Document:

NEITHER  THIS  DEBENTURE  NOR  THE  SECURITIES  INTO  WHICH  THIS  DEBENTURE  IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE  COMMISSION OR
THE  SECURITIES  COMMISSION  OF ANY STATE IN  RELIANCE  UPON AN  EXEMPTION  FROM
REGISTRATION  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED  (THE  "SECURITIES
ACT"),  AND,  ACCORDINGLY,  MAY NOT BE OFFERED  OR SOLD  EXCEPT  PURSUANT  TO AN
EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR PURSUANT TO AN
AVAILABLE  EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE  REGISTRATION
REQUIREMENTS  OF THE  SECURITIES  ACT AND IN ACCORDANCE  WITH  APPLICABLE  STATE
SECURITIES LAWS.

No. 2                                                                $200,000.00

                       ACCORD ADVANCED TECHNOLOGIES, INC.
                            12% CONVERTIBLE DEBENTURE
                                DUE JUNE 30, 2001

         THIS  DEBENTURE  is one of a  series  of  duly  authorized  and  issued
debentures of ACCORD ADVANCED TECHNOLOGIES, INC., a Nevada corporation, having a
principal  place  of  business  at  (the  "COMPANY"),   designated  as  its  12%
Convertible Debentures,  due June 30, 2001, in the aggregate principal amount of
Two Hundred Thousand and no/100 Dollars  ($200,000.00) (the  "DEBENTURES").  All
references to $ (dollars) shall be to US$ (United States dollars).

         FOR VALUE  RECEIVED,  the  Company  promises  to pay to NEW  MILLENNIUM
CAPITAL  PARTNERS  II,  LLC,  or its  registered  assigns  (the  "HOLDER"),  the
principal sum of Two Hundred Thousand and no/100 ($200,000.00), on June 30, 2001
or such earlier date as the Debentures are required or permitted to be repaid as
provided  hereunder (the  "MATURITY  DATE") and to pay interest to the Holder on
the  aggregate  unconverted  and  then  outstanding  principal  amount  of  this
Debenture  at the rate of 12% per annum,  payable on a quarterly  basis on March
31, June 30, September 30 and December 31 of each year while such Debentures are
outstanding  (each an "INTEREST  PAYMENT DATE") and on each  Conversion Date (as
defined herein)for such principal amount,  commencing on the earlier to occur of
a Conversion Date for such principal amount and June 30, 2000, in cash or shares
of Common Stock (as defined in Section 6).  Subject to the terms and  conditions
herein, the decision whether to pay interest hereunder in shares of Common Stock
or cash shall be at the  discretion  of the  Company.  Not less than ten Trading
Days (as defined in Section 6) prior to each Conversion  Date, the Company shall
provide the Holder with written notice of its election to pay interest hereunder
either  in cash or  shares  of Common  Stock  pursuant  to the terms of  Section
4(a)(i) (the Company may indicate in such notice that the election  contained in
such notice shall continue for later periods until  revised).  Failure to timely
provide  such  written  notice shall be deemed an election by the Company to pay
the interest on such  Conversion  Date in shares of Common Stock pursuant to the
terms of Section  4(a)(i).  If interest is paid in shares of Common  Stock,  the
number of shares of Common  Stock  issuable  on account of such  interest  shall
equal the cash amount of such interest on such Interest  Payment Date divided by
<PAGE>
the  Conversion  Price  (as  defined  below)  on such  date.  Interest  shall be
calculated  on the basis on a 360-day year and shall accrue daily  commencing on
the Original  Issue Date (as defined in Section 6) until  payment in full of the
principal sum,  together with all accrued and unpaid  interest and other amounts
which may become due hereunder,  has been made.  Interest hereunder will be paid
to the  Person  (as  defined  in  Section  6) in whose  name this  Debenture  is
registered on the records of the Company regarding registration and transfers of
Debentures (the "DEBENTURE  REGISTER").  All overdue accrued and unpaid interest
to be paid in cash  hereunder  shall  entail  a late  fee at the rate of 15% per
annum (or such lower  maximum  amount of interest  permitted to be charged under
applicable  law) (to accrue daily,  from the date such interest is due hereunder
through and including the date of payment), payable in cash.

         This Debenture is subject to the following additional provisions:

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

         SECTION 2. This Debenture has been issued subject to certain investment
representations  of the original Holder set forth in the Purchase  Agreement (as
defined in Section 6) and may be  transferred  or exchanged  only in  compliance
with  the  Purchase  Agreement.  Prior to due  presentment  to the  Company  for
transfer of this  Debenture,  the Company and any agent of the Company may treat
the Person (as  defined  in  Section  6) in whose  name this  Debenture  is duly
registered  on the  Debenture  Register  as the owner  hereof for the purpose of
receiving payment as herein provided and for all other purposes,  whether or not
this  Debenture is overdue,  and neither the Company nor any such agent shall be
affected by notice to the contrary.

         SECTION 3. EVENTS OF DEFAULT.

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

               (i) any default in the payment of the principal  of,  interest on
          or liquidated damages in respect of, any Debentures, free of any claim
          of  subordination,  as and when the same shall  become due and payable
          (whether on a Conversion  Date or the Maturity Date or by acceleration
          or otherwise);

               (ii) the  Company  shall fail to  observe  or  perform  any other
          covenant,  agreement or warranty contained in, or otherwise commit any
          breach of any of the Transaction  Documents (as defined in Section 6),
          and such  failure or breach shall not have been  remedied  within five
          days after the date on which  notice of such  failure or breach  shall
          have been given;

                                      -2-
<PAGE>
               (iii) the Company or any of its subsidiaries  shall commence,  or
          there shall be commenced  against the Company or any such subsidiary a
          case under any  applicable  bankruptcy  or  insolvency  laws as now or
          hereafter in effect or any successor thereto, or the Company commences
          any other proceeding under any reorganization, arrangement, adjustment
          of debt, relief of debtors, dissolution,  insolvency or liquidation or
          similar law of any  jurisdiction  whether now or  hereafter  in effect
          relating  to the  Company  or  any  subsidiary  thereof  or  there  is
          commenced  against  the  Company or any  subsidiary  thereof  any such
          bankruptcy,  insolvency or other proceeding which remains  undismissed
          for a period of 60 days; or the Company or any  subsidiary  thereof is
          adjudicated  insolvent  or  bankrupt;  or any order of relief or other
          order approving any such case or proceeding is entered; or the Company
          or any subsidiary  thereof suffers any appointment of any custodian or
          the  like  for it or  any  substantial  part  of  its  property  which
          continues  undischarged  or unstayed  for a period of 60 days;  or the
          Company or any subsidiary  thereof makes a general  assignment for the
          benefit of creditors; or the Company shall fail to pay, or shall state
          that it is  unable  to pay,  or  shall be  unable  to pay,  its  debts
          generally as they become due; or the Company or any subsidiary thereof
          shall  call a meeting  of its  creditors  with a view to  arranging  a
          composition,  adjustment or restructuring of its debts; or the Company
          or any subsidiary thereof shall by any act or failure to act expressly
          indicate  its consent to,  approval of or  acquiescence  in any of the
          foregoing; or any corporate or other action is taken by the Company or
          any  subsidiary  thereof  for  the  purpose  of  effecting  any of the
          foregoing;

               (iv) the Company  shall default in any of its  obligations  under
          any  other  Debenture  or any  mortgage,  credit  agreement  or  other
          facility, indenture agreement, factoring agreement or other instrument
          under which  there may be issued,  or by which there may be secured or
          evidenced any  indebtedness  for borrowed money or money due under any
          long term leasing or factoring arrangement of the Company in an amount
          exceeding   twenty-five  thousand  dollars  ($25,000),   whether  such
          indebtedness now exists or shall hereafter be created and such default
          shall result in such  indebtedness  becoming or being declared due and
          payable prior to the date on which it would  otherwise  become due and
          payable;

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

               (vi)  the  Company  shall  be a party to any  Change  of  Control
          Transaction  (as defined in Section 6), shall agree to sell or dispose
          all or in  excess  of 33% of its  assets  in one or more  transactions
          (whether  or not  such  sale  would  constitute  a Change  of  Control
          Transaction),  or shall  redeem or  repurchase  more than a de minimis
          number of shares of Common  Stock or other  equity  securities  of the
          Company (other than  redemptions  of Underlying  Shares (as defined in
          Section 6));

                                      -3-
<PAGE>
               (vii) an Underlying Shares Registration  Statement (as defined in
          Section 6) shall not have been  declared  effective by the  Commission
          (as  defined  in  Section  6) on or prior to the  120th  day after the
          Original Issue Date;

               (viii) if,  during the  Effectiveness  Period (as  defined in the
          Registration   Rights  Agreement  (as  defined  in  Section  8)),  the
          effectiveness of the Underlying Shares  Registration  Statement lapses
          for  any  reason  or the  Holder  shall  not be  permitted  to  resell
          Registrable   Securities  (as  defined  in  the  Registration   Rights
          Agreement)  under the Underlying  Shares  Registration  Statement,  in
          either  case,  for  more  than  five  consecutive  Trading  Days or an
          aggregate of eight Trading Days (which need not be consecutive Trading
          Days);

               (ix) an Event (as defined in the Registration  Rights  Agreement)
          shall not have been cured to the  satisfaction  of the Holder prior to
          the  expiration  of thirty days from the Event Date (as defined in the
          Registration  Rights Agreement)  relating thereto (other than an Event
          resulting  from  a  failure  of  an  Underlying  Shares   Registration
          Statement to be declared  effective by the  Commission  on or prior to
          the 120th day after the Original Issue Date, which shall be covered by
          Section 3(a)(vii));

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

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

               (xii) the Company shall fail for any reason to legally effect its
          change of name as required by the Purchase Agreement within sixty days
          following the Original Issue Date; or

               (xiii)  there  shall  have  occurred  a  breach  of the  Security
          Agreement  which shall not have been  remedied  prior to the tenth day
          following notice thereof.

         (b)  During  the  time  that  any  portion  of this  Debenture  remains
outstanding,  if any  Event  of  Default  occurs  and is  continuing,  the  full
principal  amount of this  Debenture  (and,  at the Holder's  option,  all other
Debentures  then held by such Holder),  together with interest and other amounts
owing in respect thereof, to the date of acceleration shall become,  immediately
due and payable in cash.  The aggregate  amount payable upon an Event of Default
shall be equal to the sum of (i) the Mandatory  Prepayment Amount (as defined in
Section 6) plus (ii) the product of (A) the number of  Underlying  Shares issued
in respect of  conversions  hereunder  within  thirty (30) days of the date of a
declaration  of an Event of Default  and then held by the Holder and (B) the Per
Share  Market Value (as defined in Section 6) on the date  prepayment  is due or
the date the full prepayment price is paid, whichever is greater. Interest shall

                                      -4-
<PAGE>
accrue on the prepayment amount hereunder from the seventh day after such amount
is due (being the date of an Event of Default) through the date of prepayment in
full thereof at the rate of 15% per annum (or such lesser maximum amount that is
permitted  to be paid by  applicable  law),  to accrue  daily from the date such
payment  is due  hereunder  through  and  including  the  date of  payment.  All
Debentures and Underlying  Shares for which the full prepayment  price hereunder
shall have been paid in accordance  herewith shall promptly be surrendered to or
as directed by the Company.  The Holder need not provide and the Company  hereby
waives any  presentment,  demand,  protest or other notice of any kind,  and the
Holder may  immediately  and without  expiration of any grace period enforce any
and all of its rights and remedies hereunder and all other remedies available to
it under  applicable  law.  Such  declaration  may be rescinded  and annulled by
Holder at any time prior to payment  hereunder.  No such rescission or annulment
shall  affect any  subsequent  Event of  Default or impair any right  consequent
thereon.

         SECTION 4. CONVERSION.

         (a) (i)  CONVERSION AT OPTION OF HOLDER.  (A) This  Debenture  shall be
convertible into shares of Common Stock at the option of the Holder, in whole or
in part at any  time and  from  time to time,  after  the  Original  Issue  Date
(subject  to the  limitations  on  conversion  set  forth in  Section  4(a)(iii)
hereof).  The  number  of  shares of Common  Stock  issuable  upon a  conversion
hereunder shall be determined by adding the sum of (i) the quotient  obtained by
dividing (x) the outstanding  principal amount of this Debenture to be converted
and (y) the Conversion Price (as defined  herein),  and (ii) the amount equal to
(I) the product of (x) the outstanding  principal amount of this Debenture to be
converted  and (y) the product of (1) the  quotient  obtained by dividing .12 by
360 and (2) the number of days for which such principal  amount was outstanding,
divided by (II) the Conversion Price on the Conversion Date,  PROVIDED,  that if
the Company  shall have timely  elected to pay the  interest due on a Conversion
Date in cash pursuant to the terms hereof,  subsection (ii) shall not be used in
the  calculation  of the  number  of  shares of  Common  Stock  issuable  upon a
conversion hereunder.

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

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

               (2) after the Interest  Effectiveness Date (as defined in Section
          6) such  shares of  Common  Stock (x) are not  registered  for  resale
          pursuant to an effective Underlying Shares Registration  Statement and
          (y) may not be  sold  without  volume  restrictions  pursuant  to Rule
          144(k) promulgated under the Securities Act (as defined in Section 6),
          as determined by counsel to the Company  pursuant to a written opinion
          letter,  addressed  to the  Company's  transfer  agent in the form and
          substance  acceptable to the applicable Holder and such transfer agent
          (if the  shares of  Common  Stock are  permitted  by the  Holder to be
          delivered  under this clause (2) prior to the  Effectiveness  Date (as
          defined  in the  Registration  Rights  Agreement)  and  thereafter  an

                                      -5-
<PAGE>
          Underlying Shares  Registration  Statement shall be declared effective
          by the Commission,  the Company shall,  within five Trading Days after
          the date of such  declaration of  effectiveness,  exchange such shares
          for shares of Common Stock that are free of restrictive legends of any
          kind);

               (3) the Common  Stock is not listed or quoted for  trading on the
          OTC or on a Subsequent Market;

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

               (5) the issuance of such shares of Common Stock would result in a
          violation of Sections 4(a)(iii),

              then,  at the  option  of the  Holder,  the  Company,  in  lieu of
delivering  shares of Common  Stock  pursuant to Section  4(a)(i)(A)(ii),  shall
deliver, within three Trading Days of each applicable Conversion Date, an amount
in cash equal to the  product  of (a) the  outstanding  principal  amount of the
Debentures  to be converted on such  Conversion  Date and (b) the product of (x)
the  quotient  obtained  by  dividing  .12 by 360 and (y) the number of days for
which such principal amount was outstanding.

         (C) The Holder shall effect  conversions by surrendering the Debentures
(or such portions thereof) to be converted, together with the form of conversion
notice attached hereto as EXHIBIT A (a "CONVERSION NOTICE") to the Company. Each
Conversion  Notice  shall  specify  the  principal  amount of  Debentures  to be
converted and the date on which such  conversion  is to be effected,  which date
may not be prior to the date  such  Conversion  Notice  is  deemed  to have been
delivered hereunder (a "CONVERSION DATE"). If no Conversion Date is specified in
a Conversion  Notice, the Conversion Date shall be the date that such Conversion
Notice is deemed delivered  hereunder.  Subject to Section 4(b), each Conversion
Notice, once given, shall be irrevocable.  If the Holder is converting less than
all of the principal  amount  represented  by the  Debenture(s)  tendered by the
Holder  with the  Conversion  Notice,  or if a  conversion  hereunder  cannot be
effected in full for any reason,  the Company shall honor such conversion to the
extent  permissible  hereunder and shall promptly deliver to such Holder (in the
manner and within the time set forth in Section  4(b)) a new  Debenture for such
principal amount as has not been converted.

         (ii) AUTOMATIC CONVERSION. Subject to the provisions in this paragraph,
the  principal  amount of  Debentures  for  which  conversion  notices  have not
previously  been received or for which  prepayment has not been made or required
hereunder  shall be  automatically  converted  on the first  anniversary  of the
Original  Issue  Date (the  "AUTOMATIC  CONVERSION  DATE")  pursuant  to Section
4(a)(i),  at the Conversion  Price on such date. The conversion  contemplated by
this paragraph shall not occur if (a) (1) an Underlying Securities  Registration
Statement is not then effective  that names the Holder as a selling  stockholder
thereunder  and (2) the  Holder is not  permitted  to resell  Underlying  Shares
pursuant to Rule 144(k)  promulgated  under the Securities  Act,  without volume
restrictions,  as evidenced by an opinion  letter of counsel  acceptable  to the

                                      -6-
<PAGE>
Holder  and the  transfer  agent  for the  Common  Stock;  or (b)  there are not
sufficient shares of Common Stock authorized and reserved for issuance upon such
conversion.  Notwithstanding  anything  herein to the  contrary,  the  Automatic
Conversion Date shall be extended (on a day-for-day  basis) for any Trading Days
that the  Holder is unable to resell  Underlying  Shares  due to (a) the  Common
Stock not being  listed or  granted  for  trading  on the OTC or any  Subsequent
Market, (b) the failure of an Underlying Securities Registration Statement to be
declared  effective by the  Commission or, if so declared,  to remain  effective
during  the  Effectiveness  Period  as to all  Underlying  Shares,  or  (c)  the
suspension  of the  Holder's  right  to  resell  Underlying  Shares  thereunder.
Notwithstanding anything to the contrary contained herein, a conversion pursuant
to this Section shall not be subject to the provisions of Section 4(a)(iii).

         (iii) CERTAIN CONVERSION RESTRICTIONS.

              (A) A Holder  may not  convert  Debentures  or  receive  shares of
Common Stock as payment of interest  hereunder to the extent such  conversion or
receipt of such interest  payment would result in the Holder,  together with any
affiliate thereof, beneficially owning (as determined in accordance with Section
13(d) of the Exchange  Act and the rules  promulgated  thereunder)  in excess of
4.999% of the then  issued and  outstanding  shares of Common  Stock,  including
shares  issuable upon  conversion of, and payment of interest on, the Debentures
held by such Holder after application of this Section. Since the Holder will not
be  obligated  to report to the Company the number of shares of Common  Stock it
may hold at the time of a conversion  hereunder,  unless the conversion at issue
would  result in the  issuance of shares of Common  Stock in excess of 4.999% of
the then  outstanding  shares of Common Stock without regard to any other shares
which may be  beneficially  owned by the  Holder or an  affiliate  thereof,  the
Holder  shall  have the  authority  and  obligation  to  determine  whether  the
restriction  contained  in this  Section  will limit any  particular  conversion
hereunder  and to the extent  that the  Holder  determines  that the  limitation
contained in this Section  applies,  the  determination  of which portion of the
principal amount of Debentures are convertible shall be the  responsibility  and
obligation of the Holder.  If the Holder has delivered a Conversion Notice for a
principal amount of Debentures that, without regard to any other shares that the
Holder or its affiliates may  beneficially  own, would result in the issuance in
excess of the permitted amount hereunder, the Company shall notify the Holder of
this fact and shall  honor  the  conversion  for the  maximum  principal  amount
permitted to be converted on such Conversion Date in accordance with the periods
described  in Section 4(b) and, at the option of the Holder,  either  retain any
principal  amount  tendered for  conversion  in excess of the  permitted  amount
hereunder for future  conversions or return such excess  principal amount to the
Holder. The provisions of this Section may be waived by a Holder (but only as to
itself and not to any other  Holder)  upon not less than 61 days prior notice to
the Company. Other Holders shall be unaffected by any such waiver.

              (B) A Holder  may not  convert  Debentures  or  receive  shares of
Common Stock as payment of interest  hereunder to the extent such  conversion or
receipt of such interest  payment would result in the Holder,  together with any
affiliate thereof, beneficially owning (as determined in accordance with Section
13(d) of the Exchange  Act and the rules  promulgated  thereunder)  in excess of
9.999% of the then  issued and  outstanding  shares of Common  Stock,  including
shares  issuable upon  conversion of, and payment of interest on, the Debentures

                                      -7-
<PAGE>
held by such Holder after application of this Section. Since the Holder will not
be  obligated  to report to the Company the number of shares of Common  Stock it
may hold at the time of a conversion  hereunder,  unless the conversion at issue
would  result in the  issuance of shares of Common  Stock in excess of 9.999% of
the then  outstanding  shares of Common Stock without regard to any other shares
which may be  beneficially  owned by the  Holder or an  affiliate  thereof,  the
Holder  shall  have the  authority  and  obligation  to  determine  whether  the
restriction  contained  in this  Section  will limit any  particular  conversion
hereunder  and to the extent  that the  Holder  determines  that the  limitation
contained in this Section  applies,  the  determination  of which portion of the
principal amount of Debentures are convertible shall be the  responsibility  and
obligation of the Holder.  If the Holder has delivered a Conversion Notice for a
principal amount of Debentures that, without regard to any other shares that the
Holder or its affiliates may  beneficially  own, would result in the issuance in
excess of the permitted amount hereunder, the Company shall notify the Holder of
this fact and shall  honor  the  conversion  for the  maximum  principal  amount
permitted to be converted on such Conversion Date in accordance with the periods
described  in Section 4(b) and, at the option of the Holder,  either  retain any
principal  amount  tendered for  conversion  in excess of the  permitted  amount
hereunder for future  conversions or return such excess  principal amount to the
Holder. The provisions of this Section may be waived by a Holder (but only as to
itself and not to any other  Holder)  upon not less than 61 days prior notice to
the Company. Other Holders shall be unaffected by any such waiver.

         (b) (i) Not later than five Trading Days after any Conversion Date, the
Company will deliver to the Holder (i) a certificate or certificates which shall
be free of  restrictive  legends  and  trading  restrictions  (other  than those
required by Section 3.1(b) of the Purchase Agreement) representing the number of
shares of Common Stock being acquired upon the conversion of Debentures (subject
to the limitations set forth in Section 4(a)(iii) hereof),  (ii) Debentures in a
principal amount equal to the principal amount of Debentures not converted,  and
(iii) a bank check in the amount of accrued and unpaid  interest (if the Company
has timely  elected or is required to pay accrued  interest in cash),  PROVIDED,
that the Company  shall not be obligated to issue  certificates  evidencing  the
shares of Common Stock  issuable  upon  conversion  of the  principal  amount of
Debentures until Debentures are delivered for conversion to the Company,  or the
Holder  notifies  the Company  that such  Debentures  have been lost,  stolen or
destroyed  and  provides  a  bond  (or  other  adequate   security)   reasonably
satisfactory  to the Company to indemnify  the Company from any loss incurred by
it in connection  therewith.  The Company shall,  upon request of the Holder, if
available,  use its best  efforts to deliver  any  certificate  or  certificates
required  to be  delivered  by the  Company  under this  Section  electronically
through  the  Depository  Trust  Corporation  or  another  established  clearing
corporation  performing  similar  functions.  If in the  case of any  Conversion
Notice such  certificate or certificates  are not delivered to or as directed by
the  applicable  Holder by the fifth  Trading Day after a Conversion  Date,  the
Holder  shall be  entitled  by written  notice to the  Company at any time on or
before its receipt of such  certificate or certificates  thereafter,  to rescind
such  conversion,  in which  event the  Company  shall  immediately  return  the
certificates  representing  the  principal  amount of  Debentures  tendered  for
conversion.

         (ii) If the Company fails to deliver to the Holder such  certificate or
certificates  pursuant  to Section  4(b)(i) by the fifth  Trading  Day after the
Conversion  Date,  the Company shall pay to such Holder,  in cash, as liquidated
damages  and not as a  penalty,  $2,500  for each  Trading  Day after such fifth

                                      -8-
<PAGE>
Trading Day until such certificates are delivered.  Nothing herein shall limit a
Holder's right to pursue actual damages or declare an Event of Default  pursuant
to  Section  3  herein  for  the  Company's  failure  to  deliver   certificates
representing  shares of Common Stock upon conversion within the period specified
herein and such Holder shall have the right to pursue all remedies  available to
it at law or in equity  including,  without  limitation,  a decree  of  specific
performance  and/or injunctive relief. The exercise of any such rights shall not
prohibit  the  Holders  from  seeking to enforce  damages  pursuant to any other
Section hereof or under applicable law.  Further,  if the Company shall not have
delivered any cash due in respect of  conversions of Debentures or as payment of
interest  thereon by the third Trading Day after the Conversion Date, the Holder
may, by notice to the  Company,  require  the Company to issue  shares of Common
Stock  pursuant to Section  4(c),  except that for such  purpose the  Conversion
Price  applicable  thereto  shall be the lesser of the  Conversion  Price on the
Conversion Date and the Conversion Price on the date of such Holder demand.  Any
such shares will be subject to the provision of this Section.

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

         (c) (i) The conversion price (the "CONVERSION  PRICE") in effect on any
Conversion  Date  shall be the  lesser  of (1)  $.23  (the  "INITIAL  CONVERSION
PRICE"),  and (2) 60% of the average of the lowest three inter-day prices (which
need not occur on  consecutive  Trading  Days)  during the twenty  Trading  Days
immediately  preceding the applicable Conversion Date (which may include Trading
Days prior to the Original Issue Date),  PROVIDED,  that such twenty Trading Day

                                      -9-
<PAGE>
period  shall be extended  for the number of Trading  Days during such period in
which (A) trading in the Common  Stock is  suspended  by the OTC or a Subsequent
Market on which the Common Stock is then listed,  or (B) after the date declared
effective by the Commission,  the Underlying  Shares  Registration  Statement is
either  not  effective,   the  Prospectus  included  in  the  Underlying  Shares
Registration  Statement  may  not be  used  by the  Holder  for  the  resale  of
Underlying Shares.

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

         (iii) If the Company, at any time while any Debentures are outstanding,
shall issue rights,  options or warrants to all holders of Common Stock (and not
to Holders)  entitling them to subscribe for or purchase  shares of Common Stock
at a price per share less than the Per Share  Market  Value at the  record  date
mentioned below, then the Conversion Price shall be multiplied by a fraction, of
which  the  denominator  shall be the  number  of  shares  of the  Common  Stock
(excluding  treasury shares, if any) outstanding on the date of issuance of such
rights or warrants plus the number of additional  shares of Common Stock offered
for subscription or purchase,  and of which the numerator shall be the number of
shares of the Common Stock (excluding  treasury  shares,  if any) outstanding on
the date of issuance of such rights or warrants  plus the number of shares which
the  aggregate  offering  price of the total  number of shares so offered  would
purchase at such Per Share Market Value.  Such adjustment shall be made whenever
such rights or warrants are issued, and shall become effective immediately after
the record date for the  determination of stockholders  entitled to receive such
rights,  options or warrants.  However,  upon the  expiration of any such right,
option or warrant to purchase  shares of the Common  Stock the issuance of which
resulted in an adjustment in the Conversion  Price pursuant to this Section,  if
any such  right,  option  or  warrant  shall  expire  and  shall  not have  been
exercised,  the  Conversion  Price shall  immediately  upon such  expiration  be
recomputed and effective  immediately  upon such  expiration be increased to the
price  which it would have been (but  reflecting  any other  adjustments  in the
Conversion  Price made  pursuant to the  provisions  of this  Section  after the
issuance of such rights or warrants) had the adjustment of the Conversion  Price
made upon the  issuance of such  rights,  options or  warrants  been made on the
basis of offering for subscription or purchase only that number of shares of the
Common Stock  actually  purchased  upon the exercise of such rights,  options or
warrants actually exercised.

                                      -10-
<PAGE>
         (iv) If the  Company or any  subsidiary  thereof,  as  applicable  with
respect  to Common  Stock  Equivalents  (as  defined  below),  at any time while
Debentures  are  outstanding  shall issue either (i) shares of Common Stock at a
price per share less than the Conversion  Price (the  "ISSUANCE  PRICE") or (ii)
rights, warrants,  options or other securities or debt that are convertible into
or  exchangeable  for  shares  of Common  Stock  ("COMMON  STOCK  EQUIVALENTS"),
entitling any Person to acquire shares of Common Stock at an Issuance Price less
than the  Conversion  Price (if the holder of the  Common  Stock  Equivalent  so
issued shall at any time,  whether by operation of purchase  price  adjustments,
reset provisions,  floating conversion, exercise or exchange prices or otherwise
be entitled to receive  shares of Common Stock at a conversion or exercise price
less than the Conversion  Price,  such issuance shall be deemed to have occurred
for less than the Conversion Price), then, the Conversion Price shall be reduced
to the Issuance Price.  Such  adjustment  shall be made whenever Common Stock or
Common  Stock  Equivalents  are issued at a price  below the  Conversion  Price.
However,  upon the  expiration of any Common Stock  Equivalents  the issuance of
which  resulted  in an  adjustment  in the  Conversion  Price  pursuant  to this
Section,  if any such Common Stock  Equivalents  shall expire and shall not have
been exercised,  the Conversion Price shall  immediately upon such expiration be
recomputed and effective  immediately  upon such  expiration be increased to the
price  which it would have been (but  reflecting  any other  adjustments  in the
Conversion  Price made  pursuant to the  provisions  of this  Section  after the
issuance of such Common Stock  Equivalents) had the adjustment of the Conversion
Price made upon the issuance of such Common Stock  Equivalents  been made on the
basis of offering  for  subscription  or purchase  only that number of shares of
Common  Stock  actually  purchased  upon  the  exercise  of  such  Common  Stock
Equivalents actually exercised.

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

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

                                      -11-
<PAGE>
Debentures  shall  be  entitled  upon  such  event to  receive  such  amount  of
securities,  cash or property  as the shares of the Common  Stock of the Company
into which the then outstanding principal amount,  together with all accrued but
unpaid  interest and any other  amounts then owing  hereunder in respect of this
Debenture could have been converted  immediately prior to such  reclassification
or share  exchange would have been entitled or (B) require the Company to prepay
the  aggregate  of its  outstanding  principal  amount of  Debentures,  plus all
interest and other  amounts due and payable  thereon,  at a price  determined in
accordance with Section 3(b). The entire prepayment price shall be paid in cash.
This provision shall similarly  apply to successive  reclassifications  or share
exchanges.

         (vii)  All  calculations  under  this  Section  4 shall  be made to the
nearest  cent or the  nearest  1/100th  of a  share,  as the  case  may  be.  No
adjustments in either the Conversion Price or the Initial Conversion Price shall
be required if such adjustment is less than $0.01,  PROVIDED,  however, that any
adjustments which by reason of this Section are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.

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

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

                                      -12-
<PAGE>
         (x) In case of any (1) merger or  consolidation  of the Company with or
into  another  Person,  or (2) sale by the Company of more than  one-half of the
assets  of the  Company  (on an as valued  basis) in one or a series of  related
transactions,  a Holder shall have the right to (A) if permitted  under  Section
3(b) hereof,  exercise its rights of prepayment  under Section 3(b) with respect
to such event,  (B) convert its aggregate  principal  amount of Debentures  then
outstanding  into the shares of stock and other  securities,  cash and  property
receivable  upon or deemed to be held by holders of Common Stock  following such
merger, consolidation or sale, and such Holder shall be entitled upon such event
or series of  related  events to receive  such  amount of  securities,  cash and
property  as the shares of Common  Stock into  which  such  aggregate  principal
amount of Debentures could have been converted immediately prior to such merger,
consolidation or sales would have been entitled,  or (C) in the case of a merger
or  consolidation,   (x)  require  the  surviving  entity  to  issue  shares  of
convertible preferred stock or convertible debentures with such aggregate stated
value  or in such  face  amount,  as the case  may be,  equal  to the  aggregate
principal  amount of Debentures  then held by such Holder,  plus all accrued and
unpaid  interest and other amounts owing  thereon,  which newly issued shares of
preferred stock or debentures shall have terms identical (including with respect
to conversion) to the terms of this Debenture (except,  in the case of preferred
stock,  as may be required to reflect the  differences  between equity and debt)
and  shall be  entitled  to all of the  rights  and  privileges  of a Holder  of
Debentures set forth herein and the agreements  pursuant to which the Debentures
were  issued  (including,  without  limitation,  as such  rights  relate  to the
acquisition,  transferability,  registration and listing of such shares of stock
other securities issuable upon conversion thereof),  and (y) simultaneously with
the issuance of such  convertible  preferred  stock or  convertible  debentures,
shall have the right to convert  such  instrument  only into shares of stock and
other  securities,  cash and  property  receivable  upon or deemed to be held by
holders of Common Stock following such merger or  consolidation.  In the case of
clause (C), the  conversion  price  applicable  for the newly  issued  shares of
convertible  preferred stock or convertible  debentures  shall be based upon the
amount of  securities,  cash and property  that each share of Common Stock would
receive in such transaction and the Conversion Price in effect immediately prior
to the effectiveness or closing date for such transaction. The terms of any such
merger, sale or consolidation shall include such terms so as to continue to give
the Holders the right to receive the securities,  cash and property set forth in
this  Section upon any  conversion  or  redemption  following  such event.  This
provision shall similarly apply to successive such events.

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

                                      -13-
<PAGE>
paid,  nonassessable  and, if the Underlying Shares  Registration  Statement has
been declared effective under the Securities Act,  registered for public sale in
accordance with such Underlying Shares Registration Statement.

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

         (f) The  issuance  of  certificates  for shares of the Common  Stock on
conversion of the Debentures shall be made without charge to the Holders thereof
for any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such  certificate,  provided  that the Company shall not be
required to pay any tax that may be payable in respect of any transfer  involved
in the issuance and delivery of any such  certificate  upon conversion in a name
other than that of the Holder of such  Debentures  so converted  and the Company
shall not be required to issue or deliver such certificates  unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the  amount of such tax or shall have  established  to the  satisfaction  of the
Company that such tax has been paid.

         (g) Any and all notices or other  communications  or  deliveries  to be
provided by the Holders hereunder, including, without limitation, any Conversion
Notice, shall be in writing and delivered  personally,  by facsimile,  sent by a
nationally  recognized  overnight  courier  service  or  sent  by  certified  or
registered mail,  postage prepaid,  addressed to the Company,  at 5002 South Ash
Avenue, Tempe, Arizona 85282 facsimile (480) 820-2319, attention Chief Financial
Officer,  or such other  address or facsimile  number as the Company may specify
for such  purposes by notice to the Holders  delivered in  accordance  with this
Section.  Any and all  notices  or  other  communications  or  deliveries  to be
provided by the Company hereunder shall be in writing and delivered  personally,
by facsimile,  sent by a nationally recognized overnight courier service or sent
by certified or registered mail,  postage  prepaid,  addressed to each Holder at
the facsimile  telephone number or address of such Holder appearing on the books
of the Company,  or if no such facsimile telephone number or address appears, at
the principal place of business of the Holder. Any notice or other communication
or deliveries  hereunder  shall be deemed given and effective on the earliest of
(i) the date of  transmission,  if such notice or communication is delivered via
facsimile at the facsimile  telephone  number specified in this Section prior to
6:30 p.m. (New York City time), (ii) the date after the date of transmission, if
such  notice or  communication  is  delivered  via  facsimile  at the  facsimile
telephone  number  specified in this Section later than 6:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) four days after deposit in the United  States mail,  (iv) the Business Day
following  the  date of  mailing,  if sent by  nationally  recognized  overnight
courier service,  or (v) upon actual receipt by the party to whom such notice is
required to be given.

         SECTION 5. OPTIONAL PREPAYMENT.

         (a) Subject to Section  5(b) below,  the Company  shall have the right,
exercisable  at any time and from time to time after the Original Issue Date, in

                                      -14-
<PAGE>
accordance with the terms hereof and upon ten Trading Days' prior written notice
to the Holders to be prepaid (an "OPTIONAL PREPAYMENT NOTICE"), to prepay all or
any portion of the outstanding  principal amount of the Debentures which has not
previously been repaid or for which Conversion  Notices have not previously been
delivered.  The prepayment  price  applicable to prepayments  under this Section
5(a)  shall  equal the  Prepayment  Price  and  shall be paid in cash.  Any such
prepayment shall be free of any claim of  subordination.  The Holders shall have
the right to tender,  and the Company shall honor,  Conversion Notices delivered
prior to the expiration of the tenth Trading Day after receipt by the Holders of
an Optional  Prepayment  Notice for such Debentures (the tenth Trading Day after
receipt by the Holders of an Optional Prepayment Notice is referred to herein as
the "OPTIONAL PREPAYMENT DATE")

         (b) The Company shall not be entitled to deliver an Optional Prepayment
Notice to the Holder (and, if after  delivery  thereof and prior to the Optional
Prepayment  Date,  any of the following  conditions  shall cease to be met, such
notice,  at the option of the Holders,  shall be deemed no longer effective) if:
(i) the number of shares of Common  Stock at the time  authorized,  unissued and
unreserved for all purposes is insufficient to satisfy the Company's  conversion
obligations of the aggregate principal amount of Debentures then outstanding, or
(ii) there is neither an  effective  Underlying  Shares  Registration  Statement
under which the Holders can resell all of the issued  Underlying  Shares and all
of the  Underlying  Shares  as are  issuable  upon  conversion  in  full  of the
principal amount of Debentures subject to an Optional  Prepayment Notice nor may
all of such issued and issuable Underlying Shares be sold by the Holders subject
to such prepayment without volume restrictions  pursuant to Rule 144 promulgated
under the Securities Act, as determined by counsel to the Company  pursuant to a
written  opinion letter,  addressed to the Company's  transfer agent in the form
and substance  acceptable to the Holders and such transfer  agent,  or (iii) the
Common  Stock  is not then  listed  or  quoted  for  trading  on the OTC or on a
Subsequent Market.

         (c) If any  portion of the  Prepayment  Price  shall not be paid by the
Company by the fifth (5th) Trading Day following the Optional  Prepayment  Date,
the Prepayment Price shall be increased by 15% per annum (or such lesser maximum
amount that is permitted to be paid by applicable  law) to accrue daily from the
date such  interest is due  hereunder  through and including the date of payment
(which  amount  shall be paid as  liquidated  damages and not as a penalty).  In
addition,  if any portion of the  Prepayment  Price remains  unpaid  through the
expiration  of  the  Optional  Prepayment  Date,  the  Holder  subject  to  such
prepayment  may elect by  written  notice to the  Company  to either  (x) demand
conversion in accordance with the formula and the time period therefor set forth
in Section 4 of any portion of the principal  amount of Debentures for which the
Prepayment Price, plus accrued  liquidated damages and accrued interest thereon,
has not been paid in full (the "UNPAID PREPAYMENT  PRINCIPAL AMOUNT"),  in which
event the  applicable Per Share Market Value shall be the lower of the Per Share
Market Value calculated on the Optional Prepayment Date and the Per Share Market
Value as of the Holder's  written  demand for  conversion,  or (y) invalidate AB
INITIO such optional  prepayment,  notwithstanding  anything herein contained to
the contrary.  If the Holder elects option (x) above, the Company shall,  within
five Trading Days after such election is deemed delivered hereunder,  deliver to
the Holder the shares of Common Stock  issuable  upon  conversion  of the Unpaid
Prepayment  Principal  Amount  subject to such  conversion  demand and otherwise
perform its  obligations  hereunder with respect  thereto.  If the Holder elects
option (y) above,  the Company shall  promptly,  and in any event not later than
five Trading Days from receipt of notice of such election,  return to the Holder
new  Debentures  for the full Unpaid  Prepayment  Principal  Amount and shall no
longer have any  prepayment  rights under this  Debenture.  If, upon an election

                                      -15-
<PAGE>
under option (x) above, the Company fails to deliver  certificates  representing
the shares of Common Stock  issuable upon  conversion  of the Unpaid  Prepayment
Principal  Amount within the time period set forth in this Section,  the Company
shall pay to the Holder in cash,  as  liquidated  damages  and not as a penalty,
$2,500 per day until the Company delivers such certificates to the Holder.

         SECTION 6.  DEFINITIONS.  For the purposes hereof,  the following terms
shall have the following meanings:

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

         "CHANGE OF CONTROL  TRANSACTION"  means the occurrence of any of (i) an
acquisition  after the date hereof by an  individual  or legal entity or "group"
(as  described  in Rule  13d-5(b)(1)  promulgated  under  the  Exchange  Act) of
effective  control  (whether  through legal or  beneficial  ownership of capital
stock of the  Company,  by  contract  or  otherwise)  of in excess of 33% of the
voting securities of the Company, (ii) a replacement at one time or over time of
more than one-half of the members of the Company's  board of directors  which is
not approved by a majority of those  individuals who are members of the board of
directors on the date hereof (or by those individuals who are serving as members
of the board of directors on any date whose nomination to the board of directors
was  approved  by a majority of the  members of the board of  directors  who are
members  on the date  hereof),  (iii)  the  merger of the  Company  with or into
another entity that is not wholly-owned by the Company, consolidation or sale of
50% or  more  of the  assets  of the  Company  in  one or a  series  of  related
transactions,  or (iv) the execution by the Company of an agreement to which the
Company is a party or by which it is bound,  providing for any of the events set
forth above in (i), (ii) or (iii).

         "COMMISSION" means the Securities and Exchange Commission.

         "COMMON STOCK" means the common stock,  no par value per share,  of the
Company and stock of any other class into which such shares may  hereafter  have
been reclassified or changed.

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

         "INTEREST  EFFECTIVENESS  DATE"  means the  earlier to occur of (x) the
Effectiveness  Date  and (y) the date  that an  Underlying  Shares  Registration
Statement is declared effective by the Commission.

                                      -16-
<PAGE>
         "MANDATORY PREPAYMENT AMOUNT" for any Debentures shall equal the sum of
(i) the greater of (A) 130% of the principal amount of Debentures to be prepaid,
plus all accrued and unpaid interest  thereon,  and (B) the principal  amount of
Debentures to be prepaid, plus all accrued and unpaid interest thereon,  divided
by the  Conversion  Price on (x) the date the  Mandatory  Prepayment  Amount  is
demanded or otherwise  due or (y) the date the  Mandatory  Prepayment  Amount is
paid in full, whichever is less, multiplied by the Per Share Market Value on (x)
the date the Mandatory Prepayment Amount is demanded or otherwise due or (y) the
date the Mandatory  Prepayment Amount is paid in full, whichever is greater, and
(ii) all other amounts, costs, expenses and liquidated damages due in respect of
such Debentures.

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

         "PER SHARE MARKET VALUE" means on any  particular  date (a) the closing
bid price per share of  Common  Stock on such date on the  Subsequent  Market on
which the shares of Common  Stock are then  listed or quoted,  or if there is no
such price on such date, then the closing bid price on the Subsequent  Market on
the date nearest  preceding  such date, or (b) if the shares of Common Stock are
not then listed or quoted on a  Subsequent  Market,  the closing bid price for a
share of Common Stock in the OTC, as reported by the National  Quotation  Bureau
Incorporated or similar  organization  or agency  succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the shares of
Common Stock are not then reported by the National Quotation Bureau Incorporated
(or similar  organization  or agency  succeeding  to its  functions of reporting
prices), then the average of the "Pink Sheet" quotes for the relevant conversion
period,  as  determined  in good  faith by the  Holder,  or (d) if the shares of
Common  Stock are not then  publicly  traded the fair market value of a share of
Common Stock as determined by an Appraiser selected in good faith by the Holders
of  a  majority  in  interest  of  the  principal   amount  of  Debentures  then
outstanding.

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

         "PREPAYMENT  PRICE" for any  Debentures  shall equal the sum of (i) the
greater of (A) 130% of the principal  amount of  Debentures to be prepaid,  plus
all  accrued  and  unpaid  interest  thereon,  and (B) the  principal  amount of
Debentures to be prepaid, plus all accrued and unpaid interest thereon,  divided
by the  Conversion  Price on (x) the date the  Mandatory  Prepayment  Amount  is
demanded or otherwise  due or (y) the date the  Mandatory  Prepayment  Amount is
paid in full, whichever is less, multiplied by the Per Share Market Value on (x)
the date the Mandatory Prepayment Amount is demanded or otherwise due or (y) the
date the Mandatory  Prepayment Amount is paid in full, whichever is greater, and
(ii) all other amounts, costs, expenses and liquidated damages due in respect of
such Debentures.

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

                                      -17-
<PAGE>
         "REGISTRATION   RIGHTS   AGREEMENT"  means  the   Registration   Rights
Agreement,  dated as of the  Original  Issue Date,  to which the Company and the
original Holder are parties,  as amended,  modified or supplemented from time to
time in accordance with its terms.

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

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

         "TRANSACTION  DOCUMENTS"  shall  have  the  meaning  set  forth  in the
Purchase Agreement.

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

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

         SECTION 7. Except as expressly  provided  herein,  no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional,  to pay the principal of, interest and liquidated damages (if
any) on,  this  Debenture  at the  time,  place,  and  rate,  and in the coin or
currency,  herein  prescribed.  This  Debenture  is a direct  obligation  of the
Company.  This  Debenture  ranks  PARI PASSU  with all other  Debentures  now or
hereafter  issued  under  the  terms  set  forth  herein.  As long as there  are
Debentures  outstanding,  the Company shall not and shall cause it  subsidiaries
not to,  without  the  consent  of the  Holders,  (i) amend its  certificate  of
incorporation,  bylaws or other charter  documents so as to adversely affect any
rights of the Holders; (ii) repay,  repurchase or offer to repay,  repurchase or
otherwise  acquire shares of its Common Stock or other equity  securities  other
than as to the Underlying  Shares to the extent  permitted or required under the
Transaction Documents;  or (iii) enter into any agreement with respect to any of
the foregoing. The Company may only voluntarily prepay the outstanding principal
amount on the Debentures in accordance with Section 5 hereof.

         SECTION 8. This  Debenture  shall not  entitle the Holder to any of the
rights of a stockholder of the Company,  including without limitation, the right
to vote, to receive dividends and other distributions,  or to receive any notice
of, or to attend,  meetings  of  stockholders  or any other  proceedings  of the

                                      -18-
<PAGE>
Company,  unless  and to the extent  converted  into  shares of Common  Stock in
accordance with the terms hereof.

         SECTION  9. If this  Debenture  shall be  mutilated,  lost,  stolen  or
destroyed,  the Company shall execute and deliver,  in exchange and substitution
for  and  upon  cancellation  of a  mutilated  Debenture,  or in  lieu  of or in
substitution for a lost, stolen or destroyed debenture,  a new Debenture for the
principal amount of this Debenture so mutilated,  lost,  stolen or destroyed but
only upon  receipt  of  evidence  of such  loss,  theft or  destruction  of such
Debenture,  and of the  ownership  hereof,  and  indemnity,  if  requested,  all
reasonably satisfactory to the Company.

         SECTION 10. No  indebtedness of the Company is senior to this Debenture
in  right  of  payment,  whether  with  respect  to  interest,  damages  or upon
liquidation or  dissolution or otherwise  except for the SBA Loan (as defined in
the  Purchase  Agreement)  and  $270,000  outstanding  principal  balance of the
Company's  convertible  debentures  held by Gem Management Ltd. The Company will
not and will not permit any of its  subsidiaries  to,  directly  or  indirectly,
enter into, create, incur, assume or suffer to exist any new indebtedness of any
kind, on or with respect to any of its property or assets now owned or hereafter
acquired  or any  interest  therein or any income or profits  therefrom  that is
senior in any respect to the Company's obligations under the Debentures.

         SECTION  11. This  Debenture  shall be  governed  by and  construed  in
accordance  with the laws of the State of New  York,  without  giving  effect to
conflicts of laws thereof. The Company and the Holder hereby irrevocably submits
to the exclusive  jurisdiction  of the state and federal  courts  sitting in the
City of New York,  Borough of  Manhattan,  for the  adjudication  of any dispute
hereunder or in connection herewith or with any transaction  contemplated hereby
or discussed herein, and hereby irrevocably  waives, and agrees not to assert in
any suit, action or proceeding,  any claim that it is not personally  subject to
the  jurisdiction of any such court, or that such suit,  action or proceeding is
improper.  Each of the Company and the Holder hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or  proceeding by receiving a copy thereof sent to the Company at the address in
effect for  notices to it under this  instrument  and agrees  that such  service
shall  constitute  good and  sufficient  service of process and notice  thereof.
Nothing  contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law.

         SECTION  12. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture  shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this  Debenture.  The failure of the Company or the Holder to insist upon strict
adherence to any term of this  Debenture on one or more  occasions  shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict  adherence to that term or any other term of this  Debenture.  Any waiver
must be in writing.

         SECTION 13. If any provision of this  Debenture is invalid,  illegal or
unenforceable,  the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance,  it shall  nevertheless
remain applicable to all other persons and  circumstances.  If it shall be found
that any interest or other amount deemed  interest due  hereunder  shall violate
applicable laws governing  usury,  the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.

         SECTION 14. Whenever any payment or other obligation hereunder shall be
due on a day other than a Business  Day,  such payment shall be made on the next
succeeding Business Day.

         SECTION  15.  The  payment  obligations  under this  Debenture  and the
obligations  of the Company to the Holder  arising upon the conversion of all or
any of the  Debentures  in  accordance  with the  provisions  hereof are secured
pursuant to the Security Agreement (as defined in the Purchase Agreement).

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                             SIGNATURE PAGE FOLLOWS]

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

                                      ACCORD ADVANCED TECHNOLOGIES, INC.

                                      By:
                                          --------------------------------------
                                          Name: Travis Wilson
                                          Title: Chief Executive Officer

No. 2
(NM)
<PAGE>
                                    EXHIBIT A

                              NOTICE OF CONVERSION

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

The undersigned  hereby elects to convert the attached  Debenture into shares of
common stock,  no par value per share (the "Common  Stock"),  of Accord Advanced
Technologies, Inc. (the "Company") according to the conditions hereof, as of the
date  written  below.  If shares are to be issued in the name of a person  other
than  undersigned,  the  undersigned  will pay all transfer  taxes  payable with
respect  thereto and is delivering  herewith such  certificates  and opinions as
reasonably  requested  by the Company in  accordance  therewith.  No fee will be
charged to the holder for any  conversion,  except for such transfer  taxes,  if
any.

Conversion calculations:
                            ----------------------------------------------------
                            Date to Effect Conversion

                            ----------------------------------------------------
                            Principal Amount of Debentures to be Converted

                            ----------------------------------------------------
                            Number of shares of Common Stock to be Issued

                            ----------------------------------------------------
                            Applicable Conversion Price

                            ----------------------------------------------------
                            Signature

                            ----------------------------------------------------
                            Name

                            ----------------------------------------------------
                            AddressNEITHER  THIS  DEBENTURE  NOR  THE  SECURITIES  INTO  WHICH  THIS  DEBENTURE  IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE  COMMISSION OR
THE  SECURITIES  COMMISSION  OF ANY STATE IN  RELIANCE  UPON AN  EXEMPTION  FROM
REGISTRATION  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED  (THE  "SECURITIES
ACT"),  AND,  ACCORDINGLY,  MAY NOT BE OFFERED  OR SOLD  EXCEPT  PURSUANT  TO AN
EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR PURSUANT TO AN
AVAILABLE  EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE  REGISTRATION
REQUIREMENTS  OF THE  SECURITIES  ACT AND IN ACCORDANCE  WITH  APPLICABLE  STATE
SECURITIES LAWS.

No. 1                                                                 $50,000.00

                       ACCORD ADVANCED TECHNOLOGIES, INC.
                            12% CONVERTIBLE DEBENTURE
                                DUE JUNE 30, 2001

         THIS  DEBENTURE  is one of a  series  of  duly  authorized  and  issued
debentures of ACCORD ADVANCED TECHNOLOGIES, INC., a Nevada corporation, having a
principal  place  of  business  at  (the  "COMPANY"),   designated  as  its  12%
Convertible Debentures,  due June 30, 2001, in the aggregate principal amount of
Fifty Thousand and no/100 ($50,000.00) (the  "DEBENTURES").  All references to $
(dollars) shall be to US$ (United States dollars).

         FOR VALUE RECEIVED,  the Company promises to pay to AJW PARTNERS,  LLC,
or its registered  assigns (the  "HOLDER"),  the principal sum of Fifty Thousand
and no/100  ($50,000) on May 31, 2001 or such earlier date as the Debentures are
required or permitted to be repaid as provided  hereunder (the "MATURITY  DATE")
and to pay  interest  to  the  Holder  on the  aggregate  unconverted  and  then
outstanding  principal  amount of this  Debenture  at the rate of 12% per annum,
payable on a quarterly basis on March 31, June 30,  September 30 and December 31
of each year while such  Debentures are outstanding  (each an "INTEREST  PAYMENT
DATE") and on each Conversion Date (as defined herein)for such principal amount,
commencing  on the  earlier  to occur of a  Conversion  Date for such  principal
amount  and June 30,  2000,  in cash or shares of Common  Stock (as  defined  in
Section 6). Subject to the terms and conditions  herein, the decision whether to
pay  interest  hereunder  in  shares  of  Common  Stock or cash  shall be at the
discretion of the Company. Not less than ten Trading Days (as defined in Section
6) prior to each  Conversion  Date,  the Company  shall  provide the Holder with
written  notice of its  election  to pay  interest  hereunder  either in cash or
shares of Common Stock pursuant to the terms of Section 4(a)(i) (the Company may
indicate  in such  notice  that the  election  contained  in such  notice  shall
continue  for later  periods  until  revised).  Failure to timely  provide  such
written notice shall be deemed an election by the Company to pay the interest on
such  Conversion Date in shares of Common Stock pursuant to the terms of Section
4(a)(i).  If interest is paid in shares of Common Stock, the number of shares of
Common Stock issuable on account of such interest shall equal the cash amount of
such interest on such Interest  Payment Date divided by the Conversion Price (as
<PAGE>
defined  below) on such date.  Interest  shall be  calculated  on the basis on a
360-day year and shall accrue daily  commencing  on the Original  Issue Date (as
defined in Section 6) until payment in full of the principal sum,  together with
all  accrued  and  unpaid  interest  and  other  amounts  which may  become  due
hereunder,  has been  made.  Interest  hereunder  will be paid to the Person (as
defined in Section 6) in whose name this  Debenture is registered on the records
of  the  Company  regarding   registration  and  transfers  of  Debentures  (the
"DEBENTURE  REGISTER").  All overdue  accrued and unpaid  interest to be paid in
cash  hereunder  shall  entail a late fee at the rate of 15% per  annum (or such
lower maximum amount of interest  permitted to be charged under  applicable law)
(to accrue  daily,  from the date such  interest  is due  hereunder  through and
including the date of payment), payable in cash.

         This Debenture is subject to the following additional provisions:

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

         SECTION 2. This Debenture has been issued subject to certain investment
representations  of the original Holder set forth in the Purchase  Agreement (as
defined in Section 6) and may be  transferred  or exchanged  only in  compliance
with  the  Purchase  Agreement.  Prior to due  presentment  to the  Company  for
transfer of this  Debenture,  the Company and any agent of the Company may treat
the Person (as  defined  in  Section  6) in whose  name this  Debenture  is duly
registered  on the  Debenture  Register  as the owner  hereof for the purpose of
receiving payment as herein provided and for all other purposes,  whether or not
this  Debenture is overdue,  and neither the Company nor any such agent shall be
affected by notice to the contrary.

         SECTION 3. EVENTS OF DEFAULT.

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

               (i) any default in the payment of the principal  of,  interest on
          or liquidated damages in respect of, any Debentures, free of any claim
          of  subordination,  as and when the same shall  become due and payable
          (whether on a Conversion  Date or the Maturity Date or by acceleration
          or otherwise);

               (ii) the  Company  shall fail to  observe  or  perform  any other
          covenant,  agreement or warranty contained in, or otherwise commit any
          breach of any of the Transaction  Documents (as defined in Section 6),
          and such  failure or breach shall not have been  remedied  within five
          days after the date on which  notice of such  failure or breach  shall
          have been given;

                                      -2-
<PAGE>
               (iii) the Company or any of its subsidiaries  shall commence,  or
          there shall be commenced  against the Company or any such subsidiary a
          case under any  applicable  bankruptcy  or  insolvency  laws as now or
          hereafter in effect or any successor thereto, or the Company commences
          any other proceeding under any reorganization, arrangement, adjustment
          of debt, relief of debtors, dissolution,  insolvency or liquidation or
          similar law of any  jurisdiction  whether now or  hereafter  in effect
          relating  to the  Company  or  any  subsidiary  thereof  or  there  is
          commenced  against  the  Company or any  subsidiary  thereof  any such
          bankruptcy,  insolvency or other proceeding which remains  undismissed
          for a period of 60 days; or the Company or any  subsidiary  thereof is
          adjudicated  insolvent  or  bankrupt;  or any order of relief or other
          order approving any such case or proceeding is entered; or the Company
          or any subsidiary  thereof suffers any appointment of any custodian or
          the  like  for it or  any  substantial  part  of  its  property  which
          continues  undischarged  or unstayed  for a period of 60 days;  or the
          Company or any subsidiary  thereof makes a general  assignment for the
          benefit of creditors; or the Company shall fail to pay, or shall state
          that it is  unable  to pay,  or  shall be  unable  to pay,  its  debts
          generally as they become due; or the Company or any subsidiary thereof
          shall  call a meeting  of its  creditors  with a view to  arranging  a
          composition,  adjustment or restructuring of its debts; or the Company
          or any subsidiary thereof shall by any act or failure to act expressly
          indicate  its consent to,  approval of or  acquiescence  in any of the
          foregoing; or any corporate or other action is taken by the Company or
          any  subsidiary  thereof  for  the  purpose  of  effecting  any of the
          foregoing;

               (iv) the Company  shall default in any of its  obligations  under
          any  other  Debenture  or any  mortgage,  credit  agreement  or  other
          facility, indenture agreement, factoring agreement or other instrument
          under which  there may be issued,  or by which there may be secured or
          evidenced any  indebtedness  for borrowed money or money due under any
          long term leasing or factoring arrangement of the Company in an amount
          exceeding   twenty-five  thousand  dollars  ($25,000),   whether  such
          indebtedness now exists or shall hereafter be created and such default
          shall result in such  indebtedness  becoming or being declared due and
          payable prior to the date on which it would  otherwise  become due and
          payable;

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

               (vi)  the  Company  shall  be a party to any  Change  of  Control
          Transaction  (as defined in Section 6), shall agree to sell or dispose
          all or in  excess  of 33% of its  assets  in one or more  transactions
          (whether  or not  such  sale  would  constitute  a Change  of  Control
          Transaction),  or shall  redeem or  repurchase  more than a de minimis
          number of shares of Common  Stock or other  equity  securities  of the
          Company (other than  redemptions  of Underlying  Shares (as defined in
          Section 6));

                                      -3-
<PAGE>
               (vii) an Underlying Shares Registration  Statement (as defined in
          Section 6) shall not have been  declared  effective by the  Commission
          (as  defined  in  Section  6) on or prior to the  120th  day after the
          Original Issue Date;

               (viii) if,  during the  Effectiveness  Period (as  defined in the
          Registration   Rights  Agreement  (as  defined  in  Section  8)),  the
          effectiveness of the Underlying Shares  Registration  Statement lapses
          for  any  reason  or the  Holder  shall  not be  permitted  to  resell
          Registrable   Securities  (as  defined  in  the  Registration   Rights
          Agreement)  under the Underlying  Shares  Registration  Statement,  in
          either  case,  for  more  than  five  consecutive  Trading  Days or an
          aggregate of eight Trading Days (which need not be consecutive Trading
          Days);

               (ix) an Event (as defined in the Registration  Rights  Agreement)
          shall not have been cured to the  satisfaction  of the Holder prior to
          the  expiration  of thirty days from the Event Date (as defined in the
          Registration  Rights Agreement)  relating thereto (other than an Event
          resulting  from  a  failure  of  an  Underlying  Shares   Registration
          Statement to be declared  effective by the  Commission  on or prior to
          the 120th day after the Original Issue Date, which shall be covered by
          Section 3(a)(vii));

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

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

               (xii) the Company shall fail for any reason to legally effect its
          change of name as required by the Purchase Agreement within sixty days
          following the Original Issue Date; or

               (xiii)  there  shall  have  occurred  a  breach  of the  Security
          Agreement  which shall not have been  remedied  prior to the tenth day
          following notice thereof.

         (b)  During  the  time  that  any  portion  of this  Debenture  remains
outstanding,  if any  Event  of  Default  occurs  and is  continuing,  the  full
principal  amount of this  Debenture  (and,  at the Holder's  option,  all other
Debentures  then held by such Holder),  together with interest and other amounts
owing in respect thereof, to the date of acceleration shall become,  immediately
due and payable in cash.  The aggregate  amount payable upon an Event of Default
shall be equal to the sum of (i) the Mandatory  Prepayment Amount (as defined in
Section 6) plus (ii) the product of (A) the number of  Underlying  Shares issued
in respect of  conversions  hereunder  within  thirty (30) days of the date of a
declaration  of an Event of Default  and then held by the Holder and (B) the Per
Share  Market Value (as defined in Section 6) on the date  prepayment  is due or
the date the full prepayment price is paid, whichever is greater. Interest shall

                                      -4-
<PAGE>
accrue on the prepayment amount hereunder from the seventh day after such amount
is due (being the date of an Event of Default) through the date of prepayment in
full thereof at the rate of 15% per annum (or such lesser maximum amount that is
permitted  to be paid by  applicable  law),  to accrue  daily from the date such
payment  is due  hereunder  through  and  including  the  date of  payment.  All
Debentures and Underlying  Shares for which the full prepayment  price hereunder
shall have been paid in accordance  herewith shall promptly be surrendered to or
as directed by the Company.  The Holder need not provide and the Company  hereby
waives any  presentment,  demand,  protest or other notice of any kind,  and the
Holder may  immediately  and without  expiration of any grace period enforce any
and all of its rights and remedies hereunder and all other remedies available to
it under  applicable  law.  Such  declaration  may be rescinded  and annulled by
Holder at any time prior to payment  hereunder.  No such rescission or annulment
shall  affect any  subsequent  Event of  Default or impair any right  consequent
thereon.

         SECTION 4. CONVERSION.

         (a) (i)  CONVERSION AT OPTION OF HOLDER.  (A) This  Debenture  shall be
convertible into shares of Common Stock at the option of the Holder, in whole or
in part at any  time and  from  time to time,  after  the  Original  Issue  Date
(subject  to the  limitations  on  conversion  set  forth in  Section  4(a)(iii)
hereof).  The  number  of  shares of Common  Stock  issuable  upon a  conversion
hereunder shall be determined by adding the sum of (i) the quotient  obtained by
dividing (x) the outstanding  principal amount of this Debenture to be converted
and (y) the Conversion Price (as defined  herein),  and (ii) the amount equal to
(I) the product of (x) the outstanding  principal amount of this Debenture to be
converted  and (y) the product of (1) the  quotient  obtained by dividing .12 by
360 and (2) the number of days for which such principal  amount was outstanding,
divided by (II) the Conversion Price on the Conversion Date,  PROVIDED,  that if
the Company  shall have timely  elected to pay the  interest due on a Conversion
Date in cash pursuant to the terms hereof,  subsection (ii) shall not be used in
the  calculation  of the  number  of  shares of  Common  Stock  issuable  upon a
conversion hereunder.

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

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

               (2) after the Interest  Effectiveness Date (as defined in Section
          6) such  shares of  Common  Stock (x) are not  registered  for  resale
          pursuant to an effective Underlying Shares Registration  Statement and
          (y) may not be  sold  without  volume  restrictions  pursuant  to Rule
          144(k) promulgated under the Securities Act (as defined in Section 6),
          as determined by counsel to the Company  pursuant to a written opinion
          letter,  addressed  to the  Company's  transfer  agent in the form and
          substance  acceptable to the applicable Holder and such transfer agent
          (if the  shares of  Common  Stock are  permitted  by the  Holder to be
          delivered  under this clause (2) prior to the  Effectiveness  Date (as
          defined  in the  Registration  Rights  Agreement)  and  thereafter  an

                                      -5-
<PAGE>
          Underlying Shares  Registration  Statement shall be declared effective
          by the Commission,  the Company shall,  within five Trading Days after
          the date of such  declaration of  effectiveness,  exchange such shares
          for shares of Common Stock that are free of restrictive legends of any
          kind);

               (3) the Common  Stock is not listed or quoted for  trading on the
          OTC or on a Subsequent Market;

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

               (5) the issuance of such shares of Common Stock would result in a
          violation of Sections 4(a)(iii),

              then,  at the  option  of the  Holder,  the  Company,  in  lieu of
delivering  shares of Common  Stock  pursuant to Section  4(a)(i)(A)(ii),  shall
deliver, within three Trading Days of each applicable Conversion Date, an amount
in cash equal to the  product  of (a) the  outstanding  principal  amount of the
Debentures  to be converted on such  Conversion  Date and (b) the product of (x)
the  quotient  obtained  by  dividing  .12 by 360 and (y) the number of days for
which such principal amount was outstanding.

              (C) The  Holder  shall  effect  conversions  by  surrendering  the
Debentures (or such portions thereof) to be converted, together with the form of
conversion  notice attached  hereto as EXHIBIT A (a "CONVERSION  Notice") to the
Company. Each Conversion Notice shall specify the principal amount of Debentures
to be converted and the date on which such  conversion is to be effected,  which
date may not be prior to the date such Conversion  Notice is deemed to have been
delivered hereunder (a "CONVERSION DATE"). If no Conversion Date is specified in
a Conversion  Notice, the Conversion Date shall be the date that such Conversion
Notice is deemed delivered  hereunder.  Subject to Section 4(b), each Conversion
Notice, once given, shall be irrevocable.  If the Holder is converting less than
all of the principal  amount  represented  by the  Debenture(s)  tendered by the
Holder  with the  Conversion  Notice,  or if a  conversion  hereunder  cannot be
effected in full for any reason,  the Company shall honor such conversion to the
extent  permissible  hereunder and shall promptly deliver to such Holder (in the
manner and within the time set forth in Section  4(b)) a new  Debenture for such
principal amount as has not been converted.

               (ii)  AUTOMATIC  CONVERSION.  Subject to the  provisions  in this
paragraph,  the principal amount of Debentures for which conversion notices have
not  previously  been  received  or for  which  prepayment  has not been made or
required hereunder shall be automatically  converted on the first anniversary of
the Original Issue Date (the  "AUTOMATIC  CONVERSION  DATE") pursuant to Section
4(a)(i),  at the Conversion  Price on such date. The conversion  contemplated by
this paragraph shall not occur if (a) (1) an Underlying Securities  Registration
Statement is not then effective  that names the Holder as a selling  stockholder
thereunder  and (2) the  Holder is not  permitted  to resell  Underlying  Shares
pursuant to Rule 144(k)  promulgated  under the Securities  Act,  without volume
restrictions,  as evidenced by an opinion  letter of counsel  acceptable  to the

                                      -6-
<PAGE>
Holder  and the  transfer  agent  for the  Common  Stock;  or (b)  there are not
sufficient shares of Common Stock authorized and reserved for issuance upon such
conversion.  Notwithstanding  anything  herein to the  contrary,  the  Automatic
Conversion Date shall be extended (on a day-for-day  basis) for any Trading Days
that the  Holder is unable to resell  Underlying  Shares  due to (a) the  Common
Stock not being  listed or  granted  for  trading  on the OTC or any  Subsequent
Market, (b) the failure of an Underlying Securities Registration Statement to be
declared  effective by the  Commission or, if so declared,  to remain  effective
during  the  Effectiveness  Period  as to all  Underlying  Shares,  or  (c)  the
suspension  of the  Holder's  right  to  resell  Underlying  Shares  thereunder.
Notwithstanding anything to the contrary contained herein, a conversion pursuant
to this Section shall not be subject to the provisions of Section 4(a)(iii).

              (iii) CERTAIN CONVERSION RESTRICTIONS.

              (A) A Holder  may not  convert  Debentures  or  receive  shares of
Common Stock as payment of interest  hereunder to the extent such  conversion or
receipt of such interest  payment would result in the Holder,  together with any
affiliate thereof, beneficially owning (as determined in accordance with Section
13(d) of the Exchange  Act and the rules  promulgated  thereunder)  in excess of
4.999% of the then  issued and  outstanding  shares of Common  Stock,  including
shares  issuable upon  conversion of, and payment of interest on, the Debentures
held by such Holder after application of this Section. Since the Holder will not
be  obligated  to report to the Company the number of shares of Common  Stock it
may hold at the time of a conversion  hereunder,  unless the conversion at issue
would  result in the  issuance of shares of Common  Stock in excess of 4.999% of
the then  outstanding  shares of Common Stock without regard to any other shares
which may be  beneficially  owned by the  Holder or an  affiliate  thereof,  the
Holder  shall  have the  authority  and  obligation  to  determine  whether  the
restriction  contained  in this  Section  will limit any  particular  conversion
hereunder  and to the extent  that the  Holder  determines  that the  limitation
contained in this Section  applies,  the  determination  of which portion of the
principal amount of Debentures are convertible shall be the  responsibility  and
obligation of the Holder.  If the Holder has delivered a Conversion Notice for a
principal amount of Debentures that, without regard to any other shares that the
Holder or its affiliates may  beneficially  own, would result in the issuance in
excess of the permitted amount hereunder, the Company shall notify the Holder of
this fact and shall  honor  the  conversion  for the  maximum  principal  amount
permitted to be converted on such Conversion Date in accordance with the periods
described  in Section 4(b) and, at the option of the Holder,  either  retain any
principal  amount  tendered for  conversion  in excess of the  permitted  amount
hereunder for future  conversions or return such excess  principal amount to the
Holder. The provisions of this Section may be waived by a Holder (but only as to
itself and not to any other  Holder)  upon not less than 61 days prior notice to
the Company. Other Holders shall be unaffected by any such waiver.

              (B) A Holder  may not  convert  Debentures  or  receive  shares of
Common Stock as payment of interest  hereunder to the extent such  conversion or
receipt of such interest  payment would result in the Holder,  together with any
affiliate thereof, beneficially owning (as determined in accordance with Section
13(d) of the Exchange  Act and the rules  promulgated  thereunder)  in excess of
9.999% of the then  issued and  outstanding  shares of Common  Stock,  including
shares  issuable upon  conversion of, and payment of interest on, the Debentures

                                      -7-
<PAGE>
held by such Holder after application of this Section. Since the Holder will not
be  obligated  to report to the Company the number of shares of Common  Stock it
may hold at the time of a conversion  hereunder,  unless the conversion at issue
would  result in the  issuance of shares of Common  Stock in excess of 9.999% of
the then  outstanding  shares of Common Stock without regard to any other shares
which may be  beneficially  owned by the  Holder or an  affiliate  thereof,  the
Holder  shall  have the  authority  and  obligation  to  determine  whether  the
restriction  contained  in this  Section  will limit any  particular  conversion
hereunder  and to the extent  that the  Holder  determines  that the  limitation
contained in this Section  applies,  the  determination  of which portion of the
principal amount of Debentures are convertible shall be the  responsibility  and
obligation of the Holder.  If the Holder has delivered a Conversion Notice for a
principal amount of Debentures that, without regard to any other shares that the
Holder or its affiliates may  beneficially  own, would result in the issuance in
excess of the permitted amount hereunder, the Company shall notify the Holder of
this fact and shall  honor  the  conversion  for the  maximum  principal  amount
permitted to be converted on such Conversion Date in accordance with the periods
described  in Section 4(b) and, at the option of the Holder,  either  retain any
principal  amount  tendered for  conversion  in excess of the  permitted  amount
hereunder for future  conversions or return such excess  principal amount to the
Holder. The provisions of this Section may be waived by a Holder (but only as to
itself and not to any other  Holder)  upon not less than 61 days prior notice to
the Company. Other Holders shall be unaffected by any such waiver.

         (b) (i) Not later than five Trading Days after any Conversion Date, the
Company will deliver to the Holder (i) a certificate or certificates which shall
be free of  restrictive  legends  and  trading  restrictions  (other  than those
required by Section 3.1(b) of the Purchase Agreement) representing the number of
shares of Common Stock being acquired upon the conversion of Debentures (subject
to the limitations set forth in Section 4(a)(iii) hereof),  (ii) Debentures in a
principal amount equal to the principal amount of Debentures not converted,  and
(iii) a bank check in the amount of accrued and unpaid  interest (if the Company
has timely  elected or is required to pay accrued  interest in cash),  PROVIDED,
that the Company  shall not be obligated to issue  certificates  evidencing  the
shares of Common Stock  issuable  upon  conversion  of the  principal  amount of
Debentures until Debentures are delivered for conversion to the Company,  or the
Holder  notifies  the Company  that such  Debentures  have been lost,  stolen or
destroyed  and  provides  a  bond  (or  other  adequate   security)   reasonably
satisfactory  to the Company to indemnify  the Company from any loss incurred by
it in connection  therewith.  The Company shall,  upon request of the Holder, if
available,  use its best  efforts to deliver  any  certificate  or  certificates
required  to be  delivered  by the  Company  under this  Section  electronically
through  the  Depository  Trust  Corporation  or  another  established  clearing
corporation  performing  similar  functions.  If in the  case of any  Conversion
Notice such  certificate or certificates  are not delivered to or as directed by
the  applicable  Holder by the fifth  Trading Day after a Conversion  Date,  the
Holder  shall be  entitled  by written  notice to the  Company at any time on or
before its receipt of such  certificate or certificates  thereafter,  to rescind
such  conversion,  in which  event the  Company  shall  immediately  return  the
certificates  representing  the  principal  amount of  Debentures  tendered  for
conversion.

              (ii)  If  the  Company   fails  to  deliver  to  the  Holder  such
certificate or certificates pursuant to Section 4(b)(i) by the fifth Trading Day
after the  Conversion  Date,  the Company shall pay to such Holder,  in cash, as
liquidated damages and not as a penalty,  $2,500 for each Trading Day after such

                                      -8-
<PAGE>
fifth Trading Day until such  certificates  are delivered.  Nothing herein shall
limit a Holder's  right to pursue actual  damages or declare an Event of Default
pursuant to Section 3 herein for the Company's  failure to deliver  certificates
representing  shares of Common Stock upon conversion within the period specified
herein and such Holder shall have the right to pursue all remedies  available to
it at law or in equity  including,  without  limitation,  a decree  of  specific
performance  and/or injunctive relief. The exercise of any such rights shall not
prohibit  the  Holders  from  seeking to enforce  damages  pursuant to any other
Section hereof or under applicable law.  Further,  if the Company shall not have
delivered any cash due in respect of  conversions of Debentures or as payment of
interest  thereon by the third Trading Day after the Conversion Date, the Holder
may, by notice to the  Company,  require  the Company to issue  shares of Common
Stock  pursuant to Section  4(c),  except that for such  purpose the  Conversion
Price  applicable  thereto  shall be the lesser of the  Conversion  Price on the
Conversion Date and the Conversion Price on the date of such Holder demand.  Any
such shares will be subject to the provision of this Section.

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

         (c) (i) The conversion price (the "CONVERSION  PRICE") in effect on any
Conversion  Date  shall be the  lesser  of (1)  $.23  (the  "INITIAL  CONVERSION
PRICE"),  and (2) 60% of the average of the lowest three inter-day prices (which
need not occur on  consecutive  Trading  Days)  during the twenty  Trading  Days
immediately  preceding the applicable Conversion Date (which may include Trading
Days prior to the Original Issue Date),  PROVIDED,  that such twenty Trading Day

                                      -9-
<PAGE>
period  shall be extended  for the number of Trading  Days during such period in
which (A) trading in the Common  Stock is  suspended  by the OTC or a Subsequent
Market on which the Common Stock is then listed,  or (B) after the date declared
effective by the Commission,  the Underlying  Shares  Registration  Statement is
either  not  effective,   the  Prospectus  included  in  the  Underlying  Shares
Registration  Statement  may  not be  used  by the  Holder  for  the  resale  of
Underlying Shares.

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

              (iii)  If the  Company,  at any  time  while  any  Debentures  are
outstanding,  shall issue  rights,  options or warrants to all holders of Common
Stock (and not to Holders) entitling them to subscribe for or purchase shares of
Common  Stock at a price per share less than the Per Share  Market  Value at the
record date mentioned below,  then the Conversion Price shall be multiplied by a
fraction,  of which the denominator  shall be the number of shares of the Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance of
such rights or warrants  plus the number of  additional  shares of Common  Stock
offered for  subscription  or purchase,  and of which the numerator shall be the
number  of  shares of the  Common  Stock  (excluding  treasury  shares,  if any)
outstanding  on the date of issuance of such rights or warrants  plus the number
of shares which the  aggregate  offering  price of the total number of shares so
offered would purchase at such Per Share Market Value.  Such adjustment shall be
made  whenever  such rights or warrants are issued,  and shall become  effective
immediately after the record date for the determination of stockholders entitled
to receive such rights, options or warrants. However, upon the expiration of any
such  right,  option or  warrant  to  purchase  shares of the  Common  Stock the
issuance of which resulted in an adjustment in the Conversion  Price pursuant to
this  Section,  if any such right,  option or warrant shall expire and shall not
have been exercised, the Conversion Price shall immediately upon such expiration
be recomputed and effective immediately upon such expiration be increased to the
price  which it would have been (but  reflecting  any other  adjustments  in the
Conversion  Price made  pursuant to the  provisions  of this  Section  after the
issuance of such rights or warrants) had the adjustment of the Conversion  Price
made upon the  issuance of such  rights,  options or  warrants  been made on the
basis of offering for subscription or purchase only that number of shares of the
Common Stock  actually  purchased  upon the exercise of such rights,  options or
warrants actually exercised.

                                      -10-
<PAGE>
              (iv) If the Company or any subsidiary  thereof, as applicable with
respect  to Common  Stock  Equivalents  (as  defined  below),  at any time while
Debentures  are  outstanding  shall issue either (i) shares of Common Stock at a
price per share less than the Conversion  Price (the  "ISSUANCE  PRICE") or (ii)
rights, warrants,  options or other securities or debt that are convertible into
or  exchangeable  for  shares  of Common  Stock  ("COMMON  STOCK  EQUIVALENTS"),
entitling any Person to acquire shares of Common Stock at an Issuance Price less
than the  Conversion  Price (if the holder of the  Common  Stock  Equivalent  so
issued shall at any time,  whether by operation of purchase  price  adjustments,
reset provisions,  floating conversion, exercise or exchange prices or otherwise
be entitled to receive  shares of Common Stock at a conversion or exercise price
less than the Conversion  Price,  such issuance shall be deemed to have occurred
for less than the Conversion Price), then, the Conversion Price shall be reduced
to the Issuance Price.  Such  adjustment  shall be made whenever Common Stock or
Common  Stock  Equivalents  are issued at a price  below the  Conversion  Price.
However,  upon the  expiration of any Common Stock  Equivalents  the issuance of
which  resulted  in an  adjustment  in the  Conversion  Price  pursuant  to this
Section,  if any such Common Stock  Equivalents  shall expire and shall not have
been exercised,  the Conversion Price shall  immediately upon such expiration be
recomputed and effective  immediately  upon such  expiration be increased to the
price  which it would have been (but  reflecting  any other  adjustments  in the
Conversion  Price made  pursuant to the  provisions  of this  Section  after the
issuance of such Common Stock  Equivalents) had the adjustment of the Conversion
Price made upon the issuance of such Common Stock  Equivalents  been made on the
basis of offering  for  subscription  or purchase  only that number of shares of
Common  Stock  actually  purchased  upon  the  exercise  of  such  Common  Stock
Equivalents actually exercised.

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

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

                                      -11-
<PAGE>
Debentures  shall  be  entitled  upon  such  event to  receive  such  amount  of
securities,  cash or property  as the shares of the Common  Stock of the Company
into which the then outstanding principal amount,  together with all accrued but
unpaid  interest and any other  amounts then owing  hereunder in respect of this
Debenture could have been converted  immediately prior to such  reclassification
or share  exchange would have been entitled or (B) require the Company to prepay
the  aggregate  of its  outstanding  principal  amount of  Debentures,  plus all
interest and other  amounts due and payable  thereon,  at a price  determined in
accordance with Section 3(b). The entire prepayment price shall be paid in cash.
This provision shall similarly  apply to successive  reclassifications  or share
exchanges.

              (vii) All  calculations  under this Section 4 shall be made to the
nearest  cent or the  nearest  1/100th  of a  share,  as the  case  may  be.  No
adjustments in either the Conversion Price or the Initial Conversion Price shall
be required if such adjustment is less than $0.01,  PROVIDED,  however, that any
adjustments which by reason of this Section are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.

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

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

                                      -12-
<PAGE>
period  commencing  the date of such notice to the  effective  date of the event
triggering such notice.

              (x) In case of any (1) merger or consolidation of the Company with
or into another Person,  or (2) sale by the Company of more than one-half of the
assets  of the  Company  (on an as valued  basis) in one or a series of  related
transactions,  a Holder shall have the right to (A) if permitted  under  Section
3(b) hereof,  exercise its rights of prepayment  under Section 3(b) with respect
to such event,  (B) convert its aggregate  principal  amount of Debentures  then
outstanding  into the shares of stock and other  securities,  cash and  property
receivable  upon or deemed to be held by holders of Common Stock  following such
merger, consolidation or sale, and such Holder shall be entitled upon such event
or series of  related  events to receive  such  amount of  securities,  cash and
property  as the shares of Common  Stock into  which  such  aggregate  principal
amount of Debentures could have been converted immediately prior to such merger,
consolidation or sales would have been entitled,  or (C) in the case of a merger
or  consolidation,   (x)  require  the  surviving  entity  to  issue  shares  of
convertible preferred stock or convertible debentures with such aggregate stated
value  or in such  face  amount,  as the case  may be,  equal  to the  aggregate
principal  amount of Debentures  then held by such Holder,  plus all accrued and
unpaid  interest and other amounts owing  thereon,  which newly issued shares of
preferred stock or debentures shall have terms identical (including with respect
to conversion) to the terms of this Debenture (except,  in the case of preferred
stock,  as may be required to reflect the  differences  between equity and debt)
and  shall be  entitled  to all of the  rights  and  privileges  of a Holder  of
Debentures set forth herein and the agreements  pursuant to which the Debentures
were  issued  (including,  without  limitation,  as such  rights  relate  to the
acquisition,  transferability,  registration and listing of such shares of stock
other securities issuable upon conversion thereof),  and (y) simultaneously with
the issuance of such  convertible  preferred  stock or  convertible  debentures,
shall have the right to convert  such  instrument  only into shares of stock and
other  securities,  cash and  property  receivable  upon or deemed to be held by
holders of Common Stock following such merger or  consolidation.  In the case of
clause (C), the  conversion  price  applicable  for the newly  issued  shares of
convertible  preferred stock or convertible  debentures  shall be based upon the
amount of  securities,  cash and property  that each share of Common Stock would
receive in such transaction and the Conversion Price in effect immediately prior
to the effectiveness or closing date for such transaction. The terms of any such
merger, sale or consolidation shall include such terms so as to continue to give
the Holders the right to receive the securities,  cash and property set forth in
this  Section upon any  conversion  or  redemption  following  such event.  This
provision shall similarly apply to successive such events.

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

                                      -13-
<PAGE>
paid,  nonassessable  and, if the Underlying Shares  Registration  Statement has
been declared effective under the Securities Act,  registered for public sale in
accordance with such Underlying Shares Registration Statement.

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

         (f) The  issuance  of  certificates  for shares of the Common  Stock on
conversion of the Debentures shall be made without charge to the Holders thereof
for any documentary stamp or similar taxes that may be payable in respect of the
issue or delivery of such  certificate,  provided  that the Company shall not be
required to pay any tax that may be payable in respect of any transfer  involved
in the issuance and delivery of any such  certificate  upon conversion in a name
other than that of the Holder of such  Debentures  so converted  and the Company
shall not be required to issue or deliver such certificates  unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the  amount of such tax or shall have  established  to the  satisfaction  of the
Company that such tax has been paid.

         (g) Any and all notices or other  communications  or  deliveries  to be
provided by the Holders hereunder, including, without limitation, any Conversion
Notice, shall be in writing and delivered  personally,  by facsimile,  sent by a
nationally  recognized  overnight  courier  service  or  sent  by  certified  or
registered mail,  postage prepaid,  addressed to the Company,  at 5002 South Ash
Avenue, Tempe, Arizona 85282 facsimile (480) 820-2319, attention Chief Financial
Officer,  or such other  address or facsimile  number as the Company may specify
for such  purposes by notice to the Holders  delivered in  accordance  with this
Section.  Any and all  notices  or  other  communications  or  deliveries  to be
provided by the Company hereunder shall be in writing and delivered  personally,
by facsimile,  sent by a nationally recognized overnight courier service or sent
by certified or registered mail,  postage  prepaid,  addressed to each Holder at
the facsimile  telephone number or address of such Holder appearing on the books
of the Company,  or if no such facsimile telephone number or address appears, at
the principal place of business of the Holder. Any notice or other communication
or deliveries  hereunder  shall be deemed given and effective on the earliest of
(i) the date of  transmission,  if such notice or communication is delivered via
facsimile at the facsimile  telephone  number specified in this Section prior to
6:30 p.m. (New York City time), (ii) the date after the date of transmission, if
such  notice or  communication  is  delivered  via  facsimile  at the  facsimile
telephone  number  specified in this Section later than 6:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) four days after deposit in the United  States mail,  (iv) the Business Day
following  the  date of  mailing,  if sent by  nationally  recognized  overnight
courier service,  or (v) upon actual receipt by the party to whom such notice is
required to be given.

         SECTION 5. OPTIONAL PREPAYMENT.

         (a) Subject to Section  5(b) below,  the Company  shall have the right,
exercisable  at any time and from time to time after the Original Issue Date, in
accordance with the terms hereof and upon ten Trading Days' prior written notice

                                      -14-
<PAGE>
to the Holders to be prepaid (an "OPTIONAL PREPAYMENT NOTICE"), to prepay all or
any portion of the outstanding  principal amount of the Debentures which has not
previously been repaid or for which Conversion  Notices have not previously been
delivered.  The prepayment  price  applicable to prepayments  under this Section
5(a)  shall  equal the  Prepayment  Price  and  shall be paid in cash.  Any such
prepayment shall be free of any claim of  subordination.  The Holders shall have
the right to tender,  and the Company shall honor,  Conversion Notices delivered
prior to the expiration of the tenth Trading Day after receipt by the Holders of
an Optional  Prepayment  Notice for such Debentures (the tenth Trading Day after
receipt by the Holders of an Optional Prepayment Notice is referred to herein as
the "OPTIONAL PREPAYMENT DATE")

         (b) The Company shall not be entitled to deliver an Optional Prepayment
Notice to the Holder (and, if after  delivery  thereof and prior to the Optional
Prepayment  Date,  any of the following  conditions  shall cease to be met, such
notice,  at the option of the Holders,  shall be deemed no longer effective) if:
(i) the number of shares of Common  Stock at the time  authorized,  unissued and
unreserved for all purposes is insufficient to satisfy the Company's  conversion
obligations of the aggregate principal amount of Debentures then outstanding, or
(ii) there is neither an  effective  Underlying  Shares  Registration  Statement
under which the Holders can resell all of the issued  Underlying  Shares and all
of the  Underlying  Shares  as are  issuable  upon  conversion  in  full  of the
principal amount of Debentures subject to an Optional  Prepayment Notice nor may
all of such issued and issuable Underlying Shares be sold by the Holders subject
to such prepayment without volume restrictions  pursuant to Rule 144 promulgated
under the Securities Act, as determined by counsel to the Company  pursuant to a
written  opinion letter,  addressed to the Company's  transfer agent in the form
and substance  acceptable to the Holders and such transfer  agent,  or (iii) the
Common  Stock  is not then  listed  or  quoted  for  trading  on the OTC or on a
Subsequent Market.

         (c) If any  portion of the  Prepayment  Price  shall not be paid by the
Company by the fifth (5th) Trading Day following the Optional  Prepayment  Date,
the Prepayment Price shall be increased by 15% per annum (or such lesser maximum
amount that is permitted to be paid by applicable  law) to accrue daily from the
date such  interest is due  hereunder  through and including the date of payment
(which  amount  shall be paid as  liquidated  damages and not as a penalty).  In
addition,  if any portion of the  Prepayment  Price remains  unpaid  through the
expiration  of  the  Optional  Prepayment  Date,  the  Holder  subject  to  such
prepayment  may elect by  written  notice to the  Company  to either  (x) demand
conversion in accordance with the formula and the time period therefor set forth
in Section 4 of any portion of the principal  amount of Debentures for which the
Prepayment Price, plus accrued  liquidated damages and accrued interest thereon,
has not been paid in full (the "UNPAID PREPAYMENT  PRINCIPAL AMOUNT"),  in which
event the  applicable Per Share Market Value shall be the lower of the Per Share
Market Value calculated on the Optional Prepayment Date and the Per Share Market
Value as of the Holder's  written  demand for  conversion,  or (y) invalidate AB
INITIO such optional  prepayment,  notwithstanding  anything herein contained to
the contrary.  If the Holder elects option (x) above, the Company shall,  within
five Trading Days after such election is deemed delivered hereunder,  deliver to
the Holder the shares of Common Stock  issuable  upon  conversion  of the Unpaid
Prepayment  Principal  Amount  subject to such  conversion  demand and otherwise
perform its  obligations  hereunder with respect  thereto.  If the Holder elects

                                      -15-
<PAGE>
option (y) above,  the Company shall  promptly,  and in any event not later than
five Trading Days from receipt of notice of such election,  return to the Holder
new  Debentures  for the full Unpaid  Prepayment  Principal  Amount and shall no
longer have any  prepayment  rights under this  Debenture.  If, upon an election
under option (x) above, the Company fails to deliver  certificates  representing
the shares of Common Stock  issuable upon  conversion  of the Unpaid  Prepayment
Principal  Amount within the time period set forth in this Section,  the Company
shall pay to the Holder in cash,  as  liquidated  damages  and not as a penalty,
$2,500 per day until the Company delivers such certificates to the Holder.

         SECTION 6.  DEFINITIONS.  For the purposes hereof,  the following terms
shall have the following meanings:

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

         "CHANGE OF CONTROL  TRANSACTION"  means the occurrence of any of (i) an
acquisition  after the date hereof by an  individual  or legal entity or "group"
(as  described  in Rule  13d-5(b)(1)  promulgated  under  the  Exchange  Act) of
effective  control  (whether  through legal or  beneficial  ownership of capital
stock of the  Company,  by  contract  or  otherwise)  of in excess of 33% of the
voting securities of the Company, (ii) a replacement at one time or over time of
more than one-half of the members of the Company's  board of directors  which is
not approved by a majority of those  individuals who are members of the board of
directors on the date hereof (or by those individuals who are serving as members
of the board of directors on any date whose nomination to the board of directors
was  approved  by a majority of the  members of the board of  directors  who are
members  on the date  hereof),  (iii)  the  merger of the  Company  with or into
another entity that is not wholly-owned by the Company, consolidation or sale of
50% or  more  of the  assets  of the  Company  in  one or a  series  of  related
transactions,  or (iv) the execution by the Company of an agreement to which the
Company is a party or by which it is bound,  providing for any of the events set
forth above in (i), (ii) or (iii).

         "COMMISSION" means the Securities and Exchange Commission.

         "COMMON STOCK" means the common stock,  no par value per share,  of the
Company and stock of any other class into which such shares may  hereafter  have
been reclassified or changed.

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

         "INTEREST  EFFECTIVENESS  DATE"  means the  earlier to occur of (x) the
Effectiveness  Date  and (y) the date  that an  Underlying  Shares  Registration
Statement is declared effective by the Commission.

         "MANDATORY PREPAYMENT AMOUNT" for any Debentures shall equal the sum of
(i) the greater of (A) 130% of the principal amount of Debentures to be prepaid,

                                      -16-
<PAGE>
plus all accrued and unpaid interest  thereon,  and (B) the principal  amount of
Debentures to be prepaid, plus all accrued and unpaid interest thereon,  divided
by the  Conversion  Price on (x) the date the  Mandatory  Prepayment  Amount  is
demanded or otherwise  due or (y) the date the  Mandatory  Prepayment  Amount is
paid in full, whichever is less, multiplied by the Per Share Market Value on (x)
the date the Mandatory Prepayment Amount is demanded or otherwise due or (y) the
date the Mandatory  Prepayment Amount is paid in full, whichever is greater, and
(ii) all other amounts, costs, expenses and liquidated damages due in respect of
such Debentures.

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

         "PER SHARE MARKET VALUE" means on any  particular  date (a) the closing
bid price per share of  Common  Stock on such date on the  Subsequent  Market on
which the shares of Common  Stock are then  listed or quoted,  or if there is no
such price on such date, then the closing bid price on the Subsequent  Market on
the date nearest  preceding  such date, or (b) if the shares of Common Stock are
not then listed or quoted on a  Subsequent  Market,  the closing bid price for a
share of Common Stock in the OTC, as reported by the National  Quotation  Bureau
Incorporated or similar  organization  or agency  succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the shares of
Common Stock are not then reported by the National Quotation Bureau Incorporated
(or similar  organization  or agency  succeeding  to its  functions of reporting
prices), then the average of the "Pink Sheet" quotes for the relevant conversion
period,  as  determined  in good  faith by the  Holder,  or (d) if the shares of
Common  Stock are not then  publicly  traded the fair market value of a share of
Common Stock as determined by an Appraiser selected in good faith by the Holders
of  a  majority  in  interest  of  the  principal   amount  of  Debentures  then
outstanding.

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

         "PREPAYMENT  PRICE" for any  Debentures  shall equal the sum of (i) the
greater of (A) 130% of the principal  amount of  Debentures to be prepaid,  plus
all  accrued  and  unpaid  interest  thereon,  and (B) the  principal  amount of
Debentures to be prepaid, plus all accrued and unpaid interest thereon,  divided
by the  Conversion  Price on (x) the date the  Mandatory  Prepayment  Amount  is
demanded or otherwise  due or (y) the date the  Mandatory  Prepayment  Amount is
paid in full, whichever is less, multiplied by the Per Share Market Value on (x)
the date the Mandatory Prepayment Amount is demanded or otherwise due or (y) the
date the Mandatory  Prepayment Amount is paid in full, whichever is greater, and
(ii) all other amounts, costs, expenses and liquidated damages due in respect of
such Debentures.

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

                                      -17-
<PAGE>
         "REGISTRATION   RIGHTS   AGREEMENT"  means  the   Registration   Rights
Agreement,  dated as of the  Original  Issue Date,  to which the Company and the
original Holder are parties,  as amended,  modified or supplemented from time to
time in accordance with its terms.

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

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

         "TRANSACTION  DOCUMENTS"  shall  have  the  meaning  set  forth  in the
Purchase Agreement.

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

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

         SECTION 7. Except as expressly  provided  herein,  no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional,  to pay the principal of, interest and liquidated damages (if
any) on,  this  Debenture  at the  time,  place,  and  rate,  and in the coin or
currency,  herein  prescribed.  This  Debenture  is a direct  obligation  of the
Company.  This  Debenture  ranks  PARI PASSU  with all other  Debentures  now or
hereafter  issued  under  the  terms  set  forth  herein.  As long as there  are
Debentures  outstanding,  the Company shall not and shall cause it  subsidiaries
not to,  without  the  consent  of the  Holders,  (i) amend its  certificate  of
incorporation,  bylaws or other charter  documents so as to adversely affect any
rights of the Holders; (ii) repay,  repurchase or offer to repay,  repurchase or
otherwise  acquire shares of its Common Stock or other equity  securities  other
than as to the Underlying  Shares to the extent  permitted or required under the
Transaction Documents;  or (iii) enter into any agreement with respect to any of
the foregoing. The Company may only voluntarily prepay the outstanding principal
amount on the Debentures in accordance with Section 5 hereof.

         SECTION 8. This  Debenture  shall not  entitle the Holder to any of the
rights of a stockholder of the Company,  including without limitation, the right
to vote, to receive dividends and other distributions,  or to receive any notice
of, or to attend,  meetings  of  stockholders  or any other  proceedings  of the

                                      -18-
<PAGE>
Company,  unless  and to the extent  converted  into  shares of Common  Stock in
accordance with the terms hereof.

         SECTION  9. If this  Debenture  shall be  mutilated,  lost,  stolen  or
destroyed,  the Company shall execute and deliver,  in exchange and substitution
for  and  upon  cancellation  of a  mutilated  Debenture,  or in  lieu  of or in
substitution for a lost, stolen or destroyed debenture,  a new Debenture for the
principal amount of this Debenture so mutilated,  lost,  stolen or destroyed but
only upon  receipt  of  evidence  of such  loss,  theft or  destruction  of such
Debenture,  and of the  ownership  hereof,  and  indemnity,  if  requested,  all
reasonably satisfactory to the Company.

         SECTION 10. No  indebtedness of the Company is senior to this Debenture
in  right  of  payment,  whether  with  respect  to  interest,  damages  or upon
liquidation or  dissolution or otherwise  except for the SBA Loan (as defined in
the  Purchase  Agreement)  and  $270,000  outstanding  principal  balance of the
Company's  convertible  debentures  held by Gem Management Ltd. The Company will
not and will not permit any of its  subsidiaries  to,  directly  or  indirectly,
enter into, create, incur, assume or suffer to exist any new indebtedness of any
kind, on or with respect to any of its property or assets now owned or hereafter
acquired  or any  interest  therein or any income or profits  therefrom  that is
senior in any respect to the Company's obligations under the Debentures.

         SECTION  11. This  Debenture  shall be  governed  by and  construed  in
accordance  with the laws of the State of New  York,  without  giving  effect to
conflicts of laws thereof. The Company and the Holder hereby irrevocably submits
to the exclusive  jurisdiction  of the state and federal  courts  sitting in the
City of New York,  Borough of  Manhattan,  for the  adjudication  of any dispute
hereunder or in connection herewith or with any transaction  contemplated hereby
or discussed herein, and hereby irrevocably  waives, and agrees not to assert in
any suit, action or proceeding,  any claim that it is not personally  subject to
the  jurisdiction of any such court, or that such suit,  action or proceeding is
improper.  Each of the Company and the Holder hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or  proceeding by receiving a copy thereof sent to the Company at the address in
effect for  notices to it under this  instrument  and agrees  that such  service
shall  constitute  good and  sufficient  service of process and notice  thereof.
Nothing  contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law.

         SECTION  12. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture  shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this  Debenture.  The failure of the Company or the Holder to insist upon strict
adherence to any term of this  Debenture on one or more  occasions  shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict  adherence to that term or any other term of this  Debenture.  Any waiver
must be in writing.

         SECTION 13. If any provision of this  Debenture is invalid,  illegal or
unenforceable,  the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance,  it shall  nevertheless
remain applicable to all other persons and  circumstances.  If it shall be found
that any interest or other amount deemed  interest due  hereunder  shall violate

                                      -19-
<PAGE>
applicable laws governing  usury,  the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.

         SECTION 14. Whenever any payment or other obligation hereunder shall be
due on a day other than a Business  Day,  such payment shall be made on the next
succeeding Business Day.

         SECTION  15.  The  payment  obligations  under this  Debenture  and the
obligations  of the Company to the Holder  arising upon the conversion of all or
any of the  Debentures  in  accordance  with the  provisions  hereof are secured
pursuant to the Security Agreement (as defined in the Purchase Agreement).

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                             SIGNATURE PAGE FOLLOWS]

                                      -20-
<PAGE>
         IN WITNESS WHEREOF,  the Company has caused this Convertible  Debenture
to be duly  executed  by a duly  authorized  officer as of the date first  above
indicated.

                                       ACCORD ADVANCED TECHNOLOGIES, INC.

                                       By: /s/ Travis Wilson
                                           -------------------------------------
                                           Name: Travis Wilson
                                           Title: Chief Executive Officer

No. 1
(AJW)
<PAGE>
                                    EXHIBIT A

                              NOTICE OF CONVERSION

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

The undersigned  hereby elects to convert the attached  Debenture into shares of
common stock,  no par value per share (the "Common  Stock"),  of Accord Advanced
Technologies, Inc. (the "Company") according to the conditions hereof, as of the
date  written  below.  If shares are to be issued in the name of a person  other
than  undersigned,  the  undersigned  will pay all transfer  taxes  payable with
respect  thereto and is delivering  herewith such  certificates  and opinions as
reasonably  requested  by the Company in  accordance  therewith.  No fee will be
charged to the holder for any  conversion,  except for such transfer  taxes,  if
any.

Conversion calculations:
                            ----------------------------------------------------
                            Date to Effect Conversion

                            ----------------------------------------------------
                            Principal Amount of Debentures to be Converted

                            ----------------------------------------------------
                            Number of shares of Common Stock to be Issued

                            ----------------------------------------------------
                            Applicable Conversion Price

                            ----------------------------------------------------
                            Signature

                            ----------------------------------------------------
                            Name

                            ----------------------------------------------------
                            Address

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