SUBSCRIPTION AGREEMENT
                             ----------------------

         THIS SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of July 30,
2004, by and among XRG, Inc., a Delaware corporation (the "Company"), and the
subscribers identified on the signature page hereto (each a "Subscriber" and
collectively "Subscribers").

         WHEREAS, the Company and the Subscribers are executing and delivering
this Agreement in reliance upon an exemption from securities registration
afforded by the provisions of Section 4(2), Section 4(6) and/or Regulation D
("Regulation D") as promulgated by the United States Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"1933 Act").

         WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the
Subscribers, as provided herein, and the Subscribers shall purchase, in the
aggregate, $1,250,000 (the "Purchase Price") of the Company's common stock,
$.001 par value (the "Common Stock" or "Shares"), and share purchase warrants in
the form attached hereto as Exhibit A (the "Warrants"), to purchase shares of
Common Stock (the "Warrant Shares"). The per Share Purchase Price shall be
$0.10, subject to adjustment as described in this Agreement. The Purchase Price
shall be payable to the Company on the Closing Date. The Common Stock, the
Warrants and the Warrant Shares are collectively referred to herein as the
"Securities"; and

         WHEREAS, the aggregate proceeds of the sale of the Common Stock and the
Warrants contemplated hereby may be held in escrow pursuant to the terms of a
Funds Escrow Agreement which may be executed by the parties substantially in the
form attached hereto as Exhibit B (the "Escrow Agreement").

         NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement, the Company and the Subscribers hereby
agree as follows:

                  1. Purchase and Sale of Shares and Warrants. Subject to the
satisfaction (or waiver) of the conditions to Closing set forth in this
Agreement and the Escrow Agreement, each Subscriber shall purchase the Shares
and Warrants for the portion of the Purchase Price indicated on the signature
page hereto, and the Company shall sell such Shares and Warrants to the
Subscriber. The Purchase Price for the Shares and Warrants shall be paid in
cash. The entire Purchase Price shall be allocated to the Shares.

                  2. Escrow Arrangements; Form of Payment. Upon execution hereof
by the parties and pursuant to the terms of the Escrow Agreement, each
Subscriber agrees to make the deliveries required of such Subscriber as set
forth in the Escrow Agreement and the Company agrees to make the deliveries
required of the Company as set forth in the Escrow Agreement.

                  3. Warrants. On the Closing Date the Company will issue
Warrants to the Subscribers. One (1) Warrant will be issued for each four (4)
Shares issued on the Closing Date. The per Warrant Share exercise price to
acquire a Warrant Share upon exercise of a Warrant shall be $0.40. The Warrants
shall be exercisable until five (5) years after the Closing Date.

                  4. Subscriber's Representations and Warranties. Each
Subscriber hereby represents and warrants to and agrees with the Company only as
to such Subscriber that:

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                           (a) Information on Company. The Subscriber has been
furnished  with or has had access at the EDGAR Website of the  Commission to the
Company's  Form  10-KSB  for the year  ended  March 31,  2004 as filed  with the
Commission,  together with all subsequently filed Forms 10-QSB, 8-K, and filings
made with the Commission available at the EDGAR website (hereinafter referred to
collectively  as the  "Reports").  In addition,  the  Subscriber has received in
writing  from the Company  such other  information  concerning  its  operations,
financial condition and other matters as the Subscriber has requested in writing
(such other information is collectively,  the "Other Written Information"),  and
considered  all  factors  the  Subscriber  deems  material  in  deciding  on the
advisability of investing in the Securities.

                           (b) Information on Subscriber. The Subscriber is, and
will be at the time of the  issuance of the Common  Stock and exercise of any of
the Warrants, an "accredited investor",  as such term is defined in Regulation D
promulgated by the Commission  under the 1933 Act, is experienced in investments
and business  matters,  has made  investments  of a  speculative  nature and has
purchased  securities  of United  States  publicly-owned  companies  in  private
placements in the past and,  with its  representatives,  has such  knowledge and
experience  in  financial,  tax and other  business  matters  as to  enable  the
Subscriber to utilize the information  made available by the Company to evaluate
the merits and risks of and to make an informed investment decision with respect
to the  proposed  purchase,  which  represents  a  speculative  investment.  The
Subscriber  has the authority and is duly and legally  qualified to purchase and
own the  Securities.  The Subscriber is able to bear the risk of such investment
for an indefinite period and to afford a complete loss thereof.  The information
set forth on the signature page hereto regarding the Subscriber is accurate.

                           (c) Purchase of Common Stock and Warrants. On the
closing date, the Subscriber
will purchase the Common Stock and Warrants as principal for its own account and
not with a view to any distribution thereof.

                           (d) Compliance with Securities Act. The Subscriber
understands and agrees that the Securities  have not been  registered  under the
1933 Act or any applicable state securities laws, by reason of their issuance in
a transaction  that does not require  registration  under the 1933 Act (based in
part  on the  accuracy  of the  representations  and  warranties  of  Subscriber
contained herein),  and that such Securities must be held indefinitely  unless a
subsequent  disposition is registered under the 1933 Act or any applicable state
securities laws or is exempt from such registration.

                           (e) Shares Legend. The Shares and the Warrant Shares
shall bear the following or
similar legend:

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

                           (f) Warrants Legend. The Warrants shall bear the
following or similar legend:

                  "THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
                  THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
                  OF 1933, AS AMENDED. THIS WARRANT AND THE COMMON SHARES
                  ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,


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                  OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
                  EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID
                  ACT OR ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF
                  COUNSEL REASONABLY SATISFACTORY TO XRG, INC. THAT SUCH
                  REGISTRATION IS NOT REQUIRED."

     (g)  Communication  of Offer. The offer to sell the Securities was directly
communicated  to the  Subscriber by the Company.  At no time was the  Subscriber
presented with or solicited by any leaflet, newspaper or magazine article, radio
or  television  advertisement,  or any  other  form of  general  advertising  or
solicited  or  invited  to  attend  a  promotional  meeting  otherwise  than  in
connection and concurrently with such communicated offer.

     (h)  Authority;   Enforceability.   This  Agreement  and  other  agreements
delivered together with this Agreement or in connection  herewith have been duly
authorized,  executed and delivered by the  Subscriber and are valid and binding
agreements  enforceable in accordance  with their terms,  subject to bankruptcy,
insolvency, fraudulent transfer, reorganization,  moratorium and similar laws of
general  applicability  relating to or affecting creditors' rights generally and
to general  principles of equity;  and Subscriber  has full corporate  power and
authority  necessary to enter into this Agreement and such other  agreements and
to perform its obligations hereunder and under all other agreements entered into
by the Subscriber relating hereto.

     (i) Restricted Securities.  Subscriber understands that the Securities have
not been registered  under the 1933 Act and such Subscriber will not sell, offer
to sell, assign, pledge, hypothecate or otherwise transfer any of the Securities
unless (i) pursuant to an effective  registration  statement under the 1933 Act,
(ii) such Subscriber  provides the Company with an opinion of counsel, in a form
reasonably  acceptable to the Company, to the effect that a sale,  assignment or
transfer of the Securities may be made without  registration under the 1933 Act,
or (iii) Subscriber provides the Company with reasonable assurances (in the form
of seller  and broker  representation  letters)  that the Shares or the  Warrant
Shares,  as the case may be, can be sold  pursuant  to (A) Rule 144  promulgated
under the 1933 Act, or (B) Rule 144(k)  promulgated  under the 1933 Act, in each
case following the applicable holding period set forth therein.  Notwithstanding
anything to the  contrary  contained  in this  Agreement,  such  Subscriber  may
transfer  (without  restriction  and without the need for an opinion of counsel)
the  Securities to its  Affiliates  (as defined  below)  provided that each such
Affiliate is an  "accredited  investor"  under  Regulation D and such  Affiliate
agrees to be bound by the terms and conditions of this Agreement.

     For the  purposes  of  this  Agreement,  an  "Affiliate"  of any  specified
Subscriber means any other person or entity directly or indirectly  controlling,
controlled  by or under direct or indirect  common  control with such  specified
Subscriber. For purposes of this definition, "control" means the power to direct
the  management  and  policies of such person or firm,  directly or  indirectly,
whether through the ownership of voting securities, by contract or otherwise.

     (j) No  Governmental  Review.  Each Subscriber  understands  that no United
States  federal or state  agency or any other  governmental  or state agency has
passed  on or made  recommendations  or  endorsement  of the  Securities  or the
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.

     (k) Correctness of Representations.  Each Subscriber  represents as to such
Subscriber  that  the  foregoing  representations  and  warranties  are true and


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correct as of the date hereof and,  unless a Subscriber  otherwise  notifies the
Company prior to the Closing Date (as  hereinafter  defined),  shall be true and
correct as of the Closing Date.

     (l) Survival.  The foregoing  representations  and warranties shall survive
the Closing Date for a period of two years.

     5. Company Representations and Warranties. The Company
represents and warrants to and agrees with each Subscriber that:

     (a) Due  Incorporation.  The  Company  and  each of its  subsidiaries  is a
corporation duly organized, validly existing and in good standing under the laws
of the respective  jurisdictions of their  incorporation  and have the requisite
corporate  power to own their  properties  and to carry on their business as now
being conducted. The Company and each of its subsidiaries is duly qualified as a
foreign  corporation to do business and is in good standing in each jurisdiction
where the nature of the business  conducted  or property  owned by it makes such
qualification necessary,  other than those jurisdictions in which the failure to
so qualify  would not have a  material  adverse  effect.  For  purposes  of this
Agreement,  a "material  adverse effect" shall mean a material adverse effect on
the financial  condition,  results of operations,  properties or business of the
Company taken as a whole.

     (b) Outstanding  Stock. All issued and outstanding  shares of capital stock
of the  Company  and each of its  subsidiaries  have  been duly  authorized  and
validly issued and are fully paid and nonassessable.

     (c)  Authority;  Enforceability.  This  Agreement,  the Common  Stock,  the
Warrants,  the Escrow Agreement and any other agreements delivered together with
this Agreement or in connection herewith (collectively  "Transaction Documents")
have been duly  authorized,  executed and delivered by the Company and are valid
and binding  agreements  enforceable in accordance with their terms,  subject to
bankruptcy,  insolvency,  fraudulent  transfer,  reorganization,  moratorium and
similar laws of general applicability relating to or affecting creditors' rights
generally and to general  principles of equity.  The Company has full  corporate
power  and  authority  necessary  to enter  into  and  deliver  the  Transaction
Documents and to perform its obligations thereunder.

     (d) Additional Issuances. There are no outstanding agreements or preemptive
or  similar  rights  affecting  the  Company's  common  stock or  equity  and no
outstanding rights,  warrants or options to acquire, or instruments  convertible
into or exchangeable  for, or agreements or  understandings  with respect to the
sale or issuance of any shares of common stock or equity of the Company or other
equity interest in any of the subsidiaries of the Company except as described in
the Reports.

     (e) Consents.  No consent,  approval,  authorization or order of any court,
governmental  agency or body or arbitrator having jurisdiction over the Company,
or any of its affiliates,  the American Stock Exchange, the National Association
of Securities  Dealers,  Inc.,  Nasdaq,  SmallCap Market, the OTC Bulletin Board
("Bulletin Board") nor the Company's  shareholders is required for the execution
by the Company of the  Transaction  Documents and compliance and  performance by
the  Company of its  obligations  under the  Transaction  Documents,  including,
without limitation, the issuance and sale of the Securities.

     (f) No Violation or Conflict.  Assuming the  representations and warranties
of the  Subscribers in Section 4 are true and correct,  neither the issuance and
sale of the Securities nor the  performance of the Company's  obligations  under
the Transaction Documents by the Company will:

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<PAGE>

     (i) violate,  conflict with, result in a breach of, or constitute a default
(or an event  which with the giving of notice or the lapse of time or both would
be  reasonably  likely  to  constitute  a  default)  under (A) the  articles  or
certificate  of  incorporation,  charter  or bylaws of the  Company,  (B) to the
Company's knowledge, any decree, judgment,  order, law, treaty, rule, regulation
or determination applicable to the Company of any court,  governmental agency or
body,  or  arbitrator  having  jurisdiction  over  the  Company  or  any  of its
subsidiaries  or over the  properties  or  assets of the  Company  or any of its
affiliates,  (C) the terms of any bond, debenture, note or any other evidence of
indebtedness,  or any agreement,  stock option or other similar plan, indenture,
lease,  mortgage,  deed of trust or other instrument to which the Company or any
of its affiliates or subsidiaries is a party, by which the Company or any of its
affiliates or  subsidiaries  is bound,  or to which any of the properties of the
Company or any of its affiliates or subsidiaries is subject, or (D) the terms of
any "lock-up" or similar  provision of any underwriting or similar  agreement to
which the Company,  or any of its affiliates or  subsidiaries  is a party except
the violation,  conflict,  breach, or default of which would not have a material
adverse effect on the Company; or

     (ii)  result  in  the  creation  or  imposition  of  any  lien,  charge  or
encumbrance  upon  the  Securities  or any of the  assets  of the  Company,  its
subsidiaries or any of its affiliates; or

     (iii) result in the  activation of any  anti-dilution  rights or a reset or
repricing  of any debt or security  instrument  of any other  creditor or equity
holder of the  Company,  nor result in the  acceleration  of the due date of any
obligation of the Company; or

     (iv) result in the activation of any piggy-back  registration rights of any
person  or entity  holding  securities  of the  Company  or having  the right to
receive securities of the Company.

     (g) The Securities. The Securities upon issuance:

     (i) are,  or will be,  free and  clear of any  security  interests,  liens,
claims or other  encumbrances,  subject to restrictions  upon transfer under the
1933 Act and any applicable state securities laws;

     (ii) have been, or will be, duly and validly  authorized and on the date of
issuance of the Shares and upon exercise of the Warrants, the Shares and Warrant
Shares will be duly and validly  issued,  fully paid and  nonassessable  (and if
registered  pursuant  to the 1933  Act,  and  resold  pursuant  to an  effective
registration statement will be free trading and unrestricted, provided that each
Subscriber complies with the prospectus delivery requirements of the 1933 Act);

     (iii) will not have been issued or sold in violation of any  preemptive  or
other similar rights of the holders of any securities of the Company; and

     (iv) will not subject the holders  thereof to personal  liability by reason
of being such holders.

     (h)  Litigation.  There is no  pending  or,  to the best  knowledge  of the
Company,  threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its  affiliates  that would affect the execution by the Company or the


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<PAGE>

performance by the Company of its obligations  under the Transaction  Documents.
Except  as  disclosed  in the  Reports,  there  is no  pending  or,  to the best
knowledge of the Company,  basis for or threatened action,  suit,  proceeding or
investigation  before  any court,  governmental  agency or body,  or  arbitrator
having  jurisdiction over the Company, or any of its affiliates which litigation
if adversely determined would have a material adverse effect on the Company.

     (i) Reporting  Company.  The Company is a publicly-held  company subject to
reporting  obligations  pursuant to Section 13 of the Securities Exchange Act of
1934,  as amended (the "1934 Act") and has a class of common  shares  registered
pursuant to Section  12(g) of the 1934 Act.  Pursuant to the  provisions  of the
1934 Act, the Company has timely filed all reports and other materials  required
to be filed thereunder with the Commission during the preceding twelve months.

     (j) No Market  Manipulation.  The Company has not taken, and will not take,
directly or  indirectly,  any action  designed to, or that might  reasonably  be
expected to, cause or result in  stabilization  or  manipulation of the price of
the  common  stock  of the  Company  to  facilitate  the sale or  resale  of the
Securities or affect the price at which the Securities may be issued or resold.

     (k)  Information  Concerning  Company.  The Reports  contain  all  material
information  relating to the Company and its operations and financial  condition
as of their  respective  dates which  information  is  required to be  disclosed
therein. Since the date of the financial statements included in the Reports, and
except as modified in the Other Written  Information or in the Schedules hereto,
there has been no material adverse change in the Company's  business,  financial
condition or affairs not  disclosed  in the Reports.  The Reports do not contain
any  untrue  statement  of a  material  fact or omit to  state a  material  fact
required to be stated  therein or necessary to make the  statements  therein not
misleading in light of the circumstances when made.

     (l)  Stop  Transfer.  The  Securities,  when  issued,  will  be  restricted
securities.  The Company will not issue any stop  transfer  order or other order
impeding the sale, resale or delivery of any of the Securities, except as may be
required  by  any  applicable  federal  or  state  securities  laws  and  unless
contemporaneous notice of such instruction is given to the Subscriber.

     (m)  Defaults.  The  Company  is  not  in  violation  of  its  articles  of
incorporation or bylaws. The Company is (i) not in default under or in violation
of any other material agreement or instrument to which it is a party or by which
it or any of its  properties  are bound or affected,  which default or violation
would have a material  adverse  effect on the Company,  (ii) not in default with
respect to any order of any court, arbitrator or governmental body or subject to
or party to any order of any court or governmental  authority arising out of any
action, suit or proceeding under any statute or other law respecting  antitrust,
monopoly, restraint of trade, unfair competition or similar matters, or (iii) to
its  knowledge  not in  violation  of any  statute,  rule or  regulation  of any
governmental  authority which violation would have a material  adverse effect on
the Company.

     (n) No Integrated Offering. Neither the Company, nor any of its affiliates,
nor any person  acting on its or their behalf,  has directly or indirectly  made
any offers or sales of any security or solicited  any offers to buy any security
under  circumstances  that would cause the offer of the  Securities  pursuant to
this Agreement to be integrated with prior offerings by the Company for purposes
of the 1933 Act or any applicable  stockholder approval  provisions,  including,
without limitation,  under the rules and regulations of the Bulletin Board which
if so integrated  would eliminate the exemption for the Offering as described in
the second  paragraph  of this  Agreement.  The  Company  will not  conduct  any
offering other than the transactions contemplated hereby that will be integrated
with the  offer or  issuance  of the  Securities  which if so  integrated  would
eliminate the exemption for the Offering as described in the second paragraph of
this Agreement.

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     (o)  No  General  Solicitation.   Neither  the  Company,  nor  any  of  its
affiliates,  nor to its knowledge, any person acting on its or their behalf, has
engaged in any form of general  solicitation or general  advertising (within the
meaning of Regulation D under the 1933 Act) in connection with the offer or sale
of the Securities.

     (p) Listing.  The Company's  common stock is quoted on the Bulletin  Board.
The Company has not received any oral or written notice that its common stock is
not eligible nor will become  ineligible for quotation on the Bulletin Board nor
that its common stock does not meet all  requirements  for the  continuation  of
such quotation and the Company satisfies and as of the Closing Date, the Company
will  satisfy all the  requirements  for the  continued  quotation of its common
stock on the Bulletin Board.

     (q)  No  Undisclosed  Liabilities.   The  Company  has  no  liabilities  or
obligations which are material,  individually or in the aggregate, which are not
disclosed  in the  Reports  and Other  Written  Information,  other  than  those
incurred in the ordinary course of the Company's businesses since March 31, 2004
and which,  individually  or in the aggregate,  would  reasonably be expected to
have a material adverse effect on the Company's financial condition.

     (r) No Undisclosed Events or Circumstances.  Since March 31, 2004, no event
or  circumstance  has  occurred  or exists  with  respect to the  Company or its
businesses,   properties,   operations  or  financial  condition,   that,  under
applicable law, rule or regulation,  requires public  disclosure or announcement
prior to the date  hereof by the  Company  but  which  has not been so  publicly
announced or disclosed in the Reports.

     (s)  Capitalization.  The authorized and  outstanding  capital stock of the
Company as of the date of this  Agreement  and the Closing  Date is set forth in
the Reports and Other Written Information.  There are no options,  warrants,  or
rights to subscribe to,  securities,  rights or obligations  convertible into or
exchangeable  for or giving  any right to  subscribe  for any  shares of capital
stock of the Company except as set forth in the Reports.  All of the outstanding
shares of Common Stock of the Company have been duly and validly  authorized and
issued and are fully paid and nonassessable.

     (t)  Correctness  of  Representations.  The  Company  represents  that  the
foregoing  representations  and  warranties  are true and correct as of the date
hereof in all material respects,  and, unless the Company otherwise notifies the
Subscribers prior to the Closing Date, shall be true and correct in all material
respects as of the Closing Date.

     (u) Survival.  The foregoing  representations  and warranties shall survive
the Closing Date for a period of two years.

     6.  Regulation D Offering.  The offer and issuance of the Securities to the
Subscribers  is being  made  pursuant  to the  exemption  from the  registration
provisions  of the 1933 Act afforded by Section 4(2) or Section 4(6) of the 1933
Act and/or Rule 506 of Regulation D promulgated thereunder. On the Closing Date,
the Company will provide an opinion reasonably acceptable to Subscriber from the
Company's  legal  counsel  opining  on the  availability  of an  exemption  from
registration  under the 1933 Act as it relates to the offer and  issuance of the
Securities and other matters reasonably requested by Subscribers.  A form of the
legal opinion is annexed  hereto as Exhibit C. The Company will provide,  at the
Company's  expense,  such other legal  opinions in the future as are  reasonably
necessary  for the resale of the Common  Stock and  exercise of the Warrants and
resale of the Warrant Shares.

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<PAGE>

     7. Finder/Legal Fees.

     (a) Finder's  Fee. The Company on the one hand,  and each  Subscriber  (for
himself  only) on the other hand,  agree to indemnify the other against and hold
the  other  harmless  from  any  and all  liabilities  to any  persons  claiming
brokerage  commissions  or finder's  fees other than the parties  identified  on
Schedule 7 (each a "Finder" and  collectively  "Finders") on account of services
purported  to  have  been  rendered  on  behalf  of the  indemnifying  party  in
connection  with this  Agreement  or the  transactions  contemplated  hereby and
arising out of such party's actions.  Anything to the contrary in this Agreement
notwithstanding,  each  Subscriber  is providing  indemnification  only for such
Subscriber's  own actions and not for any action of any other  Subscriber.  Each
Subscriber's  liability  hereunder is several and not joint.  The Company agrees
that it will pay the  Finder a cash  finder's  fee of nine  percent  (9%) of the
Purchase Price ("Finder's  Fees") directly out of the funds held pursuant to the
Escrow  Agreement.  The  Company  represents  that  there  are no other  parties
entitled to receive fees,  commissions,  or similar  payments in connection with
the Offering except the Finder.

     (b) Finder's  Warrants.  On the Closing Date, the Company will issue to the
Finder  Warrants  identical  to and  carrying  the same  rights as the  Warrants
issuable to the Subscribers ("Finder's  Warrants").  The Finder will receive one
(1) Warrant for each Share issued on the Closing  Date.  Each such Warrant shall
be exercisable at $0.10 per Warrant Share.  The Finder will also receive one (1)
Warrant for each ten (10)  Warrants  issued on the Closing  Date.  Such Warrants
shall be  exercisable  at $0.40  per  Warrant  Share.  All the  representations,
covenants,    warranties,    undertakings,    remedies,    liquidated   damages,
indemnification,  and other  rights  including  but not limited to  registration
rights made or granted to or for the benefit of the  Subscribers are hereby also
made by and granted to the Finder in respect of the Finder's Warrants.

     (c) Legal Fees. The Company shall pay to Grushko & Mittman,  P.C., a fee of
$5,000 ("Legal Fees") as reimbursement  for services rendered to the Subscribers
in  connection  with this  Agreement and the purchase and sale of the Shares and
Warrants (the "Offering") and acting as Escrow Agent for the Offering. The Legal
Fees will be  payable on the  Closing  Date out of funds  held  pursuant  to the
Escrow Agreement.

     8.  Covenants of the  Company.  The Company  covenants  and agrees with the
Subscribers as follows:

     (a) Stop Orders. The Company will advise the Subscribers, promptly after it
receives notice of issuance by the Commission,  any state securities  commission
or any other  regulatory  authority of any stop order or of any order preventing
or  suspending  any  offering  of  any  securities  of  the  Company,  or of the
suspension of the  qualification of the Common Stock of the Company for offering
or sale in any  jurisdiction,  or the  initiation of any proceeding for any such
purpose.

     (b) Listing.  The Company will  maintain the listing of its Common Stock on
the American Stock  Exchange,  Nasdaq  SmallCap  Market,  Nasdaq National Market
System,  Bulletin Board, or New York Stock Exchange  (whichever of the foregoing
is at the time the  principal  trading  exchange or market for the Common  Stock
(the  "Principal  Market")),  and will comply in all respects with the Company's
reporting,  filing  and  other  obligations  under  the  bylaws  or rules of the
Principal Market, as applicable.

     (c) Market  Regulations.  The  Company  shall  notify the  Commission,  the
Principal  Market and applicable  state  authorities,  in accordance  with their
requirements, of the transactions contemplated by this Agreement, and shall take
all other  necessary  action and proceedings as may be required and permitted by
applicable  law, rule and  regulation,  for the legal and valid  issuance of the
Securities to the Subscribers and promptly provide copies thereof to Subscriber.

                                       8
<PAGE>

     (d) Reporting  Requirements.  From the date of this Agreement and until the
sooner of (i) two (2) years after the Closing Date, or (ii) until all the Shares
and  Warrant  Shares  have been  resold or  transferred  by all the  Subscribers
pursuant to the  Registration  Statement or pursuant to Rule 144, without regard
to volume limitation, the Company will (v) cause its Common Stock to continue to
be  registered  under  Section 12(b) or 12(g) of the 1934 Act, (x) comply in all
respects  with its  reporting  and filing  obligations  under the 1934 Act,  (y)
comply with all reporting  requirements  that are applicable to an issuer with a
class of shares  registered  pursuant to Section 12(b) or 12(g) of the 1934 Act,
as applicable,  and (z) comply with all requirements related to any registration
statement  filed  pursuant  to this  Agreement.  The  Company  will use its best
efforts not to take any action or file any document (whether or not permitted by
the 1933 Act or the 1934 Act or the rules  thereunder)  to  terminate or suspend
such   registration  or  to  terminate  or  suspend  its  reporting  and  filing
obligations  under said acts until two (2) years after the Closing  Date.  Until
the  earlier of the resale of the Common  Stock and the  Warrant  Shares by each
Subscriber or at least two (2) years after the Warrants have been exercised, the
Company  will use its best  efforts to continue  the listing or quotation of the
Common Stock on the Principal Market or other market with the reasonable consent
of  Subscribers  holding a majority of the Shares and Warrant  Shares,  and will
comply  in  all  respects  with  the  Company's  reporting,   filing  and  other
obligations  under the  bylaws or rules of the  Principal  Market.  The  Company
agrees to timely file a Form D with respect to the  Securities if required under
Regulation D and to provide a copy  thereof to each  Subscriber  promptly  after
such filing.

     (e)  Reservation.  Prior to the Closing  Date,  the Company  undertakes  to
reserve,  pro rata, on behalf of each  Subscriber and holder of a Warrant,  from
its authorized but unissued common stock, a number of common shares equal to the
amount of Warrant Shares issuable upon exercise of the Warrants.

     (f) Non-Public  Information.  The Company covenants and agrees that neither
it nor any other Person acting on its behalf will provide any  Subscriber or its
agents or counsel with any  information  that the Company  believes  constitutes
material non-public information, unless prior thereto such Subscriber shall have
agreed in writing to receive  such  information.  The  Company  understands  and
confirms that each Subscriber shall be relying on the foregoing  representations
in effecting transactions in securities of the Company.

     9. Covenants of the Company and Subscriber Regarding Indemnification.

     (a) The Company agrees to indemnify,  hold  harmless,  reimburse and defend
the  Subscribers,  the Subscribers'  officers,  directors,  agents,  affiliates,
control persons, and principal  shareholders,  against any claim, cost, expense,
liability,  obligation,  loss or damage (including reasonable legal fees) of any
nature,  incurred by or imposed  upon the  Subscriber  or any such person  which
results,  arises out of or is based upon (i) any material  misrepresentation  by
Company  or  breach  of any  warranty  by  Company  in  any  of the  Transaction
Documents;  or (ii) after any applicable notice and/or cure periods,  any breach
or default in  performance  by the Company of any covenant or  undertaking to be
performed  by the  Company  under  any  Transaction  Documents  other  than  its
obligations under Section 11 of this Agreement.

     (b) Each  Subscriber  agrees to  indemnify,  hold  harmless,  reimburse and
defend  the  Company  and each of the  Company's  officers,  directors,  agents,
affiliates,  control  persons  against  any  claim,  cost,  expense,  liability,
obligation,  loss or damage  (including  reasonable  legal  fees) of any nature,
incurred by or imposed upon the Company or any such person which results, arises
out of or is based upon (i) any material misrepresentation by such Subscriber in
this  Agreement  or in any  Exhibits  or  Schedules  attached  hereto,  or other
agreement  delivered pursuant hereto; or (ii) after any applicable notice and/or
cure periods,  any breach or default in  performance  by such  Subscriber of any
covenant or undertaking  to be performed by such  Subscriber  hereunder,  or any
other agreement entered into by the Company and Subscribers, relating hereto.

                                       9
<PAGE>

     (c) In no  event  shall  the  liability  of  any  Subscriber  or  permitted
successor  hereunder  or under  any  other  agreement  delivered  in  connection
herewith  be  greater  in amount  than the  dollar  amount  of the net  proceeds
actually received by such Subscriber upon the sale of Registrable Securities (as
defined herein).

     (d)  The   procedures  set  forth  in  Section  10.6  shall  apply  to  the
indemnifications set forth in Sections 9(a) and 9(b) above.

     10.1.  Registration  Rights. The Company shall file with the Commission not
later than  September  30, 2004 (the  "Filing  Date"),  and cause to be declared
effective  within the  sooner of sixty (60) days after the actual  filing of the
registration  statement or December 31, 2004 (the "Effective Date"), a Form SB-2
registration  statement (the "Registration  Statement") (or such other form that
it is eligible  to use) in order to  register  the  Registrable  Securities  for
resale and  distribution  under the 1933 Act. The Company will register not less
than a number  of  shares of  common  stock in the  aforedescribed  registration
statement  that is  equal  to all of the  Shares  and  Warrant  Shares  issuable
pursuant to this Agreement. The Registrable Securities shall be reserved and set
aside  exclusively for the benefit of each  Subscriber and Warrant  holder,  pro
rata,  and not  issued,  employed or  reserved  for anyone  other than each such
Subscriber and Warrant holder.  The  Registration  Statement will immediately be
amended or additional  registration  statements will be immediately filed by the
Company as necessary to register  additional shares of Common Stock to allow the
public  resale of all Common  Stock  included  in and  issuable by virtue of the
Registrable  Securities.  Without  the  written  consent of the  Subscriber,  no
securities of the Company other than the Registrable Securities will be included
in the Registration Statement except as described on Schedule 10.1.

     10.2. Registration  Procedures.  If and whenever the Company is required by
the  provisions of Section 10.1 to effect the  registration  of any  Registrable
Securities under the 1933 Act, the Company will, as expeditiously as possible:

     (a) subject to the timelines  provided in this Agreement,  prepare and file
with the  Commission  a  registration  statement  required  by Section  10, with
respect to such  securities and use its best efforts to cause such  registration
statement  to become and  remain  effective  for the period of the  distribution
contemplated  thereby (as herein provided),  and promptly provide to the holders
of the Registrable  Securities  copies of all filings and Commission  letters of
comment and notify Subscribers and Grushko & Mittman, P.C. (by telecopier and by
email  to  Counslers@aol.com)  within  two (2)  hours  of (i)  notice  that  the
Commission has no comments or no further comments on the Registration Statement,
(ii) request by the Company of acceleration of effectiveness of any registration
statement which includes  Registrable  Securities,  and (iii) the declaration of
effectiveness of the registration statement;

     (b) prepare and file with the Commission such amendments and supplements to
such registration  statement and the prospectus used in connection  therewith as
may be  necessary  to keep such  registration  statement  effective  until  such
registration  statement has been  effective  for a period of two (2) years,  and
comply with the  provisions of the 1933 Act with respect to the  disposition  of
all of the  Registrable  Securities  covered by such  registration  statement in
accordance  with the Sellers'  intended  method of disposition set forth in such
registration statement for such period;

     (c) furnish to the Sellers, at the Company's expense, such number of copies
of the registration  statement and the prospectus  included  therein  (including


                                       10
<PAGE>

each preliminary  prospectus) as such persons reasonably may request in order to
facilitate the public sale or their  disposition  of the  securities  covered by
such registration statement;

     (d) use its best  efforts to register or qualify the  Sellers'  Registrable
Securities covered by such registration  statement under the securities or "blue
sky"  laws of such  jurisdictions  as the  Sellers  shall  request  in  writing,
provided,  however,  that the Company shall not for any such purpose be required
to qualify  generally  to  transact  business  as a foreign  corporation  in any
jurisdiction  where it is not so qualified  or to consent to general  service of
process in any such jurisdiction;

     (e)  if  applicable,  list  the  Registrable  Securities  covered  by  such
registration statement with any securities exchange on which the Common Stock of
the Company is then listed;

     (f) immediately  notify the Sellers when a prospectus  relating  thereto is
required to be  delivered  under the 1933 Act, of the  happening of any event of
which the Company has knowledge as a result of which the prospectus contained in
such registration  statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated  therein
or  necessary  to make the  statements  therein not  misleading  in light of the
circumstances then existing; and

     (g) provided  same would not be in violation of the provision of Regulation
FD under the 1934 Act,  make  available for  inspection by the Sellers,  and any
attorney,  accountant or other agent retained by the Seller or underwriter,  all
publicly  available,  non-confidential  financial and other  records,  pertinent
corporate  documents  and  properties  of the Company,  and cause the  Company's
officers,   directors   and   employees  to  supply  all   publicly   available,
non-confidential  information  reasonably  requested  by the  seller,  attorney,
accountant or agent in connection with such registration statement.

     10.3.  Provision  of  Documents.   In  connection  with  each  registration
described  in this  Section 10, each  Subscriber  will furnish to the Company in
writing such information and  representation  letters with respect to itself and
the proposed  distribution  by it as  reasonably  shall be necessary in order to
assure compliance with federal and applicable state securities laws.

     10.4.  Non-Registration  Events. The Company and the Subscribers agree that
the Sellers will suffer  damages if the  Registration  Statement is not filed by
the Filing Date and not declared  effective by the  Commission  by the Effective
Date, and maintained in the manner and within the time periods  contemplated  by
Section 10 hereof,  and it would not be feasible to ascertain the extent of such
damages with precision.  Accordingly,  if (i) the Registration  Statement is not
filed on or before the  Filing  Date,  (ii) the  Registration  Statement  is not
declared  effective on or before the Effective  Date, or (iii) the  Registration
Statement is not declared effective within three (3) business days after receipt
by the Company of a written or oral  communication  from the Commission that the
Registration  Statement  will  not be  reviewed  or that the  Commission  has no
further  comments,  or (iv) the  Registration  Statement  is filed and  declared
effective but shall  thereafter  cease to be effective  (without being succeeded
within  ten  (10)  business  days  by  an  effective   replacement   or  amended
registration  statement)  for a period of time which shall exceed 30 days in the
aggregate per year  (defined as a period of 365 days  commencing on the date the
Registration  Statement is declared  effective) or more than 20 consecutive days
(each  such  event  referred  to in clauses  (i),  (ii),  (iii) and (iv) of this
Section 10.4 is referred to herein as a "Non-Registration Event"), then for each
thirty (30) days of the  pendency of such  Non-Registration  Event,  the Company
shall deliver to the holder of Registrable Securities, as Liquidated Damages, an
amount equal to one percent (1%) of the Purchase Price of the Shares and Warrant
Shares  owned of record by such  holder as of and  during the  pendency  of such
Non-Registration  Event  which  are  subject  to  such  Non-Registration  Event.
Liquidated  Damages  payable  in  connection  with  an  Effective  Date  related
Non-Registration Event described in Section 10.4(ii) above will be waived if the


                                       11
<PAGE>

actual  effective date of the  Registration  Statement occurs within thirty (30)
days  after the  Effective  Date and may not  exceed  ten  percent  (10%) in the
aggregate.  The Company must pay the Liquidated  Damages in cash within ten (10)
days after the end of each  thirty (30) day period or shorter  part  thereof for
which Liquidated Damages are payable.  In the event a Registration  Statement is
filed by the Filing Date but is withdrawn  prior to being declared  effective by
the Commission, then such Registration Statement will be deemed to have not been
filed.

     10.5.  Expenses.  All expenses  incurred by the Company in  complying  with
Section 10,  including,  without  limitation,  all registration and filing fees,
printing  expenses,  fees and  disbursements  of counsel and independent  public
accountants for the Company,  fees and expenses  (including  reasonable  counsel
fees) incurred in connection with complying with state  securities or "blue sky"
laws, fees of the National  Association of Securities  Dealers,  Inc.,  transfer
taxes,  fees of transfer  agents and  registrars,  costs of insurance are called
"Registration  Expenses."  All  underwriting  discounts and selling  commissions
applicable  to the  sale of  Registrable  Securities,  including  any  fees  and
disbursements  of any  additional  counsel to the  Seller,  are called  "Selling
Expenses." The Company will pay all Registration Expenses in connection with the
registration  statement  under Section 10. Selling  Expenses in connection  with
each  registration  statement  under Section 10 shall be borne by the Seller and
may be apportioned  among the Sellers in proportion to the number of shares sold
by the  Seller  relative  to the number of shares  sold under such  registration
statement  or as all Sellers  thereunder  may agree.  Additionally,  the parties
agree  that  each  will  be  responsible  for  their  respective  legal  fees in
connection with this transaction.

     10.6. Indemnification and Contribution.

     (a) In the event of a registration of any Registrable  Securities under the
1933 Act pursuant to Section 10, the Company  will,  to the extent  permitted by
law,  indemnify and hold harmless the Seller,  each officer of the Seller,  each
director  of  the  Seller,  each  underwriter  of  such  Registrable  Securities
thereunder  and  each  other  person,  if  any,  who  controls  such  Seller  or
underwriter  within the meaning of the 1933 Act,  against  any  losses,  claims,
damages  or  liabilities,  joint  or  several,  to  which  the  Seller,  or such
underwriter  or  controlling  person  may become  subject  under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect  thereof) arise out of or are based upon any untrue statement or alleged
untrue  statement of any material fact contained in any  registration  statement
under  which  such  Registrable  Securities  was  registered  under the 1933 Act
pursuant to Section 10, any preliminary prospectus or final prospectus contained
therein,  or any amendment or supplement  thereof,  or arise out of or are based
upon the omission or alleged  omission to state therein a material fact required
to be stated therein or necessary to make the statements  therein not misleading
in light of the  circumstances  when made, and will subject to the provisions of
Section  10.6(c)  reimburse  the  Seller,  each such  underwriter  and each such
controlling person for any legal or other expenses  reasonably  incurred by them
in connection  with  investigating  or defending any such loss,  claim,  damage,
liability or action; provided,  however, that the Company shall not be liable to
the Seller to the extent that any such damages arise out of or are based upon an
untrue  statement  or omission  made in any  preliminary  prospectus  if (i) the
Seller failed to send or deliver a copy of the final prospectus delivered by the
Company to the Seller with or prior to the delivery of written  confirmation  of
the sale by the Seller to the person asserting the claim from which such damages
arise,  (ii) the final  prospectus would have corrected such untrue statement or
alleged untrue statement or such omission or alleged  omission,  or (iii) to the
extent that any such loss, claim,  damage or liability arises out of or is based
upon an untrue  statement  or alleged  untrue  statement  or omission or alleged
omission so made in conformity with information furnished by any such Seller, or
any such controlling person in writing specifically for use in such registration
statement or prospectus.

                                       12
<PAGE>

     (b) In the event of a  registration  of any of the  Registrable  Securities
under the 1933 Act pursuant to Section 10, each Seller severally but not jointly
will, to the extent  permitted by law,  indemnify and hold harmless the Company,
and each person, if any, who controls the Company within the meaning of the 1933
Act,  each  officer of the Company who signs the  registration  statement,  each
director of the  Company,  each  underwriter  and each person who  controls  any
underwriter  within the meaning of the 1933 Act,  against  all  losses,  claims,
damages or liabilities,  joint or several, to which the Company or such officer,
director,  underwriter or  controlling  person may become subject under the 1933
Act or otherwise,  insofar as such losses,  claims,  damages or liabilities  (or
actions in respect  thereof) arise out of or are based upon any untrue statement
or alleged untrue  statement of any material fact contained in the  registration
statement under which such Registrable Securities were registered under the 1933
Act  pursuant  to Section 10, any  preliminary  prospectus  or final  prospectus
contained therein,  or any amendment or supplement  thereof,  or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated  therein or necessary to make the  statements  therein not
misleading,  and will  reimburse  the Company and each such  officer,  director,
underwriter  and controlling  person for any legal or other expenses  reasonably
incurred by them in connection  with  investigating  or defending any such loss,
claim, damage, liability or action,  provided,  however, that the Seller will be
liable  hereunder in any such case if and only to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue  statement or omission or alleged  omission made in reliance upon
and in conformity with information pertaining to such Seller, as such, furnished
in  writing  to the  Company  by  such  Seller  specifically  for  use  in  such
registration statement or prospectus,  and provided,  further, however, that the
liability of the Seller hereunder shall be limited to the net proceeds  actually
received by the Seller from the sale of Registrable  Securities  covered by such
registration statement.

     (c) Promptly after receipt by an indemnified  party  hereunder of notice of
the  commencement  of any action,  such  indemnified  party shall, if a claim in
respect thereof is to be made against the indemnifying  party hereunder,  notify
the  indemnifying  party in writing  thereof,  but the omission so to notify the
indemnifying  party shall not relieve it from any liability which it may have to
such  indemnified  party  other than under this  Section  10.6(c) and shall only
relieve it from any liability which it may have to such indemnified  party under
this  Section  10.6(c),  except and only if and to the  extent the  indemnifying
party is prejudiced by such  omission.  In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying  party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and  undertake  the defense  thereof
with counsel  satisfactory to such indemnified party, and, after notice from the
indemnifying  party to such  indemnified  party of its election so to assume and
undertake the defense  thereof,  the  indemnifying  party shall not be liable to
such  indemnified  party  under  this  Section  10.6(c)  for any legal  expenses
subsequently  incurred by such indemnified  party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected,  provided,  however,  that,  if the  defendants  in any such action
include  both  the  indemnified  party  and  the  indemnifying   party  and  the
indemnified  party shall have reasonably  concluded that there may be reasonable
defenses  available  to it  which  are  different  from or  additional  to those
available to the indemnifying party or if the interests of the indemnified party
reasonably  may be deemed to conflict  with the  interests  of the  indemnifying
party, the indemnified  parties,  as a group, shall have the right to select one
separate  counsel and to assume such legal defenses and otherwise to participate
in the defense of such  action,  with the  reasonable  expenses and fees of such
separate  counsel  and  other  expenses  related  to  such  participation  to be
reimbursed by the indemnifying party as incurred.

     (d) In order to provide for just and equitable contribution in the event of
joint liability under the 1933 Act in any case in which either (i) a Seller,  or
any controlling person of a Seller,  makes a claim for indemnification  pursuant
to this Section 10.6 but it is  judicially  determined  (by the entry of a final
judgment or decree by a court of competent  jurisdiction  and the  expiration of
time  to  appeal  or  the  denial  of  the  last  right  of  appeal)  that  such
indemnification  may not be enforced in such case  notwithstanding the fact that
this  Section  10.6  provides  for   indemnification   in  such  case,  or  (ii)
contribution  under the 1933 Act may be  required  on the part of the  Seller or
controlling  person of the Seller in circumstances for which  indemnification is
not provided  under this Section 10.6;  then, and in each such case, the Company
and the Seller will  contribute  to the  aggregate  losses,  claims,  damages or
liabilities  to which they may be subject  (after  contribution  from others) in


                                       13
<PAGE>

such  proportion  so that  the  Seller  is  responsible  only  for  the  portion
represented by the percentage  that the public  offering price of its securities
offered by the registration  statement bears to the public offering price of all
securities offered by such registration statement,  provided,  however, that, in
any such case,  (y) the Seller will not be required to contribute  any amount in
excess  of the  public  offering  price of all  such  securities  offered  by it
pursuant to such registration  statement;  and (z) no person or entity guilty of
fraudulent  misrepresentation  (within the meaning of Section  11(f) of the 1933
Act) will be  entitled  to  contribution  from any  person or entity who was not
guilty of such fraudulent misrepresentation.

     10.7. Delivery of Unlegended Shares.

     (a) Within  five (5)  business  days (such fifth (5th)  business  day,  the
"Unlegended  Shares  Delivery Date") after the business day on which the Company
has  received  (i) a notice that  Registrable  Securities  have been sold either
pursuant to the  Registration  Statement or Rule 144 under the 1933 Act,  (ii) a
representation that the prospectus delivery requirements, or the requirements of
Rule 144, as  applicable,  have been  satisfied,  and (iii) the  original  share
certificates  representing  the shares of Common Stock that have been sold,  and
(iv) in the case of sales under Rule 144,  customary  representation  letters of
the  Subscriber  and/or  Subscriber's  broker  regarding   compliance  with  the
requirements  of Rule 144, the Company at its expense,  (y) shall  deliver,  and
shall cause legal  counsel  selected by the Company to deliver,  to its transfer
agent (with copies to Subscriber) an appropriate instruction and opinion of such
counsel,  directing  the delivery of shares of Common Stock  without any legends
including  the  legends  set forth in  Sections  4(e) and 4(f)  above,  issuable
pursuant  to any  effective  and current  Registration  Statement  described  in
Section 10 of this  Agreement  or  pursuant  to Rule 144 under the 1933 Act (the
"Unlegended  Shares");  and  (z)  cause  the  transmission  of the  certificates
representing  the  Unlegended  Shares  together  with  a  legended   certificate
representing  the balance of the unsold shares of Common  Stock,  if any, to the
Subscriber at the address  specified in the notice of sale, via express courier,
by electronic  transfer or otherwise on or before the Unlegended Shares Delivery
Date. Transfer fees shall be the responsibility of the Seller.

     (b) In lieu of delivering physical certificates representing the Unlegended
Shares, if the Company's transfer agent is participating in the Depository Trust
Company ("DTC") Fast Automated  Securities  Transfer program,  upon request of a
Subscriber,  so long as the  certificates  therefor do not bear a legend and the
Subscriber  is not obligated to return such  certificate  for the placement of a
legend  thereon,  the Company shall cause its transfer  agent to  electronically
transmit the Unlegended  Shares by crediting the account of  Subscriber's  prime
Broker with DTC through its Deposit  Withdrawal  Agent Commission  system.  Such
delivery must be made on or before the Unlegended Shares Delivery Date.

     11.  (a)  Favored  Nations  Provision.  Other than in  connection  with (i)
employee  stock  options  or  compensation   plans,  (ii)  as  full  or  partial
consideration  in  connection  with any  merger,  consolidation  or  purchase of
substantially  all of the  securities  or  assets  of any  corporation  or other
entity,  or  (iii)  as has  been  described  in the  Reports  or  Other  Written
Information  filed with the Commission or delivered to the Subscribers  prior to
the Closing Date (collectively "Excepted Issuances"),  if at any time until four
(4) years after the actual effective date of the  Registration  Statement that a
Subscriber  is still  holding  Shares or  Warrant  Shares  and during the entire
warrant exercise period, if the Company shall offer, issue or agree to issue any
common stock or securities  convertible into or exercisable for shares of common
stock (or modify any of the foregoing which may be outstanding at any time prior
to the Closing  Date) to any person or entity at a price per share or conversion


                                       14
<PAGE>

or  exercise  price per share  which  shall be less than the Per Share  Purchase
Price,  without the consent of each Subscriber holding Shares,  then the Company
shall issue, for each such occasion,  additional  shares of Common Stock to each
Subscriber so that the average Per Share  Purchase Price of the shares of Common
Stock issued to the Subscriber (of only the Common Stock or Warrant Shares still
owned by the  Subscriber)  is equal to such other  lower  price per  share.  The
delivery to the Subscriber of the additional shares of Common Stock shall be not
later than the closing date of the transaction giving rise to the requirement to
issue  additional  shares  of  Common  Stock.  The  Subscriber  is  granted  the
registration  rights  described  in  Section  10  hereof  in  relation  to  such
additional shares of Common Stock except that the Filing Date and Effective Date
vis-a-vis such  additional  common shares shall be,  respectively,  the sixtieth
(60th) and one hundred and twentieth  (120th) date after the closing date giving
rise to the  requirement  to issue the  additional  shares of Common Stock.  For
purposes  of the  issuance  and  adjustment  described  in this  paragraph,  the
issuance  of any  security  of the Company  carrying  the right to convert  such
security  into  shares of  Common  Stock or of any  warrant,  right or option to
purchase  Common Stock shall result in the issuance of the additional  shares of
Common Stock upon the issuance of such convertible security,  warrant,  right or
option.  The  rights  of the  Subscriber  set  forth in this  Section  11 are in
addition to any other rights the  Subscriber  has pursuant to this Agreement and
any other agreement referred to or entered into in connection herewith.

     (d)  Maximum  Exercise of Rights.  In the event the  exercise of the rights
described  in Section  11(a) would result in the issuance of an amount of common
stock of the Company that would exceed the maximum  amount that may be issued to
a Subscriber  calculated  in the manner  described in Section 10 of the Warrant,
then the  issuance of such  additional  shares of common stock of the Company to
such  Subscriber  will be  deferred  in whole or in part until such time as such
Subscriber is able to beneficially  own such common stock without  exceeding the
maximum amount set forth calculated in the manner described in Section 10 of the
Warrant. The determination of when such common stock may be issued shall be made
by each Subscriber as to only such Subscriber.

     12. Miscellaneous.

     (a) Notices. All notices, demands, requests, consents, approvals, and other
communications  required or permitted  hereunder shall be in writing and, unless
otherwise  specified herein,  shall be (i) personally served,  (ii) deposited in
the mail,  registered or certified,  return receipt requested,  postage prepaid,
(iii) delivered by reputable air courier service with charges  prepaid,  or (iv)
transmitted by hand  delivery,  telegram,  or facsimile,  addressed as set forth
below or to such other address as such party shall have  specified most recently
by written notice. Any notice or other communication required or permitted to be
given hereunder shall be deemed  effective (a) upon hand delivery or delivery by
facsimile,  with accurate confirmation  generated by the transmitting  facsimile
machine,  at the address or number  designated below (if delivered on a business
day during normal  business  hours where such notice is to be received),  or the
first  business  day  following  such  delivery  (if  delivered  other than on a
business day during normal  business  hours where such notice is to be received)
or (b) on the  second  business  day  following  the date of  mailing by express
courier  service,  fully  prepaid,  addressed  to such  address,  or upon actual
receipt of such  mailing,  whichever  shall first occur.  The addresses for such
communications  shall be:  (i) if to the  Company,  to: XRG Inc.,  5301  Cypress
Street,  Suite 111, Tampa, FL 33607,  Attn: Kevin P. Brennan,  CEO,  telecopier:
(813) 637-0705,  with a copy by telecopier only to: Johnson, Pope, Bokor, Ruppel
& Burns, LLP, 911 Chestnut Street,  P.O. Box 1368,  Clearwater,  FL 33756, Attn:
Michael Cronin, Esq.,  telecopier:  (727) 441-8617,  (ii) if to the Subscribers,
to: the one or more addresses and telecopier  numbers indicated on the signature
pages hereto,  with an additional copy by telecopier only to: Grushko & Mittman,
P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176, telecopier number:
(212)  697-3575,  and (iii) if to the Finder,  to: the one or more addresses and
telecopier numbers indicated on Schedule 7 hereto.

     (b) Closing. The consummation of the transactions contemplated herein shall
take place at the offices of Grushko & Mittman,  P.C.,  551 Fifth Avenue,  Suite
1601,  New York,  New York 10176,  upon the  satisfaction  of all  conditions to
Closing set forth in this  Agreement.  The "Closing Date" shall be July 30, 2004
provided all conditions to closing  hereunder are satisfied and such  deliveries


                                       15
<PAGE>

occur on or before August 4, 2004. In the event such requirements and deliveries
are not accomplished on or before August 4, 2004, then any party hereto may void
its obligations  under this Agreement and receive back from the Escrow Agent any
deliveries made by it to the Escrow Agent.

     (c)  Entire  Agreement;  Assignment.  This  Agreement  and other  documents
delivered in  connection  herewith  represent the entire  agreement  between the
parties hereto with respect to the subject matter hereof and may be amended only
by a writing  executed by both parties.  Neither the Company nor the Subscribers
have  relied  on any  representations  not  contained  or  referred  to in  this
Agreement and the documents delivered herewith. No right or obligation of either
party shall be assigned by that party  without  prior  notice to and the written
consent of the other party.

     (d) Counterparts/Execution. This Agreement may be executed in any number of
counterparts and by the different  signatories hereto on separate  counterparts,
each of which,  when so  executed,  shall be deemed  an  original,  but all such
counterparts  shall constitute but one and the same  instrument.  This Agreement
may be executed by facsimile signature and delivered by facsimile transmission.

     (e) Law Governing this  Agreement.  This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
principles of conflicts of laws.  Any action brought by either party against the
other  concerning  the  transactions  contemplated  by this  Agreement  shall be
brought only in the state courts of New York or in the federal courts located in
the state of New York. The parties and the individuals  executing this Agreement
and other agreements  referred to herein or delivered in connection  herewith on
behalf of the  Company  agree to submit to the  jurisdiction  of such courts and
waive trial by jury. The prevailing  party shall be entitled to recover from the
other  party its  reasonable  attorney's  fees and costs.  In the event that any
provision of this  Agreement  or any other  agreement  delivered  in  connection
herewith is invalid or  unenforceable  under any  applicable  statute or rule of
law, then such provision  shall be deemed  inoperative to the extent that it may
conflict  therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or  unenforceable  under
any law shall not affect the validity or  enforceability  of any other provision
of any agreement.

     (f)  Specific  Enforcement,   Consent  to  Jurisdiction.  The  Company  and
Subscriber  acknowledge  and agree that  irreparable  damage  would occur in the
event  that  any of the  provisions  of this  Agreement  were not  performed  in
accordance  with  their  specific  terms  or  were  otherwise  breached.  It  is
accordingly  agreed that the  parties  shall be  entitled  to an  injunction  or
injunctions  to prevent or cure breaches of the provisions of this Agreement and
to enforce  specifically the terms and provisions hereof, this being in addition
to any  other  remedy  to which any of them may be  entitled  by law or  equity.
Subject  to  Section  12(e)  hereof,  each of the  Company,  Subscriber  and any
signator hereto in his personal capacity hereby waives, and agrees not to assert
in any such suit,  action or  proceeding,  any claim  that it is not  personally
subject to the jurisdiction in New York of such court,  that the suit, action or
proceeding  is brought in an  inconvenient  forum or that the venue of the suit,
action or proceeding is improper.  Nothing in this Section shall affect or limit
any right to serve process in any other manner permitted by law.

     (g) Independent  Nature of Subscribers.  The Company  acknowledges that the
obligations of each Subscriber  under the Transaction  Documents are several and
not joint with the obligations of any other Subscriber,  and no Subscriber shall
be  responsible in any way for the  performance of the  obligations of any other
Subscriber under the Transaction  Documents.  The Company  acknowledges that the
decision  of each  Subscriber  to  purchase  Securities  has  been  made by such
Subscriber  independently  of any  other  Subscriber  and  independently  of any
information,  materials,  statements  or opinions as to the  business,  affairs,
operations, assets, properties,  liabilities,  results of operations,  condition
(financial or otherwise) or prospects of the Company which may have been made or
given  by any  other  Subscriber  or by  any  agent  or  employee  of any  other
Subscriber,  and no Subscriber or any of its agents or employees  shall have any
liability to any  Subscriber  (or any other person)  relating to or arising from
any  such   information,   materials,   statements  or  opinions.   The  Company


                                       16
<PAGE>

acknowledges that nothing contained in any Transaction  Document,  and no action
taken by any Subscriber pursuant hereto or thereto  (including,  but not limited
to, the (i)  inclusion of a Subscriber  in the SB-2  Registration  Statement and
(ii) review by, and consent to, such  Registration  Statement  by a  Subscriber)
shall be deemed to constitute the Subscribers as a partnership,  an association,
a joint venture or any other kind of entity,  or create a  presumption  that the
Subscribers  are in any way acting in concert or as a group with respect to such
obligations or the transactions  contemplated by the Transaction Documents.  The
Company  acknowledges  that each Subscriber  shall be entitled to  independently
protect and enforce its rights, including without limitation, the rights arising
out of the  Transaction  Documents,  and it shall not be necessary for any other
Subscriber  to be  joined  as an  additional  party in any  proceeding  for such
purpose. The Company acknowledges that it has elected to provide all Subscribers
with the same terms and Transaction Documents for the convenience of the Company
and not because  Company was required or requested to do so by the  Subscribers.
The Company  acknowledges  that such procedure  with respect to the  Transaction
Documents in no way creates a presumption  that the  Subscribers  are in any way
acting in concert or as a group with respect to the Transaction Documents or the
transactions contemplated thereby.

     (h)  Equitable  Adjustment.  The  Securities  and the  purchase  prices  of
Securities  shall be  equitably  adjusted to offset the effect of stock  splits,
stock  dividends,  and  distributions  of  property or equity  interests  of the
Company to its shareholders.


                      [THIS SPACE INTENTIONALLY LEFT BLANK]




                                       17
<PAGE>



                  SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (A)


         Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.

                                        XRG, INC.
                                        a Delaware corporation



                                        By:_________________________________
                                                Name:
                                                Title:

                                        Dated: as of July 30, 2004


<TABLE>
<CAPTION>

------------------------------------------------------- --------------------------- --------------------- ------------------------
SUBSCRIBER                                              PURCHASE PRICE              SHARES                WARRANTS
------------------------------------------------------- --------------------------- --------------------- ------------------------
<S>                                                     <C>                         <C>                   <C>
ALPHA CAPITAL AKTIENGESELLSCHAFT                        $500,000.00                 5,000,000             1,250,000
Pradafant 7
9490 Furstentums
Vaduz, Lichtenstein
Fax: 011-42-32323196


-------------------------------------
(Signature)

-------------------------------------
Print Name and Title
------------------------------------------------------- --------------------------- --------------------- ------------------------
</TABLE>


<PAGE>

                  SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (B)


         Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.

                                         XRG, INC.
                                         a Delaware corporation



                                         By:_________________________________
                                             Name:
                                             Title:

                                         Dated: as of July 30, 2004


<TABLE>
<CAPTION>

------------------------------------------------------- --------------------------- --------------------- ------------------------
SUBSCRIBER                                              PURCHASE PRICE              SHARES                WARRANTS
------------------------------------------------------- --------------------------- --------------------- ------------------------
<S>                                                     <C>                         <C>                   <C>
STONESTREET LIMITED PARTNERSHIP                         $400,000.00                 4,000,000             1,000,000
260 Town Centre Boulevard
Markham, Ontario 13R 8H8, Canada
Fax: (416) 956-8989


-------------------------------------
(Signature)

-------------------------------------
Print Name and Title
------------------------------------------------------- --------------------------- --------------------- ------------------------
</TABLE>


<PAGE>

                  SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (C)


         Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.

                                         XRG, INC.
                                         a Delaware corporation



                                         By:_________________________________
                                             Name:
                                             Title:

                                         Dated: as of July 30, 2004


<TABLE>
<CAPTION>

------------------------------------------------------- --------------------------- --------------------- ------------------------
SUBSCRIBER                                              PURCHASE PRICE              SHARES                WARRANTS
------------------------------------------------------- --------------------------- --------------------- ------------------------
<S>                                                     <C>                         <C>                   <C>
WHALEHAVEN CAPITAL, LP                                  $100,000.00                 1,000,000             250,000
3rd Floor, 14 Par-Laville Road
Hamilton, Bermuda HM08
Fax: (441) 292-1373


-------------------------------------
(Signature)

-------------------------------------
Print Name and Title
------------------------------------------------------- --------------------------- --------------------- ------------------------

</TABLE>



<PAGE>

                  SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (D)


         Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.

                                          XRG, INC.
                                          a Delaware corporation



                                          By:_________________________________
                                               Name:
                                               Title:

                                          Dated: as of July 30, 2004

<TABLE>
<CAPTION>

------------------------------------------------------- --------------------------- --------------------- ------------------------
SUBSCRIBER                                              PURCHASE PRICE              SHARES                WARRANTS
------------------------------------------------------- --------------------------- --------------------- ------------------------
<S>                                                     <C>                         <C>                   <C>
WHALEHAVEN FUND LIMITED                                 $150,000.00                 1,500,000             375,000
3rd Floor, 14 Par-Laville Road
Hamilton, Bermuda HM08
Fax: (441) 292-1373


-------------------------------------
(Signature)

-------------------------------------
Print Name and Title
------------------------------------------------------- --------------------------- --------------------- ------------------------
</TABLE>




<PAGE>




                  SIGNATURE PAGE TO SUBSCRIPTION AGREEMENT (E)


         Please acknowledge your acceptance of the foregoing Subscription
Agreement by signing and returning a copy to the undersigned whereupon it shall
become a binding agreement between us.

                                       XRG, INC.
                                       a Delaware corporation



                                       By:_________________________________
                                            Name:
                                            Title:

                                       Dated: as of July 30, 2004


<TABLE>
<CAPTION>

------------------------------------------------------- --------------------------- --------------------- ------------------------
SUBSCRIBER                                              PURCHASE PRICE              SHARES                WARRANTS
------------------------------------------------------- --------------------------- --------------------- ------------------------
<S>                                                     <C>                         <C>                   <C>
GREENWICH GROWTH FUND LIMITED                           $100,000.00                 1,000,000             250,000
3rd Floor, 14 Par-Laville Road
Hamilton, Bermuda HM08
Fax: (441) 292-1373


-------------------------------------
(Signature)

-------------------------------------
Print Name and Title
------------------------------------------------------- --------------------------- --------------------- ------------------------
</TABLE>




<PAGE>



                         LIST OF EXHIBITS AND SCHEDULES



         Exhibit A                  Form of Warrant

         Exhibit B                  Escrow Agreement

         Exhibit C                  Form of Legal Opinion

         Schedule 7                 Finder

         Schedule 10.1              Other Securities to be Registered



<PAGE>




                                   SCHEDULE 7

                                     FINDER


                  JG Capital, Inc.
                  633 Third Avenue
                  New York, NY 10017
                  Fax: (212) 397-5832