MRU HOLDINGS, INC.

                          Securities Purchase Agreement

         This Securities  Purchase  Agreement (this  "Agreement") is dated as of
December  31,  2005,  and is made by and among MRU  Holdings,  Inc.,  a Delaware
corporation (the "Company"), and the investors identified on the signature pages
hereto (each, an "Investor" and collectively, the "Investors").

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

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

                                    ARTICLE 1

                                   Definitions

         Section 1.1. Definitions. In addition to the terms defined elsewhere in
this Agreement, for all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:

         "Action"  means  any  action,  suit,  inquiry,   notice  of  violation,
proceeding   (including  any  partial   proceeding  such  as  a  deposition)  or
investigation pending or threatened in writing against or affecting the Company,
any  Subsidiary or any of their  respective  properties  before or by any court,
arbitrator,   governmental  or  administrative   agency,   regulatory  authority
(federal,  state,  county,  local or foreign),  stock market,  stock exchange or
trading facility.

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

         "Amended and Restated Certificate" has the meaning set forth in Section
2.1.

         "Business Day" means any day except Saturday,  Sunday and any day which
is a federal legal holiday or a day on which banking  institutions  in New York,
NY, are authorized or required by law or other governmental action to close.

         "Claim" has the meaning set forth in Section 4.6(c).

         "Closing"  means the closing of the purchase and sale of the Shares and
the Warrants pursuant to Article 2.

         "Closing Date" means the third Business Day  immediately  following the
date on which all of the conditions set forth in Sections 6.1 and 6.2 hereof are
satisfied.

         "Commission" means the Securities and Exchange Commission.

<PAGE>

         "Common Stock" means the common stock of the Company,  par value $0.001
per share,  and any  securities  into which such common  stock may  hereafter be
reclassified.

         "Common Stock  Equivalents"  means any securities of the Company or any
Subsidiary which entitle the holder thereof to acquire Common Stock at any time,
including  without  limitation,  any debt,  preferred  stock,  rights,  options,
warrants  or  other   instrument  that  is  at  any  time  convertible  into  or
exchangeable  for, or otherwise  entitles the holder thereof to receive,  Common
Stock or other  securities  that  entitle  the holder to  receive,  directly  or
indirectly, Common Stock.

         "Company Counsel" means McGuireWoods LLP.

         "Company Deliverables" has the meaning set forth in Section 2.3(a).

         "Company Stock Options" has the meaning set forth in Section 3.1(g).

         "Contingent Obligations" has the meaning set forth in Section 3.1(r).

         "Conversion  Shares"  means the shares of Common  Stock  issuable  upon
conversion of the Shares or conversion of the Warrant Shares.

         "Convertible Securities" has the meaning set forth in Section 3.1(g).

         "Courts" means the state and federal courts sitting in the State of New
York.

         "Disclosure Materials" has the meaning set forth in Section 3.1(h).

         "Effective Date" means the date that any  Registration  Statement filed
pursuant to Article 4 is first declared effective by the Commission.

         "Effectiveness Date" has the meaning set forth in Section 4.1.

         "Environmental Law" has the meaning set forth in Section 3.1(aa).

         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.

         "ERISA  Affiliate"  means  any  trade  or  business,   whether  or  not
incorporated,  that  together  with the  Company  would be deemed to be a single
employer for purposes of Section 4001 of ERISA or Sections 414(b), (c), (m), (n)
or (o) of the Internal Revenue Code of 1986, as amended.

         "Evaluation Date" has the meaning set forth in Section 3.1(r).

         "Event" has the meaning set forth in Section 4.8.

         "Event Date" has the meaning set forth in Section 4.8.

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

         "Exercise Price" has the meaning set forth in Section 4.8.

         "Filing Date" has the meaning set forth in Section 4.1.

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<PAGE>

         "GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.

         "Governmental Authority" has the meaning set forth in Section 3.1(e).

         "Hazardous Substance" has the meaning set forth in Section 3.1(aa).

         "Indebtedness" has the meaning set forth in Section 3.1(r).

         "Indemnified Party" has the meaning set forth in Section 4.6(c).

         "Indemnified Person" has the meaning set forth in Section 4.6(a).

         "Indemnifying Party" has the meaning set forth in Section 4.6(c).

         "Intellectual  Property  Rights"  has the  meaning set forth in Section
3.1(o).

         "Investment   Amount"  means,  with  respect  to  each  Investor,   the
Investment Amount indicated on such Investor's signature page to this Agreement.

         "Investor Party" has the meaning set forth in Section 5.7.

         "Investor  Lock-up  Period"  means  the  period  ending on the one year
anniversary of the Closing.

         "Legend Removal Date" has the meaning set forth in Section 5.1(a).

         "Lien" means any lien, charge, encumbrance, security interest, right of
first refusal or other restrictions of any kind.

         "Losses" has the meaning set forth in Section 5.7.

         "Material  Adverse  Effect"  means any of (i) a  material  and  adverse
effect on the legality,  validity or enforceability of any Transaction Document,
(ii) a  material  and  adverse  effect on the  results  of  operations,  assets,
prospects, business or condition (financial or otherwise) of the Company and the
Subsidiaries,  taken as a whole, or (iii) a material impairment of the Company's
ability to  perform  on a timely  basis its  obligations  under any  Transaction
Document.

         "NASD Rules" has the meaning set forth in Section 4.3(o).

         "Non-Responsive Investor" has the meaning set forth in Section 4.4(a).

         "OFAC" has the meaning set forth in Section 3.1(ee).

         "Outside Date" means February 28, 2006.

         "Per Share Purchase Price" equals $3.80.

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

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<PAGE>

         "Prior Warrants" has the meaning set forth in Section 3.1(g).

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

         "Prospectus" has the meaning set forth in Section 4.3.

         "Registrable  Securities"  means the Conversion  Shares and the Warrant
Shares;  provided,  however, that the Investors shall not be required to convert
any Shares or to exercise  any Warrants in order to have the  Conversion  Shares
issuable  upon  conversion  of such Shares or the Warrant  Shares  issuable upon
exercise of such Warrants included in any Registration Statement.

         "Registration Period" has the meaning set forth in Section 4.3.

         "Registration  Statement"  means a registration  statement filed on the
appropriate  Form with,  and declared  effective  by, the  Commission  under the
Securities  Act and  covering  the resale by the  Investors  of the  Registrable
Securities.

         "Requested Information" has the meaning set forth in Section 4.4(a).

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

         "SEC Reports" has the meaning set forth in Section 3.1(h).

         "Securities" means the Shares, the Warrants,  the Conversion Shares and
the Warrant Shares.

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

         "Series B Preferred  Stock" means the shares of the preferred  stock of
the Company,  par value $.001 per share,  that have been designated as "Series B
Convertible Preferred Stock."

         "Shares"  means  the  shares  of  Series B  Preferred  Stock  issued or
issuable to the Investors pursuant to this Agreement.

         "Short Sales" include, without limitation, all "short sales" as defined
in Rule 200  promulgated  under  Regulation  SHO under the  Exchange Act and all
types of direct and indirect stock  pledges,  forward sale  contracts,  options,
puts, calls, short sales, swaps and similar  arrangements  (including on a total
return basis), and sales and other transactions through non-US broker dealers or
foreign regulated brokers.

         "Subsequent Adjustment Date" has the meaning set forth in Section 4.8.

         "Subsidiary"  means any  "significant  subsidiary"  as  defined in Rule
1-02(w) of Regulation S-X promulgated by the Commission under the Exchange Act.

         "Trading  Day" means (i) a day on which the Common Stock is traded on a
Trading Market, or (ii) if the Common Stock is not listed on a Trading Market, a
day on which  the  Common  Stock is traded in the  over-the-counter  market,  as
reported by the OTC  Bulletin  Board,  or (iii) if the Common  Stock is not then

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<PAGE>

listed or quoted on the OTC Bulletin  Board,  a day on which the Common Stock is
quoted in the  over-the-counter  market as  reported by the  National  Quotation
Bureau  Incorporated  (or any similar  organization or agency  succeeding to its
functions  of  reporting  prices);  provided,  that in the event that the Common
Stock is not listed or quoted as set forth in (i), (ii) and (iii)  hereof,  then
Trading Day shall mean a Business Day.

         "Trading  Market" means whichever of the New York Stock Exchange or the
Nasdaq National Market on which the Common Stock is listed or quoted for trading
on the date in question.

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

         "Warrants"  means the  Warrants  in the form of  Exhibit  A,  which are
issuable to the Investors at the Closing.

         "Warrant  Shares"  means the  shares of  capital  stock  issuable  upon
exercise of the Warrants.

                                    ARTICLE 2

                                Purchase and Sale

         Section 2.1.  Amended and Restated  Certificate of  Incorporation.  The
Company  shall  adopt  and file  with  the  Secretary  of State of the  State of
Delaware on or before the Closing  Date an Amended and Restated  Certificate  of
Incorporation, in the form of Exhibit B attached to this Agreement (the "Amended
and Restated Certificate").

         Section 2.2. Closing.  Subject to the terms and conditions set forth in
this Agreement, at the Closing the Company shall issue and sell to each Investor
Shares  and  Warrants,  and each  Investor  shall,  severally  and not  jointly,
purchase from the Company by delivering such Investor's  Investment  Amount, the
Shares and the Warrants  representing  such Investor's  Investment  Amount.  The
Closing  shall  take  place at the  offices of Nixon  Peabody,  LLP,  100 Summer
Street,  Boston,  MA 02110 on the Closing Date or at such other location or time
as the parties may agree.

         Section 2.3.      Closing Deliveries.

         (a)      At the  Closing,  the  Company  shall  deliver  or cause to be
                  delivered  to  each  Investor  the  following   (the  "Company
                  Deliverables"):

                  (i)      A certificate  evidencing a number of Shares equal to
                           such Investor's  Investment Amount divided by the Per
                           Share Purchase Price,  registered in the name of such
                           Investor;

                  (ii)     A Warrant, registered in the name of such Investor,
                           pursuant to which such Investor shall have the right
                           to acquire the number of Warrant Shares equal to (i)
                           the number of Shares issuable to such Investor
                           pursuant to Section 2.3(a)(i) multiplied by (ii)
                           0.325 (which number of Warrant Shares shall be
                           subject to adjustment in accordance with the
                           Warrant);

                  (iii)    The legal  opinion  of Company  Counsel,  in form and
                           substance  acceptable to the Investors,  addressed to
                           the Investors;

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<PAGE>

                  (iv)     Copies of each of the  following  documents,  in each
                           case  certified by the Secretary of the Company to be
                           in full force and effect on the Closing Date:

                           (A)   the Amended and Restated Certificate, certified
                                 by the  Secretary  of  State  of the  State  of
                                 Delaware  as  of a  date  not  more  than  five
                                 Business Days prior to the Closing Date;

                           (B)   resolutions  of the board of  directors  of the
                                 Company     determining    the     preferences,
                                 limitations   and   rights  of  the   Series  B
                                 Preferred Stock;

                           (C)   resolutions of the board of directors of the
                                 Company approving the execution, delivery and
                                 performance of the Transaction Documents and
                                 the transactions or other actions contemplated
                                 thereby, and recommending the approval of such
                                 transactions or other actions by the
                                 stockholders of the Company;

                           (D)   a good  standing  certificate  of  the  Company
                                 issued by the  Secretary  of State of the State
                                 of Delaware,  and each other jurisdiction where
                                 the Company is qualified  to do business,  each
                                 dated  as  of  a  date  no  earlier  than  five
                                 Business Days prior to the Closing Date;

                           (E)   the By-laws of the Company; and

                           (F)   irrevocable   instructions   to  the  Company's
                                 transfer  agent  as  to  the   reservation  and
                                 issuance  of  the  Conversion  Shares  and  the
                                 Warrant Shares.

         (b)      At the Closing,  each  Investor  shall  deliver or cause to be
                  delivered  to the Company  its  Investment  Amount,  in United
                  States  dollars  in  immediately   available  funds,  by  wire
                  transfer  to an  account  designated  by the  Company.  At the
                  option  of  an  Investor,   the  delivery  of  an   Investor's
                  Investment  Amount may be  satisfied,  in whole or in part, by
                  cancellation of indebtedness of the Company to such Investor.

                                    ARTICLE 3

                         Representations and Warranties

         Section 3.1. Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to each Investor:

         (a)      Subsidiaries. The Company has no direct or indirect
                  Subsidiaries other than as disclosed in Section 3.1(a) of the
                  Disclosure Letter delivered by the Company to the Investors on
                  the date hereof (the "Disclosure Letter"). Except as disclosed
                  in Section 3.1(a) of the Disclosure Letter, the Company owns,
                  directly or indirectly, all of the capital stock of each
                  Subsidiary free and clear of any and all Liens, and all the
                  issued and outstanding shares of capital stock of each
                  Subsidiary are validly issued and are fully paid,
                  non-assessable and free of preemptive and similar rights.

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<PAGE>

         (b)      Organization and  Qualification.  Each of the Company and each
                  Subsidiary  is  duly  incorporated  or  otherwise   organized,
                  validly  existing and in good  standing  under the laws of the
                  jurisdiction  of  its   incorporation   or  organization   (as
                  applicable), with the requisite power and authority to own and
                  use its  properties and assets and to carry on its business as
                  currently conducted. Neither the Company nor any Subsidiary is
                  in  violation  of  any  of the  provisions  of its  respective
                  certificate or certificate of  incorporation,  bylaws or other
                  organizational or charter  documents.  Each of the Company and
                  each  Subsidiary is duly  qualified to conduct its  respective
                  business and is in good standing as a foreign  corporation  or
                  other entity in each  jurisdiction  in which the nature of the
                  business   conducted  or  property  owned  by  it  makes  such
                  qualification  necessary,  except  where the  failure to be so
                  qualified or in good standing,  as the case may be, could not,
                  individually  or in  the  aggregate,  have  or  reasonably  be
                  expected  to  result  in a  Material  Adverse  Effect,  and no
                  proceedings  have  been  instituted  in any such  jurisdiction
                  revoking,  limiting or curtailing,  or seeking to revoke, such
                  power and authority or qualification.

         (c)      Authorization;  Enforcement.  The  Company  has the  requisite
                  corporate  power and authority to enter into and to consummate
                  the  transactions  contemplated  by  each  of the  Transaction
                  Documents   and   otherwise  to  carry  out  its   obligations
                  thereunder.   The  execution  and  delivery  of  each  of  the
                  Transaction  Documents by the Company and the  consummation by
                  it of the  transactions  contemplated  thereby  have been duly
                  authorized by all necessary  action on the part of the Company
                  and no further action is required by the Company in connection
                  therewith.   Each  Transaction  Document  has  been  (or  upon
                  delivery  will have been) duly  executed by the  Company  and,
                  when  delivered  in  accordance  with the terms  hereof,  will
                  constitute  the valid and  binding  obligation  of the Company
                  enforceable  against the Company in accordance with its terms,
                  except as such  enforceability  may be limited  by  applicable
                  bankruptcy,    insolvency,     reorganization,     moratorium,
                  liquidation   or  similar  laws   relating  to,  or  affecting
                  generally the enforcement of,  creditors'  rights and remedies
                  or by other equitable principles of general application.

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

         (e)      Filings,  Consents  and  Approvals.  Except  as  disclosed  in
                  Section  3.1(e) of the Disclosure  Letter,  the Company is not
                  required to obtain any consent, waiver, authorization or order
                  of,  give any notice  to, or make any  filing or  registration
                  with,  any  court  or  other  federal,  state,  local or other
                  governmental  authority (a "Governmental  Authority") or other
                  Person  in  connection   with  the  execution,   delivery  and

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<PAGE>

                  performance  by the Company of the  Transaction  Documents and
                  the  consummation of the  transactions  contemplated  thereby,
                  other than (i) the filing with the  Secretary  of State of the
                  State of  Delaware,  on or prior to the Closing  Date,  of the
                  Amended  and  Restated  Certificate,  (ii) the filing with the
                  Commission   of  one  or  more   Registration   Statements  in
                  accordance  with  the   requirements  of  Article  4  of  this
                  Agreement,  (iii) filings  required by state  securities laws,
                  (iv) the  filing of a Notice of Sale of  Securities  on Form D
                  with the Commission  under Regulation D of the Securities Act,
                  (v) any filings  required in accordance  with Section  4.3(d),
                  and (vi)  those that have been made or  obtained  prior to the
                  date of this Agreement.

         (f)      Issuance  of the  Securities.  The  Securities  have been duly
                  authorized.  The Shares and Warrants, when issued and paid for
                  in accordance  with this  Agreement,  will be duly and validly
                  issued,  fully paid and  nonassessable,  free and clear of all
                  Liens.  The Company has  reserved  and set aside from its duly
                  authorized  capital  stock a  sufficient  number  of shares to
                  satisfy  in full the  Company's  obligations  (i) to issue the
                  Warrant Shares upon exercise of the Warrants and (ii) to issue
                  the  Conversion  Shares upon  conversion  of the  Shares.  The
                  Warrant Shares,  when issued and paid for upon exercise of the
                  Warrants in accordance  with their terms,  and the  Conversion
                  Shares,   when  issued  upon   conversion  of  the  Shares  in
                  accordance with their terms,  will be duly and validly issued,
                  fully paid and nonassessable, free and clear of all Liens.

         (g)      Capitalization.  The  authorized  capital stock of the Company
                  consists of 200,000,000  shares of Common Stock and 25,000,000
                  shares of preferred  stock,  par value $0.001 per share. As of
                  the close of business on the Business Day immediately prior to
                  the  date  hereof,  (i)  4,500,000  shares  of  the  Company's
                  preferred  stock  have been  designated  Series A  Convertible
                  Preferred   Stock,  and  2,809,966  shares  of  the  Series  A
                  Convertible  Preferred Stock are issued and outstanding;  (ii)
                  14,256,942 shares of Common Stock were issued and outstanding,
                  all   of   which   are   validly   issued,    fully-paid   and
                  non-assessable,  (iii) 0 shares of Common  Stock  were held by
                  the Company in Treasury, (iv) 5,000,000 shares of Common Stock
                  were reserved for issuance upon exercise of authorized options
                  pursuant to the  Company's  2004  Omnibus  Incentive  Plan and
                  1,500,000  shares of Common  Stock were  reserved for issuance
                  upon exercise of authorized  options pursuant to the Company's
                  2005  Consulting  Incentive  Plan (such  plans  being the only
                  plans authorized by the Company) to employees,  directors, and
                  consultants of the Company (the "Company Stock Options"), with
                  options totaling 3,631,250 shares having been granted pursuant
                  to the 2004 Omnibus  Incentive  Plan and 183,500 shares having
                  been granted  pursuant to the 2005 Consultant  Incentive Plan;
                  (v)  11,407,906  shares  of Common  Stock  were  reserved  for
                  issuance  upon  exercise of  outstanding  warrants to purchase
                  Common  Stock  (the  "Prior  Warrants");  and (vi) 0 shares of
                  Common Stock were  reserved for issuance  upon  conversion  of
                  outstanding   convertible  notes,   debentures  or  securities
                  ("Convertible  Securities").  Upon  filing of the  Amended and
                  Restated  Certificate with the Secretary of State of the State
                  of Delaware,  12,000,000  shares of the  Company's  authorized
                  preferred  stock will be  designated  as Series B  Convertible
                  Preferred  Stock. The Company has not issued any capital stock
                  since its most recently filed SEC Report.  Except as disclosed
                  in Section 3.1(g) of the Disclosure  Letter, no Person has any
                  right   of  first   refusal,   preemptive   right,   right  of
                  participation,  or any  similar  right to  participate  in the
                  transactions contemplated by the Transaction Documents. Except
                  pursuant to the Company Stock  Options or the Prior  Warrants,
                  as a result  of the  purchase  and sale of the  Securities  as
                  contemplated  by  this  Agreement,  pursuant  to the  warrants
                  issuable  to Merrill  Lynch Bank USA on  December  23, 2005 in
                  connection with the closing of the Company's warehouse line of

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<PAGE>

                  credit,  or as otherwise  disclosed  in Section  3.1(g) of the
                  Disclosure Letter, there are no outstanding options, warrants,
                  script  rights to subscribe  to, calls or  commitments  of any
                  character  whatsoever  relating to, or  securities,  rights or
                  obligations  convertible  into or exchangeable  for, or giving
                  any Person any right to subscribe  for or acquire,  any shares
                  of Common Stock, or contracts, commitments,  understandings or
                  arrangements  by which the Company or any Subsidiary is or may
                  become  bound to issue  additional  shares of Common  Stock or
                  Common Stock Equivalents. The issue and sale of the Securities
                  will not  obligate the Company to issue shares of Common Stock
                  or other  securities to any Person (other than the  Investors)
                  and  will  not  result  in a right of any  holder  of  Company
                  securities  to adjust the  exercise,  conversion,  exchange or
                  reset  price  under such  securities.  All of the  outstanding
                  shares of capital  stock of the Company  are  validly  issued,
                  fully paid and  nonassessable,  have been issued in compliance
                  with all federal and state  securities  laws, and none of such
                  outstanding  shares was issued in violation of any  preemptive
                  rights  or  similar   rights  to  subscribe  for  or  purchase
                  securities.  No  further  approval  or  authorization  of  any
                  stockholder,  the Board of  Directors of the Company or others
                  is required for the issuance and sale of the Securities. There
                  are no  stockholders  agreements,  voting  agreements or other
                  similar agreements with respect to the Company's capital stock
                  to which the  Company is a party or, to the  knowledge  of the
                  Company, between or among any of the Company's stockholders.

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

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

                                       9
<PAGE>

                  Company  has not  altered  its  method  of  accounting  or the
                  identity of its auditors, (iv) the Company has not declared or
                  made any dividend or distribution of cash or other property to
                  its stockholders or purchased, redeemed or made any agreements
                  to purchase or redeem any shares of its capital stock, and (v)
                  the  Company  has not  issued  any  equity  securities  to any
                  officer,  director or Affiliate,  except  pursuant to existing
                  Company stock option plans.  The Company does not have pending
                  before the Commission any request for  confidential  treatment
                  of information.

         (j)      Litigation.  There is no Action which (i) adversely affects or
                  challenges the legality,  validity or enforceability of any of
                  the Transaction  Documents or the Securities or (ii) except as
                  specifically  disclosed  in the SEC Reports,  could,  if there
                  were  an  unfavorable   decision,   individually   or  in  the
                  aggregate,  have or  reasonably  be  expected  to  result in a
                  Material   Adverse   Effect.   Neither  the  Company  nor  any
                  Subsidiary, nor any director or officer thereof (in his or her
                  capacity  as such),  is or has been the  subject of any Action
                  involving a claim of violation of or liability  under  federal
                  or state  securities  laws or a claim of breach  of  fiduciary
                  duty,  except as  specifically  disclosed  in the SEC Reports.
                  There has not been, and to the knowledge of the Company, there
                  is not pending any  investigation by the Commission  involving
                  the  Company or any  current or former  director or officer of
                  the Company (in his or her capacity as such).  The  Commission
                  has not issued any stop order or other  order  suspending  the
                  effectiveness  of  any  registration  statement  filed  by the
                  Company  or  any  Subsidiary  under  the  Exchange  Act or the
                  Securities Act. There are no outstanding comments by the Staff
                  of  the  Commission  on  any  filing  by  the  Company  or any
                  Subsidiary under the Exchange Act or the Securities Act.

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

         (l)      Compliance.  Neither the Company nor any  Subsidiary (i) is in
                  default  under or in  violation  of (and no event has occurred
                  that has not been waived that, with notice or lapse of time or
                  both,  would  result  in a  default  by  the  Company  or  any
                  Subsidiary  under),  nor has  the  Company  or any  Subsidiary
                  received notice of a claim that it is in default under or that
                  it is in violation of, any indenture, loan or credit agreement
                  or any other agreement or instrument to which it is a party or
                  by which it or any of its  properties is bound (whether or not
                  such  default  or  violation  has  been  waived),  (ii)  is in
                  violation   of  any  order  of  any   court,   arbitrator   or
                  governmental body, or (iii) is or has been in violation of any
                  statute,  rule or  regulation of any  governmental  authority,
                  including without limitation all foreign,  federal,  state and
                  local laws relating to taxes, consumer lending,  environmental
                  protection,  occupational  health and safety,  product quality
                  and safety and employment and labor matters.

         (m)      Regulatory Permits.  The Company and the Subsidiaries  possess
                  all  certificates,  authorizations  and permits  issued by the
                  appropriate  federal,   state,  local  or  foreign  regulatory
                  authorities  or  self-regulatory  organizations  necessary  to
                  conduct  their  respective  businesses as described in the SEC
                  Reports  except where the failure to have such  permits  could
                  not,  individually or in the aggregate,  have or reasonably be
                  expected to result in a Material  Adverse Effect,  and neither
                  the  Company nor any  Subsidiary  has  received  any notice of
                  proceedings  relating to the revocation or modification of any
                  such permits.

                                       10
<PAGE>

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

         (o)      Patents and Trademarks. The Company and the Subsidiaries have,
                  or have  rights  to use,  all  patents,  patent  applications,
                  trademarks,  trademark  applications,   service  marks,  trade
                  names, copyrights,  licenses and other similar rights that are
                  necessary  or  material  for  use  in  connection  with  their
                  respective   businesses   as  described  in  the  SEC  Reports
                  (collectively,  the "Intellectual  Property Rights").  The SEC
                  Reports  describe  all  claims  and  Actions  made or filed by
                  others against the Company  deemed  material by the Company to
                  the  effect  that  Intellectual  Property  Rights  used by the
                  Company or any Subsidiary  violate or infringe upon the rights
                  of such claimant.  Except as set forth in the SEC Reports, all
                  of the Intellectual  Property Rights are enforceable and there
                  is no existing  infringement  by another  Person of any of the
                  Intellectual Property Rights.

         (p)      Insurance.  The  Company and the  Subsidiaries  are insured by
                  insurers of recognized financial  responsibility  against such
                  losses  and  risks  and in such  amounts  as are  prudent  and
                  customary  in the  businesses  in which  the  Company  and the
                  Subsidiaries are engaged. The Company has no reason to believe
                  that it will  not be able to renew  its and the  Subsidiaries'
                  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 on terms  consistent  with
                  market for the  Company's  and such  Subsidiaries'  respective
                  lines of business.

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

         (r)      Sarbanes-Oxley;  Internal Accounting Controls.  The Company is
                  in compliance with all provisions of the Sarbanes-Oxley Act of
                  2002  (including  the rules and  regulations of the Commission
                  adopted  thereunder)  which  are  applicable  to it as of  the
                  Closing Date. The Company's certifying officers have evaluated
                  the effectiveness of the Company's  controls and procedures as
                  of the date  prior  to the  filing  date of the most  recently
                  filed  periodic  report under the Exchange Act (such date, the
                  "Evaluation Date"). The Company presented in its most recently
                  filed periodic  report under the Exchange Act the  conclusions
                  of the  certifying  officers  about the  effectiveness  of the
                  disclosure  controls and procedures based on their evaluations
                  as of the Evaluation  Date.  Since the Evaluation  Date, there
                  have been no  significant  changes in the  Company's  internal
                  controls (as such term is defined in Item 307(b) of Regulation
                  S-K under the Exchange Act) or, to the Company's knowledge, in
                  other  factors that could  significantly  affect the Company's
                  internal controls.

                                       11
<PAGE>

         (s)      Solvency.  Based on the financial  condition of the Company as
                  of the Closing Date (and  assuming that the Closing shall have
                  occurred),   (i)  the  Company's   assets  do  not  constitute
                  unreasonably  small  capital to carry on its  business for the
                  current  fiscal  year as now  conducted  and as proposed to be
                  conducted  including its capital needs taking into account the
                  particular  capital  requirements of the business conducted by
                  the Company,  and projected  capital  requirements and capital
                  availability  thereof;  and (ii) the current  cash flow of the
                  Company, together with the proceeds the Company would receive,
                  were it to  liquidate  all of its  assets,  after  taking into
                  account all anticipated  uses of the cash, would be sufficient
                  to pay all  amounts  on or in  respect  of its debt  when such
                  amounts are  required to be paid.  The Company does not intend
                  to incur indebtedness  beyond its ability to pay such debts as
                  they  mature  (taking  into  account the timing and amounts of
                  cash to be payable on or in respect of its debt).

         (t)      Certain  Fees.  Except as disclosed  in Section  3.1(f) of the
                  Disclosure   Letter,   no  brokerage   or  finder's   fees  or
                  commissions  are or  will be  payable  by the  Company  to any
                  broker,  financial  advisor or consultant,  finder,  placement
                  agent, investment banker, bank or other Person with respect to
                  the transactions contemplated by this Agreement. The Investors
                  shall  have no  obligation  with  respect  to any fees or with
                  respect to any  claims  (other  than such fees or  commissions
                  owed by an Investor pursuant to written agreements executed by
                  such  Investor  which  fees or  commissions  shall be the sole
                  responsibility of such Investor) made by or on behalf of other
                  Persons for fees of a type  contemplated  in this Section that
                  may be due in connection with the transactions contemplated by
                  this Agreement.

         (u)      Certain Registration  Matters.  Except as disclosed in Section
                  3.1(u) of the  Disclosure  Letter and assuming the accuracy of
                  the  Investors'  representations  and  warranties set forth in
                  Section  3.2(b)-(e),  no registration under the Securities Act
                  is required  for the offer and sale of the  Securities  by the
                  Company  to the  Investors  under the  Transaction  Documents.
                  Except as specified in the Disclosure  Materials,  the Company
                  has not  granted  or agreed to grant to any  Person any rights
                  (including  "piggy-back"  registration  rights)  to  have  any
                  securities of the Company  registered  with the  Commission or
                  any other governmental authority that have not been satisfied.

         (v)      Investment  Company.  The  Company  is  not,  and  is  not  an
                  Affiliate of, and  immediately  following the Closing will not
                  have become, an "investment company" within the meaning of the
                  Investment Company Act of 1940, as amended.

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

                                       12
<PAGE>

         (x)      No  Additional  Agreements.  The  Company  does  not  have any
                  agreement or  understanding  with any Investor with respect to
                  the  transactions  contemplated by the  Transaction  Documents
                  other than as specified in the Transaction Documents.

         (y)      Material  Non-Public  Information.  The Company  confirms that
                  neither  it nor any Person  acting on its behalf has  provided
                  any  Investor  or its  respective  agents or counsel  with any
                  information  that the Company believes  constitutes  material,
                  non-public information except:

                  (i)      Insofar as the  existence  and terms of the  proposed
                           transactions    hereunder   may    constitute    such
                           information.

                  (ii)     As  to  Investors  who  executed   non-disclosure  or
                           confidentiality   agreements   with  the  Company  in
                           connection with the transactions contemplated hereby.

                  The Company  understands  and confirms that the Investors will
                  rely  on  the  foregoing   representations  and  covenants  in
                  effecting transactions in securities of the Company.

         (z)      Full  Disclosure.  All  disclosure  provided to the  Investors
                  regarding  the  Company,  its  business  and the  transactions
                  contemplated hereby,  furnished by or on behalf of the Company
                  (including  the Company's  representations  and warranties set
                  forth  in this  Agreement)  are true  and  correct  and do not
                  contain  any untrue  statement  of a material  fact or omit to
                  state  any  material  fact  necessary  in  order  to make  the
                  statements made therein,  in light of the circumstances  under
                  which they were made, not misleading.

         (aa)     Environmental  Matters.  To the Company's  knowledge:  (i) the
                  Company and its Subsidiaries have complied with all applicable
                  Environmental  Laws;  (ii) the properties  currently  owned or
                  operated by Company  (including  soils,  groundwater,  surface
                  water,  buildings or other  structures)  are not  contaminated
                  with any Hazardous  Substances;  (iii) the properties formerly
                  owned or  operated  by  Company or its  Subsidiaries  were not
                  contaminated  with Hazardous  Substances  during the period of
                  ownership or operation by Company and its  Subsidiaries;  (iv)
                  Company and its  Subsidiaries are not subject to liability for
                  any Hazardous Substance disposal or contamination on any third
                  party property; (v) Company and its Subsidiaries have not been
                  associated  with any  release  or  threat  of  release  of any
                  Hazardous  Substance;  (vi) Company and its Subsidiaries  have
                  not received any notice,  demand, letter, claim or request for
                  information  alleging that Company and its Subsidiaries may be
                  in  violation of or liable  under any  Environmental  Law; and
                  (vii)  Company  and its  Subsidiaries  are not  subject to any
                  orders,  decrees,  injunctions or other  arrangements with any
                  Governmental  Authority  or subject to any  indemnity or other
                  agreement with any third party relating to liability under any
                  Environmental Law or relating to Hazardous Substances.

                  As used in this Agreement,  the term "Environmental Law" means
                  any federal,  state, local or foreign law, regulation,  order,
                  decree, permit,  authorization,  opinion, common law or agency
                  requirement relating to: (A) the protection,  investigation or
                  restoration of the environment,  health and safety, or natural
                  resources; (B) the handling, use, presence,  disposal, release
                  or threatened release of any Hazardous Substance or (C) noise,
                  odor,  wetlands,  pollution,  contamination  or any  injury or
                  threat of injury to persons or property.

                                       13
<PAGE>

                  As used in this  Agreement,  the  term  "Hazardous  Substance"
                  means  any  substance  that  is:  (i)  listed,  classified  or
                  regulated   pursuant  to  any  Environmental   Law;  (ii)  any
                  petroleum product or by-product, asbestos-containing material,
                  lead-containing paint or plumbing,  polychlorinated biphenyls,
                  radioactive  materials or radon;  or (iii) any other substance
                  which is the subject of regulatory  action by any Governmental
                  Authority pursuant to any Environmental Law.

         (bb)     Taxes.  The  Company  and  its  Subsidiaries  have  filed  all
                  necessary federal,  state and foreign income and franchise tax
                  returns  when  due (or  obtained  appropriate  extensions  for
                  filing)  and  have  paid or  accrued  all  taxes  shown as due
                  thereon,  and the Company has no knowledge of a tax deficiency
                  which has been or might be asserted or  threatened  against it
                  or any Subsidiary which would have a Material Adverse Effect.

         (cc)     Private   Offering.    Assuming   the   correctness   of   the
                  representations  and  warranties of the Investors set forth in
                  this  Agreement,  the  offer  and sale of the  Shares  and the
                  Warrants hereunder are, and upon (i) exercise of the Warrants,
                  the issuance of the Warrant Shares and (ii) upon conversion of
                  the Shares,  the  issuance of the  Conversion  Shares will be,
                  exempt from registration under the Securities Act. Neither the
                  Company  nor any person  acting on behalf of the  Company  has
                  offered or sold any of the Shares or the  Warrants by any form
                  of general  solicitation or general  advertising.  The Company
                  has  offered  the  Shares  and  Warrants  for sale only to the
                  Investors and certain other "accredited  investors" within the
                  meaning of Rule 501 under the Securities Act.

         (dd)     ERISA.  Neither the Company nor any ERISA Affiliate maintains,
                  contributes  to or has any liability or  contingent  liability
                  with respect to any employee benefit plan subject to ERISA.

         (ee)     Foreign Assets Control Regulations and Anti-Money Laundering.

                  (i) OFAC.  Neither the  issuance of the Shares and Warrants to
                  the Investors, nor the use of the respective proceeds thereof,
                  shall cause the  Investors  to violate the U.S.  Bank  Secrecy
                  Act, as amended, and any applicable  regulations thereunder or
                  any  of  the  sanctions  programs  administered  by  the  U.S.
                  Department of the Treasury's  Office of Foreign Assets Control
                  ("OFAC") of the United  States  Department  of  Treasury,  any
                  regulations  promulgated  thereunder  by  OFAC  or  under  any
                  affiliated  or successor  governmental  or  quasi-governmental
                  office,  bureau  or agency  and any  enabling  legislation  or
                  executive  order  relating   thereto.   Without  limiting  the
                  foregoing,  neither the Company  nor any  Subsidiary  (i) is a
                  person whose  property or interests in property are blocked or
                  subject to blocking  pursuant to Section 1 of Executive  Order
                  13224 of September 23, 200l Blocking  Property and Prohibiting
                  Transactions  With Persons Who Commit,  Threaten to Commit, or
                  Support Terrorism (66 Fed. Reg. 49079 (2001)), (ii) engages in
                  any dealings or  transactions  prohibited by Section 2 of such
                  executive  order,  or is  otherwise  associated  with any such
                  person in any  manner  violative  of  Section 2, or (iii) is a
                  person  on the  list of  Specially  Designated  Nationals  and
                  Blocked  Persons or subject to the limitations or prohibitions
                  under any other OFAC regulation or executive order.

                  (ii)  Patriot Act and Other  Matters.  Each of the Company and
                  each of its  Subsidiaries  are in compliance,  in all material
                  respects,  with the  Uniting and  Strengthening  of America by
                  Providing  the  Appropriate  Tools  Required to Intercept  and
                  Obstruct Terrorism Act of 2001. No part of the proceeds of the
                  sale of the Shares and the  Warrants  hereunder  will be used,
                  directly or indirectly,  for any payments to any  governmental
                  official or employee, political party, official of a political
                  party,  candidate for political  office, or anyone else acting
                  in an official capacity,  in order to obtain, retain or direct
                  business or obtain any improper advantage, in violation of the
                  United  States  Foreign  Corrupt  Practices  Act of  1977,  as
                  amended.

                                       14
<PAGE>

         (ff) Agreements to Protect Confidential Information,  Assign Inventions
and Work, and Prevent Unfair Competition and Unfair Solicitation. Each employee,
consultant  or contractor of the Company has executed and delivered an Agreement
to Protect  Confidential  Information,  Assign  Inventions and Work, and Prevent
Unfair  Competition  and  Unfair  Solicitation  in  the  form  delivered  to the
Investors on the date hereof.  The Company has no knowledge of any breach of any
such agreement by any person that is a party thereto.

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

         (a)      Organization;  Authority.  Such  Investor  is an  entity  duly
                  organized,  validly  existing and in good  standing  under the
                  laws  of  the  jurisdiction  of  its  organization   with  the
                  requisite  corporate  or  partnership  power and  authority to
                  enter into and to consummate the transactions  contemplated by
                  the  applicable  Transaction  Documents and otherwise to carry
                  out its obligations  thereunder.  The execution,  delivery and
                  performance by such Investor of the transactions  contemplated
                  by this  Agreement  has been duly  authorized by all necessary
                  corporate  or, if such  Investor  is not a  corporation,  such
                  partnership,  limited  liability  company or other  applicable
                  like action, on the part of such Investor.  This Agreement has
                  been duly  executed by such  Investor,  and when  delivered by
                  such Investor in accordance with terms hereof, will constitute
                  the valid and legally  binding  obligation  of such  Investor,
                  enforceable against it in accordance with its terms, except as
                  such  enforceability may be limited by applicable  bankruptcy,
                  insolvency, reorganization, moratorium, liquidation or similar
                  laws relating to, or affecting  generally the  enforcement of,
                  creditors'   rights  and   remedies  or  by  other   equitable
                  principles of general application.

         (b)      Investment  Intent.  Such Investor is acquiring the Securities
                  as principal for its own account for investment  purposes only
                  and not with a view to or for  distributing  or reselling such
                  Securities or any part thereof, without prejudice, however, to
                  such  Investor's  right  at all  times  to sell  or  otherwise
                  dispose of all or any part of such  Securities  in  compliance
                  with applicable  federal and state securities laws. Subject to
                  the immediately  preceding sentence,  nothing contained herein
                  shall be deemed a representation  or warranty by such Investor
                  to hold the Securities  for any period of time.  Such Investor
                  is acquiring the Securities  hereunder in the ordinary  course
                  of its business.  Such Investor does not have any agreement or
                  understanding,  directly  or  indirectly,  with any  Person to
                  distribute any of the Securities.

         (c)      Investor  Status.  At the time such  Investor  was offered the
                  Securities,  it was, and at the date hereof it is, and on each
                  date on which it exercises Warrants it will be, an "accredited
                  investor" as defined in Rule 501(a) under the Securities  Act.
                  Such Investor is not a registered  broker-dealer under Section
                  15 of the Exchange Act.

         (d)      Access to Information.  Such Investor acknowledges that it has
                  reviewed the  Disclosure  Materials  and has been afforded (i)
                  the  opportunity  to  ask  such  questions  as it  has  deemed
                  necessary of, and to receive answers from,  representatives of
                  the  Company  concerning  the  terms  and  conditions  of  the
                  offering  of the Shares and the merits and risks of  investing
                  in the  Securities;  (ii)  access  to  information  about  the

                                       15
<PAGE>

                  Company and the Subsidiaries  and their  respective  financial
                  condition,  results  of  operations,   business,   properties,
                  management  and prospects  sufficient to enable it to evaluate
                  its  investment;  and (iii)  the  opportunity  to obtain  such
                  additional  information  that  the  Company  possesses  or can
                  acquire  without   unreasonable  effort  or  expense  that  is
                  necessary to make an informed investment decision with respect
                  to the  investment.  Neither  such  inquiries  nor  any  other
                  investigation  conducted  by or on behalf of such  Investor or
                  its  representatives or counsel shall modify,  amend or affect
                  such  Investor's  right  to rely on the  truth,  accuracy  and
                  completeness  of the  Disclosure  Materials  and the Company's
                  representations  and warranties  contained in the  Transaction
                  Documents.

         (e)      Certain Trading Activities.  Such Investor has not directly or
                  indirectly, nor has any Person acting on behalf of or pursuant
                  to  any  understanding  with  such  Investor,  engaged  in any
                  transactions  in the  securities  of the  Company  (including,
                  without  limitations,  any Short Sales involving the Company's
                  securities)  since the  earlier  to occur of (1) the time that
                  such Investor was first  contacted by the Company or any other
                  Person regarding an investment in the Company and (2) the 30th
                  day  prior  to the  date  of  this  Agreement.  Such  Investor
                  covenants  that neither it nor any Person acting on its behalf
                  or  pursuant to any  understanding  with it will engage in any
                  transactions in the securities of the Company (including Short
                  Sales) prior to the time that the transactions contemplated by
                  this Agreement are publicly disclosed.

         The Company  acknowledges and agrees that no Investor has made or makes
any representations or warranties with respect to the transactions  contemplated
hereby other than those specifically set forth in this Section 3.2.

                                    ARTICLE 4

                               Registration Rights

         Section 4.1. Registration Statement. The Company shall prepare and file
with the  Commission  (the date of such  filing  hereinafter  referred to as the
"Filing  Date"),  a Registration  Statement  relating to the offer and sale from
time  to  time  on a  continuous  basis  by the  Investors  of  the  Registrable
Securities  and shall use best efforts to cause the  Commission  to declare such
Registration  Statement  effective  under  the  Securities  Act as  promptly  as
practicable  but in no event later than the  expiration of the Investor  Lock-up
Period (the "Effectiveness  Date"). The Company shall not include any securities
other than the Registrable Securities in the Registration Statement.

         Section 4.2.  Registration Process. The Company shall promptly (and, in
any  event,  no  more  than  72  hours  after  it  receives  comments  from  the
Commission),  notify the Investors whose  Registrable  Securities are covered by
the  Registration  Statement  filed  pursuant  to this  Article 4 when and if it
receives any comments from the Commission on such Registration  Statement or any
amendment  thereof and promptly forward a copy of such comments,  if they are in
writing,  to such Investors.  At such time as the Commission  indicates,  either
orally or in  writing,  that it has no  further  comments  with  respect to such
Registration  Statement  or any  amendment  thereof  or  that it is  willing  to
entertain  appropriate  requests  for  acceleration  of  effectiveness  of  such
Registration Statement or any amendment thereof, the Company shall promptly, and
in no event later than two Business Days after receipt of such  indication  from
the Commission, request that the effectiveness of such Registration Statement or
any amendment thereof be accelerated within 48 hours of the Commission's receipt
of such request.  Within 24 hours of such  declaration  by the  Commission,  the
Company shall notify the Investors whose  Registrable  Securities are covered by
such Registration  Statement that such  Registration  Statement or any amendment
thereof has been declared effective by the Commission.

                                       16
<PAGE>

         Section  4.3.  Obligations  of the  Company.  In  connection  with  the
registration of the Registrable Securities, the Company shall:

                   (a) Prepare and file the Registration Statement in accordance
         with the time period set forth in Section 4.1 and promptly  prepare and
         file with the  Commission  such  amendments  (including  post-effective
         amendments)  to  the  Registration  Statement  and  supplements  to the
         prospectus  included  therein (a  "Prospectus")  as may be necessary to
         keep  the  Registration   Statement   continuously   effective  and  in
         compliance with the provisions of the Securities Act applicable thereto
         so as to permit the  Prospectus  forming part thereof to be current and
         useable by Investors for resales of the  Registrable  Securities  until
         such  date as is the  earlier  of (x) the  date  when  all  Registrable
         Securities covered by such Registration Statement have been sold or (y)
         the date on which the  Registrable  Securities  may be sold without any
         restriction  (including volume  limitations)  pursuant to Rule 144 (the
         "Registration  Period")  and  take  all  lawful  action  such  that the
         Registration  Statement  and any  amendment  thereto does not,  when it
         becomes  effective,  contain an 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 and that the
         Prospectus  forming  part  of  the  Registration  Statement,   and  any
         amendment  or  supplement  thereto,  does  not at any time  during  the
         Registration  Period include an 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, in light of the circumstances
         under which they were made, not misleading;

                   (b)  During  the   Registration   Period,   comply  with  the
         provisions  of the  Securities  Act  with  respect  to the  Registrable
         Securities covered by the Registration Statement until such time as all
         of such Registrable Securities have been disposed of in accordance with
         the intended  methods of  disposition  by the Investors as set forth in
         the Prospectus forming part of the Registration Statement;

                   (c)  Prior  to  the  filing  with  the   Commission   of  the
         Registration  Statement  (including  any  amendments  thereto)  and the
         distribution  or delivery of any Prospectus  (including any supplements
         thereto),  provide draft copies thereof to the Investors and reflect in
         such  documents all such comments as the Investors  (and their counsel)
         reasonably may propose and furnish to each Investor  whose  Registrable
         Securities  are included in the  Registration  Statement  and its legal
         counsel  identified  to the  Company,  (i)  promptly  after the same is
         prepared  and  publicly  distributed,  filed  with the  Commission,  or
         received by the Company, one copy of the Registration  Statement,  each
         Prospectus,  and each  amendment or supplement  thereto,  and (ii) such
         number of copies of the Prospectus  and all amendments and  supplements
         thereto  and such other  documents,  as such  Investor  may  reasonably
         request  in order to  facilitate  the  disposition  of the  Registrable
         Securities owned by such Investor;

                   (d)  (i)  register  or  qualify  the  Registrable  Securities
         covered by the  Registration  Statement  under such securities or "blue
         sky" laws of such  jurisdictions as the Investors  reasonably  request,
         (ii) prepare and file in such jurisdictions such amendments  (including
         post-effective  amendments) and supplements to such  registrations  and
         qualifications  as may  be  necessary  to  maintain  the  effectiveness
         thereof at all times  during the  Registration  Period,  (iii) take all
         such  other  lawful  actions  as  may be  necessary  to  maintain  such
         registrations  and  qualifications  in effect at all times  during  the
         Registration  Period,  and  (iv)  take all such  other  lawful  actions
         reasonably necessary or advisable to qualify the Registrable Securities
         for sale in such  jurisdictions;  provided,  however,  that the Company
         shall not be required in connection therewith or as a condition thereto
         to (A) qualify to do business  in any  jurisdiction  where it would not
         otherwise  be  required  to  qualify,  (B)  subject  itself to  general
         taxation  in any such  jurisdiction  or (C) file a general  consent  to
         service of process in any such jurisdiction;

                                       17
<PAGE>

                   (e) As promptly as  practicable  after becoming aware of such
         event, notify each Investor of the occurrence of any event, as a result
         of which the Prospectus included in the 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, in light of the circumstances under which
         they were made, not  misleading,  and promptly  prepare an amendment to
         the Registration  Statement and supplement to the Prospectus to correct
         such untrue  statement or  omission,  and deliver a number of copies of
         such  supplement  and  amendment to each  Investor as such Investor may
         reasonably request;

                   (f) As promptly as  practicable  after becoming aware of such
         event, notify each Investor who holds Registrable Securities being sold
         (or,  in  the  event  of  an   underwritten   offering,   the  managing
         underwriters)  of the issuance by the  Commission  of any stop order or
         other suspension of the effectiveness of the Registration Statement and
         take all lawful action to effect the withdrawal,  rescission or removal
         of such stop order or other suspension;

                   (g) Take all such other lawful actions  reasonably  necessary
         to expedite and  facilitate  the  disposition by the Investors of their
         Registrable Securities in accordance with the intended methods therefor
         provided in the Prospectus which are customary under the circumstances;

                   (h) Make generally  available to its security holders as soon
         as  practicable,  but in any event not later than  eighteen (18) months
         after (i) the Effective Date of the  Registration  Statement,  and (ii)
         the effective date of each post-effective amendment to the Registration
         Statement, as the case may be, an earnings statement of the Company and
         its subsidiaries complying with Section 11(a) of the Securities Act and
         the rules and regulations of the Commission thereunder;

                   (i)  In  the  event  of an  underwritten  offering,  promptly
         include or  incorporate  in a Prospectus  supplement or  post-effective
         amendment  to  the  Registration  Statement  such  information  as  the
         underwriters  reasonably  agree should be included therein and to which
         the Company does not reasonably object and make all required filings of
         such  Prospectus  supplement  or  post-effective  amendment  as soon as
         practicable  after it is  notified  of the  matters to be  included  or
         incorporated in such Prospectus supplement or post-effective amendment;

                   (j) In the event of an underwritten offering, make reasonably
         available for inspection by Investors, any underwriter participating in
         any  disposition  pursuant  to  the  Registration  Statement,  and  any
         attorney,  accountant or other agent  retained by such Investors or any
         such  underwriter all relevant  financial and other records,  pertinent
         corporate documents and properties of the Company and its subsidiaries,
         and (ii) cause the  Company's  officers,  directors  and  employees  to
         supply all  information  reasonably  requested by such Investors or any
         such underwriter,  attorney, accountant or agent in connection with the
         Registration  Statement,  in each case, as is customary for similar due
         diligence   examinations;   provided,   however,   that  all   records,
         information  and  documents  that  are  designated  in  writing  by the
         Company, in good faith, as confidential,  proprietary or containing any
         nonpublic  information shall be kept confidential by such Investors and
         any such  underwriter,  attorney,  accountant or agent  (pursuant to an
         appropriate confidentiality agreement in the case of any such holder or

                                       18
<PAGE>

         agent),  unless such disclosure is made pursuant to judicial process in
         a court  proceeding  (after  first  giving the  Company an  opportunity
         promptly to seek a protective order or otherwise limit the scope of the
         information  sought to be  disclosed)  or is  required  by law, or such
         records,  information  or  documents  become  available  to the  public
         generally or through a third party not in violation of an  accompanying
         obligation  of  confidentiality;  and provided,  further,  that, if the
         foregoing inspection and information  gathering would otherwise disrupt
         the Company's conduct of its business,  such inspection and information
         gathering  shall,  to the maximum  extent  possible,  be coordinated on
         behalf of the Investors and the other parties  entitled  thereto by one
         firm of counsel designated by and on behalf of the majority in interest
         of Investors and other parties;

                   (k)   In   connection   with   any   offering,    make   such
         representations  and warranties to the Investors  participating in such
         offering and to the underwriters if an underwritten  offering, in form,
         substance  and  scope  as  are  customarily  made  by  the  Company  to
         underwriters in secondary underwritten offerings;

                   (l) In connection  with the  Registration  Statement,  obtain
         opinions of counsel to the Company  (which  counsel  and  opinions  (in
         form,  scope and  substance)  shall be reasonably  satisfactory  to the
         Investors)  addressed to the  Investors and the  underwriters,  if any,
         covering such matters as are customarily  covered in opinions requested
         in secondary  underwritten  offerings (it being agreed that the matters
         to be covered by such opinions shall include, without limitation, as of
         the  date  of  the  opinion  and  as  of  the  Effective  Time  of  the
         Registration Statement or most recent post-effective amendment thereto,
         as the case may be, the absence from the Registration Statement and the
         Prospectus,  including any documents incorporated by reference therein,
         of an untrue statement of a material fact or the omission of a material
         fact required to be stated  therein or necessary to make the statements
         therein (in the case of the Prospectus,  in light of the  circumstances
         under  which  they were  made) not  misleading,  subject  to  customary
         limitations);

                   (m) In connection  with the  Registration  Statement,  obtain
         "cold  comfort" or  "procedures"  letters and updates  thereof from the
         independent public accountants of the Company (and, if necessary,  from
         the independent  public accountants of any subsidiary of the Company or
         of any  business  acquired  by the  Company,  in each  case  for  which
         financial  statements  and  financial  data are, or are required to be,
         included in the Registration Statement), addressed to each Investor and
         each underwriter, if any, participating in an underwritten,  if any, in
         customary form and covering matters of the type customarily  covered in
         such letters in connection with secondary offerings;

                   (n) In connection  with any  underwritten  offering,  deliver
         such documents and  certificates  as may be reasonably  required by the
         managers, if any;

                   (o) In the event that any broker-dealer  registered under the
         Exchange Act shall be an "Affiliate"  (as defined in Rule 2729(b)(1) of
         the rules and  regulations  of the National  Association  of Securities
         Dealers,  Inc. (the "NASD Rules") (or any successor provision thereto))
         of the  Company or has a  "conflict  of  interest"  (as defined in Rule
         2720(b)(7) of the NASD Rules (or any successor  provision thereto)) and
         such  broker-dealer  shall  underwrite,  participate  as a member of an
         underwriting  syndicate or selling group or assist in the  distribution
         of any Registrable  Securities  covered by the Registration  Statement,
         whether  as  a  holder  of  such   Registrable   Securities  or  as  an
         underwriter,  a  placement  or sales  agent or a broker  or  dealer  in
         respect   thereof,   or  otherwise,   the  Company  shall  assist  such
         broker-dealer  in complying  with the  requirements  of the NASD Rules,
         including, without limitation, by (i) engaging a "qualified independent

                                       19
<PAGE>

         underwriter"  (as defined in Rule 2720(b)(15) of the NASD Rules (or any
         successor  provision thereto)) to participate in the preparation of the
         Registration  Statement  relating to such  Registrable  Securities,  to
         exercise  usual  standards of due  diligence in respect  thereof and to
         recommend the public  offering  price of such  Registrable  Securities,
         (ii) indemnifying such qualified independent  underwriter to the extent
         of the  indemnification  of underwriters  provided in Section 6 hereof,
         and (iii) providing such  information to such  broker-dealer  as may be
         required   in  order  for  such   broker-dealer   to  comply  with  the
         requirements of the NASD Rules;

                   (p) Cooperate  with the  Investors to  facilitate  the timely
         preparation  and  delivery  of  certificates  representing  Registrable
         Securities to be sold  pursuant to the  Registration  Statement,  which
         certificates  shall, if required under the terms of this Agreement,  be
         free  of all  restrictive  legends,  and  to  enable  such  Registrable
         Securities to be in such  denominations and registered in such names as
         any Investor  may request and maintain a transfer  agent for the Common
         Stock; and

                   (q) Use its  commercially  reasonable  efforts  to cause  all
         Registrable  Securities  covered by the  Registration  Statement  to be
         listed or qualified for trading on the  principal  Trading  Market,  if
         any,  on which the  Common  Stock is traded or listed on the  Effective
         Date of the Registration Statement.

         Section 4.4.  Obligations  and  Acknowledgements  of the Investors.  In
connection with the  registration of the Registrable  Securities,  the Investors
shall  have  the   following   obligations   and  hereby   make  the   following
acknowledgements:

                   (a) It shall be a condition  precedent to the  obligations of
         the  Company to include  the  Registrable  Securities  of a  particular
         Investor in the  Registration  Statement  that such  Investor (i) shall
         furnish  to  the  Company  such  information   regarding  itself,   the
         Registrable   Securities   held  by  it  and  the  intended  method  of
         disposition  of the  Registrable  Securities  held  by it as  shall  be
         reasonably  required  to effect the  registration  of such  Registrable
         Securities  and (ii) shall execute such  documents in  connection  with
         such registration as the Company may reasonably  request.  At least ten
         Business  Days  prior  to  the  first  anticipated  filing  date  of  a
         Registration  Statement,  the Company shall notify each Investor of the
         information  the Company  requires from such  Investor (the  "Requested
         Information")  if such Investor  elects to have any of its  Registrable
         Securities  included  in the  Registration  Statement.  If at least two
         Business Days prior to the anticipated  filing date the Company has not
         received the Requested  Information from an Investor (a "Non-Responsive
         Investor"),  then  the  Company  may file  the  Registration  Statement
         without  including any  Registrable  Securities of such  Non-Responsive
         Investor and the Company shall have no further  obligations  under this
         Article  4 to  the  Non-Responsive  Investor  after  such  Registration
         Statement has been declared effective.  If such Non-Responsive Investor
         notifies the Company and provides the Company the information  required
         hereby  prior  to the  time  the  Registration  Statement  is  declared
         effective,  the  Company  will file an  amendment  to the  Registration
         Statement   that   includes   the   Registrable   Securities   of  such
         Non-Responsive Investor;  provided, however, that the Company shall not
         be required to file such amendment to the Registration Statement at any
         time less than five Trading Days prior to the Effectiveness Date.

                   (b) Each  Investor  agrees to  cooperate  with the Company in
         connection with the preparation and filing of a Registration  Statement
         hereunder,  unless such Investor has notified the Company in writing of
         its  election to exclude all of its  Registrable  Securities  from such
         Registration Statement;

                                       20
<PAGE>

                   (c) Each  Investor  agrees  that,  upon receipt of any notice
         from the Company of the  occurrence of any event of the kind  described
         in  Section  4.3(e) or 4.3(f),  it shall  immediately  discontinue  its
         disposition  of  Registrable  Securities  pursuant to the  Registration
         Statement  covering such  Registrable  Securities until such Investor's
         receipt  of  the  copies  of the  supplemented  or  amended  Prospectus
         contemplated by Section 4.3(e) and, if so directed by the Company, such
         Investor  shall  deliver to the Company (at the expense of the Company)
         or destroy (and deliver to the Company a  certificate  of  destruction)
         all copies in such Investor's  possession,  of the Prospectus  covering
         such  Registrable  Securities  current  at the time of  receipt of such
         notice; and

                   (d) Each Investor  acknowledges that it may be deemed to be a
         statutory  underwriter  within the meaning of the  Securities  Act with
         respect to the Registrable  Securities  being  registered for resale by
         it, and each Investor which includes  Registrable  Securities for offer
         and  sale  within  a  Registration  Statement  hereby  consents  to the
         inclusion  in  such  Registration  Statement  of a  disclosure  to such
         effect.

         Section  4.5.  Expenses  of  Registration.  All  expenses,  other  than
underwriting   discounts   and   commissions,   incurred  in   connection   with
registrations,  filings or qualifications pursuant to this Article 4, including,
without limitation, all registration, listing, and qualifications fees, printing
and engraving fees,  accounting fees, and the fees and  disbursements of counsel
for the  Company,  and  (with  respect  to the  preparation  and  filing  of the
Registration Statement) the reasonable fees of one firm of legal counsel for the
Investors   (selected  by  Investors  holding  a  majority  of  the  Registrable
Securities being included in the  Registration  Statement) shall be borne by the
Company.

         Section 4.6.    Indemnification and Contribution.

         (a)  Indemnification  by the Company.  The Company shall  indemnify and
hold harmless each Investor and each underwriter,  if any, which facilitates the
disposition of Registrable Securities, and each of their respective officers and
directors and each Person who controls such Investor or  underwriter  within the
meaning of Section 15 of the  Securities  Act or Section 20 of the  Exchange Act
(each such Person being  sometimes  hereinafter  referred to as an  "Indemnified
Person") from and against any losses, claims,  damages or liabilities,  joint or
several,  to  which  such  Indemnified  Person  may  become  subject  under  the
Securities  Act or  otherwise,  insofar  as  such  losses,  claims,  damages  or
liabilities  (or actions in respect  thereof)  arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Registration  Statement  or an omission or alleged  omission to state  therein a
material fact required to be stated  therein or necessary to make the statements
therein,  not misleading,  or arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any Prospectus or an
omission or alleged  omission to state  therein a 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 the Company hereby
agrees to reimburse such  Indemnified  Person for all reasonable legal and other
expenses incurred by them in connection with investigating or defending any such
action or claim as and when such expenses are incurred;  provided, however, that
the Company shall not be liable to any such Indemnified  Person in any such case
to the extent that any such loss, claim, damage or liability arises out of or is
based upon (i) an untrue  statement or alleged  untrue  statement made in, or an
omission or alleged omission from, such Registration  Statement or Prospectus in
reliance  upon and in  conformity  with  written  information  furnished  to the
Company by such Indemnified Person expressly for use therein or (ii) in the case
of the occurrence of an event of the type specified in Section  4.3(e),  the use
by the  Indemnified  Person of an outdated  or  defective  Prospectus  after the
Company has provided to such Indemnified Person an updated Prospectus correcting
the untrue statement or alleged untrue statement or omission or alleged omission
giving rise to such loss, claim, damage or liability.

                                       21
<PAGE>

         (b)  Indemnification  by the Investors and Underwriters.  Each Investor
agrees,  severally and not jointly,  as a consequence of the inclusion of any of
its Registrable Securities in a Registration Statement, and each underwriter, if
any, which  facilitates the disposition of Registrable  Securities  shall agree,
severally and not jointly,  as a consequence of facilitating such disposition of
Registrable  Securities  to (i)  indemnify  and hold  harmless the Company,  its
directors  (including  any person who, with his or her consent,  is named in the
Registration  Statement as a director nominee of the Company),  its officers who
sign any  Registration  Statement  and each  Person,  if any,  who  controls the
Company within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act,  against any losses,  claims,  damages or liabilities to
which the Company or such other persons may become subject, under the Securities
Act or otherwise,  insofar as such losses,  claims,  damages or liabilities  (or
actions in respect  thereof) arise out of or are based upon an untrue  statement
or alleged untrue  statement of a material fact  contained in such  Registration
Statement  or  Prospectus  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 (in light of the circumstances under
which they were made, in the case of the  Prospectus),  not misleading,  in each
case to the  extent,  but only to the  extent,  that such  untrue  statement  or
alleged  untrue  statement or omission or alleged  omission was made in reliance
upon and in conformity with written information furnished to the Company by such
holder or underwriter  expressly for use therein, and (ii) reimburse the Company
for any legal or other  expenses  incurred  by the  Company in  connection  with
investigating  or  defending  any such  action  or claim  as such  expenses  are
incurred;  provided,  however,  that no Investor or underwriter  shall be liable
under this Section  4.6(b) for any amount in excess of the net proceeds  paid to
such Investor or underwriter in respect of shares sold by it.

         (c) Notice of Claims,  etc.  Promptly after receipt by a Person seeking
indemnification pursuant to this Section 4.6 (an "Indemnified Party") of written
notice of any  investigation,  claim,  proceeding  or other action in respect of
which  indemnification is being sought (each, a "Claim"),  the Indemnified Party
promptly shall notify the Person against whom  indemnification  pursuant to this
Section  4.6 is being  sought  (the  "Indemnifying  Party") of the  commencement
thereof;  but the omission to so notify the Indemnifying Party shall not relieve
it from any  liability  that it  otherwise  may have to the  Indemnified  Party,
except to the extent that the  Indemnifying  Party is materially  prejudiced and
forfeits  substantive  rights  and  defenses  by  reason  of  such  failure.  In
connection  with any  Claim as to which  both  the  Indemnifying  Party  and the
Indemnified  Party are  parties,  the  Indemnifying  Party  shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying  Party, the Indemnified  Party shall have the right to
employ  separate  legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees,  out-of-pocket  costs
and expenses of such  separate  legal counsel to the  Indemnified  Party if (and
only if): (i) the  Indemnifying  Party shall have agreed to pay such fees, costs
and expenses,  (ii) the Indemnified  Party shall  reasonably have concluded that
representation  of the Indemnified  Party by the Indemnifying  Party by the same
legal  counsel  would  not  be  appropriate  due to  actual  or,  as  reasonably
determined  by legal counsel to the  Indemnified  Party,  potentially  differing
interests  between such parties in the conduct of the defense of such Claim,  or
if there may be legal defenses  available to the  Indemnified  Party that are in
addition to or disparate  from those  available to the  Indemnifying  Party,  or
(iii)  the  Indemnifying  Party  shall  have  failed  to  employ  legal  counsel
reasonably  satisfactory to the Indemnified  Party within a reasonable period of
time after notice of the  commencement of such Claim.  If the Indemnified  Party
employs separate legal counsel in  circumstances  other than as described in the
preceding sentence,  the fees, costs and expenses of such legal counsel shall be
borne  exclusively  by the  Indemnified  Party.  Except as provided  above,  the
Indemnifying  Party  shall  not,  in  connection  with  any  Claim  in the  same
jurisdiction,  be  liable  for the fees and  expenses  of more  than one firm of
counsel for the Indemnified Party (together with appropriate local counsel). The
Indemnified   Party  shall  not,  without  the  prior  written  consent  of  the
Indemnifying Party (which consent shall not unreasonably be withheld), settle or
compromise  any  Claim or  consent  to the entry of any  judgment  that does not
include an unconditional  release of the Indemnifying Party from all liabilities
with respect to such Claim or judgment or contain any admission of wrongdoing.

                                       22
<PAGE>

         (d) Contribution.  If the indemnification  provided for in this Section
4.6 is unavailable to or insufficient  to hold harmless an Indemnified  Party in
respect of any losses,  claims,  damages or  liabilities  (or actions in respect
thereof) referred to therein,  then each Indemnifying  Party shall contribute to
the amount paid or payable by such Indemnified Party as a result of such losses,
claims,  damages  or  liabilities  (or  actions  in  respect  thereof)  in  such
proportion as is appropriate  to reflect the relative fault of the  Indemnifying
Party and the  Indemnified  Party in connection with the statements or omissions
or alleged  statements  or  omissions  which  resulted in such  losses,  claims,
damages or  liabilities  (or actions in respect  thereof),  as well as any other
relevant equitable considerations. The relative fault of such Indemnifying Party
and  Indemnified  Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged  omission to state a material  fact relates to  information  supplied by
such Indemnifying  Party or by such Indemnified Party, and the parties' relative
intent,  knowledge,  access to information and opportunity to correct or prevent
such  statement or omission.  The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 4.6(d) were determined by
pro rata allocation (even if the Investors or any  underwriters  were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 4.6(d).
The amount  paid or payable by an  Indemnified  Party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be  deemed  to  include  any legal or other  fees or  expenses  reasonably
incurred by such Indemnified Party in connection with investigating or defending
any such  action or  claim.  No person  guilty of  fraudulent  misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution   from  any  person   who  was  not   guilty  of  such   fraudulent
misrepresentation. The obligations of the Investors and any underwriters in this
Section 4.6(d) to contribute shall be several in proportion to the percentage of
Registrable  Securities registered or underwritten,  as the case may be, by them
and not joint.

         (e)   Limitation   on   Investors'   and   Underwriters'   Obligations.
Notwithstanding  any other  provision of this Section 4.6, in no event shall any
(i) Investor have any liability under this Section 4.6 for any amounts in excess
of the dollar amount of the proceeds actually received by such Investor from the
sale of such  Investor's  Registrable  Securities  (after  deducting  any  fees,
discounts  and  commissions  applicable  thereto)  pursuant to any  Registration
Statement  under which such  Registrable  Securities  are  registered  under the
Securities Act and (ii)  underwriter  be required to undertake  liability to any
Person hereunder for any amounts in excess of the aggregate discount, commission
or  other  compensation   payable  to  such  underwriter  with  respect  to  the
Registrable  Securities  underwritten  by it  and  distributed  pursuant  to the
Registration Statement.

         (f) Other  Liabilities.  The  obligations  of the  Company  under  this
Section  4.6  shall be in  addition  to any  liability  which  the  Company  may
otherwise have to any Indemnified  Person and the obligations of any Indemnified
Person under this Section 4.6 shall be in addition to any  liability  which such
Indemnified  Person may otherwise have to the Company.  The remedies provided in
this  Section 6 are not  exclusive  and shall not limit any  rights or  remedies
which may otherwise be available to an indemnified party at law or in equity.

                                       23
<PAGE>

         Section 4.7. Rule 144. With a view to making available to the Investors
the benefits of Rule 144, the Company agrees to use its best efforts to:

                   (i) comply with the  provisions  of paragraph  (c)(1) of Rule
         144; and

                  (ii) file with the  Commission  in a timely manner all reports
         and other  documents  required to be filed by the  Company  pursuant to
         Section 13 or 15(d) under the Exchange  Act;  and, if at any time it is
         not required to file such reports but in the past had been  required to
         or did file such  reports,  it will,  upon the request of any Investor,
         make  available  other  information  as  required  by,  and so  long as
         necessary to permit sales of, its  Registrable  Securities  pursuant to
         Rule 144.

         Section 4.8. Failure to Satisfy Obligations Regarding Registration. If:
(i) a Registration  Statement is not filed at least sixty (60) days prior to the
expiration of the Investor  Lock-up  Period (if the Company files a Registration
Statement  without affording the Investors the opportunity to review and comment
on the same as required  by Article 4, the  Company  shall not be deemed to have
satisfied  this  clause  (i)),  or (ii)  the  Company  fails  to file  with  the
Commission a request for  acceleration  in accordance  with Rule 461 promulgated
under the  Securities  Act,  within two Trading Days after the date on which the
Company  is  notified  (orally  or in  writing,  whichever  is  earlier)  by the
Commission  that such  Registration  Statement will not be "reviewed," or is not
subject to further review,  or (iii) a Registration  Statement filed or required
to be filed  hereunder is not declared  effective by the Commission on or before
the  expiration of the Investor  Lock-up  Period,  or (iv) after a  Registration
Statement  is first  declared  effective  by the  Commission,  it ceases for any
reason to remain continuously effective as to all Securities covered thereby for
which it is  required to be  effective,  or the  Holders  are not  permitted  to
utilize the Prospectus  therein to resell such  Securities  (any such failure or
breach being  referred to as an "Event," and for purposes of clause (i) or (iii)
the date on which such Event occurs,  or for purposes of clause (ii) the date on
which such two Trading Day period is  exceeded,  or for  purposes of clause (iv)
the date on which such 30 Trading  Day period is exceeded  being  referred to as
"Event  Date"),  then in addition  to any other  rights the  Investors  may have
hereunder or under  applicable law, on each such Event Date and on the same date
of each month  thereafter (if the applicable  Event shall not have been cured by
such date) (each, a "Subsequent  Adjustment Date") until the applicable Event is
cured,  the  Exercise  Price of the  Warrants  (as such term is  defined  in the
Warrants, the "Exercise Price") shall be reduced as provided in the Warrants.

         Section 4.9. Common Stock Issued upon Stock Split,  etc. The provisions
of this  Article  4 shall  apply to any  shares  of  Common  Stock or any  other
securities  issued as a dividend or  distribution  in respect of the  Conversion
Shares or the Warrant Shares.

                                    ARTICLE 5

                         Other Agreements of the Parties

         Section 5.1.      Certificates; Legends.

         (a)      Securities may only be transferred of in compliance with state
                  and federal  securities  laws. In connection with any transfer
                  of  the  Securities   other  than  pursuant  to  an  effective
                  registration  statement, to the Company, to an Affiliate of an
                  Investor or in  connection  with a pledge as  contemplated  in
                  Section 5.1(b), the Company may require the transferor thereof
                  to provide to the  Company an opinion of counsel  selected  by
                  the  transferor  (which  may  be  such  transferor's  in-house
                  counsel),  the form and  substance of which  opinion  shall be
                  reasonably  satisfactory  to the  Company,  to the effect that
                  such   transfer   does  not  require   registration   of  such
                  transferred Securities under the Securities Act.

                                       24
<PAGE>

         (b)      Certificates  evidencing  the  Shares and the  Warrants  to be
                  delivered  at the  Closing  and  certificates  evidencing  the
                  Conversion  Shares and the Warrant Shares to be delivered upon
                  conversion of the Shares or exercise of the  Warrants,  as the
                  case may be, will  contain  appropriate  legends  referring to
                  restrictions   on  transfer   relating  to  the   registration
                  requirements  of  the  Securities  Act  and  applicable  state
                  securities laws.

                  The Company  acknowledges and agrees that an Investor may from
                  time to time pledge,  and/or grant a security interest in some
                  or all of  the  Securities  pursuant  to a  bona  fide  margin
                  agreement in connection  with a bona fide margin  account and,
                  if required under the terms of such agreement or account, such
                  Investor may  transfer  pledged or secured  Securities  to the
                  pledgees or secured  parties.  Such a pledge or transfer would
                  not be subject to  approval  or consent of the  Company and no
                  legal opinion of legal  counsel to the pledgee,  secured party
                  or pledgor  shall be required in  connection  with the pledge,
                  but such legal  opinion may be required in  connection  with a
                  subsequent   transfer   following   default  by  the  Investor
                  transferee of the pledge.  No notice shall be required of such
                  pledge.  At the appropriate  Investor's  expense,  the Company
                  will execute and deliver such  reasonable  documentation  as a
                  pledgee or secured party of Securities may reasonably  request
                  in  connection  with a pledge or  transfer  of the  Securities
                  including   the   preparation   and  filing  of  any  required
                  prospectus  supplement  under Rule 424(b)(3) of the Securities
                  Act or other  applicable  provision of the  Securities  Act to
                  appropriately   amend   the  list  of   selling   stockholders
                  thereunder.

         (c)      Certificates  evidencing the Registrable  Securities shall not
                  contain  any  legend  (including  the  legend  referred  to in
                  Section 5.1(b)),  (i) while a Registration  Statement covering
                  the resale of such Security is effective  under the Securities
                  Act, or (ii) following any sale of such Registrable Securities
                  pursuant to Rule 144, or (iii) if such Registrable  Securities
                  are  eligible  for sale  under  Rule  144(k),  or (iv) if such
                  legend is not required under  applicable  requirements  of the
                  Securities  Act  (including   judicial   interpretations   and
                  pronouncements issued by the Staff of the Commission) and such
                  lack  of   requirement   is  confirmed  by  a  legal   opinion
                  satisfactory  to the  Company.  If all  or  any  portion  of a
                  Warrant  is  exercised  at a time when  there is an  effective
                  Registration  Statement  to cover the  resale  of the  Warrant
                  Shares,  or if such  Warrant  Shares  may be sold  under  Rule
                  144(k)  or if such  legend  is not  otherwise  required  under
                  applicable  requirements  of  the  Securities  Act  (including
                  judicial  interpretations  thereof)  then such Warrant  Shares
                  shall be issued free of all legends.  The Company  agrees that
                  following the Effective Date or at such time as such legend is
                  no longer  required  under this Section  5.1(c),  it will,  no
                  later than three  Trading  Days  following  the  delivery by a
                  Investor to the Company or the Company's  transfer  agent of a
                  certificate representing  Registrable Securities,  as the case
                  may be,  issued with a  restrictive  legend  (such  date,  the
                  "Legend  Removal  Date"),  deliver or cause to be delivered to
                  such Investor a certificate  representing such Securities that
                  is free from all  restrictive  and other legends.  The Company
                  may not make any notation on its records or give  instructions
                  to  any  transfer  agent  of  the  Company  that  enlarge  the
                  restrictions on transfer set forth in this Section.

         (d)      Each Investor, severally and not jointly with the other
                  Investor, agrees that the removal of the restrictive legend
                  from certificates representing Securities as set forth in this
                  Section 5.1 is predicated upon the Company's reliance that the
                  Investor will sell any Securities pursuant to either the
                  registration requirements of the Securities Act, including any
                  applicable prospectus delivery requirements, or an exemption
                  therefrom.

                                       25
<PAGE>

         Section 5.2. Furnishing of Information;  Inspection Rights. (a) As long
as any Investor owns the  Securities,  the Company  covenants to timely file (or
obtain  extensions  in respect  thereof  and file  within the  applicable  grace
period)  all reports  required to be filed by the Company  after the date hereof
pursuant to the Exchange Act. The Company shall deliver to such holder a written
certification  of a duly  authorized  officer as to whether it has complied with
the preceding sentence, together with a copy of all such filings.

         (b) Upon the request of an  Investor,  the Company will deliver to such
Investor any monthly  financial  statement of the Company,  annual  budgets,  or
other information as reasonably requested.

         (c) The  Company  shall  permit  each  Investor,  or  their  authorized
representatives,  to visit and inspect the properties of the Company,  including
its corporate and  financial  records,  and to discuss its business and finances
with officers of the Company,  during normal business hours following reasonable
notice and as often as may be reasonably requested.

         Section 5.3. Integration.  The Company has not and shall not, and shall
use its best  efforts to ensure that no Affiliate  of the Company  shall,  sell,
offer for sale or solicit offers to buy or otherwise negotiate in respect of any
security  (as  defined  in  Section  2 of the  Securities  Act)  that  would  be
integrated  with the  offer or sale of the  Securities  in a manner  that  would
require the registration  under the Securities Act of the sale of the Securities
to the  Investors,  or that  would be  integrated  with the offer or sale of the
Securities for purposes of the rules and  regulations of any Trading Market in a
manner that would require stockholder  approval of the sale of the securities to
the Investors.

         Section 5.4. Subsequent  Registrations.  Other than (i) pursuant to the
Registration Statement, or (ii) with respect to the warrants issuable to Merrill
Lynch  Bank USA on  December  23,2005  in  connection  with the  closing  of the
Company's  warehouse  line  of  credit,  prior  to  the  Effective  Date  of the
Registration  Statement,  the  Company may not file any  registration  statement
(other than on Form S-8) with the  Commission  with respect to any securities of
the Company.

         Section 5.5. Securities Laws Disclosure;  Publicity.  By 9:00 a.m. (New
York time) on the second Trading Day following the execution of this  Agreement,
and by 5:00 p.m.  (New York time) on the Closing  Date,  the Company shall issue
press releases disclosing the transactions  contemplated hereby and the Closing.
On the Trading Day following  the  execution of this  Agreement the Company will
file a  Current  Report  on  Form  8-K  disclosing  the  material  terms  of the
Transaction   Documents  (and  attach  as  exhibits   thereto  the   Transaction
Documents),  and on the Closing Date the Company will file an additional Current
Report on Form 8-K to disclose the Closing.  In addition,  the Company will make
such other filings and notices in the manner and time required by the Commission
and the Trading Market on which the Common Stock is listed.  Notwithstanding the
foregoing,  the Company shall not publicly disclose the name of any Investor, or
include the name of any Investor in any filing with the  Commission  (other than
the  Registration  Statement and any exhibits to filings made in respect of this
transaction in accordance with periodic filing  requirements  under the Exchange
Act) or any  regulatory  agency or Trading  Market,  without  the prior  written
consent of such  Investor,  except to the extent such  disclosure is required by
law or Trading Market regulations.

         Section 5.6. Limitation on Issuance of Future Priced Securities. During
the eighteen months  following the Closing Date, the Company shall not issue any
future priced securities.

                                       26
<PAGE>

         Section 5.7. Indemnification of Investors. In addition to the indemnity
provided in Article 4, the Company will  indemnify  and hold the  Investors  and
their directors, officers,  shareholders,  partners, employees and agents (each,
an "Investor Party") harmless from any and all losses, liabilities, obligations,
claims,  contingencies,  damages,  costs and expenses,  including all judgments,
amounts paid in  settlements,  court costs and  reasonable  attorneys'  fees and
costs of investigation (collectively, "Losses") that any such Investor Party may
suffer or incur as a result of or relating to: (a) any misrepresentation, breach
or inaccuracy of any representation, warranty, covenant or agreement made by the
Company in any  Transaction  Document;  and/or (b) any cause of action,  suit or
claim brought or made against such Investor  Party and arising  solely out of or
solely  resulting  from  the  Investor's  execution,  delivery,  performance  or
enforcement  of this  Agreement or any of the other  Transaction  Documents  and
without  causation  by any other  activity,  obligation,  condition or liability
pertaining to such Investor.  In addition to the indemnity contained herein, the
Company will reimburse  each Investor  Party for its reasonable  legal and other
expenses  (including the cost of any  investigation,  preparation  and travel in
connection  therewith)  incurred in connection  therewith,  as such expenses are
incurred.

         Section 5.8. Non-Public  Information.  The Company covenants and agrees
that, from and after the date of this Agreement, neither it nor any other Person
acting on its behalf will provide any Investor or its agents or counsel with any
information  that  the  Company   believes   constitutes   material   non-public
information,  unless prior thereto such  Investor  shall have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands  and confirms that each  Investor  shall be relying on the foregoing
representations in effecting transactions in securities of the Company.

         Section  5.9.  Net  Proceeds.  Except  as  otherwise  disclosed  in the
Disclosure  Materials,  the Company  shall use the net proceeds from the sale of
the Securities hereunder for working capital purposes,  to purchase fixed assets
used in the development or production of the Company's  business and not for the
satisfaction  of any portion of the Company's  debt (other than payment of trade
payables in the ordinary course of the Company's  business and prior practices),
to  redeem  any  Common  Stock or Common  Stock  Equivalents  or to  settle  any
outstanding litigation.

         Section 5.10. Regulatory  Compliance.  Prior to engaging in any line of
business  subject  to  regulation  by  any  federal,  state,  local  or  foreign
regulatory  authority or self-regulatory  organization,  the Company will obtain
any and all certificates, authorizations, permits or other approvals required by
such authority or organization for the Company to conduct such line of business.
The  Company  shall use best  efforts  to  comply  with all  statutes,  rules or
regulations of any  governmental  authority,  including  without  limitation all
foreign,  federal,  state  and  local  laws  relating  to  taxes,  environmental
protection,  occupational  health and  safety,  product  quality  and safety and
employment and labor matters.

         Section  5.11.  Board of  Directors  and  Shareholder  Consent.  By the
earlier  of (i) the time of filing of the Form 8-K  required  by the  signing of
this  Agreement  pursuant to Section 5.5, and (ii) 5:00 PM on the second Trading
Day following the execution of this Agreement,  the Company shall have delivered
(a)  the  consent  of the  board  of  directors  of the  Company  approving  the
execution,  delivery  and  performance  of the  Transaction  Documents  and  the
transactions  or  other  actions  contemplated  thereby,  and  recommending  the
approval  of such  transactions  or other  actions  by the  stockholders  of the
Company and (b) the  consents,  waivers or approvals of its disclosed in Section
3.1(e)  of the  Disclosure  Letter,  to the  Investors,  in form  and  substance
reasonably satisfactory to the Investors.

         Section 5.12.  Preparation of Reports and Filings. After receipt of the
shareholder  consents  described in Section  5.11,  the Company  shall  promptly
prepare  and file with the  Commission,  and  distribute  to the  holders of its
Common Stock, an Information  Statement relating to the issuance of the Series B
Preferred  Stock and the filing of the Amended  and  Restated  Certificate.  The
Investors  shall have the right to review and approve the form and  substance of
such  Information  Statement,  as well as any  report  on Form 8-K or any  other
filing or communication relating to the transactions contemplated hereby.

                                       27
<PAGE>

         5.13.  Reporting Matters.  The Company and each of the Investors agree,
and all of them specifically contemplate, that under current law and regulations
only cash  dividends  declared by the Board of Directors of the Company and paid
to  the  stockholders  of  the  Company  are  required  to be  reported  to  any
governmental  authority on IRS Form 1099-DIV or other  information  return,  and
that none of the  terms of the  Series B  Preferred  Stock as  expressed  in the
Amended  and  Restated  Certificate  and none of the  terms  of the  Transaction
Documents contemplate any transaction or event, taking into account all existing
and  contemplated  operative  facts,  that would  require the  reporting  of any
deemed,  constructive or actual  dividend to any of the Investors.  In the event
that the Company  determines,  based on advice  received  from its tax advisers,
that this  understanding is or becomes  incorrect as a result of changes in law,
regulations,  or operative facts, it will give reasonable  advance notice to the
Investors of any proposed  reporting  inconsistent with the preceding  sentence,
and will meet and confer with the Investors or their designated professional tax
advisers  in an effort to resolve  the issue in a mutually  satisfactory  manner
before transmitting the applicable  information reports to the Investors and any
governmental  authority,  including the IRS. The Company agrees with each of the
Investors that for tax, accounting and all other purposes the issue price of the
Series B  Preferred  Stock  will be the Per  Share  Purchase  Price and that the
Series B Preferred Stock shall be treated as stock and not as debt.

                                    ARTICLE 6

                         Conditions Precedent to Closing

         Section 6.1.  Conditions  Precedent to the Obligations of the Investors
to Purchase Securities. The obligation of each Investor to acquire Securities at
the Closing is subject to the  satisfaction  or waiver by such  Investor,  at or
before the Closing, of each of the following conditions:

         (a)      Representations   and  Warranties.   The  Company  shall  have
                  delivered  a  certificate  of the  Company's  Chief  Executive
                  Officer certifying that the  representations and warranties of
                  the Company  contained herein shall be true and correct in all
                  material  respects  as of the  date  when  made  and as of the
                  Closing as though made on and as of such date;

         (b)      Performance.  The Company shall have performed,  satisfied and
                  complied  in  all  material   respects  with  all   covenants,
                  agreements   and  conditions   required  by  the   Transaction
                  Documents to be performed, satisfied or complied with by it at
                  or prior to the Closing;

         (c)      No Injunction. No statute, rule, regulation,  executive order,
                  decree, ruling or injunction shall have been enacted, entered,
                  promulgated or endorsed by any court or governmental authority
                  of competent  jurisdiction  that prohibits the consummation of
                  any  of  the  transactions  contemplated  by  the  Transaction
                  Documents;

         (d)      No  Adverse  Changes.  Since  the  date of  execution  of this
                  Agreement,  no event or series of events  shall have  occurred
                  that  reasonably  could have or result in a  Material  Adverse
                  Effect;

                                       28
<PAGE>

         (e)      No  Suspensions  of  Trading  in Common  Stock.  From the date
                  hereof to the Closing Date,  trading in the Common Stock shall
                  not have been  suspended  by the  Commission  (except  for any
                  suspension  of trading of  limited  duration  agreed to by the
                  Company,  which  suspension  shall be terminated  prior to the
                  Closing),  and, at any time prior to the Closing Date, trading
                  in  securities  generally as reported by  Bloomberg  Financial
                  Markets shall not have been  suspended or limited,  or minimum
                  prices shall not have been  established  on  securities  whose
                  trades are reported by such service, or on any Trading Market,
                  nor shall a banking  moratorium  have been declared  either by
                  the  United  States or New York  State  authorities  nor shall
                  there have  occurred any material  outbreak or  escalation  of
                  hostilities  or other  national or  international  calamity of
                  such  magnitude  in its  effect  on, or any  material  adverse
                  change in, any financial  market  which,  in each case, in the
                  reasonable  judgment of each Investor,  makes it impracticable
                  or  inadvisable to purchase the Shares and the Warrants at the
                  Closing;

         (f)      Lock-Up Agreements.  Raza Khan and Vishal Garg (the "Locked-Up
                  Holders") shall have entered into Lock-Up  Agreements with the
                  Company  on terms  substantially  set  forth in the  following
                  paragraph.

                  The  Locked-Up  Holders  shall agree:  (i) for a period of one
                  year  following the Closing,  not to sell any shares of Common
                  Stock;  (ii)  during the period  from one year until two years
                  after the Closing,  not to sell more than 25% of the shares of
                  Common  Stock held by such person in any 180 day period and no
                  more  than  50%  in  total  during  such  period;   and  (iii)
                  thereafter,  no more than 25% of the  shares  of Common  Stock
                  held by such  person in any  ninety  (90) day  period.  In the
                  event that either of the  Locked-Up  Holders is  terminated by
                  the Company prior to the end of the lock-up  period  specified
                  in  (i)  above,   the   schedule  set  forth  above  shall  be
                  accelerated  by one year  and the  period  set  forth in (iii)
                  above  shall  not  apply.  In the  event  that  either  of the
                  Locked-Up  Holders are terminated by the Company after the end
                  of the lock-up period specified in (i) above, but prior to the
                  end of the lock-up  period  specified in (ii) and (iii) above,
                  all lock-up  obligations of such terminated  Locked-Up  Holder
                  shall  expire upon such  termination.  The  Locked-Up  Holders
                  shall  agree to sign any lockup  agreement  deemed  reasonably
                  necessary  by any  underwriter  of any offering by the Company
                  generating gross proceeds of at least $30 million.

         (g)      Consents, Waivers and Approvals. All of the consents, waivers
                  or approvals disclosed in Section 3.1(e) of the Disclosure
                  Letter shall have been obtained in form and substance
                  reasonably acceptable to the Investors, evidence of such
                  consents, waivers or approvals shall have been delivered to
                  the Investors, and such consents, waivers and approvals shall
                  remain in full force and effect and shall not have been
                  rescinded or modified in any respect;

         (h)      Filings with Regulatory Authorities. The Company shall have
                  made, in form and substance reasonably acceptable to the
                  Investors, any and all filings with, or disclosures to the
                  Commission or any other regulatory or self-regulatory
                  organization or exchange deemed reasonably necessary by the
                  Investors in connection with the Amended and Restated
                  Certificate, the filing thereof with the Delaware Secretary of
                  State, the Transaction Documents, or the transactions
                  contemplated therein, and each such organization or exchange
                  shall have accepted such filing or disclosure and given its
                  approval or clearance, as applicable;

         (i)      Notices. The Company shall have circulated all notices or
                  other communications to its shareholders required under the
                  Exchange Act, the Delaware General Corporation Law, or other
                  applicable law or regulation in connection with the consents,
                  waivers and approvals disclosed in Section 3.1(e) of the
                  Disclosure Letter, in form and substance reasonably acceptable
                  to the Investors, and all statutory or other waiting or notice
                  periods with respect to such notices or communications shall
                  have expired;

                                       29
<PAGE>

(j)               Due  Diligence.  The Investors  shall be reasonably  satisfied
                  with  the  results  of the  Investors'  financial,  legal  and
                  accounting due diligence;

         (k)      By-Laws. The By-Laws of the Company shall have been amended in
                  form and substance satisfactory to the Investors; and

         (l)      Company  Deliverables.  The Company  shall have  delivered the
                  Company Deliverables in accordance with Section 2.3(a).

         Section 6.2. Conditions  Precedent to the Obligations of the Company to
Sell Securities. The obligation of the Company to sell Securities at the Closing
is  subject  to the  satisfaction  or waiver by the  Company,  at or before  the
Closing, of each of the following conditions:

         (a)      Representations   and  Warranties.   The  representations  and
                  warranties of each Investor contained herein shall be true and
                  correct in all material  respects as of the date when made and
                  as of the Closing Date as though made on and as of such date;

         (b)      Performance. Each Investor shall have performed, satisfied and
                  complied  in  all  material   respects  with  all   covenants,
                  agreements   and  conditions   required  by  the   Transaction
                  Documents to be performed,  satisfied or complied with by such
                  Investor at or prior to the Closing;

         (c)      No Injunction. No statute, rule, regulation,  executive order,
                  decree, ruling or injunction shall have been enacted, entered,
                  promulgated or endorsed by any court or governmental authority
                  of competent  jurisdiction  that prohibits the consummation of
                  any  of  the  transactions  contemplated  by  the  Transaction
                  Documents; and

         (d)      Delivery  of  Investment  Amount.  Each  Investor  shall  have
                  delivered its  Investment  Amount in  accordance  with Section
                  2.3(b).

                                    ARTICLE 7

                                  Miscellaneous

         Section 7.1.  Fees and Expenses.  The Company shall pay all  reasonable
fees and expenses of its and the Investors' advisers,  counsel,  accountants and
other experts, if any, and all other expenses incurred by such party incident to
the negotiation,  preparation,  execution, delivery, performance and enforcement
of the  Transaction  Documents,  together with costs of collection.  The Company
shall pay all stamp and other  taxes and duties  levied in  connection  with the
sale of the Shares.

         Section 7.2. Entire Agreement. The Transaction Documents, together with
the  Exhibits  thereto,  contain the entire  understanding  of the parties  with
respect  to the  subject  matter  hereof  and  supersede  all prior  agreements,
understandings,  discussions and representations,  oral or written, with respect
to such  matters,  which the  parties  acknowledge  have been  merged  into such
documents and exhibits.

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<PAGE>

         Section 7.3.  Notices.  Any and all notices or other  communications or
deliveries  required or permitted to be provided  hereunder  shall be in writing
and  shall be deemed  given and  effective  on the  earliest  of (a) the date of
transmission,  if such  notice  or  communication  is  delivered  via  facsimile
(provided the sender  receives a  machine-generated  confirmation  of successful
transmission)  at the facsimile  number  specified in this Section prior to 6:30
p.m.  (New York City time) on a Trading  Day, (b) the next Trading Day after the
date of transmission, if such notice or communication is delivered via facsimile
at the facsimile number specified in this Section on a day that is not a Trading
Day or later than 6:30 p.m.  (New York City time) on any  Trading  Day,  (c) the
Trading Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service,  or (d) upon actual receipt by the party to whom such
notice is required to be given. The address for such notices and  communications
shall be as follows:

If to the Company:         MRU Holdings, Inc.
                           Attn.:  Chairman
                           1114 Avenue of the Americas
                           30th Floor
                           New York, NY 10036

                           Telephone:  (212) 202-3746
                           Facsimile:  (212) 836-4195

With a copy to:            McGuireWoods LLP
                           Attn.:  Louis W. Zehil, Esq.
                           1345 Avenue of the Americas, 7th Floor
                           New York, NY 10105

                           Telephone:  (212) 548-2138
                           Facsimile:  (212) 548-2175

If to an Investor:         To the address set forth under such  Investor's  name
                           on such Investor's Counterpart Signature Page hereto;

or such other  address as may be designated  in writing  hereafter,  in the same
manner, by such Person.

         Section 7.4. Amendments; Waivers; No Additional Consideration. Prior to
the Closing,  this Agreement may only be amended by a written  instrument signed
by each  party to this  Agreement.  After  the  Closing,  no  provision  of this
Agreement may be waived or amended except in a written  instrument signed by the
Company and by  Investors  holding at least  sixty-six  and  two-thirds  percent
(66-(2)/3%)  of the then  outstanding  Shares.  No  waiver of any  default  with
respect to any provision,  condition or  requirement of this Agreement  shall be
deemed to be a  continuing  waiver in the  future or a waiver of any  subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise  any right  hereunder in
any manner  impair the  exercise of any such right.  No  consideration  shall be
offered or paid to any Investor to amend or consent to a waiver or  modification
of any provision of any Transaction  Document unless the same  consideration  is
also offered to all Investors who then hold Shares.

         Section 7.5.  Termination.  This  Agreement may be terminated  prior to
Closing:

         (a)      by written agreement of the Investors and the Company;

                                       31
<PAGE>

         (b)      by the Company or the Investors upon written notice to the
                  other, if the Closing shall not have taken place by 6:30 p.m.
                  Eastern time on the Outside Date; provided, that the right to
                  terminate this Agreement under this Section 7.5(b) shall not
                  be available to any Person whose failure to comply with its
                  obligations under this Agreement has been the cause of or
                  resulted in the failure of the Closing to occur on or before
                  such time;

         (c)      by the Investors if any of the conditions  precedent contained
                  in Section 6.1 have not been  satisfied  or waived on or prior
                  to the Outside Date.

         In the event of a  termination  pursuant to this  Section,  the Company
shall  promptly  notify all  non-terminating  Investors.  Upon a termination  in
accordance  with Section  7.5(a),  the Company and the  Investors  shall have no
further obligation or liability  (including as arising from such termination) to
the other and no Investor  will have any liability to any other  Investor  under
the  Transaction  Documents  as  a  result  therefrom.  Upon  a  termination  in
accordance  with Section  7.5(b) or 7.5(c) (other than a termination  due to the
failure of the Company to satisfy the condition set forth in Sections  6.1(j) or
6.1(k)),  the  Company  shall  promptly  (but in no event  later  than the third
Trading Day after the Investors give written  notice of such  termination to the
Company) pay to the Investors the Termination  Payment (determined in accordance
with the following  paragraph).  Upon a termination  in accordance  with Section
7.5(b) or 7.5(c) due to the failure of the Company to satisfy the  condition set
forth in Section  6.1(j) or 6.1(k),  the sole  liability of the Company shall be
for the  reasonable  fees and  expenses of the  Investors as provided in Section
7.1.

         As used in this Agreement,  "Termination Payment" shall mean an amount,
determined  as of the date on which  the  Investors  have  given  notice  to the
Company of the Investors'  termination of this  Agreement,  equal to the greater
of: (i) $2,500,000 or (ii) the aggregate of (x) all reasonable fees and expenses
of the Investors  (determined in accordance with Section 7.1) plus (y) an amount
equal to (A) 1.5 times the  difference  (if  positive) in the closing price of a
share of Common Stock of the Company on the date of such termination compared to
the closing  price of a share of Common Stock of the Company on the date of this
Agreement, multiplied by (B) the number of shares of Common Stock into which the
Shares and the Warrant  Shares would have  converted had such Shares and Warrant
Shares been issued on the termination  date. The parties hereto  acknowledge and
agree that, in connection  with the  negotiation  and signing of this Agreement,
the  Investors  have  spent a  significant  amount of time and  effort  and have
incurred significant costs and expenses in reviewing and analyzing the business,
assets and  operations  of the  Company  and that the  Termination  Payment is a
reasonable  estimate  of the  liquidated  damages  that would be suffered by the
Investors in the event of such termination and is not intended to be a penalty.

         Section  7.6.  Construction.  The headings  herein are for  convenience
only,  do not  constitute  a part of this  Agreement  and shall not be deemed to
limit  or  affect  any of the  provisions  hereof.  The  language  used  in this
Agreement  will be deemed to be the  language  chosen by the  parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.  This  Agreement  shall be  construed  as if  drafted  jointly by the
parties,  and no  presumption  or  burden  of  proof  shall  arise  favoring  or
disfavoring  any party by virtue of the  authorship  of any  provisions  of this
Agreement or any of the Transaction Documents.

         Section 7.7.  Successors and Assigns.  This Agreement  shall be binding
upon and inure to the benefit of the parties and their  successors and permitted
assigns.  The Company may not assign this Agreement or any rights or obligations
hereunder  without the prior written consent of the Investors.  Any Investor may
assign any or all of its rights under this  Agreement to any Person to whom such
Investor assigns or transfers any Securities, provided such transferee agrees in
writing  to be  bound,  with  respect  to  the  transferred  Securities,  by the
provisions hereof that apply to the "Investors."

                                       32
<PAGE>

         Section 7.8. No Third-Party  Beneficiaries.  This Agreement is intended
for the  benefit of the  parties  hereto  and their  respective  successors  and
permitted assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other  Person,  except as otherwise  set forth in Article 4. or
Section 5.7 (with respect to rights to indemnification and contribution).

         Section 7.9. Governing Law. All questions  concerning the construction,
validity,  enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance  with the internal laws of the State of
New York,  without  regard to the  principles of conflicts of law thereof.  Each
party agrees that all Proceedings  concerning the  interpretations,  enforcement
and of the transactions contemplated by this Agreement and any other Transaction
Documents (whether brought against a party hereto or its respective  Affiliates,
employees or agents) shall be commenced exclusively in the New York Courts. Each
party hereto hereby irrevocably submits to the exclusive jurisdiction of the New
York Courts for the  adjudication  of any  dispute  hereunder  or in  connection
herewith  or with  any  transaction  contemplated  hereby  or  discussed  herein
(including  with  respect  to  the  enforcement  of the  any of the  Transaction
Documents),  and  hereby  irrevocably  waives,  and  agrees not to assert in any
Proceeding,  any claim that it is not personally  subject to the jurisdiction of
any such New York  Court,  or that  such  Proceeding  has been  commenced  in an
improper or  inconvenient  forum.  Each party hereto hereby  irrevocably  waives
personal  service of process and  consents to process  being  served in any such
Proceeding  by  mailing a copy  thereof  via  registered  or  certified  mail or
overnight  delivery  (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient  service of process and notice  thereof.  Nothing
contained  herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably  waives, to
the fullest  extent  permitted by applicable  law, any and all right to trial by
jury in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence a Proceeding to
enforce any provisions of a Transaction  Document,  then the prevailing party in
such  Proceeding  shall be  reimbursed  by the other  party  for its  reasonable
attorneys'  fees and other costs and expenses  incurred with the  investigation,
preparation and prosecution of such Proceeding.

         Section 7.10. Survival. The representations, warranties, agreements and
covenants  contained  herein  shall  survive the Closing and the delivery of the
Securities.

         Section 7.11. Execution.  This Agreement may be executed in two or more
counterparts,  all of which when taken  together shall be considered one and the
same agreement and shall become effective when  counterparts have been signed by
each party and  delivered  to the other  party,  it being  understood  that both
parties need not sign the same  counterpart.  In the event that any signature is
delivered by facsimile  transmission,  such  signature  shall create a valid and
binding  obligation of the party executing (or on whose behalf such signature is
executed)  with the same force and effect as if such  facsimile  signature  page
were an original thereof.

         Section 7.12. Severability.  If any provision of this Agreement is held
to be invalid or unenforceable in any respect,  the validity and  enforceability
of the remaining  terms and provisions of this Agreement shall not in any way be
affected or impaired  thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor,  and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

         Section 7.13. Rescission and Withdrawal Right. Notwithstanding anything
to the contrary  contained in (and without  limiting any similar  provisions of)
the Transaction  Documents,  whenever any Investor exercises a right,  election,
demand or option  under a  Transaction  Document and the Company does not timely
perform its related  obligations within the periods therein provided,  then such
Investor may rescind or withdraw,  in its sole discretion from time to time upon
written notice to the Company, any relevant notice,  demand or election in whole
or in part without prejudice to its future actions and rights.

                                       33
<PAGE>

         Section  7.14.  Replacement  of  Securities.   If  any  certificate  or
instrument  evidencing any Securities is mutilated,  lost,  stolen or destroyed,
the Company shall issue or cause to be issued in exchange and  substitution  for
and upon cancellation  thereof, or in lieu of and substitution  therefor,  a new
certificate  or  instrument,  but  only  upon  receipt  of  evidence  reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable  indemnity,  if requested.  The applicants  for a new  certificate or
instrument under such  circumstances  shall also pay any reasonable  third-party
costs  associated  with  the  issuance  of  such  replacement  Securities.  If a
replacement certificate or instrument evidencing any Securities is requested due
to a  mutilation  thereof,  the Company may require  delivery of such  mutilated
certificate  or  instrument  as a  condition  precedent  to  any  issuance  of a
replacement.

         Section 7.15.  Remedies.  In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, each of
the Investors and the Company will be entitled to specific performance under the
Transaction  Documents.  The  parties  agree that  monetary  damages  may not be
adequate  compensation  for  any  loss  incurred  by  reason  of any  breach  of
obligations  described in the  foregoing  sentence and hereby agrees to waive in
any action for specific  performance  of any such  obligation the defense that a
remedy at law would be adequate.

         Section 7.16. Payment Set Aside. To the extent that the Company makes a
payment or payments to any Investor  pursuant to any Transaction  Document or an
Investor  enforces  or  exercises  its rights  thereunder,  and such  payment or
payments or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated,  declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company,  a trustee,  receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable  cause of action),  then to the extent of any such  restoration
the  obligation  or part thereof  originally  intended to be satisfied  shall be
revived and  continued  in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

         Section 7.17.  Independent Nature of Investors' Obligations and Rights.
The obligations of each Investor under any Transaction  Document are several and
not joint with the obligations of any other  Investor,  and no Investor shall be
responsible  in any way for the  performance  of the  obligations  of any  other
Investor  under any  Transaction  Document.  The  decision  of each  Investor to
purchase Securities pursuant to the Transaction  Documents has been made by such
Investor independently of any other Investor. Nothing contained herein or in any
Transaction  Document,  and no action  taken by any Investor  pursuant  thereto,
shall be deemed to constitute the Investors as a partnership,  an association, a
joint  venture  or any other kind of entity,  or create a  presumption  that the
Investors  are in any way acting in  concert or as a group with  respect to such
obligations or the transactions  contemplated by the Transaction Documents. Each
Investor  acknowledges  that no other  Investor  has  acted  as  agent  for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such  Investor  in  connection  with  monitoring  its
investment  in the  Securities  or enforcing  its rights  under the  Transaction
Documents.  Each Investor shall be entitled to independently protect and enforce
its  rights,  including  without  limitation  the  rights  arising  out of  this
Agreement  or  out of the  other  Transaction  Documents,  and it  shall  not be
necessary  for any other  Investor  to be joined as an  additional  party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Transaction Documents for the purpose of closing
a  transaction  with  multiple  Investors  and not  because it was  required  or
requested to do so by any Investor.

                                       34
<PAGE>

         Section 7.18. Limitation of Liability.  Notwithstanding anything herein
to the contrary,  the Company  acknowledges  and agrees that the liability of an
Investor arising directly or indirectly,  under any Transaction  Document of any
and every nature  whatsoever shall be satisfied solely out of the assets of such
Investor,  and that no trustee,  officer,  other investment vehicle or any other
Affiliate of such Investor or any investor,  shareholder  or holder of shares of
beneficial  interest  of such a  Investor  shall be  personally  liable  for any
liabilities of such Investor.

            [The remainder of this page is left intentionally blank.
                            Signature pages follow.]





                                       35
<PAGE>

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

                                      MRU HOLDINGS, INC.



                                      By:  ___________________________
                                      Name:

                                      Title:

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                COUNTERPART SIGNATURE PAGES FOR INVESTORS FOLLOW]





<PAGE>

     Investor's Counterpart Signature Page to Securities Purchase Agreement

         The  undersigned  hereby agrees to become a party as an Investor to the
Securities  Purchase Agreement among MRU Holdings,  Inc. (the "Company") and the
Investors  named  therein  (the  "Purchase  Agreement"),  agreeing to invest the
Investment Amount (as such term is defined in the Purchase  Agreement) set forth
below. The undersigned  hereby authorizes the Company to attach this Counterpart
Signature Page to the Purchase Agreement.

                                                NAME OF INVESTOR

                                                ________________________________

Date: _____________                             By:_____________________________
                                                              Signature

                                                Name:___________________________

                                                Title:__________________________

                                                Investment Amount:______________

                                                Tax ID No.:_____________________


ADDRESS FOR NOTICE                              DELIVERY INSTRUCTIONS
                                                (if different from above)

Street:_______________________________

                                                c/o:____________________________
City:_________________________________

                                                Street:_________________________
State/Zip:____________________________

                                                City:___________________________
Attn.:________________________________

                                                State/Zip:______________________
Tel.:_________________________________

                                                Attn.:__________________________
Fax:__________________________________

                                                Tel.:___________________________

                                                Fax:____________________________


<PAGE>

                                    Exhibit A

                                 Form of Warrant

<PAGE>

                                    Exhibit B

                Amended and Restated Certificate of Incorporation



                                       39