RATEXCHANGE CORP
PLACEMENT AGENT AGREEMENT
<DOCUMENT>
<TYPE>EX-10.31
<SEQUENCE>5
<FILENAME>p14959_ex10-31.txt
<DESCRIPTION>PLACEMENT AGENT AGREEMENT
<TEXT>

                             RATEXCHANGE CORPORATION

                            PLACEMENT AGENT AGREEMENT

                                              Dated as of November 28, 2001

Murphy & Durieu
120 Broadway
17th Floor

New York, New York  10271
Attention: Lawrence Stanton

Ladies and Gentlemen:

     The  undersigned,  RateXchange  Corporation,  a Delaware  corporation  (the
"Company"),  hereby  agrees  with  Murphy & Durieu  (the  "Placement  Agent") as
follows:

1.   Offering.

     A. The Company hereby  engages the Placement  Agent to act as its exclusive
placement  agent in  connection  with the  issuance and sale by the Company (the
"Offering") of sixty-five (65) units (the "Units") of the Company's  securities,
at a price of $50,000 per Unit, including (a) sixty (60) Units in a closing held
November  26,  2001 (the "First  Closing"),  and (b) five (5) Units in a closing
held November 28, 2001 (the "Second  Closing";  together with the First Closing,
the  "Closings"  and  each,  a  "Closing").  Each  Unit  consists  of (i) a note
(collectively  the "Notes") in the principal  amount of $50,000 bearing interest
at an annual rate of 12% and  convertible  into the Company's  common stock (the
"Common  Stock"),  par  value at  $0.0001  per  share  (collectively,  the "Note
Shares"),  at a  conversion  price  equal to $0.37  per share  (the  "Conversion
Price"),  representing  the  higher of (x) $0.35 per share and (y) the per share
price of the Common Stock as  evidenced by the last trade on the American  Stock
Exchange   prior  to  the   relevant   Closing,   and  (ii)  12,500  A  warrants
(collectively,  the  "Warrants"),  each to purchase one share of Common Stock at
the Conversion  Price (such Common Stock  underlying the Warrants,  the "Warrant
Shares").  The Units are subject to the terms of the Subscription  Agreement and
Investment  Letter,  prepared by the Company (such  agreement  together with all
amendments thereof and supplements and exhibits thereto is referred to herein as
the  "Subscription  Agreement") to be executed by each purchaser and the Company
and in the  certificates/instruments  representing the securities underlying the
Units. The Units, including the underlying Notes, Note Shares, Warrants, Warrant
Shares and the securities  issued pursuant to the Placement Agent's Warrants (as
defined  below)  are  hereinafter  sometimes  collectively  referred  to as  the
"Securities."  The Securities  will be offered  without  registration  under the
Securities Act of 1933 (the "Securities  Act").  Purchasers of the Units will be
granted certain registration rights with respect to the Securities as more fully
set forth in the Subscription  Agreements and in the  certificates  representing
the Securities.

     B. The Units will be offered on a "best  efforts"  basis.  The Company will
issue the appropriate number of Units, Notes and Warrants at each Closing, after
subscriptions have been received and accepted by the Company.  Each Closing will
take place at the offices of Kelley Drye & Warren LLP,  counsel to the Placement
Agent,  at 101 Park  Avenue,  New York,  New York 10178 or such  other  place as
determined  by the Company  and the  Placement  Agent,  at such time as shall be
determined by the Placement Agent.

     C. The Offering  commenced on or about October 25, 2001 and shall terminate
on November 30, 2001, it being  acknowledged  that the offering was to terminate
on October 31, 2001,  but was extended by the mutual  consent of the Company and
the  Placement  Agent (such date,  as the same may be extended,  is  hereinafter
referred to as the "Termination Date"; the period commencing on October 25, 2001
and  ending  on the  Termination  Date is  sometimes  referred  to herein as the
"Offering Period").

<PAGE>

     D. As compensation  for its placement of the Offering,  the Placement Agent
shall receive a commission of $325,000 (the "Commission"),  equal to ten percent
(10%) of the gross  proceeds from the Offering.  The Placement  Agent also shall
receive  a   non-accountable   expense   allowance  of  $97,500  (the   "Expense
Allowance"),  equal to three percent (3%) of the gross proceeds from the sale of
the Units. The parties hereto  acknowledge that $25,000 of the Expense Allowance
was advanced to the Placement Agent on November 21, 2001.

2.   Information.

     A. The Units will be offered on a "best efforts" basis.

     B. The Units  shall have the terms set forth in and shall be offered by the
Company by means of the Subscription  Agreement.  Payment for the Units shall be
made by check or wire  transfer  as more  fully  described  in the  Subscription
Agreements. The minimum purchase by any purchaser shall be $50,000, or one Unit,
except that subscriptions for partial Units may be accepted at the discretion of
the Company and the Placement  Agent.  The Placement Agent and the Company agree
that the Units will be offered and sold only to  "accredited  investors"  within
the meaning of Rule 501 of Regulation D ("Accredited  Investors") promulgated by
the Securities and Exchange  Commission (the "Commission")  under the Securities
Act and Rule 506 of Regulation D of the Securities Act.

     C. All funds  received in respect of the  subscriptions  for Units that are
closed on will be promptly  forwarded  to the Company,  against  delivery of the
appropriate amount of the Securities offered, net of (i) the Commission and (ii)
the Expense Allowance.

     D. The  Placement  Agent shall not be obligated to sell any Units and shall
only be obligated to offer the Units on a "best efforts" basis.

     E. The  Company  and the  Placement  Agent  reserve the right to reject any
subscriber,  in whole or in part,  in  their  sole  discretion.  Notwithstanding
anything to the contrary  contained in this Section 2(E), the Company's right to
reject a subscriber  shall lapse three (3) days after  receipt by the Company of
the fully completed and duly executed subscription  documents from the Placement
Agent with respect to such  subscriber  (unless it is  determined  subsequent to
such  period  that  such  subscriber  does  not meet  the  investor  suitability
requirements  of  this  Offering).  Funds  received  by  the  Company  from  any
subscriber  whose  subscription is rejected will be returned to such subscriber,
without deduction  therefrom or interest thereon,  but no sooner than such funds
have cleared the banking system in the normal course of business.

     F. At each Closing,  the Company shall also issue and sell to the Placement
Agent  or  its  designee(s),   for  nominal  consideration,   purchase  warrants
("Placement  Agent's  Warrants")  to purchase a number of placement  agent units
(the  "Placement  Agent  Units") of the  Company  equal to 10% of the  aggregate
number of Units sold by the Company to  investors  identified  by the  Placement
Agent at such Closing (the "Placement  Agent's  Warrants"),  under the terms and
conditions set forth in the Placement  Agent's Warrant  Agreement dated the date
of the Second  Closing by and between the Company and the  Placement  Agent (the
"Placement  Agent's  Warrant  Agreement").  The  Company  acknowledges  that the
Placement Agent or its designee(s)  will receive  Placement  Agent's Warrants to
purchase an aggregate of 6.5 Units  (consisting of Placement Agent's Warrants to
purchase 6 Units as part of the First Closing and Placement  Agent's Warrants to
purchase 0.5 Units as part of the Second  Closing).  Each  Placement  Agent Unit
shall consist of (i) up to such number of fully paid and  non-assessable  shares
of Common Stock which is equal to the total number of  securities  issuable upon
conversion  of the  original  principal  amount of a Note issued in the Offering
(whether or not the Notes have been converted and notwithstanding whether or not
the Notes have been repaid) based upon an initial  conversion price equal to the
Conversion Price,  subject to such adjustments as found in the Placement Agent's
Warrant Agreement, and (ii) 12,500 Warrants.

3.   Representations, Warranties and Covenants of the Placement Agent.

     A. The Placement Agent represents, warrants and covenants as follows:


                                       2
<PAGE>

          (i) The  Placement  Agent has the  necessary  power to enter into this
Agreement  and the Placement  Agent's  Warrant  Agreement and to consummate  the
transactions contemplated hereby and thereby.

          (ii)  The  execution  and  delivery  by the  Placement  Agent  of this
Agreement and the Placement Agent's Warrant  Agreement,  and the consummation of
the  transactions  contemplated  herein  and  therein  will  not  result  in any
violation  of, or be in  conflict  with,  or  constitute  a default  under,  any
agreement or instrument to which the Placement  Agent is a party or by which the
Placement Agent or its properties are bound, or any judgment,  decree, order or,
to the Placement Agent's knowledge,  any statute,  rule or regulation applicable
to the  Placement  Agent.  This  Agreement  and the  Placement  Agent's  Warrant
Agreement,  when executed and delivered by the Placement Agent,  will constitute
the legal, valid and binding obligations of the Placement Agent,  enforceable in
accordance  with  their  respective  terms,  except to the  extent  that (a) the
enforceability  hereof or  thereof  may be limited  by  bankruptcy,  insolvency,
reorganization,  moratorium  or  similar  laws from  time to time in effect  and
affecting the rights of creditors  generally,  (b) the enforceability  hereof or
thereof is subject to general  principles of equity, or (c) the  indemnification
provisions hereof or thereof may be held to be violative of public policy.

          (iii) The Placement Agent will deliver to each purchaser a copy of the
Subscription   Agreement,   as  it  may  have  been  most  recently  amended  or
supplemented by the Company.

          (iv)  Upon  receipt  of an  executed  Subscription  Agreement  and the
payments representing subscriptions for Units, the Placement Agent will promptly
forward copies of the Subscription  Agreement  (together with all  consideration
received for such Units) to the Company or its counsel.

          (v) The Placement Agent will not deliver the Subscription Agreement to
any person it does not believe to be an Accredited Investor.

          (vi) The Placement Agent will not take any action which,  assuming the
Company's  representation  in Section  4(A)(ii)  hereof is correct,  it believes
would cause the Offering to violate the  provisions of the  Securities  Act, the
Securities and Exchange Act of 1934, (the "Exchange  Act"), the respective rules
and  regulations   promulgated  thereunder  (the  "Rules  and  Regulations")  or
applicable Blue Sky laws of any state or jurisdiction.

          (vii)  The  Placement  Agent  shall  use  all  reasonable  efforts  to
determine (a) whether any  prospective  purchaser is an Accredited  Investor and
(b) that any material  information  furnished by a prospective  investor is true
and accurate.  The  Placement  Agent shall have no obligation to insure that (x)
any check,  note, draft or other means of payment for the Units will be honored,
paid or enforceable  against the subscriber in accordance with its terms, or (y)
subject to the performance of the Placement Agent's obligations and the accuracy
of the Placement  Agent's  representations  and  warranties  hereunder,  (A) the
Offering is exempt from the  registration  requirements of the Securities Act or
any  applicable  state  "Blue Sky" law or (B) any  prospective  purchaser  is an
Accredited Investor.

          (viii) The Placement Agent is a member of the National  Association of
Securities Dealers, Inc. (the "NASD"), and is a broker-dealer registered as such
under the Exchange Act and under the securities  laws of the states in which the
Units will be offered or sold by the  Placement  Agent,  unless an exemption for
such state registration is available to the Placement Agent. The Placement Agent
is in  compliance  with all material  Rules and  Regulations  applicable  to the
Placement Agent generally and applicable to the Placement Agent's  participation
in the Offering.

          (ix)  The  information   contained  in  the  Subscription   Agreements
(including the exhibits  thereto,  other than Exhibit D (the Company's Form 10-Q
for the  quarterly  period ended June 30, 2001) and E (the  Company's  Notice of
Annual Meeting of stockholders  held on May 31, 2001)) relating to the Placement
Agent is complete  and correct  and does not  contain  any untrue  statement  of
material fact or omit to state a material fact required to be stated  therein or
necessary to make the statements  therein,  in light of the circumstances  under
which they were made, not misleading.

4.   Representations and Warranties of the Company.


                                       3
<PAGE>

     A. The Company represents and warrants as follows:

          (i) The execution, delivery and performance of each of this Agreement,
the Placement  Agent's Warrant  Agreement,  the Subscription  Agreements and the
Securities  (collectively,  the "Operative Documents") has been duly and validly
authorized by the Company,  including,  without limitation,  the corporate power
and authority to issue,  sell and deliver the Securities as provided  herein and
therein.  Each of this Agreement,  the Placement Agent's Warrant Agreement,  the
Subscription  Agreements,  the Notes and the Warrants is, or will be a valid and
binding  agreement  of  the  Company,   enforceable  in  accordance  with  their
respective  terms,  except to the extent that (a) the  enforceability  hereof or
thereof may be limited by bankruptcy, insolvency, reorganization,  moratorium or
similar laws from time to time in effect and  affecting  the rights of creditors
generally,  (b) the  enforceability  hereof or  thereof  is  subject  to general
principles of equity,  or (c) the  indemnification  provisions hereof or thereof
may be held to be  violative of public  policy.  The  Securities  have been duly
authorized and, when issued and paid for in accordance with this Agreement,  the
Subscription Agreements, the certificates/instruments  representing each of such
Securities, will be valid and binding obligations of the Company, enforceable in
accordance  with  their  respective  terms,  except to the  extent  that (x) the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium  or similar laws from time to time in effect and affecting the rights
of creditors generally, and (y) the enforceability thereof is subject to general
principles  of  equity.  All  corporate  action  required  to be  taken  for the
authorization,  issuance  and sale of the  Securities  has been duly and validly
taken by the Company.

          (ii) The Company and the  Subsidiaries  (as hereinafter  defined) have
the outstanding  capitalization as set forth in the Subscription Agreements. The
Company  and the  Subsidiaries  are not a party to or  bound by any  instrument,
agreement  or other  arrangement  providing  for it to issue any capital  stock,
rights, warrants, options or other securities,  except for this Agreement and as
described in the Subscription Agreements or the exhibits thereto. All issued and
outstanding  securities  of the  Company  and the  Subsidiaries,  have been duly
authorized  and validly issued and are fully paid and  non-assessable,  and were
issued in compliance with all applicable  federal and state securities laws; the
holders  thereof have no rights of rescission or preemptive  rights with respect
thereto  and are not  subject to  personal  liability  solely by reason of being
securityholders;  and none of such  securities  were issued in  violation of the
preemptive  rights  of any  holders  of any  security  of the  Company  and  the
Subsidiaries.  The Company has 300,000,000 shares of authorized Common Stock, of
which 18,328,174  shares are outstanding as of the date hereof.  The Company has
60,000,000 authorized shares of Preferred Stock of which 2,000,000 shares of non
redeemable  Series A  Convertible  Preferred  Stock  are  currently  issued  and
outstanding.  The Company has duly authorized and reserved for issuance the Note
Shares,  the  Warrant  Shares  and the shares  underlying  the  Placement  Agent
Warrants.

          (iii) When  issued in  accordance  with their  respective  terms,  the
Securities will be validly issued,  fully-paid and  non-assessable;  the holders
thereof will not be subject to personal liability solely by reason of being such
holders;  and such  Securities are not and will not be subject to the preemptive
rights of any holder of any security of the Company.

          (iv) Each of the Company and the  Subsidiaries has good and marketable
title to, or valid and enforceable  leasehold  estates in, all items of real and
personal  property  necessary  to  conduct  its  business  (including,   without
limitation any real or personal property stated in the Subscription Agreement to
be owned or leased by it),  free and clear of all liens,  encumbrances,  claims,
security interests and defects of any material nature whatsoever.

          (v) Except as is described in the Company's  public filings,  there is
no  litigation  or  governmental  proceeding  pending  or,  to the  best  of the
Company's knowledge, threatened against, or involving the properties or business
of the Company or the Subsidiaries.

          (vi) Each of the Company and the  Subsidiaries has been duly organized
and is validly  existing as a corporation in good standing under the laws of its
jurisdiction  of  incorporation.  The  Company  owns  100%  of  the  issued  and
outstanding voting shares of Xpit Corporation, a Delaware corporation, PolarCap,
Inc., a Delaware  corporation,  and RateXchange I, Inc., a Delaware corporation,
RMG   Partners   Corporation,   a   Delaware   corporation   (collectively   the
"Subsidiaries"), free and clear of all liens, encumbrances, claims, security and
defects. The


                                       4
<PAGE>

Company has no other subsidiaries other than the Subsidiaries. PolarCap is being
liquidated and all of the material assets of Xpit Corporation have been sold.

          (vii)  Neither  the  Company  nor  any of  the  Subsidiaries  owns  or
controls,  directly  or  indirectly,  an  interest  in  any  other  corporation,
partnership,  trust, joint venture or other business entity other than as listed
in the  Subscription  Agreement,  except that the Company owns 750,000 shares of
common stock of Telenisus Corporation,  a Delaware corporation that is privately
held. Each of the Company and the Subsidiaries is duly qualified or licensed and
in good  standing as a foreign  corporation  in each  jurisdiction  in which the
character of its operations  requires such  qualification or licensing and where
failure to so qualify  would have a material  adverse  effect on the Company and
the Subsidiaries  taken as a whole. Each of the Company and the Subsidiaries has
all  requisite  corporate  power and  authority,  and all material and necessary
authorizations,  approvals,  orders,  licenses,  certificates and permits of and
from all governmental  regulatory officials and bodies (domestic and foreign) to
conduct its businesses (and proposed  business) as described in the Subscription
Agreement,  and each of the Company and the  Subsidiaries  is doing  business in
material compliance with all such authorizations,  approvals,  orders, licenses,
certificates and permits and all foreign,  federal,  state and local laws, rules
and regulations  concerning the business in which it is engaged. Any disclosures
in the Subscription Agreement concerning the effects of foreign,  federal, state
and local regulation on the Company's or  Subsidiaries'  businesses as currently
conducted and as  contemplated  are correct in all material  respects and do not
omit to state a material fact. The Company has all corporate power and authority
to enter into this Agreement and the other Operative  Documents and to carry out
the   provisions  and   conditions   hereof  and  thereof,   and  all  consents,
authorizations,  approvals  and  orders  required  in  connection  herewith  and
therewith  have  been  obtained  prior  to the  Termination  Date.  No  consent,
authorization or order of, and no filing with, any court,  government  agency or
other body is  required by the Company  for the  issuance of the  Securities  or
execution and delivery of the  Subscription  Agreements,  except for  applicable
federal  and  state  securities  laws.  Neither  the  Company  nor  any  of  the
Subsidiaries  has, since its inception,  incurred any liability arising under or
as a result of the  application of any of the provisions of the Securities  Act,
the Exchange Act or the Rules and Regulations.

          (viii) There has been no material  adverse  change in the condition or
prospects  of the  Company  or any of the  Subsidiaries  except  that all of the
material  assets of Xpit  Corporation  were sold on  October  29,  2001,  either
individually  or as a whole,  financial  or  otherwise,  from that on the latest
dates as of which such  condition or prospects,  respectively,  are set forth in
each of the Subscription Agreements,  and the outstanding debt, the property and
the  businesses  of each of the  Company  and the  Subsidiaries  conforms in all
material  respects to the  descriptions  thereof  contained in the  Subscription
Agreements.

          (ix)  Except  as  otherwise  set forth in the  Subscription  Agreement
(including  the  exhibits   thereto),   neither  the  Company  nor  any  of  the
Subsidiaries is in breach of, or in default under,  any term or provision of any
indenture, mortgage, deed of trust, lease, note, loan or credit agreement or any
other  agreement or instrument  evidencing an obligation for borrowed  money, or
any other  agreement or  instrument to which it is a party or by which it or any
of its properties  may be bound or affected.  Neither the Company nor any of the
Subsidiaries  is in violation  of any  provision  of its  respective  charter or
Bylaws or in violation of any franchise,  license, permit,  judgment,  decree or
order, or in violation of any statute, rule or regulation. Neither the execution
and delivery of this Agreement,  the Placement  Agent's Warrant  Agreement,  the
Subscription Agreements, the Notes or the Warrants, nor the issuance and sale or
delivery of the  Securities,  nor the  consummation  of any of the  transactions
contemplated herein or in the other Operative  Documents,  nor the compliance by
the Company with the terms and provisions hereof or thereof, as the case may be,
has conflicted  with or will conflict with, or has resulted in or will result in
a breach  of, any of the terms and  provisions  of, or has  constituted  or will
constitute a default under, or has resulted in or will result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company or any of the  Subsidiaries  or pursuant to the terms of any  indenture,
mortgage,  deed of trust,  note, loan or credit agreement or any other agreement
or  instrument  evidencing  an  obligation  for  borrowed  money,  or any  other
agreement or instrument to which the Company or any of the  Subsidiaries  may be
bound or to which any of the  property  or assets of the  Company  or any of the
Subsidiaries  is subject;  nor will such action  result in any  violation of the
provisions of the respective  charter or the Bylaws of the Company or any of the
Subsidiaries or any statute or any order,  rule or regulation  applicable to the
Company or any of the Subsidiaries of any court or of any


                                       5
<PAGE>

foreign,  federal,  state or other regulatory authority or other government body
having jurisdiction over the Company or any of the Subsidiaries.

          (x) This Agreement,  the Placement  Agent's Warrant  Agreement and the
Securities  conform in all  material  respects  to all  statements  in  relation
thereto  contained  in the  Subscription  Agreements.  Neither the  Subscription
Agreements nor the exhibits  attached  thereto contain any untrue statement of a
material fact or omit to state any 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.

          (xi)  Subsequent to the dates as of which  information is given in the
Subscription Agreement, and except as may otherwise be indicated or contemplated
herein or  therein,  neither the  Company  nor any of the  Subsidiaries  has (a)
issued any  securities  or  incurred  any  liability  or  obligation,  direct or
contingent,  for borrowed money, (b) entered into any transaction  other than in
the ordinary  course of  business,  or (c) declared or paid any dividend or made
any other  distribution  on or in  respect of its  capital  stock.  Neither  the
Company nor any of the  Subsidiaries  has outstanding  obligations to any of its
respective  officers  or  directors,  except as  disclosed  in the  Subscription
Agreement.

          (xii) There are no claims for  services in the nature of a finder's or
origination fee with respect to the sale of the Units or any other arrangements,
agreements or understandings that may affect the Placement Agent's compensation,
as determined by the NASD.

          (xiii)  Each of the Company and the  Subsidiaries  owns or  possesses,
free and clear of all liens or  encumbrances  and  rights  thereto or therein by
third  parties,  the requisite  licenses or other rights to use all  trademarks,
service  marks,   copyrights,   service  names,  trade  names,  patents,  patent
applications and licenses necessary to conduct its business (including,  without
limitation,  any such licenses or rights described in the Subscription Agreement
as being owned or possessed by the Company or any of the Subsidiaries) and there
is no claim or action by any person  pertaining  to, or  proceeding,  pending or
threatened,  which  challenges the exclusive rights of the Company or any of the
Subsidiaries with respect to any trademarks,  service marks, copyrights, service
names,  trade names,  patents,  patent  applications  and  licenses  used in the
conduct  of the  Company's  or any of  the  Subsidiaries  respective  businesses
(including,  without  limitation,  any such licenses or rights  described in the
Subscription  Agreement as being owned or possessed by the Company or any of the
Subsidiaries).  The  Company's  current  products,  services or processes do not
infringe or will not infringe on the patents currently held by any third party.

          (xiv)  Neither the Company  nor any of the  Subsidiaries  is under any
obligation  to pay  royalties or fees of any kind  whatsoever to any third party
with respect to any trademarks,  service marks, copyrights, service names, trade
names,  patents,  patent applications,  licenses or technology it has developed,
uses,  employs  or intends  to use or  employ,  other  than to their  respective
licensors.

          (xv)  Subject  to  the  performance  by  the  Placement  Agent  of its
obligations hereunder,  the Subscription Agreement and the offer and sale of the
Securities  comply,  and will continue to comply,  up to the Termination Date in
all  material  respects  with  the  requirements  of Rule  506 of  Regulation  D
promulgated  by the  Commission  pursuant  to the  Securities  Act and any other
applicable  federal and state laws,  rules,  regulations  and executive  orders.
Neither the Subscription  Agreement nor any amendment or supplement  thereto nor
any documents  prepared by the Company and the  Subsidiaries  in connection with
the  Offering  will contain any untrue  statement of a material  fact or omit to
state any material fact  required to be stated  therein or necessary to make the
statements  therein,  in light of the circumstances  under which they were made,
not misleading.  All statements of material facts in the Subscription  Agreement
are true and correct as of the date of the applicable Subscription Agreement and
will be true and correct on the date of each Closing.

          (xvi) All taxes  that are due and  payable  from the  Company  and the
Subsidiaries  have  been paid in full and  neither  the  Company  nor any of the
Subsidiaries  has any tax deficiency or claim  outstanding  assessed or proposed
against it.


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<PAGE>

          (xvii) The financial  information of the Company and the  Subsidiaries
included in the Subscription Agreement fairly presents the financial position of
the Company and the  Subsidiaries  at and for the  periods  indicated,  and such
financial  information has been prepared in conformity  with generally  accepted
accounting  principles,  consistently  applied  throughout the periods involved.
There has been no adverse change or development involving a material prospective
change in the condition,  financial or otherwise, or in the earnings, prospects,
stockholders'  equity,  value,  operations,  properties,  business or results of
operations of the Company and the Subsidiaries on a consolidated basis,  whether
or not  arising  in the  ordinary  course  of  business,  since  the date of the
financial   information  included  in  the  Subscription   Agreement;   and  the
outstanding debt, the property, both tangible and intangible, and the businesses
of the  Company and the  Subsidiaries  conform in all  material  respects to the
descriptions thereof contained in the Subscription Agreement.

          (xviii)  Neither the Company nor any of the  Subsidiaries,  nor any of
its or their  officers,  directors,  employees  or agents,  nor any other person
acting  on  behalf  of the  Company  and  the  Subsidiaries,  has,  directly  or
indirectly,  given or agreed to give any money,  gift or similar  benefit to any
customer,  supplier, employee or agent of a customer or supplier, or official or
employee  of any  governmental  agency  or  instrumentality  of  any  government
(domestic or foreign) or any political  party or candidate for office  (domestic
or foreign) or other person who is or may be in a position to help or hinder the
business of the Company or any of the  Subsidiaries  (or assist it in connection
with any actual or proposed  transaction) which (a) might subject the Company or
any of the  Subsidiaries  to any damage or penalty  in any  civil,  criminal  or
governmental  litigation or proceeding,  or (b) if not given in the past,  might
have had a materially  adverse  effect on the assets,  business or operations of
the Company or any of the Subsidiaries,  as reflected in any of the consolidated
financial  statements  contained in the  Subscription  Agreement,  or (c) if not
continued in the future, might adversely affect the assets, business, operations
or prospects of the Company in the future.

          (xix) The  Common  Stock of the  Company  is  registered  pursuant  to
Section 12 of the Exchange Act and the Company has filed all reports, schedules,
forms,  statements  and  other  documents  required  to be  filed by it with the
Commission pursuant to the reporting requirements of the Exchange Act, including
material  filed  pursuant  to  Section  13(a)  or  15(d)  (all of the  foregoing
including filings  incorporated by reference therein being referred to herein as
the  "SEC  Documents").  The  Company  has not  provided  to any  purchaser  any
information which, according to applicable law, rule or regulation,  should have
been disclosed  publicly by the Company but which has not been so disclosed.  As
of their respective dates, the SEC Documents (as amended by any amendments filed
prior to the date  hereof  and the date of each  Closing  and  provided  to each
purchaser) complied in all material respects with the applicable requirements of
the  Exchange Act and the Rules and  Regulations  and other  federal,  state and
local laws, rules and regulations applicable to such SEC Documents,  and none of
the SEC Documents  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  and  the
Subsidiaries  included in the SEC Documents comply in all material respects with
applicable  accounting  requirements  and the published rules and regulations of
the Commission or other  applicable  rules and regulations with respect thereto.
Such financial statements have be prepared in accordance with generally accepted
accounting  principles applied on a consistent basis during the periods involved
and fairly present the financial position of the Company and the Subsidiaries as
of 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
year-end audit adjustments).

5.   Certain Covenants and Agreements of the Company.

     The Company covenants to deliver to the Placement Agent, (i) promptly after
receipt thereof, the Company's good standing  certificate,  which delivery shall
be made no later  than two (2) weeks  after the date  hereof,  and (ii) no later
than  December 31, 2001,  a copy of minutes  from the next  regularly  scheduled
meeting  of the  Company's  Board of  Directors  supplementing  the  minutes  of
September 2001 relating to the Offering so as to  specifically  reserve the Note
Shares and the Warrant Shares. In addition,  the Company covenants and agrees at
its expense and without any expense to the Placement Agent as follows:


                                       7
<PAGE>

     A. To advise the Placement  Agent of any adverse change in the Company's or
any of the Subsidiaries'  financial  condition,  prospects or business or of any
development  materially  affecting  the  Company or any of the  Subsidiaries  or
rendering  untrue or  misleading  any  material  statement  in the  Subscription
Agreement  occurring at any time prior to each Closing as soon as the Company or
any of the Subsidiaries is either informed or becomes aware thereof.

     B. To use its best  efforts  to cause the  Securities  to be  qualified  or
registered  for  sale,  or to  obtain  exemptions  from  such  qualification  or
registration  requirements,  on  terms  consistent  with  those  stated  in  the
Subscription  Agreement under the securities laws of such  jurisdictions  as the
Placement  Agent  shall  reasonably  request,  provided  that  such  states  and
jurisdictions  do not require  the Company to qualify as a foreign  corporation.
Qualification,  registration and exemption charges and fees shall be at the sole
cost and expense of the Company. The Placement Agent's counsel shall perform the
required "Blue Sky" services and all reasonable fees, expenses and disbursements
relating to such "Blue Sky" matters and  relating to the Offering  shall be paid
by the Placement Agent.

     C. To  provide  and  continue  to  provide  to each  holder  of  Securities
participating  in the  Offering,  so long as such holder shall remain a security
holder  of  the  Company,  for a  period  ending  on  the  earlier  of  (i)  the
registration  of the Note Shares and Warrant Shares under the Securities Act and
(ii) five (5) years from the Termination Date, copies of all quarterly financial
statements and audited annual financial  statements  prepared by or on behalf of
the Company,  other  reports  prepared by or on behalf of the Company for public
disclosure  and all  documents  delivered to the Company's  stockholders  upon a
Holder's request.

     D. To deliver,  for a period of five (5) years  following  the  Termination
Date, to the Placement Agent, upon the Placement Agent's request,  in the manner
provided in Section  10(B) of this  Agreement:  (i) within  forty five (45) days
after the end of each of the first  three  quarters  of each  fiscal year of the
Company,  commencing with the first quarter ending after the Termination Date, a
statement of its income for each such  quarterly  period,  and its balance sheet
and a  statement  of  changes  in  stockholders'  equity  as of the  end of such
quarterly period, all in reasonable detail, certified by its principal financial
or  accounting  officer;  (ii)  within  ninety (90) days after the close of each
fiscal year,  its balance  sheet as of the close of such fiscal  year,  together
with a statement of income, a statement of changes in stockholders' equity and a
statement of cash flow for such fiscal year,  such balance  sheet,  statement of
income,  statement of changes in stockholders' equity and statement of cash flow
to be in  reasonable  detail and  accompanied  by a copy of the  certificate  or
report  thereon of  independent  auditors if audited  financial  statements  are
prepared;  and (iii) a copy of all documents,  reports and information furnished
to its stockholders at the time that such documents, reports and information are
furnished to its stockholders.

     E. To apply  the  proceeds  of the  Offering  in  accordance  with  "Use of
Proceeds" in Exhibit H to the  Subscription  Agreement and not to apply proceeds
from the  Offering to pay any  principal  amount,  or accrued  interest  due and
payable  therein,  payable  under any  loan(s),  advances  or  indebtedness,  to
directors, officers or 5% or greater shareholders.

     F. To provide the Placement  Agent with as many copies of the  Subscription
Agreement as the Placement Agent may reasonably request.

     G. To comply with the terms of the  Subscription  Agreement,  the Notes and
the Warrants,  including, without limitation, the registration rights provisions
contained in the Notes and the Warrants.

     H. To keep  available  out of its  authorized  Common  Stock solely for the
purpose of issuance  upon the  conversion  of the Notes and the  exercise of the
Warrants,  such number of shares of Common Stock as shall then be issuable  upon
the conversion of the Notes and the exercise of all Warrants.

     I. To issue to the Placement Agent or its designee(s) the Placement Agent's
Warrants as described in the Placement Agent's Warrant Agreement.

     J. To ensure  that any  transactions  between  or among the  Company or its
Subsidiaries,  or any of its or their  officers,  directors and affiliates be on
terms  and  conditions  that  are  no  less  favorable  to  the  Company  or its


                                       8
<PAGE>

Subsidiaries, than the terms and conditions that would be available in an "arm's
length" transaction with an independent third party.

     K. Not to amend or  supplement  the  Subscription  Agreements  prior to the
Termination  Date unless the Placement Agent shall have been previously  advised
thereof and shall have not objected thereto within a reasonable time after being
furnished a copy thereof. The Company shall promptly prepare, upon the Placement
Agent's request, any amendment or supplement to the Subscription Agreements that
may be necessary or advisable in connection with the Offering.

     L. To file the appropriate  registration  statement with the Securities and
Exchange  Commission  to register  the Note Shares,  the Warrant  Shares and the
Common Stock  underlying the Placement  Agent's Warrants within six months after
the Termination Date.

6.   Indemnification.

     A. The Company  hereby agrees that it will indemnify and hold the Placement
Agent and each officer, director, shareholder, employee, agent or representative
of the  Placement  Agent,  and each person  controlling,  controlled by or under
common  control of the  Placement  Agent within the meaning of Section 15 of the
Securities  Act or Section 20 of the Exchange Act or the Rules and  Regulations,
harmless from and against any and all loss, claim,  damage,  liability,  cost or
expense whatsoever (including,  but not limited to, any and all reasonable legal
fees  and  other  expenses  and   disbursements   incurred  in  connection  with
investigating,  preparing to defend or defending any action, suit or proceeding,
including any inquiry or  investigation,  commenced or threatened,  or any claim
whatsoever  or in  appearing  or preparing  for  appearance  as a witness in any
action,  suit or proceeding,  including any inquiry,  investigation  or pretrial
proceeding  such  as  a  deposition)  to  which  the  Placement  Agent  or  such
indemnified  person  of  the  Placement  Agent  may  become  subject  under  the
Securities  Act,  the  Exchange  Act,  the Rules and  Regulations,  or any other
federal or state law or regulation,  common law or otherwise,  arising out of or
based upon (i) any untrue  statement or alleged  untrue  statement of a material
fact  contained  in (A)  Section  4 of  this  Agreement,  (B)  the  Subscription
Agreements,  (C) any  application  or other  document  or written  communication
executed  by the  Company or based upon  written  information  furnished  by the
Company filed in any  jurisdiction in order to qualify the Securities  under the
securities laws thereof, or any state securities  commission or agency; (ii) the
omission or alleged  omission from the  documents  described in clauses (i) (A),
(B) or (C) above of a material fact  required to be stated  therein or necessary
to make the  statements  therein  not  misleading;  or (iii)  the  breach of any
representation,  warranty,  covenant  or  agreement  made by the Company in this
Agreement. The Company further agrees that upon demand by an indemnified person,
at any time or from time to time, it will promptly  reimburse  such  indemnified
person for any loss,  claim,  damage,  liability,  cost or expense  actually and
reasonably  paid  by  the  indemnified  person  as  to  which  the  Company  has
indemnified such person pursuant hereto.

     B. The Placement  Agent hereby  agrees that it will  indemnify and hold the
Company  and  each   officer,   director,   shareholder,   employee,   agent  or
representative  of the Company,  and each person  controlling,  controlled by or
under common  control  with the Company  within the meaning of Section 15 of the
Securities  Act or Section 20 of the Exchange Act or the Rules and  Regulations,
harmless from and against any and all loss, claim,  damage,  liability,  cost or
expense whatsoever (including,  but not limited to, any and all reasonable legal
fees  and  other  expenses  and   disbursements   incurred  in  connection  with
investigating,  preparing to defend or defending any action, suit or proceeding,
including any inquiry or  investigation,  commenced or threatened,  or any claim
whatsoever  or in  appearing  or preparing  for  appearance  as a witness in any
action,  suit or proceeding,  including any inquiry,  investigation  or pretrial
proceeding such as a deposition) to which the Company or such indemnified person
of the Company may become  subject under the  Securities  Act, the Exchange Act,
the Rules and  Regulations,  or any other  federal  or state law or  regulation,
common  law or  otherwise,  arising  out of or  based  upon  the  breach  of any
representation,  warranty,  covenant or agreement made by the Placement Agent in
this  Agreement.  The  Placement  Agent  further  agrees  that upon demand by an
indemnified person, at any time or from time to time, it will promptly reimburse
such indemnified person for any loss, claim, damage,  liability, cost or expense
actually and reasonably paid by the indemnified person as to which the Placement
Agent has indemnified such person pursuant hereto.


                                       9
<PAGE>

     C. Promptly after receipt by an indemnified party of notice of commencement
of any  action  covered  by Section  6(A) or 6(B),  the party to be  indemnified
shall,  within five (5)  business  days,  notify the  indemnifying  party of the
commencement  thereof;  the omission by one  indemnified  party to so notify the
indemnifying party shall not relieve the indemnifying party of its obligation to
indemnify any indemnified party and shall not relieve the indemnifying  party of
any  liability  outside of this  indemnification  if not  materially  prejudiced
thereby.  In the event that any action is brought against the indemnified party,
the  indemnifying  party will be entitled  to  participate  therein  and, to the
extent it may desire,  to assume and control the defense  thereof  with  counsel
chosen by it which is reasonably  acceptable  to the  indemnified  party.  After
notice from the indemnifying  party to such indemnified party of its election to
so assume the defense thereof, the indemnifying party will not be liable to such
indemnified  party  under  such  Section  6(A) or 6(B)  for any  legal  or other
expenses  subsequently incurred by such indemnified party in connection with the
defense thereof, but the indemnified party may, at its own expense,  participate
in such  defense  by  counsel  chosen by it,  without,  however,  impairing  the
indemnifying  party's  control of the  defense.  Subject to the  proviso of this
sentence and  notwithstanding  any other  statement  to the  contrary  contained
herein,  the indemnified  party or parties shall have the right to choose its or
their own counsel  and control the defense of any action,  all at the expense of
the  indemnifying  party if, (i) the  employment of such counsel shall have been
authorized in writing by the  indemnifying  party in connection with the defense
of  such  action  at  the  expense  of  the  indemnifying  party,  or  (ii)  the
indemnifying  party shall not have employed counsel  reasonably  satisfactory to
such  indemnified  party to have charge of the  defense of such action  within a
reasonable  time  after  notice of  commencement  of the  action,  or (iii) such
indemnified  party or parties shall have reasonably  concluded that there may be
defenses available to it or them which are different from or additional to those
available  to one  or  all  of the  indemnifying  parties  (in  which  case  the
indemnifying  parties  shall not have the right to direct  the  defense  of such
action on behalf of the  indemnified  party or parties),  in any of which events
such  fees  and  expenses  of one  additional  counsel  shall  be  borne  by the
indemnifying party; provided, however, that the indemnifying party shall not, in
connection with any one action or separate but substantially  similar or related
actions in the same jurisdiction  arising out of the same general allegations or
circumstance,  be liable for the  reasonable  fees and expenses of more than one
separate  firm of attorneys  at any time for all such  indemnified  parties.  No
settlement of any action or  proceeding  against an  indemnified  party shall be
made without the consent of the indemnifying  party,  provided that such consent
was not reasonably withheld.

     D. In order to provide for just and equitable contribution in circumstances
in which the  indemnification  provided  for in  Section  6(A) or 6(B) is due in
accordance  with  its  terms  but  is for  any  reason  held  by a  court  to be
unavailable on grounds of policy or otherwise, the Company and the Subsidiaries,
on the one hand, and the Placement  Agent, on the other hand shall contribute to
the aggregate losses,  claims, damages and liabilities (including legal or other
expenses  reasonably incurred in connection with the investigation or defense of
same)  which the other may incur,  in such  proportions  as are  appropriate  to
reflect the relative fault of the Company and the Placement  Agent in connection
with the facts which resulted in such losses, liabilities,  claims, damages, and
expenses;  provided,  however,  that if  applicable  law  does not  permit  such
allocation,  then other relevant equitable  considerations  such as the relative
benefits received by the Company, on the one hand and the Placement Agent on the
other hand shall also be  considered.  The  relative  benefits  received  by the
Company,  on the one hand, and the Placement  Agent, on the other hand, shall be
deemed  to be in the same  proportion  as (x) the total  net  proceeds  from the
Offering  (before  deducting  expenses)  received  by the  Company,  and (y) the
Commission  received by the  Placement  Agent  pursuant to Section  1(D) hereof.
Relative fault shall be determined by reference to, among other things,  whether
the untrue or alleged  untrue  statement  of a material  fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or by the Placement Agent, and the parties' relative intent,  knowledge,
access to  information  and  opportunity  to  correct  or  prevent  such  untrue
statement  or  omission.  Notwithstanding  the  foregoing,  no person  guilty of
fraudulent  misrepresentation  within  the  meaning  of  Section  11(f)  of  the
Securities  Act shall be  entitled to  contribution  from any person who was not
guilty of such fraudulent misrepresentation.  For purposes of this Section 6(D),
any person controlling, controlled by or under common control with the Placement
Agent, or any partner, director, officer, employee,  representative or any agent
of any  thereof,  shall have the same rights to  contribution  as the  Placement
Agent and each person  controlling,  controlled by or under common  control with
the Company within the meaning of Section 15 of the Securities Act or Section 20
of the  Exchange  Act and each  officer of the Company and each  director of the
Company  shall have the same rights to  contribution  as the Company.  Any party
entitled to contribution will,  promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a claim
for contribution


                                       10
<PAGE>

may be made against the other party under this Section  6(D),  notify such party
from whom  contribution may be sought,  but the omission to so notify such party
shall not  relieve  the  party  from whom  contribution  may be sought  from any
obligation  they  may  have  hereunder  or  otherwise  if the  party  from  whom
contribution may be sought is not materially  prejudiced thereby.  The indemnity
and contribution  agreements  contained in this Section 6 shall remain operative
and in full  force and  effect  regardless  of any  investigation  made by or on
behalf of any indemnified person or any termination of this Agreement.

7.   Payment of Expenses.

     Whether or not the Offering is successfully completed,  except as otherwise
set forth in this Section 7, the Company  hereby  agrees to bear the fees of the
escrow agent equally with the Placement  Agent.  It is agreed that the Placement
Agent's counsel shall perform the required Blue Sky legal  services.  "Blue Sky"
and counsel  fees and expenses  shall be paid by the  Placement  Agent.  In this
connection,  Blue  Sky  applications  for  registration  of  the  Securities  or
exemption  therefrom shall be made in such states and  jurisdictions as shall be
reasonably  requested  by the  Placement  Agent,  provided  that such states and
jurisdictions do not require the Company to qualify as a foreign corporation. In
addition,  the Company  hereby agrees to pay to the Placement  Agent the Expense
Allowance,  of which $13,500 was advanced to the Placement Agent on November 21,
2001.

8.   Conditions of Closing

     Each  Closing  shall be held at the offices of the  Placement  Agent or its
counsel.  The  obligations of the Placement  Agent hereunder shall be subject to
the  continuing  accuracy of the  representations  and warranties of the Company
herein as of the date hereof and as of such  Closing with respect to the Company
as if it had been made on and as of the Closing;  the accuracy on and as of such
Closing of the  statements  of the officers of the Company made  pursuant to the
provisions  hereof;  and the performance by the Company on and as of the Closing
of  its  covenants  and  obligations  hereunder  and to  the  following  further
conditions:

     A. At each Closing,  the Placement Agent shall receive the opinion of Barry
Feiner,  Esq.,  counsel to the  Company,  dated as of the date of such  Closing,
which opinion shall be in form and substance reasonably  satisfactory to counsel
for the Placement Agent, to the effect that:

          (i) The execution,  delivery and  performance of each of the Operative
Documents  has been  duly and  validly  authorized  by the  Company,  including,
without limitation, the corporate power and authority to issue, sell and deliver
the Securities as provided herein and therein.  Each of the Operative  Documents
is a valid and binding agreement of the Company,  enforceable in accordance with
its respective terms, except to the extent that (a) the enforceability hereof or
thereof may be limited by bankruptcy, insolvency, reorganization,  moratorium or
similar laws from time to time in effect and  affecting  the rights of creditors
generally,  (b) the  enforceability  hereof or  thereof  is  subject  to general
principles of equity or (c) the indemnification provisions hereof or thereof may
be held to be violative of public policy. The Placement Agent's Warrants and the
Warrants  constitute  valid and binding  obligations of the Company to issue and
sell,  upon  exercise  thereof and payment  therefor  in  accordance  with their
respective  terms,  the number and type of securities of the Company  called for
thereby.  The  Securities to be issued and sold by the Company  pursuant to this
Agreement,   the  Placement  Agent's  Warrant  Agreement  and  the  Subscription
Agreements  have been duly  authorized  and, when issued in accordance with this
Agreement,   the  Placement  Agent's  Warrant  Agreement  and  the  Subscription
Agreements,  the  certificates/instruments  representing  each of the Securities
will be validly issued,  fully paid and non-assessable;  the holders thereof are
not and will not be subject to personal  liability  to third  parties  solely by
reason of being such holders; such Securities are not and will not be subject to
the  preemptive  rights of any  stockholder  of the Company;  and all  corporate
action  required to be taken for the  authorization,  issuance  and sale of such
Securities  has been  duly and  validly  taken by the  Company.  The  Securities
conform in all material  respects to the  description  thereof  contained in the
Subscription Agreement.

          (ii) The Operative  Documents  conform in all material respects to the
descriptions thereof contained in the Subscription Agreement.


                                       11
<PAGE>

          (iii)  Assuming that each purchaser of the Securities is an Accredited
Investor, that the representations made by the Company, the Subsidiaries and the
Placement  Agent in this  Agreement are true and correct at all times during the
Offering  Period and at the time of such Closing,  that the Placement  Agent has
complied  with  the  provisions  of this  Agreement  and of  Section  502(c)  of
Regulation D and that a Form D will be filed in accordance  with the  provisions
of Section 503 of Regulation D, and that appropriate transfer  restrictions will
be placed on the  certificates/instruments  representing each of the Securities,
no registration under the Securities Act is required in connection with the sale
and issuance of any of the  Securities.  The offering and sale of the Securities
in the manner  contemplated  by this  Agreement,  the Placement  Agent's Warrant
Agreement,  the  Subscription  Agreements and the Warrant  Agreement will not be
integrated  with any offering made before the offer and sale of such  securities
in a manner that would render  unavailable any exemption from registration under
the Securities Act.

          Such counsel shall state that he has  participated in conferences with
officers,  accountants and other representatives of the Company during which the
contents of the Subscription Agreement were discussed.  Although such counsel is
not passing  upon,  and does not assume any  responsibility  for, the  accuracy,
completeness  or  fairness  of any  statements  contained  in  the  Subscription
Agreement, such counsel shall state that, on the basis of the foregoing, nothing
has  come  to  such  counsel's  attention  to  lead  him  to  believe  that  the
Subscription  Agreement,  as of the date  thereof and the date of such  opinion,
contained or contains any untrue  statement of a material fact or omits to state
a  material  fact  required  to be  stated  therein  or  necessary  to make  the
statements  therein,  in the light of the  circumstances  under  which they were
made, not  misleading  (except for the financial  statements,  notes thereto and
other  statistical  and  financial   information  included  therein  or  omitted
therefrom, as to which such counsel need express no opinion).

     B. At each  Closing,  the  Placement  Agent  shall  receive  the opinion of
Christopher Aguilar, Esq., General Counsel for the Company, dated as of the date
of such  Closing,  which  opinion  shall  be in form  and  substance  reasonably
satisfactory to counsel for the Placement Agent, to the effect that:

          (i) Each of the Company and the  Subsidiaries  has been duly organized
and is validly  existing as a corporation in good standing under the laws of its
respective   jurisdiction  of   organization.   Each  of  the  Company  and  the
Subsidiaries  is duly  qualified or licensed  and in good  standing as a foreign
corporation  in each  jurisdiction  in which its  ownership  or  leasing  of any
properties or the character of its  operations  requires such  qualification  or
licensing.  Each of the Company and the Subsidiaries has all requisite corporate
power  and  authority,  and all  authorizations,  approvals,  orders,  licenses,
certificates and permits of and from all governmental  regulatory  officials and
bodies  (domestic  and foreign) to own or lease its  properties  and conduct its
business (or proposed business) as described in the Subscription Agreement. Each
of the Company and the  Subsidiaries  is doing business in compliance  with such
authorizations,  approvals,  orders, licenses,  certificates and permits and all
federal,  state,  local and foreign laws,  rules and regulations  concerning the
business in which such entity is engaged.

          (ii) Each of the  Company  and the  Subsidiaries  has the  outstanding
capitalization as set forth in the Subscription  Agreement.  Neither the Company
nor any of the Subsidiaries is a party to or bound by any instrument,  agreement
or other  arrangement  providing  for it to issue  any  capital  stock,  rights,
warrants,  options  or  other  securities,  except  for  this  Agreement  and as
described in the  Subscription  Agreement or in the  Company's  filings with the
Commission. All issued and outstanding securities of each of the Company and the
Subsidiaries  have been duly  authorized,  validly issued and are fully paid and
non-assessable,  and were issued in compliance  with all applicable  federal and
state  securities  laws;  the holders  thereof have no rights of  rescission  or
preemptive rights with respect thereto and are not subject to personal liability
solely by  reason of being  securityholders;  and none of such  securities  were
issued in violation of the  preemptive  rights of any holders of any security of
any of the Company or the Subsidiaries.  The Company has (a) 300,000,000  shares
of authorized  Common Stock,  18,278,174 this was the number  outstanding per C.
Aguilar on  11/20/01,  just  needs to be  brought  down] of which are issued and
outstanding  as of the date  hereof,  and (b)  60,000,000  shares of  authorized
preferred  stock,  of  which  2,000,000  shares  of  non  redeemable   Series  A
Convertible  Preferred Stock are issued and outstanding on the date hereof.  The
Company has duly  authorized  and reserved  for  issuance  the Note Shares,  the
Warrant Shares, and the securities underlying the Placement Agent Warrants.


                                       12
<PAGE>

          (iii) Each of the Company and the Subsidiaries owns or possesses, free
and clear of all liens or  encumbrances  and rights  thereto or therein by third
parties,  the requisite licenses or other rights to use all trademarks,  service
marks, copyrights,  service names, trade names, patents, patent applications and
licenses necessary to conduct its business (including,  without limitation,  any
such licenses or rights described in the  Subscription  Agreement as being owned
or possessed by the Company or any of the Subsidiaries,  respectively) and there
is no claim or action by any person  pertaining  to, or  proceeding,  pending or
threatened,  which  challenges the exclusive rights of the Company or any of the
Subsidiaries with respect to any trademarks,  service marks, copyrights, service
names,  trade names,  patents,  patent  applications  and  licenses  used in the
conduct of any of the Company's or any of the Subsidiaries respective businesses
(including,  without  limitation,  any such licenses or rights  described in the
Subscription  Agreement as being owned or possessed by the Company or any of the
Subsidiaries);  none  of  the  Company's  or any  of  the  Subsidiaries  current
products,  services  or  processes  infringe  or will  infringe  on the  patents
currently  held  by  any  third  party.  Neither  the  Company  nor  any  of the
Subsidiaries  is  under  any  obligation  to pay  royalties  or fees or any kind
whatsoever  to any third party with respect to any  trademarks,  service  marks,
copyrights,  service names, trade names, patents, patent applications,  licenses
or technology it has developed, uses, employs or intends to use or employ, other
than to their respective licensors.

          (iv)  Except as  otherwise  publicly  disclosed  by the Company in its
filings with the  Commission,  there is no material  litigation or  governmental
proceeding pending or, to the best of the Company's or Subsidiaries'  knowledge,
threatened  against, or involving the properties or businesses of the Company or
the Subsidiaries.

          (v)  Except as  otherwise  publicly  disclosed  by the  Company in its
filings with the Commission,  neither the Company nor any of the Subsidiaries is
in breach of, or in  default  under,  any term or  provision  of any  indenture,
mortgage,  deed of trust,  lease,  note,  loan or credit  agreement or any other
agreement or  instrument  evidencing an obligation  for borrowed  money,  or any
other  agreement or  instrument  to which it is a party or by which it or any of
its properties may be bound or affected.

          (vi) Neither the Company nor any  Subsidiaries  is in violation of any
provision of its respective  charter or Bylaws or in violation of any franchise,
license, permit, judgment, decree or order, or in violation of any statute, rule
or  regulation.  Neither  the  execution  and  delivery of this  Agreement,  the
Placement Agent's Warrant  Agreement,  the Warrant Agreement or the Subscription
Agreements,  nor the  issuance  and sale or delivery of the  Securities  nor the
consummation  of  any  of  the  transactions   contemplated  herein  or  in  the
Subscription Agreements,  the Warrant Agreement or the Placement Agent's Warrant
Agreement,  nor the  compliance  by the  Company  with the terms and  provisions
hereof or thereof, has conflicted with or will conflict with, or has resulted in
or will  result  in a breach  of,  any of the terms  and  provisions  of, or has
constituted  or will  constitute  a default  under,  or has  resulted in or will
result in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of the  Subsidiaries or pursuant to the
terms of any indenture,  mortgage, deed of trust, note, loan or credit agreement
or any other  agreement or  instrument  evidencing  an  obligation  for borrowed
money,  or any other  agreement or instrument to which the Company or any of the
Subsidiaries  may be bound or to which  any of the  property  or  assets  of the
Company or any of the  Subsidiaries  is subject;  nor will such action result in
any violation of the provisions of the  respective  charter or the Bylaws of the
Company or any of the Subsidiaries, any statute or any order, rule or regulation
applicable  to the  Company of any court or of any  foreign,  federal,  state or
other regulatory authority or other government body having jurisdiction over the
Company or any of the Subsidiaries.

          Such counsel shall state that he has  participated in conferences with
other  officers  of  the  Company,   as  well  as  with  accountants  and  other
representatives  of the Company,  during which the contents of the  Subscription
Agreement  were  discussed.  Although such counsel is not passing upon, and does
not assume any responsibility for, the accuracy, completeness or fairness of any
statements  contained in the  Subscription  Agreement,  such counsel shall state
that,  on the  basis  of the  foregoing,  nothing  has  come to  such  counsel's
attention to lead him to believe that the Subscription Agreement, as of the date
thereof and the date of such opinion, contained or contains any untrue statement
of a  material  fact or omits to state a  material  fact  required  to be stated
therein  or  necessary  to make  the  statements  therein,  in the  light of the
circumstances  under  which  they were  made,  not  misleading  (except  for the
financial  statements,   notes  thereto  and  other  statistical  and  financial
information included therein or omitted therefrom, as to which such counsel need
express no opinion).


                                       13
<PAGE>

     C. At or prior to each Closing,  counsel for the Placement Agent shall have
been furnished such documents,  certificates and opinions as they may reasonably
require for the purpose of  enabling  them to review the matters  referred to in
this  Agreement  and the  Subscription  Agreement,  or in order to evidence  the
accuracy, completeness or satisfaction of any of the representations, warranties
or conditions herein contained.

     D. At and prior to each  Closing,  (i) there  shall  have been no  material
adverse change nor development  involving a prospective  change in the condition
or prospects or the business activities,  financial or otherwise, of the Company
or any of its  Subsidiaries  from the latest dates as of which such condition is
set  forth  in the  Subscription  Agreement;  (ii)  there  shall  have  been  no
transaction, not in the ordinary course of business, entered into by the Company
or any of its  Subsidiaries  which has not been  disclosed  in the  Subscription
Agreement;  (iii)  neither the Company nor any of the  Subsidiaries  shall be in
default  under any  provision  of any  instrument  relating  to any  outstanding
indebtedness  for which a waiver or extension has not been  otherwise  received;
(iv)  neither  the  Company  nor any of the  Subsidiaries  shall have issued any
securities  (other  than  those  set  forth in the  Subscription  Agreement)  or
declared or paid any dividend or made any  distribution  of its capital stock of
any class and there shall not have been any change in the indebtedness  (long or
short  term)  or  liabilities  or  obligations  of  the  Company  or  any of its
Subsidiaries  (contingent or otherwise)  except as disclosed in the Subscription
Agreement;  (v) no  material  amount of the assets of the  Company or any of its
Subsidiaries shall have been pledged or mortgaged;  and (vi) no action,  suit or
proceeding,  at law or in equity, against the Company or any of its Subsidiaries
or affecting any of their  respective  properties or businesses shall be pending
or threatened  before or by any court or federal or state  commission,  board or
other  administrative  agency,  domestic  or  foreign,  wherein  an  unfavorable
decision,  ruling or finding  could  materially  adversely  affect the business,
prospects  or  financial  condition  or  income  of  the  Company  or any of its
Subsidiaries.

     E. At each Closing,  the Placement  Agent shall have received a certificate
of the  Company  signed  by its chief  executive  officer  and  chief  financial
officer, dated as of the date of such Closing, to the effect that the conditions
set forth in subparagraph (C) above have been satisfied and that, as of the date
of such  Closing,  the  representations  and  warranties  of the Company and the
Subsidiaries set forth herein are true and correct.

     F. At each Closing,  the Company shall have duly executed and delivered the
appropriate amount and designation of certificates/instruments  representing the
Notes  and the  Warrants  to the  Placement  Agent as agent  for the  respective
holders thereof.

     G. At each  Closing,  the Company shall have duly executed and delivered to
the Placement Agent, or its designees, the Placement Agent Warrants in the names
and denominations specified by the Placement Agent.

9.   Termination.

     Either the Placement Agent or the Company may terminate the Offering in its
sole  discretion  prior  to  either  Closing.  In the  event  that  the  Company
determines to terminate the Offering from and after the date hereof  through the
end of the  Offering  Period for any reason  other  than the  Placement  Agent's
breach of the terms of this  Agreement,  and the  Placement  Agent is willing to
proceed,  then the Company  shall  immediately  pay to the  Placement  Agent the
amount of its out-of-pocket  expenses.  Upon such termination,  all Subscription
Agreements and payments for the Units not previously delivered to the purchasers
thereof,  without interest thereon or deduction therefrom,  shall be returned to
the respective subscribers, the Placement Agent shall have no further obligation
to the Company, and the Company shall have no obligation to the Placement Agent.
If the  Placement  Agent  does not or fails to  complete  the  Offering  and the
reasons  therefor are  reasonably  related to a material  adverse  change in the
business or financial  results,  prospects or condition of the Company,  factors
beyond  the  Placement  Agent's  control  and  through  no fault of its own or a
material adverse change in market conditions then, in any such case, the Company
agrees to promptly pay the Placement  Agent its actual  out-of-pocket  expenses,
including the fees and  disbursements of the Placement Agent's legal counsel and
shall remain  liable for all  reasonable  Blue Sky counsel fees and expenses and
Blue Sky filing fees.

10.  Miscellaneous.


                                       14
<PAGE>

     A. This  Agreement may be executed in any number of  counterparts,  each of
which shall be deemed to be an original, but all which shall be deemed to be one
and the same instrument.

     B. Any notice required or permitted to be given hereunder shall be given in
writing and shall be deemed  effective  when (i)  deposited in the United States
mail, postage prepaid,  (ii) sent by nationally  recognized overnight courier or
(iii) received if personally delivered or faxed, addressed as follows:

     To the Placement Agent:

          Murphy & Durieu
          120 Broadway
          17th Floor
          New York, New York  10271
          Fax: (212) 618-0749
          Attention: Lawrence Stanton

     with a copy to:

          Kelley Drye & Warren LLP
          101 Park Avenue
          New York, New York  10178
          Fax:  (203) 327-2669
          Attention:  Paul F. McCurdy, Esq.

     To the Company:

          RateXchange Corporation
          100 Pine Street, Suite 500
          San Francisco, California 94111-5101
          Fax:  (415) 274-5651
          Attention: D. Jonathan Merriman and
          Christopher L. Aguilar, Esq.

          with a copy to:

          Barry Feiner, Esq.
          170 Falcon Court
          Manhasset, New York 11030
          Fax:  (516) 484-6867

or to such other address of which written notice is given to the others.

     C. THIS AGREEMENT  SHALL BE GOVERNED BY AND CONSTRUED IN ALL RESPECTS UNDER
THE LAWS OF THE STATE OF NEW YORK,  WITHOUT  REFERENCE  TO ITS  CONFLICT OF LAWS
RULES OR PRINCIPLES.  ANY SUIT, ACTION,  PROCEEDING OR LITIGATION ARISING OUT OF
OR RELATING TO THIS AGREEMENT SHALL BE BROUGHT AND PROSECUTED IN SUCH FEDERAL OR
STATE COURT OR COURTS  LOCATED  WITHIN THE STATE OF NEW YORK AS PROVIDED BY LAW.
THE PARTIES HEREBY IRREVOCABLY AND  UNCONDITIONALLY  CONSENT TO THE JURISDICTION
OF EACH  SUCH  COURT OR COURTS  LOCATED  WITHIN  THE  STATE OF NEW YORK,  AND TO
SERVICE OF PROCESS BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR
BY ANY OTHER  MANNER  PROVIDED BY  APPLICABLE  LAW, AND HEREBY  IRREVOCABLY  AND


                                       15
<PAGE>

UNCONDITIONALLY  WAIVE ANY RIGHT TO CLAIM THAT ANY SUIT,  ACTION,  PROCEEDING OR
LITIGATION SO COMMENCED HAS BEEN COMMENCED IN AN INCONVENIENT FORUM.

     D. This Agreement and the other  agreements  referenced  herein contain the
entire   understanding   between  the  parties  hereto,   supersedes  all  prior
understandings and agreements with respect to the subject matter hereof, and may
not be modified or amended  except by a writing duly signed by the party against
whom enforcement of the modification or amendment is sought. If any provision of
this Agreement shall be held to be invalid or unenforceable,  such invalidity or
unenforceability shall not affect any other provision of this Agreement.

All  representations,   covenants,  warranties  and  indemnification  provisions
contained in this Agreement shall remain in full force and effect  following the
termination of this Agreement.

              [The remainder of this page intentionally left blank]


                                       16
<PAGE>

     IN WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of
the date first written above.

                                 RATEXCHANGE CORPORATION


                                 By: ___________________________________________
                                     Name:  D. Jonathan Merriman
                                     Title: Chairman and Chief Executive Officer
MURPHY & DURIEU


By: __________________________
    Name:
    Title:


                                       17

</TEXT>
</DOCUMENT>
