Titanium Group LTD
EXH 10-1 SPA
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>2
<FILENAME>exh10-1_spa.txt
<DESCRIPTION>EXH 10-1 SPA
<TEXT>














                                  EXHIBIT 10.1

                         SECURITIES PURCHASE AGREEMENT
                              DATED APRIL 3, 2007



<PAGE>

                          SECURITIES PURCHASE AGREEMENT

         This Securities  Purchase  Agreement (this  "AGREEMENT") is dated as of
April 3, 2007 among Titanium Group Limited,  a corporation  organized  under the
laws  of  the  British  Virgin  Islands  (the  "COMPANY"),  and  each  purchaser
identified on the signature  pages hereto (each,  including its  successors  and
assigns, a "PURCHASER" and collectively the "PURCHASERS").

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

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

                                   ARTICLE I.
                                   DEFINITIONS

         1.1   DEFINITIONS.  In addition to the terms defined  elsewhere in this

Agreement:  (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Debentures (as defined herein),  and (b) the
following terms have the meanings set forth in this Section 1.1:

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

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

              "BUSINESS  DAY" means any day  except  Saturday,  Sunday,  any day
         which shall be a federal  legal holiday in the United States or any day
         on which banking  institutions  in the State of New York are authorized
         or required by law or other governmental action to close.

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

              "CLOSING  DATE" means the Trading Day when all of the  Transaction
         Documents  have been executed and delivered by the  applicable  parties
         thereto,   and  all  conditions


<PAGE>

         precedent to (i) the  Purchasers' obligations  to pay the  Subscription
         Amount  and (ii)  the  Company's  obligations to deliver the Securities
         have been satisfied or waived.

              "COMMISSION" means the Securities and Exchange Commission.

              "COMMON  STOCK" means the common  stock of the Company,  par value
         $0.01 per  share,  and any other  class of  securities  into which such
         securities may hereafter be reclassified or changed into.

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

              "COMPANY  COUNSEL"  means Dill Dill Carr  Stonbraker  & Hutchings,
         P.C., with offices located at 455 Sherman  Street,  Suite 300,  Denver,
         Colorado 80203-4404.

              "CONVERSION PRICE" shall have the meaning ascribed to such term in
         the Debentures.

              "DEBENTURES" means the Series A 8% Senior  Convertible  Debentures
         due, subject to the terms therein, 3 years from their date of issuance,
         issued  by the  Company  to the  Purchasers  hereunder,  in the form of
         EXHIBIT A attached hereto.

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

              "DISCUSSION  TIME" shall have the meaning ascribed to such term in
         Section 3.2(f).

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

              "ESCROW  AGENT"  shall  mean  Signature  Bank,  a New  York  State
         chartered  bank and having an office at 261 Madison  Avenue,  New York,
         New York 10016.

              "ESCROW AGREEMENT" shall mean the Escrow Deposit Agreement,  dated
         prior to the date hereof, by and among the Company, the Placement Agent
         and the Escrow Agent  pursuant to which the  Purchasers  shall  deposit
         Subscription  Amounts  with  the  Escrow  Agent  to be  applied  to the
         transactions  contemplated  hereunder,  substantially  in the  form  of
         EXHIBIT E attached hereto.

              "EVALUATION  DATE" shall have the meaning ascribed to such term in
         Section 3.1(r).

              "EXCHANGE  ACT"  means the  Securities  Exchange  Act of 1934,  as
         amended, and the rules and regulations promulgated thereunder.

                                       2
<PAGE>

              "EXEMPT ISSUANCE" means the issuance of (a) shares of Common Stock
         or options to employees,  officers or directors of the Company pursuant
         to any stock or option plan duly adopted for such purpose by a majority
         of the members of the Board of  Directors  of the Company or a majority
         of the members of a committee of directors established for such purpose
         by the Board of  Directors  of the  Company,  (b)  securities  upon the
         exercise  or  exchange  of  or  conversion  of  any  Securities  issued
         hereunder  and/or other  securities  exercisable or exchangeable for or
         convertible  into shares of Common Stock issued and  outstanding on the
         date of this  Agreement,  provided that such  securities  have not been
         amended since the date of this Agreement to increase the number of such
         securities or to decrease the exercise, exchange or conversion price of
         such  securities,  (c) securities  issued  pursuant to  acquisitions or
         strategic  transactions  approved  by a majority  of the  disinterested
         directors of the Company, provided that any such issuance shall only be
         to a Person which is, itself or through its subsidiaries,  an operating
         company in a business  synergistic with the business of the Company and
         in which the Company receives benefits in addition to the investment of
         funds,  but shall not  include a  transaction  in which the  Company is
         issuing  securities  primarily for the purpose of raising capital or to
         an entity whose primary business is investing in securities, (d) shares
         of Common Stock or options to consultants  providing  financial  public
         relations,  corporate  finance,  technical  or  other  services  to the
         Company,  provided  that  issuances to such  consultants  (i) shall not
         exceed  the  aggregate  number of shares  set forth  under the  heading
         "Commitments"  on  SCHEDULE  3.1(G)  (as such  share  amounts  shall be
         adjusted for reverse and forward  stock splits,  recapitalizations  and
         the like after the date  hereof) and (ii) shall not carry  registration
         rights  of any  kind,  (e)  commencing  on the date that is the 3 month
         anniversary of the Effective Date, shares of Common Stock or options to
         consultants  providing  financial public relations,  corporate finance,
         technical or other services to the Company,  provided that issuances to
         such  consultants  (i) shall not exceed an aggregate of 300,000  shares
         (adjusted for reverse and forward stock splits,  recapitalizations  and
         the like after the date  hereof) in any 12 month  period and (ii) shall
         not carry  registration  rights of any kind and (f) with prior  written
         consent  of the  Placement  Agent,  up to an amount of  debentures  and
         warrants equal to the difference  between  $4,000,000 and the aggregate
         Subscription  Amounts  hereunder,  on the same  terms,  conditions  and
         prices as hereunder, with investors executing definitive agreements for
         the purchase of such securities and such transactions  having closed on
         or before the  earlier of (i) 5 Business  Days prior to the Filing Date
         (as defined in the Registration Rights Agreement) or (ii) the date that
         the  Initial   Registration   Statement  is  actually  filed  with  the
         Commission.

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

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

              "INDEBTEDNESS"  shall have the  meaning  ascribed  to such term in
         Section 3.1(aa).

              "INTELLECTUAL  PROPERTY RIGHTS" shall have the meaning ascribed to
         such term in Section 3.1(o).


                                       3
<PAGE>

              "LEGEND REMOVAL DATE" shall have the meaning ascribed to such term
         in Section 4.1(c).

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

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

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

              "MAXIMUM  RATE"  shall have the  meaning  ascribed to such term in
         Section 5.17.

              "PARTICIPATION  MAXIMUM"  shall have the meaning  ascribed to such
         term in Section 4.13.

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

              "PLACEMENT  AGENT" means First  Montauk  Securities  Corp.,  a New
         Jersey corporation.

              "PLACEMENT  AGENT SHARES" means the aggregate  number of shares of
         Common Stock underlying the Placement Agent Warrant.

              "PRE-NOTICE"  shall  have the  meaning  ascribed  to such  term in
         Section 4.13.

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

              "PURCHASER  PARTY" shall have the meaning ascribed to such term in
         Section 4.11.

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

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

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

                                       4
<PAGE>

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

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

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

              "SECURITIES"  means the  Debentures,  the  Warrants,  the  Warrant
         Shares and the Underlying Shares.

              "SECURITIES ACT" means the Securities Act of 1933, as amended, and
         the rules and regulations promulgated hereunder.

              "SHORT  SALES"  means all "short  sales" as defined in Rule 200 of
         Regulation  SHO  under  the  Exchange  Act (but  shall not be deemed to
         include the location and/or  reservation of borrowable shares of Common
         Stock).

              "SUBSCRIPTION  AMOUNT" means, as to each Purchaser,  the aggregate
         amount to be paid for  Debentures and Warrants  purchased  hereunder as
         specified  below such  Purchaser's  name on the signature  page of this
         Agreement  and next to the  heading  "Subscription  Amount,"  in United
         States dollars and in immediately available funds.

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

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

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

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

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

                                       5
<PAGE>

              "TRANSACTION DOCUMENTS" means this Agreement, the Debentures,  the
         Warrants,  the Registration Rights Agreement and any other documents or
         agreements  executed in connection with the  transactions  contemplated
         hereunder.

              "TRANSFER AGENT" means Computershare  Trust Company,  Inc., with a
         mailing  address of 350 Indiana  Street,  Suite 800,  Golden,  Colorado
         80401 and a  facsimile  number  of (303)  262-0700,  and any  successor
         transfer agent of the Company.

              "UNDERLYING  SHARES"  means the shares of Common  Stock issued and
         issuable  upon  conversion or  redemption  of the  Debentures  and upon
         exercise of the  Warrants  and issued and  issuable in lieu of the cash
         payment of interest on the  Debentures in accordance  with the terms of
         the Debentures.

              "VARIABLE  RATE  TRANSACTION"  shall have the meaning  ascribed to
         such term in Section 4.14(c).

              "VWAP" means,  for any date, the price  determined by the first of
         the  following  clauses that  applies:  (a) if the Common Stock is then
         listed or quoted on a Trading Market, the daily volume weighted average
         price of the Common Stock for such date (or the nearest preceding date)
         on the  Trading  Market on which  the  Common  Stock is then  listed or
         quoted as reported by Bloomberg L.P.  (based on a Trading Day from 9:30
         a.m.  New York City time to 4:02 p.m.  New York City time);  (b) if the
         OTC Bulletin Board is not a Trading Market, the volume weighted average
         price of the Common Stock for such date (or the nearest preceding date)
         on the OTC Bulletin  Board;  (c) if the Common Stock is not then listed
         or quoted on the OTC Bulletin  Board and if prices for the Common Stock
         are then  reported in the "Pink Sheets"  published by Pink Sheets,  LLC
         (or a similar  organization  or agency  succeeding  to its functions of
         reporting  prices),  the most  recent bid price per share of the Common
         Stock so reported;  or (d) in all other cases, the fair market value of
         a share of  Common  Stock as  determined  by an  independent  appraiser
         selected in good faith by the  Purchaser and  reasonably  acceptable to
         the  Company,  the fees  and  expenses  of  which  shall be paid by the
         Company.

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

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

                                  ARTICLE II.
                                PURCHASE AND SALE

         2.1  CLOSING.  On  the Closing Date,  upon the terms and subject to the
conditions  set forth herein,  substantially  concurrent  with the execution and
delivery of this  Agreement by the parties  hereto,  the Company agrees to sell,
and each  Purchaser,  severally  and not  jointly,  agrees


                                       6
<PAGE>

to  purchase  up to an  aggregate  of  $4,000,000  in  principal  amount  of the
Debentures.  Each Purchaser shall deliver to the Escrow Agent, via wire transfer
or a certified  check,  immediately  available  funds equal to its  Subscription
Amount and the Company shall deliver to each Purchaser its respective  Debenture
and a Warrant,  as determined  pursuant to Section  2.2(a),  and the Company and
each  Purchaser  shall  deliver  the  other  items  set  forth  in  Section  2.2
deliverable  at the Closing.  Upon  satisfaction  of the conditions set forth in
Sections  2.2 and 2.3,  the  Closing  shall  occur at the offices of FWS or such
other location as the parties shall mutually agree.

         2.2  DELIVERIES.

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

                    (i)      this Agreement duly executed by the Company;

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

                    (iii) a  Debenture  with a  principal  amount  equal to such
              Purchaser's  Subscription  Amount,  registered in the name of such
              Purchaser;

                    (iv) a Warrant  registered in the name of such  Purchaser to
              purchase up to a number of shares of Common Stock equal to 100% of
              such  Purchaser's  Subscription  Amount  divided  by  the  initial
              Conversion Price,  with an exercise price equal to $0.50,  subject
              to adjustment therein;

                    (v) a common stock purchase  warrant  registered in the name
              of the  Placement  Agent,  or its  designees,  to purchase up to a
              number of shares of  Common  Stock  equal to 10% of the  aggregate
              shares of Common Stock issuable upon conversion of the Debentures,
              with an  exercise  price  equal to $0.50,  subject  to  adjustment
              therein (such warrant, the "PLACEMENT AGENT WARRANT");

                    (vi) the  Escrow  Deposit  Agreement  duly  executed  by the
              Company and the Placement Agent; and

                    (vii) the Registration Rights Agreement duly executed by the
              Company.

              (b)    On the Closing Date, each Purchaser shall deliver  or cause
         to be delivered to the Company (or, if specified, the Escrow Agent) the
         following:

                    (i) this Agreement duly executed by such Purchaser;

                    (ii) such Purchaser's  Subscription  Amount by wire transfer
              to the Escrow Agent; and

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


                                       7
<PAGE>

         2.3  CLOSING CONDITIONS.

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

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

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

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

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

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

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

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

                    (iv) there shall have been no Material  Adverse  Effect with
              respect to the Company since the date hereof; and

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

                                       8
<PAGE>

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

         3.1  REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth
in the Disclosure  Schedules which  Disclosure  Schedules shall be deemed a part
hereof and shall  qualify any  representation  or  otherwise  made herein to the
extent  of  the  disclosure  contained  in  the  corresponding  section  of  the
Disclosure Schedules, the Company hereby makes the following representations and
warranties to each Purchaser:

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

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

              (c)   AUTHORIZATION;  ENFORCEMENT.  The  Company has the requisite
         corporate  power and  authority  to enter  into and to  consummate  the
         transactions  contemplated  by each of the  Transaction  Documents  and
         otherwise to carry out its obligations  hereunder and  thereunder.  The
         execution  and  delivery of each of the  Transaction  Documents  by the
         Company and the  consummation  by it of the  transactions  contemplated
         hereby and thereby have been duly authorized by all necessary action on
         the part of the  Company  and no  further  action  is  required  by the
         Company,  its board of  directors  or its


                                       9
<PAGE>

         stockholders in connection  therewith other than in connection with the
         Required  Approvals.  Each  Transaction  Document  has  been  (or  upon
         delivery  will have  been)  duly  executed  by the  Company  and,  when
         delivered  in  accordance  with the  terms  hereof  and  thereof,  will
         constitute the valid and binding obligation of the Company  enforceable
         against the Company in accordance  with its terms except (i) as limited
         by general equitable principles and applicable bankruptcy,  insolvency,
         reorganization,  moratorium  and  other  laws  of  general  application
         affecting  enforcement of creditors' rights generally,  (ii) as limited
         by  laws  relating  to  the   availability  of  specific   performance,
         injunctive  relief or other  equitable  remedies  and (iii)  insofar as
         indemnification   and   contribution   provisions  may  be  limited  by
         applicable law.

              (d)   NO CONFLICTS. The execution, delivery and performance of the
         Transaction  Documents  by the  Company  and  the  consummation  by the
         Company of the other  transactions  contemplated  hereby and thereby do
         not and will not:  (i)  conflict  with or violate any  provision of the
         Company's or any Subsidiary's certificate or articles of incorporation,
         bylaws or other  organizational or charter documents,  or (ii) conflict
         with, or constitute a default (or an event that with notice or lapse of
         time or both would become a default)  under,  result in the creation of
         any Lien upon any of the  properties  or assets of the  Company  or any
         Subsidiary,  or give to others  any rights of  termination,  amendment,
         acceleration or cancellation (with or without notice,  lapse of time or
         both) of, any  agreement,  credit  facility,  debt or other  instrument
         (evidencing  a  Company  or  Subsidiary  debt or  otherwise)  or  other
         understanding  to which the Company or any  Subsidiary is a party or by
         which any property or asset of the Company or any  Subsidiary  is bound
         or affected, or (iii) subject to the Required Approvals,  conflict with
         or result in a violation of any law, rule, regulation, order, judgment,
         injunction,  decree or other  restriction of any court or  governmental
         authority  to which the Company or a Subsidiary  is subject  (including
         federal and state  securities  laws and  regulations),  or by which any
         property or asset of the Company or a Subsidiary  is bound or affected;
         except in the case of each of clauses (ii) and (iii), such as could not
         have or reasonably be expected to result in a Material Adverse Effect.

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

              (f)   ISSUANCE  OF  THE  SECURITIES.   The  Securities  are   duly
         authorized  and,  when  issued  and  paid  for in  accordance  with the
         applicable  Transaction  Documents,  will be duly and  validly  issued,
         fully paid and  nonassessable,  free and clear of all Liens  imposed

                                       10
<PAGE>

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

              (g)   CAPITALIZATION.  The capitalization of the Company is as set
         forth on SCHEDULE 3.1(G),  which SCHEDULE 3.1(G) shall also include the
         number of shares of Common Stock owned beneficially,  and of record, by
         Affiliates  of the Company as of the date  hereof.  The Company has not
         issued any capital stock since its most recently filed periodic  report
         under the Exchange Act, other than pursuant to the exercise of employee
         stock options under the Company's  stock option plans,  the issuance of
         shares of Common Stock to employees  pursuant to the Company's employee
         stock  purchase  plan and  pursuant  to the  conversion  or exercise of
         Common  Stock  Equivalents  outstanding  as of the  date  of  the  most
         recently  filed  periodic  report under the Exchange Act. No Person has
         any right of first refusal,  preemptive right,  right of participation,
         or any similar right to participate in the transactions contemplated by
         the Transaction  Documents.  Except as set forth on SCHEDULE 3.1(G) and
         as a result of the  purchase and sale of the  Securities,  there are no
         outstanding options,  warrants,  scrip rights to subscribe to, calls or
         commitments  of any character  whatsoever  relating to, or  securities,
         rights or obligations  convertible  into or exercisable or exchangeable
         for, or giving any Person any right to  subscribe  for or acquire,  any
         shares of Common Stock, or contracts,  commitments,  understandings  or
         arrangements  by which the Company or any  Subsidiary  is or may become
         bound to issue  additional  shares  of  Common  Stock or  Common  Stock
         Equivalents.  The issuance and sale of the Securities will not obligate
         the Company to issue shares of Common Stock or other  securities to any
         Person  (other than the  Purchasers)  and will not result in a right of
         any holder of Company  securities to adjust the  exercise,  conversion,
         exchange  or  reset  price  under  any of such  securities.  All of the
         outstanding  shares of capital stock of the Company are validly issued,
         fully paid and  nonassessable,  have been issued in compliance with all
         federal and state securities laws, and none of such outstanding  shares
         was issued in violation of any  preemptive  rights or similar rights to
         subscribe  for  or  purchase   securities.   No  further   approval  or
         authorization of any stockholder, the Board of Directors of the Company
         or others is  required  for the  issuance  and sale of the  Securities.
         There  are no  stockholders  agreements,  voting  agreements  or  other
         similar agreements with respect to the Company's capital stock to which
         the Company is a party or, to the knowledge of the Company,  between or
         among any of the Company's stockholders.

              (h)   SEC REPORTS;  FINANCIAL  STATEMENTS.  The  Company has filed
         all reports,  schedules, forms, statements and other documents required
         to be filed by the Company  under the  Securities  Act and the Exchange
         Act, including pursuant to Section 13(a) or 15(d) thereof,  for the two
         years  preceding the date hereof (or such shorter period as the Company
         was required by law or regulation to file such material) (the foregoing
         materials, including the exhibits thereto and documents incorporated by
         reference therein,  being  collectively  referred to herein as the "SEC
         REPORTS") on a timely  basis or has


                                       11
<PAGE>

         received  a valid  extension  of such time of filing  and has filed any
         such SEC Reports prior to the expiration of any such  extension.  As of
         their  respective  dates,  the SEC  Reports  complied  in all  material
         respects with the  requirements  of the Securities Act and the Exchange
         Act, as applicable,  and none of the SEC Reports, when filed, contained
         any untrue  statement of a material fact or omitted to state a material
         fact  required to be stated  therein or  necessary in order to make the
         statements  therein, in the light of the circumstances under which they
         were made,  not  misleading.  The  financial  statements of the Company
         included  in the SEC  Reports  comply  in all  material  respects  with
         applicable accounting requirements and the rules and regulations of the
         Commission  with  respect  thereto  as in effect at the time of filing.
         Such financial  statements have been prepared in accordance with United
         States generally accepted accounting principles applied on a consistent
         basis during the periods involved ("GAAP"),  except as may be otherwise
         specified in such financial  statements or the notes thereto and except
         that  unaudited  financial  statements  may not contain  all  footnotes
         required  by GAAP,  and fairly  present in all  material  respects  the
         financial position of the Company and its consolidated  Subsidiaries as
         of and for the dates  thereof  and the results of  operations  and cash
         flows for the periods  then ended,  subject,  in the case of  unaudited
         statements, to normal, immaterial, year-end audit adjustments.

              (i)   MATERIAL  CHANGES.  Since  the  date  of the latest  audited
         financial  statements  included  within  the  SEC  Reports,  except  as
         specifically  disclosed in a  subsequent  SEC Report filed prior to the
         date hereof,  (i) there has been no event,  occurrence  or  development
         that has had or that  could  reasonably  be  expected  to  result  in a
         Material  Adverse  Effect,  (ii)  the  Company  has  not  incurred  any
         liabilities (contingent or otherwise) other than (A) trade payables and
         accrued expenses incurred in the ordinary course of business consistent
         with past practice and (B)  liabilities not required to be reflected in
         the  Company's  financial  statements  pursuant to GAAP or disclosed in
         filings made with the Commission, (iii) the Company has not altered its
         method of  accounting,  (iv) the Company  has not  declared or made any
         dividend or distribution of cash or other property to its  stockholders
         or purchased, redeemed or made any agreements to purchase or redeem any
         shares of its  capital  stock and (v) the  Company  has not  issued any
         equity  securities  to  any  officer,  director  or  Affiliate,  except
         pursuant to existing  Company stock option plans.  The Company does not
         have  pending  before  the  Commission  any  request  for  confidential
         treatment of  information.  Except for the  issuance of the  Securities
         contemplated by this Agreement or as set forth on SCHEDULE  3.1(i),  no
         event,  liability or development has occurred or exists with respect to
         the  Company  or  its  Subsidiaries  or  their   respective   business,
         properties,  operations or financial condition,  that would be required
         to be disclosed by the Company under applicable  securities laws at the
         time this  representation is made that has not been publicly  disclosed
         at least one Trading Day prior to the date that this  representation is
         made.

              (j)   LITIGATION.  There is no action, suit,  inquiry,  notice  of
         violation,  proceeding or investigation pending or, to the knowledge of
         the  Company,   threatened  against  or  affecting  the  Company,   any
         Subsidiary  or any of  their  respective  properties  before  or by any
         court, arbitrator,  governmental or administrative agency or regulatory
         authority (federal, state, county, local or foreign) (collectively,  an
         "ACTION")  which (i)  adversely


                                       12
<PAGE>

         affects or challenges the legality,  validity or  enforceability of any
         of the Transaction  Documents or the Securities or (ii) could, if there
         were an unfavorable decision,  have or reasonably be expected to result
         in a Material  Adverse Effect.  Neither the Company nor any Subsidiary,
         nor any director or officer thereof,  is or has been the subject of any
         Action  involving a claim of violation of or liability under federal or
         state securities laws or a claim of breach of fiduciary duty. There has
         not been, and to the knowledge of the Company,  there is not pending or
         contemplated, any investigation by the Commission involving the Company
         or any  current  or former  director  or officer  of the  Company.  The
         Commission has not issued any stop order or other order  suspending the
         effectiveness of any registration statement filed by the Company or any
         Subsidiary under the Exchange Act or the Securities Act.

              (k)   LABOR  RELATIONS.  No material  labor dispute  exists or, to
         the  knowledge of the Company,  is imminent  with respect to any of the
         employees of the Company  which could  reasonably be expected to result
         in  a  Material   Adverse   Effect.   None  of  the  Company's  or  its
         Subsidiaries'  employees  is a member of a union  that  relates to such
         employee's  relationship  with the Company,  and neither the Company or
         any  of  its  Subsidiaries  is  a  party  to  a  collective  bargaining
         agreement,  and the Company  and its  Subsidiaries  believe  that their
         relationships with their employees are good. No executive  officer,  to
         the  knowledge  of the  Company,  is,  or is  now  expected  to be,  in
         violation   of  any   material   term  of  any   employment   contract,
         confidentiality,  disclosure or  proprietary  information  agreement or
         non-competition  agreement,  or any other  contract or agreement or any
         restrictive  covenant,  and  the  continued  employment  of  each  such
         executive   officer  does  not  subject  the  Company  or  any  of  its
         Subsidiaries  to any  liability  with  respect to any of the  foregoing
         matters.  The Company and its  Subsidiaries  are in compliance with all
         applicable U.S. federal,  state, local and foreign laws and regulations
         relating to employment and employment  practices,  terms and conditions
         of  employment  and wages and hours,  except where the failure to be in
         compliance could not,  individually or in the aggregate,  reasonably be
         expected to have a Material Adverse Effect.

              (l)   COMPLIANCE.  Neither the Company nor any  Subsidiary  (i) is
         in default under or in violation of (and no event has occurred that has
         not been  waived  that,  with  notice  or lapse of time or both,  would
         result in a default by the Company or any  Subsidiary  under),  nor has
         the Company or any Subsidiary  received notice of a claim that it is in
         default  under or that it is in violation  of, any  indenture,  loan or
         credit  agreement or any other agreement or instrument to which it is a
         party or by which it or any of its  properties is bound (whether or not
         such default or violation has been waived), (ii) is in violation of any
         order of any court, arbitrator or governmental body, or (iii) is or has
         been  in  violation  of  any  statute,   rule  or   regulation  of  any
         governmental  authority,  including  without  limitation  all  foreign,
         federal,  state and local laws  applicable to its business and all such
         laws that affect the environment, except in each case as could not have
         or reasonably be expected to result in a Material Adverse Effect.

              (m)   REGULATORY PERMITS. The Company and the Subsidiaries possess
         all certificates,  authorizations and permits issued by the appropriate
         federal,  state, local or foreign regulatory  authorities  necessary to
         conduct  their  respective  businesses as


                                       13
<PAGE>

         described in the SEC Reports,  except where the failure to possess such
         permits  could  not have or  reasonably  be  expected  to  result  in a
         Material Adverse Effect ("MATERIAL  PERMITS"),  and neither the Company
         nor any Subsidiary  has received any notice of proceedings  relating to
         the revocation or modification of any Material Permit.

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

              (o)   PATENTS  AND  TRADEMARKS.  The Company and the  Subsidiaries
         have,  or  have  rights  to  use,  all  patents,  patent  applications,
         trademarks,  trademark applications,  service marks, trade names, trade
         secrets,  inventions,   copyrights,  licenses  and  other  intellectual
         property  rights and similar  rights  necessary  or material for use in
         connection  with their  respective  businesses  as described in the SEC
         Reports and which the failure to so have could have a Material  Adverse
         Effect (collectively,  the "INTELLECTUAL PROPERTY RIGHTS"). Neither the
         Company nor any Subsidiary has received a notice (written or otherwise)
         that  the  Intellectual  Property  Rights  used by the  Company  or any
         Subsidiary  violates or infringes upon the rights of any Person. To the
         knowledge of the Company,  all such  Intellectual  Property  Rights are
         enforceable and there is no existing  infringement by another Person of
         any  of  the  Intellectual   Property  Rights.   The  Company  and  its
         Subsidiaries  have taken  reasonable  security  measures to protect the
         secrecy,  confidentiality  and  value  of  all  of  their  intellectual
         properties, except where failure to do so could not, individually or in
         the  aggregate,  reasonably  be  expected  to have a  Material  Adverse
         Effect.

              (p)   INSURANCE.  The  Company and the Subsidiaries are insured by
         insurers of recognized financial responsibility against such losses and
         risks  and  in  such  amounts  as  are  prudent  and  customary  in the
         businesses  in which the  Company  and the  Subsidiaries  are  engaged,
         including,  but  not  limited  to,  directors  and  officers  insurance
         coverage at least equal to the aggregate  Subscription Amount.  Neither
         the Company nor any  Subsidiary  has any reason to believe that it will
         not be able to renew its existing  insurance  coverage as and when such
         coverage expires or to obtain similar coverage from similar insurers as
         may be  necessary  to  continue  its  business  without  a  significant
         increase in cost.

              (q)   TRANSACTIONS WITH AFFILIATES  AND  EMPLOYEES.  Except as set
         forth in the SEC  Reports,  none of the  officers or  directors  of the
         Company and, to the knowledge of the Company,  none of the employees of
         the Company is presently a party to any


                                       14
<PAGE>

         transaction with the Company or any Subsidiary (other than for services
         as  employees,   officers  and  directors),   including  any  contract,
         agreement or other arrangement providing for the furnishing of services
         to or by, providing for rental of real or personal property to or from,
         or otherwise  requiring  payments to or from any  officer,  director or
         such employee or, to the knowledge of the Company,  any entity in which
         any officer,  director, or any such employee has a substantial interest
         or is an officer,  director, trustee or partner, in each case in excess
         of $60,000 other than for (i) payment of salary or consulting  fees for
         services  rendered,  (ii) reimbursement for expenses incurred on behalf
         of the Company  and (iii)  other  employee  benefits,  including  stock
         option agreements under any stock option plan of the Company.

              (r)   SARBANES-OXLEY; INTERNAL ACCOUNTING CONTROLS.   The  Company
         is in material compliance with all provisions of the Sarbanes-Oxley Act
         of 2002 which are  applicable to it as of the Closing Date. The Company
         and the Subsidiaries  maintain a system of internal accounting controls
         sufficient to provide  reasonable  assurance that (i)  transactions are
         executed  in   accordance   with   management's   general  or  specific
         authorizations,  (ii)  transactions are recorded as necessary to permit
         preparation  of financial  statements  in  conformity  with GAAP and to
         maintain asset accountability, (iii) access to assets is permitted only
         in accordance with management's general or specific authorization,  and
         (iv) the  recorded  accountability  for  assets  is  compared  with the
         existing assets at reasonable intervals and appropriate action is taken
         with respect to any differences. The Company has established disclosure
         controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
         15d-15(e))  for the Company and designed such  disclosure  controls and
         procedures to ensure that  information  required to be disclosed by the
         Company in the reports it files or submits  under the  Exchange  Act is
         recorded,  processed,  summarized and reported, within the time periods
         specified in the Commission's rules and forms. The Company's certifying
         officers have evaluated the  effectiveness of the Company's  disclosure
         controls  and  procedures  as of the end of the  period  covered by the
         Company's most recently  filed  periodic  report under the Exchange Act
         (such date, the "EVALUATION  DATE").  The Company presented in its most
         recently filed periodic  report under the Exchange Act the  conclusions
         of the certifying  officers about the  effectiveness  of the disclosure
         controls and procedures based on their evaluations as of the Evaluation
         Date.  Since the  Evaluation  Date,  there  have been no changes in the
         Company's  internal  control over financial  reporting (as such term is
         defined  in the  Exchange  Act)  that has  materially  affected,  or is
         reasonably likely to materially  affect, the Company's internal control
         over financial reporting.

              (s)   CERTAIN FEES.  Other  than the fees payable to the Placement
         Agent which are set forth on SCHEDULE 3.1(S),  no brokerage or finder's
         fees or  commissions  are or  will be  payable  by the  Company  to any
         broker,  financial  advisor or  consultant,  finder,  placement  agent,
         investment   banker,   bank  or  other   Person  with  respect  to  the
         transactions  contemplated by the Transaction Documents. The Purchasers
         shall have no  obligation  with  respect to any fees or with respect to
         any  claims  made by or on behalf of other  Persons  for fees of a type
         contemplated  in this  Section that may be due in  connection  with the
         transactions contemplated by the Transaction Documents.


                                       15
<PAGE>

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

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

              (v)   REGISTRATION RIGHTS.  Other than each of the Purchasers,  no
         Person has any right to cause the  Company  to effect the  registration
         under the Securities Act of any securities of the Company.

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

              (x)   APPLICATION OF TAKEOVER  PROTECTIONS.  The  Company  and its
         board of directors have taken all necessary action, if any, in order to
         render   inapplicable   any   control   share   acquisition,   business
         combination,  poison pill  (including any  distribution  under a rights
         agreement) or other similar anti-takeover provision under the Company's
         certificate of incorporation (or similar charter documents) or the laws
         of its state of incorporation that is or could become applicable to the
         Purchasers  as a result of the  Purchasers  and the Company  fulfilling
         their  obligations  or  exercising  their rights under the  Transaction
         Documents,  including  without  limitation as a result of the Company's
         issuance  of  the  Securities  and  the  Purchasers'  ownership  of the
         Securities.

              (y)   DISCLOSURE.  Except  with respect to the material  terms and
         conditions  of  the   transactions   contemplated  by  the  Transaction
         Documents,  the Company  confirms  that neither it nor any other Person
         acting on its behalf has provided any of the Purchasers or their agents
         or counsel with any information  that it believes  constitutes or might
         constitute material, nonpublic information. The Company understands and
         confirms that the Purchasers will rely on the foregoing  representation
         in effecting  transactions in securities of the Company. All disclosure
         furnished  by or on behalf of the Company to the  Purchasers  regarding
         the Company,  its business and the  transactions  contemplated

                                       16
<PAGE>

         hereby,  including the Disclosure Schedules to this Agreement,  is true
         and correct and does not  contain  any untrue  statement  of a material
         fact or omit to state any material fact  necessary in order to make the
         statements made therein, in light of the circumstances under which they
         were made,  not  misleading.  The press  releases  disseminated  by the
         Company  during the twelve months  preceding the date of this Agreement
         taken as a whole do not contain any untrue statement of a material fact
         or omit to state a  material  fact  required  to be stated  therein  or
         necessary   in  order  to  make  the   statements,   in  light  of  the
         circumstances under which they were made and when made, not misleading.
         The Company acknowledges and agrees that no Purchaser makes or has made
         any  representations  or  warranties  with respect to the  transactions
         contemplated  hereby other than those specifically set forth in Section
         3.2 hereof.

              (z)   NO  INTEGRATED  OFFERING.   Assuming  the  accuracy  of  the
         Purchasers'  representations  and  warranties set forth in Section 3.2,
         neither the Company,  nor any of its Affiliates,  nor any Person acting
         on its or their behalf has, directly or indirectly,  made any offers or
         sales of any  security  or  solicited  any offers to buy any  security,
         under circumstances that would cause this offering of the Securities to
         be integrated  with prior  offerings by the Company for purposes of the
         Securities Act or any applicable  shareholder approval provision of any
         Trading Market on which any of the securities of the Company are listed
         or designated.

              (aa)  SOLVENCY.  Based on the  financial  condition of the Company
         as of the  Closing  Date  after  giving  effect to the  receipt  by the
         Company of the proceeds from the sale of the Securities hereunder,  (i)
         the fair saleable value of the Company's assets exceeds the amount that
         will be required to be paid on or in respect of the Company's  existing
         debts and other liabilities (including known contingent liabilities) as
         they mature;  (ii) the Company's assets do not constitute  unreasonably
         small capital to carry on its business as now conducted and as proposed
         to be  conducted  including  its capital  needs taking into account the
         particular  capital  requirements  of  the  business  conducted  by the
         Company,  and projected capital  requirements and capital  availability
         thereof; and (iii) the current cash flow of the Company,  together with
         the proceeds the Company would receive, were it to liquidate all of its
         assets,  after  taking into account all  anticipated  uses of the cash,
         would  be  sufficient  to  pay  all  amounts  on or in  respect  of its
         liabilities when such amounts are required to be paid. The Company does
         not intend to incur debts  beyond its ability to pay such debts as they
         mature  (taking  into  account  the  timing  and  amounts of cash to be
         payable on or in respect of its debt).  The Company has no knowledge of
         any facts or  circumstances  which lead it to believe that it will file
         for   reorganization   or   liquidation   under   the   bankruptcy   or
         reorganization  laws of any  jurisdiction  within  one  year  from  the
         Closing Date.  SCHEDULE  3.1(AA) sets forth as of the dates thereof all
         outstanding  secured and unsecured  Indebtedness  of the Company or any
         Subsidiary, or for which the Company or any Subsidiary has commitments.
         For  the  purposes  of this  Agreement,  "INDEBTEDNESS"  means  (a) any
         liabilities  for  borrowed  money or amounts  owed in excess of $50,000
         (other than trade accounts  payable  incurred in the ordinary course of
         business),  (b)  all  guaranties,  endorsements  and  other  contingent
         obligations in respect of  Indebtedness  of others,  whether or not the
         same are or should be reflected in the Company's  balance sheet (or the
         notes  thereto),   except   guaranties  by

                                       17
<PAGE>

         endorsement  of  negotiable  instruments  for deposit or  collection or
         similar  transactions in the ordinary  course of business;  and (c) the
         present  value of any lease  payments  in excess of  $50,000  due under
         leases required to be capitalized in accordance with GAAP.  Neither the
         Company  nor  any   Subsidiary  is  in  default  with  respect  to  any
         Indebtedness.

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

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

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

              (ee)  ACCOUNTANTS.  The Company's accounting  firm is set forth on
         SCHEDULE  3.1(EE) of the  Disclosure  Schedule.  To the  knowledge  and
         belief of the Company,  such accounting firm (i) is a registered public
         accounting  firm as required by the Exchange Act and (ii) shall express
         its opinion with respect to the financial  statements to be included in
         the Company's  Annual  Report on Form 10-K for the year ended  December
         31, 2006.

              (ff)  SENIORITY.  Except  as set forth on SCHEDULE 3.1(FF),  as of
         the Closing Date, no Indebtedness or other claim against the Company is
         senior to the  Debentures in right of payment,  whether with respect to
         interest or upon liquidation or dissolution,  or otherwise,  other than
         indebtedness  secured by purchase  money security  interests  (which is
         senior only as to underlying  assets covered thereby) and capital lease
         obligations (which is senior only as to the property covered thereby).

              (gg)  NO DISAGREEMENTS WITH ACCOUNTANTS AND  LAWYERS.   There  are
         no  disagreements  of  any  kind  presently  existing,   or  reasonably
         anticipated  by the  Company  to arise,  between  the  Company  and the
         accountants and lawyers  formerly or presently  employed by the Company
         and,  except as set forth on SCHEDULE  3.1(GG),  the Company is current
         with respect to any fees owed to its accountants and lawyers.

                                       18
<PAGE>

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

              (ii)  ACKNOWLEDGMENT   REGARDING   PURCHASERS'  TRADING  ACTIVITY.
         Anything  in  this  Agreement  or  elsewhere  herein  to  the  contrary
         notwithstanding  (except for Sections  3.2(f) and 4.16  hereof),  it is
         understood  and  acknowledged  by the  Company  (i)  that  none  of the
         Purchasers have been asked to agree, nor has any Purchaser  agreed,  to
         desist from purchasing or selling, long and/or short, securities of the
         Company,  or "derivative"  securities based on securities issued by the
         Company or to hold the  Securities  for any specified  term;  (ii) that
         past or future  open  market or other  transactions  by any  Purchaser,
         including Short Sales, and specifically including,  without limitation,
         Short Sales or "derivative"  transactions,  before or after the closing
         of this or future private placement transactions, may negatively impact
         the market price of the  Company's  publicly-traded  securities;  (iii)
         that any Purchaser, and counter-parties in "derivative" transactions to
         which any such Purchaser is a party, directly or indirectly,  presently
         may have a "short"  position  in the Common  Stock,  and (iv) that each
         Purchaser shall not be deemed to have any  affiliation  with or control
         over any arm's length  counter-party in any  "derivative"  transaction.
         The Company further  understands and acknowledges  that (a) one or more
         Purchasers may engage in hedging activities at various times during the
         period  that  the  Securities  are  outstanding,   including,   without
         limitation,  during the periods that the value of the Underlying Shares
         deliverable  with respect to Securities  are being  determined  and (b)
         such hedging activities (if any) could reduce the value of the existing
         stockholders'  equity  interests  in the  Company at and after the time
         that  the  hedging   activities  are  being   conducted.   The  Company
         acknowledges  that  such  aforementioned   hedging  activities  do  not
         constitute a breach of any of the Transaction Documents.

              (jj)  REGULATION  M  COMPLIANCE.  The  Company has not, and to its
         knowledge  no one acting on its behalf  has,  (i)  taken,  directly  or
         indirectly,   any  action  designed  to  cause  or  to  result  in  the
         stabilization  or  manipulation  of the  price of any  security  of the
         Company to facilitate the sale or resale of any of the Securities, (ii)
         sold,  bid for,  purchased,  or paid any  compensation  for  soliciting
         purchases  of, any of the  securities  of the  Company or (iii) paid or
         agreed to pay to any Person any compensation for soliciting  another to
         purchase any other  securities of the Company,  other than, in the case
         of clauses (ii) and (iii), compensation paid to the Company's placement
         agent in connection with the placement of the Securities.

                                       19
<PAGE>

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

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

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

              (c)   PURCHASER STATUS.   At the time such Purchaser  was  offered
         the Securities,  it was, and at the date hereof it is, and on each date
         on which it exercises  any Warrants or converts any  Debentures it will
         be either:  (i) an "accredited  investor" as defined in Rule 501(a)(1),
         (a)(2),  (a)(3),  (a)(7) or (a)(8) under the  Securities  Act or (ii) a
         "qualified  institutional  buyer" as defined in Rule 144A(a)  under the
         Securities  Act.  Such  Purchaser is not required to be registered as a
         broker-dealer under Section 15 of the Exchange Act.

              (d)   EXPERIENCE OF SUCH PURCHASER.  Such Purchaser,  either alone
         or   together   with   its   representatives,   has   such   knowledge,
         sophistication  and experience in business and financial  matters so as
         to be capable  of  evaluating  the merits and risks of the  prospective
         investment in the Securities, and has so evaluated the merits and risks
         of such

                                       20
<PAGE>

         investment.  Such  Purchaser  is able to bear the  economic  risk of an
         investment  in the  Securities  and,  at the present  time,  is able to
         afford a complete loss of such investment.

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

              (f)   SHORT  SALES  AND  CONFIDENTIALITY PRIOR TO THE DATE HEREOF.
         Other than the transaction  contemplated hereunder,  such Purchaser has
         not directly or  indirectly,  nor has any Person acting on behalf of or
         pursuant  to  any  understanding  with  such  Purchaser,  executed  any
         transaction,  including  Short Sales,  in the securities of the Company
         during the period  commencing  from the time that such Purchaser  first
         received a term sheet  (written  or oral) from the Company or any other
         Person   setting   forth  the  material   terms  of  the   transactions
         contemplated  hereunder  until  the date  hereof  ("DISCUSSION  TIME").
         Notwithstanding  the  foregoing,  in the case of a Purchaser  that is a
         multi-managed  investment  vehicle whereby separate  portfolio managers
         manage separate  portions of such Purchaser's  assets and the portfolio
         managers have no direct  knowledge of the investment  decisions made by
         the portfolio  managers  managing  other  portions of such  Purchaser's
         assets,  the  representation  set forth  above  shall  only  apply with
         respect to the portion of assets managed by the portfolio  manager that
         made the investment decision to purchase the Securities covered by this
         Agreement.  Other than to other Persons party to this  Agreement,  such
         Purchaser has maintained the confidentiality of all disclosures made to
         it in connection  with this  transaction  (including  the existence and
         terms of this transaction).

                                   ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

         4.1  TRANSFER RESTRICTIONS.

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

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

                                       21
<PAGE>

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

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

              (c)   Certificates  evidencing  the  Underlying  Shares  shall not
         contain any legend  (including  the legend set forth in Section  4.1(b)
         hereof): (i) while a registration statement (including the Registration
         Statement)  covering the resale of such security is effective under the
         Securities  Act, or (ii) following any sale of such  Underlying  Shares
         pursuant to Rule 144, or (iii) if such  Underlying  Shares are eligible
         for sale  under Rule  144(k),  or (iv) if such  legend is not  required
         under applicable requirements of the Securities Act (including judicial
         interpretations   and  pronouncements   issued  by  the  staff  of  the
         Commission).  The  Company  shall  cause its  counsel  to issue a legal
         opinion to the Transfer  Agent  promptly  after the  Effective  Date if
         required  by the  Transfer  Agent to effect  the  removal of the legend
         hereunder. If all or any portion of a Debenture or

                                       22
<PAGE>

         Warrant is converted or exercised (as  applicable) at a time when there
         is an  effective  registration  statement  to cover  the  resale of the
         Underlying  Shares, or if such Underlying Shares may be sold under Rule
         144(k) or if such legend is not  otherwise  required  under  applicable
         requirements of the Securities Act (including judicial  interpretations
         and  pronouncements  issued by the staff of the  Commission)  then such
         Underlying  Shares  shall be issued  free of all  legends.  The Company
         agrees that following the Effective Date or at such time as such legend
         is no longer required under this Section 4.1(c), it will, no later than
         three Trading Days following the delivery by a Purchaser to the Company
         or the Transfer Agent of a certificate  representing Underlying Shares,
         as  applicable,  issued with a  restrictive  legend (such third Trading
         Day, the "LEGEND  REMOVAL  DATE"),  deliver or cause to be delivered to
         such Purchaser a certificate representing such shares that is free from
         all  restrictive  and  other  legends.  The  Company  may not  make any
         notation on its records or give instructions to the Transfer Agent that
         enlarge  the  restrictions  on  transfer  set  forth  in this  Section.
         Certificates for Underlying  Shares subject to legend removal hereunder
         shall  be  transmitted  by the  Transfer  Agent  to the  Purchasers  by
         crediting  the  account  of  the  Purchaser's  prime  broker  with  the
         Depository Trust Company System.

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

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

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

                                       23
<PAGE>

the dilutive  effect that such  issuance may have on the  ownership of the other
stockholders of the Company.

         4.3  FURNISHING  OF  INFORMATION.  As  long  as   any  Purchaser   owns
Securities,  the  Company  covenants  to timely  file (or obtain  extensions  in
respect  thereof  and file  within the  applicable  grace  period)  all  reports
required  to be filed by the  Company  after  the date  hereof  pursuant  to the
Exchange Act. As long as any Purchaser  owns  Securities,  if the Company is not
required to file  reports  pursuant  to the  Exchange  Act, it will  prepare and
furnish to the  Purchasers and make publicly  available in accordance  with Rule
144(c) such information as is required for the Purchasers to sell the Securities
under Rule 144.  The Company  further  covenants  that it will take such further
action  as any  holder of  Securities  may  reasonably  request,  to the  extent
required from time to time to enable such Person to sell such Securities without
registration  under the Securities Act within the  requirements of the exemption
provided by Rule 144.

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

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

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

                                       24
<PAGE>

contemplated by the  Registration  Rights  Agreement and (B) the filing of final
Transaction  Documents  (including  signature pages thereto) with the Commission
and (ii) to the extent such  disclosure  is  required  by law or Trading  Market
regulations,  in which case the Company shall provide the Purchasers  with prior
notice of such disclosure permitted under this clause (ii).

         4.7  SHAREHOLDER RIGHTS PLAN.  No claim will be made or enforced by the
Company  or,  with the  consent  of the  Company,  any  other  Person,  that any
Purchaser is an "Acquiring Person" under any control share acquisition, business
combination,  poison pill (including any distribution  under a rights agreement)
or similar  anti-takeover  plan or arrangement in effect or hereafter adopted by
the Company,  or that any Purchaser could be deemed to trigger the provisions of
any such  plan or  arrangement,  by  virtue of  receiving  Securities  under the
Transaction  Documents or under any other agreement  between the Company and the
Purchasers.

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

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

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

                                       25
<PAGE>

         4.11 INDEMNIFICATION  OF PURCHASERS.  Subject to the provisions of this
Section  4.11,  the  Company  will  indemnify  and hold each  Purchaser  and its
directors, officers, shareholders,  members, partners, employees and agents (and
any other Persons with a functionally  equivalent  role of a Person holding such
titles notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser  (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers,  shareholders,
agents,   members,   partners  or  employees  (and  any  other  Persons  with  a
functionally  equivalent role of a Person holding such titles  notwithstanding a
lack of such  title or any other  title) of such  controlling  person  (each,  a
"PURCHASER PARTY") harmless from any and all losses,  liabilities,  obligations,
claims,  contingencies,  damages,  costs and expenses,  including all judgments,
amounts paid in  settlements,  court costs and  reasonable  attorneys'  fees and
costs of  investigation  that any such Purchaser  Party may suffer or incur as a
result  of or  relating  to (a)  any  breach  of  any  of  the  representations,
warranties,  covenants or agreements made by the Company in this Agreement or in
the  other  Transaction  Documents  or  (b)  any  action  instituted  against  a
Purchaser, or any of them or their respective Affiliates,  by any stockholder of
the Company who is not an  Affiliate of such  Purchaser,  with respect to any of
the transactions  contemplated by the Transaction  Documents (unless such action
is based  upon a  breach  of such  Purchaser's  representations,  warranties  or
covenants  under the Transaction  Documents or any agreements or  understandings
such  Purchaser  may have with any such  stockholder  or any  violations  by the
Purchaser of state or federal  securities  laws or any conduct by such Purchaser
which constitutes fraud,  gross negligence,  willful misconduct or malfeasance).
If any action shall be brought  against any Purchaser  Party in respect of which
indemnity may be sought pursuant to this  Agreement,  such Purchaser Party shall
promptly notify the Company in writing,  and the Company shall have the right to
assume  the  defense  thereof  with  counsel  of  its  own  choosing  reasonably
acceptable to the Purchaser  Party.  Any Purchaser Party shall have the right to
employ  separate  counsel in any such  action  and  participate  in the  defense
thereof,  but the fees and expenses of such  counsel  shall be at the expense of
such Purchaser  Party except to the extent that (i) the  employment  thereof has
been  specifically  authorized  by the Company in writing,  (ii) the Company has
failed  after a  reasonable  period of time to assume such defense and to employ
counsel  or (iii) in such  action  there is, in the  reasonable  opinion of such
separate counsel, a material conflict on any material issue between the position
of the  Company  and the  position of such  Purchaser  Party,  in which case the
Company shall be  responsible  for the  reasonable  fees and expenses of no more
than one such separate counsel.  The Company will not be liable to any Purchaser
Party under this Agreement (i) for any settlement by a Purchaser  Party effected
without the Company's  prior written  consent,  which shall not be  unreasonably
withheld or delayed;  or (ii) to the extent, but only to the extent that a loss,
claim,  damage or liability is attributable  to any Purchaser  Party's breach of
any of the  representations,  warranties,  covenants or agreements  made by such
Purchaser Party in this Agreement or in the other Transaction Documents.

         4.12 RESERVATION AND LISTING OF SECURITIES.

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


                                       26
<PAGE>

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

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

         4.13 PARTICIPATION IN FUTURE FINANCING.

              (a)   From  the  date  hereof until  the date that is the 12 month
         anniversary of the Effective  Date, upon any issuance by the Company or
         any of its Subsidiaries of Common Stock or Common Stock  Equivalents (a
         "SUBSEQUENT  FINANCING"),  each  Purchaser  shall  have  the  right  to
         participate  in up to an amount of the  Subsequent  Financing  equal to
         100% of the Subsequent  Financing (the "PARTICIPATION  MAXIMUM") on the
         same  terms,  conditions  and  price  provided  for in  the  Subsequent
         Financing.

              (b)   At  least  3  Trading  Days  prior  to  the  closing  of the
         Subsequent  Financing,  the Company shall  deliver to each  Purchaser a
         written  notice  of its  intention  to  effect a  Subsequent  Financing
         ("PRE-NOTICE"),  which  Pre-Notice shall ask such Purchaser if it wants
         to review the details of such  financing  (such  additional  notice,  a
         "SUBSEQUENT  FINANCING NOTICE").  Upon the request of a Purchaser,  and
         only upon a  request  by such  Purchaser,  for a  Subsequent  Financing
         Notice,  the Company  shall  promptly,  but no later than 1 Trading Day
         after  such  request,  deliver a  Subsequent  Financing  Notice to such
         Purchaser. The Subsequent Financing Notice shall describe in reasonable
         detail the proposed terms of such Subsequent  Financing,  the amount of
         proceeds  intended  to be raised  thereunder  and the Person or Persons
         through  or with whom  such  Subsequent  Financing  is  proposed  to be
         effected and shall  include a term sheet or similar  document  relating
         thereto as an attachment.

              (c)   Any  Purchaser  desiring  to  participate in such Subsequent
         Financing must provide  written notice to the Company by not later than
         5:30 p.m.  (New York City time) on the 3rd Trading Day after all of the
         Purchasers  have received the Pre-Notice  that the Purchaser is willing
         to  participate  in  the  Subsequent  Financing,   the  amount  of  the
         Purchaser's participation, and that the Purchaser has such funds ready,
         willing,  and  available  for  investment on the terms set forth in the
         Subsequent  Financing  Notice. If the Company receives no notice from a
         Purchaser as of such 3rd Trading Day, such

                                       27
<PAGE>

         Purchaser shall be deemed to have notified the Company that it does not
         elect to participate.

              (d)   If by 5:30 p.m. (New York City time) on the 3rd  Trading Day
         after all of the Purchasers have received the Pre-Notice, notifications
         by the Purchasers of their willingness to participate in the Subsequent
         Financing  (or to cause  their  designees  to  participate)  is, in the
         aggregate, less than the total amount of the Subsequent Financing, then
         the  Company  may  effect  the  remaining  portion  of such  Subsequent
         Financing on the terms and with the Persons set forth in the Subsequent
         Financing Notice.

              (e)   If by 5:30 p.m. (New York City time) on the 3rd  Trading Day
         after all of the Purchasers have received the  Pre-Notice,  the Company
         receives  responses to a Subsequent  Financing  Notice from  Purchasers
         seeking to purchase more than the aggregate amount of the Participation
         Maximum,  each such Purchaser  shall have the right to purchase its Pro
         Rata Portion (as defined below) of the Participation Maximum. "PRO RATA
         PORTION" means the ratio of (x) the  Subscription  Amount of Securities
         purchased on the Closing Date by a Purchaser  participating  under this
         Section 4.13 and (y) the sum of the aggregate  Subscription  Amounts of
         Securities   purchased   on  the   Closing   Date  by  all   Purchasers
         participating under this Section 4.13.

              (f)   The  Company  must  provide  the  Purchasers  with  a second
         Subsequent  Financing  Notice,  and the Purchasers  will again have the
         right of  participation  set forth above in this Section  4.13,  if the
         Subsequent Financing subject to the initial Subsequent Financing Notice
         is not  consummated  for any  reason  on the  terms  set  forth in such
         Subsequent  Financing  Notice  within 60 Trading Days after the date of
         the initial Subsequent Financing Notice.

              (g)   Notwithstanding  the  foregoing,  this  Section  4.13  shall
         not apply in respect of (i) an Exempt  Issuance or (ii) an underwritten
         public offering of Common Stock.

         4.14 SUBSEQUENT EQUITY SALES.

              (a)   From  the  date  hereof  until 90  days after the  Effective
         Date,  neither  the Company nor any  Subsidiary  shall issue  shares of
         Common Stock or Common Stock Equivalents; PROVIDED, HOWEVER, the 90 day
         period set forth in this  Section 4.14 shall be extended for the number
         of Trading  Days  during such period in which (i) trading in the Common
         Stock  is  suspended  by any  Trading  Market,  or (ii)  following  the
         Effective  Date,  the  Registration  Statement is not  effective or the
         prospectus  included in the  Registration  Statement may not be used by
         the Purchasers for the resale of the Underlying Shares.

              (b)   [RESERVED]

              (c)   From  the date hereof until such time as no Purchaser  holds
         any  Debentures  or  Warrants,  the Company  shall be  prohibited  from
         effecting  or  entering  into an  agreement  to effect  any  Subsequent
         Financing  involving  a  Variable  Rate  Transaction.   "VARIABLE  RATE
         TRANSACTION"  means a transaction  in which the Company issues or sells
         (i)

                                       28
<PAGE>

         any debt or equity securities that are convertible  into,  exchangeable
         or exercisable for, or include the right to receive  additional  shares
         of Common Stock either (A) at a  conversion,  exercise or exchange rate
         or other price that is based upon and/or varies with the trading prices
         of or  quotations  for the shares of Common Stock at any time after the
         initial  issuance  of such  debt or  equity  securities,  or (B) with a
         conversion,  exercise or exchange  price that is subject to being reset
         at some future  date after the initial  issuance of such debt or equity
         security or upon the  occurrence  of  specified  or  contingent  events
         directly or  indirectly  related to the  business of the Company or the
         market  for  the  Common  Stock  or (ii)  enters  into  any  agreement,
         including,  but not limited  to, an equity line of credit,  whereby the
         Company may sell securities at a future determined price.

              (d)   Notwithstanding  the foregoing,  this Section 4.14 shall not
         apply in respect of an Exempt  Issuance,  except that no Variable  Rate
         Transaction shall be an Exempt Issuance.

         4.15 EQUAL TREATMENT OF PURCHASERS.  No consideration  shall be offered
or paid to any  Person to amend or consent  to a waiver or  modification  of any
provision of any of the Transaction  Documents unless the same  consideration is
also offered to all of the parties to the Transaction  Documents.  Further,  the
Company shall not make any payment of principal or interest on the Debentures in
amounts  which  are   disproportionate  to  the  respective   principal  amounts
outstanding  on  the  Debentures  at  any  applicable  time.  For  clarification
purposes,  this provision constitutes a separate right granted to each Purchaser
by the Company and negotiated separately by each Purchaser,  and is intended for
the  Company  to treat  the  Purchasers  as a class  and shall not in any way be
construed as the Purchasers  acting in concert or as a group with respect to the
purchase, disposition or voting of Securities or otherwise.

         4.16 SHORT  SALES  AND  CONFIDENTIALITY  AFTER  THE DATE  HEREOF.  Each
Purchaser  severally and not jointly with the other  Purchasers  covenants  that
neither  it  nor  any  Affiliate  acting  on  its  behalf  or  pursuant  to  any
understanding  with it will execute any Short Sales during the period commencing
at the Discussion Time and ending at the time that the transactions contemplated
by this Agreement are first publicly announced as described in Section 4.6. Each
Purchaser,  severally and not jointly with the other Purchasers,  covenants that
until such time as the transactions  contemplated by this Agreement are publicly
disclosed  by the Company as  described  in Section  4.6,  such  Purchaser  will
maintain the  confidentiality  of all disclosures  made to it in connection with
this transaction  (including the existence and terms of this transaction).  Each
Purchaser understands and acknowledges, severally and not jointly with any other
Purchaser,  that the  Commission  currently  takes the position that coverage of
short  sales of  shares  of the  Common  Stock  "against  the box"  prior to the
Effective Date of the Registration  Statement with the Securities is a violation
of Section 5 of the  Securities  Act, as set forth in Item 65, Section A, of the
Manual  of  Publicly  Available  Telephone  Interpretations,  dated  July  1997,
compiled  by the  Office of Chief  Counsel,  Division  of  Corporation  Finance.
Notwithstanding the foregoing,  no Purchaser makes any representation,  warranty
or covenant  hereby that it will not engage in Short Sales in the  securities of
the Company after the time that the transactions  contemplated by this Agreement
are first publicly  announced as described in Section 4.6.  Notwithstanding  the
foregoing, in the case of a Purchaser that is a multi-managed investment vehicle
whereby separate portfolio managers manage separate portions of such Purchaser's
assets


                                       29
<PAGE>

and the portfolio managers have no direct knowledge of the investment  decisions
made by the  portfolio  managers  managing  other  portions of such  Purchaser's
assets,  the  covenant  set forth  above  shall only  apply with  respect to the
portion of assets  managed by the  portfolio  manager  that made the  investment
decision to purchase the Securities covered by this Agreement.

         4.17 FORM D; BLUE SKY FILINGS. The Company agrees to timely file a Form
D with respect to the Securities as required under Regulation D and to provide a
copy  thereof,  promptly upon request of any  Purchaser.  The Company shall take
such action as the Company shall  reasonably  determine is necessary in order to
obtain  an  exemption  for,  or to  qualify  the  Securities  for,  sale  to the
Purchasers at the Closing under applicable  securities or "Blue Sky" laws of the
states of the United States, and shall provide evidence of such actions promptly
upon request of any Purchaser.

         4.18 CAPITAL CHANGES.  Until  the one year anniversary of the Effective
Date,  the  Company  shall not  undertake  a reverse or forward  stock  split or
reclassification  of the Common Stock without the prior  written  consent of the
Purchasers holding a majority in principal amount outstanding of the Debentures.

         4.19 MOST FAVORED NATION PROVISION. From the date hereof until the date
when  the  Debentures  are no  longer  outstanding,  if the  Company  effects  a
Subsequent Financing at an effective per share price that is lower than the then
Conversion Price (if the holder of the Common Stock or Common Stock  Equivalents
so issued shall at any time, whether by operation of purchase price adjustments,
reset provisions, floating conversion, exercise or exchange prices or otherwise,
or due to warrants,  options or rights per share which are issued in  connection
with such  issuance,  be  entitled  to  receive  shares  of  Common  Stock at an
effective  price per share that is lower than the then  Conversion  Price,  such
issuance  shall be deemed  to have  occurred  for less than the then  Conversion
Price),  each Purchaser may elect,  in its sole  discretion,  to exchange all or
some of the  Debentures  then held by such Purchaser for any securities or units
issued in such  Subsequent  Financing  on a $1.00 for $1.00  basis  based on the
outstanding  principal  amount of such  Debentures,  along with any  accrued but
unpaid  interest,  liquidated  damages and other amounts owing thereon,  and the
effective price at which such securities were sold in such Subsequent Financing;
PROVIDED, HOWEVER, that this Section 4.19 shall not apply with respect to (i) an
Exempt  Issuance or (ii) an underwritten  public  offering of Common Stock.  The
Company  shall  provide  each  Purchaser  with  notice  of any  such  Subsequent
Financing in the manner set forth in Section 4.13.

                                   ARTICLE V.
                                  MISCELLANEOUS

         5.1  TERMINATION.  This  Agreement  may be terminated by any Purchaser,
as to such  Purchaser's  obligations  hereunder  only  and  without  any  effect
whatsoever on the obligations  between the Company and the other Purchasers,  by
written notice to the other parties,  if the Closing has not been consummated on
or before April 16, 2007;  PROVIDED,  HOWEVER,  that such  termination  will not
affect  the  right of any party to sue for any  breach  by the  other  party (or
parties).

                                       30
<PAGE>

         5.2  FEES  AND  EXPENSES.  At  the  Closing,  the  Company  agrees   to
reimburse (i) Crescent  International Ltd.  ("CRESCENT") the non-accountable sum
of $15,000 for its legal fees and expenses,  $5,000 of which has been paid prior
to the Closing,  and (ii) the Placement Agent the  non-accountable sum of $5,000
for its legal fees and expenses.  Accordingly, in lieu of the foregoing payment,
the aggregate  amount that Crescent is to pay for the  Securities at the Closing
shall be reduced by $10,000 in lieu thereof. In addition,  the Company agrees to
pay,  out of the  proceeds  of the  Closing,  Cantara  (Switzerland)  S.A.,  the
investment  advisor  to  Crescent,   a  fee  equal  to  1.5%  of  the  aggregate
Subscription  Amounts of Crescent and  Purchasers  introduced  to the  Placement
Agent and/or the Company by Cantara  (Switzerland) S.A.. Except as expressly set
forth in the  Transaction  Documents to the  contrary,  each party shall pay the
fees and expenses of its advisers,  counsel,  accountants and other experts,  if
any, and all other expenses  incurred by such party incident to the negotiation,
preparation,  execution, delivery and performance of this Agreement. The Company
shall pay all transfer agent fees, stamp taxes and other taxes and duties levied
in connection with the delivery of any Securities to the Purchasers.

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

         5.4  NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided  hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of  transmission,  if
such notice or  communication is delivered via facsimile at the facsimile number
set forth on the signature  pages  attached  hereto prior to 5:30 p.m. (New York
City  time)  on a  Trading  Day,  (b) the next  Trading  Day  after  the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile  number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day,  (c) the 2nd Trading  Day  following  the date of mailing,  if sent by U.S.
nationally  recognized  overnight courier service, or (d) upon actual receipt by
the party to whom such  notice is  required  to be given.  The  address for such
notices and communications shall be as set forth on the signature pages attached
hereto.

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

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

                                       31
<PAGE>

         5.7  SUCCESSORS AND ASSIGNS.  This Agreement  shall be binding upon and
inure to the benefit of the parties and their successors and permitted  assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser (other than by merger).  Any
Purchaser may assign any or all of its rights under this Agreement to any Person
to whom such  Purchaser  assigns or  transfers  any  Securities,  provided  such
transferee  agrees in  writing  to be bound,  with  respect  to the  transferred
Securities,  by the  provisions of the  Transaction  Documents that apply to the
"Purchasers."

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

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

         5.10 SURVIVAL.  The  representations  and warranties  shall survive the
Closing  and the  delivery  of the  Securities  for  the  applicable  statue  of
limitations.

         5.11 EXECUTION.   This  Agreement  may  be  executed  in  two  or  more
counterparts,  all of which when taken  together shall be considered one and the
same agreement and shall become effective when  counterparts have been signed by
each party and  delivered  to the other  party,  it being  understood  that both
parties need not sign the same  counterpart.  In the event that any

                                       32
<PAGE>

signature  is delivered by  facsimile  transmission  or by e-mail  delivery of a
".pdf"  format  data  file,  such  signature  shall  create a valid and  binding
obligation  of the  party  executing  (or on  whose  behalf  such  signature  is
executed)  with the  same  force  and  effect  as if such  facsimile  or  ".pdf"
signature page were an original thereof.

         5.12 SEVERABILITY.  If  any term,  provision,  covenant or  restriction
of this  Agreement is held by a court of competent  jurisdiction  to be invalid,
illegal,  void  or  unenforceable,  the  remainder  of  the  terms,  provisions,
covenants  and  restrictions  set forth  herein  shall  remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto  shall use their  commercially  reasonable  efforts to find and employ an
alternative  means to achieve the same or substantially  the same result as that
contemplated  by such term,  provision,  covenant or  restriction.  It is hereby
stipulated  and declared to be the intention of the parties that they would have
executed the remaining terms,  provisions,  covenants and  restrictions  without
including any of such that may be hereafter declared invalid,  illegal,  void or
unenforceable.

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

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

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

        5.16 PAYMENT SET ASIDE.  To the extent that the Company  makes a payment
or payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such

                                       33
<PAGE>

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

         5.17 USURY.  To  the extent  it may lawfully do so, the Company  hereby
agrees not to insist upon or plead or in any manner  whatsoever  claim, and will
resist any and all efforts to be compelled to take the benefit or advantage  of,
usury  laws  wherever  enacted,  now or at  any  time  hereafter  in  force,  in
connection  with any  claim,  action or  proceeding  that may be  brought by any
Purchaser  in  order to  enforce  any  right or  remedy  under  any  Transaction
Document.  Notwithstanding  any  provision  to  the  contrary  contained  in any
Transaction  Document,  it is  expressly  agreed  and  provided  that the  total
liability of the Company  under the  Transaction  Documents  for payments in the
nature of interest  shall not exceed the maximum  lawful rate  authorized  under
applicable law (the "MAXIMUM RATE"), and, without limiting the foregoing,  in no
event  shall any rate of  interest or default  interest,  or both of them,  when
aggregated with any other sums in the nature of interest that the Company may be
obligated to pay under the Transaction Documents exceed such Maximum Rate. It is
agreed  that  if the  maximum  contract  rate  of  interest  allowed  by law and
applicable to the Transaction  Documents is increased or decreased by statute or
any official  governmental action subsequent to the date hereof, the new maximum
contract rate of interest  allowed by law will be the Maximum Rate applicable to
the  Transaction  Documents  from  the  effective  date  forward,   unless  such
application  is  precluded  by  applicable  law.  If  under  any   circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to any
Purchaser with respect to indebtedness  evidenced by the Transaction  Documents,
such excess shall be applied by such Purchaser to the unpaid  principal  balance
of any such  indebtedness or be refunded to the Company,  the manner of handling
such excess to be at such Purchaser's election.

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

                                       34
<PAGE>

all Purchasers with the same terms and Transaction Documents for the convenience
of the  Company and not because it was  required  or  requested  to do so by the
Purchasers.

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

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

                            (SIGNATURE PAGES FOLLOW)


















                                       35

<PAGE>


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

TITANIUM GROUP LIMITED                        ADDRESS FOR NOTICE:


By: /s/ JASON MA
   --------------------------------------     4/F BOCG INSURANCE TOWER
     Name: Jason Ma                           134-136 DES VOEUX ROAD CENTRAL
     Title: CEO                               HONG KONG, CHINA

With a copy to (which shall not constitute notice):
Dill Dill Carr Stonbraker & Hutchings, P.C.
455 Sherman Street, Suite 300
Denver, Colorado 80203-4404
Attention: Fay M. Matsukage


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





















                                       36
<PAGE>


       [PURCHASER SIGNATURE PAGES TO TTNUF SECURITIES PURCHASE AGREEMENT]

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


Name of Purchaser: CRESCENT INTERNATIONAL LTD.
                  --------------------------------------------------------------

SIGNATURE OF AUTHORIZED SIGNATORY
OF PURCHASER:            /s/ MAXI BREZZI /s/ BACHIR TALEB-IBRAHIMI
             -------------------------------------------------------------------

Name of Authorized Signatory: MAXI BREZZI    BACHIR TALEB-IBRAHIMI
                             ---------------------------------------------------

Title of Authorized Signatory: AUTHORIZED SIGNATORIES
                              --------------------------------------------------

Email Address of Purchaser: CANTARA@DMITRUST.COM
                           -----------------------------------------------------

Facsimile Number of Purchaser:  +41 22 791 7171
                              --------------------------------------------------

Address for Notice of Purchaser:  c/o Cantara (Switzerland) SA
                                  84 Av. Louis-Casai,
                                  CH-1216 Cointrin/Geneva, Switzerland




Address for Delivery of  Securities  for  Purchaser  (if not same as address for
notice):





Subscription Amount: $ 1,000,000 USD
                      ------------------

Warrant Shares:   3,333,333
                -----------------




EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]






                                       37
<PAGE>


       [PURCHASER SIGNATURE PAGES TO TTNUF SECURITIES PURCHASE AGREEMENT]

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


Name of Purchaser: CHESTNUT RIDGE PARTNERS, LP
                  --------------------------------------------------------------

SIGNATURE OF AUTHORIZED SIGNATORY OF PURCHASER:  /s/ KENNETH HOLZ
                                               ---------------------------------

Name of Authorized Signatory:   KENNETH HOLZ
                             ---------------------------------------------------

Title of Authorized Signatory: CHIEF FINANCIAL OFFICER
                              --------------------------------------------------

Email Address of Purchaser: KHOLZ@CHESTNUTCAP.COM
                           -----------------------------------------------------

Facsimile Number of Purchaser:  (201) 802-9450
                              --------------------------------------------------

Address for Notice of Purchaser:
50 Tice Boulevard
Woodcliff Lake, NJ  07677



Address for Delivery of  Securities  for  Purchaser  (if not same as address for
notice):





Subscription Amount: $ 200,000 USD
                      ------------------

Warrant Shares:   666,667
                -----------------




EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]






<PAGE>


       [PURCHASER SIGNATURE PAGES TO TTNUF SECURITIES PURCHASE AGREEMENT]

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


Name of Purchaser: WHALEHAVEN CAPITAL FUND LIMITED
                  --------------------------------------------------------------

SIGNATURE OF AUTHORIZED SIGNATORY
OF PURCHASER:       /s/ EVAN SCHEMENAUER
             -------------------------------------------------------------------

Name of Authorized Signatory:  EVAN SCHEMENAUER
                             ---------------------------------------------------

Title of Authorized Signatory: CFO
                              --------------------------------------------------

Email Address of Purchaser: BRIAN@WHALEHAVENCAPITAL.COM
                           -----------------------------------------------------

Facsimile Number of Purchaser:
                              --------------------------------------------------

Address for Notice of Purchaser:
3rd Floor, 14 Par-La-Ville Road
Hamilton, HM08 Bermuda



Address for Delivery of  Securities  for  Purchaser  (if not same as address for
notice):
Research Capital Attn: Cheryl Burton
Suite 4500, 199 Bay St.
Toronto, ON M5L 1G2 Canada




Subscription Amount: $ 250,000
                      ------------------

Warrant Shares:   833,333
                -----------------




EIN Number:  [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]






</TEXT>
</DOCUMENT>
