EXHIBIT 10.21


                              INVESTMENT AGREEMENT


     INVESTMENT AGREEMENT (this "AGREEMENT"), dated as of October 5, 2001 by and
among CAN-CAL  Resources,  Ltd., a Nevada  corporation (the "COMPANY"),  and the
undersigned investors (the "INVESTOR").

     WHEREAS,  the  parties  desire  that,  upon the  terms and  subject  to the
conditions  contained  herein,  the Investor  shall invest up to  $8,000,000  to
purchase  the  Company's  common  stock,  $.001 par value per share (the "COMMON
STOCK");

     WHEREAS,  such  investments will be made in reliance upon the provisions of
Section 4(2) under the Securities Act of 1933, as amended (the "1933 ACT"), Rule
506 of  Regulation  D, and the rules  and  regulations  promulgated  thereunder,
and/or upon such other exemption from the registration  requirements of the 1933
Act as may be available with respect to any or all of the  investments in Common
Stock to be made hereunder.

     WHEREAS,   contemporaneously  with  the  execution  and  delivery  of  this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement   substantially  in  the  form  attached  hereto  as  Exhibit  A  (the
"REGISTRATION  RIGHTS  AGREEMENT")  pursuant  to which the Company has agreed to
provide  certain  registration  rights  under  the 1933  Act,  and the rules and
regulations promulgated thereunder, and applicable state securities laws.

     NOW THEREFORE, the Company and the Investor hereby agree as follows:

     1. DEFINITIONS.  As used in this Agreement,  the following terms shall have
the  following  meanings  specified or  indicated,  and such  meanings  shall be
equally applicable to the singular and plural forms of the defined terms.

"1933 ACT" shall mean the Securities Act of 1933, as it may be amended.

"1934 ACT" shall mean the Securities Exchange Act of 1934, as it may be amended.

"AFFILIATE" shall have the meaning specified in Section 5(h).

"AGREED  UPON  PROCEDURES  REPORT"  shall have the meaning  specified in Section
2(o).

"AGREEMENT" shall mean this Investment Agreement.

"BRING DOWN COLD  COMFORT  LETTER"  shall have the meaning  specified in Section
2(n).


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"BUY-IN" shall have the meaning specified in Section 6.

"BUY-IN ADJUSTMENT AMOUNT" shall have the meaning specified in Section 6.

"CLOSING" shall have the meaning specified in Section 2(h).

"CLOSING  DATE"  shall  mean,  as  defined in  Section  2(h),  the date which is
thirteen (13) Trading Days following the Put Notice Date.

"COMMON STOCK" shall mean the Common Stock of the Company.

"CONTROL" or "CONTROLS" shall have the meaning specified in Section 5(h).

"COVERING SHARES" shall have the meaning specified in Section 6.

"EFFECTIVE DATE" shall mean the date the SEC declares effective the Registration
Statement covering the transactions described in the Agreement.

"ENVIRONMENTAL LAWS" shall have the meaning specified in Section 4(m).

"ESCROW AGENT" shall mean First Union National Bank.

"ESCROW  AGREEMENT"  shall mean the Escrow  Agreement  entered  into between the
Company, Investor and Escrow Agent and attached as Exhibit C.

"EXECUTION  DATE" shall mean the date all Transaction  Documents are executed by
the Company and Investor.

"INDEMNITEES" shall have the meaning specified in Section 10.

"INDEMNIFIED LIABILITIES" shall have the meaning specified in Section 10.

"INEFFECTIVE  PERIOD"  shall  mean any  period  of time  that  the  Registration
Statement  or  any  Supplemental  Registration  Statement  (as  defined  in  the
Registration  Rights Agreement)  becomes  ineffective or unavailable for use for
the sale or resale, as applicable,  of any or all of the Registrable  Securities
(as  defined in the  Registration  Rights  Agreement)  for any reason (or in the
event the prospectus  under either of the above is not current and  deliverable)
during any time period required under the Registration Rights Agreement.

"INVESTOR" shall mean the undersigned investors.

"MAJOR TRANSACTION" shall have the meaning specified in Section 2(g).

"MATERIAL ADVERSE EFFECT" shall have the meaning specified in Section 4(a).


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"MATERIAL FACTS" shall have the meaning specified in Section 2(m).

"MAXIMUM  COMMON  STOCK  ISSUANCE"  shall have the meaning  specified in Section
2(j).

"OPEN PERIOD"  shall mean the period  beginning on and including the Trading Day
immediately  following the  Effective  Date and ending on the earlier of (i) the
date  which  is  thirty-six  (36)  months  from  the  Effective  Date  and  (ii)
termination of the Agreement in accordance with Section 9.

"PAYMENT AMOUNT" shall have the meaning specified in Section 2(p).

"PARTIAL RELEASE FORM" shall have the meaning specified in Section 2(i).

"PRICING  PERIOD"  shall mean the period  beginning  on the Put Notice  Date and
ending on and  including  the date which is ten (10) Trading Days after such Put
Notice Date.

"PRINCIPAL MARKET" shall have the meaning specified in Section 2(f).

"PROSPECTUS" shall mean the prospectus,  preliminary prospectus and supplemental
prospectus used in connection with the Registration Statement.

"PURCHASE  AMOUNT" shall mean the total amount being paid by both Investors on a
particular Closing Date to purchase the Shares.

"PURCHASE  PRICE" shall mean 93% of the average of the lowest  closing bid price
of the  Company's  Common  Stock  during the first five (5) Trading  Days of the
specified  Pricing  Period and the  lowest  closing  bid price of the  Company's
Common Stock during the second five (5) Trading  Days of the  specified  Pricing
Period.

"PUT  AMOUNT"  shall mean,  with  respect to any single Put Notice,  one hundred
seventy-  five  percent  (175%) of the average  daily  volume for the forty (40)
Trading Days prior to the applicable Put Notice Date  multiplied by ninety-three
(93%) of the lowest  closing bid price during that period,  but in no event more
than $1,000,000.

"PUT  NOTICE"  shall mean a written  notice sent to the  Investor by the Company
stating  the Put Amount of Shares the  Company  intends to sell to the  Investor
pursuant to the terms of the Agreement and stating the current  number of Shares
issued and outstanding on such date.

"PUT NOTICE DATE" shall mean the Trading Day  immediately  following  the day on
which the Investor  receives a Put Notice,  however a Put Notice shall be deemed
delivered on (x) 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  (receipt
being deemed to occur if the Company  possess a facsimile  confirmation  showing
completed  transmission by such time), or (y) the immediately succeeding Trading
Day if it is received by facsimile or otherwise after 12:00

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noon Eastern Time on a Trading Day (receipt being documented as described in (x)
above).  No Put  Notice may be deemed  delivered  on a day that is not a Trading
Day.

"REGISTRATION OPINION" shall have the meaning specified in Section 2(m).

"REGISTRATION  OPINION  DEADLINE"  shall mean the date that is three (3) Trading
Days prior to each Put Notice Date.

"REGISTRATION PERIOD" shall have the meaning specified in Section 5(c).

"REGISTRATION  RIGHTS  AGREEMENT"  shall mean the Agreement  entered into by the
Company with Investor for the registration of this transaction.

"REGISTRATION  STATEMENT" means the registration  statement of the Company filed
under the 1933 Act covering this transaction.

"RELATED PARTY" shall have the meaning specified in Section 5(h).

"REPURCHASE EVENT" shall have the meaning specified in Section 2(p).

"RESOLUTION" shall have the meaning specified in Section 8(f).

"SEC" shall mean the Securities & Exchange Commission.

"SEC DOCUMENTS" shall have the meaning specified in Section 4(f).

"SECURITIES"  shall mean the shares of Common Stock issued pursuant to the terms
of the Agreement.

"SHARES" shall mean the shares of common stock of the Company having a par value
of $.001 per share.

"SOLD SHARES" shall have the meaning specified in Section 6.

"SUBSIDIARIES" shall have the meaning specified in Section 4(a).

"TRADING DAY" shall mean any day on which the Principal Market for the Company's
common stock is open for trading.

"TRANSACTION DOCUMENTS" shall mean the Agreement, Registration Rights Agreement,
Escrow  Agreement and each of the other  agreements  entered into by the parties
hereto in connection with the Agreement.

"VALUATION EVENT" shall have the meaning specified in Section 2(k).


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"VOLUME  WEIGHTED  AVERAGE  PRICE" shall be as reported by  Bloomberg  Financial
Markets  ("BLOOMBERG"),  or  if  not  available  through  Bloomberg  because  of
delisting,  then the  average  of the bid  prices of any  market  makers for the
Company's  Common  Stock  as  reported  in the  "pink  sheets"  by the  National
Quotation Bureau, Inc.

     2. PURCHASE AND SALE OF COMMON STOCK

     a. Purchase and Sale of Common  Stock.  Upon the terms and  conditions  set
forth herein, the Company shall issue and sell to the Investor, and the Investor
shall purchase from the Company, up to that number of Shares having an aggregate
Purchase Price of $8,000,000.

     b.  Delivery of Put  Notices.  Subject to the terms and  conditions  of the
Transaction Documents,  and from time to time during the Open Period the Company
may, in its sole  discretion,  deliver a Put Notice to the Investor which states
the Put  Amount of Shares  which the  Company  intends  to sell to the  Investor
during the Pricing Period. In addition, the Put Amount designated by the Company
in a Put Notice shall be equal to one hundred seventy-five percent (175%) of the
average daily volume for the forty (40) Trading Days prior to the applicable Put
Notice Date  multiplied by  ninety-three  (93%) of the lowest  closing bid price
during that period,  but in no event less than $25,000 nor more than $1,000,000.
Once the Put Notice is  received  by the  Investor  the Put Notice  shall not be
terminated, withdrawn or otherwise revoked by the Company except as set forth in
this  Agreement.  During the Open Period,  the Company  shall not be entitled to
submit a Put Notice until after the  previous  closing has been  completed.  The
Purchase  Price shall be equal to 93% of the  average of the lowest  closing bid
price of the  Company's  Common  Stock during the first five (5) Trading Days of
the specified  Pricing  Period and the lowest closing bid price of the Company's
Common Stock during the second five (5) Trading  Days of the  specified  Pricing
Period.

     Within ten (10)  calendar  days  after the  commencement  of each  calendar
quarter occurring subsequent to the commencement of the Open Period, the Company
undertakes to notify  Investor as to its reasonable  expectations  as to the Put
Amount it intends to raise during such  calendar  quarter,  if any,  through the
issuance of Put Notices.  Such notification  shall constitute only the Company's
good faith  estimate with respect to such  calendar  quarter and shall in no way
obligate  the  Company to raise such  amount  during  such  calendar  quarter or
otherwise limit its ability to deliver Put Notices during such calendar quarter.
The  failure by the Company to comply  with this  provision  can be cured by the
Company's notifying Investor at any time as to its reasonable  expectations with
respect to the current calendar quarter.

     c. Interest. It is the intention of the parties that only interest that may
be payable under this Agreement  shall not exceed the maximum  amount  permitted
under any applicable  law. If a law, which applies to this Agreement  which sets
the maximum  interest  amount,  is finally  interpreted  so that the interest in
connection with this Agreement exceeds the permitted limits,  then: (1) any such
interest shall be reduced by the amount necessary to

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reduce the interest to the permitted limit;  and (2) any sums already  collected
(if any) from the Company which exceed the permitted  limits will be refunded to
the Company.  The Investor may choose to make this refund by reducing the amount
that the Company owes under this  Agreement or by making a direct payment to the
Company. If a refund reduces the amount that the Company owes the Investor,  the
reduction  will be treated as a partial  payment.  In case any provision of this
Agreement is held by a court of competent  jurisdiction to be excessive in scope
or otherwise invalid or  unenforceable,  such provision shall be adjusted rather
than  voided,  if  possible,  so that it is  enforceable  to the maximum  extent
possible,  and the validity and  enforceability  of the remaining  provisions of
this Agreement will not in any way be affected or impaired thereby.

     d. Investor's Obligation to Purchase Shares.  Subject to the conditions set
forth in this Agreement, following the Investor's receipt of a validly delivered
Put Notice,  the Investor  shall be required to purchase from the Company during
the related  Pricing  Period that number of Shares having an aggregate  Purchase
Price equal to the lesser of (i) the Put Amount set forth in the Put Notice, and
(ii) 15% of the aggregate  trading volume during the  applicable  Pricing Period
times (x) the average of the lowest  closing bid price of the  Company's  Common
Stock during the first five (5) Trading Days of the specified Pricing Period and
the lowest  closing bid price of the  Company's  Common  Stock during the second
five (5) Trading Days of the specified  Pricing Period,  but only if said Shares
bear no restrictive  legend,  are not subject to stop transfer  instructions and
are being held in escrow,  pursuant  to Section  2(h),  prior to the  applicable
Closing  Date.  The Company  acknowledges  that there are two entities that will
sign as Investor and that each Put Notice will be divided  between them equally.
DRH Investment Company, LLC shall be obligated to provide fifty percent (50%) of
the Put Amount of each Put Notice and Dutchess  Private  Equities Fund,  L.P., a
Delaware limited  partnership  shall be obligated to provide fifty percent (50%)
of the Put Amount of each Put Notice.

     e. Limitation on Investor's Obligation to Purchase Shares.  Notwithstanding
anything to the  contrary in this  Agreement,  in no event shall the Investor be
required to purchase,  and the Company  shall in no event sell to the  Investor,
that  number of  Shares,  which  when  added to the sum of the  number of Shares
beneficially  owned, (as such term is defined under Section 13(d) and Rule 13d-3
of the Securities Exchange Act of 1934, as may be amended, (the "1934 ACT")), by
the Investor,  would exceed 4.99% of the number of Shares outstanding on the Put
Notice Date for such Pricing  Period,  as  determined  in  accordance  with Rule
13d-1(j) under the 1934 Act. In no event shall the Investor  purchase  Shares of
the Common Stock other than pursuant to this  Agreement  until such date as this
Agreement is terminated.  Each Put Notice shall include a representation  of the
Company as to the number of Shares of Common  Stock  outstanding  on the related
Put Notice Date as determined in accordance  with Section 13(d) of the 1934 Act.
In the event that the number of Shares of Common Stock outstanding as determined
in accordance with Section 13(d) of the 1934 Act is different on any date during
a Pricing  Period  than on the Put  Notice  Date  associated  with such  Pricing
Period,  then the  number of Shares of  Common  Stock  outstanding  on such date
during such Pricing Period shall govern for purposes of

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determining whether the Investor would be acquiring beneficial ownership of more
than  4.99% of the  number of Shares of Common  Stock  outstanding  during  such
period.

     f. Conditions to Investor's Obligation to Purchase Shares.  Notwithstanding
anything to the contrary in this Agreement, the Company shall not be entitled to
deliver a Put  Notice and  require  the  Investor  to  purchase  any Shares at a
Closing (as defined in Section 2(h)) unless each of the following conditions are
satisfied:

        (i) a  Registration  Statement  shall have been  declared  effective and
        shall  remain  effective  and  available  for  the  resale  of  all  the
        Registrable Securities (as defined in the Registration Rights Agreement)
        at all times during the Pricing Period;

        (ii) at all times during the period  beginning on the related Put Notice
        Date and ending on and  including the related  Closing Date,  the Common
        Stock shall have been listed on The American Stock Exchange, Inc. or The
        New York Stock  Exchange,  Inc.  or  designated  on the Nasdaq  National
        Market,  The Nasdaq  SmallCap  Market,  or the National  Association  of
        Securities Dealer's,  Inc. OTC electronic bulletin board (the "PRINCIPAL
        MARKET") and shall not have been  suspended  from trading  thereon for a
        period of five (5)  consecutive  Trading Days during the Open Period and
        the Company  shall not have been  notified of any pending or  threatened
        proceeding or other action to delist or suspend the Common Stock;

        (iii) the Company has complied with its obligations and is otherwise not
        in breach of a material provision,  or in default under, this Agreement,
        the  Registration  Rights  Agreement or any other agreement  executed in
        connection  herewith which has not been  corrected  prior to delivery of
        the Put Notice Date;

        (iv) no  injunction  shall have been  issued,  or action  commenced by a
        governmental authority,  prohibiting the purchase or the issuance of the
        Common Stock; and

        (v) the  issuance of the Common  Stock will not violate the  shareholder
        approval requirements of Nasdaq.

        If any of the events  described  in clauses (i) through (v) above occurs
        during a Pricing  Period,  then the Investor shall have no obligation to
        purchase the Put Amount of Common Stock set forth in the  applicable Put
        Notice.

     g. For purposes of this Agreement, a "MAJOR TRANSACTION" shall be deemed to
have  occurred  at  the  closing  of  any  of  the  following  events:  (i)  the
consolidation,  merger or other business combination of the Company with or into
another person (other than pursuant to a migratory  merger  effected  solely for
the purposes of changing the

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jurisdiction of  incorporation  of the Company) (ii) the sale or transfer of all
or  substantially  all of the Company's  assets;  or (iii) the consummation of a
purchase, tender or exchange offer made to, and accepted by, the holders of more
than 30% of the  economic  interest  in,  or the  combined  voting  power of all
classes of voting stock of, the Company.

     h. Mechanics of Purchase of Shares by Investor. Subject to the satisfaction
of the  conditions  set forth in  Sections  2(f),  7 and 8, the  closing  of the
purchase by the Investor of Shares (a  "CLOSING")  shall occur on the date which
is thirteen (13) Trading Days following the Put Notice Date (a "CLOSING  DATE").
Prior to each Closing  Date,  (i) the Company  shall deliver to the Escrow Agent
pursuant  to the Escrow  Agreement,  annexed  hereto as Exhibit C,  certificates
representing the Shares to be issued to the Investor on such date and registered
in the name of the Investor or deposit such Shares into the account(s) (with the
Investor  receiving  confirmation  that  the  Shares  are  in  such  account(s))
designated by the Investor for the benefit of the Investor and (ii) the Investor
shall deliver to the Escrow Agent the Purchase  Price to be paid for such Shares
(after  receipt of  confirmation  of delivery  of such  Shares),  determined  as
aforesaid,  by  wire  transfer.  In  lieu of  delivering  physical  certificates
representing  the Common  Stock and  provided  that the  Transfer  Agent then is
participating in The Depository Trust Company ("DTC") Fast Automated  Securities
Transfer ("FAST") program,  upon request of the Investor,  the Company shall use
its   commercially   reasonable   efforts  to  cause  the   Transfer   Agent  to
electronically  transmit the shares of Common Stock by crediting  the account of
each  Investors'  prime broker  (which  shall be  specified  by that  Investor a
reasonably  sufficient time in advance) with DTC through its Deposit  Withdrawal
Agent Commission  ("DWAC") system,  and provide proof satisfactory to the Escrow
Agent of such delivery.

     The Company  understands  that a delay in the issuance of Shares beyond the
Closing Date could result in economic loss to the Investor.  After the Effective
Date, as  compensation  to the Investor for such loss, the Company agrees to pay
late payments to the Investor for late issuance of Shares in accordance with the
following  schedule  (where  "No. of Days Late" is defined as the number of days
beyond the Closing Date):

                                         Late Payment For Each
        No. of Days Late                $10,000 of Common Stock
        ----------------                -----------------------

               1                               $100
               2                               $200
               3                               $300
               4                               $400
               5                               $500
               6                               $600
               7                               $700
               8                               $800
               9                               $900
               10                              $1,000
               Over 10                         $1,000 + $200 for each
                                               Business Day late beyond 10
                                               days

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The Company shall pay any payments  incurred  under this Section in  immediately
available funds upon demand.  Nothing herein shall limit the Investor's right to
pursue actual damages for the Company's  failure to issue and deliver the Shares
to the Investor,  except to the extent that such late payments shall  constitute
payment for and offset any such actual damages alleged by the Investor,  and any
Buy In Adjustment Amount.

     i. Partial Release of Shares. After Investor has received a Put Notice, but
prior to the related Closing Date, the Investor,  may authorize the Escrow Agent
to release,  every five (5) Trading Days, a portion of the Purchase  Amount from
escrow to the Company in exchange for a fixed  number of Shares,  subject to the
following conditions:

        (i)    The  Investor  shall  fill  out and  sign a  Partial  Release  of
               Purchase  Amount and Shares (the  "Partial  Release  Form").  The
               Partial  Release  Form shall set forth the number of Shares to be
               released to Investor and the dollar amount the Escrow Agent shall
               wire to the Company.

        (ii)   The  Partial  Release  Form shall be filled out and signed by the
               appropriate Investor and faxed to the Company prior to 12:00 p.m.
               New York City time.

     The number of Shares  stated in the Partial  Release Form shall be equal to
the dollar amount to be released  divided by 93% of the lowest closing bid price
during the first five (5) Trading Days of the Pricing Period.

     The  Company  and  Investor  agree that on the  related  Closing  Date,  an
adjustment shall be made so that the terms set forth in the Investment Agreement
shall be honored with the balance of the Purchase  Amount being  released to the
Company  and the  balance of the  Shares  owed to  Investor  being  released  to
Investor.

     j.  Overall  Limit  on  Common  Stock  Issuable.  Notwithstanding  anything
contained herein to the contrary,  if during the Open Period the Company becomes
listed on an exchange  that limits the number of shares of Common Stock that may
be issued without  shareholder  approval,  then the number of Shares issuable by
the Company and  purchasable  by the  Investor,  including  the shares of Common
Stock issuable to the Investors pursuant to Section 11(b), shall not exceed that
number of the shares of Common  Stock that may be issuable  without  shareholder
approval,  subject to appropriate  adjustment for stock splits, stock dividends,
combinations or other similar  recapitalization  affecting the Common Stock (the
"MAXIMUM COMMON STOCK ISSUANCE"),  unless the issuance of Shares,  including any
Common Stock to be issued to the Investors  pursuant to Section 11(b), in excess
of the Maximum  Common Stock  Issuance  shall first be approved by the Company's
shareholders  in accordance  with applicable law and the By-laws and Articles of
Incorporation  of the Company,  if such issuance of shares of Common Stock could
cause a delisting on the Principal Market. The parties understand and agree that
the Company's  failure to seek or obtain such  shareholder  approval shall in no
way adversely affect the validity and due authorization of the issuance and sale
of Shares hereunder or the Investor's

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obligation  in  accordance  with the terms and  conditions  hereof to purchase a
number  of Shares in the  aggregate  up to the  Maximum  Common  Stock  Issuance
limitation,  and that such approval  pertains only to the  applicability  of the
Maximum Common Stock Issuance limitation provided in this Section 2(j).

     k.  "VALUATION  EVENT" shall mean an event in which the Company at any time
during a "Pricing Period" takes any of the following actions:

         (i)   subdivides or combines its Common Stock;

         (ii)  pays a dividend in Common  Stock or makes any other  distribution
               of its Common Stock,  except for  dividends  paid with respect to
               the Preferred Stock;

         (iii) issues any options or other rights to  subscribe  for or purchase
               Common  Stock and the price per share for which  Common Stock may
               at any time  thereafter  be issuable  pursuant to such options or
               other  rights  shall  be  less  than  the  Bid  Price  in  effect
               immediately prior to such issuance;

         (iv)  issues any securities convertible into or exchangeable for Common
               Stock and the  consideration per share for which shares of Common
               Stock may at any time  thereafter  be  issuable  pursuant  to the
               terms of such  convertible or  exchangeable  securities  shall be
               less  than the Bid  Price  in  effect  immediately  prior to such
               issuance;

         (v)   issues shares of Common Stock  otherwise  than as provided in the
               foregoing  subsections  (i)  through  (iv),  at a price per share
               less,  or for other  consideration  lower,  than the Bid Price in
               effect   immediately   prior  to  such   issuance,   or   without
               consideration;

         (vi)  makes a distribution  of its assets or evidences of  indebtedness
               to the holders of Common Stock as a dividend in liquidation or by
               way of return of capital or other than as a dividend  payable out
               of earnings or surplus  legally  available  for  dividends  under
               applicable  law or any  distribution  to  such  holders  made  in
               respect of the sale of all or substantially  all of the Company's
               assets  (other than under the  circumstances  provided for in the
               foregoing subsections (i) through (v); or

         (vii) takes any action  affecting  the number of shares of Common Stock
               outstanding,  other  than  an  action  described  in  any  of the
               foregoing subsections (i) through (vi) hereof,  inclusive,  which
               in the opinion of the Company's Board of Directors, determined in
               good faith, would

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               have a materially  adverse  effect upon the rights of Investor at
               the time of a Put Notice is delivered to Investor.

     l. The Company  agrees that it shall not take any action that would  result
in a Valuation Event occurring during a Pricing Period.

     m.  Accountant's  Letter  and  Registration  Opinion.  Whenever  reasonably
requested by Investor,  the Company shall cause to be delivered to the Investor,
on or prior to each Registration  Opinion Deadline,  an opinion of the Company's
independent  counsel,  (the "REGISTRATION  OPINION"),  addressed to the Investor
stating,  inter  alia,  that  no  facts  ("MATERIAL  FACTS")  have  come to such
counsel's  attention  that  have  caused  it to  believe  that the  Registration
Statement  is  subject  to  an  Ineffective   Period  or  to  believe  that  the
Registration Statement, any supplemental  Registration Statement (as each may be
amended,  if  applicable),  and any  related  prospectuses,  contain  an  untrue
statement  of  material  fact or  omits a  material  fact  required  to make the
statements  contained  therein,  in light of the circumstances  under which they
were made, not misleading.  If a Registration Opinion cannot be delivered by the
Company's  independent  counsel  to the  Investor  on the  Registration  Opinion
Deadline due to the existence of Material  Facts or an Ineffective  Period,  the
Company  shall  promptly  notify the Investor and as promptly as possible  amend
each of the Registration Statement and any supplemental Registration Statements,
as applicable,  and any related  prospectus or cause such Ineffective  Period to
terminate, as the case may be, and deliver such Registration Opinion and updated
prospectus  as soon as  possible  thereafter.  If at any time after a Put Notice
shall have been  delivered to Investor but before the related  Closing Date, the
Company  acquires  knowledge of such Material  Facts or any  Ineffective  Period
occurs, the Company shall promptly notify the Investor.

     n. (i) Whenever reasonably requested by Investor,  the Company shall engage
its  independent  auditors  to perform the  procedures  in  accordance  with the
provisions of Statement on Auditing  Standards No. 71, as amended,  as agreed to
by the parties  hereto,  and  reports  thereon  (the  "BRING  DOWN COLD  COMFORT
LETTERS") as shall have been  reasonably  requested by the Investor with respect
to certain  financial  information  contained in the Registration  Statement and
shall have delivered to the Investor such a report addressed to the Investor, on
or prior to each Registration Opinion Deadline;

        (ii) in the event that the Investor shall have requested  delivery of an
Agreed Upon Procedures Report pursuant to Section 2(o), the Company shall engage
its  independent  auditors to perform  certain agreed upon procedures and report
thereon as shall have been reasonably  requested by the Investor with respect to
certain  financial  information  of the Company and the Company shall deliver to
the Investor a copy of such report addressed to the Investor.  In the event that
the report  required by this Section  2(n) cannot be delivered by the  Company's
independent  auditors,  the Company  shall,  if necessary,  promptly  revise the
Registration  Statement  and the  Company  shall  not  deliver  a Put  Notice to
Investor until such report is delivered.


                                       11

<PAGE>



     o. Procedure if Material Facts are Reasonably  believed to be untrue or are
omitted.  In the event after such  consultation  the Investor or the  Investor's
counsel reasonably  believes that the Registration  Statement contains an untrue
statement or a 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,
(i) the  Company  shall  file  with  the SEC an  amendment  to the  Registration
Statement  responsive to such alleged  untrue  statement or omission and provide
the  Investor,  as promptly  as  practicable,  with  copies of the  Registration
Statement and related Prospectus, as so amended, or (ii) if the Company disputes
the existence of any such material  misstatement or omission,  (x) the Company's
independent  counsel shall provide the  Investor's  counsel with a  Registration
Opinion and (y) in the event the dispute  relates to the  adequacy of  financial
disclosure and the Investor shall reasonably request, the Company's  independent
auditors shall provide to the Company a letter ("AGREED UPON PROCEDURES REPORT")
outlining  the  performance  of  such  "agreed  upon  procedures"  as  shall  be
reasonably  requested by the Investor and the Company shall provide the Investor
with a copy of such letter.

     p. Delisting;  Suspension.  If at any time during the Open Period or within
thirty (30) calendar days after the end of the Open Period, (i) the Registration
Statement,  after it has been declared effective, shall not remain effective and
available  for sale of all the  Registrable  Securities,  (ii) the Common  Stock
shall not be listed on the Principal  Market or shall have been  suspended  from
trading  thereon  (excluding  suspensions  of not  more  than  one  trading  day
resulting from business  announcements by the Company) or the Company shall have
been notified of any pending or threatened  proceeding or other action to delist
or suspend the Common Stock, (iii) there shall have occurred a Major Transaction
(as  defined in  Section  2(g)) or the public  announcement  of a pending  Major
Transaction which has not been abandoned or terminated, or (iv) the Registration
Statement  is no  longer  effective  or stale for a period of more than five (5)
Trading  Days as a result of the  Company  to timely  file its  financials,  the
Company shall  repurchase  within thirty (30) calendar days of the occurrence of
one of the events  listed in  clauses  (i),  (ii),  (iii) or  (iv)above  (each a
"REPURCHASE EVENT") and subject to the limitations imposed by applicable federal
and state law, all or any part of the Shares  issued to the Investor  within the
sixty (60) Trading Days  preceding the  occurrence of the  Repurchase  Event and
then  held by the  Investor  at a price per Share  equal to the  highest  Volume
Weighted Average Price during the period beginning on the date of the Repurchase
Event and ending on and  including the date on which the Investor is paid by the
Company for the repurchase of the Shares (the "PAYMENT AMOUNT").  If the Company
fails to pay to the Investor the full  aggregate  Payment Amount within ten (10)
calendar days of the occurrence of a Repurchase  Event, the Company shall pay to
the Investor, on the first Trading Day following such tenth (10th) calendar day,
in addition to and not in lieu of the Payment  Amount  payable by the Company to
the Investor an amount equal to 2% of the aggregate  Payment Amount then due and
payable  to the  Investor,  in cash by wire  transfer,  plus  compounded  annual
interest of 18% on such Payment  Amount during the period,  beginning on the day
following  such tenth  calendar day,  during which such Payment  Amount,  or any
portion thereof, is outstanding.


                                       12

<PAGE>



     3.  INVESTOR'S REPRESENTATIONS AND WARRANTIES.


     The Investor represents and warrants to the Company that:

     a. Sophisticated Investor. The Investor has such knowledge,  sophistication
and  experience  in  business  and  financial  matters  so as to be  capable  of
evaluating the merits and risks of the prospective investment in the Securities.

     b.  Authorization;  Enforcement.  This  Agreement has been duly and validly
authorized,  executed and delivered on behalf of the Investor and is a valid and
binding agreement of the Investor enforceable against the Investor in accordance
with its terms, subject as to enforceability to general principles of equity and
to applicable bankruptcy,  insolvency,  reorganization,  moratorium, liquidation
and other similar laws relating to, or affecting  generally,  the enforcement of
applicable creditors' rights and remedies..

     c.  Section 9 of the 1934 Act.  During the Open Period,  the Investor  will
comply  with  the  provisions  of  Section  9 of the  1934  Act,  and the  rules
promulgated thereunder, with respect to transactions involving the Common Stock.

     d. Accredited Investor.  Investor is an "Accredited  Investor" as that term
is defined in Rule 501(a)(3) of Regulation D of the 1933 Act.

     e. No Conflicts. The execution, delivery and performance of the Transaction
Documents  by  the  Investor  and  the  consummation  by  the  Investor  of  the
transactions  contemplated hereby and thereby will not (i) result in a violation
of the  Articles of  Incorporation  or the  By-laws or (ii)  conflict  with,  or
constitute a material default (or an event which with notice or lapse of time or
both would  become a material  default)  under,  or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
contract,  indenture mortgage,  indebtedness or instrument to which the Investor
or any of its  Subsidiaries  is a party,  or result in a  violation  of any law,
rule, regulation, order, judgment or decree applicable to the Investor or any of
its Subsidiaries or by which any property or asset of the Investor or any of its
Subsidiaries  is  bound  or  affected.  The  business  of the  Investor  and its
Subsidiaries is not being conducted, and shall not be conducted, in violation of
any law,  statute,  ordinance,  rule,  order or regulation  of any  governmental
authority or agency,  regulatory or self-regulatory agency, or court, except for
possible  violations  the  sanctions  for which  either  individually  or in the
aggregate would not have a Material Adverse Effect.

     4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

     Except  as  set  forth  in  the  Schedules  attached  hereto,  the  Company
represents and warrants to the Investor that:

     a.  Organization  and  Qualification.  The Company  and its  "SUBSIDIARIES"
(which for  purposes of this  Agreement  means any entity in which the  Company,
directly or

                                       13

<PAGE>



indirectly,  owns  capital  stock or holds an equity  or  similar  interest)  (a
complete  list of which is set forth in  Schedule  4(a)) are  corporations  duly
organized and validly existing in good standing under the laws of the respective
jurisdictions of their incorporation, and have the requisite corporate power and
authorization  to own their  properties  and to carry on their  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 its ownership of property or 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 good standing would not have a Material Adverse Effect. As
used in this Agreement,  "MATERIAL  ADVERSE  EFFECT" means any material  adverse
effect on the business,  properties,  assets, operations, results of operations,
financial  condition or prospects of the Company and its  Subsidiaries,  if any,
taken  as a  whole,  or on  the  transactions  contemplated  hereby  or  by  the
agreements and instruments to be entered into in connection herewith,  or on the
authority  or  ability  of the  Company to  perform  its  obligations  under the
Transaction Documents (as defined in Section 1 and 4(b)below).

     b. 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
and  each  of the  other  agreements  entered  into  by the  parties  hereto  in
connection with the transactions  contemplated by this Agreement  (collectively,
the  "TRANSACTION  DOCUMENTS"),  and to issue the Shares in accordance  with the
terms hereof and thereof,  (ii) the  execution  and delivery of the  Transaction
Documents  by  the  Company  and  the  consummation  by it of  the  transactions
contemplated  hereby and thereby,  including without  limitation the reservation
for  issuance and the issuance of the Shares  pursuant to this  Agreement,  have
been duly and validly  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 shareholders,  (iii) the Transaction Documents have been duly
and validly  executed and  delivered by the  Company,  and (iv) the  Transaction
Documents   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.

     c.  Capitalization.  As of the date hereof, the authorized capital stock of
the Company  consists of (i) 15,000,000  shares of Common Stock,  of which as of
the date  hereof,  9,372,791  shares are issued and  outstanding,  -0- shares of
Preferred  Stock and  approximately  100,000 (as of August 20,  2001)  shares of
Common Stock are issuable upon the exercise of options,  warrants and conversion
rights.  All of such  outstanding  shares have been,  or upon  issuance will be,
validly  issued and are fully paid and  nonassessable.  Except as  disclosed  in
Schedule 4(c) which is attached hereto and made a part hereof,  (i) no shares of
the  Company's  capital  stock are  subject  to  preemptive  rights or any other
similar  rights  or any  liens or  encumbrances  suffered  or  permitted  by the
Company,  (ii) there are no  outstanding  debt  securities,  (iii)  there are no
outstanding  shares  of  capital  stock,  options,  warrants,  scrip,  rights to
subscribe to, calls or commitments of any character whatsoever relating to, or

                                       14

<PAGE>



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,  (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 1933 Act (except the Registration  Rights Agreement),
(v)  there  are  no  outstanding  securities  of  the  Company  or  any  of  its
Subsidiaries which contain any redemption or similar  provisions,  and there are
no contracts,  commitments,  understandings or arrangements by which the Company
or any of its  Subsidiaries  is or may become  bound to redeem a security of the
Company or any of its Subsidiaries,  (vi) there are no securities or instruments
containing  anti-dilution  or similar  provisions  that will be triggered by the
issuance of the  Securities  as described in this  Agreement,  (vii) the Company
does not  have  any  stock  appreciation  rights  or  "phantom  stock"  plans or
agreements or any similar plan or agreement and (viii) there is no dispute as to
the  class of any  shares  of the  Company's  capital  stock.  The  Company  has
furnished to the Investor, or the Investor has had access through EDGAR to, true
and correct copies of the Company's  Articles of Incorporation,  as in effect on
the date hereof (the "ARTICLES OF INCORPORATION"), and the Company's 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.

     d. Issuance of Shares. A sufficient  number of Shares issuable  pursuant to
this Agreement has been duly  authorized  and reserved for issuance  (subject to
adjustment  pursuant to the Company's  covenant set forth in Section 5(f) below)
pursuant to this Agreement. Upon issuance in accordance with this Agreement, the
Securities will be validly issued,  fully paid and  nonassessable  and free from
all taxes, liens and charges with respect to the issue thereof. In the event the
Company  cannot  register a sufficient  number of Shares,  due to the  remaining
number of authorized shares of Common Stock being insufficient, the Company will
use its best  efforts to register  the maximum  number of shares it can based on
the  remaining  balance of  authorized  shares and will use its best  efforts to
increase the number of its authorized shares as soon as reasonably practicable.

     e. No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated  hereby  and  thereby  will not (i)  result in a  violation  of the
Articles of  Incorporation,  any  Certificate of  Designations,  Preferences and
Rights  of any  outstanding  series of  preferred  stock of the  Company  or the
By-laws or (ii) conflict  with,  or  constitute a material  default (or an event
which  with  notice or lapse of time or both would  become a  material  default)
under, or give to others any rights of termination,  amendment,  acceleration or
cancellation  of,  any  material   agreement,   contract,   indenture  mortgage,
indebtedness 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   United  States  federal  and  state  securities  laws  and
regulations and the rules and regulations of the Principal Market

                                       15

<PAGE>



or principal  securities exchange or trading market on which the Common Stock is
traded or listed)  applicable  to the Company or any of its  Subsidiaries  or by
which any property or asset of the Company or any of its  Subsidiaries  is bound
or affected.  Except as disclosed in Schedule 4(e),  neither the Company nor its
Subsidiaries  is in violation of any term of, or in default under,  the Articles
of Incorporation, any Certificate of Designations, Preferences and Rights of any
outstanding  series of  preferred  stock of the  Company or the By-laws or their
organizational  charter or by-laws,  respectively,  or any contract,  agreement,
mortgage, indebtedness,  indenture, instrument, judgment, decree or order or any
statute,  rule or  regulation  applicable  to the  Company or its  Subsidiaries,
except   for   possible   conflicts,   defaults,    terminations,    amendments,
accelerations,  cancellations  and violations that would not  individually or in
the aggregate have a Material  Adverse  Effect.  The business of the Company and
its  Subsidiaries  is not  being  conducted,  and  shall  not be  conducted,  in
violation of any law,  statute,  ordinance,  rule,  order or  regulation  of any
governmental  authority or agency,  regulatory  or  self-regulatory  agency,  or
court,   except  for  possible   violations   the  sanctions  for  which  either
individually  or in the  aggregate  would not have a  Material  Adverse  Effect.
Except as specifically  contemplated by this Agreement and as required under the
1933 Act,  the  Company is not  required to obtain any  consent,  authorization,
permit or order of, or make any filing or  registration  (except the filing of a
registration  statement)  with,  any court,  governmental  authority  or agency,
regulatory  or self-  regulatory  agency or other third party in order for it to
execute,  deliver or perform any of its obligations  under, or contemplated  by,
the Transaction  Documents in accordance  with the terms hereof or thereof.  All
consents,  authorizations,  permits, 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 and are in full force and
effect as of the date hereof.  Except as disclosed in Schedule 4(e), the Company
and its Subsidiaries are unaware of any facts or circumstances  which might give
rise to any of the foregoing.  The Company is not, and will not be, in violation
of the listing  requirements  of the  Principal  Market as in effect on the date
hereof  and on each of the  Closing  Dates and is not  aware of any facts  which
would  reasonably lead to delisting of the Common Stock by the Principal  Market
in the foreseeable future.

     f. SEC Documents;  Financial  Statements.  Since February 1999, the Company
has filed all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC  pursuant to the  reporting  requirements  of the
1934 Act (all of the  foregoing  filed prior to the date hereof and all exhibits
included  therein and financial  statements and schedules  thereto and documents
incorporated  by reference  therein  being  hereinafter  referred to as the "SEC
DOCUMENTS").  The Company has delivered to the Investor or its  representatives,
or they have had  access  through  EDGAR,  true and  complete  copies of the SEC
Documents.  As of their  respective  dates,  the SEC  Documents  complied in all
material  respects  with the  requirements  of the 1934  Act and the  rules  and
regulations of the SEC promulgated  thereunder  applicable to the SEC Documents,
and  none of the SEC  Documents,  at the  time  they  were  filed  with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements  therein,
in light of the circumstances under which they were made, not misleading.  As of
their respective dates, the financial statements of the Company included

                                       16

<PAGE>



in the  SEC  Documents  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 written
information provided by or on behalf of the Company to the Investor which is not
included  in the  SEC  Documents,  including,  without  limitation,  information
referred to in Section 4(d) of this Agreement,  contains any untrue statement of
a  material  fact or omits to state  any  material  fact  necessary  to make the
statements  therein,  in the light of the  circumstance  under which they are or
were made, not  misleading.  Neither the Company nor any of its  Subsidiaries or
any of their officers, directors, employees or agents have provided the Investor
with any material,  nonpublic information which was not publicly disclosed prior
to the date  hereof and any  material,  nonpublic  information  provided  to the
Investor by the Company or its Subsidiaries or any of their officers, directors,
employees or agents prior to any Closing Date shall be publicly disclosed by the
Company prior to such Closing Date.

     g. Absence of Certain Changes.  Except as disclosed in Schedule 4(g) or the
SEC Documents filed at least five (5) days prior to the date hereof,  since June
1, 2000,  there has been no change or development  in the business,  properties,
assets, operations,  financial condition,  results of operations or prospects of
the  Company  or its  Subsidiaries  which  has had or  reasonably  could  have a
Material  Adverse  Effect.  The  Company  has not taken any steps,  and does not
currently  expect  to  take  any  steps,  to  seek  protection  pursuant  to any
bankruptcy  law nor does the Company or its  Subsidiaries  have any knowledge or
reason to believe that its creditors intend to initiate  involuntary  bankruptcy
proceedings.

     h. Absence of Litigation. Except as set forth in Schedule 4(h), there is no
action,  suit,  proceeding,  inquiry  or  investigation  before or by any court,
public board,  government agency,  self-regulatory  organization or body pending
or,  to the  knowledge  of  the  executive  officers  of  Company  or any of its
Subsidiaries,  threatened against or affecting the Company,  the Common Stock or
any of the  Company's  Subsidiaries  or any of the  Company's  or the  Company's
Subsidiaries'  officers or directors in their  capacities  as such,  in which an
adverse decision could have a Material Adverse Effect.

     i.  Acknowledgment  Regarding  Investor's  Purchase of Shares.  The Company
acknowledges  and agrees that the  Investor is acting  solely in the capacity of
arm's  length  purchaser  with  respect  to the  Transaction  Documents  and the
transactions  contemplated hereby and thereby.  The Company further acknowledges
that the  Investor  is not acting as a  financial  advisor or  fiduciary  of the
Company (or in any similar  capacity) with respect to the Transaction  Documents
and the transactions contemplated hereby and thereby and any advice given by the
Investor or any of its respective representatives or agents in connection

                                       17

<PAGE>



with the  Transaction  Documents and the  transactions  contemplated  hereby and
thereby is merely incidental to the Investor's  purchase of the Securities.  The
Company further  represents to the Investor that the Company's decision to enter
into  the  Transaction  Documents  has  been  based  solely  on the  independent
evaluation by the Company and its representatives.

     j. No Undisclosed Events,  Liabilities,  Developments or Circumstances.  No
event, liability,  development or circumstance has occurred or exists, or to its
knowledge  is  contemplated  to  occur,  with  respect  to  the  Company  or its
Subsidiaries  or  their  respective  business,  properties,  assets,  prospects,
operations or financial condition, that would be required to be disclosed by the
Company under applicable securities laws on a registration  statement filed with
the SEC  relating to an issuance and sale by the Company of its Common Stock and
which has not been publicly announced.

     k. Employee  Relations.  Neither the Company nor any of its Subsidiaries is
involved in any union labor  dispute nor, to the knowledge of the Company or any
of its Subsidiaries, is any such dispute threatened. Neither the Company nor any
of its  Subsidiaries is a party to a collective  bargaining  agreement,  and the
Company and its  Subsidiaries  believe that relations  with their  employees are
good.  No  executive  officer  (as  defined in Rule  501(f) of the 1933 Act) has
notified the Company that such officer intends to leave the Company's  employ or
otherwise terminate such officer's employment with the Company.

     l.  Intellectual  Property Rights.  The Company and its Subsidiaries own or
possess adequate rights or licenses to use all 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.  Except  as set  forth  on  Schedule  4(l),  none  of  the  Company's
trademarks,  trade names,  service marks,  service mark  registrations,  service
names, patents,  patent rights,  copyrights,  inventions,  licenses,  approvals,
government  authorizations,  trade secrets or other intellectual property rights
necessary  to conduct its  business as now or as proposed to be  conducted  have
expired or terminated,  or are expected to expire or terminate  within two years
from the date of this  Agreement.  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,  or of any such  development  of similar or
identical  trade secrets or technical  information by others and,  except as set
forth on Schedule 4(l),  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.  The Company and its  Subsidiaries  have taken  reasonable
security  measures to protect the secrecy,  confidentiality  and value of all of
their intellectual properties.


                                       18

<PAGE>



     m.  Environmental  Laws.  The  Company  and  its  Subsidiaries  (i)  are in
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 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  where, in each of the three
foregoing  cases,  the failure to so comply would have,  individually  or in the
aggregate, a Material Adverse Effect.

     n. Title. The Company and its  Subsidiaries  have good and marketable title
in fee simple to all real property and good and marketable title to all personal
property  owned by them which is material to the business of the Company and its
Subsidiaries, in each case free and clear of all liens, encumbrances and defects
except  such as are  described  in  Schedule  4(n) or such as do not  materially
affect the value of such  property  and do not  interfere  with the use made and
proposed to be made of such property by the Company or any of its  Subsidiaries.
Any real property and  facilities  held under lease by the Company or any of 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.

     o.  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 have a Material Adverse Effect.

     p. Regulatory Permits.  The Company and its Subsidiaries have in full force
and effect all  certificates,  approvals,  authorizations  and permits  from the
appropriate  federal,   state,  local  or  foreign  regulatory  authorities  and
comparable foreign regulatory agencies, necessary to own, lease or operate their
respective  properties and assets and 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 certificate,
approval,  authorization  or permit,  except for such  certificates,  approvals,
authorizations  or  permits  which  if not  obtained,  or  such  revocations  or
modifications which, would not have a Material Adverse Effect.

     q. 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

                                       19

<PAGE>



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

     r. No Materially Adverse Contracts, Etc. 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.  Neither  the  Company  nor any of its  Subsidiaries  is a party  to any
contract or agreement which in the judgment of the Company's  officers has or is
expected to have a Material Adverse Effect.

     s. Tax Status.  The Company and each of its  Subsidiaries has made or filed
all United  States  federal and state income and all other tax returns,  reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its  Subsidiaries  has set aside
on its books  provisions  reasonably  adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental  assessments and
charges  that are  material  in amount,  shown or  determined  to be due on such
returns,  reports and  declarations,  except those being contested in good faith
and has set aside on its books 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.

     t. Certain  Transactions.  Except as set forth on Schedule  4(t) and in the
SEC  Documents  filed at least ten days prior to the date  hereof and except for
arm's length  transactions  pursuant to which the Company makes  payments in the
ordinary  course of business upon terms no less favorable than the Company could
obtain from third parties and other than the grant of stock options disclosed on
Schedule 4(c), none of the officers,  directors,  or employees of the Company is
presently a party to any transaction with the Company or any of its Subsidiaries
(other than for services as employees,  officers and  directors),  including any
contract,  agreement  or  other  arrangement  providing  for the  furnishing  of
services to or by, providing for rental of real or personal property to or from,
or  otherwise  requiring  payments  to or from  any  officer,  director  or such
employee  or, to the  knowledge of the Company,  any  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.

     u. Dilutive  Effect.  The Company  understands  and  acknowledges  that the
number of shares  of Common  Stock  issuable  upon  purchases  pursuant  to this
Agreement will increase in certain circumstances  including, but not necessarily
limited  to, the  circumstance  wherein the  trading  price of the Common  Stock
declines  during the period  between the Effective  Date and the end of the Open
Period.  The Company's  executive  officers and directors have studied and fully
understand the nature of the transactions

                                       20

<PAGE>



contemplated by this Agreement and recognize that they have a potential dilutive
effect.  The board of directors of the Company has concluded,  in its good faith
business  judgment,  that such issuance is in the best interests of the Company.
The Company  specifically  acknowledges that, subject to such limitations as are
expressly set forth in the Transaction Documents, its obligation to issue shares
of Common  Stock upon  purchases  pursuant to this  Agreement  is  absolute  and
unconditional  regardless of the dilutive  effect that such issuance may have on
the ownership interests of other shareholders of the Company.

     v. Right of First Refusal.  The Company shall not,  directly or indirectly,
without the prior written consent of Investor offer,  sell,  grant any option to
purchase,  or otherwise  dispose of (or announce any offer,  sale,  grant or any
option to purchase or other  disposition)  any of its Common Stock or securities
convertible  into Common  Stock at a price that is less than the market price of
the Common  Stock at the time of issuance  of such  security  or  investment  (a
"SUBSEQUENT  FINANCING")  for a period  of one year  after the  Effective  Date,
except (i) the granting of options or warrants to employees, officers, directors
and  consultants,  and the issuance of shares upon exercise of options  granted,
under any stock  option  plan  heretofore  or  hereinafter  duly  adopted by the
Company,  (ii) shares issued upon exercise of any currently outstanding warrants
or  options  and  upon  conversion  of  any  currently  outstanding  convertible
debenture or convertible  preferred  stock,  in each case disclosed  pursuant to
Section 4(c), (iii) securities  issued in connection with the  capitalization or
creation of a joint venture with a strategic partner,  (iv) shares issued to pay
part or all of the purchase price for the  acquisition by the Company of another
entity (which, for purposes of this clause (iv), shall not include an individual
or group of  individuals),  and (v) shares issued in a bona fide public offering
by the Company of its securities,  unless (A) the Company delivers to Investor a
written notice (the  "SUBSEQUENT  FINANCING  NOTICE") of its intention to effect
such Subsequent  Financing,  which Subsequent Financing Notice shall describe in
reasonable detail the proposed terms of such Subsequent Financing, the amount of
proceeds intended to be raised thereunder,  the person with whom such Subsequent
Financing  shall be  effected,  and  attached  to which shall be a term sheet or
similar  document  relating thereto and (B) Investor shall not have notified the
Company by 5:00 p.m.  (New York time) on the fifth  (5th)  Trading Day after its
receipt  of the  Subsequent  Financing  Notice of its  willingness  to  provide,
subject to completion  of mutually  acceptable  documentation,  financing to the
Company on substantially the terms set forth in the Subsequent Financing Notice.
If Investor shall fail to notify the Company of its intention to enter into such
negotiations within such time period, then the Company may effect the Subsequent
Financing  substantially  upon the terms set forth in the  Subsequent  Financing
Notice;  PROVIDED  THAT  the  Company  shall  provide  Investor  with  a  second
Subsequent  Financing  Notice,  and Investor shall again have the right of first
refusal set forth above in this Section, if the Subsequent  Financing subject to
the initial Subsequent  Financing Notice shall not have been consummated for any
reason on the terms set forth in such Subsequent  Financing Notice within thirty
(30) Trading Days after the date of the initial Subsequent Financing Notice. The
rights granted to Investor in this Section are not subject to any prior right of
first refusal given to any other person except as disclosed on Schedule 4(c).


                                       21

<PAGE>



     w.  Lock-up.  The  Company  agrees  to use its  best  efforts  to have  its
officers, directors and affiliates refrain from selling Common Stock during each
Pricing Period.

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

     5.  COVENANTS OF THE COMPANY

     a. Best Efforts.  The Company shall use its best efforts  timely to satisfy
each of the  conditions  to be  satisfied by it as provided in Section 7 of this
Agreement.

     b. Blue Sky. The Company shall, at its sole cost and expense,  on or before
each of the Closing  Dates,  take such action as the  Company  shall  reasonably
determine is necessary to qualify the  Securities  for, or obtain  exemption for
the  Securities  for,  sale to the Investor at each of the Closings  pursuant to
this Agreement under applicable  securities or "Blue Sky" laws of such states of
the United States,  as specified by Investor,  and shall provide evidence of any
such  action  so taken to the  Investor  on or prior to the  Closing  Date.  The
Company  shall,  at its sole cost and  expense,  make all  filings  and  reports
relating to the offer and sale of the  Securities  required under the applicable
securities or "Blue Sky" laws of such states of the United States following each
of the Closing Dates.

     c. Reporting Status. Until the earlier of (i) the first date which is after
the date this  Agreement  is  terminated  pursuant to Section 9 and on which the
Holders (as that term is defined in the Registration  Rights Agreement) may sell
all of the Securities  acquired pursuant to this Agreement  without  restriction
pursuant to Rule 144(k)  promulgated under the 1933 Act (or successor  thereto),
or (ii) the date on which (A) the  Holders  shall  have sold all the  Securities
issuable  hereunder  and (B) this  Agreement  has been  terminated  pursuant  to
Section 9 (the  "REGISTRATION  PERIOD"),  the  Company  shall  file all  reports
required  to be filed with the SEC  pursuant  to the 1934 Act,  and the  Company
shall not terminate its status as a reporting company under the 1934 Act.

     d. Use of Proceeds.  The Company will use the proceeds from the sale of the
Shares  (excluding  amounts  paid by the  Company  for fees as set  forth in the
Transaction Documents) for general corporate and working capital purposes.

     e.  Financial  Information.  The Company  agrees to make  available  to the
Investor  via EDGAR or other  electronic  means the  following  to the  Investor
during the  Registration  Period:  (i) within  five (5)  Trading  Days after the
filing  thereof  with the SEC,  a copy of its Annual  Reports on Form 10-K,  its
Quarterly  Reports  on Form  10-Q,  any  Current  Reports  on  Form  8-K and any
Registration  Statements or amendments  filed  pursuant to the 1933 Act; (ii) on
the same day as the  release  thereof,  facsimile  copies of all press  releases
issued by the Company or any of its  Subsidiaries,  (iii)  copies of any notices
and other information made available or given to the shareholders of the Company
generally, contemporaneously

                                       22

<PAGE>



with the making  available or giving thereof to the shareholders and (iv) within
two (2) calendar  days of filing or delivery  thereof,  copies of all  documents
filed with, and all correspondence sent to, the Principal Market, any securities
exchange or market, or the National Association of Securities Dealers, INC.

     f. Reservation of Shares.  Subject to the following  sentence,  the Company
shall take all action  necessary to at all times have  authorized,  and reserved
for the purpose of issuance,  a  sufficient  number of shares of Common Stock to
provide for the  issuance  of the  Securities  hereunder.  In the event that the
Company  determines  that it does not have a  sufficient  number  of  authorized
shares of Common Stock to reserve and keep  available  for issuance as described
in this  Section  5(f),  the Company  shall use its best efforts to increase the
number of authorized shares of Common Stock by seeking shareholder  approval for
the authorization of such additional shares.

     g.  Listing.  The Company shall  promptly  secure the listing of all of the
Registrable  Securities (as defined in the Registration  Rights  Agreement) upon
the Principal Market and each other national  securities  exchange and automated
quotation  system,  if any,  upon which  shares of Common  Stock are then listed
(subject to official  notice of  issuance)  and shall  maintain,  so long as any
other shares of Common Stock shall be so listed, such listing of all Registrable
Securities  from  time to time  issuable  under  the  terms  of the  Transaction
Documents.  The Company  shall  maintain the Common  Stock's  authorization  for
quotation  on  the  Principal  Market.  Neither  the  Company  nor  any  of  its
Subsidiaries shall take any action which would be reasonably  expected to result
in the  delisting  or  suspension  of the Common Stock on the  Principal  Market
(excluding  suspensions of not more than one trading day resulting from business
announcements  by the  Company).  The  Company  shall  promptly  provide  to the
Investor copies of any notices it receives from the Principal  Market  regarding
the  continued  eligibility  of the Common  Stock for listing on such  automated
quotation  system or  securities  exchange.  The Company  shall pay all fees and
expenses in connection with satisfying its obligations under this Section 5(g).

     h.  Transactions  With  Affiliates.  The Company shall not, and shall cause
each of its Subsidiaries  not to, enter into,  amend,  modify or supplement,  or
permit any Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction,  commitment  or  arrangement  with  any of its or any  Subsidiary's
officers,  directors,  persons who were officers or directors at any time during
the  previous two years,  shareholders  who  beneficially  own 5% or more of the
Common Stock, or affiliates or with any individual related by blood, marriage or
adoption to any such  individual  or with any entity in which any such entity or
individual  owns a 5% or more  beneficial  interest  (each a  "RELATED  PARTY"),
except  for (i)  customary  employment  arrangements  and  benefit  programs  on
reasonable terms, (ii) any agreement, transaction,  commitment or arrangement on
an arms-length basis on terms no less favorable than terms which would have been
obtainable  from a person other than such Related Party, or (iii) any agreement,
transaction,  commitment or  arrangement  which is approved by a majority of the
disinterested directors of the Company. For purposes hereof, any director who is
also an officer of the Company or any  Subsidiary  of the Company shall not be a
disinterested  director  with  respect  to  any  such  agreement,   transaction,
commitment

                                       23

<PAGE>



or  arrangement.  "AFFILIATE"  for purposes  hereof  means,  with respect to any
person or entity, another person or entity that, directly or indirectly, (i) has
a 5% or more  equity  interest  in that  person or  entity,  (ii) has 5% or more
common  ownership  with that  person or entity,  (iii)  controls  that person or
entity,  or (iv) shares common control with that person or entity.  "CONTROL" or
"CONTROLS"  for  purposes  hereof  means  that a person or entity has the power,
direct or  indirect,  to  conduct or govern the  policies  of another  person or
entity.

     i.  Filing of Form 8-K.  On or before the date  which is three (3)  Trading
Days after the Execution  Date,  the Company shall file a Current Report on Form
8-K with the SEC describing  the terms of the  transaction  contemplated  by the
Transaction  Documents  in the form  required by the 1934 Act, if such filing is
required.

     j. Corporate Existence.  The Company shall use its best efforts to preserve
and continue the corporate existence of the Company.

     k. Notice of Certain Events Affecting Registration;  Suspension of Right to
Make a Put. The Company shall  promptly  notify  Investor upon the occurrence of
any of the following  events in respect of a  Registration  Statement or related
prospectus  in respect of an offering of the Shares:  (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 any  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 Shares 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 such  Registration
Statement or related  prospectus  or 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 a  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
shall  promptly make  available to Investor any such  supplement or amendment to
the related prospectus. The Company shall not deliver to Investor any Put Notice
during the continuation of any of the foregoing events.

     l.  Reimbursement.  If (i)  Investor,  other  than by  reason  of its gross
negligence  or willful  misconduct,  becomes  involved  in any  capacity  in any
action,  proceeding or investigation  brought by any shareholder of the Company,
in  connection  with or as a  result  of the  consummation  of the  transactions
contemplated by the Transaction Documents, or if

                                       24

<PAGE>



Investor is impleaded in any such action,  proceeding  or  investigation  by any
person,  or (ii)  Investor,  other  than by reason of its  gross  negligence  or
willful  misconduct  or by reason of its trading of the Common Stock in a manner
that is illegal  under the  federal  securities  laws,  becomes  involved in any
capacity in any action,  proceeding or investigation  brought by the SEC against
or  involving  the  Company  or  in  connection  with  or  as a  result  of  the
consummation of the transactions  contemplated by the Transaction Documents,  or
if Investor is impleaded in any such action,  proceeding or investigation by any
person,  then in any such case,  the Company  will  reimburse  Investor  for its
reasonable legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith, as such expenses are incurred. In
addition,  other than with  respect to any matter in which  Investor  is a named
party, the Company will pay to Investor the charges, as reasonably determined by
Investor,  for the time of any  officers or  employees  of  Investor  devoted to
appearing  and preparing to appear as witnesses,  assisting in  preparation  for
hearings,  trials or pretrial  matters,  or otherwise with respect to inquiries,
hearing,  trials,  and other proceedings  relating to the subject matter of this
Agreement. The reimbursement obligations of the Company under this section shall
be in addition to any  liability  which the Company may  otherwise  have,  shall
extend upon the same terms and conditions to any affiliates of Investor that are
actually  named in such  action,  proceeding  or  investigation,  and  partners,
directors, agents, employees, attorneys,  accountants,  auditors and controlling
persons  (if a), as the case may be, of  Investor  and any such  affiliate,  and
shall be binding upon and inure to the benefit of any successors of the Company,
Investor and any such affiliate and any such person.

     6. COVER.  If, the number of Shares  represented  by any Put Notices become
restricted  or are no  longer  freely  trading  for any  reason,  and  after the
applicable Closing Date, the Investor  purchases,  in an open market transaction
or otherwise,  the Company's  Common Stock (the  "Covering  Shares") in order to
make  delivery in  satisfaction  of a sale of Common Stock by the Investor  (the
"Sold  Shares"),  which  delivery  such Investor  anticipated  to make using the
Shares represented by the Put Notice (a "Buy-In"),  the Company shall pay to the
Investor the Buy-In Adjustment Amount (as defined below). The "Buy-In Adjustment
Amount" is the amount equal to the excess,  if any, of (a) the Investor's  total
purchase price (including brokerage commissions, if any) for the Covering Shares
over (b) the net proceeds (after brokerage commissions,  if any) received by the
Investor  from the sale of the Sold  Shares.  The  Company  shall pay the Buy-In
Adjustment  Amount to the Investor in immediately  available  funds  immediately
upon demand by the Investor. By way of illustration and not in limitation of the
foregoing,  if the Investor purchases Common Stock having a total purchase price
(including  brokerage  commissions) of $11,000 to cover a Buy-In with respect to
the Common  Stock it sold for net  proceeds  of $10,000,  the Buy-In  Adjustment
Amount which the Company will be required to pay to the Investor will be $1,000.

     7.  CONDITIONS OF THE COMPANY'S OBLIGATION TO SELL.

     The obligation hereunder of the Company to issue and sell the Shares to the
Investor is further subject to the satisfaction, at or before each Closing Date,
of each of the following

                                       25

<PAGE>



conditions set forth below.  These conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion.

     a.  The  Investor  shall  have  executed  each  of this  Agreement  and the
Registration Rights Agreement and delivered the same to the Company.

     b. The Investor  shall have delivered to the Company the Purchase Price for
the Shares  being  purchased by the  Investor at the Closing  (after  receipt of
confirmation  of  delivery  of such  Shares)  by wire  transfer  of  immediately
available funds pursuant to the wire instructions provided by the Company.

     c. The  representations  and  warranties of the Investor  shall be true and
correct as of the date when made and as of the applicable Closing Date as though
made at that time (except for  representations and warranties that speak as of a
specific date),  and the Investor shall have  performed,  satisfied and complied
with the  covenants,  agreements  and  conditions  required  by the  Transaction
Documents  to be  performed,  satisfied  or complied  with by the Investor at or
prior to such Closing Date.

     d. 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  which prohibits the
consummation of any of the transactions contemplated by this Agreement.

     e. No Valuation  Event shall have occurred  since the applicable Put Notice
Date.

     8.  FURTHER CONDITIONS OF THE INVESTOR'S OBLIGATION TO PURCHASE.

     The obligation of the Investor  hereunder to purchase  Shares is subject to
the  satisfaction,  on or before each  Closing  Date,  of each of the  following
conditions set forth below.

     a. The Company shall have executed  each of the  Transaction  Documents and
delivered the same to the Investor.

     b. The Common Stock shall be  authorized  for  quotation  on the  Principal
Market and  trading in the Common  Stock  shall not have been  suspended  by the
Principal  Market  or the SEC,  at any time  beginning  on the date  hereof  and
through and including the respective Closing Date (excluding  suspensions of not
more than one Trading Day resulting from business  announcements by the Company,
provided that such suspensions occur prior to the Company's  delivery of the Put
Notice related to such Closing).

     c. The  representations  and  warranties  of the Company  shall be true and
correct as of the date when made and as of the applicable Closing Date as though
made at that time (except for (i)  representations  and warranties that speak as
of a specific date and (ii) with

                                       26

<PAGE>



respect to the representations  made in Sections 4(g), (h) and (j) and the third
sentence of Section 4(k) hereof, events which occur on or after the date of this
Agreement and are disclosed in SEC filings made by the Company at least ten (10)
Trading Days prior to the applicable Put Notice Date) and the Company shall have
performed, satisfied and complied with the covenants,  agreements and conditions
required by the  Transaction  Documents to be  performed,  satisfied or complied
with by the Company on or before such Closing Date.  The Investor may request an
update as of such Closing Date regarding the representation contained in Section
4(c) above.

     d. Investor shall have received an opinion letter of the Company's  counsel
on or before the Execution Date.

     e. The Company  shall have  executed  and  delivered to the Escrow Agent or
Investor the certificates  representing,  or have executed electronic book-entry
transfer of, the Shares,  (in such denominations as such Investor shall request)
being purchased by the Investor at such Closing.

     f. The Board of  Directors of the Company  shall have  adopted  resolutions
consistent with Section  4(b)(ii) above and in a form  reasonably  acceptable to
the  Investor  (the  "RESOLUTIONS")  and such  Resolutions  shall  not have been
amended or rescinded prior to such Closing Date.

     g. If requested by the Investor, the Investor shall receive a letter of the
type, in the form and with the substance of the letter described in Section 3(s)
of the Registration Rights Agreement from the Company's auditors.

     h. 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  which prohibits the
consummation of any of the transactions contemplated by this Agreement.

     i. The  Registration  Statement shall be effective on each Closing Date and
no stop order suspending the  effectiveness of the Registration  statement shall
be in effect or shall be pending or  threatened.  Furthermore,  on each  Closing
Date (i) neither the Company nor Investor  shall have  received  notice that the
SEC  has  issued  or  intends  to  issue  a stop  order  with  respect  to  such
Registration  Statement or that the SEC otherwise has suspended or withdrawn the
effectiveness of such Registration Statement, either temporarily or permanently,
or  intends or has  threatened  to do so (unless  the SEC's  concerns  have been
addressed  and  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 such Registration Statement or related
prospectus shall exist.

     j. At the  time of each  Closing,  the  Registration  Statement  (including
information or documents  incorporated by reference  therein) and any amendments
or supplements thereto shall not contain any untrue statement of a material fact
or omit to state

                                       27

<PAGE>



any  material  fact  required  to be stated  therein  or  necessary  to make the
statements therein not misleading or which would require public disclosure or an
update supplement to the prospectus.

     k.  There  shall have been no filing of a petition  in  bankruptcy,  either
voluntarily  or  involuntarily,  with respect to the Company and there shall not
have been commenced any proceedings  under any bankruptcy or insolvency laws, or
any laws  relating to the relief of debtors,  readjustment  of  indebtedness  or
reorganization of debtors,  and there shall have been no calling of a meeting of
creditors  of  the  Company  or  appointment  of a  committee  of  creditors  or
liquidating  agents or offering of a  composition  or extension to creditors by,
for, with or without the consent or acquiescence of the Company.

     l. If applicable,  the  shareholders of the Company shall have approved the
issuance  of any  Shares in excess  of the  Maximum  Common  Stock  Issuance  in
accordance with Section 2(j).

     m. The conditions to such Closing set forth in Section 2(f) shall have been
satisfied on or before such Closing Date.

     n. The Company shall have certified to the Investor the number of shares of
Common Stock outstanding as of a date within five (5) Trading Days prior to such
Closing Date.

     o. The Company shall have  delivered to such Investor such other  documents
relating to the transactions  contemplated by this Agreement as such Investor or
its counsel may reasonably request upon reasonable advance notice.

     9. TERMINATION.  This Agreement  shall terminate  upon any of the following
events:

        (i) when the Investor has  purchased an aggregate of  $8,000,000  in the
        Common Stock of the Company  pursuant to this  Agreement;  provided that
        the Company's  representations,  warranties  and covenants  contained in
        this  Agreement  insofar as applicable to the  transactions  consummated
        hereunder  prior to such  termination,  shall survive the termination of
        this Agreement for the period of any applicable statute of limitations,

        (ii) on the date which is  thirty-six  (36) months  after the  Effective
        Date;

        (iii) if the Company shall file or consent by answer or otherwise to the
        entry of an order  for  relief  or  approving  a  petition  for  relief,
        reorganization  or  arrangement  or any other petition in bankruptcy for
        liquidation  or to take advantage of any bankruptcy or insolvency law of
        any  jurisdiction,  or shall make an  assignment  for the benefit of its
        creditors, or shall consent to the appointment of a custodian, receiver,
        trustee or other officer with similar

                                       28

<PAGE>



        powers of itself or of any substantial part of its property, or shall be
        adjudicated a bankrupt or insolvent,  or shall take corporate action for
        the  purpose  of any of the  foregoing,  or if a court  or  governmental
        authority of competent  jurisdiction  shall enter an order  appointing a
        custodian,  receiver,  trustee or other officer with similar powers with
        respect to the  Company or any  substantial  part of its  property or an
        order for relief or approving a petition for relief or reorganization or
        any other petition in bankruptcy or for liquidation or to take advantage
        of any  bankruptcy or insolvency  law, or an order for the  dissolution,
        winding up or liquidation of the Company,  or if any such petition shall
        be filed against the Company;

        (iv) if the  Company  shall  issue  or sell  any  equity  securities  or
        securities  convertible  into, or exchangeable for, equity securities or
        enter into any other equity  financing  facility during the Open Period,
        other than in compliance with Section 4(v);

        (v) the  trading  of the  Common  Stock is  suspended  by the  SEC,  the
        Principal  Market  or the  NASD for a  period  of five  (5)  consecutive
        Trading Days during the Open Period;

        (vi)  the  Company  shall  not  have  filed  with  the SEC  the  initial
        Registration  Statement  with  respect to the resale of the  Registrable
        Securities  in  accordance  with the terms of the  initial  Registration
        Rights  Agreement  within sixty (60) calendar days of the date hereof or
        the  Registration  Statement has not been declared  effective within one
        hundred eighty (180) calendar days of the date hereof; or

        (vii) The Common  Stock  ceases to be  registered  under the 1934 Act or
        listed or traded on the Principal Market; or

        (viii) The Company requires  shareholder  approval under Nasdaq rules to
        issue additional shares and such approval is not obtained within 60 days
        from the date when the  Company has issued its 19.9%  maximum  allowable
        shares.

Upon the occurrence of one of the above-described events, the Company shall send
written notice of such event to the Investor.

     10.  INDEMNIFICATION.  In  consideration  of the  Investor's  execution and
delivery  of the  this  Agreement  and the  Registration  Rights  Agreement  and
acquiring the Shares  hereunder  and in addition to all of the  Company's  other
obligations under the Transaction Documents,  the Company shall defend, protect,
indemnify  and  hold  harmless  the  Investor  and  all of  their  shareholders,
officers,  directors,  employees and direct or indirect investors and any of the
foregoing  person's  agents  or  other   representatives   (including,   without
limitation,  those retained in connection with the transactions  contemplated by
this Agreement)  (collectively,  the "INDEMNITEES") from and against any and all
actions,

                                       29

<PAGE>



causes of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith  (irrespective of whether any such
Indemnitee  is a party to the  action  for which  indemnification  hereunder  is
sought),  and  including  reasonable  attorneys'  fees  and  disbursements  (the
"INDEMNIFIED  LIABILITIES'),  incurred  by any  Indemnitee  as a result  of,  or
arising  out of,  or  relating  to (i) any  misrepresentation  or  breach of any
representation  or warranty made by the Company in the Transaction  Documents or
any other  certificate,  instrument or document  contemplated  hereby or thereby
(ii)  any  breach  of any  covenant,  agreement  or  obligation  of the  Company
contained in the Transaction  Documents or any other certificate,  instrument or
document  contemplated  hereby or  thereby,  (iii) any cause of action,  suit or
claim  brought or made against such  Indemnitee by a third party and arising out
of or resulting from the execution,  delivery, performance or enforcement of the
Transaction   Documents  or  any  other  certificate,   instrument  or  document
contemplated hereby or thereby,  (iv) any transaction financed or to be financed
in whole or in part,  directly or indirectly,  with the proceeds of the issuance
of the  Shares or (v) the status of the  Investor  or holder of the Shares as an
investor in the Company, except insofar as any such misrepresentation, breach or
any untrue statement, alleged untrue statement,  omission or alleged omission is
made in reliance upon and in conformity  with written  information  furnished to
the Company by the Investor which is  specifically  intended by the Investor for
use  in  the  preparation  of  any  such  Registration  Statement,   preliminary
prospectus or  prospectus.  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. The indemnity  provisions
contained  herein shall be in addition to any cause of action or similar  rights
the Investor may have, and any liabilities the Investor may be subject to.

     11. GOVERNING LAW; MISCELLANEOUS.

     a. Governing Law. This  Agreement  shall be governed by and  interpreted in
accordance with the laws of the State of Nevada without regard to the principles
of conflict of laws. Each party hereby irrevocably  submits to the non-exclusive
jurisdiction  of the state and federal  courts  sitting in the City of New York,
borough of  Manhattan,  for the  adjudication  of any  dispute  hereunder  or in
connection  herewith or with any  transaction  contemplated  hereby or discussed
herein,  and hereby  irrevocably  waives,  and agrees not to assert in any suit,
action  or  proceeding,  any  claim  that it is not  personally  subject  to the
jurisdiction of any such court,  that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper.  Each party hereby  irrevocably waives personal service of process and
consents  to process  being  served in any such suit,  action or  proceeding  by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof.  Nothing contained herein shall be deemed
to limit in any way any right to serve  process in any manner  permitted by law.
If any  provision of this  Agreement  shall be invalid or  unenforceable  in any
jurisdiction,  such invalidity or unenforceability shall not affect the validity
or

                                       30

<PAGE>



enforceability  of the remainder of this Agreement in that  jurisdiction  or the
validity or  enforceability  of any  provision  of this  Agreement  in any other
jurisdiction.

     b. Commitment  Fees;  Placement Agent Fees;  Advisory Fees; Legal Fees; and
Escrow Fees.


        (i) As an inducement to Dutchess  Private  Equities,  L.P. to enter into
     this  Agreement,  the  Company  has  agreed  to issue to  Dutchess  Private
     Equities,  L.P. as a  commitment  fee that number of shares of Common Stock
     equal to $50,000  divided by the closing bid price of the Company's  Common
     Stock on the Execution Date. These shares will be registered in the current
     offering and issued to Dutchess Private Equities,  L.P. in certificate form
     no later than two (2) Trading Days after the Execution Date.

        (ii) The Company has agreed to issue to May Davis Group,  Inc.,  as part
     of its  placement  fee,  that  number of shares  of Common  Stock  equal to
     $200,000  divided by the closing bid price of the Company's Common Stock on
     the Execution Date. These shares will be registered in the current offering
     and issuable to May Davis  Group,  Inc. no later than ten (10) Trading Days
     following the Execution Date.

        (iii) On each  Closing  Date the Company  shall pay to May Davis  Group,
     Inc., a placement  fee in an amount  equal to 3.5% of the Purchase  Amount,
     which amount shall be deducted from the Purchase Amount by the Escrow Agent
     and paid directly to May Davis Group, Inc.

        (iv) Dutchess Advisors, Ltd. is acting in an advisory capacity to one of
     the Investors,  Dutchess  Private  Equities Fund, L.P., and the Company has
     agreed to pay an amount in cash and Common Stock for the advisory  services
     being rendered to that Investor. On each Closing Date the Company shall pay
     to Dutchess Advisors, Ltd., as part of its advisory fee, an amount equal to
     3.5% of the  Purchase  Amount,  which  amount  shall be  deducted  form the
     Purchase Amount by the Escrow Agent and paid directly to Dutchess Advisors,
     Ltd. The Company  shall also issue to Dutchess  Advisors,  Ltd., as part of
     its advisory  fee,  that number of shares of Common Stock equal to $150,000
     divided  by the  closing  bid price of the  Company's  Common  Stock on the
     Execution Date. These shares will be registered in the current offering and
     issued to Dutchess Advisors, Ltd. in certificate form no later than two (2)
     Trading Days after the Execution Date.

        (v) The Company  shall issue to Investors'  counsel,  Joseph B. LaRocco,
     Esq., 37,000 shares of Common Stock. These shares will be registered in the
     current offering and issued to Joseph B. LaRocco,  Esq. in certificate form
     no later than two (2) Trading Days after the Execution Date.

        (vi) The  Company  shall also pay the Escrow  Agent for escrow  services
     pursuant to a separate escrow agreement.

                                       31

<PAGE>



        (vii)  The  Company  shall  pay  May  Davis  Group,  Inc.  any  National
     Association of Securities Dealers,  Inc. filing fees that may be associated
     with his offering.

        (viii) Except as otherwise  set forth  herein,  each party shall pay the
     fees and expenses of its advisers, counsel,  accountants and other experts,
     if any,  and all other  expenses  incurred  by such party  incident  to the
     negotiation,  preparation,  execution,  delivery  and  performance  of this
     Agreement.  Any attorneys' fees and expenses incurred by either the Company
     or by  the  Investor  in  connection  with  the  preparation,  negotiation,
     execution and delivery of any  amendments to this  Agreement or relating to
     the  enforcement  of the rights of any party,  after the  occurrence of any
     breach of the terms of this  Agreement  by another  party or any default by
     another party in respect of the transactions contemplated hereunder,  shall
     be  paid on  demand  by the  party  which  breached  the  Agreement  and/or
     defaulted,  as the case may be. The  Company  shall pay all stamp and other
     taxes and duties levied in connection  with the issuance of any  Securities
     issued pursuant hereto.

     c.  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;  provided  that a facsimile  signature  shall be
considered  due execution  and shall be binding upon the signatory  thereto with
the same force and effect as if the signature were an original,  not a facsimile
signature.

     d.  Headings;  Singular/Plural.  The  headings  of this  Agreement  are for
convenience   of   reference   and  shall  not  form  part  of,  or  affect  the
interpretation  of,  this  Agreement.  Whenever  required by the context of this
Agreement, the singular shall include the plural and masculine shall include the
feminine.

     e.  Severability.  If any provision of this  Agreement  shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction  or the  validity  or  enforceability  of  any  provision  of  this
Agreement in any other jurisdiction.

     f. 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  (including the other
Transaction  Documents)  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 amended  other than by an  instrument in
writing signed by the Company and the Investor,  and no provision  hereof may be
waived other than by an instrument  in writing  signed by the party against whom
enforcement is sought.


                                       32

<PAGE>



     g. Notices. Any notices 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;  (ii) upon
receipt,  when sent by  facsimile  (provided  confirmation  of  transmission  is
mechanically or electronically generated and kept on file by the sending party);
or (iii)  one (1) day  after  deposit  with a  nationally  recognized  overnight
delivery  service,  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:

     CAN-CAL RESOURCES, LTD.
     Ronald D. Sloan, President
     8221 Cretan Blue Lane
     Las Vegas, NV 89128
     Telephone:    702-240-6565
     Facsimile:    702-243-1869

And
     The Law Office of Stephen E. Rounds
     4635 East Eighteenth Avenue
     Denver, Colorado USA 80220
     Attention:  Stephen E. Rounds, Esq.
     Telephone:    303-377-6997
     Facsimile:    303-377-0231

     If to the Investor:

     At the address listed in the Questionnaire

     If to May Davis Group, Inc.:
              Hunter Singer
              May Davis Group, Inc.
              Telephone:
              Facsimile:

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

     No Assignment. This Agreement may not be assigned.

     i. No Third Party Beneficiaries. This Agreement is intended for the benefit
of the  parties  hereto and is not for the  benefit  of,  nor may any  provision
hereof be enforced by, any other person.


                                       33

<PAGE>



     j.  Survival.  The  representations  and  warranties of the Company and the
Investor  contained in Sections 2 and 3, the  agreements and covenants set forth
in Sections 4 and 5, and the indemnification provisions set forth in Section 10,
shall survive each of the Closings.  The Investor shall be responsible  only for
its own representations, warranties, agreements and covenants hereunder.

     k.  Publicity.  The Company and Investor  shall  consult with each other in
issuing any press releases or otherwise making public statements with respect to
the  transactions  contemplated  hereby and no party  shall issue any such press
release or otherwise  make any such public  statement  without the prior written
consent of the other parties,  which consent shall not be unreasonably  withheld
or delayed, except that no prior consent shall be required if such disclosure is
required by law, in which such case the disclosing party shall provide the other
parties  with  prior  notice  of  such  public  statement.  Notwithstanding  the
foregoing,  the Company shall not publicly disclose the name of Investor without
the prior written  consent of such  Investor,  except to the extent  required by
law.  Investor  acknowledges  that  this  Agreement  and  all  or  part  of  the
Transaction  Documents may be deemed to be "material  contracts" as that term is
defined by Item 601(b)(10) of Regulation S-K, and that the Company may therefore
be  required  to file such  documents  as  exhibits  to reports or  registration
statements filed under the Securities 1933 Act or the 1934 Act. Investor further
agrees that the status of such  documents  and  materials as material  contracts
shall be determined solely by the Company, in consultation with its counsel.

     l. Further Assurances. Each party shall do and perform, or cause to be done
and performed,  all such further acts and things,  and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

     m.  Placement  Agent.  Except  as set forth in this  Agreement,  no fees or
commissions will be payable by the Company to any broker,  financial  advisor or
consultant,  finder, placement agent, investment banker, bank or other person or
entity,  with  respect  to the  transactions  contemplated  by  the  Transaction
Documents.  The Investor  shall have no  obligation  with respect to any fees or
with respect to any claims made by or on behalf of other persons or entities for
fees of a type  contemplated  in this Section that may be due in connection with
the transactions  contemplated by the Transaction  Documents.  The Company shall
indemnify and hold harmless the Investor, their employees,  officers, directors,
agents,  and partners,  and their  respective  affiliates,  from and against all
claims,  losses,   damages,  costs  (including  the  costs  of  preparation  and
attorney's  fees) and  expenses  incurred  in  respect  of any such  claimed  or
existing fees, as such fees and expenses are incurred.

     n. No Strict  Construction.  The language  used in this  Agreement  will be
deemed to be the language  chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.


                                       34

<PAGE>



     o.  Remedies.  The  Investor  and each holder of the Shares  shall have all
rights and  remedies set forth in this  Agreement  and the  Registration  Rights
Agreement  and all rights and  remedies  which such holders have been granted at
any time under any other  agreement or contract and all of the rights which such
holders have under any law. Any person  having any rights under any provision of
this Agreement  shall be entitled to enforce such rights  specifically  (without
posting a bond or other  security),  to recover damages by reason of any default
or  breach  of any  provision  of this  Agreement,  including  the  recovery  of
reasonable attorneys fees and costs, and to exercise all other rights granted by
law.

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

     q. The Company agrees that the Investors shall not be jointly and severally
liable for the representations, covenants and warranties made in this Agreement.
Also the Company  agrees that the  Investors  shall not be jointly and severally
liable for any breaches of this  Agreement,  but rather each Investor shall bear
its own liability based on which Investor caused such breach.



                                       35

<PAGE>



     IN WITNESS  WHEREOF,  the parties  hereto  have  caused  this Common  Stock
Investment  Agreement  to be duly  executed  as of the date and year first above
written.


     COMPANY: CAN-CAL RESOURCES, LTD.
     By:      /s/  Ronald D. Sloan
              -----------------------------------------
              Name:    Ronald D. Sloan
              Title:   President

     DRH INVESTMENT COMPANY, LLC
     By Del Rey Investments, LLC - A Managing Member


     By:      /s/  Alfred Hannfeldt
              -----------------------------------------
              Name:    Alfred Hannfeldt
              Title:   Managing Member


     DUTCHESS PRIVATE EQUITIES FUND, L.P.
     By its General Partner Dutchess Capital Management, LLC


     By:      /s/  Michael A. Novielli
              -----------------------------------------
              Name:    Michael A. Novielli
              Title:   A Managing Member

     INVESTOR INFORMATION.

     Contact Name
                 ---------------------------------------------------------
     Place of Organization
                          ------------------------------------------------
     Principal Business Address
                                ------------------------------------------
     City, State, Zip Code
                          ------------------------------------------------
     Phone                                   Fax
           -----------------------------        --------------------------

     INVESTOR INFORMATION.

     Contact Name
                 ---------------------------------------------------------
     Place of Organization
                          ------------------------------------------------
     Principal Business Address
                                ------------------------------------------
     City, State, Zip Code
                          ------------------------------------------------
     Phone                                   Fax
           -----------------------------        --------------------------



                                       36

<PAGE>



                                LIST OF EXHIBITS
                                -----------------

     EXHIBIT A                Registration Rights Agreement
     EXHIBIT B                Opinion of Company's Counsel
     EXHIBIT C                Escrow Agreement
     EXHIBIT D                Broker Representation Letter
     EXHIBIT E                Board Resolution
     EXHIBIT F                Put Notice
     EXHIBIT G                Partial Release of Put Amount and Shares


                                LIST OF SCHEDULES
                                -----------------
     Schedule 4(a)            Subsidiaries
     Schedule 4(c)            Capitalization
     Schedule 4(e)            Conflicts
     Schedule 4(g)            Material Changes
     Schedule 4(h)            Litigation
     Schedule 4(l)            Intellectual Property
     Schedule 4(n)            Liens
     Schedule 4(t)            Certain Transactions


                                       37

<PAGE>



CAN-CAL RESOURCES, LTD.
QUESTIONNAIRE


     The information contained in this Questionnaire is being furnished in order
to  determine  whether the  undersigned's  subscription  to purchase  the Shares
described in this Agreement may be accepted.

     ALL   INFORMATION   CONTAINED  IN  THIS   QUESTIONNAIRE   WILL  BE  TREATED
CONFIDENTIALLY.  The  undersigned  understands,  however,  that the  Company may
present this  Questionnaire  to such parties as it deems  appropriate  if called
upon to establish  that the proposed  offer and sale of the Securities is exempt
from  registration  under the 1933 Act, as  amended.  Further,  the  undersigned
understands  that the offering may be required to be reported to the  Securities
and Exchange  Commission,  NASDAQ and to various state securities and "blue sky"
regulators.

     IN ADDITION TO SIGNING THE SIGNATURE PAGE, IF REQUESTED BY THE COMPANY, THE
UNDERSIGNED MUST COMPLETE FORM W-9.

I.   PLEASE CHECK EACH OF THE STATEMENTS BELOW THAT APPLIES.

         1. The undersigned:  (a) has total assets in excess of $5,000,000;  (b)
         was not formed for the specific purpose of acquiring the securities and
         (c) has its principal place of business in ___________.

         2. The  undersigned is a natural person whose  individual net worth* or
         joint net worth with his or her spouse exceeds $1,000,000.

         3. The undersigned is a natural person who had an individual income* in
         excess  of  $200,000  in each  of the two  most  recent  years  and who
         reasonably  expects an  individual  income in excess of $200,000 in the
         current  year.  Such  income  is  solely  that of the  undersigned  and
         excludes the income of the undersigned's spouse.

         4. The  undersigned is a natural  person who,  together with his or her
         spouse,  has had a joint  income* in excess of  $300,000 in each of the
         two most  recent  years and who  reasonably  expects a joint  income in
         excess of $300,000 in the current year.

* For purposes of this  Questionnaire,  the term "net worth" means the excess of
total assets over total liabilities. In determining "income", an investor should
add to his or her adjusted gross income any amounts  attributable  to tax-exempt
income received, losses claimed as a limited partner in any limited partnership,
deductions claimed for depletion, contributions to IRA or Keogh retirement plan,
alimony payments and any amount by which income from long-term capital gains has
been reduced in arriving at adjusted gross income.

                                       38

<PAGE>



         5. The undersigned is:

            (a) a bank as defined in Section 3(a)(2) of the 1933 Act; or

            (b) a savings and loan  association or other  institution as defined
            in  Section  3(a)(5)(A)  of  the  1933  Act  whether  acting  in its
            individual or fiduciary capacity; or

            (c) a broker or dealer registered pursuant to Section 15 of the 1934
            Act; or

            (d) an  insurance  company as  defined in Section  2(13) of the 1933
            Act; or

            (e) An investment  company  registered under the Investment  Company
            Act of 1940 or a business  development company as defined in Section
            2(a)(48) of the Investment Company Act of 1940; or

            (f) a small business  investment  company licensed by the U.S. Small
            Business  Administration  under  Section 301 (c) or (d) of the Small
            Business Investment Act of 1958; or

         6. The  undersigned  is an entity in which all of the equity owners are
         "accredited  investors",  as that term is defined in Rule  501(a)(3) of
         Regulation D of the 1933 Act.


                                       39

<PAGE>



II.  INVESTOR INFORMATION.

     (A)      IF THE UNDERSIGNED IS AN INDIVIDUAL:

              Name
                   --------------------------------------------------

              Street Address
                             ----------------------------------------

              City, State, Zip Code
                                    ---------------------------------

              Phone                         Fax
                    -------------------         ---------------------

              Social Security Number
                                     --------------------------------

              Send Correspondence to:

              -------------------------------------------------------

              -------------------------------------------------------

              -------------------------------------------------------


     (B)      IF THE UNDERSIGNED IS NOT AN INDIVIDUAL:

              Name of Entity
                             ----------------------------------------

              Person's Name                       Title
                            --------------------        -------------

              State of Organization
                                    ---------------------------------

              Principal Business Address
                                         ----------------------------

              City, State, Zip Code
                                    ---------------------------------

              Taxpayer Identification Number
                                             ------------------------

              Phone                         Fax
                    -------------------         ---------------------

              Send Correspondence to:

              -------------------------------------------------------

              -------------------------------------------------------

              -------------------------------------------------------



                                       40

<PAGE>



                             CAN-CAL RESOURCES, LTD.
                                 SIGNATURE PAGE

     Your  signature on this Signature Page evidences your agreement to be bound
by the Questionnaire, Subscription Agreement and Registration Rights Agreement.

     1. The undersigned hereby represents that (a) the information  contained in
the  Questionnaire  is complete and accurate and (b) the undersigned will notify
CAN-CAL  RESOURCES,  LTD.  immediately  if  any  material  change  in any of the
information occurs prior to the acceptance of the undersigned's subscription and
will promptly send CAN-CAL RESOURCES, LTD. written confirmation of such change.

     2. The  undersigned  signatory  hereby  certifies  that he/she has read and
understands   the   Subscription   Agreement   and   Questionnaire,    and   the
representations  made by the undersigned in this Agreement and Questionnaire are
true and accurate.



                                       -----------------------------------------
                                       Date

                                       By:
                                           -------------------------------------
                                           (Signature)

                                       Name:
                                            ------------------------------------
                                            (Please Type or Print)

                                       Title:
                                              ----------------------------------
                                              (Please Type or Print)



                                       41

<PAGE>



                             COMPANY ACCEPTANCE PAGE


This Subscription Agreement accepted and agreed
to this ________ day of October, 2001.


CAN-CAL RESOURCES, LTD.



By
     --------------------------------------------
     Ronald D. Sloan its President



                                       42

<PAGE>



                                    EXHIBIT D

                              [BROKER'S LETTERHEAD]




Date
Via Facsimile

Attention:



Re: CAN-CAL RESOURCES, LTD.

Dear                               :
     ------------------------------

It is our understanding that the Form________ Registration Statement bearing SEC
File  Number (  ___-______)  filed by CAN-CAL  RESOURCES,  LTD. on Form _____ on
__________, 2001 was declared effective on _____________, 200___.

This letter  shall  confirm  that  ______________  shares of the common stock of
CAN-CAL RESOURCES,  LTD. are being sold on behalf of __________________ and that
we shall  comply with the  prospectus  delivery  requirements  set forth in that
Registration Statement by filing the same with the purchaser.

If you have any questions please do not hesitate to call.

Sincerely,






cc:  Joseph B. LaRocco, Esq.



                                       43

<PAGE>



                                    EXHIBIT F
PUT NOTICE NO.   ______

CAN-CAL RESOURCES, LTD., a Nevada corporation (the "Company"),  hereby elects to
exercise its right pursuant to the Investment  Agreement to require  Investor to
purchase shares of its common stock. The Company hereby certifies that:

      1.  The Put Amount is: $_______________.

      2.  The Pricing Period runs from __________________ to __________________.

      3.  The current number of shares of common stock issued and outstanding as
          of __________________ are __________________________.

      4. 93% of the average of the lowest  closing bid price of the Company's
Common  Stock during the first five (5) Trading  Days of the  specified  Pricing
Period and the lowest closing bid price of the Company's Common Stock during the
second five (5) Trading Days of the specified Pricing Period ("Ave.  Lowest") is
as follows:

 Ave. Lowest   x   93%   =   Purchase Price x  (15% of Volume) =    Total
___________    x   93%   =    __________    x  _____________   =  $__________
___________    x   93%   =    __________    x  _____________   =  $__________
___________    x   93%   =    __________    x _____________    =  $__________
___________    x   93%   =    __________    x  _____________   =  $__________
___________    x   93%   =    __________    x  _____________   =  $__________
___________    x   93%   =    __________    x  _____________   =  $__________
___________    x   93%   =    __________    x  _____________   =  $__________
___________    x   93%   =    __________    x  _____________   =  $__________
___________    x   93%   =    __________    x  _____________   =  $__________
___________    x   93%   =    __________    x  _____________   =  $__________
                         GRAND TOTALS          _____________*    $____________**

Number of Shares being Purchased (total of 15% volume column) _____________*



                                       44

<PAGE>



Aggregate Purchase Price of Shares $___________________________**


                   Less Escrow Fee      -
                                            --------------------------

           Less Placement Agent Fee     -
                                            --------------------------

                Less Advisor's Fee      -
                                            --------------------------

     Amount to be wired to Company
                                            ==========================


The undersigned has executed this Put Notice as of
this ______ day of _______________, 200___.


CAN-CAL RESOURCES, LTD.


By:
   ----------------------------------------------
   Name and title:



                                       45

<PAGE>



                                    EXHIBIT G

                  PARTIAL RELEASE OF PURCHASE AMOUNT AND SHARES

     To:
     CAN-CAL Resources, Ltd.
     8221 Cretan Blue Lane
     Las Vegas, NV 89128
     Attention: Ronald D. Sloan, President
     Telephone:    702-240-6565
     Facsimile:    702-243-1869

     With a copy to:
     The Law Office of Stephen E. Rounds
     4635 East Eighteenth Avenue
     Denver, Colorado USA 80220
     Attention:  Stephen E. Rounds, Esq.
     Telephone:    303-377-6997
     Facsimile:    303-377-0231

     First Union National Bank
     Corporate Trust Department
     One World Trade Center, Suite 4711
     New York, New York 10048
     Telephone No.:  212-839-7612
     Telecopier No.:  212-938-0821

Pursuant to the terms of the  Investment  Agreement  the  Investor  requests the
release from the Company of __________  shares of the Company's  Common Stock by
overnight delivery or DWAC, if available, and the Investor, upon confirmation of
receipt of the  Shares by the  Escrow  Agent  shall  wire  $____________  to the
Company  within two (2) Trading Days of said  confirmation  at which time Escrow
Agent shall wire the funds to the Company and deliver the shares to the Investor
pursuant to the joint instructions given to the Escrow Agent by May Davis Group,
Inc. and the Company.

                                          INVESTOR


                                       By:
                                          --------------------------------

Note:  The  number of Shares  stated in this  PARTIAL  RELEASE OF PUT AMOUNT AND
SHARES Form shall be equal to the dollar amount to be released divided by 93% of
the lowest  closing  bid price  during the first  five (5)  Trading  Days of the
Pricing Period.


                                       46

<PAGE>





                           SCHEDULE 4(a) SUBSIDIARIES



         NONE.



                                       47

<PAGE>





                          SCHEDULE 4(c) CAPITALIZATION


         THERE ARE  CURRENTLY  15,000,000  COMMON SHARES  AUTHORIZED,  PAR VALUE
$0.001, WITH APPROXIMATELY 9,372,791 ISSUED AND OUTSTANDING. THERE ARE CURRENTLY
-0- PREFERRED SHARES AUTHORIZED, PAR VALUE $0.001, WITH APPROXIMATELY -0- ISSUED
AND  OUTSTANDING  AND  APPROXIMATELY  100,000 (AS OF AUGUST 20,  2001) SHARES OF
COMMON STOCK ARE ISSUABLE UPON THE EXERCISE OF OPTIONS,  WARRANTS AND CONVERSION
RIGHTS.



                                       48

<PAGE>





                             SCHEDULE 4(e) CONFLICTS



         NONE.



                                       49

<PAGE>





                         SCHEDULE 4(g) MATERIAL CHANGES



         NONE.


                                       50

<PAGE>





                            SCHEDULE 4(h) LITIGATION



         NONE, EXCEPT AS DISCLOSED IN SEC FILINGS.



                                       51

<PAGE>





                       SCHEDULE 4(l) INTELLECTUAL PROPERTY



         NONE.



                                       52

<PAGE>





                               SCHEDULE 4(n) LIENS



         NONE.



                                       53

<PAGE>




                       SCHEDULE 4(t) CERTAIN TRANSACTIONS



         NONE.


                                       54

<PAGE>