CIROND CORP
EXH 10-1 PURCHASE AGMT
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>exh10-1_purchagmt.txt
<DESCRIPTION>EXH 10-1 PURCHASE AGMT
<TEXT>











                                  EXHIBIT 10.1

               FORM OF SECURITIES PURCHASE AGREEMENT DATED AS OF
                DECEMBER 22, 2004 BETWEEN CIROND CORPORATION AND
                          THE PURCHASER NAMED THEREIN


<PAGE>


                          SECURITIES PURCHASE AGREEMENT

         This Securities  Purchase  Agreement (this  "AGREEMENT") is dated as of
December  22,  2004,  among  Cirond  Corporation,   a  Nevada  corporation  (the
"COMPANY"),  and each purchaser  identified on the signature pages hereto (each,
including  its  successors  and assigns,  a  "PURCHASER"  and  collectively  the
"PURCHASERS").

         WHEREAS,  subject  to the  terms  and  conditions  set  forth  in  this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "SECURITIES ACT") and Rule 506 promulgated thereunder,  the Company desires
to issue  and sell to each  Purchaser,  and each  Purchaser,  severally  and not
jointly, desires to purchase from the Company, securities of the Company as more
fully described in this Agreement.

         NOW,  THEREFORE,  IN CONSIDERATION of the mutual covenants contained in
this Agreement,  and for other good and valuable  consideration  the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:

                                   ARTICLE I.
                                   DEFINITIONS

         1.1      DEFINITIONS.  In addition to the terms  defined  elsewhere  in
this Agreement: (a) capitalized terms that are not otherwise defined herein have
the meanings given to such terms in the  Certificate of Designation  (as defined
herein), and (b) the following terms have the meanings indicated in this Section
1.1:

                  "ACTION"  shall  have the  meaning  ascribed  to such  term in
         Section 3.1(j).

                  "ADDITIONAL  INVESTMENT RIGHT" means the Additional Investment
         Rights as  described  in Section  2.2(a)(iv),  in the form of EXHIBIT E
         attached hereto.

                  "ADDITIONAL  INVESTMENT RIGHT  SECURITIES" means the Preferred
         Stock and Warrants issuable upon exercise of the Additional  Investment
         Right.

                  "ADDITIONAL  INVESTMENT  RIGHT  SHARES"  means  the  shares of
         Common Stock  issuable  upon  conversion of the  Additional  Investment
         Right Securities.

                  "AFFILIATE"  means any Person  that,  directly  or  indirectly
         through one or more intermediaries,  controls or is controlled by or is
         under  common  control  with a  Person,  as such  terms are used in and
         construed  under Rule 144 under the  Securities  Act. With respect to a
         Purchaser,  any investment fund or managed account that is managed on a
         discretionary  basis by the same  investment  manager as such Purchaser
         will be deemed to be an Affiliate of such Purchaser.

<PAGE>

                  "CERTIFICATE   OF   DESIGNATION"   means  the  Certificate  of
         Designation  to be filed prior to the  Closing by the Company  with the
         Secretary of State of Nevada, in the form of EXHIBIT A attached hereto.

                  "CLOSING"  means the closing of the  purchase  and sale of the
         Securities pursuant to Section 2.1.

                  "CLOSING   DATE"  means  the  Trading  Day  when  all  of  the
         Transaction   Documents   have  been  executed  and  delivered  by  the
         applicable  parties  thereto,  and all conditions  precedent to (i) the
         Purchasers'  obligations  to pay the  Subscription  Amount and (ii) the
         Company's  obligations to deliver the Securities have been satisfied or
         waived.

                  "CLOSING  PRICE"  means  on any  particular  date (a) the last
         reported  closing  bid price per share of Common  Stock on such date on
         the Trading  Market (as reported by Bloomberg L.P. at 4:15 PM (New York
         time),  or (b) if there is no such price on such date, then the closing
         bid price on the Trading Market on the date nearest preceding such date
         (as  reported  by  Bloomberg  L.P.  at 4:15 PM (New York  time) for the
         closing bid price for regular  session  trading on such day), or (c) if
         the Common Stock is not then listed or quoted on the Trading Market and
         if prices for the Common Stock are then  reported in the "pink  sheets"
         published by the National  Quotation Bureau  Incorporated (or a similar
         organization  or  agency  succeeding  to  its  functions  of  reporting
         prices),  the most  recent bid price per share of the  Common  Stock so
         reported,  or (d) if the shares of Common  Stock are not then  publicly
         traded the fair market value of a share of Common  Stock as  determined
         by a  qualified  independent  appraiser  selected  in good faith by the
         Purchasers  of a  majority  in  interest  of the  Preferred  Stock then
         outstanding.

                  "COMMISSION" means the Securities and Exchange Commission.


                  "COMMON  STOCK"  means the common  stock of the  Company,  par
         value $0.001 per share, and any securities into which such common stock
         shall hereinafter have been reclassified.

                  "COMMON STOCK EQUIVALENTS" means any securities of the Company
         or the  Subsidiaries  which would entitle the holder thereof to acquire
         at any time  Common  Stock,  including  without  limitation,  any debt,
         preferred stock, rights, options,  warrants or other instrument that is
         at any time convertible into or exchangeable for, or otherwise entitles
         the holder thereof to receive, Common Stock.

                  "COMPANY COUNSEL" means Dill Dill Carr Stonbraker & Hutchings,
         P.C. with offices at 455 Sherman Street,  Suite 300,  Denver,  Colorado
         80203.

                  "CONVERSION  PRICE"  shall have the  meaning  ascribed to such
         term in the Certificate of Designation.

                  "DISCLOSURE SCHEDULES" shall have the meaning ascribed to such
         term in Section 3.1 hereof.


                                        2
<PAGE>

                  "EFFECTIVE DATE" means the date that the initial  Registration
         Statement  filed by the  Company  pursuant to the  Registration  Rights
         Agreement is first declared effective by the Commission.

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

                  "EXEMPT  ISSUANCE"  means the issuance of (a) shares of Common
         Stock or options to  employees,  officers or  directors  of the Company
         pursuant to any stock or option plan duly  adopted by a majority of the
         non-employee  members  of the Board of  Directors  of the  Company or a
         majority  of the  members  of a  committee  of  non-employee  directors
         established  for such purpose,  (b) securities  upon the exercise of or
         conversion of any securities  issued hereunder  (including the warrants
         issued to  Ascendiant  Securities,  LLC and the  Additional  Investment
         Right Securities),  convertible securities,  options or warrants issued
         and  outstanding  on the date of this  Agreement,  provided  that  such
         securities  have not been amended  since the date of this  Agreement to
         increase  the  number  of such  securities  and (c)  securities  issued
         pursuant to acquisitions or strategic  transactions,  provided any such
         issuance  shall only be to a Person  which is,  itself or  through  its
         subsidiaries,  an operating company in a business  synergistic with the
         business of the Company and in which the Company  receives  benefits in
         addition  to  the  investment  of  funds,   but  shall  not  include  a
         transaction  in which the Company is issuing  securities  primarily for
         the purpose of raising  capital or to an entity whose primary  business
         is investing in securities.

                  "FW" means Feldman Weinstein LLP with offices at 420 Lexington
         Avenue, Suite 2620, New York, New York 10170-0002.

                  "GAAP" shall have the meaning ascribed to such term in Section
         3.1(h) hereof.

                  "LIENS" means a lien, charge, security interest,  encumbrance,
         right of first refusal, preemptive right or other restriction.

                  "MATERIAL  ADVERSE EFFECT" shall have the meaning  assigned to
         such term in Section 3.1(b) hereof.

                  "MATERIAL  PERMITS"  shall have the  meaning  ascribed to such
         term in Section 3.1(m).

                  "PERSON"  means an  individual  or  corporation,  partnership,
         trust,  incorporated  or  unincorporated  association,  joint  venture,
         limited  liability  company,  joint stock  company,  government  (or an
         agency or subdivision thereof) or other entity of any kind.

                  "PREFERRED  STOCK"  means  the  up  to  6,000  shares  of  the
         Company's  Series B 5%  Convertible  Preferred  Stock issued  hereunder
         having  the  rights,  preferences  and  privileges  set  forth  in  the
         Certificate of Designation

                                       3
<PAGE>

                  "PROCEEDING" means an action,  claim,  suit,  investigation or
         proceeding (including,  without limitation, an investigation or partial
         proceeding, such as a deposition), whether commenced or threatened.

                  "REGISTRATION  RIGHTS AGREEMENT" means the Registration Rights
         Agreement, dated the date hereof, among the Company and the Purchasers,
         in the form of EXHIBIT B attached hereto.

                  "REGISTRATION   STATEMENT"  means  a  registration   statement
         meeting the requirements set forth in the Registration Rights Agreement
         and covering  the resale of the  Underlying  Shares and the  Additional
         Investment  Right  Shares  by each  Purchaser  as  provided  for in the
         Registration Rights Agreement.

                  "REQUIRED  APPROVALS"  shall have the meaning ascribed to such
         term in Section 3.1(e).

                  "REQUIRED   MINIMUM"  means,  as  of  any  date,  the  maximum
         aggregate  number of shares of Common Stock then issued or  potentially
         issuable in the future pursuant to the Transaction Documents, including
         any Underlying  Shares  issuable upon exercise or conversion in full of
         all  Warrants,   Preferred  Stock  and  Additional  Investment  Rights,
         ignoring  any  conversion  or exercise  limits set forth  therein,  and
         assuming  that the  Conversion  Price is at all  times on and after the
         date of  determination  75% of the then Conversion Price on the Trading
         Day immediately prior to the date of determination.

                  "RULE  144"  means  Rule  144  promulgated  by the  Commission
         pursuant to the  Securities  Act, as such Rule may be amended from time
         to time,  or any similar rule or  regulation  hereafter  adopted by the
         Commission having substantially the same effect as such Rule.

                  "SEC REPORTS" shall have the meaning  ascribed to such term in
         Section 3.1(h) hereof.

                  "SECURITIES"  means the Preferred  Stock,  the  Warrants,  the
         Underlying  Shares,  the Additional  Investment  Rights, the Additional
         Investment Right Securities and the Additional Investment Right Shares.

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

                  "STATED VALUE" means $1,000 per share of Preferred Stock.

                  "SUBSCRIPTION AMOUNT" means, as to each Purchaser, the amounts
         set forth below such Purchaser's signature block on the signature pages
         hereto, in United States Dollars and in immediately available funds.

                  "SUBSEQUENT FINANCING" shall have the meaning ascribed to such
         term in Section 4.13.

                                        4
<PAGE>

                  "SUBSIDIARY"  means any subsidiary of the Company as set forth
         on SCHEDULE 3.1(A).

                  "TRADING  DAY" means a day on which the Common Stock is traded
         on a Trading Market.

                  "TRADING  MARKET" means the following  markets or exchanges on
         which the Common  Stock is listed or quoted for  trading on the date in
         question:  the Nasdaq SmallCap Market, the American Stock Exchange, the
         New York Stock Exchange, the Nasdaq National Market or the OTC Bulletin
         Board.

                  "TRANSACTION DOCUMENTS" means this Agreement,  the Certificate
         of Designation,  the Warrants,  the Registration Rights Agreement,  the
         Additional  Investment  Right and any  other  documents  or  agreements
         executed in connection with the transactions contemplated hereunder.

                  "UNDERLYING  SHARES" means the shares of Common Stock issuable
         upon conversion of the Preferred Stock and the Warrant Shares.

                  "WARRANTS"  means   collectively  the  Common  Stock  purchase
         warrants,  in the form of EXHIBIT C delivered to the  Purchasers at the
         Closing in accordance with Section 2.2(a) hereof,  which Warrants shall
         be  exercisable  immediately  and  have a term of  exercise  equal to 5
         years.

                  "WARRANT  SHARES"  means the shares of Common  Stock  issuable
         upon exercise of the Warrants.


                                  ARTICLE II.
                                PURCHASE AND SALE

         2.1      CLOSING.  On the Closing  Date,  upon the terms and subject to
the conditions set forth herein,  concurrent  with the execution and delivery of
this  Agreement  by the parties  hereto,  the Company  agrees to sell,  and each
Purchaser agrees to purchase in the aggregate,  severally and not jointly, up to
$2,000,000 of shares of Preferred Stock with an aggregated Stated Value equal to
such Purchaser's  Subscription  Amount and Warrants as determined by pursuant to
Section  2.2(a)(iii).  Upon  satisfaction of the conditions set forth in Section
2.2, the Closing shall occur at the offices of FW, or such other location as the
parties shall mutually agree.

         2.2      DELIVERIES.

                  a)       At or prior to the Closing  Date,  the Company  shall
                           deliver or cause to be  delivered  to each  Purchaser
                           the following:

                           (i)      this Agreement duly executed by the Company;

                           (ii)     a certificate  evidencing a number of shares
                                    of Preferred Stock equal to such Purchaser's
                                    Subscription  Amount  divided  by the

                                        5
<PAGE>

                                    Stated Value, registered in the name of such
                                    Purchaser;

                           (iii)    a  Warrant  registered  in the  name of such
                                    Purchaser  to  purchase  up to a  number  of
                                    shares of Common  Stock equal to 50% of such
                                    Purchaser's  aggregate  Subscription  Amount
                                    divided  by the  Conversion  Price,  with an
                                    exercise  price  equal to $0.55,  subject to
                                    adjustment therein;

                           (iv)     an Additional  Investment Right,  registered
                                    in the name of such  Purchaser,  pursuant to
                                    which such Purchaser shall have the right to
                                    purchase  up to such  Purchaser's  pro  rata
                                    share  (based  on the  number  of  shares of
                                    Preferred Stock  purchased  hereunder at the
                                    Closing) of up to  $4,000,000  of  preferred
                                    stock  and  warrants,  on  the  same  terms,
                                    prices and conditions of the Preferred Stock
                                    and Warrants issued hereunder;

                           (v)      the   Registration   Rights  Agreement  duly
                                    executed by the Company;

                           (vi)     a lock-up  agreement,  in the form  attached
                                    hereto  as  EXHIBIT  F,   executed  by  each
                                    officer and director of the Company; and

                           (vii)    a legal opinion of Company  Counsel,  in the
                                    form of EXHIBIT D attached hereto.

                  b)       At or prior to the Closing Date, each Purchaser shall
                           deliver or cause to be  delivered  to the Company the
                           following:

                           (i)      this   Agreement   duly   executed  by  such
                                    Purchaser;

                           (ii)     such  Purchaser's  Subscription  Amount,  by
                                    wire transfer to the account as specified in
                                    writing by the Company; and

                           (iii)    the   Registration   Rights  Agreement  duly
                                    executed by such Purchaser.

         2.3      CLOSING CONDITIONS.

                  a)       The   obligations   of  the  Company   hereunder   in
                           connection  with  the  Closing  are  subject  to  the
                           following conditions being met:

                           (i)      the accuracy in all material  respects  when
                                    made  and  on  the   Closing   Date  of  the
                                    representations   and   warranties   of  the
                                    Purchasers contained herein;

                           (ii)     all obligations, covenants and agreements of
                                    the  Purchasers  required to be performed at
                                    or prior to the Closing Date shall have been
                                    performed; and

                                        6
<PAGE>

                           (iii)    the delivery by the  Purchasers of the items
                                    set   forth  in   Section   2.2(b)  of  this
                                    Agreement.

                  b)       The   respective   obligations   of  the   Purchasers
                           hereunder in connection  with the Closing are subject
                           to the following conditions being met:

                           (i)      the accuracy in all material respects on the
                                    Closing  Date  of  the  representations  and
                                    warranties of the Company contained herein;

                           (ii)     all obligations, covenants and agreements of
                                    the Company  required to be  performed at or
                                    prior to the  Closing  Date  shall have been
                                    performed;

                           (iii)    the delivery by the Company of the items set
                                    forth in Section 2.2(a) of this Agreement;

                           (iv)     there  shall have been no  Material  Adverse
                                    Effect with respect to the Company since the
                                    Closing Date;

                           (v)      from the date  hereof to the  Closing  Date,
                                    trading in the Common  Stock  shall not have
                                    been suspended by the Commission (except for
                                    any   suspension   of   trading  of  limited
                                    duration  agreed  to by the  Company,  which
                                    suspension  shall be terminated prior to the
                                    Closing),  and,  at any  time  prior  to the
                                    Closing   Date,    trading   in   securities
                                    generally as reported by Bloomberg Financial
                                    Markets  shall  not have been  suspended  or
                                    limited,  or minimum  prices  shall not have
                                    been  established on securities whose trades
                                    are  reported  by  such  service,  or on any
                                    Trading   Market,   nor   shall  a   banking
                                    moratorium  have been declared either by the
                                    United States or New York State  authorities
                                    nor shall there have  occurred  any material
                                    outbreak or  escalation  of  hostilities  or
                                    other national or international  calamity of
                                    such  magnitude  in its  effect  on,  or any
                                    material  adverse  change in, any  financial
                                    market   which,   in  each   case,   in  the
                                    reasonable judgment of each Purchaser, makes
                                    it  impracticable or inadvisable to purchase
                                    the Preferred Stock at the Closing; and

                           (vi)     the  Company   shall  have  entered  into  a
                                    written employment agreement with [CEO] with
                                    a minimum term of two years.

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

         3.1      REPRESENTATIONS  AND WARRANTIES OF THE COMPANY.  Except as set
forth under the corresponding  section of the disclosure  schedules delivered to
the  Purchasers   concurrently  herewith  (the  "DISCLOSURE   SCHEDULES")  which
Disclosure Schedules shall be deemed a part

                                       7
<PAGE>

hereof,  the Company hereby makes the  representations  and warranties set forth
below to each Purchaser.

                  (a)      SUBSIDIARIES.   All  of  the  direct   and   indirect
         subsidiaries  of the  Company  are set forth on  SCHEDULE  3.1(A).  The
         Company owns, directly or indirectly, all of the capital stock or other
         equity  interests of each Subsidiary  free and clear of any Liens,  and
         all  the  issued  and  outstanding  shares  of  capital  stock  of each
         Subsidiary  are validly issued and are fully paid,  non-assessable  and
         free of  preemptive  and similar  rights to  subscribe  for or purchase
         securities. If the Company has no subsidiaries,  then references in the
         Transaction Documents to the Subsidiaries will be disregarded.

                  (b)      ORGANIZATION AND  QUALIFICATION.  Each of the Company
         and the  Subsidiaries  is an  entity  duly  incorporated  or  otherwise
         organized,  validly existing and in good standing under the laws of the
         jurisdiction of its incorporation or organization (as applicable), with
         the  requisite  power and authority to own and use its  properties  and
         assets and to carry on its business as currently conducted. Each of the
         Company and the  Subsidiaries is duly qualified to conduct business and
         is in good  standing as a foreign  corporation  or other entity in each
         jurisdiction in which the nature of the business  conducted or property
         owned  by it makes  such  qualification  necessary,  except  where  the
         failure to be so  qualified  or in good  standing,  as the case may be,
         could not have or  reasonably  be  expected to result in (i) a material
         adverse  effect on the  legality,  validity  or  enforceability  of any
         Transaction Document,  (ii) a material adverse effect on the results of
         operations,  assets, business,  prospects or financial condition of the
         Company  and the  Subsidiaries,  taken as a whole,  or (iii) a material
         adverse  effect on the  Company's  ability to  perform in any  material
         respect  on a  timely  basis  its  obligations  under  any  Transaction
         Document (any of (i), (ii) or (iii), a "MATERIAL  ADVERSE  EFFECT") and
         no Proceeding has been  instituted in any such  jurisdiction  revoking,
         limiting  or  curtailing  or seeking to revoke,  limit or curtail  such
         power and  authority  or  qualification.  Neither  the  Company nor any
         Subsidiary  is in violation or default of any of the  provisions of its
         respective  certificate or articles of  incorporation,  bylaws or other
         organizational  or charter  documents,  except where such  violation or
         default  could  not have or  reasonably  be  expected  to  result  in a
         Material Adverse Effect.

                  (c)      AUTHORIZATION;   ENFORCEMENT.  The  Company  has  the
         requisite corporate power and authority to enter into and to consummate
         the transactions  contemplated by each of the Transaction Documents and
         otherwise to carry out its  obligations  thereunder.  The execution and
         delivery of each of the  Transaction  Documents  by the Company and the
         consummation by it of the transactions  contemplated  thereby have been
         duly authorized by all necessary  action on the part of the Company and
         no further  action is required by the Company in  connection  therewith
         other than in connection with the Required Approvals.  Each Transaction
         Document has been (or upon  delivery  will have been) duly  executed by
         the Company and, when  delivered in  accordance  with the terms hereof,
         will  constitute  the  valid  and  binding  obligation  of the  Company
         enforceable against the Company in accordance with its terms except (i)
         as  limited  by  applicable  bankruptcy,  insolvency,   reorganization,
         moratorium and other laws of general application

                                       8
<PAGE>

         affecting  enforcement  of  creditors'  rights  generally  and  (ii) as
         limited by laws relating to the  availability of specific  performance,
         injunctive relief or other equitable remedies.

                  (d)      NO CONFLICTS. The execution, delivery and performance
         of the Transaction Documents by the Company and the consummation by the
         Company of the other transactions  contemplated thereby do not and will
         not: (i) conflict with or violate any provision of the Company's or any
         Subsidiary's certificate or articles of incorporation,  bylaws or other
         organizational  or  charter  documents,   or  (ii)  conflict  with,  or
         constitute  a default (or an event that with notice or lapse of time or
         both would become a default) under,  result in the creation of any Lien
         upon any of the properties or assets of the Company or any  Subsidiary,
         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 a
         Company or  Subsidiary  debt or otherwise)  or other  understanding  to
         which the Company or any Subsidiary is a party or by which any property
         or asset of the  Company or any  Subsidiary  is bound or  affected,  or
         (iii) subject to the Required  Approvals,  conflict with or result in a
         violation of any law, rule, regulation,  order,  judgment,  injunction,
         decree or other  restriction of any court or governmental  authority to
         which the Company or a  Subsidiary  is subject  (including  federal and
         state  securities  laws and  regulations),  or by which any property or
         asset of the Company or a Subsidiary  is bound or  affected;  except in
         the case of each of clauses  (ii) and (iii),  such as could not have or
         reasonably be expected to result in a Material Adverse Effect.

                  (e)      FILINGS,  CONSENTS AND APPROVALS.  The Company is not
         required to obtain any consent, waiver, authorization or order of, give
         any notice to, or make any filing or  registration  with,  any court or
         other federal,  state, local or other  governmental  authority or other
         Person in connection  with the execution,  delivery and  performance by
         the Company of the Transaction Documents,  other than (i) the filing if
         the  Certificate  of  Designation,  (ii) filings  required  pursuant to
         Section 4.6, (iii) the filing with the  Commission of the  Registration
         Statement,  (iv) the notice and/or  application(s)  to each  applicable
         Trading  Market for the  issuance and sale of the  Preferred  Stock and
         Warrants,  the Additional  Investment Rights, the Additional Investment
         Right  Securities and the listing of the Underlying  Shares for trading
         thereon in the time and manner  required  thereby and (v) the filing of
         Form D with the  Commission and such filings as are required to be made
         under  applicable state  securities laws  (collectively,  the "REQUIRED
         APPROVALS").

                  (f)      ISSUANCE OF THE  SECURITIES.  The Securities are duly
         authorized  and,  when  issued  and  paid  for in  accordance  with the
         applicable  Transaction  Documents,  will be duly and  validly  issued,
         fully paid and  nonassessable,  free and clear of all Liens  imposed by
         the Company  other than  restrictions  on transfer  provided for in the
         Transaction Documents. The Underlying Shares, when issued in accordance
         with the terms of the  Transaction  Documents,  will be validly issued,
         fully paid and  nonassessable,  free and clear of all Liens  imposed by
         the Company.  The Company has reserved from its duly authorized capital
         stock a number of shares of Common Stock for issuance of the Underlying
         Shares at least equal to the Required Minimum on the date hereof.

                                        9
<PAGE>

                  (g)      CAPITALIZATION.  The capitalization of the Company is
         as described in the Company's  most recent  periodic  report filed with
         the Commission. The Company has not issued any capital stock since such
         filing other than  pursuant to the exercise of employee  stock  options
         under the  Company's  stock  option  plans,  the  issuance of shares of
         Common  Stock to employees  pursuant to the  Company's  employee  stock
         purchase plan and pursuant to the conversion or exercise of outstanding
         Common  Stock  Equivalents.  No Person has any right of first  refusal,
         preemptive  right,  right of  participation,  or any  similar  right to
         participate  in  the  transactions   contemplated  by  the  Transaction
         Documents.  Except  as a  result  of  the  purchase  and  sale  of  the
         Securities,  there are no outstanding options,  warrants, script rights
         to  subscribe  to, calls or  commitments  of any  character  whatsoever
         relating to, or securities,  rights or obligations  convertible into or
         exchangeable  for, or giving any Person any right to  subscribe  for or
         acquire,  any  shares  of  Common  Stock,  or  contracts,  commitments,
         understandings  or  arrangements by which the Company or any Subsidiary
         is or may become  bound to issue  additional  shares of Common Stock or
         Common Stock Equivalents.  The issuance and sale of the Securities will
         not  obligate  the  Company  to issue  shares of Common  Stock or other
         securities  to any  Person  (other  than the  Purchasers)  and will not
         result in a right of any  holder of  Company  securities  to adjust the
         exercise,  conversion,  exchange or reset price under such  securities.
         All of the  outstanding  shares of  capital  stock of the  Company  are
         validly  issued,  fully  paid and  nonassessable,  have been  issued in
         compliance with all federal and state securities laws, and none of such
         outstanding  shares was issued in violation of any preemptive rights or
         similar  rights to  subscribe  for or purchase  securities.  No further
         approval or authorization of any stockholder, the Board of Directors of
         the  Company or others is  required  for the  issuance  and sale of the
         Securities. There are no stockholders agreements,  voting agreements or
         other similar agreements with respect to the Company's capital stock to
         which  the  Company  is a party or, to the  knowledge  of the  Company,
         between or among any of the Company's stockholders.

                  (h)      SEC REPORTS;  FINANCIAL  STATEMENTS.  The Company has
         filed all reports  required to be filed by it under the  Securities Act
         and the  Exchange  Act,  including  pursuant to Section  13(a) or 15(d)
         thereof,  for the two years  preceding the date hereof (or such shorter
         period as the Company was required by law to file such  material)  (the
         foregoing materials, including the exhibits thereto, being collectively
         referred  to  herein  as the "SEC  REPORTS")  on a timely  basis or has
         received  a valid  extension  of such time of filing  and has filed any
         such SEC Reports prior to the expiration of any such  extension.  As of
         their respective  dates, the SEC Reports in final amended form complied
         in all material  respects with the  requirements  of the Securities Act
         and the Exchange Act and the rules and  regulations  of the  Commission
         promulgated  thereunder,  and  none of the  SEC  Reports,  when  filed,
         contained any untrue statement of a material fact or omitted to state a
         material  fact  required to be stated  therein or necessary in order to
         make the statements  therein, in light of the circumstances under which
         they were made, not misleading. The financial statements of the Company
         included  in the SEC  Reports  comply  in all  material  respects  with
         applicable accounting requirements and the rules and regulations of the
         Commission  with  respect  thereto  as in effect at the time of filing.
         Such financial  statements have been prepared in accordance with United
         States generally accepted accounting principles applied on a consistent
         basis during the periods involved

                                       10
<PAGE>

         ("GAAP"),  except  as may be  otherwise  specified  in  such  financial
         statements  or the notes  thereto and except that  unaudited  financial
         statements  may not contain all footnotes  required by GAAP, and fairly
         present in all material respects the financial  position of the Company
         and its  consolidated  subsidiaries as of and for the dates thereof and
         the results of  operations  and cash flows for the periods  then ended,
         subject, in the case of unaudited  statements,  to normal,  immaterial,
         year-end audit adjustments.

                  (i)      MATERIAL  CHANGES.  Since  the  date  of  the  latest
         audited financial statements included within the SEC Reports, except as
         specifically disclosed in the SEC Reports, (i) there has been no event,
         occurrence  or  development  that has had or that could  reasonably  be
         expected to result in a Material  Adverse Effect,  (ii) the Company has
         not incurred any liabilities  (contingent or otherwise)  other than (A)
         trade payables and accrued expenses  incurred in the ordinary course of
         business consistent with past practice and (B) liabilities not required
         to be reflected in the Company's financial  statements pursuant to GAAP
         or required to be disclosed in filings made with the Commission,  (iii)
         the Company has not altered its method of accounting,  (iv) the Company
         has not declared or made any dividend or  distribution of cash or other
         property  to its  stockholders  or  purchased,  redeemed  or  made  any
         agreements  to purchase  or redeem any shares of its capital  stock and
         (v) the Company has not issued any equity  securities  to any  officer,
         director or Affiliate, except pursuant to existing Company stock option
         plans.  The Company does not have  pending  before the  Commission  any
         request for confidential treatment of information.

                  (j)      LITIGATION. There is no action, suit, inquiry, notice
         of violation,  proceeding or investigation pending or, to the knowledge
         of the  Company,  threatened  against or  affecting  the  Company,  any
         Subsidiary  or any of  their  respective  properties  before  or by any
         court, arbitrator,  governmental or administrative agency or regulatory
         authority (federal, state, county, local or foreign) (collectively,  an
         "ACTION")  which (i)  adversely  affects or  challenges  the  legality,
         validity or enforceability  of any of the Transaction  Documents or the
         Securities or (ii) could, if there were an unfavorable  decision,  have
         or  reasonably  be  expected  to result in a Material  Adverse  Effect.
         Neither  the Company nor any  Subsidiary,  nor any  director or officer
         thereof,  is or has been the subject of any Action involving a claim of
         violation of or liability  under federal or state  securities laws or a
         claim of  breach of  fiduciary  duty.  There  has not been,  and to the
         knowledge of the  Company,  there is not pending or  contemplated,  any
         investigation by the Commission involving the Company or any current or
         former  director  or officer of the  Company.  The  Commission  has not
         issued any stop order or other order  suspending the  effectiveness  of
         any registration statement filed by the Company or any Subsidiary under
         the Exchange Act or the Securities Act.

                  (k)      LABOR RELATIONS. No material labor dispute exists or,
         to the knowledge of the Company, is imminent with respect to any of the
         employees of the Company  which could  reasonably be expected to result
         in a Material Adverse Effect.

                  (l)      COMPLIANCE.  Neither the  Company nor any  Subsidiary
         (i) is in default  under or in  violation of (and no event has occurred
         that has not been  waived  that, with

                                       11
<PAGE>
         notice  or lapse of time or both,  would  result  in a  default  by the
         Company or any Subsidiary under), nor has the Company or any Subsidiary
         received notice of a claim that it is in default under or that it is in
         violation  of, any  indenture,  loan or credit  agreement  or any other
         agreement or instrument to which it is a party or by which it or any of
         its  properties is bound  (whether or not such default or violation has
         been  waived),  (ii)  is in  violation  of  any  order  of  any  court,
         arbitrator or  governmental  body, or (iii) is or has been in violation
         of any  statute,  rule or  regulation  of any  governmental  authority,
         including without limitation all foreign, federal, state and local laws
         applicable  to its  business  except  in each  case as could not have a
         Material Adverse Effect.

                  (m)      REGULATORY PERMITS.  The Company and the Subsidiaries
         possess all  certificates,  authorizations  and  permits  issued by the
         appropriate  federal,  state, local or foreign  regulatory  authorities
         necessary to conduct  their  respective  businesses as described in the
         SEC Reports, except where the failure to possess such permits could not
         have or reasonably be expected to result in a Material  Adverse  Effect
         ("MATERIAL  PERMITS"),  and neither the Company nor any  Subsidiary has
         received  any  notice of  proceedings  relating  to the  revocation  or
         modification of any Material Permit.

                  (n)      TITLE TO ASSETS.  The  Company  and the  Subsidiaries
         have good and marketable title in fee simple to all real property owned
         by  them  that is  material  to the  business  of the  Company  and the
         Subsidiaries  and good and  marketable  title in all personal  property
         owned by them that is material  to the  business of the Company and the
         Subsidiaries,  in each  case free and clear of all  Liens,  except  for
         Liens as do not materially affect the value of such property and do not
         materially  interfere with the use made and proposed to be made of such
         property by the Company and the  Subsidiaries and Liens for the payment
         of  federal,  state or other  taxes,  the  payment  of which is neither
         delinquent  nor subject to penalties.  Any real property and facilities
         held under lease by the Company and the  Subsidiaries  are held by them
         under valid, subsisting and enforceable leases of which the Company and
         the Subsidiaries are in compliance.

                  (o)      PATENTS   AND   TRADEMARKS.   The   Company  and  the
         Subsidiaries  have,  or  have  rights  to  use,  all  patents,   patent
         applications,  trademarks, trademark applications, service marks, trade
         names, copyrights, licenses and other similar rights that are necessary
         or material for use in connection with their  respective  businesses as
         described  in the SEC  Reports  and which the  failure to so have could
         have  a  Material  Adverse  Effect  (collectively,   the  "INTELLECTUAL
         PROPERTY RIGHTS").  Neither the Company nor any Subsidiary has received
         a written  notice  that the  Intellectual  Property  Rights used by the
         Company or any Subsidiary  violates or infringes upon the rights of any
         Person. To the knowledge of the Company, all such Intellectual Property
         Rights are enforceable and there is no existing infringement by another
         Person of any of the Intellectual Property Rights of others.

                  (p)      INSURANCE.  The  Company  and  the  Subsidiaries  are
         insured by insurers of recognized financial responsibility against such
         losses and risks and in such  amounts as are prudent and  customary  in
         the businesses in which the Company and the  Subsidiaries  are engaged,
         including,  but  not  limited  to,  directors  and  officers  insurance
         coverage at

                                       12
<PAGE>

         least  equal  to the  aggregate  Subscription  Amounts.  To the best of
         Company's knowledge, such insurance contracts and policies are accurate
         and complete.  Neither the Company nor any Subsidiary has any reason to
         believe  that it  will  not be able to  renew  its  existing  insurance
         coverage  as and  when  such  coverage  expires  or to  obtain  similar
         coverage  from  similar  insurers as may be  necessary  to continue its
         business without a significant increase in cost.

                  (q)      TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as
         set forth in the SEC Reports,  none of the officers or directors of the
         Company and, to the knowledge of the Company,  none of the employees of
         the Company is presently a party to any transaction with the Company or
         any  Subsidiary  (other than for  services as  employees,  officers and
         directors),  including  any  contract,  agreement or other  arrangement
         providing for the furnishing of services to or by, providing for rental
         of real  or  personal  property  to or  from,  or  otherwise  requiring
         payments to or from any officer,  director or such  employee or, to the
         knowledge of the Company, any entity in which any officer, director, or
         any  such  employee  has a  substantial  interest  or  is  an  officer,
         director,  trustee or partner,  in each case in excess of $60,000 other
         than  (i) for  payment  of  salary  or  consulting  fees  for  services
         rendered,  (ii)  reimbursement  for expenses  incurred on behalf of the
         Company and (iii) for other employee  benefits,  including stock option
         agreements under any stock option plan of the Company.

                  (r)      SARBANES-OXLEY;  INTERNAL  ACCOUNTING  CONTROLS.  The
         Company  is  in  material   compliance   with  all  provisions  of  the
         Sarbanes-Oxley Act of 2002 which are applicable to it as of the Closing
         Date.  The Company and the  Subsidiaries  maintain a system of internal
         accounting controls sufficient to provide reasonable assurance that (i)
         transactions  are executed in accordance with  management's  general or
         specific authorizations, (ii) transactions are recorded as necessary to
         permit preparation of financial  statements in conformity with GAAP and
         to maintain asset  accountability,  (iii) access to assets is permitted
         only in accordance with management's general or specific authorization,
         and (iv) the recorded  accountability  for assets is compared  with the
         existing assets at reasonable intervals and appropriate action is taken
         with respect to any differences. The Company has established disclosure
         controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
         15d-15(e))  for the Company and designed such  disclosure  controls and
         procedures to ensure that material information relating to the Company,
         including its Subsidiaries, is made known to the certifying officers by
         others within those entities,  particularly  during the period in which
         the Company's most recently  filed  periodic  report under the Exchange
         Act, as the case may be, is being  prepared.  The Company's  certifying
         officers have evaluated the effectiveness of the Company's controls and
         procedures as of the date prior to the filing date of the most recently
         filed   periodic   report  under  the  Exchange  Act  (such  date,  the
         "EVALUATION  DATE").  The Company  presented in its most recently filed
         periodic   report  under  the  Exchange  Act  the  conclusions  of  the
         certifying  officers about the effectiveness of the disclosure controls
         and procedures  based on their  evaluations as of the Evaluation  Date.
         Since the Evaluation  Date,  there have been no significant  changes in
         the Company's internal controls (as such term is defined in Item 307(b)
         of  Regulation  S-K  under  the  Exchange

                                       13
<PAGE>

         Act) or,  to the  Company's  knowledge,  in other  factors  that  could
         significantly affect the Company's internal controls.

                  (s)      CERTAIN  FEES.  No  brokerage  or  finder's  fees  or
         commissions  are or will  be  payable  by the  Company  to any  broker,
         financial advisor or consultant,  finder,  placement agent,  investment
         banker,   bank  or  other  Person  with  respect  to  the  transactions
         contemplated by this Agreement. The Purchasers shall have no obligation
         with  respect to any fees or with  respect to any claims  made by or on
         behalf of other Persons for fees of a type contemplated in this Section
         that may be due in connection  with the  transactions  contemplated  by
         this Agreement.

                  (t)      PRIVATE  PLACEMENT.  Assuming  the  accuracy  of  the
         Purchasers  representations and warranties set forth in Section 3.2, no
         registration  under the  Securities  Act is required  for the offer and
         sale of the Securities by the Company to the Purchasers as contemplated
         hereby.  The issuance  and sale of the  Securities  hereunder  does not
         contravene the rules and regulations of the Trading Market.

                  (u)      INVESTMENT COMPANY. The Company is not, and is not an
         Affiliate  of,  and  immediately  after  receipt  of  payment  for  the
         Securities,  will not be or be an Affiliate of, an "investment company"
         within the meaning of the  Investment  Company Act of 1940, as amended.
         The Company  shall conduct its business in a manner so that it will not
         become subject to the Investment Company Act.

                  (v)      REGISTRATION RIGHTS. No Person has any right to cause
         the Company to effect the registration  under the Securities Act of any
         securities of the Company.

                  (w)      LISTING AND MAINTENANCE  REQUIREMENTS.  The Company's
         Common Stock is  registered  pursuant to Section  12(g) of the Exchange
         Act,  and the Company has taken no action  designed to, or which to its
         knowledge is likely to have the effect of, terminating the registration
         of the Common Stock under the Exchange Act nor has the Company received
         any notification that the Commission is contemplating  terminating such
         registration.  The Company has not, in the 12 months preceding the date
         hereof,  received  notice from any  Trading  Market on which the Common
         Stock is or has been listed or quoted to the effect that the Company is
         not in compliance with the listing or maintenance  requirements of such
         Trading  Market.  The Company is, and has no reason to believe  that it
         will not in the  foreseeable  future continue to be, in compliance with
         all such listing and maintenance requirements.

                  (x)      APPLICATION OF TAKEOVER PROTECTIONS.  The Company and
         its Board of  Directors  have taken all  necessary  action,  if any, in
         order to render  inapplicable any control share  acquisition,  business
         combination,  poison pill  (including any  distribution  under a rights
         agreement) or other similar anti-takeover provision under the Company's
         Certificate of Incorporation (or similar charter documents) or the laws
         of its state of incorporation that is or could become applicable to the
         Purchasers  as a result of the  Purchasers  and the Company  fulfilling
         their  obligations  or  exercising  their rights under

                                       14
<PAGE>

         the Transaction Documents,  including without limitation as a result of
         the Company's issuance of the Securities and the Purchasers'  ownership
         of the Securities.

                  (y)      DISCLOSURE.  The Company confirms that neither it nor
         any  other  Person  acting  on  its  behalf  has  provided  any  of the
         Purchasers  or  their  agents  or  counsel  with any  information  that
         constitutes or might constitute material,  nonpublic  information.  The
         Company  understands  and confirms that the Purchasers will rely on the
         foregoing  representations  and covenants in effecting  transactions in
         securities of the Company.  All  disclosure  provided to the Purchasers
         regarding the Company,  its business and the transactions  contemplated
         hereby, including the Disclosure Schedules to this Agreement, furnished
         by or on behalf of the Company with respect to the  representations and
         warranties  made  herein  are true and  correct  with  respect  to such
         representations  and warranties and do not contain any untrue statement
         of a material  fact or omit to state any  material  fact  necessary  in
         order  to  make  the   statements   made  therein,   in  light  of  the
         circumstances  under which they were made, not misleading.  The Company
         acknowledges  and  agrees  that no  Purchaser  makes  or has  made  any
         representations   or  warranties  with  respect  to  the   transactions
         contemplated  hereby other than those specifically set forth in Section
         3.2 hereof.

                  (z)      NO INTEGRATED OFFERING.  Assuming the accuracy of the
         Purchasers'  representations  and  warranties set forth in Section 3.2,
         neither the Company,  nor any of its affiliates,  nor any Person acting
         on its or their behalf has, directly or indirectly,  made any offers or
         sales of any  security  or  solicited  any offers to buy any  security,
         under circumstances that would cause this offering of the Securities to
         be integrated  with prior  offerings by the Company for purposes of the
         Securities  Act  or any  applicable  shareholder  approval  provisions,
         including,  without limitation,  under the rules and regulations of any
         exchange or automated  quotation  system on which any of the securities
         of the Company are listed or designated.

                  (aa)     SOLVENCY.  Based on the  financial  condition  of the
         Company as of the Closing  Date after  giving  effect to the receipt by
         the Company of the proceeds from the sale of the Securities  hereunder,
         (i) the Company's  fair saleable value of its assets exceeds the amount
         that will be  required  to be paid on or in  respect  of the  Company's
         existing  debts  and  other  liabilities  (including  known  contingent
         liabilities)  as  they  mature;   (ii)  the  Company's  assets  do  not
         constitute  unreasonably small capital to carry on its business for the
         current  fiscal year as now  conducted  and as proposed to be conducted
         including its capital needs taking into account the particular  capital
         requirements  of the business  conducted by the Company,  and projected
         capital  requirements and capital  availability  thereof; and (iii) the
         current  cash  flow of the  Company,  together  with the  proceeds  the
         Company would  receive,  were it to liquidate all of its assets,  after
         taking  into  account  all  anticipated  uses  of the  cash,  would  be
         sufficient  to pay all  amounts  on or in respect of its debt when such
         amounts are  required to be paid.  The Company does not intend to incur
         debts beyond its ability to pay such debts as they mature  (taking into
         account  the timing and  amounts of cash to be payable on or in respect
         of  its  debt).   The  Company  has  no   knowledge  of  any  facts  or
         circumstances   which  lead  it  to  believe  that  it  will  file  for
         reorganization  or liquidation  under the bankruptcy or  reorganization
         laws of

                                       15
<PAGE>

         any jurisdiction within one year from the Closing Date. The SEC Reports
         set forth as of the dates thereof all outstanding secured and unsecured
         Indebtedness of the Company or any Subsidiary, or for which the Company
         or any Subsidiary has commitments.  For the purposes of this Agreement,
         "INDEBTEDNESS"  shall mean (a) any  liabilities  for borrowed  money or
         amounts owed in excess of $50,000  (other than trade  accounts  payable
         incurred  in the  ordinary  course of  business),  (b) all  guaranties,
         endorsements   and  other   contingent   obligations   in   respect  of
         Indebtedness  of  others,  whether  or not the  same are or  should  be
         reflected in the Company's balance sheet (or the notes thereto), except
         guaranties  by  endorsement  of negotiable  instruments  for deposit or
         collection or similar  transactions in the ordinary course of business;
         and (c) the  present  value of any lease  payments in excess of $50,000
         due under leases  required to be capitalized  in accordance  with GAAP.
         Neither the Company nor any  Subsidiary  is in default  with respect to
         any Indebtedness.

                  (bb)     TAX  STATUS.  Except  for  matters  that  would  not,
         individually  or in the  aggregate,  have or  reasonably be expected to
         result in a Material  Adverse  Effect,  the Company and each Subsidiary
         has filed all necessary federal, state and foreign income and franchise
         tax returns and has paid or accrued all taxes shown as due thereon, and
         the  Company  has no  knowledge  of a tax  deficiency  which  has  been
         asserted or threatened against the Company or any Subsidiary.

                  (cc)     NO GENERAL SOLICITATION.  Neither the Company nor any
         person  acting on behalf of the  Company has offered or sold any of the
         Securities by any form of general  solicitation or general advertising.
         The Company has offered the  Securities for sale only to the Purchasers
         and certain other "accredited investors" within the meaning of Rule 501
         under the Securities Act.

                  (dd)     FOREIGN CORRUPT PRACTICES.  Neither the Company,  nor
         to the  knowledge of the Company,  any agent or other person  acting on
         behalf of the Company, has (i) directly or indirectly, used any corrupt
         funds  for  unlawful  contributions,   gifts,  entertainment  or  other
         unlawful  expenses related to foreign or domestic  political  activity,
         (ii) made any  unlawful  payment  to  foreign  or  domestic  government
         officials or employees or to any foreign or domestic  political parties
         or campaigns from corporate  funds,  (iii) failed to disclose fully any
         contribution  made by the Company (or made by any person  acting on its
         behalf of which the Company is aware)  which is in violation of law, or
         (iv)  violated in any  material  respect any  provision  of the Foreign
         Corrupt Practices Act of 1977, as amended

                  (ee)     ACCOUNTANTS.  The Company's accountants are set forth
         on  SCHEDULE  3.1(FF)  of the  Disclosure  Schedule.  To the  Company's
         knowledge, such accountants, who the Company expects will express their
         opinion with respect to the financial  statements to be included in the
         Company's Annual Report on Form 10-KSB for the year ending December 31,
         2004  are a  registered  public  accounting  firm  as  required  by the
         Securities Act.

                  (ff)     SENIORITY. As of the Closing Date, no indebtedness or
         other equity of the Company is senior to the  Preferred  Stock in right
         of payment,  whether  with respect to

                                       16
<PAGE>

         interest or upon liquidation or dissolution,  or otherwise,  other than
         indebtedness  secured by purchase  money security  interests  (which is
         senior only as to underlying  assets covered thereby) and capital lease
         obligations (which is senior only as to the property covered thereby).

                  (gg)     NO DISAGREEMENTS WITH ACCOUNTANTS AND LAWYERS.  There
         are no  disagreements  of any kind  presently  existing,  or reasonably
         anticipated  by the  Company  to arise,  between  the  accountants  and
         lawyers  formerly or presently  employed by the Company and the Company
         is  current  with  respect  to any  fees  owed to its  accountants  and
         lawyers.

                  (hh)     ACKNOWLEDGMENT   REGARDING  PURCHASERS'  PURCHASE  OF
         SECURITIES.  The  Company  acknowledges  and  agrees  that  each of the
         Purchasers  is  acting  solely  in  the  capacity  of an  arm's  length
         purchaser   with  respect  to  the   Transaction   Documents   and  the
         transactions contemplated hereby. The Company further acknowledges that
         no  Purchaser  is acting as a  financial  advisor or  fiduciary  of the
         Company (or in any similar capacity) with respect to this Agreement and
         the  transactions  contemplated  hereby  and any  advice  given  by any
         Purchaser  or any of their  respective  representatives  or  agents  in
         connection with this Agreement and the transactions contemplated hereby
         is merely incidental to the Purchasers' purchase of the Securities. The
         Company  further  represents  to  each  Purchaser  that  the  Company's
         decision  to enter into this  Agreement  has been  based  solely on the
         independent  evaluation of the transactions  contemplated hereby by the
         Company and its representatives.

         3.2      REPRESENTATIONS   AND  WARRANTIES  OF  THE  PURCHASERS.   Each
Purchaser hereby, for itself and for no other Purchaser, represents and warrants
as of the date hereof and as of the Closing Date to the Company as follows:

                  (a)      ORGANIZATION;  AUTHORITY. Such Purchaser is an entity
         duly organized, validly existing and in good standing under the laws of
         the  jurisdiction  of its  organization  with full right,  corporate or
         partnership  power and  authority to enter into and to  consummate  the
         transactions contemplated by the Transaction Documents and otherwise to
         carry out its  obligations  thereunder.  The  execution,  delivery  and
         performance by such Purchaser of the transactions  contemplated by this
         Agreement  have been duly  authorized  by all  necessary  corporate  or
         similar action on the part of such Purchaser. Each Transaction Document
         to which it is a party has been duly  executed by such  Purchaser,  and
         when delivered by such  Purchaser in accordance  with the terms hereof,
         will  constitute  the  valid and  legally  binding  obligation  of such
         Purchaser,  enforceable against it in accordance with its terms, except
         (i)  as  limited  by  general   equitable   principles  and  applicable
         bankruptcy,  insolvency,  reorganization,  moratorium and other laws of
         general   application   affecting   enforcement  of  creditors'  rights
         generally,  (ii) as limited by laws  relating  to the  availability  of
         specific performance, injunctive relief or other equitable remedies and
         (iii) insofar as  indemnification  and  contribution  provisions may be
         limited by applicable law.

                                       17
<PAGE>

                  (b)      PURCHASER REPRESENTATION.  Such Purchaser understands
         that  the  Securities  are  "restricted  securities"  and have not been
         registered  under the Securities Act or any applicable state securities
         law and is acquiring  the  Securities  as principal for its own account
         and not with a view to or for distributing or reselling such Securities
         or any part thereof,  has no present  intention of distributing  any of
         such Securities and has no arrangement or understanding  with any other
         persons   regarding  the   distribution   of  such   Securities   (this
         representation and warranty not limiting such Purchaser's right to sell
         the Securities  pursuant to the Registration  Statement or otherwise in
         compliance with applicable  federal and state  securities  laws).  Such
         Purchaser is acquiring the Securities  hereunder in the ordinary course
         of its  business.  Such  Purchaser  does  not  have  any  agreement  or
         understanding,  directly or  indirectly,  with any Person to distribute
         any of the Securities.

                  (c)      PURCHASER  STATUS.  At the time  such  Purchaser  was
         offered the  Securities,  it was,  and at the date hereof it is, and on
         the  Closing  Date  and  date on which it  exercises  any  Warrants  or
         Additional Investment Right or converts any Preferred Stock it will be,
         an "accredited investor" as defined in Rule 501(a)(1),  (a)(2), (a)(3),
         (a)(7) or (a)(8)  under  the  Securities  Act.  Such  Purchaser  is not
         required to be  registered as a  broker-dealer  under Section 15 of the
         Exchange Act.

                  (d)      EXPERIENCE OF SUCH PURCHASER. Such Purchaser,  either
         alone  or  together  with  its  representatives,  has  such  knowledge,
         sophistication  and experience in business and financial  matters so as
         to be capable  of  evaluating  the merits and risks of the  prospective
         investment in the Securities, and has so evaluated the merits and risks
         of such investment. Such Purchaser is able to bear the economic risk of
         an  investment in the  Securities  and, at the present time, is able to
         afford a complete loss of such investment.

                  (e)      GENERAL   SOLICITATION.   Such   Purchaser   is   not
         purchasing  the Securities as a result of any  advertisement,  article,
         notice or other communication regarding the Securities published in any
         newspaper,  magazine or similar media or broadcast  over  television or
         radio or presented at any seminar or any other general  solicitation or
         general advertisement.

                  (f)      SHORT SALES.  Each Purchaser  represents  that during
         the sixty days prior to the date hereof to the date hereof,  neither it
         nor any Person over which the Purchaser has direct  control,  have made
         any purchases or sales of, or granted any option for the purchase of or
         entered into any hedging or similar  transaction with the same economic
         effect as a net short sale, of the Common Stock.

                  (g)      DISCLOSURE OF INFORMATION; INDEPENDENT INVESTIGATION.
         Such  Purchaser has received,  read,  carefully  considered,  and fully
         understands this Agreement and all documents related to the Company and
         its operations  required by and furnished to such Purchaser.  In making
         its decision to invest in the  Securities,  such  Purchaser  has relied
         upon the independent  investigations made by such Purchaser and by such
         Purchaser's own professional advisors. Such Purchaser and its advisors,
         if any, have been given the  opportunity to obtain  information  and to
         examine this  Agreement  and certain  other

                                       18
<PAGE>

         information  regarding  the  Company  and to ask  questions  of, and to
         receive answers from, the Company or any Person acting on the Company's
         behalf concerning the Securities, the Company, and terms and conditions
         of this investment,  and to obtain any additional information to verify
         the  accuracy  of  any  information  previously  furnished.   All  such
         questions have been answered to such Purchaser's full satisfaction.

                  The Company  acknowledges  and agrees that each Purchaser does
         not make or has not made any representations or warranties with respect
         to the transactions  contemplated  hereby other than those specifically
         set forth in this Section 3.2.

                                  ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

         4.1      TRANSFER RESTRICTIONS.

                  (a)      The  Securities may only be disposed of in compliance
         with state and federal securities laws. In connection with any transfer
         of  Securities  other  than  pursuant  to  an  effective   registration
         statement or Rule 144, to the Company or to an affiliate of a Purchaser
         or in connection with a pledge as  contemplated in Section 4.1(b),  the
         Company may require the transferor thereof to provide to the Company an
         opinion of counsel selected by the transferor and reasonably acceptable
         to the  Company,  the form and  substance  of  which  opinion  shall be
         reasonably  satisfactory  to the  Company,  to  the  effect  that  such
         transfer does not require  registration of such transferred  Securities
         under  the  Securities  Act.  As a  condition  of  transfer,  any  such
         transferee  shall  agree in  writing  to be bound by the  terms of this
         Agreement and shall have the rights of a Purchaser under this Agreement
         and the Registration Rights Agreement.

                  (b)      The Purchasers agree to the imprinting, so long as is
         required by this Section  4.1(b),  of a legend on any of the Securities
         in the following form:

         [NEITHER]  THESE  SECURITIES  [NOR  THE  SECURITIES  INTO  WHICH  THESE
         SECURITIES ARE [EXERCISABLE]  [CONVERTIBLE]]  HAVE BEEN REGISTERED WITH
         THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES  COMMISSION OF
         ANY STATE IN RELIANCE  UPON AN EXEMPTION  FROM  REGISTRATION  UNDER THE
         SECURITIES  ACT OF  1933,  AS  AMENDED  (THE  "SECURITIES  ACT"),  AND,
         ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
         REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR  PURSUANT  TO AN
         AVAILABLE  EXEMPTION  FROM,  OR IN A  TRANSACTION  NOT  SUBJECT TO, THE
         REGISTRATION  REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
         APPLICABLE  STATE  SECURITIES  LAWS AS EVIDENCED BY A LEGAL  OPINION OF
         COUNSEL TO THE TRANSFEROR TO SUCH EFFECT,  THE SUBSTANCE OF WHICH SHALL
         BE  REASONABLY  ACCEPTABLE  TO THE COMPANY.  THESE  SECURITIES  AND THE
         SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN
         CONNECTION  WITH

                                       19
<PAGE>

         A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

                  The Company  acknowledges and agrees that a Purchaser may from
         time to time pledge  pursuant to a bona fide  margin  agreement  with a
         registered broker-dealer or grant a security interest in some or all of
         the  Securities  to a  financial  institution  that  is an  "accredited
         investor"  as defined in Rule 501(a) under the  Securities  Act and who
         agrees  to be  bound  by the  provisions  of  this  Agreement  and  the
         Registration  Rights Agreement and, if required under the terms of such
         arrangement,  such Purchaser may transfer pledged or secured Securities
         to the pledgees or secured parties. Such a pledge or transfer would not
         be subject to approval  of the  Company  and no legal  opinion of legal
         counsel of the pledgee,  secured  party or pledgor shall be required in
         connection  therewith.  Further,  no notice  shall be  required of such
         pledge.  At the  appropriate  Purchaser's  expense,  the  Company  will
         execute  and  deliver  such  reasonable  documentation  as a pledgee or
         secured party of Securities may reasonably request in connection with a
         pledge or transfer of the Securities,  including, if the Securities are
         subject to registration  pursuant to the Registration Rights Agreement,
         the preparation and filing of any required prospectus  supplement under
         Rule 424(b)(3) under the Securities Act or other  applicable  provision
         of the  Securities  Act to  appropriately  amend  the  list of  Selling
         Stockholders thereunder.

                  (c)      Certificates  evidencing the Underlying  Shares shall
         not  contain  any  legend  (including  the  legend set forth in Section
         4.1(b)  hereof):  (i) while a  registration  statement  (including  the
         Registration  Statement)  covering  the  resale  of  such  security  is
         effective  under the Securities Act, or (ii) following any sale of such
         Underlying  Shares  pursuant to Rule 144,  or (iii) if such  Underlying
         Shares are eligible for sale under Rule 144(k),  or (iv) if such legend
         is not required  under  applicable  requirements  of the Securities Act
         (including judicial  interpretations  and pronouncements  issued by the
         staff of the Commission).  The Company shall cause its counsel to issue
         a legal  opinion to the Company's  transfer  agent  promptly  after the
         Effective  Date if required by the Company's  transfer  agent to effect
         the removal of the legend hereunder.  If all or any shares of Preferred
         Stock, Warrant or Additional Investment Rights Security is converted or
         exercised  (as  applicable)  at a  time  when  there  is  an  effective
         registration statement to cover the resale of the Underlying Shares, or
         if such  Underlying  Shares may be sold  under  Rule  144(k) or if such
         legend is not otherwise  required under applicable  requirements of the
         Securities Act (including judicial  interpretations  thereof) then such
         Underlying  Shares  shall be issued  free of all  legends.  The Company
         agrees that following the Effective Date or at such time as such legend
         is no longer required under this Section 4.1(c), it will, no later than
         three Trading Days following the delivery by a Purchaser to the Company
         or  the  Company's   transfer  agent  of  a  certificate   representing
         Underlying  Shares,  as  applicable,  issued with a restrictive  legend
         (such third Trading Day, the "LEGEND REMOVAL  DATE"),  deliver or cause
         to be  delivered  to such  Purchaser a  certificate  representing  such
         shares that is free from all restrictive and other legends. The Company
         may not make any  notation on its records or give  instructions  to any
         transfer agent of the Company that enlarge the restrictions on transfer
         set forth in this  Section.  Certificates  for  Securities  subject  to
         legend removal  hereunder shall be transmitted by the

                                       20
<PAGE>

         transfer  agent of the  Company  to the  Purchasers  by  crediting  the
         account of the  Purchaser's  prime  broker  with the  Depository  Trust
         Company System.

                  (d)      In  addition  to  such  Purchaser's  other  available
         remedies,  the Company  shall pay to a Purchaser,  in cash,  as partial
         liquidated damages and not as a penalty,  for each $1,000 of Underlying
         Shares (based on the Closing Price of the Common Stock on the date such
         Securities are submitted to the Company's transfer agent) delivered for
         removal of the  restrictive  legend and subject to this Section 4.1(c),
         $10 per Trading Day  (increasing  to $20 per Trading Day 5 Trading Days
         after such damages have begun to accrue) for each Trading Day after the
         Legend  Removal  Date until such  certificate  is  delivered  without a
         legend.  Nothing  herein shall limit such  Purchaser's  right to pursue
         actual  damages  for the  Company's  failure  to  deliver  certificates
         representing  any Securities as required by the Transaction  Documents,
         and  such  Purchaser  shall  have  the  right to  pursue  all  remedies
         available to it at law or in equity including,  without  limitation,  a
         decree of specific performance and/or injunctive relief.

                  (e)      Each  Purchaser,  severally  and not jointly with the
         other  Purchasers,  agrees that the removal of the  restrictive  legend
         from certificates  representing Securities as set forth in this Section
         4.1 is predicated  upon the Company's  reliance that the Purchaser will
         sell any Securities pursuant to either the registration requirements of
         the  Securities  Act,  including  any  applicable  prospectus  delivery
         requirements, or an exemption therefrom.

                  (f)      Until the date that each  Purchaser  holds  less than
         20% of the shares of Preferred Stock initially  purchased  hereunder by
         such  Purchaser,  the Company  shall not undertake a reverse or forward
         stock split or  reclassification  of the Common Stock without the prior
         written consent of the Purchasers holding a majority in interest of the
         outstanding shares of Preferred Stock.

         4.2      ACKNOWLEDGMENT OF DILUTION.  The Company acknowledges that the
issuance of the Securities may result in dilution of the  outstanding  shares of
Common Stock, which dilution may be substantial under certain market conditions.
The Company  further  acknowledges  that its  obligations  under the Transaction
Documents,  including without  limitation its obligation to issue the Underlying
Shares pursuant to the Transaction Documents, are unconditional and absolute and
not  subject  to any  right  of  set  off,  counterclaim,  delay  or  reduction,
regardless  of the effect of any such dilution or any claim the Company may have
against any Purchaser and  regardless of the dilutive  effect that such issuance
may have on the ownership of the other stockholders of the Company.

         4.3      FURNISHING  OF  INFORMATION.  As  long as any  Purchaser  owns
Securities,  the  Company  covenants  to timely  file (or obtain  extensions  in
respect  thereof  and file  within the  applicable  grace  period)  all  reports
required  to be filed by the  Company  after  the date  hereof  pursuant  to the
Exchange Act. As long as any Purchaser  owns  Securities,  if the Company is not
required to file  reports  pursuant  to the  Exchange  Act, it will  prepare and
furnish to the  Purchasers and make publicly  available in accordance  with Rule
144(c) such information as is required for the Purchasers to sell the Securities
under Rule 144.  The Company  further  covenants  that it will take such further
action as any holder of Securities  may  reasonably  request,

                                       21
<PAGE>

all to the extent  required from time to time to enable such Person to sell such
Securities  without  registration under the Securities Act within the limitation
of the exemptions provided by Rule 144.

         4.4      INTEGRATION.  The  Company  shall not sell,  offer for sale or
solicit  offers to buy or  otherwise  negotiate  in respect of any  security (as
defined in Section 2 of the  Securities  Act) that would be integrated  with the
offer or sale of the Securities in a manner that would require the  registration
under the Securities Act of the sale of the Securities to the Purchasers or that
would be integrated with the offer or sale of the Securities for purposes of the
rules and regulations of any Trading Market.

         4.5      CONVERSION  AND  EXERCISE  PROCEDURES.  The form of  Notice of
Exercise included in the Warrants,  the form of Notice of Conversion included in
the Certificate of Designations and the form of Notice of Exercise or Conversion
set forth in the Additional  Investment  Rights and Additional  Investment Right
Securities set forth the totality of the  procedures  required of the Purchasers
in order to exercise the  Warrants,  convert the  Preferred  Stock or convert or
exercise  the  Additional  Investment  Rights and  Additional  Investment  Right
Securities.  No additional  legal opinion or other  information or  instructions
shall be required of the  Purchasers  to  exercise  the  Warrants or convert the
Preferred  Stock or convert or exercise  the  Additional  Investment  Rights and
Additional Investment Right Securities. The Company shall honor exercises of the
Warrants and the Additional  Investment  Rights and conversions of the Preferred
Stock  and  Additional   Investment  Right  Securities  and  shall  deliver  the
Additional  Investment  Securities and the Underlying  Shares in accordance with
the terms, conditions and time periods set forth in the Transaction Documents.

         4.6      SECURITIES LAWS DISCLOSURE;  PUBLICITY.  The Company shall, by
8:30 a.m.  Eastern time on the Trading Day  following  the date hereof,  issue a
Current Report on Form 8-K, reasonably  acceptable to each Purchaser  disclosing
the material terms of the transactions contemplated hereby, and shall attach the
Transaction Documents thereto as exhibits.  The Company and each Purchaser shall
consult with each other in issuing any other press  releases with respect to the
transactions  contemplated  hereby,  and neither  the Company nor any  Purchaser
shall issue any such press release or otherwise  make any such public  statement
without the prior  consent of the Company,  with respect to any press release of
any Purchaser,  or without the prior consent of each Purchaser,  with respect to
any press  release of the  Company,  which  consent  shall not  unreasonably  be
withheld,  except if such  disclosure  is  required  by law,  in which  case the
disclosing  party shall  promptly  provide the other party with prior  notice of
such public  statement or  communication.  Notwithstanding  the  foregoing,  the
Company shall not publicly  disclose the name of any  Purchaser,  or include the
name of any Purchaser in any filing with the Commission or any regulatory agency
or Trading Market,  without the prior written consent of such Purchaser,  except
(i) as required by federal  securities law in connection  with the  registration
statement  contemplated  by the  Registration  Rights  Agreement and (ii) to the
extent such  disclosure  is required by law or Trading  Market  regulations,  in
which case the Company  shall provide the  Purchasers  with prior notice of such
disclosure permitted under subclause (i) or (ii).

                                       22
<PAGE>

         4.7      SHAREHOLDER  RIGHTS PLAN. No claim will be made or enforced by
the Company  or, to the  knowledge  of the  Company,  any other  Person that any
Purchaser is an "Acquiring  Person" under any shareholder rights plan or similar
plan or arrangement in effect or hereafter  adopted by the Company,  or that any
Purchaser  could be  deemed  to  trigger  the  provisions  of any  such  plan or
arrangement,  by virtue of receiving Securities under the Transaction  Documents
or under any other agreement between the Company and the Purchasers. The Company
shall conduct its business in a manner so that it will not become subject to the
Investment Company Act.

         4.8      NON-PUBLIC INFORMATION.  The Company covenants and agrees that
neither it nor any other Person  acting on its behalf will provide any Purchaser
or its  agents  or  counsel  with  any  information  that the  Company  believes
constitutes material non-public information, unless prior thereto such Purchaser
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that each Purchaser shall
be  relying  on the  foregoing  representations  in  effecting  transactions  in
securities of the Company.

         4.9      USE OF PROCEEDS.  Except as set forth on SCHEDULE 4.9 attached
hereto,  the Company shall use the net proceeds from the sale of the  Securities
hereunder  for working  capital  purposes  and not for the  satisfaction  of any
portion of the  Company's  debt  (other  than  payment of trade  payables in the
ordinary course of the Company's  business and prior  practices),  to redeem any
Common Stock or Common Stock Equivalents.

         4.10     REIMBURSEMENT.  If  any  Purchaser  becomes  involved  in  any
capacity in any  Proceeding by or against any Person who is a stockholder of the
Company  (except  as a result  of  sales,  pledges,  margin  sales  and  similar
transactions by such Purchaser to or with any current stockholder),  solely as a
result of such  Purchaser's  acquisition of the Securities under this Agreement,
the Company will reimburse  such  Purchaser for its  reasonable  legal and other
expenses  (including  the cost of any  investigation  preparation  and travel in
connection  therewith)  incurred in connection  therewith,  as such expenses are
incurred.  The  reimbursement  obligations  of the Company under this  paragraph
shall be in addition to any  liability  which the  Company may  otherwise  have,
shall  extend  upon the same  terms  and  conditions  to any  Affiliates  of the
Purchasers who are actually named in such action,  proceeding or  investigation,
and partners,  directors, agents, employees and controlling persons (if any), as
the case may be, of the Purchasers and any such Affiliate,  and shall be binding
upon and inure to the benefit of any  successors,  assigns,  heirs and  personal
representatives  of the Company,  the  Purchasers and any such Affiliate and any
such Person.  The Company also agrees that neither the  Purchasers  nor any such
Affiliates,  partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company  solely as a result of acquiring  the  Securities  under
this Agreement.

         4.11     INDEMNIFICATION  OF  PURCHASERS.  Subject to the provisions of
this Section 4.11,  the Company will indemnify and hold the Purchasers and their
directors,  officers,  shareholders,  partners,  employees and agents  (each,  a
"PURCHASER PARTY") harmless from any and all losses,  liabilities,  obligations,
claims,  contingencies,  damages,  costs and expenses,  including all judgments,
amounts paid in  settlements,  court costs and  reasonable  attorneys'  fees and
costs of  investigation  that any such Purchaser  Party may suffer or incur as a
result  of or  relating  to (a)  any  breach  of  any  of  the  representations,
warranties,  covenants or agreements made by the Company

                                       23
<PAGE>

in this  Agreement  or in the  other  Transaction  Documents  or (b) any  action
instituted against a Purchaser,  or any of them or their respective  Affiliates,
by any  stockholder  of the Company who is not an Affiliate  of such  Purchaser,
with  respect  to any  of  the  transactions  contemplated  by  the  Transaction
Documents  (unless  such  action  is  based  upon a breach  of such  Purchaser's
representation,  warranties or covenants under the Transaction  Documents or any
agreements or  understandings  such Purchaser may have with any such stockholder
or any  violations by the Purchaser of state or federal  securities  laws or any
conduct by such Purchaser which constitutes  fraud,  gross  negligence,  willful
misconduct or malfeasance). If any action shall be brought against any Purchaser
Party in respect of which  indemnity may be sought  pursuant to this  Agreement,
such  Purchaser  Party shall  promptly  notify the  Company in writing,  and the
Company  shall have the right to assume the defense  thereof with counsel of its
own  choosing.  Any  Purchaser  Party  shall  have the right to employ  separate
counsel in any such action and participate in the defense thereof,  but the fees
and expenses of such  counsel  shall be at the expense of such  Purchaser  Party
except to the  extent  that (i) the  employment  thereof  has been  specifically
authorized  by the  Company in  writing,  (ii) the  Company  has failed  after a
reasonable  period of time to assume such defense and to employ counsel or (iii)
in such action there is, in the reasonable  opinion of such separate counsel,  a
material  conflict on any material issue between the position of the Company and
the  position of such  Purchaser  Party.  The Company  will not be liable to any
Purchaser Party under this Agreement (i) for any settlement by a Purchaser Party
effected  without  the  Company's  prior  written  consent,  which  shall not be
unreasonably  withheld or delayed; or (ii) to the extent, but only to the extent
that a loss, claim, damage or liability is attributable to any Purchaser Party's
breach of any of the representations,  warranties,  covenants or agreements made
by the Purchasers in this Agreement or in the other Transaction Documents.

         4.12     RESERVATION AND LISTING OF SECURITIES.

                  (a)      The Company  shall  maintain a reserve  from its duly
         authorized  shares  of  Common  Stock  for  issuance  pursuant  to  the
         Transaction  Documents in such amount as may be required to fulfill its
         obligations in full under the Transaction Documents.

                  (b)      If,  on  any  date,  the  number  of  authorized  but
         unissued (and otherwise unreserved) shares of Common Stock is less than
         the Required  Minimum on such date,  then the Board of Directors of the
         Company  shall  use  commercially   reasonable  efforts  to  amend  the
         Company's  certificate  or articles of  incorporation  to increase  the
         number of  authorized  but unissued  shares of Common Stock to at least
         the Required Minimum at such time, as soon as possible and in any event
         not later than the 75th day after such date.

                  (c)      The Company shall, if applicable: (i) in the time and
         manner  required  by the  Trading  Market,  prepare  and file with such
         Trading  Market an additional  shares  listing  application  covering a
         number of shares of Common Stock at least equal to the Required Minimum
         on the date of such application, (ii) take all steps necessary to cause
         such shares of Common  Stock to be approved  for listing on the Trading
         Market as soon as possible thereafter,  (iii) provide to the Purchasers
         evidence of such listing,  and (iv) maintain the listing of such Common
         Stock on any date at least equal to the  Required  Minimum on such date
         on such Trading Market or another Trading Market.

                                       24
<PAGE>

         4.13     PARTICIPATION IN FUTURE FINANCING.  From the date hereof until
the one year  anniversary  of the  Effective  Date,  upon any  financing  by the
Company or any of its  Subsidiaries of Common Stock or Common Stock  Equivalents
or  any  non-convertible  debt  securities  (a  "SUBSEQUENT  FINANCING"),   each
Purchaser  shall have the right to  participate  in up to 100% of the Subsequent
Financing (the  "PARTICIPATION  MAXIMUM").  At least 5 Trading Days prior to the
closing of the Subsequent Financing, the Company shall deliver to each Purchaser
a  written   notice  of  its   intention  to  effect  a   Subsequent   Financing
("PRE-NOTICE"),  which Pre-Notice shall ask such Purchaser if it wants to review
the details of such financing (such additional  notice, a "SUBSEQUENT  FINANCING
NOTICE").  Upon the  request  of a  Purchaser,  and only upon a request  by such
Purchaser, for a Subsequent Financing Notice, the Company shall promptly, but no
later than 1 Trading  Day after such  request,  deliver a  Subsequent  Financing
Notice to such  Purchaser.  The  Subsequent  Financing  Notice shall describe in
reasonable detail the proposed terms of such Subsequent Financing, the amount of
proceeds intended to be raised thereunder,  the Person with whom such Subsequent
Financing  is proposed  to be  effected,  and  attached to which shall be a term
sheet or similar document relating thereto. If by 5:30 p.m. (New York City time)
on the 5th Trading Day after all of the Purchasers have received the Pre-Notice,
notifications  by the  Purchasers of their  willingness  to  participate  in the
Subsequent  Financing (or to cause their  designees to  participate)  is, in the
aggregate,  less than the total  amount of the  Participation  Amount,  then the
Company may effect the  remaining  portion of such  Subsequent  Financing on the
terms and to the Persons set forth in the Subsequent  Financing  Notice.  If the
Company  receives no notice from a Purchaser  as of such 5th Trading  Day,  such
Purchaser shall be deemed to have notified the Company that it does not elect to
participate.  The Company must provide the Purchasers  with a second  Subsequent
Financing Notice,  and the Purchasers will again have the right of participation
set forth above in this Section 4.13, if the Subsequent Financing subject to the
initial  Subsequent  Financing  Notice is not  consummated for any reason on the
terms set forth in such Subsequent Financing Notice within 60 Trading Days after
the date of the initial  Subsequent  Financing  Notice. In the event the Company
receives  responses to Subsequent  Financing Notices from Purchasers  seeking to
purchase more than the aggregate amount of the Participation  Amount,  each such
Purchaser  shall have the right to purchase  their Pro Rata  Portion (as defined
below) of the Participation  Maximum. "PRO RATA PORTION" is the ratio of (x) the
Subscription Amount of Securities purchased by a participating Purchaser and (y)
the sum of the aggregate  Subscription  Amount of all participating  Purchasers.
Notwithstanding  the foregoing,  this Section 4.13 shall not apply in respect of
an Exempt  Issuance or a firm  commitment  underwritten  public  offering of the
Company's securities.

         4.14     SUBSEQUENT TRANSACTIONS.  From the date hereof until after the
Effective  Date,  neither the Company nor any  Subsidiary  shall issue shares of
Common Stock or Common Stock Equivalents or indebtedness for borrowed monies. In
addition to the  limitations  set forth herein,  from the date hereof until such
time  as no  Purchaser  holds  any of  the  Securities,  the  Company  shall  be
prohibited from effecting or entering into an agreement to effect any Subsequent
Financing  involving a "VARIABLE RATE TRANSACTION" (as defined below).  The term
"VARIABLE RATE TRANSACTION" shall mean a transaction in which the Company issues
or  sells  (i)  any  debt  or  equity  securities  that  are  convertible  into,
exchangeable  or  exercisable  for, or include  the right to receive  additional
shares of Common Stock either (A) at a conversion,  exercise or exchange rate or
other  price that is based upon  and/or  varies  with the  trading  prices of or
quotations for the shares of Common Stock at any time after the initial issuance
of such  debt or  equity  securities,  or

                                       25
<PAGE>

(B) with a conversion, exercise or exchange price that is subject to being reset
at some future date after the initial  issuance of such debt or equity  security
or upon the occurrence of specified or contingent  events directly or indirectly
related to the  business of the Company or the market for the Common  Stock (but
not including customary  anti-dilution  provisions that adjust the conversion or
exercise price of outstanding  securities).  Any Purchaser  shall be entitled to
obtain  injunctive  relief  against the Company to preclude  any such  issuance,
which   remedy   shall  be  in  addition  to  any  right  to  collect   damages.
Notwithstanding  the foregoing,  this Section 4.14 shall not apply in respect of
an Exempt Issuance,  except that no Variable Rate Transaction shall be an Exempt
Issuance.

         4.15     EQUAL  TREATMENT  OF  PURCHASERS.  No  consideration  shall be
offered or paid to any person to amend or consent to a waiver or modification of
any provision of any of the Transaction  Documents unless the same consideration
is  also  offered  to all of the  parties  to  the  Transaction  Documents.  For
clarification  purposes,  this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated  separately by each Purchaser,  and
is intended to treat for the Company the  Purchasers as a class and shall not in
any way be  construed  as the  Purchasers  acting in  concert or as a group with
respect to the purchase, disposition or voting of Securities or otherwise.

         4.16     NO NET SHORT POSITION.  Each Purchaser  agrees,  severally and
not jointly  with any other  Purchasers,  that they or any Person  acting at the
request or  direction  of  Purchaser,  will not enter  into any Short  Sales (as
hereinafter  defined) from the period  commencing on the Closing Date and ending
on the date that such  Purchaser no longer holds any shares of Preferred  Stock.
For purposes of this Section 4.16, a "SHORT SALE" by any Purchaser  shall mean a
sale of Common Stock by such  Purchaser  that is marked as a short sale and that
is made at a time when there is no equivalent offsetting long position in Common
Stock held by such  Purchaser.  For purposes of determining  whether there is an
equivalent  offsetting  long  position  in Common  Stock held by the  Purchaser,
Underlying Shares that have not yet been exercised or converted,  as applicable,
shall be deemed to be held long by the  Purchaser,  and the  amount of shares of
Common Stock held in a long position  shall be all Underlying  Shares  (ignoring
any exercise  limitations included therein) held by such Purchaser on such date,
plus  any  shares  of  Common  Stock  otherwise  then  held by  such  Purchaser.
Additionally,  each Purchaser  understands and  acknowledges,  severally and not
jointly with any other Purchaser, that the SEC currently takes the position that
coverage of short sales of shares of the Common Stock "against the box" prior to
the Effective Date of the  Registration  Statement  with the  Underlying  Shares
issuable  hereunder  is a violation of Section 5 of the  Securities  Act, as set
forth in Item 65, Section 5 under Section A, of the Manual of Publicly Available
Telephone  Interpretations,  dated  July 1997,  compiled  by the Office of Chief
Counsel, Division of Corporation Finance.

                                   ARTICLE V.
                                  MISCELLANEOUS

         5.1      TERMINATION.   This   Agreement   may  be  terminated  by  any
Purchaser,  by written notice to the other parties,  if the Closing has not been
consummated on or before  December 31, 2004;  provided that no such  termination
will  affect the right of any party to sue for any breach by the other party (or
parties).

                                       26
<PAGE>

         5.2      FEES AND  EXPENSES.  The Company shall  deliver,  prior to the
Closing, a completed and executed copy of the Closing Statement, attached hereto
as ANNEX A. Except as expressly  set forth in the  Transaction  Documents to the
contrary,  each party shall pay the fees and expenses of its advisers,  counsel,
accountants and other experts,  if any, and all other expenses  incurred by such
party  incident  to  the  negotiation,   preparation,  execution,  delivery  and
performance  of this  Agreement.  The Company shall pay all transfer agent fees,
stamp taxes and other taxes and duties levied in connection with the issuance of
any Securities.

         5.3      ENTIRE AGREEMENT. The Transaction Documents, together with the
exhibits and schedules thereto,  contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

         5.4      NOTICES.  Any and  all  notices  or  other  communications  or
deliveries  required or permitted to be provided  hereunder  shall be in writing
and  shall be deemed  given and  effective  on the  earliest  of (a) the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile  number set forth on the signature pages attached hereto prior to 5:30
p.m.  (New York City time) on a Trading  Day, (b) the next Trading Day after the
date of transmission, if such notice or communication is delivered via facsimile
at the facsimile  number set forth on the signature  pages attached  hereto on a
day that is not a Trading  Day or later  than 5:30 p.m.  (New York City time) on
any Trading Day, (c) the second  Trading Day following  the date of mailing,  if
sent by U.S. nationally recognized overnight courier service, or (d) upon actual
receipt by the party to whom such notice is  required  to be given.  The address
for such notices and communications shall be as set forth on the signature pages
attached hereto.

         5.5      AMENDMENTS;  WAIVERS.  No provision of this  Agreement  may be
waived  or  amended  except in a written  instrument  signed,  in the case of an
amendment, by the Company and each Purchaser or, in the case of a waiver, by the
party against whom  enforcement  of any such waiver is sought.  No waiver of any
default  with  respect  to any  provision,  condition  or  requirement  of  this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any  subsequent  default  or a  waiver  of any  other  provision,  condition  or
requirement  hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.

         5.6      CONSTRUCTION. The headings herein are for convenience only, do
not  constitute  a part of this  Agreement  and  shall not be deemed to limit or
affect any of the provisions hereof. 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.

         5.7      SUCCESSORS AND ASSIGNS.  This Agreement  shall be binding upon
and inure to the  benefit of the  parties  and their  successors  and  permitted
assigns.  The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of each Purchaser. Any Purchaser may
assign any or all of its rights under this  Agreement to any Person to whom such
Purchaser  assigns or transfers any Securities,  provided such transferee agrees
in

                                       27
<PAGE>

writing  to be  bound,  with  respect  to  the  transferred  Securities,  by the
provisions hereof that apply to the "Purchasers".

         5.8      NO THIRD-PARTY  BENEFICIARIES.  This Agreement is intended for
the benefit of the parties hereto and their respective  successors and permitted
assigns and is not for the benefit of, nor may any provision  hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.11.

         5.9      GOVERNING  LAW. All  questions  concerning  the  construction,
validity,  enforcement and interpretation of the Transaction  Documents 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  legal   proceedings   concerning  the
interpretations,  enforcement  and defense of the  transactions  contemplated by
this Agreement and any other  Transaction  Documents  (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. Each party 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  (including  with  respect  to the  enforcement  of any of the
Transaction Documents),  and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding,  any claim that it is not personally  subject
to the jurisdiction of any such court,  that such suit,  action or proceeding is
improper  or  inconvenient   venue  for  such  proceeding.   Each  party  hereby
irrevocably  waives  personal  service of process and consents to process  being
served in any such suit,  action or  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. The parties
hereby waive all rights to a trial by jury.  If either  party shall  commence an
action or proceeding to enforce any  provisions  of the  Transaction  Documents,
then the  prevailing  party in such action or proceeding  shall be reimbursed by
the other party for its  attorneys'  fees and other costs and expenses  incurred
with  the   investigation,   preparation  and  prosecution  of  such  action  or
proceeding.

         5.10     SURVIVAL.  The representations and warranties contained herein
shall survive the Closing and the delivery,  exercise  and/or  conversion of the
Securities, as applicable for the applicable statue of limitations.

         5.11     EXECUTION.  This  Agreement  may be  executed  in two or  more
counterparts,  all of which when taken  together shall be considered one and the
same agreement and shall become effective when  counterparts have been signed by
each party and  delivered  to the other  party,  it being  understood  that both
parties need not sign the same  counterpart.  In the event that any signature is
delivered by facsimile  transmission,  such  signature  shall create a valid and
binding  obligation of the party executing (or on whose behalf such signature is
executed)  with the same force and effect as if such  facsimile  signature  page
were an original thereof.

                                       28
<PAGE>

         5.12     SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable in any respect,  the validity and enforceability of the
remaining  terms  and  provisions  of  this  Agreement  shall  not in any way be
affected or impaired  thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor,  and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

         5.13     RESCISSION AND WITHDRAWAL RIGHT.  Notwithstanding  anything to
the contrary  contained in (and without limiting any similar  provisions of) the
Transaction  Documents,  whenever  any  Purchaser  exercises a right,  election,
demand or option  under a  Transaction  Document and the Company does not timely
perform its related  obligations within the periods therein provided,  then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice,  demand or election in whole
or in part  without  prejudice  to its  future  actions  and  rights;  PROVIDED,
HOWEVER,  in the case of a  rescission  of a  conversion  of shares of Preferred
Stock,  exercise of a Warrant or  conversion  and/or  exercise of an  Additional
Investment Right Security,  the Purchaser shall be required to return any shares
of Common Stock subject to any such rescinded conversion notice.

         5.14     REPLACEMENT  OF SECURITIES.  If any  certificate or instrument
evidencing any Securities is mutilated,  lost, stolen or destroyed,  the Company
shall  issue or cause to be issued in  exchange  and  substitution  for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument,  but only upon receipt of evidence reasonably satisfactory to the
Company  of such  loss,  theft  or  destruction  and  customary  and  reasonable
indemnity,  if requested.  The  applicants  for a new  certificate or instrument
under  such  circumstances  shall  also  pay any  reasonable  third-party  costs
associated with the issuance of such replacement Securities.

         5.15     REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law,  including  recovery of damages,  each of the
Purchasers  and the Company will be entitled to specific  performance  under the
Transaction  Documents.  The  parties  agree that  monetary  damages  may not be
adequate  compensation  for  any  loss  incurred  by  reason  of any  breach  of
obligations  described in the  foregoing  sentence and hereby agrees to waive in
any action for specific  performance  of any such  obligation the defense that a
remedy at law would be adequate.

         5.16     PAYMENT  SET ASIDE.  To the extent  that the  Company  makes a
payment or payments to any Purchaser  pursuant to any Transaction  Document or a
Purchaser  enforces or  exercises  its rights  thereunder,  and such  payment or
payments or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated,  declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company,  a trustee,  receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable  cause of action),  then to the extent of any such  restoration
the  obligation  or part thereof  originally  intended to be satisfied  shall be
revived and  continued  in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

                                       29
<PAGE>

         5.17     INDEPENDENT NATURE OF PURCHASERS'  OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the  obligations of any other  Purchaser,  and no Purchaser  shall be
responsible  in any way for the  performance  of the  obligations  of any  other
Purchaser under any Transaction  Document.  Nothing  contained  herein or in any
Transaction  Document,  and no action taken by any Purchaser  pursuant  thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint  venture  or any other kind of entity,  or create a  presumption  that the
Purchasers  are in any way acting in concert or as a group with  respect to such
obligations or the transactions  contemplated by the Transaction Document.  Each
Purchaser  shall be  entitled to  independently  protect and enforce its rights,
including without  limitation the rights arising out of this Agreement or out of
the other  Transaction  Documents,  and it shall not be necessary  for any other
Purchaser  to be  joined  as an  additional  party  in any  proceeding  for such
purpose.  Each Purchaser has been  represented by its own separate legal counsel
in their review and  negotiation of the  Transaction  Documents.  For reasons of
administrative  convenience only,  Purchasers and their respective  counsel have
chosen to communicate  with the Company through FW. FW does not represent any of
the Purchasers but only the placement  agent,  Ascendiant  Securities,  LLC. The
Company  has  elected  to  provide  all  Purchasers  with  the  same  terms  and
Transaction  Documents for the convenience of the Company and not because it was
required or requested to do so by the Purchasers.

         5.18     LIQUIDATED  DAMAGES.  The  Company's  obligations  to pay  any
partial  liquidated  damages  or  other  amounts  owing  under  the  Transaction
Documents  is a  continuing  obligation  of the Company and shall not  terminate
until all unpaid  partial  liquidated  damages and other  amounts have been paid
notwithstanding  the fact that the instrument or security pursuant to which such
partial  liquidated damages or other amounts are due and payable shall have been
canceled.

         5.19     CONSTRUCTION. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved  against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.

                            (SIGNATURE PAGES FOLLOW)


                                       30
<PAGE>


         IN WITNESS  WHEREOF,  the parties  hereto  have caused this  Securities
Purchase   Agreement  to  be  duly  executed  by  their  respective   authorized
signatories as of the date first indicated above.

CIROND CORPORATION                                ADDRESS FOR NOTICE:



By:__________________________________________
     Name:
     Title:

With a copy to (which shall not constitute notice):




                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]



                                       31
<PAGE>


        [PURCHASER SIGNATURE PAGES TO CROO SECURITIES PURCHASE AGREEMENT]

         IN  WITNESS  WHEREOF,  the  undersigned  have  caused  this  Securities
Purchase   Agreement  to  be  duly  executed  by  their  respective   authorized
signatories as of the date first indicated above.


Name of Investing Entity: ___________________________________________________
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: ______________________
Name of Authorized Signatory: _______________________________________________
Title of Authorized Signatory: ______________________________________________
Email Address of Authorized Entity:__________________________________________

Address for Notice of Investing Entity:




Address for Delivery of Securities for Investing Entity (if not same as above):





Subscription Amount:
Warrant Shares:
Additional Investment Right:
EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]




                                       32
<PAGE>

                                                                         ANNEX A

                                CLOSING STATEMENT

Pursuant to the attached  Securities  Purchase  Agreement,  dated as of the date
hereto,  the  purchasers  shall  purchase up to $2,000,000  of Preferred  Stock,
Warrants  and  Additional   Investment  Rights  from  Cirond   Corporation  (the
"COMPANY"). All funds will be wired into a trust account maintained by Dill Dill
Carr  Stonbraker & Hutchings,  P.C.,  counsel to the Company.  All funds will be
disbursed in accordance with this Closing Statement.

DISBURSEMENT DATE:    December 22, 2004
--------------------------------------------------------------------------

I.   PURCHASE PRICE

                  GROSS PROCEEDS TO BE RECEIVED IN TRUST          $2,000,000

II.  DISBURSEMENTS

                  Ascendiant   Securities,   LLC  (Placement      $60,000
                  Agent Fee - 8% of  Aggregate  Subscription
                  Amount  based  on  $2M,  net  of  $100,000
                  invested  for  Ascendiant's   Subscription
                  Amount)

                  Feldman Weinstein, LLP (Legal Fee)              $15,000
                  Dill Dill Carr Stonbraker & Hutchings, P.C.     $85,000

TOTAL AMOUNT DISBURSED:                                           $160,000

WIRE INSTRUCTIONS:


To: Ascendiant Securities, LLC                                    $60,000
                  AMERICAN BUSINESS BANK
                  523 WEST 6TH STREET, SUITE 900
                  LOS ANGELES, CA 90014-1223
                  213-430-4000
                  ABA #    122042807
                  ACCOUNT: ASCENDIANT SECURITIES,
                  LLC
                  ACCOUNT #        02100363
To: Feldman Weinstein, LLP                                        $15,000
                  STERLING NATIONAL BANK
                  622 3RD AVENUE
                  NEW YORK, NY 10017
                  Account Name:  Feldman Weinstein

                             33
<PAGE>
                  LLP
                  ABA ROUTING NO: 026007773
                  ACCT NO: 0814180101
                  Remark: croo fee/Ascendiant



                             34
<PAGE>
               SCHEDULE 3.1(A) - SUBSIDIARIES

Cirond Networks Inc. - a Nevada corporation
Cirond Networks (Canada) Inc., a British Columbia corporation


              SCHEDULE 3.1(G) - CAPITALIZATION

At September 30, 2004, the Company had received a subscription in the amount of
$25,000 for 50,000 shares of common stock. These shares were issued in November
2004. As of December 10, 2004, 37,110,000 shares of common stock are issued and
outstanding and no shares of preferred stock are issued or outstanding.

Pursuant to the Company's agreement with Ascendiant Securities, LLC dated August
26, 2004, the Company has agreed to pay a cash fee equal to 8% of the gross
proceeds from the sale of Securities. In addition, upon the sale of Securities,
the Company is to grant Ascendiant warrants for the purchase of an amount equal
to 8% of the Securities to be issued in the transaction. The warrants are to be
exercisable into Securities similar to those issued in the transaction and have
an exercise price and term consistent with the warrants issued to investors. The
warrants are to contain piggyback registration rights and a net exercise
provision.

In connection with the acquisition of the Company's wholly-owned subsidiary,
Cirond Networks, Inc., the Company issued 17,000,000 of its common stock to
Seaside Holdings Inc. (f/k/a Cirond Technologies Inc.), a Colorado corporation
("Seaside"). Effective July 31, 2004, Seaside transferred the 17,000,000 shares
of the Company's common stock to a trust, the Seaside Holdings Trust (the
"Trust"), for the benefit of the shareholders of Seaside as of July 31, 2004.
The Trust will be dissolved on or before December 31, 2004 in accordance with
the terms of the trust agreement and upon dissolution will distribute the shares
of the Company held by the Trust to the beneficiaries of the Trust. Pursuant to
the terms of the trust agreement establishing the Trust, the trustee may vote on
the following matters only as directed by the beneficiaries of the Trust which
are the beneficial owners of two-thirds of the Company's common shares held by
the Trust:

(1)      Proposals to dissolve the Company, or to merge or consolidate it with
         another company or companies;

(2)      Proposals to amend the Articles of Incorporation and/or Bylaws of the
         Company;

(3)      Proposals to sell substantially all the assets of the Company not in
         the ordinary course of business;

(4)      Proposals which will have the effect, directly or indirectly, of
         reducing substantially the voting power, right to dividends, or rights
         to the assets of the Company upon liquidation, of the stock of Company
         subject to the Trust; and

(5)      Proposals to sell all or any portion of the stock of the Company.

<PAGE>

Officers and directors of the Company will be executing a lock-up agreement in
connection with this transaction.


               SCHEDULE 3.1(H) - SEC REPORTS; FINANCIAL STATEMENTS

The following reports were not filed on a timely basis:

<TABLE>
<CAPTION>
                                                                        DUE DATE
                           REPORT                             (AS EXTENDED, IF APPLICABLE)         DATE FILED
------------------------------------------------------------- ------------------------------ ------------------------
<S>                                                           <C>                            <C>
Form 8-K dated September 8, 2003                              September 15, 2003             October 10, 2003
Amended Form 8-K dated November 25, 2003                      February 10, 2004              April 19, 2004
Form 10-KSB (year ended December 31, 2003)                    April 14, 2004                 May 10, 2004
Form 10-QSB (quarter ended March 31, 2004)                    May 20, 2004                   May 21, 2004
Form 10-QSB (quarter ended June 30, 2004)                     August 19, 2004                August 20, 2004
Form 8-K dated September 20, 2004                             September 24, 2004             October 5, 2004
Form 8-K dated October 1, 2004                                October 7, 2004                December 2, 2004
</TABLE>


                          SCHEDULE 3.1(J) - LITIGATION

Tate Holt, a director of the Company, was an outside director of AremisSoft
Corporation ("AremisSoft"), an enterprise application software company that
encountered accounting issues in its international emerging markets division.
The following derivative state court actions were filed in Delaware in 2001
alleging breaches of fiduciary duties against the directors, but not fraud:

Jeffrey Music, Derivatively on Behalf of AremisSoft Corporation, v. Lycourgos K.
Kyprianou, Roys Poyiadjis, Dann V, Angeloff, H. Tate Holt, George Papadopoulos,
John Malamas, Noel Voice, George H. Ellis, and Theodore S. Fessas, Civil Action
No. 18955-NC, Delaware Chancery Court. Case dismissed with prejudice.

Thomas Malagisi, Derivatively on Behalf of AremisSoft Corporation v. Lycourgos
K. Kyprianou, Roys Poyiadjis, Dann V, Angeloff, H. Tate Holt, George
Papadopolos, John Malamas, Noel Voice, George H. Ellis and Theordore S. Fessas,
Civil Action No. 18954, Delaware Chancery Court. Sister complaint to Music v.
Kyprianou, et al. above. Case dismissed with prejudice.


                           SCHEDULE 3.1(P) - INSURANCE

Neither the Company nor its Subsidiaries has any directors and officers
liability insurance.

<PAGE>

                         SCHEDULE 3.1(S) - CERTAIN FEES

Pursuant to the Company's agreement with Ascendiant Securities, LLC dated August
26, 2004, the Company has agreed to pay a cash fee equal to 8% of the gross
proceeds from the sale of Securities. In addition, upon the sale of Securities,
the Company is to grant Ascendiant warrants for the purchase of an amount equal
to 8% of the Securities to be issued in the transaction. The warrants are to be
exercisable into Securities similar to those issued in the transaction and have
an exercise price and term consistent with the warrants issued to investors. The
warrants are to contain piggyback registration rights and a net exercise
provision.


                      SCHEDULE 3.1(V) - REGISTRATION RIGHTS

On August 2, 2004, the Company entered into a Management Services Agreement with
STS. The agreement is effective as of August 2, 2004 and has a term of two
years. Pursuant to the terms of the agreement, the Company has issued 1,200,000
shares of its common stock to STS at a deemed price of $1.50 per share. The
shares will be held in escrow by the Company, with the Company releasing 50,000
shares from escrow for every month of services performed. STS was granted
piggy-back registration rights in connection with the agreement and the shares
are subject to anti-dilution provisions in the event of a consolidation of the
Company's share capital.


              SCHEDULE 3.1(X) - APPLICATION OF TAKEOVER PROVISIONS

The Company is currently not subject to the provisions of Nevada Revised
Statutes Sections 78.378 through 78.3793 and 78.411 through 78.444 because it
does not come under the definitions of "Issuing Corporation" and "Resident
Domestic Corporation," respectively. The Articles of Incorporation currently do
not contain any provisions making these sections inapplicable to the Company
generally.

The Company will amend its Articles of Incorporation to render these sections
inapplicable.


                           SCHEDULE 3.1(AA) - SOLVENCY

At September 30, 2004, the Company reported a stockholders' deficiency of
$705,664, current assets of $96,447, total assets of $165,729, and current
liabilities of $871,393.

As is common with many software companies, the Company's asset base is
relatively small since it must expense product development costs and research.

<PAGE>


                          SCHEDULE 3.1(FF) - SENIORITY

The Company notes that indebtedness generally can be said to have priority over
any form of equity, including preferred stock.

At September 30, 2004, total liabilities were $871,393, consisting of the
following:

         Accounts payable and accrued liabilities1..........$     143,428
         Consulting fees payable............................      110,516
         Share subscriptions payable2.......................       25,000
         Deferred revenue3..................................       30,874
         Loan payable4......................................      400,000
         Due to stockholder.................................      161,575
                                                            -------------
         TOTAL..............................................$     871,393
                                                            =============

         1 Included in accounts payable and accrued liabilities at September 30,
         2004 was $50,776 that was being disputed by management with the
         supplier. This amount is no longer included in accounts payable as the
         supplier has agreed that the Company is not liable for this amount.

         2 Share subscriptions outstanding at September 30, 2004, consist of
         subscriptions to acquire 50,000 common shares at a price of $0.50 per
         share. These shares were issued in November, 2004.

         3 Represents support fees received but not deemed to be earned as of
         September 30, 2004.

         4 This amount will be paid from proceeds of this transaction. See
         Schedule 4.9 below.


                         SCHEDULE 4.9 - USE OF PROCEEDS

The Company proposes to use $400,000 of the proceeds to pay an unsecured demand
loan made by an unaffiliated third party.


<PAGE>

</TEXT>
</DOCUMENT>
