Exhibit 4.2

                              AMENDED AND RESTATED
                                 DEBT AGREEMENT

                                   DATED AS OF

                                  JUNE 30, 2004

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                              AMENDED AND RESTATED
                                 DEBT AGREEMENT

      THIS  AGREEMENT is made as of the 30th day of June,  2004 between  Ovation
Products Corporation, a corporation organized and existing under the laws of the
State of  Delaware  (the  "Company"),  and WMS Family I LLC, a Delaware  limited
liability  company  with  principal  offices at 285  Commandants  Way,  Chelsea,
Massachusetts 02150 (the "Lender").

      WHEREAS, the Company's predecessor in interest and Lender's predecessor in
interest entered into a certain Debenture  Purchase Agreement dated as of August
21, 1997 (the "Purchase Agreement");

      WHEREAS,  in a series  of  amendments,  the  parties  have  altered  their
understandings,  including  the  issuance  of  Debentures,  notes  in the  total
aggregate  amount  of  $478,535  (the  "Existing  Notes")  and  warrants  for an
aggregate of 192,964 shares of the Company's Common Stock , which total does not
include,  and this  Agreement  does not affect,  warrants for 1200 shares of the
Company's  Preferred  Stock issuable to the Lender or it predecessor in interest
by  reason  of the  investment  of  $20,000  in a  financing  round of  $800,000
commenced in October 2003 (the "Existing Warrants");

      WHEREAS,  for the sake of  convenience,  the  parties  wish to  amend  the
Existing  Notes and  Existing  Warrants in their  entirety by the  issuance of a
single Note and two Warrants;

      WHEREAS,  the  parties  now  wish to  update  this  Agreement  to  reflect
subsequent understandings;

      NOW  THEREFORE,  the Purchase  Agreement is hereby amended and restated as
follows:

The Lender and the Company hereby agree as follows:

1. DEFINITIONS.

      The  following  terms,  as used  herein,  have  the  following  respective
meanings:

      1.1 "BUDGET"  means  operating  expenses,  including,  but not limited to,
salaries,  outside  fabrication costs, by month,  generated and projected,  as a
result of, or  anticipated  as a result of,  the design and  development  of the
Product.

      1.2 "BUSINESS DAY" means any day except Saturday, Sunday or a day on which
banking institutions in Delaware are authorized by law to close.

      1.3  "CLOSING"  and  "CLOSING  DATE"  mean the date set forth in the first
paragraph above.

      1.4 "CODE" means the Internal Revenue Code of 1986, as amended.

      1.5 "COMPANY" means Ovation Products Corporation,  a Delaware corporation,
and its assigns.

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                                                                  DEBT AGREEMENT
                                                                          Page 2

      1.6 "DEFAULT"  means any Event of Default  hereunder or any other event or
condition  which,  with the giving of notice or the lapse of time or both, would
constitute an Event of Default hereunder.

      1.7 "EVENT OF DEFAULT" has the meaning set forth in Section 6.

      1.8 "FOUNDERS" means William Zebuhr.

      1.9  "FUNDAMENTAL  CHANGE"  means the  occurrence  of any of the following
events:  (a) the Company shall, or shall agree, to merge or consolidate with any
other  corporation;  (b) the  Company  shall be  acquired,  or shall agree to be
acquired, by any Person (including any individual,  partnership,  joint venture,
corporation,  trust or group  thereof),  whether  pursuant to a stock  tender or
otherwise;  or (c) the Company shall sell, lease,  transfer or otherwise dispose
of, or shall  agree to sell,  lease,  transfer or  otherwise  dispose of, all or
substantially all of its assets.

      1.10  "LENDER"  means  WMS  Family I LLC,  a  Delaware  limited  liability
company,   as  successor  to  Wilfred  M.  Sherman,   dba  WMS  Enterprises,   a
Massachusetts proprietorship.

      1.11  "NOTE(S)"  shall have the  meaning  given  that term in Section  2.2
hereof;

      1.12 "OUTSTANDING  EQUITY SECURITIES" means all authorized and outstanding
shares of the Company's  capital  stock,  on a fully diluted  basis,  including,
without limitation,  the authorized employee stock reserve approved by the Board
of Directors and all securities  issuable upon exercise of outstanding  warrants
and options and upon conversion of outstanding convertible instruments.

      1.13  "PERSON"  means  an  individual,  corporation,  partnership,  trust,
organization, association, governmental body or agency or other entity.

      1.14  "PRODUCT"  means  the  inventions   relating  to  a  countertop  and
undercounter distiller to be used to purify water in the home.

      1.15 "PUBLIC  OFFERING" means public  offering  pursuant to a registration
statement  filed and declared  effective  under the  Securities Act or upon some
other means by which the Common shares of the Company become publicly traded and
listed on a national securities exchange or listed on the National Market System
("NMS") of the National  Association of Securities  Dealers Automated  Quotation
System ("NASDAQ") allowing WMS to sell its Warrant Shares.

      1.16 "Restated  License  Agreement" means that certain  "restated  license
agreement"  of  even  date  referencing  an  agreement   between  each  parties'
predecessors in interest executed in August 1997;

      1.17 "RIGHT OF FIRST REFUSAL" has the meaning set forth in Section 8.

      1.18 "SECURITIES ACT" means the Securities Act of 1933, as amended.

      1.19 "SECURITIES  EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.

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                                                                  DEBT AGREEMENT
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      1.20 "VOTING SHARES" of any corporation  means  securities of any class or
classes  (however  designated)  having ordinary voting power for the election of
members of the board of directors (or other governing body) of such corporation.

      1.21  "WARRANT  SHARES"  means the shares of Common  Stock  issuable  upon
conversion of the Warrant in accordance with the terms hereof.

      1.22  "WARRANT(S)"  shall have the meaning  given that term on Section 2.2
hereof.

2. EXCHANGE OF DEBENTURE FOR NOTES AND WARRANTS.

      2.1  DELIVERIES  BY LENDER.  Simultaneously  herewith,  the  Lender  shall
deliver to the Company:

            (a) the  Convertible  Debenture(s),  the  delivery  of  which  shall
      constitute the exchange by Lender of all rights to reinstate its rights to
      acquire Securities of the Company pursuant to the Debenture Agreement, and

            (b) the Existing Notes;

            (c) the Existing Warrants;

            (d) its check for  $100,000  in good  funds as its  payment  for its
      subscription to the Preferred Series C offering of the Company; and

            (e) the Restated License Agreement.

      2.2 DELIVERIES BY COMPANY.  Simultaneously herewith, Company shall deliver
to Lender its duly authorized and executed

            (a) promissory note in the total  aggregate  amount due Lender under
      the Existing Notes and all prior agreements in the form attached hereto as
      EXHIBIT A (the "Note");

            (b) warrants  with respect to the issuance of its  Securities in the
      total aggregate amount due Lender under the Existing  Warrants (and at the
      strike  prices of each) and  otherwise  in the  forms  attached  hereto as
      EXHIBITS B AND C in exchange for the Existing Warrants and its warrant for
      50,000 shares in the form attached hereto as EXHIBIT D issued with respect
      to the  extension of the debt  reflected by issuance of the Note (all such
      warrants  and any other  warrant  issued to the Lender or any  assignee of
      Lender by the Company to be included  in the defined  term the  "Warrants"
      and if  referred  to  individually  in the term  "Warrant"  herein).  Each
      Warrant shall have an expiration date of June 30, 2014; and

            (c) the Restated License Agreement.

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                                                                  DEBT AGREEMENT
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The parties have previously executed a security agreement dated as of August 21,
1997,  which  agreement,  as amended to date, shall continue to secure the Notes
and the obligations of the Company to Lender  described  herein and therein (the
"Security Agreement").

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

      The Company represents and warrants that:

      3.1  ORGANIZATION  AND  QUALIFICATION.  The Company is a corporation  duly
organized,  validly existing and in good standing under the laws of the State of
Delaware. The Company has all corporate power and authority to own and lease its
properties and to conduct its business as presently  conducted,  and as proposed
to be  conducted  pursuant  to the  Budget as  agreed  upon.  The  copies of the
Company's  Articles and Bylaws furnished are complete and correct on or prior to
the Closing Date. The Company is not controlled by,  directly or indirectly,  by
any  corporation,  association  or  business  organization.  The Company is duly
qualified to transact business as a foreign  corporation in each jurisdiction in
which the conduct of its business, as presently conducted,  or its ownership, or
leasing, of property makes such qualification necessary and in which the failure
to so qualify would have a material adverse effect on the Company's  business or
financial  condition,  taken  as a  whole,  and has  obtained  all  governmental
licenses,  authorizations,  consents,  approvals  and made all filings which are
required to conduct its business as presently  conducted,  and as proposed to be
conducted,  and the failure to obtain which would have a material adverse effect
on the Company's business or financial condition,  taken as a whole. The Company
does not have any  Subsidiaries  and does not  directly  or  indirectly  own any
interest in any other corporation, partnership or entity.

      3.2 AUTHORIZATION AND VALIDITY OF THIS AGREEMENT. The execution,  delivery
and  performance  by the Company of this  Agreement,  including  the  execution,
delivery and  performance  of the  Debenture and the offer,  issuance,  sale and
delivery of the Debenture and the Warrant Shares  contemplated hereby are within
the  Company's  corporate  powers,  have been duly  authorized  by all necessary
corporate action,  require no approval of, filing with or other action by, or in
respect of, any governmental  body, agency or official,  and do not and will not
contravene or constitute a default under any applicable  law or regulation,  the
Articles of Incorporation  or Bylaws of the Company or any agreement,  judgment,
injunction,  order,  decree or instrument binding upon the Company, or result in
the creation or imposition of any lien, claim or encumbrance on any asset of the
Company. This Agreement constitutes a valid and binding agreement of the Company
and the Debenture, when executed and delivered by the Company in accordance with
this Agreement,  will constitute  valid and binding  obligations of the Company,
subject to laws of general  application  relating to bankruptcy,  insolvency and
the  relief  of  debtors  and  rules  of  law  governing  specific  performance,
injunctive  relief or equitable  remedies.  The Company has obtained any and all
consents or waivers of third parties that are  necessary in connection  with the
execution,  delivery and  performance of this  Agreement,  the Debenture and the
consummation of the transactions contemplated hereby and thereby,  including the
issuance  by the  Company of the  Debenture  and the  Warrant  Shares.  True and
complete copies of the Articles of Incorporation and Bylaws of the Company, each
as amended to date, have been or will be provided to Lender.

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                                                                  DEBT AGREEMENT
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      3.3 CAPITALIZATION. As of the date hereof, the authorized capital stock of
the Company consists of (a) eight million (8,000,000) shares of Common Stock, of
which (i) 623,301 shares are issued and outstanding, and (ii) 530,931 shares are
reserved for issuance upon the exercise of outstanding options and warrants; and
(b) two million (2,000,000) shares of Preferred Stock, of which;  186,800 shares
of Class A Preferred Stock are issued and outstanding; 425,102 shares of Class B
Preferred  Stock are  issued  and  outstanding;  and  400,016  shares of Class C
Preferred Stock are issued and outstanding.  All of such outstanding  shares are
duly authorized, validly issued, fully paid and non-assessable.  All outstanding
securities of the Company were issued in compliance  with all  applicable  state
and federal  laws  concerning  the issuance of  securities.  Except as described
above or in SCHEDULE 1, and as specifically  contemplated by this Agreement,  no
subscription,  warrant,  option, plan or other right to purchase or acquire from
the  Company  any  shares  of any  class  of  capital  stock of the  Company  or
securities  convertible into such capital stock is authorized or outstanding and
there is no  commitment  of the  Company  to issue  any such  shares,  warrants,
options or other such rights or  securities.  SCHEDULE 1 hereto  contains a true
and complete list of the names and addresses of the record holders of all of the
outstanding  Common  Stock and  options of the  Company and the number of shares
and/or  options  held by each such holder.  To the best of Company's  knowledge,
there are no voting trusts,  voting agreements or voting  arrangements among any
of the record  holders of such stock or options  other than as will be  provided
herein. Except as provided under this Agreement or in SCHEDULE 1, no stockholder
has any  preemptive  or similar  right to acquire  additional  shares of capital
stock and there are no  restrictions  on the transfer of shares of capital stock
of the Company other than those imposed by relevant  state,  federal and foreign
securities  laws. None of the Company's  capital stock is entitled to cumulative
voting rights and no  registration  rights under the Securities Act of 1933 (the
"Securities Act") have been granted by the Company with respect to shares of its
capital  stock  other  than as  provided  under  the  Agreement.  To the best of
Company's knowledge, except as set forth in or specifically contemplated by this
Purchase  Agreement,  no stockholder of the Company has granted options or other
rights to any other  person to  purchase  from such  stockholder  any  shares of
capital  stock of the  Company.  Except as  described  or  contemplated  by this
Agreement  and  SCHEDULE  1 hereto,  there are no  agreements,  written or oral,
between the Company and any holder of its  securities,  or to the best knowledge
of  the  Company,  among  any  holders  of  its  securities,   relating  to  the
acquisition, disposition or voting of the securities of the Company.

      3.4 AUTHORIZATION AND ISSUANCE OF THE WARRANTS AND THE NOTES. The issuance
of the Warrant will be free of  preemptive or similar  rights.  When issued upon
exercise of the Warrant, in accordance with the terms hereof, the Warrant Shares
will have been validly issued and fully paid and will be nonassessable  and free
of preemptive or similar rights.  Upon the issuance of the Warrant,  the Company
will have duly  authorized  and reserved  sufficient  shares of Common Stock for
issuance as Warrant  Shares,  and the Warrant and Warrant Shares will be free of
any liens or encumbrances other than those created by or imposed upon the Lender
through no action of the Company;  provided,  however,  that the Warrant and the
Warrant  Shares will be subject to the  restrictions  on  transfer  set forth in
Section 7 hereof  and the  Warrant  and the  Warrant  Shares  may be  subject to
restrictions on transfer under state and/or federal securities laws as set forth
herein.

      3.5  LITIGATION.  There is no action,  suit,  proceeding or  investigation
relating to the Company which is pending or threatened (nor, to the knowledge of
the  Company,  any  basis

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                                                                  DEBT AGREEMENT
                                                                          Page 6

therefor)  before or by any court,  arbitrator or governmental  body,  agency or
official in which there is a reasonable possibility of an adverse decision which
could materially adversely affect the business,  consolidated financial position
or  consolidated  results of operations of the Company of which,  in any manner,
questions the validity of this Agreement, the Debenture or the Warrant Shares.

      3.6  PATENTS  AND  TRADEMARKS.  The  Company  has such  right,  title  and
ownership of, or licenses under, all patents,  trademarks,  service marks, trade
names, copyrights, licenses, trade secrets, information,  proprietary rights and
processes as is necessary for the lawful  conduct of the business of the Company
as it is contemplated to be conducted,  without any conflicts with the rights of
others. No officer or directors of the Company owns any rights therein which are
competitive  with those to be owned or used by the Company.  The Company has not
been sued or charged with any infringement of any patent,  trademark,  copyright
or mask work,  with  misappropriation  of any trade secret or other  proprietary
information,  or with the violation of any license,  which remains unresolved by
agreement,  license or  otherwise,  or has any knowledge of the existence of any
such infringement,  misappropriation or violation, whether or not claimed by any
Person.

      3.7 PROPERTIES.  The Company has good and marketable title to the tangible
properties  and assets owned by it and material to its business,  and good title
to all of its leasehold  estates,  in each case subject to no mortgage,  pledge,
lien,  lease,  claim or  encumbrance  of any  nature  whatsoever,  except  minor
encumbrances  to title which,  in the  aggregate,  do not  materially  adversely
affect the use,  proposed  use or value of the  property or other  assets of the
Company.  All of the Company's  properties and assets are, in material respects,
in good operating and usable  condition,  subject to normal wear and tear.  With
respect to the property and assets it leases,  the Company is in  compliance  in
all material respects with such leases and holds valid leasehold interests.

      3.8 EMPLOYEES.  To the best of the Company's knowledge, no activity of any
employee of the  Company  as, or while,  an employee of the Company has caused a
violation of any term of any  employment  contract,  confidentiality  agreement,
patent  disclosure  agreement  or any  other  contract  or  agreement,  and  the
continued  employment by the Company of its present employees will not result in
any such violation. There are neither pending nor threatened any actions, suits,
proceedings  or claims,  or any threats  thereof,  with respect to any contract,
agreement,  covenant or obligation referred to in the preceding sentence, nor is
there any judgment,  decree or order of any court or administrative  agency that
would  interfere  with the use by any employee or  consultant of his or her best
efforts to promote  the  interests  of the  Company or would  conflict  with the
Company's  business as proposed to be conducted.  No present or former  officer,
employee or consultant of the Company is in violation of any obligation relating
to the use of  confidential  or  proprietary  information  of the Company.  Each
person  employed by the  Company,  or  retained by the Company as a  consultant,
including,  without  limitation,  all  officers of the  Company,  has executed a
proprietary  information  agreement  restricting such person's right to disclose
proprietary information of the Company and its clients. The Company is not aware
of any key  employee of the Company  who has any plans to  terminate  his or her
employment with the Company.

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                                                                  DEBT AGREEMENT
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      3.9 ERISA.  Except as set forth on SCHEDULE  2, (a) the  Company  does not
have any  "employee  pension  benefit  plans" as such term is defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended, and the
Company is not required to maintain or contribute to any such plans; and (b) the
Company  has not ever  maintained  and has not ever  made  contributions  to any
deferred  compensation,  pension,  profit  sharing,  retirement,  bonus or other
employee  benefit or fringe benefit plan or other  Employee  Benefit Plan within
the meaning of Section 3 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")  (including health,  life insurance and other benefit plans
maintained for retirees). The Company is not a party to any pension plan that is
a "multi-employer  plan" as defined in ERISA. The Company is not in violation of
any provision of ERISA,  has filed all required  reports with the  Department of
Labor and the Internal  Revenue  Service  with  respect to all Employee  Benefit
Plans and no lien  exists on any of the  Company's  assets  pursuant  to Section
302(f) of ERISA or Section 412(n) of the Code.

      3.10 FINANCIAL STATEMENTS.

            (A) The  Company has  furnished  to the Lender  unaudited  financial
information pertaining to the Company as of March 31, 2004. All of the foregoing
financial  information  is herein  referred to as  "Financial  Statements".  The
Financial  Statements  are correct and complete and fairly present the financial
position of the Company at the dates  thereof and the results of  operations  of
the Company, for the periods covered thereby,  subject in the case of statements
to  year-end  audit  adjustments  (which  are,  neither  individually  or in the
aggregate,  material).  All financial  information  furnished hereunder has been
prepared in  accordance  with GAAP,  consistently  applied,  and the Company has
furnished  to Lender  the  Budget of the  Company  as of March 31,  2004,  which
fairly,  accurately and in all material  respects  presents the  information set
forth therein.  The Company has no material liability,  contingent or otherwise,
not adequately reflected in the Budget, nor does the Company have any reasonable
grounds to know of any such liability.  The Company has previously delivered the
Budget to Lender which was prepared by the Company based upon the best available
information and in good faith.

            (B) Since March 31, 2004,  and at all times up to the  Closing,  (i)
there has not been,  nor, so far as reasonably  can be foreseen at this time, is
there likely to be, any event or condition of any character, either individually
or, in the aggregate,  which has materially adversely affected,  or is likely to
materially  adversely  affect,  the  Company's  business   operations,   assets,
condition (financial or otherwise), liabilities, earnings, results of operations
or prospects;  (ii) no employee or consultant of the Company,  the loss of whose
services could  materially  and adversely  affect the Company or the business or
prospects of the Company,  taken as a whole, has left the employ of the Company,
has given any indication that he or she intends to do so or is considering doing
so, or is being terminated, (iii) there has been no damage, destruction or loss,
whether or not covered by  insurance,  materially  and  adversely  affecting the
properties or business of the Company,  taken as a whole, (iv) there has been no
waiver by the Company of a valuable  right or of a material debt owed to it, (v)
there has been no loan made by the Company to any employee,  officer or director
other than  advances of expenses made in the ordinary  course of business,  (vi)
there has been no declaration  or payment of any dividend or other  distribution
of the assets of the Company or any director or indirect redemption, purchase or
acquisition  of any  securities  of the  Company,  (vii) there has been no labor
organization  activity  or labor  trouble,

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                                                                  DEBT AGREEMENT
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and (viii) there has been no sale,  transfer or lease of, except in the ordinary
course of business,  or mortgage or pledge of or  imposition  of lien on, any of
the Company's assets.

      3.11  EXEMPT  TRANSACTIONS.  Subject  to  the  accuracy  of  the  Lender's
representations in Section 4 hereof, the offer,  issuance,  sale and delivery of
the Warrant(s) and the Warrant Shares pursuant to this Agreement are exempt from
the  registration  requirements  of the Securities Act and the  registration  or
qualification  requirements of the State of Delaware and neither the Company nor
anyone acting on its behalf will take any action  hereafter that would cause the
loss of such exemption.

      3.12 TAX RETURNS AND AUDITS.

            (A) All required federal, state and local tax returns of the Company
have been accurately prepared and duly and timely filed, and all federal,  state
and local taxes required to be paid with respect to the periods  covered by such
returns have been paid. No deficiency  assessment or proposed  adjustment of the
Company's  United  States  income tax or state or  municipal  taxes is  pending,
except as  disclosed  on the  Company's  books and records as  furnished  to the
Lender  and its  counsel,  and the  Company  has no  knowledge  of any  proposed
liability  for any tax to be imposed upon its income,  properties  or assets for
which  there  is not  adequate  reserve  reflected  in the  unaudited  Financial
Statements.

            (B) PAYMENT OF TAXES. The Company has accurately  prepared and filed
within the time  prescribed by law all federal,  state and local income,  excise
and franchise tax returns, real estate and personal property tax returns,  sales
and use tax  returns,  payroll tax returns and other tax returns  required to be
filed by it and has paid or made provision for the payment of all taxes shown to
be due  thereon  and  adequate  provision  has been made for all taxes and other
charges  to which the  Company is subject  and which are not  currently  due and
payable.  The federal income tax returns of the Company have never been examined
by the Internal  Revenue  Service.  Neither the Internal Revenue Service nor any
other taxing authority is now asserting or, to the best of Company's  knowledge,
is  threatening  to assert  against the  Company,  any  deficiency  or claim for
additional taxes or interest thereon or penalties in connection  therewith,  and
the Company does not know of any basis for any such deficiency or claim.

      3.13 LABOR AGREEMENTS AND ACTIONS.  The Company is not bound by or subject
to any  contract,  commitment or  arrangement  with any labor union and no labor
union has requested or, to the knowledge of the Company, sought to represent any
of the employees,  representatives or agents of the Company.  There is no strike
or other labor dispute involving the Company pending or, to the knowledge of the
Company, threatened, nor is the Company aware of any labor organization activity
involving the employees of the Company.

      3.14 INSURANCE COVERAGE.  There are, in full force,  policies of insurance
issued by insurers of  recognized  responsibility  insuring the  Company,  their
properties and business against such losses and risks and in such amounts as are
adequate for their business and proposed  business and customary among companies
engaged in the same or similar businesses.

      3.15 INTEREST IN COMPETITORS.  Neither the Company nor any of its officers
or directors has any interest, either by way of contract or by way of investment
(other  than as  holder  of not

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more than one percent [1%] of the outstanding capital stock of a publicly traded
Person) or  otherwise,  directly  or  indirectly,  in any Person  other than the
Company that (i) provides any services or designs, produces or sells any product
or product lines or engages in any activity  similar to or competitive  with any
activity currently conducted or proposed to be conducted by the Company, or (ii)
has any direct or indirect interest in any assets or property, real or personal,
tangible or intangible, of the Company.

      3.16 ENVIRONMENTAL  MATTERS. To the best of its knowledge,  the Company is
not in violation  in any  material  respect of any  applicable  statute,  law or
regulation relating to the environment or occupational health and safety and, to
the best of the Company's  knowledge,  no material  expenditures  are or will be
required in order to comply with any such existing statute, law or regulation.

      3.17 DISCLOSURE.  The Company has provided Lender with all the information
it has  requested  for  deciding  whether  to  purchase  the  Debenture  and all
information  which the Company  believes is reasonably  necessary to make such a
decision.  Neither this Purchase Agreement (including all schedules and exhibits
hereto),  nor any  other  written  statements,  certificates  or  other  written
information  delivered  pursuant to, or in  connection  with,  the  transactions
contemplated hereby contains any untrue statement of a material fact or omits to
state a material  fact  necessary to make the  statements  herein or therein not
misleading.  To the  best of the  Company's  knowledge,  there  is no fact  that
materially adversely affects the business,  projections,  condition,  affairs or
operations  of  the  Company,  taken  as a  whole,  or any of  either  of  their
properties  or  assets  that  has not been set  forth in this  Agreement  or the
Exhibits  other than facts  relating  generally  to the state of the  economy or
which  otherwise  affect the Company and all persons in its  industry  similarly
situated in the same manner.

      3.18 REGISTRATION RIGHTS.  Except as set forth in EXHIBIT E, "Registration
Rights", the Company is not under any contractual  obligation to register any of
its  presently  outstanding  securities  or  any  of its  securities  which  may
hereafter be issued.

      3.19 NO BROKERS OR FINDERS.  The Company  has not  incurred,  and will not
incur,  directly or indirectly,  as a result of any action taken by the Company,
any  liability  for  brokerage or finders'  fees or agents'  commissions  or any
similar  charges in  connection  with any  financing  since 1997 except for a 2%
commission  payable in connection with the Company's  closing of its issuance of
Preferred C Shares on June 30, 2004.

      3.20 COMPLIANCE WITH OTHER INSTRUMENTS.  The Company is in compliance with
all material obligations, agreements and conditions contained in any evidence of
indebtedness  or any loan agreement or other  contract or agreement  (whether or
not relating to indebtedness) of the Company,  the lack of compliance with which
would afford to any Person the right to accelerate any material  indebtedness or
terminate  any material  right or  agreement  of the Company.  The Company is in
compliance in all respects with the provisions of its Articles and Bylaws.

      3.21  LICENSES  AND  OTHER  RIGHTS,   COMPLIANCE.   The  Company  has  all
franchises,  permits,  licenses  and other  rights and  privileges  necessary to
permit  it to own its  properties  and to  conduct  its  business  as  presently
conducted  and as planned to be  conducted.  The Company is

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                                                                  DEBT AGREEMENT
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in  compliance  in all  material  respects  under  each,  and  the  transactions
contemplated  by this  Agreement  will not cause a violation  under any, of such
franchises,  permits, licenses or other rights and privileges. The Company is in
compliance  in all material  respects with all laws and  governmental  rules and
regulations  applicable  to its  businesses,  properties  and  assets and to the
products,  systems, machinery and equipment and services designed,  manufactured
or provided or sold by it, including,  without limitation,  all such laws, rules
and regulations relating to fair employment and  anti-discrimination  practices,
public  or  employee  safety  and  to  environmental  protection,  water  or air
pollution and similar matters.

      3.22  INVESTMENTS IN OTHER  PERSONS.  The Company has not made any loan or
advance to any Person  which is  outstanding  on the date  hereof or the Closing
Date,  nor is it committed  or  obligated to make any such loan or advance,  nor
does the Company  have any  material  interest in any capital  stock,  assets or
obligations of, or any financial or equity interest in, any Person.

      3.23 TRANSACTIONS WITH AFFILIATES.  Except as previously disclosed,  there
are no loans,  leases or other continuing  transactions  between the Company and
any  person  or entity  associated  with the  Company  in each  case,  except as
specifically contemplated herein; nor to the best of the Company's knowledge and
belief does any person or entity  associated  with the Company own,  directly or
indirectly,  individually  or  collectively,  any equity  interest in any Person
which is a competitor,  customer or supplier of the Company or have any existing
contractual  relationship  with any such Person.  "A Person or Entity Associated
with the Company"  shall be deemed to be any person who, or entity  which,  is a
stockholder,  officer or  director  of the  Company  or a  relative  by blood or
marriage  of, a trust or estate for the benefit of, or a person or entity  which
directly or indirectly  controls,  is  controlled by or is under common  control
with, any such stockholder, director or officer.

4. REPRESENTATIONS OF THE LENDER; SECURITIES LAW TRANSFER RESTRICTIONS.

      4.1  REPRESENTATIONS  AND  WARRANTIES.  The  Lender  understands  that the
securities  are being offered  hereby under  exemptions  from the securities law
based in part on the following representations and warranties:

            (A)  INVESTMENT  REPRESENTATION.  The Lender has such  knowledge and
experience in financial and business  matters as to be capable of evaluating the
merits and risks of its  investment  in the  Warrant(s)  and the Warrant  Shares
(collectively,  the  "Securities"),  and of  protecting  its  own  interests  in
connection  with the transaction  contemplated by this Agreement.  The Lender is
capable of bearing the economic  risks of such  investment and is purchasing the
Securities  for its own  account for  investment  with no present  intention  of
distributing  or selling the  Securities  or any interest  therein.  Lender is a
Qualified Investor as such term in used by the SEC. Lender acknowledges that the
Securities  have not been  registered  under the  Securities  Act and  cannot be
resold  unless  they are  registered  under  the  Securities  Act,  or unless an
exemption from such registration is available.

            (B)  ACCESS  TO   INFORMATION.   During  the   negotiation   of  the
transactions  contemplated  herein, the Lender and its representatives have been
afforded full and free access to corporate books, records, contracts,  documents
and other information  concerning the Company

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                                                                  DEBT AGREEMENT
                                                                         Page 11

and to its offices and facilities, have been afforded an opportunity to ask such
questions  of  the  Company's  officers,   employees,  agents,  accountants  and
representatives  concerning  the  Company's  business,   operations,   financial
condition,  assets,  liabilities and other relevant  matters as they have deemed
necessary or desirable, and have been given, to the Lender's knowledge, all such
information as has been requested,  in order to evaluate the merits and risks of
the prospective  investments  contemplated herein, all as it has found necessary
to make  an  informed  investment  decision;  provided,  however,  that  any due
diligence  investigation  undertaken by Lender shall not limit or modify, in any
way, the Company's  obligations  and  representations  in Section 3.17 or in any
other Section hereof.

            (C) VALIDITY OF THIS  AGREEMENT  AND  QUALIFICATION.  The Lender has
full right,  power,  capacity and authority to execute,  deliver and perform its
obligations  under this Agreement;  to purchase the Securities and to consummate
the transactions contemplated hereby. This Agreement has been duly authorized by
Lender.  This  Agreement  constitutes  and,  when duly executed and delivered by
Lender,  will  constitute  a valid  and  binding  obligation  of the  Lender  in
accordance with its terms.

            (D) NO BROKERS OR FINDERS.  The Lender has not engaged any broker or
finder for the transactions contemplated hereby.

      4.2 TRANSFERS TO COMPLY WITH THE  SECURITIES  ACT. The Lender  understands
and agrees that the Notes and Warrants,  and any interest in either,  may not be
sold,  assigned,  pledged,  hypothecated,  encumbered  or in  any  other  manner
transferred  or  disposed  of, in whole or in part,  except in  compliance  with
applicable  United States federal and state  securities or Blue Sky laws and the
terms and conditions hereof. Any certificate for the Warrant Shares,  unless, at
the time of conversion,  such Warrant Shares are registered under the Securities
Act, shall bear the following legend:

      THE SHARES  REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
      THE SECURITIES ACT OF 1933. THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT
      AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE,  AND MA Y NOT BE MORTGAGED,
      PLEDGED,  HYPOTHECATED  OR  OTHERWISE  TRANSFERRED  WITHOUT  AN  EFFECTIVE
      REGISTRATION  STATEMENT FOR SUCH SHARES UNDER THE  SECURITIES ACT OF 1933,
      OR AN OPINION OF COUNSEL  FOR THE  CORPORATION  THAT  REGISTRATION  IS NOT
      REQUIRED UNDER SUCH ACT.

      Such  legend  shall be  removed  by the  Company  from any  Warrant or the
certificate  for any Warrant Shares at any such time upon the  effectiveness  of
any  registration  statement  under  the  Securities  Act as the  holder of such
securities  satisfies the  requirements of Rule 144(k) under the Securities Act,
provided that Rule 144(k), as then in effect, does not differ substantially from
Rule 144(k) as in effect as of the date of this Agreement and,  provided further
that the Company has received from the holder a written  representation that (i)
such  holder  otherwise  satisfies  the  requirements  of Rule 144(k) as then in
effect  with  respect to such  securities,  and (ii) such holder will submit the
certificate  for any such  securities  to the Company for  reapplication  of the
legend at such  time as the  holder  becomes  an  affiliate  of the  Company  or
otherwise ceases to satisfy the requirements of Rule 144(k) as then in effect.

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                                                                  DEBT AGREEMENT
                                                                         Page 12

5. AFFIRMATIVE COVENANTS OF THE COMPANY.

      5.1  INFORMATION.  Without  limiting any other  covenants  and  provisions
hereof,  the Company  covenants  and agrees that it will perform and observe the
following covenants and provisions:

            (A) PAYMENT OF TAXES AND TRADE DEBT.  Pay and  discharge  all taxes,
assessments  and  governmental  charges  or levies  imposed  upon it or upon its
income,  profits or business,  or upon any properties  belonging to it, prior to
the date on which  penalties  attach  thereto,  and all lawful claims which,  if
unpaid,  might  become a lien or  charge  upon any  properties  of the  Company,
provided that the Company shall not be required to pay any such tax, assessment,
charge,  levy or claim which is being contested in good faith and by appropriate
proceedings if the Company shall have set aside on its books  adequate  reserves
with respect  thereto;  and pay when due or in conformity  with customary  trade
terms all lease obligations,  all trade debt and all other indebtedness incident
to the  operations  of the Company,  except such as are being  contested in good
faith and by proper proceedings if the Company shall have set aside on its books
adequate reserves with respect thereto.

            (B) REPORTING REQUIREMENTS. Furnish to Lender the following:

                  (i) As soon as  available  and, in any event,  within  fifteen
(15) days after the end of every calendar month, the unaudited  balance sheet of
the Company as at the end of such month and  unaudited  statements of income and
cash flow of the Company for the month then  ended,  and for the current  fiscal
year to the end of such month,  fairly presenting the financial condition of the
Company on the date of such  statements  and the results of its  operations  and
changes in cash flow for the respective  periods covered thereby;  in accordance
with  GAPP  and  subject  to  year-end  audit  adjustments  and the  absence  of
footnotes.

                  (ii) As soon as  available  and, in any event,  within  ninety
(90) days after the end of each fiscal year of the Company, the reviewed balance
sheets of the Company as at the end of such fiscal year and the related  audited
statements  of income and changes in  stockholders'  equity and cash flow of the
Company for such fiscal year, setting forth in each cash in comparative form the
corresponding figures for the preceding fiscal year, such balance sheet and such
statements to be accompanied by a certificate of an independent certified public
accountant,  reasonably  acceptable to Lender, to the effect that such financial
statements,  in its opinion,  with  qualification,  fairly present the financial
condition  of the  Company as at the end of such  fiscal year and the results of
its operations and changes in stockholders' equity and cash flow for such fiscal
year in conformity with generally accepted  accounting  principles  consistently
applied  and on a  basis  consistent  with  those  principles  applied  for  the
preceding fiscal year.

                  (iii)  Promptly  after the  happening  thereof,  notice of any
material  adverse  change in the  business,  properties,  assets  or  condition,
financial or  otherwise,  of the Company,  and promptly  after the  commencement
thereof, notice of all actions, suits, proceedings and investigations pending or
threatened against the Company, or against any officer,  director,  key employee
or  principal  stockholder  of the  Company,  before  any court or  governmental
department,  commission,  board, bureau, agency or instrumentality,  domestic or
foreign,  affecting

<PAGE>

                                                                  DEBT AGREEMENT
                                                                         Page 13

or relating to the Company or any of its or their  assets,  rights or agreements
which,  if decided  adversely  to the  Company,  could have a material  negative
effect on the conduct by its business,  or result in a money  judgment in excess
of twenty thousand dollars ($20,000.00).

                  (iv) With reasonable promptness, such other financial or other
information  and data as  Lender  may,  from time to time,  reasonably  request;
provided,  however,  that the request for  information or material which already
exists in the Company's records shall always be deemed "reasonable" hereunder.

            (C)  Simultaneously,  with the  delivery  of each  set of  Financial
Statements  referred to in Section 5.1(B) above,  if there exists on the date of
such  Financial  Statements  any  Default,  a  certificate  of an officer of the
Company,  setting forth the details thereof, and the action which the Company is
taking, or proposes to take, with respect thereto.

            (D) As soon as available, the Company's projected financial plan and
projected  revenue and  operating  expense and capital  expense  budgets for the
forthcoming year, including monthly cash flow projections,  quarterly profit and
loss projections and annual projected balance sheets, itemized in such detail as
the Board of Directors of the Company may reasonably require.

            (E) MAINTENANCE OF INSURANCE.  Maintain  insurance with  responsible
and reputable  insurance  companies or associations in such amounts and covering
such risks as is customarily  carried by companies engaged in similar businesses
and owning  similar  properties  in the same general  areas in which the Company
operates.

            (F) PRESERVATION OF CORPORATE  EXISTENCE.  Preserve and maintain its
corporate  existence,  rights,  franchises and privileges in the jurisdiction of
its incorporation  and qualify and remain qualified as a foreign  corporation in
each  jurisdiction  in which the  absence  of such  qualification  could  have a
material adverse effect upon the Company.

            (G)  MAINTENANCE  OF  PROPERTIES.  Maintain  and preserve all of its
properties  necessary  or useful in the proper  conduct of its  business in good
repair, working order and condition, ordinary wear and tear excepted.

            (H) LICENSES AND OTHER RIGHTS,  COMPLIANCE  WITH LAWS.  Use its best
efforts  to obtain  all  franchises,  permits,  licenses  and other  rights  and
privileges  necessary  to permit it to conduct  its  business  substantially  as
proposed to be conducted at any time hereafter.  Comply with the requirements of
all  applicable  laws,  rules,   regulations  and  orders  of  any  governmental
authority,  noncompliance  with  which  could  materially  adversely  affect its
business, assets or condition, financial or otherwise.

            (I)  COMPLIANCE;   TRANSACTION   DOCUMENTS.   Comply  with  all  the
provisions of each of the Transaction Documents.

            (J) Promptly,  upon the mailing thereof to holders of capital stock,
a copy of all financial statements, reports or proxy statements so mailed.

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                                                                  DEBT AGREEMENT
                                                                         Page 14

      5.2  MAINTENANCE  OF BOOKS;  INSPECTION.  The  Company  will keep books of
record and  account in which full,  true and correct  entries are made of all of
its  dealings,  business  and  affairs in  accordance  with  generally  accepted
accounting  principles.  The Company  will permit the Lender and its  authorized
representatives  to visit and inspect the properties of the Company,  to examine
its  respective  operating  records,  books of account  and tax  returns  and to
discuss their business,  assets,  financial condition,  results of operations or
prospects with their officers,  all at such reasonable times and as often as may
be reasonably requested by the Lender.

      5.3 CONFIDENTIALITY AND TERMINATION OF COVENANTS.

            (A) Lender  agrees that any  information  obtained by it pursuant to
Section 5.1 and 5.2 will not be  disclosed  to any Person or entity  without the
prior written consent of the Company.  Notwithstanding the foregoing, Lender may
disclose such  information  without the prior written  consent of the Company to
its legal counsel, professional accountants, associates or employees in order to
evaluate  this  investment  and as may be  necessary to continue to evaluate the
Company.  Lender agrees that any recipient of information obtained by the Lender
pursuant to Sections  5.1 and 5.2 shall agree to be bound by the  provisions  of
this Section 5.3 or shall be otherwise bound by applicable  ethical standards of
confidentiality with respect to such information.

            (B) The covenants set forth in Sections 5.1 and 5.2 shall  terminate
and be of no further  force or effect upon the first to occur of (i) the sale of
securities  pursuant to a registration  statement filed by the Company under the
Securities Act in connection with the firm commitment  underwritten  offering of
its  securities to the general  public is  consummated  or (ii) when the Company
first becomes subject to the periodic  reporting  requirements of Sections 12(g)
or 15(d) of the Securities Exchange Act, whichever event shall first occur.

      5.4  NEGATIVE  COVENANTS  OF  THE  COMPANY.  Without  limiting  any  other
covenants and provisions  hereof,  the Company  covenants and agrees that, until
the  consummation  of a Public  Offering  or  repayment  of all debt owed to the
Lender by the Company, it will not:

            (A) DEALINGS  WITH  AFFILIATES.  Except as may be  undertaken in the
ordinary  course of the Company's  business and approved by members of the Board
of  Directors  who  have  no  direct  or  indirect   material  interest  in  the
transaction,  other  than  as a  stockholder  of the  Company,  enter  into  any
transaction including,  without limitation, any loans, compensation arrangements
or  extensions  of credit  or  royalty  agreements  with any  "person  or entity
associated with the Company" as that term is defined herein,  or any transaction
in which any of such  persons  or  entities  has a direct or  indirect  material
interest other than as a stockholder of the Company.

            (B) REDEMPTIONS;  DIVIDENDS.  Declare or pay any dividends on Common
Stock, or purchase or redeem securities of the Company,  other than (i) pursuant
to the terms of the  Articles  or the  Bylaws or (ii)  repurchases  of shares of
Common Stock held by employees or consultants of the Company upon termination of
their  employment  or services  pursuant to the terms of  employment  agreements
providing for such repurchase.

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                                                                  DEBT AGREEMENT
                                                                         Page 15

            (C) DEBT FINANCING. Except with the consent of Lender, subsequent to
his failure to exercise  his Right of First  Refusal,  enter into or  materially
modify any debt financing of the Company senior to the Debt of the Lender.

            (D)  TRANSFERS OF  TECHNOLOGY.  Transfer  any  ownership or interest
(including  but  not  limited  to any  license,  sale,  or  grant  of  exclusive
distribution  rights) in, or material rights relating to, any of its technology,
trade secrets, patents, patent rights, copyrights or other intellectual property
rights to any person or entity except in the normal course of business.

            (E) MERGER,  CONSOLIDATION,  SALE OF ASSETS.  Merge,  consolidate or
reorganize the Company or lease or sell  substantially  all of the assets of the
Company or sell or pledge shares  constituting  more than fifty percent (50%) of
the  Company's  stock,  unless as part of the  transaction  all Debt owed to the
Lender by the Company will be repaid at the closing.

            (F)  LOANS/GUARANTIES.  Except with the consent of the Lender,  make
any loans or advances greater than twenty thousand  dollars  ($20,000.00) to any
person or guaranty any obligations of any person, firm or corporation.

            (G)  BUSINESS.  Except  as  approved  by the Board of  Directors  in
furtherance of the Company's business purposes, make any material changes in the
nature of its business as carried on at the date hereof.

      5.5 RESTRICTIONS AS TO PAYMENT OF DISTRIBUTIONS.

            (A) Without  the prior  written  consent of the Lender,  the Company
will not make any distribution of cash or property other than equity  securities
of the Company on account of any shares of capital stock of the Company,  now or
hereafter outstanding, or set apart any sum for any such purpose.

            (B) The Company will not,  without the prior written approval of the
Lender,  make any  payment  on  account  of the  purchase,  redemption  or other
acquisition or retirement of any shares of any class of the Company's stock, how
or hereafter  outstanding (except in connection with repurchases of Common Stock
held by  employees  and  directors  of, or  consultants  to,  the  Company  upon
termination  of their  employment  or their  status as a director or  consultant
pursuant  to  agreements  providing  for  such  repurchase),   or  any  security
convertible into, or option, warrant or other right to acquire any such shares.

      5.6  NOTIFICATION OF FUNDAMENTAL  CHANGE.  Unless waived in writing by the
Lender,  the Company shall deliver to the Lender at least twenty (20) days prior
to the effective date of a Fundamental  Change,  a notice in writing stating the
date  on  which  such  Fundamental  Change  is  expected  to  become  effective.
Notwithstanding anything contained herein to the contrary, the Company shall not
undertake a Fundamental Change without the prior written consent of the Lender.

      5.7  TERMINATION  OF  PROVISIONS.  Except for the  covenant  contained  in
Section  5.4(D)  and then only if and to the  extent  that any such  transaction
serves to defeat or otherwise  avoid the realization of the rights of the Lender
or  its  predecessor  interest  under  the  Restated  License  Agreement  or the
Distribution  Agreement  dated August __, 1997,  all the provisions of Section 5

<PAGE>

                                                                  DEBT AGREEMENT
                                                                         Page 16

shall  terminate upon the occurrence of a Public Offering by the Company or upon
repayment of all of the Debt owed by the Company to the Lender.

6. EVENTS OF DEFAULT.

      6.1 EVENT OF DEFAULT DEFINED: ACCELERATION OF MATURITY; WAIVER OF DEFAULT.
In case one or more of the following  events (whatever the reason for such event
and whether it shall be voluntary or  involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or any order, rule
or  regulation  of any  administrative  or  governmental  body)  (an  "Event  of
Default") shall have occurred and be continuing:

            (A) Default in the payment of any  interest  upon the Note(s) as and
when the same shall become due and payable and continuance of such default for a
period of ten (10)  Calendar Days after receipt by the Company of notice of such
default from the Lender;

            (B)  Default in the payment of all or any part of the  principal  or
any  installment  of the  principal of the  Note(s),  as and when the same shall
become due and payable and  continuance of such default for a period of ten (10)
Calendar  Days after  receipt by the Company of notice of such  default from the
Lender;

            (C) An  involuntary  case or other  proceeding  shall  be  commenced
against the Company  seeking  liquidation,  reorganization  or other relief with
respect to it or its debts under any applicable bankruptcy,  insolvency or other
similar  law,  now or  hereafter  in effect,  or seeking  the  appointment  of a
receiver,  liquidator,  assignee,  custodian,  trustee, sequestrator (or similar
official)  of the  Company or for any  substantial  part of the  property of the
Company or the winding up or liquidation of the affairs of the Company, and such
case or proceeding  shall remain unstayed and undismissed for a period of thirty
(30) days, or an order for relief shall be entered against the Company under the
federal bankruptcy laws as now of hereafter in effect;

            (D) Company  shall  commence a voluntary  case under any  applicable
bankruptcy,  insolvency  or other  similar law,  now or hereafter in effect,  or
consent  to the entry of an order for  relief in an  involuntary  case under any
such law,  or consent to the  appointment  or taking  possession  by a receiver,
liquidator,  assignee, custodian, trustee, sequestrator (or similar official) of
the Company or for any substantial  part of the property of the Company,  or the
Company shall make any general assignment for the benefit of creditors, or shall
fail  generally  to pay its debts as they come due, or shall take any  corporate
action to authorize any of the foregoing;

            (E) Any  representation or warranty made by the Company in Section 3
hereof,  or in any of the  Transaction  Documents,  shall  prove  to  have  been
incorrect in any respect  which is  materially  adverse to the Company or Lender
when made or as of the Closing Date; or

            (F)  The  Company  shall  fail  to  observe  the  covenants  of this
Agreement,  or in any of the  Transaction  Documents,  and  such  failure  shall
continue  for twenty  (20) days after the  receipt  of written  notice  from the
holder  (except  as to  covenants  contained  in Section 5 as to which no notice
shall be required).

<PAGE>

                                                                  DEBT AGREEMENT
                                                                         Page 17

      Then,  and in each and every  such case  [other  than an Event of  Default
specified in Section 6.1(C) or (D)],  unless all of the principal  amount of the
Note(s) shall have already become due and payable, the Lender, for so long as it
holds more than fifty percent (50%) aggregate  principal  amount of the Note(s),
and  thereafter,  the  holder  of more than  fifty  percent  (50%) in  aggregate
principal  amount of the Note(s) then  outstanding,  by notice in writing to the
Company, may declare the entire principal amount of the Note(s) and the interest
accrued  thereon  to  be  due  and  payable  immediately,  and,  upon  any  such
declaration,  the same shall become immediately due and payable.  If an Event of
Default  specified in Section  6.1(C) or (D) occurs with respect to the Company,
the  principal  of, and accrued  interest  on, the Note(s)  shall  become and be
immediately  due and payable without any declaration or other act on the part of
the Lender.  Presentment,  demand, protest and all other notices of any kind are
hereby expressly waived by the Company.

      The foregoing paragraph,  however, is subject to the condition that if, at
any time after all of the  principal of the Note(s)  shall have been so declared
due and payable, and before any judgment or decree for the payment of the monies
due shall have been  obtained or entered as  hereinafter  provided,  the Company
shall pay,  or shall  deposit  in trust for the  benefit  of the  Lender,  a sum
sufficient to pay all matured  installments of interest upon the Note(s) and the
principal  of the  Note(s)  which  shall  have  become  due  otherwise  than  by
acceleration  (with interest upon such principal and, to the extent that payment
of such interest is enforceable under applicable law, on overdue installments of
interest,  at the same rate as the rate of interest specified in the Note(s), to
the date of such payment or deposit),  and if any and all Defaults and Events of
Default under this Agreement, other than the non-payment of the principal of the
Note(s)  which  shall have  become due by  acceleration,  shall have been cured,
waived or otherwise  remedied as provided herein,  then, and in every such case,
the holders of more than fifty  percent (50%) of aggregate  principal  amount of
the Note(s),  then outstanding,  by written notice to the Company, may waive all
Defaults and rescind and annul such  declaration  and its  consequences,  but no
such waiver or  rescission  and  annulment  shall  extend to or shall affect any
subsequent Default or shall impair any right consequent thereon.

      6.2  POWERS  AND  REMEDIES  CUMULATIVE;  DELAY OR  OMISSION  NOT WAIVER OF
DEFAULT.  No right or remedy herein  conferred upon or reserved to the Lender is
intended  to be  exclusive  of any other  right or remedy,  and every  right and
remedy shall,  to the extent  permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or  otherwise.  The  assertion or employment of any right or remedy
hereunder,  or  otherwise,   shall  not  prevent  the  concurrent  assertion  or
employment of any other appropriate right or remedy.

      No delay or omission of the Lender to exercise any right or power accruing
upon any Event of Default occurring and continuing as aforesaid shall impair any
such  right or power or shall be  construed  to be a waiver of any such Event of
Default or an  acquiescence  therein;  and every power and remedy  given by this
Agreement,  any Note or Warrant or by law may be exercised from time to time and
as often as shall be deemed expedient by the Lender.

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                                                                  DEBT AGREEMENT
                                                                         Page 18

7. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF NOTE(S) OR WARRANT(S).

            (A) Upon surrender of any Note or Warrant to the Company,  or at the
office of its stock transfer  agent,  with an instrument of assignment and funds
sufficient to pay any transfer tax, the Company shall,  without charge,  execute
and deliver a new Note or Warrant in the name of the assignee or assignees named
in such  instrument of assignment  and, if such holder's  entire interest is not
being  assigned in the name of such holder,  such Note or Warrant shall promptly
be canceled.

            (B) A Note or Warrant may be divided or combined  with other Note(s)
or Warrant(s) that carry the same rights upon presentation thereof at the office
of the  Company or at the office of its stock  transfer  agent  together  with a
written notice  specifying the names and denominations in which such new Note(s)
or Warrant(s) is/are to be issued and signed by the holder thereof.

            (C) Upon  receipt by the Company of evidence  satisfactory  to it of
the loss, theft, destruction or mutilation of any Note(s) or Warrant(s), and (in
the  case  of  loss,   theft  or   destruction)   of   reasonably   satisfactory
indemnification   and  upon  surrender  and   cancellation  of  any  Note(s)  or
Warrant(s), if mutilated, the Company shall execute and deliver a new Note(s) or
Warrant(s) of like tenor and date.  Any such new Note(s) or Warrant(s)  executed
and delivered shall constitute an additional  contractual obligation on the part
of the  Company,  whether or not the  Note(s)  or  Warrant(s)  so lost,  stolen,
destroyed or mutilated shall be, at any time, enforceable by anyone.

8. LENDER'S RIGHT OF FIRST REFUSAL.

      8.1 RIGHT OF FIRST REFUSAL.

            (A) The Company hereby grants to the Lender,  for a period of thirty
(30) days, and any subsequent holder (the "Rights Holders") of the Warrants, the
right of first offer to purchase,  pro rata, a portion of "New  Securities"  (as
defined in this Section 8) that the Company may,  from time to time,  propose to
sell and issue.  Each Rights Holder's pro rata share, for purposes of this Right
of First  Refusal,  is the ratio of (X) the  number of shares of  capital  stock
owned or issuable  upon the  conversion  or exercise of any of the common  stock
owned  by  Rights  Holder  immediately  after  the  Closing  to  (Y)  the  total
Outstanding  Equity Securities of the Company;  provided,  however,  that in the
event  that any  Rights  Holder  elects  not to  purchase  its pro rata share in
accordance   with  the   above  (a   "Non-Participating   Holder"),   then  each
participating  Rights Holder  purchasing New  Securities may purchase,  on a pro
rata  basis,  based on the  common  stock held  among the  participating  Rights
Holders,  such  Non-Participating  Holder's pro rata share.  This right of first
refusal shall be subject to the following provisions.

            (B) "NEW SECURITIES" shall mean any Common Stock or other securities
(debt or equity) of the Company,  whether or not  authorized on the date hereof,
and  rights,  options  or  warrants  to  purchase  such  Common  Stock  or other
securities,  and  securities  of any type  whatsoever  that are,  or may become,
convertible into said Common Stock or Preferred Stock;  provided,  however, that
"New Securities" does not include the following:

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                                                                  DEBT AGREEMENT
                                                                         Page 19

                  (i) Securities of the Company  offered to the public  pursuant
      to a bona fide Public Offering;

                  (ii)   Securities  of  the  Company  issued  pursuant  to  the
      acquisition of another  corporation by the Company by merger,  or purchase
      of  substantially  all of the assets or other  reorganization  whereby the
      Company owns not less than fifty-one  percent (51%) of the voting power of
      such other corporation; or

                  (iii)  Securities  issued in connection  with any stock split,
      stock dividend or recapitalization by the Company.

                  (iv) Options approved by the Board of Directors of the Company
      for issuance to employees or directors of the Company,  or the issuance of
      shares upon the exercise of outstanding options or warrants.

            (C) In the event that the Company  proposes to undertake an issuance
of New  Securities,  it shall  give each  Rights  Holder  written  notice of its
intention,  describing  the  type of New  Securities,  the  price,  the name and
address of the intended  purchaser  and the general terms upon which the Company
proposes to issue the same.  Each Rights  Holder shall have twenty (20) business
days  from the date of such  notice is given to agree to  purchase  its pro rata
share of such New  Securities  or any portion  thereof at the price and upon the
general terms  specified in the notice by giving  written  notice to the Company
and stating therein the quantity of New Securities to be purchased.

            (D) In the  event  that  the  Rights  Holders'  aggregate  pro  rata
exercised  portion  is less than the  amount of New  Securities  proposed  to be
issued in the notice  referred to above,  the Company shall have sixty (60) days
thereafter to sell (or enter into an agreement pursuant to which the sale of New
Securities  covered thereby shall be closed,  if at all, within thirty [30] days
from the date of such  agreement) with the New Securities  respecting  which the
Rights  Holders'  rights were not exercised at a price and upon general terms no
more favorable to the purchasers thereof than specified in the Company's notice.
In the event the Company has not sold the New Securities  within such sixty (60)
day period (or sold and issued New  Securities in accordance  with the foregoing
within thirty (30) days from the date of such agreement),  the Company shall not
thereafter  issue or sell any New  Securities  without  first  offering such New
Securities to the Rights Holders in the manner provided above.

            (E) The Right of First Refusal  granted under this  Agreement  shall
expire  immediately  after the closing of the Company's  initial Public Offering
pursuant to a  registration  statement  filed and declared  effective  under the
Securities  Act or upon  some  other  means by which the  shares of the  Company
become publicly traded and listed on a national securities exchange or listed on
the National Market System (the "NMS") of the National Association of Securities
Dealers  Automated  Quotation  System  ("NASDAQ"),  but shall be in effect  with
respect to such transaction.

            (F) This Right of First Refusal is nonassignable  except if (i) such
assignee agrees to be bound by the provisions of this Section 8 and (ii) written
notice of such transfer is promptly furnished to the Company.

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                                                                  DEBT AGREEMENT
                                                                         Page 20

            (G) This Right of First  Refusal  shall  terminate  as to any Rights
Holder who no longer owns any shares of capital stock  issuable upon  conversion
of the Warrants as of the date of the notice referred to above.

9. REGISTRATION RIGHTS.

      The Lender shall have  Piggyback  Registration  Rights with respect to all
Warrant Shares. The Registration  Rights of Lender are defined herein in EXHIBIT
E.

10. MISCELLANEOUS.

      10.1 SURVIVAL. All representations,  warranties,  agreements and covenants
contained herein shall survive the execution of this Agreement,  the purchase of
the Note(s) and Warrant(s) contemplated hereby and any disposition or conversion
thereof,  notwithstanding  any  investigation  made  at any  time  by any of the
parties hereto.

      10.2  SUCCESSORS  AND  ASSIGNS.  Subject to the  restrictions  or transfer
contained  herein,  this Agreement  shall be binding upon and shall inure to the
benefit  of and be  enforceable  by the  parties  hereto  and  their  respective
successors and assigns. No assignment or transfer of a Note or Warrant Shares by
the Lender or other holder thereof shall  constitute an assignment by the Lender
or other holder of its rights  hereunder in the absence of a written  assignment
by the  Lender or other  holder of such  rights.  The Lender or  assignee  shall
notify the Company of any such assignment of its rights hereunder.

      10.3 NOTICES. All notices,  requests and other communications provided for
herein  shall be in writing  and shall be deemed to have been made or given when
delivered, or mailed postage prepaid, or sent by telex, telegram or telecopier:

            (A) If to the Company, to it at:
                                             Ovation Products Corporation
                                             6 Southgate Drive
                                             Nashua, NH 03062
                                             Attn: William Lockwood

            (B) If to the Lender, to it at:
                                             WMS Family I LLC
                                             285 Commandants Way
                                             Chelsea, MA 02150
                                             Attn: Wilfred M. Sherman

            (C) If to any  assignee of the Lender,  to it at such address and to
the  attention  specified in a notice to the Company or in any of the  foregoing
cases at such  other  address  as such  Person may  hereafter  specify  for such
purpose by notice to the other Persons referred to above.

      10.4  AMENDMENTS  AND WAIVERS.  Any  provisions  of this  Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed by the Company

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                                                                  DEBT AGREEMENT
                                                                         Page 21

and the Lender.  No failure or delay by the Company or the Lender in  exercising
any right, power or privilege  hereunder shall operate as a waiver thereof,  nor
shall any  single or  partial  exercise  thereof  preclude  any other or further
exercise thereof or the exercise of any other right, power or privilege.

      10.5  RIGHTS AND  REMEDIES  CUMULATIVE.  The rights  and  remedies  herein
provided  shall be cumulative  and not exclusive of any other rights or remedies
provided by law or otherwise.

      10.6 SEVERABILITY.  Any invalidity,  illegality or unenforceability of any
provision of this Agreement in any  jurisdiction  shall not invalidate or render
illegal or unenforceable  the remaining  provisions  hereof in such jurisdiction
and shall not  invalidate or render illegal or  unenforceable  such provision in
any other jurisdiction.

      10.7  HEADINGS.  The  headings of the Sections of this  Agreement  are for
convenience  of  reference  only and  shall  not be  deemed to be a part of this
Agreement.

      10.8 GOVERNING  LAW. This Agreement  shall be governed by and construed in
accordance with the law of the State of Delaware.

      10.9  COUNTERPARTS.  This  Agreement  may be  executed  in any  number  of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

      10.10 USURY. The Company hereby agrees, to the fullest extent permitted by
applicable law, not to insist upon, please or in any manner whatsoever claim the
benefit or advantage of, or assert as a counterclaim  or defense,  any usury law
of any  jurisdiction  in connection  with any claim,  proceeding or other action
which may be brought or instituted hereunder.

      10.11  ENTIRE  AGREEMENT.  This  Agreement  and the  other  documents  and
agreements  delivered  pursuant  hereto at the Closing  constitute  the full and
entire  understanding  and  agreement  between  the  parties  with regard to the
subject  hereof and thereof and  supersedes  any  previous  agreement  among the
parties with respect to such subject matter.

      10.12 ADVICE OF COUNSEL.  EACH PARTY  ACKNOWLEDGES THAT, IN EXECUTING THIS
AGREEMENT,  IT HAS HAD THE  OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT  LEGAL
COUNSEL,  AND HAS READ AND  UNDERSTOOD  ALL OF THE TERMS AND  PROVISIONS OF THIS
AGREEMENT.  THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY REASON OF
THE DRAFTING OR PREPARATION HEREOF.

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

<PAGE>

                                                                  DEBT AGREEMENT
                                                                         Page 22

                                                 OVATION PRODUCTS CORPORATION

                                                 By: /s/ William E. Lockwood
                                                     ---------------------------
                                                     Title: President and COO


                                                 WMS FAMILY I LLC

                                                 By: /s/ Wilfred M. Sherman
                                                     ---------------------------
                                                     Wilfred M. Sherman, Manager