<PAGE>


                                                           Exhibit 4.10



                            STOCK PURCHASE AGREEMENT

                                 BY AND BETWEEN

                          MERCATOR MOMENTUM FUND, L.P.

                                       AND

                               FAMOUS FIXINS, INC.

                          DATED AS OF December 27, 2002


                                       21

<PAGE>




                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                                               PAGE
<S>     <C>                                                                                                    <C>

ARTICLE I: CERTAIN DEFINITIONS...................................................................................26
    Section 1.1      "Adjustment Price"..........................................................................26
    Section 1.2      "Adjustment Shares".........................................................................26
    Section 1.3      "Bid Price".................................................................................26
    Section 1.4      "Capital Shares"............................................................................26
    Section 1.5      "Closing"...................................................................................26
    Section 1.6      "Closing Date"..............................................................................27
    Section 1.7      "Commitment Period".........................................................................27
    Section 1.8      "Commitment Shares".........................................................................27
    Section 1.9      "Common Stock"..............................................................................27
    Section 1.10     "Condition Satisfaction Date"...............................................................27
    Section 1.11     "Daily Trading Value".......................................................................27
    Section 1.12     "Damages"...................................................................................27
    Section 1.13     "Effective Date"............................................................................27
    Section 1.14     "Exchange Act"..............................................................................27
    Section 1.15     "Investment Amount".........................................................................27
    Section 1.16     "Legend"....................................................................................27
    Section 1.17     "Lowest Price"..............................................................................27
    Section 1.18     "Material Adverse Effect"...................................................................27
    Section 1.19     "Material Adverse Market Event".............................................................28
    Section 1.20     "Maximum Commitment Amount".................................................................28
    Section 1.21     "Maximum Put Amount"........................................................................28
    Section 1.22     "Minimum Bid Price".........................................................................28
    Section 1.23     "Minimum Put Amount"........................................................................28
    Section 1.24     "Minimum Time Interval".....................................................................28
    Section 1.25     "NASD"......................................................................................28
    Section 1.26     "Outstanding"...............................................................................28
    Section 1.27     "Person"....................................................................................28
    Section 1.28     "Principal Market"..........................................................................28
    Section 1.29     "Purchase Price"............................................................................28
    Section 1.30     "Put".......................................................................................29
    Section 1.31     "Put Date"..................................................................................29
    Section 1.32     "Put Notice"................................................................................29
    Section 1.33     "Put Notice Period".........................................................................29
    Section 1.34     "Put Shares"................................................................................29
    Section 1.35     "Registrable Securities"....................................................................29
    Section 1.36     "Registration Rights Agreement".............................................................29
    Section 1.37     "Registration Statement"....................................................................30
    Section 1.38     "Regulation D"..............................................................................30
    Section 1.39     "SEC".......................................................................................30
    Section 1.40     "SEC Documents".............................................................................30
    Section 1.41     "Section 4(2)"..............................................................................30
    Section 1.42     "Securities Act"............................................................................30


                                       22
<PAGE>

    Section 1.43     "Subscription Date".........................................................................30
    Section 1.44     "Subsidiary"................................................................................30
    Section 1.45     "Trading Day"...............................................................................30
    Section 1.46     "Underwriter"...............................................................................30
    Section 1.47     "Valuation Period"..........................................................................30

ARTICLE II: PURCHASE AND SALE OF COMMON STOCK; TERMINATION OF OBLIGATIONS........................................30
    Section 2.1      Investments.................................................................................30
    Section 2.2      Mechanics...................................................................................31
    Section 2.3      Closings....................................................................................31
    Section 2.4      Termination of Agreement and Investment Obligation..........................................31
    Section 2.5      The Commitment Fee..........................................................................32
    Section 2.6      Adjustment Shares...........................................................................32

ARTICLE III: REPRESENTATIONS AND WARRANTIES OF INVESTOR..........................................................32
    Section 3.1      Intent......................................................................................32
    Section 3.2      Sophisticated Investor......................................................................32
    Section 3.3      Authority...................................................................................33
    Section 3.4      Not an Affiliate............................................................................33
    Section 3.5      Organization and Standing...................................................................33
    Section 3.6      Absence of Conflicts........................................................................33
    Section 3.7      Disclosure; Access to Information...........................................................33
    Section 3.8      Manner of Sale..............................................................................33

ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................................33
    Section 4.1      Organization of the Company.................................................................33
    Section 4.2      Authority...................................................................................34
    Section 4.3      Corporate Documents.........................................................................34
    Section 4.4      Books and Records...........................................................................34
    Section 4.5      Capitalization..............................................................................34
    Section 4.6      Registration and Listing of Common Stock....................................................35
    Section 4.7      Financial Statements........................................................................35
    Section 4.8      SEC Documents...............................................................................35
    Section 4.9      Exemption from Registration; Valid Issuances; New Issuances.................................36
    Section 4.10     No General Solicitation or Advertising in Regard to this Transaction........................36
    Section 4.11     No Conflicts................................................................................36
    Section 4.12     No Material Adverse Change..................................................................37
    Section 4.13     No Undisclosed Liabilities..................................................................37
    Section 4.14     No Undisclosed Events or Circumstances......................................................37
    Section 4.15     No Integrated Offering......................................................................37
    Section 4.16     Litigation and Other Proceedings............................................................38
    Section 4.17     No Misleading or Untrue Communication.......................................................38
    Section 4.18     Material Non-Public Information.............................................................38

                                       23
<PAGE>

ARTICLE V: COVENANTS OF THE INVESTOR.............................................................................38
    Section 5.1      No Short Sales..............................................................................38

ARTICLE VI: COVENANTS OF THE COMPANY.............................................................................38
    Section 6.1      Registration Rights.........................................................................38
    Section 6.2      Reservation of Common Stock.................................................................38
    Section 6.3      Listing of Common Stock.....................................................................39
    Section 6.4      Exchange Act Registration...................................................................39
    Section 6.5      Legends.....................................................................................39
    Section 6.6      Corporate Existence.........................................................................39
    Section 6.7      Additional SEC Documents....................................................................39
    Section 6.8      Notice of Certain Events Affecting Registration; Suspension of Right to Make a Put..........39
    Section 6.9      Consolidation; Merger.......................................................................40
    Section 6.10     Legal Opinion on Subscription Date..........................................................40
    Section 6.11     No Similar Arrangement; Right of First Refusal..............................................40

ARTICLE VII: CONDITIONS TO DELIVERY OF PUT NOTICES AND CONDITIONS TO CLOSING.....................................41
    Section 7.1      Conditions Precedent to the Obligation of the Company to Issue and Sell Common Stock........41
    Section 7.2      Conditions Precedent to the Right of the Company to Deliver a Put Notice and the Obligation of the Investor to
                     Purchase Put Shares.........................................................................41
    Section 7.3      Due Diligence Review; Non-Disclosure of Non-Public Information..............................44

ARTICLE VIII: LEGENDS............................................................................................45
    Section 8.1      Legends.....................................................................................45
    Section 8.2      No Other Legend or Stock Transfer Restrictions..............................................46
    Section 8.3      Investor's Compliance.......................................................................46

ARTICLE IX: INDEMNIFICATION; ARBITRATION.........................................................................46
    Section 9.1      Indemnification.............................................................................46
    Section 9.2      Method of Asserting Indemnification Claims..................................................47
    Section 9.3      Arbitration.................................................................................49

ARTICLE X: MISCELLANEOUS.........................................................................................50
    Section 10.1     Transaction Costs...........................................................................50
    Section 10.2     Reporting Entity for the Common Stock.......................................................50
    Section 10.3     Brokerage...................................................................................50
    Section 10.4     Notices.....................................................................................50

                                       24
<PAGE>

    Section 10.5     Assignment..................................................................................51
    Section 10.6     Amendment; No Waiver........................................................................51
    Section 10.7     Annexes and Exhibits; Entire Agreement......................................................51
    Section 10.8     Survival....................................................................................52
    Section 10.9     Severability................................................................................52
    Section 10.10    Title and Subtitles.........................................................................52
    Section 10.11    Counterparts................................................................................52
    Section 10.12    Choice of Law...............................................................................52
    Section 10.13    Other Expenses..............................................................................52

</TABLE>






                                       25
<PAGE>


                            STOCK PURCHASE AGREEMENT

                                 BY AND BETWEEN

                          MERCATOR MOMENTUM FUND, L.P.

                                       AND

                               FAMOUS FIXINS, INC.



This STOCK  PURCHASE  AGREEMENT  is entered into as of the __th day of December,
2002 (this "Agreement"),  by and between MERCATOR MOMENTUM FUND, L.P., a limited
partnership  organized and existing  under the laws of California and affiliates
it may  designate  as  co-investors  (collectively  the  "Investor")  and FAMOUS
FIXINS,  INC., a corporation  organized and existing under the laws of the State
of New York (the "Company").

WHEREAS,  the  parties  desire  that,  subject  to the terms and  subject to the
conditions  contained herein,  the Company shall issue and sell to the Investor,
from time to time as provided  herein,  and the Investor shall  purchase,  up to
$2,000,000 of shares of the Company's Common Stock (as defined below); and

WHEREAS,  such  investments  will be made in reliance upon the private  offering
exemption under Section 4(2) ("Section  4(2)") and Regulation D ("Regulation D")
of the  Securities  Act of  1933,  as  amended  and the  rules  and  regulations
promulgated  thereunder (the "Securities Act"), and/or upon such other exemption
from the  registration  requirements  of the  Securities Act as may be available
with  respect  to any or all of the  investments  in  Common  Stock  to be  made
hereunder.

NOW, THEREFORE, the parties hereto agree as follows:

                         ARTICLE I: CERTAIN DEFINITIONS

Section  1.1......."Adjustment Price" shall mean ninety-two percent (92%) of the
lowest  closing Bid Price of the  Company's  Common  Stock during the 15 Trading
Days following each Closing Date.

Section  1.2......."Adjustment  Shares" shall mean all shares issued pursuant to
Section 2.6 below.

Section 1.3......."Bid Price" shall mean the closing bid price as reported under
Section 10.2 of this Agreement.

Section 1.4......."Capital Shares" shall mean the Common Stock and any shares of
any other class of common stock whether now or hereafter authorized,  having the
right to participate in the distribution of dividends (as and when declared) and
assets (upon liquidation of the Company).

Section  1.5......."Closing"  shall mean one of the  closings of a purchase  and
sale of the Common Stock pursuant to Section 2.1.

Section  1.6......."Closing  Date" shall mean,  with  respect to a Closing,  the
Trading Day specified in the Put Notice  related to such  Closing,  provided all
conditions to such Closing have been satisfied on or before such Trading Day.



                                       26
<PAGE>

Section  1.7......."Commitment  Period" shall mean the period  commencing on the
effectiveness of the Registration Statement and expiring on the earlier to occur
of (i) the date on which the Investor shall have  purchased Put Shares  pursuant
to this  Agreement  for an aggregate  Purchase  Price of the Maximum  Commitment
Amount,  (ii) the date this Agreement is terminated  pursuant to Section 2.4, or
(iii) the date occurring three years from the Subscription Date.

Section 1.8......."Commitment Shares" shall mean any shares of Common Stock that
may be issued pursuant to Section 2.5 below.

Section  1.9......."Common  Stock" shall mean the Company's common stock, no par
value per share.

Section 1.10......"Condition Satisfaction Date" shall have the meaning set forth
in Section 7.2 of this Agreement.

Section  1.11......"Daily Trading Value" shall mean, on any Trading Day, the Bid
Price multiplied by the trading volume of the Common Stock.

Section  1.12......"Damages"  shall mean any and all  losses,  claims,  damages,
liabilities,  costs and expenses  (including,  without  limitation,  any and all
investigative,  legal and other expenses reasonably incurred in connection with,
and any and all amounts paid in defense or  settlement  of, any action,  suit or
proceeding  between any indemnified party and any indemnifying  party or between
any indemnified party and any third party, or otherwise, or any claim asserted).

Section  1.13......"Effective  Date" shall mean the earlier to occur of: (i) the
date  on  which  the  SEC  has  declared  effective  a  Registration   Statement
registering resale of Registrable Securities as set forth in Section 7.2(a); and
(ii) the date on which such  Registrable  Securities  first become  eligible for
resale pursuant to Rule 144 of the Securities Act.

Section  1.14......"Exchange  Act"  shall  mean  the  United  States  Securities
Exchange  Act of 1934,  as  amended  and the rules and  regulations  promulgated
thereunder.

Section  1.15......"Investment  Amount"  shall  mean  the  dollar  amount  to be
invested by the  Investor to purchase Put Shares with respect to any Put Date as
notified by the Company to the Investor in accordance with Section 2.2 hereof.

Section 1.16......"Legend" shall have the meaning specified in Section 8.1.

Section 1.17......"Lowest Price" shall mean the lowest closing Bid Prices during
the applicable Valuation Period.

Section  1.18......"Material  Adverse  Effect"  shall  mean  any  effect  on the
business,  operations,  properties,  prospects,  or  financial  condition of the
Company  that is material  and adverse to the Company or to the Company and such
other  entities  controlling  or  controlled  by the Company,  taken as a whole,
and/or  any  condition,  circumstance,  or  situation  that  would  prohibit  or
otherwise  interfere  with the  ability of the Company to enter into and perform
its obligations under any of (i) this Agreement or (ii) the Registration  Rights
Agreement.  Material  Adverse Effect shall  include,  but not be limited to, any
qualification  of  the  Company's  financial  statements  by  its  auditor,  any
restatement of prior financial  results,  resignation by any Director or failure
to timely file any SEC documents.

                                       27
<PAGE>

Section  1.19......"Material  Adverse  Market  Event"  shall  mean a fall in the
NASDAQ  Composite  Index or Standard and Poors 500 index in excess of 10% in any
Trading Day or in excess of 20% over any 5 consecutive Trading Days.

Section 1.20......"Maximum Commitment Amount" shall mean $2,000,000.

Section  1.21......"Maximum  Put  Amount"  shall be limited to the lesser of (a)
$150,000;  (b) the remaining  amounts  available  under the line;  (c) an amount
equal to 10% of the total dollar  trading  volume in Company common stock (based
on the  closing bid prices)  during the month in  questions;  or (d) the maximum
amount which the Investor could  purchase  without being required to file a Form
13D under the Securities Exchange Act of 1934.

Section  1.22......"Minimum  Bid  Price"  shall  have the  meaning  set forth in
Section 7.2(j) of this Agreement.

Section 1.23......"Minimum Put Amount" shall mean $50,000.

Section  1.24......"Minimum  Time Interval" shall mean the mandatory  twenty-two
(22) Trading Days between any two Put Dates.

Section 1.25......"NASD" shall mean the National Association of Securities
Dealers, Inc.

Section  1.26......"Outstanding"  when used with  reference to Common  Shares or
Capital Shares (collectively the "Shares"),  shall mean, at any date as of which
the  number of such  Shares is to be  determined,  all  issued  and  outstanding
Shares,  and shall  include all such Shares  issuable in respect of  outstanding
scrip or any  certificates  representing  fractional  interests  in such Shares;
provided,  however,  that "Outstanding"  shall not refer to any such Shares then
directly or indirectly owned or held by or for the account of the Company.

Section   1.27......"Person"  shall  mean  an  individual,   a  corporation,   a
partnership, an association, a trust or other entity or organization,  including
a government or political subdivision or an agency or instrumentality thereof.

Section  1.28......"Principal Market" shall mean the NASDAQ National Market, the
NASDAQ Small Cap Market, the American Stock Exchange,  the OTC Bulletin Board or
the New York Stock  Exchange,  whichever  is at the time the  principal  trading
exchange or market for the Common Stock.

Section 1.29......"Purchase Price" shall mean, with respect to a Put, ninety-two
percent (92%) of the Lowest Price.

Section  1.30......"Put" shall mean each occasion the Company elects to exercise
its  right  to  tender  a Put  Notice  requiring  the  Investor  to  purchase  a
discretionary  amount of the Company's  Common  Stock,  subject to the terms and
conditions of this Agreement.

Section  1.31......"Put  Date" shall mean the Trading Day during the  Commitment
Period  that a Put  Notice  to sell  Common  Stock  to the  Investor  is  deemed
delivered pursuant to Section 2.2(b) hereof.



                                       28
<PAGE>


Section  1.32......"Put  Notice"  shall  mean a written  notice to the  Investor
setting forth the: (i) intended Closing Date, which shall not be less than seven
(7) nor more  than ten  (10)  Trading  Days  from  the  date the Put  Notice  is
delivered to the Investor;  and (ii) Investment  Amount that the Company intends
to require the Investor to purchase pursuant to the terms of this Agreement.

Section  1.33......"Put  Notice  Period" shall mean a period  beginning on a Put
Date and ending on a Closing Date;  provided that in no event shall a Put Notice
Period be less than seven (7) nor more than ten (10) Trading Days.

Section  1.34......"Put  Shares" shall mean all shares of Common Stock issued or
issuable  pursuant  to a Put that  has been  exercised  or may be  exercised  in
accordance  with the terms and  conditions of this  Agreement and, in respect of
representations  and  warranties  of the Company  and any  ongoing  registration
obligations, shall also include any Commitment Shares and any Adjustment Shares,
whether or not those are specified or not below.

Section  1.35......"Registrable  Securities" shall mean (i) the Put Shares, (ii)
any Commitment Shares; (ii) any Adjustment Shares and (iv) any securities issued
or issuable  with  respect to any of the  foregoing  by way of  exchange,  stock
dividend  or  stock  split  or in  connection  with  a  combination  of  shares,
recapitalization, merger, consolidation or other reorganization or otherwise. As
to any particular  Registrable  Securities,  once issued such  securities  shall
cease  to  be  Registrable  Securities  when  (w)  the  applicable  Registration
Statement  has  been  declared  effective  by the SEC and all  such  Registrable
Securities  have  been  disposed  of  pursuant  to the  applicable  Registration
Statement,   (x)  all  such   Registrable   Securities   have  been  sold  under
circumstances  under which all of the applicable  conditions of Rule 144 (or any
similar  provision then in force) under the Securities  Act("Rule 144") are met,
(y) such time as all such Registrable Securities have been otherwise transferred
to holders who may trade such shares  without  restriction  under the Securities
Act,  and the  Company  has  delivered a new  certificate  or other  evidence of
ownership for such  securities  not bearing a  restrictive  legend or (z) in the
opinion of counsel to the Company,  which counsel shall be reasonably acceptable
to  the  Investor,   all  such  Registrable   Securities  may  be  sold  without
registration or the need for an exemption from any registration requirements and
without any time, volume or manner  limitations  pursuant to Rule 144(k) (or any
similar provision then in effect) under the Securities Act.

Section  1.36......"Registration  Rights  Agreement" shall mean the registration
rights agreement in the form of Exhibit A hereto.

Section  1.37......"Registration  Statement" shall mean a registration statement
on Form S-3 (if use of such form is then  available  to the Company  pursuant to
the rules of the SEC and, if not, on such other form  promulgated by the SEC for
which the Company then  qualifies  and which  counsel for the Company shall deem
appropriate  and which form shall be available for the resale of the Registrable
Securities to be registered thereunder in accordance with the provisions of this
Agreement, the Registration Rights Agreement and in accordance with the intended
method of distribution of such  securities),  for the registration of the resale
by the Investor of the Registrable Securities under the Securities Act.

Section  1.38......"Regulation  D"  shall  have  the  meaning  set  forth in the
recitals of this Agreement.

                                       29
<PAGE>

Section 1.39......"SEC" shall mean the Securities and Exchange Commission.

Section  1.40......"SEC  Documents" shall mean the Company's latest Form 10-K as
of the time in question, all Forms 10-Q and 8-K filed thereafter,  and the Proxy
Statement for its latest fiscal year as of the time in question  until such time
the Company no longer has an  obligation  to  maintain  the  effectiveness  of a
Registration Statement as set forth in the Registration Rights Agreement.

Section  1.41......"Section  4(2)"  shall  have  the  meaning  set  forth in the
recitals of this Agreement.

Section  1.42......"Securities  Act"  shall  have the  meaning  set forth in the
recitals of this Agreement.

Section  1.43......"Subscription  Date"  shall  mean  the  date  on  which  this
Agreement is executed and delivered by the parties hereto.

Section  1.44......"Subsidiary"  shall  mean any  Person in which  the  Company,
directly or indirectly through Subsidiaries or otherwise, beneficially owns more
than  fifty  percent  (50%) of either  the  equity  interests  in, or the voting
control of, such Person.

Section  1.45......"Trading  Day" shall mean any day during which the  Principal
Market shall be open for business.

Section  1.46......"Underwriter" shall mean any underwriter participating in any
disposition of the Registrable  Securities on behalf of the Investor pursuant to
a Registration Statement.

Section  1.47......"Valuation  Period"  shall  mean:  (i)  with  respect  to  an
Effective Date, the five Trading Day period immediately preceding such Effective
Date;  and (ii) with  respect to a Closing  Date,  the five  Trading  Day period
immediately  preceding the applicable Put Date,  during which the Purchase Price
of the Common Stock is determined.

                 ARTICLE II: PURCHASE AND SALE OF COMMON STOCK;
                           TERMINATION OF OBLIGATIONS

Section 2.1 INVESTMENTS.

(a) PUTS.  Upon the terms and  conditions set forth herein  (including,  without
limitation,  the provisions of Article VII hereof),  on any Put Date the Company
may  exercise a Put by the  delivery of a Put  Notice.  The number of Put Shares
that the Investor  shall  receive  pursuant to such Put shall be  determined  by
dividing the Investment Amount specified in the Put Notice by the Purchase Price
with respect to such Put Date.

(b) MAXIMUM AMOUNT OF PUTS. Unless the Company obtains the requisite approval of
its  shareholders  in  accordance  with  the  corporate  laws  of any  State  or
regulatory or self regulatory  authority  which may be applicable,  no more than
19.9% of the Outstanding  shares of Common Stock may be issued and sold pursuant
to Puts without  shareholder  approval.  The  Investor's  obligation to purchase
shares of the  Company's  Common  Stock under this  Agreement  during any 30-day
period  shall  be the  lesser  of:  (i)  $150,000;  (ii) the  remaining  amounts
available  under the  line;  (iii) an  amount  equal to 10% of the total  dollar
trading  volume in the Company's  Common Stock (based on the closing bid prices)
during the 30-days in questions;  or (iv) the maximum  amount which the Investor
could  purchase  without being  required to file a Form 13D under the Securities
Exchange Act of 1934.


                                       30
<PAGE>

Section 2.2 MECHANICS.

     (a) PUT NOTICE. At any time during the Commitment  Period,  the Company may
deliver a Put Notice to the  Investor,  subject to the  conditions  set forth in
Section 7.2; provided, however, the Investment Amount for each Put as designated
by the  Company  in the  applicable  Put Notice  shall be neither  less than the
Minimum Put Amount nor more than the Maximum Put Amount.

     (b) DATE OF DELIVERY OF PUT NOTICE.  A Put Notice shall be deemed delivered
on (i) the Trading Day it is received by  facsimile or otherwise by the Investor
if such  notice  is  received  prior to 12:00  noon New York  time,  or (ii) the
immediately  succeeding  Trading Day if it is received by facsimile or otherwise
after  9:00 a.m.  Pacific  Coast  time on a Trading  Day or at any time on a day
which is not a Trading Day. No Put Notice may be deemed delivered, on a day that
is not a Trading Day.

Section  2.3 CLOSINGS.  The Closing  Date shall not be less than seven (7)
nor more than ten (10) Trading Days from the date the Put Notice is delivered to
the  Investor.  On each Closing Date for a Put,  (i) the Company  shall  deliver
irrevocable  instructions to the transfer agent to promptly  prepare and deliver
to the  Investor  a share  certificate  in the name of the  Investor  and in the
amount of the  applicable  Put Shares and (ii) the Investor shall deliver to the
Company the  Investment  Amount  specified in the Put Notice by wire transfer of
immediately  available  funds to the account  designated  in the Put Notice.  In
addition, on or prior to such Closing Date, each of the Company and the Investor
shall  deliver  to the  other  party all  documents,  instruments  and  writings
required to be delivered or  reasonably  requested by either of them pursuant to
this  Agreement in order to implement and effect the  transactions  contemplated
herein.

Section  2.4  TERMINATION  OF  AGREEMENT  AND  INVESTMENT  OBLIGATION.  The
Company shall have the right to terminate this Agreement at any time upon thirty
(30) days' written notice to the Investor.  The Investor shall have the right to
immediately  terminate this Agreement (including with respect to any Put, notice
of which has been given but the applicable Closing Date has not yet occurred) in
the event that: (i) the  Registration  Statement with respect to the Registrable
Securities is not effective  within one hundred and eighty (180) days  following
the  Subscription  Date (The Company shall use all  available  resources to have
Registration   Statement  declared  effective  within  180  days  following  the
Subscription  Date);  (ii) a Registration  Statement with respect to Registrable
Securities is no longer  effective or current at any point during the Commitment
Period;   (iii)  there  shall  occur  any  stop  order  or   suspension  of  the
effectiveness  of the  Registration  Statement  for an  aggregate of thirty (30)
Trading Days during the  Commitment  Period;  (iv) the Company shall at any time
fail to comply with the  requirements of Section 6.2, 6.3, 6.4, 6.5, 6.6, 6.8 or
6.9;  (v) a  Material  Adverse  Market  Event has  occurred;  (vi) a  regulatory
authority of the self regulatory organization governing broker-dealers takes the
position that the intended purchase of the Common Stock contemplated  herein and
its resale by the Investor may cause the Investor to be a statutory  underwriter
subject  alone  or with  its  agents  to the  restrictions  of  Regulation  M as
promulgated  by the SEC or  otherwise  restrict  or  prohibit  the resale of the
Common  Stock;  or (vii) the Company  shall  otherwise  breach the terms of this
Agreement, including payment of the commitment fee provided for in Section 2.5.

                                       31
<PAGE>

Section  2.5  THE  COMMITMENT  FEE. A Commitment Fee of $100,000 is due and
payable  by the  Company  to the  Investor  at the time the  parties  sign  this
Agreement.

Section  2.6  ADJUSTMENT  SHARES.  If the Adjustment  Price shall fall more
than two and a half percent (2.5%) below the Purchase Price in respect of shares
of Common Stock purchased by the Investor on any Closing Date, then the Investor
shall be issued Adjustment Shares equal to the difference  between the number of
shares  purchased  on the last  Closing Date and the amount that would have been
purchased if the Purchase  Price had been the Adjustment  Price.  The Adjustment
Shares  shall be  promptly  issued to  Investor  within 12  Trading  Days of the
determination more shares are due the Investor.

            ARTICLE III: REPRESENTATIONS AND WARRANTIES OF INVESTOR

                  The Investor represents and warrants to the Company that:


Section  3.1.......INTENT.  The Investor is entering into this Agreement for its
own account and has no present  arrangement  (whether or not legally binding) at
any time to sell the Registrable  Securities to or through any person or entity;
provided,  however, that by making the representations herein, the Investor does
not agree to hold the  Registrable  Securities for any minimum or other specific
term and reserves the right to dispose of the Registrable Securities at any time
pursuant to the Registration  Statement and in accordance with federal and state
securities laws applicable to such disposition.

Section 3.2.......SOPHISTICATED INVESTOR. The Investor is an accredited investor
(as defined in Rule 501 of  Regulation  D), and has such  experience in business
and financial  matters that it is capable of evaluating  the merits and risks of
an investment in the Common Stock. The Investor  acknowledges that an investment
in the Common Stock is speculative and involves a high degree of risk.

Section 3.3.......AUTHORITY.  Each of this Agreement and the Registration Rights
Agreement  has been duly  authorized  by all  necessary  action  and no  further
consent or authorization of the Investor, or its partners, is required.  Each of
this Agreement and the  Registration  Rights  Agreement was validly executed and
delivered  by the  Investor  and each is a valid and  binding  agreement  of the
Investor  enforceable  against  it in  accordance  with its  terms,  subject  to
applicable  bankruptcy,  insolvency,  or similar laws  relating to, or affecting
generally  the  enforcement  of,  creditors'  rights  and  remedies  or by other
equitable principles of general application.

Section 3.4.......NOT AN AFFILIATE. The Investor is not an officer,  director or
"affiliate"  (as that term is defined in Rule 405 of the Securities  Act) of the
Company.

Section 3.5.......ORGANIZATION AND STANDING. Investor is duly organized, validly
existing, and in good standing under the laws of California.

Section  3.6.......ABSENCE  OF  CONFLICTS.  The  execution  and delivery of this
Agreement and any other  document or  instrument  contemplated  hereby,  and the
consummation of the transactions  contemplated  thereby, and compliance with the
requirements  thereof,  will not (a) violate any law, rule,  regulation,  order,
writ,  judgment,  injunction,  decree or award  binding on Investor,  or, to the
Investor's knowledge, (b) violate any provision of any indenture,  instrument or
agreement to which  Investor is a party or is subject,  or by which  Investor or


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<PAGE>

any of its assets is bound,  (c) conflict with or constitute a material  default
thereunder, (d) result in the creation or imposition of any lien pursuant to the
terms of any such indenture,  instrument or agreement, or constitute a breach of
any  fiduciary  duty owed by  Investor  to any third  party,  or (e) require the
approval  of any  third-party  (that  has not  been  obtained)  pursuant  to any
material  contract  to which  Investor is subject or to which any of its assets,
operations or management may be subject.

Section 3.7.......DISCLOSURE;  ACCESS TO INFORMATION.  Investor has received all
documents,  records,  books  and  other  information  pertaining  to  Investor's
investment in the Company that has been requested by Investor.  The Investor has
received and reviewed copies of the SEC Documents.

Section  3.8.......MANNER  OF SALE.  At no time was Investor  presented  with or
solicited  by or through any leaflet,  public  promotional  meeting,  television
advertisement or any other form of general solicitation or advertising.

           ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF THE COMPANY

                  The Company represents and warrants to the Investor that:

Section 4.1.......ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized,  validly existing and in good standing under the laws of the State of
New York and has all requisite power and authority to own, lease and operate its
properties  and to carry on its business as now being  conducted.  Except as set
forth in the SEC  Documents,  the Company  does not own more than fifty  percent
(50%) of the outstanding  capital stock of or control any other business entity.
The Company is duly qualified as a foreign  corporation to do business and is in
good  standing  in  every  jurisdiction  in which  the  nature  of the  business
conducted or property owned by it makes such qualification necessary, other than
those in which the  failure  so to  qualify  would not have a  Material  Adverse
Effect.

Section  4.2.......AUTHORITY.  (i) The Company has the requisite corporate power
and authority to enter into and perform its obligations under this Agreement and
the Registration  Rights  Agreement and to issue the Put Shares,  the Commitment
Shares and the  Additional  Shares;  (ii) the  execution  and  delivery  of this
Agreement  and  the  Registration  Rights  Agreement  by  the  Company  and  the
consummation by it of the transactions contemplated hereby and thereby have been
duly  authorized by all  necessary  corporate  action and no further  consent or
authorization  of the  Company  or its Board of  Directors  or  stockholders  is
required; and (iii) each of this Agreement and the Registration Rights Agreement
has been duly  executed and  delivered by the Company and  constitute  valid and
binding obligations of the Company enforceable against the Company in accordance
with their respective  terms,  except as such  enforceability  may be limited by
applicable  bankruptcy,  insolvency,  or similar laws  relating to, or affecting
generally  the  enforcement  of,  creditors'  rights  and  remedies  or by other
equitable principles of general application.

Section  4.3.......CORPORATE  DOCUMENTS.  The  Company  has  furnished  or  made
available to the Investor true and correct  copies of the Company's  Articles of
Incorporation,  as amended and in effect on the date hereof (the "Certificate"),
and the  Company's  By-Laws,  as amended  and in effect on the date  hereof (the
"By-Laws").


                                       33
<PAGE>

Section  4.4.......BOOKS AND RECORDS. The minute books and other similar records
of the Company and its  subsidiaries  as made available to Investor prior to the
execution of this Agreement  contain a true and complete record, in all material
respects,  of all action taken at all  meetings  and by all written  consents in
lieu of meetings of the stockholders,  the boards of directors and committees of
the boards of directors of the Company and the subsidiaries.  The stock transfer
ledgers and other similar  records of the Company and the  subsidiaries  as made
available  to  Investor  prior to the  execution  of this  Agreement  accurately
reflect all record  transfers  prior to the  execution of this  Agreement in the
capital stock of the Company and the  subsidiaries.  Neither the Company nor any
subsidiary  has any of its  Books  and  Records  recorded,  stored,  maintained,
operated  or  otherwise  wholly  or partly  dependent  upon or held by any means
(including  any  electronic,   mechanical  or  photographic   process,   whether
computerized  or not) which  (including  all means of access  thereto  and there
from) are not under the exclusive ownership and direct control of the Company or
a subsidiary.

Section  4.5.......CAPITALIZATION.  The authorized  capital stock of the Company
consists of 200,000,000  shares of Common Stock, of which 23,360,179  shares are
issued  and  outstanding,  and 0 shares  of  preferred  stock of a  wholly-owned
subsidiary,  none of which are issued  and  outstanding.  Except for  options to
purchase not more than  _________  shares of Common Stock with  purchase  prices
between $. ___ and $___ per share, there are no options,  warrants, or rights to
subscribe to, securities, rights or obligations convertible into or exchangeable
for or giving any right to  subscribe  for any  shares of  capital  stock of the
Company.  All of the outstanding shares of Common Stock of the Company have been
duly and validly authorized and issued and are fully paid and nonassessable.

Section  4.6.......REGISTRATION  AND  LISTING OF COMMON  STOCK.  The Company has
registered  its Common Stock  pursuant to Section 12(b) or 12(g) of the Exchange
Act and is in full  compliance  with all reporting  requirements of the Exchange
Act, and the Company has maintained all requirements  for the continued  listing
or quotation of its Common Stock,  and such Common Stock is currently  listed or
quoted on the Principal Market.  As of the date hereof,  the Principal Market is
the OTC Bulletin Board.

Section  4.7.......FINANCIAL   STATEMENTS.   Prior  to  the  execution  of  this
Agreement, the Company has delivered to the Investor true and complete copies of
the following financial statements:

     (a)  the  audited  balance  sheets  of the  Company  and  its  consolidated
subsidiaries  as of December  31,  2001,  and the related  audited  consolidated
statements of  operations,  stockholders'  equity and cash flows for each of the
fiscal years then ended,  together with a true and correct copy of the report of
such  audited  information  by Freeman & Davis,  LLP and all  letters  from such
accountants with respect to the results of such audits; and

     (b) the  unaudited  balance  sheets  of the  Company  and its  consolidated
subsidiaries  as of September  30, 2002,  found in the  Company's  10-Q filed on
November  14, 2002 for the  quarterly  period ended  September  30, 2002 and the
related unaudited consolidated statements of operations and stockholders' equity
for the portion of the fiscal year then ended.  The financial  statements of the
Company  delivered  to the  Investor  have  been  prepared  in  accordance  with
generally  accepted  accounting  principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial


                                       34
<PAGE>

statements  or the  notes  thereto,  or (ii) in the  case of  unaudited  interim
statements,  to the extent they may not include footnotes or may be condensed or
summary  statements)  and fairly present in all material  respects the financial
position  of the Company as of the dates  thereof and the results of  operations
and cash flows for the  periods  then  ended(subject,  in the case of  unaudited
statements, to normal year-end audit adjustments).

Section 4.8.......SEC  DOCUMENTS. The Company has delivered or made available to
the Investor true and complete copies of the SEC Documents  (including,  without
limitation,  proxy information and solicitation materials).  The Company has not
provided to the Investor any information that, according to applicable law, rule
or regulation,  should have been disclosed  publicly prior to the date hereof by
the Company, but which has not been so disclosed.  As of their respective dates,
the SEC Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and other federal, state
and local laws, rules and regulations applicable to such SEC Documents, and none
of the SEC  Documents  contained  any untrue  statement  of a  material  fact or
omitted to state a material fact  required to be stated  therein or necessary in
order to make the statements  therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Documents  comply as to form and  substance in all material  respects
with applicable accounting  requirements and the published rules and regulations
of the SEC or other applicable rules and regulations with respect thereto.  Such
financial  statements have been prepared in accordance  with generally  accepted
accounting  principles applied on a consistent basis during the periods involved
(except (i) as may be otherwise  indicated in such  financial  statements or the
notes  thereto,  or (ii) in the case of  unaudited  interim  statements,  to the
extent  they  may  include  summary  notes  and  may  be  condensed  or  summary
statements) and fairly present in all material  respects the financial  position
of the Company as of the dates  thereof and the results of  operations  and cash
flows for the periods then ended (subject,  in the case of unaudited statements,
to normal year-end audit adjustments).

Section  4.9.......EXEMPTION FROM REGISTRATION;  VALID ISSUANCES; NEW ISSUANCES.
The  sale  and  issuance  of the  Put  Shares,  the  Commitment  Shares  and the
Additional  Shares  in  accordance  with  the  terms  and  on the  bases  of the
representations  and  warranties set forth in this  Agreement,  may and shall be
properly issued pursuant to Rule 4(2),  Regulation D and/or any applicable state
law. When issued and paid for as herein provided, the Put Shares, the Commitment
Shares and the Additional  Shares shall be duly and validly issued,  fully paid,
and nonassessable.  Neither the sales of the Put Shares or the Additional Shares
pursuant  to, nor the  Company's  performance  of its  obligations  under,  this
Agreement or the Registration  Rights Agreement shall (i) result in the creation
or imposition of any liens,  charges,  claims or other encumbrances upon the Put
Shares or the  Additional  Shares or any of the assets of the  Company,  or (ii)
entitle the holders of Outstanding  Capital Shares to preemptive or other rights
to  subscribe  to or  acquire  the  Capital  Shares or other  securities  of the
Company.  The Put Shares,  the Commitment Shares and the Additional Shares shall
not  subject  the  Investor to  personal  liability  by reason of the  ownership
thereof.  The Put Shares,  the Commitment  Shares and the Additional Shares have
been duly  authorized by the Company,  but have not been issued  (whether or not


                                       35
<PAGE>

subsequently  repurchased by the Company) to any Person,  and when issued to the
Investor  in  accordance  with  this  Agreement  and will not have  been  issued
(whether or not  subsequently  repurchased  by the  Company) to any Person other
than the Investor.

Section  4.10 NO  GENERAL  SOLICITATION  OR  ADVERTISING  IN REGARD TO THIS

TRANSACTION.  Neither the Company nor any of its affiliates nor any  distributor
or any person  acting on its or their  behalf (i) has  conducted or will conduct
any general  solicitation  (as that term is used in Rule 502(c) of Regulation D)
or general  advertising with respect to any of the Put Shares,  or (ii) made any
offers or sales of any  security  or  solicited  any offers to buy any  security
under any  circumstances  that would  require  registration  of the Common Stock
under the Securities Act.

Section 4.11......NO CONFLICTS. The execution,  delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated  hereby,  including  without  limitation  the  issuance  of the Put
Shares,  the Commitment Shares and the Additional Shares do not and will not (i)
result in a violation of the  Certificate or By-Laws,  or (ii) conflict with, or
constitute a material  default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment,  acceleration or cancellation of, any material agreement,  indenture,
instrument or any "lock-up" or similar  provision of any underwriting or similar
agreement to which the Company is a party, or (iii) result in a violation of any
federal,  state,  local or foreign law,  rule,  regulation,  order,  judgment or
decree (including federal and state securities laws and regulations)  applicable
to the  Company  or by which any  property  or asset of the  Company is bound or
affected  (except  for  such  conflicts,  defaults,  terminations,   amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate,  have a Material  Adverse  Effect)  nor is the Company  otherwise  in
violation of, conflict with or in default under any of the foregoing;  provided,
however, that for purposes of the Company's representations and warranties as to
violations of foreign law, rule or regulation  referenced in clause (iii),  such
representations  and  warranties  are  made  only to the  best of the  Company's
knowledge  insofar as the execution,  delivery and performance of this Agreement
by the  Company  and  the  consummation  by  the  Company  of  the  transactions
contemplated  hereby are or may be affected by the status of the Investor  under
or pursuant to any such foreign  law,  rule or  regulation.  The business of the
Company is not being conducted in violation of any law,  ordinance or regulation
of any governmental entity, except for possible violations that either singly or
in the  aggregate  does not and will not have a  Material  Adverse  Effect.  The
Company is not required under federal, state or local law, rule or regulation to
obtain  any  consent,   authorization  or  order  of,  or  make  any  filing  or
registration with, any court or governmental  agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or issue and sell
the Common Stock in  accordance  with the terms hereof (other than any SEC, NASD
or state  securities  filings  that may be  required  to be made by the  Company
subsequent to any Closing, any registration statement that may be filed pursuant
hereto,  and any  shareholder  approval  required  by the  rules  applicable  to
companies whose common stock trades on the Principal Market); provided that, for
purposes of the  representation  made in this sentence,  the Company is assuming
and relying upon the accuracy of the relevant  representations and agreements of
the Investor herein.

Section 4.12......NO MATERIAL ADVERSE CHANGE. Since September 30, 2002, no event
has occurred that would have a Material Adverse Effect on the Company.


                                       36
<PAGE>

Section 4.13......NO UNDISCLOSED LIABILITIES.  The Company has no liabilities or
obligations  that are material,  individually  or in the  aggregate,  other than
those  incurred  in the  ordinary  course  of  the  Company's  businesses  since
September 30, 2002, and which, individually or in the aggregate, do not or would
not have a Material Adverse Effect on the Company.

Section  4.14......NO  UNDISCLOSED EVENTS OR CIRCUMSTANCES.  Since September 30,
2002,  no event or  circumstance  has  occurred  or exists  with  respect to the
Company  or its  businesses,  properties,  prospects,  operations  or  financial
condition,  that,  under  applicable  law, rule or regulation,  requires  public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced.

Section 4.15......NO  INTEGRATED  OFFERING.  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,  other than pursuant to this  Agreement and the  registration
statement  required  by  the  10%  Secured  Convertible  Debenture  and  Related
Registration Rights Agreement dated December ___, 2002, under circumstances that
would require registration of the Common Stock under the Securities Act.

Section  4.16......LITIGATION AND OTHER PROCEEDINGS.  Except as may be set forth
in the SEC  Documents,  there are no lawsuits or  proceedings  pending or to the
best  knowledge  of the Company  threatened,  against the  Company,  nor has the
Company received any written or oral notice of any such action, suit, proceeding
or  investigation,  which might have a Material  Adverse  Effect.  Except as set
forth in the SEC Documents,  no judgment,  order, writ,  injunction or decree or
award has been issued by or, so far as is known by the Company, requested of any
court,  arbitrator  or  governmental  agency  which  might  result in a Material
Adverse Effect.

Section 4.17......NO MISLEADING OR UNTRUE COMMUNICATION. The Company, any Person
representing the Company, and, to the knowledge of the Company, any other Person
selling  or  offering  to sell the Put  Shares,  the  Commitment  Shares and the
Additional  Shares in  connection  with the  transactions  contemplated  by this
Agreement, have not made, at any time, any oral communication in connection with
the offer or sale of the same which contained any untrue statement of a material
fact or  omitted  to state  any  material  fact  necessary  in order to make the
statements,  in the light of the  circumstances  under which they were made, not
misleading.

Section  4.18......MATERIAL  NON-PUBLIC  INFORMATION.  The  Company  is  not  in
possession of, nor has the Company or its agents disclosed to the Investor,  any
material  non-public  information  that  (i)  if  disclosed,   would,  or  could
reasonably be expected to have,  an effect on the price of the Common Stock,  or
(ii) according to applicable law, rule or regulation, should have been disclosed
publicly  by the  Company  prior to the date  hereof  but  which has not been so
disclosed.

                      ARTICLE V: COVENANTS OF THE INVESTOR

Section  5.1.......NO  SHORT  SALES.  During the  thirty  (30) days prior to the
Subscription  Date,  neither the Investor nor any affiliate of the Investor has,
and during the  Commitment  Period neither the Investor nor any affiliate of the
Investor  will (i) engage in any short sale of the Common  Stock of the  Company
unless  Investor has given prior written notice to the Company.  Nothing in this
Section 5.1 shall  prohibit the Investor or any  affiliate  from making  regular
sales of the Common Stock acquired  pursuant to this Agreement or to require any
approvals from the Company.


                                       37
<PAGE>

                      ARTICLE VI: COVENANTS OF THE COMPANY

Section  6.1.......REGISTRATION RIGHTS. The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall comply
in all respects with the terms thereof.

Section  6.2.......RESERVATION  OF  COMMON  STOCK.  As of the date  hereof,  the
Company has available  and the Company  shall reserve and keep  available at all
times,  free of  preemptive  rights,  shares of Common  Stock for the purpose of
enabling  the Company to satisfy  any  obligation  to issue the Put Shares,  the
Commitment  Shares and the  Additional  Shares;  such amount of shares of Common
Stock to be reserved shall be calculated  based upon the minimum  Purchase Price
for the Put Shares under the terms and conditions of this Agreement.  The number
of shares so reserved from time to time, as theretofore  increased or reduced as
hereinafter provided, may be reduced by the number of shares actually delivered.

Section  6.3.......LISTING  OF COMMON  STOCK.  The Company  shall  exercise best
efforts to maintain the listing of the Common Stock on a Principal  Market,  and
as soon as practicable  (but in any event prior to the Closing Date for any Put)
will cause the Put Shares,  the Commitment Shares and the Additional Shares with
respect to such Put to be listed on the Principal  Market.  The Company  further
shall,  if the  Company  applies  to have the Common  Stock  traded on any other
Principal  Market,  include in such  application the Put Shares,  the Commitment
Shares  and the  Additional  Shares,  and  shall  take such  other  action as is
necessary  or desirable in the opinion of the Investor to cause the Common Stock
to be listed on such other Principal Market as promptly as possible. The Company
shall use commercially reasonable efforts to continue the listing and trading of
its  Common  Stock  on the  Principal  Market  (including,  without  limitation,
maintaining sufficient net tangible assets) and will comply in all respects with
the Company's reporting,  filing and other obligations under the bylaws or rules
of the NASD and the Principal Market.

Section  6.4.......EXCHANGE ACT REGISTRATION.  After each Registration Statement
becomes  effective,  the Company  shall cause the Common  Stock  covered by such
Registration Statement to continue to be registered under Section 12(g) or 12(b)
of the Exchange  Act,  will comply in all respects with its reporting and filing
obligations  under the  Exchange  Act,  and will not take any action or file any
document  (whether  or not  permitted  by the  Exchange  Act  or the  rules)  to
terminate or suspend such  registration or to terminate or suspend its reporting
and filing obligations under the Exchange Act.

Section  6.5.......LEGENDS.  The  certificates  evidencing  the Put Shares,  the
Commitment Shares and the Additional Shares shall be free of legends,  except as
provided for in Article VIII.

Section  6.6.......CORPORATE   EXISTENCE.  The  Company  shall  take  all  steps
necessary to preserve and continue the corporate existence of the Company.

Section  6.7.......ADDITIONAL  SEC DOCUMENTS.  During the Commitment Period, the
Company  shall  promptly  deliver  to the  Investor,  as and when the  originals
thereof are  submitted  to the SEC for filing,  copies of all SEC  Documents  so
furnished or submitted to the SEC.



                                       38
<PAGE>

Section 6.8.......NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF
RIGHT TO MAKE A PUT. The Company shall immediately  notify the Investor,  but in
no event later than two (2) business days by facsimile and by overnight courier,
upon the occurrence of any of the following  events in respect of a Registration
Statement  or  related  prospectus  in  respect of an  offering  of  Registrable
Securities:  (i) receipt of any request for additional information by the SEC or
any  other  federal  or  state  governmental  authority  during  the  period  of
effectiveness of the Registration Statement for amendments or supplements to the
Registration  Statement or related  prospectus;  (ii) the issuance by the SEC or
any other federal or state  governmental  authority of any stop order suspending
the  effectiveness  of  a  Registration  Statement  or  the  initiation  of  any
proceedings for that purpose;  (iii) receipt of any notification with respect to
the suspension of the  qualification  or exemption from  qualification of any of
the  Registrable  Securities for sale in any  jurisdiction  or the initiation or
threatening of any proceeding for such purpose;  (iv) the happening of any event
that  makes  any  statement  made  in such  Registration  Statement  or  related
prospectus or any document  incorporated or deemed to be incorporated therein by
reference  untrue in any  material  respect or that  requires  the making of any
changes in the Registration Statement,  related prospectus or documents so that,
in the  case  of a  Registration  Statement,  it will  not  contain  any  untrue
statement of a material  fact or omit to state any material  fact required to be
stated therein or necessary to make the statements  therein not misleading,  and
that in the case of the  related  prospectus,  it will not  contain  any  untrue
statement of a material  fact or omit to state any material  fact required to be
stated therein or necessary to make the statements  therein, in the light of the
circumstances under which they were made, not misleading; (v) the declaration by
the SEC of the effectiveness of a Registration Statement; and (vi) the Company's
reasonable  determination  that a  post-effective  amendment to the Registration
Statement would be appropriate, and the Company shall promptly make available to
the Investor any such  supplement  or amendment to the related  prospectus.  The
Company shall not deliver to the Investor any Put Notice during the continuation
of any of the  foregoing  events.  While in  possession  of material  non-public
information  received  from the Company,  the Investor  shall not dispose of any
Registrable  Securities  until such  information  is  disclosed to the public (a
"Restricted  Period");  provided  that, if such  Restricted  Period  exceeds one
hundred twenty (120) days, the liquidated damages described in Section 1.1(c) of
the  Registration  Rights  Agreement  shall be increased to three percent (3.0%)
until such Restricted Period shall have elapsed.

Section  6.9.......CONSOLIDATION;  MERGER.  The  Company  shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another  entity unless the resulting  successor or acquiring  entity (if not the
Company) assumes by written instrument the obligation to deliver to the Investor
such shares of stock  and/or  securities  as the Investor is entitled to receive
pursuant to this Agreement.

Section  6.10......LEGAL OPINION ON SUBSCRIPTION DATE. The Company's independent
counsel shall deliver to the Investor on the Subscription Date an opinion in the
form of Exhibit B, except for paragraph 7 thereof.

Section 6.11......NO  SIMILAR  ARRANGEMENT;  RIGHT OF FIRST REFUSAL. The Company
shall  refrain  from  entering  into  any  other  agreements,   arrangements  or
understandings  granting  to  the  Company  the  right  to  sell  shares  of its
securities to one or more investors in similar (Equity Line)  placements  exempt
from registration under the Securities Act until thirty (30) calendar days after
this  Agreement is terminated  pursuant to Section 2.4 hereof (the  "Exclusivity
Period").  The  Exclusivity  Period shall not apply to an issuance of securities
exempt from  registration  under the Securities Act by the Company in connection
with any  strategic  investment,  corporate  partnering  arrangements,  or other
situations  in which the  investment  in the Company is not strictly a financial
one. If the Company,  for the purpose of  obtaining  any  additional  financing,
wishes to sell shares of its securities in placements  exempt from  registration
under the  Securities  Act during the  Exclusivity  Period (a "Sale") to a party
other than the Investor (the "Third Party"),  the Company shall first offer (the
"Offer") to the  Investor,  in writing,  the right to purchase  such shares (the
"Offered  Shares") at the bona fide price offered by the Third Party (the "Offer


                                       39
<PAGE>

Price").  The Offer  shall  grant the  Investor  the right  during  the five (5)
Trading Days  immediately  following  the date of the Offer to elect to purchase
any or all of the Offered Shares.  The Company,  in connection with such a Sale,
shall refrain from  circumventing  or attempting  to circumvent  the  Investor's
right of first  refusal  by way of making  such a Sale to any of its  affiliates
without first making an Offer to the Investor.  If the Investor so exercises its
right to purchase any or all of the Offered Shares, the purchase will be treated
as a Put except  that the  purchase  price for the Offered  Shares  shall be the
Offer  Price.  The  closing and method of payment  shall be as  provided  for in
Section  2.2 hereof and the Closing  Date shall be seven (7) Trading  Days after
the Investor  exercises such right.  If the Investor fails to exercise its right
to  purchase  any or all of the  Offered  Shares,  then  during the thirty  (30)
calendar days  immediately  following the expiration of such right,  the Company
shall be free to sell any or all of the  Offered  Shares  to a  purchaser  for a
purchase  price not lower than the Offer Price  payable on terms and  conditions
that are not more favorable to such purchaser than those contained in the Offer.
In the event that the Company effects a Sale to a Third Party,  the Investor may
immediately terminate this Agreement.

               ARTICLE VII: CONDITIONS TO DELIVERY OF PUT NOTICES
                            AND CONDITIONS TO CLOSING

Section 7.1.......CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE
AND SELL COMMON STOCK. The obligation hereunder of the Company to issue and sell
the Put Shares,  the Commitment Shares and the Additional Shares to the Investor
incident to each Closing is subject to the satisfaction,  at or before each such
Closing, of each of the conditions set forth below.

     (a)  ACCURACY  OF  THE  INVESTOR'S   REPRESENTATION  AND  WARRANTIES.   The
representations  and warranties of the Investor herein shall be true and correct
in all material  respects as of the date of this Agreement and as of the date of
each such Closing as though made at each such time.

     (b)  PERFORMANCE  BY THE  INVESTOR.  The  Investor  shall  have  performed,
satisfied  and  complied in all  respects  with all  covenants,  agreements  and
conditions  required by this  Agreement to be  performed,  satisfied or complied
with by the Investor at or prior to such Closing.

Section 7.2.......CONDITIONS  PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER A
PUT NOTICE AND THE OBLIGATION OF THE INVESTOR TO PURCHASE PUT SHARES.  Following
completion  of the Early Put,  the right of the  Company to deliver a Put Notice
and the  obligation  of the  Investor  hereunder  to acquire and pay for the Put
Shares  incident  to a  Closing  is  subject  to the  satisfaction,  on (i)  the
applicable  Put Date and (ii) the  applicable  Closing  Date (each a  "Condition
Satisfaction Date"), of each of the following conditions:


                                       40
<PAGE>

(a) TERMINATION  EVENTS.  None of the Events that are listed in Section 2.4 that
would allow the Investor to terminate this Agreement has occurred.

(b) EFFECTIVE  REGISTRATION  STATEMENT.  As set forth in the Registration Rights
Agreement, the Registration  Statement(s) shall have previously become effective
and shall remain effective on each Condition  Satisfaction  Date and (i) neither
the Company nor the Investor shall have received  notice that the SEC has issued
or intends to issue a stop order with  respect to a  Registration  Statement  or
that the SEC  otherwise  has  suspended  or  withdrawn  the  effectiveness  of a
Registration  Statement,  either  temporarily or permanently,  or intends or has
threatened  to do so (unless  the SEC's  concerns  have been  addressed  and the
Investor  is  reasonably  satisfied  that the SEC no  longer is  considering  or
intends to take such action),  (ii) no other suspension of the use or withdrawal
of the effectiveness of such Registration  Statement or related prospectus shall
exist,  and  (iii)  at  least 30 days  shall  have  elapsed  since  the  Initial
Registration  Statement (as defined in the  Registration  Rights  Agreement) has
been declared effective by the SEC.

(c)   ACCURACY   OF  THE   COMPANY'S   REPRESENTATIONS   AND   WARRANTIES.   The
representations  and  warranties  of the Company shall be true and correct as of
each  Condition  Satisfaction  Date as though made at each such time (except for
representations and warranties specifically made as of a particular date).

(d) PERFORMANCE BY THE COMPANY. The Company shall have performed,  satisfied and
complied in all respects with all covenants,  agreements and conditions required
by this  Agreement  and  the  Registration  Rights  Agreement  to be  performed,
satisfied  or  complied  with by the  Company  at or  prior  to  each  Condition
Satisfaction Date.

(e) NO INJUNCTION. No statute, rule, regulation, executive order, decree, ruling
or injunction  shall have been enacted,  entered,  promulgated or adopted by any
court or  governmental  authority of competent  jurisdiction  that prohibits the
transactions  contemplated by this Agreement or otherwise has a Material Adverse
Effect,  and no actions,  suits or proceedings shall be in progress,  pending or
threatened  by any  Person,  that seek to enjoin or  prohibit  the  transactions
contemplated by this Agreement or otherwise could reasonably be expected to have
a Material  Adverse  Effect.  For purposes of this  paragraph (e), no proceeding
shall be deemed  pending or  threatened  unless one of the parties has  received
written or oral notification thereof prior to the applicable Closing Date.

(f) NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. The trading of the
Common Stock shall not have been  suspended by the SEC, the Principal  Market or
the NASD and the Common Stock shall have been  approved for listing or quotation
on and shall not have been delisted from the Principal  Market.  The issuance of
shares of Common Stock with respect to the applicable Closing, if any, shall not
violate the shareholder approval requirements of the Principal Market.
(g)  LEGAL  OPINION.  The  Company  shall  have  caused to be  delivered  to the
Investor,  within five (5) Trading Days of the effective  date of a Registration
Statement,  an  opinion  of the  Company's  independent  counsel  in the form of
Exhibit D hereto, addressed to the Investor.

                                       41
<PAGE>

(h) DUE  DILIGENCE.  Pursuant  to Section  7.3,  the  Investor  shall not have a
material dispute with the Company as to the adequacy of the disclosure contained
in the Registration Statement.

(i) FIVE PERCENT LIMITATION. On each Closing Date, the number of Put Shares, the
Commitment Shares and the Additional Shares then to be purchased by the Investor
shall not exceed the number of such shares that,  when aggregated with all other
shares of Common  Stock and  Registrable  Securities  then owned by the Investor
beneficially or deemed  beneficially owned by the Investor,  would result in the
Investor  owning  no more  than  4.9% of all of such  Common  Stock  as would be
outstanding on such Closing Date, as determined in accordance with Section 13(d)
of the Exchange Act and the regulations promulgated thereunder.  For purposes of
this  Section,  in the event  that the  amount of Common  Stock  outstanding  as
determined  in  accordance  with  Section  13(d)  of the  Exchange  Act  and the
regulations promulgated thereunder is greater on a Closing Date than on the date
upon which the Put Notice associated with such Closing Date is given, the amount
of Common  Stock  outstanding  on such Closing Date shall govern for purposes of
determining whether the Investor, when aggregating all purchases of Common Stock
made pursuant to this Agreement and would own more than 4.9% of the Common Stock
following such Closing Date.

(j) MINIMUM BID PRICE. The Bid Price equals or exceeds $.05 on each of the seven
(7) Trading Days immediately preceding the Subscription Date and on each Trading
Day during any Put Notice Period.

(k) MINIMUM AVERAGE DAILY TRADING VALUE.  The average of the Daily Trading Value
during the twenty-two (22) Trading Days immediately preceding the applicable Put
Notice Period equals or exceeds $50,000.

(l) NO  KNOWLEDGE.  The Company shall have no knowledge of any event more likely
than  not to have  the  effect  of  causing  any  Registration  Statement  to be
suspended or otherwise ineffective (which event is more likely than not to occur
within the 15 Trading  Days  following  the  Trading Day on which such notice is
deemed delivered).

(m) MINIMUM TIME  INTERVAL.  The Minimum Time Interval  shall have elapsed since
the immediately preceding Put Date.

(n) SHAREHOLDER VOTE. The issuance of shares of Common Stock with respect to the
applicable  Closing,  if  any,  shall  not  violate  the  shareholder   approval
requirements of the Principal Market.

(o) OTHER. On each Condition Satisfaction Date, the Investor shall have received
and been  reasonably  satisfied  with such other  certificates  and documents as
shall have been  reasonably  requested by the Investor in order for the Investor
to  confirm  the  Company's  satisfaction  of the  conditions  set forth in this
Section 7.2, including,  without limitation,  a certificate in substantially the
form and substance of Exhibit C hereto,  executed in either case by an executive
officer of the Company and to the effect that all the conditions to such Closing
shall have been satisfied as at the date of each such certificate.


                                       42
<PAGE>

Section   7.3      DUE   DILIGENCE   REVIEW;   NON-DISCLOSURE   OF   NON-PUBLIC
                   INFORMATION.

(a) The Company shall make  available for inspection and review by the Investor,
advisors  to  and  representatives  of the  Investor  (who  may  or  may  not be
affiliated with the Investor and who are reasonably  acceptable to the Company),
and any  Underwriter,  any  Registration  Statement or  amendment or  supplement
thereto or any blue sky, NASD or other filing,  all financial and other records,
all SEC  Documents  and other  filings  with the SEC,  and all  other  corporate
documents and  properties of the Company as may be reasonably  necessary for the
purpose  of such  review,  and  cause  the  Company's  officers,  directors  and
employees to supply all such information reasonably requested by the Investor or
any  such  representative,  advisor  or  Underwriter  in  connection  with  such
Registration  Statement  (including,  without  limitation,  in  response  to all
questions  and other  inquiries  reasonably  made or  submitted by any of them),
prior to and from  time to time  after  the  filing  and  effectiveness  of such
Registration  Statement  for the sole  purpose of enabling the Investor and such
representatives,  advisors and Underwriters and their respective accountants and
attorneys  to conduct  initial  and ongoing due  diligence  with  respect to the
Company and the accuracy of such Registration Statement.

(b) Each of the Company, its officers, directors,  employees and agents shall in
no  event  disclose  non-public  information  to the  Investor,  advisors  to or
representatives  of the Investor unless prior to disclosure of such  information
the Company  identifies  such  information as being  non-public  information and
provides the Investor, such advisors and representatives with the opportunity to
accept or refuse to accept such non-public  information for review.  The Company
may, as a condition to disclosing any non-public information hereunder,  require
the  Investor's  advisors and  representatives  to enter into a  confidentiality
agreement in form reasonably satisfactory to the Company and the Investor.

(c) Nothing herein shall require the Company to disclose non-public  information
to the Investor or its advisors or  representatives,  and the Company represents
that it  does  not  disseminate  non-public  information  to any  investors  who
purchase  stock in the  Company in a public  offering,  to money  managers or to
securities analysts;  provided, however, that notwithstanding anything herein to
the contrary,  the Company shall, as herein above provided,  immediately  notify
the advisors and  representatives  of the Investor and any  Underwriters  of any
event or the existence of any  circumstance  (without any obligation to disclose
the specific  event or  circumstance)  of which it becomes  aware,  constituting
non-public  information (whether or not requested of the Company specifically or
generally  during  the course of due  diligence  by such  persons or  entities),
which,   if  not  disclosed  in  the  prospectus   included  in  the  applicable
Registration  Statement  would  cause  such  prospectus  to  include a  material
misstatement  or to omit a material fact required to be stated  therein in order
to make the statements,  therein,  in light of the  circumstances  in which they
were made,  not  misleading.  Nothing  contained  in this  Section  7.3 shall be
construed to mean that such persons or entities other than the Investor (without
the written consent of the Investor prior to disclosure of such information) may
not obtain  non-public  information in the course of conducting due diligence in
accordance  with the terms and  conditions of this  Agreement and nothing herein
shall prevent any such persons or entities  from  notifying the Company of their


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<PAGE>

opinion that based on such due diligence by such persons or entities,  that such
Registration  Statement contains an untrue statement of a material fact or omits
a  material  fact  required  to be  stated  in such  Registration  Statement  or
necessary  to  make  the  statements   contained   therein,   in  light  of  the
circumstances in which they were made, not misleading.

                             ARTICLE VIII: LEGENDS

Section  8.1.......LEGENDS.  Unless otherwise  provided below,  each certificate
representing   Registrable  Securities  will  bear  the  following  legend  (the
"Legend"):

                  THE  SECURITIES  EVIDENCED BY THIS  CERTIFICATE  HAVE NOT BEEN
                  REGISTERED  UNDER THE U.S.  SECURITIES ACT OF 1933, AS AMENDED
                  (THE  "SECURITIES  ACT"), OR ANY OTHER  APPLICABLE  SECURITIES
                  LAWS AND HAVE BEEN ISSUED IN RELIANCE  UPON AN EXEMPTION  FROM
                  THE  REGISTRATION  REQUIREMENTS OF THE SECURITIES ACT AND SUCH
                  OTHER SECURITIES LAWS.  NEITHER THIS SECURITY NOR ANY INTEREST
                  OR  PARTICIPATION  HEREIN MAY BE  REOFFERED,  SOLD,  ASSIGNED,
                  TRANSFERRED,  PLEDGED,  ENCUMBERED,  HYPOTHECATED OR OTHERWISE
                  DISPOSED  OF,  EXCEPT  PURSUANT TO AN  EFFECTIVE  REGISTRATION
                  STATEMENT   UNDER  THE   SECURITIES   ACT  OR  PURSUANT  TO  A
                  TRANSACTION  THAT IS EXEMPT  FROM,  OR NOT  SUBJECT  TO,  SUCH
                  REGISTRATION.   THE   HOLDER  OF  THIS   CERTIFICATE   IS  THE
                  BENEFICIARY OF CERTAIN OBLIGATIONS OF THE COMPANY SET FORTH IN
                  A STOCK PURCHASE  AGREEMENT,  DATED AS OF DECEMBER __, 2002. A
                  COPY OF THE PORTION OF THE AFORESAID AGREEMENT EVIDENCING SUCH
                  OBLIGATIONS  MAY  BE  OBTAINED  FROM  THE  ISSUER'S  EXECUTIVE
                  OFFICES.

As soon as practicable after the execution and delivery hereof, but in any event
within five (5) Trading Days hereafter,  the Company shall issue to the transfer
agent for its Common Stock (and to any substitute or replacement  transfer agent
for its Common Stock upon the Company's  appointment  of any such  substitute or
replacement  transfer agent)  instructions,  with a copy to the Investor.  Other
than as  required  as a result  of  change in law,  such  instructions  shall be
irrevocable  by the Company from and after the date hereof or from and after the
issuance  thereof to any such  substitute or replacement  transfer agent, as the
case may be, except as otherwise  expressly provided in the Registration  Rights
Agreement.  It is the  intent  and  purpose of such  instructions,  as  provided
therein,  to require the  transfer  agent for the Common Stock from time to time
upon transfer of  Registrable  Securities by the Investor to issue  certificates


                                       44
<PAGE>

evidencing such  Registrable  Securities free of the Legend during the following
periods and under the following  circumstances  and without  consultation by the
transfer  agent with the  Company or its  counsel  and  without the need for any
further advice or instruction or  documentation to the transfer agent by or from
the Company or its counsel or the Investor:

(a) At any time after the applicable  Effective  Date,  upon surrender of one or
more  certificates  evidencing  Common Stock that bear the Legend, to the extent
accompanied by a notice  requesting the issuance of new certificates free of the
Legend  to  replace  those   surrendered;   provided  that  (i)  the  applicable
Registration  Statement shall then be effective and (ii) if reasonably requested
by the  transfer  agent the  Investor  confirms to the  transfer  agent that the
Investor  has   transferred  the   Registrable   Securities   pursuant  to  such
Registration   Statement   and  has  complied  with  the   prospectus   delivery
requirement.

(b) At any  time  upon  any  surrender  of one or more  certificates  evidencing
Registrable  Securities  that bear the Legend,  to the extent  accompanied  by a
notice requesting the issuance of new certificates free of the Legend to replace
those surrendered and containing  representations that the Investor is permitted
to dispose of such  Registrable  Securities  without  limitation as to amount or
manner of sale pursuant to Rule 144(k) under the Securities Act.

Section  8.2.......NO  OTHER LEGEND OR STOCK  TRANSFER  RESTRICTIONS.  No legend
other than the one  specified  in Section 8.1 has been or shall be placed on the
share  certificates  representing  the Common Stock and no instructions or "stop
transfers   orders,"  so  called,   "stock  transfer   restrictions,"  or  other
restrictions  have been or shall be given to the Company's  transfer  agent with
respect thereto other than as expressly set forth in this Article VIII.

Section  8.3.......INVESTOR'S  COMPLIANCE.  Nothing in this  Article  VIII shall
affect in any way the Investor's  obligations under any agreement to comply with
all applicable securities laws upon resale of the Common Stock.

                    ARTICLE IX: INDEMNIFICATION; ARBITRATION

Section 9.1   INDEMNIFICATION.

(a) The  Company  agrees  to  indemnify  and hold  harmless  the  Investor,  its
partners,  affiliates,  officers,  directors,  employees,  and  duly  authorized
agents,  and each Person or entity, if any, who controls the Investor within the
meaning of Section 15 of the  Securities  Act or Section 20 of the Exchange Act,
together  with its  controlling  persons from and against any Damages,  joint or
several, and any action in respect thereof to which the Investor,  its partners,
affiliates,  officers, directors, employees, and duly authorized agents, and any
such controlling  person becomes subject to,  resulting from,  arising out of or
relating to any  misrepresentation,  breach of warranty or  nonfulfillment of or
failure to perform any covenant or agreement on the part of Company contained in
this  Agreement,  as such  Damages  are  incurred,  unless such  Damages  result
primarily from the Investor's  gross  negligence,  recklessness  or bad faith in
performing its obligations  under this Agreement;  provided,  however,  that the
maximum  aggregate  liability  of the  Company  shall be  limited  to the amount
actually invested by the Investor under this Agreement,  and provided,  further,
that in no event  shall  this  provision  be  deemed  to  limit  any  rights  to
indemnification arising under the Registration Rights Agreement.


                                       45
<PAGE>

     (b) The Investor  agrees to indemnify  and hold  harmless the Company,  its
partners,  affiliates,  officers,  directors,  employees,  and  duly  authorized
agents,  and each Person or entity,  if any, who controls the Company within the
meaning of Section 15 of the  Securities  Act or Section 20 of the Exchange Act,
together  with its  controlling  persons from and against any Damages,  joint or
several,  and any action in respect thereof to which the Company,  its partners,
affiliates,  officers, directors, employees, and duly authorized agents, and any
such controlling  person becomes subject to,  resulting from,  arising out of or
relating to any  misrepresentation,  breach of warranty or  nonfulfillment of or
failure  to  perform  any  covenant  or  agreement  on the part of the  Investor
contained in this Agreement,  as such Damages are incurred,  unless such Damages
result primarily from the Company's gross negligence,  recklessness or bad faith
in performing its obligations under this Agreement;  provided, however, that the
maximum  aggregate  liability  of the  Investor  shall be  limited to the amount
actually invested by the Investor under this Agreement,  and provided,  further,
that in no event  shall  this  provision  be  deemed  to  limit  any  rights  to
indemnification arising under the Registration Rights Agreement.

Section  9.2.......METHOD  OF ASSERTING  INDEMNIFICATION  CLAIMS. All claims for
indemnification  by any  Indemnified  Party (as defined below) under Section 9.1
shall be asserted and resolved as follows:

     (a) In the  event  any claim or  demand  in  respect  of which  any  person
claiming  indemnification  under any  provision of Section 9.1 (an  "Indemnified
Party") might seek indemnity under Section 9.1 is asserted  against or sought to
be collected from such Indemnified Party by a person other than the Company, the
Investor  or  any  affiliate  of  the  Company  (a  "Third  Party  Claim"),  the
Indemnified Party shall deliver a written notification,  enclosing a copy of all
papers  served,  if any, and  specifying  the nature of and basis for such Third
Party Claim and for the Indemnified  Party's claim for  indemnification  that is
being  asserted  under any  provision  of Section  9.1  against  any person (the
"Indemnifying  Party"),  together  with the  amount  or, if not then  reasonably
ascertainable,  the estimated  amount,  determined in good faith,  of such Third
Party Claim (a "Claim  Notice") with reasonable  promptness to the  Indemnifying
Party.  If the  Indemnified  Party  fails  to  provide  the  Claim  Notice  with
reasonable  promptness after the Indemnified Party receives notice of such Third
Party Claim,  the  Indemnifying  Party shall not be  obligated to indemnify  the
Indemnified  Party with respect to such Third Party Claim to the extent that the
Indemnifying  Party's ability to defend has been irreparably  prejudiced by such
failure of the  Indemnified  Party.  The  Indemnifying  Party  shall  notify the
Indemnified  Party as soon as  practicable  within the period ending thirty (30)
calendar  days  following  receipt by the  Indemnifying  Party of either a Claim
Notice or an Indemnity Notice (as defined below) (the "Dispute  Period") whether
the Indemnifying  Party disputes its liability or the amount of its liability to
the  Indemnified  Party under  Section 9.1 and  whether the  Indemnifying  Party
desires,  at its sole cost and expense,  to defend the Indemnified Party against
such Third Party Claim.

     (i) If the  Indemnifying  Party notifies the  Indemnified  Party within the
Dispute  Period that the  Indemnifying  Party desires to defend the  Indemnified
Party with  respect to the Third Party Claim  pursuant to this  Section  9.2(a),
then the  Indemnifying  Party  shall  have the  right to  defend,  with  counsel
reasonably  satisfactory to the Indemnified  Party, at the sole cost and expense
of  the  Indemnifying   Party,   such  Third  Party  Claim  by  all  appropriate
proceedings,  which proceedings shall be vigorously and diligently prosecuted by
the  Indemnifying  Party  to a  final  conclusion  or  will  be  settled  at the
discretion  of  the  Indemnifying  Party  (but  only  with  the  consent  of the
Indemnified  Party in the case of any  settlement  that  provides for any relief


                                       46
<PAGE>

other than the payment of monetary  damages or that  provides for the payment of
monetary  damages as to which the Indemnified  Party shall not be indemnified in
full pursuant to Section 9.1). The Indemnifying Party shall have full control of
such defense and  proceedings,  including any compromise or settlement  thereof;
provided,  however, that the Indemnified Party may, at the sole cost and expense
of the Indemnified Party, at any time prior to the Indemnifying Party's delivery
of the notice  referred to in the first  sentence  of this clause (i),  file any
motion,  answer or other pleadings or take any other action that the Indemnified
Party  reasonably  believes  to be  necessary  or  appropriate  to  protect  its
interests;  and provided further,  that if requested by the Indemnifying  Party,
the  Indemnified  Party will,  at the sole cost and expense of the  Indemnifying
Party,  provide  reasonable  cooperation to the Indemnifying Party in contesting
any Third  Party  Claim  that the  Indemnifying  Party  elects to  contest.  The
Indemnified Party may participate in, but not control, any defense or settlement
of any Third Party Claim controlled by the  Indemnifying  Party pursuant to this
clause (i), and except as provided in the preceding  sentence,  the  Indemnified
Party shall bear its own costs and expenses with respect to such  participation.
Notwithstanding  the foregoing,  the Indemnified Party may take over the control
of  the  defense  or  settlement  of a  Third  Party  Claim  at any  time  if it
irrevocably waives its right to indemnity under Section 9.1 with respect to such
Third Party Claim.

     (ii) If the Indemnifying Party fails to notify the Indemnified Party within
the Dispute Period that the Indemnifying Party desires to defend the Third Party
Claim pursuant to Section 9.2(a), or if the Indemnifying Party gives such notice
but fails to  prosecute  vigorously  and  diligently  or settle the Third  Party
Claim, or if the Indemnifying  Party fails to give any notice  whatsoever within
the Dispute Period,  then the Indemnified  Party shall have the right to defend,
at the sole cost and expense of the Indemnifying Party, the Third Party Claim by
all  appropriate  proceedings,  which  proceedings  shall be  prosecuted  by the
Indemnified Party in a reasonable manner and in good faith or will be settled at
the discretion of the  Indemnified  Party (with the consent of the  Indemnifying
Party, which consent will not be unreasonably  withheld).  The Indemnified Party
will have full control of such defense and proceedings, including any compromise
or settlement thereof;  provided,  however, that if requested by the Indemnified
Party,  the  Indemnifying  Party  will,  at the  sole  cost and  expense  of the
Indemnifying Party, provide reasonable  cooperation to the Indemnified Party and
its counsel in contesting any Third Party Claim which the  Indemnified  Party is
contesting. Notwithstanding the foregoing provisions of this clause (ii), if the
Indemnifying  Party has notified the Indemnified Party within the Dispute Period
that  the  Indemnifying  Party  disputes  its  liability  or the  amount  of its
liability  hereunder to the  Indemnified  Party with respect to such Third Party
Claim and if such dispute is resolved in favor of the Indemnifying  Party in the
manner  provided  in clause  (iii)  below,  the  Indemnifying  Party will not be
required  to bear the costs and  expenses  of the  Indemnified  Party's  defense
pursuant  to this  clause  (ii)  or of the  Indemnifying  Party's  participation
therein at the Indemnified  Party's  request,  and the  Indemnified  Party shall
reimburse the  Indemnifying  Party in full for all reasonable costs and expenses
incurred by the  Indemnifying  Party in  connection  with such  litigation.  The
Indemnifying  Party  may  participate  in,  but  not  control,  any  defense  or
settlement controlled by the Indemnified Party pursuant to this clause (ii), and
the  Indemnifying  Party shall bear its own costs and  expenses  with respect to
such participation.


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                         1325 Howard  Avenue,  Suite  #422
                         Burlingame, California 94010
                         Telephone: 650-340-9585
                         Facsimile: 650-340-8015


                 If to the Investor:

                          Mercator Advisory Group
                          555 South Flower Street, Suite 4500
                          Los Angeles, CA 90071
                          Attention:  David Firestone
                          Telephone:  213-533-8288
                          Facsimile:   213-533-8285

Either party hereto may from time to time change its address or facsimile number
for notices  under this Section by giving at least ten (10) days' prior  written
notice of such changed address or facsimile number to the other party hereto.

Section  10.5......ASSIGNMENT.  Neither  this  Agreement  nor any  rights of the
Investor or the Company  hereunder  may be assigned by either party to any other
person. Notwithstanding the foregoing, the Investor's interest in this Agreement
may be  assigned  at any  time,  in whole or in part,  to any  affiliate  of the
Investor or co-investor, provided, however, that any such assignment or transfer
shall  relieve  the  Investor  of its  duties  under  this  Agreement  only upon
performance thereof by any such assignee or transferee.

Section 10.6......AMENDMENT; NO WAIVER. No party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants except
as  specifically  set forth in this  Agreement  or therein.  Except as expressly
provided in this  Agreement,  neither this  Agreement nor any term hereof may be
amended,  waived,  discharged or terminated  other than by a written  instrument
signed by both  parties  hereto.  The  failure of the either  party to insist on
strict compliance with this Agreement,  or to exercise any right or remedy under
this Agreement,  shall not constitute a waiver of any rights provided under this
Agreement,  nor estop the parties from  thereafter  demanding  full and complete
compliance nor prevent the parties from exercising such a right or remedy in the
future.

Section  10.7......ANNEXES  AND  EXHIBITS;  ENTIRE  AGREEMENT.  All  annexes and
exhibits  to this  Agreement  are  incorporated  herein by  reference  and shall
constitute part of this Agreement.  This Agreement and the  Registration  Rights
Agreement  set forth the  entire  agreement  and  understanding  of the  parties
relating to the subject  matter  hereof and thereof and  supersede all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written, relating to the subject matter hereof.

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Section  10.8......SURVIVAL.  The provisions of Articles VI, VIII, IX and X, and
of Section 7.3, shall survive the termination of this Agreement.

Section  10.9......SEVERABILITY.  In  the  event  that  any  provision  of  this
Agreement  becomes or is declared  by a court of  competent  jurisdiction  to be
illegal,  unenforceable or void, this Agreement shall continue in full force and
effect  without  said  provision;  provided  that  such  severability  shall  be
ineffective if it materially  changes the economic  benefit of this Agreement to
any party.

Section  10.10.....TITLE  AND  SUBTITLES.  The titles and subtitles used in this
Agreement are used for the convenience of reference and are not to be considered
in construing or interpreting this Agreement.

Section  10.11.....COUNTERPARTS.  This  Agreement  may be  executed  in multiple
counterparts,  each of which may be executed by less than all of the parties and
shall be deemed to be an original  instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument.

Section  10.12.....CHOICE  OF LAW. This Agreement  shall be construed  under the
laws of the State of California.

Section  10.13.....OTHER  EXPENSES.  In the  event  that a dispute  between  the
parties is not determined by a Board of Arbitration, the non-prevailing party in
any action,  suit or proceeding  shall bear all  investigative,  legal and other
expenses reasonably incurred in connection with, and any and all amounts paid in
defense or settlement of such action, suit or proceeding, including of the other
party to this Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by the undersigned,  there unto duly authorized,  as of the date first set forth
above.



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                                  FAMOUS FIXINS, INC.

                                     /s/ S. Michael Rudolph
                                  By:
                                     ---------------------------------------
                                     Name: S. Michael Rudolph
                                     Title:  Chief Executive Officer


                                  MERCATOR MOMENTUM FUND, L.P.

                                   By It's General Partner- Mercator
                                      Advisory Group

                                            /s/ David Firestone
                                   By:
                                            -------------------
                                   David Firestone
                                   Managing Partner



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