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                                                                    Exhibit 4.21

                                                                       EXHIBIT E

                               SECURITY AGREEMENT

     SECURITY AGREEMENT, dated as of December 10, 2005 (this "Agreement"), among
Edentify, Inc., a Nevada corporation (the "Debtor") and the holder or holders of
the 6% Debtor's Secured Convertible Debenture in the original principal amount
of $1,050,000 (the "Debenture"), signatory hereto, their endorsees, transferees
and assigns (collectively referred to as, the "Secured Parties").

                                   WITNESSETH:

     WHEREAS, pursuant to the Debenture, the Secured Parties have severally
agreed to extend the loans to the Debtor evidenced by the Debenture; and

     WHEREAS, in order to induce the Secured Parties to extend the loans
evidenced by the Debentures, the Debtor has agreed to execute and deliver to the
Secured Parties this Agreement and to grant the Secured Parties, pari passu with
each other Secured Party, a perfected first priority security interest in
certain property of the Debtor to secure the prompt payment, performance and
discharge in full of all of the Debtor's obligations under the Debenture.

     NOW, THEREFORE, in consideration of the agreements herein contained and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:

     1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth in this Section 1. Terms used but not
otherwise defined in this Agreement that are defined in Article 9 of the UCC
(such as "general intangibles" and "proceeds") shall have the respective
meanings given such terms in Article 9 of the UCC.

          (a) "Collateral" means the collateral in which the Secured Parties are
     granted a security interest by this Agreement and which shall include the
     following, whether presently owned or existing or hereafter acquired or
     coming into existence, and all additions and accessions thereto and all
     substitutions and replacements thereof, and all proceeds, products and
     accounts thereof, including, without limitation, all proceeds from the sale
     or transfer of the Collateral and of insurance covering the same and of any
     tort claims in connection therewith:

               (i) All Goods of the Debtor, including, without limitations, all
          machinery, equipment, computers, motor vehicles, trucks, tanks, boats,
          ships, appliances, furniture, special and general tools, fixtures,
          test and quality control devices and other equipment of every kind and
          nature and wherever situated, together with all documents of title and
          documents representing the same, all additions and accessions thereto,
          replacements therefor, all parts therefor, and all substitutes for any
          of the foregoing and all other items used and useful in connection
          with the

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          Debtor's businesses and all improvements thereto (collectively, the
          "Equipment"); and

               (ii) All Inventory of the Debtor; and

               (iii) All of the Debtor's contract rights and general
          intangibles, including, without limitation, all partnership interests,
          stock or other securities, licenses, distribution and other
          agreements, computer software (whether "off-the-shelf", licensed from
          any third party or developed by Debtor) computer software development
          rights, leases, franchises, customer lists, quality control
          procedures, grants and rights, goodwill, trademarks, service marks,
          trade styles, trade names, patents, patent applications, copyrights,
          deposit accounts and income tax refunds (collectively, the "General
          Intangibles"); and

               (iv) All Receivables of the Debtor including all insurance
          proceeds, and rights to refunds or indemnification whatsoever owing,
          together with all instruments, all documents of title representing any
          of the foregoing, all rights in any merchandising, goods, equipment,
          motor vehicles and trucks which any of the same may represent, and all
          right, title, security and guaranties with respect to each Receivable,
          including any right of stoppage in transit; and

               (v) All of the Debtor's documents, instruments and chattel paper,
          files, records, books of account, business papers, computer programs
          and the products and proceeds of all of the foregoing Collateral set
          forth in clauses (i)-(iv) above.

          (b) "Obligations" means all of the Debtor's obligations under this
     Agreement and the Debentures, in each case, whether now or hereafter
     existing, voluntary or involuntary, direct or indirect, absolute or
     contingent, liquidated or unliquidated, whether or not jointly owed with
     others, and whether or not from time to time decreased or extinguished and
     later increased, created or incurred, and all or any portion of such
     obligations or liabilities that are paid, to the extent all or any part of
     such payment is avoided or recovered directly or indirectly from any of the
     Secured Parties as a preference, fraudulent transfer or otherwise as such
     obligations may be amended, supplemented, converted, extended or modified
     from time to time.

          (c) "UCC" means the Uniform Commercial Code and or any other
     applicable law of any jurisdiction (including, without limitation, the
     state of California) as to any Collateral located therein.

     2. GRANT OF PERFECTED FIRST PRIORITY SECURITY INTEREST. As an inducement
for the Secured Parties to extend the loans as evidenced by the Debentures and
to secure the complete and timely payment, performance and discharge in full, as
the case may be, of all of the Obligations, the Debtor hereby unconditionally
and irrevocably pledges, grants and hypothecates to the Secured Parties a
continuing and perfected first priority security interest in and to, a lien upon
and a right of set-off against all of their respective right, title and interest
of whatsoever kind and nature in and to, the Collateral (the "Security
Interest").

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     3. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF THE DEBTOR. The
Debtor represents and warrants to, and covenants and agrees with, the Secured
Parties as follows:

          (a) The Debtor has the requisite corporate power and authority to
     enter into this Agreement and otherwise to carry out its obligations
     hereunder. The execution, delivery and performance by the Debtor of this
     Agreement and the filings contemplated therein have been duly authorized by
     all necessary action on the part of the Debtor and no further action is
     required by the Debtor.

          (b) The Debtor represents and warrants that they have no place of
     business or offices where their respective books of account and records are
     kept (other than temporarily at the offices of its attorneys or
     accountants) or places where Collateral is stored or located, except as set
     forth on Schedule A attached hereto.

          (c) Except as set forth on Schedule B attached hereto, the Debtor is
     the sole owner of the Collateral (except for non-exclusive licenses granted
     by the Debtor in the ordinary course of business), free and clear of any
     liens, security interests, encumbrances, rights or claims, and are fully
     authorized to grant the Security Interest in and to pledge the Collateral.
     There is not on file in any governmental or regulatory authority, agency or
     recording office an effective financing statement, security agreement,
     license or transfer or any notice of any of the foregoing (other than those
     that will be filed in favor of the Secured Parties pursuant to this
     Agreement) covering or affecting any of the Collateral. So long as this
     Agreement shall be in effect, Debtor shall not execute and shall not
     knowingly permit to be on file in any such office or agency any such
     financing statement or other document or instrument (except to the extent
     filed or recorded in favor of the Secured Parties pursuant to the terms of
     this Agreement).

          (d) No part of the Collateral has been judged invalid or
     unenforceable. No written claim has been received that any Collateral or
     Debtor's use of any Collateral violates the rights of any third party.
     There has been no adverse decision to Debtor's claim of ownership rights in
     or exclusive rights to use the Collateral in any jurisdiction or to
     Debtor's right to keep and maintain such Collateral in full force and
     effect, and there is no proceeding involving said rights pending or, to the
     best knowledge of the Debtor, threatened before any court, judicial body,
     administrative or regulatory agency, arbitrator or other governmental
     authority.

          (e) The Debtor shall at all times maintain its books of account and
     records relating to the Collateral at its principal place of business and
     its Collateral at the locations set forth on Schedule A attached hereto and
     may not relocate such books of account and records or tangible Collateral
     unless it delivers to the Secured Parties at least 30 days prior to such
     relocation (i) written notice of such relocation and the new location
     thereof (which must be within the United States) and (ii) evidence that
     appropriate financing statements under the UCC and other necessary
     documents have been filed and recorded and other steps have been taken to
     perfect the Security Interest to create in favor

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     of the Secured Parties a valid, perfected and continuing perfected first
     priority lien in the Collateral.

          (f) This Agreement creates in favor of the Secured Parties a valid
     security interest in the Collateral securing the payment and performance of
     the Obligations and, upon making the filings described in the immediately
     following sentence, a perfected first priority security interest in such
     Collateral.

          (g) The Debtor hereby authorizes the Secured Parties, or any of them,
     to file one or more financing statements under the UCC, with respect to the
     Security Interest with the proper filing and recording agencies in any
     jurisdiction deemed proper by them.

          (h) The execution, delivery and performance of this Agreement by the
     Debtor does not conflict with, or constitute a default (or an event that
     with notice or lapse of time or both would become a default) under, or give
     to others any rights of termination, amendment, acceleration or
     cancellation (with or without notice, lapse of time or both) of, any
     agreement, credit facility, debt or other instrument (evidencing Debtor's
     debt or otherwise) or other understanding to which Debtor is a party or by
     which any property or asset of the Debtor is bound or affected. No consent
     (including, without limitation, from stockholders or creditors of the
     Debtor) is required for the Debtor to enter into and perform its
     obligations hereunder.

          (i) The Debtor shall at all times maintain the liens and Security
     Interest provided for hereunder as valid and perfected first priority liens
     and security interests in the Collateral in favor of the Secured Parties
     until this Agreement and the Security Interest hereunder shall be
     terminated pursuant to Section 11 hereof. The Debtor hereby agrees to
     defend the same against any and all persons. The Debtor shall safeguard and
     protect all Collateral for the account of the Secured Parties. At the
     request of the Secured Parties, the Debtor will sign and deliver to the
     Secured Parties at any time or from time to time one or more financing
     statements pursuant to the UCC in form reasonably satisfactory to the
     Secured Parties and will pay the cost of filing the same in all public
     offices wherever filing is, or is deemed by the Secured Parties to be,
     necessary or desirable to effect the rights and obligations provided for
     herein. Without limiting the generality of the foregoing, the Debtor shall
     pay all fees, taxes and other amounts necessary to maintain the Collateral
     and the Security Interest hereunder, and the Debtor shall obtain and
     furnish to the Secured Parties from time to time, upon demand, such
     releases and/or subordinations of claims and liens which may be required to
     maintain the priority of the Security Interest hereunder.

          (j) The Debtor will not transfer, pledge, hypothecate, encumber,
     license (except for non-exclusive licenses granted by a Debtor in its
     ordinary course of business and sales of inventory), sell or otherwise
     dispose of any of the Collateral without the prior written consent of a
     majority in interest of the Secured Parties.

          (k) The Debtor shall keep and preserve its Equipment, Inventory and
     other tangible Collateral in good condition, repair and order and shall not
     operate or locate any

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     such Collateral (or cause to be operated or located) in any area excluded
     from insurance coverage.

          (l) The Debtor shall, within ten (10) days of obtaining knowledge
     thereof, advise the Secured Parties promptly, in sufficient detail, of any
     substantial change in the Collateral, and of the occurrence of any event
     which would have a material adverse effect on the value of the Collateral
     or on the Secured Parties' security interest therein.

          (m) The Debtor shall promptly execute and deliver to the Secured
     Parties such further deeds, mortgages, assignments, security agreements,
     financing statements or other instruments, documents, certificates and
     assurances and take such further action as the Secured Parties may from
     time to time request and may in its sole discretion deem necessary to
     perfect, protect or enforce its security interest in the Collateral
     including, without limitation, if applicable, the execution and delivery of
     a separate security agreement with respect to each Debtor's intellectual
     property ("Intellectual Property Security Agreement") in which the Secured
     Parties have been granted a security interest hereunder, substantially in a
     form acceptable to the Secured Parties, which Intellectual Property
     Security Agreement, other than as stated therein, shall be subject to all
     of the terms and conditions hereof.

          (n) The Debtor shall permit the Secured Parties and their
     representatives and agents to inspect the Collateral at any time, and to
     make copies of records pertaining to the Collateral as may be requested by
     a Secured Party from time to time.

          (o) The Debtor shall take all steps reasonably necessary to diligently
     pursue and seek to preserve, enforce and collect any rights, claims, causes
     of action and accounts receivable in respect of the Collateral.

          (p) The Debtor shall promptly notify the Secured Parties in sufficient
     detail upon becoming aware of any attachment, garnishment, execution or
     other legal process levied against any Collateral and of any other
     information received by the Debtor that may materially affect the value of
     the Collateral, the Security Interest or the rights and remedies of the
     Secured Parties hereunder.

          (q) All information heretofore, herein or hereafter supplied to the
     Secured Parties by or on behalf of the Debtor with respect to the
     Collateral is accurate and complete in all material respects as of the date
     furnished.

          (r) The Debtor shall at all times preserve and keep in full force and
     effect their respective valid existence and good standing and any rights
     and franchises material to its business.

          (s) The Debtor will not change its name, corporate structure, or
     identity, or add any new fictitious name unless it provides at least 30
     days prior written notice to the Secured Parties of such change and, at the
     time of such written notification, such Debtor provides any financing
     statements or fixture filings necessary to perfect and continue

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     perfected the perfected first priority Security Interest granted and
     evidenced by this Agreement.

          (t) The Debtor may not consign any of its Inventory or sell any of its
     Inventory on bill and hold, sale or return, sale on approval, or other
     conditional terms of sale without the consent of a majority in interest of
     the Secured Parties which shall not be unreasonably withheld..

          (u) The Debtor may not relocate its chief executive office to a new
     location without providing 30 days prior written notification thereof to
     the Secured Parties and so long as, at the time of such written
     notification, the Debtor provides any financing statements or fixture
     filings necessary to perfect and continue perfected the perfected first
     priority Security Interest granted and evidenced by this Agreement.

     4. DEFAULTS. The following events shall be "Events of Default":

          (a) The occurrence of an Event of Default (as defined in the
     Debenture) under the Debenture;

          (b) Any representation or warranty of Debtor in this Agreement shall
     prove to have been incorrect in any material respect when made;

          (c) The failure by Debtor to observe or perform any of its obligations
     hereunder for five (5) days after delivery to Debtor of notice of such
     failure by or on behalf of a Secured Party;

          (c) If any provision of this Agreement shall at any time for any
     reason be declared to be null and void, or the validity or enforceability
     thereof shall be contested by Debtor, or a proceeding shall be commenced by
     Debtor, or by any governmental authority having jurisdiction over Debtor,
     seeking to establish the invalidity or unenforceability thereof, or Debtor
     shall deny that Debtor has any liability or obligation purported to be
     created under this Agreement; or

     5. Duty To Hold In Trust. Upon the occurrence of any Event of Default and
at any time thereafter, the Debtor shall, upon receipt of any revenue, income or
other sums subject to the Security Interest, whether payable pursuant to the
Debenture or otherwise, or of any check, draft, note, trade acceptance or other
instrument evidencing an obligation to pay any such sum, hold the same in trust
for the Secured Parties and shall forthwith endorse and transfer any such sums
or instruments, or both, to the Secured Parties, pro-rata in proportion to their
initial purchases of Debentures for application to the satisfaction of the
Obligations (and if any Debenture is not outstanding, pro-rata in proportion to
the initial purchases of the remaining Debentures).

     6. Rights and Remedies Upon Default. Upon the occurrence of any Event of
Default and at any time thereafter, the Secured Parties shall have the right to
exercise all of the remedies conferred hereunder and under the Debentures, and
the Secured Parties shall have all the rights

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and remedies of a secured party under the UCC. Without limitation, the Secured
Parties shall have the following rights and powers:

          (a) The Secured Parties shall have the right to take possession of the
     Collateral and, for that purpose, enter, with the aid and assistance of any
     person, any premises where the Collateral, or any part thereof, is or may
     be placed and remove the same, and the Debtor shall assemble the Collateral
     and make it available to the Secured Parties at places which the Secured
     Parties shall reasonably select, whether at the Debtor's premises or
     elsewhere, and make available to the Secured Parties, without rent, all of
     the Debtor's respective premises and facilities for the purpose of the
     Secured Parties taking possession of, removing or putting the Collateral in
     saleable or disposable form.

          (b) The Secured Parties shall have the right to operate the business
     of the Debtor using the Collateral and shall have the right to assign,
     sell, lease or otherwise dispose of and deliver all or any part of the
     Collateral, at public or private sale or otherwise, either with or without
     special conditions or stipulations, for cash or on credit or for future
     delivery, in such parcel or parcels and at such time or times and at such
     place or places, and upon such terms and conditions as the Secured Parties
     may deem commercially reasonable, all without (except as shall be required
     by applicable statute and cannot be waived) advertisement or demand upon or
     notice to the Debtor or right of redemption of a Debtor, which are hereby
     expressly waived. Upon each such sale, lease, assignment or other transfer
     of Collateral, the Secured Parties may, unless prohibited by applicable law
     which cannot be waived, purchase all or any part of the Collateral being
     sold, free from and discharged of all trusts, claims, right of redemption
     and equities of the Debtor, which are hereby waived and released.

     7. Applications of Proceeds. The proceeds of any such sale, lease or other
disposition of the Collateral hereunder shall be applied first, to the expenses
of retaking, holding, storing, processing and preparing for sale, selling, and
the like (including, without limitation, any taxes, fees and other costs
incurred in connection therewith) of the Collateral, to the reasonable
attorneys' fees and expenses incurred by the Secured Parties in enforcing their
rights hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations pro rata among the
Secured Parties, and to the payment of any other amounts required by applicable
law, after which the Secured Parties shall pay to the applicable Debtor any
surplus proceeds. If, upon the sale, license or other disposition of the
Collateral, the proceeds thereof are insufficient to pay all amounts to which
the Secured Parties are legally entitled, the Debtor will be liable for the
deficiency, together with interest thereon, at the rate of 10% per annum or the
lesser amount permitted by applicable law (the "Default Rate"), and the
reasonable fees of any attorneys employed by the Secured Parties to collect such
deficiency. To the extent permitted by applicable law, the Debtor waives all
claims, damages and demands against the Secured Parties arising out of the
repossession, removal, retention or sale of the Collateral, unless due to the
gross negligence or willful misconduct of the Secured Parties.

     8. Costs and Expenses. The Debtor agrees to pay all reasonable
out-of-pocket fees, costs and expenses incurred in connection with any filing
required hereunder, including without limitation, any financing statements
pursuant to the UCC, continuation statements, partial

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releases and/or termination statements related thereto or any expenses of any
searches reasonably required by the Secured Parties. The Debtor shall also pay
all other claims and charges which in the reasonable opinion of the Secured
Parties might prejudice, imperil or otherwise affect the Collateral or the
Security Interest therein. The Debtor will also, upon demand, pay to the Secured
Parties the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, which the
Secured Parties may incur in connection with (i) the enforcement of this
Agreement, (ii) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Collateral, or (iii) the exercise or
enforcement of any of the rights of the Secured Parties under the Debentures.
Until so paid, any fees payable hereunder shall be added to the principal amount
of the Debentures and shall bear interest at the Default Rate.

     9. Responsibility for Collateral. The Debtor assumes all liabilities and
responsibility in connection with all Collateral, and the Obligations in no way
be affected or diminished by reason of the loss, destruction, damage or theft of
any of the Collateral or its unavailability for any reason.

     10. Security Interest Absolute. All rights of the Secured Parties and all
Obligations of the Debtor hereunder, shall be absolute and unconditional,
irrespective of: (a) any lack of validity or enforceability of this Agreement,
the Debentures or any agreement entered into in connection with the foregoing,
or any portion hereof or thereof; (b) any change in the time, manner or place of
payment or performance of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Debentures or any other agreement entered into in connection with the
foregoing; (c) any exchange, release or nonperfection of any of the Collateral,
or any release or amendment or waiver of or consent to departure from any other
collateral for, or any guaranty, or any other security, for all or any of the
Obligations; (d) any action by the Secured Parties to obtain, adjust, settle and
cancel in its sole discretion any insurance claims or matters made or arising in
connection with the Collateral; or (e) any other circumstance which might
otherwise constitute any legal or equitable defense available to a Debtor, or a
discharge of all or any part of the Security Interest granted hereby. Until the
Obligations shall have been paid and performed in full, the rights of the
Secured Parties shall continue even if the Obligations are barred for any
reason, including, without limitation, the running of the statute of limitations
or bankruptcy. The Debtor expressly waives presentment, protest, notice of
protest, demand, notice of nonpayment and demand for performance. In the event
that at any time any transfer of any Collateral or any payment received by the
Secured Parties hereunder shall be deemed by final order of a court of competent
jurisdiction to have been a voidable preference or fraudulent conveyance under
the bankruptcy or insolvency laws of the United States, or shall be deemed to be
otherwise due to any party other than the Secured Parties, then, in any such
event, the Debtor's obligations hereunder shall survive cancellation of this
Agreement, and shall not be discharged or satisfied by any prior payment thereof
and/or cancellation of this Agreement, but shall remain a valid and binding
obligation enforceable in accordance with the terms and provisions hereof. The
Debtor waives all right to require the Secured Parties to proceed against any
other person or to apply any Collateral which the Secured Parties may hold at
any time, or to marshal assets, or to pursue any other remedy. The Debtor waives
any defense arising by reason of the application of the statute of limitations
to any obligation secured hereby.

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     11. Term of Agreement. This Agreement and the Security Interest shall
terminate on the date on which all payments under the Debentures have been made
in full or have been satisfied and all other Obligations have been paid or
discharged. Upon such termination, the Secured Parties, at the request and at
the expense of the Debtor, will join in executing any termination statement with
respect to any financing statement executed and filed pursuant to this
Agreement.

     12. Power of Attorney; Further Assurances.

          (a) The Debtor authorizes the Secured Parties, and does hereby make,
     constitute and appoint the Secured Parties and their respective officers,
     agents, successors or assigns with full power of substitution, as the
     Debtor's true and lawful attorney-in-fact, with power, in the name of the
     various Secured Parties or the Debtor, to, after the occurrence and during
     the continuance of an Event of Default, (i) endorse any note, checks,
     drafts, money orders or other instruments of payment (including payments
     payable under or in respect of any policy of insurance) in respect of the
     Collateral that may come into possession of the Secured Parties; (ii) to
     sign and endorse any financing statement pursuant to the UCC or any
     invoice, freight or express bill, bill of lading, storage or warehouse
     receipts, drafts against debtors, assignments, verifications and notices in
     connection with accounts, and other documents relating to the Collateral;
     (iii) to pay or discharge taxes, liens, security interests or other
     encumbrances at any time levied or placed on or threatened against the
     Collateral; (iv) to demand, collect, receipt for, compromise, settle and
     sue for monies due in respect of the Collateral; and (v) generally, to do,
     at the option of the Secured Parties, and at the expense of the Debtor, at
     any time, or from time to time, all acts and things which the Secured
     Parties deem necessary to protect, preserve and realize upon the Collateral
     and the Security Interest granted therein in order to effect the intent of
     this Agreement and the Debentures all as fully and effectually as the
     Debtor might or could do; and the Debtor hereby ratifies all that said
     attorney shall lawfully do or cause to be done by virtue hereof. This power
     of attorney is coupled with an interest and shall be irrevocable for the
     term of this Agreement and thereafter as long as any of the Obligations
     shall be outstanding.

          (b) On a continuing basis, the Debtor will make, execute, acknowledge,
     deliver, file and record, as the case may be, with the proper filing and
     recording agencies in any jurisdiction, including, without limitation, the
     jurisdictions indicated on Schedule C attached hereto, all such
     instruments, and take all such action as may reasonably be deemed necessary
     or advisable, or as reasonably requested by the Secured Parties, to perfect
     the Security Interest granted hereunder and otherwise to carry out the
     intent and purposes of this Agreement, or for assuring and confirming to
     the Secured Parties the grant or perfection of a perfected first priority
     security interest in all the Collateral under the UCC.

          (c) The Debtor hereby irrevocably appoints the Secured Parties as the
     Debtor's attorney-in-fact, with full authority in the place and instead of
     the Debtor and in the name of the Debtor, from time to time in the Secured
     Parties' discretion, to take any action and to execute any instrument which
     the Secured Parties may deem necessary or advisable to

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     accomplish the purposes of this Agreement, including the filing, in its
     sole discretion, of one or more financing or continuation statements and
     amendments thereto, relative to any of the Collateral without the signature
     of the Debtor where permitted by law.

     13. Notices. All notices, requests, demands and other communications
hereunder shall be subject to the notice provision of the Purchase Agreement.

     14. Other Security. To the extent that the Obligations are now or hereafter
secured by property other than the Collateral or by the guarantee, endorsement
or property of any other person, firm, corporation or other entity, then the
Secured Parties shall have the right, in its sole discretion, to pursue,
relinquish, subordinate, modify or take any other action with respect thereto,
without in any way modifying or affecting any of the Secured Parties' rights and
remedies hereunder.

     15. Miscellaneous.

          (a) No course of dealing between the Debtor and the Secured Parties,
     nor any failure to exercise, nor any delay in exercising, on the part of
     the Secured Parties, any right, power or privilege hereunder or under the
     Debentures shall operate as a waiver thereof; nor shall any single or
     partial exercise of any right, power or privilege hereunder or thereunder
     preclude any other or further exercise thereof or the exercise of any other
     right, power or privilege.

          (b) All of the rights and remedies of the Secured Parties with respect
     to the Collateral, whether established hereby or by the Debentures or by
     any other agreements, instruments or documents or by law shall be
     cumulative and may be exercised singly or concurrently.

          (c) This Agreement constitutes the entire agreement of the parties
     with respect to the subject matter hereof and is intended to supersede all
     prior negotiations, understandings and agreements with respect thereto.
     Except as specifically set forth in this Agreement, no provision of this
     Agreement may be modified or amended except by a written agreement
     specifically referring to this Agreement and signed by the parties hereto.

          (d) In the event any provision of this Agreement is held to be
     invalid, prohibited or unenforceable in any jurisdiction for any reason,
     unless such provision is narrowed by judicial construction, this Agreement
     shall, as to such jurisdiction, be construed as if such invalid, prohibited
     or unenforceable provision had been more narrowly drawn so as not to be
     invalid, prohibited or unenforceable. If, notwithstanding the foregoing,
     any provision of this Agreement is held to be invalid, prohibited or
     unenforceable in any jurisdiction, such provision, as to such jurisdiction,
     shall be ineffective to the extent of such invalidity, prohibition or
     unenforceability without invalidating the remaining portion of such
     provision or the other provisions of this Agreement and without affecting
     the validity or enforceability of such provision or the other provisions of
     this Agreement in any other jurisdiction.

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          (e) No waiver of any breach or default or any right under this
     Agreement shall be considered valid unless in writing and signed by the
     party giving such waiver, and no such waiver shall be deemed a waiver of
     any subsequent breach or default or right, whether of the same or similar
     nature or otherwise.

          (f) This Agreement shall be binding upon and inure to the benefit of
     each party hereto and its successors and assigns.

          (g) Each party shall take such further action and execute and deliver
     such further documents as may be necessary or appropriate in order to carry
     out the provisions and purposes of this Agreement.

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

          (i) This Agreement may be executed in any number of counterparts, each
     of which when so executed shall be deemed to be an original and, all of
     which taken together shall constitute one and the same Agreement. In the
     event that any signature is delivered by facsimile transmission, such
     signature shall create a valid binding obligation

                                       11

<PAGE>

     of the party executing (or on whose behalf such signature is executed) the
     same with the same force and effect as if such facsimile signature were the
     original thereof.

                            [SIGNATURE PAGES FOLLOW]

                                       12

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed on the day and year first above written.

                                        EDENTIFY, INC.

                                        By:
                                            ------------------------------------
                                        Name: Terrence DeFranco
                                        Title: Chief Executive Officer

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                       13

<PAGE>

                   [SIGNATURE PAGE OF HOLDERS TO EDENTIFY SA]

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

Signature of Authorized Signatory of Investing entity:
                                                       -------------------------
Name of Authorized Signatory:
                              -------------------------
Title of Authorized Signatory:
                               ------------------------

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                       14

<PAGE>

                                   SCHEDULE A

Principal Place of Business of Debtor:

     74 West Broad Street
     Suite 350
     Bethlehem, PA 18018

Locations Where Collateral is Located or Stored:

     74 West Broad Street
     Suite 350
     Bethlehem, PA 18018

                                       15

<PAGE>

                                   SCHEDULE B

                                      None

                                       16

<PAGE>

                                   SCHEDULE C

                                       17<PAGE>
                                                                    Exhibit 10.3

                              EMPLOYMENT AGREEMENT

          THIS EMPLOYMENT AGREEMENT, dated as of January 8, 2005, is between
EDENTIFY, INC., (the "Company") a Delaware corporation with an office located at
109 Shearwater Court, Jersey City, NJ 07305 and TERRENCE DEFRANCO, an individual
with an address at 710 Pennsylvania Avenue, Roseto, PA 18013 (the "Executive").
In consideration of the mutual covenants and representations herein contained
and the mutual benefits derived herefrom, the parties, intending to be legally
bound, covenant and agree as follows:

          1. PURPOSE. The Company is engaged in the business of providing
businesses with information-based and technology based services used in the
detection and prevention of identity fraud (collectively, the "Business"). The
Company currently employs the Executive, and wishes to continue to employ the
Executive, and the Executive has agreed to continue to be employed by the
Company, on the terms and conditions herein provided.

          2. FULL-TIME EMPLOYMENT OF EXECUTIVE - DUTIES AND STATUS.

               (a) The Company hereby engages the Executive as a full-time
executive to hold the offices of Chief Executive Officer and President for the
period (the "Employment Period") specified in Section 5(a) hereof, and the
Executive accepts such employment, on the terms and conditions set forth in this
Agreement. Throughout the Employment Period, the Executive shall faithfully
exercise such authority and perform such executive duties as are commensurate
with the authority and duties of such officers of the Company and such other
reasonable duties as may otherwise be assigned to him from time to time by the
Board of Directors of the Company (the "Board").

               (b) Throughout the Employment Period, the Executive shall (i)
devote his full time and efforts to the business of the Company and will not
engage in consulting work or any trade or business for his own account or for or
on behalf of any other person, firm or corporation which competes, conflicts or
interferes with the performance of his duties hereunder in any way, and (ii)
accept such additional office or offices to which he may be appointed by the
Company, provided that the performance of the duties of such office or offices
shall generally be consistent with the scope of the duties provided for in
Section 2(a) hereof.

               (c) Throughout the Employment Period, the Executive shall be
entitled to vacation, leave of absence, and leave for illness or temporary
disability in accordance with the policies of the Company in effect from time to
time for its executive officers. Vacation leave and leave of absence, if taken
by the Executive, shall be taken at such times as are reasonably acceptable to
the Company. Any leave on account of illness or temporary disability which is
short of Total Disability (as defined in Section 5(d)(ii) hereof) shall not
constitute a breach by the Executive of his agreements hereunder even though
leave on account of a Total Disability may be deemed to result in a termination
of the Employment Period under the applicable provisions of this Agreement.

<PAGE>

          3. COMPENSATION AND GENERAL BENEFITS. As full compensation for his
services to the Company, the Executive shall, during the Employment Period, be
compensated as follows:

               (a) The Company shall pay to the Executive a salary (the
"Salary") based upon a monthly rate of Seven Thousand Five Hundred Dollars until
July 15, 2005 and a monthly rate of Twelve Thousand Five Hundred Dollars
thereafter until the completion of the Term (collectively, the "Salary"). The
Salary shall be payable in periodic equal installments not less frequently than
monthly, less such sums as may be required to be deducted or withheld under
applicable provisions of federal, state and local law, plus increases in the
Salary, if any, as may be approved from time to time by the Board. The Company
shall pay such annual bonus to the Executive based upon such performance and
other standards as the Board shall from time to time determine.

               (b) Throughout the Employment Period, the Executive shall be
entitled to participate in such pension, 401K, profit sharing, stock incentive,
bonus or incentive compensation, stock option, stock purchase, incentive, group
and individual disability, group and individual life, survivor income, sickness,
accident, dental, medical and health benefits and other plans of the Company or
additional benefit programs, plans or arrangements of the Company which may be
established by the Company for its executive officers, as and to the extent any
such benefit programs, plans and arrangements are or may from time to time be in
effect, as determined by the Company and pursuant to the terms hereof and as and
to the extent that the Company is eligible to participate in such plans under
the terms of such plans. In addition, the Company shall grant to the Executive
on the date hereof options to purchase Two Hundred Fifty Thousand shares of
Common Stock at an exercise price of Seventy Five Cents ($0.75) per share, Five
Hundred Thousand shares of Common Stock at an exercise price of Two Dollars
($2.00) per share, and Five Hundred Thousand shares of Common Stock at an
exercise price of Five Dollars ($5.00) per share (collectively, the "Stock
Options"). The Stock Options shall vest per month at a rate of 1/36th of the
amount granted commencing with the execution date of this Agreement and in each
month thereafter and shall be fully vested on the date which is thirty six (36)
months following the execution of this Agreement.

               (c) The Company shall reimburse the Executive on a monthly basis
for all reasonable and customary business expenses incurred by him in the
performance of his duties hereunder, provided that the Executive shall submit
vouchers and other supporting data to substantiate the amount of said expenses
in accordance with Company policy from time to time in effect.

               (d) If the Company purchases and maintains at any time during the
term of this Agreement one or more life insurance policies on the life of the
Executive, in addition to any policies purchased pursuant to Section 3(b)
hereof, in whatever amount or amounts which the Company deems desirable, the
Company shall be the beneficiary of said policy or policies and the Executive
shall cooperate with the Company and submit to such reasonable medical
examinations as are necessary to enable

                                       2

<PAGE>

the Company to purchase and maintain in full force and effect such additional
insurance policy or policies.

          4. NON-COMPETITION; CONFIDENTIAL INFORMATION; PUBLIC STATEMENTS.

               (a) Non-Competition. The Executive and the Company recognize that
due to the Executive's engagement hereunder and the relationship of the
Executive to the Company, the Executive will have access to and will acquire,
and may assist in developing, confidential and proprietary information relating
to the assets, business and operations of the Company and its affiliates,
including, without limiting the generality of the foregoing, formulations, and
other information with respect to, among other things, the Company's present and
prospective techniques, systems, customers, accounts, sales and marketing
methods. The Executive acknowledges that such information has been and will
continue to be of central importance to the business of the Company and that
disclosure of it to, or its use by, others could cause substantial loss to the
Company. The Executive and the Company also recognize that an important part of
the Executive's duties may be to develop goodwill for the Company through his
personal contact with customers, agents and others having business relationships
with the Company, and that there is a danger that this goodwill, a proprietary
asset of the Company, may follow the Executive if and when his relationship with
the Company is terminated. The Executive accordingly agrees that, at all times
during the Employment Period and for two (2) years after expiration or earlier
termination of his employment, the Executive shall not, in any capacity
whatsoever, whether directly or indirectly, on its own behalf, or on behalf of
any other person, firm, partnership, corporation, limited liability company,
association or other entity (collectively, "Person"):

                    (i) own, manage, invest, participate, engage or become
employed in any activity which comprises or is similar to the Business,
including, but not limited to, any business which constitutes a "identity fraud
detection and protection business," anywhere in the Commonwealth of
Pennsylvania, and the States New Jersey, Delaware and such other States in which
the Company is conducting business as of the date of such termination;

                    (ii) suggest to, induce or persuade any vendor or customer
of the Company to discontinue doing business, with, or to change the terms or
conditions of such relationship with the Company or otherwise disparage, disrupt
or disturb the relationship of the Company with such vendor or customer;

                    (iii) suggest to, induce or persuade any vendor or customer
of the Company to do business with any other Person which conducts a business
competitive with the Business;

                                       3

<PAGE>

                    (iv) suggest to, induce, solicit or persuade any employee or
consultant of the Company to leave the employ or engagement of the Company,
whether or not such inducement involves the Executive directly or indirectly
hiring or engaging or attempting to hire or engage such employee or consultant
of the Company at the time of such solicitation, whether on its own behalf or on
behalf of any other Person, whether or not the Executive has a direct or
indirect remunerative or other interest, as a proprietor, partner, coventurer,
creditor, stockholder, director, officer, employee, agent, representative or
otherwise in such Person;

                    (v) participate in planning for and will not accept any
employment in or associate with any Person which then employs more than two
former employees of the Company who left the Company within the twelve months
next preceding his termination of employment with the Company; and

                    (vi) without limiting the term of his general obligation to
honor the Confidential Information (as defined below) so long as it remains
protectable, the Executive specifically agrees that he will not plan for, accept
employment from any Person, nor directly or indirectly engage in, any business
wherein the loyal and diligent performance of the duties and responsibilities of
such new employment or business will inherently call upon him to use, to
disclose or to base judgments upon Confidential Information of the Company or to
utilize the goodwill of the Company in making sales for a competitor of the
Company. The foregoing restrictive period is based upon the Executive's and the
Company's good faith belief that:

                         (A) the Company's investment of time and money in the
Executive, and the nature of the Company's business (which is maintained and
increased through the personal contact of employees such as the Executive with
customers and vendors and potential customers and vendors of the Company) has
rendered and will continue to render the Executive a unique asset to the
Company;

                         (B) the Company would be placed at a competitive
disadvantage for such period, due to the Executive's knowledge of Confidential
Information and other matters arising out of his employment with the Company;
and

                         (C) the time required to rebuild the contacts and
patronage that the Executive will develop for the Company and to provide the
necessary training, exposure and education to his replacement would, for such a
period, place the Company at a competitive disadvantage.

               (b) Confidential Information.

                    (i) At all times during the Employment Period and at all
times following termination thereof, the Executive shall keep confidential and
not disclose, directly or indirectly, and shall not use for the benefit of
himself or any other Person in connection with and furtherance of the Business
and the affairs of the Company, any Confidential Information relating to any
aspect of the business of the

                                       4

<PAGE>

Company which is now known or which may become known to him. For purposes of
this Agreement, "Confidential Information" includes any trade secrets or
confidential or intellectual property or proprietary information whether in
written, oral or other form which is unique, confidential or proprietary to the
Company, its affiliates, customers or other persons who disclose such
information to the Company in confidence.

                    (ii) The Company's failure to mark any Confidential
Information as confidential, proprietary or otherwise shall not affect its
status as Confidential Information hereunder.

                    (iii) The Executive acknowledges that all Confidential
Information is the property of the Company, its affiliates, customers or other
persons who disclose such information to the Company in confidence, and upon
expiration of the Employment Period or earlier termination of this Agreement or
earlier at the request of the Company, the Executive shall deliver to the
Company all records, notes, reference items, sketches, drawings, memoranda,
records, and other documents or materials, and all copies thereof (including but
not limited to such items stored by computer memory or other media) which relate
to or in any way incorporate the Confidential Information which are in the
Executive's possession or under his control.

                    (v) The Executive agrees that should third parties request
to submit Confidential Information to them pursuant to subpoena, summons, search
warrant or governmental order, the Executive will notify the Company immediately
upon receipt of such request, and thereafter deliver written notice of the
request to the Company no later than one business day after receipt. If the
Company objects to the release of the Confidential Information, the Executive
will permit counsel chosen by the Company to represent the Executive in order to
resist release of the Confidential Information. The Company will pay the
Executive for any expenses incurred by him in connection with resisting the
release of the Confidential Information.

               (c) Ownership of Developed Information.

                    (i) The Executive covenants and agrees that all right, title
and interest in any Developed Information, as defined below, shall be and remain
the exclusive property of the Company. The Executive agrees to make prompt and
complete disclosure from time to time to the Company of all Developed
Information. The Executive agrees to immediately disclose to the Company all
Developed Information, and to assign to the Company any right, title and
interest which he may have in the Developed Information. The Executive agrees to
execute any instruments and to do all things reasonably requested by the
Company, both during and after the Employment Period, to vest the Company with
all ownership rights in the Developed Information. If any Developed Information
can be protected by federal copyright registration, patent registration or
trademark registration shall be owned solely, completely and exclusively by the
Company, and any rights the Executive may have in any such Developed Information
shall be deemed to be irrevocably assigned and transferred completely and
exclusively to the Company by the Executive.

                                       5

<PAGE>

                    (ii) For purposes of this Agreement, "Developed Information"
shall mean all trade secrets, confidential or other proprietary information
conceived, developed, designed, devised or otherwise created, modified or
improved by the Executive or with respect to which he receives or receives
access to, in whole or in part, in connection with the performance of his
services for the Company, its customers or other persons who disclose such
information to the Company in confidence hereunder during the Employment Period
or resulting from the Executive's use of or access to the Company's facilities
or resources, including its Confidential Information. The "Developed
Information" shall also include, without limitation, the following materials and
information, whether or not reduced to writing, whether now or hereafter
existing, whether or not patentable or protectable by copyright or trademark:

                         (A) Marketing techniques and arrangements, purchasing
information, pricing policies, quoting procedures, information processes,
financial information, customer and prospect names and requirements, employee,
customer, supplier and distributor data and other materials or information
relating to the Business and/or the manner in which the Company does business;

                         (B) Discoveries, concepts, and ideas, including without
limitation, processes, formulas, techniques, know how, designs, drawings, and
specifications relating to the Business and/or the manner in which the Company
does business;

                         (C) Formulations for any products of the Company,
including, but not limited to, software, databases, technology infrastructures
and similar information;

                         (D) Any other materials or information related to the
business or activities of the Company which are not generally known to others
engaged in similar businesses or activities; and

                         (E) All ideas which are derived from or related to the
Executive's access to or knowledge of any of the materials or information
described in this Section 3(b)(ii).

               (d) Acknowledgment. The Executive acknowledges that he has
carefully read and reviewed the restrictions set forth in Sections 4(a), (b) and
(c) hereof, and having done so he agrees that those restrictions, including but
not limited to the time period and geographical areas of restriction, are fair
and reasonable and are reasonably required for the protection of the legitimate
business interests of the Company.

               (e) Invalidity, Etc. If any covenant, provision, or agreement
contained in any part of Section 4(a), (b) or (c) hereof is found by a court
having jurisdiction to be unreasonable in duration, geographic scope or
character of restrictions, the covenant, provision or agreement shall not be
rendered unenforceable thereby, but

                                       6

<PAGE>

rather the duration, geographical scope or character of restrictions of such
covenant, provision or agreement shall be deemed reduced or modified with
retroactive effect to render such covenant or agreement reasonable and such
covenant or agreement shall be enforced as modified. If the court having
jurisdiction will not review the covenant, provision or agreement, the parties
shall mutually agree to a revision having an effect as close as permitted by law
to the provision declared unenforceable. The Executive agrees that if a court
having jurisdiction determines, despite the express intent of the Executive,
that any portion of the restrictive covenants contained in Section 4(a), (b) or
(c) hereof are not enforceable, the remaining provisions shall be valid and
enforceable.

               (f) Equitable Relief. The Executive recognizes and acknowledges
that if he breaches the provisions of Section 4(a), (b) or (c) hereof, damages
to the Company may be difficult if not impossible to ascertain, and because of
the immediate and irreparable damage and loss that may be caused to the Company
for which it would have no adequate remedy, it is therefore agreed that the
Company, in addition to and without limiting any other remedy or right it may
have, shall be entitled to have an injunction or other equitable relief in any
court of competent jurisdiction, enjoining any such breach, and the Executive
hereby waives any and all defenses he may have on the grounds of lack of
jurisdiction or competence of a court to grant such an injunction or other
equitable relief. The existence of this right shall not preclude the
applicability or exercise of any other rights and remedies at law or in equity
which the Company may have.

               (g) Accounting for Profits. The Executive covenants and agrees
that if he violates any covenants or agreements under this Agreement, the
Company shall be entitled to an accounting and repayment of all profits,
compensations, royalties, commissions, remuneration or benefits which directly
or indirectly shall have been realized or may be realized relating to, growing
out of or in connection with any such violations; such remedy shall be in
addition to and not in limitation of any injunctive relief or other rights or
remedies to which the Company is or may be entitled at law or in equity or
otherwise under this Agreement.

               (h) Public Statements. The Executive and the Company recognize
that, due to the relationship of the Executive and the Company and such
relationship's susceptibility to public comment which may be injurious to the
Executive or the Company, or both, it is necessary for the protection of both
parties that neither party make any disparaging public statements with respect
to each other concerning the terms of this Agreement and the arrangements made
pursuant hereto. The Executive and the Company accordingly agree that neither
the Executive nor the Company will make any disparaging public statements with
respect to each other or concerning the terms of this Agreement and the
arrangements made pursuant hereto at any time following the termination of this
Agreement without the prior written approval of the other party.

          5. EMPLOYMENT PERIOD.

                                       7

<PAGE>

               (a) Duration. The Employment Period shall commence on the date of
this Agreement and shall continue until the earlier of (i) the close of business
on the day immediately preceding the three (3) year anniversary of this
Agreement (the "Expiration Date"), or (ii) termination of this Agreement by the
Company with "cause" (as defined in Section 5(d)(i) hereof), or (iii)
termination of this Agreement by the Company for any reason other than cause, or
(iv) the death or Total Disability of the Executive.

               (b) Payments Upon Termination.

                    (i) If the Executive's employment is terminated by the
Company for any reason other than "cause" (as defined in Section 5(c)(i)
hereof), or due to the "total disability" (as defined in Section 5(c)(ii)
hereof), or death of the Executive, at any time during the Employment Period,
the Company shall pay to, or provide for, as the case may be, the Executive, at
the times otherwise provided in this Agreement as if the Executive had not been
terminated:

                         (A) his Salary as accrued through the date of
termination and for three months thereafter (the "Severance Period"), which
Salary shall be payable, at the Company's option, as a lump sum or in equal
monthly installments during such period in accordance with existing payroll
policies; and

                         (B) to the extent applicable, the sickness and health
insurance programs to which he would have been entitled under this Agreement if
he had remained in the employ of the Company for the Severance Period; and

                         (C) such other benefits to which he is entitled under
applicable laws.

                    In addition, the Company shall, to the extent applicable,
pay to, or provide for, as the case may be, the employee benefits (including,
but not limited to, coverage under any disability, group life, and accident
insurance programs and split-dollar life insurance arrangements or programs) to
which he would have been entitled under this Agreement if he had remained in the
employ of the Company throughout such Severance Period.

                    The Executive shall use his best efforts to discharge his
legal obligation to mitigate the amount of payments provided for in this Section
5(b) by actively seeking employment, and the amount of any payment provided for
in this Section 5(b) shall be reduced by any compensation or remuneration earned
as the result of employment by another employer after the date of termination
and during the Severance Period.

                    (ii) If the Executive's employment is terminated (A) by the
Company for "cause"; (B) by the Executive for any reason, then the Company shall
have no further liability to the Executive, except for the Salary which has
accrued through the

                                       8

<PAGE>

date of termination, which amounts shall be paid by the Company within thirty
(30) days of such termination.

                    (iii) Notwithstanding any other provision of this Section
5(b), if the Executive violates any covenant, term or condition of this
Agreement the Company shall be entitled, in addition to any other remedies it
may have hereunder or at law or in equity, to offset the amount of any payment
otherwise due to the Executive pursuant to this Section 5(b) against any loss or
damage incurred by the Company as a result of the Executive's violation of said
covenant, term or condition.

               (c) Definitions. When used in this Agreement, the words "cause"
and "total disability" shall have the respective meanings set forth below:

                    (i) The term "cause" means: (A) the Executive's failure to
perform his employment duties hereunder after reasonable notice to the Executive
by the Company specifying such failure and providing the Executive with a
reasonable opportunity to cure such failure given the context of the
circumstances, (B) the Executive's breach of the covenants or agreements
contained in Sections 4(a), (b) or (c) hereof, or of any other material
agreement or undertaking of the Executive, (C) the Executive's commission of a
felony or any crime involving moral turpitude, fraud or misrepresentation,
whether or not related to the business or property of the Company, (D) any act
of the Executive against the Company intended to enrich the Executive in
derogation of his duties to the Company, (E) any willful or purposeful act or
omission (or any act or omission taken in bad faith) of the Executive having the
effect of injuring the business or business relationships of the Company, or (F)
the Executive's breach of his duty of loyalty to the Company.

                    (ii) The term "total disability" ("Total Disability") means
total disability as defined in the Company's group and individual disability
plans, if any. If the Company does not have in existence such plans, then Total
Disability shall mean:

                    (iii) The inability to perform the duties required hereunder
for a continuous period of six (6) months during the Employment Period due to
"mental incompetence" or "physical disability" as hereinafter defined. The
Executive shall be considered to be mentally incompetent and/or physically
disabled: (A) if he is under a legal decree of incompetency (the date of such
decree being deemed the date on which such mental incompetence occurred for
purposes of this Section 5(c)); or (B) because of a "Medical Determination of
Mental and/or Physical Disability." A Medical Determination of Mental and/or
Physical Disability shall mean the written determination by: (1) the physician
regularly attending the Executive, and (2) a physician selected by the Company,
that because of a medically determinable mental and/or physical disability the
Executive is unable to perform each of the material duties of the Executive, and
such mental and/or physical disability is determined or reasonably expected to
last twelve (12) months or longer after the date of determination, based on
medically available information. If the two physicians do not agree, they shall
jointly choose a third consulting physician and the written opinion of the
majority of these three (3) physicians

                                       9

<PAGE>

shall be conclusive as to such mental and/or physical disability and shall be
binding on the parties. The date of any written opinion which is conclusive as
to the mental and/or physical disability shall be deemed the date on which such
mental and/or physical disability commenced for purposes of this Section 5(c),
if the written opinion concludes that the Executive is mentally and/or
physically disabled. In conjunction with determining mental and/or physical
disability for purposes of this Agreement, the Executive consents to any such
examinations which are relevant to a determination of whether he is mentally
and/or physically disabled, and which is required by any two (2) of the
aforesaid physicians, and to furnish such medical information as may be
reasonably requested, and to waive any applicable physician patient privilege
that may arise because of such examination. All physicians selected hereunder
shall be Board-certified in the specialty most closely related to the nature of
the mental and/or physical disability alleged to exist.

                    (iv) For purposes of determining whether the Executive is
mentally incompetent or physically disabled for the continuous six (6) month
period specified in this Section 5(c), such disability shall be deemed to
continue from the date of any legal decree of incompetency, or written opinion
which is conclusive as to the mental and/or physical disability, through the
date the legal decree expires or is otherwise revoked or removed, or the date on
which the mental and/or physical disability has ceased, as the case may be, as
set forth in a written opinion prepared by the physicians described in this
Section 5(c) pursuant to the procedures provided herein.

          6. NOTICES. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail to the Executive at the last address he has filed
in writing with the Company.

          7. BINDING AGREEMENT; ASSIGNMENT. This Agreement shall be effective as
of the date hereof and shall be binding upon and inure to the benefit of, the
parties and their respective heirs, successors, assigns, and personal
representatives, as the case may be. The Executive may not assign any rights or
duties under this Agreement. As used herein, the successors of the Company shall
include, but not be limited to, any successor by way of merger, consolidation,
sale of all or substantially all of the assets, or similar reorganization or
change in control.

          8. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding of the Executive and the Company with respect to the subject
matter hereof and supersede any and all prior understandings written or oral.
This Agreement may not be changed, modified or discharged orally, but only by an
instrument in writing signed by the parties.

          9. ENFORCEABILITY. This Agreement has been duly authorized, executed
and delivered and constitutes the valid and binding obligations of the parties
hereto, enforceable in accordance with its terms. The undertakings herein shall
not be

                                       10

<PAGE>

construed as any limitation upon the remedies Company might, in the absence of
this Agreement, have at law or in equity for any wrongs of the Executive.

          10. GOVERNING LAW. The validity and construction of this Agreement or
any of its provisions shall be determined under the internal laws of the
Commonwealth of Pennsylvania, without giving effect to its conflicts of laws
provisions, and without regard to its place of execution or its place of
performance. The parties irrevocably consent and agree to the exclusive
jurisdiction of the applicable Federal and State courts located in the
Commonwealth of Pennsylvania and to service of process for it and on its behalf
by certified mail, for resolution of all matters involving this Agreement or the
transactions contemplated hereby. Each party waives all rights to a trial by
jury in any suit, action or proceeding hereunder.

          11. SEVERABILITY. Except as provided in Section 4(e) hereof, if any
one or more of the terms or provisions of this Agreement shall for any reason be
held to be invalid, illegal or unenforceable, in whole or in part, or in any
respect or in the event that any one or more of the provisions of this Agreement
operated or would prospectively operate to invalidate this Agreement, then and
in either of those events, such provision or provisions only shall be deemed
null and void and shall not affect any other provision of this Agreement and the
remaining provisions of this Agreement shall remain operative and in full force
and effect and shall in no way be affected, prejudiced or disturbed thereby.

          12. AMENDMENTS AND WAIVERS. This Agreement may, to the maximum extent
permitted by applicable law, be amended by the parties, which amendment shall be
set forth in an instrument executed by all of the parties. Any term, provision
or condition of this Agreement (other than as prohibited by applicable law) may
be waived in writing at any time by the party which is entitled to the benefits
thereof.

          IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as an instrument under seal on the date first above written.

                                        COMPANY:
                                        EDENTIFY, INC.

                                        By: /s/ Craig DeFranco
                                            ------------------------------------
                                            Craig DeFranco
                                        Title: Chief Financial Officer

                                        EXECUTIVE:

                                        /s/ Terrence DeFranco
                                        ----------------------------------------
                                        Terrence DeFranco

                                       11

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