by this Section 6 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as such
expense, loss, damage or liability is incurred and is due and payable.

<PAGE>

                  7. CONTRIBUTION. To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent permitted by
law; provided, however, that (a) no contribution shall be made under
circumstances where the maker would not have been liable for indemnification
under the fault standards set forth in Section 6; (b) no seller of Registrable
Securities guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any seller
of Registrable Securities who was not guilty of such fraudulent
misrepresentation; and (c) except where the seller has committed fraud (other
than a fraud by reason of the information included or omitted from the
Registration Statement as to which the Company has not given notice as
contemplated under Section 3 hereof) or intentional misconduct, contribution by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.

                  8. REPORTS UNDER SECURITIES ACT AND EXCHANGE ACT. With a view
to making available to Investor the benefits of Rule 144 promulgated under the
Securities Act or any other similar rule or regulation of the SEC that may at
any time permit Investor to sell securities of the Company to the public without
Registration ("Rule 144"), the Company agrees to:

                  (a) make and keep public information available, as those terms
are understood and defined in Rule 144;

                  (b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;

                  (c) furnish to the Investor so long as the Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) if not available on the SEC's EDGAR
system, a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company and (iii) such other
information as may be reasonably requested to permit the Investor to sell such
securities pursuant to Rule 144 without Registration; and

                  (d) at the request of any Investor holding Registrable
Securities (a "Holder"), give its Transfer Agent instructions (supported by an
opinion of Company counsel, if required or requested by the Transfer Agent) to
the effect that, upon the Transfer Agent's receipt from such Holder of

         (i) a certificate (a "Rule 144 Certificate") certifying (A) that the
         Holder's holding period (as determined in accordance with the
         provisions of Rule 144) for the shares of Registrable Securities which
         the Holder proposes to sell (the "Securities Being Sold") is not less
         than (1) year and (B) as to such other matters as may be appropriate in
         accordance with Rule 144 under the Securities Act, and

<PAGE>

         (ii) an opinion of counsel acceptable to the Company (for which
         purposes it is agreed that the initial Investor's Counsel shall be
         deemed acceptable if not given by Davis Wright Tremaine) that, based on
         the Rule 144 Certificate, Securities Being Sold may be sold pursuant to
         the provisions of Rule 144, even in the absence of an effective
         Registration Statement,

the Transfer Agent is to effect the transfer of the Securities Being Sold and
issue to the buyer(s) or transferee(s) thereof one or more stock certificates
representing the transferred Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such
shares on the Transfer Agent's books and records (except to the extent any such
legend or restriction results from facts other than the identity of the Holder,
as the seller or transferor thereof, or the status, including any relevant
legends or restrictions, of the shares of the Securities Being Sold while held
by the Holder). If the Transfer Agent reasonably requires any additional
documentation at the time of the transfer, the Company shall deliver or cause to
be delivered all such reasonable additional documentation as may be necessary to
effectuate the issuance of an unlegended certificate.

                  9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have
the Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investors to any transferee of the Registrable
Securities (or all or any portion of any unconverted Debentures) only if the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee and (b) the securities with respect to which such registration rights
are being transferred or assigned.

                  10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and Investors who
hold a eighty (80%) percent interest of the Registrable Securities (as
calculated by the stated value of the Debentures). Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and the Company.

                  11. MISCELLANEOUS.

                  (a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.

                  (b) Notices required or permitted to be given hereunder shall
be given in the manner contemplated by the Securities Purchase Agreement, (i) if
to the Company or to the Initial Investor, to their respective address
contemplated by the Securities Purchase Agreement, and (ii) if to any other
Investor, at such address as such Investor shall have provided in writing to the
Company, or at such other address as each such party furnishes by notice given
in accordance with this Section 11(b).

<PAGE>

                  (c) Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.

                  (d) This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on FORUM NON COVENIENS, to the bringing of any such proceeding in such
jurisdictions.

                  (e) The Company and the Investor hereby waive a trial by jury
in any action, proceeding or counterclaim brought by either of the parties
hereto against the other in respect of any matter arising out of or in
connection with this Agreement or any of the other Transaction Agreements.

                  (f) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.

                  (g) Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.

                  (h) All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.

                  (i) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning thereof.

                  (j) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.

                  (k) The Company acknowledges that any failure by the Company
to perform its obligations under Section 3(a) hereof, or any delay in such
performance could result in loss to the Investors, and the Company agrees that,
in addition to any other liability the Company may have by reason of such
failure or delay, the Company shall be liable for all direct damages caused by
any such failure or delay, unless the same is the result of force majeure.
Neither party shall be liable for consequential damages.

<PAGE>

                  (l) This Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof. This Agreement may be amended only by an instrument in writing signed by
the party to be charged with enforcement thereof.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

         IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the day
and year first above written.

                                 COMPANY:
                                 COMPUTERIZED THERMAL IMAGING, INC.

                                  By:      /s/ Bernard J. Brady
                                        --------------------------------------
                                  Name:    Bernard J. Brady
                                        --------------------------------------
                                  Title:   CFO, Secretary, Treasurer
                                        --------------------------------------

                                  BEACH BOULEVARD LLC

                                  By:      Navigator Management Limited
                                        --------------------------------------
                                  By:      /s/ David K. Sims
                                        --------------------------------------
                                  Title:   Director
                                        --------------------------------------<PAGE>

                                   EXHIBIT 4.2

         THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
         1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
         SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
         STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
         ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

NNo.     01-1-1                                                 US $2,500,000.00
         --------------                                            -------------

                       COMPUTERIZED THERMAL IMAGING, INC.

           7% CONVERTIBLE DEBENTURE SERIES 01-1 DUE DECEMBER 31, 2004

         THIS DEBENTURE is one of a duly authorized issue of up to $2,500,000 in
Debentures of COMPUTERIZED THERMAL IMAGING, INC., a corporation organized and
existing under the laws of the State of Nevada (the "Company") designated as its
7% Convertible Debentures Series 01-1. Such Debentures may be issued in series,
each of which may have a different maturity date, but which otherwise have
substantially similar terms.

         FOR VALUE RECEIVED, the Company promises to pay to BEACH BOULEVARD,
L.L.C., the registered holder hereof (the "Holder"), the principal sum of Two
Million Five Hundred Thousand and 00/100 Dollars (US $ 2,500,000.00) on December
31, 2004 (the "Maturity Date") and to pay interest on the principal sum
outstanding from time to time in arrears at the rate of 7% per annum, accruing
from December 31 , 2001, the date of initial issuance of this Debenture (the
"Issue Date"), on the relevant Conversion Date (as defined below). Accrual of
interest shall commence on the first such business day to occur after the Issue
Date and shall continue to accrue on a daily basis until payment in full of the
principal sum has been made or duly provided for. Additional provisions
regarding the payment of interest are provided in Section 4(D) below (the terms
of which shall govern as if this sentence were not included in this Debenture).

         This Debenture is being issued pursuant to the terms of the Securities
Purchase Agreement, dated December 20, 2001 (the "Securities Purchase
Agreement"), to which the Company and the Holder (or the Holder's predecessor in
interest) are parties. Capitalized terms not otherwise defined herein shall have
the meanings ascribed to them in the Securities Purchase Agreement.

         This Debenture is subject to the following additional provisions:

         1. The Debentures will initially be issued in denominations determined
by the Company, but are exchangeable for an equal aggregate principal amount of

<PAGE>

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

         2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax laws or
other applicable laws at the time of such payments, and Holder shall execute and
deliver all required documentation in connection therewith.

         3. This Debenture has been issued subject to investment representations
of the original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act"), and other
applicable state and foreign securities laws and the terms of the Securities
Purchase Agreement . In the event of any proposed transfer of this Debenture,
the Company may require, prior to issuance of a new Debenture in the name of
such other person, that it receive reasonable transfer documentation. Prior to
due presentment 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 Company's 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 be overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.

         4.   A.   (i) At any time on or after the Issue Date and prior to the
time this Debenture is paid in full in accordance with its terms (including
without limitation after the Maturity Date and after the occurrence of an Event
of Default, as defined below), the Holder of this Debenture is entitled, at its
option, subject to the following provisions of this Section 4, to convert this
Debenture at any time into shares of Common Stock, $0.001 par value ("Common
Stock"), of the Company at the Conversion Price (as defined below).

                   (ii) The term "Conversion Price" means the Fixed Conversion
Price (as defined below), except (x) as provided in Section 6(C)(iv)(y) hereof
or (y) if the Effective Date has not occurred before the first annual
anniversary of the Closing Date, the "Conversion Price" shall mean the
Alternative Conversion Price (as defined below).

                   (iii) The term "Fixed Conversion Price" means $1.44 (which
amount is subject to adjustment as provided herein).

                   (iv) The term "Closing Bid Price" means the closing bid price
during regular trading hours of the Common Stock (in U.S. Dollars) on the
Principal Trading Market, as reported by the Reporting Service (as defined
below).

                   (v) The term "Reporting Service" means Bloomberg LP or if
that service is not then reporting the relevant information regarding the Common
Stock, a comparable reporting service of national reputation selected by the
Holders of the Debentures and reasonably acceptable to the Company.

              B. Conversion shall be effectuated by faxing a Notice of
Conversion (as defined below) to the Company as provided in this paragraph. The

<PAGE>

Notice of Conversion shall be executed by the Holder of this Debenture and shall
evidence such Holder's intention to convert this Debenture or a specified
portion hereof in the form annexed hereto as Exhibit A. If paid in Common Stock
as contemplated hereby, interest accrued or accruing from the Issue Date to the
relevant Conversion Date shall be paid in Common Stock at the Conversion Price
applicable as of such Conversion Date. No fractional shares of Common Stock or
scrip representing fractions of shares will be issued on conversion, but the
number of shares issuable shall be rounded to the nearest whole share. The date
on which notice of conversion is given (the "Conversion Date") shall be deemed
to be the date on which the Holder faxes or otherwise delivers the conversion
notice ("Notice of Conversion") to the Company so that it is received by the
Company on or before such specified date, provided that, if such conversion
would convert the entire remaining principal of this Debenture, the Holder shall
deliver to the Company the original Debentures being converted no later than
five (5) business days thereafter. Facsimile delivery of the Notice of
Conversion shall be accepted by the Company at facsimile number (503) 594-1217;
Attn: Bernard Brady, Chief Financial Officer. Certificates representing Common
Stock upon conversion ("Conversion Certificates") will be delivered to the
Holder at the address specified in the Notice of Conversion (which may be the
Holder's address for notices as contemplated by the Securities Purchase
Agreement or a different address), via express courier, by electronic transfer
or otherwise, within three (3) business days (such third business day, the
"Delivery Date") after the date on which the Notice of Conversion is delivered
to the Company as contemplated in this paragraph B.

              C. Notwithstanding any other provision hereof or of any of the
other Transaction Agreements, in no event (except (i) as specifically provided
herein as an exception to this provision, or (ii) while there is outstanding a
tender offer for any or all of the shares of the Company's Common Stock) shall
the Holder be entitled to convert any portion of this Debenture, or shall the
Company have the obligation to convert such Debenture (and the Company shall not
have the right to pay interest hereon in shares of Common Stock) to the extent
that, after such conversion or issuance of stock in payment of interest, the sum
of (1) the number of shares of Common Stock beneficially owned by the Holder and
its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the
Debentures or other convertible securities or of the unexercised portion of the
Warrants or other rights to purchase Common Stock), and (2) the number of shares
of Common Stock issuable upon the conversion of the Debentures with respect to
which the determination of this proviso is being made, would result in
beneficial ownership by the Holder and its affiliates of more than 4.99% (the
"Applicable Percentage") of the outstanding shares of Common Stock (after taking
into account the shares to be issued to the Holder upon such conversion). For
purposes of the proviso to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, except as otherwise provided in clause (1) of
such sentence. The Holder, by its acceptance of this Debenture, further agrees
that if the Holder transfers or assigns any of the Debentures to a party who or
which would not be considered such an affiliate, such assignment shall be made
subject to the transferee's or assignee's specific agreement to be bound by the
provisions of this Section 4(C) as if such transferee or assignee were the
original Holder hereof. Nothing herein shall preclude the Holder from disposing

<PAGE>

of a sufficient number of other shares of Common Stock beneficially owned by the
Holder so as to thereafter permit the continued conversion of this Debenture.

              D.   (i) Subject to the other terms of this Section D, interest on
the principal amount of this Debenture converted pursuant to a Notice of
Conversion shall be due and payable, at the option of the Company, in cash or
Common Stock on the Conversion Date.

                   (ii) Notwithstanding the foregoing, the Company's right to
issue shares in payment of such interest is applicable if, and only if, there is
then in effect a current Registration Statement covering the shares to be issued
to the Holder in payment of such interest.

                   (iii) The number of shares of Common Stock to be issued in
payment of such interest shall be determined by dividing the dollar amount of
the interest to be so paid by the Conversion Price on the relevant Conversion
Date. Such Common Stock shall be delivered to the Holder, or per Holder's
instructions, on the Delivery Date for the related Conversion Certificates
pursuant to Section 4(B) hereof.

                   (iv) If the Company elects to have the interest paid in cash,
the Company shall make such payment within three (3) business days of the
Conversion Date. If such payment is not made in cash by such date, it shall be
deemed that the Company has elected to pay the interest in stock, if the Company
were otherwise eligible to issue shares of Common Stock in payment of such
interest, as provided above.

              E. Anything herein to the contrary notwithstanding, in the event
the Company breaches the provisions of Section 4(g) of the Securities Purchase
Agreement, the Conversion Price shall be amended to be equal to (i) ninety
percent (90%) of (ii) the Conversion Price determined in accordance with the
other provisions of this Debenture without regard to this Section 4(E), and the
Holder may require the Company to immediately redeem all or any part of the
outstanding portion of this Debenture for an amount equal to the Redeemable
Balance (as defined below).

         5. On the Maturity Date, the Company shall redeem any then outstanding
principal amount of this Debenture not previously converted or redeemed at the
Special Redemption Price.

         6.   A.   (i) The Company agrees that, if a Trigger Event (as defined
below) has occurred, the Holder shall have the option, exercisable in such
Holder's sole and absolute discretion, to require the Company to redeem each
Unconverted Debenture (as defined below) for the Redeemable Balance, payable in
cash.

                   (ii) Such option shall be exercised by the Holder giving
written notice of the exercise of this provision by the Holder (a "Holder
Redemption Notice") at any time within fifteen (15) trading days after a Trigger
Event has occurred. The Holder Redemption Notice shall specify the date (the
"Redemption Due Date") on which the Redeemable Balance shall be paid, which date
shall be at least five (5) business days after the date (a "Redemption Notice
Date") on which the Holder Redemption Notice is given, and the wire instructions

<PAGE>

for the account to which the Redeemable Balance is to be paid; provided,
however, that the Company shall have the right to accelerate the date of such
payment.

                   (iii) The Holder of an Unconverted Debenture may elect to
redeem a portion of such Unconverted Debenture without electing to redeem the
balance of the Unconverted Debenture.

                   (iv) If the Holder does not give the Holder Redemption Notice
within the period contemplated by subparagraph (ii) of this Section 6(A), the
Holder's right to elect a redemption under this Section 6 shall expire unless
and until a subsequent Trigger Event occurs, in which event the provisions of
this Section 6(A) (including, but not limited to, this subparagraph (iv)) shall
apply.

              B. The term "Trigger Event" means that one or more of the
following events has occurred:

         (i) the average Closing Bid Prices for the ninety (90) consecutive
         trading days after the Relevant Trigger Start Date (as defined below)
         is less than the average of the Closing Bid Prices during the five (5)
         trading days ending on the trading day immediately preceding the
         Closing Date; or

         (ii) the Effective Date has not occurred by the date which is the first
         anniversary of the Initial Closing Date.

The term "Relevant Trigger Start Date" means the earlier to occur of (x) the
Effective Date or (y) the date (the "Half Year Date") which is one hundred
eighty (180) trading days after the Closing Date.

              C.   (i) The term "Unconverted Debenture" means the principal
amount of this Debenture which has not been converted as of the relevant date.

                   (ii) The term "Redeemable Balance" means the amount, in cash,
equal to (x) the aggregate principal of the Unconverted Debenture and all
accrued interest thereon through and including the Redemption Payment Date (as
defined below) (collectively, the "Accrued Balance"), multiplied by (y) one
hundred eleven percent (111.00%).

                   (iii) The term "Redemption Payment Date" means the date on
which the Company actually pays the Redeemable Balance.

                   (iv) If the Company does not pay the Redeemable Balance in
full by the Redemption Due Date, then the balance of the Redeemable Balance (the
"Current Redeemable Balance") shall be paid as follows:

<PAGE>

         (x) if the Company and the Holder have entered into the Equity Credit
         Line Agreement and the registration statement contemplated by such
         Equity Credit Line Agreement (the "Credit Line Registration Statement")
         is currently effective, the Company shall issue registered unrestricted
         shares of Common Stock pursuant to a series of mandatory put notices
         contemplated by and consistent with the terms of such Equity Line
         Agreement for a period not to exceed six (6) months from the date of
         the Redemption Notice Date (the last day of such six month period, the
         "Six Month Date"), and the Current Redeemable Balance shall be reduced
         by an amount equal to the amount specified in such put notice (and the
         Holder shall be deemed to have fulfilled its payment obligation with
         respect to such put notice by such reduction); provided, further, that
         if the full Current Redeemable Balance is not satisfied by the Six
         Month Date, the balance of the Current Redeemable Balance shall be paid
         in cash on the Six Month Date; and

         (y) if the Credit Line Registration Statement is not currently
         effective, the "Conversion Price" shall be amended to mean the
         Alternative Conversion Price.

Payments of less than the full amount of the Current Redeemable Balance shall be
applied in the following order of priority: (1) first, to the excess of the
Current Redeemable Balance over the Accrued Balance, (2) then, to accrued
interest on the principal of the Unconverted Debenture, and (3) then, to
principal of the Unconverted Debenture.

                   (v) Anything in the other provisions of this Section 6 or
other provisions of this Debenture to the contrary notwithstanding, if the
Effective Date has not occurred by the first annual anniversary of the Closing
Date, the Holder shall have the right to require that the Company redeem the
then outstanding Debentures in cash for the Special Redemption Amount (as
defined below). The provisions of the immediately preceding subparagraph (iv)
shall not apply to a redemption demanded under this subparagraph (v).

                   (vi) The term "Alternative Conversion Price" means the lower
of (x) the Fixed Conversion Price or (y) the Variable Conversion Price. The term
"Variable Conversion Price" means the amount equal to seventy-five percent (75%)
of the average of the three (3) lowest Closing Bid Prices (which need not be
from consecutive trading days) during the ten (10) trading days ending on the
trading day immediately preceding the Conversion Date.

                   (vii) The term "Special Redemption Amount" means an amount
equal to the Special Redemption Price (as defined below).

                   (viii) If all of the Unconverted Debentures are being
redeemed pursuant to this Section 6, then, upon payment in full of the
Redeemable Balance or Special Redemption Amount, as the case may be, for all of
the Unconverted Debentures in accordance with the provisions of this Section 6,
the Holder shall deliver the Debenture to the Company marked "paid in full".

<PAGE>

                   (ix) If the Redeemable Balance or Special Redemption Amount,
as the case may be, is not timely paid by the Company, the Redeemable Balance
computed as of such date will bear interest at the rate of eighteen percent
(18%) or the highest rate allowed by law, whichever is lower, from the date it
was due until and including the date actually paid. The preceding sentence (x)
shall apply to amounts of the Redeemable Balance not yet deemed paid pursuant to
clause (x) of Section 6(C)(iv) above and (y) shall not apply where clause (y) of
Section 6(C)(iv) above is applicable. The failure of the Company to timely pay
the cash portion of any Redeemable Balance or Special Redemption Amount, as the
case may be, when such cash is due and payable shall be an Event of Default.

         7.   A. Anything herein or in any of the other Transaction Agreements
to the contrary notwithstanding, the Company will have the absolute and
unconditional right to redeem all, but not less than all, of the then
Unconverted Debenture in cash for the Special Redemption Price (as defined
below) in accordance with the terms of this Section 7 (such redemption, a
"Special Redemption").

              B.   (i) The term "Special Redemption Price" means the amount,
payable in cash, equal to (x) the greater of the Fixed Special Redemption Amount
or the Variable Special Redemption Amount (as those terms are defined below),
plus (y) any amounts (other than principal and accrued interest due hereunder)
due from the Company to the Holder pursuant to any other provisions of this
Debenture or any of the other Transaction Agreements.

                   (ii) The term "Fixed Special Redemption Amount" means (x) one
hundred twenty-five percent (125.00%) of (y) the aggregate principal of the
Unconverted Debentures and all accrued interest thereon through and including
the Special Redemption Payment Date (as defined below).

                   (iii) The term "Variable Special Redemption Amount" means the
amount equal to:

                   V                      x                 M
               ---------
                   CP

         where:

              "V" means the principal of an Unconverted Debenture plus any
         accrued but unpaid interest thereon;

              "CP" means the Conversion Price in effect on the date (the
         "Special Redemption Notice Date") of the Special Redemption Notice (as
         defined below); and

              "M" means the highest closing price per share of the Common
         Stock during the period beginning on the Special Redemption Notice Date
         and ending on the date Special Redemption Payment Date.

<PAGE>

                   (iv) The term "Special Redemption Payment Date" means the
date the Special Redemption Amount is actually paid by the Company to the
Holder.

              C. The Company shall give written notice of such Special
Redemption to the Holder (the "Special Notice of Redemption"). The date of
payment of the Special Redemption Amount specified in such Special Notice of
Redemption shall be the "Special Redemption Payment Due Date," provided that the
Special Redemption Payment Due Date may not be later than seven (7) business
days after the Special Redemption Notice Date (for purposes of such computation,
the Special Redemption Notice Date shall be deemed the first day).

              D. In the event such Special Redemption Price payment is not
timely made, the Special Redemption Notice shall be null and void and any rights
of the Company to redeem outstanding Debentures under this Section 7 shall
terminate.

              E. Upon issuance of a Special Redemption Notice, the Holder shall
have no right to convert this Debenture into shares of Common Stock for as long
as such Special Redemption Notice has not been declared null and void pursuant
to the preceding paragraph D. The Company, however, will honor all Conversion
Notices submitted by the Holder prior to the Holder's receipt of a Special
Redemption Notice. Anything in this Debenture or any Conversion Notice to the
contrary notwithstanding, upon the Holder's receipt of a Special Redemption
Notice, the Holder shall have the right, in the Holder's sole and absolute
discretion, to notify the Company in writing that the Holder has canceled all or
any part of any outstanding Conversion Notice for which the Conversion Shares
have not been delivered to the Holder. In such event the Debentures for which
the Conversion Notice has been canceled shall be deemed Unconverted Debentures..

         8. Subject to the terms of the Securities Purchase Agreement, no
provision of this Debenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, and interest on,
this Debenture at the time, place, and rate, and in the coin or currency, herein
prescribed. This Debenture and all other Debentures now or hereafter issued of
similar terms are direct obligations of the Company.

         9. No recourse shall be had for the payment of the principal of, or the
interest on, this Debenture, or for any claim based hereon, or otherwise in
respect hereof, against any incorporator, shareholder, officer or director, as
such, past, present or future, of the Company or any successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.

         10. All payments contemplated hereby to be made "in cash" shall be made
in immediately available good funds of United States of America currency by wire
transfer to an account designated in writing by the Holder to the Company (which
account may be changed by notice similarly given). All payments of cash and each
delivery of shares of Common Stock issuable to the Holder as contemplated hereby
shall be made to the Holder at the address last appearing on the Debenture

<PAGE>

Register of the Company as designated in writing by the Holder from time to
time; except that the Holder can designate, by notice to the Company, a
different delivery address for any one or more specific payments or deliveries.

         11. If, for as long as this Debenture remains outstanding, the Company
enters into a merger (other than where the Company is the surviving entity) or
consolidation with another corporation or other entity or a sale or transfer of
all or substantially all of the assets of the Company to another person
(collectively, a "Sale"), the Company will require, in the agreements reflecting
such transaction, that the surviving entity expressly assume the obligations of
the Company hereunder. Notwithstanding the foregoing, if the Company enters into
a Sale and the holders of the Common Stock are entitled to receive stock,
securities or property in respect of or in exchange for Common Stock, then as a
condition of such Sale, the Company and any such successor, purchaser or
transferee will agree that the Debenture may thereafter be converted on the
terms and subject to the conditions set forth above into the kind and amount of
stock, securities or property receivable upon such merger, consolidation, sale
or transfer by a holder of the number of shares of Common Stock into which this
Debenture might have been converted immediately before such merger,
consolidation, sale or transfer, subject to adjustments which shall be as nearly
equivalent as may be practicable. In the event of any such proposed Sale, (i)
the Holder hereof shall have the right to convert by delivering a Notice of
Conversion to the Company within fifteen (15) days of receipt of notice of such
Sale from the Company, except that Section 4(C) shall not apply to such
conversion.

         12. If, at any time while any portion of this Debenture remains
outstanding, the Company spins off or otherwise divests itself of a part of its
business or operations or disposes of all or of a part of its assets in a
transaction (the "Spin Off") in which the Company does not receive just
compensation for such business, operations or assets, but causes securities of
another entity (the "Spin Off Securities") to be issued to security holders of
the Company, the Company shall cause (i) to be reserved Spin Off Securities
equal to the number thereof which would have been issued to the Holder had all
of the Holder's Debentures outstanding on the record date (the "Record Date")
for determining the amount and number of Spin Off Securities to be issued to
security holders of the Company (the "Outstanding Debentures") been converted as
of the close of business on the trading day immediately before the Record Date
(the "Reserved Spin Off Shares"), and (ii) to be issued to the Holder on the
conversion of all or any of the Outstanding Debentures, such amount of the
Reserved Spin Off Shares equal to (x) the Reserved Spin Off Shares multiplied by
(y) a fraction, of which (I) the numerator is the principal amount of the
Outstanding Debentures then being converted, and (II) the denominator is the
principal amount of the Outstanding Debentures.

         13. If, at any time while any portion of this Debenture remains
outstanding, the Company effectuates a stock split or reverse stock split of its
Common Stock or issues a dividend on its Common Stock consisting of shares of
Common Stock, the Conversion Price, the Minimum Conversion Price, the Fixed
Conversion Price and any other amounts calculated as contemplated hereby or by
any of the other Transaction Agreements shall be equitably adjusted to reflect
such action. By way of illustration, and not in limitation, of the foregoing (i)
if the Company effectuates a 2:1 split of its Common Stock, thereafter, with
respect to any conversion for which the Company issues shares after the record
date of such split, any market price from a date prior to such split which was

<PAGE>

used in any of the calculation of the Conversion Price shall be deemed to be
one-half of what it had been calculated to be immediately prior to such split;
(ii) if the Company effectuates a 1:10 reverse split of its Common Stock,
thereafter, with respect to any conversion for which the Company issues shares
after the record date of such reverse split, any market price from a date prior
to such split which was used in any of the calculation of the Conversion Price
shall be deemed to be ten times what it had been calculated to be immediately
prior to such split; and (iii) if the Company declares a stock dividend of one
share of Common Stock for every 10 shares outstanding, thereafter, with respect
to any conversion for which the Company issues shares after the record date of
such dividend, any market price from a date prior to such record date which was
used in any of the calculation of the Conversion Price shall be deemed to be
such amount multiplied by a fraction, of which the numerator is the number of
shares (10 in the example) for which a dividend share will be issued and the
denominator is such number of shares plus the dividend share(s) issuable or
issued thereon (11 in the example).

         14. The Holder of the Debenture, by acceptance hereof, agrees that this
Debenture is being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Debenture or the shares of Common Stock
issuable upon conversion thereof except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky or foreign
laws or similar laws relating to the sale of securities.

         15. This Debenture shall be governed by and construed in accordance
with the laws of the State of New York. Each of the parties consents to the
exclusive jurisdiction of the federal courts whose districts encompass any part
of the City of New York or the state courts of the State of New York sitting in
the City of New York in connection with any dispute arising under this Agreement
and hereby waives, to the maximum extent permitted by law, any objection,
including any objection based on FORUM NON COVENIENS, to the bringing of any
such proceeding in such jurisdictions.

         16. JURY TRIAL WAIVER. The Company and the Holder hereby waive a trial
by jury in any action, proceeding or counterclaim brought by either of the
Parties hereto against the other in respect of any matter arising out or in
connection with this Debenture.

         17. The following shall constitute an "Event of Default":

              a.   The Company shall default in the payment of principal or
                   interest on this Debenture, any Redeemable Balance due
                   hereunder or any other amount due, and, in any such instance,
                   the same shall continue for a period of five (5) business
                   days; or

<PAGE>

              b.   Any of the representations or warranties made by the Company
                   herein, in the Securities Purchase Agreement or any of the
                   other Transaction Agreements or in any certificate or
                   financial or other written statements heretofore or hereafter
                   furnished by the Company in connection with the execution and
                   delivery of this Debenture or the Securities Purchase
                   Agreement shall be false or misleading in any material
                   respect at the time made; or

              c.   Subject to the terms of the Securities Purchase Agreement,
                   the Company fails to authorize or to cause its Transfer Agent
                   to issue shares of Common Stock upon exercise by the Holder
                   of the conversion rights of the Holder in accordance with the
                   terms of this Debenture, fails to transfer or to cause its
                   Transfer Agent to transfer any certificate for shares of
                   Common Stock issued to the Holder upon conversion of this
                   Debenture and when required by this Debenture or the
                   Registration Rights Agreement, and such transfer is otherwise
                   lawful, or fails to remove any restrictive legend on any
                   certificate or fails to cause its Transfer Agent to remove
                   such restricted legend, in each case where such removal is
                   lawful, as and when required by this Debenture, the Agreement
                   or the Registration Rights Agreement, and any such failure
                   shall continue uncured for ten (10) business days; or

              d.   The Company shall fail to perform or observe, in any material
                   respect, any other covenant, term, provision, condition,
                   agreement or obligation of any Debenture in this series and
                   such failure shall continue uncured for a period of thirty
                   (30) days after written notice from the Holder of such
                   failure; or

              e.   The Company shall fail to perform or observe, in any material
                   respect, any covenant, term, provision, condition, agreement
                   or obligation of the Company under any of the Transaction
                   Agreements and such failure shall continue uncured for a
                   period of thirty (30) days after written notice from the
                   Holder of such failure; or

              f.   The Company shall (1) admit in writing its inability to pay
                   its debts generally as they mature; (2) make an assignment
                   for the benefit of creditors or commence proceedings for its
                   dissolution; or (3) apply for or consent to the appointment
                   of a trustee, liquidator or receiver for its or for a
                   substantial part of its property or business; or

              g.   A trustee, liquidator or receiver shall be appointed for the
                   Company or for a substantial part of its property or business
                   without its consent and shall not be discharged within sixty
                   (60) days after such appointment; or

              h.   Any governmental agency or any court of competent
                   jurisdiction at the instance of any governmental agency shall

<PAGE>

                   assume custody or control of the whole or any substantial
                   portion of the properties or assets of the Company and shall
                   not be dismissed within sixty (60) days thereafter; or

              i.   Any money judgment, writ or warrant of attachment, or similar
                   process in excess of Four Hundred Thousand ($400,000) Dollars
                   in the aggregate shall be entered or filed against the
                   Company or any of its properties or other assets and shall
                   remain unpaid, unvacated, unbonded or unstayed for a period
                   of sixty (60) days or in any event later than five (5) days
                   prior to the date of any proposed sale thereunder; or

              j.   Bankruptcy, reorganization, insolvency or liquidation
                   proceedings or other proceedings for relief under any
                   bankruptcy law or any law for the relief of debtors shall be
                   instituted by or against the Company and, if instituted
                   against the Company, shall not be dismissed within sixty (60)
                   days after such institution or the Company shall by any
                   action or answer approve of, consent to, or acquiesce in any
                   such proceedings or admit the material allegations of, or
                   default in answering a petition filed in any such proceeding;
                   or

              k.   The Company shall have its Common Stock suspended from
                   trading on, or delisted from, the Principal Trading Market
                   for in excess of ten (10) trading days; or

              l.   Any event defined in another provision of this Debenture as
                   an Event of Default shall have occurred.

If an Event of Default shall have occurred, then, or at any time thereafter, and
in each and every such case, unless such Event of Default shall have been waived
in writing by the Holder (which waiver shall not be deemed to be a waiver of any
subsequent default) at the option of the Holder and in the Holder's sole
discretion, the Holder may consider this Debenture immediately due and payable
(and the Maturity Date shall be accelerated accordingly), without presentment,
demand, protest or notice of any kinds, all of which are hereby expressly
waived, anything herein or in any note or other instruments contained to the
contrary notwithstanding, and the Holder may immediately enforce any and all of
the Holder's rights and remedies provided herein or any other rights or remedies
afforded by law.

         18. Nothing contained in this Debenture shall be construed as
conferring upon the Holder the right to vote or to receive dividends or to
consent or receive notice as a shareholder in respect of any meeting of
shareholders or any rights whatsoever as a shareholder of the Company, unless
and to the extent converted in accordance with the terms hereof.

         19. In the event for any reason, any payment by or act of the Company
or the Holder shall result in payment of interest which would exceed the limit
authorized by or be in violation of the law of the jurisdiction applicable to
this Debenture, then IPSO FACTO the obligation of the Company to pay interest or
perform such act or requirement shall be reduced to the limit authorized under
such law, so that in no event shall the Company be obligated to pay any such

<PAGE>

interest, perform any such act or be bound by any requirement which would result
in the payment of interest in excess of the limit so authorized. In the event
any payment by or act of the Company shall result in the extraction of a rate of
interest in excess of a sum which is lawfully collectible as interest, then such
amount (to the extent of such excess not returned to the Company) shall, without
further agreement or notice between or by the Company or the Holder, be deemed
applied to the payment of principal, if any, hereunder immediately upon receipt
of such excess funds by the Holder, with the same force and effect as though the
Company had specifically designated such sums to be so applied to principal and
the Holder had agreed to accept such sums as an interest-free prepayment of this
Debenture. If any part of such excess remains after the principal has been paid
in full, whether by the provisions of the preceding sentences of this Section 19
or otherwise, such excess shall be deemed to be an interest-free loan from the
Company to the Holder, which loan shall be payable immediately upon demand by
the Company. The provisions of this Section 19 shall control every other
provision of this Debenture.

         IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.

Dated: December 31, 2001

                                      COMPUTERIZED THERMAL IMAGING, INC.

                                      By:      /s/ Bernard J. Brady
                                         ---------------------------------------

                                                   Bernard J. Brady
                                      ------------------------------------------
                                      (Print Name)

                                               Secretary, Treasurer, CFO
                                      ------------------------------------------
                                      (Title)

<PAGE>

                                    EXHIBIT A

                              NOTICE OF CONVERSION
                                       OF
           7% CONVERTIBLE DEBENTURE SERIES 01-01 DUE December 31, 2004

   (To be Executed by the Registered Holder in Order to Convert the Debenture)

FROM:                                                                 ("Holder")
      ---------------------------------------------------------------

DATE:                                                    (the "Conversion Date")
     ---------------------------------------------------

RE:      Conversion of $__________ principal amount (the "Converted Debenture")
         of the 7% Convertible Debenture Series 01-_ Due _________, 200_ (the
         "Debenture") of COMPUTERIZED THERMAL IMAGING, INC. (the "Company") into
         shares (the "Conversion Shares") of Common Stock (defined below)

CONVERSION DATE:

         The captioned Holder hereby gives notice to the Company, pursuant to
the Debenture of COMPUTERIZED THERMAL IMAGING, INC. that the Holder elects to
convert the Converted Debenture into fully paid and non-assessable shares of
Common Stock, $0.001 par value (the "Common Stock"), of the Company as of the
Conversion Date specified above. Said conversion shall be based on the following
Conversion Price (THE LOWER OF THE TWO ALTERNATIVES IS CHECKED; THE VARIABLE
CONVERSION PRICE IS AVAILABLE ONLY UNDER CERTAIN SPECIFIED CIRCUMSTANCES):

                  $               , representing the Fixed Conversion Price (as
      ---          ---------------
                  defined in the Debenture)

                  $               , representing the Variable Conversion Price
      ---          ---------------
                  (as defined in the Debenture).

                  If the Variable Conversion Price is selected above, a schedule
                  of the Closing Bid Prices of the Common Stock for the ten (10)
                  trading days prior to the Conversion Date, as reported by the
                  Reporting Service, is attached for your reference in
                  determining the Conversion Price.

<PAGE>

Based on this Conversion Price, the number of Conversion Shares indicated above
should be issued in the following name(s):

                  Name and Record Address                      Conversion Shares

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

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

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

         It is the intention of the Holder to comply with the provisions of
Section 4(C) of the Debenture regarding certain limits on the Holder's right to
convert thereunder. Based on the analysis on the attached Worksheet Schedule,
the Holder believe this conversion complies with the provisions of said Section
4(C). Nonetheless, to the extent that, pursuant to the conversion effected
hereby, the Holder would have more shares than permitted under said Section,
this notice should be amended and revised, ab initio, to refer to the conversion
which would result in the issuance of shares consistent with such provision. Any
conversion above such amount is hereby deemed void and revoked.

         As contemplated by the Debenture and the Securities Purchase Agreement,
this Notice of Conversion is being sent by facsimile to the telecopier number
and officer indicated above.

         If this Notice of Conversion represents the full conversion of the
outstanding balance of the Converted Debenture, the Holder either (1) has
previously surrendered the Converted Debenture, duly endorsed, to the Company or
(2) will surrender (or cause to be surrendered) the Converted Debenture, duly
endorsed, to the Company at the address indicated above by express courier
within five (5) business days after delivery or facsimile transmission of this
Notice of Conversion.

         The certificates representing the Conversion Shares should be
transmitted by the Company to the Holder via express courier or by electronic
transfer within the time contemplated by the Debenture and Securities Purchase
Agreement after receipt of this Notice of Conversion (by facsimile transmission
or otherwise) to:

<PAGE>

         As contemplated by the Debenture, the Company should also pay all
accrued but unpaid interest on the Converted Debenture to the Holder. The Holder

                      __      If the Company elects to pay such interest in
                  Common Stock, as contemplated by the Debenture, such shares
                  should be issued in the name of the Holder and delivered in
                  the same manner as, and together with, the Conversion Shares.

                      __      If the Company elects or is required to pay the
                  interest paid in cash, such payment should be made by wire
                  transfer as follows:

                                    COMPUTERIZED THERMAL IMAGING, INC.

                                    By:         /s/ Bernard J. Brady
                                          --------------------------------------
                                    Name:       Bernard J. Brady
                                          --------------------------------------
                                    Title:      CFO, Secretary, Treasurer
                                          --------------------------------------

<PAGE>

                              NOTICE OF CONVERSION
                               WORKSHEET SCHEDULE

<TABLE>
<S>                                                         <C>           <C>
1. Current Common Stock holdings of Holder and Affiliates                 _____________
2. Shares to be issued on current conversion                              _____________
3. Other shares eligible to be acquired without restriction               _____________
4. Total [sum of Lines 1 through 3]                                       _____________

5. Outstanding     shares of Common Stock                                 _____________
6. Adjustments to Outstanding
         a. Shares from Line 1 not included in Line 5       ____________
         b. Shares to be issued per Line 2                  ____________
         c. Total Adjustments [Lines 6a and 6b]                           _____________
7. Total Adjusted Outstanding [Lines 5 plus 6c]                           _____________

8. Holder's Percentage [Line 4 divided by Line 7]                         _____________%
[Note: Line 8 not to be above 4.99%]
</TABLE>

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