PATH 1 NETWORK TECHNOLOGIES INC
STOCK PURCHASE AGREEMENT
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>2
<FILENAME>stockpurchaseagmt.txt
<DESCRIPTION>STOCK PURCHASE AGREEMENT
<TEXT>
                          COMMON STOCK PURCHASE AGREEMENT


                  This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is
dated as of January 17, 2002 by and between Path 1 Network Technologies Inc., a
Delaware corporation (the "Company") and DTKA Holdings Limited (the
"Purchaser"), a British Virgin Islands corporation.

                  WHEREAS, the parties desire that, upon the terms and subject
to the conditions contained herein, the Company shall issue and sell to
Purchaser from time to time as provided herein, and Purchaser shall purchase, up
to US$10,000,000 of Common Stock; and

                  WHEREAS, such investments will be made by the Purchaser as
statutory underwriter of a registered indirect primary offering of such Common
Stock by the Company.

                  NOW, THEREFORE, in consideration of the foregoing premises,
and the promises and covenants herein contained, the receipt and sufficiency of
which are hereby acknowledged by the parties hereto, the parties, intending to
be legally bound, hereby agree as follows:

                                    ARTICLE 1

                        PURCHASE AND SALE OF COMMON STOCK

     Section  1.1.  Purchase  and  Sale  of  Stock.  Subject  to the  terms  and
conditions  of this  Agreement,  the Company may sell and issue to the Purchaser
and the  Purchaser  shall be  obligated to purchase  from the Company,  up to an
aggregate of US$10,000,000 of Common Stock (the "Commitment Amount"), subject to
the terms herein.

     Section 1.2.  Purchase  Price and Initial  Closing.  The Company  agrees to
issue and sell to the Purchaser and, in consideration of and in express reliance
upon the representations,  warranties,  covenants,  terms and conditions of this
Agreement,  the  Purchaser  agrees to  purchase  that number of the Shares to be
issued in  connection  with each Draw Down.  The delivery of executed  documents
under this Agreement and the other agreements referred to herein and the payment
of the fees set forth in Article I of the Escrow Agreement,  attached as Exhibit
B hereto,  (the  "Initial  Closing")  shall  take  place at the  offices  of the
Purchaser's  legal  counsel at 36 West 44th  Street,  Suite 1201,  New York,  NY
10036,  (i) within ten (10)  calendar  days from the date  hereof,  or (ii) such
other time and place or on such date as the  Purchaser and the Company may agree
upon (the  "Initial  Closing  Date").  Each party shall  deliver all  documents,
instruments and writings required to be delivered by such party pursuant to this
Agreement at or prior to the Initial Closing.

                                    ARTICLE 2


                         REPRESENTATIONS AND WARRANTIES

     Section 2.1.  Representation  and  Warranties  of the Company.  The Company
hereby represents and warrants to the Purchaser as follows,  except as set forth
in the SEC Documents or on the Disclosure  Schedule  prepared by the Company and
attached hereto, or as contemplated by this Agreement:

(a)  Organization,  Good Standing and Power.  The Company is a corporation  duly
     incorporated  validly  existing and in good standing  under the laws of the
     state of Delaware and has all requisite  corporate  authority to own, lease
     and operate its  properties  and assets and to carry on its business as now
     being  conducted.  The Company does not have any  subsidiaries and does not
     own more than fifty percent (50%) of or control any other  business  entity
     except as set forth in the SEC Documents or on the Disclosure Schedule. The
     Company is duly  qualified  to do  business  and is in good  standing  as a
     foreign  corporation  in every  jurisdiction  in which  the  nature  of the
     business  conducted  or  property  owned  by it  makes  such  qualification
     necessary,  other than those in which the  failure so to qualify  would not
     have a Material Adverse Effect.

(b)  Authorization,  Enforcement.  (i) The Company has the  requisite  corporate
     power and  corporate  authority  to enter into and perform its  obligations
     under the Transaction  Documents and to issue the Draw Down Shares pursuant
     to  their  respective  terms,  (ii)  the  execution  and  delivery  of  the
     Transaction  Documents  by the  Company and the  consummation  by it of the
     transactions  contemplated  hereby and thereby have been duly authorized by
     all necessary  corporate  action and no further consent or authorization of
     the Company or its Board of Directors  or  stockholders  is  required,  and
     (iii) the  Transaction  Documents  have been duly executed and delivered by
     the Company and at the Initial Closing shall  constitute  valid and binding
     obligations  of the Company  enforceable  against the Company in accordance
     with  their  terms,  except  as  such  enforceability  may  be  limited  by
     applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
     conservatorship,  receivership  or similar  laws  relating to, or affecting
     generally the  enforcement of,  creditors'  rights and remedies or by other
     equitable principles of general application.

(c)  Capitalization.  As of the date hereof, the authorized capital stock of the
     Company  consists of 10,000,000  shares of Common Stock of which  8,814,226
     shares  are  issued and  outstanding,  20,000,000  shares of Class B Common
     Stock none of which are issued and  outstanding  and  10,000,000  shares of
     Blank Check Preferred Stock of which none are issued and  outstanding.  All
     of the outstanding  shares of the Company's Common Stock have been duly and
     validly  authorized  and are fully  paid and  non-assessable  except as set
     forth in the SEC  Documents.  No  shares of Common  Stock are  entitled  to
     preemptive  rights or  registration  rights  and  there are no  outstanding
     options,  warrants,  scrip, rights to subscribe to, calls or commitments of
     any character  whatsoever  relating to, or securities or rights convertible
     into,  any shares of capital stock of the Company except as set forth in he
     SEC  Documents  or on the  Disclosure  Schedule.  There  are no  contracts,
     commitments, understandings, or arrangements by which the Company is or may
     become bound to issue additional shares of the capital stock of the Company
     or options,  securities or rights  convertible into shares of capital stock
     of the  Company.  The  Company  is not a party  to any  agreement  granting
     registration rights to any person with respect to any of its equity or debt
     securities.  The Company is not a party to, and it has no knowledge of, any
     agreement  restricting  the voting or transfer of any shares of the capital
     stock of the Company. The offer and sale of all capital stock,  convertible
     securities, rights, warrants, or options of the Company issued prior to the
     Initial Closing  complied with all applicable  federal and state securities
     laws, and no stockholder  has a right of rescission or damages with respect
     thereto which would have a Material  Adverse  Effect.  The Company has made
     available  to the  Purchaser  true  and  correct  copies  of the  Company's
     Certificate  of  Incorporation  as  in  effect  on  the  date  hereof  (the
     "Charter"),  and the Company's  Bylaws as in effect on the date hereof (the
     "Bylaws").  The Company  has not  received  any notice  from the  Principal
     Market  questioning  or threatening  the continued  inclusion of the Common
     Stock on such market.

(d)  No Conflicts. The execution,  delivery and performance of this Agreement by
     the  Company  and  the  consummation  by the  Company  of the  transactions
     contemplated  herein do not and will not (i) violate any  provision  of the
     Company's  Charter or Bylaws,  (ii) conflict  with, or constitute a default
     (or an event  which  with  notice or lapse of time or both  would  become a
     default)  under,  or give to others any rights of  termination,  amendment,
     acceleration or cancellation  of, any agreement,  mortgage,  deed of trust,
     indenture,  note, bond, license, lease agreement,  instrument or obligation
     to which the Company is a party,  (iii) create or impose a lien,  charge or
     encumbrance  on any  property of the  Company  under any  agreement  or any
     commitment to which the Company is a party or by which the Company is bound
     or by which any of its respective  properties or assets are bound,  or (iv)
     result  in a  violation  of any  federal,  state,  local or  other  foreign
     statute, rule, regulation, order, judgment or decree (including any federal
     or state securities laws and regulations)  applicable to the Company or any
     of its subsidiaries or by which any property or asset of the Company or any
     of its subsidiaries are bound or affected,  except,  in all cases, for such
     conflicts, defaults, termination, amendments, accelerations,  cancellations
     and violations as would not reasonably be expected,  individually or in the
     aggregate,  to have a Material Adverse Effect.  The business of the Company
     and its  subsidiaries  is not being  conducted  in  violation  of any laws,
     ordinances or regulations of any governmental  entity,  except for possible
     violations  which singularly or in the aggregate do not and will not have a
     Material  Adverse  Effect.  The Company is not required  under any federal,
     state or local law, rule or regulation to obtain any consent, authorization
     or  order  of,  or make any  filing  or  registration  with,  any  court or
     governmental  agency in order for it to execute,  deliver or perform any of
     its  obligations  under  this  Agreement,  or issue and sell the  Shares in
     accordance  with the terms  hereof  (other  than any  filings  which may be
     required  to be made  by the  Company  with  the  SEC or  state  securities
     administrators  and any registration  statement which may be filed pursuant
     hereto); provided, however, that for purpose of the representations made in
     this sentence, the Company is assuming and relying upon the accuracy of the
     relevant representations and agreements of the Purchaser herein.

(e)  SEC  Documents,  Financial  Statements.  The Common Stock of the Company is
     registered  pursuant to Section 12(g) of the Exchange Act, and, the Company
     is  current  with all  reports,  schedules,  forms,  statements  and  other
     documents required to be filed by it with the SEC pursuant to the reporting
     requirements  of the Exchange Act,  including  material  filed  pursuant to
     Section  13(a) or 15(d) of the Exchange  Act. The Company has  delivered or
     made  available to the  Purchaser,  through the EDGAR system or  otherwise,
     true and  complete  copies of the SEC  Documents  filed  with the SEC since
     January  10,  2000.  The  Company has not  provided  to the  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, other than with respect to the transactions contemplated by this
     Agreement.  As of their respective filing dates, the SEC Documents complied
     in all material  respects with the  requirements of the Exchange Act or the
     Securities  Act, as  applicable,  and the rules and  regulations of the SEC
     promulgated  thereunder  applicable  to such  documents,  and,  as of their
     respective  filing dates,  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  included  in the SEC  Documents
     comply  as to form in all  material  respects  with  applicable  accounting
     requirements  under GAAP and the published rules and regulations of the SEC
     or other  applicable  rules and  regulations  with  respect  thereto.  Such
     financial  statements have been prepared in accordance with GAAP applied on
     a  consistent  basis  during the  periods  involved  (except  (i) as may be
     otherwise  indicated in such  financial  statements or the notes thereto or
     (ii) in the case of unaudited  interim  statements,  to the extent they may
     not include  footnotes  or may be  condensed  or summary  statements),  and
     fairly  present in all  material  respects  the  financial  position of the
     Company  and its  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).

(f)  Subsidiaries.  The SEC Documents or the Disclosure Schedule attached hereto
     sets forth each subsidiary of the Company,  showing the jurisdiction of its
     incorporation  or organization  and showing the percentage of the Company's
     ownership of the outstanding  stock or other interests of such  subsidiary.
     For the purposes of this Agreement, "subsidiary" shall mean any corporation
     or other  entity of which at least a majority  of the  securities  or other
     ownership   interests   having   ordinary   voting  power   (absolutely  or
     contingently)  for the election of directors  or other  persons  performing
     similar  functions  are at the time owned  directly  or  indirectly  by the
     Company  and/or  any of its  other  subsidiaries.  All  of the  issued  and
     outstanding  shares  of  capital  stock of each  subsidiary  have been duly
     authorized and validly issued, and are fully paid and non-assessable. There
     are  no  outstanding  preemptive,  conversion  or  other  rights,  options,
     warrants or agreements  granted or issued by or binding upon any subsidiary
     for the  purchase  or  acquisition  of any shares of  capital  stock of any
     subsidiary or any other securities  convertible  into,  exchangeable for or
     evidencing  the rights to subscribe  for any shares of such capital  stock.
     Neither  the  Company  nor any  subsidiary  is  subject  to any  obligation
     (contingent or otherwise) to repurchase or otherwise  acquire or retire any
     shares  of  the  capital  stock  of  any  subsidiary  or  any   convertible
     securities,  rights,  warrants  or  options  of the type  described  in the
     preceding sentence.

(g)  No  Material  Adverse  Effect.  Since the date of the  financial  statement
     contained in the most recently filed Form 10-Q (or 10-QSB) or Form 10-K (or
     10-KSB), whichever is most current, no Material Adverse Effect has occurred
     or exists  with  respect to the  Company,  except as  disclosed  in the SEC
     Documents or on the Disclosure Schedule attached hereto.

(h)  No Undisclosed Liabilities. Neither the Company nor any of its subsidiaries
     has any liabilities,  obligations,  claims or losses (whether liquidated or
     unliquidated,  secured  or  unsecured,  absolute,  accrued,  contingent  or
     otherwise) that would be required to be disclosed on a balance sheet of the
     Company or any subsidiary  (including the notes thereto) in conformity with
     GAAP which are not  disclosed  in the SEC  Documents  or on the  Disclosure
     Schedule, other than those incurred in the ordinary course of the Company's
     or its  subsidiaries'  respective  businesses  since  such  date or  which,
     individually  or in the  aggregate,  do not or would  not  have a  Material
     Adverse Effect on the Company or its subsidiaries.

(i)  No  Undisclosed  Events or  Circumstances.  Since the date of the financial
     statement  contained in the most  recently  filed Form 10- Q (or 10-QSB) or
     Form 10-K (or 10-KSB),  whichever is most current, no event or circumstance
     has  occurred  or exists  with  respect to the  Company or its  businesses,
     properties,  prospects,  operations  or financial  condition,  that,  under
     applicable  law,  rule  or  regulation,   requires  public   disclosure  or
     announcement prior to the date hereof by the Company but which has not been
     so publicly announced or disclosed in the SEC Documents.

(j)  Indebtedness.   The  SEC  Documents  (including  the  financial  statements
     included therein) or the Disclosure  Schedule attached hereto sets forth as
     of the date hereof 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 in excess of $500,000  (other
     than trade accounts  payable  incurred in the ordinary course of business),
     (B) all guaranties,  endorsements and 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) any lease payments
     with a present value in excess of $500,000 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.

(k)  Title to Assets.  Each of the  Company  and the  subsidiaries  has good and
     marketable title to all of its real and personal property  reflected in the
     SEC Documents,  free of any mortgages,  pledges,  charges,  liens, security
     interests or other  encumbrances,  except such that do not cause a Material
     Adverse  Effect.  All real  property  leases of the Company and each of its
     subsidiaries are valid and subsisting and in full force and effect.

(l)  Actions  Pending.  There  is  no  action,  suit,  claim,  investigation  or
     proceeding pending or, to the knowledge of the Company,  threatened against
     the  Company  or any  subsidiary  which  questions  the  validity  of  this
     Agreement or the transactions contemplated hereby or any action taken or to
     be taken  pursuant  hereto or  thereto.  There is no action,  suit,  claim,
     investigation  or  proceeding  pending or, to the knowledge of the Company,
     threatened,  against or involving  the Company,  any  subsidiary  or any of
     their  respective   properties  or  assets,   which  action,  suit,  claim,
     investigation or proceeding would reasonably be expected to have a Material
     Adverse Effect.  There are no outstanding orders,  judgments,  injunctions,
     awards or decrees of any court,  arbitrator or  governmental  or regulatory
     body against the Company or any subsidiary except those orders,  judgments,
     injunctions,  awards or decrees  which would not  reasonably be expected to
     have a Material Adverse Effect.

(m)  Compliance  with Law.  The  Company and each of its  subsidiaries  have all
     franchises,   permits,   licenses,   consents  and  other  governmental  or
     regulatory  authorizations and approvals necessary for the conduct of their
     respective  businesses as now being conducted by them unless the failure to
     possess such franchises, permits, licenses, consents and other governmental
     or  regulatory  authorizations  and  approvals,   individually  or  in  the
     aggregate,  could not  reasonably  be expected  to have a Material  Adverse
     Effect.

(n)  Taxes.  The Company has timely  filed all material Tax Returns and notices.
     The Company has no knowledge, or any reasonable grounds to know, of any Tax
     deficiencies of any nature  whatsoever  which would,  in the aggregate,  be
     reasonably likely to result in a Material Adverse Effect.

For purposes of this Section 3.1(n):

          "Tax" or "Taxes" means federal,  state,  county,  local,  foreign,  or
     other income, gross receipts, ad valorem, franchise, profits, sales or use,
     transfer,  registration,  excise, utility,  environmental,  communications,
     real or personal property,  capital stock, license,  payroll, wage or other
     withholding,  employment,  social security,  severance,  stamp, occupation,
     alternative  or  add-on  minimum,  estimated  and  other  taxes of any kind
     whatsoever  (including,   without  limitation,   deficiencies,   penalties,
     additions to tax, and interest  attributable  thereto)  whether disputed or
     not.

          "Tax  Return"  means any  return,  information  report or filing  with
     respect to Taxes,  including any schedules  attached  thereto and including
     any amendment thereof.

(o)  Certain Fees. No brokers, finders or financial advisory fees or commissions
     will be  payable  by the  Company  or any  subsidiary  with  respect to the
     transactions contemplated by this Agreement.

(p)  Disclosure. To the best of the Company's knowledge,  neither this Agreement
     or  the  Schedules  hereto  nor  any  other   documents,   certificates  or
     instruments  furnished  to the  Purchaser by or on behalf of the Company or
     any subsidiary in connection  with the  transactions  contemplated  by this
     Agreement contain any untrue statement of a material fact or omits to state
     a material fact  necessary in order to make the  statements  made herein or
     therein,  in the  light of the  circumstances  under  which  they were made
     herein or therein, not misleading.

(q)  Operation of  Business.  The Company and each of the  subsidiaries  owns or
     possesses all patents, trademarks,  service marks, trade names, copyrights,
     licenses  and  authorizations  as set  forth  in the SEC  Documents  or the
     Disclosure  Schedule  attached  hereto,  and all rights with respect to the
     foregoing,  which to its knowledge  would be  reasonably  necessary for the
     conduct of its  business as now  conducted  without any  conflict  with the
     rights of others.

(r)  Regulatory   Compliance.   The   Company   has  all   necessary   licenses,
     registrations and permits to conduct its business as now being conducted in
     all states where the Company conducts its business.

(s)  Books and  Records.  The  records  and  documents  of the  Company  and its
     subsidiaries  accurately  reflect in all material  respects the information
     relating to the business of the Company and the subsidiaries,  the location
     and collection of their assets,  and the nature of all transactions  giving
     rise to the  obligations  or  accounts  receivable  of the  Company  or any
     subsidiary.

(t)  Material Agreements. Neither the Company nor any subsidiary is a party to a
     Material  Agreement.  The Company and each of its  subsidiaries  has in all
     material respects performed all the obligations required to be performed by
     them to date under the  foregoing  agreements,  have  received no notice of
     default  and,  to the best of the  Company's  knowledge  are not in default
     under any Material Agreement now in effect, the result of which would cause
     a  Material  Adverse  Effect.  No  written  or oral  contract,  instrument,
     agreement, commitment, obligation, plan or arrangement of the Company or of
     any  subsidiary  limits or shall  limit the  payment  of  dividends  on the
     Company's  Common Stock.

(u)  Transactions  with  Affiliates.  There  are no loans,  leases,  agreements,
     contracts,  royalty  agreements,  management  contracts or  arrangements or
     other continuing  transactions  exceeding $100,000 between

          (A) the Company,  any subsidiary or any of their respective  customers
     or suppliers on the one hand, and

          (B) on the other hand, any officer,  employee,  consultant or director
     of the  Company,  or any of its  subsidiaries,  or any  person  owning  any
     capital  stock  of the  Company  or any  subsidiary  or any  member  of the
     immediate  family  of  such  officer,  employee,  consultant,  director  or
     stockholder or any corporation or other entity  controlled by such officer,
     employee, consultant, director or stockholder, or a member of the immediate
     family of such officer, employee, consultant,  director or stockholder. (v)
     Securities  Laws.  The  Company  has  complied  and  will  comply  with all
     applicable  federal and state securities laws in connection with the offer,
     issuance and sale of the Shares  hereunder.  Neither the Company nor anyone
     acting on its behalf,  directly or indirectly,  has or will sell,  offer to
     sell or  solicit  offers to buy the  Shares or  similar  securities  to, or
     solicit  offers with respect  thereto from,  or enter into any  preliminary
     conversations or negotiations relating thereto with, any person (other than
     the  Purchaser),  so as to bring the  issuance and sale of the Shares under
     the  registration  provisions of the Securities  Act and  applicable  state
     securities  laws.  Neither the Company nor any of its  affiliates,  nor any
     person  acting on its or their  behalf,  has engaged in any form of general
     solicitation  or general  advertising  (within the meaning of  Regulation D
     under  the  Securities  Act) in  connection  with the  offer or sale of the
     Shares.

(w)  Employees.  Neither  the  Company  nor any  subsidiary  has any  collective
     bargaining  arrangements  or  agreements  covering  any of  its  employees.
     Neither  the  Company  nor any  subsidiary  is in breach of any  employment
     contract,  agreement  regarding  proprietary  information,   noncompetition
     agreement,  nonsolicitation  agreement,  confidentiality  agreement, or any
     other similar  contract or restrictive  covenant,  relating to the right of
     any  officer,  employee  or  consultant  to be  employed  or engaged by the
     Company or such subsidiary. Since December 31, 2000, no officer, consultant
     or key employee of the Company or any subsidiary whose termination,  either
     individually or in the aggregate, could have a Material Adverse Effect, has
     terminated or, to the knowledge of the Company,  has any present  intention
     of terminating  his or her employment or engagement with the Company or any
     subsidiary.  (x) Absence of Certain Developments.  Since December 31, 2000,
     neither the Company nor any subsidiary has:

               (i) issued any stock, bonds or other corporate  securities or any
          rights, options or warrants with respect thereto;

               (ii)  borrowed  any amount or incurred  or become  subject to any
          liabilities   (absolute  or  contingent)  except  current  liabilities
          incurred in the ordinary  course of business  which are  comparable in
          nature and amount to the current liabilities  incurred in the ordinary
          course of business  during the comparable  portion of its prior fiscal
          year,  as adjusted  to reflect  the  current  nature and volume of the
          Company's or such subsidiary's business;

               (iii) discharged or satisfied any lien or encumbrance or paid any
          obligation or liability  (absolute or contingent),  other than current
          liabilities paid in the ordinary course of business;

               (iv)  declared  or made any  payment or  distribution  of cash or
          other property to stockholders with respect to its stock, or purchased
          or  redeemed,  or made any  agreements  so to purchase or redeem,  any
          shares of its capital stock;

               (v) sold,  assigned or transferred any other tangible assets,  or
          canceled  any  debts or  claims,  except  in the  ordinary  course  of
          business;

               (vi) sold, assigned or transferred any patent rights, trademarks,
          trade names,  copyrights,  trade secrets or other intangible assets or
          intellectual   property   rights,   or   disclosed   any   proprietary
          confidential  information  to any person  except to  customers  in the
          ordinary   course   of   business   or  to   the   Purchaser   or  its
          representatives;

               (vii)  suffered  any  substantial  losses or waived any rights of
          material value, whether or not in the ordinary course of business,  or
          suffered  the loss of any  material  amount of  prospective  business;
          (viii)  made  any  changes  in  employee  compensation  except  in the
          ordinary course of business and consistent  with past practices;

               (ix) made  capital  expenditures  or  commitments  therefor  that
          aggregate in excess of $500,000;

               (x) entered into any other material  transaction,  whether or not
          in the ordinary course of business;

               (xi) suffered any material damage,  destruction or casualty loss,
          whether or not covered by insurance;

               (xii)  experienced any material problems with labor or management
          in connection  with the terms and conditions of their  employment;  or

               (xiii)  effected  any two or more  events of the  foregoing  kind
          which  in the  aggregate  would  be  material  to the  Company  or its
          subsidiaries.

(y)  Governmental  Approvals.  Except  for the  filing  of any  notice  prior or
     subsequent to any  Settlement  Date that may be required  under  applicable
     federal or state  securities  laws (which if required,  shall be filed on a
     timely  basis),  including  the  filing  of  a  registration  statement  or
     post-effective  amendment  pursuant to this  Agreement,  no  authorization,
     consent,  approval,  license, exemption of, filing or registration with any
     court or governmental  department,  commission,  board,  bureau,  agency or
     instrumentality,  domestic or foreign,  is or will be necessary  for, or in
     connection with, the delivery of the Shares,  or for the performance by the
     Company  of  its  obligations  under  this  Agreement.

(z)  Acknowledgment   Regarding   Purchaser's   Purchase   of  Shares.   Company
     acknowledges  and agrees that Purchaser is acting solely in the capacity of
     arm's length  purchaser with respect to this Agreement and the transactions
     contemplated hereunder. The Company further acknowledges that the Purchaser
     is not acting as a financial advisor or fiduciary of the Company (or in any
     similar  capacity)  with  respect to this  Agreement  and the  transactions
     contemplated  hereunder.  The Company  further  represents to the Purchaser
     that the  Company's  decision to enter into this  Agreement  has been based
     solely on (a) the  Purchaser's  representations  and  warranties in Section
     2.2,  and  (b)  the  independent  evaluation  by the  Company  and  its own
     representatives and counsel.

     Section 2.2. Representations and Warranties of the Purchaser. The Purchaser
hereby makes the following  representations  and warranties to the Company:

(a)  Organization and Standing of the Purchaser.  The Purchaser is a corporation
     duly incorporated,  validly existing and in good standing under the laws of
     the British Virgin Islands.

(b)  Authorization  and  Power.  The  Purchaser  has  the  requisite  power  and
     authority  to enter  into and  perform  the  Transaction  Documents  and to
     purchase  the  Shares.  The  execution,  delivery  and  performance  of the
     Transaction  Documents  by  Purchaser  and  the  consummation  by it of the
     transactions contemplated hereby have been duly authorized by all necessary
     corporate  action and at the Initial  Closing  shall  constitute  valid and
     binding  obligations of the Purchaser  enforceable against the Purchaser in
     accordance with their terms,  except as such  enforceability may be limited
     by   applicable   bankruptcy,   insolvency,   reorganization,   moratorium,
     liquidation, conservatorship,  receivership or similar laws relating to, or
     affecting  generally the enforcement of,  creditors' rights and remedies or
     by other equitable principles of general application

(c)  No Conflicts. The execution, delivery and performance of this Agreement and
     the consummation by the Purchaser of the transactions  contemplated  hereby
     or  relating  hereto do not and will not (i) result in a  violation  of the
     Purchaser's   charter  documents  or  bylaws  or  (ii)  conflict  with,  or
     constitute  a default  (or an event  which with  notice or lapse of time or
     both  would  become a  default)  under,  or give to  others  any  rights of
     termination,  amendment,  acceleration  or  cancellation  of any agreement,
     indenture or instrument  to which the Purchaser is a party,  or result in a
     violation of any law, rule, or regulation, or any order, judgment or decree
     of any court or  governmental  agency  applicable  to the  Purchaser or its
     properties  (except for such  conflicts,  defaults and  violations as would
     not,  individually or in the aggregate,  have a Material  Adverse Effect on
     Purchaser).   The   Purchaser  is  not  required  to  obtain  any  consent,
     authorization  or order of, or make any filing or  registration  with,  any
     court or governmental agency in order for it to execute, deliver or perform
     any of its  obligations  under this  Agreement or to purchase the Shares in
     accordance  with  the  terms  hereof,  provided  that for  purposes  of the
     representation made in this sentence, the Purchaser is assuming and relying
     upon the accuracy of the relevant  representations  and  agreements  of the
     Company herein.

(d)  Financial  Risks.  The Purchaser  acknowledges  that it is able to bear the
     financial risks associated with an investment in the Shares and that it has
     been given full access to such records of the Company and the  subsidiaries
     and to the  officers of the Company and the  subsidiaries  as it has deemed
     necessary or  appropriate to conduct its due diligence  investigation.  The
     Purchaser is capable of evaluating the risks and merits of an investment in
     the Shares by virtue of its  experience  as an investor and its  knowledge,
     experience,  and  sophistication  in financial and business matters and the
     Purchaser  is capable of bearing the entire loss of its  investment  in the
     Shares.

(e)  Accredited Investor.  The Purchaser is an "accredited  investor" as defined
     in Rule 501 of  Regulation  D  promulgated  under the  Securities  Act.

(f)  General.  The  Purchaser  understands  that the Company is relying upon the
     truth  and  accuracy  of  the  representations,   warranties,   agreements,
     acknowledgments  and  understandings  of the  Purchaser set forth herein in
     order to determine the suitability of the Purchaser to acquire the Shares.



                                    ARTICLE 3


                                    COVENANTS


     The Company  covenants  with the  Purchaser  as follows:

     Section 3.1. The Shares.  As of the date of each  applicable Draw Down, the
Company  will  have  authorized  and  reserved,  free of  preemptive  rights,  a
sufficient number of authorized but unissued shares of its Common Stock to cover
the Draw Down Shares to be issued in  connection  with such Draw Down  requested
under this  Agreement.  The Draw Down Shares to be issued under this  Agreement,
when paid for and issued in accordance with the terms hereof,  shall be duly and
validly issued and outstanding, fully paid and non-assessable, and the Purchaser
shall be entitled to all rights  accorded to a holder of Common Stock.  Anything
in this  Agreement to the contrary  notwithstanding,  the Company may not make a
Draw Down to the extent that,  after such purchase by the Purchaser,  the sum of
the number of shares of Common Stock beneficially owned by the Purchaser and its
affiliates  would  result  in  beneficial  ownership  by the  Purchaser  and its
affiliates of more than 9.9% of the then outstanding shares of Common Stock. For
purposes of the immediately  preceding sentence,  beneficial  ownership shall be
determined in accordance with Section 13(d) of the Exchange Act.

     Section 3.2. Securities Compliance. If applicable, the Company shall notify
the Principal  Market,  in  accordance  with its rules and  regulations,  of the
transactions  contemplated by this Agreement, and shall take all other necessary
action and  proceedings as may be required and permitted by applicable law, rule
and regulation,  for the legal and valid issuance of the Shares to the Purchaser
or subsequent holders.

     Section 3.3.  Registration  and Listing.  The Company will cause its Common
Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange
Act,  will  comply  in all  material  respects  with its  reporting  and  filing
obligations under the Exchange Act, will comply with all requirements related to
any registration  statement filed pursuant to this Agreement,  and will not take
any action or file any document  (whether or not permitted by the Securities Act
or the Exchange Act or the rules promulgated thereunder) to terminate or suspend
such   registration  or  to  terminate  or  suspend  its  reporting  and  filing
obligations  under the  Exchange  Act or  Securities  Act,  except as  permitted
herein.  The Company  will take all action  necessary to continue the listing or
trading  of its Common  Stock on the  Principal  Market  and will  comply in all
respects with the Company's  reporting,  filing and other  obligations under the
bylaws or rules of the Principal  Market and shall  provide the  Purchaser  with
copies of any correspondence to or from such Principal Market which questions or
threatens  delisting of the Common  Stock,  within three (3) Trading Days of the
Company's  receipt  thereof,  until the  Purchaser  has  disposed  of all of the
Shares.

     Section 3.4. Escrow Arrangement.  The Company and the Purchaser shall enter
into an escrow  arrangement  with New York  Escrow  Services,  LLC (the  "Escrow
Agent") in the form of Exhibit B hereto  respecting  payment against delivery of
the Shares.

     Section 3.5.  Registration Rights Agreement.  The Company and the Purchaser
shall  enter into the  Registration  Rights  Agreement  in the form of Exhibit A
hereto.  Before the  Purchaser  shall be obligated to accept a Draw Down request
from the Company, the Company shall have caused a sufficient number of shares of
Common  Stock to be  registered  to cover the Shares to be issued in  connection
with such Draw Down.

     Section 3.6.  Accuracy of Registration  Statement.On  each Settlement Date,
the Registration  Statement and the prospectus therein (a) shall not contain any
untrue  statement of a material  fact or omit to state any  material  fact to be
required  to be stated  therein  or  necessary  in order to make the  statements
therein not misleading in light of the circumstances under which they were made;
and (b) on such Settlement Date or date of filing of the Registration  Statement
and the prospectus  therein will not include any untrue  statement of a material
fact or omit to state a material fact  necessary in order to make the statements
therein,  in the light of the  circumstances  under  which they were  made,  not
misleading;   provided,   however,  the  Company  makes  no  representations  or
warranties as to the information  contained in or omitted from the  Registration
Statement and the prospectus therein in reliance upon and in conformity with the
information  furnished in writing to the Company by the  Purchaser  specifically
for inclusion in the Registration Statement and the prospectus therein.

     Section 3.7. Compliance with Laws. The Company shall materially comply, and
cause each subsidiary to materially comply,  with all applicable state,  federal
and Principal Market laws,  rules,  regulations and orders,  noncompliance  with
which could have a Material Adverse Effect.

     Section  3.8.  Keeping of Records and Books of Account.  The Company  shall
keep and cause each subsidiary to keep adequate records and books of account, in
which  complete  entries  will be  made in  accordance  with  GAAP  consistently
applied,   reflecting  all  financial   transactions  of  the  Company  and  its
subsidiaries,  and in which,  for each  fiscal  year,  all proper  reserves  for
depreciation, depletion, obsolescence,  amortization, taxes, bad debts and other
purposes in connection with its business shall be made.

     Section  3.9.  Other  Agreements.  The  Company  shall not  enter  into any
agreement  the terms of which  would  restrict  the  ability  of the  Company to
perform its obligations under this Agreement.

     Section 3.10. Notice of Certain Events Affecting  Registration;  Suspension
of Right to Request a Draw Down. Subject to applicable laws, rules,  regulations
and orders,  the Company will promptly  notify the Purchaser in writing upon the
occurrence  of  any of the  following  events  in  respect  of the  Registration
Statement  or related  prospectus  in respect of the Shares:

               (i) receipt of any request for  additional  information  from the
          SEC or any other federal or state  governmental  authority  during the
          period of effectiveness of the Registration  Statement the response to
          which would require any amendments or supplements to the  Registration
          Statement or related  prospectus;

               (ii)  the  issuance  by the SEC or any  other  federal  or  state
          governmental  authority of any stop order suspending the effectiveness
          of the Registration Statement or the initiation of any proceedings for
          that purpose;

               (iii) receipt of any notification  with respect to the suspension
          of the  qualification  or exemption from  qualification  of any of the
          Shares for sale in any  jurisdiction  or the initiation or threatening
          of any  proceeding  for such purpose;

               (iv) the happening of any event that makes any statement  made in
          the  Registration  Statement  or related  prospectus  or any  document
          incorporated or deemed to be incorporated  therein by reference untrue
          in any material  respect or that requires the making of any changes in
          the Registration  Statement,  related prospectus or documents so that,
          in the case of the  Registration  Statement,  it will not  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  not  misleading,   and  that  in  the  case  of  the  related
          prospectus,  it will not  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 the  light of the
          circumstances under which they were made, not misleading;  and

               (v) the  Company's  reasonable  determination  that  filing  of a
          post-effective  amendment or withdrawal of the Registration  Statement
          would be  appropriate.  The Company shall not deliver to the Purchaser
          any Draw Down Notice during the  continuation  of any of the foregoing
          events. The Company shall promptly make available to the Purchaser any
          such  supplements  or amendments to the related  prospectus,  at which
          time, provided that the Registration Statement and any supplements and
          amendments thereto are then effective,  the Company may recommence the
          delivery of Draw Down Notices.

     Section  3.11.  Consolidation;  Merger.  The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another  entity (a  "Consolidation  Event")  unless the  resulting  successor or
acquiring  entity  (if not the  Company)  assumes by  written  instrument  or by
operation of law the obligation to deliver to the Purchaser such shares of stock
and/or  securities  as the  Purchaser  is entitled  to receive  pursuant to this
Agreement.

     Section 3.12.  Limitation  on Future  Financing.  The Company  agrees that,
except as set forth below, it will not enter into any sale of its securities for
cash at a discount  to the  current  market  price  until the  earlier of (i) 24
months  from the  Effective  Date,  or (ii)  sixty  (60) days  after the  entire
Commitment  Amount has been purchased by the Purchaser.  The foregoing shall not
prevent or limit the Company from  engaging in any sale of  securities  (i) in a
registered  public  offering by the Company which is underwritten by one or more
established  investment  banks (not including an equity line type of financing),
(ii)  in one or  more  private  placements  where  the  purchasers  do not  have
registration rights, (iii) pursuant to any presently existing or future employee
benefit plan which plan has been or is approved by the  Company's  stockholders,
(iv)  pursuant  to  any  compensatory  plan  for a  full-time  employee  or  key
consultant,  (v) in connection  with a strategic  partnership  or other business
transaction,  the principal  purpose of which is not simply to raise money, (vi)
pursuant to the  exercise of any  presently  issued and  outstanding  options or
warrants,  (vii) in a private placement of up to, in the aggregate,  $5,000,000,
with either Laidlaw Global Securities,  Inc. or SG Cowan acting as the placement
agent for such private  placement,  or (viii) to which Purchaser gives its prior
written consent, which consent shall not be unreasonably withheld.  Further, the
Purchaser  shall have a right of first  refusal,  or at its option,  to elect to
participate,  in such  subsequent  transaction  in the case of (vii) and  (viii)
above. Such right of first refusal or participation, as the case may be, must be
exercised in writing within seven (7) Trading Days of the Purchaser's receipt of
notice of the proposed terms of such financing.

     Section  3.13.  Use of Proceeds.  The proceeds  from the sale of the Shares
will be used by the Company and its subsidiaries for general corporate purposes.

                  The Purchaser covenants with the Company as follows:

     Section 3.14.  Limitations  on Short Sales.  The Purchaser  shall not enter
into any Short Sales (as hereinafter  defined) (or shall not cause or induce any
of its affiliates  (as defined in Rule 501 of the Securities  Act) to enter into
any Short  Sales) from the period  commencing  on the Initial  Closing  Date and
ending at the earlier of the date this  Agreement is  terminated  and the end of
the Commitment  Period. For purposes of this Section 3.14, a "Short Sale" by the
Purchaser shall mean a sale of Common Stock by the 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 the Purchaser. For purposes of determining
whether there is an equivalent offsetting long position in the Common Stock held
by the  Purchaser,  Draw Down  Shares to be  delivered  pursuant  to a Draw Down
Notice but not yet delivered shall be deemed to be held long by the Purchaser as
of the date of the applicable Draw Down Notice and the Warrant Shares underlying
the Warrants shall be deemed to be held long by the Purchaser.

     Section 3.15. Prospectus Delivery  Requirements.  The Purchaser agrees that
it will,  whenever required by federal  securities laws,  deliver the Prospectus
included in the Registration Statement to any purchaser of Draw Down Shares from
the Purchaser.



                                    ARTICLE 4


                  CONDITIONS TO INITIAL CLOSING AND DRAW DOWNS

     Section 4.1. Conditions  Precedent to the Obligation of the Company to Sell
the Shares.  The  obligation  hereunder  of the Company to proceed to close this
Agreement and to issue and sell the Shares to the  Purchaser  pursuant to a Draw
Down Notice delivered  hereunder is subject to the satisfaction or waiver, at or
before the  Initial  Closing,  and as of each  Settlement  Date,  of each of the
conditions set forth below.  These conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion.

(a)  Accuracy  of  the   Purchaser's   Representations   and   Warranties.   The
     representations  and warranties of the Purchaser  shall be true and correct
     in all  material  respects  as of the date when made and as of the  Initial
     Closing and as of each Settlement Date as though made at that time,  except
     for representations and warranties that speak as of a particular date.

(b)  Performance by the Purchaser. The Purchaser shall have performed, satisfied
     and  complied  in  all  material  respects  with  all  material  covenants,
     agreements  and  conditions  required by this  Agreement  to be  performed,
     satisfied  or  complied  with by the  Purchaser  at or prior to the Initial
     Closing and as of each Settlement Date.

(c)  No Injunction.  No statute,  rule,  regulation,  executive  order,  decree,
     ruling or  injunction  shall have been  enacted,  entered,  promulgated  or
     endorsed by any court or governmental  authority of competent  jurisdiction
     which prohibits the consummation of any of the transactions contemplated by
     this Agreement.

     Section 4.2.  Conditions  Precedent to the  Obligation  of the Purchaser to
Close.  The  obligation  hereunder of the  Purchaser to perform its  obligations
under this  Agreement and to purchase the Shares is subject to the  satisfaction
or waiver, at or before the Initial Closing, of each of the conditions set forth
below.  These  conditions are for the Purchaser's sole benefit and may be waived
by the Purchaser at any time in its sole discretion.

(a)  Accuracy  of the  Company's  Representations  and  Warranties.  Each of the
     representations  and warranties of the Company shall be true and correct in
     all  material  respects  as of the date  when  made  and as of the  Initial
     Closing  as  though  made at that  time  (except  for  representations  and
     warranties that speak as of a particular date).

(b)  Performance by the Company. The Company shall have performed, satisfied and
     complied in all respects  with all  covenants,  agreements  and  conditions
     required by this  Agreement to be performed,  satisfied or complied with by
     the Company at or prior to the Initial Closing.

(c)  No Injunction.  No statute,  rule,  regulation,  executive  order,  decree,
     ruling or  injunction  shall have been  enacted,  entered,  promulgated  or
     endorsed by any court or governmental  authority of competent  jurisdiction
     which prohibits the consummation of any of the transactions contemplated by
     this Agreement.

(d)  No  Proceedings  or Litigation.  No action,  suit or proceeding  before any
     arbitrator or any governmental authority shall have been commenced,  and no
     investigation  by any  governmental  authority shall have been  threatened,
     against  the  Purchaser  or the  Company or any  subsidiary,  or any of the
     officers,  directors or affiliates of the Company or any subsidiary seeking
     to  restrain,  prevent  or change  the  transactions  contemplated  by this
     Agreement, or seeking damages in connection with such transactions.

(e)  Opinion of Counsel,  Etc. At the Initial Closing,  the Purchaser shall have
     received  an opinion of counsel  to the  Company,  dated as of the  Initial
     Closing Date, in the form of Exhibit C hereto.

(f)  Warrant.  On the  Initial  Closing  Date,  the  Company  shall issue to the
     Purchaser a warrant to  purchase  up to a number of shares of Common  Stock
     (the  "Warrant  Shares")  equal to  $300,000  divided by the average of the
     VWAPs during the 15 Trading Days  immediately  prior to the Initial Closing
     Date (the  "Warrant  Base  Price").  The Warrant shall have a term from its
     initial  date of exercise  of 5 years.  The  exercise  price of the Warrant
     shall be 115% of the Warrant Base Price.  The Common Stock  underlying  the
     Warrant will be registered  in the  Registration  Statement  referred to in
     Section 4.3 hereof. The Warrant shall be in the form of Exhibit E hereto.

     Section 4.3.  Conditions  Precedent to the  Obligation  of the Purchaser to
Accept a Draw Down and Purchase the Draw Down Shares.  The obligation  hereunder
of the  Purchaser  to accept a Draw Down  request and to acquire and pay for the
Draw Down Shares is subject to the  satisfaction  at or before  each  Settlement
Date, of each of the conditions set forth below.

(a)  Satisfaction  of  Conditions  to Initial  Closing.  The Company  shall have
     satisfied at the Initial Closing, or the Purchaser shall have waived at the
     Initial Closing, the conditions set forth in Section 4.2 hereof

(b)  Effective  Registration  Statement.  The Registration Statement registering
     the Shares shall have been  declared  effective by the SEC and shall remain
     effective on each Settlement Date.

(c)  No  Suspension.  Trading in the Company's  Common Stock shall not have been
     suspended by the SEC or the Principal  Market (except for any suspension of
     trading of limited  duration  agreed to by the  Company,  which  suspension
     shall be terminated  prior to the delivery of each Draw Down Notice),  and,
     at any time prior to such Draw Down Notice, trading in securities generally
     as  reported  on the  Principal  Market  shall not have been  suspended  or
     limited,  or minimum  prices shall not have been  established on securities
     whose  trades are  reported  on the  Principal  Market  unless the  general
     suspension or limitation  shall have been terminated  prior to the delivery
     of such Draw Down Notice.

(d)  Material  Adverse Effect.  No Material  Adverse Effect and no Consolidation
     Event where the  successor  entity has not agreed to perform the  Company's
     obligations  hereunder  shall have occurred  since the later of the Initial
     Closing or the  Settlement of the  immediately  preceding  Draw Down,  such
     occurrences to be determined in accordance with Section 8.9 herein.

(e)  Opinion of Counsel.  On the Effective Date and on the first Settlement Date
     of each Draw Down, the Purchaser  shall have received (i) a  "down-to-date"
     letter from the Company's counsel,  confirming that there is no change from
     the  counsel's  previously  delivered  opinion,  or  else  specifying  with
     particularity the reason for any change and an opinion as to the additional
     items  specified in Exhibit C hereto,  (ii) as to each  Settlement,  a Form
     424(b)(3) supplemental prospectus,  if required by applicable law and (iii)
     any other items set forth in the Escrow Agreement (not including the escrow
     fee if the  Escrow  Agent is not used for such Draw  Down).  As to any Draw
     Down,  the Company may elect not to deliver the  above-referenced  opinion;
     provided, however, the applicable Purchase Price Percentage as to such Draw
     Down shall be reduced an additional 4%.

(f)  Future  Financing.  The  Company  shall have not  completed  any  financing
     prohibited  by Section 3.12  unless,  prior to the Company  delivering  the
     first Draw Down  Notice  after any such  financing,  the  Company  pays the
     Purchaser as a condition to accepting  such draw down and not as liquidated
     damages, the sum of $100,000.



                                    ARTICLE 5


                                 DRAW DOWN TERMS

     Section 5.1. Draw Down Terms. Subject to the satisfaction of the conditions
set forth in this Agreement, the parties agree as follows:

(a)  The Company  may, in its sole  discretion,  issue and  exercise  draw downs
     against the  Commitment  Amount (each a "Draw Down") during the  Commitment
     Period,  which  Draw  Downs the  Purchaser  shall be  obligated  to accept,
     subject to the terms and conditions herein.

(b)  Only one Draw Down shall be allowed in each Draw Down Pricing Period. There
     shall be a minimum of 3 Trading Days between Draw Down Pricing Periods. The
     number of shares of Common Stock purchased by the Purchaser with respect to
     each Draw Down shall be determined as set forth in Section  5.1(e)  herein.
     The Draw Down  Pricing  Period  shall be divided  into  settlement  periods
     (each,  a  "Settlement  Period").  Notwithstanding  anything  herein to the
     contrary,  if the Draw Down Pricing Period consists of less than 12 Trading
     Days, the Draw Down Pricing Period shall be the same number of Trading Days
     as the Draw Down Pricing  Period.  If the Draw Down Pricing Period is equal
     to or greater  than 12 Trading  Days,  the Draw Down  Pricing  Period shall
     consist of 2 Settlement  Periods  determined  as follows:  if the number of
     Trading Days in the Draw Down Pricing Period is even, the number of Trading
     Days in each  Settlement  Period  shall be equal.  If the number of Trading
     Days in the Draw  Down  Pricing  Period is odd,  then the first  Settlement
     Period shall have one more Day than the second Settlement Period.  Delivery
     of the Draw Down Shares  purchased  as to a  Settlement  Period and payment
     therefore  shall  occur on or prior to the  second  Trading  Day  after the
     applicable Settlement Period (the "Settlement Date").

(c)  In connection with each Draw Down Pricing Period, the Company shall set the
     Threshold  Price in the Draw Down  Notice.  During  any Draw  Down  Pricing
     Period,  the Company may provide  notice to the Purchaser that it elects to
     increase  or decrease  the  Threshold  Price,  provided  that such  amended
     Threshold  Price shall only be  effective  as to the Trading Days in a Draw
     Down Pricing Period  occurring 2 Trading Days after such notice is properly
     delivered  to  the  Purchaser.   Notwithstanding  anything  herein  to  the
     contrary,  the Company shall be precluded from amending the Threshold Price
     during an Over  Investment  Amount  Period (as  defined  in Section  5.1(d)
     below).

(d)  The minimum  Investment  Amount for any Draw Down shall be $100,000 and the
     maximum  Investment  Amount as to each Draw Down shall be equal to [Pricing
     Days]/20  multiplied  by 6.0% of the EQY weighted  average  price field (as
     reported on  Bloomberg  Financial  L.P.  using the BLPH  function)  for the
     Common  Stock  for the 60  calendar  day  period  immediately  prior to the
     applicable  Commencement  Date  (defined  below)  multiplied  by the  total
     trading   volume  in  respect  of  the  Common   Stock  for  such   period.
     Notwithstanding  anything  herein  to the  contrary,  (i) the  Company  may
     request an Investment Amount that exceeds the maximum Investment Amount set
     forth above provided that the Threshold  Price for the applicable Draw Down
     Pricing Period exceeds 80% of the average of the 5 VWAPs  immediately prior
     to the date the applicable Draw Down Notice is delivered, and (ii) during a
     Draw Down Pricing Period, the Company may increase the unallocated  portion
     of Investment  Amount by delivering to the Purchaser written notice stating
     the amount by which the Company increases the Investment Amount,  provided,
     however,  such notice also  stipulates a Threshold  Price for the remaining
     portion of the Draw Down Pricing  Period that exceeds 80% of the average of
     the 5 VWAPs  immediately  prior to the date such notice is delivered  (such
     periods in (i) and (ii) above, "Over Investment Amount Periods").

(e)  The number of Shares of Common Stock to be issued on each  Settlement  Date
     shall be a number of  shares  equal to the sum of the  quotients  (for each
     trading day within the Settlement  Period) of (x)  1/[Pricing  Days] of the
     Investment Amount allocated to a Trading Day within the Settlement  Period,
     and (y) the Purchase  Price on such Trading Day,  subject to the  following
     adjustments:

               (i) if the VWAP on a given Trading Day is less than the Threshold
          Price,  then that portion of the  Investment  Amount to be paid on the
          immediately  pending  Settlement  Date shall be reduced by  1/[Pricing
          Days] of the applicable  Investment  Amount and such Trading Day shall
          be withdrawn from the Settlement Period;

               (ii) if during  any  Trading  Day during  the  Settlement  Period
          trading of the Common Stock on the  Principal  Market is suspended for
          more than three (3) hours,  in the  aggregate,  or if any  Trading Day
          during the Settlement Period is shortened because of a public holiday,
          then  that  portion  of  the  Investment  Amount  to be  paid  on  the
          immediately  pending  Settlement  Date shall be reduced by  1/[Pricing
          Days] of the applicable  Investment  Amount and such Trading Day shall
          be withdrawn from the Settlement Period; and

               (iii) if during any  Trading  Day during  the  Settlement  Period
          sales of Draw Down Shares pursuant to the  Registration  Statement are
          suspended by the Company in  accordance  with Sections 3(j) or 5(e) of
          the  Registration  Rights  Agreement for more than three (3) hours, in
          the aggregate,  during the Settlement Period, then that portion of the
          Investment  Amount to be paid on the  immediately  pending  Settlement
          Date shall be reduced by 1/[Pricing Days] of the applicable Investment
          Amount and such  Trading Day shall be  withdrawn  from the  Settlement
          Period.

(f)  The Company must inform the Purchaser by delivering a draw down notice,  in
     the form of  Exhibit D hereto  (the  "Draw  Down  Notice"),  via  facsimile
     transmission  in  accordance  with Section 8.4 as to the amount of the Draw
     Down (the  "Investment  Amount")  the Company  wishes to  exercise  and the
     number of Trading Days in the Draw Down Pricing  Period  ("Pricing  Days"),
     before the first day of the Draw Down  Pricing  Period  (the  "Commencement
     Date").  Notwithstanding anything herein to the contrary, in no event shall
     the Company  deliver a Draw Down Notice with a number of Pricing Days as to
     any Draw Down Pricing  Period that is less than 2 Trading Days or more than
     20 Trading  Days.  If the  Commencement  Date is to be the date of the Draw
     Down  Notice,  the  Draw  Down  Notice  must be  delivered  to and  receipt
     confirmed by the Purchaser at least one (1) hour before  trading  commences
     on such date.  Unless during an Over Investment  Amount Period,  at no time
     shall  the  Purchaser  be  required  to  purchase  more  than  the  maximum
     Investment  Amount for a given Draw Down Pricing Period; in other words, if
     the  Company  chooses not to exercise  the maximum  Investment  Amount in a
     given Draw Down Pricing  Period the Purchaser is not obligated to and shall
     not  purchase  more  than the  scheduled  maximum  Investment  Amount  in a
     subsequent Draw Down Pricing Period.

(g)  On each Settlement  Date, the Shares  purchased by the Purchaser during the
     immediately   preceding   Settlement  Period  shall  be  delivered  to  The
     Depository  Trust  Company  ("DTC")  on the  Purchaser's  behalf.  Upon the
     Company  electronically  delivering  whole  shares of  Common  Stock to the
     Purchaser or its  designees  via DTC through its Deposit  Withdrawal  Agent
     Commission  ("DWAC") system by 1:00 p.m. New York time, the Purchaser shall
     wire  transfer  immediately  available  funds to the  Company's  designated
     account on such day,  less any fees as set forth in the  Escrow  Agreement,
     which fees shall be wired as  directed  in the Escrow  Agreement.  Upon the
     Company  electronically  delivering  whole  shares of  Common  Stock to the
     Purchaser  or its  designees  DTC account via DWAC after 1:00 p.m. New York
     time,  the Purchaser  shall wire  transfer next day available  funds to the
     Company's designated account on such day, less any fees as set forth in the
     Escrow  Agreement,  which  fees  shall be wired as  directed  in the Escrow
     Agreement.  In the event that either party elects to use the Escrow  Agent,
     the Shares  shall be credited by the Company to the DTC account  designated
     by the  Purchaser  via DWAC upon receipt by the Escrow Agent of payment for
     the Draw Down Shares into the Escrow  Agent's  master  escrow  account,  as
     further set forth in the Escrow  Agreement,  and the Escrow  Agent shall be
     directed  to pay the  purchase  price to the  Company,  net of  $1,000  per
     Settlement as escrow  expenses to the Escrow Agent and any additional  fees
     as set forth in the Escrow Agreement.  The Company understands that a delay
     in the  delivery of the Draw Down Shares into the  Purchaser's  DTC account
     beyond 5 Trading  Days  after the dates set forth  herein or in the  Escrow
     Agreement,  as the  case  may be,  could  result  in  economic  loss to the
     Purchaser. Notwithstanding anything herein to the contrary, as compensation
     to the Purchaser for such loss,  the Company agrees to pay late payments to
     the  Purchaser  for late  delivery  after 5 Trading Days from such dates in
     accordance with the following  schedule  (where "No.  Trading Days Late" is
     defined as the number of Trading  Days beyond 5 Trading Days from the dates
     set forth herein or in the Escrow  Agreement,  as the case may be, on which
     such Draw Down Shares are to be delivered into the  Purchaser's DTC account
     via the DWAC system):

------------------------- ------------------------------------------------------
No. Trading Days Late                    Late Payment for Each
                                       $5,000 of Draw Down Shares
                                             Being Purchased
------------------------- ------------------------------------------------------
------------------------- ------------------------------------------------------
   1                                              $100
------------------------- ------------------------------------------------------
------------------------- ------------------------------------------------------
   2                                              $200
------------------------- ------------------------------------------------------
------------------------- ------------------------------------------------------
   3                                              $300
------------------------- ------------------------------------------------------
------------------------- ------------------------------------------------------
   4                                              $400
------------------------- ------------------------------------------------------
------------------------- ------------------------------------------------------
   5                                              $500
------------------------- ------------------------------------------------------
------------------------- ------------------------------------------------------
   6                                              $600
------------------------- ------------------------------------------------------
------------------------- ------------------------------------------------------
   7                                              $700
------------------------- ------------------------------------------------------
------------------------- ------------------------------------------------------
   8                                              $800
------------------------- ------------------------------------------------------
------------------------- ------------------------------------------------------
   9                                              $900
------------------------- ------------------------------------------------------
------------------------- ------------------------------------------------------
  10                                            $1,000
------------------------- ------------------------------------------------------
------------------------- ------------------------------------------------------
More than 10                       $1,000 +$200 for each Trading Day
                                      Late beyond 10 Trading Days.
------------------------- ------------------------------------------------------

     The Company shall pay any payments  incurred  under this Section  5.1(g) in
immediately  available  funds  upon  demand.  Nothing  herein  shall  limit  the
Purchaser's  right to pursue injunctive relief and/or actual damages (in lieu of
the liquidated  damages set forth above) for the Company's  failure to issue and
deliver the Draw Down Shares to the Company, including,  without limitation, the
Purchaser's   actual   losses   occasioned  by  any  "buy-in"  of  Common  Stock
necessitated by such late delivery.



                                    ARTICLE 6


                                   TERMINATION

     Section  6.1.  Term.  The term of this  Agreement  shall  begin on the date
hereof and shall end 24 months from the Effective Date or as otherwise set forth
in Section 6.2.

     Section 6.2. Other Termination.

(a)  This Agreement  shall terminate upon one (1) Trading Day's notice if (i) an
     event resulting in a Material  Adverse Effect has occurred and has not been
     cured for a period of 30 days after written notice thereof, (ii) the Common
     Stock is  de-listed  from the  Principal  Market for a period  exceeding  3
     consecutive days unless such de-listing is in connection with the Company's
     subsequent  listing of the  Common  Stock on the  Nasdaq  National  Market,
     Nasdaq SmallCap  Market,  the American Stock Exchange or the New York Stock
     Exchange,  or (iii) the Company files for protection  from creditors  under
     any applicable law.

(b)  The Company may terminate  this Agreement upon one (1) Trading Day's notice
     if the Purchaser  shall fail to fund a properly  noticed Draw Down within 5
     Trading Days of the end of the applicable Settlement Period.

     Section 6.3. Effect of Termination.

     Section  6.4. In the event of  termination  of this  Agreement  pursuant to
Section 6.2 herein, written notice thereof shall forthwith be given to the other
party and the  transactions  contemplated  by this Agreement shall be terminated
without  further  action by either  party.  If this  Agreement is  terminated as
provided in Section 6.1 or 6.2 herein,  this Agreement  shall become void and of
no further force and effect, except for Sections 8.1, 8.2 and 8.9, and Article 7
herein.  Nothing in this  Section  6.3 shall be deemed to release the Company or
the  Purchaser  from any liability  for any breach under this  Agreement,  or to
impair the rights of the Company or the Purchaser to compel specific performance
by the other party of its obligations under this Agreement.



                                    ARTICLE 7


                                 INDEMNIFICATION

     Section 7.1. General Indemnity.

(a)  The Company  agrees to indemnify and hold  harmless the Purchaser  (and its
     directors,  officers,  affiliates, agents, successors and assigns) from and
     against any and all losses, liabilities,  deficiencies,  costs, damages and
     expenses  (including,  without  limitation,   reasonable  attorneys'  fees,
     charges and  disbursements)  incurred by the  Purchaser  as a result of any
     material  inaccuracy  in or breach of the  representations,  warranties  or
     covenants made by the Company herein.

(b)  The  Purchaser  agrees to indemnify  and hold  harmless the Company and its
     directors,  officers,  affiliates,  agents, successors and assigns from and
     against any and all losses, liabilities,  deficiencies,  costs, damages and
     expenses  (including,  without  limitation,   reasonable  attorneys'  fees,
     charges  and  disbursements)  incurred  by the  Company  as  result  of any
     material  inaccuracy  in or breach of the  representations,  warranties  or
     covenants  made by the Purchaser  herein.  Notwithstanding  anything to the
     contrary  herein,  the Purchaser  shall be liable under this Section 7.1(b)
     for only that amount as does not exceed the net  proceeds to the  Purchaser
     as a result of the sale of the Shares.

     Section   7.2.   Indemnification   Procedure.   Any   party   entitled   to
indemnification  under this Article 7 (an "Indemnified Party") will give written
notice  to the  indemnifying  party of any  matters  giving  rise to a claim for
indemnification;   provided,   that  the  failure  of  any  party   entitled  to
indemnification  hereunder  to give notice as provided  herein shall not relieve
the  indemnifying  party of its  obligations  under this Article 7 except to the
extent that the  indemnifying  party is actually  prejudiced  by such failure to
give  notice.  In case any  action,  proceeding  or claim is brought  against an
Indemnified Party in respect of which  indemnification is sought hereunder,  the
indemnifying  party  shall be  entitled  to  participate  in and,  unless in the
reasonable  judgment of counsel to the Indemnified  Party a conflict of interest
between it and the  indemnifying  party may exist with  respect of such  action,
proceeding  or claim,  to assume the defense  thereof  with  counsel  reasonably
satisfactory to the Indemnified  Party. In the event that the indemnifying party
advises  an   Indemnified   Party  that  it  will   contest  such  a  claim  for
indemnification  hereunder,  or fails, within thirty (30) days of receipt of any
indemnification  notice to notify,  in writing,  such person of its  election to
defend,  settle  or  compromise,  at its sole  cost  and  expense,  any  action,
proceeding or claim (or  discontinues its defense at any time after it commences
such defense),  then the Indemnified Party may, at its option, defend, settle or
otherwise compromise or pay such action or claim. In any event, unless and until
the  indemnifying  party  elects in  writing  to assume  and does so assume  the
defense of any such claim,  proceeding or action, the Indemnified  Party's costs
(including  reasonable  attorneys' fees, charges and disbursements) and expenses
arising out of the defense,  settlement or compromise of any such action,  claim
or  proceeding  shall  be  losses  subject  to  indemnification  hereunder.  The
Indemnified  Party  shall  cooperate  fully  with  the  indemnifying   party  in
connection  with any  settlement  negotiations  or defense of any such action or
claim by the indemnifying  party and shall furnish to the indemnifying party all
information reasonably available to the Indemnified Party, which relates to such
action or claim. The indemnifying  party shall keep the Indemnified  Party fully
apprised  at  all  times  as to the  status  of the  defense  or any  settlement
negotiations  with respect thereto.  If the indemnifying  party elects to defend
any such  action or claim,  then the  Indemnified  Party  shall be  entitled  to
participate  in such  defense  with  counsel  of its choice at its sole cost and
expense.  The  indemnifying  party shall not be liable for any settlement of any
action,  claim  or  proceeding  effected  without  its  prior  written  consent.
Notwithstanding  anything in this Article 7 to the  contrary,  the  indemnifying
party shall not,  without the  Indemnified  Party's prior written consent (which
consent shall not be unreasonably  withheld),  settle or compromise any claim or
consent to entry of any  judgment in respect  thereof  which  imposes any future
obligation  on  the  Indemnified  Party  or  which  does  not  include,   as  an
unconditional  term thereof,  the giving by the claimant or the plaintiff to the
Indemnified  Party of a release from all liability in respect of such claim. The
indemnification required by this Article 7 shall be made by periodic payments of
the amount thereof during the course of  investigation  or defense,  as and when
bills are received or expense, loss, damage or liability is incurred, within ten
(10) Trading Days of written notice thereof to the indemnifying party so long as
the Indemnified Party irrevocably  agrees to refund such moneys,  with interest,
if it is ultimately  determined by a court of competent  jurisdiction  that such
party was not entitled to indemnification.  The indemnity  agreements  contained
herein shall be in addition to (a) any cause of action or similar  rights of the
Indemnified  Party  against  the  indemnifying  party  or  others,  and  (b) any
liabilities to which the indemnifying party may be subject in each case pursuant
to applicable law, rules or regulations.



                                    ARTICLE 8


                                  MISCELLANEOUS

     Section 8.1. Fees and Expenses. Each of the parties to this Agreement shall
pay its own fees and expenses related to the  transactions  contemplated by this
Agreement;  except  that,  the  Company  shall pay, at the  Initial  Closing,  a
non-accountable expense allowance for the Purchaser's legal,  administrative and
due diligence costs and expenses of $50,000 to the Purchaser, and the escrow fee
upon each Settlement. The Company shall pay all stamp or other similar taxes and
duties levied in connection with issuance of the Shares pursuant hereto.

     Section  8.2.   Specific   Enforcement.   The  Company  and  the  Purchaser
acknowledge and agree that irreparable  damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance  with their
specific terms or were  otherwise  breached.  It is accordingly  agreed that the
parties  shall be entitled to an injunction  or  injunctions  to prevent or cure
breaches of the  provisions of this  Agreement and to enforce  specifically  the
terms and  provisions  hereof or  thereof,  this being in  addition to any other
remedy to which any of them may be entitled by law or equity.

     Section 8.3. Entire Agreement; Amendment. The Transaction Documents contain
the entire  understanding  of the parties with respect to the matters covered in
the  Transaction  Documents.  No  provision of this  Agreement  may be waived or
amended  other than by a written  instrument  signed by the party  against  whom
enforcement  of any such  amendment  or  waiver is sought  and no  condition  to
closing any Draw Down in favor of the Purchaser may be waived by the Purchaser.

     Section  8.4.  Notices.  Any  notice,  demand,  request,  waiver  or  other
communication  required or permitted to be given  hereunder  shall be in writing
and shall be  effective  (a) upon hand  delivery or  facsimile at the address or
number  designated  below (if delivered on a business day during normal business
hours where such notice is to be received),  or the first business day following
such delivery (if delivered  other than on a business day during normal business
hours where such notice is to be  received),  or (b) on the second  business day
following  the date of  mailing  by  express  courier  service,  fully  prepaid,
addressed to such address,  or upon actual  receipt of such  mailing,  whichever
shall first occur. The addresses for such communications shall be:

If to the Company:                          3636 Nobel Dr, Suite 400
                                            San Diego, CA 92122
                                            Attn:  Frederick A. Cary, President
                                                    and CEO
                                            Tel:  (858) 450-4220
                                            Fax: (858) 450-4203

with copies to:                             Brobeck, Phleger & Harrison LLP
(which shall not constitute notice):        12390 El Camino Real
                                            San Diego, California 92130-2081
                                            Attn:  Hayden Trubitt
                                            Tel:  (858) 720-2500
                                            Fax:  (858) 720-2555


If to Purchaser:                    as set forth on the signature page hereto

     Any party  hereto may from time to time  change its  address for notices by
giving  written  notice of such  changed  address to the other  party  hereto in
accordance  herewith.  Section  8.5.  Waivers.  No waiver by either party 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 other provisions,  condition or requirement  hereof,  nor shall any delay or
omission of any party to exercise any right  hereunder in any manner  impair the
exercise of any such right accruing to it thereafter.

     Section 8.6. Headings. The article, section and subsection headings in this
Agreement  are for  convenience  only and  shall not  constitute  a part of this
Agreement  for any other  purpose and shall not be deemed to limit or affect any
of the provisions hereof.

     Section 8.7.  Successors  and Assigns.  This  Agreement  and the rights and
obligations  thereunder may not be assigned by either party.  The parties hereto
may not amend this Agreement or any rights or obligations  hereunder without the
prior written consent of the Company and the Purchaser.

     Section 8.8. No Third Party  Beneficiaries.  This Agreement is intended for
the benefit of the parties hereto and their respective  permitted successors and
assigns and is not for the benefit of, nor may any provision  hereof be enforced
by, any other person.

     Section 8.9. Governing Law/Arbitration. This Agreement shall be governed by
and  construed in  accordance  with the internal  laws of the State of New York,
without  giving  effect to the choice of law  provisions.  The  Company  and the
Purchaser  agree to submit  themselves  to the in personam  jurisdiction  of the
state and federal courts situated  within the Southern  District of the State of
New York with regard to any dispute or controversy arising out of or relating to
this Agreement.  Any dispute or controversy  under this Agreement or any Exhibit
attached hereto shall be submitted to arbitration under the American Arbitration
Association  (the  "AAA") in New York City,  New York,  and shall be finally and
conclusively  determined by the decision of a board of arbitration consisting of
three (3)  members  (hereinafter  referred  to as the  "Board  of  Arbitration")
selected as according to the rules  governing the AAA. The Board of  Arbitration
shall meet on  consecutive  business days in New York City,  New York, and shall
reach and  render a  decision  in writing  (concurred  in by a  majority  of the
members of the Board of Arbitration)  with respect to the amount,  if any, which
the losing  party is  required  to pay to the other  party in respect of a claim
filed.  In connection  with  rendering its  decisions,  the Board of Arbitration
shall  adopt  and  follow  the laws of the  State  of New  York.  To the  extent
practical,  decisions of the Board of Arbitration shall be rendered no more than
thirty (30) calendar days following  commencement  of  proceedings  with respect
thereto.  The Board of  Arbitration  shall  cause  its  written  decision  to be
delivered to all parties involved in the dispute. The Board of Arbitration shall
be  authorized  and is  directed to enter a default  judgment  against any party
refusing to participate in the arbitration proceeding within thirty (30) days of
any  deadline  for  such  participation.  Any  decision  made  by the  Board  of
Arbitration  (either  prior to or  after  the  expiration  of such  thirty  (30)
calendar day period)  shall be final,  binding and  conclusive on the parties to
the dispute,  and entitled to be enforced to the fullest extent permitted by law
and entered in any court of competent  jurisdiction.  The prevailing party shall
be  awarded  its  costs,   including   reasonable   attorneys'  fees,  from  the
non-prevailing  party as part of the arbitration award. Any party shall have the
right to seek injunctive  relief,  including without  limitation as set forth in
Section  8.2,  from any court of competent  jurisdiction  in any case where such
relief is available.  The prevailing  party in such  injunctive  action shall be
awarded its costs, including reasonable attorneys' fees, from the non-prevailing
party.

     Section 8.10. Counterparts. This Agreement may be executed in any number of
counterparts,  all of which taken  together  shall  constitute  one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties  hereto,  it being  understood that all
parties need not sign the same counterpart. Execution may be made by delivery by
facsimile.

     Section 8.11.  Publicity.  Except as required by law or  regulations or the
rules of the Principal Market, neither the Company nor the Purchaser shall issue
any press release or otherwise make any public  statement or  announcement  with
respect  to  this  Agreement  or the  transactions  contemplated  hereby  or the
existence  of this  Agreement,  without the prior  written  consent of the other
party. In connection with the Initial Closing, if the Company deems it necessary
or  desirable,  the  Company  may issue a press  release or file an  appropriate
report with the SEC regarding the transactions  contemplated  hereby;  provided,
however,  that prior to issuing any such press  release,  making any such public
statement  or  announcement,  the  Company  obtains  the  prior  consent  of the
Purchaser, which consent shall not be unreasonably withheld or delayed.

     Section 8.12. Severability.  The provisions of this Agreement are severable
and, in the event that The Board of Arbitration or any court or officials of any
regulatory agency of competent jurisdiction shall determine that any one or more
of the provisions or part of the provisions  contained in this Agreement  shall,
for any reason, be held to be invalid,  illegal or unenforceable in any respect,
such  invalidity,  illegality  or  unenforceability  shall not  affect any other
provision or part of a provision of this Agreement and this  Agreement  shall be
reformed and construed as if such invalid or illegal or unenforceable provision,
or part of such  provision,  had  never  been  contained  herein,  so that  such
provisions would be valid, legal and enforceable to the maximum extent possible,
so long as such construction  does not materially  adversely affect the economic
rights of either party hereto.

     Section  8.13.  Further  Assurances.  From  and  after  the  date  of  this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the  Purchaser  shall  execute and deliver such  instruments,  documents and
other writings as may be reasonably  necessary or desirable to confirm and carry
out and to effectuate fully the intent and purposes of this Agreement.

     Section 8.14.  Effectiveness  of  Agreement.  This  Agreement  shall become
effective  only upon  satisfaction  of the  conditions  precedent to the Initial
Closing set forth in Article I of the Escrow Agreement.



                                    ARTICLE 9


                                   DEFINITIONS

     Section 9.1. Certain Definitions.

(a)  "Commencement Date" shall have the meaning assigned to such term in Section
     5.1(f) hereof.

(b)  "Commitment Amount" shall have the meaning assigned to such term in Section
     1.1 hereof.

(c)  "Commitment  Period" shall mean the period commencing on the Effective Date
     and  expiring  on the  earliest  to  occur  of (i) the  date on  which  the
     Purchaser  shall have exercised an aggregate  amount of Draw Downs equal to
     the  Commitment  Amount,  (ii) the date this  Agreement  is  terminated  in
     accordance  with the terms  hereof,  or (iii) the date  occurring 24 months
     after the Effective Date.

(d)  "Common  Stock" shall mean the Company's  Class A Common Stock,  $0.001 par
     value per share.

(e)  "Disclosure  Schedule" shall mean the schedules prepared by the Company and
     attached hereto.

(f)  "Draw Down" shall have the meaning  assigned to such term in Section 5.1(a)
     hereof.

(g)  "Draw Down Notice" shall have the meaning  assigned to such term in Section
     5.1(f) hereof.

(h)  "Draw Down  Pricing  Period"  shall mean,  as to any Draw Down, a period of
     consecutive  Trading Days equal to the Pricing Days,  beginning on the date
     specified in the Draw Down Notice; provided, however, the Draw Down Pricing
     Period  shall not begin  before the day on which  receipt of such notice is
     confirmed by the Purchaser.

(i)  "DTC" shall have the meaning assigned to such term in Section 5.1(g).

(j)  "DWAC" shall have the meaning assigned to such term in Section 5.1(g).

(k)  "Effective  Date"  shall mean the date the  Registration  Statement  of the
     Company  covering  the  Shares  being  subscribed  for  hereby is  declared
     effective by the SEC.

(l)  "Exchange Act" shall mean the Securities  Exchange Act of 1934, as amended,
     and the rules and regulations promulgated thereunder.

(m)  "GAAP"  shall  mean  the  United  States  Generally   Accepted   Accounting
     Principles as those conventions, rules and procedures are determined by the
     Financial Accounting Standards Board and its predecessor agencies.

(n)  "Initial  Closing" shall have the meaning assigned to such term in S ection
     1.2 hereof.

(o)  "Initial  Closing  Date"  shall have the  meaning  assigned to such term in
     Section 1.2 hereof.

(p)  "Investment Amount" shall have the meaning assigned to such term in Section
     5.1(f) hereof.

(q)  "Material  Adverse  Effect" shall mean any adverse  effect on the business,
     operations,  properties  or  financial  condition  of the  Company  that is
     material and adverse to the Company and its  subsidiaries  and  affiliates,
     taken as a whole and/or any  condition,  circumstance,  or  situation  that
     would  prohibit or otherwise  materially  interfere with the ability of the
     Company to perform any of its material  obligations under this Agreement or
     the Registration  Rights Agreement or to perform its obligations  under any
     other material agreement;  provided,  however, that the following shall not
     be taken into account in determining a "Material  Adverse  Event":  (i) any
     adverse change, event or effect that is directly attributable to conditions
     affecting  the United  States  economy  generally  unless  such  conditions
     adversely affect the Company in a materially  disproportionate  manner, and
     (ii) any adverse change,  event or effect that is directly  attributable to
     conditions   affecting  the  Company's  industry  generally,   unless  such
     conditions  adversely  affect the Company in a materially  disproportionate
     manner.

(r)  "Material  Agreement" shall mean any written or oral contract,  instrument,
     agreement, commitment,  obligation, plan or arrangement, a copy of which is
     required  to be  filed  with  the  SEC as an  exhibit  to  any  of the  SEC
     Documents.

(s)  "Pricing  Days"  shall have the  meaning  assigned  to such term in Section
     5.1(e) hereof.

(t)  "Principal  Market" shall mean  initially the OTC Bulletin  Board and shall
     include the American Stock Exchange, the Nasdaq National Market, the Nasdaq
     Small-Cap  Market and the New York Stock  Exchange if the  Company  becomes
     listed and trades on such market or exchange after the date hereof.

(u)  "Purchase  Price" shall mean, with respect to Shares  purchased during each
     applicable Draw Down Pricing Period and subject to Section 4.3(e), 91.5% of
     the VWAP on the date in question (the "Purchase Price Percentage"),  except
     that, for each US$15,000,000  increase in the Market Cap over US$65,000,000
     during the applicable  Market Cap Period (as defined  below),  the Purchase
     Price Percentage shall be increased by 0.25% as to the applicable Draw Down
     Pricing Period until the Purchase Price Percentage equals 93.5%. The Market
     Cap shall be calculated by multiplying the number of shares of Common Stock
     issued and  outstanding  on the date in  question by the VWAP of the Common
     Stock on such date.  Notwithstanding  anything to the contrary herein, such
     increases in the Purchase Price Percentage shall only occur if the increase
     in the  Market  Cap is  maintained  for at least  twenty  (20)  consecutive
     Trading Days immediately prior to the date the applicable Draw Down Pricing
     Period  commences  (the  "Market Cap  Period").  By way of example,  if the
     Market  Cap is greater  than  US$79,999,999  during  the entire  Market Cap
     Period  applicable  to a Draw  Down  Pricing  Period,  the  Purchase  Price
     Percentage shall be 91.75% as to that Draw Down Pricing Period. However, if
     the Market Cap at any time  during a  subsequent  Market Cap period is less
     than  US$79,999,999  the  Purchase  Price  Percentage  as to such Draw Down
     Pricing Period shall be 91.5%.

(v)  "Registration  Statement" shall mean the  registration  statement under the
     Securities Act, to be filed with the Securities and Exchange Commission for
     the  registration  of  the  Shares  pursuant  to  the  Registration  Rights
     Agreement   attached  hereto  as  Exhibit  A  (the   "Registration   Rights
     Agreement).

(w)  "SEC" shall mean the Securities and Exchange Commission.

(x)  "SEC Documents" shall mean the Company's latest Form 10-K or Form 10-KSB as
     of the time in question,  all Forms 10-Q or 10-QSB and 8-K filed thereafter
     until the time in question,  the Proxy Statement for its latest fiscal year
     as of the  time  in  question,  and  any  exhibits  to  the  aforementioned
     documents,  until such time as the Company no longer has an  obligation  to
     maintain the effectiveness of a Registration  Statement as set forth in the
     Registration Rights Agreement.

(y)  "Securities Act" shall mean the Securities Act of 1933, as amended, and the
     rules and regulations promulgated thereunder.

(z)  "Settlement"  shall  mean the  delivery  of the Draw Down  Shares  into the
     Purchaser's  DTC  account  via DTC's DWAC  System in  exchange  for payment
     therefor.

(aa) "Settlement  Date" shall have the meaning  assigned to such term in Section
     5.1(b).

(bb) "Settlement Notice" shall have the meaning assigned to such term in Section
     5.1(a)(i).

(cc) "Settlement Period" shall have the meaning assigned to such term in Section
     5.1(b).

(dd) "Shares"  shall  mean,  collectively,  the  shares of  Common  Stock of the
     Company  being  subscribed  for hereunder and issued upon the exercise of a
     Draw Down  (also  referred  to herein as the "Draw  Down  Shares")  and the
     Warrant Shares.

(ee) "Threshold  Price" shall mean the price per Share designated by the Company
     as the lowest VWAP during any Draw Down Pricing Period at which the Company
     shall sell its Common Stock in accordance with this Agreement.

(ff) "Trading Day" shall mean any day on which the Principal  Market is open for
     business.

(gg) "Transaction Documents" shall mean this Agreement,  the Registration Rights
     Agreement and the Escrow Agreement.

(hh) "VWAP" shall mean the daily volume weighted  average price of the Company's
     Common Stock on the  Principal  Market as reported by  Bloomberg  Financial
     L.P.  (based on a trading day from 9:30 a.m. ET to 4:02 p.m.  Eastern Time)
     using the VAP function on the date in question.

(ii) "Warrant"  shall  mean the  warrant  issued to the  Purchaser  pursuant  to
     Section 4.2(f) hereof.

(jj) "Warrant Shares" shall have the meaning set forth in Section 4.2(f) hereof.



                         ***********************



<PAGE>



            [SIGNATURE PAGE TO EQUITY LINE PURCHASE AGREEMENT]



     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly executed by their  respective  authorized  officer as of the date set forth
above.


                              PATH 1 NETWORK TECHNOLOGIES INC.



                              By: /s/ Frederick A. Cary
                                 -------------------------------------
                                  Frederick A. Cary, President & CEO

                              DTKA HOLDINGS LIMITED



                              By: /s/ David Sims
                                 --------------------------------------
                                   Name: David Sims
                                   Title: Director

                                   Address for Notice:
                                     c/o Beacon Capital Management
                                     P.O. Box 972
                                     Roadtown, Tortola
                                     British Virgin Islands

<PAGE>
                                 EXHIBIT A


                          REGISTRATION RIGHTS AGREEMENT



     THIS REGISTRATION  RIGHTS  AGREEMENT,  dated as of January 17, 2002 between
DTKA Holdings Limited  ("Purchaser")  and Path 1 Network  Technologies Inc. (the
"Company").

     WHEREAS,  simultaneously with the execution and delivery of this Agreement,
pursuant  to a Common  Stock  Purchase  Agreement  dated  the date  hereof  (the
"Purchase  Agreement") the Purchaser has committed to purchase up to $10,000,000
of the Company's  Common Stock (terms not defined herein shall have the meanings
ascribed to them in the Purchase Agreement) and Warrants; and

     WHEREAS,  the Company  desires to grant to the Purchaser  the  registration
rights set forth  herein  with  respect to the Draw Down  Shares and the Warrant
Shares (collectively, the "Securities").

     NOW, THEREFORE, the parties hereto mutually agree as follows:

     Section 1.  Registrable  Securities.  As used herein the term  "Registrable
Security"  means the Securities  until (i) all Securities  have been disposed of
pursuant to the Registration Statement, (ii) all Securities have been sold under
circumstances  under which all of the applicable  conditions of Rule 144 (or any
similar  provision then in force) under the Securities Act ("Rule 144") are met,
(iii) all Securities  have been  otherwise  transferred to persons who may trade
such Securities  without  restriction  under the Securities Act, and the Company
has  delivered  a new  certificate  or  other  evidence  of  ownership  for such
Securities  not  bearing  a  restrictive  legend,  or (iv)  such time as, in the
opinion of counsel to the Company,  all Securities may be sold without any time,
volume or manner  limitations  pursuant to Rule 144(k) (or any similar provision
then  in  effect)  under  the  Securities  Act.  In the  event  of  any  merger,
reorganization,  consolidation,  recapitalization  or other  change in corporate
structure affecting the Common Stock, such adjustment shall be deemed to be made
in the  definition  of  "Registrable  Security"  as is  appropriate  in order to
prevent  any  dilution or  enlargement  of the rights  granted  pursuant to this
Agreement.

Section 2. Restrictions on Transfer. The Purchaser acknowledges and understands
that in the absence of an effective Registration Statement authorizing the
resale of the Securities as provided herein, the Securities are "restricted
securities" as defined in Rule 144. The Purchaser understands that no
disposition or transfer of the Securities may be made by Purchaser in the
absence of (i) an opinion of counsel to the Purchaser, in form and substance
reasonably satisfactory to the Company, that such transfer may be made without
registration under the Securities Act or (ii) such registration.

     With a view to making  available to the Purchaser the benefits of Rule 144,
the Company  agrees to: (a) comply with the  provisions  of paragraph  (c)(1) of
Rule 144; and (b) file with the  Commission  in a timely  manner all reports and
other  documents  required to be filed by the Company  pursuant to Section 13 or
15(d) under the  Exchange  Act;  and, if at any time it is not  required to file
such reports but in the past had been required to or did file such  reports,  it
will,  upon the request of the Purchaser,  make available  other  information as
required  by,  and so long as  necessary  to permit  sales of,  its  Registrable
Securities pursuant to Rule 144.

     Section 3. Registration Rights With Respect to the Securities.

(a)  The Company  agrees that it will prepare and file with the  Securities  and
     Exchange Commission ("Commission"),  within thirty (30) days after the date
     hereof,  a  registration  statement  (on  Form  S-3  and/or  S-1,  or other
     appropriate  form of registration  statement) under the Securities Act (the
     "Registration  Statement"),  at the sole expense of the Company  (except as
     provided in Section 3(c) hereof), in respect of Purchaser,  so as to permit
     a public offering and resale of the Securities  under the Securities Act by
     Purchaser. The Company shall use its best efforts to cause the Registration
     Statement to become effective within ninety (90) days of the date hereof or
     five (5) days of SEC  clearance  and will within said five (5) days request
     acceleration  of  effectiveness.  The Company will notify  Purchaser of the
     effectiveness of the Registration  Statement within one Trading Day of such
     event.

(b)  The Company will  maintain  the  Registration  Statement or  post-effective
     amendment filed under this Section 3 hereof  effective under the Securities
     Act until the  earliest of (i) the date that all the  Securities  have been
     disposed of pursuant to the Registration Statement,  (ii) the date that all
     of the Securities  have been sold pursuant to the  Registration  Statement,
     (iii) the date that the Securities may be sold under the provisions of Rule
     144 without limitation as to volume, (iv) the date all Securities have been
     otherwise  transferred  to  persons  who  may  trade  such  shares  without
     restriction  under the Securities  Act, and the Company has delivered a new
     certificate or other evidence of ownership for such  securities not bearing
     a restrictive  legend,  or (v) the date all  Securities may be sold without
     any time,  volume  or manner  limitations  pursuant  to Rule  144(k) or any
     similar   provision   then  in  effect  under  the   Securities   Act  (the
     "Effectiveness Period").

(c)  All fees,  disbursements and  out-of-pocket  expenses and costs incurred by
     the  Company  in  connection   with  the  preparation  and  filing  of  the
     Registration  Statement  under  subparagraph  3(a)  and in  complying  with
     applicable securities and Blue Sky laws (including, without limitation, all
     attorneys'  fees  of the  Company)  shall  be  borne  by the  Company.  The
     Purchaser shall bear the cost of underwriting  and/or brokerage  discounts,
     fees and commissions, if any, applicable to the Securities being registered
     and the fees and expenses of its  counsel.  The  Purchaser  and its counsel
     shall have a reasonable  period,  not to exceed three (3) Trading  Days, to
     review the proposed Registration  Statement or any amendment thereto, prior
     to filing with the Commission,  and the Company shall provide the Purchaser
     with  copies of any  comment  letters  received  from the  Commission  with
     respect thereto within two (2) Trading Days of receipt thereof. The Company
     shall  make   reasonably   available  for  inspection  by  Purchaser,   any
     underwriter  participating in any disposition  pursuant to the Registration
     Statement,  and any  attorney,  accountant  or other agent  retained by the
     Purchaser or any such underwriter all relevant financial and other records,
     pertinent  corporate  documents  and  properties  of the  Company  and  its
     subsidiaries,  and cause the Company's officers, directors and employees to
     supply all  information  reasonably  requested by the Purchaser or any such
     underwriter,   attorney,   accountant  or  agent  in  connection  with  the
     Registration  Statement,  in each case,  as is  customary  for  similar due
     diligence examinations;  provided,  however, that all records,  information
     and documents that are designated in writing by the Company, in good faith,
     as  confidential,   proprietary  or  containing  any  material   non-public
     information  shall  be kept  confidential  by the  Purchaser  and any  such
     underwriter,  attorney,  accountant  or agent  (pursuant to an  appropriate
     confidentiality  agreement  in  the  case  of the  Purchaser,  underwriter,
     attorney,  accountant or agent), unless such disclosure is made pursuant to
     judicial process in a court  proceeding  (after first giving the Company an
     opportunity  promptly to seek a  protective  order or  otherwise  limit the
     scope of the information  sought to be disclosed) or is required by law, or
     such  records,  information  or  documents  become  available to the public
     generally  or through a third  party not in  violation  of an  accompanying
     obligation of confidentiality;  and provided further that, if the foregoing
     inspection and information  gathering would otherwise disrupt the Company's
     conduct of its business,  such inspection and information  gathering shall,
     to the maximum extent  possible,  be coordinated on behalf of the Purchaser
     and the other parties  entitled  thereto by one firm of counsel designed by
     and on behalf of the majority in interest of Purchaser  and other  parties.
     The Company shall qualify any of the  Securities for sale in such states as
     the Purchaser  reasonably  designates and shall furnish  indemnification in
     the manner provided in Section 6 hereof.  However, the Company shall not be
     required  to  qualify in any state  which  will  require an escrow or other
     restriction  relating  to the  Company  and/or the  sellers,  or which will
     require  the Company to qualify to do business in such state or require the
     Company to file  therein  any general  consent to service of  process.  The
     Company  at its  expense  will  supply  the  Purchaser  with  copies of the
     Registration  Statement  and the final  prospectus  included  therein  (the
     "Prospectus")  and other  related  documents in such  quantities  as may be
     reasonably requested by the Purchaser.

(d)  The  Company  shall  not be  required  by this  Section  3 to  include  the
     Purchaser's  Securities in any Registration  Statement which is to be filed
     if, in the opinion of counsel for both the  Purchaser  and the Company (or,
     should they not agree,  in the opinion of another  counsel  experienced  in
     securities  law matters  acceptable  to counsel for the  Purchaser  and the
     Company)  the  proposed  offering  or  other  transfer  as  to  which  such
     registration  is  requested  is exempt  from  applicable  federal and state
     securities laws and would result in all purchasers or transferees obtaining
     securities  which are not "restricted  securities",  as defined in Rule 144
     under the Securities Act.

     If at any  time  or  from  time to time  after  the  effective  date of the
Registration  Statement,  the Company  notifies the  Purchaser in writing of the
existence of a Potential  Material Event (as defined in Section 3(e) below), the
Purchaser  shall  not  offer or sell  any  Securities  or  engage  in any  other
transaction involving or relating to Securities,  from the time of the giving of
notice with respect to a Potential  Material Event until the Purchaser  receives
written  notice from the Company that such  Potential  Material Event either has
been disclosed to the public or no longer constitutes a Potential Material Event
(the  "Suspension  Period");  provided,  however,  that, if a Suspension  Period
occurs  during any  periods  commencing  on a Trading  Day a Draw Down Notice is
deemed  delivered  and ending ten (10)  Trading  Days  following  the end of the
corresponding  Draw Down Pricing  Period,  then the Company must  compensate the
Purchaser for any net decline in the market value of any Securities committed to
be purchased by the Purchaser  through the end of such  Suspension  Period.  Net
decline shall be calculated  as the  difference  between the highest VWAP during
the  applicable  Suspension  Period and the VWAP on the Trading Day  immediately
following a properly  delivered  notice to the  Purchaser  that such  Suspension
Period has ended. The Company must give Purchaser notice in writing at least two
(2) Trading Days prior to the first day of the blackout period,  if lawful to do
so.

(e) Potential Material Event" means any of the following:

               (i) the possession by the Company of material information that is
          not ripe for disclosure in a registration  statement, as determined in
          good faith by the Chief Executive Officer or the Board of Directors of
          the Company or that disclosure of such information in the Registration
          Statement  would be  detrimental  to the  business  and affairs of the
          Company;  or

               (ii) any  material  engagement  or activity by the Company  which
          would, in the good faith  determination of the Chief Executive Officer
          or the Board of  Directors of the  Company,  be adversely  affected by
          disclosure   in  a   registration   statement  at  such  time,   which
          determination  shall be accompanied by a good faith  determination  by
          the Chief  Executive  Officer or the Board of Directors of the Company
          that the Registration  Statement would be materially misleading absent
          the  inclusion of such  information;  or

               (iii)  pursuant  to  applicable  law, a  fundamental  change that
          requires  the  Company  to  file  a  post-effective  amendment  to the
          Registration  Statement,  change  the  plan  of  distribution  to  the
          Prospectus,  or must update the information included in the Prospectus
          pursuant  to  Section  10(a)(3)  of the  Securities  Act.

     Section 4. Cooperation with Company.  The Purchaser will cooperate with the
Company in all respects in  connection  with this  Agreement,  including  timely
supplying  all  information  reasonably  requested  by the Company  (which shall
include all  information  regarding the Purchaser and proposed manner of sale of
the  Registrable  Securities  required  to  be  disclosed  in  the  Registration
Statement)  and executing and  returning all documents  reasonably  requested in
connection  with the  registration  and sale of the  Registrable  Securities and
entering into and performing its obligations  under any underwriting  agreement,
if the offering is an underwritten  offering,  in usual and customary form, with
the managing  underwriter or underwriters  of such  underwritten  offering.  The
Purchaser  shall  consent  to be named  as an  underwriter  in the  Registration
Statement.  Purchaser  acknowledges  that in accordance with current  Commission
policy,  the Purchaser will be named as the underwriter of the Securities in the
Registration Statement.

     Section 5. Registration Procedures. If and whenever the Company is required
by any of the provisions of this Agreement to effect the  registration of any of
the Registrable  Securities  under the Securities Act, the Company shall (except
as otherwise provided in this Agreement), as expeditiously as possible,  subject
to the Purchaser's assistance and cooperation as reasonably required:

(a)  prepare and file with the Commission such amendments and supplements to the
     Registration  Statement and the Prospectus as may be necessary to keep such
     registration  statement  effective and to comply with the provisions of the
     Securities  Act  with  respect  to the  sale or  other  disposition  of all
     securities covered by such registration statement whenever the Purchaser of
     such Registrable  Securities  shall desire to sell or otherwise  dispose of
     the same  (including  prospectus  supplements  with respect to the sales of
     securities  from time to time in connection  with a registration  statement
     pursuant to Rule 415  promulgated  under the Securities  Act) and (ii) take
     all lawful action such that each of (A) the Registration  Statement and any
     amendment  thereto does not, when it becomes  effective,  contain an untrue
     statement of a material  fact or omit to state a material  fact required to
     be  stated  therein  or  necessary  to  make  the  statements  therein  not
     misleading and (B) the Prospectus, and any amendment or supplement thereto,
     does not at any time  during  the  Effectiveness  Period  include an untrue
     statement of a material  fact or omit to state a material  fact required to
     be stated therein or necessary to make the statements  therein, in light of
     the circumstances under which they were made, not misleading;

(b)  prior to the  filing  with the  Commission  of any  Registration  Statement
     (including any amendments  thereto) and the distribution or delivery of the
     Prospectus  (including  any  supplements  thereto),  provide  draft  copies
     thereof to the Purchaser and reflect in such documents all such comments as
     the Purchaser (and its counsel)  reasonably may propose and (ii) furnish to
     the  Purchaser  such  numbers  of  copies  of the  Prospectus  including  a
     preliminary prospectus or any amendment or supplement to the Prospectus, as
     applicable,  in conformity with the requirements of the Securities Act, and
     such other documents,  as the Purchaser may reasonably  request in order to
     facilitate  the  public  sale  or  other  disposition  of  the  Registrable
     Securities;

(c)  register and qualify the Registrable Securities covered by the Registration
     Statement  under the applicable  blue sky laws (subject to the  limitations
     set forth in Section 3(c) above),  and do any and all other acts and things
     which may be  reasonably  necessary or advisable to enable the Purchaser to
     consummate the public sale or other disposition in such jurisdiction of the
     Registrable  Securities,  except  that the  Company  shall not for any such
     purpose be required to qualify to do business as a foreign  corporation  in
     any  jurisdiction  wherein it is not so  qualified  or to file  therein any
     general consent to service of process;

(d)  list such  Registrable  Securities on the Principal  Market,  and any other
     exchange on which the Common  Stock of the Company is then  listed,  if the
     listing of such Registrable Securities is then permitted under the rules of
     such exchange or the Nasdaq Stock Market;

(e)  notify the  Purchaser  at any time when the  Prospectus  is  required to be
     delivered  under the Securities Act, of the happening of any event of which
     it has  knowledge as a result of which the  Prospectus,  as then in effect,
     includes  an  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 not misleading in the light of the  circumstances  then
     existing,  and the Company shall  prepare and file a curative  amendment or
     curative supplement under Section 5(a) as quickly as commercially  possible
     and the period beginning on the date of notice until the curative amendment
     is effective or curative  supplement is provided to the Purchaser  shall be
     deemed a Suspension  Period and the Company shall  compensate the Purchaser
     as set forth in Section 3(d) herein;

(f)  as promptly as practicable  after becoming aware of such event,  notify the
     Purchaser who holds Registrable  Securities being sold (or, in the event of
     an underwritten offering, the managing underwriters) of the issuance by the
     Commission or any state authority of any stop order or other  suspension of
     the  effectiveness of the Registration  Statement at the earliest  possible
     time and take all lawful  action to effect the  withdrawal,  rescission  or
     removal of such stop order or other suspension;

(g)  take all such other  lawful  actions  reasonably  necessary to expedite and
     facilitate the disposition by the Purchaser of its  Registrable  Securities
     in accordance with the intended methods therefor provided in the Prospectus
     which are customary for issuers to perform under the circumstances;

(h)  in the event of an underwritten  offering,  promptly include or incorporate
     in a prospectus supplement or post-effective  amendment to the Registration
     Statement such  information as the managing  underwriters  reasonably agree
     should be included  therein and to which the  Company  does not  reasonably
     object and make all  required  filings  of such  prospectus  supplement  or
     post-effective amendment as soon as practicable after it is notified of the
     matters to be included or  incorporated  in such  prospectus  supplement or
     post-effective amendment; and

(i)  maintain a transfer agent for its Common Stock.

     Section 6.  Indemnification.

(a)  The Company  agrees to indemnify  and hold  harmless the Purchaser and each
     person,  if any,  who  controls  the  Purchaser  within the  meaning of the
     Securities  Act  ("Distributing  Purchaser")  against any  losses,  claims,
     damages or liabilities,  joint or several (which shall, for all purposes of
     this  Agreement,  include,  but not be limited to, all reasonable  costs of
     defense and investigation and all reasonable attorneys' fees), to which the
     Distributing  Purchaser may become  subject,  under the  Securities  Act or
     otherwise,  insofar as such  losses,  claims,  damages or  liabilities  (or
     actions  in  respect  thereof)  arise out of or are based  upon any  untrue
     statement or alleged untrue statement of any material fact contained in the
     Registration  Statement,   or  any  related  preliminary  prospectus,   the
     Prospectus or amendment or supplement thereto, or arise out of or are based
     upon the  omission  or alleged  omission to state  therein a material  fact
     required to be stated therein or necessary to make the  statements  therein
     not misleading;  provided,  however, that the Company will not be liable in
     any such case to the extent that any such loss, claim,  damage or liability
     arises  out of or is based  upon an  untrue  statement  or  alleged  untrue
     statement  or  omission  or  alleged  omission  made  in  the  Registration
     Statement,   preliminary   prospectus,   the  Prospectus  or  amendment  or
     supplement  thereto in  reliance  upon,  and in  conformity  with,  written
     information  furnished  to  the  Company  by  the  Distributing   Purchaser
     specifically  for use in the preparation  thereof.  This Section 6(a) shall
     not inure to the benefit of any Distributing  Purchaser with respect to any
     person  asserting such loss,  claim,  damage or liability who purchased the
     Registrable  Securities  which are the subject thereof if the  Distributing
     Purchaser failed to send or give (in violation of the Securities Act or the
     rules and regulations  promulgated  thereunder) a copy of the Prospectus to
     such person at or prior to the written  confirmation  to such person of the
     sale of such Registrable  Securities,  where the Distributing Purchaser was
     obligated to do so under the  Securities  Act or the rules and  regulations
     promulgated thereunder. This indemnity agreement will be in addition to any
     liability which the Company may otherwise have.

(b)  Each Distributing Purchaser agrees that it will indemnify and hold harmless
     the Company,  and each officer,  director of the Company or person, if any,
     who controls the Company within the meaning of the Securities Act,  against
     any losses,  claims,  damages or liabilities (which shall, for all purposes
     of this Agreement,  include, but not be limited to, all reasonable costs of
     defense and investigation and all reasonable  attorneys' fees) to which the
     Company or any such  officer,  director  or  controlling  person may become
     subject  under the  Securities  Act or  otherwise,  insofar as such losses,
     claims, damages or liabilities (or actions in respect thereof) arise out of
     or are based upon any untrue  statement or alleged untrue  statement of any
     material  fact  contained  in the  Registration  Statement,  or any related
     preliminary prospectus,  the Prospectus or amendment or supplement thereto,
     or arise out of or are based upon the  omission or the alleged  omission to
     state therein a material fact required to be stated therein or necessary to
     make the statements  therein not  misleading,  but in each case only to the
     extent that such untrue  statement or alleged untrue  statement or omission
     or alleged  omission was made in the  Registration  Statement,  preliminary
     prospectus,  the Prospectus or amendment or supplement  thereto in reliance
     upon, and in conformity with, written information  furnished to the Company
     by such  Distributing  Purchaser  specifically  for use in the  preparation
     thereof.  This  indemnity  agreement  will be in addition to any  liability
     which  the  Distributing  Purchaser  may  otherwise  have.  Notwithstanding
     anything to the contrary herein,  the  Distributing  Purchaser shall not be
     liable under this Section 6(b) for any amount in excess of the net proceeds
     to such  Distributing  Purchaser  as a result  of the  sale of  Registrable
     Securities pursuant to the Registration Statement.

(c)  Promptly  after  receipt by an  indemnified  party under this  Section 6 of
     notice of the commencement of any action, such indemnified party will, if a
     claim in respect thereof is to be made against the indemnifying party under
     this Section 6, notify the indemnifying party of the commencement  thereof;
     but the omission so to notify the  indemnifying  party will not relieve the
     indemnifying  party from any liability which it may have to any indemnified
     party  except  to  the  extent  of  actual  prejudice  demonstrated  by the
     indemnifying  party.  In case  any  such  action  is  brought  against  any
     indemnified   party,  and  it  notifies  the  indemnifying   party  of  the
     commencement   thereof,   the  indemnifying   party  will  be  entitled  to
     participate in, and, to the extent that it may wish, jointly with any other
     indemnifying party similarly notified,  assume the defense thereof, subject
     to the  provisions  herein  stated and after  notice from the  indemnifying
     party to such  indemnified  party of its  election so to assume the defense
     thereof,  the  indemnifying  party  will not be liable to such  indemnified
     party  under this  Section 6 for any legal or other  expenses  subsequently
     incurred by such  indemnified  party in connection with the defense thereof
     other than reasonable costs of investigation, unless the indemnifying party
     shall not pursue the action to its final conclusion.  The indemnified party
     shall have the right to employ  separate  counsel in any such action and to
     participate  in the  defense  thereof,  but the fees and  expenses  of such
     counsel  shall  not be at the  expense  of the  indemnifying  party  if the
     indemnifying  party has  assumed  the  defense of the action  with  counsel
     reasonably  satisfactory  to the  indemnified  party;  provided that if the
     indemnified party is the Distributing  Purchaser,  the fees and expenses of
     such counsel shall be at the expense of the  indemnifying  party if (i) the
     employment of such counsel has been  specifically  authorized in writing by
     the  indemnifying  party,  or (ii) the  named  parties  to any such  action
     (including any impleaded  parties) include both the Distributing  Purchaser
     and the indemnifying  party and the Distributing  Purchaser shall have been
     advised  by such  counsel  that  there  may be one or more  legal  defenses
     available to the indemnifying  party different from or in conflict with any
     legal  defenses  which may be available to the  Distributing  Purchaser (in
     which case the  indemnifying  party  shall not have the right to assume the
     defense of such action on behalf of the  Distributing  Purchaser,  it being
     understood,  however, that the indemnifying party shall, in connection with
     any one such  action or  separate  but  substantially  similar  or  related
     actions  in  the  same  jurisdiction   arising  out  of  the  same  general
     allegations or  circumstances,  be liable only for the reasonable  fees and
     expenses of one separate firm of attorneys for the Distributing  Purchaser,
     which firm shall be designated in writing by the Distributing Purchaser and
     be approved by the indemnifying party). No settlement of any action against
     an indemnified party shall be made without the prior written consent of the
     indemnified party, which consent shall not be unreasonably withheld.

     All fees and expenses of the indemnified party (including  reasonable costs
of defense and  investigation in a manner not inconsistent with this Section and
all reasonable  attorneys'  fees and expenses)  shall be paid to the indemnified
party,  as incurred,  within ten (10) Trading Days of written  notice thereof to
the indemnifying party;  provided,  that the indemnifying party may require such
indemnified  party to undertake  to reimburse  all such fees and expenses to the
extent it is finally  judicially  determined that such indemnified  party is not
entitled to indemnification hereunder.

     Section  7.  Contribution.  In order  to  provide  for  just and  equitable
contribution  under the Securities Act in any case in which (i) the  indemnified
party  makes a claim for  indemnification  pursuant  to  Section 6 hereof but is
judicially  determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 6 hereof provide
for  indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any indemnified  party,  then the Company and the
applicable  Distributing  Purchaser  shall  contribute to the aggregate  losses,
claims,  damages or liabilities  to which they may be subject (which shall,  for
all purposes of this Agreement,  include,  but not be limited to, all reasonable
costs of defense and  investigation  and all  reasonable  attorneys'  fees),  in
either such case (after contribution from others) on the basis of relative fault
as well as any other relevant equitable considerations. The 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 on the one hand
or the  applicable  Distributing  Purchaser on the other hand,  and the parties'
relative intent, knowledge,  access to information and opportunity to correct or
prevent such statement or omission.  The Company and the Distributing  Purchaser
agree that it would not be just and equitable if  contribution  pursuant to this
Section 7 were  determined  by pro rata  allocation  or by any  other  method of
allocation which does not take account of the equitable  considerations referred
to in this  Section 7. The amount paid or payable by an  indemnified  party as a
result of the  losses,  claims,  damages or  liabilities  (or actions in respect
thereof)  referred  to above in this  Section 7 shall be deemed to  include  any
legal  or  other  expenses  reasonably  incurred  by such  indemnified  party in
connection with  investigating  or defending any such action or claim. 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.

     Notwithstanding  any other  provision  of this Section 7, in no event shall
any (i)  Purchaser be required to  undertake  liability to any person under this
Section 7 for any amounts in excess of the dollar  amount of the net proceeds to
be  received  by the  Purchaser  from  the sale of the  Purchaser's  Registrable
Securities  (after  deducting  any fees,  discounts and  commissions  applicable
thereto)  pursuant to any  Registration  Statement under which such  Registrable
Securities are to be registered under the Securities Act and (ii) underwriter be
required  to  undertake  liability  to any person  hereunder  for any amounts in
excess of the aggregate  discount,  commission or other compensation  payable to
such underwriter with respect to the Registrable  Securities  underwritten by it
and distributed pursuant to the Registration Statement.

     Section 8. Notices. All notices, demands,  requests,  consents,  approvals,
and other  communications  required or permitted  hereunder  shall be in writing
and, unless otherwise  specified herein,  shall be delivered as set forth in the
Purchase Agreement.

     Section  9.  Assignment.  Neither  this  Agreement  nor any  rights  of the
Purchaser or the Company  hereunder may be assigned by either party to any other
person.  Notwithstanding  the  foregoing,  (a) the  provisions of this Agreement
shall inure to the benefit of, and be  enforceable  by, any transferee of any of
the Common Stock purchased by the Purchaser  pursuant to the Purchase  Agreement
other than through  open-market sales, and (b) upon the prior written consent of
the Company,  which consent shall not be unreasonably withheld or delayed in the
case of an assignment to an affiliate of the Purchaser, the Purchaser's interest
in this Agreement may be assigned at any time, in whole or in part, to any other
person or entity  (including  any affiliate of the  Purchaser)  who agrees to be
bound hereby.

     Section 10.  Counterparts/Facsimile.  This Agreement may be executed in two
or more  counterparts,  each of which shall  constitute an original,  but all of
which, when together shall constitute but one and the same instrument, and shall
become  effective when one or more  counterparts  have been signed by each party
hereto and delivered to the other party.  In lieu of the  original,  a facsimile
transmission  or copy of the original  shall be as effective and  enforceable as
the original.

     Section  11.  Remedies  and  Severability.  The  remedies  provided in this
Agreement are cumulative  and not exclusive of any remedies  provided by law. If
any term,  provision,  covenant or  restriction  of this  Agreement is held by a
court of competent  jurisdiction to be invalid,  illegal, void or unenforceable,
the remainder of the terms,  provisions,  covenants and  restrictions  set forth
herein  shall  remain in full force and effect and shall in no way be  affected,
impaired or invalidated,  and the parties hereto shall use their best efforts to
find and employ an alternative  means to achieve the same or  substantially  the
same  result  as  that  contemplated  by  such  term,  provision,   covenant  or
restriction.  It is hereby  stipulated  and declared to be the  intention of the
parties that they would have executed the remaining terms, provisions, covenants
and restrictions  without including any of those that may be hereafter  declared
invalid, illegal, void or unenforceable.

     Section 12.  Conflicting  Agreements.  The Company shall not enter into any
agreement with respect to its securities  that is  inconsistent  with the rights
granted to the  Purchasers in this  Agreement or otherwise  prevents the Company
from complying with all of its obligations hereunder.

     Section 13.  Headings.  The headings in this  Agreement  are for  reference
purposes only and shall not affect in any way the meaning or  interpretation  of
this Agreement.

     Section  14.  Governing  Law.  This  Agreement  shall  be  governed  by and
construed in  accordance  with the laws of the State of New York  applicable  to
contracts  made in New York by persons  domiciled  in New York City and  without
regard to its  principles  of conflicts of laws.  The Company and the  Purchaser
agree to submit  themselves  to the in  personam  jurisdiction  of the state and
federal courts  situated  within the Southern  District of the State of New York
with regard to any controversy arising out of or relating to this Agreement. Any
party shall have the right to seek injunctive relief from any court of competent
jurisdiction  in any case where such relief is  available.  Any party shall have
the right to seek injunctive relief from any court of competent  jurisdiction in
any case where such relief is available.  Any dispute under this Agreement shall
be submitted to  arbitration  under the American  Arbitration  Association  (the
"AAA")  in New York  City,  New  York,  and shall be  finally  and  conclusively
determined  by the decision of a board of  arbitration  consisting  of three (3)
members  (hereinafter  referred  to as the "Board of  Arbitration")  selected as
according to the rules governing the AAA. The Board of Arbitration shall meet on
consecutive business days in New York City, New York, and shall reach and render
a decision in writing (concurred in by a majority of the members of the Board of
Arbitration)  with  respect to the  amount,  if any,  which the losing  party is
required to pay to the other party in respect of a claim  filed.  In  connection
with  rendering its decisions,  the Board of Arbitration  shall adopt and follow
the laws of the State of New York.  To the extent  practical,  decisions  of the
Board of  Arbitration  shall be rendered no more than thirty (30)  calendar days
following  commencement  of  proceedings  with  respect  thereto.  The  Board of
Arbitration  shall cause its written  decision  to be  delivered  to all parties
involved in the dispute.  The Board of  Arbitration  shall be authorized  and is
directed to enter a default  judgment  against any party refusing to participate
in the  arbitration  proceeding  within  thirty  days of any  deadline  for such
participation. Any decision made by the Board of Arbitration (either prior to or
after the  expiration  of such thirty (30)  calendar day period) shall be final,
binding  and  conclusive  on the  parties to the  dispute,  and  entitled  to be
enforced  to the  fullest  extent  permitted  by law and entered in any court of
competent  jurisdiction.  The  prevailing  party  shall be  awarded  its  costs,
including  attorneys'  fees,  from  the  non-prevailing  party  as  part  of the
arbitration award. Any party shall have the right to seek injunctive relief from
any court of competent  jurisdiction in any case where such relief is available.
The  prevailing  party in such  injunctive  action  shall be awarded  its costs,
including attorney's fees, from the non-prevailing party.


                       ***************************


<PAGE>


                 [REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE]


     IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement  to be duly  executed as of the date set forth  above.  PATH 1 NETWORK
TECHNOLOGIES INC.



                                 By: /s/ Frederick A. Cary
                                    --------------------------------------
                                    Frederick A. Cary, President & CEO


                                 DTKA HOLDINGS LIMITED



                                 By: /s/ David Sims
                                    --------------------------------------
                                    Name: David Sims
                                    Title: Director







<PAGE>

                                    EXHIBIT B


                                ESCROW AGREEMENT


     THIS ESCROW AGREEMENT (this  "Agreement") is made as of January 17, 2002 by
and among Path 1 Network Technologies Inc., a corporation incorporated under the
laws of Delaware (the  "Company"),  DTKA  Holdings  Limited  ("Purchaser"),  and
Feldman  Weinstein LLP with offices at 36 West 44th Street,  New York,  New York
10036-8102 (the "Escrow Agent").  Capitalized  terms used but not defined herein
shall  have the  meanings  set  forth in the  Common  Stock  Purchase  Agreement
referred to in the first recital.

     WHEREAS,  the Purchaser will from time to time as requested by the Company,
purchase  shares of the Company's  Common Stock from the Company as set forth in
that certain Common Stock Purchase  Agreement (the "Purchase  Agreement")  dated
the date hereof  between the Purchaser and the Company,  which will be issued as
per the terms and conditions contained herein and in the Purchase Agreement; and

     WHEREAS, the Company and the Purchaser have requested that the Escrow Agent
hold in escrow and then distribute the initial documents and certain funds which
are conditions  precedent to the  effectiveness of the Purchase  Agreement,  and
have further  requested that upon each exercise of a Draw Down, the Escrow Agent
hold the relevant documents and the applicable purchase price pending receipt by
Purchaser of the Draw Down Shares;

     NOW,  THEREFORE,  in  consideration  of the covenants  and mutual  promises
contained  herein and other good and  valuable  consideration,  the  receipt and
legal  sufficiency of which are hereby  acknowledged and intending to be legally
bound hereby, the parties agree as follows:


                                    ARTICLE 1



                   TERMS OF THE ESCROW FOR THE INITIAL CLOSING

     1.1.  The parties  hereby  agree to  establish  an escrow  account with the
Escrow Agent whereby the Escrow Agent shall hold the funds and  documents  which
are referenced in Section 4.2 of the Purchase Agreement.

     1.2. At the Initial Closing, the Company shall deliver to the Escrow Agent:

               (i) the original  executed  Registration  Rights Agreement in the
          form of Exhibit A to the Purchase Agreement;

               (ii) the original  executed opinion of Brobeck Phleger & Harrison
          LLP in the form of Exhibit C to the Purchase Agreement;

               (iii) the sum of $50,000;

               (iv) the original  executed  Company  counterpart  of this Escrow
          Agreement;

               (v) the Original executed Warrant;

               (vi) the original  executed  Company  counterpart of the Purchase
          Agreement; and

               (vii) a warrant issued to Jesup & Lamont  Securities  Corporation
          otherwise identical to the Warrant ("J&L Warrant")

     1.3. Upon receipt of the  foregoing,  and receipt of executed  counterparts
from the Purchaser of the Purchase Agreement,  the Registration Rights Agreement
and this Escrow Agreement,  the Escrow Agent shall wire transfer $50,000 per the
instructions  of the Purchaser for  Purchaser's  legal,  administrative  and due
diligence costs and expenses and the Escrow Agent shall then arrange to have the
Purchase  Agreement,  this Escrow Agreement,  the Registration Rights Agreement,
the  Warrant,  the J&L  Warrant  and the  opinion  of counsel  delivered  to the
appropriate parties.

     1.4. Wire transfers to the Escrow Agent shall be made as follows:

                           Chase Manhattan Bank, NA
                           510 Fifth Avenue
                           New York, NY 10036 USA
                           ABA Routing Number: 021000021
                           Account Number: 987074342668
                           Name of Account: Feldman Weinstein LLP Master Escrow
                                            Account
                           Remark:  PNWK


                                   ARTICLE II


                     TERMS OF THE ESCROW FOR EACH DRAW DOWN

     2.1.  Each time the Company  shall send a Draw Down Notice to the Purchaser
as provided in the Purchase  Agreement,  it shall send a copy, by facsimile,  to
the Escrow Agent.

     2.2. Each time the Purchaser shall purchase Shares pursuant to a Draw Down,
the Purchaser  shall send the applicable  purchase price of the Draw Down Shares
to the Escrow  Agent,  which  shall  promptly,  but no later than within one (1)
Trading  Day advise the Company in writing  that it has  received  the  purchase
price for such Draw Down Shares.  The Company shall promptly,  but no later than
two (2) Trading Days after receipt of such funding notice from the Escrow Agent,
cause its  transfer  agent to issue the Draw Down  Shares to the  Purchaser  via
DTC's DWAC system to the account  specified by the Purchaser  from time to time,
deliver the original  executed  opinion of the Company's  outside counsel in the
form of  Exhibit C to the  Purchase  Agreement  and a Form  424(b)  supplemental
prospectus to the Escrow Agent.  Upon receipt of written  confirmation  from the
transfer  agent or from the  Purchaser  that such Draw Down  Shares have been so
deposited,  the opinion and the supplemental  prospectus have been so delivered,
the Escrow  Agent  shall,  within one (1) Trading  Day wire 95% of the  Purchase
Price of the Draw  Down per the  written  instructions  of the  Company,  net of
$1,000 as escrow  expenses to the Escrow  Agent,  and the  remaining  5% per the
instructions  of Jesup & Lamont  Securities  Corporation and deliver the opinion
and the supplemental prospectus to the Purchaser.

     2.3. In the event that such Draw Down Shares are not in the Purchaser's DTC
account and the opinion and  supplemental  prospectus  are not  delivered to the
Purchaser  within  three  (3)  Trading  Days of the date of the  Escrow  Agent's
notice,  then Purchaser shall have the right to demand, by notice, the return of
the  Purchase  Price,  and the  applicable  Draw  Down  Notice  shall be  deemed
cancelled.


                                   ARTICLE III



                                  MISCELLANEOUS

     3.1. No waiver of any breach of any covenant or provision  herein contained
shall be deemed a waiver of any preceding or succeeding  breach  thereof,  or of
any other  covenant or  provision  herein  contained.  No  extension of time for
performance  of any  obligation  or act shall be deemed an extension of the time
for performance of any other obligation or act.

     3.2. All notices or other  communications  required or permitted  hereunder
shall be in writing, and shall be sent by fax or overnight courier, and shall be
deemed received upon receipt thereof, at the addresses set forth in the Purchase
Agreement.

     3.3.  This Escrow  Agreement  shall be binding  upon and shall inure to the
benefit of the permitted successors and permitted assigns of the parties hereto.

     3.4.  This Escrow  Agreement is the final  expression  of, and contains the
entire agreement between,  the parties with respect to the subject matter hereof
and  supersedes  all prior  understandings  with  respect  thereto.  This Escrow
Agreement may not be modified, changed,  supplemented or terminated, nor may any
obligations  hereunder  be waived,  except by written  instrument  signed by the
parties to be charged or by their  respective  agents duly authorized in writing
or as otherwise expressly permitted herein.

     3.5.  Whenever  required  by the  context  of this  Escrow  Agreement,  the
singular shall include the plural and masculine shall include the feminine. This
Escrow Agreement shall not be construed as if it had been prepared by one of the
parties,  but rather as if both parties had prepared the same.  Unless otherwise
indicated, all references to Articles are to this Escrow Agreement.

     3.6. The parties hereto expressly agree that this Escrow Agreement shall be
governed by, interpreted under and construed and enforced in accordance with the
laws of the State of New York. Except as expressly set forth herein,  any action
to enforce,  arising out of, or relating in any way to, any  provisions  of this
Escrow  Agreement  shall be brought in the Federal or state  courts of New York,
New York as is more fully set forth in the Purchase Agreement.

     3.7. The Escrow Agent's duties hereunder may be altered,  amended, modified
or revoked  only by a writing  signed by the Company,  Purchaser  and the Escrow
Agent.

     3.8. The Escrow Agent shall be obligated  only for the  performance of such
duties as are  specifically set forth herein and may rely and shall be protected
in relying or refraining  from acting on any instrument  reasonably  believed by
the  Escrow  Agent to be genuine  and to have been  signed or  presented  by the
proper party or parties. The Escrow Agent shall not be personally liable for any
act the Escrow  Agent may do or omit to do  hereunder  as the Escrow Agent while
acting  in good  faith,  excepting  only its own  gross  negligence  or  willful
misconduct,  and any act done or  omitted by the Escrow  Agent  pursuant  to the
advice of the Escrow Agent's  attorneys-at-law  (other than Escrow Agent itself)
shall be presumptive evidence of such good faith.

     3.9. The Escrow Agent is hereby  expressly  authorized to disregard any and
all  warnings  given by any of the  parties  hereto  or by any  other  person or
corporation,  excepting  only  orders or  process of courts of law and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order,  judgment
or decree,  the Escrow Agent shall not be liable to any of the parties hereto or
to any  other  person,  firm or  corporation  by  reason  of such  decree  being
subsequently reversed,  modified,  annulled, set aside, vacated or found to have
been entered without jurisdiction.

     3.10. The Escrow Agent shall not be liable in any respect on account of the
identity,  authorization  or rights of the parties  executing or  delivering  or
purporting  to execute or deliver the  Purchase  Agreement  or any  documents or
papers deposited or called for thereunder or hereunder.

     3.11.  The Escrow Agent shall be entitled to employ such legal  counsel and
other  experts as the Escrow  Agent may deem  necessary  properly  to advise the
Escrow Agent in connection  with the Escrow Agent's duties  hereunder,  may rely
upon  the  advice  of  such  counsel,   and  may  pay  such  counsel  reasonable
compensation  therefor.  The  Escrow  Agent has acted as legal  counsel  for the
Purchaser, and may continue to act as legal counsel for the Purchaser, from time
to time,  notwithstanding its duties as the Escrow Agent hereunder.  The Company
consents to the Escrow Agent in such capacity as legal counsel for the Purchaser
and waives any claim that such representation  represents a conflict of interest
on the part of the Escrow Agent. The Company  understands that the Purchaser and
the Escrow Agent are relying  explicitly on the foregoing  provision in entering
into this Escrow Agreement.

     3.12. The Escrow Agent's  responsibilities  as escrow agent hereunder shall
terminate if the Escrow Agent shall resign by written  notice to the Company and
the  Purchaser.  In the event of any such  resignation,  the  Purchaser  and the
Company shall appoint a successor Escrow Agent.

     3.13. If the Escrow Agent reasonably  requires other or further instruments
in connection with this Escrow  Agreement or obligations in respect hereto,  the
necessary parties hereto shall join in furnishing such instruments.

     3.14.  It is  understood  and agreed  that  should any  dispute  arise with
respect to the delivery and/or ownership or right of possession of the documents
or the escrow  funds held by the Escrow  Agent  hereunder,  the Escrow  Agent is
authorized and directed in the Escrow  Agent's sole  discretion (i) to retain in
the Escrow  Agent's  possession  without  liability to anyone all or any part of
said  documents or the escrow funds until such disputes  shall have been settled
either by mutual  written  agreement of the parties  concerned by a final order,
decree  or  judgment  of  a  board  of  arbitration  or  a  court  of  competent
jurisdiction  after the time for  appeal  has  expired  and no  appeal  has been
perfected,  but the Escrow Agent shall be under no duty  whatsoever to institute
or defend any such proceedings or (ii) to deliver the escrow funds and any other
property and documents held by the Escrow Agent  hereunder to a state or Federal
court having competent subject matter  jurisdiction and located in the State and
City of New York in accordance with the applicable procedure therefor.

     3.15.  The  Company  and the  Purchaser  agree  jointly  and  severally  to
indemnify and hold harmless the Escrow Agent and its partners, employees, agents
and representatives from any and all claims,  liabilities,  costs or expenses in
any way  arising  from or relating  to the duties or  performance  of the Escrow
Agent  hereunder  or the  transactions  contemplated  hereby or by the  Purchase
Agreement  other than any such claim,  liability,  cost or expense to the extent
the same shall have been determined by final,  unappealable  judgment of a court
of competent  jurisdiction to have resulted from the gross negligence or willful
misconduct of the Escrow Agent.

                            *************************


<PAGE>


                      [SIGNATURE PATE TO ESCROW AGREEMENT]

     IN WITNESS WHEREOF,  the parties hereto have executed this Escrow Agreement
as of the date set forth above. PATH 1 NETWORK TECHNOLOGIES INC.



                          By:  /s/ Frederick A. Cary
                             -------------------------------------------------
                             Frederick A. Cary, President & CEO


                          DTKA HOLDINGS LIMITED



                          By: /s/ David Sims
                             -------------------------------------------------
                             Name: David Sims
                             Title: Director

                          ESCROW AGENT:

                          FELDMAN WEINSTEIN LLP



                          By: /s/ David Feldman
                             -------------------------------------------------
                             Name: David Feldman
                             Title: President



                                    EXHIBIT C


January 17, 2002                                 Brobeck, Phleger & Harrison LLP
                                                            12390 El Camino Real
                                               San Diego, California  92130-2081
                                                              TEL   858.720.2500
                                                              FAX   858.720.2555
                                                                 www.brobeck.com

                              DTKA Holdings Limited

Ladies and Gentlemen:

     We have acted as counsel for Path 1 Network  Technologies  Inc., a Delaware
corporation  (the  "Company"),  in  connection  with  the  issuance  and sale of
warrants to purchase  shares of Common Stock and up to  $10,000,000.00  worth of
shares of the Company's Class A Common Stock ("Common  Stock")  pursuant to that
certain  Common Stock Purchase  Agreement  dated January 17, 2002 (the "Purchase
Agreement")  between the Company and you. This opinion  letter is being rendered
to you pursuant to Section 4.2(e) of the Purchase  Agreement.  Capitalized terms
not otherwise defined in this opinion letter have the meanings given them in the
Purchase Agreement.

     In  connection  with the  opinions  expressed  herein,  we have  made  such
examination  of  matters  of law  and of fact as we  considered  appropriate  or
advisable  for purposes  hereof.  As to matters of fact material to the opinions
expressed herein, we have relied upon the  representations  and warranties as to
factual  matters  contained in and made by the Company  pursuant to the Purchase
Agreement and upon  certificates  and statements of government  officials and of
officers of the  Company.  With  respect to our opinion in paragraph 7 regarding
issued and  outstanding  capital  stock of the  Company,  such  opinion is based
solely on our review of a certificate of the Company and of the Company's  stock
records and  resolutions  of the Company's  Board of Directors  relating to such
issuances. We have also examined originals or copies of such corporate documents
or records of the Company as we have  considered  appropriate  for the  opinions
expressed  herein.  We have assumed for the purposes of this opinion  letter the
genuineness  of all  signatures,  the legal  capacity  of natural  persons,  the
authenticity  of the documents  submitted to us as originals,  the conformity to
the original documents of all documents submitted to us as certified,  facsimile
or photostatic copies, and the authenticity of the originals of such copies.

     In  rendering  this  opinion  letter  we have  also  assumed:  (A) that the
Purchase   Agreement,   the  Registration   Rights  Agreement  and  the  Warrant
(collectively,  the  "Transaction  Agreements"),  have  been  duly  and  validly
executed  and  delivered  by you or on your  behalf,  that you have the power to
enter into and perform all your  obligations  thereunder  and have taken any and
all necessary  corporate,  partnership or other relevant action to authorize the
Transaction  Agreements,  and that the Transaction  Agreements constitute valid,
legal,   binding   and   enforceable   obligations   upon  you;   (B)  that  the
representations  and warranties  made in the Purchase  Agreement by you are true
and correct;  and (C) that any wire transfers,  drafts or checks tendered by you
will be honored.

     As used in this opinion  letter,  the  expression "we are not aware" or the
phrase "to our  knowledge," or any similar  expression or phrase with respect to
our knowledge of matters of fact, means as to matters of fact that, based on the
actual knowledge of individual attorneys within the firm principally responsible
for handling current matters for the Company (and not including any constructive
or imputed  notice of any  information),  and after an  examination of documents
referred to herein and after  inquiries of certain  officers of the Company,  no
facts  have been  disclosed  to us that  have  caused  us to  conclude  that the
opinions  expressed  are  factually  incorrect;  but beyond that we have made no
factual  investigation  for the  purposes  of  rendering  this  opinion  letter.
Specifically,  but without  limitation,  we have not searched the dockets of any
courts and we have made no inquiries of  securities  holders or employees of the
Company,  other than such  officers.  No  inference  as to our  knowledge of the
existence or absence of any fact should be drawn from our  representation of the
Company or the rendering of the opinions set forth below.

     This opinion  letter relates solely to the laws of the State of California,
the General  Corporation Law of the State of Delaware and the federal law of the
United  States  and  we  express  no  opinion  with  respect  to the  effect  or
application of any other laws. Special rulings of authorities administering such
laws or opinions of other counsel have not been sought or obtained. Furthermore,
we invite your attention to the fact that the Transaction  Agreements state that
they  are  governed  by the  laws of the  State  of New  York.  We have  made no
investigation  of New York law nor consulted  with counsel  admitted to practice
law in the State of New York.  We have not  examined  the  question  of what law
would govern the  interpretation  or enforcement of the Transaction  Agreements,
and our opinion with regard to the validity,  binding nature and  enforceability
of the  Transaction  Agreements is based upon the  assumption  that the internal
laws of the State of California would govern the provisions thereof.

     Based upon our  examination  of and reliance upon the foregoing and subject
to the limitations,  exceptions,  qualifications and assumptions set forth below
and except as set forth in the  Purchase  Agreement or the  Disclosure  Schedule
thereto, we are of the opinion that as of the date hereof:

1.   The Company is a corporation  duly organized,  validly existing and in good
     standing  under the laws of the  State of  Delaware  and has all  requisite
     corporate  power and  authority to carry on its business and to own,  lease
     and operate its  properties  and assets as described in the  Company's  SEC
     Documents.  The Company and each  subsidiary is duly qualified as a foreign
     corporation to do business and is in good standing in every jurisdiction in
     which the Company  owns or leases  property,  other than those in which the
     failure so to qualify would not have a Material Adverse Effect.

2.   The Company has the requisite  corporate  power and authority to enter into
     and perform its obligations  under the Transaction  Agreements and to issue
     the Shares. The execution and delivery of the Transaction Agreements by the
     Company and the consummation by it of the transactions contemplated thereby
     have been duly authorized by all necessary  corporate action and no further
     consent  or  authorization  of the  Company  or its Board of  Directors  or
     stockholders is required.  Each of the Transaction  Agreements  (other than
     any  Warrants  to be issued  after the  signing of the  Purchase  Agreement
     pursuant to the terms of the Purchase Agreement) has been duly executed and
     delivered  by the  Company  and  constitutes  a legal,  valid  and  binding
     obligation  of the  Company,  enforceable  by you  against  the  Company in
     accordance with its terms.

3.   The execution,  delivery and performance of the  Transaction  Agreements by
     the  Company  and  the  consummation  by the  Company  of the  transactions
     contemplated thereby,  including,  without limitation,  the issuance of the
     Shares,  the Warrant and the shares  issuable  upon exercise of the Warrant
     (the  "Warrant  Shares"),  do not and will not (i) result in a violation of
     the  Company's  Charter  (the  "Charter)  or Bylaws  (the  "Bylaws");  (ii)
     conflict  with,  or  constitute  a material  default (or an event that with
     notice or lapse of time or both would become a default)  under,  or give to
     others any rights of termination,  amendment,  acceleration or cancellation
     of, any  material  agreement,  indenture,  instrument  or any  "lock-up" or
     similar  provision of any  underwriting  or similar  agreement to which the
     Company is a party that has been  included  as an exhibit to the  Company's
     last annual  report with the SEC on Form 10-K (the "Last  10-K");  or (iii)
     result in a violation of any federal or California  law, rule or regulation
     applicable  to the Company or by which any property or asset of the Company
     is bound or affected, except for such violations as would not, individually
     or in the aggregate,  have a Material Adverse Effect. To our knowledge, the
     Company is not a party to or subject to the provisions of any order,  writ,
     injunction,  judgment  or  decree  of any  court or  government  agency  or
     instrumentality.

4.   When issued and paid for,  the Shares and  Warrant  Shares will be duly and
     validly issued,  fully paid and  nonassessable,  and free of (a) any liens,
     encumbrances  imposed by the Company and (b)  preemptive or similar  rights
     contained in the Charter or Bylaws or, to our  knowledge,  in any agreement
     to which the Company is party.

5.   To our  knowledge,  there are no claims,  actions,  suits,  proceedings  or
     investigations  that are pending against the Company or its properties,  or
     against any  officer or  director of the Company in his or her  capacity as
     such, regarding the right or power of the Company to enter into and perform
     the Agreements, nor has the Company received any written threat of any such
     claims, actions, suits, proceedings, or investigations.

6.   To our knowledge,  there are no  outstanding  options,  warrants,  calls or
     commitments of any character whatsoever relating to, or securities,  rights
     or obligations convertible into or exchangeable for, or giving any right to
     subscribe  for  or  acquire  any  shares  of  Common  Stock  or  contracts,
     commitments,  understanding, or arrangements by which the Company is or may
     become bound to issue  additional  shares of Common Stock, or securities or
     rights  convertible or exchangeable into shares of Common Stock,  except as
     described in the SEC Documents or the Agreements.

7.   The authorized  capital stock of the Company consists of 10,000,000  shares
     of Class A common  stock,  $0.001  par  value  per  share,  of which to our
     knowledge  as  of  the  date  hereof,   8,814,226  shares  are  issued  and
     outstanding and 20,000,000 shares of class B common stock of which none are
     issued and outstanding.

     Our opinions  expressed  above are  specifically  subject to the  following
limitations, exceptions, qualifications and assumptions:

     (A) The  legality,  validity,  binding  nature  and  enforceability  of the
Company's  obligations  under the  Transaction  Agreements  may be subject to or
limited by (1) bankruptcy, insolvency, reorganization,  arrangement, moratorium,
fraudulent  transfer and other  similar laws  affecting  the rights of creditors
generally;  (2)  general  principles  of equity  (whether  relief is sought in a
proceeding  at law or in equity),  including,  without  limitation,  concepts of
materiality,  reasonableness, good faith and fair dealing, and the discretion of
any  court  of  competent  jurisdiction  in  awarding  specific  performance  or
injunctive  relief and other equitable  remedies;  and (3) without  limiting the
generality of the foregoing,  (a) principles  requiring the consideration of the
impracticability or impossibility of performance of the Company's obligations at
the time of the attempted enforcement of such obligations, and (b) the effect of
California  court  decisions and statutes which indicate that  provisions of the
Transaction  Agreements  which  permit  any  of  you  to  take  action  or  make
determinations may be subject to a requirement that such action be taken or such
determinations  be made on a reasonable  basis in good faith or that it be shown
that such action is reasonably necessary for your protection.

     (B) We  express  no  opinion  as to the  Company's  or  this  transaction's
compliance  or  noncompliance  with  applicable  federal or state  antifraud  or
antitrust  statutes,  laws,  rules and regulations or Section 721 (as amended by
Section 5021 of the Omnibus Trade and Competitiveness Act of 1988: the so-called
"Exon-Florio"  provision)  of  the  Defense  Production  Act  of  1950  and  the
regulations thereunder.

     (C) We express  no  opinion  concerning  the past,  present or future  fair
market value of any securities.

     (D)  We  express  no  opinion  as  to  the  enforceability   under  certain
circumstances  of any  provisions  indemnifying  a party  against,  or requiring
contributions  toward,  that party's liability for its own wrongful or negligent
acts, or where  indemnification  or contribution is contrary to public policy or
prohibited  by law.  In this  regard,  we advise you that in the  opinion of the
Securities and Exchange  Commission,  provisions  regarding  indemnification  of
directors,  officers and  controlling  persons of an issuer against  liabilities
arising under the Securities Act of 1933, as amended,  are against public policy
and are therefore unenforceable.

     (E)  We  express  no  opinion  as  to  the  enforceability   under  certain
circumstances  of  any  provisions  prohibiting  waivers  of  any  terms  of the
Transaction  Agreements other than in writing, or prohibiting oral modifications
thereof or  modification  by course of dealing.  In  addition,  our opinions are
subject to the effect of judicial decisions which may permit the introduction of
extrinsic  evidence  to  interpret  the terms of written  contracts  such as the
"Transaction Agreements."

     (F) We  express  no  opinion  as to the  effect  of  Section  1670.5 of the
California  Civil Code or any other  California  law,  federal law or  equitable
principle  which  provides that a court may refuse to enforce,  or may limit the
application  of, a contract or any clause  thereof which the court finds to have
been unconscionable at the time it was made or contrary to public policy.

     (G) We express no opinion as to the effect of Sections  1203 and 1102(3) of
the California  Uniform Commercial Code or any other California law, federal law
or  equitable  principle,  providing  for an  obligation  of good  faith  in the
performance  or  enforcement  of contracts  and  prohibiting  disclaimer of such
obligation.

     (H) Our opinion in paragraph 3 is limited to laws and regulations  normally
applicable  to  transactions  of  the  type   contemplated  in  the  Transaction
Agreements and does not extend to licenses,  permits and approvals necessary for
the conduct of the  Company's  business.  In addition  and without  limiting the
previous  sentence,  we express no opinion  herein with respect to the effect of
any land use, safety,  hazardous material,  environmental or similar law, or any
local or  regional  law.  Further,  we express no opinion as to the effect of or
compliance  with any state or  federal  laws or  regulations  applicable  to the
transactions contemplated by the Transaction Agreements because of the nature of
the business of any party  thereto  other than the Company.  Also, we express no
opinion with respect to any patent,  copyright,  trademark or other intellectual
property matter, or as to the statutes, regulations,  treaties or common laws of
any nation, state or jurisdiction with regard thereto.

     (I)  In  connection  with  our  opinion  in  paragraph  4  relating  to the
agreements  attached  as exhibits in the Last 10-K,  we have not  reviewed,  and
express no opinion on, (i) financial  covenants or similar provisions  requiring
financial  calculations or determinations to ascertain whether there is any such
conflict or (ii)  provisions  relating to the occurrence of a "material  adverse
event" or words of similar  import.  In  addition,  our opinion  relating to the
agreements  attached  as  exhibits  in the Last 10-K is subject to the effect of
judicial  decisions which may permit the  introduction of extrinsic  evidence to
interpret the terms of written contracts or allow  non-written  modifications of
written contracts.  Moreover,  to the extent that any of the agreements attached
as exhibits in the Last 10-K are governed by the laws of any jurisdiction  other
than the State of California our opinion  relating to those  agreements is based
solely upon the plain meaning of their language without regard to interpretation
or construction that might be indicated by the laws governing those agreements.

     (J) We express no opinion as to your  compliance  with any Federal or state
law relating to your legal or regulatory  status or the nature of your business.
(K) We express no opinion as to the compliance of the Company or the sale of the
Common Stock to Purchaser with the  provisions of the Small Business  Investment
Act of 1958 or the Investment  Company Act of 1940.

     (L) We  express no opinion  as to the  effect of  subsequent  issuances  of
securities  of  the  Company,  to  the  extent  that  further  issuances  may be
integrated with the Closings  contemplated by the Purchase  Agreement and to the
extent that  notwithstanding  its reservation of shares upon the exercise of the
Warrants,  the Company  may issue so many shares of Common  Stock that there are
not enough remaining authorized but unissued shares of Common Stock to issue the
full amount of Shares upon the exercise of the Warrants.

     (M) Our opinions with regard to each  respective  Transaction  Agreement do
not  extend  to other  agreements  or  instruments  (or forms of  agreements  or
instruments) which may be attached thereto as exhibits.

     (N) We  express no opinion  as to:  (1) The  enforceability  under  certain
circumstances  of  provisions  expressly or by  implication  waiving  broadly or
vaguely  stated rights,  unknown  future  rights,  or defenses to obligations or
rights granted by law, when such waivers are against public policy or prohibited
by law; (2) The enforceability under certain  circumstances of provisions to the
effect that rights or remedies may be exercised  without notice, or that failure
to exercise  or delay in  exercising  rights or  remedies  will not operate as a
waiver  of any such  right  or  remedy;  (3) The  enforceability  under  certain
circumstances  of  provisions  to the effect  that  rights or  remedies  are not
exclusive,  that every right or remedy is  cumulative  and may be  exercised  in
addition to or with any other right or remedy,  or that election of a particular
remedy or remedies does not preclude  recourse to one or more remedies;  (4) Any
provision  providing for the  exclusive  jurisdiction  of a particular  court or
purporting to waive rights to trial by jury, service of process or objections to
the  laying  of  venue or to forum on the  basis  of forum  non  conveniens,  in
connection  with any litigation  arising out of or pertaining to the Transaction
Agreements;  (5) Section 8.9 of the Stock  Purchase  Agreement and Section 14 of
the  Registration  Rights  Agreement;  (6)  Section  8.9 of the  Stock  Purchase
Agreement and Section 14 of the Registration Rights Agreement to the extent that
it purports to exclude conflict of law principles under applicable state law; or
(7) The effect of any applicable state law, federal law or equitable  principles
which limit the amount of  attorneys'  fees that can be recovered  under certain
circumstances.

     This opinion  letter is rendered as of the date first  written above solely
for your  benefit  in  connection  with the  Purchase  Agreement  and may not be
delivered  to,  quoted or relied  upon by any person  other than you, or for any
other  purpose,  without our prior  written  consent.  Our opinion is  expressly
limited to the  matters  set forth  above and we render no  opinion,  whether by
implication or otherwise,  as to any other matters  relating to the Company.  We
assume  no  obligation  to  advise  you  of  facts,  circumstances,   events  or
developments  which  hereafter  may be  brought to our  attention  and which may
alter, affect or modify the opinions expressed herein.

                                 Very truly yours,
                                 BROBECK, PHLEGER & HARRISON LLP


                                    EXHIBIT D



<PAGE>

                     DRAW DOWN NOTICE/COMPLIANCE CERTIFICATE


                        Path 1 Network Technologies Inc.



     The undersigned hereby certifies, with respect to shares of Common Stock of
Path 1 Network  Technologies  Inc. (the  "Company")  issuable in connection with
this Draw Down  Notice  and  Compliance  Certificate  dated  _____________  (the
"Notice"), delivered pursuant to the Common Stock Purchase Agreement dated as of
January 17, 2002 (the "Agreement"), as follows:

               1. The undersigned is the duly appointed Chief Executive  Officer
          of the Company.

               2.  Unless  as  otherwise  set  forth  in a  Disclosure  Schedule
          attached hereto, the representations and warranties of the Company set
          forth in the Agreement  are true and correct in all material  respects
          as though made on and as of the date hereof and all SEC  Documents are
          as represented in Section 2.1 of the Agreement.

               3.  The  Company  has  performed  in all  material  respects  all
          covenants and agreements to be performed by the Company on or prior to
          the date of this Draw Down  Notice and has  complied  in all  material
          respects  with  all  obligations  and  conditions   contained  in  the
          Agreement.

               4. The Investment Amount is $___________.

               5. The Threshold Price, if any, is $__________.

               6. The Draw Down Pricing Period shall commence on ____________.

               7. The number of Pricing Days shall be _______.

               The  undersigned has executed this  Certificate  this ____ day of
          ________, _____.

                                 PATH 1 NETWORK TECHNOLOGIES INC.


                                 By: _______________________________
                                      Name:



                                    EXHIBIT E

NEITHER  THIS WARRANT NOR THE SHARES  ISSUABLE  UPON  EXERCISE  HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT" OR
ANY OTHER  APPLICABLE  STATE  SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PURSUANT TO REGULATION D AND
SUCH OTHER  SECURITIES  LAWS.  NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON
EXERCISE  HEREOF MAY BE SOLD,  PLEDGED,  TRANSFERRED,  ENCUMBERED  OR  OTHERWISE
DISPOSED OF EXCEPT  PURSUANT TO AN EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE
SECURITIES ACT OR IN A TRANSACTION WHICH IS EXEMPT FROM  REGISTRATION  UNDER THE
PROVISIONS OF THE SECURITIES ACT OR ANY APPLICABLE STATE LAWS.




<PAGE>

NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT" OR
ANY OTHER APPLICABLE STATE SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT PURSUANT TO REGULATION D AND
SUCH OTHER SECURITIES LAWS. NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON
EXERCISE HEREOF MAY BE SOLD, PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE
PROVISIONS OF THE SECURITIES ACT OR ANY APPLICABLE STATE LAWS.



                             STOCK PURCHASE WARRANT


                  To Purchase 61,131 Shares of Common Stock of

                        PATH 1 NETWORK TECHNOLOGIES INC.

     THIS  CERTIFIES  that,  for value  received,  DTKA  Holdings  Limited  (the
"Holder"),  is  entitled,  upon the  terms and  subject  to the  limitations  on
exercise and the conditions  hereinafter  set forth, at any time on or after the
date  hereof  (the  "Initial  Exercise  Date")  and on or prior to the  close of
business on January 18, 2002 (the  "Termination  Date") but not  thereafter,  to
subscribe for and purchase from Path 1 Network  Technologies Inc., a corporation
incorporated in the State of Delaware (the "Company"),  up to 61,131 shares (the
"Warrant Shares") of Common Stock, $0.001 par value, of the Company (the "Common
Stock").  The purchase price of one share of Common Stock (the "Exercise Price")
under this  Warrant  shall be $5.6436  (subject to  adjustment  hereunder).  The
Exercise  Price and the  number of  Warrant  Shares  for  which the  Warrant  is
exercisable  shall be subject to adjustment as provided herein.  In the event of
any conflict  between the terms of this  Warrant and the Common  Stock  Purchase
Agreement dated as of January 17, 2002,  pursuant to which this Warrant has been
issued  (the  "Purchase  Agreement"),  the  Purchase  Agreement  shall  control.
Capitalized  terms used and not otherwise defined herein shall have the meanings
set forth for such terms in the Purchase Agreement.



<PAGE>




     1.  Title  to  Warrant.  Prior  to the  Termination  Date  and  subject  to
compliance  with  applicable  laws,  this Warrant and all rights  hereunder  are
transferable, in whole or in part, at the office or agency of the Company by the
Holder in person or by duly authorized attorney,  upon surrender of this Warrant
together with the Assignment Form annexed hereto properly endorsed.

     2.  Authorization  of Shares.  The Company  covenants  that all the Warrant
Shares which may be issued upon the exercise of the purchase rights  represented
by this Warrant will, upon exercise of the purchase  rights  represented by this
Warrant,  be duly authorized,  validly issued,  fully paid and nonassessable and
free from all taxes,  liens and charges in respect of the issue  thereof  (other
than taxes in  respect of any  transfer  occurring  contemporaneously  with such
issue).

     3. Exercise of Warrant.

          (a) Except as provided in Section 4 herein,  exercise of the  purchase
     rights  represented  by this Warrant may be made at any time or times on or
     after the Initial  Exercise  Date,  and before the close of business on the
     Termination  Date by the  surrender  of this  Warrant  and  the  Notice  of
     Exercise Form annexed  hereto duly  executed,  at the office of the Company
     (or such  other  office or agency of the  Company  as it may  designate  by
     notice in writing to the  registered  Holder  hereof at the address of such
     Holder  appearing  on the books of the  Company)  and upon  payment  of the
     Exercise  Price  of the  shares  thereby  purchased  by  wire  transfer  or
     cashier's  check drawn on a United  States bank,  or by means of a cashless
     exercise  as  provided  herein,  the Holder  shall be entitled to receive a
     certificate for the number of Warrant Shares so purchased. Certificates for
     shares  purchased  hereunder  shall be  delivered  to the  Holder  within 5
     Trading Days after the date on which this Warrant shall have been exercised
     as aforesaid.  This Warrant shall be deemed to have been exercised and such
     certificate or certificates shall be deemed to have been issued, and Holder
     or any other person so  designated  to be named  therein shall be deemed to
     have become a holder of record of such shares for all  purposes,  as of the
     date the  Warrant  has been  exercised  by  payment  to the  Company of the
     Exercise  Price  and all  taxes  required  to be paid  by  Holder,  if any,
     pursuant to Section 5 prior to the issuance of such shares, have been paid.
     If the Company fails to deliver to the Holder a certificate or certificates
     representing  the Warrant Shares pursuant to this Section 3(a) by the fifth
     Trading Day after the date of exercise, then the Holder will have the right
     to rescind such exercise.  In addition to any other rights available to the
     Holder,  if the  Company  fails to deliver to the Holder a  certificate  or
     certificates representing the Warrant Shares pursuant to an exercise by the
     eighth  Trading  Day after the date of  exercise,  and if after such eighth
     Trading  Day  the  Holder  purchases  (in an  open  market  transaction  or
     otherwise)  shares of Common Stock to deliver in  satisfaction of a sale by
     the Holder of the Warrant  Shares  which the Holder  anticipated  receiving
     upon such exercise (a "Buy-In"),  then the Company shall (1) pay in cash to
     the  Holder  the  amount by which (x) the  Holder's  total  purchase  price
     (including brokerage commissions, if any) for the shares of Common Stock so
     purchased  exceeds (y) the amount obtained by multiplying (A) the number of
     Warrant  Shares that the  Company was  required to deliver to the Holder in
     connection  with the  exercise  at issue times (B) the closing bid price of
     the Common Stock at the time of the obligation giving rise to such purchase
     obligation,  and (2) at the  option of the  Holder,  either  reinstate  the
     portion of the Warrant and  equivalent  number of Warrant  Shares for which
     such exercise was not honored or deliver to the Holder the number of shares
     of Common Stock that would have been issued had the Company timely complied
     with its exercise and delivery obligations  hereunder.  For example, if the
     Holder  purchases  Common Stock having a total purchase price of $11,000 to
     cover a Buy-In with  respect to an  attempted  exercise of shares of Common
     Stock with a market price on the date of exercise  totaled  $10,000,  under
     clause (1) of the  immediately  preceding  sentence  the  Company  shall be
     required to pay the Holder  $1,000.  The Holder  shall  provide the Company
     written notice  indicating the amounts  payable to the Holder in respect of
     the Buy-In. Nothing herein shall limit a Holder's right to pursue any other
     remedies available to it hereunder, at law or in equity including,  without
     limitation,  a decree of specific performance and/or injunctive relief with
     respect  to  the   Company's   failure  to  timely   deliver   certificates
     representing  shares  of Common  Stock  upon  exercise  of the  Warrant  as
     required pursuant to the terms hereof.

          (b) If this Warrant  shall have been  exercised  in part,  the Company
     shall,  at  the  time  of  delivery  of  the  certificate  or  certificates
     representing Warrant Shares, deliver to Holder a new Warrant evidencing the
     rights of Holder to purchase the  unpurchased  Warrant Shares called for by
     this Warrant,  which new Warrant  shall in all other  respects be identical
     with this Warrant.

          (c) This  Warrant  shall also be  exercisable  by means of a "cashless
     exercise"  in which the Holder  shall be entitled to receive a  certificate
     for the number of Warrant Shares equal to the quotient obtained by dividing
     [(A-B) (X)] by (A), where:

               (A) = the average of the high and low trading prices per share of
               Common Stock on the five (5) Trading Days  immediately  preceding
               the date of such election on the Nasdaq Stock  Market,  or if the
               Common Stock is not traded on the Nasdaq Stock  Market,  then the
               Principal Market in terms of volume;

               (B) = the Exercise Price of this Warrant; and

               (X) = the number of Warrant Shares  issuable upon exercise of the
               this Warrant in accordance with the terms of this Warrant and the
               notice of exercise.

          (d) Notwithstanding anything herein to the contrary, in no event shall
     the Holder be permitted to exercise this Warrant for Warrant  Shares to the
     extent  that (x) the number of shares of Common  Stock owned by such Holder
     (other than Warrant  Shares  issuable upon exercise of this Warrant)  plus,
     (y) the number of Warrant  Shares  issuable  upon exercise of this Warrant,
     would be equal to or exceed  9.9% of the  number of shares of Common  Stock
     then issued and  outstanding,  including  shares  issuable upon exercise of
     this Warrant held by the Holder after  application of this Section 3(d). As
     used herein,  beneficial  ownership  shall be determined in accordance with
     Section  13(d) of the  Exchange  Act.  To the  extent  that the  limitation
     contained in this Section 3(d) applies,  the  determination of whether this
     Warrant  is  exercisable  (in  relation  to other  securities  owned by the
     Holder) and of which a portion of this Warrant is  exercisable  shall be in
     the sole  discretion  of the  Holder,  and the  submission  of a Notice  of
     Exercise shall be deemed to be the Holder's  determination  of whether this
     Warrant is  exercisable  (in  relation  to other  securities  owned by such
     Holder) and of which portion of this Warrant is  exercisable,  in each case
     subject to such aggregate percentage limitation, and the Company shall have
     no  obligation  to verify or confirm the  accuracy  of such  determination.
     Nothing  contained  herein  shall be  deemed to  restrict  the right of the
     Holder to exercise  this Warrant  into Warrant  Shares at such time as such
     exercise  will  not  violate  the  provisions  of this  Section  3(d).  The
     provisions of this Section 3(d) may be waived by the Holder of this Warrant
     upon,  at the  election  of the Holder,  with 61 days' prior  notice to the
     Company,  and the  provisions of this Section 3(d) shall  continue to apply
     until such 61st day (or such later date as may be  specified in such notice
     of waiver).  No exercise of this  Warrant in violation of this Section 3(d)
     but  otherwise in  accordance  with this Warrant shall affect the status of
     the Warrant Shares issued upon such exercise as validly issued,  fully-paid
     and nonassessable.

          (e) Piggyback  Registration  Rights.  In addition to the  registration
     rights granted pursuant to the Registration  Rights Agreement,  the Company
     shall be obligated to register the Warrant  Shares for resale by the Holder
     on the  first  registration  statement  that  the  Company  files  with the
     Commission  after the Initial  Exercise  Date. Any  registration  statement
     filed pursuant to this Agreement  shall be maintained and remain  effective
     during the term of this  Warrant.  In the event that the  Company  fails to
     register  the  Warrant  Shares  for  resale as set forth  herein,  then the
     Exercise   Price  of  this  Warrant  shall   decrease  by  $0.25  for  each
     registration  statement  filed  with  the  Commission  that  does  not also
     register the Warrant Shares.

     4.  No  Fractional   Shares  or  Scrip.  No  fractional   shares  or  scrip
representing  fractional  shares  shall  be  issued  upon the  exercise  of this
Warrant.  As to any fraction of a share which Holder would otherwise be entitled
to purchase  upon such  exercise,  the Company  shall pay a cash  adjustment  in
respect of such final fraction in an amount equal to such fraction multiplied by
the Exercise Price.

     5. Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares
upon the exercise of this Warrant shall be made without charge to the Holder for
any issue or transfer tax or other incidental expense in respect of the issuance
of such  certificate,  all of  which  taxes  and  expenses  shall be paid by the
Company, and such certificates shall be issued in the name of the holder of this
Warrant or in such name or names as may be  directed  by the  Holder;  provided,
however, that in the event certificates for Warrant Shares are to be issued in a
name  other than the name of the  Holder,  this  Warrant  when  surrendered  for
exercise  shall be  accompanied  by the  Assignment  Form  attached  hereto duly
executed by the Holder; and the Company may require, as a condition thereto, the
payment of a sum  sufficient  to reimburse  it for any  transfer tax  incidental
thereto.

     6.  Closing of Books.  Other than in the ordinary  course of business,  the
Company  will not close its  stockholder  books or records  in any manner  which
prevents the timely exercise of this Warrant.

     7. Transfer, Division and Combination.

          (a)  Subject  to  compliance  with  any  applicable  securities  laws,
     transfer  of this  Warrant and all rights  hereunder,  in whole or in part,
     shall be registered  on the books of the Company to be maintained  for such
     purpose,  upon  surrender  of this Warrant at the  principal  office of the
     Company,  together with a written assignment of this Warrant  substantially
     in the form  attached  hereto  duly  executed by the Holder or its agent or
     attorney and funds  sufficient  to pay any transfer  taxes payable upon the
     making of such transfer.  In the event that the Holder wishes to transfer a
     portion of this Warrant,  the Holder shall  transfer at least 50,000 shares
     underlying this Warrant to any such transferee. Upon such surrender and, if
     required, such payment, the Company shall execute and deliver a new Warrant
     or  Warrants  in  the  name  of  the  assignee  or  assignees  and  in  the
     denomination or  denominations  specified in such instrument of assignment,
     and shall  issue to the  assignor a new Warrant  evidencing  the portion of
     this Warrant not so assigned, and this Warrant shall promptly be cancelled.
     A Warrant,  if properly assigned,  may be exercised by a new holder for the
     purchase  of  Warrant  Shares   without   having  a  new  Warrant   issued.
     Notwithstanding  the above,  the Holder shall not transfer  this Warrant or
     any rights  hereunder  to any person or entity  which is then  engaged in a
     business  that is in the  reasonable  judgment  of the Company is in direct
     competition with the Company.

          (b) This Warrant may be divided or combined  with other  Warrants upon
     presentation hereof at the aforesaid office of the Company, together with a
     written notice specifying the names and denominations in which new Warrants
     are to be  issued,  signed by Holder or its agent or  attorney.  Subject to
     compliance  with Section 7(a), as to any transfer  which may be involved in
     such division or  combination,  the Company shall execute and deliver a new
     Warrant or Warrants  in exchange  for the Warrant or Warrants to be divided
     or combined in accordance with such notice.

          (c) The Company  shall  prepare,  issue and deliver at its own expense
     (other than transfer  taxes) the new Warrant or Warrants under this Section
     7.

          (d) The Company agrees to maintain, at its aforesaid office, books for
     the registration and the registration of transfer of the Warrants.

     8. No Rights as Shareholder  until Exercise.  This Warrant does not entitle
the Holder to any voting rights or other rights as a shareholder  of the Company
prior to the exercise hereof. Upon the surrender of this Warrant and the payment
of the aggregate Exercise Price or by means of a cashless exercise,  the Warrant
Shares so  purchased  shall be and be  deemed to be issued to the  Holder as the
record owner of such shares as of the close of business on the later of the date
of such surrender or payment.

     9. Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants
that upon receipt by the Company of evidence  reasonably  satisfactory  to it of
the  loss,  theft,  destruction  or  mutilation  of this  Warrant  or any  stock
certificate  relating  to the  Warrant  Shares,  and in case of  loss,  theft or
destruction, of indemnity or security reasonably satisfactory to it (which shall
not include the posting of any bond),  and upon  surrender and  cancellation  of
such  Warrant or stock  certificate,  if  mutilated,  the Company  will make and
deliver a new  Warrant or stock  certificate  of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.

     10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the  expiration of any right  required or granted herein
shall be a Saturday, Sunday or a legal holiday, then such action may be taken or
such right may be exercised on the next succeeding day not a Saturday, Sunday or
legal holiday.

     11.  Adjustments  of  Exercise  Price and Number of Warrant  Shares,  Stock
Splits, etc. The number and kind of securities  purchasable upon the exercise of
this Warrant and the Exercise Price shall be subject to adjustment  from time to
time upon the happening of any of the  following.  In case the Company shall (i)
pay a dividend  in shares of Common  Stock or make a  distribution  in shares of
Common Stock to holders of its  outstanding  Common  Stock,  (ii)  subdivide its
outstanding  shares of Common  Stock  into a greater  number of shares of Common
Stock,  (iii)  combine  its  outstanding  shares of Common  Stock into a smaller
number of shares of Common  Stock or (iv) issue any shares of its capital  stock
in a  reclassification  of the Common Stock,  then the number of Warrant  Shares
purchasable  upon  exercise of this Warrant  immediately  prior thereto shall be
adjusted so that the Holder  shall be entitled to receive the kind and number of
Warrant  Shares or other  securities of the Company which it would have owned or
have been  entitled  to  receive  had such  Warrant  been  exercised  in advance
thereof.  Upon each such  adjustment of the kind and number of Warrant Shares or
other  securities of the Company  which are  purchasable  hereunder,  the Holder
shall  thereafter be entitled to purchase the number of Warrant  Shares or other
securities resulting from such adjustment at an Exercise Price per Warrant Share
or  other  security  obtained  by  multiplying  the  Exercise  Price  in  effect
immediately prior to such adjustment by the number of Warrant Shares purchasable
pursuant hereto  immediately prior to such adjustment and dividing by the number
of  Warrant  Shares  or other  securities  of the  Company  resulting  from such
adjustment. An adjustment made pursuant to this paragraph shall become effective
immediately  after the effective  date of such event  retroactive  to the record
date, if any, for such event.


     12. Reorganization,  Reclassification, Merger, Consolidation or Disposition
of Assets.  In case the Company shall  reorganize  its capital,  reclassify  its
capital stock,  consolidate or merge with or into another corporation (where the
Company  is not the  surviving  corporation  or where  there  is a change  in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or  otherwise  dispose  of all or  substantially  all its  property,  assets  or
business   to  another   corporation   and,   pursuant  to  the  terms  of  such
reorganization,   reclassification,  merger,  consolidation  or  disposition  of
assets, shares of common stock of the successor or acquiring corporation, or any
cash,  shares of stock or other securities or property of any nature  whatsoever
(including  warrants or other subscription or purchase rights) in addition to or
in lieu of  common  stock of the  successor  or  acquiring  corporation  ("Other
Property"),  are to be received by or distributed to the holders of Common Stock
of the Company, then the Holder shall have the right thereafter to receive, upon
exercise of this Warrant,  the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving  corporation,
and  Other  Property  receivable  upon or as a  result  of such  reorganization,
reclassification,  merger, consolidation or disposition of assets by a holder of
the number of Warrant Shares for which this Warrant is  exercisable  immediately
prior  to such  event.  In case of any  such  reorganization,  reclassification,
merger,  consolidation  or  disposition  of assets,  the  successor or acquiring
corporation  (if other  than the  Company)  shall  expressly  assume the due and
punctual  observance and performance of each and every covenant and condition of
this Warrant to be performed and observed by the Company and all the obligations
and  liabilities  hereunder,  subject  to such  modifications  as may be  deemed
appropriate (as determined in good faith by resolution of the Board of Directors
of the Company) in order to provide for  adjustments of Warrant Shares for which
this Warrant is exercisable  which shall be as nearly  equivalent as practicable
to the adjustments provided for in this Section 12. For purposes of this Section
12, "common stock of the successor or acquiring corporation" shall include stock
of such  corporation  of any class which is not  preferred  as to  dividends  or
assets  over any  other  class of stock  of such  corporation  and  which is not
subject to  redemption  and shall also include any  evidences  of  indebtedness,
shares of stock or other  securities  which are convertible into or exchangeable
for any such stock,  either  immediately or upon the arrival of a specified date
or the  happening  of a  specified  event and any  warrants  or other  rights to
subscribe  for or purchase  any such stock.  The  foregoing  provisions  of this
Section   12   shall    similarly    apply   to   successive    reorganizations,
reclassifications, mergers, consolidations or disposition of assets.

     13. Voluntary Adjustment by the Company. The Company may at any time during
the term of this Warrant  reduce the then current  Exercise  Price to any amount
and for any period of time deemed  appropriate  by the Board of Directors of the
Company.

     14. Notice of  Adjustment.  Whenever the number of Warrant Shares or number
or kind of securities or other  property  purchasable  upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company shall
promptly mail by registered or certified mail, return receipt requested,  to the
Holder  notice of such  adjustment  or  adjustments  setting forth the number of
Warrant Shares (and other securities or property)  purchasable upon the exercise
of this  Warrant  and the  Exercise  Price of such  Warrant  Shares  (and  other
securities or property) after such  adjustment,  setting forth a brief statement
of the facts  requiring  such  adjustment  and setting forth the  computation by
which such adjustment was made.  Such notice,  in the absence of manifest error,
shall be conclusive evidence of the correctness of such adjustment.

     15. Notice of Corporate Action. If at any time:

          (a) the Company shall take a record of the holders of its Common Stock
     for  the  purpose  of  entitling  them  to  receive  a  dividend  or  other
     distribution,  or any right to subscribe  for or purchase any  evidences of
     its indebtedness,  any shares of stock of any class or any other securities
     or property, or to receive any other right, or

          (b) there  shall be any capital  reorganization  of the  Company,  any
     reclassification or recapitalization of the capital stock of the Company or
     any  consolidation or merger of the Company with, or any sale,  transfer or
     other  disposition  of all or  substantially  all the  property,  assets or
     business of the Company to, another corporation, or

          (c) there shall be a voluntary or involuntary dissolution, liquidation
     or winding up of the Company;  then, in any one or more of such cases,  the
     Company shall give to Holder (i) at least 20 days' prior written  notice of
     the date on which a  record  date  shall  be  selected  for such  dividend,
     distribution or right or for  determining  rights to vote in respect of any
     such  reorganization,   reclassification,   merger,  consolidation,   sale,
     transfer,  disposition,  liquidation or winding up, and (ii) in the case of
     any such reorganization,  reclassification,  merger,  consolidation,  sale,
     transfer, disposition,  dissolution, liquidation or winding up, at least 20
     days' prior written notice of the date when the same shall take place. Such
     notice in accordance  with the foregoing  clause also shall specify (i) the
     date on  which  any such  record  is to be taken  for the  purpose  of such
     dividend,  distribution  or right,  the date on which the holders of Common
     Stock shall be entitled to any such dividend,  distribution  or right,  and
     the  amount  and  character  thereof,  and (ii) the date on which  any such
     reorganization,  reclassification,  merger, consolidation,  sale, transfer,
     disposition,  dissolution,  liquidation  or winding up is to take place and
     the  time,  if any such time is to be fixed,  as of which  the  holders  of
     Common Stock shall be entitled to exchange their shares of Common Stock for
     securities   or  other   property   deliverable   upon  such   disposition,
     dissolution,  liquidation  or winding up. Each such written notice shall be
     sufficiently  given if  addressed  to Holder at the last  address of Holder
     appearing  on the books of the Company and  delivered  in  accordance  with
     Section 17(d).

     16.  Authorized  Shares.  The Company  covenants that during the period the
Warrant is outstanding,  it will reserve from its authorized and unissued Common
Stock a  sufficient  number of shares to provide for the issuance of the Warrant
Shares upon the exercise of any purchase rights under this Warrant.  The Company
further  covenants  that its  issuance of this  Warrant  shall  constitute  full
authority  to its  officers  who are charged  with the duty of  executing  stock
certificates  to execute and issue the  necessary  certificates  for the Warrant
Shares upon the exercise of the purchase rights under this Warrant.  The Company
will take all such  reasonable  action as may be  necessary  to assure that such
Warrant  Shares  may be issued  as  provided  herein  without  violation  of any
applicable law or regulation,  or of any  requirements  of the Principal  Market
upon which the Common Stock may be listed.

     The  Company  shall  not  by any  action,  including,  without  limitation,
amending  its  corporate  charter or through  any  reorganization,  transfer  of
assets, consolidation,  merger, dissolution,  issue or sale of securities or any
other voluntary action,  avoid or seek to avoid the observance or performance of
any of the terms of this Warrant,  but will at all times in good faith assist in
the  carrying out of all such terms and in the taking of all such actions as may
be necessary or appropriate to protect the rights of Holder against  impairment.
Without  limiting  the  generality  of the  foregoing,  the Company will (a) not
increase  the par value of any Warrant  Shares  receivable  upon the exercise of
this Warrant above the amount  payable  therefor upon such exercise  immediately
prior  to such  increase  in par  value,  (b) take  all  such  action  as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and  nonassessable  Warrant Shares upon the exercise of this Warrant,
and (c) use commercially  reasonable efforts to obtain all such  authorizations,
exemptions  or consents  from any public  regulatory  body  having  jurisdiction
thereof as may be  necessary  to enable the Company to perform  its  obligations
under this Warrant.

     Before  taking any action which would result in an adjustment in the number
of Warrant  Shares for which this  Warrant  is  exercisable  or in the  Exercise
Price, the Company shall obtain all such  authorizations or exemptions  thereof,
or consents  thereto,  as may be necessary  from any public  regulatory  body or
bodies having jurisdiction thereof.

     17. Miscellaneous.

          (a) Jurisdiction. This Warrant shall be binding upon any successors or
     assigns of the Company.  This Warrant shall constitute a contract under the
     laws of California,  without  regard to its conflict of law,  principles or
     rules, and be subject to arbitration pursuant to the terms set forth in the
     Purchase Agreement.

          (b)  Restrictions.  The Holder  acknowledges  that the Warrant  Shares
     acquired upon the exercise of this Warrant,  if not  registered,  will have
     restrictions upon resale imposed by state and federal securities laws.

          (c)  Nonwaiver  and  Expenses.  No course of  dealing  or any delay or
     failure to exercise any right hereunder on the part of Holder shall operate
     as a waiver of such right or otherwise prejudice Holder's rights, powers or
     remedies, notwithstanding all rights hereunder terminate on the Termination
     Date.  If the  Company  willfully  and  knowingly  fails to comply with any
     provision of this  Warrant,  which  results in any material  damages to the
     Holder, the Company shall pay to Holder such amounts as shall be sufficient
     to cover any costs and expenses  including,  but not limited to, reasonable
     attorneys'  fees,  including  those of appellate  proceedings,  incurred by
     Holder in  collecting  any  amounts  due  pursuant  hereto or in  otherwise
     enforcing any of its rights, powers or remedies hereunder.

          (d)  Notices.  Any  notice,  request  or other  document  required  or
     permitted to be given or  delivered  to the Holder by the Company  shall be
     delivered  in  accordance  with  the  notice  provisions  of  the  Purchase
     Agreement.

          (e) Limitation of Liability.  No provision  hereof,  in the absence of
     affirmative  action by Holder to purchase  shares of Common  Stock,  and no
     enumeration herein of the rights or privileges of Holder hereof, shall give
     rise to any liability of Holder for the purchase  price of any Common Stock
     or as a stockholder  of the Company,  whether such liability is asserted by
     the Company or by creditors of the Company.

          (f) Remedies.  Holder,  in addition to being  entitled to exercise all
     rights granted by law, including  recovery of damages,  will be entitled to
     specific  performance of its rights under this Warrant.  The Company agrees
     that  monetary  damages  would not be  adequate  compensation  for any loss
     incurred by reason of a breach by it of the  provisions of this Warrant and
     hereby  agrees to waive the defense in any action for specific  performance
     that a remedy at law would be adequate.

          (g) Successors  and Assigns.  Subject to applicable  securities  laws,
     this Warrant and the rights and obligations evidenced hereby shall inure to
     the benefit of and be binding  upon the  successors  of the Company and the
     successors and permitted assigns of Holder.  The provisions of this Warrant
     are intended to be for the benefit of all Holders from time to time of this
     Warrant and shall be enforceable by any Holder or holder of Warrant Shares.

          (h)  Amendment.  This  Warrant  may  be  modified  or  amended  or the
     provisions  hereof  waived with the written  consent of the Company and the
     Holder.

          (i) Severability.  Wherever  possible,  each provision of this Warrant
     shall be  interpreted  in such  manner as to be  effective  and valid under
     applicable law, but if any provision of this Warrant shall be prohibited by
     or invalid under applicable law, such provision shall be ineffective to the
     extent  of  such  prohibition  or  invalidity,   without  invalidating  the
     remainder of such provisions or the remaining provisions of this Warrant.

          (j)  Headings.   The  headings  used  in  this  Warrant  are  for  the
     convenience of reference  only and shall not, for any purpose,  be deemed a
     part of this Warrant.

                            [SIGNATURE PAGE FOLLOWS]


<PAGE>




     IN WITNESS  WHEREOF,  the Company has caused this Warrant to be executed by
its officer thereunto duly authorized.


Dated:  January 17, 2002

                        PATH 1 NETWORK TECHNOLOGIES INC.



                    By: /s/ Frederick A. Cary
                       ---------------------------------------
                           Frederick A. Cary, President & CEO


<PAGE>




     To: Path 1 Network Technologies Inc.


     (1) The undersigned  hereby elects to purchase ________ Warrant Shares (the
"Common Stock"),  of Path 1 Network  Technologies  Inc. pursuant to the terms of
the attached  Warrant,  and tenders  herewith  payment of the exercise  price in
full, together with all applicable transfer taxes, if any.

     (2) Please issue a certificate or  certificates  representing  said Warrant
Shares in the name of the  undersigned  or in such  other  name as is  specified
below:

        ----------------------------------------


The Warrant Shares shall be delivered to the following address:


         ----------------------------------------

         ----------------------------------------

         ----------------------------------------




                          [PURCHASER]


                          By: ______________________________
                                Name:
                                Title:

                          Dated:  ________________________



<PAGE>


                           NOTICE OF CASHLESS EXERCISE

To:  Path 1 Network Technologies Inc.

                  (1) The undersigned hereby elects to convert by cashless
exercise the right to purchase ________ Warrant Shares (the "Exercised Rights"),
of Path 1 Network Technologies Inc. into shares of Common Stock pursuant to the
terms of the attached Warrant. Pursuant to Section 3 of the Warrant, no payment
will be tendered.

                  (2) Please issue a certificate or certificates representing
said shares of Common Stock in the name of the undersigned or in such other name
as is specified below:

         ----------------------------------------
         (Name)

         ----------------------------------------
         (Address)

         ----------------------------------------


o    Exercise Date: ____________

o    Date of Trading Day preceding Exercise Date: ____________

o    Average of the high  ($________)  and low  ($________)  trading  prices per
     share of Common Stock for the five (5) Trading Days  immediately  preceding
     the Exercise Date: $________ ("A")

o    Exercise Price of the Warrants: $________ ("B")

o    Exercised Rights: ________ ("X")

o    Calculation of quotient [((A-B) * (X)) / A]: ________.  A certificate shall
     be issued for the  number of shares  equal to the whole  number  portion of
     this quotient,  which is ________.  The Company shall pay a cash adjustment
     in respect of the fractional portion of this quotient in an amount equal to
     the product of the  fractional  portion of this  quotient  and the Exercise
     Price, which product is ________.


                               ------------------------------
                               Signature                 Date



<PAGE>
                                 ASSIGNMENT FORM

                    (To assign the foregoing warrant, execute
                   this form and supply required information.
                      Do not use this form to exercise the
                                   warrant.)



     FOR VALUE RECEIVED,  the foregoing Warrant and all rights evidenced thereby
are hereby assigned to


                                                  whose address is
------------------------------------------------

---------------------------------------------------------------.


---------------------------------------------------------------

                                         Dated:  ______________, _______


                 Holder's Signature:       _____________________________

                 Holder's Address:         _____________________________




Signature Guaranteed:  ___________________________________________




NOTE: The signature to this  Assignment Form must correspond with the name as it
appears on the face of the Warrant,  without  alteration or  enlargement  or any
change whatsoever,  and must be guaranteed by a bank or trust company.  Officers
of  corporations  and  those  acting  in an  fiduciary  or other  representative
capacity  should  file  proper  evidence of  authority  to assign the  foregoing
Warrant.


                                   EXHIBIT F

            SCHEDULE OF EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES


     This Schedule of Exceptions is made and given  pursuant to Article 2 of the
Common  Stock  Purchase  Agreement  dated  January  __,  2002 by and among  Path
1Network Technologies Inc. and the Purchaser listed in the Common Stock Purchase
Agreement  attached  thereto  (the  "Agreement").  The  section  numbers in this
Schedule  of  Exceptions  correspond  to the section  numbers in the  Agreement;
however,  any  information  disclosed  herein under any section  number shall be
deemed to be disclosed and incorporated  into any other section number under the
Agreement  where such  disclosure  would  otherwise  be  appropriate.  Any terms
defined in the Agreement  shall have the same meaning when used in this Schedule
of  Exceptions  as when  used in the  Agreement  unless  the  context  otherwise
requires.

     Nothing  herein  constitutes an admission of any liability or obligation on
the part of the Company nor an admission  against the  Company's  interest.  The
inclusion of any schedule herein or any exhibit hereto should not be interpreted
as indicating  that the Company has  determined  that such an agreement or other
matter is necessarily material to the Company.  The Purchaser  acknowledges that
certain  information  contained  in  these  schedules  may  constitute  material
confidential  information relating to the Company, which may not be used for any
purpose other than that contemplated in the Agreement.  Copies of the agreements
described  herein are  available  upon  request of the Company for review by the
Purchaser.




                                 Section 2.1 (c)
                                 Capitalization


     The Company had an agreement with an existing shareholder to purchase up to
700,000 shares of the Company's Class A Common Stock ("Common Stock") at US$5.00
per share.  For each share  purchased,  the Company has  committed  to provide a
warrant  for  one  additional  share  of  Common  Stock  at  US$5.00  per  share
exercisable for a two-year  period from the time of investment.  The shareholder
has  defaulted  under the  agreement  and the  Company  is  exploring  its legal
alternatives  and believes that it is under no duty to accept  investment  funds
from the shareholder or to deliver equities to him.


     The Company has an  outstanding  obligation  to provide  586,109  shares of
Common Stock (originally valued at US$4 million) to Michael Florea, an executive
of the Company, pursuant to a bonus arrangement in his employment agreement with
the Company,  which was  established  as a provision in an agreement when Path 1
purchased Mr. Florea's company.


     The Company has proposed the establishment of a Company stock purchase plan
to its shareholders in a proxy with written consent.


     The Company's  Board of Directors voted at a meeting on October 3, 2001, to
offer all holders of options to purchase  shares of the Company's Class B Common
Stock a one-time  opportunity  to exchange those options for options to purchase
shares of Common Stock. All eligible participants accepted the offer to exchange
and the shareholders approved the exchange.


     Leitch Technology Corporation has certain rights, including but not limited
to a demand  registration  right,  under terms of their prior  investment in the
Company.  Further information on Leitch's rights is available in our SEC filings
and in the Stock  Purchase  Agreement  between Path 1 and Leitch dated April 10,
2000.


     The Company engaged  Heidrick and Struggles to find a President and CEO for
Path 1 in 2001. As part of the executive search fee agreement, which resulted in
the engagement of the Company's current CEO, Path 1 agreed to issue a warrant to
H&S based on the candidate's compensation during the first year of employment.


     The Company has filed,  on Form S-8, its 2000 Stock  Option/Stock  Issuance
Plan as part of its overall  incentive  compensation  program for its employees.
The plan  allows for  options on up to  4,260,000  shares of common  stock to be
granted to employees,  directors and/or consultants of the Company. In addition,
options on  approximately 1 million shares of common stock were granted prior to
the Plan's inception.


                                 Section 2.1 (e)
                       SEC Documents, Financial Statements


     The Company has disclosed certain information, which has not been disclosed
publicly  by the  Company.  For  example,  the  Company's  Business  Plan is not
publicly  available  but has been  disclosed to Purchaser in this due  diligence
process.  Other related  information,  such as, sales  projection  and cash flow
projections are also not a matter of public record.


                                 Section 2.1 (f)
                                  Subsidiaries


     The Company maintains several subsidiary  organizations,  mainly related to
its Silicon  Systems  business unit (aka  Sistolic) as part of its  intellectual
property and tax  planning  with  respect to the  acquisition  of Metar ADC (Mr.
Florea's  company,  referenced  above) in October 2000.  These  subsidiaries are
listed below:


          o    Path 1  Holdings,  Inc.,  a Delaware  company  is a wholly  owned
               subsidiary of Path 1 Network Technologies Inc.


          o    PNWK Europe C.V., a Netherlands limited partnership is 99 percent
               owned by Path 1 Network  Technologies Inc. as limited partner and
               1 percent owned by Path 1 Holdings, Inc. as general partner.


          o    Path 1 Network  Technologies  Europe B.V., a Netherlands  limited
               liability corporation is wholly owned by PNWK Europe C.V.


          o    Path  1  Network   Technologies   Europe  B.V.  Amsterdam  Olanda
               Sucursala Bucuresti Romania, a Romanian Branch of the Netherlands
               limited  liability  corporation is wholly owned by Path 1 Network
               Technologies Europe B.V.



                                 Section 2.1 (g)
                           No Material Adverse Effect


     Since the date of the most  recently  filed Form  10-Q,  there has been one
specific  event that could have a material  adverse  effect on the  Company.  On
November  2, 2001,  the  Company  announced  a  financing  arrangement  with R&S
Invest/Meeuwi  deKraker for an equity investment of US$3.5 million. The terms of
the  financing  called  for a Note to be paid over six  months  at about  US$0.5
million per month. R&S Invest has failed to make its payments on the note and we
consider  them in default of their  obligations.  Path 1 was  counting  on those
funds to support operations and is working on obtaining  alternative  sources of
capital, including this equity line of credit.


                                 Section 2.1 (h)
                           No Undisclosed Liabilities


     The Company has a contingent liability to Metar ADC related to the purchase
of  its  intellectual   property.  Two  remaining  payments  of  US$250,000  and
US$600,000 may be payable,  subject to certain  conditions,  on October 13, 2002
and October 13, 2003, respectively.


     The  Company  has a  liability  to Mr.  Franklin  Felber as a result of the
settlement of a lawsuit. The amount of the liability was determined last week at
100,000 shares of Path 1 common stock and  approximately  US$54,000 in cash, all
of which had been reserved and accrued by the Company.


     As discussed  above,  the Company has an outstanding  obligation to provide
586,109 shares of Common Stock to Michael  Florea,  an executive of the Company,
pursuant to a bonus arrangement in his employment agreement with the Company and
as a condition of the  acquisition of Metar.  The obligation was not recorded on
our Form 10-Qs but will be  recorded  at  year-end  and will  appear in our Form
10-K.


     The  Company  has  certain  severance  agreements  with  former  employees.
Payments to those former employees are in the form of salary  continuation  and,
as  such,  are not  recorded  as  liabilities.  The  remaining  amount  of those
liabilities  is  approximately  US$150,000  and will be completely  paid by July
2002. An additional  termination  and severance  package is being  concluded and
should not cost the Company more than US$50,000.


     In addition,  the Company is subject to certain obligations with respect to
its credit  cards.  Its  agreement  with Union Bank of  California  requires the
retention of certain funds to protect  against  non-payment  of credit card debt
incurred by its employees.


                                 Section 2.1 (i)
                     No Undisclosed Events or Circumstances


     The  Company  has the  aforementioned  R&S  Invest,  Metar  ADC and  Felber
agreements/issues.


                                 Section 2.1 (l)
                                 Actions Pending


     The Company has engaged a contingency  attorney,  Richard Leuthold, to seek
recovery under our D&O insurance from National Union Insurance Company. National
Union has  refused  to  reimburse  Path 1 for  expenses  related  to the  Felber
lawsuit, which was settled January 2001. An arbitration hearing is scheduled for
mid-February. There are only minimal costs to Path 1.


                                 Section 2.1 (o)
                                  Certain Fees


     The Company has engaged Jesup & Lamont in this transaction and they will be
receiving a fee or commission of 5% of each and every draw down.


                                 Section 2.1 (t)
                               Material Agreement


     The Company has an  agreement  with Leitch  Technology  Corporation,  under
which Path 1 was  required  to  provide a Net  Operating  System to Leitch.  The
Company  believes  that  it  has  complied  with  all  material  aspects  of the
Agreement.  Leitch is disputing Path 1's full compliance.  Leitch is withholding
approximately US$100,000 in payments for products shipped to Leitch and recorded
as revenue by Path 1 in 2001 until the dispute is resolved.


                                 Section 2.1 (w)
                                    Employees


     As noted  above,  the Company is  preparing a severance  package for its VP
Corporate  Development,  who resigned  this month at the request of the Company,
but who will  continue to support the Company in a consulting  capacity for some
period of time.


                             Section 2.1 (x) (viii)
                         Absence of Certain Developments


     Due  to  the  Company's  current  cash  position,  introduced  by  the  R&S
Invest/DeKraker  default, the key officers of the Company have taken a temporary
20% reduction in salary and the  Company's  two  founders,  Ron Fellman and Doug
Palmer,  have  deferred  80%  of  their  income,  all  for  a  period  of  up to
approximately three months.  Other employees making more than US$70,000 per year
are taking a temporary 12.5% reduction in salary. The shortfall in wages will be
compensated  with additional  stock options,  granted at fair market value.  The
employees will receive vested options with a face value of four times the amount
of lost wages.


                               Section 2.1 (x) (x)
                         Absence of Certain Developments


     The Company  has  entered  into a  transaction  with a large  semiconductor
company for the license of technology and for engineering  services.  The amount
of the  transaction  is represented to be to US$5.5 million in cash for services
and  follow-on  royalty  payments.  A version  of the  agreement,  incorporating
additional,  non-cash  related  terms,  is  expected  to be signed by the end of
January 2002.

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