SECURITIES PURCHASE AGREEMENT

         THIS  SECURITIES  PURCHASE  AGREEMENT  (this  "AGREEMENT")  is made and
entered into as of February __, 2004,  by and between  PENTHOUSE  INTERNATIONAL,
INC., a Florida  corporation  (the  "COMPANY"),  and LAURUS MASTER FUND, LTD., a
Cayman Islands company ("LAURUS" or the "PURCHASER").

                                    RECITALS

         WHEREAS,  the Company has  authorized  the sale to the  Purchaser  of a
Convertible Term Note in the aggregate  principal amount of Twenty-Four  Million
Dollars ($24,000,000) (the "NOTE"), which Note is convertible into shares of the
Company's  common stock,  $.0025 par value per share (the "COMMON STOCK") at the
fixed conversion price set forth in the Note ("FIXED CONVERSION PRICE");

         WHEREAS,  the  Company  wishes to issue a warrant to the  Purchaser  to
purchase  additional  shares of the Company's  Common Stock in  connection  with
Purchaser's purchase of the Note;

         WHEREAS,  Purchaser  desires to  purchase  the Note and  Warrant on the
terms and conditions set forth herein; and

         WHEREAS,  the Company desires to issue and sell the Note and Warrant to
Purchaser on the terms and conditions set forth herein.

                                    AGREEMENT

         NOW,  THEREFORE,  in  consideration  of the foregoing  recitals and the
mutual promises, representations, warranties and covenants hereinafter set forth
and for other good and valuable  consideration,  the receipt and  sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:

         1. AGREEMENT TO SELL AND PURCHASE. Pursuant to the terms and conditions
set forth in this Agreement,  on the Closing Date (as defined in Section 3), the
Company  agrees to sell to the  Purchaser,  and the  Purchaser  hereby agrees to
purchase  from the Company a Note in the amount of  $24,000,000  convertible  in
accordance  with the terms thereof into shares of the Company's  Common Stock in
accordance with the terms of the Note and this Agreement.  The Note purchased on
the Closing Date shall be known as the "Offering." A form of the Note is annexed
hereto as Exhibit A. The Note will have a Maturity Date (as defined in the Note)
on a date  which  shall be thirty  six (36)  months  from the date of  issuance,
subject to acceleration in accordance with the terms thereof.  Collectively, the
Note and Warrant (as defined in Section 2) and Common Stock  issuable in payment
of the Note,  upon  conversion  of the Note and upon exercise of the Warrant are
referred to as the "Securities".

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      2. Fees and Warrant. On the Closing Date

                  (a) The  Company  will issue and  deliver to the  Purchaser  a
Warrant  to  purchase  up  to  [________________]  shares  of  Common  Stock  in
connection with the Offering (the "WARRANT")  pursuant to Section 1 hereof.  The
Warrant  shall be  delivered on the Closing  Date in  substantially  the form of
Warrant  annexed  hereto  as  Exhibit  B.  All the  representations,  covenants,
warranties,  undertakings, and indemnification, and other rights made or granted
to or for the benefit of the  Purchaser  by the Company are hereby also made and
granted in respect of the  Warrant  and  shares of the  Company's  Common  Stock
issuable upon exercise of the Warrant (the "WARRANT SHARES").

                  (b) Upon  execution  and  delivery  of this  Agreement  by the
Company and Purchaser, the Company shall pay to Laurus Capital Management,  LLC,
manager of Purchaser a closing  payment in an amount equal to three and one half
percent (3.5%) of the aggregate  principal amount of the Note. The foregoing fee
is referred to herein as the "CLOSING PAYMENT".

                  (c)  The  Company  shall   reimburse  the  Purchaser  for  its
reasonable  legal fees and expenses for  services  rendered to the  Purchaser in
preparation  of  this  Agreement  and the  Related  Agreements  (as  hereinafter
defined),  and expenses in connection with the Purchaser's due diligence  review
of the Company and relevant  matters.  Purchaser's  reimbursable  due  diligence
expenses shall not exceed $17,500 without the Company's prior approval.

                  (d)  The  Company  shall  pay to  the  Purchaser  the  Closing
Payment,  legal fees and due diligence fees (net of deposits  previously paid by
the Company) out of funds held pursuant to a Funds Escrow Agreement of even date
herewith among the Company,  Purchaser,  and the escrow agent named therein (the
"FUNDS ESCROW AGREEMENT") and a disbursement letter (the "DISBURSEMENT LETTER").

      3. CLOSING, DELIVERY AND PAYMENT.

         3.1 CLOSING. Subject to the terms and conditions herein, the closing of
the transactions  contemplated  hereby (the "CLOSING"),  shall take place on the
date  hereof,  at such time or place as the Company and  Purchaser  may mutually
agree (such date is hereinafter referred to as the "CLOSING DATE").

         3.2  DELIVERY.  Pursuant  to the  Funds  Escrow  Agreement  in the form
attached  hereto as Exhibit C, at the Closing on the Closing  Date,  the Company
will deliver to the Purchaser,  among other things,  a Note in the form attached
as Exhibit A representing  the principal  amount of $24,000,000 and a Warrant in
the form attached as Exhibit B in the Purchaser's name  representing the Warrant
Shares and the Purchaser  will deliver to the Company,  among other things,  the
amounts  set  forth  in the  Disbursement  Letter  by  certified  funds  or wire
transfer.

      4. Representations and Warranties of the Company.

         The Company  hereby  represents and warrants to the Purchaser as of the
date of this Agreement as set forth below which disclosures are supplemented by,
and subject to the

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<PAGE>

Company's filings under the Securities Exchange Act of 1934  (collectively,  the
"EXCHANGE ACT FILINGS"), copies of which have been provided to the Purchaser.

         4.1  ORGANIZATION,  GOOD STANDING AND  QUALIFICATION.  The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida.  The Company has the  corporate  power and authority to
own and  operate  its  properties  and  assets,  to  execute  and  deliver  this
Agreement,  and the Note and the  Warrant to be issued in  connection  with this
Agreement,   the  Real  Estate   Documentation  (as  hereafter   defined),   the
Registration  Rights  Agreement  relating to the Securities dated as of the date
hereof  between  the  Company  and  the  Purchaser  (the  "REGISTRATION   RIGHTS
AGREEMENT") and all other agreements,  documents and instruments entered into in
connection with the transactions contemplated hereby and thereby (as each of the
same may be amended,  modified and supplemented from time to time, collectively,
the "RELATED  AGREEMENTS"),  to issue and sell the Note and the shares of Common
Stock  issuable upon  conversion of the Note (the "NOTE  SHARES"),  to issue and
sell the Warrant and the Warrant Shares, and to carry out the provisions of this
Agreement and the Related  Agreements  and to carry on its business as presently
conducted. The Company is duly qualified and is authorized to do business and is
in good  standing as a foreign  corporation  in all  jurisdictions  in which the
nature of its  activities  and of its  properties  (both owned and leased) makes
such qualification necessary, except for those jurisdictions in which failure to
do so would not have a material  adverse  effect on the Company or its business.
For purposes  hereof,  the term "REAL ESTATE  DOCUMENTATION"  shall mean (a) the
mortgage  dated  as of the  date  hereof  made by the  Company  in  favor of the
Purchaser  covering the real  property  located at 14-16 East 67th  Street,  New
York,  New York (the "REAL  PROPERTY") and (b) all  documents,  instruments  and
agreements  entered  into in  connection  therewith,  as each of the same may be
amended, modified and supplemented from time to time.

         4.2  SUBSIDIARIES.   The  Company  owns  (a)  all  of  the  issued  and
outstanding capital stock and membership interests, as applicable, of NYC Realty
I LLC, P.H.  Realty  Associates,  L.L.C.,  Del Sol  Investments  LLC and Del Sol
Investments SA de CV, and (b) 99% of the capital stock of General  Media,  Inc.,
General Media Art Holding,  Inc.,  General Media  Communications,  Inc., General
Media  Entertainment,  Inc., General Media (UK), Ltd., GMCI Internet Operations,
Inc., GMI On-Line Ventures,  Ltd., Penthouse Images Acquisitions,  Ltd. and Pure
Entertainment Telecommunications, Inc.; each of which entities set forth in this
clause  "(b)"  are  debtors  (collectively,  the  "DEBTORS")  in  a  Chapter  11
bankruptcy  case  currently  pending the United  States  District  Court for the
Southern District of New York (the "BANKRUPTCY COURT"). The Company does not own
or control  any equity  security  or other  interest  of any other  corporation,
limited partnership or other business entity.

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<PAGE>

         4.3 CAPITALIZATION; VOTING RIGHTS.

                  (a) The  authorized  capital  stock of the Company,  as of the
date hereof consists of 770,000,000  shares,  of which 750,000,000 are shares of
Common Stock, par value $0.0025 per share,  _________shares  of which are issued
and  outstanding,  and  20,000,000 of which are shares of preferred  stock,  par
value $.0025 per share of which 11,555,000 shares are issued outstanding.  5,000
shares of Preferred  Stock are  designated as Series A Preferred  Stock of which
5,000 shares are  outstanding  and owned by General Media  International,  Inc.;
5,000 shares of Preferred  Stock are designated as Series B Preferred  Stock, of
which no shares are issued and outstanding;  and 11,550,000  shares of Preferred
Stock  are  designated  as  Series C  Preferred  Stock of which  11,550,000  are
outstanding and of which 10,500,000 shares are owned by Del Sol Investments G.P.
and  1,050,00  shares  are  owned  by  A & L  Capital.  The  authorized  capital
stock/membership  interests of each  guarantor of the Company's  obligations  to
Purchaser (each a "Guarantor" and collectively "Guarantors"),  together with the
related   par   value  per  share   and   number  of  issued   and   outstanding
shares/membership  interests, in each case, as of the date hereof, are set forth
on SCHEDULE 4.3(a).

                  (b) Except as disclosed on SCHEDULE 4.3(b), other than (i) the
shares  reserved for issuance under the Company's  stock option plans;  and (ii)
shares  which  may be  granted  pursuant  to  this  Agreement  and  the  Related
Agreements,  there  are no  outstanding  options,  warrants,  rights  (including
conversion  or  preemptive  rights  and  rights  of  first  refusal),  proxy  or
stockholder  agreements,  or  arrangements  or  agreements  of any  kind for the
purchase  or  acquisition  from the  Company  any of its  securities.  Except as
disclosed on SCHEDULE 4.3(b),  neither the offer, issuance or sale of any of the
Note or Warrant,  or the  issuance of any of the Note Shares or Warrant  Shares,
nor the  consummation  of any transaction  contemplated  hereby will result in a
change  in the price or number of any  securities  of the  Company  outstanding,
under  anti-dilution or other similar  provisions  contained in or affecting any
such securities.

                  (c) All issued and outstanding  shares of the Company's Common
Stock (i) have been duly  authorized  and validly  issued and are fully paid and
nonassessable  and (ii) were issued in compliance with all applicable  state and
federal laws concerning the issuance of securities.

                  (d) The rights,  preferences,  privileges and  restrictions of
the shares of the Common  Stock are as stated in the  Company's  Certificate  of
Incorporation (the "CHARTER"). The Note Shares and Warrant Shares have been duly
and validly reserved for issuance. When issued in compliance with the provisions
of this  Agreement and the Company's  Charter,  the  Securities  will be validly
issued,  fully  paid  and  nonassessable,  and  will  be free  of any  liens  or
encumbrances;   PROVIDED,  HOWEVER,  that  the  Securities  may  be  subject  to
restrictions on transfer under state and/or federal securities laws as set forth
herein or as otherwise required by such laws at the time a transfer is proposed.

         4.4  AUTHORIZATION;  BINDING  OBLIGATIONS.  All corporate action on the
part of the Company,  its officers and directors necessary for the authorization
of this Agreement and the Related Agreements, the performance of all obligations
of the Company hereunder at the Closing and, the authorization,  sale,  issuance
and  delivery  of the Note and  Warrant has been taken or will be taken prior to
the Closing. The Agreement and the Related Agreements, when executed

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<PAGE>

and delivered and to the extent it is a party thereto, will be valid and binding
obligations of the Company  enforceable in accordance  with their terms,  except
(a) as limited by applicable bankruptcy, insolvency, reorganization,  moratorium
or other laws of general application affecting enforcement of creditors' rights,
and (b) general principles of equity that restrict the availability of equitable
or legal  remedies.  The sale of the Note and the  subsequent  conversion of the
Note into Note Shares are not and will not be subject to any  preemptive  rights
or rights of first refusal that have not been properly  waived or complied with.
The  issuance  of the  Warrant  and the  subsequent  exercise of the Warrant for
Warrant  Shares  are not and will not be  subject  to any  preemptive  rights or
rights of first refusal that have not been properly waived or complied with.

         4.5  LIABILITIES.  The Company,  to the best of its  knowledge,  has no
contingent or other  liabilities,  except  current  liabilities  incurred in the
ordinary  course of business  and  liabilities  disclosed  in any  Exchange  Act
Filings, or any other liabilities and obligations which,  individually or in the
aggregate, could reasonably be expected to have a material adverse effect on the
business, assets, liabilities,  financial condition,  prospects or operations of
the  Company  and its  subsidiaries,  when  taken  as a  consolidated  whole  (a
"MATERIAL ADVERSE EFFECT").

         4.6  AGREEMENTS;  ACTION.  Except  as set forth on  SCHEDULE  4.6 or as
disclosed in any Exchange Act Filings:

         (a)  Except  for the  Debtors  or  where  the  existence  of any of the
following  could not be  reasonably  expect to have a Material  Adverse  Effect,
there  are  no  agreements,  understandings,  instruments,  contracts,  proposed
transactions,  judgments,  orders,  writs or decrees to which the Company or any
Guarantor is a party or to its  knowledge by which it or any  Guarantor is bound
which may involve (i) obligations  (contingent or otherwise) of, or payments to,
the Company  and/or any  Guarantor in excess of $50,000 in the aggregate for the
Company and the  Guarantors  (other  than  obligations  of, or payments  to, the
Company and/or any Guarantor  arising from purchase or sale  agreements  entered
into in the ordinary course of business), or (ii) the transfer or license of any
patent,  copyright,  trade  secret  or  other  proprietary  right to or from the
Company or any Guarantor  (other than licenses arising from the purchase of "off
the shelf" or other standard  products),  or (iii)  provisions  restricting  the
development,  manufacture or  distribution  of the Company's or any  Guarantor's
products or services,  or (iv) indemnification by the Company or any Guarantor's
with respect to infringements of proprietary rights.

                  (b) Since  December 31, 2003, the Company has not (i) declared
or paid any  dividends,  or  authorized  or made any  distribution  upon or with
respect  to any  class  or  series  of its  capital  stock,  (ii)  incurred  any
indebtedness  for money borrowed or any other  liabilities  (other than ordinary
course  obligations)  individually  in  excess  of  $100,000  or, in the case of
indebtedness  and/or liabilities  individually less than $100,000,  in excess of
$250,000 in the aggregate, (iii) made any loans or advances to any person not in
excess,  individually  or in the  aggregate,  of  $50,000,  other than  ordinary
advances for travel expenses,  or (iv) sold,  exchanged or otherwise disposed of
any of its  assets  or  rights,  other  than  the sale of its  inventory  in the
ordinary course of business.

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<PAGE>

                  (c) For the  purposes of  subsections  (a) and (b) above,  all
indebtedness,  liabilities, agreements,  understandings,  instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the  individual  minimum dollar amounts of
such subsections.

         4.7 OBLIGATIONS TO RELATED PARTIES. Except as set forth on SCHEDULE 4.7
or as disclosed in the Exchange  Act Filings,  there are no  obligations  of the
Company to officers,  directors,  stockholders or employees of the Company other
than (a) for payment of salary for services rendered and for bonus payments, (b)
reimbursement for reasonable expenses incurred on behalf of the Company, (c) for
other  standard  employee  benefits  made  generally  available to all employees
(including  stock  option  agreements  outstanding  under any stock  option plan
approved by the Board of Directors of the Company) and (d) obligations listed in
the  Company's  financial  statements  or  disclosed  in any of its Exchange Act
Filings.  Except as described  above or set forth on SCHEDULE  4.7,  none of the
officers, directors or, to the best of the Company's knowledge, key employees or
stockholders  of the Company or any  members of their  immediate  families,  are
indebted to the Company,  individually or in the aggregate, in excess of $50,000
or have any direct or indirect  ownership  interest  in any firm or  corporation
with which the  Company is  affiliated  or with which the Company has a business
relationship,  or any firm or corporation which competes with the Company, other
than passive investments in publicly traded companies (representing less than 1%
of such company) which may compete with the Company.  Except as described above,
no officer, director or stockholder,  or any member of their immediate families,
is, directly or indirectly, interested in any material contract with the Company
and no agreements,  understandings  or proposed  transactions  are  contemplated
between the Company and any such person.  Except as set forth on SCHEDULE 4.7 or
as disclosed  in the  Exchange  Act  Filings,  the Company is not a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation.

         4.8  CHANGES.  Since  December  31,  2003,  except as  disclosed in any
Exchange  Act  Filing  or in any  Schedule  to this  Agreement  or to any of the
Related Agreements, there has not been:

                  (a)  Any  change  in  the   assets,   liabilities,   financial
condition,  prospects or  operations  of the Company,  other than changes in the
ordinary course of business,  none of which individually or in the aggregate has
had or could reasonably be expected to have a Material Adverse Effect;

                  (b)  Any  resignation  or  termination  of  any  officer,  key
employee or group of employees of the Company;


                  (c) Any  material  change,  except in the  ordinary  course of
business,  in the  contingent  obligations  of the  Company by way of  guaranty,
endorsement, indemnity, warranty or otherwise;

                  (d) Any damage, destruction or loss, whether or not covered by
insurance, which could reasonably be expected to have a Material Adverse Effect;

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<PAGE>

                  (e) Any  waiver by the  Company  of a  valuable  right or of a
material debt owed to it;

                  (f) Any direct or indirect  material loans made by the Company
to any  stockholder,  employee,  officer or director of the Company,  other than
advances made in the ordinary course of business;

                  (g) Any material  change in any  compensation  arrangement  or
agreement with any employee, officer, director or stockholder;

                  (h) Any  declaration  or  payment  of any  dividend  or  other
distribution of the assets of the Company;

                  (i) Any labor organization activity
related to the Company;

                  (j) Any debt,  obligation  or liability  incurred,  assumed or
guaranteed by the Company,  except those for immaterial  amounts and for current
liabilities incurred in the ordinary course of business;

                  (k)  Any  sale,   assignment   or  transfer  of  any  patents,
trademarks, copyrights, trade secrets or other intangible assets;

                  (l) Any change in any material  agreement to which the Company
is a party or by which it is bound which may materially and adversely affect the
business, assets, liabilities,  financial condition,  operations or prospects of
the Company;

                  (m) Any other event or condition of any character that, either
individually or  cumulatively,  could  reasonably be expected to have a Material
Adverse Effect; or

                  (n) Any  arrangement or commitment by the Company to do any of
the acts described in subsection (a) through (m) above.

         4.9 TITLE TO PROPERTIES AND ASSETS;  LIENS, ETC. Except as set forth on
SCHEDULE 4.9, the Company has good and  marketable  title to its  properties and
assets,  and good title to its  leasehold  estates,  in each case  subject to no
mortgage,  pledge,  lien,  lease,  encumbrance  or charge,  other than (a) those
resulting from taxes which have not yet become  delinquent,  (b) minor liens and
encumbrances  which do not  materially  detract  from the value of the  property
subject  thereto or materially  impair the  operations  of the Company,  and (c)
those  that have  otherwise  arisen in the  ordinary  course  of  business.  All
facilities, machinery, equipment, fixtures, vehicles and other properties owned,
leased or used by the Company are in good operating condition and repair and are
reasonably fit and usable for the purposes for which they are being used. Except
as set forth on SCHEDULE  4.9,  the Company is in  compliance  with all material
terms of each lease to which it is a party or is otherwise bound.

         4.10 INTELLECTUAL PROPERTY.

         (a)  Except  where a breach of the  representations  contained  in this
Section 4.10 could not reasonably be expected to have a Material Adverse Effect,
(i) the Company owns

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or possesses sufficient legal rights to all patents, trademarks,  service marks,
trade  names,  copyrights,  trade  secrets,  licenses,   information  and  other
proprietary rights and processes necessary for its business as now conducted and
to  the  Company's   knowledge  as  presently  proposed  to  be  conducted  (the
"INTELLECTUAL  PROPERTY"),  without  any  known  infringement  of the  rights of
others; and (ii) there are no outstanding options, licenses or agreements of any
kind relating to the foregoing  proprietary  rights, nor is the Company bound by
or a party to any options,  licenses or  agreements  of any kind with respect to
the patents, trademarks,  service marks, trade names, copyrights, trade secrets,
licenses,  information and other  proprietary  rights and processes of any other
person or entity  other  than  such  licenses  or  agreements  arising  from the
purchase of "off the shelf" or standard products.

                  (b) Except as set forth in SCHEDULE  4.10(b),  the Company has
not received any  communications  alleging  that the Company has violated any of
the patents, trademarks, service marks, trade names, copyrights or trade secrets
or other  proprietary  rights of any other person or entity,  nor is the Company
aware of any basis therefor.

                  (c) The Company does not believe it is or will be necessary to
utilize any inventions,  trade secrets or proprietary  information of any of its
employees made prior to their employment by the Company,  except for inventions,
trade secrets or proprietary  information that have been rightfully  assigned to
the Company.

         4.11 COMPLIANCE WITH OTHER INSTRUMENTS. Except as set forth on SCHEDULE
4.11  or as  disclosed  in the  Exchange  Act  Filings,  the  Company  is not in
violation  or default of any term of its Charter or Bylaws,  or of any  material
provision  of  any  mortgage,  indenture,  contract,  agreement,  instrument  or
contract  to which  it is  party  or by  which  it is bound or of any  judgment,
decree, order or writ. The execution, delivery and performance of and compliance
with this Agreement and the Related  Agreements to which it is a party,  and the
issuance  and sale of the Note by the  Company and the other  Securities  by the
Company each pursuant  hereto,  will not, with or without the passage of time or
giving of notice, result in any such material violation,  or be in conflict with
or  constitute  a default  under any such  term or  provision,  or result in the
creation of any mortgage,  pledge,  lien,  encumbrance or charge upon any of the
properties or assets of the Company or the suspension,  revocation,  impairment,
forfeiture  or  nonrenewal  of any permit,  license,  authorization  or approval
applicable  to the Company,  its business or  operations or any of its assets or
properties.

         4.12  LITIGATION.  Except as set forth on SCHEDULE 4.12 or as disclosed
in  the  Exchange  Act  Filings,   there  is  no  action,  suit,  proceeding  or
investigation  pending  or, to the  Company's  knowledge,  currently  threatened
against the Company that  prevents  the Company to enter into this  Agreement or
the Related Agreements, or to consummate the transactions contemplated hereby or
thereby, or which might result, either individually or in the aggregate,  in any
material  adverse change in the assets,  condition,  affairs or prospects of the
Company, financially or otherwise, or any change in the current equity ownership
of the Company,  nor is the Company aware that there is any basis for any of the
foregoing. The Company is not a party or subject to the provisions of any order,
writ,  injunction,  judgment  or  decree of any  court or  government  agency or
instrumentality.  There is no action,  suit,  proceeding or investigation by the
Company currently pending or which the Company intends to initiate.

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<PAGE>

         4.13 TAX RETURNS  AND  PAYMENTS.  The Company has timely  filed all tax
returns  (federal,  state and local) required to be filed by it. All taxes shown
to be due and  payable on such  returns,  any  assessments  imposed,  and to the
Company's  knowledge all other taxes due and payable by the Company on or before
the  Closing,  have  been  paid or will be paid  prior to the time  they  become
delinquent.  Except as set forth on SCHEDULE  4.13 or  disclosed in the Exchange
Act  Filings,  the  Company has not been  advised  (a) that any of its  returns,
federal,  state or other,  have been or are being audited as of the date hereof,
or (b) of any  deficiency  in  assessment  or proposed  judgment to its federal,
state or other taxes.  The Company has no knowledge of any  liability of any tax
to be imposed  upon its  properties  or assets as of the date of this  Agreement
that is not adequately provided for.

         4.14  EMPLOYEES.  Except as set forth on SCHEDULE 4.14, the Company has
no collective bargaining agreements with any of its employees. There is no labor
union  organizing  activity pending or, to the Company's  knowledge,  threatened
with respect to the Company.  Except as disclosed in the Exchange Act Filings or
on  SCHEDULE  4.14,  the  Company  is not a party to or  bound by any  currently
effective employment contract,  deferred compensation  arrangement,  bonus plan,
incentive  plan,  profit  sharing plan,  retirement  agreement or other employee
compensation plan or agreement. Except where a breach of the following could not
reasonably  be  expected to have a Material  Adverse  Effect,  to the  Company's
knowledge,  (i) no employee of the  Company,  nor any  consultant  with whom the
Company has contracted,  is in violation of any term of any employment contract,
proprietary  information  agreement or any other agreement relating to the right
of any such  individual  to be  employed  by, or to contract  with,  the Company
because of the nature of the business to be conducted by the Company; and to the
Company's  knowledge  the  continued  employment  by the  Company of its present
employees,  and the performance of the Company's  contracts with its independent
contractors,  will not  result in any such  violation,  (ii) the  Company is not
aware that any of its  employees  is  obligated  under any  contract  (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment,  decree or order of any court or  administrative  agency,  that
would  interfere  with their  duties to the  Company,  (iii) the Company has not
received any notice  alleging that any such  violation  has  occurred,  and (iv)
except for employees who have a current effective  employment agreement with the
Company,  no employee of the  Company  has been  granted the right to  continued
employment by the Company or to any material compensation  following termination
of employment  with the Company.  Except as disclosed in Exchange Act Filings or
as set forth on SCHEDULE  4.14,  the Company is not aware that any officer,  key
employee or group of employees intends to terminate his, her or their employment
with the Company, nor does the Company have a present intention to terminate the
employment of any officer, key employee or group of employees.

         4.15  REGISTRATION  RIGHTS  AND VOTING  RIGHTS.  Except as set forth on
SCHEDULE  4.15 and except as disclosed  in Exchange Act Filings,  the Company is
presently not under any obligation,  and has not granted any rights, to register
any of the Company's presently  outstanding  securities or any of its securities
that may hereafter be issued. Except as set forth on SCHEDULE 4.15 and except as
disclosed in Exchange Act Filings, to the Company's knowledge, no stockholder of
the Company has entered into any agreement  with respect to the voting of equity
securities of the Company.

                                       9
<PAGE>

         4.16  COMPLIANCE  WITH LAWS;  PERMITS.  Except as set forth on SCHEDULE
4.16 or as disclosed in the Exchange Act Filings, to its knowledge,  the Company
is not in violation in any material  respect of any  applicable  statute,  rule,
regulation,  order or restriction  of any domestic or foreign  government or any
instrumentality  or agency  thereof in respect of the conduct of its business or
the ownership of its properties  which violation could reasonably be expected to
have a Material Adverse Effect. No governmental orders,  permissions,  consents,
approvals or authorizations  are required to be obtained and no registrations or
declarations  are  required to be filed in  connection  with the  execution  and
delivery of this  Agreement  and the issuance of any of the  Securities,  except
such as has been duly and  validly  obtained  or filed,  or with  respect to any
filings  that  must be made  after  the  Closing,  as will be  filed in a timely
manner.  The Company has all  material  franchises,  permits,  licenses  and any
similar  authority  necessary  for the  conduct  of its  business  as now  being
conducted  by it,  the lack of which  could  reasonably  be  expected  to have a
Material Adverse Effect.

         4.17  ENVIRONMENTAL AND SAFETY LAWS. The Company is not in violation of
any  applicable  statute,  law or  regulation  relating  to the  environment  or
occupational health and safety, and to its knowledge,  no material  expenditures
are or will be required in order to comply with any such existing  statute,  law
or regulation.  Except as set forth on SCHEDULE 4.17, no Hazardous Materials (as
defined below) are used or have been used, stored, or disposed of by the Company
or, to the  Company's  knowledge,  by any other person or entity on any property
owned,  leased  or  used  by the  Company.  For the  purposes  of the  preceding
sentence,  "HAZARDOUS  MATERIALS"  shall mean (a) materials  which are listed or
otherwise defined as "HAZARDOUS" or "TOXIC" under any applicable  local,  state,
federal and/or  foreign laws and  regulations  that govern the existence  and/or
remedy of  contamination  on property,  the protection of the  environment  from
contamination,  the control of hazardous wastes,  or other activities  involving
hazardous  substances,  including  building  materials,  or  (b)  any  petroleum
products or nuclear materials.

         4.18 VALID OFFERING.  Assuming the accuracy of the  representations and
warranties of the Purchaser  contained in this  Agreement,  the offer,  sale and
issuance of the Securities will be exempt from the registration  requirements of
the Securities  Act of 1933, as amended (the  "SECURITIES  ACT"),  and will have
been registered or qualified (or are exempt from registration and qualification)
under the registration,  permit or qualification  requirements of all applicable
state securities laws.

         4.19 FULL  DISCLOSURE.  The Company has provided the Purchaser with all
information  requested  by the  Purchaser  in  connection  with its  decision to
purchase the Note and Warrant, including all information the Company believes is
reasonably necessary to make such investment  decision.  Neither this Agreement,
the exhibits and schedules hereto, the Related Agreements nor any other document
delivered by the Company to Purchaser or its  attorneys or agents in  connection
herewith or therewith or with the transactions  contemplated  hereby or thereby,
contain  any untrue  statement  of a material  fact nor omit to state a material
fact necessary in order to make the statements  contained herein or therein,  in
light of the circumstances in which they are made, not misleading. Any financial
projections  and other  estimates  provided to the Purchaser by the Company were
based on the Company's experience in the industry and on assumptions of fact and
opinion as to future  events which the  Company,  at the date of the issuance of
such projections or estimates, believed to be reasonable.

                                       10
<PAGE>

         4.20 INSURANCE. The Company has general commercial,  product liability,
fire and casualty  insurance  policies with coverages which the Company believes
are  customary for  companies  similarly  situated to the Company in the same or
similar business.

         4.21 SEC REPORTS. Except as set forth on SCHEDULE 4.21, the Company has
filed all proxy statements,  reports and other documents required to be filed by
it under the Exchange Act. The Company has  furnished the Purchaser  with copies
of (i) its Annual Report on Form 10-K(SB) for the fiscal year ended December 31,
2002 and (ii) its  Quarterly  Reports on Form  10-Q(SB) for the fiscal  quarters
ended March 31, 2003,  June 30, 2003 and  September  30, 2003,  and the Form 8-K
filings which it has made during 2003 to date (collectively, the "SEC REPORTS").
Except as set forth on  SCHEDULE  4.21,  each SEC Report was, at the time of its
filing,  in substantial  compliance with the requirements of its respective form
and  none of the SEC  Reports,  nor the  financial  statements  (and  the  notes
thereto)  included in the SEC  Reports,  as of their  respective  filing  dates,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements  therein,
in light of the circumstances under which they were made, not misleading.

         4.22 LISTING.  The Company's  Common Stock is listed for trading on the
OTC BB and satisfies all requirements for the continuation of such listing.  The
Company has not received any notice that its Common Stock will be delisted  from
the OTC BB or that its Common Stock does not meet all requirements for listing.

         4.23  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  under  circumstances  that would  cause the  offering  of the
Securities  pursuant to this Agreement to be integrated  with prior offerings by
the Company for purposes of the  Securities  Act which would prevent the Company
from selling the Securities  pursuant to Rule 506 under the  Securities  Act, or
any applicable  exchange-related  stockholder approval provisions,  nor will the
Company or any of its affiliates or  subsidiaries  take any action or steps that
would  cause  the  offering  of  the  Securities  to be  integrated  with  other
offerings.

         4.24 STOP TRANSFER.  The Securities are restricted securities as of the
date of this  Agreement.  The Company will not issue any stop transfer  order or
other order impeding the sale and delivery of any of the Securities at such time
as  the  Securities  are  registered  for  public  sale  or  an  exemption  from
registration  is available,  except as required by state and federal  securities
laws.

         4.25  DILUTION.   The  Company   specifically   acknowledges  that  its
obligation  to issue the shares of Common Stock upon  conversion of the Note and
exercise of the Warrant is binding upon the Company and  enforceable  regardless
of the  dilution  such  issuance  may have on the  ownership  interests of other
shareholders of the Company.

                                       11
<PAGE>

      5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.

         The Purchaser hereby  represents and warrants to the Company as follows
(such   representations   and   warranties   do  not  lessen  or   obviate   the
representations and warranties of the Company set forth in this Agreement):

         5.1 NO SHORTING.  Neither the Purchaser nor any of its  affiliates  and
investment  partners  will or will  cause any  person  or  entity,  directly  or
indirectly,  to engage in "short  sales" of the  Company's  Common  Stock or any
"hedging"  transactions  involving  such  Common  Stock  for as long as the Note
remains  outstanding.

         5.2 REQUISITE  POWER AND AUTHORITY.  Purchaser has all necessary  power
and authority under all applicable provisions of law to execute and deliver this
Agreement  and the Related  Agreements  and to carry out their  provisions.  All
corporate  action on  Purchaser's  part  required for the lawful  execution  and
delivery  of this  Agreement  and the  Related  Agreements  have been or will be
effectively taken prior to the Closing. Upon their execution and delivery,  this
Agreement and the Related  Agreements  will be valid and binding  obligations of
Purchaser,  enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency,  reorganization,  moratorium or other laws of
general  application  affecting  enforcement  of creditors'  rights,  and (b) as
limited by general  principles  of equity  that  restrict  the  availability  of
equitable and legal remedies.

         5.3  INVESTMENT   REPRESENTATIONS.   Purchaser   understands  that  the
Securities are being offered and sold pursuant to an exemption from registration
contained in the Securities Act based in part upon  Purchaser's  representations
contained in the Agreement, including, without limitation, that the Purchaser is
an "accredited investor" within the meaning of Regulation D under the Securities
Act of 1933, as amended (the "SECURITIES  ACT"). The Purchaser  confirms that it
has  received  or has had  full  access  to all  the  information  it  considers
necessary or appropriate to make an informed investment decision with respect to
the Note and the Warrant to be purchased by it under this Agreement and the Note
Shares and the Warrant Shares acquired by it upon the conversion of the Note and
the exercise of the Warrant,  respectively.  The Purchaser further confirms that
it has had an opportunity to ask questions and receive  answers from the Company
regarding the Company's business, management and financial affairs and the terms
and conditions of the Offering,  the Note, the Warrant and the Securities and to
obtain  additional  information  (to  the  extent  the  Company  possessed  such
information  or  could  acquire  it  without  unreasonable  effort  or  expense)
necessary to verify any  information  furnished to the Purchaser or to which the
Purchaser had access.

         5.4 PURCHASER BEARS ECONOMIC RISK. Purchaser has substantial experience
in evaluating and investing in private  placement  transactions of securities in
companies  similar to the Company so that it is capable of evaluating the merits
and risks of its  investment  in the Company and has the capacity to protect its
own interests.  Purchaser must bear the economic risk of this  investment  until
the  Securities  are sold  pursuant to (i) an effective  registration  statement
under the Securities  Act, or (ii) an exemption from  registration  is available
with respect to such sale.

                                       12
<PAGE>

         5.5  ACQUISITION  FOR OWN ACCOUNT.  Purchaser is acquiring the Note and
Warrant and the Note Shares and the Warrant Shares for  Purchaser's  own account
for  investment  only, and not as a nominee or agent and not with a view towards
or for resale in connection with their distribution.

         5.6 PURCHASER CAN PROTECT ITS INTEREST.  Purchaser  represents  that by
reason  of its,  or of its  management's,  business  and  financial  experience,
Purchaser has the capacity to evaluate the merits and risks of its investment in
the Note,  the Warrant and the  Securities  and to protect its own  interests in
connection with the transactions contemplated in this Agreement, and the Related
Agreements.  Further,  Purchaser is aware of no publication of any advertisement
in connection with the transactions contemplated in the Agreement or the Related
Agreements.

         5.7 ACCREDITED INVESTOR.  Purchaser represents that it is an accredited
investor within the meaning of Regulation D under the Securities Act.

         5.8 LEGENDS.

                  (a) The Note shall bear substantially the following legend:

         "THIS NOTE AND THE COMMON STOCK  ISSUABLE UPON  CONVERSION OF THIS NOTE
         HAVE NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
         OR ANY  APPLICABLE,  STATE  SECURITIES  LAWS.  THIS NOTE AND THE COMMON
         STOCK  ISSUABLE UPON  CONVERSION OF THIS NOTE MAY NOT BE SOLD,  OFFERED
         FOR SALE,  PLEDGED  OR  HYPOTHECATED  IN THE  ABSENCE  OF AN  EFFECTIVE
         REGISTRATION  STATEMENT  AS TO THIS NOTE OR SUCH SHARES  UNDER SAID ACT
         AND  APPLICABLE   STATE  SECURITIES  LAWS  OR  AN  OPINION  OF  COUNSEL
         REASONABLY  SATISFACTORY  TO PENTHOUSE  INTERNATIONAL,  INC.  THAT SUCH
         REGISTRATION IS NOT REQUIRED."

                  (b) The Note Shares and the Warrant  Shares,  if not issued by
DWAC  system (as  hereinafter  defined),  shall bear a legend  which shall be in
substantially  the following  form until such shares are covered by an effective
registration statement filed with the SEC:

         "THE SHARES  REPRESENTED BY THIS  CERTIFICATE  HAVE NOT BEEN REGISTERED
         UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE,  STATE
         SECURITIES  LAWS.  THESE  SHARES  MAY NOT BE SOLD,  OFFERED  FOR  SALE,
         PLEDGED OR  HYPOTHECATED  IN THE ABSENCE OF AN  EFFECTIVE  REGISTRATION
         STATEMENT  UNDER SUCH  SECURITIES ACT AND  APPLICABLE  STATE LAWS OR AN
         OPINION OF COUNSEL REASONABLY SATISFACTORY TO PENTHOUSE

                                       13
<PAGE>

         INTERNATIONAL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."

                  (c) The Warrant shall bear substantially the following legend:

         "THIS  WARRANT AND THE COMMON  SHARES  ISSUABLE  UPON  EXERCISE OF THIS
         WARRANT HAVE NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS
         AMENDED,  OR ANY APPLICABLE STATE SECURITIES LAWS. THIS WARRANT AND THE
         COMMON  SHARES  ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
         OFFERED  FOR  SALE,  PLEDGED  OR  HYPOTHECATED  IN  THE  ABSENCE  OF AN
         EFFECTIVE  REGISTRATION  STATEMENT AS TO THIS WARRANT OR THE UNDERLYING
         SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE  STATE  SECURITIES
         LAWS OR AN OPINION  OF COUNSEL  REASONABLY  SATISFACTORY  TO  PENTHOUSE
         INTERNATIONAL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."

      6. COVENANTS OF THE COMPANY.

         The Company covenants and agrees with the Purchaser as follows:

         6.1 STOP-ORDERS. The Company will advise the Purchaser,  promptly after
it receives  notice of issuance by the Securities and Exchange  Commission  (the
"SEC"), any state securities commission or any other regulatory authority of any
stop  order  or of any  order  preventing  or  suspending  any  offering  of any
securities  of the Company,  or of the  suspension of the  qualification  of the
Common  Stock of the Company for  offering or sale in any  jurisdiction,  or the
initiation of any proceeding for any such purpose.

         6.2  LISTING.  The  Company  shall  promptly  secure the listing of the
shares  of  Common  Stock  issuable  upon  conversion  of the  Note and upon the
exercise of the Warrant on the OTC BB (the "PRINCIPAL MARKET") upon which shares
of Common Stock are listed  (subject to official  notice of issuance)  and shall
maintain  such  listing so long as any other  shares of Common Stock shall be so
listed.  The  Company  will  maintain  the  listing of its  Common  Stock on the
Principal  Market,  and will comply in all material  respects with the Company's
reporting,  filing  and  other  obligations  under  the  bylaws  or rules of the
National  Association  of Securities  Dealers  ("NASD") and such  exchanges,  as
applicable.

         6.3 MARKET  REGULATIONS.  The Company  shall  notify the SEC,  NASD and
applicable  state  authorities,  in accordance with their  requirements,  of the
transactions  contemplated by this Agreement, and shall take all other necessary
action and  proceedings as may be required and permitted by applicable law, rule
and regulation,  for the legal and valid issuance of the Securities to Purchaser
and promptly provide copies thereof to Purchaser.

         6.4 REPORTING  REQUIREMENTS.  The Company will timely file with the SEC
all reports  required to be filed  pursuant to the Exchange Act and refrain from
terminating its status as

                                       14
<PAGE>

an issuer  required by the Exchange Act to file reports  thereunder  even if the
Exchange  Act  or  the  rules  or  regulations   thereunder  would  permit  such
termination.

         6.5 USE OF FUNDS.  The Company  agrees that it will use the proceeds of
the sale of the Note and Warrant only to (a) retire indebtedness encumbering the
Real  Property  held by the lenders set forth in SCHEDULE 6.5 and (b) enable the
Company to purchase the Real Property; provided, that if on or after the Closing
Date the Company provides the Holder with a guaranty or other collateral  (other
than cash collateral) acceptable to the Holder and its counsel in their sole and
absolute  discretion,  in an amount significant to cover not less than the first
twelve months of payments of principal  and accrued  interest due under the Note
and taxes and insurance payable in connection with the Real Property, the Holder
shall either not require at the Closing the cash  collateral  referred to in the
Cash Collateral  Deposit  Letter,  or release such cash collateral and terminate
the Cash Collateral Deposit Letter following the Closing Date.

         6.6  ACCESS  TO  FACILITIES.  The  Company  will  permit  and cause the
Guarantors  to permit any  representatives  designated  by the Purchaser (or any
successor of the Purchaser),  upon reasonable  notice and during normal business
hours,  at such person's  expense and  accompanied  by a  representative  of the
Company and/or the  Guarantors,  as applicable,  to (a) visit and inspect any of
the properties of the Company and/or the  Guarantors,  (b) examine the corporate
and  financial  records  of the  Company  and/or  the  Guarantors  (unless  such
examination is not permitted by federal,  state or local law or by contract) and
make copies thereof or extracts therefrom and (c) discuss the affairs,  finances
and accounts of the Company and/or the Guarantors  with the directors,  officers
and independent accountants of the Company and/or the Guarantors, as applicable.
Notwithstanding  the foregoing,  neither the Company nor any Guarantor  shall be
required to provide any material, non-public information to the Purchaser unless
the Purchaser  signs a  confidentiality  agreement  and otherwise  complies with
Regulation FD, under the federal securities laws.

         6.7 TAXES.  The Company will and will cause the  Guarantors to promptly
pay and discharge, or cause to be paid and discharged, when due and payable, all
lawful taxes,  assessments and  governmental  charges or levies imposed upon the
income,  profits,  property or business  of the Company and the  Guarantors,  as
applicable;  provided,  however,  that any such tax, assessment,  charge or levy
need not be paid if the validity  thereof  shall  currently be contested in good
faith by  appropriate  proceedings  and if the  Company and the  Guarantors,  as
applicable,  shall have set aside on its books  adequate  reserves  with respect
thereto,  and  provided,  further,  that  the  Company  and the  Guarantors,  as
applicable,  will pay all such taxes,  assessments,  charges or levies forthwith
upon the  commencement  of  proceedings  to  foreclose  any lien  which may have
attached as security therefor.

         6.8  INSURANCE.  The Company will and will cause the Guarantors to keep
its and their respective  assets which are of an insurable  character insured by
financially  sound  and  reputable  insurers  against  loss or  damage  by fire,
explosion and other risks  customarily  insured  against by companies in similar
business  similarly  situated as the Company and the Guarantors,  as applicable;
and the Company will and will cause the Guarantors to maintain, with financially
sound and  reputable  insurers,  insurance  against  other hazards and risks and
liability  to persons  and  property  to the extent and in the manner  which the
Company and the Guarantors,  as applicable,  reasonably believe is customary for
companies in similar business similarly situated

                                       15
<PAGE>

as the Company and the Guarantors, as applicable, and to the extent available on
commercially reasonable terms.

         6.9  INTELLECTUAL  PROPERTY.  The  Company  shall and  shall  cause the
Guarantors  to  maintain  in full  force and  effect  its and  their  respective
corporate existences, rights and franchises and all licenses and other rights to
use Intellectual Property owned or possessed by them and reasonably deemed to be
necessary to the conduct of their respective businesses.

         6.10 PROPERTIES. The Company will keep and cause the Guarantors to keep
their  respective  properties  in good  repair,  working  order  and  condition,
reasonable  wear and tear  excepted,  and from time to time make all needful and
proper repairs, renewals, replacements,  additions and improvements thereto; and
the Company will and will cause the  Guarantors to at all times comply with each
provision  of all  leases to which they are a party or under  which they  occupy
property if the breach of such provision could  reasonably be expected to have a
material adverse effect.

         6.11 CONFIDENTIALITY. The Company agrees that it will not disclose, and
will not include in any public announcement,  the name of the Purchaser,  unless
expressly  agreed to by the  Purchaser  or unless and until such  disclosure  is
required by law or  applicable  regulation,  and then only to the extent of such
requirement.

         6.12 REQUIRED  APPROVALS.  For so long as the Note is outstanding,  the
Company, without the prior written consent of the Purchaser, shall not and shall
not cause any Guarantor to:

                  (a) directly or indirectly declare or pay any dividends, other
than dividends with respect to its preferred stock;

                  (b) liquidate, dissolve or effect a material reorganization;

                  (c) become subject to (including,  without limitation,  by way
of amendment to or  modification  of) any agreement or  instrument  which by its
terms  would  (under  any  circumstances)  restrict  the  Company's  and/or  any
Guarantor's  right to perform the  provisions  of this  Agreement  or any of the
agreements contemplated thereby; or

                  (d)  materially  alter or change the scope of the  business of
the Company and/or any Guarantor.

         6.13   REISSUANCE  OF   SECURITIES.   The  Company  agrees  to  reissue
certificates  representing  the  Securities  without  the  legends  set forth in
Section 5.7 above at such time as (a) the holder thereof is permitted to dispose
of such Securities pursuant to Rule 144(k) under the Securities Act, or (b) upon
resale subject to an effective  registration statement after such Securities are
registered  under the  Securities  Act. The Company agrees to cooperate with the
Purchaser in connection with all resales pursuant to Rule 144(d) and Rule 144(k)
and provide legal opinions  necessary to allow such resales provided the Company
and its counsel receive reasonably  requested  representations  from the selling
Purchaser and broker, if any.

                                       16
<PAGE>

         6.14  OPINION.  On the Closing  Date,  the Company  will deliver to the
Purchaser  an  opinion  acceptable  to the  Purchaser  from  the  Company's  and
Guarantors' legal counsel.  The Company will provide,  at the Company's expense,
such other legal  opinions  in the future as are  reasonably  necessary  for the
conversion of the Note and exercise of the Warrant.

      7. COVENANTS OF THE PURCHASER.

         The Purchaser covenants and agrees with the Company as follows:

         7.1  CONFIDENTIALITY.  The Purchaser  agrees that it will not disclose,
and will not include in any public announcement, the name of the Company, unless
expressly  agreed to by the  Company  or unless  and until  such  disclosure  is
required by law or  applicable  regulation,  and then only to the extent of such
requirement.

         7.2  NON-PUBLIC  INFORMATION.  The  Purchaser  agrees not to effect any
sales in the  shares  of the  Company's  Common  Stock  while in  possession  of
material,  non-public  information  regarding  the  Company if such sales  would
violate applicable securities law.

         7.3  RIGHT TO  SUBSTITUTE  COLLATERAL.  So long as no Event of  Default
shall have occurred and be continuing  under and as defined in the Note or under
any other  Related  Agreement,  the Purchaser and each Holder of the Notes agree
that the Company or its affiliates, including Guarantors, may substitute for the
pledge of the members  interests of the Guarantors and mortgages on the NYC Real
Property,  the pledge of the equity of the Del Sol Investments,  LLC and Del Sol
Investments SA de CV  subsidiaries  of the Company and first  priority  mortgage
liens on the real estate  assets  located in Mexico  currently  owned by Del Sol
Investments, LLC and Del Sol Investments SA de CV (the "SUBSTITUTE COLLATERAL");
provided,  that  (a) the then  current  appraised  value  (as  determined  by an
appraisal  firm  acceptable  to the  Purchaser  in it sole  discretion)  of such
Substitute  Collateral  shall be not  less  than  400% of the  then  outstanding
principal  amount  of the  Notes,  (b)  there  shall be no  title  or  potential
environmental liability related to such Substitute Collateral, (c) the Purchaser
shall have  received a legal opinion of  recognized  counsel,  acceptable to the
Purchaser and its counsel in their sole discretion, covering such matters as the
Purchaser and its counsel shall request, including, without limitation, opinions
covering  the  valid,  first  priority  lien  of the  Purchaser  in and to  such
Substitute  Collateral,  and the absence of fraudulent conveyance and preference
risks  associated  with  the  conveyance  to the  Purchaser  of such  Substitute
Collateral,  (d) the Purchaser shall have received a deed in lieu of foreclosure
relating to the  Substitute  Collateral in form and substance  acceptable to the
Purchaser and its counsel in their sole  discretion and (e) the Purchaser  shall
have determined that the acceptance of the Substitute Collateral does not in any
manner whatsoever  adversely affect the collateral positions of the Purchaser as
in effect  immediately prior to the date such Substitute  Collateral is intended
to be pledged to the Purchaser.

      8. COVENANTS OF THE COMPANY AND PURCHASER REGARDING INDEMNIFICATION.

         8.1 COMPANY  INDEMNIFICATION.  The Company  agrees to  indemnify,  hold
harmless,   reimburse  and  defend  Purchaser,  each  of  Purchaser's  officers,
directors,  agents,  affiliates,  control persons,  and principal  shareholders,
against  any  claim,  cost,  expense,  liability,  obligation,  loss  or  damage
(including reasonable legal fees) of any nature, incurred by or

                                       17
<PAGE>

imposed upon the Purchaser which results, arises out of or is based upon (i) any
misrepresentation  by Company  and/or any Guarantor or breach of any warranty by
Company  and/or any Guarantor in this  Agreement or in any exhibits or schedules
attached  hereto or any  Related  Agreement,  or (ii) any  breach or  default in
performance by Company and/or any Guarantor of any covenant or undertaking to be
performed by Company  and/or any  Guarantor  hereunder,  or any other  agreement
entered into by the Company and  Purchaser  and/or the Company and any Guarantor
relating hereto.

         8.2 PURCHASER'S  INDEMNIFICATION.  Purchaser agrees to indemnify,  hold
harmless,  reimburse and defend the Company and each of the Company's  officers,
directors,  agents, affiliates,  control persons and principal shareholders,  at
all times  against any claim,  cost,  expense,  liability,  obligation,  loss or
damage (including  reasonable legal fees) of any nature,  incurred by or imposed
upon  the  Company  which  results,  arises  out of or is  based  upon  (i)  any
misrepresentation  by  Purchaser  or breach of any warranty by Purchaser in this
Agreement  or in any  exhibits  or  schedules  attached  hereto  or any  Related
Agreement;  or (ii) any breach or default in  performance  by  Purchaser  of any
covenant or  undertaking  to be performed by Purchaser  hereunder,  or any other
agreement entered into by the Company and Purchaser relating hereto.

         8.3  PROCEDURES.  The procedures and  limitations  set forth in Section
10.2(c) and (d) shall apply to the  indemnifications  set forth in Sections  8.1
and 8.2 above.

      9. CONVERSION OF CONVERTIBLE NOTE.

         9.1 MECHANICS OF CONVERSION.

                  (a)  Provided  the  Purchaser  has notified the Company of the
Purchaser's  intention  to sell the Note Shares and the Note Shares are included
in an effective registration statement or are otherwise exempt from registration
when sold:  (i) Upon the  conversion  of the Note or part  thereof,  the Company
shall,  at its own cost and expense,  take all necessary  action  (including the
issuance of an opinion of counsel) to assure that the Company's  transfer  agent
shall issue shares of the  Company's  Common Stock in the name of the  Purchaser
(or its  nominee)  or such  other  persons as  designated  by the  Purchaser  in
accordance with Section 9.1(b) hereof and in such  denominations to be specified
representing the number of Note Shares issuable upon such  conversion;  and (ii)
The Company  warrants that no instructions  other than these  instructions  have
been or will be given to the transfer  agent of the  Company's  Common Stock and
that after the Effective  Date (as  hereinafter  defined) the Note Shares issued
will be freely transferable  subject to the prospectus delivery  requirements of
the Securities Act and the provisions of this Agreement,  and will not contain a
legend  restricting  the  resale  or  transferability  of the Note  Shares.

                  (b) Purchaser will give notice of its decision to exercise its
right to convert the Note or part thereof by telecopying or otherwise delivering
an executed and completed  notice of the number of shares to be converted to the
Company  (the "NOTICE OF  CONVERSION").  The  Purchaser  will not be required to
surrender the Note until the  Purchaser  receives a credit to the account of the
Purchaser's   prime  broker   through  the  DWAC  system  (as  defined   below),
representing  the Note Shares or until the Note has been fully  satisfied.  Each
date on which a Notice of  Conversion  is telecopied or delivered to the Company
in accordance with the

                                       18
<PAGE>

provisions hereof shall be deemed a "CONVERSION  DATE." Pursuant to the terms of
the Notice of Conversion,  the Borrower will issue  instructions to the transfer
agent  accompanied  by an opinion of counsel within two (2) Business Days of the
date of the delivery to Borrower of the Notice of Conversion and shall cause the
transfer agent to transmit the certificates  representing the Conversion  Shares
to the Holder by crediting the account of the Purchaser's  prime broker with the
Depository Trust Company ("DTC") through its Deposit Withdrawal Agent Commission
("DWAC")  system  within three (3) business days after receipt by the Company of
the Notice of Conversion (the "DELIVERY DATE").

                  (c) The Company  understands  that a delay in the  delivery of
the Note Shares in the form  required  pursuant  to Section 9 hereof  beyond the
Delivery Date could result in economic loss to the Purchaser.  In the event that
the Company fails to direct its transfer agent to deliver the Note Shares to the
Purchaser via the DWAC system within the time frame set forth in Section  9.1(b)
above and the Note Shares are not  delivered  to the  Purchaser  by the Delivery
Date, as  compensation to the Purchaser for such loss, the Company agrees to pay
late  payments to the Purchaser for late issuance of the Note Shares in the form
required  pursuant to Section 9 hereof upon conversion of the Note in the amount
equal to the greater of (i) $500 per  business  day after the  Delivery  Date or
(ii) the Purchaser's actual damages from such delayed delivery.  Notwithstanding
the  foregoing,  the Company will not owe the Purchaser any late payments if the
delay in the delivery of the Note Shares  beyond the Delivery Date is solely out
of the control of the  Company  and the  Company is actively  trying to cure the
cause of the delay.  The  Company  shall pay any  payments  incurred  under this
Section in  immediately  available  funds upon demand and, in the case of actual
damages,  accompanied by reasonable documentation of the amount of such damages.
Such documentation shall show the number of shares of Common Stock the Purchaser
is  forced to  purchase  (in an open  market  transaction)  which the  Purchaser
anticipated  receiving  upon such  conversion,  and shall be  calculated  as the
amount by which (A) the Purchaser's  total purchase price  (including  customary
brokerage  commissions,  if any) for the  shares  of Common  Stock so  purchased
exceeds (B) the aggregate  principal  and/or  interest  amount of the Note,  for
which such Conversion Notice was not timely honored.

         Nothing  contained  herein  or in any  document  referred  to herein or
delivered  in  connection  herewith  shall be deemed to establish or require the
payment  of a rate of  interest  or  other  charges  in  excess  of the  maximum
permitted by applicable law. In the event that the rate of interest or dividends
required  to be paid or  other  charges  hereunder  exceed  the  maximum  amount
permitted by such law, any payments in excess of such maximum  shall be credited
against  amounts  owed by the  Company to a Purchaser  and thus  refunded to the
Company.

         9.2 MAXIMUM CONVERSION.  The Purchaser shall not be entitled to convert
on a  Conversion  Date,  nor shall the  Company  be  permitted  to  require  the
Purchaser  to accept,  that amount of a Note in  connection  with that number of
shares of Common  Stock which would be in excess of the sum of (i) the number of
shares of Common Stock beneficially owned by the Purchaser on a Conversion Date,
and (ii) the number of shares of Common Stock  issuable  upon the  conversion of
the Note with respect to which the  determination  of this proviso is being made
on a  Conversion  Date,  which  would  result  in  beneficial  ownership  by the
Purchaser  of more than 4.99% of the  outstanding  shares of Common Stock of the
Company on such Conversion  Date. For the purposes of the immediately  preceding
sentence,  beneficial  ownership  shall be determined in accordance with Section
13(d) of the Exchange Act and Regulation 13d-3

                                       19
<PAGE>

thereunder.  The Purchaser may void the foregoing conversion  limitation upon 75
days prior  notice to the  Company or without  any notice  requirement  upon the
occurrence of an Event of Default.

      10. REGISTRATION RIGHTS.

         10.1   REGISTRATION   RIGHTS   GRANTED.   The  Company   hereby  grants
registration rights to the Purchaser pursuant to a Registration Rights Agreement
dated as of even date herewith between the Company and the Purchaser.

         10.2 INDEMNIFICATION.

                  (a)  In  the  event  of  a  registration  of  any  Registrable
Securities  under  the  Securities  Act  pursuant  to  the  Registration  Rights
Agreement,  the Company will indemnify and hold harmless the Purchaser,  and its
officers,  directors and each other  person,  if any, who controls the Purchaser
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities,  joint or  several,  to which the  Purchaser,  or such  persons may
become subject under the  Securities  Act or otherwise,  insofar as such losses,
claims,  damages or liabilities (or actions in respect  thereof) arise out of or
are based upon any untrue  statement or alleged untrue statement of any material
fact  contained  in any  registration  statement  under  which such  Registrable
Securities were registered under the Securities Act pursuant to the Registration
Rights  Agreement,  any  preliminary  prospectus or final  prospectus  contained
therein,  or any amendment or supplement  thereof,  or arise out of or are based
upon the omission or alleged  omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Purchaser,  and each such person for any reasonable legal
or other expenses incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action;  provided,  however, that the
Company  will not be liable in any such case if and to the extent  that any such
loss,  claim,  damage  or  liability  arises  out of or is based  upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in
conformity  with  information  furnished by or on behalf of the Purchaser or any
such person in writing specifically for use in any such document.

                  (b)  In  the  event  of  a  registration  of  the  Registrable
Securities  under  the  Securities  Act  pursuant  to  the  Registration  Rights
Agreement,  the Purchaser will indemnify and hold harmless the Company,  and its
officers,  directors  and each other  person,  if any,  who controls the Company
within the meaning of the Securities Act, against all losses, claims, damages or
liabilities,  joint or several,  to which the Company or such persons may become
subject under the Securities Act or otherwise,  insofar as such losses,  claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue  statement or alleged  untrue  statement  of any  material  fact
contained in the registration  statement under which such Registrable Securities
were  registered  under the Securities Act pursuant to the  Registration  Rights
Agreement,  any preliminary prospectus or final prospectus contained therein, or
any  amendment  or  supplement  thereof,  or arise out of or are based  upon the
omission or alleged  omission to state  therein a material  fact  required to be
stated therein or necessary to make the statements  therein not misleading,  and
will  reimburse  the Company and each such  person for any  reasonable  legal or
other expenses  incurred by them in connection with  investigating  or defending
any such loss, claim, damage, liability or action,  provided,  however, that the
Purchaser

                                       20
<PAGE>

will be liable in any such case if and only to the  extent  that any such  loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue  statement or omission or alleged  omission so made in conformity
with  information  furnished  in writing  to the  Company by or on behalf of the
Purchaser specifically for use in any such document.

                  (c) Promptly after receipt by an indemnified  party  hereunder
of notice of the commencement of any action,  such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof,  but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such  indemnified  party other than under this Section 10.2(c) and shall only
relieve it from any liability which it may have to such indemnified  party under
this Section 10.2(c) if and to the extent the  indemnifying  party is prejudiced
by such  omission.  In case  any  such  action  shall  be  brought  against  any
indemnified party and it shall notify the indemnifying party of the commencement
thereof,  the indemnifying party shall be entitled to participate in and, to the
extent it shall wish, to assume and  undertake the defense  thereof with counsel
satisfactory to such indemnified  party, and, after notice from the indemnifying
party to such  indemnified  party of its election so to assume and undertake the
defense thereof,  the indemnifying party shall not be liable to such indemnified
party under this Section 10.2(c) for any legal expenses subsequently incurred by
such  indemnified  party  in  connection  with  the  defense  thereof;   if  the
indemnified party retains its own counsel,  then the indemnified party shall pay
all fees, costs and expenses of such counsel,  provided,  however,  that, if the
defendants  in any such  action  include  both  the  indemnified  party  and the
indemnifying  party and the indemnified  party shall have  reasonably  concluded
that there may be reasonable  defenses  available to it which are different from
or additional to those available to the  indemnifying  party or if the interests
of the indemnified party reasonably may be deemed to conflict with the interests
of the indemnifying  party, the indemnified party shall have the right to select
one  separate  counsel  and to assume  such  legal  defenses  and  otherwise  to
participate in the defense of such action, with the reasonable expenses and fees
of such separate counsel and other expenses related to such  participation to be
reimbursed by the indemnifying party as incurred.

                  (d) In order to provide for just and equitable contribution in
the  event of joint  liability  under  the  Securities  Act in any case in which
either (i) the Purchaser,  or any controlling  person of the Purchaser,  makes a
claim for  indemnification  pursuant to this Section  10.2 but it is  judicially
determined  (by the entry of a final  judgment or decree by a court of competent
jurisdiction  and the  expiration  of time to appeal  or the  denial of the last
right of appeal)  that such  indemnification  may not be  enforced  in such case
notwithstanding  the fact that this Section 10.2 provides for indemnification in
such case, or (ii) contribution  under the Securities Act may be required on the
part of the Purchaser or  controlling  person of the Purchaser in  circumstances
for which indemnification is provided under this Section 10.2; then, and in each
such case,  the Company  and the  Purchaser  will  contribute  to the  aggregate
losses,  claims,  damages or  liabilities  to which  they may be subject  (after
contribution   from  others)  in  such  proportion  so  that  the  Purchaser  is
responsible  only for the portion  represented by the percentage that the public
offering price of its securities offered by the registration  statement bears to
the  public  offering  price  of all  securities  offered  by such  registration
statement, provided, however, that, in any such case, (A) the Purchaser will not
be required to contribute  any amount in excess of the public  offering price of
all such securities offered by it pursuant to such registration  statement;  and
(B) no person or entity guilty of fraudulent misrepresentation

                                       21
<PAGE>

(within the  meaning of Section 10 of the Act) will be entitled to  contribution
from  any   person  or   entity   who  was  not   guilty   of  such   fraudulent
misrepresentation.

         10.3 OFFERING  RESTRICTIONS.  Except as previously disclosed in the SEC
Reports or in the  Exchange Act Filings,  or stock or stock  options  granted to
employees or directors  of the Company;  or shares of preferred  stock issued to
pay dividends in respect of the  Company's  preferred  stock;  or equity or debt
issued in connection with an acquisition of a business or assets by the Company;
or the issuance by the Company of stock in connection with the  establishment of
a joint venture partnership or licensing arrangement, the Company will not issue
any securities with a continuously  variable/floating  conversion  feature which
are or could be (by conversion or  registration)  free-trading  securities (i.e.
common stock subject to a registration statement) prior to the full repayment or
conversion of the Note.

      11. MISCELLANEOUS.

         11.1 GOVERNING  LAW. THIS AGREEMENT  SHALL BE GOVERNED BY AND CONSTRUED
IN  ACCORDANCE  WITH  THE LAWS OF THE  STATE  OF NEW  YORK,  WITHOUT  REGARD  TO
PRINCIPLES OF CONFLICTS OF LAWS.  ANY ACTION BROUGHT BY EITHER PARTY AGAINST THE
OTHER  CONCERNING  THE  TRANSACTIONS  CONTEMPLATED  BY THIS  AGREEMENT  SHALL BE
BROUGHT ONLY IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN
THE STATE OF NEW YORK. BOTH PARTIES AND THE INDIVIDUALS EXECUTING THIS AGREEMENT
AND  OTHER  AGREEMENTS  ON  BEHALF  OF  THE  COMPANY  AGREE  TO  SUBMIT  TO  THE
JURISDICTION  OF SUCH  COURTS  AND WAIVE  TRIAL BY JURY.  IN THE EVENT  THAT ANY
PROVISION OF THIS  AGREEMENT  OR ANY OTHER  AGREEMENT  DELIVERED  IN  CONNECTION
HEREWITH IS INVALID OR  UNENFORCEABLE  UNDER ANY  APPLICABLE  STATUTE OR RULE OF
LAW, THEN SUCH PROVISION  SHALL BE DEEMED  INOPERATIVE TO THE EXTENT THAT IT MAY
CONFLICT  THEREWITH AND SHALL BE DEEMED MODIFIED TO CONFORM WITH SUCH STATUTE OR
RULE OF LAW. ANY SUCH PROVISION WHICH MAY PROVE INVALID OR  UNENFORCEABLE  UNDER
ANY LAW SHALL NOT AFFECT THE VALIDITY OR  ENFORCEABILITY  OF ANY OTHER PROVISION
OF ANY AGREEMENT.

         11.2  SURVIVAL.   The   representations,   warranties,   covenants  and
agreements made herein shall survive any investigation made by the Purchaser and
the  closing of the  transactions  contemplated  hereby to the  extent  provided
therein.  All statements as to factual  matters  contained in any certificate or
other  instrument  delivered by or on behalf of the Company  pursuant  hereto in
connection  with the  transactions  contemplated  hereby  shall be  deemed to be
representations and warranties by the Company hereunder solely as of the date of
such certificate or instrument.

         11.3 SUCCESSORS.  Except as otherwise  expressly  provided herein,  the
provisions  hereof  shall  inure to the  benefit  of, and be binding  upon,  the
successors,  heirs, executors and administrators of the parties hereto and shall
inure to the benefit of and be  enforceable by each person who shall be a holder
of the  Securities  from time to time,  other than the  holders of Common  Stock
which has been sold by the Purchaser pursuant to Rule 144 or an

                                       22
<PAGE>

effective registration statement.  Purchaser may not assign its rights hereunder
to a competitor of the Company.  The Company acknowledges that the Purchaser may
at any time and from time to time sell participating interests in this Agreement
and the Related  Agreements  and/or sell,  assign or transfer all or any part of
its rights  under this  Agreement  and the  Related  Agreements  to third  party
transferees.

         11.4 ENTIRE  AGREEMENT.  This  Agreement,  the exhibits  and  schedules
hereto, the Related Agreements and the other documents delivered pursuant hereto
constitute the full and entire  understanding  and agreement between the parties
with regard to the subjects  hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.

         11.5  SEVERABILITY.  In case any  provision of the  Agreement  shall be
invalid, illegal or unenforceable,  the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

         11.6 AMENDMENT AND WAIVER.

                  (a) This  Agreement  may be amended or modified  only upon the
written consent of the Company and the Purchaser.

                  (b) The  obligations  of the  Company  and the  rights  of the
Purchaser  under this  Agreement may be waived only with the written  consent of
the Purchaser.

                  (c) The  obligations  of the  Purchaser  and the rights of the
Company under this Agreement may be waived only with the written  consent of the
Company.

         11.7  DELAYS OR  OMISSIONS.  It is agreed  that no delay or omission to
exercise  any right,  power or remedy  accruing  to any party,  upon any breach,
default or  noncompliance  by another party under this  Agreement or the Related
Agreements,  shall  impair  any such  right,  power or  remedy,  nor shall it be
construed to be a waiver of any such breach,  default or  noncompliance,  or any
acquiescence  therein, or of or in any similar breach,  default or noncompliance
thereafter occurring. All remedies, either under this Agreement, the Note or the
Related  Agreements,  by law  or  otherwise  afforded  to any  party,  shall  be
cumulative and not alternative.

         11.8 NOTICES.  All notices required or permitted  hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed facsimile if sent during normal
business  hours of the  recipient,  if not,  then on the next  business day, (c)
three (3) business days after having been sent by registered or certified  mail,
return receipt requested,  postage prepaid,  or (d) one day after deposit with a
nationally  recognized  overnight  courier,  specifying next day delivery,  with
written verification of receipt. All communications shall be sent to the Company
at the address as set forth on the  signature  page hereof,  to the Purchaser at
the address set forth on the signature  page hereto for such  Purchaser,  with a
copy in the case of the  Purchaser  to Scott J.  Giordano,  Loeb & Loeb LLP, 345
Park Avenue,  New York, NY 10154,  facsimile  number (212)  407-4990 and to John
Tucker,  825 Third Ave. 14th Floor, New York, NY 10022, or at such other address
as the Company or the

                                       23
<PAGE>

Purchaser may designate by written  notice to the other parties  hereto given in
accordance herewith.

         11.9  ATTORNEYS'  FEES.  In the  event  that  any  suit  or  action  is
instituted to enforce any provision in this Agreement,  the prevailing  party in
such dispute shall be entitled to recover from the losing party all fees,  costs
and  expenses  of  enforcing  any right of such  prevailing  party under or with
respect to this Agreement,  including,  without limitation, such reasonable fees
and  expenses  of  attorneys  and  accountants,  which  shall  include,  without
limitation, all fees, costs and expenses of appeals.

         11.10 TITLES AND SUBTITLES.  The titles of the sections and subsections
of the  Agreement  are  for  convenience  of  reference  only  and are not to be
considered in construing this Agreement.

         11.11  FACSIMILE  SIGNATURES;   COUNTERPARTS.  This  Agreement  may  be
executed by  facsimile  signatures  and in any number of  counterparts,  each of
which shall be an  original,  but all of which  together  shall  constitute  one
instrument.

         11.12 BROKER'S FEES. Except as set forth on SCHEDULE 11.12 hereof, each
party hereto represents and warrants that no agent,  broker,  investment banker,
person or firm acting on behalf of or under the  authority  of such party hereto
is or will be entitled to any broker's or finder's  fee or any other  commission
directly or indirectly in connection with the transactions  contemplated herein.
Each party hereto  further  agrees to indemnify each other party for any claims,
losses  or   expenses   incurred  by  such  other  party  as  a  result  of  the
representation in this Section 11.12 being untrue.

         11.13  CONSTRUCTION.  Each party  acknowledges  that its legal  counsel
participated  in the  preparation of this  Agreement and the Related  Agreements
and, therefore, stipulates that the rule of construction that ambiguities are to
be  resolved   against  the   drafting   party  shall  not  be  applied  in  the
interpretation of this Agreement to favor any party against the other.

       [Balance of page intentionally left blank; signature page follows.]

                                       24
<PAGE>

                  IN WITNESS  WHEREOF,  the  parties  hereto have  executed  the
SECURITIES  PURCHASE  AGREEMENT as of the date set forth in the first  paragraph
hereof.

COMPANY:                          PURCHASER:

PENTHOUSE INTERNATIONAL, INC.     LAURUS MASTER FUND, LTD.

By:                               By:
   ------------------------------     ------------------------------
Name:                             Name:
     ----------------------------      -----------------------------
Title:                            Title:
      ---------------------------       ----------------------------

Address: 11 Penn Plaza            Address: c/o Ironshore Corporate Services Ltd.
         New York, New York 10001          P.O. Box 1234 G.T.
                                           Queensgate House, South Church Street
                                           Grand Cayman, Cayman Islands

                                       25
<PAGE>


                                LIST OF EXHIBITS

Form of  Convertible Term Note              Exhibit A

Form of Warrant                             Exhibit B

Form of Opinion                             Exhibit C

Form of Escrow Agreement                    Exhibit D

                                       26
<PAGE>

                                    EXHIBIT A

                            FORM OF CONVERTIBLE NOTE



                                      A-1
<PAGE>


                                    EXHIBIT B

                                 FORM OF WARRANT


                                      B-1
<PAGE>

                                   EXHIBIT C

                                 FORM OF OPINION


                                      C-3