COACH INDUSTRIES GROUP INC
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>v03823_ex10-1.txt
<TEXT>


                                  EXHIBIT 10.1

                         COMMON STOCK PURCHASE AGREEMENT

           COMMON STOCK PURCHASE  AGREEMENT (the  "Agreement"),  dated as of May
19, 2004 by and between COACH INDUSTRIES GROUP,  INC., a Nevada corporation (the
"Company"),  and FUSION  CAPITAL  FUND II, LLC, an  Illinois  limited  liability
company (the "Buyer").  Capitalized  terms used herein and not otherwise defined
herein are defined in Section 10 hereof.

                                    WHEREAS:

           Subject to the terms and conditions set forth in this Agreement,  the
Company  wishes  to sell to the  Buyer,  and the  Buyer  wishes  to buy from the
Company,  up to Six Million Dollars  ($6,000,000) of the Company's common stock,
par value $0.001 per share (the "Common  Stock").  The shares of Common Stock to
be purchased hereunder are referred to herein as the "Purchase Shares."

           NOW THEREFORE, the Company and the Buyer hereby agree as follows:

           1.        PURCHASE OF COMMON STOCK.

           Subject to the terms and  conditions set forth in Sections 6, 7 and 9
below,  the Company  hereby  agrees to sell to the Buyer,  and the Buyer  hereby
agrees to purchase from the Company, shares of Common Stock as follows:

           (a)  Commencement of Purchases of Common Stock. The purchase and sale
of Common Stock  hereunder shall commence (the  "Commencement")  within five (5)
Trading Days following the date of satisfaction (or waiver) of the conditions to
the  Commencement  set forth in Sections 6 and 7 below (or such later date as is
mutually agreed to by the Company and Buyer) (the date of such Commencement, the
"Commencement Date").

           (b) Buyer's Purchase Rights and Obligations. Subject to the Company's
right to suspend  purchases  under  Section  1(d)(ii)  hereof,  the Buyer  shall
purchase  shares of Common Stock on each Trading Day during each Monthly  Period
equal to the Daily  Purchase  Amount  (as  defined in  Section  1(c)(i))  at the
Purchase Price.  Within one (1) Trading Day of receipt of Purchase  Shares,  the
Buyer  shall pay to the  Company an amount  equal to the  Purchase  Amount  with
respect to such Purchase Shares as full payment for the purchase of the Purchase
Shares so  received.  The  Company  shall not issue any  fraction  of a share of
Common Stock upon any purchase.  All shares of Common Stock (including fractions
thereof)  issuable upon a purchase under this Agreement  shall be aggregated for
purposes of  determining  whether the purchase would result in the issuance of a
fraction of a share of Common Stock. If, after the  aforementioned  aggregation,
the  issuance  would  result in the  issuance of a fraction of a share of Common
Stock,  the Company  shall round such  fraction of a share of Common Stock up or
down to the nearest whole share. All payments made under this Agreement shall be
made in lawful money of the United  States of America by check or wire  transfer
of immediately  available  funds to such account as the Company may from time to
time  designate by written  notice in  accordance  with the  provisions  of this
Agreement.  Whenever  any  amount  expressed  to be  due by the  terms  of  this
Agreement is due on any day that is not a Trading Day, the same shall instead be
due on the next succeeding day which is a Trading Day.

<PAGE>

           (c) The  Daily  Purchase  Amount;  Company's  Right  to  Decrease  or
Increase the Daily Purchase Amount.

                     (i) The Daily  Purchase  Amount.  As used  herein  the term
           "Original  Daily  Purchase  Amount"  shall mean Twelve  Thousand Five
           Hundred Dollars  ($12,500) per Trading Day. As used herein,  the term
           "Daily  Purchase  Amount" shall mean initially  Twelve  Thousand Five
           Hundred  Dollars  ($12,500)  per  Trading  Day,  which  amount may be
           increased  or  decreased  from time to time  pursuant to this Section
           1(c).

                     (ii) Company's Right to Decrease the Daily Purchase Amount.
           The Company  shall  always have the right at any time to decrease the
           amount of the Daily Purchase  Amount by delivering  written notice (a
           "Daily Purchase  Amount  Decrease  Notice") to the Buyer which notice
           shall  specify the new Daily  Purchase  Amount.  The  decrease in the
           Daily  Purchase  Amount shall become  effective one Trading Day after
           receipt by the Buyer of the Daily Purchase  Amount  Decrease  Notice.
           Any  purchases by the Buyer which have a Purchase Date on or prior to
           the first  (1st)  Trading  Day after  receipt by the Buyer of a Daily
           Purchase  Amount  Decrease  Notice  must be honored by the Company as
           otherwise  provided herein. The decrease in the Daily Purchase Amount
           shall  remain in effect  until the  Company  delivers  to the Buyer a
           Daily Purchase Amount Increase Notice (as defined below).

                      (iii)  Company's  Right to  Increase  the  Daily  Purchase
           Amount.  The Company shall have the right (but not the obligation) to
           increase the amount of the Daily Purchase  Amount in accordance  with
           the  terms and  conditions  set forth in this  Section  1(c)(iii)  by
           delivering  written notice to the Buyer stating the new amount of the
           Daily Purchase Amount (a "Daily Purchase Amount Increase Notice").  A
           Daily  Purchase  Amount  Increase  Notice shall be effective five (5)
           Trading  Days after  receipt by the Buyer.  The Company  shall always
           have the  right at any  time to  increase  the  amount  of the  Daily
           Purchase  Amount  up to the  Original  Daily  Purchase  Amount.  With
           respect to increases in the Daily Purchase  Amount above the Original
           Daily  Purchase  Amount,  as the market  price for the  Common  Stock
           increases  the  Company  shall  have the  right  from time to time to
           increase  the Daily  Purchase  Amount  as  follows.  For every  $0.25
           increase  in  Threshold  Price  above  $1.75  (subject  to  equitable
           adjustment  for  any   reorganization,   recapitalization,   non-cash
           dividend,  stock  split or other  similar  transaction),  the Company
           shall have the right to increase the Daily  Purchase  Amount by up to
           an additional $2,500 in excess of the Original Daily Purchase Amount.
           "Threshold  Price" for purposes hereof means the lowest Sale Price of
           the  Common  Stock  during  the five  (5)  consecutive  Trading  Days
           immediately  prior to the submission to the Buyer of a Daily Purchase
           Amount  Increase  Notice  (subject to  equitable  adjustment  for any
           reorganization,  recapitalization,  non-cash dividend, stock split or
           other similar  transaction).  For example,  if the Threshold Price is
           $2.25,  the  Company  shall  have the  right to  increase  the  Daily
           Purchase  Amount to up to $17,500 in the aggregate.  If the Threshold
           Price is $2.50,  the  Company  shall have the right to  increase  the
           Daily Purchase Amount to up to $20,000 in the aggregate. Any increase
           in the amount of the Daily  Purchase  Amount shall continue in effect
           until the delivery to the Buyer of a Daily Purchase  Amount  Decrease
           Notice. However, if at any time during any Trading Day the Sale Price
           of the Common Stock is below the  applicable  Threshold  Price,  such
           increase in the Daily  Purchase  Amount shall be void and the Buyer's
           obligations  to  buy  Purchase  Shares  hereunder  in  excess  of the
           applicable   maximum  Daily  Purchase  Amount  shall  be  terminated.

<PAGE>

           Thereafter,  the Company  shall again have the right to increase  the
           amount of the Daily  Purchase  Amount as set forth herein by delivery
           of a new Daily Purchase Amount Increase Notice only if the Sale Price
           of the Common Stock is above the applicable  Threshold  Price on each
           of five (5) consecutive  Trading Days  immediately  prior to such new
           Daily Purchase Amount Increase Notice.

           (d) Limitations on Purchases.

                     (i) Limitation on Beneficial  Ownership.  The Company shall
           not effect any sale under this Agreement and the Buyer shall not have
           the right to purchase  shares of Common Stock under this Agreement to
           the  extent  that  after  giving  effect to such  purchase  the Buyer
           together with its affiliates would beneficially own in excess of 4.9%
           of  the  outstanding  shares  of  the  Common  Stock  following  such
           purchase.  For purposes hereof,  the number of shares of Common Stock
           beneficially owned by the Buyer and its affiliates or acquired by the
           Buyer  and its  affiliates,  as the case may be,  shall  include  the
           number of  shares  of Common  Stock  issuable  in  connection  with a
           purchase under this Agreement with respect to which the determination
           is being made, but shall exclude the number of shares of Common Stock
           which  would  be  issuable  upon  (1) a  purchase  of  the  remaining
           Available  Amount which has not been submitted for purchase,  and (2)
           exercise or conversion of the  unexercised or unconverted  portion of
           any other securities of the Company  (including,  without limitation,
           any  warrants)  subject to a  limitation  on  conversion  or exercise
           analogous to the limitation  contained herein  beneficially  owned by
           the Buyer and its affiliates.  If the 4.9% limitation is ever reached
           the Company shall have the option to increase such limitation to 9.9%
           by delivery of written notice to the Buyer.  Thereafter,  if the 9.9%
           limitation is ever reached this shall not affect or limit the Buyer's
           obligation  to  purchase  the  Daily  Purchase  Amount  as  otherwise
           provided in this Agreement.  Specifically,  even though the Buyer may
           not receive  additional  shares of Common Stock in the event that the
           9.9% limitation is ever reached,  the Buyer is still obligated to pay
           to the  Company  the Daily  Purchase  Amount on each  Trading  Day as
           otherwise  obligated under this  Agreement,  e.g. no Event of Default
           (as defined in Section 9 hereof) has  occurred,  nor any event which,
           after notice and/or lapse of time,  would become an Event of Default.
           Under such  circumstances,  the Buyer would have the right to acquire
           additional  shares of Common Stock in the future only at such time as
           its ownership subsequently become less than the 9.9% limitation.  For
           purposes of this Section,  in  determining  the number of outstanding
           shares  of  Common  Stock  the  Buyer  may  rely  on  the  number  of
           outstanding  shares of Common Stock as reflected in (1) the Company's
           most  recent  Form 10-Q or Form 10-K,  as the case may be, (2) a more
           recent  public  announcement  by the Company or (3) any other written
           communication  by the Company or its Transfer Agent setting forth the
           number of shares of Common  Stock  outstanding.  Upon the  reasonable
           written or oral  request of the Buyer,  the  Company  shall  promptly
           confirm  orally  and in  writing to the Buyer the number of shares of
           Common Stock then outstanding. In any case, the number of outstanding
           shares of Common Stock shall be determined after giving effect to any
           purchases  under  this  Agreement  by the Buyer  since the date as of
           which such number of outstanding shares of Common Stock was reported.
           Except as otherwise  set forth  herein,  for purposes of this Section
           1(d)(i),  beneficial ownership shall be determined in accordance with
           Section 13(d) of the Securities Exchange Act of 1934, as amended.

<PAGE>

                     (ii) Company's Right to Suspend Purchases. The Company may,
           at any time, give written notice (a "Purchase  Suspension Notice") to
           the Buyer suspending  purchases of Purchase Shares by the Buyer under
           this  Agreement.  The Purchase  Suspension  Notice shall be effective
           only for  purchases  that have a  Purchase  Date  later  than one (1)
           Trading Day after  receipt of the Purchase  Suspension  Notice by the
           Buyer. Any purchase by the Buyer that has a Purchase Date on or prior
           to the  first  (1st)  Trading  Day  after  receipt  by the Buyer of a
           Purchase  Suspension  Notice from the Company  must be honored by the
           Company as otherwise provided herein.  Such purchase suspension shall
           continue in effect until a revocation  in writing by the Company,  at
           its sole discretion.  So long as a Purchase  Suspension  Notice is in
           effect,  the Buyer shall not be  obligated  to purchase  any Purchase
           Shares from the Company under Section 1 of this Agreement.

                     (iii)  Purchase  Price Floor.  The Company shall not affect
           any sales under this Agreement and the Buyer shall not have the right
           nor the  obligation  to  purchase  any  Purchase  Shares  under  this
           Agreement  on any  Trading  Day  where  the  Purchase  Price  for any
           purchases of Purchase Shares would be less than the Floor Price.

           (e)  Records  of  Purchases.  The Buyer and the  Company  shall  each
maintain records showing the remaining Available Amount at any give time and the
dates and  Purchase  Amounts for each  purchase or shall use such other  method,
reasonably satisfactory to the Buyer and the Company.

           (f)  Taxes.  The  Company  shall pay any and all  transfer,  stamp or
similar  taxes that may be payable  with respect to the issuance and delivery of
any shares of Common Stock to the Buyer made under this Agreement.


           2.        BUYER'S REPRESENTATIONS AND WARRANTIES.

           The Buyer  represents and warrants to the Company that as of the date
hereof and as of the Commencement Date:

           (a) Investment Purpose. The Buyer is entering into this Agreement and
acquiring  the  Commitment  Shares,  (as defined in Section 4(f)  hereof)  (this
Agreement and the Commitment  Shares are collectively  referred to herein as the
"Securities"),  for its own  account  for  investment  only  and not with a view
towards,  or for resale in  connection  with,  the public  sale or  distribution
thereof;  provided however, by making the representations herein, the Buyer does
not agree to hold any of the Securities for any minimum or other specific term.

           (b) Accredited Investor Status. The Buyer is an "accredited investor"
as that term is defined in Rule 501(a)(3) of Regulation D.

           (c) Reliance on Exemptions. The Buyer understands that the Securities
are being  offered and sold to it in reliance  on specific  exemptions  from the
registration requirements of United States federal and state securities laws and
that the  Company  is relying  in part upon the truth and  accuracy  of, and the
Buyer's   compliance   with,  the   representations,   warranties,   agreements,
acknowledgments  and  understandings  of the Buyer set forth  herein in order to
determine the  availability  of such exemptions and the eligibility of the Buyer
to acquire the Securities.

<PAGE>

           (d)  Information.  The Buyer has been  furnished  with all  materials
relating to the business,  finances and  operations of the Company and materials
relating  to the offer  and sale of the  Securities  that  have been  reasonably
requested by the Buyer,  including,  without  limitation,  the SEC Documents (as
defined in Section 3(f) hereof).  The Buyer  understands  that its investment in
the Securities involves a high degree of risk. The Buyer (i) is able to bear the
economic risk of an investment in the  Securities  including a total loss,  (ii)
has such knowledge and  experience in financial and business  matters that it is
capable of  evaluating  the merits and risks of the proposed  investment  in the
Securities  and (iii) has had an  opportunity  to ask  questions  of and receive
answers from the officers of the Company concerning the financial  condition and
business of the  Company  and others  matters  related to an  investment  in the
Securities.  Neither such  inquiries nor any other due diligence  investigations
conducted by the Buyer or its representatives  shall modify, amend or affect the
Buyer's right to rely on the Company's  representations and warranties contained
in Section 3 below. The Buyer has sought such  accounting,  legal and tax advice
as it has  considered  necessary to make an informed  investment  decision  with
respect to its acquisition of the Securities.

           (e) No  Governmental  Review.  The Buyer  understands  that no United
States federal or state agency or any other  government or  governmental  agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness  or  suitability  of the  investment  in the  Securities  nor have such
authorities  passed  upon  or  endorsed  the  merits  of  the  offering  of  the
Securities.

           (f) Transfer or Resale. The Buyer understands that except as provided
in the Registration  Rights  Agreement (as defined in Section 4(a) hereof):  (i)
the Securities have not been and are not being  registered under the 1933 Act or
any state securities  laws, and may not be offered for sale,  sold,  assigned or
transferred  unless (A) subsequently  registered  thereunder or (B) an exemption
exists  permitting such Securities to be sold,  assigned or transferred  without
such registration;  (ii) any sale of the Securities made in reliance on Rule 144
may be made only in accordance  with the terms of Rule 144 and further,  if Rule
144 is not applicable, any resale of the Securities under circumstances in which
the seller (or the person  through whom the sale is made) may be deemed to be an
underwriter  (as that term is  defined in the 1933 Act) may  require  compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder;  and (iii) neither the Company nor any other person is under any
obligation to register the Securities under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption thereunder.

           (g) Validity;  Enforcement.  This Agreement has been duly and validly
authorized,  executed  and  delivered  on behalf of the Buyer and is a valid and
binding agreement of the Buyer enforceable  against the Buyer in accordance with
its terms,  subject as to enforceability to general  principles of equity and to
applicable bankruptcy, insolvency,  reorganization,  moratorium, liquidation and
other  similar laws  relating to, or affecting  generally,  the  enforcement  of
applicable creditors' rights and remedies.

           (h) Residency. The Buyer is a resident of the State of Illinois.

           (i) No Prior Short Selling.  The Buyer represents and warrants to the
Company  that at no time  prior  to the  date of this  Agreement  has any of the
Buyer, its agents,  representatives or affiliates engaged in or effected, in any
manner whatsoever, directly or indirectly, any (i) "short sale" (as such term is

<PAGE>

defined  in Rule  3b-3 of the 1934  Act) of the  Common  Stock  or (ii)  hedging
transaction,  which  establishes a net short position with respect to the Common
Stock.

           3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

           The Company  represents and warrants to the Buyer that as of the date
hereof and as of the Commencement Date:

           (a)   Organization   and   Qualification.   The   Company   and   its
"Subsidiaries"  (which for purposes of this Agreement  means any entity in which
the  Company,  directly or  indirectly,  owns 50% or more of the voting stock or
capital stock or other similar equity interests) are corporations duly organized
and validly  existing in good  standing  under the laws of the  jurisdiction  in
which  they are  incorporated,  and  have  the  requisite  corporate  power  and
authority to own their  properties  and to carry on their  business as now being
conducted.  Each of the  Company and its  Subsidiaries  is duly  qualified  as a
foreign corporation to do business and is in good standing in every jurisdiction
in which its ownership of property or the nature of the business conducted by it
makes such qualification necessary,  except to the extent that the failure to be
so qualified or be in good standing  could not  reasonably be expected to have a
Material Adverse Effect.  As used in this Agreement,  "Material  Adverse Effect"
means any  material  adverse  effect on any of:  (i) the  business,  properties,
assets, operations,  results of operations or financial condition of the Company
and its Subsidiaries, if any, taken as a whole, or (ii) the authority or ability
of the Company to perform its obligations  under the  Transaction  Documents (as
defined in Section 3(b) hereof).  The Company has no Subsidiaries  except as set
forth on Schedule 3(a).

           (b)  Authorization;  Enforcement;  Validity.  (i) The Company has the
requisite   corporate  power  and  authority  to  enter  into  and  perform  its
obligations under this Agreement,  the Registration Rights Agreement and each of
the other agreements  entered into by the parties on the  Commencement  Date and
attached hereto as exhibits to this Agreement  (collectively,  the  "Transaction
Documents"), and to issue the Securities in accordance with the terms hereof and
thereof,  (ii) the  execution and delivery of the  Transaction  Documents by the
Company and the consummation by it of the transactions  contemplated  hereby and
thereby, including without limitation, the issuance of the Commitment Shares and
the  reservation  for issuance and the issuance of the Purchase  Shares issuable
under  this  Agreement,  have been duly  authorized  by the  Company's  Board of
Directors and no further  consent or  authorization  is required by the Company,
its Board of Directors or its  shareholders,  (iii) this Agreement has been, and
each other Transaction Document shall be on the Commencement Date, duly executed
and delivered by the Company and (iv) this Agreement constitutes, and each other
Transaction  Document  upon  its  execution  on  behalf  of the  Company,  shall
constitute, the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as such enforceability may be
limited by general  principles of equity or applicable  bankruptcy,  insolvency,
reorganization,   moratorium,  liquidation  or  similar  laws  relating  to,  or
affecting  generally,  the  enforcement of creditors'  rights and remedies.  The
Board of Directors of the Company has approved  the  resolutions  (the  "Signing
Resolutions")  substantially  in the form as set forth as Exhibit  C-1  attached
hereto to authorize this Agreement and the transactions contemplated hereby. The
Signing  Resolutions  are  valid,  in full  forth and  effect  and have not been
modified or  supplemented in any respect other than by the resolutions set forth
in Exhibit C-2 attached hereto regarding the registration  statement referred to
in Section 4 hereof.  The Company has  delivered to the Buyer a true and correct
copy of a unanimous written consent adopting the Signing Resolutions executed by
all of the members of the Board of Directors of the Company.  No other approvals
or consents of the Company's Board of Directors and/or shareholders is necessary

<PAGE>

under  applicable  laws and the Company's  Certificate of  Incorporation  and/or
Bylaws to authorize the  execution and delivery of this  Agreement or any of the
transactions contemplated hereby, including, but not limited to, the issuance of
the Commitment Shares and the issuance of the Purchase Shares.

           (c)  Capitalization.  As of the date hereof,  the authorized  capital
stock of the Company consists of (i) 50,000,000 shares of Common Stock, of which
as of the date hereof,  9,785,531 shares are issued and  outstanding,  1,600,000
are held as treasury shares There are an aggregate of 1,500,000 shares of Common
Stock underlying warrants to purchase Common Stock at an exercise price of $2.50
per share. All of such  outstanding  shares have been, or upon issuance will be,
validly  issued and are fully paid and  nonassessable.  Except as  disclosed  in
Schedule  3(c),  (i) no shares of the  Company's  capital  stock are  subject to
preemptive  rights or any  other  similar  rights  or any liens or  encumbrances
suffered  or  permitted  by the  Company,  (ii)  there are no  outstanding  debt
securities,  (iii) 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 or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements  by which the Company or any of its  Subsidiaries  is or may become
bound to issue  additional  shares of capital stock of the Company or any of its
Subsidiaries  or 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 or any of its
Subsidiaries,  (iv) there are no  agreements  or  arrangements  under  which the
Company or any of its  Subsidiaries  is obligated to register the sale of any of
their securities under the 1933 Act (except the Registration  Rights Agreement),
(v) there are no outstanding  securities or instruments of the Company or any of
its Subsidiaries which contain any redemption or similar  provisions,  and there
are no  contracts,  commitments,  understandings  or  arrangements  by which the
Company or any of its  Subsidiaries  is or may become bound to redeem a security
of the  Company  or any of its  Subsidiaries,  (vi) there are no  securities  or
instruments  containing   anti-dilution  or  similar  provisions  that  will  be
triggered by the issuance of the  Securities as described in this  Agreement and
(vii) the Company does not have any stock appreciation rights or "phantom stock"
plans or agreements or any similar plan or agreement.  The Company has furnished
to  the  Buyer  true  and  correct  copies  of  the  Company's   Certificate  of
Incorporation,  as amended and as in effect on the date hereof (the "Certificate
of  Incorporation"),  and the Company's By-laws,  as amended and as in effect on
the date hereof (the  "By-laws"),  and summaries of the terms of all  securities
convertible  into or  exercisable  for Common  Stock,  if any, and copies of any
documents  containing  the  material  rights of the  holders  thereof in respect
thereto.

           (d)  Issuance of  Securities.  The  Commitment  Shares have been duly
authorized  and,  upon  issuance  in  accordance  with  the  terms  hereof,  the
Commitment Shares shall be (i) validly issued, fully paid and non-assessable and
(ii) free from all taxes,  liens and charges with respect to the issue  thereof.
4.0 Million  shares of Common Stock have been duly  authorized  and reserved for
issuance upon purchase under this Agreement.  Upon issuance and payment therefor
in  accordance  with the terms and  conditions of this  Agreement,  the Purchase
Shares shall be validly issued,  fully paid and  nonassessable and free from all
taxes,  liens and charges  with respect to the issue  thereof,  with the holders
being entitled to all rights accorded to a holder of Common Stock.

           (e)  No  Conflicts.   Except  as  disclosed  in  Schedule  3(e),  the
execution,  delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions  contemplated hereby and
thereby  (including,  without  limitation,  the  reservation  for  issuance  and
issuance  of the  Purchase  Shares)  will not (i) result in a  violation  of the
Certificate of Incorporation,  any Certificate of Designations,  Preferences and
Rights  of any  outstanding  series of  preferred  stock of the  Company  or the

<PAGE>

By-laws 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  Company  or  any  of  its
Subsidiaries is a party, or result in a violation of any law, rule,  regulation,
order,  judgment  or decree  (including  federal and state  securities  laws and
regulations and the rules and regulations of the Principal Market  applicable to
the Company or any of its Subsidiaries) or by which any property or asset of the
Company or any of its  Subsidiaries is bound or affected,  except in the case of
conflicts, defaults and violations under clause (ii), which could not reasonably
be expected  to result in a Material  Adverse  Effect.  Except as  disclosed  in
Schedule 3(e),  neither the Company nor its  Subsidiaries is in violation of any
term of or in default under its Certificate of Incorporation, any Certificate of
Designation, Preferences and Rights of any outstanding series of preferred stock
of  the  Company  or  By-laws  or  their  organizational   charter  or  by-laws,
respectively.  Except as disclosed in Schedule 3(e), neither the Company nor any
of its  Subsidiaries  is in violation of any term of or is in default  under any
material contract, agreement,  mortgage,  indebtedness,  indenture,  instrument,
judgment,  decree or order or any statute,  rule or regulation applicable to the
Company  or  its  Subsidiaries,   except  for  possible   conflicts,   defaults,
terminations  or  amendments  which could not  reasonably  be expected to have a
Material Adverse Effect. The business of the Company and its Subsidiaries is not
being conducted, and shall not be conducted, in violation of any law, ordinance,
regulation  of any  governmental  entity,  except for possible  violations,  the
sanctions for which either individually or in the aggregate could not reasonably
be  expected  to  have  a  Material  Adverse  Effect.   Except  as  specifically
contemplated  by this Agreement and as required under the 1933 Act or applicable
state  securities  laws,  the  Company is not  required  to obtain any  consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency or any regulatory or self-regulatory  agency in order for it
to execute,  deliver or perform any of its obligations  under or contemplated by
the Transaction Documents in accordance with the terms hereof or thereof. Except
as disclosed in Schedule 3(e), all consents, authorizations, orders, filings and
registrations  which the Company is required to obtain pursuant to the preceding
sentence  shall be obtained or  effected on or prior to the  Commencement  Date.
Except as listed in  Schedule  3(e),  since  January 1, 2003 the Company has not
received nor  delivered any notices or  correspondence  from or to the Principal
Market. The Principal Market has not commenced any delisting proceedings against
the Company.

           (f) SEC  Documents;  Financial  Statements.  Except as  disclosed  in
Schedule 3(f),  since January 1, 2003, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "1934 Act") (all of the foregoing  filed prior to the date
hereof and all exhibits included therein and financial  statements and schedules
thereto and  documents  incorporated  by  reference  therein  being  hereinafter
referred to as the "SEC  Documents").  As of their  respective  dates (except as
they have been correctly  amended),  the SEC Documents  complied in all material
respects with the  requirements of the 1934 Act and the rules and regulations of
the SEC promulgated thereunder applicable to the SEC Documents,  and none of the
SEC Documents, at the time they were filed with the SEC (except as they may have
been properly  amended),  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.  As of their  respective  dates (except as they
have been properly amended), the financial statements of the Company included in
the SEC Documents  complied as to form in all material  respects with applicable
accounting  requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally  accepted  accounting  principles,  consistently  applied,  during the
periods  involved  (except (i) as may be otherwise  indicated in such  financial

<PAGE>

statements  or the  notes  thereto  or (ii) in the  case  of  unaudited  interim
statements,  to the extent they may exclude  footnotes  or may be  condensed  or
summary  statements)  and fairly present in all material  respects the financial
position  of  the  Company  as of the  dates  thereof  and  the  results  of its
operations  and cash flows for the periods then ended  (subject,  in the case of
unaudited statements, to normal year-end audit adjustments). Except as listed in
Schedule  3(f), the Company has received no notices or  correspondence  from the
SEC since January 1, 2003. The SEC has not commenced any enforcement proceedings
against the Company or any of its subsidiaries.

           (g) Absence of Certain Changes. Except as disclosed in Schedule 3(g),
since  December  31,  2003,  there has been no  material  adverse  change in the
business, properties,  operations,  financial condition or results of operations
of the Company or its  Subsidiaries.  The  Company has not taken any steps,  and
does not currently expect to take any steps, to seek protection  pursuant to any
Bankruptcy  Law  nor  does  the  Company  or any of its  Subsidiaries  have  any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy or insolvency proceedings.  The Company is financially solvent and is
generally able to pay its debts as they become due.

           (h)  Absence of  Litigation.  There is no action,  suit,  proceeding,
inquiry  or  investigation  before or by any  court,  public  board,  government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the Company,
the Common Stock or any of the Company's Subsidiaries or any of the Company's or
the Company's  Subsidiaries'  officers or directors in their capacities as such,
which  could  reasonably  be  expected  to have a  Material  Adverse  Effect.  A
description of each action, suit, proceeding, inquiry or investigation before or
by any court, public board, government agency,  self-regulatory  organization or
body  which,  as of the date of this  Agreement,  is  pending or  threatened  in
writing  against  or  affecting  the  Company,  the  Common  Stock or any of the
Company's  Subsidiaries  or any of the Company's or the Company's  Subsidiaries'
officers or  directors  in their  capacities  as such,  is set forth in Schedule
3(h).

           (i) Acknowledgment Regarding Buyer's Status. The Company acknowledges
and  agrees  that the Buyer is acting  solely in the  capacity  of arm's  length
purchaser  with  respect  to the  Transaction  Documents  and  the  transactions
contemplated hereby and thereby. The Company further acknowledges that the Buyer
is not acting as a  financial  advisor or  fiduciary  of the  Company (or in any
similar capacity) with respect to the Transaction Documents and the transactions
contemplated  hereby and thereby and any advice given by the Buyer or any of its
representatives  or agents in connection with the Transaction  Documents and the
transactions contemplated hereby and thereby is merely incidental to the Buyer's
purchase of the Securities. The Company further represents to the Buyer that the
Company's decision to enter into the Transaction Documents has been based solely
on the  independent  evaluation  by the  Company  and  its  representatives  and
advisors.

           (j) No General  Solicitation.  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 1933 Act) in  connection  with the offer or sale of the
Securities.

            (k) Intellectual  Property Rights.  The Company and its Subsidiaries
own or possess adequate rights or licenses to use all material trademarks, trade
names, service marks, service mark registrations, service names, patents, patent
rights,    copyrights,    inventions,    licenses,    approvals,    governmental
authorizations,  trade secrets and rights  necessary to conduct their respective

<PAGE>

businesses as now conducted.  Except as set forth on Schedule 3(k),  none of the
Company's  material  trademarks,   trade  names,  service  marks,  service  mark
registrations,  service names, patents, patent rights,  copyrights,  inventions,
licenses,   approvals,   government  authorizations,   trade  secrets  or  other
intellectual  property  rights have expired or terminated,  or, by the terms and
conditions thereof,  could expire or terminate within two years from the date of
this  Agreement.  The Company and its  Subsidiaries do not have any knowledge of
any infringement by the Company or its  Subsidiaries of any material  trademark,
trade name rights, patents,  patent rights,  copyrights,  inventions,  licenses,
service names, service marks, service mark registrations,  trade secret or other
similar  rights of others,  or of any such  development  of similar or identical
trade  secrets or technical  information  by others and,  except as set forth on
Schedule  3(k),  there is no claim,  action or proceeding  being made or brought
against, or to the Company's knowledge, being threatened against, the Company or
its  Subsidiaries  regarding  trademark,  trade name,  patents,  patent  rights,
invention,  copyright,  license,  service  names,  service  marks,  service mark
registrations,  trade secret or other  infringement,  which could  reasonably be
expected to have a Material Adverse Effect.

           (l)  Environmental  Laws. The Company and its Subsidiaries (i) are in
compliance with any and all applicable  foreign,  federal,  state and local laws
and  regulations  relating to the  protection  of human  health and safety,  the
environment  or  hazardous  or  toxic   substances  or  wastes,   pollutants  or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable  Environmental Laws to conduct
their  respective  businesses  and  (iii) are in  compliance  with all terms and
conditions of any such permit, license or approval, except where, in each of the
three  foregoing  clauses,  the  failure to so comply  could not  reasonably  be
expected to have, individually or in the aggregate, a Material Adverse Effect.

           (m) Title. The Company and its Subsidiaries  have good and marketable
title in fee simple to all real  property and good and  marketable  title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects  except  such  as are  described  in  Schedule  3(m)  or  such as do not
materially  affect the value of such property and do not interfere  with the use
made and  proposed  to be made of such  property  by the  Company and any of its
Subsidiaries.  Any real property and facilities  held under lease by the Company
and any of its  Subsidiaries  are  held  by them  under  valid,  subsisting  and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such  property and buildings by the
Company and its Subsidiaries.

           (n) Insurance.  The Company and each of its  Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such  amounts as  management  of the  Company  believes to be prudent and
customary  in the  businesses  in which the  Company  and its  Subsidiaries  are
engaged.  Neither  the  Company  nor any such  Subsidiary  has been  refused any
insurance  coverage  sought or applied  for and neither the Company nor any such
Subsidiary  has any  reason  to  believe  that it will not be able to renew  its
existing  insurance  coverage  as and when such  coverage  expires  or to obtain
similar  coverage  from  similar  insurers as may be  necessary  to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise,  or the earnings,  business or operations of the Company
and its Subsidiaries, taken as a whole.

           (o) Regulatory Permits.  The Company and its Subsidiaries possess all
material  certificates,  authorizations  and permits  issued by the  appropriate
federal,  state or foreign  regulatory  authorities  necessary to conduct  their
respective  businesses,  and neither the  Company  nor any such  Subsidiary  has

<PAGE>

received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.

           (p) Tax Status.  The Company and each of its Subsidiaries has made or
filed all federal and state income and all other  material tax returns,  reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its  Subsidiaries  has set aside
on its books  provisions  reasonably  adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental  assessments and
charges  that are  material  in amount,  shown or  determined  to be due on such
returns,  reports and  declarations,  except those being contested in good faith
and has set aside on its books provision  reasonably adequate for the payment of
all taxes for periods  subsequent to the periods to which such returns,  reports
or declarations  apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any  jurisdiction,  and the officers of the
Company know of no basis for any such claim.

           (q)  Transactions  With  Affiliates.  Except as set forth on Schedule
3(q) and other than the grant or exercise of stock options disclosed on Schedule
3(c), none of the officers,  directors, or employees of the Company is presently
a party to any transaction  with the Company or any of its  Subsidiaries  (other
than for services as employees, officers and directors), including any contract,
agreement or other  arrangement  providing for the  furnishing of services to or
by,  providing for rental of real or personal  property to or from, or otherwise
requiring payments to or from any officer,  director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any  officer,  director,  or any such  employee  has an  interest or is an
officer, director, trustee or partner.

           (r) Application of Takeover Protections. The Company and its board of
directors have taken or will take prior to the  Commencement  Date all necessary
action, if any, in order to render  inapplicable any control share  acquisition,
business  combination,  poison pill (including any  distribution  under a rights
agreement) or other similar  anti-takeover  provision  under the  Certificate of
Incorporation  or the laws of the state of its  incorporation  which is or could
become  applicable to the Buyer as a result of the transactions  contemplated by
this Agreement,  including,  without  limitation,  the Company's issuance of the
Securities and the Buyer's ownership of the Securities.

           (s) Foreign Corrupt  Practices.  Neither the Company,  nor any of its
Subsidiaries,  nor any director, officer, agent, employee or other person acting
on behalf of the  Company or any of its  Subsidiaries  has, in the course of its
actions  for, or on behalf of, the  Company,  used any  corporate  funds for any
unlawful contribution,  gift,  entertainment or other unlawful expenses relating
to  political  activity;  made any direct or  indirect  unlawful  payment to any
foreign or  domestic  government  official  or employee  from  corporate  funds;
violated  or is in  violation  of any  provision  of the  U.S.  Foreign  Corrupt
Practices Act of 1977, as amended; or made any unlawful bribe,  rebate,  payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.

<PAGE>

           4. COVENANTS.

           (a) Filing of  Registration  Statement.  The Company shall , no later
than June 30,  2004,  file a  registration  statement  covering  the sale of the
Commitment  Shares and at least 4.0 Million  Purchase  Shares in accordance with
the terms of the  Registration  Rights  Agreement  between  the  Company and the
Buyer, dated as of the date hereof ("Registration Rights Agreement.").

           (b) Blue Sky.  The  Company  shall take such  action,  if any,  as is
reasonably  necessary in order to obtain an exemption  for or to qualify (i) the
initial sale of the Commitment Shares and any Purchase Shares to the Buyer under
this Agreement and (ii) any subsequent  resale of the Commitment  Shares and any
Purchase Shares by the Buyer, in each case, under applicable securities or "Blue
Sky" laws of the states of the  United  States in such  states as is  reasonably
requested by the Buyer from time to time, and shall provide evidence of any such
action so taken to the Buyer.

           (c) No  Variable  Priced  Financing.  Other  than  pursuant  to  this
Agreement,  the Company  agrees that beginning on the date of this Agreement and
ending on the date of  termination  of this  Agreement  (as  provided in Section
11(k) hereof),  neither the Company nor any of its Subsidiaries  shall,  without
the prior written  notification to the Buyer,  contract for any equity financing
(including  any debt  financing  with an equity  component)  or issue any equity
securities  of the  Company  or any  Subsidiary  or  securities  convertible  or
exchangeable  into or for equity  securities  of the  Company or any  Subsidiary
(including debt securities with an equity  component) which, in any case (i) are
convertible into or exchangeable for an indeterminate number of shares of common
stock,  (ii) are convertible  into or  exchangeable  for Common Stock at a price
which  varies  with the market  price of the Common  Stock,  (iii)  directly  or
indirectly  provide  for any  "re-set"  or  adjustment  of the  purchase  price,
conversion  rate or exercise  price after the issuance of the security,  or (iv)
contain any  "make-whole"  provision  based upon,  directly or  indirectly,  the
market  price of the Common Stock after the  issuance of the  security,  in each
case, other than reasonable and customary anti-dilution adjustments for issuance
of shares  of Common  Stock at a price  which is below the  market  price of the
Common Stock.

           (d) Listing.  The Company shall promptly secure the listing of all of
the Purchase Shares and Commitment Shares upon each national securities exchange
and automated  quotation  system,  if any, upon which shares of Common Stock are
then listed (subject to official notice of issuance) and shall maintain, so long
as any other shares of Common Stock shall be so listed, such listing of all such
securities  from  time to time  issuable  under  the  terms  of the  Transaction
Documents.  The Company  shall  maintain the Common  Stock's  authorization  for
quotation  on  the  Principal  Market.  Neither  the  Company  nor  any  of  its
Subsidiaries  shall take any action that would be reasonably  expected to result
in the delisting or suspension of the Common Stock on the Principal Market.  The
Company shall  promptly,  and in no event later than the following  Trading Day,
provide to the Buyer copies of any notices it receives from the Principal Market
regarding  the  continued  eligibility  of the Common  Stock for listing on such
automated  quotation  system or securities  exchange.  The Company shall pay all
fees and expenses in  connection  with  satisfying  its  obligations  under this
Section.

           (e)  Limitation  on Short Sales and Hedging  Transactions.  The Buyer
agrees that  beginning on the date of this  Agreement  and ending on the date of
termination of this  Agreement as provided in Section  11(k),  the Buyer and its
agents,  representatives and affiliates shall not in any manner whatsoever enter
into or effect,  directly or  indirectly,  any (i) "short sale" (as such term is

<PAGE>

defined  in Rule  3b-3 of the 1934  Act) of the  Common  Stock  or (ii)  hedging
transaction,  which  establishes a net short position with respect to the Common
Stock.

           (f) Issuance of Commitment Shares;  Limitation on Sales of Commitment
Shares.  Immediately  upon the  execution of this  Agreement,  the Company shall
issue to the Buyer 224,900 shares of Common Stock (the "Commitment Shares"). The
Commitment Shares shall be issued in certificated form and (subject to Section 5
hereof) shall bear the following restrictive legend:

           "THE  SECURITIES  REPRESENTED  BY  THIS  CERTIFICATE  HAVE  NOT  BEEN
           REGISTERED  UNDER  THE  SECURITIES  ACT  OF  1933,  AS  AMENDED,   OR
           APPLICABLE  STATE  SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED
           FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,  TRANSFERRED OR
           ASSIGNED IN THE ABSENCE OF AN EFFECTIVE  REGISTRATION  STATEMENT  FOR
           THE  SECURITIES  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED,  OR
           APPLICABLE  STATE  SECURITIES LAWS, OR AN OPINION OF BUYER'S COUNSEL,
           IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
           OR APPLICABLE  STATE  SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE
           144 UNDER SAID ACT."

             The Buyer  agrees  that the Buyer  shall not  transfer  or sell the
Commitment  Shares  until the earlier of 480 Trading  Days (24 Monthly  Periods)
from the date hereof or the date on which this  Agreement  has been  terminated,
provided,  however,  that such  restrictions  shall not apply: (i) in connection
with any  transfers to or among  affiliates  (as defined in the 1934 Act),  (ii)
(iii) in the event that the Commencement does not occur on or before October 15,
2004,  due to the failure of the Company to satisfy the  conditions set forth in
Section 7 or (iv) if an Event of Default has occurred, or any event which, after
notice  and/or lapse of time,  would become an Event of Default,  including  any
failure by the Company to timely issue  Purchase  Shares  under this  Agreement.
Notwithstanding  the  forgoing,  the Buyer may transfer  Commitment  Shares to a
third  party  in order  to  settle a sale  made by the  Buyer  where  the  Buyer
reasonably  expects  the Company to deliver  Purchase  Shares to the Buyer under
this  Agreement  so long as the Buyer  maintains  ownership  of the same overall
number of  shares  of  Common  Stock by  "replacing"  the  Commitment  Shares so
transferred with Purchase Shares when the Purchase Shares are actually issued by
the Company to the Buyer.

           (g) Due Diligence.  The Buyer shall have the right, from time to time
as the  Buyer  may  reasonably  deem  appropriate,  to  perform  reasonable  due
diligence  on the Company  during  normal  business  hours.  The Company and its
officers and employees shall provide  information and reasonably  cooperate with
the Buyer in connection with any reasonable  request by the Buyer related to the
Buyer's due  diligence of the Company,  including,  but not limited to, any such
request made by the Buyer in connection with (i) the filing of the  registration
statement described in Section 4(a) hereof and (ii) the Commencement. Each party
hereto agrees not to disclose any Confidential Information of the other party to
any third party and shall not use the  Confidential  Information for any purpose
other  than  in  connection   with,  or  in  furtherance  of,  the  transactions
contemplated  hereby.  Each  party  hereto  acknowledges  that the  Confidential
Information shall remain the property of the disclosing party and agrees that it
shall take all  reasonable  measures to protect the secrecy of any  Confidential
Information disclosed by the other party.

<PAGE>

           5.        TRANSFER AGENT INSTRUCTIONS.

           Immediately  upon the execution of this Agreement,  the Company shall
deliver  to the  Transfer  Agent a letter in the form as set forth as  Exhibit E
attached  hereto with respect to the issuance of the Commitment  Shares.  On the
Commencement  Date,  the  Company  shall  cause  any  restrictive  legend on the
Commitment  Shares  and the  shares of  Common  Stock  issued to the Buyer  upon
signing that  certain Term Sheet  between the Buyer and the Company and dated as
of March 26, 2004 (the  "Signing  Shares") to be removed and all of the Purchase
Shares to be issued under this Agreement shall be issued without any restrictive
legend. The Company shall issue irrevocable  instructions to the Transfer Agent,
and any subsequent  transfer  agent, to issue Purchase Shares in the name of the
Buyer for the Purchase Shares (the "Irrevocable  Transfer Agent  Instructions").
The Company warrants to the Buyer that no instruction other than the Irrevocable
Transfer Agent Instructions  referred to in this Section 5, will be given by the
Company to the Transfer  Agent with respect to the Purchase  Shares and that the
Commitment  Shares  Signing  Shares and the Purchase  Shares shall  otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration  Rights Agreement subject to the
provisions of Section 4(f) in the case of the Commitment Shares.


           6.        CONDITIONS TO THE COMPANY'S OBLIGATION TO COMMENCE
                     SALES OF SHARES OF COMMON STOCK.

           The  obligation  of the Company  hereunder  to commence  sales of the
Purchase  Shares  is  subject  to the  satisfaction  of  each  of the  following
conditions  on or before the  Commencement  Date (the date that sales begin) and
once such  conditions  have been  initially  satisfied,  there  shall not be any
ongoing  obligation  to  satisfy  such  conditions  after the  Commencement  has
occurred;  provided that these conditions are for the Company's sole benefit and
may be waived by the Company at any time in its sole discretion by providing the
Buyer with prior written notice thereof:

           (a)       The  Buyer  shall  have  executed  each of the  Transaction
                     Documents and delivered the same to the Company.

           (b)       Subject to the  Company's  compliance  with Section 4(a), a
                     registration  statement  covering  the  sale  of all of the
                     Commitment Shares,  Signing Shares and at least 4.0 Million
                     Purchase  Shares shall have been declared  effective  under
                     the 1933 Act by the SEC and no stop order  with  respect to
                     the  Registration  Statement shall be pending or threatened
                     by the SEC.

           (c)       The  representations  and  warranties of the Buyer shall be
                     true and  correct in all  material  respects as of the date
                     when made and as of the Commencement Date as though made at
                     that time (except for  representations  and warranties that
                     speak as of a  specific  date),  and the Buyer  shall  have
                     performed,  satisfied and complied in all material respects
                     with the covenants,  agreements and conditions  required by
                     this Agreement to be performed,  satisfied or complied with
                     by the Buyer at or prior to the Commencement Date.


           7.        CONDITIONS TO THE BUYER'S  OBLIGATION TO COMMENCE PURCHASES
                     OF SHARES OF COMMON STOCK.

           The obligation of the Buyer to commence  purchases of Purchase Shares
under this  Agreement is subject to the  satisfaction  of each of the  following
conditions  on or before the  Commencement  Date (the date that sales begin) and

<PAGE>

once such  conditions  have been  initially  satisfied,  there  shall not be any
ongoing  obligation  to  satisfy  such  conditions  after the  Commencement  has
occurred;  provided that these  conditions  are for the Buyer's sole benefit and
may be waived by the Buyer at any time in its sole  discretion  by providing the
Company with prior written notice thereof:

           (a) The Company shall have executed each of the Transaction Documents
and delivered the same to the Buyer.

           (b) The Company shall have issued to the Buyer the Commitment  Shares
and shall have  removed the  restrictive  transfer  legend from the  certificate
representing the Commitment Shares and Signing Shares.

           (c) The  Common  Stock  shall  be  authorized  for  quotation  on the
Principal  Market,  trading in the Common  Stock  shall not have been within the
last 365 days  suspended  by the SEC or the  Principal  Market and the  Purchase
Shares  and the  Commitment  Shares  shall  be  approved  for  listing  upon the
Principal Market.

           (d) The Buyer shall have received the opinions of the Company's legal
counsel dated as of the Commencement Date substantially in the form of EXHIBIT A
attached hereto.

           (e) The  representations  and warranties of the Company shall be true
and  correct in all  material  respects  (except to the extent  that any of such
representations and warranties is already qualified as to materiality in Section
3 above, in which case, such  representations  and warranties  shall be true and
correct  without further  qualification)  as of the date when made and as of the
Commencement  Date as though made at that time (except for  representations  and
warranties  that  speak  as of a  specific  date)  and the  Company  shall  have
performed, satisfied and complied with the covenants,  agreements and conditions
required by the  Transaction  Documents to be  performed,  satisfied or complied
with by the Company at or prior to the  Commencement  Date. The Buyer shall have
received a  certificate,  executed by the CEO,  President or CFO of the Company,
dated as of the Commencement  Date, to the foregoing effect in the form attached
hereto as EXHIBIT B.

           (f)  The  Board  of  Directors  of the  Company  shall  have  adopted
resolutions  in the form  attached  hereto as  EXHIBIT C which  shall be in full
force  and  effect  without  any  amendment  or  supplement  thereto  as of  the
Commencement Date.

           (g) As of the Commencement  Date, the Company shall have reserved out
of its authorized and unissued Common Stock, solely for the purpose of effecting
purchases of Purchase  Shares  hereunder,  at least 4.0 Million shares of Common
Stock.

           (h) The Irrevocable  Transfer Agent Instructions,  in form acceptable
to the Buyer shall have been  delivered  to and  acknowledged  in writing by the
Company and the Company's Transfer Agent.

           (i) The  Company  shall  have  delivered  to the Buyer a  certificate
evidencing  the  incorporation  and good standing of the Company in the State of
Nevada  issued  by the  Secretary  of State of the  State of Nevada as of a date
within ten (10) Trading Days of the Commencement Date.

<PAGE>

           (j) The Company shall have delivered to the Buyer a certified copy of
the Certificate of  Incorporation  as certified by the Secretary of State of the
State of Nevada within ten (10) Trading Days of the Commencement Date.

           (k) The  Company  shall  have  delivered  to the Buyer a  secretary's
certificate  executed  by  the  Secretary  of  the  Company,  dated  as  of  the
Commencement Date, in the form attached hereto as EXHIBIT D.

           (l) A  registration  statement  covering  the  sale  of  all  of  the
Commitment Shares, Signing Shares and at least 4.0 Million Purchase Shares shall
have been  declared  effective  under the 1933 Act by the SEC and no stop  order
with respect to the registration statement shall be pending or threatened by the
SEC. The Company  shall have prepared and delivered to the Buyer a final form of
prospectus  to be  used  by the  Buyer  in  connection  with  any  sales  of any
Commitment Shares, Signing Shares or any Purchase Shares. The Company shall have
made all  filings  under  all  applicable  federal  and  state  securities  laws
necessary to consummate  the issuance of the Commitment  Shares,  Signing Shares
and the Purchase Shares pursuant to this Agreement in compliance with such laws.

           (m)  No Event of Default  has  occurred,  or any  event which,  after
notice and/or lapse of time, would become an Event of Default has occurred.

           (n) On or prior to the Commencement  Date, the Company shall take all
necessary action, if any, and such actions as reasonably requested by the Buyer,
in  order  to  render  inapplicable  any  control  share  acquisition,  business
combination,  shareholder rights plan or poison pill (including any distribution
under a rights  agreement) or other similar  anti-takeover  provision  under the
Certificate of Incorporation or the laws of the state of its incorporation which
is or could  become  applicable  to the  Buyer as a result  of the  transactions
contemplated by this Agreement,  including,  without  limitation,  the Company's
issuance of the Securities and the Buyer's ownership of the Securities.

           (o) The Company  shall have  provided the Buyer with the  information
requested by the Buyer in connection with its due diligence  requests made prior
to, or in connection  with, the  Commencement,  in accordance  with the terms of
Section 4(g) hereof.

           8. INDEMNIFICATION.

           In  consideration  of  the  Buyer's  execution  and  delivery  of the
Transaction  Documents and acquiring the Securities hereunder and in addition to
all of the Company's  other  obligations  under the Transaction  Documents,  the
Company shall defend, protect,  indemnify and hold harmless the Buyer and all of
its  affiliates,  shareholders,  officers,  directors,  employees  and direct or
indirect   investors  and  any  of  the  foregoing   person's  agents  or  other
representatives  (including,  without  limitation,  those retained in connection
with  the  transactions  contemplated  by  this  Agreement)  (collectively,  the
"Indemnitees")  from and against any and all actions,  causes of action,  suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith  (irrespective of whether any such Indemnitee is a party to
the  action  for which  indemnification  hereunder  is  sought),  and  including
reasonable  attorneys' fees and disbursements  (the "Indemnified  Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any  misrepresentation  or breach of any  representation or warranty made by the
Company in the  Transaction  Documents or any other  certificate,  instrument or
document  contemplated  hereby  or  thereby,  (b) any  breach  of any  covenant,
agreement or obligation of the Company contained in the Transaction Documents or

<PAGE>

any other certificate, instrument or document contemplated hereby or thereby, or
(c) any cause of action,  suit or claim brought or made against such  Indemnitee
and arising out of or resulting  from the  execution,  delivery,  performance or
enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby,  other than with respect to Indemnified
Liabilities  which  directly and primarily  result from the gross  negligence or
willful  misconduct  of  the  Indemnitee.  To  the  extent  that  the  foregoing
undertaking  by the Company  may be  unenforceable  for any reason,  the Company
shall make the maximum  contribution to the payment and  satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law.

           9.        EVENTS OF DEFAULT.

           An "Event of Default" shall be deemed to have occurred at any time as
any of the following events occurs:

           (a) while any  registration  statement  is required to be  maintained
effective  pursuant  to the  terms of the  Registration  Rights  Agreement,  the
effectiveness of such registration  statement lapses for any reason  (including,
without limitation, the issuance of a stop order) or is unavailable to the Buyer
for sale of all of the  Registrable  Securities (as defined in the  Registration
Rights  Agreement)  in  accordance  with the  terms of the  Registration  Rights
Agreement,  and such lapse or unavailability  continues for a period of ten (10)
consecutive  Trading  Days or for more than an  aggregate of thirty (30) Trading
Days in any 365-day period;

           (b)  the suspension from trading or failure of the Common Stock to be
listed on the  Principal  Market for a period of three (3)  consecutive  Trading
Days;

           (c) the  delisting of the  Company's  Common Stock from the Principal
Market,  provided,  however, that the Common Stock is not immediately thereafter
trading on the New York Stock Exchange,  the Nasdaq National Market,  the Nasdaq
SmallCap Market, or the American Stock Exchange;

           (d) the  failure  for any  reason  by the  Transfer  Agent  to  issue
Purchase  Shares to the Buyer within five (5) Trading Days after the  applicable
Purchase Date which the Buyer is entitled to receive;

           (e) the Company breaches any  representation,  warranty,  covenant or
other term or condition under any Transaction Document if such breach could have
a  Material  Adverse  Effect and  except,  in the case of a breach of a covenant
which is reasonably  curable,  only if such breach  continues for a period of at
least ten (10) Trading Days;

           (f)  any  payment  default  under  any  contract  whatsoever  or  any
acceleration  prior  to  maturity  of  any  mortgage,   indenture,  contract  or
instrument  under  which there may be issued or by which there may be secured or
evidenced  any  indebtedness  for money  borrowed  by the  Company  or for money
borrowed the  repayment  of which is  guaranteed  by the  Company,  whether such
indebtedness or guarantee now exists or shall be created hereafter,  which, with
respect to any such payment  default or  acceleration  prior to maturity,  is in
excess of $1,000,000;

           (g) if any Person commences a proceeding against the Company pursuant
to or within the meaning of any Bankruptcy Law;

<PAGE>

           (h)  if  the  Company  pursuant  to or  within  the  meaning  of  any
Bankruptcy  Law; (A) commences a voluntary case, (B) consents to the entry of an
order  for  relief  against  it in an  involuntary  case,  (C)  consents  to the
appointment  of a  Custodian  of it or  for  all  or  substantially  all  of its
property,  (D) makes a general assignment for the benefit of its creditors,  (E)
becomes  insolvent,  or (F) is  generally  unable  to pay its  debts as the same
become due; or

           (i) a court of competent jurisdiction enters an order or decree under
any  Bankruptcy Law that (A) is for relief against the Company in an involuntary
case, (B) appoints a Custodian of the Company or for all or substantially all of
its property, or (C) orders the liquidation of the Company or any Subsidiary.

In addition  to any other  rights and  remedies  under  applicable  law and this
Agreement, including the Buyer termination rights under Section 11(k) hereof, so
long as an Event of Default  has  occurred  and is  continuing,  or if any event
which, after notice and/or lapse of time, would become an Event of Default,  has
occurred  and is  continuing,  or so long as the  Purchase  Price is  below  the
Purchase Price Floor, the Buyer shall not be obligated to purchase any shares of
Common Stock under this  Agreement.  If pursuant to or within the meaning of any
Bankruptcy Law, the Company commences a voluntary case or any Person commences a
proceeding  against the Company, a Custodian is appointed for the Company or for
all or  substantially  all of its  property,  or the  Company  makes  a  general
assignment for the benefit of its creditors,  (any of which would be an Event of
Default as described  in Sections  9(g),  9(h) and 9(i)  hereof) this  Agreement
shall  automatically  terminate  without any liability or payment to the Company
without  further  action or notice by any Person.  No such  termination  of this
Agreement  under  Section  11(k)(i)  shall  affect the  Company's or the Buyer's
obligations  under this  Agreement  with  respect to pending  purchases  and the
Company and the Buyer shall complete their  respective  obligations with respect
to any pending purchases under this Agreement.

           10.       CERTAIN DEFINED TERMS.

           For purposes of this  Agreement,  the following  terms shall have the
following meanings:

           (a) "1933 Act" means the Securities Act of 1933, as amended.

           (b)   "Available   Amount"  means   initially  Six  Million   Dollars
($6,000,000)  in the  aggregate  which  amount  shall be reduced by the Purchase
Amount each time the Buyer purchases  shares of Common Stock pursuant to Section
1 hereof.

           (c)  "Bankruptcy  Law" means  Title 11,  U.S.  Code,  or any  similar
federal or state law for the relief of debtors.

           (d) "Closing Sale Price" means,  for any security as of any date, the
last closing trade price for such  security on the Principal  Market as reported
by  Bloomberg,  or,  if the  Principal  Market is not the  principal  securities
exchange or trading  market for such  security,  the last closing trade price of
such security on the principal  securities exchange or trading market where such
security is listed or traded as reported by Bloomberg.

           (e)  "Confidential  Information"  means any information  disclosed by
either  party to the other party,  either  directly or  indirectly,  in writing,
orally or by  inspection of tangible  objects  (including,  without  limitation,
documents,  prototypes,  samples,  plant and equipment),  which is designated as
"Confidential,"   "Proprietary"   or  some  similar   designation.   Information

<PAGE>

communicated  orally  shall  be  considered  Confidential  Information  if  such
information is confirmed in writing as being Confidential Information within ten
(10) business days after the initial  disclosure.  Confidential  Information may
also  include  information  disclosed to a  disclosing  party by third  parties.
Confidential  Information shall not, however,  include any information which (i)
was publicly  known and made  generally  available in the public domain prior to
the time of disclosure by the disclosing  party; (ii) becomes publicly known and
made  generally  available  after  disclosure  by the  disclosing  party  to the
receiving party through no action or inaction of the receiving  party;  (iii) is
already in the  possession of the  receiving  party at the time of disclosure by
the  disclosing  party as shown  by the  receiving  party's  files  and  records
immediately  prior to the time of disclosure;  (iv) is obtained by the receiving
party from a third party without a breach of such third party's  obligations  of
confidentiality;  (v) is independently  developed by the receiving party without
use of or reference to the disclosing party's Confidential Information, as shown
by documents and other competent  evidence in the receiving party's  possession;
or (vi) is required by law to be disclosed by the receiving party, provided that
the receiving  party gives the  disclosing  party prompt  written notice of such
requirement  prior to such  disclosure  and  assistance  in  obtaining  an order
protecting the information from public disclosure.

           (f) "Custodian" means any receiver, trustee, assignee,  liquidator or
similar official under any Bankruptcy Law.

           (g)  "Floor  Price"  means  initially  $1.50,  which  amount  may  be
increased or decreased  from time to time as provided  below,  except that in no
case shall the Floor Price be less than $0.50.  The Company may at any time give
written  notice (a "Floor  Price  Change  Notice")  to the Buyer  increasing  or
decreasing  the Floor Price.  The Floor Price  Change  Notice shall be effective
only for  purchases  that have a Purchase  Date later than one (1)  Trading  Day
after receipt of the Floor Price Change Notice by the Buyer. Any purchase by the
Buyer  that has a  Purchase  Date on or prior to the  first  Trading  Day  after
receipt of a Floor Price  Change  Notice from the Company must be honored by the
Company as otherwise  provided  herein.  The Floor Price shall be  appropriately
adjusted for any  reorganization,  recapitalization,  non-cash  dividend,  stock
split or other similar transaction.

           (h)  "Maturity  Date"  means  the date that is 480  Trading  Days (24
Monthly Periods) from the  Commencement  Date which such date may be extended by
up to an  additional  three (3)  Monthly  Periods  by the  Company,  in its sole
discretion, by written notice to the Buyer.

           (i)  "Monthly  Period"  means each  successive  20 Trading Day period
commencing with the Commencement Date.

           (j) "Person"  means an  individual  or entity  including  any limited
liability  company, a partnership,  a joint venture, a corporation,  a trust, an
unincorporated  organization  and a  government  or  any  department  or  agency
thereof.

           (k) "Principal Market" means the NASDAQ OTC Bulletin Board;  provided
however,  that in the event the Company's  Common Stock is ever listed or traded
on the Nasdaq National Market,  the Nasdaq SmallCap  Market,  the New York Stock
Exchange or the American Stock Exchange,  than the "Principal Market" shall mean
such other market or exchange on which the Company's Common Stock is then listed
or traded.

           (l) "Purchase Amount" means the portion of the Available Amount to be
purchased by the Buyer pursuant to Section 1 hereof.

<PAGE>

           (m)    "Purchase Date" means the actual date that the Buyer is to buy
Purchase Shares pursuant to Section 1 hereof.

           (n) "Purchase Price" means, as of any date of determination the lower
of the  (A)  the  lowest  Sale  Price  of the  Common  Stock  on  such  date  of
determination  and (B) the  arithmetic  average of the three (3) lowest  Closing
Sale Prices for the Common Stock during the twelve (12) consecutive Trading Days
ending on the Trading Day immediately  preceding such date of determination  (to
be appropriately  adjusted for any  reorganization,  recapitalization,  non-cash
dividend, stock split or other similar transaction).

           (o) "Sale Price"  means,  for any security as of any date,  any trade
price for such security on the Principal Market as reported by Bloomberg, or, if
the Principal Market is not the principal  securities exchange or trading market
for such security,  the trade price of such security on the principal securities
exchange or trading  market where such  security is listed or traded as reported
by Bloomberg.

           (p) "SEC" means the United States Securities and Exchange Commission.

           (q) "Transfer  Agent" means the transfer  agent of the Company as set
forth in Section  11(f)  hereof or such other  person who is then serving as the
transfer agent for the Company in respect of the Common Stock.

           (r) "Trading Day" means any day on which the Principal Market is open
for customary trading.

<PAGE>

           11. MISCELLANEOUS.

           (a) Governing Law;  Jurisdiction;  Jury Trial.  The corporate laws of
the State of Nevada shall govern all issues  concerning  the relative  rights of
the  Company  and  its   shareholders.   All  other  questions   concerning  the
construction, validity, enforcement and interpretation of this Agreement and the
other Transaction  Documents shall be governed by the internal laws of the State
of  Illinois,  without  giving  effect to any choice of law or  conflict  of law
provision or rule (whether of the State of Illinois or any other  jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of  Illinois.  Each party  hereby  irrevocably  submits  to the  exclusive
jurisdiction of the state and federal courts sitting in the City of Chicago, for
the  adjudication  of any  dispute  hereunder  or under  the  other  Transaction
Documents  or in  connection  herewith  or  therewith,  or with any  transaction
contemplated  hereby or discussed herein,  and hereby  irrevocably  waives,  and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or  proceeding  is  brought in an  inconvenient  forum or that the venue of such
suit,  action or proceeding is improper.  Each party hereby  irrevocably  waives
personal  service of process and  consents to process  being  served in any such
suit,  action or  proceeding  by  mailing a copy  thereof  to such  party at the
address for such notices to it under this Agreement and agrees that such service
shall  constitute  good and  sufficient  service of process and notice  thereof.
Nothing  contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST,  A JURY TRIAL FOR THE ADJUDICATION
OF ANY  DISPUTE  HEREUNDER  OR IN  CONNECTION  HEREWITH  OR ARISING  OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

           (b)  Counterparts.  This  Agreement  may be  executed  in two or more
identical  counterparts,  all of  which  shall  be  considered  one and the same
agreement and shall become effective when  counterparts have been signed by each
party and  delivered to the other  party;  provided  that a facsimile  signature
shall be  considered  due  execution  and shall be  binding  upon the  signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.

           (c)  Headings.  The headings of this Agreement are for convenience of
reference  and shall not form part of, or affect  the  interpretation  of,  this
Agreement.

           (d) Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction,  such invalidity or unenforceability shall
not affect the validity or  enforceability of the remainder of this Agreement in
that  jurisdiction  or the validity or  enforceability  of any provision of this
Agreement in any other jurisdiction.

           (e) Entire  Agreement;  Amendments.  With the exception of the Mutual
Nondisclosure  Agreement  between  the parties  dated as of March 1, 2004,  this
Agreement  supersedes  all other  prior oral or written  agreements  between the
Buyer,  the Company,  their  affiliates  and persons acting on their behalf with
respect  to  the  matters  discussed  herein,  and  this  Agreement,  the  other
Transaction  Documents and the instruments  referenced herein contain the entire
understanding  of the parties  with  respect to the matters  covered  herein and
therein and,  except as  specifically  set forth herein or therein,  neither the
Company  nor  the  Buyer  makes  any  representation,   warranty,   covenant  or
undertaking with respect to such matters.  No provision of this Agreement may be
amended  other than by an  instrument  in writing  signed by the Company and the

<PAGE>

Buyer,  and no  provision  hereof may be waived other than by an  instrument  in
writing signed by the party against whom enforcement is sought.

           (f) Notices. Any notices,  consents,  waivers or other communications
required or permitted to be given under the terms of this  Agreement  must be in
writing  and will be deemed  to have  been  delivered:  (i) upon  receipt,  when
delivered  personally;  (ii)  upon  receipt,  when sent by  facsimile  (provided
confirmation of transmission  is  mechanically or  electronically  generated and
kept on file by the sending party);  or (iii) one Trading Day after deposit with
a  nationally  recognized  overnight  delivery  service,  in each case  properly
addressed to the party to receive the same. The addresses and facsimile  numbers
for such communications shall be:

           If to the Company:
                     Coach Industries Group, Inc.
                     9600 W. Sample Road, Suite 505
                     Coral Springs, Florida 33065
                     Telephone: 954-796-4200
                     Facsimile: 954-796-7600
                     Attention: Chief Financial Officer

           With a copy to:
                     Joseph Emas
                     1224 Washington Avenue
                     Miami Beach
                     Florida  33139
                     Telephone: (305) 531-1174
                     Facsimile: (305) 531-1274

           If to the Buyer:
                     Fusion Capital Fund II, LLC
                     222 Merchandise Mart Plaza, Suite 9-112
                     Chicago, IL 60654
                     Telephone: 312-644-6644
                     Facsimile: 312-644-6244
                     Attention: Steven G. Martin

           If to the Transfer Agent:
                     Madison Stock Transfer
                     1688 East 16th St
                     Suite 7
                     Brooklyn, NY  11229
                     Telephone: (718) 627-4453
                     Facsimile: (718) 627-6341
                     Attention: Mike Ajzenman

or at such other address and/or facsimile number and/or to the attention of such
other person as the  recipient  party has  specified by written  notice given to
each other  party  three (3)  Trading  Days prior to the  effectiveness  of such
change.  Written  confirmation  of receipt  (A) given by the  recipient  of such
notice,   consent,   waiver  or  other   communication,   (B)   mechanically  or
electronically  generated by the sender's facsimile machine containing the time,
date, and recipient facsimile number or (C) provided by a nationally  recognized

<PAGE>

overnight  delivery service,  shall be rebuttable  evidence of personal service,
receipt by facsimile or receipt from a nationally  recognized overnight delivery
service in accordance with clause (i), (ii) or (iii) above, respectively.

           (g) Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
The  Company  shall not  assign  this  Agreement  or any  rights or  obligations
hereunder without the prior written consent of the Buyer, including by merger or
consolidation.  The Buyer may not assign its  rights or  obligations  under this
Agreement.

           (h) 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.

           (i)  Publicity.  The Buyer  shall  have the right to  approve  before
issuance  any press  releases  or any other  public  disclosure  (including  any
filings  with the SEC) with  respect to the  transactions  contemplated  hereby;
provided,  however,  that the  Company  shall be  entitled,  without  the  prior
approval  of the Buyer,  to make any press  release or other  public  disclosure
(including  any filings  with the SEC) with respect to such  transactions  as is
required  by  applicable  law and  regulations  (although  the  Buyer  shall  be
consulted  by the  Company in  connection  with any such press  release or other
public  disclosure  prior  to its  release  and  shall be  provided  with a copy
thereof).

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

           (k) Termination. This Agreement may be terminated only as follows:

                     (i) By the  Buyer  any  time an  Event  of  Default  exists
           without any liability or payment to the Company. However, if pursuant
           to or within the meaning of any Bankruptcy Law, the Company commences
           a voluntary  case or any Person  commences a  proceeding  against the
           Company,  a  Custodian  is  appointed  for the  Company or for all or
           substantially  all of its  property,  or the Company  makes a general
           assignment for the benefit of its  creditors,  (any of which would be
           an Event of Default as  described  in  Sections  9(g),  9(h) and 9(i)
           hereof) this  Agreement  shall  automatically  terminate  without any
           liability or payment to the Company  without further action or notice
           by any  Person.  No such  termination  of this  Agreement  under this
           Section   11(k)(i)   shall  affect  the   Company's  or  the  Buyer's
           obligations  under this Agreement  with respect to pending  purchases
           and the  Company  and  the  Buyer  shall  complete  their  respective
           obligations  with  respect  to  any  pending   purchases  under  this
           Agreement.

                     (ii) In the  event  that the  Commencement  shall  not have
           occurred,  the  Company  shall  have the  option  to  terminate  this
           Agreement  for any reason or for no reason  without  liability of any
           party to any other party.

                     (iii) In the  event  that the  Commencement  shall not have
           occurred on or before August 31, 2004,  due to the failure to satisfy
           the  conditions  set forth in Sections 6 and 7 above with  respect to

<PAGE>

           the Commencement (and the nonbreaching  party's failure to waive such
           unsatisfied  condition(s)),  the  nonbreaching  party  shall have the
           option to terminate  this  Agreement at the close of business on such
           date or thereafter without liability of any party to any other party.

                     (iv)  If by the  Maturity  Date  (including  any  extension
           thereof by the Company  pursuant to Section  10(g)  hereof),  for any
           reason  or for  no  reason  the  full  Available  Amount  under  this
           Agreement has not been purchased as provided for in Section 1 of this
           Agreement,  by the Buyer  without  any  liability  or  payment to the
           Company.

                     (v) At any time after the  Commencement  Date,  the Company
           shall have the option to terminate  this  Agreement for any reason or
           for no reason by delivering notice (a "Company  Termination  Notice")
           to the  Buyer  electing  to  terminate  this  Agreement  without  any
           liability  or payment to the Buyer.  The Company  Termination  Notice
           shall not be  effective  until one (1)  Trading Day after it has been
           received by the Buyer.

                     (vi) This Agreement  shall  automatically  terminate on the
           date  that  the  Company  sells  and the  Buyer  purchases  the  full
           Available Amount as provided herein,  without any action or notice on
           the part of any party.

Except as set forth in  Sections  11(k)(i)  (in  respect  of an Event of Default
under  Sections  9(g),  9(h) and 9(i)) and  11(k)(vi),  any  termination of this
Agreement  pursuant to this  Section  11(k) shall be effected by written  notice
from the Company to the Buyer, or the Buyer to the Company,  as the case may be,
setting forth the basis for the  termination  hereof.  The  representations  and
warranties  of the Company and the Buyer  contained  in Sections 2 and 3 hereof,
the indemnification  provisions set forth in Section 8 hereof and the agreements
and covenants set forth in Section 11, shall  survive the  Commencement  and any
termination of this Agreement. No termination of this Agreement shall affect the
Company's  or the  Buyer's  obligations  under this  Agreement  with  respect to
pending  purchases and the Company and the Buyer shall complete their respective
obligations with respect to any pending purchases under this Agreement.

           (l) No Financial  Advisor,  Placement  Agent,  Broker or Finder.  The
Company acknowledges that it has retained Allied Capital International, Inc., as
financial advisor in connection with the transactions  contemplated  hereby. The
Company  represents  and warrants to the Buyer that it has not engaged any other
financial  advisor,  placement  agent,  broker or finder in connection  with the
transactions  contemplated  hereby.  The Buyer  represents  and  warrants to the
Company that it has not engaged any financial advisor,  placement agent,  broker
or finder in connection with the transactions  contemplated  hereby. The Company
shall be responsible for the payment of any fees or commissions,  if any, of any
financial advisor,  placement agent, broker or finder relating to or arising out
of the  transactions  contemplated  hereby.  The Company shall pay, and hold the
Buyer harmless  against,  any  liability,  loss or expense  (including,  without
limitation,  attorneys' fees and out of pocket  expenses)  arising in connection
with any such claim.

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

           (n) Remedies, Other Obligations,  Breaches and Injunctive Relief. The
Buyer's remedies  provided in this Agreement shall be cumulative and in addition
to all other remedies available to the Buyer under this Agreement,  at law or in
equity  (including  a decree of specific  performance  and/or  other  injunctive
relief),  no remedy of the Buyer  contained  herein  shall be deemed a waiver of

<PAGE>

compliance  with the  provisions  giving rise to such remedy and nothing  herein
shall limit the Buyer's  right to pursue  actual  damages for any failure by the
Company to comply with the terms of this  Agreement.  The  Company  acknowledges
that a breach by it of its obligations  hereunder will cause irreparable harm to
the Buyer and that the remedy at law for any such breach may be inadequate.  The
Company  therefore  agrees that,  in the event of any such breach or  threatened
breach,  the  Buyer  shall be  entitled,  in  addition  to all  other  available
remedies,  to an  injunction  restraining  any breach,  without the necessity of
showing economic loss and without any bond or other security being required.

           (o) Changes to the Terms of this  Agreement.  This  Agreement and any
provision  hereof may only be amended by an instrument in writing  signed by the
Company and the Buyer. The term "Agreement" and all reference  thereto,  as used
throughout this instrument,  shall mean this instrument as originally  executed,
or if later amended or supplemented, then as so amended or supplemented.

           (p) Enforcement  Costs. If: (i) this Agreement is placed by the Buyer
in the hands of an attorney for  enforcement or is enforced by the Buyer through
any legal proceeding;  or (ii) an attorney is retained to represent the Buyer in
any  bankruptcy,  reorganization,  receivership or other  proceedings  affecting
creditors'  rights  and  involving  a claim  under this  Agreement;  or (iii) an
attorney is retained to represent the Buyer in any other proceedings  whatsoever
in connection with this  Agreement,  then the Company shall pay to the Buyer, as
incurred by the Buyer,  all reasonable costs and expenses  including  attorneys'
fees  incurred in  connection  therewith,  in addition to all other  amounts due
hereunder.

           (q)  Failure or  Indulgence  Not  Waiver.  No failure or delay in the
exercise of any power,  right or privilege  hereunder  shall operate as a waiver
thereof,  nor shall any single or partial  exercise of any such power,  right or
privilege  preclude  other or further  exercise  thereof or of any other  right,
power or privilege.


                                    * * * * *

<PAGE>

           IN WITNESS WHEREOF, the Buyer and the Company have caused this Common
Stock Purchase Agreement to be duly executed as of the date first written above.



                                    THE COMPANY:

                                    COACH INDUSTRIES GROUP, INC.

                                    By: /s/ Francis O'Donnell
                                        ---------------------------
                                    Name:  Francis O'Donnell
                                    Title: President and Chief Executive Officer


                                    BUYER:

                                    FUSION CAPITAL FUND II, LLC
                                    BY: FUSION CAPITAL PARTNERS, LLC
                                    BY: SGM HOLDINGS CORP.

                                    By: /s/ Steven G. Martin
                                        ---------------------------
                                    Name:  Steven G. Martin
                                    Title: President


</TEXT>
</DOCUMENT>
