EXHIBIT 10.1

                          SECURITIES PURCHASE AGREEMENT

            THIS SECURITIES PURCHASE AGREEMENT, dated as of August 1, 2005 (this
"Agreement"),  is entered  into by and between  SUPERCLICK,  INC.,  a Washington
corporation with headquarters  located at 4275 Executive  Square,  Suite 215, La
Jolla,  CA 92037 (the  "Company"),  and each  individual  or entity  named on an
executed  counterpart  of the  signature  page hereto  (each such  signatory  is
referred to as a "Buyer")  (each  agreement with a Buyer being deemed a separate
and independent  agreement between the Company and such Buyer,  except that each
Buyer acknowledges and consents to the rights granted to each other Buyer (each,
an "Other  Buyer")  under such  agreement  and the  Transaction  Agreements,  as
defined below, referred to therein).

                              W I T N E S S E T H:

            WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration for offers
and  sales to  accredited  investors  afforded,  inter  alia,  by Rule 506 under
Regulation D ("Regulation D") as promulgated by the United States Securities and
Exchange  Commission  (the "SEC") under the  Securities  Act of 1933, as amended
(the "1933 Act"), and/or Section 4(2) of the 1933 Act; and

            WHEREAS,  the Buyer  wishes to lend to the  Company,  subject to and
upon the terms and conditions of this Agreement and acceptance of this Agreement
by the Company,  the Purchase Price (as defined  below),  the repayment of which
will be represented by Senior Secured Convertible Debentures Series 05-01 of the
Company  (the  "Secured  Convertible   Debentures")  and  Unsecured  Convertible
Debentures Series 06-01 of the Company (the "Unsecured Convertible  Debentures,"
and together with the Convertible  Debentures,  collectively,  the  "Convertible
Debentures"  or  the  "Debentures"),   which  Convertible   Debentures  will  be
convertible  into shares of Common  Stock,  $0.0006 par value per share,  of the
Company (the "Common  Stock"),  upon the terms and subject to the  conditions of
such  Convertible  Debentures,  together  with the Warrants  (as defined  below)
exercisable for the purchase of shares of Common Stock;

            NOW  THEREFORE,  in  consideration  of the  premises  and the mutual
covenants  contained  herein  and other  good and  valuable  consideration,  the
receipt and sufficiency of which are hereby  acknowledged,  the parties agree as
follows:

            1. AGREEMENT TO PURCHASE; PURCHASE PRICE.

            a. Purchase.

            (i) Subject to the terms and  conditions  of this  Agreement and the
other Transaction Agreements, the undersigned Buyer hereby agrees to loan to the
Company the  principal  amount set forth on the Buyer's  signature  page of this
Agreement (the "Purchase  Price"),  out of the aggregate  amount being loaned by
all Buyers of US $2,250,000 (the "Aggregate Purchase Price").  The obligation to
repay the loan from the Buyer shall be  evidenced by the  Company's  issuance of
one or more Secured Convertible Debentures and one or more Unsecured Convertible
Debentures  to the Buyer in such  principal  amounts  set  forth on the  Buyer's
signature  page of this  Agreement.  Each  Debenture  (i)  shall  provide  for a
Conversion  Price (as defined  below),  which price may be adjusted from time to
time as provided in the Debenture,  and (ii) shall have the terms and conditions
of, and be  substantially  in the form attached hereto as, Annex I. Each Secured
Convertible  Debenture  shall be secured  pursuant to the terms of the  Security
Interest  Agreement  substantially  in the form annexed  hereto as Annex IX (the
"Security Interest Agreement").

            (ii)  The  loan to be  made by the  Buyer  and the  issuance  of the
Debentures and the Warrants  (collectively,  the "Purchased  Securities") to the
Buyer are sometimes  referred to herein and in the other Transaction  Agreements
as the purchase and sale of the Debentures and the Warrants.

            b. Certain Definitions.  As used herein, each of the following terms
has the meaning set forth below, unless the context otherwise requires:

<PAGE>

            "Additional  Closing  Date"  means  the date of any  closing  of the
purchase and sale of the Purchased Securities  subsequent to the Initial Closing
Date.

            "Affiliate"  means, with respect to a specific Person referred to in
the relevant provision, another Person who or which controls or is controlled by
or is under common control with such specified Person.

            "Buyer  Control  Person"  means each  director,  executive  officer,
promoter,  and such  other  Persons  as may be  deemed in  control  of the Buyer
pursuant  to Rule  405  under  the 1933  Act or  Section  20 of the 1934 Act (as
defined below).

            "Certificates" means the (x) the original ink-signed  Debentures and
(y) the  original  ink-signed  Warrants,  each duly  executed by the Company and
issued in the name of the Buyer on a Closing Date.

            "Closing  Date"  means the  Initial  Closing  Date or an  Additional
Closing Date, as applicable.

            "Closing Price" means the 4:00 P.M.  closing bid price of a share of
Common Stock on the  Principal  Trading  Market on the relevant  Trading Day, as
reported by the Reporting Service.

            "Company  Control  Person" means each director,  executive  officer,
promoter,  and such other  Persons  as may be deemed in  control of the  Company
pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act.

            "Company  Principal's  Agreement"  has the  meaning  ascribed  to in
Section 4(h).

            "Company's SEC Documents"  means the Company's  filings on the SEC's
EDGAR  system  which are  listed  on Annex VII  annexed  hereto,  to the  extent
available on EDGAR or otherwise provided to the Buyer as indicated on said Annex
VII.

            "Conversion   Certificates"  means  certificates   representing  the
Conversion Shares.

            "Conversion  Date"  means  the date a  Holder  submits  a Notice  of
Conversion, as provided in the Debentures.

            "Conversion  Price" means the Pre-Maturity  Date Conversion Price or
the Post-Maturity Date Conversion Price, as applicable.

            "Conversion  Shares" means the shares of Common Stock  issuable upon
conversion  of  the  Debentures  and/or  in  payment  of  accrued  interest,  as
contemplated in the Debentures.

            "Converting  Holder" means the Holder of Debentures who or which has
submitted a Notice of Conversion (as contemplated by the Debentures).

            "Disclosure  Annex"  means  Annex  VI to this  Agreement;  provided,
however,  that the Disclosure Annex shall be arranged in sections  corresponding
to the  identified  Sections of this  Agreement,  but the disclosure in any such
section of the Disclosure Annex shall qualify other provisions in this Agreement
to the extent that it would be readily  apparent  to an  informed  reader from a
reading of such  section of the  Disclosure  Annex that it is also  relevant  to
other provisions of this Agreement.

            "Effective  Percentage" means the Pre-Maturity  Effective Percentage
and/or the Post-Maturity Effective Percentage, as applicable.

            "Effective Date" means the date the Registration  Statement covering
the Registrable Securities is declared effective by the SEC.

                                       2
<PAGE>

            "Escrow Agent" means the escrow agent identified in the Joint Escrow
Instructions attached hereto as Annex II (the "Joint Escrow Instructions").

            "Escrow  Funds"  means the  Purchase  Price  delivered to the Escrow
Agent as contemplated by Sections 1(c) and (d) hereof.

            "Escrow  Property"  means  the  Escrow  Funds  and the  Certificates
delivered to the Escrow Agent as contemplated by Section 1(c) hereof.

            "Exercise  Price" means the per share exercise price of the relevant
Warrant.

            "Holder"  means the Person  holding the relevant  Securities  at the
relevant time.

            "Initial Closing Date" means August 1, 2005, the initial date of the
closing of the purchase and sale of the Purchased Securities.

            "Issue Date  Conversion  Share" means the number of shares of Common
Stock  equal  to (i) the  Purchase  Price  paid  by the  Buyer,  divided  by the
Conversion Price on a Closing Date.

            "Last Audited Date" means October 31, 2004.

            "Majority  in Interest  of the  Holders"  means one or more  Holders
whose respective outstanding principal amounts of the Debentures held by each of
them, as of the relevant  date,  aggregate  more than fifty percent (50%) of the
aggregate  outstanding  principal amounts of the Unconverted  Debentures held by
the Buyer and all Other Buyers on that date.

            "Material  Adverse  Effect" means an event or combination of events,
which  individually  or in the  aggregate,  would  reasonably be expected to (x)
adversely  affect the  legality,  validity or  enforceability  of the  Purchased
Securities  or any of the  Transaction  Agreements,  (y)  have  or  result  in a
material  adverse  effect on the results of  operations,  assets,  prospects  or
financial  condition of the Company and its  subsidiaries,  taken as a whole, or
(z) adversely  impair the  Company's  ability to perform fully on a timely basis
its  material  obligations  under  any  of  the  Transaction  Agreements  or the
transactions contemplated thereby.

            "Maturity  Date"  shall  have  the  meaning  ascribed  to it in  the
Convertible Debentures.

            "New Common  Stock" means  shares of Common Stock and/or  securities
convertible into, and/or other rights  exercisable for, Common Stock,  which are
offered or sold in a New Transaction. "New Transaction Investor" means the third
party  investor,   purchaser  or  lender   (howsoever   denominated)  in  a  New
Transaction.

            "New  Transaction"  means,  unless  consented  to by a  Majority  in
Interest of the Buyers (which  consent is in the sole  discretion of the Holders
and may be withheld for any reason or for no reason whatsoever), the sale of New
Common Stock by or on behalf of the Company to a New  Transaction  Investor in a
transaction  offered or consummated  after the date hereof;  provided,  however,
that it is specifically  understood that the term "New  Transaction"  (1) unless
consented to otherwise by a Majority in Interest of the Buyers (which consent is
in the sole  discretion of the Holders and may be withheld for any reason or for
no reason whatsoever),  includes,  but is not limited to, a sale of Common Stock
or of a  security  convertible  into  Common  Stock or an equity or credit  line
transaction,  but (2) does not include (a) the sale of the Purchased  Securities
to the Buyer and the Other  Buyers,  (b) the  issuance of Common  Stock upon the
exercise  or  conversion  of  options,   warrants  or   convertible   securities
outstanding on the date hereof, or in respect of any other financing  agreements
as in effect on the date hereof and identified in the Disclosure Annex (provided
the same is not amended after the date hereof) or in the Company's SEC Documents
(provided the same is not amended  after the date  hereof),  (c) the issuance of
Common Stock  pursuant to the Superclick  2004 Incentive  Stock Option Plan (the
"ESOP")  (provided  the same is not  amended  after  the date  hereof),  (d) the
issuance of up to 1,500,000  shares of Common  Stock  pursuant to a duly adopted
stock  incentive or stock option plan (whether such plan or plans,  individually
or in the  aggregate,  contemplate  issuances of shares to employees,  officers,
directors,  non-employee directors or consultants),  but only to the extent that
such options are incentive  stock options and have an exercise price of not less
than $0.50 per share,  or (e) the  issuance of Common Stock upon the exercise of
any options or warrants  referred to in any one of the preceding clauses of this
paragraph.

                                       3
<PAGE>

            "Person"  means any living  person or any  entity,  such as, but not
necessarily limited to, a corporation, partnership, limited liability company or
trust.

            "Pre-Maturity  Date  Conversion  Price"  means,  with respect to the
Pre-Maturity Date Period,  (i) the average Closing Price for the forty five (45)
Trading Days ending on the Trading Day  immediately  before the Conversion  Date
(as selected by the Holder),  multiplied  by (ii) a percentage  equal to (x) one
hundred  percent  (100%),  less  (y)  the  Pre-Maturity   Effective   Percentage
(provided,  however,  that such amount shall be recomputed  for all  Unconverted
Debentures if the Pre-Maturity  Effective Percentage is adjusted as contemplated
by this Agreement or the Debentures);  provided,  however, that the Pre-Maturity
Date Conversion  Price shall not be less than Thirty Cents ($0.30) per share (as
that amount may  subsequently  be adjusted  as  provided  in the  Debentures  or
herein);  provided,  further, that, with respect to each such amount referred to
in this  definition,  as that amount may subsequently be adjusted as provided in
the Debentures or herein. Notwithstanding the foregoing, if the Closing Price is
less than $0.50 per share on a  Conversion  Date  during the  Pre-Maturity  Date
Period,  then during the calendar month in which such  Conversion  Date falls, a
Converting Holder may not convert an aggregate amount  (including  principal and
interest)  in  excess  of  $175,000;   provided,  however,  that  the  foregoing
limitation  shall not be  applicable in the event that the Closing Price on such
Conversion Date is equal to or exceeds 150% of the average Closing Price for the
ten  (10)  Trading  Days  ending  on the  Trading  Day  immediately  before  the
Conversion Date.

            "Pre-Maturity  Date Period" means the period  commencing on the date
of this Agreement and ending on the Maturity Date.

            "Pre-Maturity  Effective Percentage" means, initially thirty percent
(30%), which percentage is subject to increase as provided herein.

            "Post-Maturity  Date  Conversion  Price" means,  with respect to the
Post-Maturity Date Period, (i) the average Closing Price for the forty five (45)
Trading Days ending on the Trading Day  immediately  before the Conversion  Date
(as selected by the Holder),  multiplied  by (ii) a percentage  equal to (x) one
hundred  percent  (100%),  less  (y)  the  Post-Maturity   Effective  Percentage
(provided,  however,  that such amount shall be recomputed  for all  Unconverted
Debentures if the Post-Maturity Effective Percentage is adjusted as contemplated
by this Agreement or the Debentures);  provided,  however, that, with respect to
each such amount referred to in this definition, as that amount may subsequently
be adjusted as provided in the Debentures or herein.

            "Post-Maturity Date Period" means the period commencing  immediately
following the Maturity Date.

            "Post-Maturity Effective Percentage" means, initially twenty percent
(20%),, which percentage is subject to increase as provided herein.

            "Placement  Agent" means  Ascendiant  Securities,  LLC, a registered
broker-dealer.

            "Principal Trading Market" means the Over the Counter Bulletin Board
or such other  market on which the  Common  Stock is  principally  traded at the
relevant time.

            "Registrable  Securities"  shall have the meaning  ascribed to it in
the Registration Rights Agreement.

                                       4
<PAGE>

            "Registration   Rights  Agreement"  means  the  Registration  Rights
Agreement  in the form  annexed  hereto as Annex IV as executed by the Buyer and
the Company simultaneously with the execution of this Agreement.

            "Registration  Statement" means an effective  registration statement
covering the Registrable Securities.

            "Reporting  Service"  means  Bloomberg  LP or if that service is not
then reporting the relevant information regarding the Common Stock, a comparable
reporting service of national  reputation  selected by a Majority in Interest of
the Holders and reasonably acceptable to the Company.

            "SBA Compliance Documents" has the meaning ascribed to it in Section
4(p) hereof.

            "Securities" means the Purchased Securities and the Shares.

            "Shares" means the shares of Common Stock representing any or all of
the Conversion  Shares, the Warrant Shares and the Payment Shares (as defined in
the Registration Rights Agreement).

            "State of Incorporation" means Washington State.

            "Strategic  Partner" means a third party,  whether or not affiliated
with the Company as of the date hereof, which party (i) is engaged in a business
which is the  business in which the Company is engaged or a similar,  related or
complementary business, and (ii) subsequently purchases equity securities of the
Company (or securities convertible into equity securities of the Company), where
such purchase is accompanied  or followed by one or more of the  following:  the
licensing by the Company of all or any portion of its  technology  to such third
party, the licensing by such third party of all or any portion of its technology
to the  Company,  or  any  other  coordination  of all  or a  portion  of  their
respective  business  activities  or  operations  by the  Company and such third
party.

            "Trading  Day"  means any day  during  which the  Principal  Trading
Market shall be open for business.

            "Transaction Agreements" means this Agreement,  the Debentures,  the
Joint Escrow  Instructions,  the Registration  Rights Agreement,  the Disclosure
Annex,  the Security  Interest  Agreement,  and the  Warrants,  and includes all
ancillary documents referred to in those agreements.

            "Transfer  Agent"  means,  at any time,  the transfer  agent for the
Company's Common Stock.

            "Unconverted  Debenture"  means, as of any given date, the principal
amount of any then outstanding Debenture.

            "Warrants"  means (i) the  warrants  referred to in Section 4 hereof
and (ii) the Additional Warrants (as defined below), if any.

            "Warrant  Shares"  means the shares of Common  Stock  issuable  upon
exercise of the Warrants.

            c. Form of Payment; Delivery of Certificates.

            (i) The Buyer shall pay the Purchase Price by delivering immediately
available  good funds in United States Dollars to the Escrow Agent no later than
the day prior to the Closing Date.

            (ii) Within one (1) Trading Day after the Escrow Agent  notifies the
Company that the Escrow Agent has on deposit  cleared funds from or on behalf of
one or more Buyers an aggregate amount equal to the Aggregate Purchase Price and
the Company shall have accepted the Buyer's  subscription  hereunder,  but in no
event later than the Closing Date, the Company will deliver the  Certificates to
the Escrow Agent. Such  Certificates  shall be held in escrow as provided in the
Joint Escrow Instructions.

                                       5
<PAGE>

            (iii) By signing this Agreement,  each of the Buyer and the Company,
subject  to  acceptance  by the  Escrow  Agent,  agrees  to all of the terms and
conditions of, and becomes a party to, the Joint Escrow Instructions, all of the
provisions of which are incorporated herein by this reference as if set forth in
full.

            d. Method of Payment.  Payment  into  escrow of the  Purchase  Price
shall be made by wire transfer of funds to:

                  Bank One
                  Chicago, Illinois

                  ABA# 071000013
                  Acct. #:  18108830
                  Acct. Name: Wildman, Harrold, Allen & Dixon Trust Acct.
                  Reference: Superclick 05 Transaction/[Name of Buyer]

            e.  Additional  Closings.  Notwithstanding  any  provision  in  this
Agreement  or any other  Transaction  Documents  to the  contrary,  the  Company
acknowledges  and agrees that: (i) the closing on the loan to the Company of the
Aggregate Purchase Price by all Buyers and the related purchase of the Purchased
Securities  by  the  Buyers  and  all  other  transactions  contemplated  by the
Transaction Documents, shall occur on the Initial Closing Date, plus one or more
Additional  Closing Dates; and (ii) on each Additional Closing Date, the Company
shall have the irrevocable obligation to enter into the Transaction Documents in
the same form as that entered into by the Buyer on the Initial Closing Date, and
to otherwise  issue the Purchased  Securities to such  additional  Buyers on the
same terms and conditions.

            2. BUYER  REPRESENTATIONS  AND  WARRANTIES;  ACCESS TO  INFORMATION;
INDEPENDENT INVESTIGATION.

            The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:

            a. Without limiting Buyer's right to sell the Securities pursuant to
an effective  registration  statement or otherwise in  compliance  with the 1933
Act, the Buyer is purchasing  the  Securities for its own account for investment
only and not with a view towards the public sale or distribution thereof and not
with a view to or for sale in connection with any distribution thereof.

            b. The Buyer is (i) an "accredited investor" as that term is defined
in Rule 501 of the  General  Rules and  Regulations  under  the 1933  Act,  (ii)
experienced  in making  investments  of the kind described in this Agreement and
the other  Transaction  Agreements,  (iii) able,  by reason of the  business and
financial  experience of its officers (if an entity) and  professional  advisors
(who are not affiliated  with or compensated in any way by the Company or any of
its  Affiliates or selling  agents),  to protect its own interests in connection
with the  transactions  described in this  Agreement  and the other  Transaction
Agreements,  and to  evaluate  the  merits  and  risks of an  investment  in the
Securities,  and (iv) able to afford the entire  loss of its  investment  in the
Securities.

            c. All  subsequent  offers and sales of the  Securities by the Buyer
shall be made pursuant to registration of the relevant Securities under the 1933
Act or pursuant to an exemption from such registration.

            d. The Buyer  understands  that the Securities are being offered and
sold to it in reliance on specific exemptions from the registration requirements
of the 1933 Act and state  securities  laws and that the Company is relying upon
the truth and accuracy of, and the Buyer's compliance with, the representations,
warranties,  agreements,  acknowledgments  and  understandings  of the Buyer set
forth herein in order to determine the  availability  of such exemptions and the
eligibility of the Buyer to acquire the Securities.

                                       6
<PAGE>

            e. The Buyer and its advisors,  if any, have been  furnished with or
have been given access to all materials  relating to the business,  finances and
operations  of the Company and  materials  relating to the offer and sale of the
Purchased Securities which have been requested by the Buyer, including those set
forth in any annex  attached  hereto.  The Buyer and its advisors,  if any, have
been afforded the opportunity to ask questions of the Company and its management
and have  received  complete  and  satisfactory  answers to any such  inquiries.
Without  limiting the  generality of the  foregoing,  the Buyer has also had the
opportunity to obtain and to review the Company's SEC Documents.

            f. The  Buyer  understands  that its  investment  in the  Securities
involves a high degree of risk.

            g. In connection with its purchase of the Securities,  the Buyer has
not relied on any  statement or  representation  by the Company or the Placement
Agent or any of their  respective  officers,  directors  and employees or any of
their  respective  attorneys  or  agents  or  the  Placement  Agent,  except  as
specifically set forth herein.  The Placement Agent is a third party beneficiary
of this provision.

            h. The Buyer  understands  that no United  States  federal  or state
agency or any other government or governmental  agency has passed on or made any
recommendation or endorsement of the Securities.

            i. This Agreement and the other Transaction  Agreements to which the
Buyer is a party, and the transactions  contemplated thereby, have been duly and
validly authorized,  executed and delivered on behalf of the Buyer and are valid
and  binding  agreements  of the Buyer  enforceable  in  accordance  with  their
respective terms,  subject as to enforceability to general  principles of equity
and to bankruptcy,  insolvency,  moratorium and other similar laws affecting the
enforcement of creditors' rights generally.

            3. COMPANY  REPRESENTATIONS.  The Company represents and warrants to
the Buyer as of the date  hereof and as of each  Closing  Date  that,  except as
otherwise provided in the Disclosure Annex or in the Company's SEC Documents:

            a.  Rights  of  Others  Affecting  the  Transactions.  There  are no
preemptive  rights of any  shareholder  of the Company to acquire the  Purchased
Securities or the Shares.  No other party has a currently  exercisable  right of
first  refusal  which  would  be  applicable  to any or all of the  transactions
contemplated by the Transaction Agreements.

            b. Status.  The Company is a  corporation  duly  organized,  validly
existing and in good standing under the laws of the State of  Incorporation  and
has the  requisite  corporate  power to own its  properties  and to carry on its
business  as now being  conducted.  The Company is duly  qualified  as a foreign
corporation  to do business and is in good standing in each  jurisdiction  where
the  nature  of the  business  conducted  or  property  owned by it  makes  such
qualification necessary,  other than those jurisdictions in which the failure to
so qualify would not have or result in a Material  Adverse  Effect.  The Company
has registered its stock and is obligated to file reports pursuant to Section 12
or Section  15(d) of the  Securities  and Exchange Act of 1934,  as amended (the
"1934 Act").  The Common Stock is quoted on the Over the Counter Bulletin Board.
The Company has received no notice,  either oral or written, with respect to the
continued  eligibility  of the Common  Stock for such  quotation on the Over the
Counter  Bulletin Board,  and the Company has maintained all requirements on its
part for the continuation of such quotation.

            c. Authorized Shares.

            (i) The  authorized  capital  stock of the  Company  consists of (i)
120,000,000  shares of  Common  Stock,  par value  $.0006  per  share,  of which
approximately  27,583,113  are  outstanding  as of  August  1,  2005,  and  (ii)
20,000,000  shares of Preferred Stock, par value $.0001 per share, none of which
is outstanding as of the date hereof.

                                       7
<PAGE>

            (ii) There are no outstanding  securities which are convertible into
shares of Common  Stock,  whether such  conversion is currently  exercisable  or
exercisable  only upon some future date or the  occurrence  of some event in the
future. If any such securities are listed on the Disclosure Annex but not in the
Company's  SEC  Documents,  the  number  or  amount  of  each  such  outstanding
convertible  security and the conversion  terms are set forth in said Disclosure
Annex.

            (iii) All issued and  outstanding  shares of Common  Stock have been
duly  authorized and validly issued and are fully paid and  non-assessable.  The
Company has sufficient  authorized and unissued shares of Common Stock as may be
necessary  to effect the  issuance  of the Shares on the  Closing  Date and each
Additional Closing Date.

            (iv) The Shares  shall have been duly  authorized  by all  necessary
corporate action on the part of the Company,  and, when issued on conversion of,
or in payment of interest on, the  Debentures  or upon exercise of the Warrants,
in each case in accordance with their respective  terms, will have been duly and
validly issued,  fully paid and  non-assessable  and will not subject the Holder
thereof to personal liability by reason of being such Holder.

            d. Transaction  Agreements and Stock. This Agreement and each of the
other  Transaction  Agreements,  and the  transactions  contemplated  hereby and
thereby,  have been duly and validly  authorized by the Company,  this Agreement
has been duly executed and  delivered by the Company and this  Agreement is, and
the Debentures, the Warrants and each of the other Transaction Agreements,  when
executed and delivered by the Company, will be, valid and binding obligations of
the Company enforceable in accordance with their respective terms, subject as to
enforceability  to general  principles of equity and to bankruptcy,  insolvency,
moratorium,  and other  similar laws  affecting  the  enforcement  of creditors'
rights generally.

            e.  Non-contravention.  The execution and delivery of this Agreement
and each of the other Transaction Agreements by the Company, the issuance of the
Securities,  and the  consummation  by the  Company  of the  other  transactions
contemplated  by this  Agreement,  the  Debentures,  the  Warrants and the other
Transaction  Agreements  do not and will not conflict with or result in a breach
by the Company of any of the terms or  provisions  of, or  constitute  a default
under (i) the certificate of  incorporation  or by-laws of the Company,  each as
currently  in effect,  (ii) any  indenture,  mortgage,  deed of trust,  or other
material  agreement or instrument to which the Company is a party or by which it
or any of its  properties or assets are bound,  including any listing  agreement
for the Common Stock except as herein set forth, or (iii) to its knowledge,  any
existing applicable law, rule, or regulation or any applicable decree, judgment,
or  order  of any  court,  United  States  federal  or  state  regulatory  body,
administrative  agency, or other governmental body having  jurisdiction over the
Company or any of its  properties  or assets,  except such  conflict,  breach or
default which would not have or result in a Material Adverse Effect.

            f. Approvals.  No  authorization,  approval or consent of any court,
governmental body,  regulatory agency,  self-regulatory  organization,  or stock
exchange or market or the shareholders of the Company is required to be obtained
by the  Company  for the  issuance  and sale of the  Securities  to the Buyer as
contemplated  by this  Agreement,  except  such  authorizations,  approvals  and
consents that have been obtained.

            g. Filings.  None of the Company's SEC Documents  contained,  at the
time they were  filed,  any untrue  statement  of a material  fact or omitted to
state any material fact  required to be stated  therein or necessary to make the
statements  made therein,  in light of the  circumstances  under which they were
made,  not  misleading.  Since May 1, 2004,  the Company has filed all requisite
forms, reports and exhibits thereto required to be filed by the Company with the
SEC.

            h. Absence of Certain  Changes.  Since the Last Audited Date,  there
has been no Material  Adverse  Effect,  except as disclosed in the Company's SEC
Documents.  Since the Last Audited Date, except as provided in the Company's SEC
Documents,  the Company has not (i)  incurred or become  subject to any material
liabilities (absolute or contingent) except liabilities incurred in the ordinary
course of business consistent with past practices;  (ii) discharged or satisfied
any material lien or  encumbrance  or paid any material  obligation or liability
(absolute or contingent),  other than current  liabilities  paid in the ordinary
course of business  consistent with past  practices;  (iii) declared or made any
payment or distribution  of cash or other property to shareholders  with respect
to its capital  stock,  or  purchased  or redeemed,  or made any  agreements  to
purchase or redeem,  any shares of its  capital  stock;  (iv) sold,  assigned or
transferred any other material  tangible assets,  or canceled any material debts
owed to the Company by any third party or material claims of the Company against
any third party,  except in the ordinary course of business consistent with past
practices;  (v)  waived  any  rights of  material  value,  whether or not in the
ordinary  course of business,  or suffered  the loss of any  material  amount of
existing business;  (vi) made any increases in employee compensation,  except in
the  ordinary  course  of  business  consistent  with past  practices;  or (vii)
experienced  any material  problems with labor or management in connection  with
the terms and conditions of their employment.

                                       8
<PAGE>

            i. Full  Disclosure.  To the Company's  knowledge,  there is no fact
known to the  Company  (other  than facts  known to the public  generally  or as
disclosed in the Company's SEC Documents) that has not been disclosed in writing
to the Buyer that would  reasonably  be expected to have or result in a Material
Adverse Effect.

            j.  Absence of  Litigation.  There is no action,  suit,  proceeding,
inquiry or  investigation  before or by any court,  public board or body pending
or, to the knowledge of the Company, threatened against or affecting the Company
before  or  by  any  governmental  authority  or  non-governmental   department,
commission,  board,  bureau,  agency or  instrumentality  or any  other  person,
wherein an unfavorable decision, ruling or finding would have a Material Adverse
Effect or which would adversely affect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations under, any of the
Transaction Agreements. The Company is not aware of any valid basis for any such
claim that (either  individually  or in the aggregate with all other such events
and  circumstances)  could  reasonably  be expected  to have a Material  Adverse
Effect.  There are no  outstanding or unsatisfied  judgments,  orders,  decrees,
writs,  injunctions or  stipulations to which the Company is a party or by which
it or any of its properties is bound, that involve the transaction  contemplated
herein or that, alone or in the aggregate,  could reasonably be expect to have a
Material Adverse Effect.

            k. Absence of Events of Default. Except as set forth in Section 3(e)
hereof,  no Event  of  Default  (or its  equivalent  term),  as  defined  in the
respective  agreement to which the Company or its subsidiary is a party,  and no
event  which,  with the giving of notice or the  passage of time or both,  would
become an Event of  Default  (or its  equivalent  term) (as so  defined  in such
agreement), has occurred and is continuing,  which would have a Material Adverse
Effect.

            l. Absence of Certain Company  Control Person Actions or Events.  To
the Company's knowledge, none of the following has occurred during the past five
(5) years with respect to a Company Control Person:

            (i) A  petition  under  the  federal  bankruptcy  laws or any  state
insolvency law was filed by or against,  or a receiver,  fiscal agent or similar
officer was  appointed  by a court for the  business or property of such Company
Control  Person,  or any  partnership  in which he was a general  partner  at or
within two years before the time of such filing,  or any corporation or business
association  of which he was an executive  officer at or within two years before
the time of such filing;

            (ii)  Such  Company  Control  Person  was  convicted  in a  criminal
proceeding or is a named  subject of a pending  criminal  proceeding  (excluding
traffic violations and other minor offenses);

            (iii) Such  Company  Control  Person  was the  subject of any order,
judgment or decree,  not  subsequently  reversed,  suspended or vacated,  of any
court of competent jurisdiction,  permanently or temporarily enjoining him from,
or otherwise limiting, the following activities:

                  (A) acting, as an investment advisor,  underwriter,  broker or
            dealer  in  securities,  or as an  affiliated  person,  director  or
            employee  of  any  investment   company,   bank,  savings  and  loan
            association or insurance company, as a futures commission  merchant,
            introducing  broker,  commodity  trading  advisor,   commodity  pool
            operator,  floor broker, any other Person regulated by the Commodity
            Futures Trading Commission ("CFTC") or engaging in or continuing any
            conduct or practice in connection with such activity;

                                       9
<PAGE>

                  (B) engaging in any type of business practice; or

                  (C) engaging in any activity in  connection  with the purchase
            or sale of any  security  or  commodity  or in  connection  with any
            violation of federal or state securities laws or federal commodities
            laws;

                  (D) Such Company  Control Person was the subject of any order,
            judgment or decree, not subsequently reversed, suspended or vacated,
            of any federal or state authority  barring,  suspending or otherwise
            limiting  for more  than 60 days the right of such  Company  Control
            Person to engage in any activity  described in paragraph (3) of this
            item, or to be associated with Persons engaged in any such activity;
            or

                  (E)  Such  Company  Control  Person  was  found  by a court of
            competent  jurisdiction  in a civil  action or by the CFTC or SEC to
            have violated any federal or state  securities law, and the judgment
            in such  civil  action  or  finding  by the CFTC or SEC has not been
            subsequently reversed, suspended, or vacated.

            m. No Undisclosed  Liabilities or Events.  No event or circumstances
has occurred or exists with respect to the Company or its properties,  business,
operations, condition (financial or otherwise), or results of operations, which,
under  applicable  law,  rule  or  regulation,  requires  public  disclosure  or
announcement  prior to the date  hereof by the Company but which has not been so
publicly  announced  or  disclosed.  There  are  no  proposals  currently  under
consideration or currently anticipated to be under consideration by the Board of
Directors or the  executive  officers of the Company  which  proposal  would (x)
change the articles or certificate of incorporation or other charter document or
by-laws of the Company, each as currently in effect, with or without shareholder
approval, which change would reduce or otherwise adversely affect the rights and
powers  of  the   shareholders   of  the  Common  Stock  or  (y)  materially  or
substantially change the business,  assets or capital of the Company,  including
its interests in subsidiaries.

            n.  No  Integrated  Offering.  Neither  the  Company  nor any of its
Affiliates  nor any  Person  acting  on its or their  behalf  has,  directly  or
indirectly,  at any time since December 1, 2004,  made any offer or sales of any
security or solicited any offers to buy any security  under  circumstances  that
would  eliminate the  availability  of the  exemption  from  registration  under
Regulation  D in  connection  with  the  offer  and  sale of the  Securities  as
contemplated hereby.

            o.  Dilution.  The number of shares  issuable on  conversion  of the
Debentures,  upon exercise of the Warrants or pursuant to the other terms of the
Transaction  Agreements may have a dilutive effect on the ownership interests of
the other shareholders (and Persons having the right to become  shareholders) of
the Company.  The Company's  executive  officers and directors  have studied and
fully  understand the nature of the  Securities  being sold hereby and recognize
that they have such a potential  dilutive effect  (including but not necessarily
limited  to  the  effect  of  the  provisions  Section  4(h)  hereof  and of the
application of the Post-Maturity Date Conversion Price, if relevant).  The board
of directors of the Company has concluded,  in its good faith business judgment,
that  such  issuance  is in the  best  interests  of the  Company.  The  Company
specifically  acknowledges  that its obligation to issue the  Conversion  Shares
upon  conversion  of the  Debentures,  the Warrant  Shares upon  exercise of the
Warrants or the Payment Shares as provided in the Registration  Rights Agreement
is binding upon the Company and  enforceable  regardless  of the  dilution  such
issuance  may  have on the  ownership  interests  of other  shareholders  of the
Company,  and the Company will honor such obligations,  including honoring every
Notice of  Conversion  (as  contemplated  by the  Debentures),  every  Notice of
Exercise (as contemplated by the Warrants),  and every demand for Payment Shares
(as contemplated by the Registration  Rights  Agreement),  unless the Company is
subject  to an  injunction  (which  injunction  was not  sought by the  Company)
prohibiting the Company from doing so.

                                       10
<PAGE>

            p. Fees to Brokers,  Placement Agents and Others. Except for payment
of the the Placement  Agent's  Compensation  (as defined below) to the Placement
Agent,  payment of which is the sole responsibility of the Company,  the Company
has taken no  action  which  would  give  rise to any  claim by any  Person  for
brokerage  commission,  placement agent or finder's fees or similar  payments by
Buyer relating to this Agreement or the transactions  contemplated hereby. Buyer
shall have no obligation with respect to such fees or with respect to any claims
made by or on behalf of other  Persons for fees of a type  contemplated  in this
paragraph  that  may be due in  connection  with the  transactions  contemplated
hereby.  The  Company  shall  indemnify  and hold  harmless  each of Buyer,  its
employees,  officers,  directors,  agents,  and partners,  and their  respective
Affiliates,  from and against all claims, losses,  damages, costs (including the
costs of preparation  and attorney's  fees) and expenses  suffered in respect of
any such claimed or existing  fees, as and when  incurred.  The term  "Placement
Agent's  Compensation"  means,  in  connection  with  the  consummation  of  the
transactions  contemplated by this Agreement, the consideration  contemplated by
the Joint Escrow Instructions.

            q. Disclosure. All information relating to or concerning the Company
set forth in the Transaction  Agreements or in the Company's public filings with
the SEC is true and correct in all material  respects  and all such  information
has not  omitted  to state  any  material  fact  necessary  in order to make the
statements made, in light of the  circumstances  under which they were made, not
misleading.  No event or circumstance has occurred or exists with respect to the
Company  or  its  business,  properties,   prospects,  operations  or  financial
conditions,  which under  applicable  law, rule or regulation,  requires  public
disclosure or announcement by the Company.

            r.  Confirmation.  The Company  confirms that all  statements of the
Company contained herein shall survive acceptance of this Agreement by the Buyer
for a period of three (3)  years  from the last  Additional  Closing  Date.  The
Company  agrees that,  if, to the knowledge of the Company,  any events occur or
circumstances  exist  prior  to a  Closing  Date  which  would  make  any of the
Company's representations, warranties, agreements or other information set forth
herein materially  untrue or materially  inaccurate as of such date, the Company
shall immediately notify the Buyer (directly or through its counsel, if any) and
the Escrow Agent in writing  prior to such date of such fact,  specifying  which
representation, warranty or covenant is affected and the reasons therefor.

            4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.

            a.  Transfer  Restrictions.  The  Buyer  acknowledges  that  (1) the
Securities  have not been and are not being  registered  under the provisions of
the 1933 Act and,  except as provided in the  Registration  Rights  Agreement or
otherwise included in an effective  registration  statement,  the Securities may
not be  transferred  unless (A)  subsequently  registered  thereunder or (B) the
Buyer shall have  delivered  to the  Company an opinion of  counsel,  reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred  may be sold or transferred  pursuant to an
exemption  from  such  registration;  (2)  any  sale of the  Securities  made in
reliance  on Rule  144  promulgated  under  the  1933  Act  may be made  only in
accordance  with  the  terms  of said  Rule  and  further,  if said  Rule is not
applicable,  any  resale of such  Securities  under  circumstances  in which the
seller,  or the  Person  through  whom the sale is made,  may be deemed to be an
underwriter,  as that term is used in the 1933 Act, may require  compliance with
some other  exemption under the 1933 Act or the rules and regulations of the SEC
thereunder;  and (3)  neither  the  Company  nor any  other  Person is under any
obligation to register the Securities  (other than pursuant to the  Registration
Rights  Agreement) under the 1933 Act or to comply with the terms and conditions
of any exemption thereunder.

            b. Restrictive Legend. The Buyer acknowledges and agrees that, until
such time as the  relevant  Shares have been  registered  under the 1933 Act, as
contemplated by the Registration Rights Agreement, and may be sold in accordance
with an effective Registration Statement or otherwise in accordance with another
effective  registration  statement,  or until such Shares can  otherwise be sold
without   restriction,   whichever  is  earlier,   the  certificates  and  other
instruments  representing any of the Securities shall bear a restrictive  legend
in  substantially  the following form (and a  stop-transfer  order may be placed
against transfer of any such Securities):

                                       11
<PAGE>

      THESE  SECURITIES  HAVE NOT BEEN  REGISTERED  UNDER THE  SECURITIES ACT OF
      1933, AS AMENDED,  OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD
      OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE  REGISTRATION STATEMENT
      FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER  EVIDENCE  ACCEPTABLE
      TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

            c. Filings. The Company undertakes and agrees to make all filings it
deems necessary  (based on the advice of Company counsel) in connection with the
sale of the Securities to the Buyer under any United States laws and regulations
applicable  to the Company,  or by any domestic  securities  exchange or trading
market,  and to provide a copy thereof to the Buyer  promptly after such filing.
Reference is made to the Section titled  "Publicity,  Filings,  Releases,  Etc."
below.

            d. Reporting Status.  So long as the Buyer  beneficially owns any of
the Purchased  Securities and for at least twenty (20) Trading Days  thereafter,
the Company  shall  timely  file all  reports  required to be filed with the SEC
pursuant  to  Section  13 or 15(d) of the 1934 Act,  shall  take all  reasonable
action under its control to ensure that adequate current public information with
respect to the Company,  as required in  accordance  with Rule  144(c)(2) of the
1933 Act, is publicly available, and shall not terminate its status as an issuer
required  to file  reports  under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would permit such termination.  The Company will take
all  reasonable  action under its control to maintain the continued  listing and
quotation and trading of its Common Stock (including,  without  limitation,  all
Registrable  Securities)  on the  Principal  Trading  Market or a listing on the
NASDAQ/Small Cap or National  Markets and, to the extent  applicable to it, will
comply in all material respects with the Company's  reporting,  filing and other
obligations  under the by-laws or rules of the Principal  Trading  Market and/or
the  National  Association  of  Securities  Dealers,  Inc.,  as the case may be,
applicable  to it at least  through  the date which is sixty (60) days after the
later of the date on which (x) all of the Debentures have been converted or have
been  paid in  full  or (y) all of the  Warrants  have  been  exercised  or have
expired.

            e. Use of Proceeds.

            (i)  The  Company  will  use  the net  proceeds  received  hereunder
(excluding amounts paid as contemplated by the Joint Escrow Instructions) solely
for general corporate purposes for its operations in the United States.

            (ii) The Company represents, warrants and covenants that none of the
net  proceeds  referred to in Section  4(e)(i)  will be used for  operations  or
expenses of the Company outside of the United States.

            (iii) The Company  covenants that, within five (5) Trading Days from
the Company's receipt of a written request therefor from the Holder, the Company
will provide to the Holder written  assurance,  certified by the chief financial
officer  of  the  Company,   that  the  Company  is  in   compliance   with  the
representation,  warranty  and  covenant of the Section  4(e)(ii)  hereof.  This
provision shall no longer be applicable once the Company issues such a certified
written assurance to the Holder which includes a certified  representation  that
all of such net proceeds  have been  expended in a manner which is in compliance
with the representation, warranty and covenant of said Section 4(e)(ii).

            f. Warrants.

            (i) The Company agrees to issue to the Buyer on the Closing Date and
each Additional Closing Date:

                  (A) a  transferable  warrant  for the  purchase of a number of
            shares of Common  Stock equal to  twenty-five  percent  (25%) of the
            Issue Date  Conversion  Shares at an exercise  price (the  "Exercise
            Price") equal to the average  Closing Price for the forty-five  (45)
            Trading  Days  ending on the  Trading  Day  immediately  before  the
            exercise  date,  multiplied  by (i) a  percentage  equal  to (x) one
            hundred  percent  (100%),   less  (y)  the  Pre-Maturity   Effective
            Percentage;  provided, however, that the Exercise Price shall not be
            less than Thirty Cents  ($0.30) per share;  provided  further,  that
            such Exercise Price will be subject to adjustment as provided in the
            Warrant and herein (the "Coverage Warrants"); and

                                       12
<PAGE>

                  (B) a  transferable  warrant  for the  purchase of a number of
            shares of Common  Stock equal to the  aggregate  number of shares of
            Common  Stock  into  which  the  prepaid  portion  of a  Convertible
            Debenture is convertible,  at an Exercise Price equal to $0.0006 per
            share,  provided  that  such  Exercise  Price  will  be  subject  to
            adjustment  as provided  in the  Warrant  and herein (the  "Catch-up
            Warrants,"  and together with the Coverage  Warrants,  collectively,
            the "Warrants").

            (ii)  Each  Warrant   shall  be   exercisable   commencing   on  the
Commencement  Date  specified  in the  Warrants and shall expire at the close of
business  on the date which is the last day of the  calendar  month in which the
fifth annual  anniversary of the Effective Date occurs.  Each Warrant shall have
cashless exercise rights as provided in the Warrant.  Except as specified above,
each Warrant shall generally be in the form annexed hereto as Annex V.

            (iii) The Warrant  Shares shall be subject to the  provisions of the
Registration Rights Agreement.

            g.  Actions or Events  Requiring  Approval.  So long as any  amounts
(including, without limitation, principal or interest) remain due and payable to
Buyer  under the  Convertible  Debentures,  neither  the  Company nor any of its
subsidiaries may do any of the following without the approval of the Buyer:

            (i) merge or consolidate  with,  enter into a joint venture with, or
acquire all or substantially  all of the capital stock or assets of, any Person,
unless the cash consideration payable by the Company in connection with any such
transaction  or event  does not  exceed  $100,000,  or if the value of any stock
consideration  paid or  issued  by the  Company  in  connection  with  any  such
transaction or event is not less than $0.50 per share;

            (ii)  authorize  or incur any  indebtedness  in any  transaction  or
series of related transactions, or provide any guarantee, in excess of $100,000,
in the aggregate, or refinance existing indebtedness;

            (iii) create,  incur, assume or permit to exist any mortgage or deed
of trust, pledge, lien, charge,  claim,  security interest or encumbrance of any
kind or nature (collectively,  "Encumbrances")  whatsoever on or with respect to
any of its properties or assets (whether now owned or hereafter acquired);

            (iv) declare or pay any dividends  (other than dividends  payable to
the Company by a  wholly-owned  subsidiary),  or make any other  payments on its
capital stock, redeem or repurchase any of its capital stock;

            (v)  grant or issue  any  capital  stock,  warrant,  right or option
pertaining to its capital stock or other security  convertible  into its capital
stock (other than grants of stock or stock  options to employees  pursuant to an
existing employee stock option plan);

            (vi) make any  capital  expenditure  in excess  of  $100,000  in the
aggregate;

            (vii) sell,  lease,  assign,  transfer or  otherwise  dispose of any
property,  assets  and  rights  (including  the  capital  stock  of  any  of its
subsidiaries) other than in the ordinary course of business; or

            (viii) liquidate, dissolve or wind up.

                                       13
<PAGE>

            h. Actions or Events Leading to Adjustments.

            (i) For purposes of this  Agreement,  the following terms shall have
meanings indicated:

                  (A) "New  Transaction  Period" means the period  commencing on
            the Closing  Date and  continuing  through and  including  the Final
            Lock-up Date.

                  (B)  "Final   Lock-up  Date"  means  the  date  on  which  the
            Debentures  have  been  fully  converted  and the date on which  any
            Unconverted  Debenture has been paid in full in accordance  with its
            terms, whichever is later.

                  (C) "New  Transaction  Price" means the Basic New  Transaction
            Price (as defined below) except that if the New Transaction Exercise
            Price is lower than the Basic New  Transaction  Price,  it means the
            New Transaction Exercise Price.

                  (D) "Basic New Transaction Price" means, as may be applicable,
            on a per share  basis,  the lower of (1) the lowest  fixed  purchase
            price of any shares of the New Common Stock  contemplated in the New
            Transaction, or (2) the lowest conversion price or put or call price
            which would be applicable under the terms of the New Transaction; in
            each such case,  whether such purchase or conversion price or put or
            call price is stated or otherwise  specified or is determined on the
            closing date of the New  Transaction by the application of a formula
            set in the documents  reflecting the New Transaction or could result
            from   adjustments  or  revisions   contemplated   in  the  relevant
            agreements for the New  Transaction  and whenever such adjustment or
            revision  would be  applicable  (and if no minimum  purchase  price,
            conversion  price or put or call price,  as the case may be, is set,
            it shall be assumed that such minimum  purchase  price or conversion
            price is $.0006);  and provided,  further,  that, if the  securities
            issued in the New  Transaction  are issued at a Face Value  Discount
            (as defined below),  the New Transaction  Price shall be adjusted to
            reflect such discount.

                  (E)  "Exercise  Threshold  Price"  means  the then  applicable
            Exercise Price.

                  (F) "New Transaction Exercise Price" means the lowest exercise
            price per  share  applicable  to the  warrants,  option  or  similar
            instrument (howsoever  denominated;  collectively,  "New Transaction
            Warrants")  included in such New Transaction,  whether such exercise
            price is  stated  or could  result  from  adjustments  or  revisions
            contemplated in the relevant  agreements for the New Transaction and
            whenever such exercise price would be applicable (and, if no minimum
            exercise  price is set,  it  shall  be  assumed  that  such  minimum
            exercise price is $.0006).

                  (G) The term "New Transaction  Effective Percentage" means the
            percentage  equal to the excess,  if any, of (i) one hundred percent
            (100%)  over (ii) the  percentage  equal to (x) the New  Transaction
            Price,  divided by (y) the  Closing  Price for the ten (10)  Trading
            Days ending on the Trading Day  immediately  before the closing date
            of the New Transaction.

                  (H) "Alternative  Warrant  Percentage" means (x) the number of
            shares which are eligible to be purchased  under the New Transaction
            Warrants,  divided by (y) the  aggregate of the shares of New Common
            Stock issued or issuable in such  transaction  (excluding the shares
            issuable on exercise of the New Transaction Warrants).

                  (I)  "Outstanding  Warrant Shares" means,  for the Warrants or
            for any previously  issued  Additional  Warrants (as defined below),
            the then  outstanding  number of Warrant  Shares which would then be
            issuable upon the exercise in full of such Warrants  (without regard
            to any  limitations  which  may  then  restrict  the  Holder's  full
            exercise of such Warrant at any time) or such  Additional  Warrants,
            if  any,  as  in  effect  immediately  prior  to  the  relevant  New
            Transaction.

                                       14
<PAGE>

                  (J) "Original  Warrant Shares" means,  for the Warrants or for
            any previously  issued Additional  Warrants,  the original number of
            Warrant Shares  issuable on exercise of such Warrants on the Closing
            Date or as  Additional  Warrants,  as the case may be (in each  case
            without  regard  to any  limitations  which  may then  restrict  the
            Holder's full exercise of such Warrant at any time).

                  (K) "Face Value  Discount" means  consideration  less than, as
            the case may be, (x) the number of shares being issued multiplied by
            the stated  purchase  price,  (y) the stated  principal  amount of a
            debenture, note or similar instrument or (z) the stated value of the
            shares of convertible stock.

            (ii) The  Company  covenants  and agrees  that,  if,  during the New
Transaction Period,  without the prior written consent of a Majority in Interest
of the Holders in each instance  (which consent is in the sole discretion of the
Holders and may be  withheld  for any reason or for no reason  whatsoever),  the
Company enters into a New Transaction,  then (in each instance, unless waived by
the Holder):

                  (A) if the New  Transaction  Price  is  lower  than  the  then
            effective Conversion Price, the Conversion Price for all Unconverted
            Debentures  shall be  adjusted  to be equal to such New  Transaction
            Price; and

                  (B) if the New Transaction Effective Percentage is higher than
            the then applicable Effective  Percentage,  the Effective Percentage
            shall  be  adjusted  for all  Unconverted  Debentures  to  such  New
            Transaction Effective Percentage; and

                  (C) if the New  Transaction  Exercise  Price of any of the New
            Transaction  Warrants  representing  the first  twenty-five  percent
            (25%) of the  Alternative  Warrant  Percentage(1)  (the  "First  New
            Transaction Warrants") is lower than the Exercise Threshold Price of
            the  Warrants,  then the  Exercise  Price  of the  then  outstanding
            Warrants  shall  be  adjusted  to be  equal  to the New  Transaction
            Exercise Price of such First New Transaction Warrants; and

                  (D) if the provisions  applicable to the convertible preferred
            stock,   convertible  debenture  or  similar  instrument  (howsoever
            denominated),  if any, of the New Transaction are more beneficial to
            the  holder  of  such  instrument  than  the   corresponding   terms
            applicable to the  Debentures or in or to the Warrants,  as the case
            may be, or if the terms which are  beneficial  to the Company in the
            relevant   Transaction   Agreements   are   not   included   in  the
            corresponding instrument in the New Transaction, then, unless waived
            by the Holder, the terms of the Transaction  Agreements  applying to
            the then  Unconverted  Debentures  or the  Warrants  or to the other
            Transaction  Agreements,  as the case may be,  shall be  modified to
            reflect  similar terms (based,  if relevant,  on the Closing  Date);
            provided,  however,  that nothing in this provision shall be read to
            mean that the  Purchased  Securities  shall be  changed to any other
            form of security;

                  (E) if the  Alternative  Warrant  Percentage  is greater  than
            twenty-five  percent  (25%),  the Company  shall issue to the Holder
            additional warrants ("Additional  Warrants") for the purchase of the
            number of shares equal to the excess, if any, of

                  (1) (x) the Alternative Warrant Percentage,  multiplied by (y)
            (I) the  Purchase  Price,  divided by (II) the  Conversion  Price in
            effect on the Closing Date or immediately  after the closing date of
            the  New  Transaction   (after  taking  into  account  all  relevant
            adjustments contemplated by the Debentures or hereby),  whichever is
            lower,  multiplied by (y) a fraction,  of which the numerator is the
            Outstanding  Warrant Shares for all Warrants  (including  previously
            issued Additional  Warrants) and the denominator is Original Warrant
            Shares for all  Warrants  (including  previously  issued  Additional
            Warrants); over

----------
(1) If New Transaction Warrants have more than one exercise price, they shall be
ranked in priority order from lowest exercise price to highest exercise price.

                                       15
<PAGE>

                  (2) the aggregate  Outstanding Warrant Shares for all Warrants
            (including previously issued Additional Warrants);

      and the terms of such Additional Warrants (including,  but not limited, to
      term of exercisability, exercise price, manner and limitations, if any, on
      exercise,  registration rights) shall be the same (on a pro rata basis, if
      relevant) as the applicable New  Transaction  Warrants  issued in such New
      Transaction.

            (iii) The Company  covenants  and agrees that,  any of the foregoing
provisions of this Section 4(h) or any other  provision of this Agreement or any
of the other Transaction Agreements to the contrary notwithstanding, without the
prior written  consent of a Majority in Interest in each instance (which consent
is in the sole  discretion  of the Holders and may be withheld for any reason or
for no reason whatsoever),

                  (A) during the New  Transaction  Period,  the Company will not
            enter into any New Transaction where such transaction provides for a
            variable conversion price or a variable exercise price;

                  (B) during  the  period  commencing  on the  Closing  Date and
            continuing  through the Effective  Date,  the Company will not enter
            into any New Transaction whatsoever, and

                  (C) during the period  commencing  on the  Effective  Date and
            continuing  through the date which is the sixth monthly  anniversary
            of the  Effective  Date,  the  Company  will not enter  into any New
            Transaction where such New Transaction provides for any registration
            rights   (including,   but  not  limited  to  demand  or  piggy-back
            registration  rights)  to any one or  more  of the  New  Transaction
            Investors in such New Transaction.

The Company acknowledges that each of the foregoing provisions is independent of
the others and that a breach of any of the foregoing  provisions might result in
adjustments  referred  to in other  provisions  of this  Section  4(h)  and,  in
addition (and not in lieu of such adjustments, if any) shall constitute an event
of default under the Debenture and the other Transaction Agreements. The Company
is aware that if such event of default occurs, a Holder of a Debenture will have
certain redemption rights contemplated by the Debenture.

            (iv)  Nothing  in  the  foregoing   provisions  reflects  either  an
obligation on the part of any Buyer to participate  in any New  Transaction or a
limitation on any Buyer from participating in any New Transaction.

            (v) Any of the  foregoing  provisions  of this  Section  4(h) or any
other provision of this Agreement or any of the other Transaction  Agreements to
the contrary notwithstanding,  the Company shall not engage in any offers, sales
or other  transactions  of its  securities  which  would  adversely  affect  the
exemption from registration  available for the transactions  contemplated by the
Transaction Agreements.

            (vi) The Company  agrees  that,  prior to the  Effective  Date,  the
Company will not file any  registration  statement for the sale of shares by the
Company  or  any  other  shareholder  other  than  the  Registration   Statement
contemplated by the Registration Rights Agreement.

            i. Company Principal's  Agreements.  The Company hereby agrees that,
no later than the  Initial  Closing  Date,  the  Company  will cause each of its
principal officers and all of its directors and certain other persons identified
in the heading of Annex VIII attached hereto (each, a "Company Principal"),  and
certain Persons who are related to or controlled by such Company  Principal,  to
execute and  deliver an  agreement  (each,  a "Company  Principal's  Agreement")
regarding  limitations  on the sale or other  disposition  of the  shares of the
Company's Common Stock (or instruments  convertible into or exercisable for such
shares) held by such Company  Principal  or other  Principal  (as defined in the
Company  Principal's  Agreement),  except that,  notwithstanding  its terms, the
Company Principal's  Agreement will be deemed not apply to the sale of shares of
Common Stock bought by a Principal in open market  transactions.  As provided in
the Company Principal's Agreement, the spouse of a Company Principal, whether or
not such spouse,  directly or indirectly holds or is the beneficial owner of any
shares of Common  Stock of the  Company,  is a  Principal  for  purposes  of the
Company  Principal's   Agreement.   Subject  to  the  foregoing,   each  Company
Principal's Agreement shall be substantially in the form set forth in Annex VIII
attached hereto.

                                       16
<PAGE>

            j. Available Shares.  The Company shall have at all times authorized
and reserved for issuance,  free from preemptive  rights,  a number of shares of
Common  Stock  (the  "Reserved  Amount")  at  least  equal  to  the  Reservation
Percentage  (as defined  below) of the sum of (x) the number of shares of Common
Stock issuable as may be required, at any time, to satisfy the conversion rights
of the Holders of principal on all Unconverted  Debentures plus interest thereon
for one year beyond the date such  computation  is made,  plus (y) the number of
shares  issuable upon exercise of all  outstanding  Warrants held by all Holders
(in  each  case,  whether  any of such  Unconverted  Debentures  or  outstanding
Warrants were originally  issued to the Holder,  the Buyer or to any other party
and without regard to any  restrictions  which might limit any Holder's right to
convert any of the  Debentures  or to exercise any of the  Warrants  held by any
Holder).  The term  "Reservation  Percentage" means (i) until the Maturity Date,
one hundred  twenty-five  percent (125%) and (ii) thereafter two hundred percent
(200%).  The Reserved  Amount shall be determined on the first Trading Day after
the end of each calendar  quarter and the number of shares to be reserved  shall
be based on (q) all Unconverted Debentures and the Conversion Price in effect or
applicable  as of such date and (r)  unexercised  Warrants as of such date.  The
Reserved  Amount  determined on such date shall remain the Reserved Amount until
the next quarterly determination.

            k. Publicity, Filings, Releases, Etc.

            (i) Each of the parties agrees that,  except as provided below,  the
other  party may  report  on or refer to the  consummation  of the  transactions
contemplated by the Transaction Agreements;  provided, however, the Company will
provide to the Buyer drafts of the  applicable  text of any press release or any
filing  intended  to be made  with the SEC  which  refers  to or  describes  the
Transaction  Agreements  or the  transactions  contemplated  thereby  as soon as
practicable  (but at least three (3) business days before such release or filing
will be made) and will not include in such filing any statement or statements or
other material to which the Buyer or Buyer's counsel reasonably objects.

            (ii)  Each  of  the  parties  hereby  specifically  consents  to the
inclusion of the text of the Transaction Agreements in filings made with the SEC
(but any descriptive  text  accompanying or part of such filing shall be subject
to the other provisions of this Section 4(k)).

            (iii)  Notwithstanding,  but subject to, the foregoing provisions of
this Section 4(k), the Company will,  after the Initial  Closing Date,  promptly
issue a press release and file a Current Report on Form 8-K or, if  appropriate,
a  quarterly  or  annual  report  on  the  appropriate  form,  referring  to the
transactions contemplated by the Transaction Agreements.

            l.  Independent  Nature  of  Buyers'  Obligations  and  Rights.  The
obligations of each Buyer under the  Transaction  Agreements are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the  performance of the  obligations of any Other Buyer under any
one or more of the Transaction  Agreements.  The decision of each Buyer or Other
Buyer to purchase Purchased  Securities  pursuant to the Transaction  Agreements
has been made by such Buyer independently of any Other Buyer.  Nothing contained
herein  or in any  Transaction  Agreement,  and no  action  taken  by any  Buyer
pursuant  thereto,  shall be deemed to  constitute  any two or more  Buyers as a
partnership,  an  association,  a joint venture or any other kind of entity,  or
create a  presumption  that the  Buyers are in any way acting in concert or as a
group with respect to such obligations or the  transactions  contemplated by the
Transaction Agreements. Each Buyer acknowledges that no Other Buyer has acted as
agent for such Buyer in connection with making its investment hereunder and that
no Buyer  will be  acting  as  agent of such  Other  Buyer  in  connection  with
monitoring  its  investment in the Purchased  Securities or enforcing its rights
under the Transaction Agreements.  Each Buyer 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  Agreements,  and it shall
not be necessary for any Other Buyer to be joined as an additional  party in any
proceeding for such purpose.  The Company  acknowledges  that each of the Buyers
has been  provided  with the same  Transaction  Agreements  for the  purpose  of
closing a transaction  with  multiple  Buyers and not because it was required or
requested to do so by any Buyer.

                                       17
<PAGE>

            m. Equal Treatment of Buyers.  No consideration  shall be offered or
paid to any  person  to amend or  consent  to a waiver  or  modification  of any
provision of any of the Transaction  Agreements unless the same consideration is
also offered to all of the parties to the Transaction Agreements.

            n. Independent  Investment Decision. No Buyer has agreed to act with
any Other Buyer for the purpose of  acquiring,  holding,  voting or disposing of
the  Securities  purchased  hereunder  for  purposes of Section  13(d) under the
Exchange  Act,  and each  Buyer is  acting  independently  with  respect  to its
investment in the Securities.  The decision of each Buyer to purchase  Purchased
Securities  pursuant to this Agreement has been made by such Buyer independently
of  any  other  purchase  and  independently  of  any  information,   materials,
statements  or  opinions  as  to  the  business,  affairs,  operations,  assets,
properties,   liabilities,   results  of  operations,  condition  (financial  or
otherwise) or prospects of the Company or its  subsidiaries  which may have made
or given by any Other Buyer or by any agent or employee of any Other Buyer,  and
no Buyer or any of its agents or employees shall have any liability to any Other
Buyer (or any other  person)  relating to or arising from any such  information,
materials, statements or opinions.

            o. NASD Rule 2710. The Company is aware that the Corporate Financing
Rule 2710 ("NASD Rule 2710") of the National  Association of Securities  Dealers
("NASD") is or may become  applicable to the  transactions  contemplated  by the
Transaction  Agreements or to the sale by a Holder of any of the Securities.  If
NASD Rule 2710 is so applicable,  the Company shall,  to the extent  required by
such rule,  cooperate  with any broker or selling  shareholder in respect of any
consents,  authorizations  or approvals  that may be  necessary  for the NASD to
timely and expeditiously permit the shareholder to sell the securities.

            p. SBA  Compliance.  The Company agrees that, on the Initial Closing
Date,  the  Company  will  deliver  to the Buyer  (i) SBA From 480 (Size  Status
Declaration)   and   (ii)   SBA   Form  652   (Assurance   of   Compliance   for
Nondiscrimination),  together with the  certification of an executive officer of
the Company  that the  information  contained  in each of such forms is true and
correct in all  respects.  Such forms and  certification  are referred to as the
"SBA Compliance Documents."

            5. TRANSFER AGENT INSTRUCTIONS.

            a. (i) The Company  warrants that,  with respect to the  Securities,
other than the stop transfer instructions to give effect to Section 4(a) hereof,
it will give the Transfer Agent no instructions  inconsistent  with instructions
to issue Common Stock from time to time upon  conversion  of the  Debentures  or
exercise of the Warrants or in connection  with the issuance of Payment  Shares,
as may be applicable  from time to time, in such amounts as specified  from time
to time by the Company to the Transfer  Agent,  bearing the  restrictive  legend
specified in Section 4(b) of this Agreement  prior to registration of the Shares
under the 1933 Act,  registered  in the name of the Buyer or its  nominee and in
such denominations to be specified by the Holder in connection therewith. Except
as so provided,  the Shares shall otherwise be freely  transferable on the books
and records of the Company as and to the extent  provided in this  Agreement and
the other  Transaction  Agreements.  Nothing in this Section shall affect in any
way the  Buyer's  obligations  and  agreement  to  comply  with  all  applicable
securities laws upon resale of the Securities.

                                       18
<PAGE>

            (ii) If the Buyer  provides  the Company  with an opinion of counsel
reasonably  satisfactory  to the Company  that  registration  of a resale by the
Buyer of any of the Securities in accordance  with clause (1)(B) of Section 4(a)
of this  Agreement is not required under the 1933 Act, the Company shall (except
as provided in clause (2) of Section 4(a) of this Agreement) permit the transfer
of the Securities.

            (iii) The Company agrees that,  upon the Company's  receipt of (i) a
written request from a Holder while the  Registration  Statement is effective or
(ii) an opinion of counsel that the Conversion Shares, Warrant Shares or Payment
Shares then held by a Holder may be transferred without  registration under Rule
144(k)  promulgated  under the 1933 Act, the Company shall promptly instruct the
Transfer Agent to issue one or more  replacement  certificates for any or all of
the Conversion Shares, Warrant Shares or Payment Shares then held by such Holder
or  subsequently  issued  to  the  Holder.  Such  replacement  or  newly  issued
certificates  shall be issued,  without  legend and  without  any stop  transfer
instructions, in such name and in such denominations as specified by the Holder.

            b. (i) The Company  understands  that a delay in the delivery of (i)
Conversion  Certificates,  whether  on  conversion  of the  Debenture  and/or in
payment of accrued  interest,  beyond the relevant  Delivery Date (as defined in
the Debenture),  (ii) the  certificates  for the shares of Common Stock issuable
upon the  exercise of the  Warrants  (the  "Warrant  Certificates"),  beyond the
relevant Warrant Share Delivery Date (as defined in the Warrants),  or (iii) the
certificates representing Payment Shares ("Payment Shares Certificates"), beyond
the  relevant  delivery  date  of the  Payment  Shares  Certificates  under  the
Registration Rights Agreement, could each result in economic loss to the Holder.
As  compensation  to the Holder for such loss,  the  Company  agrees to pay late
payments to the Holder for late  issuance of the  Conversion  Certificates,  the
Warrant Certificates or the Payment Shares Certificates,  as the case may be, in
accordance  with the  following  schedule  (where  "No.  Business  Days Late" is
defined as the number of Trading Days after the Delivery Date):(2)

----------
(2) Example:  Notice of  Conversion  is delivered  on Monday,  May 1, 2006.  The
Delivery  Date  would be  Thursday,  May 4 (the  third  Trading  Day after  such
delivery).  If the  certificate  is delivered by by that date,  no payment under
this  provision is due. If the  certificates  are  delivered on May 5, that is 1
"Trading Day Late" in the table below; if delivered on May 8, that is 2 "Trading
Days Late" in the table  below;  and if  delivered on May 12, that is 6 "Trading
Days Late" in the table.

                                       19
<PAGE>

                                          Late Payment For Each $10,000 of
                                          Principal or Interest Being Converted
                                          or For Each $10,000 in Common Stock
                                          Being Issued Upon Exercise of a
                                          Warrant or Issuance of Payment Shares
                                          (Based on the Value of the Common
                                          Stock on the Exercise Date or
No. Trading Days Late                     Issuance Date, as applicable)
---------------------                     -----------------------------
                  1                                   $100
                  2                                   $200
                  3                                   $300
                  4                                   $400
                  5                                   $500
                  6                                   $600
                  7                                   $700
                  8                                   $800
                  9                                   $900
                  10                                  $1,000
                  >10                                 $1,000  + $200  for each
                                                      Business Day Late beyond
                                                      10 days

The Company shall pay any payments  incurred  under this Section in  immediately
available  funds upon demand.  Nothing  herein shall limit the Holder's right to
pursue  actual  damages  for the  Company's  failure  to issue and  deliver  the
Conversion  Certificates,   the  Warrant  Certificates  or  the  Payment  Shares
Certificates,  as the case may be,  to the  Holder  within  a  reasonable  time.
Furthermore,  in  addition to any other  remedies  which may be  available  to a
Holder, in the event that the Company fails for any reason to effect delivery of
such   Conversion   Certificates,   Warrant   Certificates   or  Payment  Shares
Certificates  within ten (10) Trading Days after the relevant Delivery Date, the
Converting  Holder,  the Holder  exercising  a Warrant  or the Holder  receiving
Payment Shares (as applicable) will be entitled to revoke the relevant Notice of
Conversion,  Notice of  Exercise  or  written  notice  for  Payment  Shares  (as
applicable),  by  delivering a notice to such effect to the Company prior to the
receipt  by  such  Holder  of  the  relevant  Conversion  Certificates,  Warrant
Certificates  or Payment  Shares  Certificates,  whereupon  the Company and such
Holder shall each be restored to their respective positions immediately prior to
delivery of such Notice of Conversion,  Notice of Exercise or written notice for
Payment  Shares  (as   applicable);   provided,   however,   that  any  payments
contemplated  by this Section 5(b) of this Agreement  which have accrued through
the date of such  revocation  notice  shall  remain due and owing to such Holder
notwithstanding such revocation.

            (ii) If,  after the Holder  has  submitted  a Notice of  Conversion,
Notice of Exercise or written  notice for Payment  Shares (as  applicable),  the
Company fails for any reason to deliver the Conversion Certificates, the Warrant
Certificates or the Payment Shares  Certificates (as applicable) by the relevant
Delivery Date, and at any time  thereafter  prior to the actual  delivery of the
Conversion  Certificates,   the  Warrant  Certificates  or  the  Payment  Shares
Certificates (as applicable),  such Holder  purchases,  in an arm's-length  open
market transaction or otherwise,  shares of Common Stock (the "Covering Shares")
in order to make  delivery  in  satisfaction  of a sale of Common  Stock by such
Holder (the "Sold Shares"), which delivery such Holder anticipated to make using
the shares to be issued upon such conversion, exercise or issuance (a "Buy-In"),
the Holder shall have the right to require the Company to pay to such Holder, in
addition to and not in lieu of the amounts  contemplated in other  provisions of
the Transaction Agreements, including, but not limited to, the provisions of the
immediately preceding Section 5(b)(i)), the Buy-In Adjustment Amount (as defined
below). The "Buy-In Adjustment Amount" is the amount equal to the number of Sold
Shares  multiplied  by the excess,  if any, of (x) the Holder's  total  purchase
price per  share  (including  brokerage  commissions,  if any) for the  Covering
Shares over (y) the net proceeds per share (after brokerage commissions, if any)
received by the Holder from the sale of the Sold Shares.  The Company  shall pay
the  Buy-In  Adjustment  Amount to the  Holder in  immediately  available  funds
immediately  upon  demand  by the  Holder.  By way of  illustration  and  not in
limitation  of the  foregoing,  if the Holder  purchases  shares of Common Stock
having a total purchase price  (including  brokerage  commissions) of $11,000 to
cover a Buy-In with  respect to shares of Common  Stock it sold for net proceeds
of $10,000,  the Buy-In  Adjustment Amount which Company will be required to pay
to the Holder will be $1,000.

                                       20
<PAGE>

            c. In lieu of  delivering  physical  certificates  representing  the
Common Stock issuable upon  conversion of the Debenture or exercise of a Warrant
or at the request of the Holder with  respect to any Shares  previously  issued,
provided the Transfer Agent is  participating  in the  Depository  Trust Company
("DTC") Fast Automated  Securities Transfer program,  upon request of the Holder
and the Holder's compliance with the provisions contained in this paragraph,  so
long as the certificates therefor do not bear a legend and the Holder thereof is
not obligated to return such  certificate for the placement of a legend thereon,
the  Company  shall  use its  best  efforts  to  cause  the  Transfer  Agent  to
electronically  transmit to the Holder the Common Stock issuable upon conversion
of the  Debenture  or exercise of the  Warrant or in  replacement  of any Shares
previously  issued by  crediting  the account of Holder's  Prime Broker with DTC
through its Deposit Withdrawal Agent Commission system.

            d. The  Company  shall  assume any fees or  charges of the  Transfer
Agent or Company counsel  regarding (i) the removal of a legend or stop transfer
instructions  with respect to Registrable  Securities,  and (ii) the issuance of
certificates or DTC registration to or in the name of the Holder or the Holder's
designee  or  to a  transferee  as  contemplated  by an  effective  Registration
Statement.   Notwithstanding   the   foregoing,   it  shall   be  the   Holder's
responsibility to obtain all needed formal requirements (specifically: medallion
guarantee and prospectus delivery  compliance) in connection with any electronic
issuance of shares of Common Stock.

            e. The Company will authorize the Transfer Agent to give information
relating to the Company  directly to the Holder or the Holder's  representatives
upon the  request of the Buyer or any such  representative,  to the extent  such
information  relates  to (i) the  status of shares  of  Common  Stock  issued or
claimed to be issued to the Holder in connection  with a Notice of Conversion or
a Notice of Exercise,  or (ii) the  aggregate  number of  outstanding  shares of
Common  Stock of all  shareholders  (as a group  and not  individually)  as of a
current or other specified date. At the request of the Holder,  the Company will
provide the Holder  with a copy of the  authorization  so given to the  Transfer
Agent.

            6. CLOSING DATE.

            a. The  Initial  Closing  Date shall be August 1, 2005.  One or more
Additional  Closing Date shall occur on the date on which each of the conditions
contemplated by Sections 7 and 8 hereof shall have either been satisfied or been
waived by the party in whose favor such  conditions run or as soon thereafter as
is reasonably practicable;  provided,  however, that any Additional Closing Date
shall  occur no later than thirty (30)  calendar  days from the Initial  Closing
Date.

            b.  The  closing  of the  purchase  and  issuance  of the  Purchased
Securities shall occur on each Closing Date at the offices of the Escrow Agent.

            c.  Notwithstanding  anything to the contrary  contained herein, the
Escrow Agent will be  authorized  to release the Escrow Funds to the Company and
to others and to release the other  Escrow  Property on each  Closing  Date upon
satisfaction  of the  conditions  set forth in  Sections  7 and 8 hereof  and as
provided in the Joint Escrow Instructions.

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

            The Buyer  understands  that the  Company's  obligation  to sell the
Purchased  Securities  to the Buyer  pursuant to this  Agreement on each Closing
Date is conditioned upon:

            a. The execution  and delivery of this  Agreement by the Buyer on or
before such Closing Date;

                                       21
<PAGE>

            b. Delivery by the Buyer to the Escrow Agent by such Closing Date of
good  funds as  payment  in full of an  amount  equal to the  Purchase  Price in
accordance with this Agreement;

            c. The  accuracy on such  Closing  Date of the  representations  and
warranties  of the Buyer  contained in this  Agreement,  each as if made on such
date,  and the  performance by the Buyer on or before such date of all covenants
and agreements of the Buyer required to be performed on or before such date; and

            d.  There  shall  not be in  effect  any  law,  rule  or  regulation
prohibiting or restricting the transactions  contemplated  hereby,  or requiring
any consent or approval which shall not have been obtained.

            8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.

            The Company  understands that the Buyer's obligation to purchase the
Purchased Securities on each Closing Date is conditioned upon:

            a. The  execution  and  delivery  of this  Agreement  and the  other
Transaction Agreements by the Company on or before such Closing Date;

            b. The  delivery by the Company to the Escrow  Agent of originals of
each of the Certificates in accordance with this Agreement;

            c. The  delivery by the Company to the Escrow  Agent of the executed
Company  Principal's  Agreements  from each  Company  Principal  and the related
Principals  (as defined in each Company  Principal's  Agreement) of such Company
Principal;

            d.  The  delivery  by the  Company  to the  Escrow  Agent of the SBA
Compliance Documents;

            e. On such Closing Date, each of the Transaction Agreements executed
by the  Company on or before such date shall be in full force and effect and the
Company shall not be in default thereunder;

            f The accuracy in all material  respects on such Closing Date of the
representations and warranties of the Company contained in this Agreement,  each
as if made on such date,  and the  performance  by the Company on or before such
date of all covenants and agreements of the Company  required to be performed on
or before such date;

            g. The Buyer  shall have  received  an  opinion  of counsel  for the
Company,  dated such  Closing  Date,  in form,  scope and  substance  reasonably
satisfactory  to the Buyer,  substantially  to the effect set forth in Annex III
attached hereto;

            h.  There  shall  not be in  effect  any  law,  rule  or  regulation
prohibiting or restricting the transactions  contemplated  hereby,  or requiring
any consent or approval which shall not have been obtained; and

            i. From and after the date  hereof  to and  including  such  Closing
Date, each of the following conditions will remain in effect: (i) the trading of
the Common Stock shall not have been  suspended  by the SEC or on the  Principal
Trading Market;  (ii) trading in securities  generally on the Principal  Trading
Market shall not have been suspended or limited;  (iii), no minimum prices shall
been established for securities traded on the Principal Trading Market; and (iv)
there shall not have been any material adverse change in any financial market.

            9. INDEMNIFICATION.

            a. (i) The Company  agrees to indemnify  and hold harmless the Buyer
and its  officers,  directors,  employees,  and agents,  and each Buyer  Control
Person from and against any losses,  claims,  damages,  liabilities  or expenses
incurred (collectively,  "Damages"), joint or several, and any action in respect
thereof to which the  Buyer,  its  partners,  Affiliates,  officers,  directors,
employees, and duly authorized agents, and any such Buyer Control Person becomes
subject to, resulting from, arising out of or relating to any misrepresentation,
breach of warranty or  nonfulfillment  of or failure to perform any  covenant or
agreement on the part of Company  contained in this  Agreement,  as such Damages
are incurred, except to the extent such Damages result primarily from a material
breach of a  material  representation  by Buyer or Buyer's  material  failure to
perform any covenant or agreement  contained in this Agreement (in each case, as
determined by a non-appealable judgment to such effect).

                                       22
<PAGE>


            (ii) The Company  hereby  agrees that,  if the Buyer,  other than by
reason of its gross negligence or willful misconduct or by reason of its trading
of the Common  Stock in a manner that is illegal  under the  federal  securities
laws (in each case, as determined by a non-appealable  judgment to such effect),
(x) becomes involved in any capacity in any action,  proceeding or investigation
brought by any shareholder of the Company,  in connection with or as a result of
the consummation of the transactions contemplated by this Agreement or the other
Transaction  Agreements,  or if the  Buyer  is  impleaded  in any  such  action,
proceeding  or  investigation  by any  Person,  or (y)  becomes  involved in any
capacity in any action,  proceeding  or  investigation  brought by the SEC,  any
self-regulatory  organization  or other  body  having  jurisdiction,  against or
involving the Company or in connection  with or as a result of the  consummation
of the  transactions  contemplated  by this  Agreement or the other  Transaction
Agreements,  or (z) is impleaded in any such action, proceeding or investigation
by any Person,  then in any such case, the Company shall  indemnify,  defend and
hold  harmless the Buyer from and against and in respect of all losses,  claims,
liabilities, damages or expenses resulting from, imposed upon or incurred by the
Buyer, directly or indirectly, and reimburse such Buyer for its reasonable legal
and other expenses  (including the cost of any  investigation  and  preparation)
incurred  in  connection   therewith,   as  such  expenses  are  incurred.   The
indemnification  and  reimbursement   obligations  of  the  Company  under  this
paragraph  shall be in addition to any liability which the Company may otherwise
have,  shall extend upon the same terms and  conditions to any Affiliates of the
Buyer who are actually named in such action,  proceeding or  investigation,  and
partners,  directors,  agents,  employees and Buyer Control Persons (if any), as
the case may be, of the Buyer and any such Affiliate,  and shall be binding upon
and  inure  to the  benefit  of any  successors,  assigns,  heirs  and  personal
representatives  of the  Company,  the Buyer,  any such  Affiliate  and any such
Person.  The Company also agrees that neither the Buyer nor any such  Affiliate,
partner,  director,  agent,  employee  or Buyer  Control  Person  shall have any
liability to the Company or any Person asserting claims on behalf of or in right
of the Company in  connection  with or as a result of the  consummation  of this
Agreement  or the  other  Transaction  Agreements,  except  to the  extent  such
liability is based on a material  misrepresentation made by the Buyer in Section
2 hereof or Buyer's  material  failure  to  perform  any  material  covenant  or
agreement of Buyer  contained in the  Transaction  Agreements  (in each case, as
determined by a non-appealable judgment to such effect).

            b. All  claims  for  indemnification  by any  Indemnified  Party (as
defined below) under this Section shall be asserted and resolved as follows:

            (i) In the event any claim or demand in  respect of which any Person
claiming  indemnification  under any provision of this Section (an  "Indemnified
Party")  might seek  indemnity  under  paragraph (a) of this Section is asserted
against or sought to be collected from such Indemnified  Party by a Person other
than a party  hereto or an  Affiliate  thereof  (a  "Third  Party  Claim"),  the
Indemnified Party shall deliver a written notification,  enclosing a copy of all
papers  served,  if any, and  specifying  the nature of and basis for such Third
Party Claim and for the Indemnified  Party's claim for  indemnification  that is
being  asserted  under any  provision  of this  Section  against any Person (the
"Indemnifying  Party"),  together  with the  amount  or, if not then  reasonably
ascertainable,  the estimated  amount,  determined in good faith,  of such Third
Party Claim (a "Claim  Notice") with reasonable  promptness to the  Indemnifying
Party.  If the  Indemnified  Party  fails  to  provide  the  Claim  Notice  with
reasonable  promptness after the Indemnified Party receives notice of such Third
Party Claim,  the  Indemnifying  Party shall not be  obligated to indemnify  the
Indemnified  Party with respect to such Third Party Claim to the extent that the
Indemnifying  Party's  ability to defend has been  prejudiced by such failure of
the Indemnified Party. The Indemnifying Party shall notify the Indemnified Party
as soon as  practicable  within the period  ending  thirty  (30)  calendar  days
following  receipt  by the  Indemnifying  Party of  either a Claim  Notice or an
Indemnity  Notice  (as  defined  below)  (the  "Dispute   Period")  whether  the
Indemnifying  Party disputes its liability or the amount of its liability to the
Indemnified Party under this Section and whether the Indemnifying Party desires,
at its sole cost and expense, to defend the Indemnified Party against such Third
Party Claim. The following provisions shall also apply.

                                       23
<PAGE>

      (x) If the  Indemnifying  Party notifies the Indemnified  Party within the
      Dispute  Period  that  the  Indemnifying   Party  desires  to  defend  the
      Indemnified  Party with respect to the Third Party Claim  pursuant to this
      paragraph (b) of this Section,  then the Indemnifying Party shall have the
      right to defend,  with counsel reasonably  satisfactory to the Indemnified
      Party, at the sole cost and expense of the Indemnifying  Party, such Third
      Party Claim by all appropriate  proceedings,  which  proceedings  shall be
      vigorously and diligently  prosecuted by the Indemnifying Party to a final
      conclusion or will be settled at the discretion of the Indemnifying  Party
      (but only with the  consent  of the  Indemnified  Party in the case of any
      settlement that provides for any relief other than the payment of monetary
      damages or that  provides for the payment of monetary  damages as to which
      the  Indemnified  Party  shall  not be  indemnified  in full  pursuant  to
      paragraph (a) of this  Section).  The  Indemnifying  Party shall have full
      control of such  defense and  proceedings,  including  any  compromise  or
      settlement thereof; provided,  however, that the Indemnified Party may, at
      the sole cost and expense of the  Indemnified  Party, at any time prior to
      the  Indemnifying  Party's delivery of the notice referred to in the first
      sentence  of this  subparagraph  (x),  file any  motion,  answer  or other
      pleadings or take any other action that the Indemnified  Party  reasonably
      believes  to be  necessary  or  appropriate  protect  its  interests;  and
      provided  further,  that  if  requested  by the  Indemnifying  Party,  the
      Indemnified  Party will, at the sole cost and expense of the  Indemnifying
      Party,  provide  reasonable  cooperation  to  the  Indemnifying  Party  in
      contesting  any Third Party Claim that the  Indemnifying  Party  elects to
      contest.  The Indemnified  Party may participate in, but not control,  any
      defense  or  settlement  of  any  Third  Party  Claim  controlled  by  the
      Indemnifying  Party  pursuant  to this  subparagraph  (x),  and  except as
      provided in the preceding  sentence,  the Indemnified Party shall bear its
      own costs and expenses with respect to such participation. Notwithstanding
      the  foregoing,  the  Indemnified  Party may take over the  control of the
      defense or settlement of a Third Party Claim at any time if it irrevocably
      waives its right to  indemnity  under  paragraph  (a) of this Section with
      respect to such Third Party Claim.

      (y) If the Indemnifying Party fails to notify the Indemnified Party within
      the Dispute Period that the Indemnifying Party desires to defend the Third
      Party  Claim  pursuant  to  paragraph  (b)  of  this  Section,  or if  the
      Indemnifying Party gives such notice but fails to prosecute vigorously and
      diligently or settle the Third Party Claim,  each in a reasonable  manner,
      or if the Indemnifying  Party fails to give any notice  whatsoever  within
      the Dispute  Period,  then the  Indemnified  Party shall have the right to
      defend, at the sole cost and expense of the Indemnifying  Party, the Third
      Party Claim by all appropriate  proceedings,  which  proceedings  shall be
      prosecuted  by the  Indemnified  Party in a reasonable  manner and in good
      faith or will be settled at the discretion of the Indemnified  Party (with
      the  consent  of  the  Indemnifying  Party,  which  consent  will  not  be
      unreasonably  withheld).  The Indemnified  Party will have full control of
      such defense and  proceedings,  including  any  compromise  or  settlement
      thereof;  provided,  however,  that if requested by the Indemnified Party,
      the  Indemnifying  Party  will,  at  the  sole  cost  and  expense  of the
      Indemnifying  Party,  provide  reasonable  cooperation to the  Indemnified
      Party and its  counsel  in  contesting  any Third  Party  Claim  which the
      Indemnified Party is contesting.  Notwithstanding the foregoing provisions
      of this  subparagraph  (y), if the  Indemnifying  Party has  notified  the
      Indemnified  Party within the Dispute Period that the  Indemnifying  Party
      disputes  its  liability or the amount of its  liability  hereunder to the
      Indemnified  Party  with  respect to such  Third  Party  Claim and if such
      dispute  is  resolved  in favor of the  Indemnifying  Party in the  manner
      provided in  subparagraph(z)  below,  the  Indemnifying  Party will not be
      required to bear the costs and expenses of the Indemnified Party's defense
      pursuant  to  this  subparagraph  (y)  or  of  the  Indemnifying   Party's
      participation   therein  at  the  Indemnified  Party's  request,  and  the
      Indemnified  Party shall reimburse the Indemnifying  Party in full for all
      reasonable  costs  and  expenses  incurred  by the  Indemnifying  Party in
      connection with such litigation.  The  Indemnifying  Party may participate
      in,  but  not  control,  any  defense  or  settlement  controlled  by  the
      Indemnified  Party pursuant to this subparagraph (y), and the Indemnifying
      Party  shall  bear  its  own  costs  and  expenses  with  respect  to such
      participation.

                                       24
<PAGE>

      (z) If the Indemnifying  Party notifies the Indemnified Party that it does
      not  dispute  its  liability  or  the  amount  of  its  liability  to  the
      Indemnified  Party with  respect to the Third Party Claim under  paragraph
      (a) of this  Section or fails to notify the  Indemnified  Party within the
      Dispute  Period whether the  Indemnifying  Party disputes its liability or
      the amount of its liability to the Indemnified  Party with respect to such
      Third Party  Claim,  the amount of Damages  specified  in the Claim Notice
      shall be conclusively  deemed a liability of the Indemnifying  Party under
      paragraph  (a) of this  Section and the  Indemnifying  Party shall pay the
      amount  of  such  Damages  to the  Indemnified  Party  on  demand.  If the
      Indemnifying  Party has timely disputed its liability or the amount of its
      liability  with  respect to such  claim,  the  Indemnifying  Party and the
      Indemnified Party shall proceed in good faith to negotiate a resolution of
      such  dispute;  provided,  however,  that it the  dispute is not  resolved
      within thirty (30) days after the Claim  Notice,  the  Indemnifying  Party
      shall be entitled to institute such legal action as it deems appropriate.

            (ii) In the event any  Indemnified  Party  should have a claim under
paragraph  (a) of this  Section  against  the  Indemnifying  Party that does not
involve a Third Party  Claim,  the  Indemnified  Party  shall  deliver a written
notification  of a claim  for  indemnity  under  paragraph  (a) of this  Section
specifying the nature of and basis for such claim,  together with the amount or,
if not then reasonably  ascertainable,  the estimated amount, determined in good
faith, of such claim (an "Indemnity  Notice") with reasonable  promptness to the
Indemnifying  Party. The failure by any Indemnified  Party to give the Indemnity
Notice shall not impair such party's rights  hereunder except to the extent that
the Indemnifying  Party  demonstrates  that it has been  irreparably  prejudiced
thereby.  If the Indemnifying  Party notifies the Indemnified Party that it does
not dispute  the claim or the amount of the claim  described  in such  Indemnity
Notice or fails to notify  the  Indemnified  Party  within  the  Dispute  Period
whether the  Indemnifying  Party  disputes  the claim or the amount of the claim
described  in such  Indemnity  Notice,  the amount of Damages  specified  in the
Indemnity  Notice will be  conclusively  deemed a liability of the  Indemnifying
Party under paragraph (a) of this Section and the  Indemnifying  Party shall pay
the  amount  of  such  Damages  to  the  Indemnified  Party  on  demand.  If the
Indemnifying  Party has  timely  disputed  its  liability  or the  amount of its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party shall  proceed in good faith to  negotiate a resolution  of such  dispute;
provided,  however,  that if the dispute is not resolved within thirty (30) days
after the Claim Notice,  the  Indemnifying  Party shall be entitled to institute
such legal action as it deems appropriate.

            c. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar rights of the  indemnified  party against the
indemnifying  party or others,  and (ii) any liabilities the indemnifying  party
may be subject to.

            10. JURY TRIAL  WAIVER.  The Company  and the Buyer  hereby  waive a
trial by jury in any action, proceeding or counterclaim brought by either of the
Parties  hereto  against  the other in respect of any matter  arising  out or in
connection with the Transaction Agreements.

            11. SPECIFIC PERFORMANCE.  The Company and the Buyer acknowledge and
agree that  irreparable  damage  would occur in the event that any  provision of
this Agreement or any of the other Transaction  Agreements were not performed in
accordance with its specific terms or were otherwise breached. It is accordingly
agreed  that  the  parties  (including  any  Holder)  shall  be  entitled  to an
injunction or injunctions,  without (except as specified below) the necessity to
post a bond, to prevent or cure breaches of the  provisions of this Agreement or
such  other  Transaction  Agreement  and to enforce  specifically  the terms and
provisions  hereof or thereof,  this being in  addition  to any other  remedy to
which any of them may be entitled by law or equity;  provided,  however that the
Company, upon receipt of a Notice of Conversion or a Notice of Exercise, may not
fail or refuse to deliver the stock certificates and the related legal opinions,
if any, based on any claim that the Holder has violated any provision  hereof or
for any other reason, unless the Company has first posted a bond for one hundred
fifty  percent  (150%) of the  principal  amount and then obtained a court order
specifically  directing it not to deliver said stock certificates to the Holder.
This provision is deemed  incorporated by reference into each of the Transaction
Agreements as if set forth therein in full.

                                       25
<PAGE>

            12. GOVERNING LAW: MISCELLANEOUS.

            a. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Illinois for  contracts to be wholly  performed in
such state and without  giving effect to the  principles  thereof  regarding the
conflict of laws. Each of the parties consents to the exclusive  jurisdiction of
the federal courts whose  districts  encompass any part of the County of Cook or
the state  courts  of the State of  Illinois  sitting  in the  County of Cook in
connection  with any dispute  arising  under this  Agreement or any of the other
Transaction  Agreements  and hereby waives,  to the maximum extent  permitted by
law, any objection,  including any objection based on forum non  conveniens,  to
the  bringing  of any  such  proceeding  in such  jurisdictions.  To the  extent
determined  by such  court,  the  Company  shall  reimburse  the  Buyer  for any
reasonable legal fees and disbursements  incurred by the Buyer in enforcement of
or protection of any of its rights under any of the Transaction Agreements.

            b.  Failure of any party to exercise  any right or remedy under this
Agreement or otherwise,  or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

            c. This Agreement  shall inure to the benefit of and be binding upon
the successors and assigns of each of the parties hereto.

            d. All pronouns and any  variations  thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.

            e. A facsimile  transmission of this signed Agreement shall be legal
and binding on all parties hereto.

            f. This Agreement may be signed in one or more counterparts, each of
which shall be deemed an original.

            g. The headings of this  Agreement are for  convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.

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

            i. This  Agreement  may be amended only by an  instrument in writing
signed by the party to be charged with enforcement thereof.

            j. This Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof.

            13.  NOTICES.  Any notice  required or permitted  hereunder shall be
given in  writing  (unless  otherwise  specified  herein)  and  shall be  deemed
effectively given on the earliest of

                  (a) the date delivered,  if delivered by personal  delivery as
            against   written  receipt   therefor  or  by  confirmed   facsimile
            transmission,

                  (b) the seventh  business day after deposit,  postage prepaid,
            in the United States Postal Service by registered or certified mail,
            or

                                       26
<PAGE>

                  (c) the  third  business  day after  mailing  by  domestic  or
            international express courier, with delivery costs and fees prepaid,

in each case,  addressed to each of the other parties thereunto  entitled at the
following  addresses (or at such other  addresses as such party may designate by
ten (10)  days'  advance  written  notice  similarly  given to each of the other
parties hereto):

COMPANY:          At the address set forth at the head of this Agreement.

                  Attn: Chief Executive Officer
                  Telephone No.: (858) 518-1387
                  Telecopier No.: (858) 279-1799

                  with a copy to:

                  Michael Corrigan, Esq.
                  7770 Regents Road
                  Suite 113-401
                  San Diego, CA 92122
                  Telephone No.: (858) 362-1440
                  Telecopier No.: (858) 362-1441

BUYER:            At the  address  set  forth  on the  signature  page of this
                  Agreement.

                  with a copy to:

                  Wildman, Harrold, Allen & Dixon LLP
                  225 West Wacker Drive
                  Suite 1800
                  Chicago, IL 60606
                  Attn: Alan B. Roth, Esq.
                  Telephone No.: (312) 201-2633
                  Telecopier No.  (312) 201-2555

ESCROW AGENT:     Wildman, Harrold, Allen & Dixon LLP
                  225 West Wacker Drive
                  Suite 1800
                  Chicago, IL 60606
                  Attn: Alan B. Roth, Esq.
                  Telephone No.: (312) 201-2633
                  Telecopier No.  (312) 201-2555

            14. SURVIVAL OF  REPRESENTATIONS  AND WARRANTIES.  The Company's and
the Buyer's  representations  and warranties  herein shall survive the execution
and  delivery of this  Agreement  and the delivery of the  Certificates  and the
payment  of the  Purchase  Price,  for a period of three (3)  years  after  last
Additional  Closing  Date and shall  inure to the  benefit  of the Buyer and the
Company and their respective successors and assigns.

                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]

                                       27
<PAGE>

                 [SECURITIES PURCHASE AGREEMENT SIGNATURE PAGE]

            IN WITNESS  WHEREOF,  with respect to the Purchase  Price  specified
below, each the undersigned  represents that the foregoing statements made by it
above are true and  correct  and that it has caused  this  Agreement  to be duly
executed  on its behalf (if an entity,  by one of its  officers  thereunto  duly
authorized) as of the date first above written.

PURCHASE PRICE:                                       $1,750,000

SECURED CONVERTIBLE DEBENTURE (PRINCIPAL AMOUNT)      $  437,500

UNSECURED CONVERTIBLE DEBENTURE (PRINCIPAL AMOUNT)    $1,312,500


                                    BUYER:
                                    ------


CHICAGO VENTURE PARTNERS, L.P.
an Illinois limited partnership

By: Chicago Venture Management, L.L.C.
    a Delaware limited liability company,
    sole General Partner

By: CVM, Inc., an Illinois corporation,
    Manager


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

Address:    303 East Wacker Drive, Suite 311
            Chicago, IL 60601

Facsimile:  ________________________


                                    COMPANY:
                                    --------

SUPERCLICK, INC.

By:         ________________________

Title:      ________________________

<PAGE>

      ANNEX I           FORM OF DEBENTURES

      ANNEX II          JOINT ESCROW INSTRUCTIONS

      ANNEX III         OPINION OF COUNSEL

      ANNEX IV          REGISTRATION RIGHTS AGREEMENT

      ANNEX V           FORM OF WARRANTS

      ANNEX VI          COMPANY DISCLOSURE

      ANNEX VII         COMPANY'S SEC DOCUMENTS AVAILABLE ON EDGAR

      ANNEX VIII        COMPANY PRINCIPAL'S AGREEMENT

      ANNEX IX          SECURITY INTEREST AGREEMENT