DIGS, INC.

                            PLACEMENT AGENT AGREEMENT





                                                     Dated as of: March 14, 2000


May Davis Group, Inc.
One World Trade Center - Suite 8735
New York, New York, 10038

Ladies and Gentlemen:

     The undersigned,  Digs, Inc. (the "Company"),  hereby agrees with May Davis
Group, Inc. ("May Davis") as follows:

     1. Offering.

          A. The  Company  hereby  engages  May  Davis  to act as its  exclusive
placement  agent in  connection  with the  issuance and sale by the Company (the
"Offering") of the Company's  Convertible  Series A Preferred  Stock,  $0.01 par
value per share (the "Preferred  Stock"),  at a price of $1,000 per share for an
aggregate offering price of $2,500,000. For every forty (40) shares of Preferred
Stock  purchased  in the  Offering,  an  investor  will  receive a common  stock
purchase warrant  (collectively,  the "Warrants" and individually,  a "Warrant")
for the  purchase of one (1) share of the  Company's  common  stock,  $0.001 par
value per share (the "Common Stock").

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The Preferred  Stock will be convertible by the holder for a period of three (3)
years at any time after the Closing Date (as hereinafter defined) into shares of
Common  Stock  (the  'Conversion  Shares")  in  accordance  with the  terms  and
conditions set forth in the Company's  Certificate of Designations,  Preferences
and Rights  governing  the  Preferred  Stock to be filed by the Company with the
Secretary of State of Delaware on or before the Closing  Date (the  "Certificate
of  Designations").  Each  Warrant  entitles the holder to purchase one share of
Common Stock (the  "Warrant  Shares") for an exercise  price as set forth in the
Warrants.

The Preferred Stock and the Warrants are subject to the terms of the Certificate
of Designations,  the Securities  Purchase  Agreement (the "Securities  Purchase
Agreement") and the  registration  rights  agreement (the  "Registration  Rights
Agreement") to be executed by the Company and all investors who purchase  shares
of Preferred Stock and Warrants in the Offering and all disclosure  materials of
the Company referred to in the Securities Purchase Agreement (collectively,  the
"Offering Materials").  The Preferred Stock, the Conversion Shares, the Warrants
and the Warrant Shares are hereinafter sometimes collectively referred to as the
"Securities."  The Securities  will be offered  without  registration  under the
Securities  Act of 1933, as amended (the  "Securities  Act").  Purchasers of the
Securities  will be granted  certain  registration  rights  with  respect to the
Conversion  Shares  and the  Warrant  Shares  as more  fully  set  forth  in the
Registration  Rights  Agreement,  the Securities  Purchase  Agreement and in the
certificates representing the Preferred Stock and the Warrants.

               B. The Offering of Preferred Stock will be made by May Davis on a
"best efforts,  all or none" basis.  The closing of the Offering (the "Closing")
will occur as soon as  practicable  after the date on which  subscriptions  have
been  received  and  accepted by the Company for all 2,500  shares of  Preferred
Stock being sold in the Offering  (the  "Closing  Date"),  and the Company shall
issue  shares of  Preferred  Stock and  Warrants at the Closing  upon receipt of
investors'  funds that have cleared the banking  system in the normal  course of
business.  The Closing  will take place at the offices of  Silverman,  Collura &
Chernis,  P.C.,  counsel to May Davis, at 381 Park Avenue South, Suite 1601, New
York,  New York 10016,  or such other place as determined by the Company and May
Davis, at such time as shall be determined by May Davis.

               C. The  Offering  shall  commence  on the date  hereof  and shall
terminate on March 31, 2000,  unless extended by the Company and May Davis (such
date,  as  the  same  may  be  extended,  is  hereinafter  referred  to  as  the
"Termination  Date"; the period  commencing on the date hereof and ending on the

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Termination Date is sometimes referred to herein as the "Offering  Period").  If
subscriptions  for all shares of Preferred  Stock being  offered in the Offering
are not received by May Davis prior to the Termination  Date, all funds received
by investors  will be returned  thereto  without  interest  thereon or deduction
therefrom.

     2. Information.

          A.  The  Preferred  Stock  will be  offered  by May  Davis  on a "best
efforts, all or none" basis.

          B.  The Preferred  Stock  shall  have  the  terms  set  forth  in  the
Certificate  of  Designations  and the  Preferred  Stock and  Warrants  shall be
offered by the Company by means of the Securities  Purchase  Agreement and other
Offering  Materials.  Payment for the Preferred  Stock shall be made by check or
wire transfer as more fully described in the Securities Purchase Agreement.  The
minimum  purchase by any purchaser  shall be $50,000,  or 50 shares of Preferred
Stock,  except that  subscriptions  for lesser amounts of Preferred Stock may be
accepted  at the  discretion  of the  Company  and May Davis.  May Davis and the
Company  agree  that the  Preferred  Stock  will be  offered  and  sold  only to
"accredited   investors"  within  the  meaning  of  Rule  501  of  Regulation  D
("Accredited  Investors")  promulgated by the Securities and Exchange Commission
(the "Commission")  under the Securities Act and Rule 506 of Regulation D of the
Securities Act.

          C. In the event that the Closing occurs, the funds received in respect
of the shares of  Preferred  Stock  closed on will be  forwarded to the Company,
against delivery of the appropriate amount of the securities offered, net of (i)
the placement agent  commission equal to ten percent (10%) of the gross proceeds
from the sale of shares of Preferred Stock in the Offering, and (iii) legal fees
and expenses related thereto due to May Davis's counsel.

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          D. In  addition  to the  foregoing  compensation,  at the  Closing the
Company  shall issue to May Davis  common  stock  purchase  warrants to purchase
200,000 shares of Common Stock at an exercise price equal to 110% of the closing
bid  price of the  Common  Stock on the  Closing  Date  (the  Placement  Agent's
Warrants).  The Placement  Agent's  Warrants shall be exercisable at any time by
the  Placement  Agent's for a period of sixty (60) months from the Closing  Date
and shall contain such anti-dilution and other protective provisions as are
contained in the Warrants to be issued to investors in the Offering.

          E. At the  Closing,  the  Company  shall  cause to be paid by,  at the
option of May Davis,  certified or official bank check or wire transfer,  to the
extent not previously  paid by the Company to May Davis (i) the placement  agent
commission  equal to eight  percent (8%) of the gross  proceeds from the sale of
shares Preferred Stock in the Offering, (ii) mailing and related expenses of May
Davis and (iii) and legal fees and expenses  related  thereto due to May Davis's
counsel,  not to exceed $20,000 plus out of pocket expenses.  In addition to the
foregoing, the Company shall be responsible for the fees and expenses identified
in  Sections  6, 7, and 9  hereof,  which  expenses  shall  not be  deemed to be
commissions.

          F. May Davis shall not be  obligated  to sell any shares of  Preferred
Stock and  shall  only be  obligated  to offer  the  Preferred  Stock on a "best
efforts" basis.

          G.  The  Company  and May  Davis  reserve  the  right  to  reject  any
subscriber,  in whole or in part,  in  their  sole  discretion.  Notwithstanding
anything to the contrary  contained in this Section 2(G), the Company's right to
reject a subscriber  shall lapse three (3) days after  receipt by the Company of
the fully completed and duly executed subscription documents from May Davis with
respect to such  subscriber  (unless it is determined  subsequent to such period
that such subscriber does not meet the investor suitability requirements of this
Offering).  Funds received from any subscriber  whose  subscription  is rejected
will be returned to such  subscriber,  without  deduction  therefrom or interest
thereon,  but no sooner than such funds have  cleared the banking  system in the
normal course of business.

     3. Representations, Warranties and Covenants of May Davis.

          A. May Davis represents, warrants and covenants as follows:

               (i)  May  Davis  has the  necessary  power  to  enter  into  this
Agreement,  the Placement Agent's Warrant,  the Placement  Agent's  Registration
Agreement and to consummate the transactions contemplated hereby and thereby.

<PAGE>

               (ii) The execution  and delivery by May Davis of this  Agreement,
the  Placement  Agent's  Warrant,  the  Placement  Agent's  Registration  Rights
Agreement  and the  consummation  of the  transactions  contemplated  herein and
therein  will not  result  in any  violation  of,  or be in  conflict  with,  or
constitute a default under,  any agreement or instrument to which May Davis is a
party or by which  May  Davis or its  properties  are  bound,  or any  judgment,
decree,  order or, to May Davis's  knowledge,  any statute,  rule or  regulation
applicable to May Davis. This Agreement,  the Placement Agent's Warrant, and the
Placement Agent's  Registration  Rights Agreement when executed and delivered by
May Davis,  will  constitute  the legal,  valid and binding  obligations  of May
Davis,  enforceable in accordance  with their  respective  terms,  except to the
extent  that  (a)  the  enforceability  hereof  or  thereof  may be  limited  by
bankruptcy, insolvency, reorganization,  moratorium or similar laws from time to
time in  effect  and  affecting  the  rights  of  creditors  generally,  (b) the
enforceability  hereof or thereof is subject to general principles of equity, or
(c) the indemnification provisions hereof or thereof may be held to be violative
of public policy.

               (iii) May Davis  will  deliver  to each  purchaser,  prior to any
submission  by such person of a written  offer  relating to the  purchase of the
Preferred  Stock, the Securities  Purchase  Agreement,  the Registration  Rights
Agreement, the Warrant and a copy of the Certificate of Designations.

               (iv) Upon receipt of an executed Securities Purchase Agreement, a
Registration  Rights Agreement and the payments  representing  subscriptions for
shares  of  Preferred  Stock,  May Davis  will  promptly  forward  copies of the
Securities  Purchase Agreement and Registration  Rights Agreement to the Company
or its counsel and shall forward all  consideration  received for such shares of
Preferred Stock to be held in escrow.

               (v) May Davis will not  deliver  any  Offering  Materials  to any
person it does not reasonably believe to be an Accredited Investor.

               (vi) May Davis will not  intentionally  take any  action  that it
reasonably  believes  would cause the Offering to violate the  provisions of the
Securities  Act,  the  Securities  and  Exchange  Act of 1934,  as amended  (the
"Exchange  Act"), the respective  rules and regulations  promulgated  thereunder
(the  "Rules and  Regulations")  or  applicable  "Blue Sky" laws of any state or
jurisdiction.

<PAGE>


               (vii) May Davis shall use all reasonable efforts to determine (a)
whether any  prospective  purchaser is an  Accredited  Investor and (b) that any
information furnished by a prospective investor is true and accurate.  May Davis
shall have no  obligation  to insure  that (a) any check,  note,  draft or other
means of payment for the Preferred  Stock will be honored,  paid or  enforceable
against  the  subscriber  in  accordance  with its terms,  or (b) subject to the
performance  of  May  Davis's  obligations  and  the  accuracy  of  May  Davis's
representations  and warranties  hereunder,  (i) the Offering is exempt from the
registration  requirements  of the Securities Act or any applicable  state "Blue
Sky" law or (ii) any prospective purchaser is an Accredited Investor.

               (viii)  May  Davis is a member  of the  National  Association  of
Securities  Dealers,  Inc., and is a broker-dealer  registered as such under the
Exchange Act and under the securities  laws of the states in which the Preferred
Stock will be offered or sold by May Davis,  unless an exemption  for such state
registration  is available  to May Davis.  May Davis is in  compliance  with all
material rules and regulations  applicable to May Davis generally and applicable
to May Davis's participation in the Offering.

               (ix) Placement Agent agrees that Placement Agent shall not engage
in any  transaction  constituting a "short sale" (as defined in Rule 3b-3 of the
1934  Act) of  Common  Stock  for a period  of 12  months  from the date of this
Agreement.

     4. Representations and Warranties of the Company.

          A. The Company represents and warrants as follows:

          (i) The execution, delivery and performance of each of this Agreement,
the Securities  Purchase  Agreements,  the Registration  Rights Agreements,  the
Warrant,  the Placement  Agent's  Warrant,  the Placement  Agent's  Registration
Rights  Agreement and the Certificate of  Designations  has been or will be duly
and validly  authorized by the Company and is, or with respect to the Securities
Purchase  Agreements,  the  Registration  Rights  Agreements,  the Warrant,  the
Placement Agent's Warrant,  the Placement Agent's  Registration Rights Agreement
and the  Certificate of Designations  will be, a valid and binding  agreement of
the Company,  enforceable in accordance with their respective  terms,  except to
the  extent  that (a) the  enforceability  hereof or  thereof  may be limited by
bankruptcy, insolvency, reorganization,  moratorium or similar laws from time to
time in  effect  and  affecting  the  rights  of  creditors  generally,  (b) the
enforceability  hereof or thereof is subject to general  principles of equity or
(c) the indemnification provisions hereof or thereof may be held to be violative
of public policy.  The Securities have been duly authorized and, when issued and

<PAGE>


paid for in accordance with the (x) this Agreement, the Warrant, the Certificate
of  Designations,  the Securities  Purchase  Agreements,  the Placement  Agent's
Warrant the  certificates/instruments  representing each of such Securities, (y)
will be valid and binding obligations of the Company,  enforceable in accordance
with their respective  terms,  except to the extent that (a) the  enforceability
thereof may be limited by bankruptcy, insolvency, reorganization,  moratorium or
similar laws from time to time in effect and  affecting  the rights of creditors
generally,  and (b) the enforceability  thereof is subject to general principles
of equity.  All  corporate  action  required to be taken for the  authorization,
issuance  and sale of the  Securities  has been  duly and  validly  taken by the
Company.

          (ii)  The  Company  has a  duly  authorized,  issued  and  outstanding
capitalization  as set forth in the  Offering  Materials.  The  Company is not a
party to or bound by any instrument,  agreement or other  arrangement  providing
for  it  to  issue  any  capital  stock,  rights,  warrants,  options  or  other
securities, except for this Agreement and the agreements described herein and as
described in the Offering  Materials.  All issued and outstanding  securities of
the Company, have been duly authorized and validly issued and are fully paid and
non-assessable;  the holders  thereof have no rights of rescission or preemptive
rights with respect thereto and are not subject to personal  liability solely by
reason  of being  securityholders;  and none of such  securities  was  issued in
violation  of the  preemptive  rights  of any  holders  of any  security  of the
Company. The Company has 80,000,000 shares of authorized Common Stock, 6,648,631
of which will be issued and  outstanding as of the date hereof.  The Company has
20,000,000  authorized  shares of  Preferred  Stock,  of which  2,500  shares of
Redeemable  Convertible  Series A Preferred Stock will be outstanding  after the
Offering.

          (iii) The  Securities  have been duly  authorized  and when issued and
paid  for in  accordance  with  the  (x)  this  Agreement,  the  Certificate  of
Designations,  the Securities Purchase Agreements,  the Warrants,  the Placement
Agent's  Warrant,  the   certificates/instruments   representing  each  of  such
Securities,  (y) will be validly  issued,  fully-paid  and  non-assessable;  the
holders  thereof will not be subject to personal  liability  solely by reason of
being  such  holders;  such  securities  are not and will not be  subject to the
preemptive rights of any holder of any security of the Company.

          (iv) The  Company  has good and  marketable  title  to,  or valid  and
enforceable  leasehold  estates  in,  all  items of real and  personal  property
necessary to conduct its business  (including,  without  limitation  any real or
personal property stated in the Offering  Materials to be owned or leased by the
Company), free and clear of all liens, encumbrances,  claims, security interests

<PAGE>


and defects of any material nature whatsoever, other than those set forth in the
Offering Materials and liens for taxes not yet due and payable.

          (v) There is no litigation or governmental  proceeding  pending or, to
the best of the  Company's  knowledge,  threatened  against,  or  involving  the
properties  or  business  of the  Company,  except as set forth in the  Offering
Materials.

          (vi) The Company has been duly organized and is validly  existing as a
corporation in good standing under the laws of the State of Delaware.  Except as
set  forth in the  Offering  Materials,  the  Company  does not own or  control,
directly  or  indirectly,  an interest  in any other  corporation,  partnership,
trust,  joint venture or other business entity. The Company is duly qualified or
licensed and in good standing as a foreign  corporation in each  jurisdiction in
which the character of its operations  requires such  qualification or licensing
and where  failure to so qualify  would  have a material  adverse  effect on the
Company.  The Company has all requisite  corporate power and authority,  and all
material and necessary authorizations, approvals, orders, licenses, certificates
and  permits  of and from  all  governmental  regulatory  officials  and  bodies
(domestic  and foreign) to conduct its  businesses  (and  proposed  business) as
described in the Offering Materials, and the Company is doing business in strict
compliance  with  all  such   authorizations,   approvals,   orders,   licenses,
certificates and permits and all foreign,  federal,  state and local laws, rules
and regulations  concerning the business in which it is engaged. Any disclosures
in the Offering Materials concerning the effects of foreign,  federal, state and
local  regulation  on the  Company's  businesses  as currently  conducted and as
contemplated  are correct in all  material  respects  and do not omit to state a
material fact.  The Company has all corporate  power and authority to enter into
this Agreement,  the Securities  Purchase  Agreements,  the Registration  Rights
Agreements,  the Placement Agent's Warrant,  the Placement Agent's  Registration
Rights  Agreement  and the  Certificate  of  Designations  and to carry  out the
provisions and conditions hereof and thereof, and all consents,  authorizations,
approvals  and orders  required in connection  herewith and therewith  have been
obtained or will have been obtained prior to the  Termination  Date. No consent,
authorization or order of, and no filing with, any court,  government  agency or
other body is  required by the Company  for the  issuance of the  Securities  or
execution and delivery of the Securities  Purchase  Agreements and the Placement
Agent's Warrant,  the Placement Agent's Registration Rights Agreement except for
applicable federal and state securities laws. The Company,  since its inception,
has not incurred any liability  arising under or as a result of the  application
of any of the  provisions of the  Securities  Act, the Exchange Act or the Rules
and Regulations.

<PAGE>


          (vii) There has been no material  adverse  change in the  condition or
prospects of the Company,  financial or  otherwise,  from the latest dates as of
which such condition or prospects,  respectively,  are set forth in the Offering
Materials,  and the  outstanding  debt,  the  property  and the  business of the
Company conform in all material  respects to the descriptions  thereof contained
in the Offering Materials.

          (viii) Except as set forth in the Offering  Materials,  the Company is
not in breach of, or in default  under,  any term or  provision  of any material
indenture, mortgage, deed of trust, lease, note, loan or credit agreement or any
other  material  agreement or instrument  evidencing an obligation  for borrowed
money,  or any other material  agreement or instrument to which it is a party or
by which it or any of its  properties  may be bound or affected.  The Company is
not in  violation  of any  provision of its charter or Bylaws or in violation of
any franchise,  license, permit,  judgment,  decree or order, or in violation of
any statute,  rule or  regulation.  Neither the  execution  and delivery of this
Agreement,   the  Securities  Purchase   Agreements,   the  Registration  Rights
Agreements, the Placement Agent's Warrant, or the Placement Agent's Registration
Rights Agreement, or the Certificate of Designations,  nor the issuance and sale
or delivery of the Securities,  nor the  consummation of any of the transactions
contemplated herein or in the Securities Purchase Agreements,  Placement Agent's
Warrant,  or the  Placement  Agent's  Registration  Rights  Agreement,  nor  the
compliance by the Company with the terms and provisions  hereof or thereof,  has
conflicted  with or will  conflict  with, or has resulted in or will result in a
breach  of,  any of the terms and  provisions  of,  or has  constituted  or will
constitute a default under, or has resulted in or will result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company or  pursuant  to the terms of any  indenture,  mortgage,  deed of trust,
note, loan or credit  agreement or any other agreement or instrument  evidencing
an obligation for borrowed  money, or any other agreement or instrument to which
the  Company  may be bound or to which  any of the  property  or  assets  of the
Company is subject  except (a) where such default,  lien,  charge or encumbrance
would not have a material  adverse effect on the Company and (b) as described in
the  Offering  Materials;  nor will such action  result in any  violation of the
provisions  of the  charter or the Bylaws of the Company  or,  assuming  the due
performance by May Davis of its obligations hereunder, any statute or any order,
rule or  regulation  applicable  to the Company of any court or of any  foreign,
federal,  state or other  regulatory  authority or other  government body having
jurisdiction over the Company.

          (ix)  Subsequent to the dates as of which  information is given in the
Offering  Materials,  and except as may  otherwise be indicated or  contemplated
herein or therein, the Company has not (a) issued any securities or incurred any
liability  or  obligation,  direct or  contingent,  for borrowed  money,  or (b)
entered into any transaction  other than in the ordinary course of business,  or

<PAGE>


(c)  declared  or paid any  dividend  or made any  other  distribution  on or in
respect of its capital stock. Except as described in the Offering Materials, the
Company  has no  outstanding  obligations  to any  officer  or  director  of the
Company.

          (x) There are no claims  for  services  in the  nature of a finder' or
origination  fee with  respect to the sale of the  Preferred  Stock or any other
arrangements,   agreements  or  understandings   that  may  affect  May  Davis's
compensation,  as determined by the National  Association of Securities Dealers,
Inc.

          (xi) The  Company  owns or  possesses,  free and clear of all liens or
encumbrances  and rights  thereto or therein  by third  parties,  the  requisite
licenses  or other  rights to use all  trademarks,  service  marks,  copyrights,
service names, trade names, patents,  patent applications and licenses necessary
to conduct its business  (including,  without  limitation,  any such licenses or
rights  described in the  Offering  Materials as being owned or possessed by the
Company) and, except as set forth in the Offering  Materials,  there is no claim
or action by any person  pertaining  to, or  proceeding,  pending or threatened,
which  challenges  the  exclusive  rights of the  Company  with  respect  to any
trademarks,  service marks,  copyrights,  service names,  trade names,  patents,
patent applications and licenses used in the conduct of the Company's businesses
(including,  without  limitation,  any such licenses or rights  described in the
Offering  Materials as being owned or possessed by the Company) except any claim
or action  that would not have a material  adverse  effect on the  Company;  the
Company's  current  products,  services or processes do not infringe or will not
infringe on the patents currently held by any third party.

          (xii) Except as described  in the Offering  Materials,  the Company is
not under any obligation to pay royalties or fees of any kind  whatsoever to any
third party with respect to any trademarks,  service marks, copyrights,  service
names, trade names, patents, patent applications,  licenses or technology it has
developed,  uses,  employs  or  intends  to use or  employ,  other than to their
respective licensors.

          (xiii)  Subject  to the  performance  by May Davis of its  obligations
hereunder,  the  Offering  Materials  and the offer  and sale of the  Securities
comply,  and will continue to comply, up to the Termination Date in all material
respects with the  requirements  of Rule 506 of Regulation D promulgated  by the
Commission  pursuant to the Securities Act and any other applicable  federal and
state laws,  rules,  regulations  and  executive  orders.  Neither the  Offering
Materials nor any amendment or supplement  thereto nor any documents prepared by
the Company in connection with the Offering will 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 light of the circumstances under
which they were made,  not  misleading.  All statements of material facts in the

<PAGE>


Offering Materials are true and correct as of the date of the Offering Materials
and will be true and correct on the date of the Closing.

          (xiv) All taxes which are due and payable  from the Company  have been
paid in full  and the  Company  does  not  have  any  tax  deficiency  or  claim
outstanding assessed or proposed against it.

          (xv) The financial information of the Company included in the Offering
Materials  fairly  presents the financial  position of the Company in accordance
with generally accepted accounting principles  consistently  applied.  There has
been no adverse change or development involving a material prospective change in
the  condition,   financial  or  otherwise,  or  in  the  earnings,   prospects,
stockholders'  equity,  value,  operations,  properties,  business or results of
operations of the Company on a consolidated basis, whether or not arising in the
ordinary  course  of  business,  since  the  date of the most  recent  financial
information  included in the Offering  Materials;  and the outstanding debt, the
property,  both  tangible  and  intangible,  and the  businesses  of the Company
conform in all material  respects to the descriptions  thereof  contained in the
Offering Materials.

          (xvi)  None  of  the  Company  nor  any of  its  officers,  directors,
employees or agents, nor any other person acting on behalf of the Company,  has,
directly  or  indirectly,  given or agreed to give any  money,  gift or  similar
benefit (other than legal price  concessions to customers in the ordinary course
of  business)  to any  customer,  supplier,  employee  or agent of a customer or
supplier,  or official or employee of any governmental agency or instrumentality
of any government  (domestic or foreign) or any political party or candidate for
office  (domestic  or foreign) or other person who is or may be in a position to
help or hinder the business of the Company (or assist it in connection  with any
actual or  proposed  transaction)  which (A) might  subject  the  Company to any
damage  or  penalty  in  any  civil,  criminal  or  governmental  litigation  or
proceeding, or (B) if not given in the past, might have had a materially adverse
effect on the assets,  business or operations of the Company as reflected in any
of the financial statements  contained in the Offering Materials,  or (C) if not
continued in the future, might adversely affect the assets, business, operations
or prospects of the Company in the future.

     5. Certain Covenants and Agreements of the Company.

          The  Company  covenants  and agrees at its  expense  and  without  any
     expense to May Davis as follows:

          A. To advise May Davis of any material adverse change in the Company's
financial  condition,  prospects  or business or of any  development  materially
affecting the Company or rendering  untrue or misleading any material  statement

<PAGE>


in the Offering Materials  occurring at any time prior to the Closing as soon as
the Company is either informed or becomes aware thereof.

         B. To use its best efforts to cause the  Securities  to be qualified or
registered  for  sale,  or to  obtain  exemptions  from  such  qualification  or
registration requirements, on terms consistent with those stated in the Offering
Materials  under the securities  laws of such  jurisdictions  as May Davis shall
reasonably  request,  provided that such states and jurisdictions do not require
the Company to qualify as a foreign corporation. Qualification, registration and
exemption charges and fees shall be at the sole cost and expense of the Company.

         C. Upon  written  request,  to provide and  continue to provide to each
holder of Securities participating in the Offering, so long as such holder shall
remain a security  holder of the Company,  for a period ending on the earlier of
(i) the  registration  of the  Conversion  Shares and Warrant  Shares  under the
Securities Act and (ii) three (3) years from the Termination Date, copies of all
quarterly financial  statements and audited annual financial statements prepared
by or on behalf of the Company,  other  reports  prepared by or on behalf of the
Company for public  disclosure  and all  documents  delivered  to the  Company's
stockholders.

         D.  To  deliver,  for a  period  ending  on  the  earlier  of  (i)  the
registration  of the  Conversion  Shares and Warrant Shares under the Securities
Act and (ii) three (3) years following the Termination  Date, to May Davis, upon
May Davis's request,  in the manner provided in Section 10(B) of this Agreement:
(i)  within  forty  five  (45) days  after  the end of each of the  first  three
quarters of each fiscal year of the Company,  commencing  with the first quarter
ending  after the  Termination  Date,  a  statement  of its income for each such
quarterly  period,  and  its  balance  sheet  and  a  statement  of  changes  in
stockholders'  equity as of the end of such quarterly period,  all in reasonable
detail,  certified by its principal financial or accounting officer; (ii) within
ninety (90) days after the close of each fiscal  year,  its balance  sheet as of
the close of such fiscal year,  together with a statement of income, a statement
of changes in stockholders'  equity and a statement of cash flow for such fiscal
year,  such  balance  sheet,  statement  of  income,  statement  of  changes  in
stockholders'  equity and statement of cash flow to be in reasonable  detail and
accompanied  by a copy of the  certificate  or  report  thereon  of  independent
auditors if audited financial  statements are prepared;  and (iii) a copy of all
documents,  reports and  information  furnished to its  stockholders at the time
that such documents, reports and information are furnished to its stockholders.

         E. To apply the proceeds of the Offering  substantially  in  accordance
with the Offering Materials.

<PAGE>


         F. To provide May Davis with as many copies of the  Offering  Materials
as May Davis may reasonably request.

         G. To comply with the terms of the Securities Purchase Agreements,  the
Registration  Rights Agreements,  the Placement Agent's Warrants,  the Placement
Agent's  Registration Rights Agreement,  the Certificate of Designations and the
Warrants.

         H. To keep available out of its authorized  Common Stock solely for the
purpose of issuance upon the conversion of the Preferred  Stock, the exercise of
the Warrants and the Placement Agent's Warrant,  such number of shares of Common
Stock as shall then be issuable upon the exercise or conversion thereof.

         I. To issue to May Davis, or May Davis's designee,  at the Closing, the
Placement  Agent  Warrant  to  purchase  200,000  shares of Common  Stock.  Each
Placement  Agent Warrant shall entitle the holder  thereof to purchase one share
of Common  Stock at an exercise  price equal to 110% of the closing bid price of
the Common  Stock on the Closing  Date  (subject  to  adjustment  under  certain
circumstances)  at any time  commencing  from  issuance  until sixty (60) months
thereafter.  The  Placement  Agent's  Warrants  shall not be  redeemable  by the
Company.  The terms of the Placement  Agent's  Warrants  shall be more fully set
forth in the certificate(s) representing the Placement Agent's Warrants.

         J. To ensure that any transactions between or among the Company, or any
of its officers, directors and affiliates be on terms and conditions that are no
less  favorable  to the  Company,  than the terms and  conditions  that would be
available in an "arm's length" transaction with an independent third party.

     6. Indemnification.

         A. The Company  hereby agrees that it will indemnify and hold May Davis
and each  officer,  director,  shareholder,  employee or  representative  of May
Davis, and each person  controlling,  controlled by or under common control with
May Davis within the meaning of Section 15 of the  Securities  Act or Section 20
of the Exchange Act or the Rules and Regulations,  harmless from and against any
and all loss, claim, damage,  liability,  cost or expense whatsoever (including,
but not limited to, any and all  reasonable  legal fees and other  expenses  and
disbursements incurred in connection with investigating,  preparing to defend or
defending   any  action,   suit  or   proceeding,   including   any  inquiry  or
investigation,  commenced or threatened, or any claim whatsoever or in appearing
or preparing  for  appearance  as a witness in any action,  suit or  proceeding,
including  any  inquiry,   investigation  or  pretrial   proceeding  such  as  a
deposition)  to which  May  Davis or such  indemnified  person  of May Davis may

<PAGE>


become  subject  under the  Securities  Act,  the  Exchange  Act,  the Rules and
Regulations,  or any other  federal  or state law or  regulation,  common law or
otherwise,  arising  out of or based  upon (i) any untrue  statement  or alleged
untrue  statement  of a  material  fact  contained  in  (A)  Section  4 of  this
Agreement,  (B) the Offering Materials (except those written statements relating
to May Davis given by an  indemnified  person for  inclusion  therein),  (C) any
application or other document or written  communication  executed by the Company
or  based  upon  written  information  furnished  by the  Company  filed  in any
jurisdiction  in order to qualify the Preferred  Stock under the securities laws
thereof,  or any state  securities  commission  or agency;  (ii) the omission or
alleged omission from documents  described in clauses (A), (B) or (C) above of a
material fact required to be stated  therein or necessary to make the statements
therein not  misleading;  or (iii) the breach of any  representation,  warranty,
covenant or agreement made by the Company in this Agreement. The Company further
agrees that upon demand by an  indemnified  person,  at any time or from time to
time, it will promptly  reimburse such indemnified  person for any loss,  claim,
damage,  liability,  cost  or  expense  actually  and  reasonably  paid  by  the
indemnified  person as to which the Company has indemnified such person pursuant
hereto.  Notwithstanding  the foregoing  provisions of this Paragraph  6(A), any
such payment or reimbursement by the Company of fees,  expenses or disbursements
incurred by an indemnified person in any proceeding in which a final judgment by
a court of competent  jurisdiction  (after all appeals or the expiration of time
to appeal) is entered against May Davis or such  indemnified  person as a direct
result of May Davis or such person's  gross  negligence  or willful  misfeasance
will be promptly repaid to the Company.

         B. May Davis hereby agrees that it will  indemnify and hold the Company
and each  officer,  director,  shareholder,  employee or  representative  of the
Company, and each person controlling, controlled by or under common control with
the Company within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act or the Rules and Regulations,  harmless from and against any
and all loss, claim, damage,  liability,  cost or expense whatsoever (including,
but not limited to, any and all  reasonable  legal fees and other  expenses  and
disbursements incurred in connection with investigating,  preparing to defend or
defending   any  action,   suit  or   proceeding,   including   any  inquiry  or
investigation,  commenced or threatened, or any claim whatsoever or in appearing
or preparing  for  appearance  as a witness in any action,  suit or  proceeding,
including  any  inquiry,   investigation  or  pretrial   proceeding  such  as  a
deposition) to which the Company or such  indemnified  person of the Company may
become  subject  under the  Securities  Act,  the  Exchange  Act,  the Rules and
Regulations,  or any other  federal  or state law or  regulation,  common law or
otherwise,  arising  out of or based  upon (i) the  conduct  of May Davis or its
officers,  employees or representatives in its acting as Placement Agent for the
Offering  or (ii)  the  breach  of any  representation,  warranty,  covenant  or

<PAGE>


agreement made by May Davis in this Agreement.

         C.  Promptly  after  receipt  by an  indemnified  party  of  notice  of
commencement  of any action  covered by  Section  6(A) or 6(B),  the party to be
indemnified shall,  within five (5) business days, notify the indemnifying party
of the commencement  thereof; the omission by one indemnified party to so notify
the  indemnifying  party  shall  not  relieve  the  indemnifying  party  of  its
obligation to indemnify any other  indemnified  party that has given such notice
and shall not relieve the  indemnifying  party of any liability  outside of this
indemnification  if not  materially  prejudiced  thereby.  In the event that any
action is brought against the indemnified  party, the indemnifying party will be
entitled to participate  therein and, to the extent it may desire, to assume and
control  the  defense  thereof  with  counsel  chosen by it which is  reasonably
acceptable to the indemnified party. After notice from the indemnifying party to
such  indemnified  party of its election to so assume the defense  thereof,  the
indemnifying  party  will not be liable to such  indemnified  party  under  such
Section 6(A) or 6(B) for any legal or other  expenses  subsequently  incurred by
such  indemnified  party  in  connection  with  the  defense  thereof,  but  the
indemnified  party  may,  at its own  expense,  participate  in such  defense by
counsel  chosen by it,  without,  however,  impairing the  indemnifying  party's
control  of  the  defense.   Subject  to  the  proviso  of  this   sentence  and
notwithstanding  any other  statement  to the  contrary  contained  herein,  the
indemnified  party or  parties  shall  have the right to choose its or their own
counsel  and  control  the  defense  of any  action,  all at the  expense of the
indemnifying  party if,  (i) the  employment  of such  counsel  shall  have been
authorized in writing by the  indemnifying  party in connection with the defense
of  such  action  at  the  expense  of  the  indemnifying  party,  or  (ii)  the
indemnifying  party shall not have employed counsel  reasonably  satisfactory to
such  indemnified  party to have charge of the  defense of such action  within a
reasonable  time  after  notice of  commencement  of the  action,  or (iii) such
indemnified  party or parties shall have reasonably  concluded that there may be
defenses available to it or them which are different from or additional to those
available  to one  or  all  of the  indemnifying  parties  (in  which  case  the
indemnifying  parties  shall not have the right to direct  the  defense  of such
action on behalf of the  indemnified  party or parties),  in any of which events
such  fees  and  expenses  of one  additional  counsel  shall  be  borne  by the
indemnifying party; provided, however, that the indemnifying party shall not, in
connection with any one action or separate but substantially  similar or related
actions in the same jurisdiction  arising out of the same general allegations or
circumstance,  be liable for the  reasonable  fees and expenses of more than one
separate  firm of attorneys  at any time for all such  indemnified  parties.  No
settlement of any action or  proceeding  against an  indemnified  party shall be
made without the consent of the indemnifying party.

<PAGE>


         D.  In  order  to  provide  for  just  and  equitable  contribution  in
circumstances in which the indemnification  provided for in Section 6(A) or 6(B)
is due in accordance  with its terms but is for any reason held by a court to be
unavailable  on grounds of policy or otherwise,  the Company and May Davis shall
contribute to the aggregate losses,  claims,  damages and liabilities (including
legal or other expenses reasonably incurred in connection with the investigation
or defense  of same)  which the other may incur in such  proportion  so that May
Davis shall be  responsible  for such  percent of the  aggregate of such losses,
claims,  damages  and  liabilities  as shall equal the  percentage  of the gross
proceeds paid to May Davis and the Company shall be responsible for the balance;
provided, however, that no person guilty of fraudulent  misrepresentation within
the  meaning  of  Section  11(f) of the  Securities  Act  shall be  entitled  to
contribution   from  any  person   who  was  not   guilty  of  such   fraudulent
misrepresentation.  For purposes of this Section 6(D),  any person  controlling,
controlled by or under common control with May Davis, or any partner,  director,
officer,  employee,  representative or any agent of any thereof,  shall have the
same rights to contribution as May Davis and each person controlling, controlled
by or under common  control with the Company within the meaning of Section 15 of
the  Securities  Act or Section 20 of the  Exchange  Act and each officer of the
Company  and  each  director  of the  Company  shall  have the  same  rights  to
contribution as the Company.  Any party entitled to contribution will,  promptly
after  receipt  of notice of  commencement  of any  action,  suit or  proceeding
against  such  party in respect  of which a claim for  contribution  may be made
against  the other party under this  Section  6(D),  notify such party from whom
contribution  may be sought,  but the omission to so notify such party shall not
relieve the party from whom  contribution may be sought from any obligation they
may have  hereunder  or  otherwise  if the party from whom  contribution  may be
sought is not  materially  prejudiced  thereby.  The indemnity and  contribution
agreements  contained in this Section 6 shall remain operative and in full force
and  effect  regardless  of  any  investigation  made  by or on  behalf  of  any
indemnified person or any termination of this Agreement.

     7. Payment of Expenses.

Whether or not the Offering is successfully completed, the Company hereby agrees
to bear all of the expenses in connection with the Offering,  including, but not
limited  to  the  following:   filing  fees,  printing  and  duplicating  costs,
advertisements, postage and mailing expenses with respect to the transmission of
Offering  Materials,  registrar and transfer  agent fees,  escrow agent fees and
expenses,  fees of the  Company's  counsel and  accountants,  issue and transfer
taxes,  if any, and counsel fees and expenses  (such  counsel fees not to exceed
$20,000 plus out of pocket expenses).

<PAGE>


     8. Conditions of the Closing

         The Closing  shall be held at the offices of May Davis or its  counsel.
The  obligations  of May Davis  hereunder  shall be  subject  to the  continuing
accuracy of the  representations  and warranties of the Company herein as of the
date hereof and as of the Closing  with respect to the Company as if it had been
made on and as of the  Closing;  the  accuracy  on and as of the  Closing of the
statements  of the  officers of the  Company  made  pursuant  to the  provisions
hereof;  and the  performance  by the  Company  on and as of the  Closing of its
covenants and obligations hereunder and to the following further conditions:

          A. At the Closing,  May Davis shall  receive the opinion of William B.
Barnett,  Esq.,  counsel to the  Company,  dated as of the date of the  Closing,
which opinion shall be in form and substance reasonably  satisfactory to counsel
for May Davis.

         B. At or prior to the  Closing,  counsel  for May Davis shall have been
furnished  such  documents,  certificates  and  opinions as they may  reasonably
require  for the  purpose of  enabling  them to review or pass upon the  matters
referred  to in this  Agreement  and the  Offering  Materials,  or in  order  to
evidence   the   accuracy,   completeness   or   satisfaction   of  any  of  the
representations, warranties or conditions herein contained.

         C. At and prior to the  Closing,  (i) there shall have been no material
adverse change nor development  involving a prospective  change in the condition
or prospects or the business activities,  financial or otherwise, of the Company
from the latest  dates as of which such  condition  is set forth in the Offering
Materials; (ii) there shall have been no transaction, not in the ordinary course
of  business,  entered into by the Company  which has not been  disclosed in the
Offering Materials or to May Davis in writing;  (iii) except as set forth in the
Offering  Materials,  the Company shall not be in default under any provision of
any instrument  relating to any outstanding  indebtedness  for which a waiver or
extension  has not been  otherwise  received;  (iv)  except  as set forth in the
Offering Materials, the Company shall not have issued any securities (other than
those set forth in the Offering  Materials)  or declared or paid any dividend or
made any distribution of its capital stock of any class and there shall not have
been any  change in the  indebtedness  (long or short  term) or  liabilities  or
obligations of the Company (contingent or otherwise);  (v) no material amount of
the assets of the  Company  shall  have been  pledged  or  mortgaged,  except as
indicated in the Offering Materials;  and (v) no action, suit or proceeding,  at
law or in equity,  against the Company or  affecting  any of its  properties  or
businesses  shall be pending or threatened  before or by any court or federal or
state commission,  board or other  administrative  agency,  domestic or foreign,
wherein an unfavorable  decision,  ruling or finding could materially  adversely
affect  the  businesses,  prospects  or  financial  condition  or  income of the
Company, except as set forth in the Offering Materials.

<PAGE>


         D. At the Closing,  May Davis shall have received a certificate  of the
Company signed by its chief executive officer and chief financial officer, dated
as of the date of the Closing,  to the effect that the  conditions  set forth in
subparagraph (C) above have been satisfied and that, as of the Closing Date, the
representations  and  warranties  of the Company  set forth  herein are true and
correct.

         E. At the Closing,  the Company  shall have duly executed and delivered
to May Davis, or its designees, the Placement Agent's Warrants, in the names and
denominations specified by May Davis.

          9. Termination.

         This Agreement shall terminate if the Closing specified in Section 1(B)
does  not take  place  on or  before  seven  (7)  business  days  following  the
Termination Date or as soon thereafter as the funds received from  subscriptions
have cleared the banking  system in the normal  course of  business.  Either May
Davis or the Company may terminate the Offering in its sole discretion  prior to
the Closing.  In the event that the Company determines to terminate the Offering
from and after the date hereof  through the end of the  Offering  Period for any
reason  other than May Davis's  breach of the terms of this  Agreement,  and May
Davis is willing to proceed, then the Company shall immediately pay to May Davis
the amount of its out-of-pocket expenses. Upon such termination,  the Securities
Purchase  Agreements,  Registration  Rights  Agreements  and  payments  for  the
Preferred  Stock not  previously  delivered to the purchasers  thereof,  without
interest  thereon or deduction  therefrom,  shall be returned to the  respective
subscribers,  May Davis shall have no further obligation to the Company, and the
Company shall have no obligation to May Davis. If May Davis does not or fails to
complete  the  Offering and the reasons  therefor  are  reasonably  related to a
material  adverse  change in the  business or  financial  results,  prospects or
condition of the Company,  factors beyond May Davis control and through no fault
of its own or a material  adverse change in market  conditions then, in any such
case,  the  Company  agrees to promptly  pay May Davis its actual  out-of-pocket
expenses, including the fees and disbursements of May Davis's legal counsel.

          10. Miscellaneous.

         A. This Agreement may be executed in any number of  counterparts,  each
of which shall be deemed to be an original,  but all which shall be deemed to be
one and the same instrument.

<PAGE>


         B. Any notice  required or  permitted  to be given  hereunder  shall be
given in writing  and shall be deemed  effective  when  deposited  in the United
States mail, postage prepaid, or when received if personally delivered or faxed,
addressed as follows:


         To May Davis:

                  May Davis Group, Inc.
                  One World Trade Center - Suite 8735
                  New York, New York  10048
                  Attention:


         with a copy to:

                  Silverman, Collura & Chernis, P.C.
                  Martin C. Licht, Esq.
                  381 Park Avenue South B Suite 1601
                  New York, New York  10016
                  Fax: (212) 779-8858

         To the Company:

                  Digs, Inc.
                  17327 Ventura Blvd., Suite 200
                  Encino CA 91316
                  Attention: Peter Dunn

or to such other address of which written notice is given to the others.

         C. This  Agreement  shall be governed by and  construed in all respects
under the laws of the State of New York,  without  reference  to its conflict of
laws rules or principles. Any suit, action, proceeding or litigation arising out
of or relating to this Agreement shall be brought and prosecuted in such federal
or state  court or courts  located  within the State of New York as  provided by
law.  The  parties  hereby  irrevocably  and  unconditionally   consent  to  the
jurisdiction  of each such court or courts  located within the State of New York
and to service of  process by  registered  or  certified  mail,  return  receipt
requested,  or by any other  manner  provided  by  applicable  law,  and  hereby
irrevocably and unconditionally  waive any right to claim that any suit, action,
proceeding  or litigation  so commenced  has been  commenced in an  inconvenient
forum.

<PAGE>


         D. This Agreement and the other  agreements  referenced  herein contain
the entire  understanding  between the parties hereto and may not be modified or
amended except by a writing duly signed by the party against whom enforcement of
the modification or amendment is sought.

         E. If any  provision of this  Agreement  shall be held to be invalid or
unenforceable,  such invalidity or  unenforceability  shall not affect any other
provision of this Agreement.

<PAGE>



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

                                   DIGS, INC.

                                                   By: /s/ PETER B. DUNN
                                                           --------------
                                                    Name:  Peter B. Dunn
                                                    Title: President

MAY DAVIS GROUP, INC.




By:      ________________________
         Name:
         Title: