Exhibit 10.2

                      STANDBY EQUITY DISTRIBUTION AGREEMENT

     THIS  AGREEMENT  dated as of the 10th day of August 2005 (the  "Agreement")
between  CORNELL  CAPITAL  PARTNERS,  LP, a Delaware  limited  partnership  (the
"INVESTOR"),  and CITY NETWORK,  INC, a corporation organized and existing under
the laws of the State of Nevada (the "COMPANY").

     WHEREAS,  the  parties  desire  that,  upon the  terms and  subject  to the
conditions  contained herein,  the Company shall issue and sell to the Investor,
from time to time as provided  herein,  and the Investor shall purchase from the
Company up to Fifteen  Million  Dollars  ($15,000,000)  of the Company's  common
stock,  par value  $.001 per  share  (the  "COMMON  STOCK")  over the  course of
twenty-four (24) months after an effective registration statement of such shares
of Common Stock; and

     WHEREAS,  such  investments will be made in reliance upon the provisions of
Regulation D ("Regulation D") of the Securities Act of 1933, as amended, and the
regulations  promulgated  thereunder (the  "SECURITIES  ACT"),  and or upon such
other exemption from the registration  requirements of the Securities Act as may
be available with respect to any or all of the investments to be made hereunder.

     WHEREAS,  the Company has engaged  Monitor  Capital,  Inc. (the  "Placement
Agent"),  to act as the Company's  exclusive  placement agent in connection with
the sale of the Company's Common Stock to the Investor hereunder pursuant to the
Placement Agent  Agreement  dated the date hereof by and among the Company,  the
Placement Agent and the Investor (the "PLACEMENT AGENT AGREEMENT").

     NOW, THEREFORE, the parties hereto agree as follows:

                                   ARTICLE I.
                               CERTAIN DEFINITIONS

     Section  1.1.  "Advance"  shall mean the portion of the  Commitment  Amount
requested by the Company in the Advance Notice.

     Section  1.2.  "Advance  Date"  shall  mean the date the  Escrow  Agent (as
defined below) is in receipt of the funds from the Investor and the Escrow Agent
(as defined below), is in possession of free trading shares from the Company and
therefore  an Advance by the  Investor to the Company can be made and the Escrow
Agent (as defined  below) can release the free trading  shares to the  Investor.
The Advance Date shall be the first (1st)  Trading Day after  expiration  of the
applicable Pricing Period for each Advance.

     Section 1.3.  "Advance  Notice" shall mean a written notice to the Investor
setting forth the Advance amount that the Company requests from the Investor and
the Advance Date.

     Section  1.4.  "Advance  Notice  Date"  shall  mean each  date the  Company
delivers to the  Investor an Advance  Notice  requiring  the Investor to advance
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funds to the Company,  subject to the terms of this Agreement. No Advance Notice
Date shall be less than five (5)  Trading  Days after the prior  Advance  Notice
Date.

     Section 1.5. "Bid Price" shall mean, on any date, the closing bid price (as
reported by Bloomberg  L.P.) of the Common Stock on the  Principal  Market or if
the Common Stock is not traded on a Principal  Market,  the highest reported bid
price  for the  Common  Stock,  as  furnished  by the  National  Association  of
Securities Dealers, Inc.

     Section  1.6.  "Closing"  shall mean one of the  closings of a purchase and
sale of Common Stock pursuant to Section 2.3.

     Section 1.7.  "Commitment  Amount" shall mean the aggregate amount of up to
Fifteen Million Dollars  ($15,000,000)  which the Investor has agreed to provide
to the Company in order to purchase the Company's  Common Stock  pursuant to the
terms and  conditions  of this  Agreement,  PROVIDED  that the Company shall not
request an Advance if the  issuance of the full number of shares of Common Stock
issuable in connection with such Advance would result in a violation of the AMEX
Listing  Standards,  Policies  and  Requirements  Section  713 (or  any  similar
applicable  section)  unless the necessary  shareholder  approval or consent has
been received prior to such request.

     Section 1.8.  "Commitment  Period" shall mean the period  commencing on the
earlier to occur of (i) the  Effective  Date,  or (ii) such  earlier date as the
Company and the  Investor  may  mutually  agree in writing,  and expiring on the
earliest to occur of (x) the date on which the Investor  shall have made payment
of  Advances  pursuant  to this  Agreement  in the  aggregate  amount of Fifteen
Million  Dollars  ($15,000,000),  (y) the  date  this  Agreement  is  terminated
pursuant to Section 2.4, or (z) the date occurring twenty-four (24) months after
the Effective Date.

     Section 1.9.  "Common  Stock" shall mean the Company's  common  stock,  par
value $.001 per share.

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

     Section 1.11.  "Damages"  shall mean any loss,  claim,  damage,  liability,
costs and expenses (including,  without limitation,  reasonable  attorney's fees
and disbursements and costs and expenses of expert witnesses and investigation).

     Section 1.12.  "Effective  Date" shall mean the date on which the SEC first
declares  effective  a  Registration  Statement  registering  the  resale of the
Registrable Securities as set forth in Section 7.2(a).

     Section 1.13.  "Escrow Agreement" shall mean the escrow agreement among the
Company, the Investor, and David Gonzalez,  Esq. (the "ESCROW AGENT"), dated the
date hereof.

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

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     Section  1.15.   "Material   Adverse  Effect"  shall  mean  any  condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company to enter into and perform any of its obligations
under this  Agreement  or the  Registration  Rights  Agreement  in any  material
respect.

     Section 1.16. "Market Price" shall mean the lowest VWAP of the Common Stock
during the Pricing Period.

     Section 1.17.  "Maximum  Advance  Amount"  shall be Three Hundred  Thousand
Dollars ($300,000) per Advance Notice.

     Section  1.18.  "NASD" shall mean the National  Association  of  Securities
Dealers, Inc.

     Section  1.19.  "Person"  shall  mean  an  individual,  a  corporation,   a
partnership, an association, a trust or other entity or organization,  including
a government or political subdivision or an agency or instrumentality thereof.

     Section  1.20.  "Placement  Agent"  shall  mean  Monitor  Capital  Inc.,  a
registered broker-dealer.

     Section 1.21.  "Pricing Period" shall mean the five (5) consecutive Trading
Days after the Advance Notice Date.

     Section 1.22. "Principal Market" shall mean the Nasdaq National Market, the
Nasdaq SmallCap Market,  the American Stock Exchange,  the OTC Bulletin Board or
the New York Stock  Exchange,  whichever  is at the time the  principal  trading
exchange or market for the Common Stock.

     Section 1.23.  "Purchase  Price" shall be set at ninety eight percent (98%)
of the Market Price during the Pricing Period.

     Section  1.24.  "Registrable  Securities"  shall  mean the shares of Common
Stock to be issued hereunder (i) in respect of which the Registration  Statement
has not been declared  effective by the SEC, (ii) which have not been sold under
circumstances  meeting  all of the  applicable  conditions  of Rule  144 (or any
similar  provision then in force) under the Securities Act ("RULE 144") or (iii)
which have not been otherwise  transferred to a holder who may trade such shares
without  restriction  under the Securities  Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a
restrictive legend.

     Section 1.25.  "Registration  Rights Agreement" shall mean the Registration
Rights Agreement dated the date hereof, regarding the filing of the Registration
Statement for the resale of the Registrable Securities, entered into between the
Company and the Investor.

     Section 1.26.  "Registration Statement" shall mean a registration statement
on Form  S-1 or  SB-2  (if use of such  form is then  available  to the  Company
pursuant to the rules of the SEC and, if not, on such other form  promulgated by
the SEC for which the Company then  qualifies  and which counsel for the Company
shall deem appropriate,  and which form shall be available for the resale of the
Registrable  Securities  to be  registered  thereunder  in  accordance  with the

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provisions  of this  Agreement and the  Registration  Rights  Agreement,  and in
accordance with the intended method of distribution of such securities), for the
registration of the resale by the Investor of the Registrable  Securities  under
the Securities Act.

     Section  1.27.  "Regulation  D" shall  have the  meaning  set  forth in the
recitals of this Agreement.

     Section 1.28. "SEC" shall mean the Securities and Exchange Commission.

     Section  1.29.  "Securities  Act" shall have the  meaning  set forth in the
recitals of this Agreement.

     Section 1.30.  "SEC  Documents"  shall mean Annual  Reports on Form 10-KSB,
Quarterly  Reports  on  Form  10-QSB,  Current  Reports  on Form  8-K and  Proxy
Statements  of the  Company as  supplemented  to the date  hereof,  filed by the
Company for a period of at least twelve (12) months  immediately  preceding  the
date  hereof or the  Advance  Date,  as the case may be,  until such time as the
Company  no  longer  has  an  obligation  to  maintain  the  effectiveness  of a
Registration Statement as set forth in the Registration Rights Agreement.

     Section  1.31.  "Trading  Day" shall mean any day during which the New York
Stock Exchange shall be open for business.

     Section 1.32.  "VWAP" shall mean the volume  weighted  average price of the
Company's Common Stock as quoted by Bloomberg, LP.

                                   ARTICLE II.
                                    ADVANCES

     Section 2.1. Investments.

     (a) Advances.  Upon the terms and conditions  set forth herein  (including,
without limitation, the provisions of Article VII hereof), on any Advance Notice
Date the Company may  request an Advance by the  Investor by the  delivery of an
Advance  Notice.  The number of shares of Common Stock that the  Investor  shall
receive for each  Advance  shall be  determined  by  dividing  the amount of the
Advance by the Purchase Price. No fractional shares shall be issued.  Fractional
shares shall be rounded to the next higher whole number of shares. The aggregate
maximum  amount of all  Advances  that the  Investor  shall be obligated to make
under this Agreement shall not exceed the Commitment Amount.

     Section 2.2. Mechanics.

     (a) Advance Notice. At any time during the Commitment  Period,  the Company
may deliver an Advance  Notice to the Investor,  subject to the  conditions  set
forth in  Section  7.2;  provided,  however,  the  amount  for each  Advance  as
designated by the Company in the applicable  Advance  Notice,  shall not be more
than the Maximum Advance Amount.  The aggregate amount of the Advances  pursuant
to  this  Agreement  shall  not  exceed  the  Commitment   Amount.  The  Company
acknowledges  that the  Investor may sell shares of the  Company's  Common Stock

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corresponding  with a particular Advance Notice on the day the Advance Notice is
received by the  Investor.  There  shall be a minimum of five (5)  Trading  Days
between each Advance Notice Date.

     (b) Date of Delivery of Advance  Notice.  An Advance Notice shall be deemed
delivered on (i) the Trading Day it is received by facsimile or otherwise by the
Investor if such notice is received  prior to 12:00 noon Eastern  Time,  or (ii)
the  immediately  succeeding  Trading  Day if it is  received  by  facsimile  or
otherwise after 12:00 noon Eastern Time on a Trading Day or at any time on a day
which is not a Trading Day. No Advance  Notice may be deemed  delivered on a day
that is not a Trading Day.

     Section 2.3. Closings. On each Advance Date, which shall be the first (1st)
Trading Day after expiration of the applicable  Pricing Period for each Advance,
(i) the Company shall deliver to the Escrow Agent shares of the Company's Common
Stock,  representing  the amount of the  Advance  by the  Investor  pursuant  to
Section  2.1  herein,  registered  in the name of the  Investor  which  shall be
delivered to the Investor,  or otherwise in accordance with the Escrow Agreement
and (ii) the  Investor  shall  deliver to Escrow Agent the amount of the Advance
specified in the Advance Notice by wire transfer of immediately  available funds
which shall be  delivered to the Company,  or otherwise in  accordance  with the
Escrow  Agreement.  In addition,  on or prior to the Advance  Date,  each of the
Company and the  Investor  shall  deliver to the other  through  the  Investor's
counsel,  all documents,  instruments  and writings  required to be delivered by
either of them  pursuant to this  Agreement in order to implement and effect the
transactions  contemplated herein.  Payment of funds to the Company and delivery
of the Company's Common Stock to the Investor shall occur in accordance with the
conditions  set  forth  above  and  those  contained  in the  Escrow  Agreement;
PROVIDED,  HOWEVER,  that to the  extent  the  Company  has not paid  the  fees,
expenses,  and  disbursements of the Investor,  the Investor's  counsel,  or the
Company's  counsel in  accordance  with Section  12.4,  the amount of such fees,
expenses,  and  disbursements may be deducted by the Investor (and shall be paid
to the  relevant  party) from the amount of the Advance with no reduction in the
amount of shares of the  Company's  Common Stock to be delivered on such Advance
Date.

     Section 2.4.  Termination of Investment.  The obligation of the Investor to
make an  Advance to the  Company  pursuant  to this  Agreement  shall  terminate
permanently  (including  with  respect  to an  Advance  Date  that  has  not yet
occurred)  in the event that (i) there shall occur any stop order or  suspension
of the  effectiveness  of the  Registration  Statement for an aggregate of fifty
(50)  Trading  Days,  other  than due to the acts of the  Investor,  during  the
Commitment  Period,  and (ii) the Company  shall at any time fail  materially to
comply with the  requirements of Article VI and such failure is not cured within
thirty (30) days after receipt of written  notice from the  Investor,  PROVIDED,
HOWEVER,  that  this  termination  provision  shall  not  apply  to  any  period
commencing upon the filing of a  post-effective  amendment to such  Registration
Statement  and ending upon the date on which such post  effective  amendment  is
declared effective by the SEC.

     Section 2.5. Agreement to Advance Funds. The Investor agrees to advance the
amount  specified in the Advance  Notice to the Company after the  completion of
each of the  following  conditions  and the other  conditions  set forth in this
Agreement:

     (a) the  execution and delivery by the Company,  and the Investor,  of this
Agreement and the Exhibits hereto;

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     (b) The  Escrow  Agent  shall  have  received  the  shares of Common  Stock
applicable to the Advance in  accordance  with Section 2.3. Such shares shall be
free of restrictive legends.

     (c) the Company's  Registration Statement with respect to the resale of the
Registrable  Securities in accordance with the terms of the Registration  Rights
Agreement shall have been declared effective by the SEC;

     (d) the Company shall have obtained all material permits and qualifications
required  by any  applicable  state for the  offer  and sale of the  Registrable
Securities,  or shall have the availability of exemptions therefrom and the sale
and issuance of the  Registrable  Securities  shall be legally  permitted by all
laws and regulations to which the Company is subject;

     (e) the Company shall have filed with the Commission in a timely manner all
reports, notices and other documents required of a "reporting company" under the
Exchange Act and applicable SEC regulations;

     (f) the fees as set forth in Section 12.4 below shall have been paid or can
be withheld as provided in Section 2.3; and

     (g) the conditions set forth in Section 7.2 shall have been satisfied.

     Section 2.6. Lock Up Period.  On the date hereof,  the Company shall obtain
from each executive officer and director of the Company a lock-up agreement,  as
defined below,  in the form annexed hereto as Schedule 2.6 agreeing to only sell
in compliance with the volume limitation of Rule 144.

     Section  2.7.  Hardship.  In the event  the  Investor  sells  shares of the
Company's  Common Stock after receipt of an Advance Notice and the Company fails
to perform its  obligations  as mandated in Section  2.3, and  specifically  the
Company  fails to deliver to the Escrow  Agent on the Advance Date the shares of
Common Stock corresponding to the applicable Advance,  the Company  acknowledges
that the Investor shall suffer financial  hardship and therefore shall be liable
for any and all losses,  commissions,  fees, or financial hardship caused to the
Investor.

                                  ARTICLE III.
                   REPRESENTATIONS AND WARRANTIES OF INVESTOR

     Investor  hereby  represents  and warrants to, and agrees with, the Company
that the  following  are true and as of the date  hereof and as of each  Advance
Date:

     Section  3.1.   Organization  and  Authorization.   The  Investor  is  duly
incorporated  or  organized  and  validly  existing in the  jurisdiction  of its
incorporation  or  organization  and has all  requisite  power and  authority to
purchase and hold the securities issuable hereunder.  The decision to invest and
the execution and delivery of this Agreement by such Investor,  the  performance
by such  Investor of its  obligations  hereunder  and the  consummation  by such
Investor of the transactions  contemplated  hereby have been duly authorized and
requires no other  proceedings on the part of the Investor.  The undersigned has

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the right,  power and  authority to execute and deliver this  Agreement  and all
other  instruments  (including,  without  limitations,  the Registration  Rights
Agreement), on behalf of the Investor. This Agreement has been duly executed and
delivered by the Investor and,  assuming the  execution and delivery  hereof and
acceptance thereof by the Company,  will constitute the legal, valid and binding
obligations of the Investor, enforceable against the Investor in accordance with
its terms.

     Section 3.2.  Evaluation  of Risks.  The Investor  has such  knowledge  and
experience in financial tax and business  matters as to be capable of evaluating
the  merits  and risks of,  and  bearing  the  economic  risks  entailed  by, an
investment  in the Company and of protecting  its  interests in connection  with
this  transaction.  It recognizes that its investment in the Company  involves a
high degree of risk.

     Section 3.3. No Legal Advice From the  Company.  The Investor  acknowledges
that it had the  opportunity  to  review  this  Agreement  and the  transactions
contemplated  by this Agreement with his or its own legal counsel and investment
and tax  advisors.  The Investor is relying  solely on such counsel and advisors
and  not on any  statements  or  representations  of the  Company  or any of its
representatives  or agents for legal,  tax or investment  advice with respect to
this  investment,  the  transactions  contemplated  by  this  Agreement  or  the
securities laws of any jurisdiction.

     Section 3.4. Investment Purpose.  The securities are being purchased by the
Investor for its own account, and for investment  purposes.  The Investor agrees
not to assign or in any way transfer the Investor's  rights to the securities or
any interest  therein and  acknowledges  that the Company will not recognize any
purported  assignment or transfer except in accordance  with applicable  Federal
and state securities laws. No other person has or will have a direct or indirect
beneficial  interest  in the  securities.  The  Investor  agrees  not  to  sell,
hypothecate  or  otherwise   transfer  the  Investor's   securities  unless  the
securities are registered  under Federal and applicable state securities laws or
unless, in the opinion of counsel satisfactory to the Company, an exemption from
such laws is available.

     Section 3.5. Accredited Investor.  The Investor is an "Accredited Investor"
as that term is defined in Rule 501(a)(3) of Regulation D of the Securities Act.

     Section 3.6. Information.  The Investor and its advisors (and its counsel),
if any,  have  been  furnished  with all  materials  relating  to the  business,
finances and  operations of the Company and  information  it deemed  material to
making an informed investment decision.  The Investor and its advisors,  if any,
have been  afforded  the  opportunity  to ask  questions  of the Company and its
management.  Neither such  inquiries nor any other due diligence  investigations
conducted by such Investor or its advisors, if any, or its representatives shall
modify,  amend  or  affect  the  Investor's  right  to  rely  on  the  Company's
representations  and  warranties  contained  in  this  Agreement.  The  Investor
understands that its investment  involves a high degree of risk. The Investor is
in a position  regarding  the  Company,  which,  based upon  employment,  family
relationship or economic bargaining power,  enabled and enables such Investor to
obtain information from the Company in order to evaluate the merits and risks of
this investment. The Investor has sought such accounting,  legal and tax advice,
as it has  considered  necessary to make an informed  investment  decision  with
respect to this transaction.

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     Section  3.7.  Receipt of  Documents.  The  Investor  and its counsel  have
received and read in their entirety: (i) this Agreement and the Exhibits annexed
hereto;  (ii) all due  diligence and other  information  necessary to verify the
accuracy and  completeness  of such  representations,  warranties and covenants;
(iii) the Company's Form 10-KSB for the  transition  period ended March 31, 2005
and Form 10-QSB for the period ended  November 30, 2004; and (iv) answers to all
questions the Investor  submitted to the Company  regarding an investment in the
Company;  and the Investor has relied on the information  contained  therein and
has  not  been  furnished  any  other  documents,   literature,   memorandum  or
prospectus.

     Section  3.8.  Registration  Rights  Agreement  and Escrow  Agreement.  The
parties have  entered  into the  Registration  Rights  Agreement  and the Escrow
Agreement, each dated the date hereof.

     Section 3.9. No General  Solicitation.  Neither the Company, nor any of its
affiliates,  nor any person  acting on its or their  behalf,  has engaged in any
form of general  solicitation  or general  advertising  (within  the  meaning of
Regulation D under the Securities  Act) in connection  with the offer or sale of
the shares of Common Stock offered hereby.

     Section 3.10. Not an Affiliate. The Investor is not an officer, director or
a person  that  directly,  or  indirectly  through  one or more  intermediaries,
controls or is controlled by, or is under common control with the Company or any
"AFFILIATE"  of the  Company  (as  that  term  is  defined  in  Rule  405 of the
Securities Act).

     Section 3.11.  Trading  Activities.  The Investor's trading activities with
respect to the Company's Common Stock shall be in compliance with all applicable
federal  and state  securities  laws,  rules and  regulations  and the rules and
regulations  of the  Principal  Market on which the  Company's  Common  Stock is
listed or traded.  Neither the  Investor  nor its  affiliates  has an open short
position in the Common Stock of the Company,  the Investor  agrees that it shall
not, and that it will cause its  affiliates not to, engage in any short sales of
or hedging  transactions  with respect to the Common  Stock,  PROVIDED  that the
Company  acknowledges  and agrees  that upon  receipt  of an Advance  Notice the
Investor is permitted  to sell the shares to be issued to the Investor  pursuant
to the Advance Notice during the applicable Pricing Period.

                                   ARTICLE IV.
                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     Except as stated below, on the disclosure  schedules  attached hereto or in
the SEC  Documents  (as defined  herein),  the  Company  hereby  represents  and
warrants to, and  covenants  with,  the Investor that the following are true and
correct as of the date hereof:

     Section  4.1.   Organization  and   Qualification.   The  Company  is  duly
incorporated  or  organized  and  validly  existing in the  jurisdiction  of its
incorporation  or  organization  and  has  all  requisite  power  and  authority
corporate  power to own its properties and to carry on its business as now being
conducted.  Each of the  Company and its  subsidiaries  is duly  qualified  as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the  business  conducted  by it makes such  qualification
necessary,  except to the extent  that the failure to be so  qualified  or be in

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good standing  would not have a Material  Adverse  Effect on the Company and its
subsidiaries taken as a whole.

     Section 4.2. Authorization, Enforcement, Compliance with Other Instruments.
(i) The Company has the  requisite  corporate  power and authority to enter into
and perform  this  Agreement,  the  Registration  Rights  Agreement,  the Escrow
Agreement,  the  Placement  Agent  Agreement  and  any  related  agreements,  in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
this Agreement,  the Registration  Rights Agreement,  the Escrow Agreement,  the
Placement  Agent  Agreement  and any related  agreements  by the Company and the
consummation by it of the  transactions  contemplated  hereby and thereby,  have
been duly  authorized by the Company's Board of Directors and no further consent
or  authorization  is required by the  Company,  its Board of  Directors  or its
stockholders,  (iii) this Agreement,  the  Registration  Rights  Agreement,  the
Escrow Agreement,  the Placement Agent Agreement and any related agreements have
been duly  executed  and  delivered  by the Company,  (iv) this  Agreement,  the
Registration  Rights  Agreement,  the  Escrow  Agreement,  the  Placement  Agent
Agreement and assuming the execution and delivery  thereof and acceptance by the
Investor and any related agreements constitute the valid and binding obligations
of the Company  enforceable  against the Company in accordance with their terms,
except as such  enforceability may be limited by general principles of equity or
applicable bankruptcy,  insolvency,  reorganization,  moratorium, liquidation or
similar laws relating to, or affecting generally,  the enforcement of creditors'
rights and remedies.

     Section 4.3. Capitalization.  As of the date hereof, the authorized capital
stock of the Company  consists of  100,000,000  shares of Common  Stock of which
27,500,000  shares are issued and  outstanding,  and 50,000  shares of preferred
stock, par value $0.001 per share (the "PREFERRED  Stock"), of which zero shares
are issued and  outstanding.  All of such  outstanding  shares have been validly
issued  and are fully paid and  nonassessable.  Except as  disclosed  in the SEC
Documents,  no shares of Common  Stock are subject to  preemptive  rights or any
other similar rights or any liens or  encumbrances  suffered or permitted by the
Company.  Except as disclosed in the SEC Documents,  as of the date hereof,  (i)
there are no outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character  whatsoever relating to, or securities or rights
convertible  into,  any  shares of  capital  stock of the  Company or any of its
subsidiaries, or contracts, commitments, understandings or arrangements by which
the  Company  or  any of  its  subsidiaries  is or may  become  bound  to  issue
additional  shares of capital stock of the Company or any of its subsidiaries or
options,  warrants,  scrip,  rights to subscribe to, calls or commitments of any
character  whatsoever relating to, or securities or rights convertible into, any
shares of capital  stock of the Company or any of its  subsidiaries,  (ii) there
are no outstanding debt securities,  (iii) there are no outstanding registration
statements  other than on Form S-8 or as  contemplated  by this Agreement or the
Securities Purchase  Agreement,  dated the date hereof, by and among the Company
and the Buyers named thereto,  and (iv) there are no agreements or  arrangements
under which the Company or any of its  subsidiaries is obligated to register the
sale of any of their securities under the Securities Act (except pursuant to the
Registration   Rights  Agreement).   There  are  no  securities  or  instruments
containing  anti-dilution  or similar  provisions that will be triggered by this
Agreement  or any related  agreement  or the  consummation  of the  transactions
described herein or therein.  The Company has furnished to the Investor true and
correct copies of the Company's Articles of Incorporation,  as amended and as in
effect on the date hereof (the "ARTICLES OF  INCORPORATION"),  and the Company's

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<PAGE>
By-laws,  as in effect on the date hereof (the "BY-LAWS"),  and the terms of all
securities  convertible  into or  exercisable  for Common Stock and the material
rights of the holders thereof in respect thereto.

     Section 4.4. No Conflict.  The execution,  delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated  hereby  will not (i)  result in a  violation  of the  Articles  of
Incorporation,  any certificate of  designations  of any  outstanding  series of
preferred  stock of the Company or By-laws or (ii) conflict with or constitute a
default (or an event  which with notice or lapse of time or both would  become a
default)  under,  or  give to  others  any  rights  of  termination,  amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its  subsidiaries  is a party, or result in a violation of
any law, rule,  regulation,  order,  judgment or decree  (including  federal and
state  securities  laws and  regulations  and the rules and  regulations  of the
Principal Market on which the Common Stock is quoted)  applicable to the Company
or any of its  subsidiaries  or by which any  material  property or asset of the
Company or any of its  subsidiaries is bound or affected and which would cause a
Material Adverse Effect.  Except as disclosed in the SEC Documents,  neither the
Company nor its  subsidiaries is in violation of any term of or in default under
its  Articles of  Incorporation  or By-laws or their  organizational  charter or
by-laws,   respectively,   or  any  material  contract,   agreement,   mortgage,
indebtedness,  indenture,  instrument, judgment, decree or order or any statute,
rule or regulation  applicable to the Company or its subsidiaries.  The business
of the Company and its  subsidiaries  is not being conducted in violation of any
material  law,  ordinance,  regulation  of any  governmental  entity.  Except as
specifically contemplated by this Agreement and as required under the Securities
Act and any  applicable  state  securities  laws, the Company is not required to
obtain  any  consent,   authorization  or  order  of,  or  make  any  filing  or
registration with, any court or governmental  agency in order for it to execute,
deliver  or  perform  any of its  obligations  under  or  contemplated  by  this
Agreement or the  Registration  Rights  Agreement in  accordance  with the terms
hereof  or  thereof.   All  consents,   authorizations,   orders,   filings  and
registrations  which the Company is required to obtain pursuant to the preceding
sentence  have been  obtained or effected  on or prior to the date  hereof.  The
Company and its subsidiaries are unaware of any fact or circumstance  that might
give rise to any of the foregoing.

     Section 4.5. SEC Documents;  Financial  Statements.  Since January 1, 2003,
the  Company  has filed all  reports,  schedules,  forms,  statements  and other
documents required to be filed by it with the SEC under of the Exchange Act. The
Company has delivered to the Investor or its representatives,  or made available
through the SEC's website at http://www.sec.gov, true and complete copies of the
SEC Documents.  As of their respective  dates,  the financial  statements of the
Company disclosed in the SEC Documents (the "FINANCIAL  STATEMENTS") complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto.  Such financial
statements have been prepared in accordance with generally  accepted  accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise  indicated in such financial  statements or the notes  thereto,  or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary  statements) and, fairly present in all
material respects the financial  position of the Company as of the dates thereof
and the  results of its  operations  and cash flows for the  periods  then ended
(subject,  in the  case  of  unaudited  statements,  to  normal  year-end  audit
adjustments).  No other  information  provided by or on behalf of the Company to
the  Investor  which is not  included in the SEC  Documents  contains any untrue

                                       10
<PAGE>
statement of a material  fact or omits to state any material  fact  necessary in
order to make the statements  therein,  in the light of the circumstances  under
which they were made, not misleading.

     Section 4.6. 10b-5. The SEC Documents do not include any untrue  statements
of material  fact,  nor do they omit to state any material  fact  required to be
stated  therein  necessary  to  make  the  statements  made,  in  light  of  the
circumstances under which they were made, not misleading.

     Section  4.7. No Default.  Except as disclosed  in the SEC  Documents,  the
Company is not in default  in the  performance  or  observance  of any  material
obligation,  agreement,  covenant  or  condition  contained  in  any  indenture,
mortgage, deed of trust or other material instrument or agreement to which it is
a party or by which it is or its  property is bound and  neither the  execution,
nor the  delivery  by the  Company,  nor the  performance  by the Company of its
obligations  under this Agreement or any of the exhibits or  attachments  hereto
will  conflict  with or result in the breach or violation of any of the terms or
provisions  of, or  constitute a default or result in the creation or imposition
of any lien or  charge on any  assets or  properties  of the  Company  under its
Articles of Incorporation,  By-Laws, any material indenture,  mortgage,  deed of
trust or other  material  agreement  applicable  to the Company or instrument to
which the  Company is a party or by which it is bound,  or any  statute,  or any
decree, judgment, order, rules or regulation of any court or governmental agency
or body having  jurisdiction  over the Company or its  properties,  in each case
which  default,  lien or charge is likely to cause a material  adverse effect on
the Company's business or financial condition.

     Section 4.8. Absence of Events of Default.  Except for matters described in
the SEC Documents and/or this Agreement,  no Event of Default, as defined in the
respective  agreement to which the Company is a party, and no event which,  with
the giving of notice or the  passage of time or both,  would  become an Event of
Default (as so  defined),  has occurred  and is  continuing,  which would have a
material  adverse  effect  on the  Company's  business,  properties,  prospects,
financial condition or results of operations.

     Section 4.9. Intellectual Property Rights. The Company and its subsidiaries
own or possess adequate rights or licenses to use all material trademarks, trade
names, service marks, service mark registrations, service names, patents, patent
rights,    copyrights,    inventions,    licenses,    approvals,    governmental
authorizations,  trade secrets and rights  necessary to conduct their respective
businesses as now conducted.  The Company and its  subsidiaries  do not have any
knowledge of any  infringement by the Company or its  subsidiaries of trademark,
trade name rights, patents,  patent rights,  copyrights,  inventions,  licenses,
service names, service marks, service mark registrations,  trade secret or other
similar  rights of others,  and, to the  knowledge of the  Company,  there is no
claim,  action or proceeding being made or brought against,  or to the Company's
knowledge,  being threatened against, the Company or its subsidiaries  regarding
trademark,  trade name, patents, patent rights, invention,  copyright,  license,
service names, service marks, service mark registrations,  trade secret or other
infringement;  and the Company and its  subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.

                                       11
<PAGE>
     Section  4.10.  Employee  Relations.  Neither  the  Company  nor any of its
subsidiaries  is involved in any labor  dispute  nor,  to the  knowledge  of the
Company or any of its subsidiaries,  is any such dispute threatened. None of the
Company's or its subsidiaries'  employees is a member of a union and the Company
and its subsidiaries believe that their relations with their employees are good.

     Section 4.11.  Environmental Laws. The Company and its subsidiaries are (i)
in material compliance with any and all applicable foreign,  federal,  state and
local  laws and  regulations  relating  to the  protection  of human  health and
safety,  the environment or hazardous or toxic substances or wastes,  pollutants
or contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all material permits,
licenses or other approvals required of them under applicable Environmental Laws
to conduct their  respective  businesses  and (iii) are in  compliance  with all
terms and conditions of any such permit, license or approval.

     Section 4.12. Title. Except as set forth in the SEC Documents,  the Company
has good and marketable title to its properties and material assets owned by it,
free and clear of any pledge,  lien,  security interest,  encumbrance,  claim or
equitable  interest  other than such as are not  material to the business of the
Company.  Any real property and  facilities  held under lease by the Company and
its subsidiaries are held by them under valid, subsisting and enforceable leases
with such  exceptions as are not material and do not interfere with the use made
and proposed to be made of such  property  and  buildings by the Company and its
subsidiaries.

     Section  4.13.  Insurance.  The  Company and each of its  subsidiaries  are
insured by insurers of recognized financial  responsibility  against such losses
and risks and in such  amounts  as  management  of the  Company  believes  to be
prudent  and  customary  in  the   businesses  in  which  the  Company  and  its
subsidiaries  are engaged.  Neither the Company nor any such subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such  subsidiary has any reason to believe that it will not be able to renew
its existing  insurance  coverage as and when such coverage expires or to obtain
similar  coverage  from  similar  insurers as may be  necessary  to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise,  or the earnings,  business or operations of the Company
and its subsidiaries, taken as a whole.

     Section 4.14.  Regulatory Permits. The Company and its subsidiaries possess
all material certificates,  authorizations and permits issued by the appropriate
federal,  state or foreign  regulatory  authorities  necessary to conduct  their
respective  businesses,  and neither the  Company  nor any such  subsidiary  has
received any notice of proceedings relating to the revocation or modification of
any such material certificate, authorization or permit.

     Section 4.15.  Internal  Accounting  Controls.  The Company and each of its
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 generally accepted  accounting  principles 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

                                       12
<PAGE>
accountability  for assets is compared  with the existing  assets at  reasonable
intervals and appropriate action is taken with respect to any differences.

     Section 4.16. No Material Adverse Breaches, etc. Except as set forth in the
SEC Documents, neither the Company nor any of its subsidiaries is subject to any
charter,  corporate or other legal restriction,  or any judgment, decree, order,
rule or  regulation  which in the judgment of the  Company's  officers has or is
expected  in the  future to have a  material  adverse  effect  on the  business,
properties,  operations,  financial  condition,  results  of  operations  of the
Company or its subsidiaries.  Except as set forth in the SEC Documents,  neither
the  Company  nor  any of its  subsidiaries  is in  breach  of any  contract  or
agreement  which breach,  in the judgment of the Company's  officers,  has or is
expected  to  have  a  material  adverse  effect  on the  business,  properties,
operations,  financial  condition or results of operations of the Company or its
subsidiaries.

     Section  4.17.  Absence  of  Litigation.  Except  as set  forth  in the SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board, government agency,  self-regulatory  organization
or body pending against or affecting the Company, the Common Stock or any of the
Company's subsidiaries, wherein an unfavorable decision, ruling or finding would
(i) have a material adverse effect on the transactions  contemplated hereby (ii)
adversely affect the validity or enforceability  of, or the authority or ability
of the Company to perform its  obligations  under,  this Agreement or any of the
documents contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents,  have  a  material  adverse  effect  on  the  business,   operations,
properties,  financial  condition or results of operation of the Company and its
subsidiaries taken as a whole.

     Section 4.18.  Subsidiaries.  Except as disclosed in the SEC Documents, the
Company does not presently own or control, directly or indirectly,  any interest
in any other corporation, partnership, association or other business entity.

     Section 4.19.  Tax Status.  Except as disclosed in the SEC  Documents,  the
Company  and each of its  subsidiaries  has made or filed all  federal and state
income and all other tax  returns,  reports  and  declarations  required  by any
jurisdiction  to which it is subject and (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) 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
provision  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.

     Section  4.20.  Certain  Transactions.  Except  as set  forth  in  the  SEC
Documents  none of the  officers,  directors,  or  employees  of the  Company is
presently a party to any  transaction  with the Company (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

                                       13
<PAGE>
of the Company, any corporation, partnership, trust or other entity in which any
officer,  director,  or any such  employee has a  substantial  interest or is an
officer, director, trustee or partner.

     Section  4.21.  Fees  and  Rights  of First  Refusal.  The  Company  is not
obligated to offer the securities  offered hereunder on a right of first refusal
basis or otherwise to any third parties  including,  but not limited to, current
or former shareholders of the Company,  underwriters,  brokers,  agents or other
third parties.

     Section 4.22. Use of Proceeds.  The Company shall use the net proceeds from
this offering for general  corporate and working  capital  purposes,  including,
without limitation, the payment of loans incurred by the Company. However, in no
event shall the Company use the net proceeds  from this offering for the payment
(or  loan to any  such  person  for  the  payment)  of any  judgment,  or  other
liability,  incurred by any executive officer,  officer, director or employee of
the Company, except for any liability owed to such person for services rendered,
or if any  judgment or other  liability  is incurred by such person  originating
from  services  rendered to the  Company,  or the Company has  indemnified  such
person from liability.

     Section 4.23. Further  Representation and Warranties of the Company. For so
long  as  any  securities   issuable  hereunder  held  by  the  Investor  remain
outstanding, the Company acknowledges,  represents,  warrants and agrees that it
will maintain the listing of its Common Stock on the Principal Market.

     Section 4.24. Opinion of Counsel.  Investor shall receive an opinion letter
from counsel to the Company on the date hereof.

     Section 4.25. Opinion of Counsel. The Company will obtain for the Investor,
at the  Company's  expense,  any  and  all  opinions  of  counsel  which  may be
reasonably  required in order to sell the securities  issuable hereunder without
restriction.

     Section 4.26. Dilution. The Company is aware and acknowledges that issuance
of shares of the  Company's  Common  Stock  could  cause  dilution  to  existing
shareholders and could  significantly  increase the outstanding number of shares
of Common Stock.

                                   ARTICLE V.
                                 INDEMNIFICATION

     The Investor  and the Company  represent  to the other the  following  with
respect to itself:

     Section 5.1. Indemnification.

     (a) In  consideration  of the  Investor's  execution  and  delivery of this
Agreement,  and in addition to all of the Company's other obligations under this
Agreement,  the Company shall defend,  protect,  indemnify and hold harmless the
Investor,  and all of its officers,  directors,  partners,  employees and agents
(including,   without   limitation,   those  retained  in  connection  with  the
transactions  contemplated  by  this  Agreement)  (collectively,  the  "INVESTOR
INDEMNITEES")  from and against any and all  actions,  causes of action,  suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith  (irrespective of whether any such Investor Indemnitee is a
party  to the  action  for  which  indemnification  hereunder  is  sought),  and

                                       14
<PAGE>
including  reasonable   attorneys'  fees  and  disbursements  (the  "INDEMNIFIED
LIABILITIES"),  incurred by the Investor  Indemnitees or any of them as a result
of, or arising out of, or relating to (a) any misrepresentation or breach of any
representation  or  warranty  made  by the  Company  in  this  Agreement  or the
Registration  Rights Agreement or any other certificate,  instrument or document
contemplated  hereby or thereby,  (b) any breach of any  covenant,  agreement or
obligation of the Company contained in this Agreement or the Registration Rights
Agreement or any other certificate,  instrument or document  contemplated hereby
or thereby,  or (c) any cause of action,  suit or claim  brought or made against
such Investor Indemnitee based on  misrepresentations  or due to a breach by the
Company  and  arising  out  of  or  resulting  from  the  execution,   delivery,
performance or enforcement of this Agreement or any other  instrument,  document
or agreement executed pursuant hereto by any of the Investor Indemnitees. To the
extent that the foregoing  undertaking by the Company may be  unenforceable  for
any reason,  the Company shall make the maximum  contribution to the payment and
satisfaction of each of the Indemnified Liabilities,  which is permissible under
applicable law.

     (b) In  consideration  of the  Company's  execution  and  delivery  of this
Agreement, and in addition to all of the Investor's other obligations under this
Agreement,  the Investor shall defend, protect,  indemnify and hold harmless the
Company and all of its officers, directors,  shareholders,  employees and agents
(including,   without   limitation,   those  retained  in  connection  with  the
transactions  contemplated  by  this  Agreement)  (collectively,   the  "COMPANY
INDEMNITEES") from and against any and all Indemnified  Liabilities  incurred by
the  Company  Indemnitees  or any of them as a result of, or arising  out of, or
relating  to (a)  any  misrepresentation  or  breach  of any  representation  or
warranty  made  by the  Investor  in this  Agreement,  the  Registration  Rights
Agreement, or any instrument or document contemplated hereby or thereby executed
by the Investor, (b) any breach of any covenant,  agreement or obligation of the
Investor(s)  contained in this Agreement,  the Registration  Rights Agreement or
any other  certificate,  instrument or document  contemplated  hereby or thereby
executed by the Investor,  or (c) any cause of action,  suit or claim brought or
made against such Company  Indemnitee  based on  misrepresentations  or due to a
breach by the  Investor  and arising  out of or  resulting  from the  execution,
delivery,  performance or enforcement of this Agreement or any other instrument,
document  or  agreement   executed   pursuant  hereto  by  any  of  the  Company
Indemnitees. To the extent that the foregoing undertaking by the Investor may be
unenforceable for any reason,  the Investor shall make the maximum  contribution
to the payment and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.

     (c) The obligations of the parties to indemnify or make contribution  under
this Section 5.1 shall survive termination.

                                   ARTICLE VI.
                            COVENANTS OF THE COMPANY

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

                                       15
<PAGE>
     Section 6.2.  Listing of Common Stock.  The Company shall use  commercially
reasonable efforts to maintain the Common Stock's eligibility for listing on the
American Stock Exchange or the National Association of Securities Dealers Inc.'s
Over the Counter Bulletin Board.

     Section 6.3. Exchange Act  Registration.  The Company will cause its Common
Stock to continue to be registered under Section 12(g) of the Exchange Act, will
file its quarterly and annual reports in a timely manner,  will file all reports
and other  documents  required of it as a reporting  company  under the Exchange
Act, and will not take any action or file any document (whether or not permitted
by  Exchange  Act  or  the  rules  thereunder)  to  terminate  or  suspend  such
registration  or to terminate or suspend its  reporting  and filing  obligations
under said Exchange Act.

     Section  6.4.  Transfer  Agent  Instructions.  Upon  effectiveness  of  the
Registration  Statement the Company shall deliver  instructions  to its transfer
agent to issue  shares  of  Common  Stock to the  Investor  free of  restrictive
legends on or before each Advance Date

     Section 6.5.  Corporate  Existence.  The Company will take all commercially
reasonable  steps necessary to preserve and continue the corporate  existence of
the Company.

     Section 6.6. Notice of Certain Events Affecting Registration; Suspension of
Right  to  Make  an  Advance.  The  Company  will  promptly,  in  light  of  the
circumstances  notify the Investor upon its becoming  aware of the occurrence of
any of the following  events in respect of a  registration  statement or related
prospectus relating to an offering of Registrable Securities: (i) receipt of any
request  for  additional  information  by the SEC or any other  Federal or state
governmental  authority  during the period of  effectiveness of the Registration
Statement for amendments or supplements to the registration statement or related
prospectus;  (ii)  the  issuance  by the  SEC  or any  other  Federal  or  state
governmental  authority of any stop order  suspending the  effectiveness  of the
Registration  Statement or the initiation of any  proceedings  for that purpose;
(iii)  receipt  of  any  notification  with  respect  to the  suspension  of the
qualification  or  exemption  from  qualification  of  any  of  the  Registrable
Securities for sale in any  jurisdiction or the initiation or threatening of any
proceeding  for such  purpose;  (iv) the  happening  of any event that makes any
statement  made in the  Registration  Statement  or  related  prospectus  of any
document  incorporated or deemed to be incorporated  therein by reference untrue
in any  material  respect  or that  requires  the  making of any  changes in the
Registration Statement,  related prospectus or documents so that, in the case of
the  Registration  Statement,  it will not  contain  any untrue  statement  of a
material fact or omit to state any material  fact required to be stated  therein
or necessary to make the statements therein not misleading, and that in the case
of the  related  prospectus,  it will not  contain  any  untrue  statement  of a
material fact or omit to state any material  fact required to be stated  therein
or necessary to make the statements  therein,  in the light of the circumstances
under which they were made,  not  misleading;  and (v) the Company's  reasonable
determination  that a  post-effective  amendment to the  Registration  Statement
would be  appropriate;  and the Company  will  promptly  make  available  to the
Investor any such supplement or amendment to the related prospectus. The Company
shall not deliver to the Investor any Advance Notice during the  continuation of
any of the foregoing events.

                                       16
<PAGE>
     Section 6.7.  Restriction on Sale of Capital  Stock.  During the Commitment
Period,  the Company shall not, without first providing the Investor with thirty
(30)  days'  advance  written  notice,  (i)  issue or sell any  Common  Stock or
Preferred Stock without consideration or for a consideration per share less than
the bid price of the Common Stock determined  immediately prior to its issuance,
(ii) issue or sell any Preferred Stock warrant,  option, right, contract,  call,
or other security or instrument granting the holder thereof the right to acquire
Common Stock without  consideration or for a consideration per share less Common
Stock's Bid Price determined  immediately  prior to its issuance,  or (iii) file
any registration statement on Form S-8 except to register up to 4,000,000 shares
of Common  Stock to be  issued to  employees  under a bona fide  employee  stock
incentive plan.

     Section  6.8.  Consolidation;  Merger.  The Company  shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into,  or a transfer  of all or  substantially  all the assets of the Company to
another  entity (a  "CONSOLIDATION  EVENT")  unless the  resulting  successor or
acquiring  entity  (if  not the  Company)  assumes  by  written  instrument  the
obligation to deliver to the Investor such shares of stock and/or  securities as
the Investor is entitled to receive pursuant to this Agreement.

     Section 6.9. Issuance of the Company's Common Stock. The sale of the shares
of Common Stock shall be made in accordance with the provisions and requirements
of Regulation D and any applicable state securities law.

     Section 6.10.  Reservation of Common Stock.  Until the Deferred  Investor's
Shares (as defined below) are issued  pursuant to Section  12.4(c)(iii)  hereof,
the Company  shall  maintain a share reserve of not less than 100% of the shares
of Common Stock constituting the Deferred Investor's Shares.

                                  ARTICLE VII.
                CONDITIONS FOR ADVANCE AND CONDITIONS TO CLOSING

     Section 7.1.  Conditions  Precedent to the Obligations of the Company.  The
obligation hereunder of the Company to issue and sell the shares of Common Stock
to the  Investor  incident to each  Closing is subject to the  satisfaction,  or
waiver by the Company, at or before each such Closing, of each of the conditions
set forth below.

     (a)  Accuracy  of  the  Investor's   Representations  and  Warranties.  The
representations  and warranties of the Investor shall be true and correct in all
material respects.

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

     Section 7.2. Conditions Precedent to the Right of the Company to Deliver an
Advance Notice and the  OBLIGATION OF THE INVESTOR TO PURCHASE  SHARES OF COMMON
STOCK.  The right of the Company to deliver an Advance Notice and the obligation

                                       17
<PAGE>
of the Investor  hereunder to acquire and pay for shares of the Company's Common
Stock incident to a Closing is subject to the fulfillment by the Company, on (i)
the date of delivery of such Advance Notice and (ii) the applicable Advance Date
(each a "CONDITION SATISFACTION DATE"), of each of the following conditions:

     (a)  Registration  of the Common Stock with the SEC. The Company shall have
filed with the SEC a  Registration  Statement  with respect to the resale of the
Registrable  Securities in accordance with the terms of the Registration  Rights
Agreement.  As set forth in the Registration Rights Agreement,  the Registration
Statement shall have previously  become  effective and shall remain effective on
each  Condition  Satisfaction  Date and (i) neither the Company nor the Investor
shall have  received  notice  that the SEC has issued or intends to issue a stop
order with respect to the  Registration  Statement or that the SEC otherwise has
suspended or withdrawn the effectiveness of the Registration  Statement,  either
temporarily  or  permanently,  or intends or has threatened to do so (unless the
SEC's concerns have been addressed and the Investor is reasonably satisfied that
the SEC no longer is  considering  or intends to take such action),  and (ii) no
other  suspension  of  the  use  or  withdrawal  of  the  effectiveness  of  the
Registration  Statement  or related  prospectus  shall exist.  The  Registration
Statement  must  have  been  declared  effective  by the SEC  prior to the first
Advance Notice Date.

     (b)   Authority.   The  Company   shall  have   obtained  all  permits  and
qualifications   required  by  any  applicable  state  in  accordance  with  the
Registration  Rights  Agreement  for the offer and sale of the  shares of Common
Stock,  or shall have the  availability  of exemptions  therefrom.  The sale and
issuance of the shares of Common  Stock shall be legally  permitted  by all laws
and regulations to which the Company is subject.

     (c) Fundamental  Changes.  There shall not exist any fundamental changes to
the information set forth in the Registration  Statement which would require the
Company to file a post-effective amendment to the Registration Statement.

     (d)  Stockholder  Approval.  If the Common  Stock is listed on the American
Stock Exchange at the time the Company  delivers an Advance Notice,  the holders
of Common Stock shall have  approved  the  issuance of Common Stock  pursuant to
such Advance Notice,  to the extent required by Section 713 of the Company Guide
of the American Stock Exchange.

     (e) Performance by the Company. The Company shall have performed, satisfied
and  complied  in all  material  respects  with all  covenants,  agreements  and
conditions  required  by this  Agreement  (including,  without  limitation,  the
conditions  specified  in  Section  2.5  hereof)  and  the  Registration  Rights
Agreement to be performed, satisfied or complied with by the Company at or prior
to each Condition Satisfaction Date.

     (f) No Injunction.  No statute, rule, regulation,  executive order, decree,
ruling or injunction shall have been enacted,  entered,  promulgated or endorsed
by any court or governmental  authority of competent jurisdiction that prohibits
or directly and adversely  affects any of the transactions  contemplated by this
Agreement,  and no proceeding shall have been commenced that may have the effect
of prohibiting or adversely  affecting any of the  transactions  contemplated by
this Agreement.

                                       18
<PAGE>
     (g) No Suspension  of Trading in or Delisting of Common Stock.  The trading
of the Common Stock is not suspended by the SEC or the Principal  Market (if the
Common Stock is traded on a Principal Market).  The issuance of shares of Common
Stock with  respect to the  applicable  Closing,  if any,  shall not violate the
shareholder  approval  requirements of the Principal Market (if the Common Stock
is traded on a Principal Market). The Company shall not have received any notice
threatening  the continued  listing of the Common Stock on the Principal  Market
(if the Common Stock is traded on a Principal Market).

     (h)  Maximum  Advance  Amount.  The amount of an Advance  requested  by the
Company shall not exceed the Maximum  Advance Amount.  In addition,  in no event
shall the number of shares issuable to the Investor pursuant to an Advance cause
the  aggregate  number  of  shares of  Common  Stock  beneficially  owned by the
Investor and its  affiliates to exceed nine and 9/10 percent  (9.9%) of the then
outstanding  Common  Stock of the  Company.  For the  purposes  of this  section
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Exchange Act.

     (i) No Knowledge.  The Company has no knowledge of any event which would be
more likely than not to have the effect of causing such  Registration  Statement
to be suspended or otherwise ineffective.

     (j) Other.  On each  Condition  Satisfaction  Date, the Investor shall have
received  the  certificate  executed by an officer of the Company in the form of
EXHIBIT A attached hereto.

                                  ARTICLE VIII.
         DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION

     Section 8.1. Due Diligence Review.  Prior to the filing of the Registration
Statement the Company  shall make  available  for  inspection  and review by the
Investor, its advisors and representatives, and any underwriter participating in
any disposition of the Registrable Securities on behalf of the Investor pursuant
to the Registration  Statement,  any such registration statement or amendment or
supplement  thereto or any blue sky,  NASD or other  filing,  all  financial and
other  records,  all SEC Documents and other filings with the SEC, and all other
corporate documents and properties of the Company as may be reasonably necessary
for the purpose of such review, and cause the Company's officers,  directors and
employees to supply all such information reasonably requested by the Investor or
any  such  representative,  advisor  or  underwriter  in  connection  with  such
Registration  Statement  (including,  without  limitation,  in  response  to all
questions  and other  inquiries  reasonably  made or  submitted by any of them),
prior to and  from  time to time  after  the  filing  and  effectiveness  of the
Registration  Statement  for the sole  purpose of enabling the Investor and such
representatives,  advisors and underwriters and their respective accountants and
attorneys  to conduct  initial  and ongoing due  diligence  with  respect to the
Company and the accuracy of the Registration Statement.

     Section 8.2. Non-Disclosure of Non-Public Information.

     (a) The Company shall not disclose material  non-public  information to the
Investor,  its advisors,  or its representatives,  unless prior to disclosure of

                                       19
<PAGE>
such  information  the Company  identifies  such  information  as being material
non-public   information   and  provides  the   Investor,   such   advisors  and
representatives with the opportunity to accept or refuse to accept such material
non-public information for review. The Company may, as a condition to disclosing
any material non-public information  hereunder,  require the Investor's advisors
and representatives to enter into a confidentiality agreement in form reasonably
satisfactory to the Company and the Investor.

     (b)  Nothing  herein  shall  require  the  Company  to  disclose   material
non-public  information to the Investor or its advisors or representatives,  and
the  Company  represents  that  it  does  not  disseminate  material  non-public
information  to any  investors  who  purchase  stock in the  Company in a public
offering, to money managers or to securities analysts,  provided,  however, that
notwithstanding   anything  herein  to  the  contrary,   the  Company  will,  as
hereinabove provided, immediately notify the advisors and representatives of the
Investor  and,  if any,  underwriters,  of any  event  or the  existence  of any
circumstance   (without  any  obligation  to  disclose  the  specific  event  or
circumstance)  of which  it  becomes  aware,  constituting  material  non-public
information  (whether or not requested of the Company  specifically or generally
during the course of due diligence by such persons or entities),  which,  if not
disclosed in the prospectus  included in the Registration  Statement would cause
such  prospectus to include a material  misstatement  or to omit a material fact
required to be stated therein in order to make the statements, therein, in light
of the circumstances in which they were made, not misleading.  Nothing contained
in this  Section 8.2 shall be  construed  to mean that such  persons or entities
other than the Investor  (without the written  consent of the Investor  prior to
disclosure of such information) may not obtain material  non-public  information
in the course of conducting  due diligence in accordance  with the terms of this
Agreement  and nothing  herein shall  prevent any such persons or entities  from
notifying  the Company of their opinion that based on such due diligence by such
persons  or  entities,  that  the  Registration  Statement  contains  an  untrue
statement of material fact or omits a material fact required to be stated in the
Registration Statement or necessary to make the statements contained therein, in
light of the circumstances in which they were made, not misleading.

                                   ARTICLE IX.
                           CHOICE OF LAW/JURISDICTION

     Section  9.1.  Governing  Law.  This  Agreement  shall be  governed  by and
interpreted  in  accordance  with the laws of the  State of New  Jersey  without
regard to the principles of conflict of laws. The parties further agree that any
action between them shall be heard in Hudson County,  New Jersey,  and expressly
consent  to the  jurisdiction  and venue of the  Superior  Court of New  Jersey,
sitting in Hudson County, New Jersey and the United States District Court of New
Jersey,  sitting in Newark, New Jersey, for the adjudication of any civil action
asserted pursuant to this paragraph.

                                   ARTICLE X.
                             ASSIGNMENT; TERMINATION

     Section  10.1.  Assignment.  Neither this  Agreement  nor any rights of the
Company hereunder may be assigned to any other Person.

                                       20
<PAGE>
     Section 10.2. Termination. The obligations of the Investor to make Advances
under  Article II hereof  shall  terminate  twenty-four  (24)  months  after the
Effective Date.

                                   ARTICLE XI.
                                     NOTICES

     Section  11.1.   Notices.   Any  notices,   consents,   waivers,  or  other
communications  required  or  permitted  to be  given  under  the  terms of this
Agreement  must be in writing and will be deemed to have been delivered (i) upon
receipt,  when delivered  personally or by a nationally  recognized overnight or
world wide courier;  (ii) upon confirmation of receipt,  when sent by facsimile;
or (iii) ten (10) days after being sent by U.S.  certified mail,  return receipt
requested, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:

If to the Company, to:     City Network, Inc
                           6F-3, No.16, Jian Ba Road
                           Jhonghe City, Taipei County, 235
                           Taiwan, ROC F5 235
                           Attention: Mr Tiao-Tsan Lai
                           Telephone: 886-2-8226-5566
                           Facsimile: 886-2-8226-8585

With a copy to:            Loeb & Loeb, LLP
                           345 Park Avenue
                           New York, NY 10154-0037
                           Attention: Mitchell Nussbaum, Esq.
                           Telephone: (212) 407-4159
                           Facsimile: (212) 407-4990

If to the Investor(s):     Cornell Capital Partners, LP
                           101 Hudson Street -Suite 3700
                           Jersey City, NJ 07302
                           Attention: Mark Angelo
                                      Portfolio Manager
                           Telephone: (201) 985-8300
                           Facsimile: (201) 985-8266

With a Copy to:            David Gonzalez, Esq.
                           101 Hudson Street - Suite 3700
                           Jersey City, NJ 07302
                           Telephone: (201) 985-8300
                           Facsimile: (201) 985-8266

Each party shall provide five (5) days' prior written  notice to the other party
of any change in address or facsimile number.

                                       21
<PAGE>
                                  ARTICLE XII.
                                  MISCELLANEOUS

     Section 12.1.  Counterparts.  This Agreement may be executed in two or more
identical  counterparts,  all of  which  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.  In the event any  signature  page is
delivered  by  facsimile  transmission,  the party  using such means of delivery
shall  cause  four  (4)  additional  original  executed  signature  pages  to be
physically  delivered to the other party  within five (5) days of the  execution
and delivery hereof,  though failure to deliver such copies shall not affect the
validity of this Agreement.

     Section 12.2. Entire Agreement;  Amendments.  This Agreement supersedes all
other prior oral or written agreements between the Investor,  the Company, their
affiliates  and  persons  acting on their  behalf  with  respect to the  matters
discussed  herein,  and this  Agreement and the  instruments  referenced  herein
contain  the entire  understanding  of the parties  with  respect to the matters
covered  herein and therein  and,  except as  specifically  set forth  herein or
therein,  neither  the  Company  nor  the  Investor  makes  any  representation,
warranty,  covenant or undertaking with respect to such matters. No provision of
this  Agreement  may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.

     Section 12.3.  Reporting  Entity for the Common Stock. The reporting entity
relied upon for the  determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this  Agreement  shall
be Bloomberg,  L.P. or any successor thereto.  The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.

     Section  12.4.  Fees and  Expenses.  The Company  hereby  agrees to pay the
following fees:

     (a)  Structuring  Fees.  Each of the  parties  shall  pay its own  fees and
expenses (including the fees of any attorneys, accountants, appraisers or others
engaged by such party) in connection  with this  Agreement and the  transactions
contemplated  hereby,  except that the Company shall pay a structuring fee in an
amount not to exceed Fifteen Thousand Dollars ($15,000), to the Investor,  which
shall be paid out of the gross  proceeds of the  Convertible  Debenture  of even
date hereof, issued to Highgate House Funds, Ltd by the Company. Subsequently on
each advance date,  the Company will pay Yorkville  Advisors  Management,  LLC a
structuring fee in an amount not to exceed Five Hundred Dollars ($500), directly
out the proceeds of any Advances hereunder.

     (b) Due Diligence Fee. Company shall pay the Investor a non-refundable  due
diligence fee in an amount not to exceed  Fifteen  Thousand  Dollars  ($15,000),
upon submission of the due diligence documents to the Investor.

     (c) Commitment Fees.

         (i) On  each  Advance  Date  the  Company  shall  pay to the  Investor,
directly from the gross proceeds held in escrow, an amount equal to five percent
(5%) of the amount of each  Advance.  The  Company  hereby  agrees  that if such

                                       22
<PAGE>
payment,  as is described above, is not made by the Company on the Advance Date,
such  payment  will be made at the  direction  of the  Investor as outlined  and
mandated by Section 2.3 of this Agreement.

         (ii) The Company shall issue to the Investor,  as a commitment fee, One
Million Eight Hundred Eighty Six Thousand  Three Hundred Sixty Four  (1,886,364)
shares of the Company's  Common Stock (the "INVESTOR'S  SHARES"),  of which Nine
Hundred  Seventy  Seven  Thousand  Two Hundred  Seventy  Three  (977,273) of the
Investor's  Shares  (the  "INITIAL  INVESTOR'S  SHARES")  shall be issued to the
Investor  upon the  execution of this  Agreement  and Nine Hundred Nine Thousand
Ninety One (909,091) of the Investor's Shares (the "DEFERRED INVESTOR'S SHARES")
shall be  issued  to the  Investor  upon the  earlier  of (a) the date  that the
holders  of Common  Stock  approve of the  issuance  of Common  Stock  under any
Advance  Notice,  to the extent  required by Section 713 of the Company Guide of
the American Stock Exchange, or (b) the date the Company requests Advances in an
aggregate amount of Five Million Dollars ($5,000,000) or more.

         (iii) Fully Earned.  The Investor's Shares shall be deemed fully earned
as of the date hereof.

         (iv) Registration  Rights. The Investor's Shares will have "piggy-back"
registration rights.

     Section 12.5. Brokerage.  Each of the parties hereto represents that it has
had no dealings in connection  with this  transaction  with any finder or broker
who will  demand  payment of any fee or  commission  from the other  party.  The
Company on the one hand, and the Investor, on the other hand, agree to indemnify
the other against and hold the other  harmless from any and all  liabilities  to
any  person  claiming  brokerage  commissions  or  finder's  fees on  account of
services  purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby.

     Section  12.6.   Confidentiality.   If  for  any  reason  the  transactions
contemplated by this Agreement are not  consummated,  each of the parties hereto
shall keep  confidential  any information  obtained from any other party (except
information  publicly  available  or in such  party's  domain  prior to the date
hereof,  and except as required by court order) and shall promptly return to the
other  parties  all  schedules,  documents,  instruments,  work  papers or other
written information without retaining copies thereof, previously furnished by it
as a result of this Agreement or in connection herein.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       23
<PAGE>
     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Standby  Equity
Distribution  Agreement  to be  executed  by  the  undersigned,  thereunto  duly
authorized, as of the date first set forth above.

                               COMPANY:
                               CITY NETWORK, INC


                               By: /s/ Tiao-Tsan Lai
                                  ----------------------------------
                               Name:  Mr Tiao-Tsan Lai
                               Title: Chief Executive Officer


                               INVESTOR:
                               CORNELL CAPITAL PARTNERS, LP

                               By:  Yorkville Advisors, LLC
                               Its: General Partner


                               By: /s/ Mark Angelo
                                  ----------------------------------
                               Name:  Mark Angelo
                               Title: Portfolio Manager

                                       24
<PAGE>
                                    EXHIBIT A

                      ADVANCE NOTICE/COMPLIANCE CERTIFICATE

                                CITY NETWORK, INC


     The undersigned,  _______________________ hereby certifies, with respect to
the sale of  shares  of  Common  Stock  of CITY  NETWORK,  INC (the  "COMPANY"),
issuable in connection with this Advance Notice and Compliance Certificate dated
___________________  (the  "NOTICE"),  delivered  pursuant to the Standby Equity
Distribution Agreement (the "AGREEMENT"),  as follows (all capitalized terms not
defined herein shall have the definition assigned to them in the Agreement):

     1. The undersigned is the duly elected ______________ of the Company.

     2. There are no  fundamental  changes to the  information  set forth in the
Registration  Statement which would require the Company to file a post effective
amendment to the Registration Statement.

     3. The Company has  performed in all material  respects all  covenants  and
agreements  to be  performed  by the  Company  on or prior to the  Advance  Date
related to this  Notice  and has  complied  in all  material  respects  with all
obligations and conditions contained in the Agreement.

     4. The undersigned  hereby  represents,  warrants and covenants that it has
made  all  filings  ("SEC  FILINGS")  required  to be  made  by it  pursuant  to
applicable securities laws (including,  without limitation, all filings required
under the Securities  Exchange Act of 1934, which include Forms 10-Q, 10-K, 8-K.
All SEC Filings and other public  disclosures  made by the  Company,  including,
without   limitation,   all  press  releases,   analysts   meetings  and  calls.
(collectively,  the "PUBLIC  DISCLOSURES"),  have been reviewed and approved for
release by the Company's attorneys and, if containing financial information, the
Company's independent certified public accountants. None of the Company's Public
Disclosures contain any untrue statement of a material fact or omit to state any
material fact required to be stated  therein or necessary to make the statements
therein,  in the light of the  circumstances  under  which they were  made,  not
misleading.

     5. The Advance requested is _____________________.

     The   undersigned   has  executed  this   Certificate   this  ____  day  of
_________________.

                               CITY NETWORK, INC


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

                                       25
<PAGE>
                                  SCHEDULE 2.6

                               CITY NETWORK, INC.

     The  undersigned  hereby  agrees that for a period  commencing  on the date
hereof and expiring on the later of (a) the  termination  of the Standby  Equity
Distribution  Agreement  dated August __, 2005 between City  Network,  Inc. (the
"COMPANY") and Cornell  Capital  Partners,  LP (the  "INVESTOR") or (b) the date
that all  amounts  owed to  Highgate  House  Funds,  Ltd.  ("HIGHGATE"),  or any
successors  or  assigns,  under the  Convertible  Debentures  issued to Highgate
pursuant to the Securities  Purchase  Agreement between the Company and Highgate
dated August __, 2005 have been paid (the "LOCK-UP PERIOD"),  he, she or it will
not, directly or indirectly,  without the prior written consent of the Investor,
issue,  offer, agree or offer to sell, sell, grant an option for the purchase or
sale of, transfer, pledge, assign, hypothecate, distribute or otherwise encumber
or dispose of except  pursuant to Rule 144 of the General Rules and  Regulations
promulgated under the Securities Act of 1933, as amended,  any securities of the
Company, including common stock or options, rights, warrants or other securities
underlying,  convertible into, exchangeable or exercisable for or evidencing any
right to purchase or subscribe for any common stock (whether or not beneficially
owned by the undersigned), or any beneficial interest therein (collectively, the
"SECURITIES").

     In order to enable the aforesaid covenants to be enforced,  the undersigned
hereby consents to the placing of legends and/or  stop-transfer  orders with the
transfer agent of the Company's securities with respect to any of the Securities
registered  in  the  name  of  the  undersigned  or  beneficially  owned  by the
undersigned, and the undersigned hereby confirms the undersigned's investment in
the Company.

Dated: _______________, 2005

                                 Signature



                                 Name:
                                      -----------------------------------
                                 Address:
                                 City, State, Zip Code:


                                 Print Social Security Number
                                 or Taxpayer I.D. Number

                                       26