Exhibit 10.15

                          SECURITIES PURCHASE AGREEMENT

         This Securities  Purchase  Agreement (this  "Agreement") is dated as of
August 19, 2003, among QT 5, Inc., a Delaware  corporation (the "Company"),  and
the  purchasers  identified on the signature  pages hereto (each,  including its
successors and assigns, a "Purchaser" and collectively the "Purchasers").

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

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


                                    ARTICLE I
                                   DEFINITIONS

         1.1  Definitions.  In addition to the terms  defined  elsewhere in this
Agreement:  (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Debentures (as defined herein),  and (b) the
following terms have the meanings indicated in this Section 1.1:

                  "Affiliate"  means any Person  that,  directly  or  indirectly
         through one or more intermediaries,  controls or is controlled by or is
         under  common  control  with a  Person,  as such  terms are used in and
         construed under Rule 144 under the Securities Act.

                  "Capital  Shares" means the Common Stock and any shares of any
         other class of common stock whether now or hereafter authorized, having
         the right to participate in the  distribution of earnings and assets of
         the Company.

                  "Capital Shares  Equivalents" means any securities,  rights or
         obligations  that are convertible  into or exchangeable for or give any
         right to subscribe for or purchase, directly or indirectly, any Capital
         Shares of the  Company  or any  warrants,  options  or other  rights to
         subscribe for or purchase,  directly or  indirectly,  Capital Shares or
         any such convertible or exchangeable securities.

                  "Closing  Price"  means  on any  particular  date (a) the last
         reported  closing  bid price per share of Common  Stock on such date on
         the  Principal  Market (as reported by  Bloomberg  L.P. at 4:15 PM (New
         York  time),  or (b) if there is no such price on such  date,  then the
         closing bid price on the Principal Market on the date nearest preceding
         such date (as reported by Bloomberg L.P. at 4:15 PM (New York time) for
         the closing bid price for regular session trading on such day), or (c)


<PAGE>

         if the  Common  Stock is not then  listed or  quoted  on the  Principal
         Market  and if prices  for the Common  Stock are then  reported  in the
         "pink sheets" published by the National  Quotation Bureau  Incorporated
         (or a similar  organization  or agency  succeeding  to its functions of
         reporting  prices),  the most  recent bid price per share of the Common
         Stock so  reported,  or (d) if the shares of Common  Stock are not then
         publicly  traded the fair  market  value of a share of Common  Stock as
         determined by a qualified  independent appraiser selected in good faith
         by the Purchasers of a majority in interest of the principal  amount of
         Debentures then outstanding.

                  "Closings"  means  collectively,  the closings of the purchase
         and sale of the  Securities  pursuant to Section 2.1, and any reference
         to  "Closing"  or  "Closings"  shall be  construed to include the First
         Closing  and the  Second  Closing  unless  only  one  such  closing  is
         expressly referred to.

                  "Closing  Dates" means,  collectively,  the dates of the First
         Closing and Second Closing.

                  "Commission" means the Securities and Exchange Commission.

                  "Common  Stock"  means the common  stock of the  Company,  par
         value $0.001 per share, and any securities into which such common stock
         shall hereinafter have been reclassified into.

                  "Company Counsel" means Richardson & Patel LLP.

                  "Debentures"  means,  the 6%  Convertible  Debentures due [36]
         months  from  their  date of  issuance,  issued by the  Company  to the
         Purchasers hereunder, in the form of Exhibit A.

                  "Disclosure Schedules" shall have the meaning ascribed to such
         term in Section 3.1 hereof.

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

                  "Escrow  Agent" shall have the meaning set forth in the Escrow
         Agreement.

                  "Escrow Agreement" means the Escrow Agreement in substantially
         the form of Exhibit F hereto  executed and delivered  contemporaneously
         with this Agreement.

                  "Exchange Act" means the  Securities  Exchange Act of 1934, as
         amended.

                  "First  Closing" shall have the meaning  ascribed to such term
         in Section 2.1 hereof.

                                       -2-

<PAGE>

                  "First Closing Date" means the date of the First Closing.

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

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

                  "Liens"  shall  have  the  meaning  ascribed  to such  term in
         Section 3.1(a) hereof.

                  "Losses"   means  any  and  all   losses,   claims,   damages,
         liabilities,   settlement   costs  and  expenses,   including   without
         limitation costs of preparation and reasonable attorneys' fees.

                  "Material  Adverse Effect" shall have the meaning  assigned to
         such term in Section 3.1(b) hereof.

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

                  "Principal  Market" means initially the OTC Bulletin Board and
         shall  also  include  the  American  Stock  Exchange,  New  York  Stock
         Exchange,  the NASDAQ  Small-Cap  Market or the NASDAQ National Market,
         whichever is at the time the principal  trading  exchange or market for
         the Common Stock, based upon share volume.

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

                  "Registration  Statement" means the registration  statement to
         be filed by the Company pursuant to the Registration Rights Agreement.

                  "Registration  Rights Agreement" means the Registration Rights
         Agreement,   dated  the  Closing  Date,   among  the  Company  and  the
         Purchasers, in the form of Exhibit B.

                  "Required  Approvals"  shall have the meaning ascribed to such
         term in Section 3.1(e) hereof.

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


                                       -3-
<PAGE>


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

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

                  "Second  Closing" shall have the meaning ascribed to such term
         in Section 2.1 hereof.

                  "Second Closing Date" means the date of the Second Closing.

                  "Securities"  means  the  Debentures,  the  Warrants  and  the
         Underlying Shares.

                  "Securities Act" means the Securities Act of 1933, as amended.

                  "Set Price"  shall have the  meaning  ascribed to such term in
         the Debentures.

                  "Subscription Amount" means, as to each Purchaser, the amounts
         set forth below such Purchaser's signature block on the signature pages
         hereto and next to the headings "First Closing Subscription Amount" and
         "Second Closing  Subscription  Amount", in United States Dollars and in
         immediately available funds.

                  "Subsidiary"  means any subsidiary of the Company as set forth
         in the SEC Reports.

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

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

                  "Underlying  Shares" means the shares of Common Stock issuable
         upon conversion of the Debentures and upon exercise of the Warrants and
         issued and  issuable  in lieu of the cash  payment of  interest  on the
         Debentures.

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

                  "Warrants"  means   collectively  the  Common  Stock  purchase
         warrants,  in the form of Exhibit C delivered to the  Purchasers at the
         Closing in accordance with Section 2.2 hereof.

                  "Warrant  Shares"  means the shares of Common  Stock  issuable
         upon exercise of the Warrants.



                                       -4-
<PAGE>

                                   ARTICLE II
                                PURCHASE AND SALE

         2.1 Closing.  Each Purchaser shall purchase at each Closing,  severally
and not jointly with the other  Purchasers,  the principal  amount of Debentures
equal to such Purchaser's Subscription Amount applicable to such Closing and the
Company shall sell such principal  amount of Debentures to each such  Purchaser.
The principal  amount of each Debenture  shall be convertible in accordance with
its terms at the  applicable  Set  Price.  The  Closing  shall take place in two
stages as set forth below  (respectively,  the "First  Closing"  and the "Second
Closing").  The aggregate principal amount of debentures purchased at all of the
Closings shall be $2,400,000.

                  (a) First  Closing.  The First  Closing  shall be  limited  to
         $1,200,000 in aggregate principal amount of Debentures, and shall occur
         within 5 Trading Days of the date hereof.

                  (b) Second  Closing.  The Second  Closing  shall be limited to
         $1,200,000 in aggregate principal amount of Debentures, and shall occur
         on the 5th Trading Day following the Effective Date.

         2.2 Closing Conditions. Each Closing shall take place at the offices of
the Escrow Agent,  or at such other location as the parties may agree,  pursuant
to the terms of the Escrow  Agreement.  Upon satisfaction or waiver by the party
sought to be benefited  thereby of the conditions set forth in this Section 2.2,
as applicable, each Closing shall occur.

                  (a) At or prior to each Closing,  unless  otherwise  indicated
         below, the Company shall deliver or cause to be delivered to the Escrow
         Agent the following:

                           (i) a Debenture for each  Purchaser  with a principal
                  amount equal to such Purchaser's Subscription Amount as to the
                  applicable Closing, registered in the name of such Purchaser;

                           (ii)  as  to  the  First   Closing  only,  a  Warrant
                  registered  in the name of each  Purchaser to purchase up to a
                  number  of  shares  of  Common  Stock  equal  to 50%  of  such
                  Purchaser's  aggregate  Subscription  Amount for both Closings
                  divided  by the  Set  Price,  with a term  of 5  years  and an
                  exercise price equal to $0.075, as adjusted therein;

                           (iii) as to the First Closing only, the legal opinion
                  of Company Counsel,  in the form of Exhibit D attached hereto,
                  addressed to the Purchasers;

                           (iv)  as  to  the  First  Closing  only,  the  Escrow
                  Agreement duly executed by the Company, in the form of Exhibit
                  E attached hereto;


                                       -5-
<PAGE>

                           (v) as to the First  Closing only,  the  Registration
                  Rights  Agreement  duly executed by the Company in the form of
                  Exhibit B attached hereto;

                           (vi) as to the First  Closing only,  this  Agreement,
                  duly executed by the Company.

                  (b) At or prior to each Closing,  unless  otherwise  indicated
         below,  each  Purchaser  shall  deliver or cause to be delivered to the
         Escrow Agent the following:

                           (i) such Purchaser's  Subscription  Amount, as to the
                  applicable Closing, by wire transfer;

                           (ii)  as  to  the  First  Closing  only,  the  Escrow
                  Agreement duly executed by such Purchaser;

                           (iii) as to the First Closing only,  this  Agreement,
                  duly executed by such Purchaser; and

                           (iv) as to the First Closing only,  the  Registration
                  Rights Agreement duly executed by such Purchaser.

                  (c) All  representations  and  warranties  of the other  party
         contained  herein shall remain true and correct as of each Closing Date
         and all  covenants of the other party shall have been  performed if due
         prior to such date.

                  (d) There  shall  have been no  Material  Adverse  Effect  (as
         defined in Section  3.1(b)) with respect to the Company  since the date
         hereof.

                  (e) From the date hereof to each Closing Date,  trading in the
         Common Stock shall not have been  suspended by the  Commission  (except
         for any  suspension  of trading of  limited  duration  agreed to by the
         Company,  which  suspension shall be terminated prior to the applicable
         Closing),  and,  at any time  prior to each  Closing  Date,  trading in
         securities  generally as reported by Bloomberg  Financial Markets shall
         not have been  suspended or limited,  or minimum  prices shall not have
         been  established  on  securities  whose  trades are  reported  by such
         service,  or on the Principal  Market,  nor shall a banking  moratorium
         have been  declared  either  by the  United  States  or New York  State
         authorities.

                  (f) As to the Second  Closing  only,  the  Company  shall have
         filed with the Commission the Registration Statement registering all of
         the  Underlying  Shares and,  within the time period  specified  in the
         Registration Rights Agreement,  such Registration  Statement shall have
         been declared effective by the Commission as to all such securities and
         been maintained effective since such date.


                                       -6-
<PAGE>

                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

         3.1 Representations and Warranties of the Company.  Except as set forth
under the  corresponding  section of the disclosure  schedules  delivered to the
Purchasers  concurrently herewith (the "Disclosure  Schedules") which Disclosure
Schedules  shall  be  deemed  a  part  hereof,  the  Company  hereby  makes  the
representations and warranties set forth below to each Purchaser.

                  (a)  Subsidiaries.  The Company owns,  directly or indirectly,
         all of the capital stock or other equity  interests of each  Subsidiary
         free and clear of any lien,  charge,  security  interest,  encumbrance,
         right of first refusal or other  restriction  (collectively,  "Liens"),
         and all the issued  and  outstanding  shares of  capital  stock of each
         Subsidiary  are validly issued and are fully paid,  non-assessable  and
         free  of  preemptive  and  similar  rights.   If  the  Company  has  no
         Subsidiaries,  then  references  in the  Transaction  Documents  to the
         Subsidiaries will be disregarded.

                  (b)  Organization and  Qualification.  Each of the Company and
         the Subsidiaries is an entity duly incorporated or otherwise organized,
         validly   existing  and  in  good  standing   under  the  laws  of  the
         jurisdiction of its incorporation or organization (as applicable), with
         the  requisite  power and authority to own and use its  properties  and
         assets and to carry on its business as currently conducted. Neither the
         Company nor any  Subsidiary is in violation of any of the provisions of
         its  respective  certificate  or articles of  incorporation,  bylaws or
         other organizational or charter documents.  Each of the Company and the
         Subsidiaries  is duly  qualified to do business and is in good standing
         as a foreign  corporation or other entity in each jurisdiction in which
         the nature of the business conducted or property owned by it makes such
         qualification necessary, except where the failure to be so qualified or
         in good standing, as the case may be, could not, individually or in the
         aggregate:   (i)   adversely   affect   the   legality,   validity   or
         enforceability of any Transaction  Document,  (ii) have or result in or
         be reasonably  likely to have or result in a material adverse effect on
         the results of  operations,  assets,  prospects,  business or condition
         (financial or otherwise) of the Company and the Subsidiaries,  taken as
         a whole,  or (iii)  adversely  impair the Company's  ability to perform
         fully on a timely basis its  obligations  under any of the  Transaction
         Documents (any of (i), (ii) or (iii), a "Material Adverse Effect").

                  (c) Authorization;  Enforcement. The Company has the requisite
         corporate  power and  authority  to enter  into and to  consummate  the
         transactions  contemplated  by each of the  Transaction  Documents  and
         otherwise to carry out its  obligations  hereunder or  thereunder.  The
         execution  and  delivery of each of the  Transaction  Documents  by the
         Company and the  consummation  by it of the  transactions  contemplated
         hereby or thereby have been duly authorized by all necessary  action on
         the part of the Company and no further consent or action is required by
         the Company  other than  Required  Approvals.  Each of the  Transaction
         Documents  has been (or upon  delivery  will be) duly  executed  by the
         Company and, when delivered in accordance  with the terms hereof,  will
         constitute the valid and binding obligation of the Company  enforceable
         against the Company in accordance with its terms, subject to applicable
         bankruptcy,   insolvency,   fraudulent   conveyance,    reorganization,
         moratorium  and similar laws affecting  creditors'  rights and remedies
         generally and general principles of equity. Neither the Company nor any


                                       -7-
<PAGE>

         Subsidiary is in violation of any of the  provisions of its  respective
         certificate   or   articles   of   incorporation,   by-laws   or  other
         organizational  or charter  documents except where such violation could
         not,  individually or in the aggregate,  constitute a Material  Adverse
         Effect.

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

                  (e) Filings,  Consents and Approvals.  Neither the Company nor
         any Subsidiary is required to obtain any consent, waiver, authorization
         or order of,  give any notice  to, or make any  filing or  registration
         with, any court or other federal,  state,  local or other  governmental
         authority or other Person in connection  with the  execution,  delivery
         and performance by the Company of the Transaction Documents, other than
         (i) the filings  required  under  Section 4.7, (ii) the filing with the
         Commission of the Underlying Shares Registration  Statement,  (iii) the
         notice and/or  application(s)  to each applicable  Principal Market for
         the issuance and sale of the Debentures and Warrants and the listing of
         the  Underlying  Shares  for  trading  thereon  in the time and  manner
         required thereby, and (iv) the filing of Form D with the Commission and
         applicable Blue Sky filings (collectively, the "Required Approvals").

                  (f)  Issuance  of the  Securities.  The  Securities  are  duly
         authorized  and,  when  issued  and  paid  for in  accordance  with the
         applicable  Transaction  Documents,  will be duly and  validly  issued,
         fully paid and non-assessable, free and clear of all Liens. The Company
         has reserved from its duly authorized  capital stock a number of shares
         of Common Stock for issuance of the Underlying Shares at least equal to
         the Required  Minimum on the date  hereof.  The Company has not, and to
         the  knowledge  of the  Company,  no Affiliate of the Company has sold,
         offered for sale or solicited offers to buy or otherwise  negotiated in
         respect of any security (as defined in Section 2 of the Securities Act)
         that would be integrated  with the offer or sale of the Securities in a
         manner that would require the registration  under the Securities Act of
         the  sale  of the  Securities  to the  Purchasers,  or  that  would  be
         integrated with the offer or sale of the Securities for purposes of the
         rules and regulations of any Principal Market.


                                       -8-
<PAGE>

                  (g)  Capitalization.  The  number  of  shares  and type of all
         authorized,  issued and outstanding capital stock of the Company is set
         forth in the Disclosure Schedules attached hereto. No securities of the
         Company are entitled to preemptive or similar rights, and no Person has
         any right of first refusal,  preemptive right,  right of participation,
         or any similar right to participate in the transactions contemplated by
         the Transaction Documents.  Except as a result of the purchase and sale
         of the Securities,  there are no outstanding options,  warrants, script
         rights  to  subscribe  to,  calls  or   commitments  of  any  character
         whatsoever   relating  to,  or   securities,   rights  or   obligations
         convertible into or exchangeable for, or giving any Person any right to
         subscribe  for or acquire,  any shares of Common  Stock,  or contracts,
         commitments, understandings or arrangements by which the Company or any
         Subsidiary is or may become bound to issue additional  shares of Common
         Stock, or securities or rights  convertible or exchangeable into shares
         of Common  Stock.  The  issuance  and sale of the  Securities  will not
         obligate  the  Company  to  issue  shares  of  Common  Stock  or  other
         securities  to any  Person  (other  than the  Purchasers)  and will not
         result in a right of any  holder of  Company  securities  to adjust the
         exercise, conversion, exchange or reset price under such securities.

                  (h) SEC Reports;  Financial Statements.  The Company has filed
         all reports required to be filed by it under the Securities Act and the
         Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for
         the two years  preceding the date hereof (or such shorter period as the
         Company  was  required  by law to file such  material)  (the  foregoing
         materials being  collectively  referred to herein as the "SEC Reports")
         on a timely  basis or has  received a valid  extension  of such time of
         filing and has filed any such SEC Reports  prior to the  expiration  of
         any such  extension.  As of their  respective  dates,  the SEC  Reports
         complied  in  all  material  respects  with  the  requirements  of  the
         Securities  Act and the Exchange Act and the rules and  regulations  of
         the  Commission  promulgated  thereunder,  and none of the SEC Reports,
         when  filed,  contained  any untrue  statement  of a  material  fact or
         omitted  to state a  material  fact  required  to be stated  therein or
         necessary  in  order to make the  statements  therein,  in light of the
         circumstances under which they were made, not misleading. The financial
         statements  of the Company  included  in the SEC Reports  comply in all
         material respects with applicable accounting requirements and the rules
         and  regulations of the Commission with respect thereto as in effect at
         the time of filing.  Such  financial  statements  have been prepared in
         accordance with generally accepted  accounting  principles applied on a
         consistent basis during the periods involved ("GAAP"), except as may be
         otherwise specified in such financial  statements or the notes thereto,
         and fairly present in all material  respects the financial  position of
         the Company and its  consolidated  subsidiaries as of and for the dates
         thereof  and the results of  operations  and cash flows for the periods
         then ended,  subject, in the case of unaudited  statements,  to normal,
         immaterial, year-end audit adjustments.

                  (i)  Material  Changes.   Since  March  31,  2003,  except  as
         specifically disclosed in the SEC Reports: (i) there has been no event,
         occurrence  or  development  that  has had or that  could  result  in a
         Material  Adverse  Effect,  (ii)  the  Company  has  not  incurred  any
         liabilities (contingent or otherwise) other than (A) trade payables and
         accrued expenses incurred in the ordinary course of business consistent
         with past practice and (B)  liabilities not required to be reflected in
         the Company's financial statements pursuant to GAAP or required to be


                                       -9-
<PAGE>

         disclosed  in filings made with the  Commission,  (iii) the Company has
         not altered its method of  accounting  or the identity of its auditors,
         (iv) the Company has not declared or made any dividend or  distribution
         of cash or other property to its stockholders or purchased, redeemed or
         made any  agreements  to  purchase  or redeem any shares of its capital
         stock, and (v) the Company has not issued any equity  securities to any
         officer,  director or Affiliate,  except  pursuant to existing  Company
         stock option or similar plans.

                  (j) Litigation.  There is no action, suit, inquiry,  notice of
         violation,  proceeding or investigation pending or, to the knowledge of
         the  Company,   threatened  against  or  affecting  the  Company,   any
         Subsidiary  or any of  their  respective  properties  before  or by any
         court, arbitrator,  governmental or administrative agency or regulatory
         authority (federal, state, county, local or foreign) (collectively,  an
         "Action")  which:  (i) adversely  affects or  challenges  the legality,
         validity or enforceability  of any of the Transaction  Documents or the
         Securities  or (ii)  could,  if  there  were an  unfavorable  decision,
         individually  or in the  aggregate,  have or  reasonably be expected to
         result in a  Material  Adverse  Effect.  Neither  the  Company  nor any
         Subsidiary,  nor any  director or officer  thereof,  is or has been the
         subject of any Action  involving a claim of  violation  of or liability
         under  federal  or  state  securities  laws or a  claim  of  breach  of
         fiduciary duty. The Company does not have pending before the Commission
         any request for  confidential  treatment of information.  There has not
         been,  and to the  knowledge  of the  Company,  there is not pending or
         contemplated, any investigation by the Commission involving the Company
         or any  current  or former  director  or officer  of the  Company.  The
         Commission has not issued any stop order or other order  suspending the
         effectiveness of any registration statement filed by the Company or any
         Subsidiary under the Exchange Act or the Securities Act.

                  (k) Compliance. Neither the Company nor any Subsidiary: (i) is
         in default under or in violation of (and no event has occurred that has
         not been  waived  that,  with  notice  or lapse of time or both,  would
         result in a default by the Company or any  Subsidiary  under),  nor has
         the Company or any Subsidiary  received notice of a claim that it is in
         default  under or that it is in violation  of, any  indenture,  loan or
         credit  agreement or any other agreement or instrument to which it is a
         party or by which it or any of its  properties is bound (whether or not
         such default or violation has been waived), (ii) is in violation of any
         order of any court, arbitrator or governmental body, or (iii) is or has
         been  in  violation  of  any  statute,   rule  or   regulation  of  any
         governmental authority,  except in each case as could not, individually
         or in the aggregate, have or result in a Material Adverse Effect.

                  (l) Labor  Relations.  No material labor dispute exists or, to
         the  knowledge of the Company,  is imminent  with respect to any of the
         employees of the Company.

                  (m)  Regulatory  Permits.  The  Company  and the  Subsidiaries
         possess all  certificates,  authorizations  and  permits  issued by the
         appropriate  federal,  state, local or foreign  regulatory  authorities
         necessary to conduct  their  respective  businesses as described in the
         SEC Reports,  except  where the failure to possess  such permits  could
         not,  individually or in the aggregate,  have or reasonably be expected
         to result in a Material Adverse Effect ("Material Permits"), and


                                      -10-
<PAGE>

         neither the  Company  nor any  Subsidiary  has  received  any notice of
         proceedings  relating to the revocation or modification of any Material
         Permit.

                  (n) Title to Assets.  The  Company and the  Subsidiaries  have
         good and  marketable  title in fee simple to all real property owned by
         them  that  is  material  to  the  business  of  the  Company  and  the
         Subsidiaries  and good and  marketable  title in all personal  property
         owned by them that is material  to the  business of the Company and the
         Subsidiaries,  in each  case free and clear of all  Liens,  except  for
         Liens as do not materially affect the value of such property and do not
         materially  interfere with the use made and proposed to be made of such
         property by the Company and the  Subsidiaries.  Any real  property  and
         facilities  held under lease by the Company  and the  Subsidiaries  are
         held  under  valid,  subsisting  and  enforceable  leases  of which the
         Company and the Subsidiaries are in compliance.

                  (o) Patents and Trademarks.  The Company and the  Subsidiaries
         have,  or  have  rights  to  use,  all  patents,  patent  applications,
         trademarks,   trademark  applications,   service  marks,  trade  names,
         copyrights, licenses and other similar rights necessary or material for
         use in connection with their respective  businesses as described in the
         SEC  Reports  and which the  failure  to so have  could have a Material
         Adverse Effect  (collectively,  the  "Intellectual  Property  Rights").
         Neither the Company nor any  Subsidiary  has received a written  notice
         that  the  Intellectual  Property  Rights  used by the  Company  or any
         Subsidiary  violates or infringes upon the rights of any Person. To the
         knowledge of the Company,  all such  Intellectual  Property  Rights are
         enforceable and there is no existing  infringement by another Person of
         any of the Intellectual Property Rights.

                  (p) Insurance. The Company and the Subsidiaries are insured by
         insurers of recognized financial responsibility against such losses and
         risks  and  in  such  amounts  as  are  prudent  and  customary  in the
         businesses in which the Company and the  Subsidiaries  are engaged.  To
         the best of Company's knowledge,  such insurance contracts and policies
         are accurate and complete.  Neither the Company nor any  Subsidiary has
         any  reason  to  believe  it will  not be able to  renew  its  existing
         insurance  coverage  as and when  such  coverage  expires  or to obtain
         similar  coverage from similar insurers as may be necessary to continue
         its business without a significant increase in cost.

                  (q)  Transactions  With  Affiliates and  Employees.  Except as
         required to be set forth in the SEC  Reports,  none of the  officers or
         directors of the Company and, to the knowledge of the Company,  none of
         the  employees of the Company is  presently a party to any  transaction
         with  the  Company  or any  Subsidiary  (other  than  for  services  as
         employees,  officers and directors),  including any contract, agreement
         or other arrangement providing for the furnishing of services to or by,
         providing  for  rental  of real or  personal  property  to or from,  or
         otherwise  requiring payments to or from any officer,  director or such
         employee or, to the  knowledge of the Company,  any entity in which any
         officer,  director,  or any such employee has a substantial interest or
         is an officer, director, trustee or partner.


                                      -11-
<PAGE>

                  (r)  Internal  Accounting   Controls.   The  Company  and  the
         Subsidiaries   maintain  a  system  of  internal   accounting  controls
         sufficient to provide  reasonable  assurance that (i)  transactions are
         executed  in   accordance   with   management's   general  or  specific
         authorizations,  (ii)  transactions are recorded as necessary to permit
         preparation  of financial  statements  in  conformity  with GAAP and to
         maintain asset accountability, (iii) access to assets is permitted only
         in accordance with management's general or specific authorization,  and
         (iv) the  recorded  accountability  for  assets  is  compared  with the
         existing assets at reasonable intervals and appropriate action is taken
         with respect to any differences. The Company has established disclosure
         controls  and  procedures  (as defined in Exchange Act Rules 13a-14 and
         15d-14) for the Company and  designed  such  disclosures  controls  and
         procedures to ensure that material information relating to the Company,
         including its subsidiaries, is made known to the certifying officers by
         others within those entities,  particularly  during the period in which
         the Company's Form 10-K or 10-Q, as the case may be, is being prepared.
         The Company's  certifying  officers have evaluated the effectiveness of
         the Company's controls and procedures as of a date within 90 days prior
         to the filing  date of the Form 10-Q for the  quarter  ended  March 31,
         2003 (such date, the "Evaluation  Date").  The Company presented in the
         Form 10-Q for the quarter ended March 31, 2003 the  conclusions  of the
         certifying  officers about the effectiveness of the disclosure controls
         and procedures  based on their  evaluations as of the Evaluation  Date.
         Since the Evaluation  Date,  there have been no significant  changes in
         the Company's internal controls (as such term is defined in Item 307(b)
         of Regulation S-K under the Exchange Act) or, the Company's  knowledge,
         in other factors that could significantly affect the Company's internal
         controls.

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


                                      -12-
<PAGE>

         Company's  balance  sheet or the notes  thereto,  except  guaranties by
         endorsement of negotiable  instruments for deposit or collection in the
         ordinary  course of  business,  and (c) the present  value of any lease
         payments  in  excess  of  $50,000  due  under  leases  required  to  be
         capitalized  in  accordance  with GAAP.  Neither  the  Company  nor any
         Subsidiary is in default with respect to any Indebtedness.

                  (t)  Certain  Fees.  Except as set forth in  Section  5.2,  no
         brokerage or finder's fees or commissions are or will be payable by the
         Company  to  any  broker,  financial  advisor  or  consultant,  finder,
         placement agent,  investment banker,  bank or other Person with respect
         to the transactions contemplated by this Agreement, and the Company has
         not taken any action  that would cause any  Purchaser  to be liable for
         any such fees or  commissions.  The Company  agrees that the Purchasers
         shall have no  obligation  with  respect to any fees or with respect to
         any  claims  made by or on  behalf of any  Person  for fees of the type
         contemplated by this Section with the transactions contemplated by this
         Agreement.

                  (u)  Private   Placement.   Assuming   the   accuracy  of  the
         representations  and warranties of the Purchasers set forth in Sections
         3.2(b)-(f),  the  offer,  issuance  and sale of the  Securities  to the
         Purchasers  as  contemplated  hereby are exempt  from the  registration
         requirements  of the  Securities  Act.  The  issuance  and  sale of the
         Securities  hereunder does not contravene the rules and  regulations of
         the Principal  Market and no  shareholder  approval is required for the
         Company to fulfill its obligations under the Transaction Documents.

                  (v) Listing and Maintenance Requirements. The Company has not,
         in the 12 months  preceding the date hereof,  received  notice from any
         Principal  Market on which the  Common  Stock is or has been  listed or
         quoted to the effect  that the  Company is not in  compliance  with the
         listing or  maintenance  requirements  of such  Principal  Market.  The
         Company  is,  and has no  reason  to  believe  that it will  not in the
         foreseeable  future continue to be, in compliance with all such listing
         and maintenance requirements.

                  (w) Registration Rights. The Company has not granted or agreed
         to grant to any Person any rights (including "piggy-back"  registration
         rights)  to have any  securities  of the  Company  registered  with the
         Commission  or any  other  governmental  authority  that  have not been
         satisfied.

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


                                      -13-
<PAGE>

                  (y) Seniority. As of each Closing Date, no indebtedness of the
         Company is senior to the  Debentures in right of payment,  whether with
         respect to interest or upon  liquidation or dissolution,  or otherwise,
         other than  indebtedness  secured by purchase money security  interests
         (which is senior only as to  underlying  assets  covered  thereby)  and
         capital  lease  obligations  (which is senior  only as to the  property
         covered thereby).

                  (z) Disclosure.  The Company  confirms that neither it nor any
         other Person acting on its behalf has provided any of the Purchasers or
         their agents or counsel with any information  that constitutes or might
         constitute material, nonpublic information. The Company understands and
         confirms that the Purchasers will rely on the foregoing representations
         in effecting  transactions in securities of the Company. All disclosure
         provided to the Purchasers  regarding the Company, its business and the
         transactions  contemplated  hereby,  including  the  Schedules  to this
         Agreement, furnished by or on behalf of the Company with respect to the
         representations  and  warranties  made herein are true and correct with
         respect to such  representations  and warranties and do not contain any
         untrue  statement of a material fact or omit to state any material fact
         necessary in order to make the statements made therein, in light of the
         circumstances  under which they were made, not misleading.  The Company
         acknowledges  and  agrees  that no  Purchaser  makes  or has  made  any
         representations   or  warranties  with  respect  to  the   transactions
         contemplated  hereby other than those specifically set forth in Section
         3.2 hereof.

                  (aa) Tax Status.  The Company and each of its Subsidiaries has
         made or filed all federal,  state and foreign  income and all other tax
         returns, reports and declarations required by any jurisdiction to which
         it is subject  (unless and only to the extent that the Company and each
         of its Subsidiaries  has set aside on its books  provisions  reasonably
         adequate  for the payment of all unpaid and  unreported  taxes) and has
         paid all taxes and other governmental  assessments and charges that are
         material  in amount,  shown or  determined  to be due on such  returns,
         reports and  declarations,  except those being  contested in good faith
         and has set aside on its books provisions  reasonably  adequate for the
         payment of all taxes for  periods  subsequent  to the  periods to which
         such returns,  reports or declarations apply. There are no unpaid taxes
         in any material amount claimed to be due by the taxing authority of any
         jurisdiction,  and the officers of the Company know of no basis for any
         such claim.  The Company has not  executed a waiver with respect to the
         statute of limitations  relating to the assessment or collection of any
         foreign,  federal,  statue  or local  tax.  None of the  Company's  tax
         returns is presently being audited by any taxing authority.

                  (bb)   Acknowledgment   Regarding   Purchasers'   Purchase  of
         Securities. The Company acknowledges and agrees that the Purchasers are
         acting solely in the capacity of arm's length  purchasers  with respect
         to this Agreement and the transactions contemplated hereby. The Company
         further acknowledges that no Purchaser is acting as a financial advisor
         or fiduciary of the Company (or in any similar  capacity)  with respect
         to this  Agreement  and the  transactions  contemplated  hereby and any
         statement   made  by  any   Purchaser   or  any  of  their   respective
         representatives  or agents in  connection  with this  Agreement and the
         transactions  contemplated hereby is not advice or a recommendation and
         is merely incidental to the Purchasers' purchase of the Securities. The
         Company further represents to each Purchaser that the Company's


                                      -14-
<PAGE>

         decision  to enter into this  Agreement  has been  based  solely on the
         independent evaluation of the Company and its representatives.

                  (cc) No General  Solicitation or Advertising in Regard to this
         Transaction.  Neither the Company nor, to the knowledge of the Company,
         any of its  directors or officers (i) has conducted or will conduct any
         general solicitation (as that term is used in Rule 502(c) of Regulation
         D) or general advertising with respect to the sale of the Debentures or
         the  Warrants,  or (ii)  made any  offers or sales of any  security  or
         solicited any offers to buy any security under any  circumstances  that
         would require registration of the Debentures,  the Underlying Shares or
         the Warrants  under the  Securities  Act or made any "directed  selling
         efforts" as defined in Rule 902 of Regulation S.

                  (dd) No Disagreements with Accountants and Lawyers.  There are
         no  disagreements  of  any  kind  presently  existing,   or  reasonably
         anticipated  by the  Company  to arise,  between  the  accountants  and
         lawyers  formerly or presently  employed by the Company and the Company
         is  current  with  respect  to any  fees  owed to its  accountants  and
         lawyers.

         3.2  Representations  and Warranties of the Purchasers.  Each Purchaser
hereby,  for itself and for no other  Purchaser,  represents and warrants to the
Company as follows:

                  (a) Organization;  Authority. Such Purchaser is an entity duly
         organized,  validly existing and in good standing under the laws of the
         jurisdiction  of its  organization  with  the  requisite  corporate  or
         partnership  power and  authority to enter into and to  consummate  the
         transactions contemplated by the Transaction Documents and otherwise to
         carry out its obligations thereunder. The purchase by such Purchaser of
         the  Securities  hereunder  has been duly  authorized  by all necessary
         action  on the  part of such  Purchaser.  Each of this  Agreement,  the
         Escrow  Agreement and the  Registration  Rights Agreement has been duly
         executed by such  Purchaser,  and when  delivered by such  Purchaser in
         accordance with the terms hereof, will constitute the valid and legally
         binding  obligation  of  such  Purchaser,  enforceable  against  it  in
         accordance with its terms.

                  (b)  Investment  Intent.   Such  Purchaser  is  acquiring  the
         Securities  as principal  for its own account for  investment  purposes
         only  and not  with a view to or for  distributing  or  reselling  such
         Securities or any part thereof,  without  prejudice,  however,  to such
         Purchaser's right, subject to the provisions of this Agreement,  at all
         times  to  sell  or  otherwise  dispose  of  all or any  part  of  such
         Securities  pursuant to an effective  registration  statement under the
         Securities  Act or under an  exemption  from such  registration  and in
         compliance with applicable  federal and state securities laws.  Nothing
         contained herein shall be deemed a  representation  or warranty by such
         Purchaser to hold  Securities for any period of time. Such Purchaser is
         acquiring  the  Securities  hereunder  in the  ordinary  course  of its
         business.  Such Purchaser does not have any agreement or understanding,
         directly  or  indirectly,  with any  Person  to  distribute  any of the
         Securities.


                                      -15-
<PAGE>

                  (c) Purchaser  Status.  At the time such Purchaser was offered
         the Securities,  it was, and at the date hereof it is, and on each date
         on which it exercises  any Warrants or converts any  Debentures it will
         be, an  "accredited  investor"  as  defined  in Rule  501(a)  under the
         Securities  Act.  Such  Purchaser  has not been  formed  solely for the
         purpose of acquiring the Securities. Such Purchaser is not a registered
         broker-dealer under Section 15 of the Exchange Act.

                  (d) Experience of such Purchaser. Such Purchaser, either alone
         or   together   with   its   representatives,   has   such   knowledge,
         sophistication  and experience in business and financial  matters so as
         to be capable  of  evaluating  the merits and risks of the  prospective
         investment in the Securities, and has so evaluated the merits and risks
         of such investment. Such Purchaser is able to bear the economic risk of
         an  investment in the  Securities  and, at the present time, is able to
         afford a complete loss of such investment.

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



                                   ARTICLE IV
                         OTHER AGREEMENTS OF THE PARTIES

         4.1      Transfer Restrictions.

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

                  (b) Each  Purchaser  agrees to the  imprinting,  so long as is
         required  by  this  Section  4.1(b),  of the  following  legend  on any
         certificate evidencing Securities:

         [NEITHER]  THESE  SECURITIES  [NOR  THE  SECURITIES  INTO  WHICH  THESE
         SECURITIES ARE [EXERCISABLE]  [CONVERTIBLE]]  HAVE BEEN REGISTERED WITH
         THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES  COMMISSION OF
         ANY STATE IN RELIANCE  UPON AN EXEMPTION  FROM  REGISTRATION  UNDER THE
         SECURITIES  ACT OF  1933,  AS  AMENDED  (THE  "SECURITIES  ACT"),  AND,
         ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE


                                      -16-
<PAGE>

         REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR  PURSUANT  TO AN
         AVAILABLE  EXEMPTION  FROM,  OR IN A  TRANSACTION  NOT  SUBJECT TO, THE
         REGISTRATION  REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
         APPLICABLE  STATE  SECURITIES  LAWS AS EVIDENCED BY A LEGAL  OPINION OF
         COUNSEL TO THE TRANSFEROR  REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH
         EFFECT,  THE SUBSTANCE OF WHICH SHALL BE  REASONABLY  ACCEPTABLE TO THE
         COMPANY.  THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF
         THESE  SECURITIES MAY BE PLEDGED IN CONNECTION  WITH A BONA FIDE MARGIN
         ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

                  The Company  acknowledges and agrees that a Purchaser may from
         time to time pledge pursuant to a bona fide margin agreement or grant a
         security  interest  in some or all of the  Securities  and, if required
         under  the  terms of such  arrangement,  such  Purchaser  may  transfer
         pledged or secured  Securities to the pledgees or secured  parties.  If
         required by the Company's  transfer  agent in order to effect a pledge,
         the Company shall cause its counsel,  at no cost to the Purchasers,  to
         issue an opinion of counsel to the Company's  transfer agent.  Further,
         no  notice  shall  be  required  of  such  pledge.  At the  appropriate
         Purchaser's   expense,  the  Company  will  execute  and  deliver  such
         reasonable  documentation  as a pledgee or secured  party of Securities
         may reasonably  request in connection  with a pledge or transfer of the
         Securities,  including  the  preparation  and  filing  of any  required
         prospectus  supplement  under Rule  424(b)(3) of the  Securities Act or
         other applicable provision of the Securities Act to appropriately amend
         the list of Selling Stockholders thereunder.

                  (c)  Certificates   evidencing  Underlying  Shares  shall  not
         contain any legend  (including  the legend set forth in Section  4.1(b)
         hereof):  (i) while a registration  statement (including the Underlying
         Shares Registration  Statement) covering the resale of such security is
         effective  under the Securities Act, or (ii) following any sale of such
         Underlying  Shares  pursuant to Rule 144,  or (iii) if such  Underlying
         Shares are eligible for sale under Rule 144(k),  or (iv) if such legend
         is not required  under  applicable  requirements  of the Securities Act
         (including judicial  interpretations  and pronouncements  issued by the
         staff of the  Commission);  provided,  however,  in connection with the
         issuance of the Underlying  Shares,  each Purchaser,  severally and not
         jointly with the other Purchasers, hereby agrees to adhere to and abide
         by all prospectus  delivery  requirements  under the Securities Act and
         rules and  regulations  of the  Commission.  If all or any portion of a
         Debenture or Warrant is converted or  exercised  (as  applicable)  at a
         time when there is an  effective  registration  statement  to cover the
         resale of the Underlying  Shares,  or if such Underlying  Shares may be
         sold  under Rule  144(k) or if such  legend is not  otherwise  required
         under applicable requirements of the Securities Act (including judicial
         interpretations  thereof) then such  Underlying  Shares shall be issued
         free of all legends.  The Company  agrees that  following the Effective
         Date or at such time as such  legend is no longer  required  under this
         Section 4.1(c), it will, no later than three Trading Days following the
         delivery by a Purchaser to the Company or the Company's  transfer agent
         of  a  certificate   representing   Underlying  Shares  issued  with  a
         restrictive legend (such third Trading Day, the "Legend Removal Date",


                                      -17-
<PAGE>

         deliver  or cause  to be  delivered  to such  Purchaser  a  certificate
         representing  such shares that is free from all  restrictive  and other
         legends.  The Company may not make any  notation on its records or give
         instructions  to any  transfer  agent of the Company  that  enlarge the
         restrictions on transfer set forth in this Section.

                  (d) In addition to such Purchaser's other available  remedies,
         the Company shall pay to a Purchaser,  in cash,  as liquidated  damages
         and not as a penalty,  for each $5,000 of  Underlying  Shares (based on
         the Closing Price of the Common Stock on the date such  Securities  are
         submitted to the Company's transfer agent) delivered for removal of the
         restrictive  legend and subject to this Section 4.1(c), $50 per Trading
         Day  (increasing  to $100 per  Trading  Day 3 Trading  Days  after such
         damages  have begun to accrue)  for each  Trading  Day after the Legend
         Removal Date until such certificate is delivered without a legend.

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

         4.3  Furnishing  of   Information.   As  long  as  any  Purchaser  owns
Securities,  the  Company  covenants  to timely  file (or obtain  extensions  in
respect  thereof  and file  within the  applicable  grace  period)  all  reports
required  to be filed by the  Company  after  the date  hereof  pursuant  to the
Exchange  Act. Upon the request of any  Purchaser,  the Company shall deliver to
such  Purchaser  a written  certification  of a duly  authorized  officer  as to
whether it has complied  with the preceding  sentence.  As long as any Purchaser
owns Securities, if the Company is not required to file reports pursuant to such
laws, it will prepare and furnish to the Purchasers and make publicly  available
in  accordance  with  Rule  144(c)  such  information  as is  required  for  the
Purchasers to sell the Securities under Rule 144. The Company further  covenants
that it will take such further action as any holder of Securities may reasonably
request,  all to the extent  required from time to time to enable such Person to
sell such Securities  without  registration  under the Securities Act within the
limitation of the exemptions provided by Rule 144.

         4.4 Integration.  The Company shall not, and shall use its best efforts
to ensure  that no  Affiliate  of the  Company  shall,  sell,  offer for sale or
solicit  offers to buy or  otherwise  negotiate  in respect of any  security (as
defined in Section 2 of the  Securities  Act) that would be integrated  with the
offer or sale of the Securities in a manner that would require the  registration
under the  Securities Act of the sale of the  Securities to the  Purchasers,  or
that would be integrated  with the offer or sale of the  Securities for purposes
of the rules and regulations of any Principal Market.


                                      -18-
<PAGE>

         4.5      Reservation and Listing of Securities.

                  (a) The  Company  shall  maintain  a  reserve  from  its  duly
         authorized  shares  of  Common  Stock  for  issuance  pursuant  to  the
         Transaction  Documents in such amount as may be required to fulfill its
         obligations  in full  under the  Transaction  Documents.  So long as at
         least 20% of the principal amount of the Debentures,  in the aggregate,
         issued  at  either  the  First  Closing  or  Second  Closing  are  then
         outstanding,  the Company will not undertake a forward or reverse stock
         split or reclassification of the Common Stock without the prior written
         consent of each Purchaser holding Debentures at such time.

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

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

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

         4.7 Securities Laws Disclosure;  Publicity.  The Company shall, by 8:30
a.m.  Eastern time on the Trading Day following the First Closing Date,  issue a
press release or file a Current Report on Form 8-K reasonably acceptable to each
Purchaser disclosing all material terms of the transactions contemplated hereby.
The  Company and the  Purchasers  shall  consult  with each other in issuing any
press   releases  with  respect  to  the   transactions   contemplated   hereby.
Notwithstanding  the foregoing,  other than in any registration  statement filed
pursuant to the Registration  Rights Agreement and filings related thereto,  the
Company shall not publicly  disclose the name of any  Purchaser,  or include the
name of any Purchaser in any filing with the Commission or any regulatory agency
or Principal Market, without the prior written consent of such Purchaser, except
to  the  extent  such  disclosure  is  required  by  law  or  Principal   Market
regulations,  in which case the Company shall provide each  Purchaser with prior
notice of such disclosure.


                                      -19-
<PAGE>

         4.8  Non-Public  Information.  The  Company  covenants  and agrees that
neither it nor any other Person  acting on its behalf will provide any Purchaser
or its  agents  or  counsel  with  any  information  that the  Company  believes
constitutes material non-public information, unless prior thereto such Purchaser
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that each Purchaser shall
be  relying  on the  foregoing  representations  in  effecting  transactions  in
securities of the Company.

         4.9 Use of Proceeds.  The Company  shall use the net proceeds  from the
sale of the Securities  hereunder for working  capital  purposes and not for the
satisfaction  of any portion of the Company's  debt (other than payment of trade
payables, capital lease obligations, and accrued expenses in the ordinary course
of the Company's business and prior practices),  to redeem any Company equity or
equity-equivalent securities or to settle any outstanding litigation.

         4.10  Reimbursement.  If any Purchaser becomes involved in any capacity
in any  Proceeding by or against any Person who is a stockholder of the Company,
solely as a result of such Purchaser's  acquisition of the Securities under this
Agreement and without causation by any other activity, obligation,  condition or
liability  on the  part  of,  or  pertaining  to such  Purchaser  and not to the
purchase of Securities  pursuant to this  Agreement,  the Company will reimburse
such Purchaser,  to the extent such reimbursement is not provided for in Section
4.11,  for its reasonable  legal and other  expenses  (including the cost of any
investigation,  preparation  and travel in  connection  therewith)  incurred  in
connection  therewith,   as  such  expenses  are  incurred.   The  reimbursement
obligations (and limitations  thereon) of the Company under this paragraph shall
be in addition to any  liability  which the Company may  otherwise  have,  shall
extend upon the same terms and  conditions to any  Affiliates of the  Purchasers
who are  actually  named  in  such  action,  proceeding  or  investigation,  and
partners,  directors, agents, employees and controlling persons (if any), as the
case may be, of the Purchasers and any such Affiliate, and shall be binding upon
and  inure  to the  benefit  of any  successors,  assigns,  heirs  and  personal
representatives  of the Company,  the  Purchasers and any such Affiliate and any
such Person.  The Company also agrees that neither the  Purchasers  nor any such
Affiliates,  partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company  solely as a result of acquiring  the  Securities  under
this  Agreement  except to the  extent any  covenant  or  warranty  owing to the
Company is breached.

         4.11  Indemnification of Purchasers.  Subject to the provisions of this
Section 4.11, each party (the "Indemnifying  Party") will indemnify and hold the
other parties and their directors, officers,  shareholders,  partners, employees
and agents  (each,  an  "Indemnified  Party")  harmless from any and all losses,
liabilities,  obligations,  claims, contingencies,  damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation  that any such Indemnified  Party may
suffer  or  incur  as a  result  of or  relating  to  any  breach  of any of the
representations,  warranties,  covenants or agreements made by the  Indemnifying
Party in this  Agreement or in the other  Transaction  Documents.  If any action
shall be brought against any Indemnified Party in respect of which indemnity may
be sought  pursuant to this  Agreement,  such  Indemnified  Party shall promptly
notify the Indemnifying Party in writing,  and the Indemnifying Party shall have
the right to assume the defense  thereof with counsel of its own  choosing.  Any
Indemnified Party shall have the right to employ separate counsel in any such


                                      -20-
<PAGE>

action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such  Indemnified  Party except to the extent
that  (i)  the  employment  thereof  has  been  specifically  authorized  by the
Indemnifying  Party in writing,  (ii) the Indemnifying  Party has failed after a
reasonable  period of time to assume such defense and to employ counsel or (iii)
in such action there is, in the reasonable  opinion of such separate counsel,  a
material conflict on any material issue between the position of the Indemnifying
Party and the position of such Indemnified  Party.  The Indemnifying  Party will
not be  liable  to any  Indemnified  Party  under  this  Agreement  (i)  for any
settlement by an Indemnified  Party effected  without the  Indemnifying  Party's
prior written consent,  which shall not be unreasonably  withheld or delayed; or
(ii) to the  extent,  but  only to the  extent  that a loss,  claim,  damage  or
liability  is  attributable  to any  Indemnified  Party's  breach  of any of the
representations,  warranties,  covenants or agreements made by the Purchasers in
this  Agreement  or in the other  Transaction  Documents.  In no event shall the
liability of any Purchaser hereunder be greater in amount than the dollar amount
of the net proceeds received by such Purchaser upon the sale of the Securities.

         4.12 Shareholders  Rights Plan. In the event that a shareholders rights
plan is adopted by the Company, no claim will be made or enforced by the Company
or any other Person that any Purchaser is an  "Acquiring  Person" under the plan
or in any way could be deemed to trigger the  provisions  of such plan by virtue
of receiving Securities under the Transaction Documents.

         4.13 Future  Financings.  From the date hereof  until 90 days after the
Effective  Date,  other than as  contemplated  by this  Agreement,  neither  the
Company nor any  Subsidiary  shall  issue or sell any Capital  Shares or Capital
Shares Equivalents.  Notwithstanding anything herein to the contrary, the 90 day
period  set forth in this  Section  4.13  shall be  extended  for the  number of
Trading  Days during  such  period in which (y)  trading in the Common  Stock is
suspended by any Principal  Market,  or (z) following  the Effective  Date,  the
Registration  Statement  is not  effective  or the  prospectus  included  in the
Registration  Statement may not be used by the  Purchasers for the resale of the
Underlying Shares. Notwithstanding anything to the contrary herein, this Section
4.13 shall not apply to the  following (a) the granting or issuance of shares of
Common  Stock or options to  employees,  officers  and  directors of the Company
pursuant to any stock option plan or employee  incentive  plan or agreement duly
adopted or approved by a majority  of the  non-employee  members of the Board of
Directors  of the  Company  or a  majority  of the  members  of a  committee  of
non-employee  directors  established  for such  purpose,  (b) the  exercise of a
Debenture or any other  security  issued by the Company in  connection  with the
offer and sale of this Company's  securities pursuant to this Agreement,  or (c)
the  exercise of or  conversion  of any Capital  Shares  Equivalents  issued and
outstanding  on the date hereof,  provided  that such  securities  have not been
amended since the date hereof,  or (d) the issuance of Capital Shares or Capital
Shares  Equivalents in connection with  acquisitions,  strategic  investments or
strategic partnering arrangements,  the primary purpose of which is not to raise
capital.

         4.14 Participation in Future Financing.  From the date hereof until 360
days after the Effective  Date,  the Company shall not effect a financing of its
Capital Shares or Capital Shares  Equivalents (a "Subsequent  Financing") unless
(i) the Company  delivers to each  Purchaser a written notice at least 5 Trading
Days prior to the closing of such Subsequent Financing (the "Subsequent


                                      -21-
<PAGE>

Financing Notice") of its intention to effect such Subsequent  Financing,  which
Subsequent  Financing  Notice shall  describe in reasonable  detail the proposed
terms of such Subsequent Financing, the amount of proceeds intended to be raised
thereunder,  the Person with whom such  Subsequent  Financing  is proposed to be
effected,  and  attached  to which  shall be a term  sheet or  similar  document
relating  thereto and (ii) such Purchaser shall not have notified the Company by
6:30 p.m.  (New York City time) on the fifth (5th) Trading Day after its receipt
of the Subsequent  Financing  Notice of its  willingness to provide (or to cause
its  designee  to  provide),   subject  to  completion  of  mutually  acceptable
documentation,  all or part of such  financing  to the Company on the same terms
set forth in the Subsequent  Financing  Notice.  If one or more Purchasers shall
fail to so  notify  the  Company  of their  willingness  to  participate  in the
Subsequent  Financing,  the  Company  may effect the  remaining  portion of such
Subsequent Financing on the terms and to the Persons set forth in the Subsequent
Financing  Notice;  provided that the Company must provide the Purchasers with a
second Subsequent Financing Notice, and the Purchasers will again have the right
of first  refusal  set  forth  above in this  Section  4.14,  if the  Subsequent
Financing subject to the initial Subsequent  Financing Notice is not consummated
for any reason on the terms set forth in such Subsequent Financing Notice within
60 Trading Days after the date of the initial  Subsequent  Financing Notice with
the Person  identified  in the  Subsequent  Financing  Notice.  In the event the
Company  receives  responses to  Subsequent  Financing  Notices from  Purchasers
seeking  to  purchase  more  than the  financing  sought by the  Company  in the
Subsequent  Financing such Purchasers shall have the right to purchase their Pro
Rata  Portion  (as  defined  below)  of the  Capital  Shares or  Capital  Shares
Equivalents to be issued in such Subsequent Financing. "Pro Rata Portion" is the
ratio of (x) the principal amount of Debentures purchased by a Purchaser and (y)
the sum of the aggregate principal amount of Debentures issued hereunder. If any
Purchaser no longer holds any  Debentures,  then the Pro Rata Portions  shall be
re-allocated  among the remaining  Purchasers.  Notwithstanding  anything to the
contrary  herein,  this  Section 4.14 shall not apply to the  following  (a) the
granting of options to employees, officers and directors of the Company pursuant
to any stock option plan duly adopted by a majority of the non-employee  members
of the Board of  Directors  of the  Company  or a majority  of the  members of a
committee of non-employee  directors  established  for such purpose,  or (b) the
exercise  of the  Debenture  or any  other  security  issued by the  Company  in
connection with the offer and sale of this Company's securities pursuant to this
Agreement,  or  (c)  the  exercise  of  or  conversion  of  any  Capital  Shares
Equivalents  issued and  outstanding on the Original  Issue Date,  provided such
securities  have not been amended since the date hereof,  or (d) the issuance of
Capital Shares or Capital Shares  Equivalents in connection  with  acquisitions,
strategic investments or strategic partnering arrangements,  the primary purpose
of which is not to raise  capital or  subsequent  exercise  of any such  Capital
Shares Equivalents.


                                    ARTICLE V
                                  MISCELLANEOUS

         5.1 Termination.  This Agreement may be terminated by any Purchaser, by
written notice to the other parties,  if the Closing has not been consummated on
or before  August 22, 2003;  provided that no such  termination  will affect the
right of any party to sue for any breach by the other party (or parties).


                                      -22-
<PAGE>

         5.2 Fees and Expenses.  At the First Closing, the Company has agreed to
reimburse Palisades Master Fund, L.P.  ("Palisades") up to $15,000 for its legal
fees and expenses. Except as expressly set forth in the Transaction Documents to
the  contrary,  each  party  shall pay the fees and  expenses  of its  advisers,
counsel,  accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation,  preparation, execution, delivery and
performance  of this  Agreement.  The Company shall pay all transfer agent fees,
stamp taxes and other taxes and duties levied in connection with the issuance of
any Securities.

         5.3 Entire  Agreement.  The  Transaction  Documents,  together with the
exhibits and schedules thereto,  contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
         5.4 Notices.  Any and all notices or other communications or deliveries
required or permitted to be provided  hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of  transmission,  if
such notice or  communication is delivered via facsimile at the facsimile number
specified  on the  signature  page prior to 5:30 p.m.  (New York City time) on a
Trading  Day and an  electronic  confirmation  of  delivery  is  received by the
sender, (b) the next Trading Day after the date of transmission,  if such notice
or communication is delivered via facsimile at the facsimile number specified in
this  Section on a day that is not a Trading  Day or later  than 5:30 p.m.  (New
York City time) on any Trading Day, (c) three Trading Days following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or (d)
upon  actual  receipt by the party to whom such  notice is required to be given.
The  addresses  for such notices and  communications  are those set forth on the
signature  pages  hereof,  or such other address as may be designated in writing
hereafter, in the same manner, by such Person.

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

         5.6 Construction.  The headings herein are for convenience only, do not
constitute a part of this  Agreement  and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent,  and no
rules of strict construction will be applied against any party.

         5.7  Successors and Assigns.  This Agreement  shall be binding upon and
inure to the benefit of the parties and their successors and permitted  assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign


                                      -23-
<PAGE>

its rights under this  Agreement and the  Registration  Rights  Agreement to any
Person to whom such Purchaser assigns or transfers any Securities.

         5.8 No  Third-Party  Beneficiaries.  This Agreement is intended for the
benefit of the parties  hereto and their  respective  successors  and  permitted
assigns and is not for the benefit of, nor may any provision  hereof be enforced
by, any other Person, except as otherwise set forth in Sections 4.11 and 4.12.

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

         5.10  Survival.   The  representations,   warranties,   agreements  and
covenants contained herein shall survive each Closing and the delivery, exercise
and/or conversion of the Securities, as applicable.

         5.11  Execution.  This  Agreement  may  be  executed  in  two  or  more
counterparts,  all of which when taken  together shall be considered one and the
same agreement and shall become effective when  counterparts have been signed by
each party and  delivered  to the other  party,  it being  understood  that both
parties need not sign the same  counterpart.  In the event that any signature is
delivered by facsimile  transmission,  such  signature  shall create a valid and
binding  obligation of the party executing (or on whose behalf such signature is
executed)  with the same force and effect as if such  facsimile  signature  page
were an original thereof.

         5.12  Severability.  If any  provision of this  Agreement is held to be
invalid or unenforceable in any respect,  the validity and enforceability of the
remaining  terms  and  provisions  of  this  Agreement  shall  not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid


                                      -24-
<PAGE>

and enforceable provision that is a reasonable substitute therefor,  and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

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

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

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

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

         5.17 Usury.  To the extent it may  lawfully  do so, the Company  hereby
agrees not to insist upon or plead or in any manner  whatsoever  claim, and will
resist any and all efforts to be compelled to take the benefit or advantage  of,
usury  laws  wherever  enacted,  now or at  any  time  hereafter  in  force,  in
connection  with any  claim,  action or  proceeding  that may be  brought by any



                                      -25-
<PAGE>

Purchaser  in  order to  enforce  any  right or  remedy  under  any  Transaction
Document.  Notwithstanding  any  provision  to  the  contrary  contained  in any
Transaction  Document,  it is  expressly  agreed  and  provided  that the  total
liability of the Company  under the  Transaction  Documents  for payments in the
nature of interest  shall not exceed the maximum  lawful rate  authorized  under
applicable law (the "Maximum Rate"), and, without limiting the foregoing,  in no
event  shall any rate of  interest or default  interest,  or both of them,  when
aggregated with any other sums in the nature of interest that the Company may be
obligated to pay under the Transaction Documents exceed such Maximum Rate. It is
agreed  that  if the  maximum  contract  rate  of  interest  allowed  by law and
applicable to the Transaction  Documents is increased or decreased by statute or
any official  governmental action subsequent to the date hereof, the new maximum
contract rate of interest  allowed by law will be the Maximum Rate applicable to
the  Transaction  Documents  from  the  effective  date  forward,   unless  such
application  is  precluded  by  applicable  law.  If  under  any   circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to any
Purchaser with respect to indebtedness  evidenced by the Transaction  Documents,
such excess shall be applied by such Purchaser to the unpaid  principal  balance
of any such  indebtedness or be refunded to the Company,  the manner of handling
such excess to be at such Purchaser's election.

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

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

                             ***********************



                                      -26-
<PAGE>



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


                                            QT 5, INC.

                                            By:___________________________
                                            Name:
                                            Title:

                                            Address for Notice:
                                            ------------------
                                            5655 Lindero Canyon Road
                                            Suite 120
                                            West Lake Village, CA 91362
                                            Attn:
                                            Tel: (818) 338-1510
                                            Fax:



With a copy to:


                                            Attn:
                                            Tel:
                                            Fax:

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                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]





                                      -27-
<PAGE>



                           PURCHASER'S SIGNATURE PAGE

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

PALISADES MASTER FUND L.P.                           Address for Notice:
                                                     ------------------
By: PEF ADVISORS, LLC, its authorized agent          c/o PEF Advisors, LLC
                                                     200 Mansell Court East
By: ____________________________________             Ste. 550
         Name:                                       Roswell Ga  30076
         Title:                                      Attn: Paul T. Mannion, Jr.

First Closing Subscription Amount:  $
Second Closing Subscription Amount: $

With a copy to:
--------------
(which shall not constitute notice)                  Feldman Weinstein LLP
                                                     420 Lexington Avenue
                                                     New York, New York 10170
                                                     Attn:  Robert F. Charron
                                                     Tel:  (212) 869-7000
                                                     Fax:  (212) 401-4741


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                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]





                                      -28-
<PAGE>



                           PURCHASER'S SIGNATURE PAGE

CRESCENT INTERNATIONAL LTD.             Address for Notice:
                                        ------------------
                                        c/o GreenLight (Switzerland) SA
                                        84, Avenue Louis-Casai
                                        CH 1216 Cointrin, Geneva
By: ____________________________        Switzerland
      Name:                             Attention: Mel Craw / Maxi Brezzi
      Title:                            Tel.: + 41 22 791 7170 / +41 22 791 7256
                                        Fax : +41 22 929 5394

First Closing Subscription Amount: $
Second Closing Subscription Amount: $

                           [SIGNATURE PAGE CONTINUED]


                                      -29-
<PAGE>



                     PURCHASER'S SIGNATURE PAGE (CONT. . . )

ALPHA CAPITAL AG                            Address for Notice:
                                            ------------------
                                            Lettstrasse 32
                                            Furstentum 9490
By:  __________________________             Vaduz, Liechtenstein
        Name:                               Fax: 011-423 232 3196
        Title:                              Attn: Director

First Closing Subscription Amount:  $
Second Closing Subscription Amount: $

                           [SIGNATURE PAGE CONTINUED]




                                      -30-
<PAGE>



                          [PURCHASER'S SIGNATURE PAGE]

BRISTOL INVESTMENT FUND, LTD.               Address for Notice:
                                            ------------------
                                            c/o Bristol DLP, LLC
                                            6363 Sunset Boulevard, 5th Floor
                                            Hollywood, California 90028
By:_________________________                Attn:  Amy Wang, Esq.
       Name:                                Fax:  (323) 468-8307
       Title:

First Closing Subscription Amount: $
Second Closing Subscription Amount:  $

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                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]





                                      -31-
<PAGE>



                     PURCHASER'S SIGNATURE PAGE (CONT. . . )


ELLIS INTERNATIONAL LTD                  Address for Notice:
                                         ------------------
                                         53rd Street, Urbanization Obarrio
By:  __________________________          Attn: Swiss Tower, 16th Floor, Panama
       Name:                             Republic of Panama
       Title:                            Tel:  917-748-3501

First Closing Subscription Amount: $
Second Closing Subscription Amount:  $

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                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]





                                      -32-
<PAGE>



                     PURCHASER'S SIGNATURE PAGE (CONT. . . )

ZENNY TRADING LIMITED


By: ____________________________
       Name:
       Title:

Address for Notice:
-------------------
Suites 7B & 8B
50 Town Range
Gibralter
Tel:
Fax:
Attn:  Annette Brittendon
abrittenden@mutrust.com

First Closing Subscription Amount: $50,000
Second Closing Subscription Amount:  $50,000



                                      -33-