Exhibit 10.1


                          BESTNET COMMUNICATIONS CORP.

                          SECURITIES PURCHASE AGREEMENT


                                OCTOBER ___, 2001
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                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----

1.  AGREEMENT TO SELL AND PURCHASE.............................................1

2.  FEES AND WARRANTS..........................................................1

3.  CLOSING, DELIVERY AND PAYMENT..............................................2
    3.1   Closing..............................................................2
    3.2   Delivery.............................................................2

4.  REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............................2
    4.1   Organization, Good Standing and Qualification........................2
    4.2   Subsidiaries.........................................................2
    4.3   Capitalization; Voting Rights........................................2
    4.4   Authorization; Binding Obligations...................................3
    4.5   Liabilities..........................................................3
    4.6   Agreements; Action...................................................4
    4.7   Obligations to Related Parties.......................................4
    4.8   Changes..............................................................5
    4.9   Title to Properties and Assets; Liens, Etc...........................5
    4.10  Intellectual Property................................................6
    4.11  Compliance with Other Instruments....................................6
    4.12  Litigation...........................................................6
    4.13  Tax Returns and Payments.............................................6
    4.14  Employees............................................................7
    4.15  Registration Rights and Voting Rights................................7
    4.16  Compliance with Laws; Permits........................................7
    4.17  Environmental and Safety Laws........................................7
    4.18  Valid Offering.......................................................7
    4.19  Full Disclosure......................................................8
    4.20  Insurance............................................................8
    4.21  SEC Reports..........................................................8
    4.22  No Market Manipulation...............................................8
    4.23  Listing..............................................................8
    4.24  No Integrated Offering...............................................8
    4.25  Stop Transfer........................................................8
    4.26  Dilution.............................................................8

                                      -i-
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5.  REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS...........................9
    5.1   Requisite Power and Authority........................................9
    5.2   Investment Representations...........................................9
    5.3   Purchaser Bears Economic Risk........................................9
    5.4   Acquisition for Own Account..........................................9
    5.5   Purchaser Can Protect Its Interest...................................9
    5.6   Accredited Investor..................................................9
    5.7   Legends..............................................................9

6.  COVENANTS OF THE COMPANY..................................................10
    6.1   Stop-Orders.........................................................10
    6.2   Listing.............................................................10
    6.3   Market Regulations..................................................10
    6.4   Reporting Requirements..............................................10
    6.5   Use of Funds........................................................11
    6.6   Access to Facilities................................................11
    6.7   Taxes...............................................................11
    6.8   Insurance...........................................................11
    6.9   Books and Records...................................................11
    6.10  Intellectual Property...............................................11
    6.11  Confidentiality.....................................................11
    6.12  Required Approvals..................................................12
    6.13  Reissuance of Securities............................................12
    6.14  Opinion.............................................................13

7.  COVENANTS OF THE COMPANY AND PURCHASERS REGARDING INDEMNIFICATION.........13
    7.1   Company Indemnification.............................................13
    7.2   Purchaser's Indemnification.........................................13
    7.3   Procedures..........................................................13

8.  CONVERSION OF CONVERTIBLE PREFERRED STOCK.................................13
    8.1   Mechanics of Conversion.............................................13
    8.2   Mandatory Redemption................................................14
    8.3   Maximum Conversion..................................................14
    8.4   Injunction - Posting of Bond........................................14
    8.5   Buy-In..............................................................14

9.  REGISTRATION RIGHTS.......................................................14
    9.1   Registration Rights Granted.........................................14
    9.2   Registration Procedures.............................................16
    9.3   Provision of Documents..............................................17
    9.4   Non-Registration Events.............................................17
    9.5   Expenses............................................................17
    9.6   Indemnification and Contribution....................................18

                                      -ii-
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10. OFFERING RESTRICTIONS.....................................................19

11. SECURITY INTEREST.........................................................19

12. MISCELLANEOUS.............................................................19
    12.1  Governing Law.......................................................19
    12.2  Survival............................................................20
    12.3  Successors and Assigns..............................................20
    12.4  Entire Agreement....................................................20
    12.5  Severability........................................................20
    12.6  Amendment and Waiver................................................20
    12.7  Delays or Omissions.................................................20
    12.8  Notices.............................................................20
    12.9  Attorneys' Fees.....................................................21
    12.10 Titles and Subtitles................................................21
    12.11 Counterparts........................................................21
    12.12 Broker's Fees.......................................................21
    12.13 Indemnification.....................................................21
    12.14 Construction........................................................21

                                     -iii-
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                          BESTNET COMMUNICATIONS CORP.
                          SECURITIES PURCHASE AGREEMENT


THIS SECURITIES PURCHASE AGREEMENT (the "AGREEMENT") is made and entered into as
of  October  __,  2001,  by and among  BESTNET  COMMUNICATIONS  CORP.,  a Nevada
corporation (the  "COMPANY"),  and the Purchaser listed on Exhibit A hereto (the
"PURCHASER").
                                                               RECITALS

     WHEREAS,  the Company  has  authorized  the sale of Series C 8%  Cumulative
Convertible  Preferred Stock,  $0.001 par value (the "PREFERRED  STOCK") for the
aggregate purchase price of $500,000,,  convertible into shares of the Company's
common stock, $0.001 par value per share (the "COMMON STOCK");

     WHEREAS,  the Company  wishes to issue  warrants  (the  "WARRANTS")  to the
Purchaser to purchase  shares of the Company's  Common Stock in connection  with
Purchaser's purchase of the Preferred Stock;

     WHEREAS,  Purchaser desires to purchase the Preferred Stock and Warrants on
the terms and conditions set forth herein; and

     WHEREAS,  the  Company  desires to issue and sell the  Preferred  Stock and
Warrants to Purchaser on the terms and conditions set forth herein.

                                    AGREEMENT

     NOW,  THEREFORE,  in consideration of the foregoing recitals and the mutual
promises,  representations,  warranties and covenants  hereinafter set forth and
for other good and valuable consideration,  the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

     1. AGREEMENT TO SELL AND PURCHASE. Pursuant to the terms and conditions set
forth in this  Agreement,  on the  Closing  Date (as  defined in Section 3), the
Company  agrees to sell to the  Purchaser,  and the  Purchaser  hereby agrees to
purchase  from the Company  Preferred  Stock in the amount set forth next to the
Purchaser's  name on Exhibit A under the column heading  "Closing Date Preferred
Stock,"  convertible  in  accordance  with the terms  thereof into shares of the
Company's Common Stock,  which amount shall be equal to $500,000.  The Preferred
Stock  purchased  on the  Closing  Date  shall be known as the  "OFFERING."  The
Certificate  of  Designations  for the  Preferred  Stock  (the  "CERTIFICATE  OF
DESIGNATIONS")  is annexed hereto as Exhibit B. The Preferred  Stock will have a
Mandatory Conversion Date (as defined in the Preferred Stock) two years from the
date of issuance.  Collectively,  the  Preferred  Stock and Warrants (as defined
above) and Common Stock  issuable upon  conversion  of the  Preferred  Stock and
exercise of the Warrants are referred to as the "SECURITIES."

     2. FEES AND WARRANTS.

          (a) The  Company  will  issue and  deliver  to the  persons  listed on
Exhibit A under the column heading "Warrant  Holders",  or to such other persons
as the Purchaser shall otherwise  designate (such named persons,  as they may be
so  otherwise  designated,  being  referred  to as  the  "WARRANT  RECIPIENTS"),
Warrants to purchase shares of Common Stock in the amounts designated on Exhibit
A hereto in connection with the Offering (the "WARRANTS")  pursuant to Section 1
hereof. The Warrants must be delivered on the Closing Date. The aggregate number
of shares of Common Stock  purchasable  upon exercise of the Warrants granted on
the Closing Date is set forth on Exhibit A hereto.  A form of Warrant is annexed
hereto as Exhibit C. The per share  "PURCHASE  PRICE" of Common Stock as defined
in the  Warrants  shall be  equal to 120% of the  average  of the  three  lowest
closing  prices of the Common Stock as reported by Bloomberg  Financial  for the
Pink  Sheets,  the NASD OTC  Bulletin  Board,  NASDAQ  SmallCap  Market,  NASDAQ
National  Market,  American Stock Exchange,  or New York Stock Exchange (each of
the  foregoing  the  "PRINCIPAL  MARKET"),  or such  other  principal  market or
exchange  where the Common  Stock is listed or traded,  for the ten (10) trading
days  preceding but not including  the Closing  Date.  All the  representations,
covenants, warranties,  undertakings, and indemnification, and other rights made
or granted to or for the benefit of  Purchaser  are hereby also made and granted
to the  holders of the  Warrants  in respect of the  Warrants  and shares of the
Company's  Common Stock  issuable  upon  exercise of the Warrants  (the "WARRANT
SHARES").
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          (b) The Company shall  reimburse  Purchaser for its  reasonable  legal
fees of $12,500  for  services  rendered to  Purchaser  in  preparation  of this
Agreement and the Related  Agreements,  and an  additional  amount not to exceed
$2,500 in connection  with its due diligence  review of the Company and relevant
matters. Amounts required to be paid hereunder will be paid at the Closing.

          (c) The Company will pay a cash fee in the amount of ten percent (10%)
of the aggregate gross purchase price to be paid to the Company from the sale of
Preferred Stock in the Offering (the "FUND MANAGER'S FEE") to the persons listed
on Exhibit A under the column heading "Fund  Manager's Fee  Recipient." The Fund
Manager's  Fee  must  be paid  on the  Closing  Date.  The  aforementioned  Fund
Manager's  Fee and legal fees will be payable at the  Closing  out of funds held
pursuant  to a  Funds  Escrow  Agreement  to be  entered  into  by the  Company,
Purchaser and an Escrow Agent.  Failure to timely deliver the Fund Manager's Fee
or the  Warrants  shall be deemed an Event of Default as defined in Section 9 of
the Preferred Stock.

     3. CLOSING, DELIVERY AND PAYMENT.

          3.1 CLOSING.  Subject to the terms and conditions  herein, the closing
of the  transactions  contemplated  hereby  (the  "CLOSING"),  which  closing is
comprised of Purchaser's  purchase of Preferred Stock in the aggregate principal
amount of  $500,000,  shall take  place on the date  hereof,  at the  offices of
Daniel M.  Laifer,  Esq. 135 West 50th Street,  Suite 1700,  New York,  New York
10020,  or at such other time or place as the Company and Purchaser may mutually
agree (such date is hereinafter referred to as the "CLOSING DATE").

          3.2  DELIVERY.  At the  Closing,  subject to the terms and  conditions
hereof,  the Company will  deliver to the  Purchaser  shares of Preferred  Stock
representing  the  aggregate  principal  amount  received  by the Company at the
Closing  from  the  Purchaser  and  a  warrant  certificate  registered  in  the
Purchaser's  name  representing  the  number of  Warrant  Shares as to which the
Warrant  is  exercisable  pursuant  to this  Agreement,  against  payment of the
purchase price therefor by certified  funds or wire transfer made payable to the
order of the Company,  cancellation  of  indebtedness  or any combination of the
foregoing.

     4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

     The Company hereby  represents and warrants to the Purchaser as of the date
of this  Agreement  as set forth  below.

          4.1 ORGANIZATION,  GOOD STANDING AND  QUALIFICATION.  The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of  Nevada.  The  Company  has all  requisite  corporate  power and
authority to own and operate its properties  and assets,  to execute and deliver
this Agreement, the Warrants to be issued in connection with this Agreement, the
Funds Escrow Agreement, the Security Agreement and all other agreements referred
to  herein  (collectively,  the  "RELATED  AGREEMENTS"),  to issue  and sell the
Preferred  Stock and the shares of Common Stock issuable upon  conversion of the
Preferred Stock (the  "CONVERSION  SHARES"),  to issue and sell the Warrants and
the Warrant  Shares,  and to carry out the  provisions of this Agreement and the
Related  Agreements  and to carry on its business as presently  conducted and as
presently  proposed  to be  conducted.  The  Company  is duly  qualified  and is
authorized  to do business and is in good standing as a foreign  corporation  in
all  jurisdictions  in which the nature of its  activities and of its properties
(both owned and leased)  makes such  qualification  necessary,  except for those
jurisdictions in which failure to do so would not have a material adverse effect
on the Company or its business.

          4.2  SUBSIDIARIES.  Except as disclosed  on Schedule  4.2, the Company
does not own or  control  any equity  security  or other  interest  of any other
corporation,  limited  partnership  or other business  entity.  If any entity is
listed on Schedule  4.2.  and the Company  owns a  controlling  interest in such
entity,  each of the  representations and warranties set forth in this Section 4
are being hereby  restated with respect to such entity  (modified as appropriate
to the nature of such entity.)

          4.3 CAPITALIZATION; VOTING RIGHTS.

               (a) The  authorized  capital  stock of the  Company,  immediately
prior to the Closing,  consists of (i)  50,000,000  shares of Common Stock,  par
value $0.001 per share,  14,659,148  shares of which are issued and outstanding,
and (ii) 10,000,000  shares of Preferred Stock, par value $0.001 per share, none
of which are issued and outstanding.

                                      -2-
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               (b) Other than (i) the shares  reserved  for  issuance  under the
Company's Stock Option Plan;  (ii) shares which may be granted  pursuant to this
Agreement and the Related  Agreements;  and (iii) warrants  issued to Cedar Ave.
and the placement agents,  there are no outstanding  options,  warrants,  rights
(including  conversion or preemptive rights and rights of first refusal),  proxy
or stockholder  agreements,  or  arrangements  or agreements of any kind for the
purchase or acquisition  from the Company of any of its securities.  Neither the
offer,  issuance  or sale of any of the  Preferred  Stock  or  Warrants,  or the
issuance of any of the Conversion Shares or Warrant Shares, nor the consummation
of any transaction  contemplated  hereby will result in a change in the price or
number of any  securities of the Company  outstanding,  under  anti-dilution  or
other similar provisions contained in or affecting any such securities.

               (c) All issued and  outstanding  shares of the  Company's  Common
Stock (i) have been duly  authorized  and validly  issued and are fully paid and
nonassessable  and (ii) were, to the Company's  knowledge,  issued in compliance
with  all  applicable   state  and  federal  laws  concerning  the  issuance  of
securities.

               (d) The rights,  preferences,  privileges and restrictions of the
shares of the Common Stock are as stated in the Articles of  Incorporation  (the
"CHARTER").  The Conversion Shares and Warrant Shares have been duly and validly
reserved  for  issuance.  When  issued  and  paid  for in  compliance  with  the
provisions of this  Agreement and the Company's  Charter,  the Preferred  Stock,
Warrants,  Conversion Shares and Warrant Shares (sometimes collectively referred
to  herein  as  the  "SECURITIES")  will  be  validly  issued,  fully  paid  and
nonassessable,  and will be free of any liens or encumbrances,  except for liens
or encumbrances placed on such securities by the Purchaser;  PROVIDED,  HOWEVER,
that the  Securities  may be subject to  restrictions  on  transfer  under state
and/or federal  securities laws as set forth herein or as otherwise  required by
such laws at the time a transfer is proposed.

               (e)  No  stock  plan,  stock  purchase,  stock  option  or  other
agreement  or  understanding  between  the  Company and any holder of any equity
securities or rights to purchase equity securities  provides for acceleration or
other  changes in the vesting  provisions  or other terms of such  agreement  or
understanding as the result of any merger, consolidated sale of stock or assets,
change in control or any other  transaction(s)  by the  Company,  including  the
transactions contemplated hereunder.

          4.4 AUTHORIZATION;  BINDING  OBLIGATIONS.  All corporate action on the
part of the Company, its officers,  directors and stockholders necessary for the
authorization of this Agreement and the Related  Agreements,  the performance of
all obligations of the Company  hereunder at the Closing and the  authorization,
sale,  issuance and delivery of the Securities  pursuant  hereto and the Related
Agreements  has been taken or will be taken prior to the Closing.  The Agreement
and the Related  Agreements,  when  executed  and  delivered,  will be valid and
binding  obligations of the Company  enforceable in accordance with their terms,
except (a) as  limited by  applicable  bankruptcy,  insolvency,  reorganization,
moratorium  or  other  laws of  general  application  affecting  enforcement  of
creditors'  rights,  and (b)  general  principles  of equity that  restrict  the
availability  of equitable  remedies.  The sale of the  Preferred  Stock and the
subsequent  conversion of the Preferred Stock into Conversion Shares are not and
will not be subject to any  preemptive  rights or rights of first  refusal  that
have not been properly waived or complied with. The sale of the Warrants and the
subsequent  exercise of the Warrants for Warrant  Shares are not and will not be
subject to any  preemptive  rights or rights of first refusal that have not been
properly  waived or complied  with.  The  Certificate  of  Designations  and the
Warrants,  when  executed  and  delivered in  accordance  with the terms of this
Agreement, will be valid and binding obligations of the Company,  enforceable in
accordance with their respective terms.

          4.5 LIABILITIES. Except as set forth in the SEC Reports (as defined in
Section 4.21),  the Company has no material  liabilities  and, to its knowledge,
knows of no material contingent liabilities, except current liabilities incurred
in the ordinary course of business which have not been, either in any individual
case or in the aggregate, materially adverse.

                                      -3-
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          4.6 AGREEMENTS; ACTION.

               (a)  Except  as  set  forth  in the  SEC  Reports,  there  are no
agreements,  understandings,   instruments,  contracts,  proposed  transactions,
judgments,  orders,  writs or decrees to which the Company is a party, or to its
knowledge, by which it is bound which may involve (i) obligations (contingent or
otherwise)  of, or  payments  to, the  Company in excess of $50,000  (other than
obligations  of, or  payments  to, the  Company  arising  from  purchase or sale
agreements  entered  into in the  ordinary  course  of  business),  or (ii)  the
transfer or license of any patent, copyright,  trade secret or other proprietary
right to or from the Company  (other than licenses  arising from the purchase of
"off the shelf" or other standard products), or (iii) provisions restricting the
development,  manufacture or distribution of the Company's products or services,
other than those with respect to the Softtalk licence,  or (iv)  indemnification
by the Company with respect to infringements of proprietary rights.

               (b) Since the date of the  Company's  most recent Form 10-QSB and
since the payment in  September  of the  quarterly  dividend to Cedar Ave.,  the
Company has not (i) declared or paid any  dividends,  or  authorized or made any
distribution  upon or with respect to any class or series of its capital  stock,
(ii)  incurred  any  indebtedness  for money  borrowed or any other  liabilities
individually  in  excess  of  $50,000  or,  in the case of  indebtedness  and/or
liabilities  individually  less  than  $50,000,  in excess  of  $100,000  in the
aggregate,  (iii) made any loans or advances to any person,  other than ordinary
advances for travel expenses,  or (iv) sold,  exchanged or otherwise disposed of
any of its  assets  or  rights,  other  than  the sale of its  inventory  in the
ordinary course of business.

               (c) For the  purposes  of  subsections  (a)  and (b)  above,  all
indebtedness,  liabilities, agreements,  understandings,  instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the  individual  minimum dollar amounts of
such subsections.

               (d) The  Company  has not  engaged  in the past two  years in any
discussion  (i) with  any  representative  of any  corporation  or  corporations
regarding  the  consolidation  or  merger of the  Company  with or into any such
corporation or corporations, (ii) with any corporation, partnership, association
or other  business  entity or any individual  regarding the sale,  conveyance or
disposition  of all or  substantially  all of the  assets of the  Company,  or a
transaction  or series of  related  transactions  in which  more than 50% of the
voting power of the Company is disposed of or (iii)  regarding any other form of
acquisition, liquidation, dissolution or winding up of the Company.

          4.7  OBLIGATIONS TO RELATED  PARTIES.  There are no obligations of the
Company to officers,  directors,  stockholders or employees of the Company other
than (a) for payment of salary for  services  rendered,  (b)  reimbursement  for
reasonable expenses incurred on behalf of the Company and (c) for other standard
employee  benefits made generally  available to all employees  (including  stock
option agreements  outstanding under any stock option plan approved by the Board
of Directors of the Company). With the exception of a Canadian $14,000 loan to a
vice president of the Company,  with interest  payable at prime plus 1%, none of
the officers,  directors or stockholders of the Company, or any members of their
immediate families, are indebted to the Company. None of the officers, directors
or, to the Company's knowledge,  key employees or stockholders of the Company or
any members of their immediate families, are indebted to the Company or have any
direct or indirect  ownership interest in any firm or corporation with which the
Company is  affiliated  or with which the Company  has a business  relationship,
other than with respect to Softtalk,  or any firm or corporation  which competes
with the Company,  other than passive  investments in publicly traded  companies
(representing  less than 1% of such company) which may compete with the Company.
No officer, director or stockholder,  or any member of their immediate families,
is, directly or indirectly, interested in any material contract with the Company
and no agreements,  understandings  or proposed  transactions  are  contemplated
between  the  Company and any such  person.  The  Company is not a guarantor  or
indemnitor of any indebtedness of any other person, firm or corporation.

                                      -4-
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          4.8 CHANGES. Since May 31, 2001, with the exception of a new President
and CEO being appointed on August 20, 2001, there has not been:

               (a) Any change in the assets,  liabilities,  financial condition,
or  operations  of the Company,  other than  changes in the  ordinary  course of
business,  none  of  which  individually  or in  the  aggregate  has  had  or is
reasonably   expected  to  have  a  material  adverse  effect  on  such  assets,
liabilities, financial condition, or operations of the Company;

               (b) Any  resignation or termination of any officer,  key employee
or group of employees of the Company;

               (c)  Any  material  change,  except  in the  ordinary  course  of
business,  in the  contingent  obligations  of the  Company by way of  guaranty,
endorsement, indemnity, warranty or otherwise;

               (d) Any damage,  destruction  or loss,  whether or not covered by
insurance,  materially  and  adversely  affecting  the  properties,  business or
prospects or financial condition of the Company;

               (e)  Any  waiver  by the  Company  of a  valuable  right  or of a
material debt owed to it;

               (f) Any  direct or  indirect  loans  made by the  Company  to any
stockholder,  employee,  officer or director of the Company, other than advances
made in the ordinary course of business;

               (g)  Any  material  change  in any  compensation  arrangement  or
agreement with any employee, officer, director or stockholder;

               (h)  Any   declaration  or  payment  of  any  dividend  or  other
distribution of the assets of the Company;

               (i) Any labor organization activity related to the Company;

               (j) Any  debt,  obligation  or  liability  incurred,  assumed  or
guaranteed by the Company,  except those for immaterial  amounts and for current
liabilities incurred in the ordinary course of business;

               (k) Any sale, assignment or transfer of any patents,  trademarks,
copyrights, trade secrets or other intangible assets;

               (l) Any change in any material  agreement to which the Company is
a party or by which it is bound which may  materially  and adversely  affect the
business,  assets,  liabilities,  financial  condition,  or  operations  of  the
Company;

               (m) Any other event or condition of any  character  that,  either
individually  or  cumulatively,  has or may materially and adversely  affect the
business, assets, liabilities,  financial condition,  prospects or operations of
the Company; or

               (n) Any arrangement or commitment by the Company to do any of the
acts described in subsection (a) through (m) above.

          4.9 TITLE TO PROPERTIES AND ASSETS;  LIENS,  ETC. The Company has good
and  marketable  title to its  properties  and  assets,  and  good  title to its
leasehold  estates,  in each case subject to no mortgage,  pledge,  lien, lease,
encumbrance or charge,  other than (a) those resulting from taxes which have not
yet become delinquent,  (b) minor liens and encumbrances which do not materially
detract from the value of the property subject thereto or materially  impair the
operations  of the  Company,  and (c) those  that have  otherwise  arisen in the
ordinary course of business.  All facilities,  machinery,  equipment,  fixtures,

                                      -5-
<PAGE>
vehicles and other properties  owned,  leased or used by the Company are in good
operating  condition  and  repair,  ordinary  wear  and tear  excepted,  and are
reasonably  fit and usable for the purposes  for which they are being used.  The
Company is in compliance  with all material terms of each lease to which it is a
party or is otherwise bound.

          4.10 INTELLECTUAL PROPERTY.

               (a) The Company owns or possesses  sufficient legal rights to all
patents,  trademarks,  service marks,  trade names,  copyrights,  trade secrets,
licenses,  information and other proprietary rights and processes  necessary for
its  business as now  conducted  and to the  Company's  knowledge  as  presently
proposed  to be  conducted  (the  "INTELLECTUAL  PROPERTY"),  without  any known
infringement of the rights of others. Other than with respect to Softtalk, there
are no outstanding  options,  licenses or agreements of any kind relating to the
foregoing  proprietary  rights,  nor is the  Company  bound by or a party to any
options,  licenses  or  agreements  of any kind  with  respect  to the  patents,
trademarks,  service marks, trade names,  copyrights,  trade secrets,  licenses,
information  and other  proprietary  rights and processes of any other person or
entity other than such licenses or agreements  arising from the purchase of "off
the shelf" or standard products.

               (b) The Company has not received any communications alleging that
the Company has violated any of the patents,  trademarks,  service marks,  trade
names,  copyrights  or trade  secrets or other  proprietary  rights of any other
person or entity, nor is the Company aware of any basis therefor.

               (c) The Company  does not believe it is or will be  necessary  to
utilize any inventions,  trade secrets or proprietary  information of any of its
employees made prior to their employment by the Company,  except for inventions,
trade secrets or proprietary  information that have been rightfully  assigned to
the Company.

          4.11 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in material
violation or default of any term of its Charter or Bylaws,  or of any  provision
of any material mortgage, indenture, contract, agreement, instrument or contract
to which it is party or by which it is bound or of any judgment,  decree,  order
or writ. The  execution,  delivery and  performance of and compliance  with this
Agreement  and the Related  Agreements,  and the issuance and sale of Securities
pursuant  hereto,  will not,  with or without  the  passage of time or giving of
notice, result in any material violation, or be in conflict with or constitute a
default under any term or provision,  or result in the creation of any mortgage,
pledge, lien,  encumbrance or charge upon any of the properties or assets of the
Company or the suspension,  revocation,  impairment, forfeiture or nonrenewal of
any permit,  license,  authorization or approval applicable to the Company,  its
business or operations or any of its assets or properties.

          4.12 LITIGATION. There is no action, suit, proceeding or investigation
pending or, to the Company's knowledge, currently threatened against the Company
that questions the validity of this  Agreement or the Related  Agreements or the
right of the Company to enter into any of such agreements,  or to consummate the
transactions  contemplated  hereby or  thereby,  or which might  result,  either
individually or in the aggregate,  in any material adverse change in the assets,
condition, or affairs of the Company, financially or otherwise, or any change in
the current equity ownership of the Company, nor is the Company aware that there
is any basis for any of the foregoing.  The Company is not a party or subject to
the provisions of any order, writ,  injunction,  judgment or decree of any court
or government agency or  instrumentality.  Other than the action with respect to
Joseph Vasquez III, there is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.

          4.13 TAX RETURNS AND  PAYMENTS.  The Company has timely  filed all tax
returns  (federal,  state and local) required to be filed by it. All taxes shown
to be due and  payable on such  returns,  any  assessments  imposed,  and to the
Company's  knowledge all other taxes due and payable by the Company on or before
the  Closing,  have  been  paid or will be paid  prior to the time  they  become
delinquent.  The  Company  has not been  advised  (a)  that any of its  returns,
federal,  state or other,  have been or are being audited as of the date hereof,
or (b) of any  deficiency  in  assessment  or proposed  judgment to its federal,
state or other taxes.  The Company has no knowledge of any  liability of any tax
to be imposed  upon its  properties  or assets as of the date of this  Agreement
that is not adequately provided for.

                                      -6-
<PAGE>
          4.14 EMPLOYEES.  The Company has no collective  bargaining  agreements
with any of its employees.  There is no labor union organizing  activity pending
or, to the Company's knowledge, threatened with respect to the Company. With the
exception of the  employment  agreement of Robert  Blanchard and the  employment
agreements and stock  incentive  plan stated in the SEC Reports,  the Company is
not a party to or bound by any currently effective employment contract, deferred
compensation  arrangement,  bonus plan,  incentive  plan,  profit  sharing plan,
retirement  agreement or other employee  compensation plan or agreement.  To the
Company's  knowledge,  no employee of the Company,  nor any consultant with whom
the  Company  has  contracted,  is in  violation  of any term of any  employment
contract,  proprietary  information agreement or any other agreement relating to
the right of any such  individual  to be employed by, or to contract  with,  the
Company  because of the nature of the  business to be  conducted by the Company;
and to the Company's  knowledge  the continued  employment by the Company of its
present  employees,  and the  performance  of the Company's  contracts  with its
independent  contractors,  will not result in any such violation. The Company is
not aware that any of its employees is obligated  under any contract  (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment,  decree or order of any court or  administrative  agency,  that
would  interfere with their duties to the Company.  The Company has not received
any notice  alleging that any such  violation  has occurred.  No employee of the
Company has been granted the right to continued  employment by the Company or to
any material compensation  following termination of employment with the Company.
The Company is not aware that any  officer,  key  employee or group of employees
intends to terminate his, her or their employment with the Company, nor does the
Company have a present intention to terminate the employment of any officer, key
employee or group of employees.

          4.15 REGISTRATION  RIGHTS AND VOTING RIGHTS.  The Company is presently
not under any obligation, and has not granted any rights, to register any of the
Company's  presently  outstanding  securities or any of its securities  that may
hereafter be issued. To the Company's  knowledge,  no stockholder of the Company
has entered into any agreement  with respect to the voting of equity  securities
of the Company.

          4.16 COMPLIANCE WITH LAWS; PERMITS.  To its knowledge,  the Company is
not  in  violation  of  any  applicable  statute,  rule,  regulation,  order  or
restriction  of any domestic or foreign  government  or any  instrumentality  or
agency thereof in respect of the conduct of its business or the ownership of its
properties  which violation would  materially and adversely affect the business,
assets,  liabilities,  financial  condition,  or operations  of the Company.  No
governmental  orders,  permissions,  consents,  approvals or authorizations  are
required to be obtained and no  registrations or declarations are required to be
filed in connection  with the  execution and delivery of this  Agreement and the
issuance  of any of the  Securities,  except  such as has been duly and  validly
obtained or filed,  or with  respect to any filings  that must be made after the
Closing,  as will be filed in a timely manner.  The Company has all  franchises,
permits,  licenses and any similar  authority  necessary  for the conduct of its
business as now being  conducted by it, the lack of which could  materially  and
adversely affect the business,  properties,  prospects or financial condition of
the Company.

          4.17 ENVIRONMENTAL AND SAFETY LAWS. The Company is not in violation of
any  applicable  statute,  law or  regulation  relating  to the  environment  or
occupational health and safety, and to its knowledge,  no material  expenditures
are or will be required in order to comply with any such existing  statute,  law
or regulation.  No Hazardous  Materials (as defined below) are used or have been
used, stored, or disposed of by the Company or, to the Company's  knowledge,  by
any other person or entity on any property owned, leased or used by the Company.
For the purposes of the preceding sentence, "HAZARDOUS MATERIALS" shall mean (a)
materials which are listed or otherwise  defined as "HAZARDOUS" or "TOXIC" under
any applicable  local,  state,  federal and/or foreign laws and regulations that
govern the existence and/or remedy of contamination on property,  the protection
of the environment from contamination, the control of hazardous wastes, or other
activities involving hazardous substances,  including building materials, or (b)
any petroleum products or nuclear materials.

          4.18 VALID OFFERING.  Assuming the accuracy of the representations and
warranties of the Purchaser  contained in this  Agreement,  the offer,  sale and
issuance of the Securities will be exempt from the registration  requirements of
the Securities  Act of 1933, as amended (the  "SECURITIES  ACT"),  and will have
been registered or qualified (or are exempt from registration and qualification)
under the registration,  permit or qualification  requirements of all applicable
state  securities  laws.  Neither  the  Company  nor any agent on its behalf has

                                      -7-
<PAGE>
solicited  or will  solicit  any  offers to sell or has  offered to sell or will
offer to sell all or any part of the  Securities  to any person or persons so as
to bring the sale of such  Securities  by the  Company  within the  registration
provisions of the Securities Act or any state securities laws.

          4.19 FULL DISCLOSURE.  The Company has provided the Purchaser with all
information  requested  by the  Purchaser  in  connection  with its  decision to
purchase the Preferred Stock and Warrants.  Neither this Agreement, the exhibits
and schedules hereto, the Related Agreements nor any other document delivered by
the Company to Purchaser or its  attorneys or agents in  connection  herewith or
therewith or with the transactions  contemplated hereby or thereby,  contain any
untrue  statement of a material fact nor omit to state a material fact necessary
in order to make the statements  contained herein or therein not misleading.  To
the  Company's  knowledge,  there  are no facts  which  (individually  or in the
aggregate)  materially  adversely  affect  the  business,  assets,  liabilities,
financial  condition,  or operations of the Company that have not been set forth
in the Agreement,  the exhibits and schedules hereto,  the Related Agreements or
in other  documents  delivered  to  Purchaser  or its  attorneys  or  agents  in
connection herewith.

          4.20 INSURANCE. The Company has general commercial, product liability,
fire and casualty  insurance  policies  with  coverage  customary  for companies
similarly situated to the Company.

          4.21 SEC REPORTS. To the best of the Company's knowledge,  the Company
has filed all proxy statements, reports and other documents required to be filed
by it under the  Securities  Exchange  Act of 1934,  as amended  (the  "EXCHANGE
ACT").  The Company has furnished  the  Purchaser  with copies of (i) its Annual
Report on Form  10-KSB for the  fiscal  year ended  August  31,  2000,  (ii) its
Quarterly Reports on Form 10-QSB for the fiscal quarters ended February 28, 2001
and  May  31,  2001  and  (iii)  its  Proxy   Statement  dated  August  8,  2000
(collectively, the "SEC REPORTS"). Each SEC Report was in substantial compliance
with the  requirements of its respective  form and none of the SEC Reports,  nor
the financial statements (and the notes thereto) included in the SEC Reports, as
of their respective dates,  contained any untrue statement of a material fact or
omitted to state a material fact  required to be stated  therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.

          4.22 NO MARKET  MANIPULATION.  The Company has not taken, and will not
take,  directly or indirectly,  any action designed to, or that might reasonably
be expected to, cause or result in stabilization or manipulation of the price of
the Common Stock of the Company to  facilitate  the sale or resale of any of the
Securities  being  offered  hereby  or  affect  the  price at  which  any of the
Securities being offered hereby may be issued.

          4.23 LISTING.  The Company's Common Stock is listed for trading on the
NASD OTC Bulletin Board and satisfies all  requirements  for the continuation of
such listing. The Company has not received any notice that its Common Stock will
be delisted  from the NASD OTC Bulletin  Board or that the Common Stock does not
meet all requirements for the continuation of such listing.

          4.24 NO INTEGRATED OFFERING. Neither the Company, nor to the Company's
knowledge any of its  affiliates,  nor any person acting on its or their behalf,
has directly or indirectly made any offers or sales of any security or solicited
any offers to buy any security under circumstances that would cause the offering
of the  Securities  pursuant  to this  Agreement  to be  integrated  with  prior
offerings  by the Company for  purposes of the 1933 Act which would  prevent the
Company from selling the Securities  pursuant to Rule 506 under the 1933 Act, or
any applicable  exchange-related  stockholder approval provisions.  Nor will the
Company or any of its affiliates or  subsidiaries  take any action or steps that
would  cause  the  offering  of  the  Securities  to be  integrated  with  other
offerings.

          4.25 STOP TRANSFER. The Securities are restricted securities as of the
date of this  Agreement.  The Company will not issue any stop transfer  order or
other order impeding the sale and delivery of any of the Securities at such time
as  the  Securities  are  registered  for  public  sale  or  an  exemption  from
registration is available, except as required by federal securities laws.

          4.26  DILUTION.  The number of shares of Common  Stock  issuable  upon
conversion  of the  Preferred  Stock and  exercise of the  Warrants may increase
substantially in certain circumstances,  including,  but not necessarily limited
to, the  circumstance  wherein the trading  price of the Common  Stock  declines
prior to conversion or exercise of such securities. The Company's directors have
studied and fully  understand the nature of the Securities being sold hereby and
recognize  that they have a potential  dilutive  effect.  The  directors  of the
Company have concluded,  in its good faith business judgment, that such issuance
is in the best interests of the Company. The Company  specifically  acknowledges

                                      -8-
<PAGE>
that its  obligation to issue the shares of Common Stock upon  conversion of the
Preferred  Stock and  exercise of the  Warrants 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.

     5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.

          The  Purchaser  hereby  represents  and  warrants to the Company  with
respect to itself or himself as follows (such  representations and warranties do
not lessen or obviate  the  representations  and  warranties  of the Company set
forth in this Agreement):

          5.1 REQUISITE  POWER AND AUTHORITY.  Purchaser has all necessary power
and authority under all applicable provisions of law to execute and deliver this
Agreement  and the Related  Agreements  and to carry out their  provisions.  All
action on  Purchaser's  part  required for the lawful  execution and delivery of
this Agreement and the Related Agreements have been or will be effectively taken
prior to the Closing. Upon their execution and delivery,  this Agreement and the
Related  Agreements  will  be  valid  and  binding   obligations  of  Purchaser,
enforceable in accordance with their terms,  except (a) as limited by applicable
bankruptcy,  insolvency,  reorganization,  moratorium  or other  laws of general
application  affecting  enforcement of creditors'  rights, and (b) as limited by
general  principles  of equity  that  restrict  the  availability  of  equitable
remedies.

          5.2  INVESTMENT   REPRESENTATIONS.   Purchaser  understands  that  the
Securities are being offered and sold pursuant to an exemption from registration
contained in the Securities Act based in part upon  Purchaser's  representations
contained in the Agreement.

          5.3  PURCHASER   BEARS  ECONOMIC  RISK.   Purchaser  has   substantial
experience in  evaluating  and investing in private  placement  transactions  of
securities  in  companies  similar  to the  Company  so  that it is  capable  of
evaluating  the merits and risks of its  investment  in the  Company and has the
capacity to protect its own interests.  Purchaser must bear the economic risk of
this investment  until the Securities are registered  pursuant to the Securities
Act, or an exemption from registration is available.

          5.4 ACQUISITION FOR OWN ACCOUNT.  Purchaser is acquiring the Preferred
Stock for  Purchaser's  own account  for  investment  only,  and not with a view
towards their distribution.

          5.5 PURCHASER CAN PROTECT ITS INTEREST.  Purchaser  represents that by
reason  of  its,  or of its  management's,  business  or  financial  experience,
Purchaser has the capacity to protect its own  interests in connection  with the
transactions  contemplated  in  this  Agreement,  and  the  Related  Agreements.
Further, Purchaser is aware of no publication of any advertisement in connection
with the transactions contemplated in the Agreement.

          5.6 ACCREDITED INVESTOR. Purchaser represents that it is an accredited
investor within the meaning of Regulation D under the Securities Act.

          5.7 LEGENDS.

               (a) The Preferred Stock shall bear the following legend until the
Preferred Stock and Conversion  Shares are covered by an effective  registration
statement filed with the SEC:

          "THESE  SHARES OF PREFERRED  STOCK AND THE COMMON STOCK  ISSUABLE UPON
          CONVERSION OF THE PREFERRED STOCK HAVE NOT BEEN  REGISTERED  UNDER THE
          SECURITIES  ACT  OF  1933,  AS  AMENDED,  OR,  IF  APPLICABLE,   STATE
          SECURITIES  LAWS. THESE SHARES OF PREFERRED STOCK AND THE COMMON STOCK
          ISSUABLE  UPON  CONVERSION  OF THE  PREFERRED  STOCK  MAY NOT BE SOLD,
          OFFERED  FOR  SALE,  PLEDGED  OR  HYPOTHECATED  IN THE  ABSENCE  OF AN
          EFFECTIVE  REGISTRATION  STATEMENT AS TO THE  PREFERRED  STOCK OR SUCH
          SHARES  UNDER  SAID ACT AND  APPLICABLE  STATE  SECURITIES  LAWS OR AN
          OPINION OF COUNSEL REASONABLY  SATISFACTORY TO BESTNET  COMMUNICATIONS
          CORP. THAT SUCH REGISTRATION IS NOT REQUIRED."

                                      -9-
<PAGE>
               (b) The  Conversion  Shares and the Warrant  Shares  shall bear a
legend which shall be in substantially  the following form until such shares are
covered by an effective registration statement filed with the SEC:

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

               (c) The Warrants shall bear the following legend:

          "THIS  WARRANT AND THE COMMON  SHARES  ISSUABLE  UPON EXERCISE OF THIS
          WARRANT HAVE NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS
          AMENDED,  OR APPLICABLE  STATE  SECURITIES  LAWS. THIS WARRANT AND THE
          COMMON SHARES  ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
          OFFERED  FOR  SALE,  PLEDGED  OR  HYPOTHECATED  IN THE  ABSENCE  OF AN
          EFFECTIVE  REGISTRATION STATEMENT AS TO THIS WARRANT OR THE UNDERLYING
          SHARES OF COMMON STOCK UNDER SAID ACT AND APPLICABLE  STATE SECURITIES
          LAWS OR AN  OPINION  OF  COUNSEL  REASONABLY  SATISFACTORY  TO BESTNET
          COMMUNICATIONS CORP. THAT SUCH REGISTRATION IS NOT REQUIRED."

     6.  COVENANTS OF THE  COMPANY.  The Company  covenants  and agrees with the
Purchaser as follows:

          6.1 STOP-ORDERS. The Company will advise the Purchaser, promptly after
it receives  notice of issuance by the Securities and Exchange  Commission  (the
"SEC"), any state securities commission or any other regulatory authority of any
stop  order  or of any  order  preventing  or  suspending  any  offering  of any
securities  of the Company,  or of the  suspension of the  qualification  of the
Common  Stock of the Company for  offering or sale in any  jurisdiction,  or the
initiation of any proceeding for any such purpose.

          6.2  LISTING.  The Company  shall  promptly  secure the listing of the
shares of Common Stock issuable upon  conversion of the Preferred Stock and upon
the  exercise of the  Warrants  upon the  Principal  Market upon which shares of
Common Stock are then listed  (subject to official notice of issuance) and shall
maintain  such  listing so long as any other  shares of Common Stock shall be so
listed. The Company will maintain the listing of its Common Stock on a Principal
Market, and will comply in all respects with the Company's reporting, filing and
other  obligations  under the  bylaws or rules of the  National  Association  of
Securities Dealers ("NASD") and such exchanges, as applicable.  The Company will
provide the Purchaser copies of all notices it receives notifying the Company of
the  threatened  and actual  delisting  of the Common  Stock from any  Principal
Market.

          6.3 MARKET  REGULATIONS.  The Company  shall notify the SEC,  NASD and
applicable  state  authorities,  in accordance with their  requirements,  of the
transactions  contemplated by this Agreement, and shall take all other necessary
action and  proceedings as may be required and permitted by applicable law, rule
and regulation,  for the legal and valid issuance of the Securities to Purchaser
and promptly provide copies thereof to Purchaser.

          6.4 REPORTING REQUIREMENTS. (a) Until at least two (2) years after the
effectiveness  of  the  Registration  Statement  on  Form  SB-2  or  such  other
Registration  Statement described in Section 9.1(d) hereof, the Company will (i)

                                      -10-
<PAGE>
cause its Common  Stock to continue to be  registered  under  Sections  12(b) or
12(g) of the Exchange  Act,  (ii) comply in all respects  with its reporting and
filing  obligations  under the Exchange  Act,  (iii)  comply with all  reporting
requirements  that is applicable to an issuer with a class of shares  registered
pursuant  to  Section  12(g)  of the  Exchange  Act,  and (iv)  comply  with all
requirements  related  to any  registration  statement  filed  pursuant  to this
Agreement. The Company will not take any action or file any document (whether or
not permitted by the Securities Act or the Exchange Act or the rules thereunder)
to  terminate  or suspend  such  registration  or to  terminate  or suspend  its
reporting and filing  obligations under said Acts until the later of (y) two (2)
years after the  effective  date of the  Registration  Statement on Form SB-2 or
such other Registration Statement described in Section 9.1(d) hereof, or (z) the
sale by the Purchaser of all the Securities  issuable by the Company pursuant to
this  Agreement.  Until at least two (2)  years  after  the  Warrants  have been
exercised,  the Company  will use its  commercial  best  efforts to continue the
listing of the Common  Stock on the NASD OTC  Bulletin  Board and will comply in
all respects with the Company's  reporting,  filing and other  obligations under
the bylaws or rules of the NASD and NASDAQ.

          6.5 USE OF FUNDS.  The Company  undertakes  to use the proceeds of the
Purchaser's  funds for the purposes set forth on SCHEDULE 6.5 attached hereto. A
deviation  from the use of proceeds  set forth on SCHEDULE  6.5 of more than 10%
per item or more than 20% in the aggregate  shall be deemed a material breach of
the Company's obligations hereunder.

          6.6 ACCESS TO FACILITIES.  The Company will permit any representatives
designated  by the  Purchaser  (or  any  transferee  of the  Purchaser)  under a
Confidentiality and Non-Disclosure  Agreement,  so long as such person holds any
Securities  upon  reasonable  notice and during normal  business  hours, at such
person's  expense and  accompanied by a  representative  of the Company,  to (a)
visit  and  inspect  any of the  properties  of the  Company,  (b)  examine  the
corporate and financial  records of the Company (unless such  examination is not
permitted by federal, state or local law or by contract) and make copies thereof
or extracts therefrom and (c) discuss the affairs,  finances and accounts of any
such  corporations with the directors,  officers and independent  accountants of
the Company.

          6.7 TAXES. The Company will promptly pay and discharge, or cause to be
paid and  discharged,  when due and payable,  all lawful taxes,  assessments and
governmental  charges or levies  imposed upon the income,  profits,  property or
business  of the  Company;  provided,  however,  that any such tax,  assessment,
charge or levy  need not be paid if the  validity  thereof  shall  currently  be
contested in good faith by appropriate proceedings and if the Company shall have
set aside on its books  adequate  reserves with respect  thereto,  and provided,
further,  that the  Company  will pay all such  taxes,  assessments,  charges or
levies  forthwith  upon the  commencement  of  proceedings to foreclose any lien
which may have attached as security therefor.

          6.8  INSURANCE.  The  Company  will  keep its  assets  which are of an
insurable  character insured by financially sound and reputable insurers against
loss or damage by fire, explosion and other risks customarily insured against by
companies in the Company's  line of business,  in amounts  sufficient to prevent
the Company from  becoming a  co-insurer  and not in any event less than 100% of
the insurable value of the property insured; and the Company will maintain, with
financially  sound and reputable  insurers,  insurance against other hazards and
risks and  liability  to persons  and  property  to the extent and in the manner
customary  for  companies in similar  businesses  similarly  situated and to the
extent available on commercially reasonable terms.

          6.9 BOOKS AND RECORDS. The Company will keep true records and books of
account in which full,  true and correct entries will be made of all dealings or
transactions  in  relation  to its  business  and  affairs  in  accordance  with
generally accepted accounting principles applied on a consistent basis.

          6.10 INTELLECTUAL  PROPERTY.  The Company shall maintain in full force
and effect its corporate  existence,  rights and franchises and all licenses and
other  rights  to  use  Intellectual  Property  owned  or  possessed  by it  and
reasonably deemed to be necessary to the conduct of its business.

          6.11  CONFIDENTIALITY.  The Company  agrees that it will not disclose,
and will not  include in any  public  announcement,  the name of the  Purchaser,
unless  expressly agreed to by the Purchaser or unless and until such disclosure
is required by law or applicable regulation, and then only to the extent of such
requirement.

                                      -11-
<PAGE>
          6.12 REQUIRED  APPROVALS.  For so long as at least  100,000  shares of
Preferred Stock are outstanding,  the Company, without the prior written consent
of the  Purchaser,  shall  not:  (a)  enter  into any  transaction  or series of
transactions  with any  stockholder  director,  officer or employee  which would
require  disclosure  pursuant  to  Rule  404 of the  Regulation  S-K  under  the
Securities Act;

               (b)  authorize,  create or issue any securities (or any rights or
securities   directly  or  indirectly   convertible   into  or   exercisable  or
exchangeable for securities) having rights,  preferences or privileges  superior
to the Preferred Stock;

               (c) directly or  indirectly  declare or pay any dividends or make
any  distributions  upon any of its capital stock or other equity securities (or
any  securities  directly  or  indirectly  convertible  into or  exercisable  or
exchangeable for equity securities);

               (d) directly or indirectly redeem,  purchase or otherwise acquire
any of the Corporation's  capital stock or other equity  securities  (including,
without limitation,  the Securities or any warrants, options and other rights to
acquire such capital stock or other equity securities) or directly or indirectly
redeem,  purchase or make any payments  with  respect to any stock  appreciation
rights, phantom stock plans or similar rights or plans;

               (e)  sell,  lease or  otherwise  dispose  of more than 10% of the
assets of the  Company  (computed  on the  basis of book  value,  determined  in
accordance with GAAP consistently  applied, or fair market value,  determined by
the Board of Directors in its reasonable good faith judgment) in any transaction
or series of related transactions (other than sales of inventory in the ordinary
course of business) or sell or  permanently  dispose of any of its  intellectual
property;

               (f)   liquidate,   dissolve   or   effect   a   recapitalization,
reclassification  or  reorganization  in any  form  of  transaction  (including,
without  limitation,  any  reorganization  into a limited liability  company,  a
partnership or any other non-corporate  entity which is treated as a partnership
for federal income tax purposes or a stock split or "reverse" stock split of the
Common Stock);

               (g) become subject to (including,  without limitation,  by way of
amendment to or modification  of) any agreement or instrument which by its terms
would  (under any  circumstances)  restrict the  Company's  right to perform the
provisions of this Agreement or any of the agreements contemplated thereby;

               (h)  create,  incur,  assume  or  suffer  to  exist  indebtedness
exceeding an aggregate principal amount of $375,000 outstanding at any time;

               (i)  amend,  alter or repeal  the  Company's  Bylaws or  Restated
Certificate  as to increase the number of authorized  shares of the Common Stock
or any  series of  preferred  stock,  or  materially  affect the rights or other
powers of the Conversion  Shares, or otherwise take any action which is designed
to, or could have the effect of, adversely  affecting the rights or other powers
of the Conversion Shares; or

               (j) materially alter or change the business of the Company.

          6.13   REISSUANCE  OF  SECURITIES.   The  Company  agrees  to  reissue
certificates  representing  the  Securities  without  the  legends  set forth in
Section 5.7 above at such time as (a) the holder thereof is permitted to dispose
of such  Securities  pursuant to Rule  144(k)  under the Act, or (b) upon resale
subject  to an  effective  registration  statement  after  such  Securities  are
registered  under the Act. The Company agrees to cooperate with the Purchaser in
connection with all resales  pursuant to Rule 144(d) and Rule 144(k) and provide
legal  opinions  necessary  to allow such  resales  provided the Company and its
counsel receive reasonably requested  representations from the selling Purchaser
and broker, if any.

                                      -12-
<PAGE>
          6.14  OPINION.  On the Closing  Date,  the Company will deliver to the
Purchaser  an opinion  acceptable  to the  Purchaser  from the  Company's  legal
counsel in the form annexed  hereto as Exhibit D. The Company will  provide,  at
the Company's expense, such other legal opinions in the future as are reasonably
necessary  for  the  conversion  of the  Preferred  Stock  and  exercise  of the
Warrants.

     7. COVENANTS OF THE COMPANY AND PURCHASER REGARDING INDEMNIFICATION.

          7.1 COMPANY  INDEMNIFICATION.  The Company  agrees to indemnify,  hold
harmless,   reimburse  and  defend  Purchaser,  each  of  Purchaser's  officers,
directors,  agents,  affiliates,  control persons,  and principal  shareholders,
against  any  claim,  cost,  expense,  liability,  obligation,  loss  or  damage
(including reasonable legal fees) of any nature, incurred by or imposed upon the
Purchaser   which   results,   arises   out  of  or  is   based   upon  (i)  any
misrepresentation  by the  Company or breach of any  warranty  by the Company in
this  Agreement or in any exhibits or schedules  attached  hereto or any Related
Agreement,  or (ii) any breach or default in  performance  by the Company of any
covenant or undertaking to be performed by the Company  hereunder,  or any other
agreement entered into by the Company and Purchaser relating hereto.

          7.2 PURCHASER'S  INDEMNIFICATION.  Purchaser agrees to indemnify, hold
harmless,  reimburse and defend the Company,  its officers,  directors,  agents,
affiliates, control persons, and principal shareholders at all times against any
claim,  cost,  expense,   liability,   obligation,  loss  or  damage  (including
reasonable  legal fees) of any nature,  incurred by or imposed  upon the Company
which  results,  arises  out of or is based  upon (a) any  misrepresentation  by
Purchaser in this Agreement or in any exhibits or schedules  attached  hereto or
any Related Agreement;  or (b) any breach or default in performance by Purchaser
of any covenant or  undertaking to be performed by Purchaser  hereunder,  or any
other agreement entered into by the Company and Purchaser relating hereto.

          7.3  PROCEDURES.  The procedures and  limitations set forth in Section
9.6 shall apply to the indemnifications set forth in Sections 7.1 and 7.2 above.

     8. CONVERSION OF PREFERRED STOCK.

          8.1 MECHANICS OF CONVERSION.

               (a) The Preferred Stock and accrued dividends will be convertible
according to the procedure set forth in the Certificate of Designation.

               (b) The Company  understands  that a delay in the delivery of the
Conversion Shares after Conversion, and delivery of Preferred Stock certificates
representing the unconverted  balance of a Preferred Stock certificate  tendered
for  conversion  beyond the date  described  for such  delivery set forth in the
Certificate of Designation,  or late delivery of a Mandatory  Redemption Payment
(as  defined  herein),  as the case may be,  (each of the  foregoing a "DELIVERY
DATE") could result in economic loss to the Purchaser.  As  compensation  to the
Purchaseer  for such  loss,  the  Company  agrees  to pay late  payments  to the
Purchaser  for late  delivery of Shares upon  Conversion  and late delivery of a
Preferred Stock  certificate  for the unconverted  portion of Preferred Stock or
late  delivery  of a  Mandatory  Redemption  Payment,  in the amount of $100 per
business  day after  the  Delivery  Date for each  $10,000  of  Stated  Value of
Preferred  Stock being  converted  and  Preferred  Stock  certificate  remaining
undelivered or Mandatory  Redemption Payment not paid. The Company shall pay any
payments  incurred  under  this  Section  in  immediately   available  funds  or
equivalent  shares  based upon the  applicable  Conversion  Price  upon  demand.
Furthermore,  in addition to any other  remedies  which may be  available to the
Purchaser, in the event that the Company fails for any reason to effect delivery
of the Shares within five business days after the Delivery  Date,  the Purchaser
will be entitled to revoke the relevant  Notice of  Conversion  by delivery of a
notice of  revocation  to the Company  whereupon  the Company and the  Purchaser
shall each be restored to their respective  positions  immediately  prior to the
delivery  of such  notice  of  revocation,  except  that  late  payment  charges
described  above shall be payable through the date notice of revocation is given
to the Company.

               (c)  Nothing  contained  herein or in any  document  referred  to
herein or  delivered  in  connection  herewith  shall be deemed to  establish or
require  the  payment of a rate of  interest  or other  charges in excess of the

                                      -13-
<PAGE>
maximum  permitted by applicable  law. In the event that the rate of interest or
dividends  required  to be paid or other  charges  hereunder  exceed the maximum
amount  permitted by such law,  any payments in excess of such maximum  shall be
credited against amounts owed by the Company to a Purchaser and thus refunded to
the Company.

          8.2 MANDATORY REDEMPTION.  In the event the Company is unable to issue
Conversion  Shares on a Delivery Date or at any time when the Preferred Stock is
convertible,  for any reason, then at the Purchaser's election, the Company must
pay to the Purchaser five (5) business days after request by the Purchaser or on
the Delivery Date (if requested by the  Purchaser) a sum of money  determined by
multiplying  the Stated Value of the Preferred Stock not converted (or otherwise
not  convertible,  as  applicable)  by 130%,  together  with  accrued but unpaid
dividends thereon ("MANDATORY  REDEMPTION  PAYMENT").  The Mandatory  Redemption
Payment  must be received by the  Purchaser  on the same date as the  Conversion
Shares are otherwise deliverable or within five (5) business days after request,
whichever is sooner ("MANDATORY  REDEMPTION PAYMENT DATE").  Upon receipt of the
Mandatory  Redemption  Payment,  the  corresponding   Preferred  Stock  will  be
cancelled and no longer  outstanding,  and if the Holder is in possession of the
corresponding Preferred Stock, the certificate will be returned to the Company.

          8.3 MAXIMUM CONVERSION. The Purchaser shall not be entitled to convert
on a Conversion  Date that amount of the Preferred Stock in connection with that
number of shares of Common  Stock which would be in excess of the sum of (i) the
number of  shares  of Common  Stock  beneficially  owned by the  Purchaser  on a
Conversion Date, and (ii) the number of shares of Common Stock issuable upon the
conversion of the  Preferred  Stock with respect to which the  determination  of
this  proviso  is  being  made on a  Conversion  Date,  which  would  result  in
beneficial  ownership  by the  Purchaser  of more than 4.99% of the  outstanding
shares of Common Stock of the Company on such Conversion  Date. For the purposes
of the proviso to the immediately preceding sentence, beneficial ownership shall
be  determined  in  accordance  with  Section  13(d)  of the  Exchange  Act  and
Regulation 13d-3 thereunder.  Subject to the foregoing, a Purchaser shall not be
limited  to  aggregate  conversions  of only  4.99%.  A  Purchaser  may void the
conversion limitation described in this Section 8.3 upon 75 days prior notice to
the Company or upon an Event of Default under the Preferred  Stock.  A Purchaser
may allocate  which of the equity of the Company  deemed  beneficially  owned by
such Purchaser  shall be included in the 4.99% amount  described above and which
shall be allocated to the excess above 4.99%.

          8.4 INJUNCTION - POSTING OF BOND. In the event a Purchaser shall elect
to convert  Preferred  Stock,  the  Company  may not refuse  conversion  for any
reason,  unless  an  injunction  from a court,  on  notice,  restraining  and or
enjoining  conversion  of all or part of said  Preferred  Stock  shall have been
sought and obtained and the Company  posts a surety bond for the benefit of such
Purchaser  in the  amount  of 130% of the  amount  of the  Stated  Value  of the
Preferred Stock, which is subject to the injunction,  which bond shall remain in
effect until the  completion  of  arbitration/litigation  of the dispute and the
proceeds  of which shall be payable to such  Purchaser  to the extent it obtains
judgment.

          8.5  BUY-IN.  In  addition  to  any  other  rights  available  to  the
Purchaser, if the Company fails to deliver to the Purchaser Conversion Shares by
the Delivery Date and if after the Delivery Date the Purchaser  purchases (in an
open  market  transaction  or  otherwise)  shares of Common  Stock to deliver in
satisfaction of a sale by such Purchaser of the Common Stock which the Purchaser
anticipated receiving upon such conversion (a "BUY-IN"),  then the Company shall
pay in cash to the  Purchaser  (in  addition  to any  remedies  available  to or
elected  by such  Purchaser)  the  amount  by which  (A) the  Purchaser's  total
purchase  price  (including  brokerage  commissions,  if any) for the  shares of
Common  Stock  so  purchased  exceeds  (B) the  aggregate  Stated  Value  of the
Preferred Stock, for which such conversion was not timely honored, together with
dividends thereon at a rate of 15% per annum, accruing until such amount and any
accrued  dividends  thereon  is paid  in full  (which  amount  shall  be paid as
liquidated  damages  and  not as a  penalty).  For  example,  if  the  Purchaser
purchases  shares of Common  Stock having a total  purchase  price of $11,000 to
cover a Buy-In with respect to an attempted  conversion of $10,000 of the Stated
Value of the Preferred Stock, the Company shall be required to pay the Purchaser
$1,000,  plus interest.  The Purchaser  shall provide the Company written notice
indicating the amounts payable to the Purchaser in respect of the Buy-In.

     9. REGISTRATION RIGHTS.

          9.1  REGISTRATION  RIGHTS  GRANTED.  The  Company  hereby  grants  the
following registration rights to holders of the securities purchased hereby.

                                      -14-
<PAGE>
               (a) On two occasions,  for a period  commencing 90 days after the
Closing  Date,  but not later  than two (2) years  after the  Closing  Date (the
"REQUEST  DATE"),  the Company,  upon a written request therefor from holders of
more than 50% of the aggregate of the Company's Securities then outstanding,  on
an as  converted  basis (the  Conversion  Shares and  Warrant  Shares  issued or
issuable with respect to all Preferred  Stock or Warrants issued or to be issued
hereunder, being, the "REGISTRABLE SECURITIES"), shall prepare and file with the
SEC a registration  statement  under the Securities Act covering the Registrable
Securities  which are the  subject  of such  request,  unless  such  Registrable
Securities  are  the  subject  of an  effective  registration  statement  or can
otherwise be sold pursuant to Rule 144(k). In addition, upon the receipt of such
request,  the Company  shall  promptly  give written  notice to all other record
holders of the Registrable  Securities that such registration statement is to be
filed and shall include in such registration  statement  Registrable  Securities
for which it has  received  written  requests  within 10 days after the  Company
gives such written notice.  Such other requesting record holders shall be deemed
to have exercised their demand  registration  right under this Section 9.1. As a
condition  precedent to the  inclusion  of  Registrable  Securities,  the holder
thereof  shall  provide  the  Company  with  such  information  as  the  Company
reasonably requests.  The obligation of the Company under this Section 9.1 shall
be limited to two registration statements.

               (b) If the Company at any time  proposes  to register  any of its
securities under the Act for sale to the public,  whether for its own account or
for the  account of other  security  holders  or both,  except  with  respect to
registration  statements  on Forms S-4,  S-8 or another form not  available  for
registering  the  Registrable  Securities  for sale to the public,  provided the
Registrable  Securities are not otherwise registered for resale by the Purchaser
or subsequent holder pursuant to an effective registration statement,  each such
time it will give at least 30 days' prior written notice to the record holder of
any  Securities  of its  intention  so to do.  Upon the  written  request of the
holder,  received  by the  Company  within 30 days  after the giving of any such
notice by the  Company,  to  register  any of the  Registrable  Securities,  the
Company will cause such Registrable  Securities as to which  registration  shall
have been so requested to be included  with the  securities to be covered by the
registration  statement  proposed to be filed by the Company,  all to the extent
required to permit the sale or other  disposition of the Registrable  Securities
so registered by the holder of such  Registrable  Securities (the "SELLER").  In
the event that any  registration  pursuant to this  Section  9.1(b) shall be, in
whole or in  part,  an  underwritten  public  offering  of  Common  Stock of the
Company,  the number of shares of Registrable  Securities to be included in such
an underwriting may be reduced by the managing  underwriter if and to the extent
that the Company and the  underwriter  shall  reasonably  be of the opinion that
such inclusion would adversely affect the marketing of the securities to be sold
by the Company  therein;  provided,  however,  that the Company shall notify the
Seller  in  writing  of  any  such  reduction.   Notwithstanding   the  forgoing
provisions,  or Section  9.1(a)  hereof,  the Company  may  withdraw or delay or
suffer a delay of any registration  statement referred to in this Section 9.1(b)
without thereby incurring any liability to the Seller.

               (c) If,  at the time any  written  request  for  registration  is
received by the Company  pursuant to Section 9.1(a),  the Company has determined
to proceed with the actual  preparation  and filing of a registration  statement
under the Securities Act in connection with the proposed offer and sale for cash
of any of its  securities  for the Company's own account,  such written  request
shall be deemed to have been  given  pursuant  to  Section  9.1(b)  rather  than
Section 9.1(a), and the rights of the holders of Registrable  Securities covered
by such  written  request  shall be governed by Section  9.1(b)  except that the
Company or underwriter,  if any, may not withdraw such registration or limit the
amount of Registrable Securities included in such registration.

               (d) The  Company  shall  file with the SEC  within 40 days of the
Closing Date (the "FILING DATE"),  and use its reasonable  commercial efforts to
cause to be declared effective a Form SB-2 registration statement (or such other
form that it is eligible to use) within 90 days of the Closing  Date in order to
register  the  Registrable  Securities  for  resale and  distribution  under the
Securities Act. The registration  statement  described in this paragraph must be
declared  effective  by the SEC within 90 days of the  Closing  Date (as defined
herein)  ("EFFECTIVE DATE"). The Company will register not less than a number of
shares of Common  Stock in the  aforedescribed  registration  statement  that is
equal to 300% of the  Warrant  Shares  and  Conversion  Shares  issuable  at the
Conversion  Prices set forth in the Warrants and Preferred Stock,  respectively,
that  would be in  effect  on the  Closing  Date or the date of  filing  of such
registration statement (employing the conversion price which would result in the
greater  number of Shares),  assuming the  conversion  of 100% of the  Preferred
Stock which are then outstanding or issuable  hereunder,  and at least one share
of common stock for each common  share  issuable  upon  exercise of the Warrants
which are then outstanding or issuable hereunder (employing the Conversion Price
that would result in the greater number of shares).  The Registrable  Securities

                                      -15-
<PAGE>
shall be reserved and set aside exclusively for the benefit of the Purchaser and
the holders of the  Warrants,  as the case may be, and not  issued,  employed or
reserved for anyone other than the  Purchaser  and the holders of the  Warrants.
Such registration statement will be promptly amended or additional  registration
statements  will be  promptly  filed by the  Company as  necessary  to  register
additional  Company  Shares  to allow the  public  resale  of all  Common  Stock
included in and issuable by virtue of the Registrable Securities.  No securities
of the Company  other than the  Registrable  Securities  will be included in the
registration statement described in this Section 9.1(d).

          9.2 REGISTRATION  PROCEDURES.  If and whenever the Company is required
by the provisions hereof to effect the registration of any shares of Registrable
Securities under the Act, the Company will, as expeditiously as possible:

               (a) prepare and file with the SEC a  registration  statement with
respect to such  securities and use its best efforts to cause such  registration
statement  to become and  remain  effective  for the period of the  distribution
contemplated  thereby  (determined as herein provided),  and promptly provide to
the holders of Registrable  Securities  copies of all filings and SEC letters of
comment;

               (b) prepare and file with the SEC such amendments and supplements
to such registration  statement and the prospectus used in connection  therewith
as may be  necessary to keep such  registration  statement  effective  until the
later of: (i) six months after the latest  exercise  period of the Warrants;  or
(ii) four years after the Closing  Date,  and comply with the  provisions of the
Securities  Act  with  respect  to the  disposition  of  all of the  Registrable
Securities  covered  by such  registration  statement  in  accordance  with  the
Seller's intended method of disposition set forth in such registration statement
for such period;

               (c) furnish to the Seller,  and to each  underwriter if any, such
number of copies  of the  registration  statement  and the  prospectus  included
therein  (including each preliminary  prospectus) as such persons reasonably may
request to facilitate  the public sale or their  disposition  of the  securities
covered by such registration statement;

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

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

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

               (g) make available for inspection by the Seller,  any underwriter
participating in any distribution pursuant to such registration  statement,  and
any attorney,  accountant or other agent retained by the Seller or  underwriter,
all publicly available,  non-confidential financial and other records, pertinent
corporate  documents  and  properties  of the Company,  and cause the  Company's
officers,   directors   and   employees  to  supply  all   publicly   available,
non-confidential  information  reasonably requested by the seller,  underwriter,
attorney, accountant or agent in connection with such registration statement.

                                      -16-
<PAGE>
          9.3 PROVISION OF DOCUMENTS.

               (a)  At  the  request  of  the  Seller,  provided  a  demand  for
registration  has  been  made  pursuant  to  Section  9.1(a)  or a  request  for
registration  has  been  made  pursuant  to  Section  9.1(b),   the  Registrable
Securities  will be included in a registration  statement filed pursuant to this
Section 9.

               (b) In connection with each  registration  hereunder,  the Seller
will  furnish to the  Company in writing  such  information  and  representation
letters with respect to itself and the proposed distribution by it as reasonably
shall be necessary  in order to assure  compliance  with federal and  applicable
state securities laws. In connection with each registration  pursuant to Section
9 covering an underwritten public offering,  the Company and the Seller agree to
enter into a written  agreement  with the managing  underwriter in such form and
containing such provisions as are customary in the securities  business for such
an arrangement  between such underwriter and companies of the Company's size and
investment stature.

          9.4 NON-REGISTRATION  EVENTS. The Company and the Purchaser agree that
the Seller will suffer  damages if any  registration  statement  required  under
Section  9.1(a) above is not filed within 30 days after  written  request by the
holder and not declared  effective by the SEC within 90 days after such request,
and maintained in the manner and within the time periods contemplated by Section
9 hereof,  and it would not be feasible to ascertain  the extent of such damages
with precision.  Accordingly,  if (i) the  Registration  Statement  described in
Section  9.1(a) is not filed within 30 days of such written  request,  or is not
declared effective by the SEC on or prior to the date that is 90 days after such
request,  or (ii) the registration  statement on Form SB-2 or such other form as
described  in Section  9.1(d) is not filed on or before  the Filing  Date or not
declared effective on or before the sooner of the Effective Date, or within five
days of  receipt  by the  Company  of a  communication  from  the SEC  that  the
registration  statement  described in Section  9.1(d) will not be  reviewed,  or
(iii) any registration statement described in Section 9.1(a) or (d) is filed and
declared  effective but shall  thereafter  cease to be effective  (without being
succeeded immediately by an additional registration statement filed and declared
effective)  for a period of time which shall exceed 30 days in the aggregate per
year but not more than 20 consecutive  calendar days (defined as a period of 365
days commencing on the date the  Registration  Statement is declared  effective)
(each such event  referred  to in this  Section  9.4 is  referred to herein as a
"NON-REGISTRATION  EVENT"),  then,  for so long as such  Non-Registration  Event
shall continue,  (i) the Company shall pay in cash as Liquidated Damages to each
holder of any  Registrable  Securities  an amount  equal to two percent (2%) per
month or part thereof during the pendency of such Non-Registration  Event of the
Stated Value of the  Preferred  Stock issued in  connection  with the  Offering,
whether or not converted,  then owned of record by such holder or issuable as of
or subsequent  to the  occurrence  of such  Non-Registration  Event and (ii) the
Conversion  Price as  defined in Section 5 of the  Certificate  of  Designations
shall be reduced by 10% for each 30-day period following the Effective Date that
the Registration  Statement is not declared effective by the SEC. Payments to be
made pursuant to this Section shall be due and payable  immediately  upon demand
in immediately  available funds. In the event a Mandatory  Redemption Payment is
demanded  from  the  Company  by the  holder  pursuant  to  Section  8.2 of this
Agreement,  then the Liquidated  Damages  described in this Section 9.4 shall no
longer  accrue on the portion of the purchase  price  underlying  the  Mandatory
Redemption  Payment,  from and after the date the holder  receives the Mandatory
Redemption  Payment.  It shall be deemed a Non-Registration  Event to the extent
that all the Common Stock included in the Registrable  Securities and underlying
the Securities is not included in an effective  registration statement as of and
after the Effective Date at the  conversion  prices in effect from and after the
Effective Date.

          9.5 EXPENSES.  All expenses  incurred by the Company in complying with
Section 9, including,  without  limitation,  all  registration  and filing fees,
printing  expenses,  fees and  disbursements  of counsel and independent  public
accountants for the Company,  fees and expenses  (including  reasonable  counsel
fees) incurred in connection with complying with state  securities or "blue sky"
laws, fees of the NASD,  transfer taxes, fees of transfer agents and registrars,
fees of, and disbursements incurred by, one counsel for the Seller, and costs of
insurance are called  "REGISTRATION  EXPENSES".  All underwriting  discounts and
selling commissions applicable to the sale of Registrable Securities,  including
any fees and  disbursements  of any special  counsel to the Seller  beyond those
included in Registration Expenses, are called "SELLING EXPENSES."

               The Company will pay all Registration Expenses in connection with
the  registration  statement under Section 9. All Selling Expenses in connection
with each  registration  statement  under Section 9 shall be borne by the Seller
and may be  apportioned  among the Sellers in proportion to the number of shares
sold by the Seller relative to the number of shares sold under such registration
statement  or as all  Sellers  thereunder  may agree.

                                      -17-
<PAGE>
          9.6 INDEMNIFICATION AND CONTRIBUTION.

               (a) In the event of a registration of any Registrable  Securities
under the  Securities  Act pursuant to Section 9, the Company will indemnify and
hold  harmless each Seller,  each officer of each Seller,  each director of each
Seller,  each  underwriter of such  Registrable  Securities  thereunder and each
other  person,  if any, who controls any such Seller or  underwriter  within the
meaning  of  the  Securities  Act,  against  any  losses,   claims,  damages  or
liabilities,  joint or several,  to which the  Seller,  or such  underwriter  or
controlling  person may become  subject under the  Securities  Act or otherwise,
insofar as such losses,  claims,  damages or liabilities  (or actions in respect
thereof)  arise out of or are based upon any untrue  statement or alleged untrue
statement of any material fact  contained in any  registration  statement  under
which such  Registrable  Securities  was  registered  under the Act  pursuant to
Section 9, any preliminary  prospectus or final prospectus contained therein, or
any  amendment  or  supplement  thereof,  or arise out of or are based  upon the
omission or alleged  omission to state  therein a material  fact  required to be
stated therein or necessary to make the statements  therein not misleading,  and
will  reimburse  the Seller,  each such  underwriter  and each such  controlling
person for any legal or other expenses reasonably incurred by them in connection
with  investigating  or defending  any such loss,  claim,  damage,  liability or
action; provided,  however, that the Company will not be liable in any such case
if and to the extent that any such loss,  claim,  damage or liability arises out
of or is based upon an untrue  statement or alleged untrue statement or omission
or alleged omission so made in conformity with information furnished by any such
Seller, the underwriter or any such controlling  person in writing  specifically
for use in such registration statement or prospectus.

               (b) In the  event  of a  registration  of any of the  Registrable
Securities  under the Act pursuant to Section 9, the Seller will  indemnify  and
hold  harmless  the Company,  and each person,  if any, who controls the Company
within the meaning of the Securities  Act, each officer of the Company who signs
the registration statement and each director of the Company, against all losses,
claims,  damages or liabilities,  joint or several, to which the Company or such
officer or director may become  subject under the  Securities  Act or otherwise,
insofar as such losses,  claims,  damages or liabilities  (or actions in respect
thereof)  arise out of or are based upon any untrue  statement or alleged untrue
statement of any material fact  contained in the  registration  statement  under
which such  Registrable  Securities  were  registered  under the  Securities Act
pursuant to Section 9, any preliminary  prospectus or final prospectus contained
therein,  or any amendment or supplement  thereof,  or arise out of or are based
upon the omission or alleged  omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will  reimburse  the Company and each such officer or director for any legal
or other expenses  reasonably  incurred by them in connection with investigating
or  defending  any such loss,  claim,  damage,  liability  or action,  provided,
however,  that the Seller will be liable  hereunder in any such case if and only
to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue  statement  or alleged  untrue  statement  or  omission  or
alleged  omission  made in  reliance  upon and in  conformity  with  information
pertaining to such Seller, as such,  furnished in writing to the Company by such
Seller  specifically for use in such registration  statement or prospectus,  and
provided,  further, however, that the liability of the Seller hereunder shall be
limited to the proportion of any such loss, claim, damage,  liability or expense
which  is  equal  to the  proportion  that  the  public  offering  price  of the
Registrable  Securities  sold by the Seller  under such  registration  statement
bears to the total public offering price of all securities sold thereunder,  but
not in any event to exceed the net proceeds received by the Seller from the sale
of Registrable Securities covered by such registration statement.

               (c) Promptly after receipt by an indemnified  party  hereunder of
notice of the  commencement of any action,  such  indemnified  party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof,  but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such  indemnified  party other than under this Section  9.6(c) and shall only
relieve it from any liability which it may have to such indemnified  party under
this Section 9.6(c) if and to the extent the indemnifying party is prejudiced by
such omission.  In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying  party of the  commencement  thereof,
the indemnifying party shall be entitled to participate in and, to the extent it
shall  wish,  to  assume  and   undertake  the  defense   thereof  with  counsel
satisfactory to such indemnified  party, and, after notice from the indemnifying
party to such  indemnified  party of its election so to assume and undertake the
defense thereof,  the indemnifying party shall not be liable to such indemnified
party under this Section 9.6(c) for any legal expenses  subsequently incurred by
such  indemnified  party in  connection  with the  defense  thereof  other  than
reasonable  costs of  investigation  and of liaison  with  counsel so  selected,

                                      -18-
<PAGE>
provided,  however,  that, if the defendants in any such action include both the
indemnified  party and the  indemnifying  party and the indemnified  party shall
have reasonably  concluded that there may be reasonable defenses available to it
which are different  from or additional to those  available to the  indemnifying
party or if the interests of the indemnified  party  reasonably may be deemed to
conflict with the interests of the indemnifying  party, the indemnified  parties
shall have the right to select one  separate  counsel  and to assume  such legal
defenses and otherwise to  participate  in the defense of such action,  with the
reasonable expenses and fees of such separate counsel and other expenses related
to such participation to be reimbursed by the indemnifying party as incurred.

               (d) In order to provide for just and  equitable  contribution  in
the event of joint  liability  under the Act in any case in which either (i) the
Seller,   or  any  controlling   person  of  the  Seller,   makes  a  claim  for
indemnification pursuant to this Section 9.6 but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such  indemnification may not be enforced in such case  notwithstanding the fact
that this  Section  9.6  provides  for  indemnification  in such  case,  or (ii)
contribution  under the Securities Act may be required on the part of the Seller
or controlling  person of the Seller in circumstances for which  indemnification
is provided under this Section 9.6; then, and in each such case, the Company and
the  Seller  will  contribute  to  the  aggregate  losses,  claims,  damages  or
liabilities  to which they may be subject  (after  contribution  from others) in
such  proportion  so that  the  Seller  is  responsible  only  for  the  portion
represented by the percentage  that the public  offering price of its securities
offered by the registration  statement bears to the public offering price of all
securities offered by such registration statement,  provided,  however, that, in
any such case,  (A) the Seller will not be required to contribute  any amount in
excess  of the  public  offering  price of all  such  securities  offered  by it
pursuant to such registration  statement;  and (B) no person or entity guilty of
fraudulent  misrepresentation  (within the meaning of Section  10(f) of the Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.

     10.  OFFERING  RESTRICTIONS.  Except  as  previously  disclosed  in the SEC
Reports or stock or stock  options  granted to  employees  or  directors  of the
Company;  or  equity or debt  issued  in  connection  with an  acquisition  of a
business or assets by the  Company;  or the  issuance by the Company of stock in
connection with the establishment of a joint venture or strategic partnership or
licensing arrangement (these exceptions hereinafter referred to as the "EXCEPTED
ISSUANCES"),  the Company will not issue any equity,  convertible  debt or other
securities  which are or could be (by conversion or  registration)  free-trading
securities  prior to the expiration of 12 months from the actual  effective date
of the registration  statement described in Section 9.1(d) above (the "EXCLUSION
PERIOD").  This  restriction  shall not  prohibit  the Company  from issuing any
equity,  convertible  debt or other  securities  prior to the  expiration of the
Exclusion  Period,  provided  that  such  equity,   convertible  debt  or  other
securities are restricted securities when issued and remain restricted until the
expiration of the Exclusion Period.  Notwithstanding the above, if the Purchaser
elects not to further fund the Company  following the  transaction  contemplated
hereby, the Purchaser shall waive the provisions of this Section 10.

     11. SECURITY INTEREST.  As a condition of Closing, the Company will deliver
to the Purchaser  Common Shares of the Company owned by certain  shareholders of
the Company, together with signature guaranteed stock powers. Collectively,  the
foregoing stock is referred to as "Security Shares." The Security Shares will be
held by the Purchaser  pursuant to a Security  Agreement.  The Company will also
execute all such  documents  reasonably  necessary  to  memorialize  and further
protect the security interest described above.

     12. MISCELLANEOUS.

          12.1 GOVERNING LAW. This Agreement  shall be governed by and construed
in  accordance  with  the laws of the  State  of New  York,  without  regard  to
principles of conflicts of laws.  Any action brought by either party against the
other  concerning  the  transactions  contemplated  by this  Agreement  shall be
brought only in the state courts of New York or in the federal courts located in
the state of New York. Both parties and the individuals executing this Agreement
and  other  agreements  on  behalf  of  the  Company  agree  to  submit  to  the
jurisdiction of such courts and waive trial by jury. The prevailing  party shall
be entitled to recover from the other party its reasonable  attorney's  fees and
costs.  In the event that any provision of this Agreement or any other agreement
delivered  in  connection   herewith  is  invalid  or  unenforceable  under  any
applicable  statute  or  rule  of law,  then  such  provision  shall  be  deemed
inoperative  to the extent that it may  conflict  therewith  and shall be deemed
modified to conform with such statute or rule of law. Any such  provision  which

                                      -19-
<PAGE>
may prove invalid or  unenforceable  under any law shall not affect the validity
or enforceability of any other provision of any agreement.

          12.2  SURVIVAL.   The  representations,   warranties,   covenants  and
agreements made herein shall survive any investigation made by the Purchaser and
the  closing of the  transactions  contemplated  hereby.  All  statements  as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company  pursuant  hereto in connection  with the  transactions
contemplated  hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.

          12.3 SUCCESSORS AND ASSIGNS.  Except as otherwise  expressly  provided
herein,  the  provisions  hereof  shall  inure to the benefit of, and be binding
upon,  the  successors,  assigns,  heirs,  executors and  administrators  of the
parties  hereto and shall  inure to the  benefit of and be  enforceable  by each
person who shall be a holder of the Securities from time to time.

          12.4 ENTIRE  AGREEMENT.  This  Agreement,  the exhibits and  schedules
hereto, the Related Agreements and the other documents delivered pursuant hereto
constitute the full and entire  understanding  and agreement between the parties
with regard to the subjects  hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.

          12.5  SEVERABILITY.  In case any provision of the  Agreement  shall be
invalid, illegal or unenforceable,  the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

          12.6 AMENDMENT AND WAIVER.

               (a) This  Agreement  may be  amended  or  modified  only upon the
written consent of the Company and the Purchaser.

               (b) The  obligations of the Company and the rights of the holders
of the  Securities  under  the  Agreement  may be waived  only with the  written
consent of such  holders of  Securities.  The rights of the holder of  Preferred
Stock may be waived only with the written consent of such holder.

          12.7  DELAYS OR  OMISSIONS.  It is agreed that no delay or omission to
exercise  any right,  power or remedy  accruing  to any party,  upon any breach,
default or  noncompliance  by another party under this  Agreement or the Related
Agreements,  shall  impair  any such  right,  power or  remedy,  nor shall it be
construed to be a waiver of any such breach,  default or  noncompliance,  or any
acquiescence  therein, or of or in any similar breach,  default or noncompliance
thereafter occurring.  It is further agreed that any waiver,  permit, consent or
approval of any kind or character on the Purchaser's part of any breach, default
or  noncompliance  under this  Agreement,  the  Preferred  Stock or the  Related
Agreements or any waiver on such party's part of any provisions or conditions of
the Agreement, the Certificate of Designations or the Related Agreements must be
in writing and shall be effective only to the extent  specifically  set forth in
such writing. All remedies,  either under this Agreement, the Preferred Stock or
the Related  Agreements,  by law or  otherwise  afforded to any party,  shall be
cumulative and not alternative.

          12.8 NOTICES.  All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be  notified,  (b) when sent by  confirmed  telex or  facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day,  (c) five days after  having been sent by  registered  or  certified  mail,
return receipt requested,  postage prepaid,  or (d) one day after deposit with a
nationally  recognized  overnight  courier,  specifying next day delivery,  with
written verification of receipt. All communications shall be sent to the Company
at the address as set forth on the signature page hereof and to the Purchaser at
the address set forth on the signature  page hereto for such  Purchaser,  with a
copy in the case of the  Purchaser  to Daniel  M.  Laifer,  Esq.,  135 West 50th
Street, Suite 1700, New York, NY 10020,  facsimile number (212) 541-4434,  or at
such other  address as the Company or the  Purchaser  may  designate by ten days
advance written notice to the other parties hereto.

                                      -20-
<PAGE>
          12.9  ATTORNEYS'  FEES.  In the  event  that  any  suit or  action  is
instituted to enforce any provision in this Agreement,  the prevailing  party in
such dispute shall be entitled to recover from the losing party all fees,  costs
and  expenses  of  enforcing  any right of such  prevailing  party under or with
respect to this Agreement,  including,  without limitation, such reasonable fees
and  expenses  of  attorneys  and  accountants,  which  shall  include,  without
limitation, all fees, costs and expenses of appeals.

          12.10 TITLES AND SUBTITLES. The titles of the sections and subsections
of the  Agreement  are  for  convenience  of  reference  only  and are not to be
considered in construing this Agreement.

          12.11  COUNTERPARTS.  This  Agreement may be executed in any number of
counterparts,  each of which  shall be an  original,  but all of which  together
shall constitute one instrument.

          12.12 BROKER'S FEES. Each party hereto represents and warrants that no
agent,  broker,  investment banker,  person or firm acting on behalf of or under
the  authority  of such party  hereto is or will be entitled to any  broker's or
finder's fee or any other  commission  directly or indirectly in connection with
the transactions contemplated herein, except as specified herein with respect to
the  Purchaser.  Each party hereto  further agrees to indemnify each other party
for any claims,  losses or expenses  incurred by such other party as a result of
the representation in this Section 12.12 being untrue.

          12.13  INDEMNIFICATION.  The Company shall indemnify the Purchaser for
any losses or expenses  incurred by the Purchaser in connection  with any claims
brought  against  the  Purchaser  by  any  third  party   (including  any  other
stockholder of the Company) as a result of the transactions contemplated by this
Agreement,  other than for a breach of  representation  or warranty  made by the
Purchaser herein.

          12.14  CONSTRUCTION.  Each party  acknowledges  that its legal counsel
participated  in the  preparation of this Agreement and,  therefore,  stipulates
that the rule of construction  that  ambiguities are to be resolved  against the
drafting party shall not be applied in the  interpretation  of this Agreement to
favor any party against the other.

                                      -21-
<PAGE>
     IN WITNESS  WHEREOF,  the  parties  hereto  have  executed  the  SECURITIES
PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.

<TABLE>
<S>                                                          <C>
COMPANY:                                                     PURCHASER:

BESTNET COMMUNICATIONS CORP.                                 LAURUS MASTER FUND, LTD.


By:      ______________________________________              By:      ______________________________________
Name:                                                        Name:
Title:                                                       Address: LAURUS MASTER FUND, LTD.
Address: 5210 E. Williams Circle,                                     c/o Onshore Corporate Services Ltd.
         Suite 200                                                    P.O. Box 1234  G.T., Queensgate House,
         Tucson, Arizona 85711                                        South Church Street
                                                                      Grand Cayman, Cayman Islands
</TABLE>

                 [SECURITIES PURCHASE AGREEMENT SIGNATURE PAGE]
<PAGE>
                                LIST OF EXHIBITS


Schedule of Purchasers                                                 Exhibit A

Form of Offering Certificate of Designations                           Exhibit B

Form of Warrant                                                        Exhibit C

Form of Opinion                                                        Exhibit D
<PAGE>
                                    EXHIBIT A

                             SCHEDULE OF PURCHASERS


       PURCHASER                              CLOSING DATE PREFERRED STOCK
--------------------------------------------------------------------------------
LAURUS MASTER FUND, LTD.                      $500,000

TOTAL                                         $500,000
--------------------------------------------------------------------------------

                           SCHEDULE OF WARRANT HOLDERS

NAME OF WARRANT HOLDER                        NUMBER OF WARRANT SHARES
----------------------                        ------------------------
LAURUS MASTER FUND, LTD.                      25,000

                    SCHEDULE OF FUND MANAGER'S FEE RECIPIENTS

FUND MANAGER                                  CLOSING DATE FINDER'S FEES
------------                                  --------------------------
LAURUS CAPITAL MANAGEMENT, L.L.C.             $50,000
TOTAL                                         $50,000      (10% OF CLOSING)

                                      A-1
<PAGE>
                                    EXHIBIT B

                       FORM OF CONVERTIBLE PREFERRED STOCK



                                      B-1
<PAGE>
                                    EXHIBIT C

                                 FORM OF WARRANT



                                      C-1
<PAGE>
                                                               EXHIBIT D

                                 FORM OF OPINION


     1. The Company is a corporation validly existing and in good standing under
the laws of the  State of  Nevada  and has all  requisite  corporate  power  and
authority to own,  operate and lease its properties and to carry on its business
as it is now being conducted.

     2. The Company has the requisite  corporate power and authority to execute,
deliver and perform its obligations under the Agreement and Related  Agreements.
All corporate  action on the part of the Company,  its  officers,  directors and
stockholders  necessary for (i) the  authorization  of the Agreement and Related
Agreements,  and the performance of all obligations of the Company thereunder at
each Closing,  and (ii) the  authorization,  sale,  issuance and delivery of the
Securities  pursuant to the Agreement and the Related Agreements has been taken.
The Conversion  Shares and the Warrant  Shares,  when issued  pursuant to and in
accordance  with the terms of the Agreement and upon delivery,  shall be validly
issued and outstanding, fully paid and non assessable.

     3. The execution,  delivery and performance of the Agreement, the Preferred
Stock or the  Related  Agreements  by the Company  and the  consummation  of the
transactions  contemplated by any thereof,  will not, with or without the giving
of notice or the passage of time or both:

          (a) Violate the  provisions of the Restated  Articles or bylaws of the
     Company; or

          (b) To the best of such  counsel's  knowledge,  violate any  judgment,
     decree, order or award of any court binding upon the Company.

     4. The Agreement and Related Agreements constitute and the Preferred Stock,
upon their issuance will  constitute,  valid and legally binding  obligations of
the Company,  and are  enforceable  against the Company in accordance with their
respective terms.

     5. The sale of the  Preferred  Stock and the  subsequent  conversion of the
Preferred  Stock into  Conversion  Shares are not and will not be subject to any
preemptive rights or, to such counsel's knowledge,  rights of first refusal that
have not been properly waived or complied with. The sale of the Warrants and the
subsequent  exercise of the Warrants for Warrant  Shares are not and will not be
subject to any  preemptive  rights or, to such  counsel's  knowledge,  rights of
first refusal that have not been properly waived or complied with.

     6.  Assuming  the accuracy of the  representations  and  warranties  of the
Purchasers  contained  in the  Agreement,  the offer,  sale and  issuance of the
Securities will be exempt from the  registration  requirements of the Securities
Act, and will have been registered or qualified (or are exempt from registration
and qualification) under the registration,  permit or qualification requirements
of  all  applicable  state  securities  laws.  To the  best  of  such  counsel's
knowledge, neither the Company, nor any of its affiliates, nor any person acting
on its or their behalf,  has directly or indirectly  made any offers or sales of
any security or solicited  any offers to buy and  security  under  circumstances
that would cause the offering of the Securities pursuant to this Agreement to be
integrated  with prior  offerings by the Company for purposes of the  Securities
Act which would prevent the Company from selling the Securities pursuant to Rule
506 under the  Securities  Act, or any applicable  exchange-related  stockholder
approval provisions.

                                      D-1
<PAGE>
     7. There is no action, suit, proceeding or investigation pending or, to the
best of such counsel's knowledge,  currently threatened against the Company that
questions the validity of the  Agreement or the Related  Agreements or the right
of the  Company  to enter  into any of such  agreements,  or to  consummate  the
transactions contemplated thereby, or which might result, either individually or
in the  aggregate,  in any  material  adverse  change in the assets,  condition,
affairs or prospects of the Company,  financially or otherwise, or any change in
the current  equity  ownership  of the  Company.  To the best of such  counsel's
knowledge, the Company is not a party or subject to the provisions of any order,
writ,  injunction,  judgment  or  decree of any  court or  government  agency or
instrumentality;  nor is there any action, suit,  proceeding or investigation by
the Company currently pending or which the Company intends to initiate.

     8. The holding period of the Company shares deposited as security  pursuant
to the Security  Agreement in the hands of the  Purchasers  for purposes of Rule
144 of the Act will combine with and date back to the  acquisition  date of such
security shares by the depositing Shareholders.

                                      D-2