Document:

<PAGE>
EXHIBIT 10.78

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

                          SECURED CONVERTIBLE DEBENTURE

Costa Mesa, California
January 9, 2002                                                         $200,000

                  FOR VALUE RECEIVED, KANAKARIS WIRELESS, a Nevada corporation
(hereinafter called the "BORROWER"), hereby promises to pay to the order of BANK
INSIGNER DE BEAUFORT SAFE CUSTODY NV or registered assigns (the "HOLDER") the
sum of Two Hundred Thousand Dollars ($200,000), on January 9, 2003 (the
"MATURITY DATE"), and to pay interest on the unpaid principal balance hereof at
the rate of twelve percent (12%) per annum from January 9, 2002 (the "ISSUE
DATE") until the same becomes due and payable, whether at maturity or upon
acceleration or by prepayment or otherwise. Any amount of principal or interest
on this Debenture which is not paid when due shall bear interest at the rate of
fifteen percent (15%) per annum from the due date thereof until the same is paid
("DEFAULT INTEREST"). Interest shall commence accruing on the issue date, shall
be computed on the basis of a 365-day year and the actual number of days elapsed
and shall be payable, at the option of the Holder, either quarterly on March 31,
June 30, September 30 and December 31 of each year beginning on March 31, 2002,
or at the time of conversion of the principal to which such interest relates in
accordance with Article I below. All payments due hereunder (to the extent not
converted into common stock, par value $0.001 per share, of the Borrower (the
"COMMON STOCK") in accordance with the terms hereof) shall be made in lawful
money of the United States of America or, at the option of the Holder, in whole
or in part, in shares of Common Stock of the Borrower valued at the then
applicable Conversion Price (as defined herein). All payments shall be made at
such address as the Holder shall hereafter give to the Borrower by written
notice made in accordance with the provisions of this Debenture. Whenever any
amount expressed to be due by the terms of this Debenture is due on any day
which is not a business day, the same shall instead be due on the next
succeeding day which is a business day and, in the case of any interest payment

<PAGE>

date which is not the date on which this Debenture is paid in full, the
extension of the due date thereof shall not be taken into account for purposes
of determining the amount of interest due on such date. As used in this
Debenture, the term "business day" shall mean any day other than a Saturday,
Sunday or a day on which commercial banks in the city of Los Angeles, California
are authorized or required by law or executive order to remain closed. Each
capitalized term used herein, and not otherwise defined, shall have the meaning
ascribed thereto in that certain Securities Purchase Agreement, dated January 9,
2002, pursuant to which this Debenture was originally issued (the "PURCHASE
AGREEMENT").

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

         The following terms shall apply to this Debenture:

                          ARTICLE I. CONVERSION RIGHTS

                  1.1 CONVERSION RIGHT AND INVESTMENT OPTION.

                           (a) CONVERSION RIGHT. The Holder shall have the right
from time to time, and at any time on or prior to the earlier of (i) the
Maturity Date and (ii) the date of payment of the Default Amount (as defined in
Article III) pursuant to Section 1.6(a) or Article III, the Optional Prepayment
Amount (as defined in Section 5.1 or any payments pursuant to Section 1.7, each
in respect of the remaining outstanding principal amount of this Debenture to
convert all or any part of the outstanding and unpaid principal amount of this
Debenture into fully paid and non-assessable shares of Common Stock, as such
Common Stock exists on the Issue Date, or any shares of capital stock or other
securities of the Borrower into which such Common Stock shall hereafter be
changed or reclassified at the conversion price (the "CONVERSION PRICE")
determined as provided herein (a "CONVERSION"); PROVIDED, HOWEVER, that in no
event shall the Holder be entitled to convert any portion of this Debenture (or
exercise Investment Options (as defined in Section 1.1(b))) in excess of that
portion of this Debenture upon conversion of which the sum of (1) the number of
shares of Common Stock beneficially owned by the Holder and its affiliates
(other than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unconverted portion of the Debentures, the
unexercised Investment Options or the unexercised or unconverted portion of any
other security of the Borrower (including, without limitation, the warrants
issued by the Borrower pursuant to the Purchase Agreement) subject to a
limitation on conversion or exercise analogous to the limitations contained
herein) and (2) the number of shares of Common Stock issuable upon the
conversion of the portion of this Debenture (and upon the exercise, if any, of
Investment Options in connection therewith) with respect to which the
determination of this proviso is being made, would result in beneficial
ownership by the Holder and its affiliates of more than 4.9% of the outstanding
shares of Common Stock. For purposes of the proviso to the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section

                                       2
<PAGE>

13(d) of the Securities Exchange Act of 1934, as amended, and Regulations 13D-G
thereunder, except as otherwise provided in clause (1) of such proviso. The
Holder of this Debenture may waive the limitations set forth herein by sixty-one
(61) days written notice to the Borrower. The number of shares of Common Stock
to be issued upon each conversion of this Debenture shall be determined by
dividing the Conversion Amount (as defined below) by the applicable Conversion
Price then in effect on the date specified in the notice of conversion, in the
form attached hereto as Exhibit A (the "NOTICE OF CONVERSION"), delivered to the
Borrower by the Holder in accordance with Section 1.4 below; provided that the
Notice of Conversion is submitted by facsimile (or by other means resulting in,
or reasonably expected to result in, notice) to the Borrower before 3:00 p.m.,
Los Angeles, California time on such conversion date (the "CONVERSION DATE").
The term "CONVERSION AMOUNT" means, with respect to any conversion of this
Debenture, the sum of (1) the principal amount of this Debenture to be converted
in such conversion PLUS (2) accrued and unpaid interest, if any, on such
principal amount at the interest rates provided in this Debenture to the
Conversion Date PLUS (3) Default Interest, if any, on the amounts referred to in
the immediately preceding clauses (1) and/or (2) PLUS (4) at the Holder's
option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g)
hereof or pursuant to Section 2(c) of that certain Registration Rights
Agreement, dated as of January 9, 2002, executed in connection with the initial
issuance of this Debenture and the other Debentures issued on the Issue Date
(the "REGISTRATION RIGHTS AGREEMENT").

                           (b) INVESTMENT OPTIONS. On any Conversion Date
relating to a conversion of this Debenture by the Holder, the Holder shall have
the option to purchase one additional share of Common Stock for every share of
Common Stock issuable as a result of such conversion at an exercise price equal
to the applicable Conversion Price (the option to purchase such additional
shares shall be referred to herein as the "INVESTMENT OPTIONS"). Holder (i)
shall indicate on the Notice of Conversion in respect of such Conversion Date
that it is exercising its Investment Option with respect to such conversion and
shall specify the number of shares of Common Stock with respect to which the
Investment Option is being so exercised, and (ii) shall pay to the Corporation,
in immediately available funds, on or within five (5) business days following
the Conversion Date, the aggregate purchase price for the shares of Common Stock
issuable as a result of the exercise of such Investment Options. The provisions
of this Debenture relating to conversion mechanics shall apply to any exercise
by the Holder of Investment Options.

                  1.2 CONVERSION PRICE.

                           (a) CALCULATION OF CONVERSION PRICE. The Conversion
Price shall be the lesser of (i) the Variable Conversion Price (as defined
herein) and (ii) the Fixed Conversion Price (as defined herein) (subject, in
each case, to equitable adjustments for stock splits, stock dividends or rights
offerings by the Borrower relating to the Borrower's securities or the
securities of any subsidiary of the Borrower, combinations, recapitalization,
reclassifications, extraordinary distributions and similar events). The
"VARIABLE CONVERSION PRICE" shall mean the Applicable Percentage (as defined
herein) multiplied by the Market Price (as defined herein). "MARKET PRICE" means
the average of the lowest three (3) Trading Prices (as defined below) for the
Common Stock during the twenty (20) Trading Day period ending one Trading Day
prior to the date the Conversion Notice is sent by the Holder to the Borrower
via facsimile (the "CONVERSION DATE"). "TRADING PRICE" means, for any security

                                       3
<PAGE>

as of any date, the intraday trading price on the Over-the-Counter Bulletin
Board (the "OTCBB") as reported by a reliable reporting service mutually
acceptable to and hereafter designated by Holders of a majority in interest of
the Debentures and the Borrower or, if the OTCBB is not the principal trading
market for such security, the intraday trading price of such security on the
principal securities exchange or trading market where such security is listed or
traded or, if no intraday trading price of such security is available in any of
the foregoing manners, the average of the intraday trading prices of any market
makers for such security that are listed in the "pink sheets" by the National
Quotation Bureau, Inc. If the Trading Price cannot be calculated for such
security on such date in the manner provided above, the Trading Price shall be
the fair market value as mutually determined by the Borrower and the holders of
a majority in interest of the Debentures being converted for which the
calculation of the Trading Price is required in order to determine the
Conversion Price of such Debentures. "TRADING DAY" shall mean any day on which
the Common Stock is traded for any period on the OTCBB, or on the principal
securities exchange or other securities market on which the Common Stock is then
being traded. "APPLICABLE PERCENTAGE" shall mean 50.0%. The "FIXED CONVERSION
PRICE" shall mean $.055.

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

                  1.3 AUTHORIZED SHARES. The Borrower covenants that during the
period the conversion right exists, the Borrower will reserve from its
authorized and unissued Common Stock a sufficient number of shares, free from
preemptive rights, to provide for the issuance of Common Stock upon the full
conversion of this Debenture and the other Debentures issued pursuant to the
Purchase Agreement and upon exercise of the Investment Options. The Borrower is
required at all times to have authorized and reserved two times the number of
shares that is actually issuable upon full conversion of the Debentures (based
on the Conversion Price of the Debentures or the Exercise Price of the Warrants

                                       4
<PAGE>

in effect from time to time) and upon exercise of the Investment Options (the
"RESERVED AMOUNT"). The Reserved Amount shall be increased from time to time in
accordance with the Borrower's obligations pursuant to Section 4(h) of the
Purchase Agreement. The Borrower represents that upon issuance, such shares will
be duly and validly issued, fully paid and non-assessable. In addition, if the
Borrower shall issue any securities or make any change to its capital structure
which would change the number of shares of Common Stock into which the
Debentures shall be convertible at the then current Conversion Price and for
which the Investment Option shall be exercisable, the Borrower shall at the same
time make proper provision so that thereafter there shall be a sufficient number
of shares of Common Stock authorized and reserved, free from preemptive rights,
for conversion of the outstanding Debentures and exercise of the Investment
Options. The Borrower (i) acknowledges that it has irrevocably instructed its
transfer agent to issue certificates for the Common Stock issuable upon
conversion of this Debenture and exercise of the Investment Options, and (ii)
agrees that its issuance of this Debenture shall constitute full authority to
its officers and agents who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock in accordance with the terms and conditions of this Debenture.

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

                                       5
<PAGE>

Options) and (ii) a Conversion Default. The Borrower shall send notice to the
Holder of the authorization of additional shares of Common Stock, the
Authorization Date and the amount of Holder's accrued Conversion Default
Payments. The accrued Conversion Default Payments for each calendar month shall
be paid in cash or shall be convertible into Common Stock (at such time as there
are sufficient authorized shares of Common Stock) at the applicable Conversion
Price, at the Holder's option, as follows:

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

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

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

                  1.4 METHOD OF CONVERSION.

                           (a) MECHANICS OF CONVERSION. Subject to Section 1.1,
this Debenture may be converted by the Holder in whole or in part at any time
from time to time after the Issue Date, by (A) submitting to the Borrower a
Notice of Conversion (by facsimile or other reasonable means of communication
dispatched on the Conversion Date prior to 3:00 p.m., Los Angeles, California
time) and (B) subject to Section 1.4(b), surrendering this Debenture at the
principal office of the Borrower.

                           (b) SURRENDER OF DEBENTURE UPON CONVERSION.
Notwithstanding anything to the contrary set forth herein, upon conversion of
this Debenture in accordance with the terms hereof, the Holder shall not be
required to physically surrender this Debenture to the Borrower unless the
entire unpaid principal amount of this Debenture is so converted. The Holder and
the Borrower shall maintain records showing the principal amount so converted
and the dates of such conversions or shall use such other method, reasonably
satisfactory to the Holder and the Borrower, so as not to require physical
surrender of this Debenture upon each such conversion. In the event of any
dispute or discrepancy, such records of the Borrower shall be controlling and
determinative in the absence of manifest error. Notwithstanding the foregoing,
if any portion of this Debenture is converted as aforesaid, the Holder may not
transfer this Debenture unless the Holder first physically surrenders this
Debenture to the Borrower, whereupon the Borrower will forthwith issue and

                                       6
<PAGE>

deliver upon the order of the Holder a new Debenture of like tenor, registered
as the Holder (upon payment by the Holder of any applicable transfer taxes) may
request, representing in the aggregate the remaining unpaid principal amount of
this Debenture. The Holder and any assignee, by acceptance of this Debenture,
acknowledge and agree that, by reason of the provisions of this paragraph,
following conversion of a portion of this Debenture, the unpaid and unconverted
principal amount of this Debenture represented by this Debenture may be less
than the amount stated on the face hereof.

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

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

                           (e) OBLIGATION OF BORROWER TO DELIVER COMMON STOCK.
Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be
deemed to be the holder of record of the Common Stock issuable upon such
conversion, the outstanding principal amount and the amount of accrued and
unpaid interest on this Debenture shall be reduced to reflect such conversion,
and, unless the Borrower defaults on its obligations under this Article I, all
rights with respect to the portion of this Debenture being so converted shall
forthwith terminate except the right to receive the Common Stock or other
securities, cash or other assets, as herein provided, on such conversion. If the
Holder shall have given a Notice of Conversion as provided herein, the
Borrower's obligation to issue and deliver the certificates for Common Stock
shall be absolute and unconditional, irrespective of the absence of any action
by the Holder to enforce the same, any waiver or consent with respect to any
provision thereof, the recovery of any judgment against any person or any action
to enforce the same, any failure or delay in the enforcement of any other
obligation of the Borrower to the holder of record, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holder of any obligation to the Borrower, and irrespective of any other
circumstance which might otherwise limit such obligation of the Borrower to the
Holder in connection with such conversion. The Conversion Date specified in the
Notice of Conversion shall be the Conversion Date so long as the Notice of
Conversion is received by the Borrower before 3:00 p.m., Los Angeles, California
time, on such date.

                                       7
<PAGE>

                           (f) DELIVERY OF COMMON STOCK BY ELECTRONIC TRANSFER.
In lieu of delivering physical certificates representing the Common Stock
issuable upon conversion, provided the Borrower's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer ("FAST") program, upon request of the Holder and its compliance with
the provisions contained in Section 1.1 and in this Section 1.4, the Borrower
shall use its best efforts to cause its transfer agent to electronically
transmit the Common Stock issuable upon conversion and upon exercise of the
Investment Options to the Holder by crediting the account of Holder's Prime
Broker with DTC through its Deposit Withdrawal Agent Commission ("DWAC") system.
In the event that Borrower's transfer agent is not eligible or is not currently
participating in the DTC FAST program, the Borrower will cause its transfer
agent to take whatever action is necessary to become eligible to participate in
the DTC FAST program, or will engage a transfer agent that is eligible to
participate in the DTC FAST program, within six (6) months following the Issue
Date.

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

                  1.5 CONCERNING THE SHARES. The shares of Common Stock issuable
upon conversion of this Debenture (including upon exercise of the Investment
Options) may not be sold or transferred unless (i) such shares are sold pursuant
to an effective registration statement under the Act or (ii) the Borrower or its
transfer agent shall have been furnished with an opinion of counsel (which
opinion shall be in form, substance and scope customary for opinions of counsel
in comparable transactions) to the effect that the shares to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration or (iii) such shares are sold or transferred pursuant to Rule 144
under the Act (or a successor rule) ("RULE 144") or (iv) such shares are
transferred to an "affiliate" (as defined in Rule 144) of the Borrower who
agrees to sell or otherwise transfer the shares only in accordance with this
Section 1.5 and who is an Accredited Investor (as defined in the Purchase
Agreement). Except as otherwise provided in the Purchase Agreement (and subject
to the removal provisions set forth below), until such time as the shares of

                                       8
<PAGE>

Common Stock issuable upon conversion of this Debenture (including upon exercise
of the Investment Options) have been registered under the Act as contemplated by
the Registration Rights Agreement or otherwise may be sold pursuant to Rule 144
without any restriction as to the number of securities as of a particular date
that can then be immediately sold, each certificate for shares of Common Stock
issuable upon conversion of this Debenture (including upon exercise of the
Investment Options) that has not been so included in an effective registration
statement or that has not been sold pursuant to an effective registration
statement or an exemption that permits removal of the legend, shall bear a
legend substantially in the following form, as appropriate:

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

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

                  1.6 EFFECT OF CERTAIN EVENTS.

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

                                       9
<PAGE>

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

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

                           (d) PURCHASE RIGHTS. If, at any time when any
Debentures are issued and outstanding, the Borrower issues any convertible
securities or rights to purchase stock, warrants, securities or other property
(the "PURCHASE RIGHTS") pro rata to the record holders of any class of Common
Stock, then the Holder of this Debenture will be entitled to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights which

                                       10
<PAGE>

such Holder could have acquired if such Holder had held the number of shares of
Common Stock acquirable upon complete conversion of this Debenture (without
regard to any limitations on conversion contained herein) immediately before the
date on which a record is taken for the grant, issuance or sale of such Purchase
Rights or, if no such record is taken, the date as of which the record holders
of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.

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

                  1.7 TRADING MARKET LIMITATIONS. Unless permitted by the
applicable rules and regulations of the principal securities market on which the
Common Stock is then listed or traded, in no event shall the Borrower issue upon
conversion of or otherwise pursuant to this Debenture and the other Debentures
issued pursuant to the Purchase Agreement (including upon exercise of the
Investment Options) more than the maximum number of shares of Common Stock that
the Borrower can issue pursuant to any rule of the principal United States
securities market on which the Common Stock is then traded (the "MAXIMUM SHARE
AMOUNT"), which, as of the Issue Date shall be 1,701,363 shares (19.99% of the
total shares outstanding on the Issue Date), subject to equitable adjustment
from time to time for stock splits, stock dividends, combinations, capital
reorganizations and similar events relating to the Common Stock occurring after
the date hereof. Once the Maximum Share Amount has been issued (the date of
which is hereinafter referred to as the "MAXIMUM CONVERSION DATE"), if the
Borrower fails to eliminate any prohibitions under applicable law or the rules
or regulations of any stock exchange, interdealer quotation system or other
self-regulatory organization with jurisdiction over the Borrower or any of its
securities on the Borrower's ability to issue shares of Common Stock in excess
of the Maximum Share Amount (a "TRADING MARKET PREPAYMENT EVENT"), in lieu of
any further right to convert this Debenture, and in full satisfaction of the
Borrower's obligations under this Debenture, the Borrower shall pay to the
Holder, within fifteen (15) business days of the Maximum Conversion Date (the
"TRADING MARKET PREPAYMENT DATE"), an amount equal to 130% TIMES the SUM of (a)
the then outstanding principal amount of this Debenture immediately following
the Maximum Conversion Date, PLUS (b) accrued and unpaid interest on the unpaid
principal amount of this Debenture to the Trading Market Prepayment Date, PLUS
(c) Default Interest, if any, on the amounts referred to in clause (a) and/or
(b) above, PLUS (d) any optional amounts that may be added thereto at the
Maximum Conversion Date by the Holder in accordance with the terms hereof (the
then outstanding principal amount of this Debenture immediately following the
Maximum Conversion Date, PLUS the amounts referred to in clauses (b), (c) and
(d) above shall collectively be referred to as the "REMAINING CONVERTIBLE

                                       11
<PAGE>

AMOUNT"). With respect to each Holder of Debentures, the Maximum Share Amount
shall refer to such Holder's PRO RATA share thereof determined in accordance
with Section 4.8 below. In the event that the sum of (x) the aggregate number of
shares of Common Stock issued upon conversion of this Debenture and the other
Debentures issued pursuant to the Purchase Agreement (including upon exercise of
the Investment Options) PLUS (y) the aggregate number of shares of Common Stock
that remain issuable upon conversion of this Debenture and the other Debentures
issued pursuant to the Purchase Agreement (including upon exercise of the
Investment Options), represents at least one hundred percent (100%) of the
Maximum Share Amount (the "TRIGGERING EVENT"), the Borrower will use its best
efforts to seek and obtain Stockholder Approval (or obtain such other relief as
will allow conversions hereunder in excess of the Maximum Share Amount) as soon
as practicable following the Triggering Event and before the Maximum Conversion
Date. As used herein, "STOCKHOLDER APPROVAL" means approval by the stockholders
of the Borrower to authorize the issuance of the full number of shares of Common
Stock which would be issuable upon full conversion of the then outstanding
Debentures (including upon exercise of the Investment Options) but for the
Maximum Share Amount.

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

                          ARTICLE II. CERTAIN COVENANTS

                  2.1 DISTRIBUTIONS ON CAPITAL STOCK. So long as the Borrower
shall have any obligation under this Debenture, the Borrower shall not without
the Holder's written consent (a) pay, declare or set apart for such payment, any
dividend or other distribution (whether in cash, property or other securities)
on shares of capital stock other than dividends on shares of Common Stock solely

                                       12
<PAGE>

in the form of additional shares of Common Stock or (b) directly or indirectly
or through any subsidiary make any other payment or distribution in respect of
its capital stock except for distributions pursuant to any shareholders' rights
plan which is approved by a majority of the Borrower's disinterested directors.

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

                  2.3 BORROWINGS. So long as the Borrower shall have any
obligation under this Debenture, the Borrower shall not, without the Holder's
written consent, create, incur, assume or suffer to exist any liability for
borrowed money, except (a) borrowings in existence or committed on the date
hereof and of which the Borrower has informed Holder in writing prior to the
date hereof (including that certain line of credit between the Borrower and
Alliance Equities providing for up to $7,000,000 of borrowings), (b)
indebtedness to trade creditors or financial institutions incurred in the
ordinary course of business, (c) borrowings, the proceeds of which shall be used
to repay this Debenture or (d) liabilities arising out of or relating to
indebtedness of the Borrower to Rutan & Tucker, LLP in connection with legal
services provided to the Borrower.

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

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

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

                                       13
<PAGE>

                         ARTICLE III. EVENTS OF DEFAULT

                  If any of the following events of default (each, an "EVENT OF
DEFAULT") shall occur:

                  3.1 FAILURE TO PAY PRINCIPAL OR INTEREST. The Borrower fails
to pay the principal hereof or interest thereon when due on this Debenture,
whether at maturity, upon a Trading Market Prepayment Event pursuant to Section
1.7, upon acceleration or otherwise.

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

                  3.3 FAILURE TO TIMELY FILE REGISTRATION OR EFFECT
REGISTRATION. The Borrower fails to file the Registration Statement within
forty-five (45) days following the Filing Date (as defined in the Registration
Rights Agreement) or obtain effectiveness with the Securities and Exchange
Commission of the Registration Statement within one hundred twenty (120) days
following the Filing Date or such Registration Statement lapses in effect (or
sales cannot otherwise be made thereunder effective, whether by reason of the
Borrower's failure to amend or supplement the prospectus included therein in
accordance with the Registration Rights Agreement or otherwise) for more than
thirty (30) consecutive days or sixty (60) days in any twelve month period after
the Registration Statement becomes effective;

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

                                       14
<PAGE>

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

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

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

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

                  3.9 DELISTING OF COMMON STOCK. The Borrower shall fail to
maintain the listing of the Common Stock on at least one of the OTCBB, the
Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange,
or the American Stock Exchange;

                  3.10 DEFAULT UNDER OTHER DEBENTURES. An Event of Default has
occurred and is continuing under any of the other Debentures issued pursuant to
the Purchase Agreement.

then, upon the occurrence and during the continuation of any Event of Default
specified in Section 3.1, 3.2, 3.3, 3.4, 3.5, 3.7, 3.9, or 3.10, at the option
of the Holders of a majority of the aggregate principal amount of the
outstanding Debentures issued pursuant to the Purchase Agreement exercisable
through the delivery of written notice to the Borrower by such Holders (the
"DEFAULT NOTICE"), and upon the occurrence of an Event of Default specified in
Section 3.6 or 3.8, the Debentures shall become immediately due and payable and
the Borrower shall pay to the Holder, in full satisfaction of its obligations
hereunder, an amount equal to the greater of (i) 130% TIMES the SUM of (w) the
then outstanding principal amount of this Debenture PLUS (x) accrued and unpaid
interest on the unpaid principal amount of this Debenture to the date of payment
(the "MANDATORY PREPAYMENT DATE") PLUS (y) Default Interest, if any, on the
amounts referred to in clauses (w) and/or (x) PLUS (z) any amounts owed to the
Holder pursuant to Sections 1.3 and 1.4(g) hereof or pursuant to Section 2(c) of
the Registration Rights Agreement (the then outstanding principal amount of this
Debenture to the date of payment PLUS the amounts referred to in clauses (x),
(y) and (z) shall collectively be known as the "DEFAULT SUM") or (ii) the
"parity value" of the Default Sum to be prepaid, where parity value means (a)
the highest number of shares of Common Stock issuable upon conversion of or

                                       15
<PAGE>

otherwise pursuant to such Default Sum (including upon exercise of the
Investment Options) in accordance with Article I, treating the Trading Day
immediately preceding the Mandatory Prepayment Date as the "Conversion Date" for
purposes of determining the lowest applicable Conversion Price, unless the
Default Event arises as a result of a breach in respect of a specific Conversion
Date in which case such Conversion Date shall be the Conversion Date),
MULTIPLIED BY (b) the highest Closing Price for the Common Stock during the
period beginning on the date of first occurrence of the Event of Default and
ending one day prior to the Mandatory Prepayment Date (the "DEFAULT AMOUNT") and
all other amounts payable hereunder shall immediately become due and payable,
all without demand, presentment or notice, all of which hereby are expressly
waived, together with all costs, including, without limitation, legal fees and
expenses, of collection, and the Holder shall be entitled to exercise all other
rights and remedies available at law or in equity. If the Borrower fails to pay
the Default Amount within five (5) business days of written notice that such
amount is due and payable, then the Holder shall have the right at any time, so
long as the Borrower remains in default (and so long and to the extent that
there are sufficient authorized shares), to require the Borrower, upon written
notice, to immediately issue, in lieu of the Default Amount, the number of
shares of Common Stock of the Borrower equal to the Default Amount divided by
the Conversion Price then in effect.

                            ARTICLE IV. MISCELLANEOUS

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

                  4.2 NOTICES. Any notice herein required or permitted to be
given shall be in writing and may be personally served or delivered by courier
or sent by United States mail and shall be deemed to have been given upon
receipt if personally served (which shall include telephone line facsimile
transmission) or sent by courier or three (3) days after being deposited in the
United States mail, certified, with postage pre-paid and properly addressed, if
sent by mail. For the purposes hereof, the address of the Holder shall be as
shown on the records of the Borrower; and the address of the Borrower shall be
3303 Harbor Boulevard, Suite F-3, Costa Mesa, California 92626, facsimile
number: 714-549-8970). Both the Holder and the Borrower may change the address
for service by service of written notice to the other as herein provided.

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

                                       16
<PAGE>

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

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

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

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

                                       17
<PAGE>

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

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

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

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

                  4.12 NOTICE OF CORPORATE EVENTS. Except as otherwise provided
below, the Holder of this Debenture shall have no rights as a Holder of Common
Stock unless and only to the extent that it converts this Debenture into Common
Stock. The Borrower shall provide the Holder with prior notification of any
meeting of the Borrower's shareholders (and copies of proxy materials and other
information sent to shareholders). In the event of any taking by the Borrower of
a record of its shareholders for the purpose of determining shareholders who are
entitled to receive payment of any dividend or other distribution, any right to
subscribe for, purchase or otherwise acquire (including by way of merger,
consolidation, reclassification or recapitalization) any share of any class or
any other securities or property, or to receive any other right, or for the
purpose of determining shareholders who are entitled to vote in connection with
any proposed sale, lease or conveyance of all or substantially all of the assets
of the Borrower or any proposed liquidation, dissolution or winding up of the
Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20)

                                       18
<PAGE>

days prior to the record date specified therein (or thirty (30) days prior to
the consummation of the transaction or event, whichever is earlier), of the date
on which any such record is to be taken for the purpose of such dividend,
distribution, right or other event, and a brief statement regarding the amount
and character of such dividend, distribution, right or other event to the extent
known at such time. The Borrower shall make a public announcement of any event
requiring notification to the Holder hereunder substantially simultaneously with
the notification to the Holder in accordance with the terms of this Section
4.12.

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

                         ARTICLE V. OPTIONAL PREPAYMENT

                  5.1. OPTIONAL PREPAYMENT. Notwithstanding anything to the
contrary contained in this Article V, so long as (i) no Event of Default or
Trading Market Prepayment Event shall have occurred and be continuing, and (ii)
the Borrower has a sufficient number of authorized shares of Common Stock
reserved for issuance upon full conversion of the Debentures, then at any time
after the Issue Date, the Borrower shall have the right, exercisable on not less
than ten (10) Trading Days prior written notice to the Holders of the Debentures
(which notice may not be sent to the Holders of the Debentures until the
Borrower is permitted to prepay the Debentures pursuant to this Section 5.1), to
prepay all of the outstanding Debentures in accordance with this Section 5.1.
Any notice of prepayment hereunder (an "OPTIONAL PREPAYMENT") shall be delivered
to the Holders of the Debentures at their registered addresses appearing on the
books and records of the Borrower and shall state (1) that the Borrower is
exercising its right to prepay all of the Debentures issued on the Issue Date
and (2) the date of prepayment (the "OPTIONAL PREPAYMENT NOTICE"). On the date
fixed for prepayment (the "OPTIONAL PREPAYMENT DATE"), the Borrower shall make
payment of the Optional Prepayment Amount (as defined below) to or upon the
order of the Holders as specified by the Holders in writing to the Borrower at
least one (1) business day prior to the Optional Prepayment Date. If the
Borrower exercises its right to prepay the Debentures, the Borrower shall make
payment to the holders of an amount in cash (the "OPTIONAL PREPAYMENT AMOUNT")
equal to 130% multiplied by the sum of (w) the then outstanding principal amount
of this Debenture PLUS (x) accrued and unpaid interest on the unpaid principal
amount of this Debenture to the Optional Prepayment Date PLUS (y) Default
Interest, if any, on the amounts referred to in clauses (w) and (x) PLUS (z) any
amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof or
pursuant to Section 2(c) of the Registration Rights Agreement (the then
outstanding principal amount of this Debenture to the date of payment PLUS the
amounts referred to in clauses (x), (y) and (z) shall collectively be known as

                                       19
<PAGE>

the "OPTIONAL PREPAYMENT SUM"). Notwithstanding notice of an Optional
Prepayment, the Holders shall at all times prior to the Optional Prepayment Date
maintain the right to convert all or any portion of the Debentures in accordance
with Article I and any portion of Debentures so converted after receipt of an
Optional Prepayment Notice and prior to the Optional Prepayment Date set forth
in such notice and payment of the aggregate Optional Prepayment Amount shall be
deducted from the principal amount of Debentures which are otherwise subject to
prepayment pursuant to such notice. If the Borrower delivers an Optional
Prepayment Notice and fails to pay the Optional Prepayment Amount due to the
Holders of the Debentures within two (2) business days following the Optional
Prepayment Date, the Borrower shall forever forfeit its right to redeem the
Debentures pursuant to this Section 5.1.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       20
<PAGE>

                  IN WITNESS WHEREOF, Borrower has caused this Debenture to be
signed in its name by its duly authorized officer this 9th day of January, 2002.

                                      KANAKARIS WIRELESS

                                      By:  /S/ ALEX F. KANAKARIS
                                           ------------------------------------
                                           Alex F. Kanakaris
                                           President and Chief Executive Officer

                                       21
<PAGE>

                                                                       EXHIBIT A

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

                  The undersigned hereby irrevocably elects to convert
$________principal amount of the Debenture (defined below) into shares of common
stock, par value $0.001 per share ("COMMON STOCK"), of Kanakaris Wireless, a
Nevada corporation (the "BORROWER") according to the conditions of the
convertible debentures of the Borrower dated as of January 9, 2002 (the
"Debentures"), as of the date written below. If securities are to be issued in
the name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering herewith such
certificates. No fee will be charged to the Holder for any conversion, except
for transfer taxes, if any. A copy of each Debenture is attached hereto (or
evidence of loss, theft or destruction thereof).

                  The undersigned hereby irrevocably elects to exercise its
Investment Option to purchase _______________ shares of Common Stock of the
Borrower (up to the number of shares of Common Stock issuable pursuant to the
conversion of the Debenture) at the Applicable Conversion Price set forth below
and shall make payment of $__________ for such shares by wire transfer of such
amount to the Borrower as set forth in the Debenture.

                  The Borrower shall electronically transmit the Common Stock
issuable pursuant to this Notice of Conversion to the account of the undersigned
or its nominee with DTC through its Deposit Withdrawal Agent Commission system (
"DWAC TRANSFER"), provided that the Borrower's transfer agent is able to effect
DWAC Transfers.

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

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

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

                                      A-1
<PAGE>

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

                  Date of Conversion:___________________________
                  Applicable Conversion Price:____________________
                  Number of Shares of Common Stock to be Issued Pursuant to:
                  (i) Conversion of the Debentures:______________
                  (ii) exercise of Investment Options:______________________
                  Signature:___________________________________
                  Name:______________________________________
                  Address:____________________________________

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

                                      A-2<PAGE>
EXHIBIT 10.79

                          REGISTRATION RIGHTS AGREEMENT

         REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of January
9, 2002, by and among Kanakaris Wireless, a Nevada corporation, with its
headquarters located at 3303 Harbor Boulevard, Suite F-3, Costa Mesa, California
92626 (the "Company"), and each of the undersigned (together with their
respective affiliates and any assignee or transferee of all of their respective
rights hereunder, the "Initial Investors").

         WHEREAS:

         A. In connection with the Securities Purchase Agreement by and among
the parties hereto of even date herewith (the "Securities Purchase Agreement"),
the Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to the Initial Investors (i) convertible debentures
in the aggregate principal amount of up to Two Hundred Thousand Dollars
($200,000) (the "Debentures") that are convertible into shares of the Company's
common stock (the "Common Stock"), upon the terms and subject to the limitations
and conditions set forth in such Debentures and (ii) warrants (the "Warrants")
to acquire an aggregate 600,000 shares of Common Stock, upon the terms and
conditions and subject to the limitations and conditions set forth in the
Warrants dated January 9, 2002; and

         B. To induce the Initial Investors to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable state securities laws;

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

1.       DEFINITIONS.

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

                  (i) "Investors" means the Initial Investors and any transferee
or assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.

                  (ii) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").

<PAGE>

                  (iii) "Registrable Securities" means the Conversion Shares
issued or issuable upon conversion or otherwise pursuant to the Debentures
(including, without limitation, shares of Common Stock issued or issuable upon
exercise of the Investment Options (as defined in the Debentures), Damages
Shares (as defined in the Debentures) issued or issuable pursuant to the
Debentures, shares of Common Stock issued or issuable in payment of the Standard
Liquidated Damages Amount (as defined in the Securities Purchase Agreement),
shares issued or issuable in respect of interest or in redemption of the
Debentures in accordance with the terms thereof) and Warrant Shares issuable
upon exercise or otherwise pursuant to the Warrants (including any Default
Amounts (as defined in the Warrants)), and any shares of capital stock issued or
issuable as a dividend on or in exchange for or otherwise with respect to any of
the foregoing.

                  (iv) "Registration Statement" means a registration statement
of the Company under the 1933 Act.

         b. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement or
Convertible Debenture.

2.       REGISTRATION.

         a. MANDATORY REGISTRATION. The Company shall prepare, and, on or prior
to thirty (30) days from the date of Closing (as defined in the Securities
Purchase Agreement) (the "Filing Date"), file with the SEC a Registration
Statement on Form S-3 (or, if Form S-3 is not then available, on such form of
Registration Statement as is then available to effect a registration of the
Registrable Securities, subject to the consent of the Initial Investors, which
consent will not be unreasonably withheld) covering the resale of the
Registrable Securities underlying the Debentures and Warrants issued or issuable
pursuant to the Securities Purchase Agreement, which Registration Statement, to
the extent allowable under the 1933 Act and the rules and regulations
promulgated thereunder (including Rule 416), shall state that such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon conversion of or otherwise pursuant to the
Debentures (including, but not limited to, shares issued or issuable upon
exercise of the Investment Options) and exercise of the Warrants to prevent
dilution resulting from stock splits, stock dividends or similar transactions.
The number of shares of Common Stock initially included in such Registration
Statement shall be no less than an amount equal to two (2) times the sum of the
number of Conversion Shares that are then issuable upon conversion of the
Debentures (based on the Variable Conversion Price as would then be in effect
and assuming the Variable Conversion Price is the Conversion Price at such
time), including, but not limited to, shares issued or issuable upon exercise of
the Investment Options and the number of Warrant Shares that are then issuable
upon exercise of the Warrants, without regard to any limitation on the
Investor's ability to convert the Debentures or exercise the Warrants. The
Company acknowledges that the number of shares initially included in the
Registration Statement represents a good faith estimate of the maximum number of
shares issuable upon conversion of the Debentures (including, but not limited
to, Shares issued or issuable upon exercise of the Investment Options) and upon
exercise of the Warrants.

                                      -2-
<PAGE>

         b. UNDERWRITTEN OFFERING. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering, the
Investors who hold a majority in interest of the Registrable Securities subject
to such underwritten offering, with the consent of a majority-in-interest of the
Initial Investors, shall have the right to select one legal counsel and an
investment banker or bankers and manager or managers to administer the offering,
which investment banker or bankers or manager or managers shall be reasonably
satisfactory to the Company.

         c. PAYMENTS BY THE COMPANY. The Company shall use its best efforts to
obtain effectiveness of the Registration Statement as soon as practicable. If
(i) the Registration Statement(s) covering the Registrable Securities required
to be filed by the Company pursuant to Section 2(a) hereof is not filed by the
Filing Date or declared effective by the SEC on or prior to ninety (90) days
from the date of Closing, or (ii) after the Registration Statement has been
declared effective by the SEC, sales of all of the Registrable Securities cannot
be made pursuant to the Registration Statement, or (iii) the Common Stock is not
listed or included for quotation on the Nasdaq National Market ("Nasdaq"), the
Nasdaq SmallCap Market ("Nasdaq SmallCap"), the New York Stock Exchange (the
"NYSE") or the American Stock Exchange (the "AMEX") after being so listed or
included for quotation, or (iv) the Common Stock ceases to be traded on the
Over-the-Counter Bulletin Board (the "OTC BB") prior to being listed or included
for quotation on one of the aforementioned markets, then the Company will make
payments to the Investors in such amounts and at such times as shall be
determined pursuant to this Section 2(c) as partial relief for the damages to
the Investors by reason of any such delay in or reduction of their ability to
sell the Registrable Securities (which remedy shall not be exclusive of any
other remedies available at law or in equity). The Company shall pay to each
holder of the Debentures or Registrable Securities an amount equal to the then
outstanding principal amount of the Debentures (and, in the case of holders of
Registrable Securities, the principal amount of Debentures from which such
Registrable Securities were converted) ("Outstanding Principal Amount"),
multiplied by the Applicable Percentage (as defined below) times the sum of: (i)
the number of months (prorated for partial months) after the Filing Date or the
end of the aforementioned ninety (90) day period and prior to the date the
Registration Statement is declared effective by the SEC, provided, however, that
there shall be excluded from such period any delays which are solely
attributable to changes required by the Investors in the Registration Statement
with respect to information relating to the Investors, including, without
limitation, changes to the plan of distribution, or to the failure of the
Investors to conduct their review of the Registration Statement pursuant to
Section 3(h) below in a reasonably prompt manner; (ii) the number of months
(prorated for partial months) that sales of all of the Registrable Securities
cannot be made pursuant to the Registration Statement after the Registration
Statement has been declared effective (including, without limitation, when sales
cannot be made by reason of the Company's failure to properly supplement or
amend the prospectus included therein in accordance with the terms of this
Agreement, but excluding any days during an Allowed Delay (as defined in Section
3(f)); and (iii) the number of months (prorated for partial months) that the
Common Stock is not listed or included for quotation on the OTC BB, Nasdaq,
Nasdaq SmallCap, NYSE or AMEX or that trading thereon is halted after the
Registration Statement has been declared effective. The term "Applicable
Percentage" means two hundredths (.02) with respect to the first thirty (30)
days of any calculation under clause (i) of the sentence in which the term is

                                      -3-
<PAGE>

used, and three hundredths (.03) for any other purpose. (For example, if the
Registration Statement becomes effective one (1) month after the end of such
thirty-day period, the Company would pay $5,000 for each $250,000 of Outstanding
Principal Amount. If thereafter, sales could not be made pursuant to the
Registration Statement for an additional period of one (1) month, the Company
would pay an additional $7,500 for each $250,000 of Outstanding Principal
Amount.) Such amounts shall be paid in cash or, at each Investor's option, in
shares of Common Stock priced at the Conversion Price (as defined in the
Debentures) on such payment date.

         d. PIGGY-BACK REGISTRATIONS. Subject to the last sentence of this
Section 2(d), if at any time prior to the expiration of the Registration Period
(as hereinafter defined) the Company shall determine to file with the SEC a
Registration Statement relating to an offering for its own account or the
account of others under the 1933 Act of any of its equity securities (other than
on Form S-4 or Form S-8 or their then equivalents relating to equity securities
to be issued solely in connection with any acquisition of any entity or business
or equity securities issuable in connection with stock option or other employee
benefit plans), the Company shall send to each Investor who is entitled to
registration rights under this Section 2(d) written notice of such determination
and, if within fifteen (15) days after the effective date of such notice, such
Investor shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)' judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which such Investor has
requested inclusion hereunder as the underwriter shall permit. Any exclusion of
Registrable Securities shall be made pro rata among the Investors seeking to
include Registrable Securities in proportion to the number of Registrable
Securities sought to be included by such Investors; provided, HOWEVER, that the
Company shall not exclude any Registrable Securities unless the Company has
first excluded all outstanding securities, the holders of which are not entitled
to inclusion of such securities in such Registration Statement or are not
entitled to pro rata inclusion with the Registrable Securities; and PROVIDED,
FURTHER, HOWEVER, that, after giving effect to the immediately preceding
proviso, any exclusion of Registrable Securities shall be made pro rata with
holders of other securities having the right to include such securities in the
Registration Statement other than holders of securities entitled to inclusion of
their securities in such Registration Statement by reason of demand registration
rights. No right to registration of Registrable Securities under this Section
2(d) shall be construed to limit any registration required under Section 2(a)
hereof. If an offering in connection with which an Investor is entitled to
registration under this Section 2(d) is an underwritten offering, then each
Investor whose Registrable Securities are included in such Registration
Statement shall, unless otherwise agreed by the Company, offer and sell such
Registrable Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same terms
and conditions as other shares of Common Stock included in such underwritten

                                      -4-
<PAGE>

offering. Notwithstanding anything to the contrary set forth herein, the
registration rights of the Investors pursuant to this Section 2(d) shall only be
available in the event the Company fails to timely file, obtain effectiveness or
maintain effectiveness of any Registration Statement to be filed pursuant to
Section 2(a) in accordance with the terms of this Agreement.

         e. ELIGIBILITY FOR FORM S-3, SB-2 OR S-1: CONVERSION TO FORM S-3. The
Company represents and warrants that it meets the requirements for the use of
Form S-3, SB-2 or S-1 for registration of the sale by the Initial Investors and
any other Investors of the Registrable Securities. The Company agrees to file
all reports required to be filed by the Company with the SEC in a timely manner
so as to remain eligible or become eligible, as the case may be, and thereafter
to maintain its eligibility, for the use of Form S-3. If the Company is not
currently eligible to use Form S-3, not later than five (5) business days after
the Company first meets the registration eligibility and transaction
requirements for the use of Form S-3 (or any successor form) for registration of
the offer and sale by the Initial Investors and any other Investors of
Registrable Securities, the Company shall file a Registration Statement on Form
S-3 (or such successor form) with respect to the Registrable Securities covered
by the Registration Statement on Form SB-2 or Form S-1, whichever is applicable,
filed pursuant to Section 2(a) (and include in such Registration Statement on
Form S-3 the information required by Rule 429 under the 1933 Act) or convert the
Registration Statement on Form SB-2 or Form S-1, whichever is applicable, filed
pursuant to Section 2(a) to a Form S-3 pursuant to Rule 429 under the 1933 Act
and use its best efforts to have such Registration Statement (or such amendment)
declared effective no later than forty-five (45) days after filing. In the event
of a breach by the Company of the provisions of this Section 2(e), the Company
will be required to make payments pursuant to Section 2(c) hereof.

3.       OBLIGATIONS OF THE COMPANY.

         In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:

         a. The Company shall prepare promptly, and file with the SEC not later
than the Filing Date, a Registration Statement with respect to the number of
Registrable Securities provided in Section 2(a), and thereafter use its best
efforts to cause such Registration Statement relating to Registrable Securities
to become effective as soon as possible after such filing but in no event later
than ninety (90) days from the date of Closing), and keep the Registration
Statement effective pursuant to Rule 415 at all times until such date as is the
earlier of (i) the date on which all of the Registrable Securities have been
sold and (ii) the date on which the Registrable Securities (in the opinion of
counsel to the Initial Investors) may be immediately sold to the public without
registration or restriction (including without limitation as to volume by each
holder thereof) under the 1933 Act (the "Registration Period"), which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein not misleading.

         b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statements and the prospectus used in connection with the Registration
Statements as may be necessary to keep the Registration Statements effective at
all times during the Registration Period, and, during such period, comply with

                                      -5-
<PAGE>

the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statements
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statements. In the event the number of
shares available under a Registration Statement filed pursuant to this Agreement
is insufficient to cover all of the Registrable Securities issued or issuable
upon conversion of the Debentures (including upon exercise of the Investment
Options) and exercise of the Warrants, the Company shall amend the Registration
Statement, or file a new Registration Statement (on the short form available
therefore, if applicable), or both, so as to cover all of the Registrable
Securities, in each case, as soon as practicable, but in any event within
fifteen (15) business days after the necessity therefor arises (based on the
market price of the Common Stock and other relevant factors on which the Company
reasonably elects to rely). The Company shall use its best efforts to cause such
amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof, but in any event within sixty (60)
days after the date on which the Company reasonably first determines (or
reasonably should have determined) the need therefor. The provisions of Section
2(c) above shall be applicable with respect to such obligation, with the ninety
(90) days running from the day the Company reasonably first determines (or
reasonably should have determined) the need therefor.

         c. The Company shall furnish to each Investor whose Registrable
Securities are included in a Registration Statement and its legal counsel (i)
promptly (but in no event more than two (2) business days) after the same is
prepared and publicly distributed, filed with the SEC, or received by the
Company, one copy of each Registration Statement and any amendment thereto, each
preliminary prospectus and prospectus and each amendment or supplement thereto,
and, in the case of the Registration Statement referred to in Section 2(a), each
letter written by or on behalf of the Company to the SEC or the staff of the
SEC, and each item of correspondence from the SEC or the staff of the SEC, in
each case relating to such Registration Statement (other than any portion of any
thereof which contains information for which the Company has sought confidential
treatment), and (ii) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor. The
Company will immediately notify each Investor by facsimile or electronic mail of
the effectiveness of each Registration Statement or any post-effective
amendment. The Company will promptly (but in no event more than five (5)
business days) respond to any and all comments received from the SEC (which
comments shall promptly be made available to the Investors upon request), with a
view towards causing each Registration Statement or any amendment thereto to be
declared effective by the SEC as soon as practicable, shall promptly file an
acceleration request as soon as practicable (but in no event more than two (2)
business days) following the resolution or clearance of all SEC comments or, if
applicable, following notification by the SEC that any such Registration
Statement or any amendment thereto will not be subject to review and shall
promptly file with the SEC a final prospectus as soon as practicable (but in no
event more than two (2) business days) following receipt by the Company from the
SEC of an order declaring the Registration Statement effective. In the event of
a breach by the Company of the provisions of this Section 3(c), the Company will
be required to make payments pursuant to Section 2(c) hereof.

                                      -6-
<PAGE>

         d. The Company shall use reasonable efforts to (i) register and qualify
the Registrable Securities covered by the Registration Statements under such
other securities or "blue sky" laws of such jurisdictions in the United States
as the Investors who hold a majority in interest of the Registrable Securities
being offered reasonably request, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; PROVIDED, HOWEVER, that the Company shall not be
required in connection therewith or as a condition thereto to (a) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause the Company undue expense
or burden, or (e) make any change in its charter or bylaws, which in each case
the Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders.

         e. In the event Investors who hold a majority-in-interest of the
Registrable Securities being offered in the offering (with the approval of a
majority-in-interest of the Initial Investors) select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.

         f. As promptly as practicable after becoming aware of such event, the
Company shall notify each Investor of the happening of any event, of which the
Company has knowledge, as a result of which the prospectus included in any
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to any Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request; provided that, for not more than thirty (30) consecutive
trading days (or a total of not more than forty-five (45) trading days in any
twelve (12) month period), the Company may delay the disclosure of material
non-public information concerning the Company (as well as prospectus or
Registration Statement updating) the disclosure of which at the time is not, in
the good faith opinion of the Company, in the best interests of the Company (an
"Allowed Delay"); provided, further, that the Company shall promptly (i) notify
the Investors in writing of the existence of (but in no event, without the prior
written consent of an Investor, shall the Company disclose to such investor any
of the facts or circumstances regarding) material non-public information giving
rise to an Allowed Delay and (ii) advise the Investors in writing to cease all
sales under such Registration Statement until the end of the Allowed Delay. Upon
expiration of the Allowed Delay, the Company shall again be bound by the first
sentence of this Section 3(f) with respect to the information giving rise
thereto.

                                      -7-
<PAGE>

         g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of any Registration
Statement, and, if such an order is issued, to obtain the withdrawal of such
order at the earliest possible moment and to notify each Investor who holds
Registrable Securities being sold (or, in the event of an underwritten offering,
the managing underwriters) of the issuance of such order and the resolution
thereof.

         h. The Company shall permit a single firm of counsel designated by the
Initial Investors to review such Registration Statement and all amendments and
supplements thereto (as well as all requests for acceleration or effectiveness
thereof) a reasonable period of time prior to their filing with the SEC, and not
file any document in a form to which such counsel reasonably objects and will
not request acceleration of such Registration Statement without prior notice to
such counsel. The sections of such Registration Statement covering information
with respect to the Investors, the Investor's beneficial ownership of securities
of the Company or the Investors intended method of disposition of Registrable
Securities shall conform to the information provided to the Company by each of
the Investors.

         i. The Company shall make generally available to its security holders
as soon as practicable, but not later than ninety (90) days after the close of
the period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 under the 1933 Act) covering a twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the effective date of the Registration Statement.

         j. At the request of any Investor, the Company shall furnish, on the
date that Registrable Securities are delivered to an underwriter, if any, for
sale in connection with any Registration Statement or, if such securities are
not being sold by an underwriter, on the date of effectiveness thereof (i) an
opinion, dated as of such date, from counsel representing the Company for
purposes of such Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the
underwriters, if any, and the Investors and (ii) a letter, dated such date, from
the Company's independent certified public accountants in form and substance as
is customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the underwriters, if any, and
the Investors.

         k. The Company shall make available for inspection by (i) any Investor,
(ii) any underwriter participating in any disposition pursuant to a Registration
Statement, (iii) one firm of attorneys and one firm of accountants or other
agents retained by the Initial Investors, (iv) one firm of attorneys and one
firm of accountants or other agents retained by all other Investors, and (v) one
firm of attorneys retained by all such underwriters (collectively, the
"Inspectors") all pertinent financial and other records, and pertinent corporate
documents and properties of the Company, including without limitation, records
of conversions by other holders of convertible securities issued by the Company
and the issuance of stock to such holders pursuant to the conversions, to the
extent available (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; PROVIDED, HOWEVER, that each Inspector shall
hold in confidence and shall not make any disclosure (except to an Investor) of
any Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless

                                      -8-
<PAGE>

(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (b) the release of such
Records is ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction, or (c) the information in such
Records has been made generally available to the public other than by disclosure
in violation of this or any other agreement. The Company shall not be required
to disclose any confidential information in such Records to any Inspector until
and unless such Inspector shall have entered into confidentiality agreements (in
form and substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 3(k). Each Investor agrees
that it shall, upon learning that disclosure of such Records is sought in or by
a court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. Nothing herein (or in any other
confidentiality agreement between the Company and any Investor) shall be deemed
to limit the Investor's ability to sell Registrable Securities in a manner which
is otherwise consistent with applicable laws and regulations.

         l. The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities
laws, (ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other order from a court
or governmental body of competent jurisdiction, or (iv) such information has
been made generally available to the public other than by disclosure in
violation of this or any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning an Investor is sought in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to such Investor prior to making such disclosure, and
allow the Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.

         m. The Company shall (i) cause all the Registrable Securities covered
by the Registration Statement to be listed on each national securities exchange
on which securities of the same class or series issued by the Company are then
listed, if any, if the listing of such Registrable Securities is then permitted
under the rules of such exchange, or (ii) to the extent the securities of the
same class or series are not then listed on a national securities exchange,
secure the designation and quotation, of all the Registrable Securities covered
by the Registration Statement on Nasdaq or, if not eligible for Nasdaq, on
Nasdaq SmallCap or, if not eligible for Nasdaq or Nasdaq SmallCap, on the OTC BB
and, without limiting the generality of the foregoing, to arrange for at least
two market makers to register with the National Association of Securities
Dealers, Inc. ("NASD") as such with respect to such Registrable Securities.

         n. The Company shall provide a transfer agent and registrar, which may
be a single entity, for the Registrable Securities not later than the effective
date of the Registration Statement.

                                      -9-
<PAGE>

         o. The Company shall cooperate with the Investors who hold Registrable
Securities being offered and the managing underwriter or underwriters, if any,
to facilitate the timely preparation and delivery of certificates (not bearing
any restrictive legends) representing Registrable Securities to be offered
pursuant to a Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the managing underwriter or
underwriters, if any, or the Investors may reasonably request and registered in
such names as the managing underwriter or underwriters, if any, or the Investors
may request, and, within three (3) business days after a Registration Statement
which includes Registrable Securities is ordered effective by the SEC, the
Company shall deliver, and shall cause legal counsel selected by the Company to
deliver, to the transfer agent for the Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) an instruction in the form attached hereto as Exhibit 1 and an
opinion of such counsel in the form attached hereto as Exhibit 2.

         p. At the request of the holders of a majority-in-interest of the
Registrable Securities, the Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and any prospectus used in connection with the
Registration Statement as may be necessary in order to change the plan of
distribution set forth in such Registration Statement.

         q. From and after the date of this Agreement, the Company shall not,
and shall not agree to, allow the holders of any securities of the Company to
include any of their securities in any Registration Statement under Section 2(a)
hereof or any amendment or supplement thereto under Section 3(b) hereof without
the consent of the holders of a majority-in-interest of the Registrable
Securities other than as set forth on Schedule 3(q).

         r. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities
pursuant to a Registration Statement.

4.       OBLIGATIONS OF THE INVESTORS.

         In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:

         a. It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it and the intended method of disposition of the Registrable Securities
held by it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least three (3) business
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company requires
from each such Investor.

                                      -10-
<PAGE>

         b. Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statements hereunder, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statements.

         c. In the event Investors holding a majority-in-interest of the
Registrable Securities being registered (with the approval of the Initial
Investors) determine to engage the services of an underwriter, each Investor
agrees to enter into and perform such Investor's obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from such Registration Statement.

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

         e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements in usual and
customary form entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and any expenses in excess of those payable by the
Company pursuant to Section 5 below.

5.       EXPENSES OF REGISTRATION.

         All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualification fees, printers and accounting fees, the
fees and disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel selected by the Initial Investors pursuant to
Sections 2(b) and 3(h) hereof shall be borne by the Company.

6.       INDEMNIFICATION.

         In the event any Registrable Securities are included in a Registration
Statement under this Agreement:

                                      -11-
<PAGE>

         a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) each Investor who holds such Registrable Securities,
(ii) the directors, officers, partners, employees, agents and each person who
controls any Investor within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "1934 Act"), if any, (iii) any underwriter
(as defined in the 1933 Act) for the Investors, and (iv) the directors,
officers, partners, employees and each person who controls any such underwriter
within the meaning of the 1933 Act or the 1934 Act, if any (each, an
"Indemnified Person"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "Claims") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading; (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading; or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities (the matters in the foregoing clauses (i) through (iii)
being, collectively, "Violations"). Subject to the restrictions set forth in
Section 6(c) with respect to the number of legal counsel, the Company shall
reimburse the Indemnified Person, promptly as such expenses are incurred and are
due and payable, for any reasonable legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified Person
or underwriter for such Indemnified Person expressly for use in connection with
the preparation of such Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (ii) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld; and
(iii) with respect to any preliminary prospectus, shall not inure to the benefit
of any Indemnified Person if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented, such corrected prospectus was
timely made available by the Company pursuant to Section 3(c) hereof, and the
Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a Violation and such Indemnified
Person, notwithstanding such advice, used it. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.

                                      -12-
<PAGE>

         b. In connection with any Registration Statement in which an Investor
is participating, each such Investor agrees severally and not jointly to
indemnify, hold harmless and defend, to the same extent and in the same manner
set forth in Section 6(a), the Company, each of its directors, each of its
officers who signs the Registration Statement, each person, if any, who controls
the Company within the meaning of the 1933 Act or the 1934 Act, any underwriter
and any other stockholder selling securities pursuant to the Registration
Statement or any of its directors or officers or any person who controls such
stockholder or underwriter within the meaning of the 1933 Act or the 1934 Act
(collectively and together with an Indemnified Person, an "Indemnified Party"),
against any Claim to which any of them may become subject, under the 1933 Act,
the 1934 Act or otherwise, insofar as such Claim arises out of or is based upon
any Violation by such Investor, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished to the Company by such Investor expressly for use
in connection with such Registration Statement; and subject to Section 6(c) such
Investor will reimburse any legal or other expenses (promptly as such expenses
are incurred and are due and payable) reasonably incurred by them in connection
with investigating or defending any such Claim; PROVIDED, HOWEVER, that the
indemnity agreement contained in this Section 6(b) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld; PROVIDED, FURTHER, HOWEVER, that the Investor shall be liable under
this Agreement (including this Section 6(b) and Section 7) for only that amount
as does not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.

         c. Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; PROVIDED,
HOWEVER, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The indemnifying party shall pay for only one separate legal counsel
for the Indemnified Persons or the Indemnified Parties, as applicable, and such
legal counsel shall be selected by Investors holding a majority-in-interest of
the Registrable Securities included in the Registration Statement to which the
Claim relates (with the approval of a majority-in-interest of the Initial

                                      -13-
<PAGE>

Investors), if the Investors are entitled to indemnification hereunder, or the
Company, if the Company is entitled to indemnification hereunder, as applicable.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
actually prejudiced in its ability to defend such action. The indemnification
required by this Section 6 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as such expense,
loss, damage or liability is incurred and is due and payable.

7.       CONTRIBUTION.

         To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; PROVIDED, HOWEVER, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii) contribution (together
with any indemnification or other obligations under this Agreement) by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.

8.       REPORTS UNDER THE 1934 ACT.

         With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:

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

         b. file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements (it being understood that nothing
herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and

         c. furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act and
the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the Investors to
sell such securities pursuant to Rule 144 without registration.

                                      -14-
<PAGE>

9.       ASSIGNMENT OF REGISTRATION RIGHTS.

         The rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of Registrable Securities
if: (i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, and (vi) such transferee shall be an "accredited investor" as that
term defined in Rule 501 of Regulation D promulgated under the 1933 Act.

10.      AMENDMENT OF REGISTRATION RIGHTS.

         Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company, each
of the Initial Investors (to the extent such Initial Investor still owns
Registrable Securities) and Investors who hold a majority interest of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company.

11.      MISCELLANEOUS.

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

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

                                      -15-
<PAGE>

                           If to the Company:

                           Kanakaris Wireless
                           3303 Harbor Boulevard
                           Suite F-3
                           Costa Mesa, California  92626
                           Attention:  President and Chief Executive Officer
                           Telephone:  714-444-0530
                           Facsimile:  714-549-8970
                           Email:  kana@aol.com

                           With copy to:

                           Rutan & Tucker, LLP
                           611 Anton Boulevard
                           Fourteenth Floor
                           Costa Mesa, California  92626-1998
                           Attention:  Larry A. Cerutti, Esquire
                           Telephone:  714-641-5100
                           Facsimile:  714-546-9035
                           Email:  lcerutti@rutan.com

If to an Investor: to the address set forth immediately below such Investor's
name on the signature pages to the Securities Purchase Agreement.

                           With a copy to:

                           Bristol DLP, LLC
                           Investment Manager
                           6363 Sunset Blvd., Fifth Floor
                           Hollywood, California  90028
                           Attention:  Amy Wang
                           Telephone:  323-769-2852
                           Facsimile:  323-468-8307
                           Email:  amy@bristolcompanies.net

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

         d. THIS AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES
OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED NEW YORK, NEW YORK WITH
RESPECT TO ANY DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO
IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH

                                      -16-
<PAGE>

PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE
OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.

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

         f. This Agreement, the Warrants, the Debentures and the Securities
Purchase Agreement (including all schedules and exhibits thereto) constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein. This
Agreement and the Securities Purchase Agreement supersede all prior agreements
and understandings among the parties hereto with respect to the subject matter
hereof and thereof.

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

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

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

                                      -17-
<PAGE>

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

         k. Except as otherwise provided herein, all consents and other
determinations to be made by the Investors pursuant to this Agreement shall be
made by Investors holding a majority of the Registrable Securities, determined
as if the all of the Debentures then outstanding have been converted into for
Registrable Securities.

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

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

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                      -18-
<PAGE>

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

KANAKARIS WIRELESS

/S/ ALEX F. KANAKARIS
-----------------------------------------------------
Alex F. Kanakaris
President and Chief Executive Officer

BANK INSINGER DE BEAUFORT SAFE CUSTODY NV

/S/ ROB MOOIJ
-----------------------------------------------------
By: Rob Mooij
Title:  Director

                                      -19-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00033-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00033-of-00352.parquet"}]]