Document:

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

                          SECURED CONVERTIBLE DEBENTURE

Tacoma, Washington
September 27, 2002                                                 $60,000

     FOR VALUE  RECEIVED,  Insynq,  Inc.,  a Delaware  corporation  (hereinafter
called the  "Borrower"),  hereby  promises to pay to the order of New Millennium
Capital  Partners II, LLC or registered  assigns (the "Holder") the sum of Sixty
Thousand Dollars ($60,000),  on September 27, 2003 (the "Maturity Date"), and to
pay  interest  on the  unpaid  principal  balance  hereof  at the rate of twelve
percent  (12%) per annum from  September  27, 2002 (the "Issue  Date") until the
same becomes due and  payable,  whether at maturity or upon  acceleration  or by
prepayment or otherwise.  Any amount of principal or interest on this  Debenture
which is not paid when due shall bear  interest  at the rate of fifteen  percent
(15%)  per annum  from the due date  thereof  until  the same is paid  ("Default
Interest").  Interest  shall  commence  accruing  on the  issue  date,  shall be
computed on the basis of a 365-day  year and the actual  number of days  elapsed
and shall be payable, at the option of the Holder, either quarterly on March 31,
June 30,  September 30 and December 31 of each year  beginning on September  30,
2002,  or at the time of  conversion  of the  principal  to which such  interest
relates in accordance  with Article I below.  All payments due hereunder (to the
extent not  converted  into  common  stock,  $.001 par value per  share,  of the
Borrower (the "Common Stock") in accordance with the terms hereof) shall be made
in lawful  money of the  United  States  of  America  or,  at the  option of the
Borrower,  in whole or in part, in shares of Common Stock of the Borrower valued
at the then applicable  Conversion Price (as defined herein). All payments shall
be made at such  address as the Holder shall  hereafter  give to the Borrower by
written  notice  made in  accordance  with  the  provisions  of this  Debenture.
Whenever any amount expressed to be due by the terms of this Debenture is due on
any day which is not a business  day, the same shall  instead be due on the next
succeeding day which is a business day and, in the case of any interest  payment
date  which  is not the  date on  which  this  Debenture  is paid in  full,  the
extension of the due date  thereof  shall not be taken into account for purposes
of  determining  the  amount  of  interest  due on  such  date.  As used in this
Debenture,  the term  "business  day" shall mean any day other than a  Saturday,
Sunday or a day on which  commercial banks in the city of New York, New York are
authorized  or  required  by law or  executive  order  to  remain  closed.  Each
capitalized term used herein, and not otherwise defined,  shall have the meaning
ascribed thereto in that certain Securities Purchase Agreement,  dated September
27, 2002,  pursuant to which this Debenture was originally issued (the "Purchase
Agreement").

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

     The following terms shall apply to this Debenture:

                          ARTICLE I. CONVERSION RIGHTS

1.1  Conversion  Right.  At any time after the earlier of (i)  November 29, 2002
     and (ii) the date that the Stockholder Approval (as defined in Section 4(l)
     of the Purchase  Agreement)  is  obtained,  the Holder shall have the right
     from time to time,  and at any time on or prior to the  earlier  of (i) the
     Maturity  Date and  (ii) the date of  payment  of the  Default  Amount  (as
     defined in Article  III)  pursuant to Section  1.6(a) or Article  III,  the
     Optional  Prepayment  Amount (as  defined in Section  5.1) or any  payments
     pursuant  to Section  1.7,  each in respect  of the  remaining  outstanding
     principal  amount  of this  Debenture  to  convert  all or any  part of the
     outstanding and unpaid  principal  amount of this Debenture into fully paid
     and  non-assessable  shares of Common Stock, as such Common Stock exists on
     the Issue Date, or any shares of capital  stock or other  securities of the
     Borrower  into  which  such  Common  Stock  shall  hereafter  be changed or
     reclassified at the conversion price (the "Conversion Price") determined as
     provided herein (a "Conversion"); provided, however, that in no event shall
     the Holder be entitled to convert any portion of this  Debenture  in excess
     of that portion of this Debenture  upon  conversion of which the sum of (1)
     the number of shares of Common Stock  beneficially  owned by the Holder and
     its  affiliates  (other  than  shares of Common  Stock  which may be deemed
     beneficially owned through the ownership of the unconverted  portion of the
     Debentures or the unexercised or unconverted  portion of any other security
     of the Borrower (including,  without limitation, the warrants issued by the
     Borrower  pursuant to the Purchase  Agreement)  subject to a limitation  on
     conversion or exercise  analogous to the limitations  contained herein) and
     (2) the number of shares of Common Stock  issuable  upon the  conversion of
     the portion of this  Debenture with respect to which the  determination  of
     this  proviso is being made,  would result in  beneficial  ownership by the
     Holder and its  affiliates of more than 4.9% of the  outstanding  shares of
     Common  Stock.  For  purposes of the proviso to the  immediately  preceding
     sentence,  beneficial  ownership  shall be determined  in  accordance  with
     Section  13(d) of the  Securities  Exchange  Act of 1934,  as amended,  and
     Regulations 13D-G thereunder, except as otherwise provided in clause (1) of
     such proviso.  The Holder of this Debenture may waive the  limitations  set
     forth herein by  sixty-one  (61) days  written  notice to the Company.  The
     number of shares of Common Stock to be issued upon each  conversion of this
     Debenture shall be determined by dividing the Conversion Amount (as defined
     below)  by the  applicable  Conversion  Price  then in  effect  on the date
     specified  in the  notice of  conversion,  in the form  attached  hereto as
     Exhibit A (the  "Notice of  Conversion"),  delivered to the Borrower by the
     Holder in  accordance  with Section 1.4 below;  provided that the Notice of
     Conversion  is submitted by facsimile  (or by other means  resulting in, or
     reasonably expected to result in, notice) to the Borrower before 6:00 p.m.,
     New York, New York time on such  conversion date (the  "Conversion  Date").
     The term "Conversion  Amount" means, with respect to any conversion of this
     Debenture,  the sum of (1) the  principal  amount of this  Debenture  to be
     converted in such conversion plus (2) accrued and unpaid interest,  if any,
     on such  principal  amount at the interest rates provided in this Debenture
     to the Conversion  Date plus (3) Default  Interest,  if any, on the amounts
     referred to in the immediately preceding clauses (1) and/or (2) plus (4) at
     the Holder's  option,  any amounts owed to the Holder  pursuant to Sections
     1.3 and  1.4(g)  hereof  or  pursuant  to  Section  2(c)  of  that  certain
     Registration Rights Agreement,  dated as of September 27, 2002, executed in
     connection  with the  initial  issuance  of this  Debenture  and the  other
     Debentures issued on the Issue Date (the "Registration Rights Agreement").

1.2  Conversion Price.

     (a)  Calculation of Conversion  Price.  The  Conversion  Price shall be the
          lesser of (i) the Variable  Conversion  Price (as defined  herein) and
          (ii) the Fixed Conversion Price (as defined herein) (subject,  in each
          case, to equitable  adjustments  for stock splits,  stock dividends or
          rights offerings by the Borrower relating to the Borrower's securities
          or the  securities of any  subsidiary  of the Borrower,  combinations,
          recapitalization,  reclassifications,  extraordinary distributions and
          similar  events).  The  "Variable  Conversion  Price"  shall  mean the
          Applicable  Percentage  (as defined  herein)  multiplied by the Market
          Price (as defined  herein).  "Market  Price"  means the average of the
          lowest  three (3)  Trading  Prices (as  defined  below) for the Common
          Stock during the twenty (20) Trading Day period ending one Trading Day
          prior to the date the  Conversion  Notice is sent by the Holder to the
          Borrower via facsimile (the "Conversion Date"). "Trading Price" means,
          for any  security as of any date,  the intraday  trading  price on the
          Over-the-Counter  Bulletin  Board  (the  "OTCBB")  as  reported  by  a
          reliable  reporting  service  mutually  acceptable  to  and  hereafter
          designated by Holders of a majority in interest of the  Debentures and
          the Borrower or, if the OTCBB is not the principal  trading market for
          such  security,  the intraday  trading  price of such  security on the
          principal securities exchange or trading market where such security is
          listed or traded or, if no intraday  trading price of such security is
          available in any of the foregoing manners, the average of the intraday
          trading  prices of any market makers for such security that are listed
          in the "pink  sheets" by the National  Quotation  Bureau,  Inc. If the
          Trading Price cannot be  calculated  for such security on such date in
          the manner provided above,  the Trading Price shall be the fair market
          value as  mutually  determined  by the  Borrower  and the holders of a
          majority in interest of the Debentures  being  converted for which the
          calculation of the Trading Price is required in order to determine the
          Conversion Price of such Debentures.  "Trading Day" shall mean any day
          on which the Common Stock is traded for any period on the OTCBB, or on
          the principal  securities exchange or other securities market on which
          the Common Stock is then being traded.  "Applicable  Percentage" shall
          mean 50.0%. The "Fixed Conversion Price" shall mean $0.03.

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

1.3  Authorized  Shares.  Subject to the  Stockholder  Approval  (as  defined in
     Section 4(1) of the Purchase Agreement), the Borrower covenants that during
     the period the conversion right exists,  the Borrower will reserve from its
     authorized and unissued  Common Stock a sufficient  number of shares,  free
     from  preemptive  rights,  to provide for the issuance of Common Stock upon
     the full  conversion  of this  Debenture  and the other  Debentures  issued
     pursuant to the Purchase  Agreement.  The Borrower is required at all times
     to have  authorized  and  reserved  two times the number of shares  that is
     actually  issuable  upon full  conversion of the  Debentures  (based on the
     Conversion Price of the Debentures or the Exercise Price of the Warrants in
     effect from time to time) (the  "Reserved  Amount").  The  Reserved  Amount
     shall be  increased  from time to time in  accordance  with the  Borrower's
     obligations  pursuant  to  Section  4(h)  of the  Purchase  Agreement.  The
     Borrower  represents  that  upon  issuance,  such  shares  will be duly and
     validly issued, fully paid and non-assessable. In addition, if the Borrower
     shall  issue any  securities  or make any change to its  capital  structure
     which  would  change  the  number of shares of Common  Stock into which the
     Debentures shall be convertible at the then current  Conversion  Price, the
     Borrower  shall at the same time make proper  provision so that  thereafter
     there shall be a sufficient number of shares of Common Stock authorized and
     reserved,  free from preemptive  rights,  for conversion of the outstanding
     Debentures.   The  Borrower  (i)  acknowledges   that  it  has  irrevocably
     instructed  its transfer agent to issue  certificates  for the Common Stock
     issuable  upon  conversion  of this  Debenture,  and (ii)  agrees  that its
     issuance of this Debenture shall  constitute full authority to its officers
     and agents who are charged with the duty of executing stock certificates to
     execute and issue the necessary  certificates for shares of Common Stock in
     accordance with the terms and conditions of this Debenture.

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

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

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

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

1.4  Method of Conversion.

     (a)  Mechanics of Conversion. Subject to Section 1.1, this Debenture may be
          converted  by the  Holder in whole or in part at any time from time to
          time after the Issue Date, by (A)  submitting to the Borrower a Notice
          of Conversion (by facsimile or other reasonable means of communication
          dispatched on the  Conversion  Date prior to 6:00 p.m.,  New York, New
          York  time) and (B)  subject  to  Section  1.4(b),  surrendering  this
          Debenture at the principal office of the Borrower.

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

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

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

     (e)  Obligation of Borrower to Deliver  Common  Stock.  Upon receipt by the
          Borrower of a Notice of  Conversion,  the Holder shall be deemed to be
          the  holder  of  record  of  the  Common  Stock   issuable  upon  such
          conversion, the outstanding principal amount and the amount of accrued
          and unpaid interest on this Debenture shall be reduced to reflect such
          conversion, and, unless the Borrower defaults on its obligations under
          this  Article  I, all  rights  with  respect  to the  portion  of this
          Debenture  being so converted  shall  forthwith  terminate  except the
          right to receive the Common Stock or other  securities,  cash or other
          assets,  as herein provided,  on such conversion.  If the Holder shall
          have given a Notice of Conversion as provided  herein,  the Borrower's
          obligation  to issue and deliver  the  certificates  for Common  Stock
          shall be absolute and  unconditional,  irrespective  of the absence of
          any action by the Holder to  enforce  the same,  any waiver or consent
          with respect to any  provision  thereof,  the recovery of any judgment
          against any person or any action to enforce  the same,  any failure or
          delay in the  enforcement  of any other  obligation of the Borrower to
          the  holder  of  record,  or  any  setoff,  counterclaim,  recoupment,
          limitation  or  termination,  or any breach or  alleged  breach by the
          Holder of any  obligation to the  Borrower,  and  irrespective  of any
          other  circumstance which might otherwise limit such obligation of the
          Borrower  to the  Holder  in  connection  with  such  conversion.  The
          Conversion  Date  specified in the Notice of  Conversion  shall be the
          Conversion Date so long as the Notice of Conversion is received by the
          Borrower before 6:00 p.m., New York, New York time, on such date.

     (f)  Delivery of Common Stock by Electronic Transfer. In lieu of delivering
          physical  certificates  representing  the Common Stock  issuable  upon
          conversion, provided the Borrower's transfer agent is participating in
          the  Depository  Trust  Company  ("DTC")  Fast  Automated   Securities
          Transfer  ("FAST")  program,  upon  request  of  the  Holder  and  its
          compliance  with the  provisions  contained in Section 1.1 and in this
          Section  1.4,  the  Borrower  shall use its best  efforts to cause its
          transfer  agent to  electronically  transmit the Common Stock issuable
          upon  conversion  to the Holder by  crediting  the account of Holder's
          Prime Broker with DTC through its Deposit  Withdrawal Agent Commission
          ("DWAC") system.

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

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

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

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

1.6  Effect of Certain Events.

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

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

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

     (d)  Adjustment  Due to  Dilutive  Issuance.  If,  at  any  time  when  any
          Debentures are issued and  outstanding,  the Borrower issues or sells,
          or in  accordance  with this Section  1.6(d)  hereof is deemed to have
          issued or sold, any shares of Common Stock for no consideration or for
          a consideration per share (before deduction of reasonable  expenses or
          commissions  or  underwriting  discounts or  allowances  in connection
          therewith) less than the Fixed  Conversion Price in effect on the date
          of such  issuance (or deemed  issuance) of such shares of Common Stock
          (a "Dilutive Issuance"),  then immediately upon the Dilutive Issuance,
          the  Fixed  Conversion  Price  will be  reduced  to the  amount of the
          consideration  per share  received by the  Borrower  in such  Dilutive
          Issuance;  provided  that  only one  adjustment  will be made for each
          Dilutive Issuance.

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

          Additionally,  the  Borrower  shall be deemed  to have  issued or sold
          shares of Common Stock if the  Borrower in any manner  issues or sells
          any Convertible  Securities,  whether or not  immediately  convertible
          (other than where the same are issuable upon the exercise of Options),
          and the price per share for which Common  Stock is issuable  upon such
          conversion or exchange is less than the Fixed Conversion Price then in
          effect,  then the Fixed  Conversion Price shall be equal to such price
          per share. For the purposes of the preceding sentence,  the "price per
          share for which  Common  Stock is  issuable  upon such  conversion  or
          exchange"  is  determined  by dividing (i) the total  amount,  if any,
          received  or  receivable  by the  Borrower  as  consideration  for the
          issuance or sale of all such Convertible Securities,  plus the minimum
          aggregate amount of additional  consideration,  if any, payable to the
          Borrower  upon the  conversion  or  exchange  thereof at the time such
          Convertible  Securities first become  convertible or exchangeable,  by
          (ii) the maximum total number of shares of Common Stock  issuable upon
          the  conversion  or exchange of all such  Convertible  Securities.  No
          further adjustment to the Fixed Conversion Price will be made upon the
          actual  issuance of such Common Stock upon  conversion  or exchange of
          such Convertible Securities.

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

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

1.7  Trading Market  Limitations.  Unless  permitted by the applicable rules and
     regulations of the principal securities market on which the Common Stock is
     then listed or traded, in no event shall the Borrower issue upon conversion
     of or otherwise  pursuant to this Debenture and the other Debentures issued
     pursuant to the Purchase  Agreement  more than the maximum number of shares
     of Common  Stock that the  Borrower  can issue  pursuant to any rule of the
     principal United States securities market on which the Common Stock is then
     traded (the "Maximum Share  Amount"),  which, as of the Issue Date shall be
     13,298,847  shares  (19.99% of the total  shares  outstanding  on the Issue
     Date),  subject to equitable adjustment from time to time for stock splits,
     stock dividends,  combinations,  capital reorganizations and similar events
     relating to the Common  Stock  occurring  after the date  hereof.  Once the
     Maximum  Share  Amount has been  issued  (the date of which is  hereinafter
     referred to as the "Maximum  Conversion  Date"),  if the Borrower  fails to
     eliminate any prohibitions under applicable law or the rules or regulations
     of  any   stock   exchange,   interdealer   quotation   system   or   other
     self-regulatory  organization with jurisdiction over the Borrower or any of
     its securities on the Borrower's ability to issue shares of Common Stock in
     excess of the Maximum Share Amount (a "Trading Market  Prepayment  Event"),
     in lieu  of any  further  right  to  convert  this  Debenture,  and in full
     satisfaction  of the  Borrower's  obligations  under  this  Debenture,  the
     Borrower shall pay to the Holder,  within fifteen (15) business days of the
     Maximum  Conversion Date (the "Trading Market Prepayment  Date"), an amount
     equal to 130% times the sum of (a) the then outstanding principal amount of
     this Debenture  immediately following the Maximum Conversion Date, plus (b)
     accrued  and  unpaid  interest  on the  unpaid  principal  amount  of  this
     Debenture to the Trading Market Prepayment Date, plus (c) Default Interest,
     if any, on the amounts referred to in clause (a) and/or (b) above, plus (d)
     any optional  amounts that may be added  thereto at the Maximum  Conversion
     Date  by  the  Holder  in  accordance  with  the  terms  hereof  (the  then
     outstanding  principal amount of this Debenture  immediately  following the
     Maximum  Conversion  Date, plus the amounts referred to in clauses (b), (c)
     and  (d)  above  shall  collectively  be  referred  to  as  the  "Remaining
     Convertible  Amount").  With  respect  to each  Holder of  Debentures,  the
     Maximum  Share Amount shall refer to such  Holder's pro rata share  thereof
     determined in accordance  with Section 4.8 below. In the event that the sum
     of (x)  the  aggregate  number  of  shares  of  Common  Stock  issued  upon
     conversion of this Debenture and the other  Debentures  issued  pursuant to
     the Purchase  Agreement  plus (y) the aggregate  number of shares of Common
     Stock that remain  issuable upon conversion of this Debenture and the other
     Debentures issued pursuant to the Purchase  Agreement,  represents at least
     one hundred  percent  (100%) of the Maximum  Share Amount (the  "Triggering
     Event"),  the  Borrower  will  use its  best  efforts  to seek  and  obtain
     Shareholder Approval (or obtain such other relief as will allow conversions
     hereunder  in excess of the Maximum  Share  Amount) as soon as  practicable
     following the Triggering  Event and before the Maximum  Conversion Date. As
     used herein,  "Shareholder  Approval" means approval by the shareholders of
     the  Borrower  to  authorize  the  issuance of the full number of shares of
     Common  Stock  which  would be issuable  upon full  conversion  of the then
     outstanding Debentures but for the Maximum Share Amount.

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

                          ARTICLE II. CERTAIN COVENANTS

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

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

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

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

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

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

                         ARTICLE III. EVENTS OF DEFAULT

     If any of the  following  events of default  (each,  an "Event of Default")
shall occur:

3.1  Failure  to Pay  Principal  or  Interest.  The  Borrower  fails  to pay the
     principal hereof or interest thereon when due on this Debenture, whether at
     maturity,  upon a Trading Market  Prepayment Event pursuant to Section 1.7,
     upon acceleration or otherwise.

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

3.3  Failure to Timely File  Registration or Effect  Registration.  The Borrower
     fails to file the Registration Statement within ten (10) days following the
     Filing Date (as defined in the  Registration  Rights  Agreement)  or obtain
     effectiveness   with  the  Securities   and  Exchange   Commission  of  the
     Registration  Statement  within ten (10) days  following the  Effectiveness
     Deadline  (as  defined  in  the  Registration  Rights  Agreement)  or  such
     Registration  Statement lapses in effect (or sales cannot otherwise be made
     thereunder effective,  whether by reason of the Borrower's failure to amend
     or  supplement  the  prospectus  included  therein in  accordance  with the
     Registration  Rights  Agreement  or  otherwise)  for more than  twenty (20)
     consecutive  days or forty (40) days in any twelve  month  period after the
     Registration Statement becomes effective;

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

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

3.6  Receiver or Trustee.  The Borrower or any  subsidiary of the Borrower shall
     make an assignment for the benefit of creditors, or apply for or consent to
     the  appointment of a receiver or trustee for it or for a substantial  part
     of its property or business,  or such a receiver or trustee shall otherwise
     be appointed;

3.7  Judgments.  Any money judgment, writ or similar process shall be entered or
     filed against the Borrower or any  subsidiary of the Borrower or any of its
     property or other assets for more than $50,000, and shall remain unvacated,
     unbonded  or unstayed  for a period of twenty  (20) days  unless  otherwise
     consented  to by  the  Holder,  which  consent  will  not  be  unreasonably
     withheld;

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

3.9  Delisting of Common Stock.  The Borrower shall fail to maintain the listing
     of  the  Common  Stock  on at  least  one  of the  OTCBB  or an  equivalent
     replacement  exchange,  the Nasdaq  National  Market,  the Nasdaq  SmallCap
     Market, the New York Stock Exchange, or the American Stock Exchange;

3.10 Default  Under Other  Debentures.  An Event of Default has  occurred and is
     continuing  under  any of  the  other  Debentures  issued  pursuant  to the
     Purchase Agreement.

          then, upon the occurrence and during the  continuation of any Event of
          Default  specified in Section 3.1,  3.2,  3.3,  3.4, 3.5, 3.7, 3.9, or
          3.10,  at the option of the  Holders of a  majority  of the  aggregate
          principal amount of the outstanding  Debentures issued pursuant to the
          Purchase Agreement  exercisable through the delivery of written notice
          to the Borrower by such Holders (the "Default  Notice"),  and upon the
          occurrence of an Event of Default specified in Section 3.6 or 3.8, the
          Debentures  shall become  immediately due and payable and the Borrower
          shall  pay to the  Holder,  in full  satisfaction  of its  obligations
          hereunder, an amount equal to the greater of (i) 130% times the sum of
          (w) the then  outstanding  principal amount of this Debenture plus (x)
          accrued  and unpaid  interest on the unpaid  principal  amount of this
          Debenture to the date of payment  (the  "Mandatory  Prepayment  Date")
          plus (y)  Default  Interest,  if any,  on the  amounts  referred to in
          clauses  (w)  and/or  (x)  plus  (z) any  amounts  owed to the  Holder
          pursuant to Sections 1.3 and 1.4(g) hereof or pursuant to Section 2(c)
          of the Registration  Rights Agreement (the then outstanding  principal
          amount  of this  Debenture  to the date of  payment  plus the  amounts
          referred to in clauses (x), (y) and (z) shall collectively be known as
          the "Default Sum") or (ii) the "parity value" of the Default Sum to be
          prepaid,  where parity value means (a) the highest number of shares of
          Common Stock issuable upon conversion of or otherwise pursuant to such
          Default Sum in  accordance  with  Article I,  treating the Trading Day
          immediately preceding the Mandatory Prepayment Date as the "Conversion
          Date" for purposes of  determining  the lowest  applicable  Conversion
          Price,  unless  the  Default  Event  arises as a result of a breach in
          respect of a specific  Conversion  Date in which case such  Conversion
          Date shall be the  Conversion  Date),  multiplied  by (b) the  highest
          Closing Price for the Common Stock during the period  beginning on the
          date of first  occurrence  of the Event of Default  and ending one day
          prior to the Mandatory  Prepayment Date (the "Default Amount") and all
          other  amounts  payable  hereunder  shall  immediately  become due and
          payable,  all  without  demand,  presentment  or notice,  all of which
          hereby are  expressly  waived,  together  with all  costs,  including,
          without limitation,  legal fees and expenses,  of collection,  and the
          Holder  shall be entitled to exercise  all other  rights and  remedies
          available  at law or in  equity.  If the  Borrower  fails  to pay  the
          Default  Amount within five (5) business  days of written  notice that
          such amount is due and  payable,  then the Holder shall have the right
          at any time,  so long as the Borrower  remains in default (and so long
          and to the extent that there are  sufficient  authorized  shares),  to
          require the Borrower,  upon written notice,  to immediately  issue, in
          lieu of the Default  Amount,  the number of shares of Common  Stock of
          the Borrower  equal to the Default  Amount  divided by the  Conversion
          Price then in effect.

                            ARTICLE IV. MISCELLANEOUS

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

4.2  Notices.  Any notice  herein  required or permitted to be given shall be in
     writing and may be  personally  served or  delivered  by courier or sent by
     United  States mail and shall be deemed to have been given upon  receipt if
     personally   served  (which  shall   include   telephone   line   facsimile
     transmission) or sent by courier or three (3) days after being deposited in
     the United  States  mail,  certified,  with  postage  pre-paid and properly
     addressed,  if sent by mail.  For the purposes  hereof,  the address of the
     Holder shall be as shown on the records of the Borrower; and the address of
     the  Borrower  shall be 1101  Broadway  Plaza,  Tacoma,  Washington  98498,
     facsimile  number:  (253)  284-2035.  Both the Holder and the  Borrower may
     change the address for service by service of written notice to the other as
     herein provided.

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

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

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

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

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

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

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

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

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

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

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

                         ARTICLE V. OPTIONAL PREPAYMENT

5.1. Optional Prepayment.  Notwithstanding anything to the contrary contained in
     this Article V, for thirty (30) days  following  the Issue Date, so long as
     (i) no Event of Default  or  Trading  Market  Prepayment  Event  shall have
     occurred and be continuing and (ii) the Borrower has a sufficient number of
     authorized   shares  of  Common  Stock  reserved  for  issuance  upon  full
     conversion of the  Debentures,  then at any time after the Issue Date,  the
     Borrower  shall  have the  right,  exercisable  on not  less  than ten (10)
     Trading Days prior written notice to the Holders of the  Debentures  (which
     notice may not be sent to the Holders of the Debentures  until the Borrower
     is permitted to prepay the  Debentures  pursuant to this Section  5.1),  to
     prepay all of the  outstanding  Debentures in accordance  with this Section
     5.1. Any notice of prepayment hereunder (an "Optional Prepayment") shall be
     delivered to the Holders of the  Debentures at their  registered  addresses
     appearing on the books and records of the Borrower and shall state (1) that
     the Borrower is exercising its right to prepay all of the Debentures issued
     on the Issue Date and (2) the date of prepayment (the "Optional  Prepayment
     Notice").  On the date  fixed  for  prepayment  (the  "Optional  Prepayment
     Date"),  the Borrower shall make payment of the Optional  Prepayment Amount
     (as defined  below) to or upon the order of the Holders as specified by the
     Holders in writing to the  Borrower at least one (1)  business day prior to
     the Optional Prepayment Date. If the Borrower exercises its right to prepay
     the Debentures, the Borrower shall make payment to the holders of an amount
     in cash (the "Optional  Prepayment Amount") equal to 150% multiplied by the
     sum of (w) the then outstanding principal amount of this Debenture plus (x)
     accrued  and  unpaid  interest  on the  unpaid  principal  amount  of  this
     Debenture to the Optional  Prepayment  Date plus (y) Default  Interest,  if
     any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts
     owed to the Holder  pursuant to Sections 1.3 and 1.4(g)  hereof or pursuant
     to Section 2(c) of the Registration  Rights Agreement (the then outstanding
     principal  amount of this Debenture to the date of payment plus the amounts
     referred to in clauses (x), (y) and (z) shall  collectively be known as the
     "Optional   Prepayment  Sum").   Notwithstanding   notice  of  an  Optional
     Prepayment, the Holders shall at all times prior to the Optional Prepayment
     Date maintain the right to convert all or any portion of the  Debentures in
     accordance  with Article I and any portion of Debentures so converted after
     receipt  of an  Optional  Prepayment  Notice  and  prior  to  the  Optional
     Prepayment  Date set forth in such  notice  and  payment  of the  aggregate
     Optional  Prepayment  Amount shall be deducted from the principal amount of
     Debentures  which are  otherwise  subject to  prepayment  pursuant  to such
     notice. If the Borrower delivers an Optional Prepayment Notice and fails to
     pay the  Optional  Prepayment  Amount due to the Holders of the  Debentures
     within two (2) business days  following the Optional  Prepayment  Date, the
     Borrower shall forever forfeit its right to redeem the Debentures  pursuant
     to this Section 5.1.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

     IN WITNESS WHEREOF,  Borrower has caused this Debenture to be signed in its
name by its duly authorized officer this 27th day of September, 2002.

                             INSYNQ, INC.

                    By:      ______________________________
                             John P. Gorst
                             Chief Executive Officer

<PAGE>

                                                        EXHIBIT A

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

     The undersigned hereby irrevocably elects to convert $__________  principal
amount of the Debenture  (defined below) into shares of common stock,  par value
$.001 per share  ("Common  Stock"),  of  Insynq,  a  Delaware  corporation  (the
"Borrower")  according to the  conditions of the  convertible  debentures of the
Borrower  dated as of  September  27,  2002 (the  "Debentures"),  as of the date
written below. If securities are to be issued in the name of a person other than
the  undersigned,  the  undersigned  will pay all  transfer  taxes  payable with
respect  thereto and is delivering  herewith such  certificates.  No fee will be
charged to the Holder for any  conversion,  except for transfer taxes, if any. A
copy of each  Debenture  is  attached  hereto  (or  evidence  of loss,  theft or
destruction thereof).

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

 Name of DTC Prime Broker:
                          ------------------------------------------------------
 Account Number:
                ----------------------------------------------------------------

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

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

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

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

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

     SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of September 27,
2002,  by and among  Insynq,  Inc., a Delaware  corporation,  with  headquarters
located at 1101 Broadway Plaza,  Tacoma,  Washington 98498 (the "Company"),  and
each of the purchasers set forth on the signature pages hereto (the "Buyers").

WHEREAS:

A.   The Company and the Buyers are executing and  delivering  this Agreement in
     reliance upon the exemption from  securities  registration  afforded by the
     rules and  regulations as  promulgated by the United States  Securities and
     Exchange  Commission  (the  "SEC")  under the  Securities  Act of 1933,  as
     amended (the "1933 Act");

B.   Buyers desire to purchase and the Company  desires to issue and sell,  upon
     the terms and conditions  set forth in this  Agreement (i) 12%  convertible
     debentures of the Company,  in the form attached  hereto as Exhibit "A", in
     the aggregate principal amount of up to Four Hundred Fifty Thousand Dollars
     ($450,000) (together with any debenture(s) issued in replacement thereof or
     as a dividend  thereon or otherwise with respect thereto in accordance with
     the terms thereof,  the  "Debentures"),  convertible  into shares of common
     stock, par value $.001 per share, of the Company (the "Common Stock"), upon
     the terms and subject to the  limitations  and conditions set forth in such
     Debentures and (ii) warrants,  in the form attached  hereto as Exhibit "B",
     to purchase up to Nine Hundred  Thousand  (900,000)  shares of Common Stock
     (the "Warrants").

C.   Each Buyer wishes to purchase, upon the terms and conditions stated in this
     Agreement, such principal amount of Debentures and number of Warrants as is
     set forth immediately below its name on the signature pages hereto; and

D.   Contemporaneous  with the  execution  and delivery of this  Agreement,  the
     parties  hereto  are  executing  and   delivering  a  Registration   Rights
     Agreement,  in the form attached  hereto as Exhibit "C" (the  "Registration
     Rights  Agreement"),  pursuant  to which the  Company has agreed to provide
     certain   registration  rights  under  the  1933  Act  and  the  rules  and
     regulations promulgated thereunder, and applicable state securities laws.

NOW  THEREFORE,  the Company and each of the Buyers  severally (and not jointly)
hereby agree as follows:

1.   PURCHASE AND SALE OF DEBENTURES AND WARRANTS.

     a.   Purchase of Debentures  and Warrants.  On the Closing Date (as defined
          below),  the Company shall issue and sell to each Buyer and each Buyer
          severally agrees to purchase from the Company such principal amount of
          Debentures  and number of Warrants as is set forth  immediately  below
          such Buyer's name on the signature  pages hereto,  for an aggregate of
          One Hundred Twenty Thousand  Dollars  ($120,000)  principal  amount of
          Debentures  and Warrants to purchase an aggregate of 240,000 shares of
          Common Stock.

     b.   Form of Payment.  On the Closing  Date (as  defined  below),  (i) each
          Buyer shall pay the purchase price for the Debentures and the Warrants
          to be issued and sold to it at the  Closing  (as  defined  below) (the
          "Purchase  Price") by wire transfer of immediately  available funds to
          the  Company,   in  accordance  with  the  Company's   written  wiring
          instructions,  against  delivery of the  Debentures  in the  principal
          amount  equal to the  Purchase  Price and the number of Warrants as is
          set forth  immediately  below such Buyer's name on the signature pages
          hereto,  and  (ii) the  Company  shall  deliver  such  Debentures  and
          Warrants  duly  executed  on behalf  of the  Company,  to such  Buyer,
          against delivery of such Purchase Price.

     c.   Closing Date.  Subject to the  satisfaction (or written waiver) of the
          conditions  thereto  set forth in Section 6 and  Section 7 below,  the
          date  and time of the  issuance  and  sale of the  Debentures  and the
          Warrants  pursuant to this  Agreement  (the  "Closing  Date") shall be
          12:00 noon,  Eastern Standard Time on September 27, 2002 or such other
          mutually   agreed  upon  time.   The   closing  of  the   transactions
          contemplated  by this  Agreement  (the  "Closing")  shall occur on the
          Closing Date at such location as may be agreed to by the parties.

     d.   Subsequent  Closings.  On the final business day of each of the eleven
          (11) months beginning in October 2002 and ending in August 2003 (each,
          a "Funding Date"),  the Company shall issue and sell to the Buyers and
          the Buyers  severally  agree to purchase from the Company an aggregate
          of Thirty Thousand  Dollars  ($30,000)  principal amount of Debentures
          and  Warrants  to  purchase an  aggregate  of 60,000  shares of Common
          Stock.  Subject  to  the  satisfaction  (or  written  waiver)  of  the
          conditions thereto set forth in Section 6 and Section 7 below, on each
          Funding Date, the Company will issue to the Buyers such Debentures and
          Warrants in the amounts  specified  by the Buyers and the Buyers shall
          pay for such  Debentures  and Warrants by wire transfer of immediately
          available funds to the Company. In addition,  on each Funding Date, an
          authorized  officer  of the  Company  shall  deliver  to the  Buyers a
          closing certificate in form and substance  satisfactory to the Buyers.
          Notwithstanding    the   foregoing,    either   the   Company   or   a
          majority-in-interest  of the Buyers may  terminate  their  obligations
          under this Section  1(d) upon thirty (30) days  written  notice to the
          other party, provided that no notice of termination may be sent by any
          party prior to November 29, 2002.

2.   BUYERS'  REPRESENTATIONS  AND  WARRANTIES.  Each Buyer  severally  (and not
     jointly)  represents  and  warrants to the Company  solely as to such Buyer
     that:

     a.   Investment Purpose. As of the date hereof, the Buyer is purchasing the
          Debentures and the shares of Common Stock issuable upon  conversion of
          or  otherwise   pursuant  to  the   Debentures   (including,   without
          limitation,  such  additional  shares of Common Stock,  if any, as are
          issuable  (i) on  account of  interest  on the  Debentures,  (ii) as a
          result of the  events  described  in  Sections  1.3 and  1.4(g) of the
          Debentures and Section 2(c) of the  Registration  Rights  Agreement or
          (iii) in payment of the Standard Liquidated Damages Amount (as defined
          in Section  2(f)  below)  pursuant to this  Agreement,  such shares of
          Common Stock being collectively  referred to herein as the "Conversion
          Shares") and the Warrants and the shares of Common Stock issuable upon
          exercise  thereof (the  "Warrant  Shares" and,  collectively  with the
          Debentures,  Warrants and Conversion Shares, the "Securities") for its
          own  account  and not with a present  view  towards the public sale or
          distribution thereof,  except pursuant to sales registered or exempted
          from  registration  under the 1933  Act;  provided,  however,  that by
          making the  representations  herein,  the Buyer does not agree to hold
          any of the  Securities  for any  minimum  or other  specific  term and
          reserves  the  right  to  dispose  of the  Securities  at any  time in
          accordance  with  or  pursuant  to  a  registration  statement  or  an
          exemption under the 1933 Act.

     b.   Accredited  Investor Status. The Buyer is an "accredited  investor" as
          that term is defined in Rule 501(a) of  Regulation  D (an  "Accredited
          Investor").

     c.   Reliance on Exemptions.  The Buyer understands that the Securities are
          being offered and sold to it in reliance upon specific exemptions from
          the  registration  requirements  of United  States  federal  and state
          securities  laws and that the  Company is  relying  upon the truth and
          accuracy of, and the Buyer's  compliance  with,  the  representations,
          warranties,  agreements,  acknowledgments  and  understandings  of the
          Buyer set forth herein in order to determine the  availability of such
          exemptions and the eligibility of the Buyer to acquire the Securities.

     d.   Information. The Buyer and its advisors, if any, have been, and for so
          long as the Debentures and Warrants remain  outstanding  will continue
          to be, furnished with all materials relating to the business, finances
          and operations of the Company and materials  relating to the offer and
          sale of the  Securities  which have been requested by the Buyer or its
          advisors.  The Buyer and its advisors,  if any, have been,  and for so
          long as the Debentures and Warrants remain  outstanding  will continue
          to be,  afforded  the  opportunity  to ask  questions  of the Company.
          Notwithstanding  the  foregoing,  the Company has not disclosed to the
          Buyer any material  nonpublic  information  and will not disclose such
          information  unless such  information is disclosed to the public prior
          to or promptly  following such  disclosure to the Buyer.  Neither such
          inquiries nor any other due diligence investigation conducted by Buyer
          or any of its  advisors  or  representatives  shall  modify,  amend or
          affect  Buyer's  right to rely on the  Company's  representations  and
          warranties  contained in Section 3 below.  The Buyer  understands that
          its  investment in the  Securities  involves a  significant  degree of
          risk.

     e.   Governmental  Review.  The Buyer  understands  that no  United  States
          federal or state agency or any other government or governmental agency
          has  passed  upon or made any  recommendation  or  endorsement  of the
          Securities.

     f.   Transfer or Re-sale. The Buyer understands that (i) except as provided
          in the  Registration  Rights  Agreement,  the sale or  re-sale  of the
          Securities has not been and is not being registered under the 1933 Act
          or any applicable state securities laws, and the Securities may not be
          transferred  unless  (a)  the  Securities  are  sold  pursuant  to  an
          effective  registration  statement  under the 1933 Act,  (b) the Buyer
          shall have  delivered  to the Company an opinion of counsel that shall
          be in form,  substance and scope  customary for opinions of counsel in
          comparable  transactions  to the effect that the Securities to be sold
          or  transferred  may be sold or  transferred  pursuant to an exemption
          from  such  registration,  which  opinion  shall  be  accepted  by the
          Company,  (c) the Securities are sold or transferred to an "affiliate"
          (as defined in Rule 144 promulgated under the 1933 Act (or a successor
          rule)  ("Rule  144"))  of the Buyer  who  agrees to sell or  otherwise
          transfer the Securities  only in accordance with this Section 2(f) and
          who is an Accredited Investor, (d) the Securities are sold pursuant to
          Rule 144, or (e) the  Securities  are sold  pursuant to  Regulation  S
          under the 1933 Act (or a successor  rule)  ("Regulation  S"),  and the
          Buyer shall have  delivered  to the Company an opinion of counsel that
          shall be in form,  substance  and  scope  customary  for  opinions  of
          counsel in corporate transactions,  which opinion shall be accepted by
          the Company; (ii) any sale of such Securities made in reliance on Rule
          144 may be made  only in  accordance  with the  terms of said Rule and
          further,  if  said  Rule  is  not  applicable,  any  re-sale  of  such
          Securities  under  circumstances  in which the  seller  (or the person
          through whom the sale is made) may be deemed to be an underwriter  (as
          that term is defined in the 1933 Act) may require compliance with some
          other exemption under the 1933 Act or the rules and regulations of the
          SEC thereunder;  and (iii) neither the Company nor any other person is
          under any obligation to register such Securities under the 1933 Act or
          any state  securities  laws or to comply with the terms and conditions
          of any exemption  thereunder (in each case, other than pursuant to the
          Registration  Rights  Agreement).  Notwithstanding  the  foregoing  or
          anything else contained herein to the contrary,  the Securities may be
          pledged as collateral in connection with a bona fide margin account or
          other  lending  arrangement.  In the event that the  Company  does not
          accept the opinion of counsel  provided  by the Buyer with  respect to
          the transfer of Securities pursuant to an exemption from registration,
          such as Rule 144 or  Regulation  S, within three (3) business  days of
          delivery of the opinion to the Company,  the Company  shall pay to the
          Buyer  liquidated  damages of three  percent  (3%) of the  outstanding
          amount of the Debentures per month plus accrued and unpaid interest on
          the Debentures,  prorated for partial months, in cash or shares at the
          option of the Buyer ("Standard  Liquidated  Damages  Amount").  If the
          Buyer  elects to be paid the  Standard  Liquidated  Damages  Amount in
          shares of Common Stock,  such shares shall be issued at the Conversion
          Price at the time of payment.

     g.   Legends.  The Buyer  understands  that the Debentures and the Warrants
          and, until such time as the Conversion  Shares and Warrant Shares have
          been registered under the 1933 Act as contemplated by the Registration
          Rights  Agreement  or  otherwise  may be sold  pursuant to Rule 144 or
          Regulation S without any restriction as to the number of securities as
          of a particular date that can then be immediately sold, the Conversion
          Shares  and  Warrant   Shares  may  bear  a   restrictive   legend  in
          substantially  the following  form (and a  stop-transfer  order may be
          placed against transfer of the certificates for such Securities):

          "The  securities   represented  by  this  certificate  have  not  been
          registered  under  the  Securities  Act  of  1933,  as  amended.   The
          securities may not be sold,  transferred or assigned in the absence of
          an effective registration statement for the securities under said Act,
          or an opinion of counsel,  in form,  substance and scope customary for
          opinions of counsel in comparable  transactions,  that registration is
          not  required  under said Act or unless  sold  pursuant to Rule 144 or
          Regulation S under said Act."

               The legend set forth above shall be removed and the Company shall
          issue a certificate  without such legend to the holder of any Security
          upon which it is stamped,  if, unless otherwise required by applicable
          state  securities laws, (a) such Security is registered for sale under
          an  effective  registration  statement  filed  under  the  1933 Act or
          otherwise may be sold pursuant to Rule 144 or Regulation S without any
          restriction  as to the number of  securities  as of a particular  date
          that can then be  immediately  sold,  or (b) such holder  provides the
          Company  with an  opinion of  counsel,  in form,  substance  and scope
          customary for opinions of counsel in comparable  transactions,  to the
          effect that a public sale or  transfer  of such  Security  may be made
          without  registration  under  the 1933  Act,  which  opinion  shall be
          accepted  by the  Company so that the sale or  transfer is effected or
          (c) such holder provides the Company with  reasonable  assurances that
          such  Security can be sold  pursuant to Rule 144 or  Regulation S. The
          Buyer agrees to sell all Securities,  including those represented by a
          certificate(s)  from which the legend has been removed,  in compliance
          with applicable prospectus delivery requirements, if any.

     h.   Authorization; Enforcement. This Agreement and the Registration Rights
          Agreement  have been duly and validly  authorized.  This Agreement has
          been duly  executed  and  delivered  on behalf of the Buyer,  and this
          Agreement constitutes, and upon execution and delivery by the Buyer of
          the  Registration  Rights  Agreement,  such agreement will constitute,
          valid and binding  agreements of the Buyer  enforceable  in accordance
          with their terms.

     i.   Residency.  The  Buyer is a  resident  of the  jurisdiction  set forth
          immediately below such Buyer's name on the signature pages hereto.

3.   REPRESENTATIONS  AND WARRANTIES OF THE COMPANY.  The Company represents and
     warrants to each Buyer that: a. Organization and Qualification. The Company
     and each of its Subsidiaries  (as defined below),  if any, is a corporation
     duly organized, validly existing and in good standing under the laws of the
     jurisdiction  in which it is  incorporated,  with full power and  authority
     (corporate and other) to own, lease,  use and operate its properties and to
     carry on its business as and where now owned,  leased,  used,  operated and
     conducted.  Schedule 3(a) sets forth a list of all of the  Subsidiaries  of
     the Company and the jurisdiction in which each is incorporated. The Company
     and each of its Subsidiaries is duly qualified as a foreign  corporation to
     do  business  and is in good  standing in every  jurisdiction  in which its
     ownership or use of property or the nature of the business  conducted by it
     makes  such  qualification  necessary  except  where the  failure  to be so
     qualified or in good  standing  would not have a Material  Adverse  Effect.
     "Material  Adverse  Effect"  means  any  material  adverse  effect  on  the
     business,  operations,  assets,  financial  condition  or  prospects of the
     Company  or  its  Subsidiaries,  if  any,  taken  as a  whole,  or  on  the
     transactions  contemplated hereby or by the agreements or instruments to be
     entered into in connection  herewith.  "Subsidiaries" means any corporation
     or other organization, whether incorporated or unincorporated, in which the
     Company  owns,  directly  or  indirectly,  any  equity  or other  ownership
     interest.

b.   Authorization;  Enforcement.  (i) The Company has all  requisite  corporate
     power  and  authority  to  enter  into  and  perform  this  Agreement,  the
     Registration  Rights  Agreement,  the  Debentures  and the  Warrants and to
     consummate the  transactions  contemplated  hereby and thereby and to issue
     the Securities,  in accordance with the terms hereof and thereof,  (ii) the
     execution  and  delivery  of  this  Agreement,   the  Registration   Rights
     Agreement,  the  Debentures  and  the  Warrants  by  the  Company  and  the
     consummation  by it of the  transactions  contemplated  hereby and  thereby
     (including  without  limitation,  the  issuance of the  Debentures  and the
     Warrants and the issuance and  reservation  for issuance of the  Conversion
     Shares and Warrant  Shares  issuable upon  conversion or exercise  thereof)
     have been duly  authorized by the Company's  Board of Directors and, except
     for the  Stockholder  Approval  (as  defined in Section  4(l)),  no further
     consent or  authorization  of the Company,  its Board of Directors,  or its
     shareholders  is required,  (iii) this Agreement has been duly executed and
     delivered  by  the  Company  by its  authorized  representative,  and  such
     authorized  representative  is the true and  official  representative  with
     authority  to sign this  Agreement  and the  other  documents  executed  in
     connection  herewith  and  bind the  Company  accordingly,  and  (iv)  this
     Agreement  constitutes,  and upon  execution and delivery by the Company of
     the Registration Rights Agreement, the Debentures and the Warrants, each of
     such instruments will constitute,  a legal, valid and binding obligation of
     the Company enforceable against the Company in accordance with its terms.

c.   Capitalization.  As of the date hereof, the authorized capital stock of the
     Company  consists  of (i)  250,000,000  shares  of Common  Stock,  of which
     66,527,503  shares  are  issued  and  outstanding,  23,722,925  shares  are
     reserved  for  issuance  pursuant  to the  Company's  stock  option  plans,
     159,749,572  shares are reserved for issuance pursuant to securities (other
     than the Debentures and the Warrants)  exercisable for, or convertible into
     or  exchangeable  for  shares of Common  Stock and  630,000,000  shares are
     reserved for issuance upon conversion of the Debentures and exercise of the
     Warrants (subject to the Stockholder  Approval (as defined in Section 4(l))
     and subject to adjustment  pursuant to the Company's  covenant set forth in
     Section 4(h) below);  (ii)  10,000,000  shares of Class A Common Stock,  of
     which  5,000,000  shares are issued and  outstanding  and (iii)  10,000,000
     shares of preferred  stock, of which no shares are issued and  outstanding.
     All of such outstanding  shares of capital stock are, or upon issuance will
     be, duly  authorized,  validly  issued,  fully paid and  nonassessable.  No
     shares of capital stock of the Company are subject to preemptive  rights or
     any other similar rights of the shareholders of the Company or any liens or
     encumbrances  imposed through the actions or failure to act of the Company.
     Except as  disclosed in Schedule  3(c),  as of the  effective  date of this
     Agreement, (i) there are no outstanding options, warrants, scrip, rights to
     subscribe  for,  puts,   calls,   rights  of  first  refusal,   agreements,
     understandings,  claims or other  commitments  or  rights of any  character
     whatsoever  relating  to,  or  securities  or  rights  convertible  into or
     exchangeable  for any shares of capital  stock of the Company or any of its
     Subsidiaries,   or  arrangements  by  which  the  Company  or  any  of  its
     Subsidiaries is or may become bound to issue  additional  shares of capital
     stock  of  the  Company  or  any of its  Subsidiaries,  (ii)  there  are no
     agreements  or  arrangements   under  which  the  Company  or  any  of  its
     Subsidiaries  is  obligated  to  register  the  sale of any of its or their
     securities  under the 1933 Act (except the Registration  Rights  Agreement)
     and  (iii)  there  are no  anti-dilution  or  price  adjustment  provisions
     contained  in any  security  issued  by the  Company  (or in any  agreement
     providing  rights  to  security  holders)  that  will be  triggered  by the
     issuance of the Debentures,  the Warrants, the Conversion Shares or Warrant
     Shares.  The Company has furnished to the Buyer true and correct  copies of
     the  Company's  Articles of  Incorporation  as in effect on the date hereof
     ("Articles of  Incorporation"),  the Company's By-laws, as in effect on the
     date hereof (the  "By-laws"),  and the terms of all securities  convertible
     into or exercisable for Common Stock of the Company and the material rights
     of the holders  thereof in respect  thereto.  The Company shall provide the
     Buyer with a written update of this representation  signed by the Company's
     Chief Executive or Chief  Financial  Officer on behalf of the Company as of
     the Closing Date.

d.   Issuance  of Shares.  Subject to the  Stockholder  Approval  (as defined in
     Section 4(1)), the Conversion Shares and Warrant Shares are duly authorized
     and  reserved for issuance  and,  upon  conversion  of the  Debentures  and
     exercise of the Warrants in accordance with their respective terms, will be
     validly  issued,  fully paid and  non-assessable,  and free from all taxes,
     liens,  claims and encumbrances with respect to the issue thereof and shall
     not be subject to preemptive rights or other similar rights of shareholders
     of the  Company  and will not  impose  personal  liability  upon the holder
     thereof.

e.   Acknowledgment  of Dilution.  The Company  understands and acknowledges the
     potentially  dilutive  effect to the Common  Stock upon the issuance of the
     Conversion  Shares and Warrant  Shares upon  conversion of the Debenture or
     exercise  of the  Warrants.  The  Company  further  acknowledges  that  its
     obligation to issue Conversion Shares and Warrant Shares upon conversion of
     the  Debentures  or  exercise  of the  Warrants  in  accordance  with  this
     Agreement,  the Debentures  and the Warrants is absolute and  unconditional
     regardless  of the  dilutive  effect  that  such  issuance  may have on the
     ownership interests of other shareholders of the Company.

f.   No Conflicts.  Subject to the  Stockholder  Approval (as defined in Section
     4(1)) and except as set forth in Schedule 3(f), the execution, delivery and
     performance of this  Agreement,  the  Registration  Rights  Agreement,  the
     Debentures  and the  Warrants by the Company  and the  consummation  by the
     Company of the  transactions  contemplated  hereby and thereby  (including,
     without  limitation,  the  issuance  and  reservation  for  issuance of the
     Conversion  Shares and Warrant Shares) will not (i) conflict with or result
     in a violation of any provision of the Articles of Incorporation or By-laws
     or (ii) violate or conflict  with,  or result in a breach of any  provision
     of, or constitute a default (or an event which with notice or lapse of time
     or both  could  become a  default)  under,  or give to others any rights of
     termination,  amendment,  acceleration or  cancellation  of, any agreement,
     indenture, patent, patent license or instrument to which the Company or any
     of its  Subsidiaries is a party, or (iii) result in a violation of any law,
     rule,  regulation,  order,  judgment or decree (including federal and state
     securities  laws and  regulations  and  regulations of any  self-regulatory
     organizations   to  which  the  Company  or  its  securities  are  subject)
     applicable  to the  Company  or any of its  Subsidiaries  or by  which  any
     property  or asset of the  Company or any of its  Subsidiaries  is bound or
     affected (except for such conflicts,  defaults,  terminations,  amendments,
     accelerations,  cancellations and violations as would not,  individually or
     in the aggregate,  have a Material Adverse Effect). Neither the Company nor
     any of its  Subsidiaries is in violation of its Articles of  Incorporation,
     By-laws or other  organizational  documents and neither the Company nor any
     of its  Subsidiaries  is in default (and no event has  occurred  which with
     notice  or  lapse  of time  or both  could  put the  Company  or any of its
     Subsidiaries  in  default)  under,  and  neither the Company nor any of its
     Subsidiaries  has taken any action or failed to take any action  that would
     give to  others  any  rights of  termination,  amendment,  acceleration  or
     cancellation  of,  any  agreement,  indenture  or  instrument  to which the
     Company or any of its  Subsidiaries  is a party or by which any property or
     assets of the  Company  or any of its  Subsidiaries  is bound or  affected,
     except  for  possible  defaults  as  would  not,  individually  or  in  the
     aggregate,  have a Material  Adverse Effect.  The businesses of the Company
     and its  Subsidiaries,  if any, are not being  conducted,  and shall not be
     conducted  so long as a Buyer owns any of the  Securities,  in violation of
     any law,  ordinance or regulation  of any  governmental  entity.  Except as
     specifically  contemplated by this Agreement and as required under the 1933
     Act and any applicable  state  securities laws, the Company is not required
     to obtain  any  consent,  authorization  or order of, or make any filing or
     registration with, any court,  governmental agency, regulatory agency, self
     regulatory  organization or stock market or any third party in order for it
     to execute, deliver or perform any of its obligations under this Agreement,
     the  Registration  Rights  Agreement,  the  Debentures  or the  Warrants in
     accordance  with the  terms  hereof  or  thereof  or to issue  and sell the
     Debentures  and Warrants in  accordance  with the terms hereof and to issue
     the  Conversion  Shares upon  conversion of the  Debentures and the Warrant
     Shares upon exercise of the Warrants. Except as disclosed in Schedule 3(f),
     all consents,  authorizations,  orders, filings and registrations which the
     Company is required to obtain pursuant to the preceding  sentence have been
     obtained or effected on or prior to the date hereof.  The Company is not in
     violation  of the listing  requirements  of the  Over-the-Counter  Bulletin
     Board (the  "OTCBB")  and does not  reasonably  anticipate  that the Common
     Stock will be delisted by the OTCBB in the foreseeable  future. The Company
     and its Subsidiaries are unaware of any facts or circumstances  which might
     give rise to any of the foregoing.

g.   SEC Documents;  Financial Statements. Except as disclosed in Schedule 3(g),
     the Company has timely filed all reports,  schedules, forms, statements and
     other  documents  required  to be filed by it with the SEC  pursuant to the
     reporting  requirements of the Securities  Exchange Act of 1934, as amended
     (the "1934 Act") (all of the  foregoing  filed prior to the date hereof and
     all  exhibits  included  therein and  financial  statements  and  schedules
     thereto and documents (other than exhibits to such documents)  incorporated
     by  reference  therein,  being  hereinafter  referred to herein as the "SEC
     Documents").  The Company  has  delivered  to each Buyer true and  complete
     copies of the SEC  Documents,  except for such  exhibits  and  incorporated
     documents.  As of their respective dates, the SEC Documents complied in all
     material  respects with the  requirements of the 1934 Act and the rules and
     regulations  of the  SEC  promulgated  thereunder  applicable  to  the  SEC
     Documents,  and none of the SEC Documents, at the time they were filed with
     the SEC,  contained  any untrue  statement of a material fact or omitted to
     state a material fact  required to be stated  therein or necessary in order
     to make the statements  therein,  in light of the circumstances under which
     they were made, not misleading. None of the statements made in any such SEC
     Documents  is,  or has  been,  required  to be  amended  or  updated  under
     applicable law (except for such  statements as have been amended or updated
     in subsequent filings prior the date hereof). As of their respective dates,
     the  financial  statements  of the Company  included  in the SEC  Documents
     complied as to form in all material  respects  with  applicable  accounting
     requirements  and the  published  rules  and  regulations  of the SEC  with
     respect thereto. Such financial statements have been prepared in accordance
     with United States generally accepted accounting  principles,  consistently
     applied,  during  the  periods  involved  (except  (i) as may be  otherwise
     indicated in such financial statements or the notes thereto, or (ii) in the
     case of unaudited  interim  statements,  to the extent they may not include
     footnotes or may be condensed or summary  statements) and fairly present in
     all material  respects the consolidated  financial  position of the Company
     and  its  consolidated  Subsidiaries  as  of  the  dates  thereof  and  the
     consolidated  results of their  operations  and cash flows for the  periods
     then  ended  (subject,  in the  case of  unaudited  statements,  to  normal
     year-end  audit  adjustments).   Except  as  set  forth  in  the  financial
     statements of the Company included in the SEC Documents, the Company has no
     liabilities,  contingent or otherwise,  other than (i) liabilities incurred
     in the  ordinary  course of  business  subsequent  to May 31, 2002 and (ii)
     obligations under contracts and commitments incurred in the ordinary course
     of business and not required under generally accepted accounting principles
     to be reflected in such financial statements, which, individually or in the
     aggregate, are not material to the financial condition or operating results
     of the Company.

h.   Absence of Certain Changes.  Since May 31, 2002, there has been no material
     adverse  change  and  no  material  adverse   development  in  the  assets,
     liabilities, business, properties, operations, financial condition, results
     of operations or prospects of the Company or any of its Subsidiaries.

i.   Absence of Litigation. There is no action, suit, claim, proceeding, inquiry
     or investigation  before or by any court, public board,  government agency,
     self-regulatory  organization  or body pending or, to the  knowledge of the
     Company or any of its  Subsidiaries,  threatened  against or affecting  the
     Company or any of its Subsidiaries, or their officers or directors in their
     capacity as such, that could have a Material Adverse Effect.  Schedule 3(i)
     contains  a  complete  list  and  summary  description  of any  pending  or
     threatened  proceeding  against  or  affecting  the  Company  or any of its
     Subsidiaries,  without  regard to whether it would have a Material  Adverse
     Effect.  The  Company  and its  Subsidiaries  are  unaware  of any facts or
     circumstances which might give rise to any of the foregoing.

j.   Patents, Copyrights, etc.

     (i)  The  Company  and  each  of its  Subsidiaries  owns or  possesses  the
          requisite licenses or rights to use all patents,  patent applications,
          patent  rights,  inventions,   know-how,  trade  secrets,  trademarks,
          trademark applications,  service marks, service names, trade names and
          copyrights ("Intellectual Property") necessary to enable it to conduct
          its  business as now  operated  (and,  except as set forth in Schedule
          3(j)  hereof,  to the best of the  Company's  knowledge,  as presently
          contemplated  to be  operated  in the  future);  there  is no claim or
          action by any person pertaining to, or proceeding  pending,  or to the
          Company's  knowledge  threatened,  which  challenges  the right of the
          Company or of a Subsidiary with respect to any  Intellectual  Property
          necessary to enable it to conduct its  business as now operated  (and,
          except  as set  forth  in  Schedule  3(j)  hereof,  to the best of the
          Company's knowledge,  as presently  contemplated to be operated in the
          future); to the best of the Company's knowledge,  the Company's or its
          Subsidiaries' current and intended products, services and processes do
          not infringe on any Intellectual  Property or other rights held by any
          person; and the Company is unaware of any facts or circumstances which
          might give rise to any of the  foregoing.  The Company and each of its
          Subsidiaries  have taken reasonable  security  measures to protect the
          secrecy, confidentiality and value of their Intellectual Property.

     (ii) All of the  Company's  computer  software and computer  hardware,  and
          other similar or related items of automated,  computerized or software
          systems  that are used or relied on by the  Company in the  conduct of
          its business or that were, or currently are being, sold or licensed by
          the Company to customers (collectively, "Information Technology"), are
          Year 2000 Compliant.  For purposes of this  Agreement,  the term "Year
          2000  Compliant"  means,  with  respect to the  Company's  Information
          Technology,  that the  Information  Technology  is designed to be used
          prior to, during and after the calendar Year 2000, and the Information
          Technology used during each such time period will accurately  receive,
          provide and process date and time data (including, but not limited to,
          calculating, comparing and sequencing) from, into and between the 20th
          and 21st  centuries,  including the years 1999 and 2000, and leap-year
          calculations,  and will not malfunction, cease to function, or provide
          invalid or incorrect  results as a result of the date or time data, to
          the extent that other information technology, used in combination with
          the Information Technology, properly exchanges date and time data with
          it. The Company has delivered to the Buyers true and correct copies of
          all  analyses,  reports,  studies  and  similar  written  information,
          whether prepared by the Company or another party,  relating to whether
          the Information Technology is Year 2000 Compliant, if any.

     k.   No Materially Adverse  Contracts,  Etc. Neither the Company nor any of
          its  Subsidiaries is subject to any charter,  corporate or other legal
          restriction,  or any judgment, decree, order, rule or regulation which
          in the  judgment of the  Company's  officers has or is expected in the
          future to have a Material Adverse Effect.  Neither the Company nor any
          of its  Subsidiaries  is a party to any contract or agreement which in
          the  judgment of the  Company's  officers has or is expected to have a
          Material Adverse Effect.

     l.   Tax Status. Except as set forth on Schedule 3(l), the Company and each
          of its Subsidiaries  has made or filed all federal,  state and foreign
          income and all other tax returns, reports and declarations required by
          any jurisdiction to which it is subject (unless and only to the extent
          that the  Company  and each of its  Subsidiaries  has set aside on its
          books provisions reasonably adequate for the payment of all unpaid and
          unreported  taxes)  and has  paid all  taxes  and  other  governmental
          assessments  and  charges  that  are  material  in  amount,  shown  or
          determined to be due on such returns, reports and declarations, except
          those  being  contested  in good  faith and has set aside on its books
          provisions  reasonably  adequate  for the  payment  of all  taxes  for
          periods  subsequent to the periods to which such  returns,  reports or
          declarations  apply.  There are no unpaid taxes in any material amount
          claimed to be due by the taxing authority of any jurisdiction, and the
          officers  of the  Company  know of no basis  for any such  claim.  The
          Company  has not  executed a waiver  with  respect  to the  statute of
          limitations  relating to the  assessment or collection of any foreign,
          federal,  state or local tax.  Except as set forth on  Schedule  3(l),
          none of the  Company's  tax returns is presently  being audited by any
          taxing authority.

     m.   Certain Transactions.  Except as set forth on Schedule 3(m) and except
          for arm's length transactions  pursuant to which the Company or any of
          its  Subsidiaries  makes  payments in the ordinary  course of business
          upon  terms  no  less  favorable  than  the  Company  or  any  of  its
          Subsidiaries  could obtain from third parties and other than the grant
          of stock  options  disclosed on Schedule  3(c),  none of the officers,
          directors,  or  employees  of the Company is  presently a party to any
          transaction  with the Company or any of its  Subsidiaries  (other than
          for services as  employees,  officers and  directors),  including  any
          contract,  agreement or other arrangement providing for the furnishing
          of  services  to or by,  providing  for  rental  of real  or  personal
          property to or from,  or otherwise  requiring  payments to or from any
          officer,  director  or  such  employee  or,  to the  knowledge  of the
          Company, any corporation,  partnership, trust or other entity in which
          any officer, director, or any such employee has a substantial interest
          or is an officer, director, trustee or partner.

     n.   Disclosure.  All information  relating to or concerning the Company or
          any of its  Subsidiaries  set forth in this  Agreement and provided to
          the Buyers pursuant to Section 2(d) hereof and otherwise in connection
          with the transactions  contemplated  hereby is true and correct in all
          material  respects  and the  Company  has not  omitted  to  state  any
          material fact necessary in order to make the statements made herein or
          therein, in light of the circumstances under which they were made, not
          misleading.  No event or  circumstance  has  occurred  or exists  with
          respect  to the  Company  or any of its  Subsidiaries  or its or their
          business, properties,  prospects,  operations or financial conditions,
          which,  under  applicable  law, rule or  regulation,  requires  public
          disclosure  or  announcement  by the Company but which has not been so
          publicly  announced or disclosed  (assuming  for this purpose that the
          Company's reports filed under the 1934 Act are being incorporated into
          an effective  registration  statement  filed by the Company  under the
          1933 Act).

     o.   Acknowledgment  Regarding Buyers' Purchase of Securities.  The Company
          acknowledges  and agrees  that the  Buyers  are  acting  solely in the
          capacity of arm's length purchasers with respect to this Agreement and
          the transactions contemplated hereby. The Company further acknowledges
          that no Buyer is acting as a  financial  advisor or  fiduciary  of the
          Company (or in any similar  capacity)  with respect to this  Agreement
          and the transactions contemplated hereby and any statement made by any
          Buyer  or  any  of  their  respective  representatives  or  agents  in
          connection  with  this  Agreement  and the  transactions  contemplated
          hereby is not advice or a recommendation  and is merely  incidental to
          the Buyers' purchase of the Securities. The Company further represents
          to each Buyer that the Company's decision to enter into this Agreement
          has been based solely on the independent evaluation of the Company and
          its representatives.

     p.   No  Integrated   Offering.   Neither  the  Company,  nor  any  of  its
          affiliates, nor any person acting on its or their behalf, has directly
          or  indirectly  made any offers or sales in any  security or solicited
          any offers to buy any security under  circumstances that would require
          registration  under the 1933 Act of the issuance of the  Securities to
          the Buyers.  The issuance of the  Securities to the Buyers will not be
          integrated with any other issuance of the Company's  securities (past,
          current or future) for purposes of any shareholder approval provisions
          applicable to the Company or its securities.

     q.   No Brokers.  The Company has taken no action  which would give rise to
          any claim by any person for brokerage commissions, transaction fees or
          similar  payments  relating  to  this  Agreement  or the  transactions
          contemplated hereby.

     r.   Permits;  Compliance.  The Company and each of its  Subsidiaries is in
          possession  of  all  franchises,  grants,  authorizations,   licenses,
          permits, easements,  variances,  exemptions,  consents,  certificates,
          approvals  and  orders   necessary  to  own,  lease  and  operate  its
          properties  and to carry on its business as it is now being  conducted
          (collectively,  the "Company Permits"), and there is no action pending
          or, to the knowledge of the Company,  threatened  regarding suspension
          or cancellation of any of the Company Permits. Neither the Company nor
          any  of  its  Subsidiaries  is in  conflict  with,  or in  default  or
          violation  of,  any  of the  Company  Permits,  except  for  any  such
          conflicts,  defaults  or  violations  which,  individually  or in  the
          aggregate, would not reasonably be expected to have a Material Adverse
          Effect.  Since  May  31,  2002,  neither  the  Company  nor any of its
          Subsidiaries  has received any  notification  with respect to possible
          conflicts,  defaults or  violations  of  applicable  laws,  except for
          notices relating to possible conflicts,  defaults or violations, which
          conflicts,  defaults or violations  would not have a Material  Adverse
          Effect.

     s.   Environmental Matters.

          (i)  Except as set forth in Schedule 3(s), there are, to the Company's
               knowledge, with respect to the Company or any of its Subsidiaries
               or any predecessor of the Company,  no past or present violations
               of  Environmental  Laws  (as  defined  below),  releases  of  any
               material    into   the    environment,    actions,    activities,
               circumstances,  conditions,  events,  incidents,  or  contractual
               obligations  which may give rise to any common law  environmental
               liability or any liability under the Comprehensive  Environmental
               Response,  Compensation  and  Liability  Act of 1980  or  similar
               federal, state, local or foreign laws and neither the Company nor
               any of its  Subsidiaries  has received any notice with respect to
               any  of the  foregoing,  nor is any  action  pending  or,  to the
               Company's  knowledge,  threatened in  connection  with any of the
               foregoing.  The term  "Environmental  Laws"  means  all  federal,
               state,  local or foreign laws relating to pollution or protection
               of  human   health  or  the   environment   (including,   without
               limitation, ambient air, surface water, groundwater, land surface
               or  subsurface  strata),  including,   without  limitation,  laws
               relating  to  emissions,   discharges,   releases  or  threatened
               releases  of  chemicals,  pollutants  contaminants,  or  toxic or
               hazardous   substances   or  wastes   (collectively,   "Hazardous
               Materials")  into the environment,  or otherwise  relating to the
               manufacture,  processing,  distribution, use, treatment, storage,
               disposal,  transport or handling of Hazardous Materials,  as well
               as all authorizations, codes, decrees, demands or demand letters,
               injunctions,  judgments,  licenses,  notices  or notice  letters,
               orders,   permits,   plans  or   regulations   issued,   entered,
               promulgated or approved thereunder.

          (ii) Other than those that are or were stored,  used or disposed of in
               compliance  with  applicable  law,  no  Hazardous  Materials  are
               contained on or about any real property  currently owned,  leased
               or  used  by the  Company  or any  of  its  Subsidiaries,  and no
               Hazardous  Materials  were released on or about any real property
               previously  owned,  leased or used by the  Company  or any of its
               Subsidiaries  during the period the property was owned, leased or
               used by the  Company  or any of its  Subsidiaries,  except in the
               normal  course  of the  Company's  or  any  of its  Subsidiaries'
               business.

          (iii)Except as set forth in Schedule  3(s),  there are no  underground
               storage tanks on or under any real property owned, leased or used
               by  the  Company  or  any of its  Subsidiaries  that  are  not in
               compliance with applicable law.

     t.   Title to  Property.  The  Company and its  Subsidiaries  have good and
          marketable  title  in fee  simple  to all real  property  and good and
          marketable  title to all  personal  property  owned  by them  which is
          material to the business of the Company and its Subsidiaries,  in each
          case free and clear of all liens, encumbrances and defects except such
          as are described in Schedule 3(t) or such as would not have a Material
          Adverse  Effect.  Any real property and facilities held under lease by
          the  Company  and its  Subsidiaries  are  held by  them  under  valid,
          subsisting and  enforceable  leases with such  exceptions as would not
          have a Material Adverse Effect.

     u.   Insurance.  The  Company and each of its  Subsidiaries  are insured by
          insurers of recognized  financial  responsibility  against such losses
          and risks and in such amounts as management of the Company believes to
          be prudent and  customary in the  businesses  in which the Company and
          its  Subsidiaries  are  engaged.  Neither  the  Company  nor any  such
          Subsidiary has any reason to believe that it will not be able to renew
          its existing  insurance  coverage as and when such coverage expires or
          to obtain similar  coverage from similar  insurers as may be necessary
          to  continue  its  business  at a cost that  would not have a Material
          Adverse  Effect.  The Company  has  provided to Buyer true and correct
          copies of all policies relating to directors' and officers'  liability
          coverage,  errors  and  omissions  coverage,  and  commercial  general
          liability coverage.

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

     w.   Foreign  Corrupt  Practices.  Neither  the  Company,  nor  any  of its
          Subsidiaries,  nor any  director,  officer,  agent,  employee or other
          person acting on behalf of the Company or any  Subsidiary  has, in the
          course of his  actions  for,  or on behalf of, the  Company,  used any
          corporate funds for any unlawful contribution,  gift, entertainment or
          other  unlawful  expenses  relating to  political  activity;  made any
          direct  or  indirect  unlawful  payment  to any  foreign  or  domestic
          government  official or employee from corporate funds;  violated or is
          in violation of any provision of the U.S.  Foreign  Corrupt  Practices
          Act of 1977, as amended, or made any bribe, rebate, payoff,  influence
          payment, kickback or other unlawful payment to any foreign or domestic
          government official or employee.

     x.   Solvency.  The  Company  (after  giving  effect  to  the  transactions
          contemplated  by this  Agreement) is solvent (i.e.,  its assets have a
          fair market value in excess of the amount required to pay its probable
          liabilities on its existing debts as they become absolute and matured)
          and  currently  the Company has no  information  that would lead it to
          reasonably conclude that the Company would not, after giving effect to
          the transaction  contemplated by this Agreement,  have the ability to,
          nor does it intend to take any action  that would  impair its  ability
          to, pay its debts from time to time incurred in  connection  therewith
          as such debts mature.  The Company did not receive a qualified opinion
          from its auditors with respect to its most recent fiscal year end and,
          after  giving  effect  to  the   transactions   contemplated  by  this
          Agreement,  does not  anticipate  or know of any basis  upon which its
          auditors  might  issue a  qualified  opinion in respect of its current
          fiscal year.

     y.   No Investment  Company.  The Company is not, and upon the issuance and
          sale of the Securities as  contemplated  by this Agreement will not be
          an "investment company" required to be registered under the Investment
          Company  Act of 1940 (an  "Investment  Company").  The  Company is not
          controlled by an Investment Company.

     z.   Breach  of  Representations  and  Warranties  by the  Company.  If the
          Company breaches any of the representations or warranties set forth in
          this Section 3, and in addition to any other remedies available to the
          Buyers pursuant to this Agreement,  the Company shall pay to the Buyer
          the Standard  Liquidated Damages Amount in cash or in shares of Common
          Stock at the option of the Buyer,  until such breach is cured.  If the
          Buyers elect to be paid the  Standard  Liquidated  Damages  Amounts in
          shares of Common Stock,  such shares shall be issued at the Conversion
          Price at the time of payment.

4.   COVENANTS.

     a.   Best  Efforts.  The  parties  shall use their best  efforts to satisfy
          timely  each of the  conditions  described  in Section 6 and 7 of this
          Agreement.

     b.   Form D;  Blue  Sky  Laws.  The  Company  agrees  to file a Form D with
          respect  to the  Securities  as  required  under  Regulation  D and to
          provide a copy thereof to each Buyer promptly  after such filing.  The
          Company shall,  on or before the Closing Date, take such action as the
          Company  shall  reasonably  determine  is  necessary  to  qualify  the
          Securities for sale to the Buyers at the applicable  closing  pursuant
          to this Agreement  under  applicable  securities or "blue sky" laws of
          the states of the United  States (or to obtain an exemption  from such
          qualification), and shall provide evidence of any such action so taken
          to each Buyer on or prior to the Closing Date.

     c.   Reporting  Status;  Eligibility to Use Form S-3, SB-2 or Form S-1. The
          Company's  Common Stock is registered  under Section 12(g) of the 1934
          Act.  The  Company   represents   and  warrants   that  it  meets  the
          requirements  for  the  use of  Form  S-3  (or if the  Company  is not
          eligible  for the use of Form S-3 as of the Filing Date (as defined in
          the Registration  Rights  Agreement),  the Company may use the form of
          registration  for which it is eligible at that time) for  registration
          of the sale by the Buyer of the Registrable  Securities (as defined in
          the Registration Rights Agreement).  So long as the Buyer beneficially
          owns any of the Securities,  the Company shall timely file all reports
          required to be filed with the SEC  pursuant  to the 1934 Act,  and the
          Company shall not  terminate its status as an issuer  required to file
          reports  under  the 1934 Act  even if the  1934 Act or the  rules  and
          regulations  thereunder  would  permit such  termination.  The Company
          further agrees to file all reports required to be filed by the Company
          with  the  SEC  in a  timely  manner  so as to  become  eligible,  and
          thereafter to maintain its  eligibility,  for the use of Form S-3. The
          Company shall issue a press release  describing the materials terms of
          the transaction  contemplated hereby as soon as practicable  following
          the Closing  Date but in no event more than two (2)  business  days of
          the Closing Date, which press release shall be subject to prior review
          by the Buyers.  The Company  agrees that such press  release shall not
          disclose  the name of the  Buyers  unless  expressly  consented  to in
          writing  by  the  Buyers  or  unless  required  by  applicable  law or
          regulation, and then only to the extent of such requirement.

     d.   Use of Proceeds.  The Company  shall use the proceeds from the sale of
          the  Debentures  and the  Warrants in the manner set forth in Schedule
          4(d) attached hereto and made a part hereof and shall not, directly or
          indirectly,  use such  proceeds for any loan to or  investment  in any
          other corporation,  partnership, enterprise or other person (except in
          connection   with  its   currently   existing   direct   or   indirect
          Subsidiaries)

     e.   Future  Offerings.  Subject to the  exceptions  described  below,  the
          Company   will  not,   without   the  prior   written   consent  of  a
          majority-in-interest  of the Buyers, not to be unreasonably  withheld,
          negotiate  or  contract  with any  party to obtain  additional  equity
          financing  (including  debt financing with an equity  component)  that
          involves  (A) the issuance of Common Stock at a discount to the market
          price of the Common Stock on the date of issuance (taking into account
          the value of any warrants or options to acquire Common Stock issued in
          connection  therewith) or (B) the issuance of  convertible  securities
          that are convertible into an indeterminate  number of shares of Common
          Stock or (C) the issuance of warrants  during the period (the "Lock-up
          Period")  beginning on the Closing Date and ending on the later of (i)
          two  hundred  seventy  (270) days from the  Closing  Date and (ii) one
          hundred eighty (180) days from the date the Registration Statement (as
          defined in the Registration  Rights  Agreement) is declared  effective
          (plus any days in which sales cannot be made thereunder). In addition,
          subject  to the  exceptions  described  below,  the  Company  will not
          conduct any equity financing (including debt with an equity component)
          ("Future  Offerings")  during the period beginning on the Closing Date
          and ending two (2) years after the end of the Lock-up Period unless it
          shall  have  first  delivered  to each  Buyer,  at least  twenty  (20)
          business  days prior to the closing of such Future  Offering,  written
          notice  describing the proposed Future  Offering,  including the terms
          and conditions  thereof and proposed  definitive  documentation  to be
          entered into in  connection  therewith,  and  providing  each Buyer an
          option during the fifteen (15) day period  following  delivery of such
          notice to  purchase  its pro rata  share  (based on the ratio that the
          aggregate  principal  amount of  Debentures  purchased by it hereunder
          bears  to the  aggregate  principal  amount  of  Debentures  purchased
          hereunder) of the securities  being offered in the Future  Offering on
          the  same  terms  as   contemplated   by  such  Future  Offering  (the
          limitations  referred to in this sentence and the  preceding  sentence
          are collectively referred to as the "Capital Raising Limitations"). In
          the event the terms and conditions of a proposed  Future  Offering are
          amended  in any  respect  after  delivery  of the notice to the Buyers
          concerning the proposed Future  Offering,  the Company shall deliver a
          new notice to each Buyer  describing  the amended terms and conditions
          of the proposed Future Offering and each Buyer  thereafter  shall have
          an option  during the fifteen  (15) day period  following  delivery of
          such new notice to purchase its pro rata share of the securities being
          offered  on the same terms as  contemplated  by such  proposed  Future
          Offering, as amended. The foregoing sentence shall apply to successive
          amendments  to  the  terms  and  conditions  of  any  proposed  Future
          Offering.  The  Capital  Raising  Limitations  shall  not apply to any
          transaction involving (i) issuances of securities in a firm commitment
          underwritten public offering (excluding a continuous offering pursuant
          to Rule 415 under the 1933  Act),  (ii)  issuances  of  securities  as
          consideration for a merger, consolidation or purchase of assets, or in
          connection  with  any  strategic  partnership  or joint  venture  (the
          primary  purpose  of  which  is not to raise  equity  capital),  or in
          connection with the disposition or acquisition of a business,  product
          or license  by the  Company or (iii)  issuance  of Class A  cumulative
          preferred  stock to Plazacorp  Investments  Limited in connection with
          the  conversion  of a promissory  note held by  Plazacorp  Investments
          Limited  with a principal  amount of  $1,162,000  plus  interest.  The
          Capital  Raising  Limitations  also shall not apply to the issuance of
          securities  upon  exercise or  conversion  of the  Company's  options,
          warrants or other  convertible  securities  outstanding as of the date
          hereof or to the  grant of  additional  options  or  warrants,  or the
          issuance of additional  securities,  under any Company stock option or
          restricted stock plan approved by the shareholders of the Company.

     f.   Expenses.  At the  Closing,  the Company  shall  reimburse  Buyers for
          expenses   incurred  by  them  in  connection  with  the  negotiation,
          preparation, execution, delivery and performance of this Agreement and
          the  other   agreements   to  be  executed  in   connection   herewith
          ("Documents"),   including,   without   limitation,   attorneys'   and
          consultants'  fees and expenses,  transfer agent fees,  fees for stock
          quotation  services,  fees relating to any amendments or modifications
          of the  Documents  or any  consents  or waivers of  provisions  in the
          Documents,  fees for the  preparation  of opinions of counsel,  escrow
          fees, and costs of restructuring the transactions  contemplated by the
          Documents.  When  possible,  the Company must pay these fees directly,
          otherwise the Company must make immediate payment for reimbursement to
          the Buyers for all fees and expenses  immediately  upon written notice
          by the  Buyer or the  submission  of an  invoice  by the  Buyer If the
          Company fails to reimburse the Buyer in full within three (3) business
          days of the written notice or submission of invoice by the Buyer,  the
          Company  shall  pay  interest  on  the  total  amount  of  fees  to be
          reimbursed at a rate of 15% per annum.

     g.   Financial  Information.  The  Company  agrees  to send  the  following
          reports to each Buyer until such Buyer  transfers,  assigns,  or sells
          all of the Securities:  (i) within ten (10) days after the filing with
          the SEC,  a copy of its  Annual  Report on Form  10-K,  its  Quarterly
          Reports on Form 10-Q and any Current  Reports on Form 8-K; (ii) within
          one (1) day after release,  copies of all press releases issued by the
          Company or any of its Subsidiaries;  and (iii)  contemporaneously with
          the making  available  or giving to the  shareholders  of the Company,
          copies of any notices or other information the Company makes available
          or gives to such shareholders.

     h.   Authorization  and  Reservation of Shares.  Subject to the Stockholder
          Approval (as defined in Section 4(1)),  the Company shall at all times
          have  authorized,   and  reserved  for  the  purpose  of  issuance,  a
          sufficient  number of shares of Common  Stock to provide  for the full
          conversion or exercise of the outstanding  Debentures and Warrants and
          issuance of the  Conversion  Shares and Warrant  Shares in  connection
          therewith (based on the Conversion Price of the Debentures or Exercise
          Price of the  Warrants in effect  from time to time) and as  otherwise
          required by the Debentures. The Company shall not reduce the number of
          shares of Common  Stock  reserved  for  issuance  upon  conversion  of
          Debentures  and exercise of the  Warrants  without the consent of each
          Buyer. The Company shall at all times maintain the number of shares of
          Common Stock so reserved for issuance at an amount ("Reserved Amount")
          equal to no less than two (2) times the number  that is then  actually
          issuable  upon  full  conversion  of  the  Debentures  and  Additional
          Debentures  and  upon  exercise  of the  Warrants  and the  Additional
          Warrants  (based  on the  Conversion  Price of the  Debentures  or the
          Exercise Price of the Warrants in effect from time to time). If at any
          time the number of shares of Common Stock  authorized and reserved for
          issuance  ("Authorized  and  Reserved  Shares") is below the  Reserved
          Amount,  the Company will promptly take all corporate action necessary
          to  authorize  and reserve a sufficient  number of shares,  including,
          without  limitation,  calling a special  meeting  of  shareholders  to
          authorize  additional  shares to meet the Company's  obligations under
          this Section 4(h), in the case of an insufficient number of authorized
          shares,  obtain shareholder approval of an increase in such authorized
          number of shares,  and voting the management  shares of the Company in
          favor of an increase in the authorized shares of the Company to ensure
          that  the  number  of  authorized  shares  is  sufficient  to meet the
          Reserved  Amount.  If the  Company  fails to obtain  such  shareholder
          approval  within  thirty  (30)  days  following  the date on which the
          number of Authorized and Reserved Shares exceeds the Reserved  Amount,
          the Company shall pay to the Borrower the Standard  Liquidated Damages
          Amount,  in cash or in  shares of  Common  Stock at the  option of the
          Buyer. If the Buyer elects to be paid the Standard  Liquidated Damages
          Amount in shares of Common  Stock,  such shares shall be issued at the
          Conversion  Price at the time of payment.  In order to ensure that the
          Company  has  authorized  a  sufficient  amount  of shares to meet the
          Reserved Amount at all times, the Company must deliver to the Buyer at
          the end of every  month a list  detailing  (1) the  current  amount of
          shares  authorized by the Company and reserved for the Buyer;  and (2)
          amount of shares  issuable upon  conversion of the Debentures and upon
          exercise of the  Warrants  and as payment of  interest  accrued on the
          Debentures  for one year.  If the Company  fails to provide  such list
          within five (5)  business  days of the end of each month,  the Company
          shall pay the Standard Liquidated Damages Amount, in cash or in shares
          of  Common  Stock  at the  option  of the  Buyer,  until  the  list is
          delivered.  If the  Buyer  elects to be paid the  Standard  Liquidated
          Damages Amount in shares of Common Stock,  such shares shall be issued
          at the Conversion Price at the time of payment.

     i.   Listing.  The  Company  shall  promptly  secure  the  listing  of  the
          Conversion  Shares and Warrant  Shares upon each  national  securities
          exchange or automated  quotation  system, if any, upon which shares of
          Common Stock are then listed  (subject to official notice of issuance)
          and, so long as any Buyer owns any of the Securities,  shall maintain,
          so long as any other shares of Common  Stock shall be so listed,  such
          listing of all Conversion  Shares and Warrant Shares from time to time
          issuable  upon  conversion  of  the  Debentures  or  exercise  of  the
          Warrants.  The Company  will obtain and, so long as any Buyer owns any
          of the  Securities,  maintain  the  listing  and trading of its Common
          Stock on the OTCBB or any equivalent  replacement exchange, the Nasdaq
          National  Market  ("Nasdaq"),  the  Nasdaq  SmallCap  Market  ("Nasdaq
          SmallCap"),  the New York Stock  Exchange  ("NYSE"),  or the  American
          Stock  Exchange  ("AMEX")  and will  comply in all  respects  with the
          Company's reporting,  filing and other obligations under the bylaws or
          rules of the National  Association of Securities  Dealers ("NASD") and
          such exchanges,  as applicable.  The Company shall promptly provide to
          each Buyer  copies of any notices it  receives  from the OTCBB and any
          other exchanges or quotation systems on which the Common Stock is then
          listed  regarding  the continued  eligibility  of the Common Stock for
          listing on such exchanges and quotation systems.

     j.   Corporate  Existence.  So  long  as  a  Buyer  beneficially  owns  any
          Debentures  or Warrants,  the Company  shall  maintain  its  corporate
          existence and shall not sell all or substantially all of the Company's
          assets,  except in the event of a merger or  consolidation  or sale of
          all or substantially all of the Company's assets,  where the surviving
          or  successor  entity in such  transaction  (i) assumes the  Company's
          obligations hereunder and under the agreements and instruments entered
          into in connection  herewith and (ii) is a publicly traded corporation
          whose Common Stock is listed for trading on the OTCBB, Nasdaq,  Nasdaq
          SmallCap, NYSE or AMEX.

     k.   No Integration.  The Company shall not make any offers or sales of any
          security (other than the Securities)  under  circumstances  that would
          require registration of the Securities being offered or sold hereunder
          under  the 1933 Act or cause  the  offering  of the  Securities  to be
          integrated  with any other  offering of  securities by the Company for
          the purpose of any stockholder  approval  provision  applicable to the
          Company or its securities.

     l.   Stockholder Approval.  The Company shall file an information statement
          with the SEC no later than  October 11, 2002 and use its best  efforts
          to obtain,  on or before  November  29,  2002,  such  approvals of the
          Company's  stockholders  as may be required to issue all of the shares
          of Common Stock issuable upon  conversion or exercise of, or otherwise
          with respect to, the  Debentures  and the Warrants in accordance  with
          Delaware law and any applicable  rules or regulations of the OTCBB and
          Nasdaq, either through a reverse stock split of the Common Stock or an
          increase in  authorized  capital  (the  "Stockholder  Approval").  The
          Company  shall  furnish to each Buyer and its legal  counsel  promptly
          (but in no event less than two (2)  business  days) before the same is
          filed  with the SEC,  one copy of the  information  statement  and any
          amendment  thereto,  and shall  deliver  to each Buyer  promptly  each
          letter  written by or on behalf of the Company to the SEC or the staff
          of the SEC, and each item of correspondence  from the SEC or the staff
          of the SEC, in each case relating to such information statement (other
          than any portion  thereof  which  contains  information  for which the
          Company has sought confidential treatment).  The Company will promptly
          (but in no event more than three (3) business days) respond to any and
          all comments  received from the SEC (which  comments shall promptly be
          made  available  to each  Buyer).  The Company  shall  comply with the
          filing and disclosure requirements of Section 14 under the 1934 Act in
          connection with the Stockholder  Approval.  The Company represents and
          warrants  that its  Board  of  Directors  has  approved  the  proposal
          contemplated  by this Section 4(l) and shall indicate such approval in
          the  information  statement  used in connection  with the  Stockholder
          Approval.

     m.   Breach of Covenants.  If the Company breaches any of the covenants set
          forth  in this  Section  4,  and in  addition  to any  other  remedies
          available to the Buyers pursuant to this Agreement,  the Company shall
          pay to the Buyers the Standard  Liquidated  Damages Amount, in cash or
          in shares of Common  Stock at the  option  of the  Buyer,  until  such
          breach  is  cured.  If  the  Buyers  elect  to be  paid  the  Standard
          Liquidated  Damages  Amount in shares,  such shares shall be issued at
          the Conversion Price at the time of payment.

5.   TRANSFER   AGENT   INSTRUCTIONS.   The  Company  shall  issue   irrevocable
     instructions to its transfer agent to issue certificates, registered in the
     name of each Buyer or its nominee,  for the  Conversion  Shares and Warrant
     Shares in such amounts as specified  from time to time by each Buyer to the
     Company upon  conversion  of the  Debentures or exercise of the Warrants in
     accordance  with  the  terms  thereof  (the  "Irrevocable   Transfer  Agent
     Instructions").  Prior to registration of the Conversion Shares and Warrant
     Shares  under the 1933 Act or the date on which the  Conversion  Shares and
     Warrant Shares may be sold pursuant to Rule 144 without any  restriction as
     to the  number  of  Securities  as of a  particular  date  that can then be
     immediately sold, all such certificates  shall bear the restrictive  legend
     specified in Section 2(g) of this Agreement.  The Company  warrants that no
     instruction other than the Irrevocable Transfer Agent Instructions referred
     to in this  Section 5, and stop  transfer  instructions  to give  effect to
     Section  2(f)  hereof (in the case of the  Conversion  Shares  and  Warrant
     Shares,  prior to registration of the Conversion  Shares and Warrant Shares
     under the 1933 Act or the date on which the  Conversion  Shares and Warrant
     Shares may be sold pursuant to Rule 144 without any  restriction  as to the
     number of Securities as of a particular  date that can then be  immediately
     sold),  will be given by the  Company  to its  transfer  agent and that the
     Securities shall otherwise be freely  transferable on the books and records
     of the  Company as and to the extent  provided  in this  Agreement  and the
     Registration Rights Agreement.  Nothing in this Section shall affect in any
     way the Buyer's  obligations and agreement set forth in Section 2(g) hereof
     to comply with all applicable  prospectus  delivery  requirements,  if any,
     upon re-sale of the Securities. If a Buyer provides the Company with (i) an
     opinion of counsel in form,  substance and scope  customary for opinions in
     comparable  transactions,  to the effect  that a public sale or transfer of
     such  Securities  may be made without  registration  under the 1933 Act and
     such sale or transfer is  effected  or (ii) the Buyer  provides  reasonable
     assurances  that the  Securities  can be sold  pursuant  to Rule  144,  the
     Company  shall  permit the  transfer,  and,  in the case of the  Conversion
     Shares and Warrant  Shares,  promptly  instruct its transfer agent to issue
     one or more certificates, free from restrictive legend, in such name and in
     such  denominations  as specified by such Buyer.  The Company  acknowledges
     that a breach by it of its  obligations  hereunder  will cause  irreparable
     harm to the Buyers, by vitiating the intent and purpose of the transactions
     contemplated hereby. Accordingly,  the Company acknowledges that the remedy
     at law  for a  breach  of  its  obligations  under  this  Section  5 may be
     inadequate and agrees, in the event of a breach or threatened breach by the
     Company  of the  provisions  of this  Section,  that  the  Buyers  shall be
     entitled,  in addition to all other  available  remedies,  to an injunction
     restraining  any breach  and  requiring  immediate  transfer,  without  the
     necessity of showing  economic loss and without any bond or other  security
     being required.

6.   CONDITIONS  TO THE  COMPANY'S  OBLIGATION  TO SELL.  The  obligation of the
     Company  hereunder to issue and sell the Debentures and Warrants to a Buyer
     at the  Closing is subject to the  satisfaction,  at or before the  Closing
     Date of each of the  following  conditions  thereto,  provided  that  these
     conditions  are for the  Company's  sole  benefit  and may be waived by the
     Company at any time in its sole discretion:

     a.   The  applicable  Buyer  shall have  executed  this  Agreement  and the
          Registration Rights Agreement, and delivered the same to the Company.

     b.   The  applicable  Buyer  shall have  delivered  the  Purchase  Price in
          accordance with Section 1(b) above.

     c.   The  representations  and warranties of the applicable  Buyer shall be
          true and correct in all material respects as of the date when made and
          as of the  Closing  Date  as  though  made at that  time  (except  for
          representations  and warranties that speak as of a specific date), and
          the applicable  Buyer shall have performed,  satisfied and complied in
          all material  respects with the  covenants,  agreements and conditions
          required by this Agreement to be performed, satisfied or complied with
          by the applicable Buyer at or prior to the Closing Date.

     d.   No litigation,  statute,  rule,  regulation,  executive order, decree,
          ruling or injunction shall have been enacted, entered,  promulgated or
          endorsed by or in any court or  governmental  authority  of  competent
          jurisdiction or any self-regulatory organization having authority over
          the matters  contemplated  hereby which prohibits the  consummation of
          any of the transactions contemplated by this Agreement.

7.   CONDITIONS TO EACH BUYER'S  OBLIGATION TO PURCHASE.  The obligation of each
     Buyer  hereunder to purchase the  Debentures and Warrants at the Closing is
     subject to the  satisfaction,  at or before the Closing Date of each of the
     following  conditions,  provided that these conditions are for such Buyer's
     sole  benefit  and may be  waived  by such  Buyer  at any  time in its sole
     discretion:

     a.   The Company shall have executed  this  Agreement and the  Registration
          Rights Agreement, and delivered the same to the Buyer.

     b.   The  Company  shall  have   delivered  to  such  Buyer  duly  executed
          Debentures  (in such  denominations  as the Buyer shall  request)  and
          Warrants in accordance with Section 1(b) above.

     c.   The  Irrevocable  Transfer Agent  Instructions,  in form and substance
          satisfactory to a majority-in-interest  of the Buyers, shall have been
          delivered to and  acknowledged  in writing by the  Company's  Transfer
          Agent.

     d.   The  representations  and  warranties of the Company shall be true and
          correct in all  material  respects  as of the date when made and as of
          the   Closing   Date  as  though   made  at  such  time   (except  for
          representations  and warranties  that speak as of a specific date) and
          the  Company  shall have  performed,  satisfied  and  complied  in all
          material  respects  with  the  covenants,  agreements  and  conditions
          required by this Agreement to be performed, satisfied or complied with
          by the Company at or prior to the Closing  Date.  The Buyer shall have
          received  a  certificate  or  certificates,   executed  by  the  chief
          executive officer of the Company, dated as of the Closing Date, to the
          foregoing  effect  and as to such other  matters as may be  reasonably
          requested  by such Buyer  including,  but not limited to  certificates
          with respect to the Company's  Articles of Incorporation,  By-laws and
          Board  of  Directors'   resolutions   relating  to  the   transactions
          contemplated hereby.

     e.   No litigation,  statute,  rule,  regulation,  executive order, decree,
          ruling or injunction shall have been enacted, entered,  promulgated or
          endorsed by or in any court or  governmental  authority  of  competent
          jurisdiction or any self-regulatory organization having authority over
          the matters  contemplated  hereby which prohibits the  consummation of
          any of the transactions contemplated by this Agreement.

     f.   No event shall have  occurred  which could  reasonably  be expected to
          have a Material Adverse Effect on the Company.

     g.   The Conversion  Shares and Warrant  Shares shall have been  authorized
          for  quotation  on the OTCBB and  trading in the  Common  Stock on the
          OTCBB shall not have been suspended by the SEC or the OTCBB.

     h.   The Buyer  shall have  received an opinion of the  Company's  counsel,
          dated as of the Closing Date, in form, scope and substance  reasonably
          satisfactory  to the  Buyer  and in  substantially  the  same  form as
          Exhibit "D" attached hereto.

     i.   The Buyer shall have  received an officer's  certificate  described in
          Section 3(c) above, dated as of the Closing Date.

8.   GOVERNING LAW;

          MISCELLANEOUS.

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

          b.   Counterparts;  Signatures  by  Facsimile.  This  Agreement may be
               executed  in one or more  counterparts,  each of  which  shall be
               deemed an original but all of which shall  constitute one and the
               same agreement and shall become effective when  counterparts have
               been signed by each party and delivered to the other party.  This
               Agreement,  once  executed by a party,  may be  delivered  to the
               other party  hereto by facsimile  transmission  of a copy of this
               Agreement  bearing the signature of the party so delivering  this
               Agreement.

          c.   Headings.  The headings of this Agreement are for  convenience of
               reference  only  and  shall  not  form  part of,  or  affect  the
               interpretation of, this Agreement.

          d.   Severability.  In the event that any provision of this  Agreement
               is invalid or unenforceable  under any applicable statute or rule
               of law, then such  provision  shall be deemed  inoperative to the
               extent  that  it may  conflict  therewith  and  shall  be  deemed
               modified  to  conform  with  such  statute  or rule  of law.  Any
               provision hereof which may prove invalid or  unenforceable  under
               any law shall not affect the  validity or  enforceability  of any
               other provision hereof.

          e.   Entire Agreement;  Amendments. This Agreement and the instruments
               referenced herein contain the entire understanding of the parties
               with  respect to the  matters  covered  herein and  therein  and,
               except as specifically  set forth herein or therein,  neither the
               Company  nor  the  Buyer  makes  any  representation,   warranty,
               covenant  or  undertaking  with  respect  to  such  matters.   No
               provision of this  Agreement  may be waived or amended other than
               by an  instrument  in  writing  signed by the party to be charged
               with enforcement.

          f.   Notices.  Any notices required or permitted to be given under the
               terms of this Agreement  shall be sent by certified or registered
               mail (return  receipt  requested)  or delivered  personally or by
               courier (including a recognized overnight delivery service) or by
               facsimile and shall be effective  five days after being placed in
               the mail,  if mailed  by  regular  United  States  mail,  or upon
               receipt,  if  delivered  personally  or by courier  (including  a
               recognized  overnight delivery service) or by facsimile,  in each
               case addressed to a party. The addresses for such  communications
               shall be:

                           If to the Company:

                                    Insynq, Inc.
                                    1101 Broadway Plaza
                                    Tacoma, Washington  98498
                                    Attention:  John P. Gorst
                                    Telephone:  (253) 284-2000
                                    Facsimile:  (253) 284-2035
                                    Email: jpg@insynq.com

                           With a copy to:

                                    Sichenzia Ross Friedman Ference LLP
                                    1065 Avenue of the Americas, 21st Floor
                                    New York, New York 10018
                                    Attention:  Gregory Sichenzia, Esq.
                                    Telephone:  (212) 398-1207
                                    Facsimile:   (212) 930-9725
                                    Email:  gsichenzia@srfllp.net

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

                           With a copy to:

                                    Ballard Spahr Andrews & Ingersoll, LLP
                                    1735 Market Street
                                    51st Floor
                                    Philadelphia, Pennsylvania  19103
                                    Attention:  Gerald J. Guarcini, Esq.
                                    Telephone:  (215) 864-8625
                                    Facsimile:  (215) 864-8999
                                    Email:  guarcini@ballardspahr.com

     Each  party  shall  provide  notice  to the  other  party of any  change in
address.

          g.   Successors and Assigns.  This Agreement shall be binding upon and
               inure to the  benefit of the  parties  and their  successors  and
               assigns.  Neither the  Company  nor any Buyer  shall  assign this
               Agreement  or any rights or  obligations  hereunder  without  the
               prior  written   consent  of  the  other.   Notwithstanding   the
               foregoing,  subject  to  Section  2(f),  any Buyer may assign its
               rights  hereunder to any person that  purchases  Securities  in a
               private  transaction from a Buyer or to any of its  "affiliates,"
               as that term is defined  under the 1934 Act,  without the consent
               of the Company.

          h.   Third Party  Beneficiaries.  This  Agreement  is intended for the
               benefit  of the  parties  hereto and their  respective  permitted
               successors  and  assigns,  and is not for the benefit of, nor may
               any provision hereof be enforced by, any other person.

          i.   Survival.  The  representations and warranties of the Company and
               the  agreements and covenants set forth in Sections 3, 4, 5 and 8
               shall  survive  the  closing  hereunder  notwithstanding  any due
               diligence  investigation conducted by or on behalf of the Buyers.
               The Company  agrees to indemnify  and hold  harmless  each of the
               Buyers and all their  officers,  directors,  employees and agents
               for loss or  damage  arising  as a result  of or  related  to any
               breach  or  alleged   breach  by  the   Company  of  any  of  its
               representations, warranties and covenants set forth in Sections 3
               and 4 hereof or any of its covenants and  obligations  under this
               Agreement  or  the  Registration   Rights  Agreement,   including
               advancement of expenses as they are incurred.

          j.   Publicity.  The  Company  and each of the  Buyers  shall have the
               right to review a  reasonable  period of time before  issuance of
               any press  releases,  SEC,  OTCBB or NASD  filings,  or any other
               public  statements with respect to the transactions  contemplated
               hereby;  provided,  however,  that the Company shall be entitled,
               without  --------  -------  the  prior  approval  of  each of the
               Buyers,  to make  any  press  release  or SEC,  OTCBB  (or  other
               applicable  trading  market) or NASD filings with respect to such
               transactions  as is required by  applicable  law and  regulations
               (although each of the Buyers shall be consulted by the Company in
               connection  with any such press  release prior to its release and
               shall be provided with a copy thereof and be given an opportunity
               to comment thereon).

          k.   Further Assurances.  Each party shall do and perform, or cause to
               be done and  performed,  all such  further  acts and things,  and
               shall   execute   and   deliver   all  such   other   agreements,
               certificates,  instruments and documents,  as the other party may
               reasonably   request  in  order  to  carry  out  the  intent  and
               accomplish the purposes of this Agreement and the consummation of
               the transactions contemplated hereby.

          l.   No Strict Construction.  The language used in this Agreement will
               be deemed to be the  language  chosen by the  parties  to express
               their mutual intent, and no rules of strict  construction will be
               applied against any party.

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

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

     IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused this
Agreement to be duly executed as of the date first above written.

INSYNQ, INC.

/s/ John P. Gorst
--------------------------------
John P. Gorst
Chief Executive Officer

AJW PARTNERS, LLC
By:  SMS Group, LLC

/s/Corey S. Ribotsky
--------------------------------------
Corey S. Ribotsky
Manager

RESIDENCE:  Delaware

ADDRESS: 1044 Northern Boulevard
                  Suite 302
                  Roslyn, New York  11576
                  Facsimile:  (516) 739-7115
                  Telephone:  (516) 739-7110

AGGREGATE SUBSCRIPTION AMOUNT:

         Aggregate Principal Amount of Debentures:         $    60,000
         Number of Warrants:                                   120,000
         Aggregate Purchase Price:                         $    60,000

<PAGE>

NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By:  First Street Manager II, LLC

/s/ Corey S. Ribotsky
------------------------------------
Corey S. Ribotsky
Manager

RESIDENCE:            New York

ADDRESS: 1044 Northern Boulevard
                  Suite 302
                  Roslyn, New York  11576
                  Facsimile:        (516) 739-7115
                  Telephone:        (516) 739-7110

AGGREGATE SUBSCRIPTION AMOUNT:

         Aggregate Principal Amount of Debentures:     $            60,000
         Number of Warrants:                                       120,000
         Aggregate Purchase Price:                     $            60,000

<PAGE>

AJW OFFSHORE, LTD.
By:  First Street Manager II, LLC

--------------------------------------
Corey S. Ribotsky
Manager

RESIDENCE:            Cayman Islands

ADDRESS: P.O. Box 32021 SMB
                  Grand Cayman, Cayman Island, B.W.I.

AGGREGATE SUBSCRIPTION AMOUNT:

         Aggregate Principal Amount of Debentures:         $              0
         Number of Warrants:                                              0
         Aggregate Purchase Price:                         $              0

<PAGE>

AJW QUALIFIED PARTNERS, LLC
By:  AJW Manager, LLC

------------------------------------
Corey S. Ribotsky
Manager

RESIDENCE:            New York

ADDRESS: 1044 Northern Boulevard
                  Suite 302
                  Roslyn, New York  11576
                  Facsimile:        (516) 739-7115
                  Telephone:        (516) 739-7110

AGGREGATE SUBSCRIPTION AMOUNT:

         Aggregate Principal Amount of Debentures:      $            0
         Number of Warrants:                                         0
         Aggregate Purchase Price:                      $            0

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