Document:

EXHIBIT 10.14

                           TENTH AMENDMENT TO RESTATED
                       BUSINESS LOAN AGREEMENT AND WAIVER

      THIS TENTH AMENDMENT TO RESTATED BUSINESS LOAN AGREEMENT AND WAIVER (the
"Amendment") is entered into as of March 31, 2000, between FRESH AMERICA CORP.,
a Texas corporation ("BORROWER"), the "SUBSIDIARY/DEBTORS" (herein so called)
named on the signature pages of this Amendment, and BANK OF AMERICA, N.A.,
formerly Bank of America NT & SA, successor in interest by merger with Bank of
America, N.A., formerly NationsBank, N.A. ("BANK").

      Borrower and Bank entered into the Restated Business Loan Agreement dated
February 2, 1998 (as amended, extended, renewed, or restated, the "LOAN
Agreement"), providing Borrower with a revolving line of credit. Borrower has
requested Bank to amend certain provisions of the Loan Agreement as provided in
PARAGRAPHS 2 AND 6 below and the other Loan Documents as provided herein, and
provide certain waivers as provided in PARAGRAPH 3 below, and Bank has, upon and
subject to the terms of this Amendment, agreed to those amendments and waivers.
Accordingly, for adequate and sufficient consideration, Bank, Borrower, and
Subsidiary/Debtors hereby agree as follows:

      1. DEFINITIONS. Capitalized terms used herein and defined in the Loan
Agreement shall have the meanings set forth in the Loan Agreement except as
otherwise provided herein.

      2. AMENDMENTS. The Loan Agreement is amended as follows:

           (A) SECTION 2.1(A) is entirely amended as follows:

               During THE AVAILABILITY PERIOD DESCRIBED BELOW, THE BANK WILL
               PROVIDE A LINE OF CREDIT TO THE BORROWER. THE AMOUNT OF THE LINE
               OF CREDIT (THE "REVOLVING FACILITY COMMITMENT") IS, FROM MARCH
               31, 2000, THROUGH JUNE 29, 2000, $21,000,000, FROM JUNE 30, 2000,
               THROUGH SEPTEMBER 29, 2000, $20,000,000, FROM SEPTEMBER 30, 2000,
               THROUGH DECEMBER 30, 2000, $18,000,000, AND, THEREAFTER,
               $16,000,000. EXCEPT AS SPECIFICALLY PROVIDED IN SECTION 10.25(D),
               ALL REVOLVING FACILITY COMMITMENT REDUCTIONS PROVIDED FOR
               ELSEWHERE IN THIS AGREEMENT SHALL BE IN ADDITION TO THE REVOLVING
               FACILITY COMMITMENT REDUCTIONS CONTEMPLATED BY THIS SECTION
               2.1(A).

           (B) SECTION 2.1(C) is entirely amended as follows:

               INTENTIONALLY OMITTED.

           (C) SECTIONS 2.4(B) AND (E) are entirely amended to read as follows:

               (B)  ANY AMOUNT BEARING INTEREST AT THE EURODOLLAR RATE (AS
                    DESCRIBED BELOW) WILL BE REPAID AT THE END OF EACH
                    APPLICABLE INTEREST PERIOD, PROVIDED THAT (I) NO INTEREST
                    PERIOD MAY END AFTER THE EXPIRATION DATE, AND (II) IF ANY
                    INTEREST PERIOD IS GREATER THAN ONE MONTH, THEN ACCRUED
                    INTEREST IS ALSO DUE AND PAYABLE ON THE DATE ONE MONTH AFTER
                    THE COMMENCEMENT OF THE APPLICABLE INTEREST PERIOD.
                    PROVIDED, HOWEVER, THAT EFFECTIVE MARCH 31, 2000, THE
                    BORROWER MAY NO LONGER ELECT THE EURODOLLAR RATE.

               (e)  THE BORROWER WILL PAY ON MARCH 15, 2000, MARCH 30, 2000,
                    JUNE 30, 2000, SEPTEMBER 30, 2000, AND DECEMBER 31, 2000,
                    PRINCIPAL OUTSTANDING UNDER THE REVOLVING NOTE TO THE EXTENT
                    THAT THE PRINCIPAL AMOUNT THEREOF OUTSTANDING ON SUCH DATES
                    PLUS THE OUTSTANDING AMOUNTS OF ANY LETTERS OF CREDIT ON
                    SUCH DATES (INCLUDING THE FACE AMOUNT OF ALL UNDRAWN AND
                    UNCANCELLED LETTERS OF CREDIT AND AMOUNTS DRAWN ON LETTERS
                    OF CREDIT AND NOT YET REIMBURSED), EXCEEDS THE REVOLVING
                    FACILITY COMMITMENT ON SUCH DATES.

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           (C) The first sentence of SECTION 4.1 of the Loan Agreement is
               entirely amended as follows:

                    THE INTEREST RATE ON THE OUTSTANDING PRINCIPAL AMOUNTS UNDER
                    THE REVOLVING FACILITY COMMITMENT IS EQUAL TO THE LESSER OF
                    EITHER (A) THE MAXIMUM LAWFUL RATE OF INTEREST PERMITTED
                    UNDER APPLICABLE USURY LAWS, NOW OR HEREAFTER ENACTED (THE
                    "MAXIMUM RATE") OR (B) THE RATE THAT IS EQUAL TO THE SUM OF
                    THE BANK'S REFERENCE RATE PLUS THREE PERCENT (3%).

           (D) SECTIONS 6.2(C) AND (D) are entirely amended as follows:

               (C)  SIXTY-FIVE PERCENT (65%) OF THE PRESENT AND FUTURE ISSUED
                    AND OUTSTANDING CAPITAL STOCK AND OTHER EQUITY SECURITIES
                    ISSUED BY ALL FOREIGN SUBSIDIARIES OF ANY COMPANY, PURSUANT
                    TO THE SECURITY AGREEMENT OR OTHER SECURITY DOCUMENTS IN
                    FORM AND SUBSTANCE SATISFACTORY TO THE BANK; AND

               (D)  FEE SIMPLE INTERESTS OF ANY PRESENT AND FUTURE COMPANY IN
                    ANY REAL PROPERTY (INCLUDING THE REAL PROPERTY OWNED BY
                    BORROWER IN WHICH BANK ONE, TEXAS, N.A. HAS A FIRST LIEN,
                    HEREIN THE "AUSTIN PROPERTY,") PURSUANT TO MORTGAGES OR
                    DEEDS OF TRUST, AS THE CASE MAY BE, IN FORM AND SUBSTANCE
                    ACCEPTABLE TO THE BANK. PROVIDED THAT THE DEED OF TRUST LIEN
                    UPON THE AUSTIN PROPERTY SHALL NOT BE FILED OF RECORD UNTIL
                    THE PRIOR CONSENT OF THE FIRST LIENHOLDER ON SUCH PROPERTY
                    HAS BEEN OBTAINED, WHICH CONSENT THE BORROWER AGREES TO USE
                    ITS GOOD FAITH BEST EFFORTS TO OBTAIN; PROVIDED FURTHER THAT
                    UPON OBTAINING SUCH CONSENT, THE BANK IS HEREBY AUTHORIZED
                    TO FILE SUCH DEED OF TRUST, AND THE BORROWER AGREES TO
                    PROMPTLY PROVIDE TO THE BANK A MORTGAGEE POLICY OF TITLE
                    INSURANCE INSURING THE PRIORITY OF THE BANK'S LIEN ON SUCH
                    PROPERTY IN AN AMOUNT, ISSUED BY A TITLE COMPANY, AND
                    SHOWING A STATE OF TITLE AND EXCEPTIONS THERETO SATISFACTORY
                    TO THE BANK.

           (E) SECTIONS 10.3(E) AND 10.3(F) are entirely amended as follows:

               (E)  MONTHLY WITHIN THIRTY (30) DAYS AFTER THE LAST AND FIFTEENTH
                    (15TH) DAY OF THE APPLICABLE MONTH, A BORROWING BASE REPORT
                    SETTING FORTH THE RESPECTIVE AMOUNTS OF ACCEPTABLE
                    RECEIVABLES, ACCEPTABLE GROWER CONTRACT RECEIVABLES, AND
                    ACCEPTABLE INVENTORY AS OF THE LAST DAY OF EACH CALENDAR
                    MONTH OR ANY MORE RECENT DATE FOR WHICH SUCH INFORMATION MAY
                    BE AVAILABLE, TOGETHER WITH THE CALCULATION OF THE ADJUSTED
                    BORROWING BASE. THE REPORT PROVIDED AS OF THE FIFTEENTH
                    (15TH) DAY OF EACH MONTH MAY INCLUDE ESTIMATES BASED ON
                    HISTORICAL INFORMATION AS RESPECTS PACA AND COMPARABLE STATE
                    LAW CLAIMANTS' CLAIMS. ANY BORROWING BASE REPORT WHICH HAS
                    BEEN TIMELY DELIVERED SHALL REMAIN IN EFFECT UNTIL THE NEXT
                    BORROWING BASE REPORT IS TIMELY DELIVERED.

               (f)  Concurrently with the delivery of the financial statements
                    pursuant to Section 10.3(a), (B), AND (C), A COMPLIANCE
                    CERTIFICATE FROM THE BORROWER, CERTIFYING AS TO THE
                    COMPANIES' COMPLIANCE WITH THE TERMS, COVENANTS, AND OTHER
                    AGREEMENTS CONTAINED IN THE LOAN DOCUMENTS.

           (F) SECTIONS 10.4, 10.5, 10.6, 10.7, AND 10.8 are hereby entirely
               amended as follows:

               10.4 MINIMUM EBITDA. THE COMPANIES SHALL MAINTAIN A MINIMUM
                    EBITDA CALCULATED FOR THE THREE MONTHS ENDED JUNE 30, 2000,
                    AND THEREAFTER ON A CUMULATIVE MONTHLY BASIS (BUILDING TO A
                    12 MONTH ROLLING CALCULATION), IN THE MINIMUM AMOUNTS AS OF
                    THE FOLLOWING DATES:

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                             MINIMUM EBITDA               DATE
                             --------------               ----
                               $5,028,000             June 30, 2000
                               $5,783,000             July 31, 2000
                               $6,080,000            August 31, 2000
                               $6,532,000          September 30, 2000
                               $7,066,000           October 31, 2000
                               $8,297,000           November 30, 2000
                               $9,071,000           December 31, 2000

                    "SUBORDINATED DEBT" MEANS, AT ANY TIME, (A) DEBT OF ANY
                    COMPANY INCURRED IN CONNECTION WITH BORROWER'S 12% SENIOR
                    SUBORDINATED NOTES DUE MAY 1, 2003, IN THE PRINCIPAL AMOUNT
                    OF $20,000,000, AND ANY NOTES GIVEN BY BORROWER IN EXCHANGE
                    FOR THOSE NOTES IF THE NOTES SO GIVEN ARE SUBJECT TO THE
                    SAME TERMS AS THE ORIGINAL NOTES (COLLECTIVELY, THE
                    "SUBORDINATED NOTES"), AND (B) ANY OTHER DEBT OF ANY COMPANY
                    (I) INCURRED AT A TIME WHEN NO POTENTIAL DEFAULT OR DEFAULT
                    HAS OCCURRED AND IS CONTINUING UNDER THIS AGREEMENT, (II)
                    THE INCURRENCE OF WHICH SHALL NOT CAUSE A POTENTIAL DEFAULT
                    OR DEFAULT UNDER THIS AGREEMENT, (III) FOR WHICH NO
                    SCHEDULED OR MANDATORY PRINCIPAL PAYMENT OR SINKING FUND
                    PAYMENT IS DUE ON OR BEFORE THE EXPIRATION DATE, (IV) WHOSE
                    COVENANTS ARE NO MORE RESTRICTIVE THAN THOSE SET FORTH IN
                    THIS AGREEMENT, AND (V) THE PAYMENT OF WHICH IS SUBORDINATED
                    TO DEBT OWED BY THE COMPANIES TO THE BANK IN A MANNER
                    ACCEPTABLE TO THE BANK.

                    "EBITDA" FOR ANY PERIOD MEANS:

                    (A) THE SUM (WITHOUT DUPLICATION) OF THE FOLLOWING FOR THE
                        COMPANIES ON A CONSOLIDATED BASIS AND FOR THAT PERIOD
                        TAKEN AS A SINGLE-ACCOUNTING PERIOD: (I) NET INCOME;
                        MINUS (II) EXTRAORDINARY GAINS; MINUS (III) INCOME
                        ATTRIBUTABLE TO MINORITY INTERESTS; PLUS (IV) CASH
                        DIVIDENDS OR DISTRIBUTIONS ATTRIBUTABLE TO MINORITY
                        INTERESTS, MINUS (V) INCOME FROM SUBSIDIARIES, JOINT
                        VENTURES AND INVESTMENTS RECOGNIZED ON A CONSOLIDATED
                        BASIS WHICH (A) THE SUBSIDIARY, JOINT VENTURE OR
                        INVESTMENT IS RESTRICTED BY AUTHORITY, CONTRACT OR LAW
                        FROM PAYING TO THE COMPANY IN THE FORM OF A DIVIDEND OR
                        OTHER DISTRIBUTION, AND (B) THE COMPANY HAS NOT RECEIVED
                        IN THE FORM OF A CASH DIVIDEND OR OTHER CASH
                        DISTRIBUTION, PLUS (VI) NON-CASH EXTRAORDINARY LOSSES;
                        PLUS (VII) TO THE EXTENT INCLUDED IN DETERMINING NET
                        INCOME (A) INCOME TAXES, (B) INTEREST EXPENSE, (C)
                        DEPRECIATION, AND (D) AMORTIZATION; AND

                    (B) UNLESS OTHERWISE SPECIFIED, IS DETERMINED (I) FOR A
                        PERIOD OF FOUR CONSECUTIVE FISCAL QUARTERS OF THAT
                        PERSON TAKEN AS A SINGLE ACCOUNTING PERIOD, (II)
                        EXCLUSIVE OF THE EBITDA OF ANY ENTITY (A) BEFORE IT
                        BECAME A SUBSIDIARY OF A COMPANY OR TRANSFERRED
                        SUBSTANTIALLY ALL OF ITS ASSETS TO A COMPANY OTHER THAN
                        ANY ENTITY ACQUIRED BY ANY COMPANY WITHIN SUCH PERIOD,
                        WHICH WILL BE ACCOUNTED FOR AS A "POOLING OF INTERESTS,"
                        THEN THE MOST RECENT FOUR FISCAL QUARTERS PERFORMANCE OF
                        SUCH ENTITY WILL BE USED IN SUCH CALCULATION, REGARDLESS
                        OF THE DATE OF ITS ACQUISITION BY A COMPANY, (B) AFTER
                        IT IS DIRECTLY OR INDIRECTLY DISPOSED OF BY A COMPANY,
                        AND (III) FOR PURPOSES OF CALCULATING EBITDA FOR ANY
                        FISCAL QUARTER DURING THE FISCAL YEAR ENDING DECEMBER
                        31, 1998, EBITDA SHALL INCLUDE THE HISTORICAL EBITDA (AS
                        ADJUSTED IN A MANNER ACCEPTABLE TO BANK) DURING SUCH
                        PERIOD FOR ANY ENTITY PRIOR TO THE DATE IT BECAME A
                        SUBSIDIARY OF A COMPANY, OR TRANSFERRED SUBSTANTIALLY
                        ALL OF ITS ASSETS TO A COMPANY.

               10.5 INTENTIONALLY OMITTED.

               10.6 INTENTIONALLY OMITTED.

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               10.7 INTENTIONALLY OMITTED.

               10.8 INTENTIONALLY OMITTED.

           (G) SECTION 10.11 is entirely amended as follows:

               CAPITAL EXPENDITURES. NO COMPANY SHALL MAKE CAPITAL EXPENDITURES
               OTHER THAN PERMITTED CAPITAL EXPENDITURES. "PERMITTED CAPITAL
               EXPENDITURES" MEANS FOR ANY CALENDAR QUARTER, COMMENCING WITH THE
               QUARTER BEGINNING APRIL 1, 2000, A TOTAL AMOUNT OF CAPITAL
               EXPENDITURES THAT DOES NOT EXCEED $300,000 PER QUARTER, AND IN
               THE AGGREGATE THE SUM OF $700,000 FROM APRIL 1, 2000, THROUGH THE
               EXPIRATION DATE. ADDITIONALLY, THE BORROWER SHALL PROVIDE TO THE
               BANK WITHIN THIRTY (30) DAYS AFTER THE END OF EACH MONTH A REPORT
               OF THE CAPITAL EXPENDITURES FOR THE PRIOR MONTH AND A COMPARISON
               OF SUCH CAPITAL EXPENDITURES ACTUALLY INCURRED TO CAPITAL
               EXPENDITURES BUDGETED TO OCCUR IN SUCH CALENDAR MONTH AND FOR
               SUCH PERIOD OF TIME, COMMENCING WITH THE MONTH ENDING APRIL 30,
               2000.

           (H) SECTION 10.17(A) is entirely amended as follows:

               (A)  PROMPTLY UPON THE BORROWER BECOMING AWARE OF ANY PENDING OR
                    THREATENED LITIGATION WHERE THE AMOUNT CLAIMED EXCEEDS
                    $100,000, THE BORROWER SHALL REPORT SUCH PENDING OR
                    THREATENED LITIGATION TO THE BANK IN WRITING AND SHALL
                    FURTHERMORE REPORT TO THE BANK IN WRITING PROMPTLY ALL
                    SETTLEMENTS THEREOF.

           (I) SECTION 10.25(D) is entirely amended and new subsections (N) and
               (O) are added to SECTION 10.25 to read as follows:

               (D)  SALE, ASSIGN, LEASE, TRANSFER, OR OTHERWISE DISPOSE OF ANY
                    OF ITS ASSETS (INCLUDING, WITHOUT LIMITATION, EQUITY
                    INTERESTS IN ANY REPORTING COMPANY) EXCEPT, WITHOUT
                    DUPLICATION (I) SALES AND DISPOSITIONS OF INVENTORY IN THE
                    ORDINARY COURSE OF BUSINESS, (II) SALES OF ASSETS WHICH ARE
                    OBSOLETE OR ARE NO LONGER IN USE AND WHICH ARE NOT
                    SIGNIFICANT TO THE CONTINUATION OF THAT COMPANY'S BUSINESS,
                    (III) SALES OF ASSETS (A) OBTAINED AS THE RESULT OF MERGERS
                    AND CONSOLIDATIONS PERMITTED UNDER THIS AGREEMENT AND
                    PERMITTED ACQUISITIONS AND (B) WHICH ARE UNNECESSARY TO THAT
                    COMPANY'S BUSINESS OPERATIONS, (IV) SALES AND DISPOSITIONS
                    FROM ANY COMPANY TO ANY OTHER COMPANY, (V) DISPOSITIONS OF
                    ASSETS WHERE SUBSTANTIALLY SIMILAR ASSETS HAVE BEEN OR ARE
                    SIMULTANEOUSLY BEING ACQUIRED, (VI) ARMS-LENGTH SALES AND
                    DISPOSITIONS FROM ANY COMPANY TO ANY UNRESTRICTED SUBSIDIARY
                    IN THE ORDINARY COURSE OF BUSINESS ON CUSTOMARY TRADE TERMS,
                    AND (VII) DISPOSITIONS OF ASSETS ON OR PRIOR TO NOVEMBER 15,
                    1999, THE NET PROCEEDS OF WHICH DO NOT EXCEED $500,000 IN
                    ANY FISCAL YEAR. PROVIDED, HOWEVER, WITH RESPECT TO ANY
                    SALES OTHER THAN SALES OF INVENTORY IN THE ORDINARY COURSE
                    OF BUSINESS THE BANK SHALL RECEIVE AT LEAST FIVE (5) BANKING
                    DAYS PRIOR WRITTEN NOTICE, AND WITH RESPECT TO SUBSECTIONS
                    (II), (III), AND (VI), THE PROCEEDS OF ALL SUCH SALES (OTHER
                    THAN THE SALE OF CERTAIN ASSETS IN LOUISIANA FOR
                    APPROXIMATELY $350,000 AND THE SALE OF CERTAIN ASSETS IN
                    AUSTIN, TEXAS, FOR APPROXIMATELY $400,000 WHICH SALES CLOSED
                    IN NOVEMBER 1999), EXCLUSIVE OF REASONABLE EXPENSES OF
                    SELLING, SHALL BE IMMEDIATELY APPLIED TOWARDS THE REPAYMENT
                    OF THE OUTSTANDING PRINCIPAL BALANCE OF THE REVOLVING NOTE,
                    AND THE AMOUNT OF SUCH PROCEEDS SHALL ALSO CONSTITUTE A
                    PERMANENT REDUCTION IN THE REVOLVING FACILITY COMMITMENT.
                    SEVENTY-FIVE PERCENT (75%) OF THE PAYMENTS REQUIRED PURSUANT
                    TO THE FOREGOING SENTENCE SHALL BE CREDITED TO THE SCHEDULED
                    REDUCTIONS IN THE REVOLVING FACILITY COMMITMENT DUE ON
                    DECEMBER 31, 2000, AND TWENTY-FIVE PERCENT (25%) OF SUCH
                    PAYMENTS SHALL BE CREDITED TO THE SCHEDULED REDUCTION NEXT
                    FOLLOWING THE DATE WHEN SUCH PAYMENT AND REDUCTION IS MADE.

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               (N)  ADDITIONALLY, THE REVOLVING FACILITY COMMITMENT SHALL BE
                    REDUCED BY ONE HUNDRED PERCENT (100%) OF ANY ALL TAX REFUNDS
                    RECEIVED BY THE BORROWER, ALL OF WHICH SHALL BE APPLIED TO
                    THE PRINCIPAL OWING TO THE BANK IMMEDIATELY UPON RECEIPT
                    THEREOF BY THE BORROWER AND SHALL CONSTITUTE PERMANENT
                    REDUCTIONS IN THE REVOLVING FACILITY COMMITMENT.

               (O)  ADDITIONALLY, THE REVOLVING FACILITY COMMITMENT SHALL BE
                    REDUCED BY THE GREATER OF (I) FIFTY PERCENT (50%) OF THE
                    CASH PROCEEDS, NET OF REASONABLE EXPENSES OF ISSUANCE, OF
                    ANY EQUITY ISSUED BY ANY COMPANY (OTHER THAN THE $5,000,000
                    IN PREFERRED STOCK TO BE ISSUED BY THE BORROWER ON APRIL 30,
                    2000, AS DESCRIBED IN THE TENTH AMENDMENT TO RESTATED
                    BUSINESS LOAN AGREEMENT AND WAIVER DATED AS OF MARCH 31,
                    2000) OR (II) THE AMOUNT OF SUCH NET PROCEEDS REQUIRED TO
                    REDUCE THE REVOLVING FACILITY COMMITMENT TO AN AMOUNT NOT IN
                    EXCESS OF THE ADJUSTED BORROWING BASE MOST RECENTLY REPORTED
                    TO THE BANK.

               (J)  SECTION 10.25(L) is hereby amended to read as follows:

                    (L) CONSENT TO OR PERMIT TO EXIST ANY AMENDMENT TO OR
                    RESCISSION OF THAT CERTAIN WAIVER TO NOTE PURCHASE AGREEMENT
                    DATED AS OF APRIL 13, 2000, AMONG THE HOLDERS OF THE
                    SUBORDINATED NOTES AND THE BORROWER, OR MAKE ANY PAYMENTS OF
                    ACCRUED AND UNPAID INTEREST UNDER THE SUBORDINATED NOTES AT
                    A TIME WHEN FAILURE TO MAKE SUCH PAYMENTS WILL NOT CAUSE A
                    DEFAULT UNDER SUCH SUBORDINATED NOTES.

               (K) A new SECTION 10.31 is hereby added to the Loan Agreement to
                   read as follows:

                    10.31 FILING OF TAX RETURN. ON OR BEFORE APRIL 17, 2000, THE
                          BORROWER SHALL FILE THE NECESSARY TAX RETURN FOR ITS
                          PENDING TAX REFUND IN THE ESTIMATED AMOUNT OF
                          $3,600,000 WITH THE UNITED STATES INTERNAL REVENUE
                          SERVICE, AND SHALL PROMPTLY PROVIDE A COPY OF SUCH TAX
                          RETURN TO THE BANK.

               (L) SECTION 12.1 is hereby amended to read as follows:

                    12.1  FAILURE TO PAY. THE BORROWER FAILS TO MAKE A PAYMENT
                          UNDER THIS AGREEMENT, INCLUDING WITHOUT LIMITATION THE
                          PAYMENTS REQUIRED UNDER SECTIONS 2.4(E), 10.25(D),
                          10.25(N), AND 10.25(O), AND WITH RESPECT SOLELY TO
                          INTEREST PAYMENTS, SUCH FAILURE CONTINUES FOR FIVE
                          DAYS AFTER THE DATE WHEN DUE.

      3. WAIVERS. Subject to the terms and conditions hereof, Bank hereby
waives, but only during the Waiver Period (hereinafter defined), the Specified
Defaults (hereinafter defined); PROVIDED, HOWEVER, that Bank's waiver of the
Specified Defaults and its rights and remedies as a result of the occurrence
thereof shall not constitute and shall not be deemed to constitute a waiver of
any other Default or Potential Default, whether arising as a result of further
violations of any provision of the Loan Agreement previously violated, or a
waiver of any rights and remedies arising as a result of such other Defaults or
Potential Defaults. As used herein, "WAIVER PERIOD" shall mean the period
commencing on the effective date of this Amendment and terminating on the
earlier to occur of (i) any further Default or Potential Default, and (ii)
February 2, 2001. As used herein, "SPECIFIED DEFAULTS" shall mean the existence
of an Event of Default under Section 12.12 as a result of the Borrower's failure
to pay amounts due in October and November 1999 to Sam Perricone Citrus
Co.-related Persons and to Preston and Connie Thompson exceeding $750,000 in the
aggregate. At the end of the Waiver Period, the waiver of the Specified Defaults
will automatically terminate.

      4. CONDITIONS PRECEDENT. This Amendment will not become effective until
all corporate actions of Borrower and each of the Subsidiary/Debtors taken in
connection herewith and the transactions contemplated hereby shall be
satisfactory in form and substance to the Bank, and each of the following
conditions precedent shall have been satisfied, all of which must occur on or
before April 17, 2000:

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           (a) Bank has received counterparts of this Amendment duly executed
               and duly delivered by Bank, Borrower, and each other party named
               on the signature page below.

           (b) All fees and expenses, including reasonable legal and other
               professional fees and expenses incurred on or prior to the date
               of this Amendment by the Bank, including without limitation the
               fees and expenses of legal counsel and financial advisors to the
               Bank, shall have been paid to the extent that same had been
               billed.

           (c) The Bank shall have received a certificate of the Borrower
               certifying as to the accuracy, after giving effect to this
               Amendment, of the representations and warranties set forth in the
               Loan Agreement, the other Loan Documents and this Amendment, that
               there exists no Default or Potential Default after giving effect
               to this Amendment, and that the execution, delivery and
               performance of this Amendment will not cause a Default or
               Potential Default.

           (d) The Bank shall have received such other documents, instruments
               and certificates, in form and substance reasonably satisfactory
               to the Bank, as the Bank shall deem necessary or appropriate in
               connection with this Amendment and the transactions contemplated
               hereby, including without limitation copies of resolutions of the
               boards of directors of each of Borrower and each
               Subsidiary/Debtor which is a party to the documents contemplated
               by this Amendment.

           (e) The Bank shall have received a facility fee in the amount of
               $47,500.

           (f) Borrower shall have executed and delivered to the Bank, or cause
               to be executed and delivered to the Bank, the following documents
               and other items, each satisfactory to the Bank:

               i.   The Borrower shall deliver to the Bank, to be attached to
                    this Amendment as Schedule 2 hereto, an updated listing of
                    any and all payments of principal, interest, earn-out,
                    contingency payment, or other obligation owed by any Company
                    to any Person which were incurred in connection with the
                    acquisition by Company of substantially all of the business
                    (or part of a business) or shares of a Person, whether
                    pursuant to an asset acquisition or a stock purchase,
                    including the amount of such payment, the date on which such
                    payment is due, the Person to whom such payment is owed, and
                    any grace period currently available with respect to such
                    payment.

                    (a) The Borrower shall simultaneously receive an audit
                        opinion without a going concern modification and shall
                        have deliver a copy thereof to the Bank.

                    (b) The Borrower shall execute and deliver or cause to be
                        executed and delivered to the Bank, in form and
                        substance reasonably satisfactory to the Bank and its
                        counsel, the items delineated on Schedule 1 hereto.

      5. FURTHER AMENDMENTS UPON SATISFACTION OF CONDITIONS SUBSEQUENT. If the
Borrower provides to the Bank on or before 2:00 p.m., Dallas, Texas time on
April 30, 2000, satisfactory evidence that it has received on or after March 31,
2000, and on or before 2:00 p.m., Dallas, Texas time on April 30, 2000, proceeds
of the issuance of preferred stock of the Borrower in an amount not less than
$5,000,000 net of reasonable expenses of issuance and upon terms and conditions
satisfactory to the Bank, the Loan Agreement shall, effective April 30, 2000, be
further amended as follows so long as no Default then exists:

           (A) SECTION 2.1(A) is entirely amended as follows:

               DURING THE AVAILABILITY PERIOD DESCRIBED BELOW, THE BANK WILL
               PROVIDE A LINE OF CREDIT TO THE BORROWER. THE AMOUNT OF THE LINE
               OF CREDIT (THE "REVOLVING FACILITY COMMITMENT") IS, FROM MARCH
               31, 2000, THROUGH MAY 30, 2000, $21,000,000, FROM MAY 31, 2000,
               THROUGH JUNE 29, 2000, $20,000,000, FROM JUNE 30, 2000, THROUGH
               JULY 30, 2000, $19,000,000, FROM JULY 31,

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               2000, THROUGH AUGUST 30, 2000, $18,000,000, FROM AUGUST 31, 2000,
               THROUGH SEPTEMBER 29, 2000, $17,000,000, FROM SEPTEMBER 30, 2000,
               THROUGH OCTOBER 30, 2000, $16,000,000, FROM OCTOBER 31, 2000,
               THROUGH DECEMBER 30, 2000, $15,750,000, AND, THEREAFTER,
               $14,500,000. PROVIDED, HOWEVER, THAT SHOULD THE BORROWER RECEIVE
               AND PAY TO THE BANK THE TAX REFUND CONTEMPLATED BY SECTION 10.31
               OF THIS AGREEMENT ON OR BEFORE OCTOBER 31, 2000, THE $250,000
               REDUCTION OF THE REVOLVING FACILITY COMMITMENT SCHEDULED FOR
               OCTOBER 31, 2000, SHALL NOT BE REQUIRED AND THE REVOLVING
               FACILITY COMMITMENT FROM SEPTEMBER 30, 2000, THROUGH DECEMBER 30,
               2000, SHALL BE $16,000,000, AND THE REVOLVING FACILITY COMMITMENT
               FROM DECEMBER 31, 2000, AND THEREAFTER SHALL BE $14,500,000.
               EXCEPT AS SPECIFICALLY PROVIDED IN SECTION 10.25(D), ALL
               REVOLVING FACILITY COMMITMENT REDUCTIONS PROVIDED FOR ELSEWHERE
               IN THIS AGREEMENT SHALL BE IN ADDITION TO THE REVOLVING FACILITY
               COMMITMENT REDUCTIONS CONTEMPLATED BY THIS SECTION 2.1(A).

           (B) SECTIONS 2.4(E) is entirely amended to read as follows:

               (E)  THE BORROWER WILL PAY ON MARCH 15, 2000, MARCH 30, 2000, MAY
                    31, 2000, JUNE 30, 2000, JULY 31, 2000, AUGUST 31, 2000,
                    SEPTEMBER 30, 2000, OCTOBER 31, 2000, AND DECEMBER 31, 2000,
                    PRINCIPAL OUTSTANDING UNDER THE REVOLVING NOTE TO THE EXTENT
                    THAT THE PRINCIPAL AMOUNT THEREOF OUTSTANDING ON SUCH DATES
                    PLUS THE OUTSTANDING AMOUNTS OF ANY LETTERS OF CREDIT ON
                    SUCH DATES (INCLUDING THE FACE AMOUNT OF ALL UNDRAWN AND
                    UNCANCELLED LETTERS OF CREDIT AND AMOUNTS DRAWN ON LETTERS
                    OF CREDIT AND NOT YET REIMBURSED), EXCEEDS THE REVOLVING
                    FACILITY COMMITMENT ON SUCH DATES.

           (C) SECTION 10.4 is hereby entirely amended as follows:

               10.4 MAXIMUM ADJUSTED BORROWING BASE SHORTFALL. IF AT ANY TIME
                    THE REVOLVING FACILITY COMMITMENT MINUS THE ADJUSTED
                    BORROWING BASE (CALCULATED AS OF THE END OF THE MOST
                    RECENTLY PRECEDING CALENDAR MONTH) EXCEEDS THE AMOUNTS SET
                    FORTH BELOW ON OR AFTER EACH DATE SET FORTH BELOW UNTIL THE
                    DAY BEFORE THE NEXT SUCH DATE, THE COMPANY SHALL IMMEDIATELY
                    PAY TO THE BANK ANY SUCH SHORTFALL.

                                 AMOUNT             DATE
                                 ------             ----
                               $9,000,000        May 31, 2000
                               $8,000,000      August 31, 2000
                               $7,500,000    September 30, 2000
                               $5,000,000      October 31, 2000
                               $4,500,000     November 30, 2000
                               $4,000,000     December 31, 2000

                    PROVIDED, HOWEVER, TO THE EXTENT THAT THE REVOLVING FACILITY
                    COMMITMENT REDUCTION REQUIRED BY SECTION 10.25(N) HEREOF HAS
                    NOT OCCURRED ON OR PRIOR TO NOVEMBER 30, 2000, THE AMOUNT
                    SET FORTH ABOVE FOR OCTOBER 31, 2000 SHALL BE $7,000,000
                    UNTIL THE EARLIER OF THE TIME THAT SUCH REVOLVING FACILITY
                    COMMITMENT REDUCTION OCCURS OR NOVEMBER 30, 2000.

                    "SUBORDINATED DEBT" MEANS, AT ANY TIME, (A) DEBT OF ANY
                    COMPANY INCURRED IN CONNECTION WITH BORROWER'S 12% SENIOR
                    SUBORDINATED NOTES DUE MAY 1, 2003, IN THE PRINCIPAL AMOUNT
                    OF $20,000,000, AND ANY NOTES GIVEN BY BORROWER IN EXCHANGE
                    FOR THOSE NOTES IF THE NOTES SO GIVEN ARE SUBJECT TO THE
                    SAME TERMS AS THE ORIGINAL NOTES (COLLECTIVELY, THE
                    "SUBORDINATED NOTES"), AND (B) ANY OTHER DEBT OF ANY COMPANY
                    (I) INCURRED AT A TIME WHEN NO POTENTIAL DEFAULT OR DEFAULT
                    HAS OCCURRED AND IS CONTINUING UNDER THIS AGREEMENT, (II)
                    THE INCURRENCE OF WHICH SHALL NOT CAUSE A POTENTIAL DEFAULT
                    OR DEFAULT UNDER THIS AGREEMENT (III) FOR WHICH NO SCHEDULED
                    OR MANDATORY PRINCIPAL PAYMENT OR SINKING FUND PAYMENT IS
                    DUE ON OR BEFORE THE EXPIRATION DATE, (IV) WHOSE

                                       7
<PAGE>
                    COVENANTS ARE NO MORE RESTRICTIVE THAN THOSE SET FORTH IN
                    THIS AGREEMENT, AND (V) THE PAYMENT OF WHICH IS SUBORDINATED
                    TO DEBT OWED BY THE COMPANIES TO THE BANK IN A MANNER
                    ACCEPTABLE TO THE BANK.

           (D) SECTION 10.12 is hereby amended to read as follows:

               10.12 DIVIDENDS. THE BORROWER SHALL NOT DECLARE OR PAY ANY
                     DIVIDENDS ON ANY OF ITS SHARES EXCEPT DIVIDENDS PAYABLE IN
                     CAPITAL STOCK OF THE BORROWER, AND THE BORROWER SHALL NOT
                     PURCHASE, REDEEM OR OTHERWISE ACQUIRE FOR VALUE ANY OF ITS
                     SHARES, OR CREATE ANY SINKING FUND IN RELATION THERETO;
                     PROVIDED, HOWEVER, THAT SO LONG AS PRIOR TO THE TIME OF
                     SUCH PAYMENT THE REVOLVING FACILITY COMMITMENT HAS BEEN
                     REDUCED AS CONTEMPLATED BY SECTION 10.25(N) HEREOF AND NO
                     DEFAULT THEN EXISTS OR WILL RESULT THEREFROM, THE BORROWER
                     MAY PAY CASH DIVIDENDS IN AN AMOUNT NOT TO EXCEED $300,000
                     ON A DATE NOT BEFORE NOVEMBER 1, 2000, WITH RESPECT TO ITS
                     PREFERRED STOCK ISSUED ON OR ABOUT APRIL 30, 2000.

           (E) SECTION 10.25(N) is hereby amended to read as follows:

                    (N) ADDITIONALLY, THE REVOLVING FACILITY COMMITMENT SHALL BE
                    REDUCED ON OR BEFORE NOVEMBER 30, 2000, BY THE GREATER OF
                    $3,600,000 OR ONE HUNDRED PERCENT (100%) OF ANY ALL TAX
                    REFUNDS RECEIVED BY THE BORROWER, ALL OF WHICH SHALL BE
                    APPLIED TO THE PRINCIPAL OWING TO THE BANK IMMEDIATELY UPON
                    RECEIPT THEREOF BY THE BORROWER AND SHALL CONSTITUTE
                    PERMANENT REDUCTIONS IN THE REVOLVING FACILITY COMMITMENT.

           (F) SECTION 12.1 is hereby amended to read as follows:

               12.1 FAILURE TO PAY. THE BORROWER FAILS TO MAKE A PAYMENT UNDER
                    THIS AGREEMENT, INCLUDING WITHOUT LIMITATION THE PAYMENTS
                    REQUIRED UNDER SECTION 2.4(E), SECTIONS 10.4, 10.25(D),
                    10.25(N), AND 10.25(O), AND WITH RESPECT SOLELY TO INTEREST
                    PAYMENTS, SUCH FAILURE CONTINUES FOR FIVE DAYS AFTER THE
                    DATE WHEN DUE.

      6. RELEASE. In consideration of the Bank's agreements herein and certain
other good and valuable consideration, Borrower hereby expressly acknowledges
and agrees that as of the date hereof it has no setoffs, counterclaims,
adjustments, recoupments, defenses, claims or actions of any character, whether
contingent, non-contingent, liquidated, unliquidated, fixed, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured, known or unknown,
against the Bank or any grounds or cause for reduction, modification or
subordination of the obligations or owed to the Bank or any liens or security
interests of the Bank. To the extent Borrower may possess any such setoffs,
counterclaims, adjustments, recoupments, claims, actions, grounds or causes,
Borrower hereby waives, and hereby releases the Bank from, any and all of such
setoffs, counterclaims, adjustments, recoupments, claims, actions, grounds and
causes, such waiver and release being with full knowledge and understanding of
the circumstances and effects of such waiver and release and after having
consulted counsel with respect thereto.

      7. CONTINUED EFFECT. Except to the extent provided herein, all terms,
provisions, and conditions of the Loan Agreement and the other Loan Documents
shall continue in full force and effect and are hereby ratified and confirmed,
and the Loan Agreement and the other Loan Documents shall remain enforceable and
binding in accordance with their respective terms. Borrower and each
Subsidiary/Debtor confirms and agrees that the other Loan Documents, and the
guaranties, liens, and security interests granted therein, shall continue to
assure and secure Borrower's obligations and indebtedness to Bank, direct or
indirect, arising pursuant to the Revolving Note and the Loan Agreement, whether
or not such other Loan Documents shall be expressly affected by this Amendment.
All references in the Loan Documents to the Loan Agreement shall hereafter be
deemed to be references to the Loan Agreement affected by this Amendment.

                                       8
<PAGE>
      8. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, all of which when taken together shall constitute one and the same
document, and each party hereto may execute this Amendment by signing any of
such counterparts. Telecopies of signatures shall be binding and effective as
originals.

      9. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon, and inure
to be the benefit of, the parties hereto and their respective heirs,
administrators, successors and assigns.

      10. NO ORAL AGREEMENTS. THIS WRITTEN DOCUMENT AND THE DOCUMENTS EXECUTED
IN CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES IN
RESPECT OF THE MATTERS COVERED HEREIN AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

      11. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of Texas.

      12. LOAN DOCUMENT. This Amendment is a Loan Document and is subject to all
provisions of the Loan Agreement applicable to Loan Documents, all of which are
incorporated in this Amendment by reference the same as if set forth in this
Amendment verbatim.

      [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK - SIGNATURE PAGE FOLLOWS]

                                       9
<PAGE>
      IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first written above.

BANK OF AMERICA, N.A. (formerly        FRESH AMERICA CORP., as BORROWER
Bank of America NT & SA, successor
in interest by merger with Bank of
America, N.A., formerly
NationsBank, N.A.), as BANK

By   /S/ WILLIAM E. LIVINGSTONE, IV    By   /S/ JOHN H. GRAY,
     ------------------------------         -----------------
     Managing Director                      Executive Vice President

                              CONSENT AND AGREEMENT

To induce Bank to enter into this Amendment the undersigned jointly and
severally (a) consent and agree to this Amendment's execution and delivery and
the terms hereof, including without limitation the amendments to the Security
Agreement and the Guaranty, (b) ratify and confirm that all guaranties,
assurances, liens, and subordinations granted, conveyed, or assigned to Bank
under the Loan Documents (as they may have been renewed, extended, and amended)
(i) are not released, diminished, impaired, reduced, or otherwise adversely
affected by this Amendment, and (ii) continue to guarantee, assure, secure, and
subordinate other debt to the full payment and performance of all present and
future obligations under the Loan Documents, and (c) waive notice of acceptance
of this consent and agreement, which consent and agreement binds the undersigned
and their successors and permitted assigns and inures to Bank and its successors
and permitted assigns.

COLUMBIA MARKETING SERVICES, INC.,
JNC ACQUISITION CORP.,
FRESH AMERICA ARIZONA, INC.,
FRESH AMERICA CALIFORNIA, INC.,
ELEANOR CORPORATION,
TORONTO CORPORATION,
FRESH AMERICA LOUISIANA, INC.,
FRESH AMERICA GEORGIA, INC.,
FRESH AMERICA FLORIDA, INC.,
HEREFORD HAVEN, INC.,
FRANCISCO ACQUISITION CORP.,
ALLIED-PERRICONE, INC., F/K/A SAM PERRICONE CITRUS CO.,
      each as a SUBSIDIARY/DEBTOR

By    John H. Gray, Vice President of each of the above companies

                                       10
<PAGE>
                                   SCHEDULE 1

                         ADDITIONAL CONDITIONS PRECEDENT

1.    The Borrower shall execute and deliver or cause to be executed and
      delivered to the Bank mortgages or deeds of trust, as appropriate, in form
      and substance satisfactory to the Bank, granting to Bank a priority
      (except for certain customary permitted encumbrances as delineated on
      title reports delivered to the Bank and including zoning restrictions,
      easements, licenses, or other minor irregularities of title which do not
      in the aggregate materially detract from the value of the property or
      materially impair the use thereof) lien upon all real property owned by
      the Borrower and the Subsidiary/Debtors other than the Unrestricted
      Subsidiaries (the "Deeds of Trust"), as security for the payment and
      performance of all now existing and hereafter owing obligations,
      indebtedness and liabilities owed by the Borrower to the Bank, and all
      renewals, extensions and modifications thereof, which real property Bank
      currently does not have a lien upon, together with such UCC-1 financing
      statements as the Bank may require to confirm the perfection of its
      security interest in the Collateral, which lien shall be prior to all
      liens other than an existing lien in favor of Bank One, Texas, N.A. Such
      Deed of Trust lien upon the Austin Property shall be held and filed only
      in accordance with Section 6.2(d) of the Loan Agreement.

2.    The Borrower shall cause 1277649 Ontario Limited and Sarfog, Inc. to
      deliver to the Bank an Additional Subsidiaries Supplement to the Security
      Agreement, granting to the Bank a first priority perfected security
      interest in sixty-five percent (65%) of the present and future issued and
      outstanding capital stock and other equity securities issued by all
      foreign Subsidiaries of any Company upon which the Bank does not currently
      have a lien, and evidence of corporate authority with respect to such
      security interests.

                                       11
<PAGE>
                                   SCHEDULE 2

                              ACQUISITION PAYMENTS

                                                         DATE    ANY AVAILABLE
       OBLIGOR          AMOUNT           PAYEE           DUE      GRACE PERIOD
--------------------  ----------  --------------------  ------  ---------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                       12SECURITIES PURCHASE AGREEMENT

     THIS  SECURITIES  PURCHASE  AGREEMENT,  dated as of March  14,  2000  (this
"Agreement"), is entered into by and between USA Biomass Corporation, a Delaware
corporation  (the  "Company"),  and Siete  Investors  LLC,  a  Delaware  limited
liability company.

                              W I T N E S S E T H:

     WHEREAS,  the Company and the Purchaser are executing and  delivering  this
Agreement  in  reliance  upon  the  exemptions  from  registration  provided  by
Regulation  D  ("Regulation  D")  promulgated  by the  Securities  and  Exchange
Commission (the "Commission")  under the Securities Act of 1933, as amended (the
"Securities Act"), and/or Section 4(2) of the Securities Act; and

     WHEREAS, the Purchaser wishes to purchase,  and the Company wishes to issue
and sell,  upon the terms and  conditions  of this  Agreement  for an  aggregate
purchase price of three million dollars ($3,000,000), (i) three thousand (3,000)
shares (the "Shares") of the Company's 6% Convertible  Series C Preferred Stock,
stated value one thousand  dollars ($1,000) per share, par value $.001 per share
(the  "Preferred   Stock")  which  shall  be  governed  by  the  Certificate  of
Designations  attached hereto as Exhibit A (the  "Certificate of  Designations")
and (ii) warrants ("Stock  Purchase  Warrants") to purchase one hundred thousand
(100,000) shares (the "Warrants") of the Company's common stock, par value $.001
per share (the "Common Stock"); and

     WHEREAS,  the Series A Preferred Stock shall be convertible  into shares of
the  Company's  Common  Stock  on the  terms  set  forth in the  Certificate  of
Designations,  and the Stock Purchase  Warrants (which shall be in substantially
the form  attached  as Exhibit B) may be  exercised  for the  purchase of Common
Stock, on the terms set forth therein; and

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

1. AGREEMENT TO PURCHASE; PURCHASE PRICE

     Purchase of Shares and Warrants.  Purchaser  hereby agrees to purchase from
the Company,  and the Company  hereby agrees to issue and sell to the Purchaser,
the Shares and the  Warrants for an aggregate  purchase  price of three  million
dollars  ($3,000,000)  which  shall be payable on the  Closing  Date (as defined
herein) in immediately available funds.

     Closings.  The  Shares  and  the  Warrants  to be  purchased  by  Purchaser
hereunder,  in definitive  form, and in such  denominations  as Purchaser or its
representative,  if any,  may request  upon at least  twenty-four  hours'  prior
notice to the Company, shall be delivered by or on behalf of the Company for the
account of Purchaser, against payment by the Purchaser of the aggregate purchase
price of three  million  dollars  ($3,000,000)  therefor by wire  transfer to an
account of the  Company,  all at the offices of Cohen  Tauber  Spievack & Wagner
LLP, 1350 Avenue of the Americas,  26th Floor, New York, New York 10019, by 5:00
PM,  New  York  time

<PAGE>

on the  date  hereof,  or at such  other  time and  date as  Purchaser  or their
representative,  if any,  and the Company  may agree upon in writing,  such date
being referred to herein as the "Closing Date."

2.  REPRESENTATIONS  AND  WARRANTIES OF THE  PURCHASER;  ACCESS TO  INFORMATION;
    INDEPENDENT INVESTIGATION

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

     a. The  Purchaser  is (i)  experienced  in making  investments  of the kind
described in this Agreement and the related  documents,  (ii) able, by reason of
the business and  financial  experience  of its  management,  to protect its own
interests in connection  with the  transactions  described in this Agreement and
the  related  documents,  and  (iii)  able  to  afford  the  entire  loss of its
investment in the Shares and the Warrants.

     b. All  subsequent  offers and sales of the Shares and the Warrants and the
Common Stock  issuable  upon  conversion  or exercise of, or in lieu of dividend
payments on, the Shares and the Warrants  shall be made pursuant to an effective
registration  statement  under the  Securities  Act or pursuant to an applicable
exemption from such registration.

     c. The  Purchaser  understands  that the Shares and the  Warrants are being
offered  and  sold to it in  reliance  upon  exemptions  from  the  registration
requirements of the United States federal  securities laws, and that the Company
is relying upon the truth and accuracy of the  Purchaser's  representations  and
warranties,  and the Purchaser's  compliance  with its  agreements,  each as set
forth herein,  in order to determine the availability of such exemptions and the
eligibility of the Purchaser to acquire the Shares and the Warrants.

     d. The Purchaser:  (A) has been provided with sufficient  information  with
respect to the  business  of the  Company  and such  documents  relating  to the
Company as the Purchaser has requested and Purchaser has carefully  reviewed the
same  including,  without  limitation,  the Company's Form 10-KSB for the fiscal
year ended December 31, 1998, filed with the Securities and Exchange  Commission
(the  "Commission")  and Form 10-QSB for the period  ending  September 30, 1999,
filed  with  the  Commission,   (B)  has  been  provided  with  such  additional
information with respect to the Company and its business and financial condition
as the Purchaser,  or the Purchaser's agent or attorney, has requested,  and (C)
has had access to management of the Company and the  opportunity  to discuss the
information  provided by management  of the Company and any  questions  that the
Purchaser had with respect  thereto have been answered to the full  satisfaction
of the Purchaser.

     e. The Purchaser has the requisite  corporate  power and authority to enter
into this Agreement and the registration rights agreement,  dated as of the date
hereof,  between  the  Company  and  the  Purchaser  (the  "Registration  Rights
Agreement").

     f.  This  Agreement  and  the   Registration   Rights   Agreement  and  the
transactions  contemplated  hereby  and  thereby,  have  been  duly and  validly
authorized by the Purchaser; and such agreements, when executed and delivered by
each of the Purchaser and the Company will each be a valid and binding agreement
of the Purchaser,  enforceable in accordance with their

                                       2
<PAGE>

respective  terms,  except to the extent that enforcement of each such agreement
may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance  or other  similar  laws  now or  hereafter  in  effect  relating  to
creditors' rights generally and to general principles of equity.

3. REPRESENTATIONS OF THE COMPANY

     The Company represents and warrants to the Purchaser that:

     a.  Organization.  The Company is a  corporation  duly  organized,  validly
existing and in good standing  under the laws of the State of Delaware.  Each of
the Company's  subsidiaries,  if any, is a corporation  duly organized,  validly
existing and in good  standing  under the laws of its  respective  jurisdiction.
Each of the Company and its subsidiaries, if any, is duly qualified as a foreign
corporation in all jurisdictions in which the failure to so qualify would have a
material  adverse effect on the Company and its  subsidiaries  taken as a whole.
Schedule  3(a)  lists  all  subsidiaries  of the  Company  and,  except as noted
therein,  all of the outstanding capital stock of all such subsidiaries is owned
of record and beneficially by the Company.

     b.  Capitalization.  On the date  hereof,  the  authorized  capital  of the
Company  consists  of 25 million  shares of Common  Stock,  par value  $.001 per
share, of 9,726,000 shares are issued and  outstanding;  and 2,000,000 shares of
Preferred  Stock,  par  value  $.001  per  share,  of which  747,500  have  been
designated as series A preferred  stock, all of which are issued and outstanding
are issued and  outstanding,  591,000 have been designated as series B preferred
stock,  all of which have been converted into shares of Common Stock and may not
be reissued by the Company, and 3,000 have been designated as series C preferred
stock, none of which are issued and outstanding. Schedule 3(b) sets forth all of
the options,  warrants and convertible  securities of the Company, and any other
rights to acquire  securities  of the  Company  (collectively,  the  "Derivative
Securities")  which are  outstanding on the date hereof,  including in each case
(i) the name and class of such  Derivative  Securities,  (ii) the issue  date of
such  Derivative  Securities,  (iii) the number of shares of Common Stock of the
Company into which such  Derivative  Securities  are  convertible as of the date
hereof,  (iv) the  conversion  or  exercise  price or prices of such  Derivative
Securities as of the date hereof,  (v) the expiration  date of any conversion or
exercise  rights held by the owners of such  Derivative  Securities and (vi) any
registration  rights  associated with such Derivative  Securities or outstanding
Common Stock.

     c. Concerning the Common Stock and the Warrants.  The Shares,  the Warrants
and Common Stock issuable upon  conversion  of, or in lieu of dividend  payments
on, the Shares, and upon exercise of the Warrants when issued, shall be duly and
validly issued, fully paid and non-assessable, will not be subject to preemptive
rights and will not subject the holder  thereof to personal  liability by reason
of being  such a  holder.  There  are  currently  no  preemptive  rights  of any
stockholder of the Company,  as such, to acquire the Shares, the Warrants or the
Common Stock  issuable to the Purchaser  pursuant to the terms of the Shares and
the Warrants.

     d. Reporting  Company Status.  The Common Stock is registered under Section
12 of the  Securities  Exchange Act of 1934,  as amended (the  "Exchange  Act").
Except as provided in Schedule  3(d),  the Company has duly and timely filed all
materials and documents  required to be filed within the last twelve (12) months
pursuant to all reporting obligations under either

                                       3
<PAGE>

Section  13(a) or 15(d) of the  Exchange  Act.  The  Common  Stock is listed and
traded  on the  Nasdaq  SmallCap  Market,  and the  Company  is not aware of any
pending or contemplated  action or proceeding of any kind to suspend the trading
of the Common Stock.

     e.  Authorized  Shares.  The Company has  available a sufficient  number of
authorized  and  unissued  shares of Common  Stock as may be necessary to effect
conversion  of the  Shares  and  the  exercise  of  the  Warrants.  The  Company
understands and acknowledges the potentially dilutive effect to the Common Stock
of the issuance of shares of Common Stock upon the  conversion of the Shares and
the  exercise  of the  Warrants.  The  Company  further  acknowledges  that  its
obligation  to issue  shares of Common Stock upon  conversion  of the Shares and
upon  exercise of the Warrants is absolute and  unconditional  regardless of the
dilutive effect that such issuance may have on the ownership  interests of other
stockholders  of the Company and  notwithstanding  the  commencement of any case
under 11 U.S.C. ss. 101 et seq. (the "Bankruptcy Code").

     f. Legality. The Company has the requisite corporate power and authority to
enter into this Agreement and the Registration  Rights  Agreement,  and to issue
and  deliver  the  Shares,  the  Warrants  and the Common  Stock  issuable  upon
conversion  of, or in lieu of dividend  payments on, the Shares and the exercise
of the Warrants.

     g.  Transaction  Agreements.   This  Agreement,   the  Registration  Rights
Agreement,  the  Certificate of  Designations  and the Stock  Purchase  Warrants
(collectively,  the  "Primary  Documents"),  and the  transactions  contemplated
hereby and thereby,  have been duly and validly authorized by the Company;  this
Agreement has been duly executed and delivered by the Company and this Agreement
is, and the other Primary Documents, when executed and delivered by the Company,
will each be, a valid and  binding  agreement  of the  Company,  enforceable  in
accordance with their respective terms, except to the extent that enforcement of
each  of  the  Primary  Documents  may be  limited  by  bankruptcy,  insolvency,
reorganization,  moratorium,  fraudulent conveyance or other similar laws now or
hereafter  in effect  relating to  creditors'  rights  generally  and to general
principles of equity.

     h. Non-contravention. The execution and delivery of this Agreement and each
of the other  Primary  Documents,  and the  consummation  by the  Company of the
transactions  contemplated  by this  Agreement  and  each of the  other  Primary
Documents,  does not and will not  conflict  with or  result  in a breach by the
Company of any of the terms or provisions of, or constitute a default under, the
Articles of Incorporation or By-laws of the Company,  or any material indenture,
mortgage, deed of trust or other agreement or instrument to which the Company or
any of its  subsidiaries is a party or by which they or any of their  properties
or assets are bound, or any existing  applicable law, rule, or regulation or any
applicable  decree,  judgment or order of any court or United  States or foreign
federal  or  state  regulatory  body,   administrative   agency,  or  any  other
governmental body having jurisdiction over the Company, its subsidiaries, or any
of their  properties  or  assets,  other than  those  which have been  waived or
satisfied  on  or  prior  to  the  Closing  Date.  Neither  the  filing  of  the
registration  statement  required  to be filed by the  Company  pursuant  to the
Registration  Rights  Agreement  nor the  offering  or sale of the Shares or the
Warrants as contemplated by this Agreement,  and the shares of Common Stock into
which such securities may be converted or exercised,  as applicable,  gives rise
to any rights,

                                       4
<PAGE>

other than those which have been waived or  satisfied on or prior to the Closing
Date, for or relating to the registration of any shares of the Common Stock.

     i.  Approvals.  No  authorization,   approval  or  consent  of  any  court,
governmental  body,  regulatory  agency,  self-regulatory  organization,   stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the entry into or the  performance  of this Agreement and the
other Primary Documents.

     j. SEC Filings.  None of the reports or documents filed by the Company with
the Commission (the "SEC Documents") contained, at the time they were filed, any
untrue  statement  of a  material  fact or omitted  to state any  material  fact
required to be stated therein, or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading.

     k. Stabilization. Neither the Company, nor any of its affiliates, has taken
or may take, directly or indirectly,  any action designed to cause or result in,
or which has  constituted  or which might  reasonably be expected to constitute,
the stabilization or manipulation of the price of the shares of Common Stock.

     l. Absence of Certain  Changes.  Except as disclosed in the  Company's  SEC
Documents or set forth on Schedule 3(l) hereto,  since  October 31, 1999,  there
has been no material adverse change nor any material adverse  development in the
business, properties,  operations,  financial condition, prospects,  outstanding
securities or results of operations of the Company.

     m. Full  Disclosure.  There is no fact  known to the  Company  (other  than
general  economic  conditions  known to the public  generally) that has not been
disclosed in writing to the Purchaser  (i) that could  reasonably be expected to
have a material  adverse  effect upon the condition  (financial or otherwise) or
the earnings, business affairs, properties or assets of the Company or (ii) that
could  reasonably be expected to materially and adversely  affect the ability of
the Company to perform the obligations set forth in the Primary  Documents.  The
representations  and  warranties of the Company set forth in this Agreement (and
the schedules thereto) do not contain any untrue statement of a material fact or
omit any material fact necessary to make the  statements  contained  herein,  in
light of the circumstances under which they were made, not misleading.

     n. Title to Properties;  Liens and  Encumbrances.  The Company has good and
marketable  title to all of its material  properties  and assets,  both real and
personal,  and has  good  title to all its  leasehold  interests,  in each  case
subject only to mortgages, pledges, liens, security interests,  conditional sale
agreements, encumbrances or charges created in the ordinary course of business.

     o. Patents and Other Proprietary  Rights.  The Company has sufficient title
and  ownership  of  all  patents,   trademarks,   service  marks,  trade  names,
copyrights,  trade  secrets,  information,   proprietary  rights  and  processes
necessary for the conduct of its business as now conducted and as proposed to be
conducted,  and such business does not and would not conflict with or constitute
an infringement on the rights of others.

                                       5
<PAGE>

     p.  Permits.  The Company has all  franchises,  permits,  licenses  and any
similar  authority  necessary for the conduct of its business as now  conducted,
the  lack of which  would  materially  and  adversely  affect  the  business  or
financial condition of the Company. The Company is not in default in any respect
under any of such franchises, permits, licenses or similar authority.

     q.  Absence  of  Litigation.  Except  as  disclosed  in the  Company's  SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any  court,  public  board or body  pending  or, to the  knowledge  of the
Company or any of its subsidiaries,  threatened against or affecting the Company
or any of its subsidiaries,  in which an unfavorable decision, ruling or finding
would have a material  adverse  effect on the  properties,  business,  condition
(financial   or  other)  or  results  of  operations  of  the  Company  and  its
subsidiaries,  taken as a whole, or the transactions contemplated by the Primary
Documents, or which would adversely affect the validity or enforceability of, or
the authority or ability of the Company to perform its  obligations  under,  the
Primary Documents.

     r. No Default.  Except as set forth on Schedule  3(r)  hereto,  none of the
Company  or  any  of its  subsidiaries  is in  default  in  the  performance  or
observance of any obligation,  covenant or condition contained in any indenture,
mortgage,  deed of trust or other instrument or agreement to which it is a party
or by which it or its property may be bound.

     s.  Transactions  with  Affiliates.  Except as disclosed  in the  Company's
public filings with the  Commission or set forth on Schedule 3(s) hereto,  there
are no agreements,  understandings or proposed  transactions between the Company
and any of its  officers,  directors  or  affiliates  that,  had they existed on
October 31, 1999, would have been required to be disclosed in the Company's 1999
Annual Report to stockholders.

     t.  Employment  Matters.  The Company is in compliance in all respects with
all presently  applicable  provisions of the Employee Retirement Income Security
Act of 1974, as amended, including the regulations and published interpretations
thereunder  ("ERISA");  no "reportable event" (as defined in ERISA) has occurred
with respect to any  "pension  plan" (as defined in ERISA) for which the Company
would have any  liability;  the Company has not  incurred and does not expect to
incur  liability  under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal
Revenue  Code of 1986,  as amended,  including  the  regulations  and  published
interpretations  thereunder (the "Code");  and each "pension plan" for which the
Company would have any liability that is intended to be qualified  under Section
401(a) of the Code is so  qualified  in all  material  respects  and nothing has
occurred,  whether by action or by failure to act, which would cause the loss of
such qualification.

     u.  Insurance.  The  Company  maintains  property  and  casualty,   general
liability, personal injury and other similar types of insurance with financially
sound  and  reputable  insurers  that  is  adequate,  consistent  with  industry
standards and the Company's  historical claims  experience.  The Company has not
received  notice from,  and has no knowledge of any threat by, any insurer (that
has issued any  insurance  policy to the Company)  that such insurer  intends to
deny coverage  under or cancel,  discontinue  or not renew any insurance  policy
covering the Company or any of its Subsidiaries presently in force.

                                       6
<PAGE>

     v. Taxes.  All applicable  tax returns  required to be filed by the Company
and each of its subsidiaries have been prepared and filed in compliance with all
applicable laws, or if not yet filed have been granted  extensions of the filing
dates which extensions have not expired,  and all taxes,  assessments,  fees and
other governmental  charges upon the Company,  its subsidiaries,  or upon any of
their respective properties,  income or franchises, shown in such returns and on
assessments  received by the Company or its  subsidiaries  to be due and payable
have been paid,  or adequate  reserves  therefor have been set up if any of such
taxes are being  contested in good faith; or if any of such tax returns have not
been  filed or if any such  taxes  have not been paid or so  reserved  for,  the
failure to so file or to pay would not in the aggregate have a material  adverse
effect  on  the  business  or  financial   condition  of  the  Company  and  its
subsidiaries, taken as a whole.

     w.  Foreign  Corrupt  Practices  Act.  Neither  the  Company nor any of its
directors,  officers or other  employees  has (i) used any Company funds for any
unlawful  contribution,  endorsement,  gift,  entertainment  or  other  unlawful
expense  relating to any  political  activity;  (ii) made any direct or indirect
unlawful payment of Company funds to any foreign or domestic government official
or employee;  (iii)  violated or is in violation of any provision of the Foreign
Corrupt  Practices  Act of 1977,  as  amended;  or (iv) made any bribe,  rebate,
payoff, influence payment, kickback or other similar payment to any person.

     x. Internal Controls. The Company maintains a system of internal accounting
controls  sufficient to provide reasonable  assurances that (i) transactions are
executed in accordance with management's general or specific authorization; (ii)
transactions  are  recorded as  necessary  to permit  preparation  of  financial
statements in conformity with generally  accepted  accounting  principles and to
maintain  accountability for assets; (iii) access to assets is permitted only in
accordance with  management's  general or specific  authorization;  and (iv) the
recorded   accountability  for  assets  is  compared  with  existing  assets  at
reasonable  intervals  and  appropriate  action  is taken  with  respect  to any
differences.

     y.  Investment  Company  Act. The Company is not  conducting,  and will not
conduct, its business in a manner which would cause it to become, an "investment
company," as defined in Section 3(a) of the  Investment  Company Act of 1940, as
amended.

     z. Agent Fees.  Except for  Institutional;  Finance  Group,  whose fees and
expenses  shall  be paid by the  Company,  the  Company  has  not  incurred  any
liability  for  any  finder's  or  brokerage  fees  or  agent's  commissions  in
connection  with the offer  and sale of the  transactions  contemplated  by this
Agreement.

     aa.  Private   Offering.   Subject  to  the  accuracy  of  the  Purchaser's
representations  and  warranties  set forth in Section 2 hereof,  (i) the offer,
sale and  issuance of the Shares and the  Warrants,  (ii) the issuance of Common
Stock in lieu of  dividend  payments  on the  Shares,  and (iii) the  conversion
and/or  exercise  of such  securities  into  shares  of  Common  Stock,  each as
contemplated  by  the  Primary   Documents  are  exempt  from  the  registration
requirements  of the Securities Act. The Company agrees that neither the Company
nor anyone acting on its behalf will offer any of the Preferred Stock, the Stock
Purchase Warrants or any similar securities for issuance or sale, or solicit any
offer to acquire  any of the same from anyone so as to render the  issuance  and
sale  of  such  securities  subject  to  the  registration  requirements  of the
Securities Act.

                                       7
<PAGE>

The Company has not offered or sold the  Preferred  Stock or the Stock  Purchase
Warrants by any form of general  solicitation  or general  advertising,  as such
terms are used in Rule 502(c) under the Securities Act.

     bb. Year 2000 Processing.  The computer systems used by the Company and its
subsidiaries  (the "Systems"),  both hardware and software,  are in good working
order.  As of the  date  of this  Agreement,  the  Company  has  experienced  no
disruptions  in its business or  operations  as a result of the inability of its
information systems to process date and time data from, into and beyond the year
2000.

     cc.  Environmental  Matters.  Except as set forth on Schedule 3(cc) hereto:
(i) Neither the Company and its  subsidiaries,  nor any  predecessor in interest
nor, to the Company's  knowledge,  after due inquiry,  any other person has ever
caused or permitted  any Hazardous  Material (as defined  below) to be released,
treated or disposed of on, at, under or within any real property  owned,  leased
or operated by the Company and its  subsidiaries or any predecessor in interest,
and no such real  property  has ever been used  (either by the  Company  and its
subsidiaries,  any predecessor in interest or, to the Company's knowledge, after
due inquiry,  by any other person) as a treatment,  storage or disposal site for
any Hazardous Material;  and (ii) The Company has no liabilities with respect to
Hazardous Materials,  and to the knowledge of the Company, after due inquiry, no
facts or  circumstances  exist which could give rise to liabilities with respect
to Hazardous Materials,  which could have any reasonable  likelihood of having a
material  adverse  effect  on  the  Company.  For  purposes  of  this  Agreement
"Hazardous  Materials"  shall mean (a) any pollutants or  contaminants,  (b) any
asbestos or insulation or other material composed of or containing  asbestos and
(c) any petroleum product and any hazardous, toxic or dangerous waste, substance
or  material  defined  as  such  in,  or  for  purposes  of,  the  Comprehensive
Environmental   Response,   Compensation   and  Liability   Act,  any  so-called
"Superfund"  or "Superlien"  law, or (d) any other  applicable  federal,  state,
local or other statute, law, ordinance, code, rule, regulation,  order or decree
concerning  the  protection  of human  health or the  environment  or  otherwise
regulating,   relating  to,  or  imposing  liability  or  standards  of  conduct
concerning,  any hazardous,  toxic or dangerous waste, substance or material, as
now or at any time hereafter in effect.

     dd. Intellectual Property. Except as set forth in the SEC Documents, to the
best of the Company's  knowledge,  each of the Company and its subsidiaries owns
or  possesses  adequate  rights  to use all  material  patents,  patent  rights,
inventions, trade secrets, know-how,  trademarks, service marks, trade names and
copyrights which are described in the SEC Documents;  except as set forth in the
SEC Documents,  the Company has not received any notice of, and has no knowledge
of, any  infringement  of or  conflict  with  asserted  rights of the Company by
others with respect to any patent,  patent  rights,  inventions,  trade secrets,
know-how, trademarks, service marks, trade names and copyrights which, singly or
in the aggregate, if the subject of an unfavorable decision,  ruling or finding,
would have a material adverse effect on the condition  (financial or otherwise),
earnings, operations,  business of the Company and its subsidiaries,  taken as a
whole,  as presently  conducted;  and, except as set forth in the SEC Documents,
the  Company  has not  received  any  notice of,  and has no  knowledge  of, any
infringement  of or conflict with the asserted  rights of others with respect to
any patent,  patent rights,  inventions,  trade secrets,  know-how,  trademarks,
service marks, trade names and copyrights which, singly or in the aggregate,  if
the subject of an unfavorable decision, ruling or finding, would have a

                                       8
<PAGE>

material  adverse effect on the condition  (financial or  otherwise),  earnings,
operations,  or business of the Company and its subsidiaries,  taken as a whole,
as presently conducted.

4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS

     a.  Transfer  Restrictions.  The  Purchaser  acknowledges  that,  except as
provided in the  Registration  Rights  Agreement,  (1)  neither the Shares,  the
Warrants  nor the  Common  Stock  issuable  upon  conversion  of,  or in lieu of
dividend payments on, the Shares or upon exercise of the Warrants, have been, or
are being,  registered  under the Securities Act, and such securities may not be
transferred  unless  (A)  subsequently  registered  thereunder  or (B)  they are
transferred pursuant to an exemption from such registration; and (2) any sale of
the Shares,  the  Warrants  or the Common  Stock  issuable  upon  conversion  or
exchange thereof (collectively, the "Securities") made in reliance upon Rule 144
under the Securities  Act may be made only in accordance  with the terms of said
Rule. The  provisions of Section 4(a) and 4(b) hereof,  together with the rights
of the Purchaser under this Agreement and the other Primary Documents,  shall be
binding upon any  subsequent  transferee  of the  Preferred  Stock and the Stock
Purchase Warrants.

     b. Restrictive  Legend.  The Purchaser  acknowledges and agrees that, until
such time as the Securities  shall have been registered under the Securities Act
or the Purchaser demonstrates to the reasonable  satisfaction of the Company and
its counsel that such registration shall no longer be required,  such Securities
may be subject to a  stop-transfer  order  placed  against the  transfer of such
Securities, and such Securities shall bear a restrictive legend in substantially
the following form:

     THESE SECURITIES  (INCLUDING ANY UNDERLYING  SECURITIES) HAVE NOT
     BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933, AS AMENDED.
     THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,  HYPOTHECATED OR
     OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
     STATEMENT  AS TO THE  SECURITIES  UNDER SAID ACT OR AN OPINION OF
     COUNSEL OR OTHER EVIDENCE REASONABLY  SATISFACTORY TO THE COMPANY
     THAT SUCH REGISTRATION SHALL NO LONGER BE REQUIRED.

     c.  Filings.  The  Company  undertakes  and  agrees  that it will  make all
required  filings in connection with the sale of the Securities to the Purchaser
as required by United States laws and regulations, or by any domestic securities
exchange or trading market, and if applicable,  the filing of a notice on Form D
(at such time and in such manner as required by the Rules and Regulations of the
Commission),  and to provide copies thereof to the Purchaser promptly after such
filing or filings.

     d. NASDAQ Listing.  The Company undertakes and agrees that it will promptly
file an  additional  application  with the  NASDAQ to list all of the  shares of
Common Stock issuable upon  conversion  of, or in lieu of dividend  payments on,
the Shares and upon exercise of the Warrants on the NASDAQ SmallCap Market.  The
Company  further  agrees  and  covenants  that it will use

                                       9
<PAGE>

its best efforts to maintain its  eligibility for trading on the NASDAQ SmallCap
Market and, if such trading of its Common Stock is suspended or terminated, will
use its best  efforts to  requalify  its Common  Stock or  otherwise  cause such
trading to resume. The Company shall promptly provide to the Purchaser copies of
any notices it receives from Nasdaq  regarding the continued  eligibility of the
Common Stock for listing on such automated  quotation system.  The Company shall
pay all fees and expenses in connection with  satisfying its  obligations  under
this Section 4(d).

     e. Reporting Status. So long as the Purchaser  beneficially owns any of the
Securities  or any  shares of Common  Stock  issuable  upon  conversion  thereof
(collectively  with the Securities,  the "Collective  Securities"),  the Company
shall timely file all reports required to be filed with the Commission  pursuant
to Section 13 or 15(d) of the Exchange Act and shall not terminate its status as
an issuer  required to file reports  under the Exchange Act even if the Exchange
Act or the rules and regulations thereunder would permit such termination.

     f. State Securities  Filings.  The Company shall from time to time promptly
take such action as the Purchaser or any of its representatives,  if applicable,
may  reasonably  request to qualify the  Collective  Securities for offering and
sale under the  securities  laws (other than United  States  federal  securities
laws) of the jurisdictions in the United States as shall be so identified to the
Company,  and to comply with such laws so as to permit the  continuance of sales
therein,  provided  that in  connection  therewith,  the  Company  shall  not be
required to qualify as a foreign corporation or to file a general consent to the
service of process in any jurisdiction.

     g. Use of Proceeds. The Company will use the net proceeds from the issuance
of the  Collective  Securities for  acquisitions,  payment of accrued and unpaid
dividends relating to the Company's Series A Preferred Stock, reduction of up to
$100,000 in outstanding indebtedness and working capital purposes.

     h.  Reservation  of  Common  Stock.  The  Company  will at all  times  have
authorized  and  reserved  for the  purpose of issuance a  sufficient  number of
shares of Common  Stock to  provide  for the  conversion  of the  Shares and the
exercise of the Warrants.  The Company will use its best efforts at all times to
maintain a number of shares of Common Stock so reserved for issuance  that is no
less  than the sum of (i) one and one half  (1.5)  times the  maximum  number of
shares of Common Stock that could be issuable upon the  conversion of the Shares
and (ii) the number of shares of Common Stock  issuable upon exercise in full of
the Warrants.

     i.  Sales  of  Additional  Shares.  The  Company  shall  not,  directly  or
indirectly,  without the prior written  consent of the Purchaser,  offer,  sell,
offer to sell,  contract  to sell or  otherwise  dispose  of any  shares  of its
capital  stock  or  any  security  or  other  instrument   convertible  into  or
exchangeable  for  shares  of  Common  Stock,  in  each  case  for a  period  of
two-hundred and seventy (270) days after the Closing Date (the "Lock-Up Period")
(i) at a price per share of Common  Stock of less than four and  65/100  dollars
($4.65) or (ii) which contain provisions for re-pricing or (iii) are convertible
into Common Stock at a price which  adjusts  based upon changes in market price,
except that notwithstanding the foregoing the Company may issue shares of Common
Stock (a) for the  aggregate  consideration  of at least ten million  dollars in
connection with a bona fide, firm commitment, underwritten public offering under
the Securities  Act. (ii) in connection with a bona fide  transaction  involving
the acquisition of another  business entity or

                                       10
<PAGE>

segment of any such  entity by the  Company by merger,  asset,  purchase,  stock
purchase or  otherwise;  and (iii) may issue common Stock in  connection  with a
stock split,  stock  dividend or similar  recapitalization  of the Company which
affects all holders of the  Company's  Common Stock on an equivalent  basis,  in
each case, without the prior written consent of the Purchaser.  In addition, the
Company  agrees that it will not cause any shares of its capital stock that were
issued in connection with any financing,  acquisition or other  transaction that
occurred  prior to the date of this  Agreement  to be covered by a  registration
statement  to be filed or declared  effective by the  Commission  until the date
that the registration statement filed by the Company pursuant to its obligations
under the Registration  Rights Agreement has been effective under the Securities
Act for a period of at least one-hundred and eighty (180) days.

     j. Right of First Refusal.  Subject to Section 4(i), if during the eighteen
(18) month period following the Lock-Up Period the Company shall desire to sell,
offer to sell,  contract to sell or otherwise  dispose of any  securities or any
security or other  instrument  convertible  into or  exchangeable  for shares of
Common Stock (collectively,  the "Offered Securities") to a prospective investor
(the "Prospective Investor"),  the Company shall notify (the "Offer Notice") the
Purchaser  in  accordance  with Section 10 hereof of the terms (the "Third Party
Terms") on which the  Company  proposes to sell,  contract to sell or  otherwise
dispose of the Offered  Securities to the Prospective  Investor.  If, within the
five (5) day period following the Purchaser's  receipt of the Offer Notice,  the
Purchaser  delivers a written  notice (the  "Acceptance  Notice") to the Company
stating its desire to purchase all or any portion of the Offered  Securities  on
the Third  Party  Terms,  the  Company  shall be  required  to sell the  Offered
Securities (or any portion thereof so desired by the Purchaser) to the Purchaser
at the price and on the terms  set  forth in the Offer  Notice  and the  Company
shall  not be  permitted  to sell such  Offered  Securities  to the  Prospective
Investor.  If the Purchaser does not deliver an Acceptance Notice to the Company
in such five (5) day period,  then for a period of sixty (60) days following the
date of the Offer  Notice the  Company may sell the  Offered  Securities  to the
Prospective Investor on the terms set forth in the Offer Notice.

     k.  Additional  Registration  Statements.  At any time  during  the  period
beginning  on the date hereof and ending on the first date that follows a period
of one hundred eighty (180)  consecutive days following the effectiveness of the
Registration  Statement (as defined in the Registration Rights Agreement) during
which there has been no Blackout  Event (as defined in the  Registration  Rights
Agreement) relating to such Registration  Statement,  the Company agrees that it
will neither file nor cause any registration  statement to be declared effective
by the  Commission  other than (i) any  Registration  Statement  relating to the
Securities or (ii) any Registration  Statement relating to a proposed bona fide,
firm  commitment  underwritten  public  offering  under the Securities Act of an
aggregate initial public offering price of at least ten million dollars or (iii)
the  filing  of a Form  S-8 for  the  Common  Stock  currently  included  in the
Company's existing employee stock option plan, as reflected in the Form S-8 most
recently filed by the Company with the Commission.

     l. Stockholder Approval. If required in accordance with Nasdaq Rule 4310 or
4460, the Company agrees to use its best efforts  (including  obtaining any vote
of its stockholders required by applicable law or Nasdaq rules) to authorize and
approve the issuance of the Common Stock issuable upon  conversion of the Shares
and upon  exercise  of the  Warrants,  to the  extent  that such  conversion  or
issuance  results in the  issuance of 20% or more of the  Company's

                                       11
<PAGE>

outstanding  Common  Stock,  except  that the  conversion  of the Shares and the
exercise  of the  Warrants  will not equal 20% or more of the  Company's  common
stock as of the Closing Date; provided,  however, that the failure to obtain any
such stockholder approval shall not limit any of Purchaser's rights hereunder or
pursuant to any Primary Document.

     m.  Ownership.  At no time shall the  Purchaser  (including  its  officers,
directors and  affiliates)  maintain in the aggregate  beneficial  ownership (as
defined for purposes of Section 16 of the  Securities  Exchange Act of 1934,  as
amended)  of  shares  of  Common  Stock in  excess  of  9.99%  of the  Company's
outstanding  Common  Stock  unless  the  Purchaser  gives the  Company  at least
sixty-one (61) days notice that it intends to increase its ownership percentage.

     n. Return of  Certificates  on Conversion  and Stock  Purchase  Warrants on
Exercise. (i) Upon any conversion by Purchaser of less than all of the Shares of
Preferred  Stock pursuant to the terms of the Certificate of  Designations,  the
Company shall issue and deliver to Purchaser within three (3) days of the Series
A  Preferred   Stock   Conversion   Date  (as  defined  in  the  Certificate  of
Designations),  a new certificate or certificates for, as applicable,  the total
number of shares of Preferred  Stock, in each case,  which Purchaser has not yet
elected  to  convert  (with  the  number  of  and   denomination   of  such  new
certificate(s) designated by Purchaser).

          (ii)  Upon  any  partial  exercise  by  Purchaser  of  Stock  Purchase
     Warrants, the Company shall issue and deliver to Purchaser within three (3)
     days of the date on which such Stock Purchase Warrants are exercised, a new
     Stock Purchase Warrant or Stock Purchase  Warrants  representing the number
     of adjusted Shares covered thereby, in accordance with the terms thereof.

     o.  Replacement   Certificates  and  Stock  Purchase   Warrants.   (i)  The
certificate(s)  representing  the shares of Preferred  Stock,  held by Purchaser
shall be exchangeable,  at the option of Purchaser, at any time and from time to
time at the office of Company,  for  certificates  with different  denominations
representing,  as applicable,  an equal aggregate  number of shares of Preferred
Stock, as requested by Purchaser upon  surrendering  the same. No service charge
will be made for such registration or transfer or exchange.

          (ii) The Stock Purchase  Warrants will be exchangeable,  at the option
     of  Purchaser,  at any  time  and from  time to time at the  office  of the
     Company,  for other  Stock  Purchase  Warrants of  different  denominations
     entitling  the holder  thereof to purchase in the aggregate the same number
     of shares of Common  Stock as are  purchasable  under such  Stock  Purchase
     Warrants. No service charge will be made for such transfer or exchange.

     p. Dividends or Distributions;  Purchases of Equity Securities.  So long as
any portion of the Shares or the Warrants remain outstanding, the Company agrees
that it shall not (a) declare or pay any dividends or make any  distributions to
any holder or holders of Common Stock, or (b) purchase or otherwise  acquire for
value, directly or indirectly,  any shares of Common Stock or equity security of
the Company.

     q. Bankruptcy  Waiver.  In the event the Company becomes a debtor under the
Bankruptcy  Code, the Company hereby waives to the fullest extent  permitted any
rights to relief it may have under 11 U.S.C.ss. 362 in respect of the conversion
of the Shares and the exercise of the  Warrants.  At the direction of Purchaser,
the Company agrees, without cost or expense to the

                                       12
<PAGE>

Purchaser,  to take or  consent to any and all action  necessary  to  effectuate
relief under 11 U.S.C.ss. 362.

5. TRANSFER AGENT INSTRUCTIONS

     a. The Company  warrants that no instruction,  other than the  instructions
referred to in this Section 5 and stop transfer  instructions  to give effect to
Sections  4(a) and 4(b)  hereof  prior to the  registration  and sale  under the
Securities Act of the Common Stock issuable upon conversion of the Shares or the
shares of Common Stock issuable upon exercise of the Warrants,  will be given by
the Company to the transfer  agent and that the shares of Common Stock  issuable
upon  conversion  of, or in lieu of  dividend  payments  on,  the Shares or upon
exercise of the Warrants,  shall  otherwise be freely  transferable on the books
and records of the Company as and to the extent provided in this Agreement,  the
Registration  Rights Agreement and applicable law. Nothing in this Section shall
affect in any way the  Purchaser's  obligations and agreement to comply with all
applicable  securities  laws upon resale of the  Collective  Securities.  If the
Purchaser provides the Company with an opinion of counsel that registration of a
resale by the Purchaser of any of the Collective  Securities in accordance  with
clause  (1)(B) of  Section  4(a) of this  Agreement  is not  required  under the
Securities  Act,  the  Company  shall  permit  the  transfer  of the  Collective
Securities and, in the case of the Common Stock, promptly instruct the Company's
transfer agent to issue one or more certificates for Common Stock without legend
in such names and in such denominations as specified by the Purchaser.

     b. Purchaser  shall exercise its right to convert the Shares or to exercise
the Warrants by faxing an executed and completed Notice of Conversion or Form of
Election to Purchase, as applicable, to the Company, and delivering within three
(3) business days thereafter, the original Notice of Conversion (and the related
certificates  representing the shares of Preferred Stock, as applicable) or Form
of Election to Purchase (and the related  original Stock  Purchase  Warrants) to
the Company by hand delivery or by express courier, duly endorsed.  Each date on
which a  Notice  of  Conversion  or Form of  Election  to  Purchase  is faxed in
accordance with the provisions  hereof shall be deemed a "Conversion  Date." The
Company will transmit the  certificates  representing  the Common Stock issuable
upon  conversion of any shares of Preferred  Stock or upon exercise of any Stock
Purchase Warrants  (together with the shares of Preferred Stock not so converted
or the Stock  Purchase  Warrants not so  exercised) to the Purchaser via express
courier  as soon as  practicable,  but in all  events  no later  than  three (3)
business days after the Conversion Date relating to shares of Preferred Stock or
Stock Purchase  Warrants  (each such delivery  date,  together with the Dividend
Delivery  Date  referred  to in  paragraph  c below,  is referred to herein as a
"Delivery Date").  For purposes of this Agreement,  any conversion of the Shares
or the  exercise of the Warrants  shall be deemed to have been made  immediately
prior to the close of business on the Conversion Date.

     c. The Company will transmit the certificates representing the Common Stock
issuable in lieu of dividends  payable on any shares of  Preferred  Stock to the
Purchaser via express courier as soon as practicable, but in all events no later
than three (3) business days after the dividend payment date applicable to which
such Common Stock is delivered (the "Dividend Delivery Date").

                                       13
<PAGE>

     d. In lieu of  delivering  physical  certificates  representing  the Common
Stock issuable upon the conversion of, or in lieu of dividends on, the Shares or
upon the exercise of the  Warrants,  provided the  Company's  transfer  agent is
participating in the Depositary Trust Company ("DTC") Fast Automated  Securities
Transfer  program,  on the  written  request  of the  Purchaser,  who shall have
previously  instructed the  Purchaser's  prime broker to confirm such request to
the Company's  transfer  agent,  the Company  shall cause its transfer  agent to
electronically  transmit  such Common Stock to the  Purchaser  by crediting  the
account of the Purchaser's prime broker with DTC through its Deposit  Withdrawal
Agent Commission ("DWAC") system no later than the applicable Delivery Date.

     e. The Company  understands  that a delay in the  issuance of Common  Stock
beyond the  applicable  Delivery  Date could  result in an economic  loss to the
Purchaser. As compensation to the Purchaser for such loss, the Company agrees to
pay to the Purchaser for late issuance of Common Stock upon conversion of, or in
lieu of dividend  payments on, the Shares or upon exercise of the Warrants,  the
sum of five thousand  dollars ($5,000) per day for each (i) one hundred thousand
dollars  ($100,000) of aggregate  Stated Value (as defined in the Certificate of
Designations)  amount of Shares that are being  converted,  or (ii)  twenty-five
thousand  (25,000)  shares  of  Common  Stock  purchased  upon the  exercise  of
Warrants.  The Company  shall pay any payments that are payable to the Purchaser
pursuant to this Section 5 in immediately  available funds upon demand.  Nothing
herein  shall  limit the  Purchaser's  right to pursue  actual  damages  for the
Company's  failure  to so issue  and  deliver  Common  Stock  to the  Purchaser.
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 such Common Stock within five (5) business  days after the relevant  Delivery
Date, the Purchaser will be entitled to revoke the relevant Notice of Conversion
or Form of Election to  Purchase  by  delivering  a notice to such effect to the
Company, whereupon the Company and the Purchaser shall each be restored to their
respective positions  immediately prior to delivery of such Notice of Conversion
or Form of Election to Purchase.  For purposes of this Section 5, "business day"
shall mean any day in which the  financial  markets  of New York are  officially
open for the conduct of business therein.

6. CONDITIONS TO THE COMPANY'S OBLIGATION TO ISSUE THE SHARES AND THE WARRANTS

     The Purchaser understands that the Company's obligation to issue the Shares
and the Warrants on the Closing Date to the Purchaser pursuant to this Agreement
is conditioned upon:

     a. The accuracy on the Closing Date of the  representations  and warranties
of the Purchaser  contained in this Agreement as if made on the Closing Date and
the  performance by the Purchaser on or before the Closing Date of all covenants
and  agreements  of the  Purchaser  required  to be  performed  on or before the
Closing Date.

     b. The absence or inapplicability of any and all laws, rules or regulations
prohibiting or restricting the transactions  contemplated  hereby,  or requiring
any consent or approval which shall not have been obtained.

                                       14
<PAGE>

7.  CONDITIONS  TO THE  PURCHASER'S  OBLIGATION  TO PURCHASE  THE SHARES AND THE
    WARRANTS

     The Company  understands  that the  Purchaser's  obligation to purchase the
Shares and the Warrants on the Closing Date is conditioned upon:

     a. The Certificate of Designations shall have been filed with the Secretary
of State of the State of Delaware and a copy thereof certified by such Secretary
of State shall have been delivered to the Purchaser.

     b. The accuracy on the Closing Date of the  representations  and warranties
of the Company  contained in this  Agreement as if made on the Closing Date, and
the  performance  by the Company on or before the Closing Date of all  covenants
and agreements of the Company  required to be performed on or before the Closing
Date.

     c. On the Closing  Date,  the  Purchaser  shall have received an opinion of
counsel for the Company,  dated the Closing Date, in  substantially  the form as
attached in Exhibit D.

     d. The Company  shall have  executed and  delivered to the  Purchaser (i) a
signed  counterpart to the Registration  Rights  Agreement in substantially  the
form as attached in Exhibit C, (ii) the Shares and (iii) the Warrants.

     e. On the Closing  Date,  the  Purchaser  shall have received a certificate
executed  by the  President  or the  Chairman  of the  Company  and by the Chief
Financial Officer of the Company,  stating that all of the  representations  and
warranties  of the Company set forth in this  Agreement  are  accurate as of the
Closing  Date  and that the  Company  has  performed  all of its  covenants  and
agreements  required  to be  performed  under  this  Agreement  on or before the
Closing Date.

     f. On the Closing Date, the Purchaser  shall have received from the Company
such  other  certificates  and  documents  as  it  or  its  representatives,  if
applicable,  shall reasonably request,  and all proceedings taken by the Company
in connection with the Primary Documents  contemplated by this Agreement and the
other Primary  Documents  and all documents and papers  relating to such Primary
Documents shall be satisfactory to the Purchaser.

     g. On or prior to the Closing  Date,  there shall not have  occurred any of
the  following:  (i) a  suspension  or  material  limitation  in the  trading of
securities  generally  on the New York  Stock  Exchange,  NASDAQ  or the  NASDAQ
Bulletin Board; (ii) a general  moratorium on commercial  banking  activities in
New York declared by the applicable banking  authorities;  (iii) the outbreak or
escalation of hostilities involving the United States, or the declaration by the
United States of a national emergency or war; or (iv) a change in international,
political, financial or economic conditions, if the effect of any such event, in
the judgment of the Purchaser,  makes it impracticable or inadvisable to proceed
with the purchase of the Securities on the terms and in the manner  contemplated
in this Agreement and in the other Primary Documents.

     h. The Company shall have delivered to the Purchaser  reimbursement  of the
Purchaser's  out-of-pocket  costs and expenses  incurred in connection  with the
transactions contemplated by

                                       15
<PAGE>

this  Agreement  (including  fees and  disbursements  of the  Purchaser's  legal
counsel) in accordance with Section 8 hereof.

8. EXPENSES

     The Company  covenants and agrees with the Purchaser  that the Company will
pay or cause to be paid the following:  (a) the fees, disbursements and expenses
of the Purchaser and Purchaser's  counsel in connection with the issuance of the
Collective  Securities  payable on the Closing Date up to  twenty-five  thousand
dollars  ($25,000),   (b)  all  expenses  in  connection  with  registration  or
qualification  of the  Collective  Securities  for offering and sale under state
securities laws as provided in Section 4(f) hereof,  and (c) all other costs and
expenses incident to the performance of its obligations  hereunder which are not
otherwise  specifically  provided for in this Section 8,  including the fees and
disbursements  of the  Company's  counsel,  accountants  and other  professional
advisors,  if any. If the Company fails to satisfy its obligations or to satisfy
any condition set forth in this  Agreement,  as a result of which the Collective
Securities  are not delivered to the Purchaser on the terms and  conditions  set
forth herein,  the Company shall  reimburse the Purchaser for any  out-of-pocket
expenses reasonably  incurred in making preparations for the purchase,  sale and
delivery of the Collective Securities not so delivered.

9. GOVERNING LAW; MISCELLANEOUS

     This Agreement  shall be governed by and interpreted in accordance with the
laws of the State of New York, without regard to principles of conflict of laws.
Each of the parties  consents to the  jurisdiction  of the federal  courts whose
districts  encompass any part of the City of New York or the state courts of the
State of New York sitting in the City of New York in connection with any dispute
arising under this Agreement or any of the transactions contemplated hereby, and
hereby waives, to the maximum extent permitted by law, any objection,  including
any  objections  based on forum  non  conveniens,  to the  bringing  of any such
proceeding in such  jurisdictions.  This  Agreement may be signed in one or more
counterparts,  each of which shall be deemed an  original.  The headings of this
Agreement are for  convenience  of reference only and shall not form part of, or
affect the  interpretation  of this  Agreement.  This  Agreement and each of the
Primary  Documents  have  been  entered  into  freely  by each  of the  parties,
following  consultation with their respective counsel,  and shall be interpreted
fairly in accordance  with its respective  terms,  without any  construction  in
favor of or against either party.  If any provision of this  Agreement  shall be
invalid   or   unenforceable   in   any   jurisdiction,   such   invalidity   or
unenforceability  shall  not  affect  the  validity  or  enforceability  of  the
remainder  of  this  Agreement  or the  validity  or  unenforceability  of  this
Agreement in any other  jurisdiction.  This Agreement shall inure to the benefit
of, and be  binding  upon the  successors  and  assigns  of each of the  parties
hereto, including any transferees of the Shares and the Warrants. This Agreement
may be  amended  only by an  instrument  in  writing  signed  by the party to be
charged with  enforcement.  This Agreement  supersedes all prior  agreements and
understandings  among the  parties  hereto with  respect to the  subject  matter
hereof.

10. NOTICES

     Any  notice  required  or  permitted  hereunder  shall be given in  writing
(unless  otherwise  specified  herein)  and  shall be  effective  upon  personal
delivery, via facsimile (upon receipt of confirmation of error-free transmission
and mailing a copy of such  confirmation,

                                       16
<PAGE>

postage  prepaid by certified  mail,  return receipt  requested) or two business
days following deposit of such notice with an internationally recognized courier
service,  with  postage  prepaid  and  addressed  to each of the  other  parties
thereunto entitled at the following  addresses,  or at such other addresses as a
party may  designate  by five days advance  written  notice to each of the other
parties hereto.

Company:              USA Biomass Corporation
                      7314 Scout Avenue
                      Bell Gardens, California 90201
                      Attention:  Mr. Fred Behrens
                      Phone:   (562) 928-9900
                      Fax:  (562) 928-9932

                      with a copy to:

                      Stepp & Beauchamp LLP
                      1301 Dove Street, Suite 480
                      Newport Beach, California 92660-2422
                      Attention:  Thomas E. Stetpp, Jr., Esq.
                      Phone: (949) 660-9700
                      Fax: (949) 660-9010

Purchaser:            Siete Investors LLC
                      c\o WEC Asset Management LLC
                      110 Colabough Pond Road
                      Croton-on-the-Hudson, New York 10520
                      Attention:  Ethan E. Benovitz
                      Phone:  (914) 271-2211
                      Fax: (914) 271-0889

                      with a copy to:

                      Cohen Tauber Spievack & Wagner LLP
                      1350 Avenue of the Americas
                      26th Floor
                      New York, New York 10019
                      Attention:  Laurence S. Tauber
                      Phone:  (212) 519-5195
                      Fax:  (212) 262-1766

11. SURVIVAL

     The agreements, covenants representations and warranties of the Company and
the Purchaser shall survive the execution and delivery of this Agreement and the
delivery of the Securities hereunder.

                                       17
<PAGE>

12. INDEMNIFICATION

     Each of the Company and the Purchaser (the "Indemnifying  Party") agrees to
indemnify the other party and each officer, director,  employee, agent, partner,
stockholder,  member  and  affiliate  of such  other  party  (collectively,  the
"Indemnified  Parties") for, and hold each  Indemnified  Party harmless from and
against:  (i) any and all damages,  losses,  claims and other liabilities of any
and  every  kind,  including,   without  limitation,   judgments  and  costs  of
settlement,  and (ii) any and all reasonable out-of-pocket costs and expenses of
any  and  every  kind,  including,  without  limitation,   reasonable  fees  and
disbursements  of counsel for such  Indemnified  Parties (all of which  expenses
periodically  shall be reimbursed as incurred),  in each case, arising out of or
suffered  or  incurred  in  connection  with  any  of  the  following:  (a)  any
misrepresentation  or any breach of any warranty made by the Indemnifying  Party
herein  or  in  any  of  the  other  Primary   Documents,   (b)  any  breach  or
non-fulfillment  of any covenant or  agreement  made by the  Indemnifying  Party
herein or in any of the other Primary Documents and (c) any claim relating to or
arising out of a violation of applicable federal or state securities laws by the
Indemnifying  Party in  connection  with the sale or  issuance  of the Shares or
Warrants by the Indemnifying Party to the Indemnified Party  (collectively,  the
"Indemnified Liabilities").  To the extent that the foregoing undertaking by the
Indemnifying  Party may be unenforceable for any reason,  the Indemnifying Party
shall make the maximum  contribution to the payment and  satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law.

         [REMAINDER OF PAGE INTENTIONALLY BLANK, SIGNATURE PAGE FOLLOWS]

                                       18
<PAGE>

     IN  WITNESS  WHEREOF,  this  Securities  Purchase  Agreement  has been duly
executed by each of the undersigned.

                                           USA BIOMASS CORPORATION

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

                                           SIETE INVESTORS LLC
                                           By: WEC Asset Management LLC, Manager

                                           By:
                                              ----------------------------------
                                               Name: Ethan E. Benovitz
                                               Title: Managing Director

<PAGE>

                                  EXHIBIT INDEX

EXHIBIT A                              FORM OF CERTIFICATE OF DESIGNATIONS

EXHIBIT B                              FORM OF STOCK PURCHASE WARRANT

EXHIBIT C                              FORM OF REGISTRATION RIGHTS AGREEMENT

                                       OPINION OF COUNSEL
EXHIBIT D

                                 SCHEDULE INDEX

SCHEDULE 3(a)                          LIST OF SUBSIDIARIES

SCHEDULE 3(b)                          CAPITALIZATION, DERIVATIVE SECURITIES AND
                                       REGISTRATION RIGHTS

SCHEDULE 3(d)                          REPORTING COMPANY STATUS EXCEPTIONS

SCHEDULE 3(l)                          CERTAIN CHANGES

SCHEDULE 3(r)                          DEFAULTS

SCHEDULE 3(s)                          TRANSACTIONS WITH AFFILIATES

SCHEDULE 3(cc)                         ENVIRONMENTAL MATTERS

<PAGE>

                                  SCHEDULE 3(a)

                              LIST OF SUBSIDIARIES

Continuing Operations

     USA Waste  Transport,  Inc.,  USA  Biomass-Greenwaste,  Inc.,  TransPacific
Environmental, Inc., AMCOR Biomass Farms, LLC

Discontinued Operations

     Sun Goddess Farms,  Inc., AMCOR Properties,  Inc., Las Palomas Country Club
Estates, LLC, AMCOR Builders, LLC.

<PAGE>

                                  SCHEDULE 3(b)

          CAPITALIZATION, DERIVATIVE SECURITIES AND REGISTRATION RIGHTS

<TABLE>
<CAPTION>
                                   Number of Shares   Conversion
                          Issue    upon exercise of   or exercise         Expiration     Registration
Name                       Date       Conversion        Price                Date           Rights
----                       ----       ----------        -----                ----           ------
<S>                      <C>          <C>             <C>                 <C>              <C>
Stock Option
Plans                    various      2,403,867       Market value        5 years from     Form S-8
                                                      at date of          date of grant

Series A                 Sept. 97     1,346,847       $5.55               None             Yes
Preferred
Stock

Warrants                 various        142,500       $2.00 to            February         Yes
                                                      $4.50               2001

Common Stock                            100,000                                            Yes(1)
</TABLE>

--------
(1)  The  acquisition of American Waste Transport will result in the issuance of
     up to 1,000,000 shares, of which 100,000 have registration rights.

<PAGE>

                                  SCHEDULE 3(d)

                            REPORTING COMPANY STATUS

The  Company  has timely  filed all  materials  and  documents  pursuant  to its
obligations  under either Section 13(a) or 5(d) of the Exchange Act,  except for
its 1998 10-KSB which was not timely filed due to extensive  financial statement
revisions as a result of the Company's Plan of Discontinued  Operations approved
by its Board oF  Directors  in late 1998.  It  expects to make all  filings on a
timely basis in the future.

<PAGE>

                                  SCHEDULE 3(l)

                                 CERTAIN CHANGES

1.   Material changes since September 30, 1999 include the following:

     A.   Conversion of $4,044,140  Series B preferred  stock to 591,621  common
          shares in fourth quarter.

     B.   Conversion of 1,770,071 of short-term  notes for 574,709 common shares
          at 11/30/99.

     C.   During  the  fourth  quarter,   the  spin-off  of  most   discontinued
          operations to AMCOR Financial Corporation.  Excluded from the spin-off
          was the Company's  $2.5 million  Oregon Farming Joint Venture which is
          presently being appraised pursuant to a planned sale by 6/30/00.

     D.   The exercise,  during the fourth quarter, 1999 and first quarter, 2000
          of stock  options at prices  from  $1.60 to $3.00 per share,  totaling
          approximately 881,133 shares for about $1,608,333.

     E.   The  acquisition of American Waste Transport as of 3/1/00 for $750,000
          cash and 1 million  shares of Company  Common  Stock,  all but 100,000
          shares restricted.

<PAGE>

                                  SCHEDULE 3(r)

                                    DEFAULTS

1.   Subsequent  to October 31, 1999 the Company spun off  substantially  all of
     its real estate  operations.  As part of this transaction,  AMCOR Financial
     Corporation (AFC) agreed to service debt for which the Company is primarily
     liable and is collateralized by property included in the spin-off. In early
     2000, AFC allowed the golf course,  which was part of the spin-off  assets,
     to be foreclosed upon by the Lender.  AFC is in discussions with the lender
     to  recollateralize  any  deficiency  on the $3  million  note  with  other
     property  included in the spin-off.  The Company believes that the property
     held by AFC has sufficient  value to  collateralize  this deficiency  along
     with all other  liabilities  assumed by AFC. The Company does not expect to
     realize any loss related to this obligations.

2.   As  discussed,  the  Company  has not  declared  dividends  on its Series A
     Preferred stock and is currently six quarters in arrears. It intends to use
     approximately  $500,000 of the proceeds from this offering to pay dividends
     on these shares.  The current voluntary  conversion rate of the Series A is
     $5.55 per share (1.8 common shares for one $10  preferred)  and the Company
     can force conversion at $6.67 per share. During the year, should the Series
     A trade at or above that level for a sustained  period of time, the Company
     may elect to force conversion of the preferred to common.

<PAGE>

                                  SCHEDULE 3(s)

                          TRANSACTIONS WITH AFFILIATES

At  12/31/99 a  partnership  controlled  by two  principals  of the  Company was
indebted to the Company for  approximately  $1.5 million.  In turn,  the Company
owed the two individuals approximately $1,125,000.  The two amounts were applied
to offset each other,  with the difference  (approximately  $375,000 owed to the
Company) paid by the individuals  through common stock (87,000 shares at $4.313)
transferred to the Company.

<PAGE>

                                 SCHEDULE 3(cc)

                              ENVIRONMENTAL MATTERS

The Company's history is in agriculture,  and as a result, it has regularly used
chemical  fertilizers and petroleum  products.  Other than its 6,000-acre Oregon
property,  it has sold all of its agricultural  land, the sales being subject to
extensive  environmental  review.  To date, no problems have been incurred.  One
600-acre property, on which the company conducted a green waste processing pilot
program,  has been sold. As a condition of the sale, the Company agreed to clean
up and remediate certain residual green waste processing  material,  confined to
approximately  25-acres. The Company is in the process of this clean up now. The
clean up consists strictly of removing residual debris. Chemical tests reveal no
toxic or  hazardous  contamination.  The buyer of the property has agreed to pay
$50,000 of clean up. an additional  $100,000 is in escrow for this purpose.  The
Company  believes  that the  entire  remediation  can be done for  approximately
$150,000, which has been reserved on its financial statements.

In addition to processing  green waste,  the Company is a major contract  hauler
for Waste Management for non-hazardous  municipal solid waste.  Waste Management
is responsible  for any claims and liability  resulting from  contamination.  To
date there have been none.

<PAGE>

                                    EXHIBIT A

                         CERTIFICATE OF DESIGNATIONS OF
                   SERIES C 6% CONVERTIBLE PREFERRED STOCK OF
                             USA BIOMASS CORPORATION

                 Pursuant to Section ____________ of the General
                    Corporation Law of the State of Delaware

     The undersigned, Fred H. Behrens and Hilly G. Jones, hereby certify that:

     I.  They  are  the  duly  elected  and  acting   Chairman  and   Secretary,
respectively,   of  USA  Biomass   Corporation,   a  Delaware  corporation  (the
"Corporation").

     II. The Certificate of  Incorporation  of the Corporation  authorizes three
thousand (3,000) shares of preferred stock, $0.001 par value per share.

     III. The following is a true and correct copy of  resolutions  duly adopted
by the Board of Directors of the Corporation (the "Board of Directors") on March
14, 2000 pursuant to the Articles of  Incorporation  of the  Corporation  and in
accordance  with the provisions of the General  Corporation  Law of the State of
Delaware.

RESOLUTIONS

     WHEREAS,  the Board of Directors is  authorized to provide for the issuance
of the shares of preferred  stock,  and by filing a certificate  pursuant to the
applicable law of the State of Delaware to establish and issue  preferred  stock
with  such  voting  powers,  full or  limited,  or no  voting  powers,  and such
designations, preferences and relative, participating, optional or other special
rights, and with such qualifications, limitations or restrictions thereon as the
Board of Directors may determine.

     WHEREAS,  the Board of  Directors  desires,  pursuant to its  authority  as
aforesaid,  to  designate  a new series of  preferred  stock,  set the number of
shares constituting such series and fix the rights, preferences,  privileges and
restrictions of such series.

     NOW,  THEREFORE,  BE IT  RESOLVED,  that  the  Board  of  Directors  hereby
designates a new series of preferred stock and the number of shares constituting
such  series and fixes the  rights,  preferences,  privileges  and  restrictions
relating to such series as follows:

     A.  Designation,  Amount and Par Value. The series of preferred stock shall
be  designated  as the Series C 6%  Convertible  Preferred  Stock (the "Series C
Preferred  Stock"),  and the  number  of  shares  so  designated  shall be three
thousand  (3,000)  (which  shall not be subject to increase or  decrease).  Each
share of Series C Preferred Stock shall have a par value of $0.001 per share and
a  stated  value  (the  "Stated  Value")  of  the  Liquidation   Preference  (as
hereinafter defined in Section C(1)).

<PAGE>

     B. Dividends.

     (1) Holders of the Series C  Preferred  Stock shall be entitled to receive,
out of funds legally  available  therefor,  dividends at a rate equal to 6% (the
"Dividend  Rate") of the Liquidation  Preference per share per annum (subject to
appropriate  adjustments  in the  event  of any  stock  dividend,  stock  split,
combination or other similar  recapitalization  affecting  such shares),  and no
more,  payable  in  accordance  with  the  provisions  of  this  Certificate  of
Designations.

     (2) At the election of the Corporation, each dividend on Series C Preferred
Stock shall be paid either in shares of Common Stock of the Corporation,  $0.001
par value per share ("Common Stock") or in cash on the Delivery Date (as defined
in Subsection  G(2)(a) of this Certificate of Designations)  with respect to any
shares  of  Series C  Preferred  Stock  which  are the  subject  of a Notice  of
Conversion (as defined in Subsection G(2) of this Certificate of  Designations).
Dividends  paid in shares of Common  Stock  shall be paid  (based on an  assumed
value of $1,000 per share) in full shares only, with a cash payment equal to the
value of any  fractional  shares.  Each dividend paid in cash shall be mailed to
the  holders  of  record  of the  Series C  Preferred  Stock as their  names and
addresses  appear on the share  register of the  Corporation or at the office of
the transfer agent on the corresponding dividend payment date. Holders of Series
C Preferred Stock will receive written  notification from the Corporation or the
transfer agent if a dividend is paid in kind,  which  notification  will specify
the  number of shares of Common  Stock paid as a  dividend  and the  recipient's
aggregate  holdings of Common Stock as of that  dividend  payment date and after
giving effect to the  dividend.  All holders of shares of Common Stock issued as
dividends shall be entitled to all of the rights and benefits relating to shares
of Common Stock as set forth in the Corporation's Articles of Incorporation,  as
amended, and By-laws.

     (3) Holders of the Series C Preferred Stock shall be entitled to payment of
any dividends in preference  and priority to any payment of any cash dividend on
Common Stock or any other class or series of capital  stock of the  Corporation,
other than  holders of shares of the issued and  outstanding  Series A Preferred
Stock of the Company,  as of the date  hereof,  who shall be entitled to receive
such  dividends on a pari passu basis with the holders of the Series C Preferred
Stock.  Dividends  on the Series C Preferred  Stock shall accrue with respect to
each share of the Series C Preferred  Stock from the date on which such share is
issued and outstanding and thereafter  shall be deemed to accrue from day to day
whether or not earned or  declared  and  whether  or not there  exists  profits,
surplus or other funds legally available for the payment of dividends, and shall
be  cumulative so that if such  dividends on the Series C Preferred  Stock shall
not have been paid, or declared and set apart for payment,  the deficiency shall
be fully paid or declared and set apart for payment before any dividend shall be
paid or declared  or set apart for any Common  Stock or other class or series of
capital stock ranking  junior to the Series C Preferred  Stock (such stock being
collectively  referred to herein as the "Junior  Stock") and before any purchase
or  acquisition of any Junior Stock is made by the  Corporation.  At the earlier
of: (1) the redemption or conversion of the Series C Preferred  Stock or (2) the
liquidation of the  Corporation,  any accrued but undeclared  dividends shall be
paid to the  holders of record of  outstanding  shares of the Series C Preferred
Stock in accordance with the provisions of this Certificate of Designations.  No
accumulation of dividends on the Series C Preferred Stock shall bear interest.

                                       2
<PAGE>

     C. Liquidation, Dissolution or Winding Up. In the event of any voluntary or
involuntary  liquidation,  dissolution  or  winding up of the  Corporation,  the
holders of shares of the Series C  Preferred  Stock  then  outstanding  shall be
entitled  to be  paid  out  of  the  assets  of the  Corporation  available  for
distribution  to its  stockholders,  before  any  payment  shall  be made to the
holders of Junior Stock by reason of their ownership thereof, an amount equal to
one  thousand  dollars  ($1,000)  per share of  Series C  Preferred  Stock  (the
"Liquidation  Preference") plus any accrued but unpaid dividends (whether or not
declared).  If upon any  such  liquidation,  dissolution  or  winding  up of the
Corporation the remaining  assets of the Corporation  available for distribution
to its  stockholders  shall be  insufficient to pay the holders of shares of the
Series C Preferred  Stock the full amount to which they shall be  entitled,  the
holders of shares of the Series C Preferred  Stock  shall  share  ratably in any
distribution of the remaining  assets and funds of the Corporation in proportion
to the  respective  amounts  which would  otherwise be payable in respect of the
shares held by them upon such  distribution  if all  amounts  payable on or with
respect to such shares were paid in full.

     D. Voting.

     (1) Each holder of outstanding  shares of Series C Preferred Stock shall be
entitled,  at each meeting of stockholders of the Corporation  (and with respect
to written consents of stockholders in lieu of meetings) with respect to any and
all matters presented to the stockholders of the Corporation for their action or
consideration,  to the number of votes  equal to the  number of whole  shares of
Common  Stock  into which the  shares of Series C  Preferred  Stock held by such
holder are  convertible  (as adjusted from time to time pursuant to Subsection I
hereof)  immediately  after the close of  business  on the record date fixed for
such meeting or the effective date of such written  consent.  Except as provided
by law, and by the provisions of Section K below,  holders of Series C Preferred
Stock shall vote together with the holders Common Stock as a single class.

     (2) The  holders of the Series C  Preferred  Stock shall not be entitled to
any rights of cumulative voting with respect to their shares.

     E.  Other  Securities.   Subject  to  any  limitations  contained  in  this
Certificate of Designations,  the Corporation's Articles of Incorporation and/or
the Primary Documents (as defined in the Securities Purchase Agreement, dated as
of March 14, 2000,  hereinafter the "Securities Purchase Agreement"),  the Board
of Directors  of the  Corporation  reserves  the right to  establish  additional
classes and/or series of capital stock of the  Corporation  and to designate the
preferences,  limitations and relative rights of any such classes and/or series;
provided,  however,  that no such  class  and/or  series  may have  preferences,
limitations  and  relative  rights  which  are  superior  to or  senior  to  the
preferences,  limitations  and  relative  rights  granted to the  holders of the
Series C Preferred Stock.

     F. Capital  Reorganization.  If the Corporation shall at any time hereafter
subdivide or combine its outstanding shares of Common Stock,  declare a dividend
payable  in  Common  Stock,  or  in  case  of  any  capital   reorganization  or
reclassification of the shares of Common Stock of the Corporation, the number of
shares of the  Series C  Preferred  Stock and the  Stated  Value of the Series C
Preferred  Stock  shall be  adjusted  appropriately  to allow the holders of the
Series C Preferred Stock, as nearly as reasonably possible,  to maintain (i) the
aggregate

                                       3
<PAGE>

Stated Value of the Series C Preferred Stock and (ii) their pro rata interest in
the  Corporation  and in the  Common  Stock  upon  conversion  of the  Series  C
Preferred  Stock,   that  each  holder  had  prior  to  any  such   subdivision,
combination, stock dividend, reorganization or reclassification.

     G.   Conversion.

     (1) The  holders  of the Series C  Preferred  Stock  shall have  conversion
rights as follows (the "Series C Preferred Stock Conversion Rights"):

          (a) Each share of Series C Preferred  Stock shall be  convertible,  at
     the option of the holder  thereof,  at any time and from time to time, into
     such number of fully paid and  nonassessable  shares of Common  Stock as is
     determined  by dividing  $1,000,  plus the amount of any accrued and unpaid
     dividends the Corporation  elects to pay in Common Stock, by the Conversion
     Price  (as  defined  below)  in  effect  at the  time  of  conversion.  The
     Conversion  Price at which shares of Common Stock shall be deliverable upon
     conversion  of Series C Preferred  Stock  without the payment of additional
     consideration by the holder thereof (the  "Conversion  Price") shall be the
     lower of (i) four and 65/100 dollars  ($4.65) or (ii) 85% of the average of
     the three  lowest  Closing Bid Prices of the shares of Common Stock for the
     fifteen  (15)  trading days  immediately  preceding  the Series C Preferred
     Stock  Conversion  Date (as  hereinafter  defined).  For  purposes of these
     Articles of Amendment, the term "Closing Bid Price" means, for any security
     as of any date, the closing bid price on the principal  securities exchange
     or trading market where the Common Stock is listed or traded as reported by
     Bloomberg,  L.P. ("Bloomberg") or, if applicable,  the closing bid price of
     the Common Stock in the over-the-counter  market on the electronic bulletin
     board for such  security as reported  by  Bloomberg,  or, if no closing bid
     price is reported  for the Common Stock by  Bloomberg,  then the average of
     the bid prices of any market  makers for such  security  as reported in the
     "pink  sheets" by the National  Quotation  Bureau,  Inc. If the Closing Bid
     Price of the Common Stock can not be  calculated on such date on any of the
     foregoing  bases,  the Closing  Bid Price of the Common  Stock on such date
     shall be the fair market value as  determined  by the holders of a majority
     of the  outstanding  shares of Series C Preferred Stock being converted for
     which the  calculation  of the  Closing  Bid Price is  required in order to
     determine the Conversion Price of such shares. "Trading day" shall mean any
     day on which the Corporation's Common Stock is traded for any period on the
     principal  securities  exchange  or other  securities  market  on which the
     Common Stock is then being traded.  If, during any period  following  March
     14, 2000 (the "Original Issue Date"),  as a result of the occurrence of any
     of the events set forth in Section 3(f) or 3(g) of the Registration  Rights
     Agreement,  dated as of March 14, 2000, by and between the  Corporation and
     the Purchaser set forth therein (the "Registration Rights Agreement"),  the
     Purchasers  set forth  therein are not able to sell shares of Common  Stock
     issuable upon conversion of, or in lieu of dividends on, shares of Series C
     Preferred Stock pursuant to a registration statement filed pursuant to such
     agreement, the holders of shares of Series C Preferred Stock shall have the
     right,  for any purpose during such period and thereafter,  to designate as
     the Conversion  Price any Conversion  Price that would have been applicable
     during such period had such Series C Preferred Stock shareholder  delivered
     a Notice of Conversion with respect to any such Series C Preferred Stock.

                                       4
<PAGE>

          (b) At any time that the number of shares of Common  Stock  issued (A)
     upon conversion of the Series C Preferred Stock and (B) in lieu of dividend
     payments  on the Series C Preferred  Stock,  shall equal 20% or more of the
     Corporation's outstanding Common Stock (a "Common Stock Redemption Event"),
     the  Corporation  shall (x)  redeem,  at a price per share equal to (A) the
     quotient of (i) the Liquidation  Preference per share of Series C Preferred
     Stock plus all  accrued  but unpaid  dividends  on such  shares of Series C
     Preferred Stock and (ii) the Conversion  Price as if the Series C Preferred
     Stock had been converted on the Series C Preferred  Stock  Redemption  Date
     multiplied  by (B) the average  Closing Bid Price of shares of Common Stock
     for the five (5) trading days immediately  preceding the Series C Preferred
     Stock Redemption  Date, all of the outstanding  Series C Preferred Stock or
     (y) call a special meeting of its stockholders for the purpose of approving
     the  transactions   contemplated  by  the  Securities  Purchase  Agreement,
     including  the  issuance of the Series C  Preferred  Stock on the terms set
     forth therein,  together with any other approvals that shall be required so
     as to  cause  the  transactions  contemplated  by the  Securities  Purchase
     Agreement to remain in  compliance  with the Rules and  Regulations  of The
     Nasdaq   Stock   Market   (including   Rules  4300  and  4310  of  Nasdaq's
     Non-Qualitative  Designation  Criteria in connection  with  conversions  of
     Series C Preferred  Stock;  such  approvals  are  referred to herein as the
     "Required  Approvals").  The Corporation  shall  determine  within five (5)
     business days following the receipt of a Notice of Conversion which of such
     actions it shall take,  and shall  promptly  furnish  notice to each of the
     holders of Series C Preferred Stock as to such determination, including, if
     applicable, a notice of redemption. In no event shall the Corporation issue
     shares of Common Stock upon conversion of, or in lieu of dividend  payments
     on, the Series C Preferred  Stock,  after the  occurrence of a Common Stock
     Redemption Event until the Required Approvals, if any, are obtained.

          (c)  If the  Corporation  elects  to  call a  special  meeting  of its
     stockholders   pursuant  to  Subsection  G(1)(b)  of  this  Certificate  of
     Designations to obtain the Required  Approvals,  the Corporation  shall use
     its best efforts to obtain such Required  Approvals within thirty (30) days
     of the Closing Date (as defined in the Securities Purchase Agreement) (such
     thirty (30) day period is referred to herein as an "Approval  Period").  If
     the Corporation does not obtain the Required  Approvals within the Approval
     Period  and the  Corporation  receives  a Notice  of  Conversion  after the
     termination  of the  Approval  Period,  the  Corporation  must  redeem,  in
     accordance with this Subsection G of this Certificate of Designations,  any
     shares of Series C Preferred  Stock  outstanding  after the Corporation has
     issued in excess of  1,944,227  shares of Common Stock in  connection  with
     conversions of the Series C Preferred Stock.

          (d) If the  Corporation  elects,  pursuant  to this  Subsection  G, to
     redeem the Series C Preferred  Stock on the  occurrence  of a Common  Stock
     Redemption  Event,  it shall  redeem such  Series C Preferred  Stock at the
     price determined in accordance with Subsection  G(1)(b) of this Certificate
     of Designations.  If the Corporation  shall have elected,  pursuant to this
     Subsection  G(1), to obtain the Required  Approvals but shall not have done
     so by the later of the occurrence of the Common Stock  Redemption  Event or
     the expiration of the Approval Period, it shall furnish a redemption notice
     to the Purchaser within three (3) business days after the expiration of the
     Approval Period.

                                       5
<PAGE>

     (2) The Series C Preferred  Stock  Conversion  Rights shall be exercised as
follows:

          (e) The  Corporation  will  permit  each  holder of Series C Preferred
     Stock to  exercise  its right to convert  the Series C  Preferred  Stock by
     faxing an executed  and  completed  notice of  conversion  (the  "Notice of
     Conversion") to the Corporation,  and delivering  within three (3) business
     days  thereafter,  the original Notice of Conversion (and the  certificates
     representing  the  related  shares  of  Series C  Preferred  Stock)  to the
     Corporation by hand delivery or by express  courier,  duly  endorsed.  Each
     date on which a Notice  of  Conversion  is  faxed  in  accordance  with the
     provisions  hereof shall be deemed a "Series C Preferred  Stock  Conversion
     Date." The  Corporation  will transmit the  certificates  representing  the
     Common  Stock  issuable  upon  conversion  of the Series C Preferred  Stock
     (together  with  certificates  representing  the related shares of Series C
     Preferred Stock not so converted and, if applicable,  a check  representing
     any fraction of a share not  converted) to such holder via express  courier
     as soon as  practicable,  but in all  events no later  than (the  "Delivery
     Date")  three  (3)  business  days  after  the  Series  C  Preferred  Stock
     Conversion  Date. For purposes of this  Certificate of  Designations,  such
     conversion  of the Series C  Preferred  Stock  shall be deemed to have been
     made  immediately  prior to the close of business on the Series C Preferred
     Stock Conversion Date.

          (f) In lieu  of  delivering  physical  certificates  representing  the
     Common Stock issuable upon the conversion of the Series C Preferred  Stock,
     provided that the  Corporation's  transfer  agent is  participating  in the
     Depository Trust  Corporation  ("DTC") Fast Automated  Securities  Transfer
     program, on the written request of a holder of Series C Preferred Stock who
     shall have previously instructed such holder's prime broker to confirm such
     request to the Corporation's  transfer agent, the Corporation shall use its
     best efforts to cause its transfer  agent to  electronically  transmit such
     Common Stock to such holder by crediting the account of the holder's  prime
     broker with DTC through its Deposit  Withdrawal Agent Commission  system no
     later than the applicable Delivery Date.

          (g) The Corporation will at all times have authorized and reserved for
     the purpose of issuance a  sufficient  number of shares of Common  Stock to
     provide for the conversion of the Series C Preferred Stock. The Corporation
     will use its best  efforts  at all times to  maintain a number of shares of
     Common Stock so reserved  for issuance  that is no less than the sum of (i)
     one and  one-half  (1.5)  times the  number  that would  then  actually  be
     issuable upon the conversion of three  thousand  (3,000) shares of Series C
     Preferred  Stock and (ii) the  exercise of the  Warrants (as defined in the
     Securities Purchase Agreement).  Before taking any action which would cause
     an adjustment reducing the Conversion Price below the established par value
     of the shares of Common  Stock  issuable  upon  conversion  of the Series C
     Preferred Stock, the Corporation shall take any corporate action which may,
     in the  opinion of its  counsel or in the  opinion of counsel to holders of
     the Series C Preferred  Stock,  be necessary in order that the  Corporation
     may validly and legally issue fully paid and nonassessable shares of Common
     Stock at such adjusted Conversion Price.

                                       6
<PAGE>

     (3) In  the  event  of a  liquidation  of the  Corporation,  the  Series  C
Preferred  Stock  Conversion  Rights shall terminate at the close of business on
the first  full day  preceding  the date fixed for the  payment  of any  amounts
distributable on liquidation to the holders of the Series C Preferred Stock.

     (4) If the  conversion  is in  connection  with an  underwritten  offer  of
securities  registered  pursuant to the Securities Act of 1933, as amended,  the
conversion may, at the option of any holder  tendering  Series C Preferred Stock
for conversion, be conditioned upon the closing with the underwriter of the sale
of securities  pursuant to such offering,  in which event the person(s) entitled
to receive  the  Common  Stock  issuable  upon such  conversion  of the Series C
Preferred  Stock shall not be deemed to have  converted  such Series C Preferred
Stock until immediately prior to the closing of the sale of securities.

     (5) At no time  shall any holder of the Series C  Preferred  Stock  convert
such  amount of Series C  Preferred  Stock as shall  result in such  Purchaser's
ownership,   after  such  conversion,   exceeding  9.99%  of  the  Corporation's
outstanding Common Stock.

     (6) No fractional shares of Common Stock shall be issued upon conversion of
the Preferred  Stock. In lieu of fractional  shares,  the Corporation  shall pay
cash equal to such  fraction  multiplied by the then  effective  and  applicable
Conversion Price.

     (7) The Corporation will not, by amendment of its Articles of Incorporation
or  through  any  reorganization,  transfer  of assets,  consolidation,  merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the  observance or  performance of any of the terms to be observed
or performed under this Certificate of Designations by the Corporation, but will
at all times in good faith assist in the carrying out of all the  provisions  of
this  Certificate of Designations and in the taking of all such action as may be
necessary  or  appropriate  in order to  protect  the Series C  Preferred  Stock
Conversion  Rights  of the  holders  of the  Series C  Preferred  Stock  against
impairment.

     (8) In the event (a) that the Corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or other securities of
the Corporation, (b) that the Corporation subdivides or combines its outstanding
shares of Common Stock, (c) of any  reclassification  of the Common Stock of the
Corporation  (other than a subdivision or combination of its outstanding  shares
of Common Stock or a stock dividend or stock distribution  thereon),  (d) of any
consolidation or merger of the Corporation into or with another corporation, (e)
of the sale of all or substantially all of the assets of the Corporation, or (f)
of the  involuntary or voluntary  dissolution,  liquidation or winding up of the
Corporation,  then the  Corporation  shall  cause  to be filed at its  principal
office or at the office of the transfer  agent of the Series C Preferred  Stock,
and shall cause to be mailed to each  holder of the Series C Preferred  Stock at
their last address as shown on the records of the  Corporation  or such transfer
agent, at least ten (10) days prior to the record date specified in (i) below or
twenty (20) days before the date specified in (ii) below, a notice stating

          (i) the record date of such  dividend,  distribution,  subdivision  or
     combination,  or, if a record is not to be taken,  the date as of which the
     holders  of

                                       7
<PAGE>

     Common  Stock of  record to be  entitled  to such  dividend,  distribution,
     subdivision or combination are to be determined, or

          (ii) the date on which such reclassification,  consolidation,  merger,
     sale,  dissolution,  liquidation  or  winding  up  is  expected  to  become
     effective,  and the date as of which it is expected  that holders of Common
     Stock of record shall be entitled to exchange  their shares of Common Stock
     for securities or other property  deliverable  upon such  reclassification,
     consolidation, merger, sale, dissolution or winding up.

     H.  Sinking  Fund.  There  shall  be no  sinking  fund for the  payment  of
dividends,  or liquidation  preferences  on the Series C Preferred  Stock or the
redemption of any shares thereof.

     I. Redemption  Events. In case one or more of the following events,  each a
redemption event, shall have occurred:

          (a)  failure to  deliver  the shares of Common  Stock  required  to be
     delivered upon  conversion of the shares of Series C Preferred Stock in the
     manner and at the time  required  by Section 5 of the  Securities  Purchase
     Agreement; or

          (c) failure of the Corporation to have authorized the number of shares
     of  Common  Stock  issuable  upon  conversion  of the  shares  of  Series C
     Preferred  Stock or exercise of the Stock Purchase  Warrants (as defined in
     the Securities Purchase Agreement); or

          (d) failure on the part of the  Corporation to duly observe or perform
     any of the  provisions of this  Certificate of  Designations  or any of its
     other  covenants  or  agreements   contained  in  the  Securities  Purchase
     Agreement,  or to cure any material breach in a material  representation or
     covenant contained in the Securities Purchase Agreement or the Registration
     Rights  Agreement  for a period  of ten (10)  days  after the date on which
     written notice of such failure or breach  requiring the same to be remedied
     has been given by a registered holder of shares of Series C Preferred Stock
     to the Corporation;

          then,  and in each and every  such  case,  so long as such  redemption
     event has not been remedied, the holders of not less than fifty-one percent
     (51%) of the shares of Series C Preferred Stock then outstanding, by notice
     in  writing to the  Corporation  (the date of such  notice the  "Redemption
     Notice Date"), may demand that the Corporation  redeem, and the Corporation
     shall redeem,  each share of Series C Preferred Stock then outstanding at a
     price per share equal to one hundred  twenty-five percent (125%) of the sum
     of (x) the Stated Value and (y) the aggregate  accrued and unpaid dividends
     on such Redemption Notice Date

     For purposes of this Section I "Material  Subsidiary"  means any subsidiary
with  respect to which the  Corporation  has  directly or  indirectly  invested,
loaned, advanced or guaranteed the obligations of, an aggregate amount exceeding
fifteen percent (15%) of the  Corporation's  gross assets,  or the Corporation's
proportionate  share  of the  assets  or  net  income

                                       8
<PAGE>

of which (based on the  subsidiary's  most recent financial  statements)  exceed
fifteen  percent  (15%)  of  the  Corporation's  gross  assets  or  net  income,
respectively, or the gross revenues of which exceed fifteen percent (15%) of the
gross  revenues  of  the  Corporation  based  upon  the  most  recent  financial
statements of such subsidiary and the Corporation.

     J. Amendment.  This  Certificate of  Designations  constitutes an agreement
between the  Corporation  and the holders of the Series C Preferred  Stock.  The
Corporation  shall not amend this Certificate of Designations or alter or repeal
the preferences,  rights,  powers or other terms of the Series C Preferred Stock
so as to affect  adversely  the Series C  Preferred  Stock,  without the written
consent or affirmative  vote of the holders of at least sixty-six and two-thirds
percent  (66-2/3%) of the then  outstanding  shares of Series C Preferred Stock,
given in writing or

                                       9
<PAGE>

by vote at a meeting,  consenting or voting (as the case may be) separately as a
class.

     IN WITNESS WHEREOF,  USA Biomass  Corporation has caused its corporate seal
to be hereunto affixed and this certificate to be signed by  _____________,  its
Chairman, and attested by ____________,  its Secretary,  this 14th day of March,
2000.

                                                     USA BIOMASS CORPORATION

                                              By:
                                                  ------------------------------
                                                  Name:
                                                  Title: Chairman
Attest:

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

                                   EXHIBIT B

     THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE  SECURITIES  ACT OF 1933, AS AMENDED,  OR THE  SECURITIES  LAWS OF ANY
STATE,  AND MAY NOT BE  TRANSFERRED  IN  VIOLATION  OF SUCH  ACT,  THE RULES AND
REGULATIONS  THEREUNDER OR ANY STATE  SECURITIES  LAWS OR THE PROVISIONS OF THIS
WARRANT.

                  No. of Shares of Common Stock: _____________

                                     WARRANT

                           To Purchase Common Stock of

                             USA BIOMASS CORPORATION

     THIS IS TO CERTIFY THAT Siete Investors LLC, a Delaware  limited  liability
company, or its registered  assigns,  is entitled,  at any time from the Warrant
Issuance Date (as  hereinafter  defined) to the Expiration  Date (as hereinafter
defined), to purchase from USA BIOMASS CORPORATION,  a Delaware corporation (the
"Company"), one hundred thousand (100,000 shares of Common Stock (as hereinafter
defined and subject to  adjustment  as  provided  herein),  in whole or in part,
including  fractional  parts,  at a purchase  price per share  equal to four and
65/100  ($4.65)  (subject to any  adjustments  made to such  amount  pursuant to
Section 4 hereto) on the terms and  conditions  and  pursuant to the  provisions
hereinafter set forth.

1.   DEFINITIONS

     As used in this Warrant,  the following terms have the respective  meanings
set forth below:

                                       10
<PAGE>

     "Additional  Shares of Common  Stock" shall mean all shares of Common Stock
issued by the Company after the Closing Date, other than Warrant Stock.

     "Book  Value"  shall mean,  in respect of any share of Common  Stock on any
date herein specified, the consolidated book value of the Company as of the last
day of any month immediately preceding such date, divided by the number of Fully
Diluted Outstanding shares of Common Stock as determined in accordance with GAAP
(assuming  the  payment of the  exercise  prices  for such  shares) by a firm of
independent   certified  public  accountants  of  recognized  national  standing
selected by the Company and reasonably acceptable to the Holder.

     "Business Day" shall mean any day that is not a Saturday or Sunday or a day
on which banks are required or permitted to be closed in the State of New York.

     "Closing Date" shall have the meaning set forth in the Securities  Purchase
Agreement.

     "Commission" shall mean the Securities and Exchange Commission or any other
federal  agency  then   administering  the  Securities  Act  and  other  federal
securities laws.

     "Common  Stock" shall mean (except where the context  otherwise  indicates)
the Common Stock,  par value $.001 per share,  of the Company as  constituted on
the  Closing  Date,  and any  capital  stock into which  such  Common  Stock may
thereafter  be changed,  and shall also include (i) capital stock of the Company
of any other  class  (regardless  of how  denominated)  issued to the holders of
shares of  Common  Stock  upon any  reclassification  thereof  which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to  redemption  and (ii) shares of common  stock of any
successor or acquiring  corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.4.

     "Convertible  Securities"  shall mean evidences of indebtedness,  shares of
stock or other securities  which are convertible  into or exchangeable,  with or
without payment of additional  consideration in cash or property,  for shares of
Common Stock, either immediately or upon the occurrence of a specified date or a
specified event.

     "Current  Warrant Price" shall mean four and 65/100 dollars ($4.65) subject
to any adjustments to such amount made in accordance with Section 4 hereof.

     "Exchange Act" shall mean the Securities  Exchange Act of 1934, as amended,
or  any  successor  federal  statute,  and  the  rules  and  regulations  of the
Commission thereunder, all as the same shall be in effect from time to time.

     "Exercise  Period"  shall mean the  period  during  which  this  Warrant is
exercisable pursuant to Section 2.1.

     "Expiration Date" shall mean March 13, 2005.

     "Fully Diluted  Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all  shares of

                                       3
<PAGE>

Common Stock Outstanding at such date and all shares of Common Stock issuable in
respect of this Warrant, outstanding on such date, and other options or warrants
to purchase,  or securities  convertible into,  including without limitation the
shares  of  Common  Stock  outstanding  on  such  date  which  would  be  deemed
outstanding in accordance  with GAAP for purposes of  determining  book value or
net income per share.

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

     "Holder"  shall mean the Person in whose name the Warrant or Warrant  Stock
set forth herein is registered on the books of the Company  maintained  for such
purpose.

     "Market Price" per Common Share means the average of the closing bid prices
of the Common  Shares as  reported on the  National  Association  of  Securities
Dealers  Automated  Quotation System for the National Market,  ("NASDAQ") or, if
such  security  is not  listed or  admitted  to trading  on the  NASDAQ,  on the
principal  national security exchange or quotation system on which such security
is quoted  or listed or  admitted  to  trading,  or, if not  quoted or listed or
admitted to trading on any national securities exchange or quotation system, the
closing bid price of such security on the over-the-counter  market on the day in
question as reported by the National Association of Security Dealers, Inc., or a
similar generally accepted  reporting service,  as the case may be, for the five
(5) trading days immediately preceding the date of determination.

     "Other Property" shall have the meaning set forth in Section 4.5.

     "Outstanding"  shall mean, when used with reference to Common Stock, at any
date as of which the number of shares  thereof is to be  determined,  all issued
shares of Common  Stock,  except shares then owned or held by or for the account
of the Company or any subsidiary thereof,  and shall include all shares issuable
in respect of  outstanding  scrip or any  certificates  representing  fractional
interests in shares of Common Stock.

     "Person" shall mean any individual, sole proprietorship, partnership, joint
venture,   trust,   incorporated   organization,    association,    corporation,
institution,  public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise,  including, without limitation, any
instrumentality, division, agency, body or department thereof).

     "Registration   Rights  Agreement"  shall  mean  the  Registration   Rights
Agreement  dated a date even  herewith  by and  between  the  Company  and Siete
Investors LLC, as it may be amended from time to time.

     "Restricted  Common  Stock" shall mean shares of Common Stock which are, or
which upon their issuance on the exercise of this Warrant would be, evidenced by
a certificate bearing the restrictive legend set forth in Section 9.1(a).

     "Securities Act" shall mean the Securities Act of 1933, as amended,  or any
successor  federal  statute,  and the rules and  regulations  of the  Commission
thereunder, all as the same shall be in effect at the time.

                                       4
<PAGE>

     "Securities   Purchase   Agreement"  shall  mean  the  Securities  Purchase
Agreement  dated as of a date even herewith by and between the Company and Siete
Investors LLC, as it may be amended from time to time.

     "Transfer" shall mean any disposition of any Warrant or Warrant Stock or of
any interest in either thereof, which would constitute a sale thereof within the
meaning of the Securities Act.

     "Transfer Notice" shall have the meaning set forth in Section 9.2.

     "Warrant  Issuance  Date" shall mean any date on which  Warrants are issued
pursuant to the Securities Purchase Agreement.

     "Warrants"  shall mean this Warrant and all warrants  issued upon transfer,
division or combination  of, or in substitution  for, any thereof.  All Warrants
shall at all times be identical as to terms and conditions  and date,  except as
to the number of shares of Common Stock for which they may be exercised.

     "Warrant  Price"  shall mean an amount equal to (i) the number of shares of
Common Stock being  purchased upon exercise of this Warrant  pursuant to Section
2.1,  multiplied  by (ii)  the  Current  Warrant  Price  as of the  date of such
exercise.

     "Warrant  Stock"  shall mean the shares of Common  Stock  purchased  by the
holders of the Warrants upon the exercise thereof.

2.   EXERCISE OF WARRANT

     2.1. Manner of Exercise. From and after the Warrant Issuance Date and until
5:00 P.M., New York City time, on the Expiration Date,  Holder may exercise this
Warrant,  on any  Business  Day,  for all or any part of the number of shares of
Common Stock purchasable hereunder.

     In order to  exercise  this  Warrant,  in  whole or in part,  Holder  shall
deliver  to the  Company  at the  office or  agency  designated  by the  Company
pursuant  to Section 12, (i) a written  notice of Holder's  election to exercise
this Warrant, which notice shall specify the number of shares of Common Stock to
be purchased,  (ii) payment by cash,  check or bank draft payable to the Company
of the Warrant Price in cash or by wire  transfer or cashier's  check drawn on a
United  States bank or by the Holder's  surrender of Warrant Stock (or the right
to receive such number of shares) having an aggregate  Market Price equal to the
Warrant Price for all shares then being  purchased and (iii) this Warrant.  Such
notice shall be substantially in the form of the subscription  form appearing at
the end of this  Warrant as Exhibit A, duly  executed  by Holder or its agent or
attorney.  Upon receipt of the items  referred to in clauses (i), (ii) and (iii)
above,  the Company shall, as promptly as  practicable,  and in any event within
five (5) Business Days  thereafter,  execute or cause to be executed and deliver
or cause to be delivered to Holder a certificate  or  certificates  representing
the aggregate number of full shares of Common Stock issuable upon such exercise,
together with cash in lieu of any fraction of a share, as hereinafter  provided.
The stock  certificate  or  certificates  so  delivered  shall be, to the extent
possible,  in such  denomination or denominations as Holder shall request in the
notice and shall be registered  in

                                       5
<PAGE>

the name of  Holder  or,  subject  to  Section  9, such  other  name as shall be
designated in the notice.  This Warrant  shall be deemed to have been  exercised
and such  certificate or certificates  shall be deemed to have been issued,  and
Holder or any other Person so  designated to be named therein shall be deemed to
have become a holder of record of such shares for all  purposes,  as of the date
the Warrant has been  exercised by payment to the Company of the Warrant  Price.
If this Warrant shall have been  exercised in part,  the Company  shall,  at the
time of delivery of the certificate or certificates  representing Warrant Stock,
deliver to Holder a new Warrant  evidencing the rights of Holder to purchase the
unpurchased shares of Common Stock called for by this Warrant, which new Warrant
shall in all other respects be identical with this Warrant.

     The Holder  shall be entitled to exercise the Warrant  notwithstanding  the
commencement  of any case  under 11  U.S.C.  ss.  101 et seq.  (the  "Bankruptcy
Code").  In the event the Company is a debtor  under the  Bankruptcy  Code,  the
Company  hereby waives to the fullest  extent  permitted any rights to relief it
may have under 11 U.S.C. ss. 362 in respect of the Holder's  exercise right. The
Company  hereby waives to the fullest  extent  permitted any rights to relief it
may have under 11 U.S.C. ss. 362 in respect of the exercise of the Warrant.  The
Company agrees, without cost or expense to the Holder, to take or consent to any
and all action necessary to effectuate relief under 11 U.S.C. ss. 362.

     2.2. Payment of Taxes and Charges. All shares of Common Stock issuable upon
the  exercise  of this  Warrant  pursuant to the terms  hereof  shall be validly
issued,  fully paid and  nonassessable,  and without any preemptive  rights. The
Company  shall pay all  expenses  in  connection  with,  and all taxes and other
governmental  charges that may be imposed with respect to, the issue or delivery
thereof.

     2.3.  Fractional  Shares.  The  Company  shall not be  required  to issue a
fractional  share of  Common  Stock  upon  exercise  of any  Warrant.  As to any
fraction of a share which  Holder would  otherwise be entitled to purchase  upon
such exercise,  the Company shall pay a cash adjustment in respect of such final
fraction in an amount  equal to the same  fraction of the Market Price per share
of Common Stock on the relevant exercise date.

     2.4. Continued Validity. A holder of shares of Common Stock issued upon the
exercise of this Warrant,  in whole or in part (other than a holder who acquires
such shares after the same have been publicly  sold  pursuant to a  Registration
Statement  under the  Securities  Act or sold pursuant to Rule 144  thereunder),
shall continue to be entitled with respect to such shares to all rights to which
it would  have been  entitled  as  Holder  under  Sections  9, 10 and 14 of this
Warrant.  The Company will, at the time of exercise of this Warrant, in whole or
in part, upon the request of Holder,  acknowledge in writing, in form reasonably
satisfactory  to Holder,  its  continuing  obligation  to afford Holder all such
rights;  provided,  however, that if Holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
to Holder all such rights.

     2.5. Right to Convert Warrant.  The Holder shall have the right to convert,
in whole or in part, this Warrant (the "Conversion  Right") at any time prior to
the expiration of the Exercise Period, into shares of Common Stock in accordance
with this Section 2.5. Upon exercise of the Conversion  Right, the Company shall
deliver to the Holder (without  payment by the Holder of the Warrant Price) that
number of shares of Common Stock equal to the quotient

                                       6
<PAGE>

obtained  by  dividing  (x) the  value  of the  portion  of this  Warrant  being
converted  at  the  time  the  Conversion  Right  is  exercised  (determined  by
subtracting  the Warrant Price for the portion of this Warrant  being  converted
(in effect  immediately  prior to the exercise of the Conversion Right) from the
amount  obtained by  multiplying  the number of shares of Common Stock  issuable
upon the whole or partial  exercise of this Warrant,  as the case may be, by the
Market Price  immediately  prior to the exercise of the Conversion Right) by (y)
the Market Price of one share of Common Stock  immediately prior to the exercise
of the Conversion Right.

     The  Conversion  Right may be exercised by the Holder,  at any time or from
time to time,  prior to its  expiration,  on any  business  day by  delivering a
written  notice (the  "Conversion  Notice") to the Company at the offices of the
Company,  exercising the Conversion Right and specifying (i) the total number of
shares of Common Stock the Holder will purchase  pursuant to the  conversion and
(ii) a place and date not less than two (2) nor more than twenty  (20)  Business
Days from the date of the Subscription Notice for the closing of such purchase.

     At any closing under this Section 2.5, (i) the Holder will  surrender  this
Warrant  and (ii) the  Company  will  deliver  to the  Holder a  certificate  or
certificates  for the  number  of  shares of  Common  Stock  issuable  upon such
conversion.  If this Warrant shall have been converted only in part, the Company
shall,  at the time of  delivery  of said  stock  certificate  or  certificates,
deliver  to the  Holder a new  Warrant  evidencing  the  rights of the Holder to
purchase the remaining shares of Common Stock called for by this Warrant,  which
new Warrant shall in all other respects be identical to this Warrant, or, at the
request of the Holder,  appropriate notation may be made on this Warrant and the
same returned to the Holder. The Company shall pay all expenses, taxes and other
charges payable in connection with the  preparation,  issue and delivery of such
stock   certificates  and  new  Warrants,   except  that,  in  case  such  stock
certificates  and/or new Warrants  shall be  registered in a name or names other
than the name of the Holder,  funds  sufficient to pay all stock  transfer taxes
that are payable  upon the issuance of such stock  certificates  or new Warrants
shall be paid by the Holder at the time of  delivering  the  notice of  exercise
mentioned above.

3. TRANSFER, DIVISION AND COMBINATION

     3.1.  Transfer.  Subject to  compliance  with  Sections 9, transfer of this
Warrant and all rights  hereunder,  in whole or in part,  shall be registered on
the books of the Company to be maintained  for such purpose,  upon  surrender of
this Warrant at the principal  office of the Company  referred to in Section 2.1
or the office or agency  designated  by the  Company  pursuant  to  Section  12,
together with a written assignment of this Warrant  substantially in the form of
Exhibit B hereto  duly  executed by Holder or its agent or  attorney.  Upon such
surrender,  the Company  shall,  subject to Section 9, execute and deliver a new
Warrant  or  Warrants  in the  name  of the  assignee  or  assignees  and in the
denomination specified in such instrument of assignment,  and shall issue to the
assignor a new Warrant  evidencing  the portion of this Warrant not so assigned,
and this Warrant shall promptly be cancelled. A Warrant, if properly assigned in
compliance  with Section 9, may be exercised by a new Holder for the purchase of
shares of Common Stock without having a new Warrant issued.

     3.2.  Division and  Combination.  Subject to Section 9, this Warrant may be
divided  or  combined  with  other  Warrants  upon  presentation  hereof  at the
aforesaid  office or

                                       7
<PAGE>

agency of the Company,  together with a written notice  specifying the names and
denominations  in which new Warrants  are to be issued,  signed by Holder or its
agent or attorney. Subject to compliance with Section 3.1 and with Section 9, as
to any  transfer  which may be involved in such  division  or  combination,  the
Company  shall execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with such notice.

     3.3.  Expenses.  The Company  shall  prepare,  issue and deliver at its own
expense the new Warrant or Warrants under this Section 3.

     3.4. Maintenance of Books. The Company agrees to maintain, at its aforesaid
office or agency, books for the registration and the registration of transfer of
the Warrants.

4. ADJUSTMENTS

     The number of shares of Common Stock for which this Warrant is exercisable,
or the  price at which  such  shares  may be  purchased  upon  exercise  of this
Warrant,  shall be subject to adjustment  from time to time as set forth in this
Section 4. The Company  shall give Holder  notice of any event  described  below
which  requires an  adjustment  pursuant  to this  Section 4 at the time of such
event.

     4.1. Stock  Dividends,  Subdivisions and  Combinations.  If at any time the
Company shall:

     (a) take a record of the  holders  of its Common  Stock for the  purpose of
entitling  them to  receive a dividend  payable  in, or other  distribution  of,
Additional Shares of Common Stock,

     (b) subdivide its  outstanding  shares of Common Stock into a larger number
of shares of Common Stock, or

     (c) combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock,

     then (i) the  number of shares of Common  Stock for which  this  Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record  holder of the same
number of  shares  of  Common  Stock  for  which  this  Warrant  is  exercisable
immediately  prior to the  occurrence  of such event would own or be entitled to
receive  after the happening of such event,  and (ii) the Current  Warrant Price
shall be adjusted  to equal (A) the  Current  Warrant  Price  multiplied  by the
number of  shares  of  Common  Stock  for  which  this  Warrant  is  exercisable
immediately  prior to the  adjustment  divided  by (B) the  number of shares for
which this Warrant is exercisable immediately after such adjustment.

     4.2. Certain Other Distributions.

     In case the Company shall issue any Common Stock or any rights,  options or
warrants to all holders of record of its Common Stock  entitling  all holders to
subscribe for or

                                       8
<PAGE>

purchase  shares of Common Stock at a price per share less than the Market Price
per share of the Common  Stock on the date  fixed for such  issue,  the  Current
Warrant Price in effect  immediately  prior to the close of business on the date
fixed for such  determination  shall be  reduced  to the  amount  determined  by
multiplying  such Current  Warrant  Price by a fraction,  the numerator of which
shall be the number of shares of Common Stock  outstanding  immediately prior to
the close of business on the date fixed for such  determination  plus the number
of shares of Common Stock which the aggregate of the offering price of the total
number of shares of Common Stock so offered for  subscription  or purchase would
purchase at such Market Price and the  denominator  of which shall be the number
of shares of Common Stock outstanding immediately prior to the close of business
on the date  fixed for such  determination  plus the  number of shares of Common
Stock so offered for  subscription  or purchase,  such reduced  amount to become
effective  immediately  after the close of  business  on the date fixed for such
determination.  For the purposes of this clause (b), (i) the number of shares of
Common  Stock at any time  outstanding  shall  not  include  shares  held in the
treasury of the Company and (ii) in the case of any rights,  options or warrants
which expire by their terms not more than 60 days after the date of issue, sale,
grant or assumption thereof, no adjustment of the Current Warrant Price shall be
made until the  expiration  or  exercise  of all  rights,  options or  warrants,
whereupon such  adjustment  shall be made in the manner  provided in this clause
(b),  but only  with  respect  to the  shares of Common  Stock  actually  issued
pursuant thereto.  Such adjustment shall be made successively whenever any event
specified  above shall  occur.  In the event that any or all rights,  options or
warrants  covered by this  clause  (b) are not so issued or expire or  terminate
before  being  exercised,  the  Current  Warrant  Price then in effect  shall be
appropriately readjusted.

     4.3. Common Share Distribution.

     (a) If, other than in an Exempt  Distribution,  the Company  shall issue or
otherwise  sell any shares of its Common Stock (any such  issuance or sale other
than an Exempt Distribution, including any event described in paragraphs (b) and
(c) of this Section 4.3, hereafter being called a "Common Share  Distribution"),
the  Current  Warrant  Price  shall be reduced to the price  (calculated  to the
nearest cent)  determined  by  multiplying  the Current  Warrant Price in effect
immediately prior to such Common Share Distribution by a fraction, the numerator
of  which  shall  be the  sum of (A)  the  number  of  shares  of  Common  Stock
outstanding  immediately prior to such Common Share  Distribution  multiplied by
the Market  Price per share on the date of such Common Share  Distribution  plus
(B)  the   consideration   received  by  the  Company  upon  such  Common  Share
Distribution, and the denominator of which shall be the product of (1) the total
number of shares of Common Stock outstanding immediately after such Common Share
Distribution,  multiplied  by (2) the Market Price per share on the date of such
Common Share Distribution.

     No adjustment of the Current  Warrant Price shall be made in an amount less
than 1% of such Current Warrant Price,  but any such lesser  adjustment shall be
carried  forward and shall be made at the time of, and together  with,  the next
subsequent  adjustment  which together with any  adjustments so carried  forward
shall  aggregate an amount  equal to or greater than 1% of such Current  Warrant
Price.

     If any Common Share Distribution shall require an adjustment to the Current
Warrant  Price  pursuant to the  foregoing  provisions of this Section 4.3, then
effective at the time

                                       9
<PAGE>

such  adjustment  is made,  the  number of shares of  Common  Stock  subject  to
purchase upon exercise of this Warrant shall be increased to a number determined
by  multiplying  the  number  of  shares of Common  Stock  subject  to  purchase
immediately before such Common Share  Distribution by a fraction,  the numerator
of which  shall be the number of shares  outstanding  immediately  after  giving
effect to such Common Share Distribution and the denominator shall be the sum of
the number of shares outstanding immediately before giving effect to such Common
Share Distribution plus the number of shares of Common Stock which the aggregate
consideration  received  by the  Company  with  respect  to  such  Common  Share
Distribution would purchase at the Market Price on the date of such Common Share
Distribution  (before  giving  effect to such Common  Share  Distribution).  The
provisions of this Section 4.3 shall not operate to increase the Current Warrant
Price or reduce the number of shares of Common  Stock  subject to purchase  upon
exercise of this Warrant.

     (b) If,  other than in an Exempt  Distribution,  the Company  shall  issue,
sell,  distribute  or  otherwise  grant in any manner  (whether  directly  or by
assumption in a merger or otherwise) any rights to subscribe for or to purchase,
or any  warrants or options for the  purchase  of,  Common Stock or any stock or
securities  convertible  into or  exchangeable  for Common  Stock (such  rights,
warrants or options  being  herein  called  "Options"  and such  convertible  or
exchangeable stock or securities being herein called "Convertible  Securities"),
whether  or not such  Options  or the  right to  convert  or  exchange  any such
Convertible Securities are immediately exercisable,  and the price per share for
which shares of Common Stock are issuable  upon exercise of such Options or upon
conversion or exchange of such  Convertible  Securities  (determined by dividing
(i) the  aggregate  amount,  if any,  received or  receivable  by the Company as
consideration  for the  granting of such  Options,  plus the  minimum  aggregate
amount of additional  consideration  payable to the Company upon the exercise of
all  such  Options,  plus,  in  the  case  of  Options  to  acquire  Convertible
Securities,  the minimum aggregate amount of additional  consideration,  if any,
payable  upon the  issue  or sale of such  Convertible  Securities  and upon the
conversion or exchange  thereof,  by (ii) the total maximum  number of shares of
Common Stock  issuable upon the exercise of such Options or upon the  conversion
or exchange of all such  Convertible  Securities  issuable  upon the exercise of
such  Options)  shall be less  than the  Market  Price  per share on the date of
granting such Options  (before giving effect to such grant),  then, for purposes
of  paragraph  (a) above,  the total  maximum  number of shares of Common  Stock
issuable upon the exercise of such Options or upon conversion or exchange of all
such Convertible  Securities issuable upon the exercise of such Options shall be
deemed  to have been  issued  as of the date of  granting  of such  Options  and
thereafter  shall be deemed to be outstanding and the Company shall be deemed to
have  received as  consideration  such price per share,  determined  as provided
above,  therefor,  provided,  however  upon the  expiration  or  termination  of
Convertible Securities or Options, if any thereof shall not have been converted,
exchanged or exercised, the number of shares of Common Stock deemed to be issued
and outstanding  pursuant to this subsection (b) shall be reduced by such number
of shares as to which  Convertible  Securities  or Options shall have expired or
terminated  unexercised,  and such shares shall no longer be deemed to be issued
and  outstanding,  and the  Current  Warrant  Price  then  in  effect  shall  be
readjusted  and  thereafter be the price which it would have been had adjustment
been made on the basis of the issuance only of shares  actually  issued pursuant
to such  Convertible  Securities  or Options.  Except as  otherwise  provided in
paragraph (c) below, no additional adjustment of the Current Warrant Price shall
be made upon the actual  exercise of such Options or upon conversion or exchange
of such Convertible Securities.

                                       10
<PAGE>

     (c) If the  purchase  price  provided  for in  any  Option  referred  to in
paragraph (b) above,  the  additional  consideration,  if any,  payable upon the
conversion or exchange of any  Convertible  Securities  referred to in paragraph
(b)  above,  or the rate at which  any  Convertible  Securities  referred  to in
paragraph (b) above are convertible  into or exchangeable for Common Stock shall
change at any time  (other  than under or by reason of  provisions  designed  to
protect  against  dilution upon an event which  results in a related  adjustment
pursuant  to this  Section 4), the Current  Warrant  Price then in effect  shall
forthwith  be  readjusted  (effective  only with respect to any exercise of this
Warrant after such  readjustment)  to the Current Warrant Price which would then
be in effect had the adjustment made upon the issue, sale, distribution or grant
of such  Options or  Convertible  Securities  been made based upon such  changed
purchase price, additional consideration or conversion rate, as the case may be;
provided,  however, that such readjustment shall give effect to such change only
with  respect  to  such  Options  and  Convertible  Securities  as  then  remain
outstanding.

     (d) If any shares of Common Stock, Options or Convertible  Securities shall
be issued,  sold or distributed for cash, the  consideration  received  therefor
shall be  deemed  to be the  amount  received  by the  Company  therefor,  after
deduction therefrom of any expenses incurred and any underwriting  commission or
concessions  paid or allowed  by the  Company in  connection  therewith.  If any
shares of Common Stock, Options or Convertible  Securities shall be issued, sold
or  distributed  for  a  consideration  other  than  cash,  the  amount  of  the
consideration  other than cash received by the Company shall be deemed to be the
fair  market  value  of such  consideration,  after  deduction  of any  expenses
incurred and any underwriting  commissions or concessions paid or allowed by the
Company  in  connection  therewith.  If any shares of Common  Stock,  Options or
Convertible  Securities  shall be issued in connection  with any merger in which
the Company is the surviving  corporation,  the amount of consideration therefor
shall be deemed to be the fair  market  value of such  portion of the assets and
business of the nonsurviving corporation as shall be attributable to such shares
of Common Stock,  Option or Convertible  Securities,  as the case may be. If any
Options  shall  be  issued  in  connection  with  the  issue  and  sale of other
securities of the Company, together comprising one integral transaction in which
no specific  consideration  is allocated to such Options by the parties thereto,
such Options shall be deemed to have been issued for an amount of  consideration
equal to the fair market value thereof.

     (e) For the purposes of this Section 4, "Exempt  Distribution"  shall means
an issuance or other sale by the Company of any shares of its Common Stock:

          (i) (a) to the Company's officers or directors or (b) to the Company's
     officers, directors or employees pursuant to employee stock option, benefit
     or incentive plans  established for their benefit,  whether in existence on
     the date hereof or approved by the Board of Directors of the Company  after
     the date hereof,  provided that the number of shares of Common Stock issued
     from and after March 14, 2000 pursuant to all issuances and sales  pursuant
     to this  subparagraph  (i) does not exceed,  in the aggregate,  ten percent
     (10%) of the Fully Diluted Outstanding of the Company March 14, 2000;

          (ii) at a price per share of more than the  greater of (a) the Current
     Warrant Price or (b) eighty five percent (85%) of the Market Price;

                                       11
<PAGE>

          (iii) upon the  conversion  or  exercise of any  options,  warrants or
     other convertible  securities of the Company  outstanding on March 14, 2000
     and  disclosed  on the  disclosure  schedules  to the  Securities  Purchase
     Agreement;

     4.4. Other  Provisions  Applicable to Adjustments  under this Section.  The
following  provisions  shall be applicable to the making of  adjustments  of the
number of shares of Common Stock for which this Warrant is  exercisable  and the
Current Warrant Price provided for in this Section 4:

     (a) When Adjustments to Be Made. The adjustments required by this Section 4
shall  be made  whenever  and as  often  as any  specified  event  requiring  an
adjustment shall occur.  For the purpose of any adjustment,  any specified event
shall be deemed to have  occurred  at the close of  business  on the date of its
occurrence.

     (b) Fractional  Interests.  In computing  adjustments under this Section 4,
fractional  interests in Common Stock shall be taken into account to the nearest
1/10th of a share.

     (c) When Adjustment Not Required. If the Company shall take a record of the
holders  of its Common  Stock for the  purpose  of  entitling  them to receive a
dividend  or   distribution  or  subscription  or  purchase  rights  and  shall,
thereafter and before the distribution to stockholders thereof,  legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights,  then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment  previously made in respect thereof shall
be rescinded and annulled.

     (d) Challenge to Good Faith Determination.  Whenever the Board of Directors
of the Company  shall be required to make a  determination  in good faith of the
fair  value  of any  item  under  this  Section  4,  such  determination  may be
challenged in good faith by the Holder,  and any dispute shall be resolved by an
investment  banking firm of recognized  national standing selected by the Holder
and reasonably acceptable to the Company.

     (e) Proceeding  Prior to Any Action  Requiring  Adjustment.  As a condition
precedent to the taking of any action which would require an adjustment pursuant
to this  Section 4, the Company  shall take any action  which may be  necessary,
including  obtaining  regulatory  approvals  or  exemptions,  in order  that the
Company may thereafter validly and legally issue as fully paid and nonassessable
all shares of Common Stock which the Holder is entitled to receive upon exercise
hereof.

     4.5. Reorganization, Reclassification, Merger, Consolidation or Disposition
of Assets.  In case the Company shall  reorganize  its capital,  reclassify  its
capital stock,  consolidate or merge with or into another corporation (where the
Company  is not the  surviving  corporation  or where  there  is a change  in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or  otherwise  dispose  of all or  substantially  all its  property,  assets  or
business   to  another   corporation   and,   pursuant  to  the  terms  of  such
reorganization,   reclassification,  merger,  consolidation  or  disposition  of
assets, shares of common stock of the successor or acquiring corporation, or any
cash,  shares of stock or other securities or property of any nature  whatsoever

                                       12
<PAGE>

(including  warrants or other subscription or purchase rights) in addition to or
in lieu of  common  stock of the  successor  or  acquiring  corporation  ("Other
Property"),  are to be received by or distributed to the holders of Common Stock
of the Company,  then Holder shall have the right  thereafter  to receive,  upon
exercise of the Warrant,  the number of shares of common stock of the  successor
or acquiring corporation or of the Company, if it is the surviving  corporation,
and  Other  Property  receivable  upon or as a  result  of such  reorganization,
reclassification,  merger, consolidation or disposition of assets by a holder of
the  number of shares of Common  Stock for which  this  Warrant  is  exercisable
immediately   prior  to  such  event.  In  case  of  any  such   reorganization,
reclassification,  merger, consolidation or disposition of assets, the successor
or acquiring  corporation (if other than the Company) shall expressly assume the
due and  punctual  observance  and  performance  of each and every  covenant and
condition of this  Warrant to be  performed  and observed by the Company and all
the obligations and liabilities hereunder,  subject to such modifications as may
be deemed appropriate,  subject to the Holder's consent, in order to provide for
adjustments  of shares of Common  Stock for which this  Warrant  is  exercisable
which shall be as nearly  equivalent as practicable to the adjustments  provided
for in this Section 4. For purposes of this  Section 4.5,  "common  stock of the
successor or acquiring  corporation"  shall include stock of such corporation of
any class which is not  preferred as to dividends or assets over any other class
of stock of such  corporation  and which is not subject to redemption  and shall
also include any evidences of indebtedness,  shares of stock or other securities
which  are  convertible  into  or  exchangeable  for  any  such  stock,   either
immediately  or upon the  arrival  of a  specified  date or the  happening  of a
specified  event and any warrants or other  rights to subscribe  for or purchase
any such stock.  The foregoing  provisions  of this Section 4.4 shall  similarly
apply to successive reorganizations,  reclassifications, mergers, consolidations
or disposition of assets.

     4.6. Other Action  Affecting Common Stock. In case at any time or from time
to time the Company shall take any action in respect of its Common Stock,  other
than any action taken in the ordinary  course of the  Company's  business or any
action  described in this Section 4, which would have a material  adverse effect
upon the rights of the Holder,  the number of shares of Common  Stock and/or the
purchase  price  thereof shall be adjusted in such manner as may be equitable in
the circumstances, as determined in good faith by an investment bank selected by
Holder.

     4.6. Certain Limitations.  Notwithstanding anything herein to the contrary,
the Company  agrees not to enter into any  transaction  which,  by reason of any
adjustment hereunder,  would cause the Current Warrant Price to be less than the
par value per share of Common Stock.

     4.7. No Voting  Rights.  This  Warrant  shall not entitle its Holder to any
voting rights or other rights as a shareholder of the Company.

5. NOTICES TO HOLDER

     5.1. Notice of  Adjustments.  Whenever the number of shares of Common Stock
for which this Warrant is exercisable, or whenever the price at which a share of
such Common  Stock may be  purchased  upon  exercise of the  Warrants,  shall be
adjusted   pursuant  to  Section  4,  the  Company  shall  forthwith  prepare  a
certificate to be executed by an executive officer of the Company setting forth,
in reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated,  specifying the number of shares of

                                       13
<PAGE>

Common Stock for which this Warrant is exercisable  and (if such  adjustment was
made pursuant to Section 4.4 or 4.5) describing the number and kind of any other
shares of stock or Other Property for which this Warrant is exercisable, and any
change in the purchase  price or prices  thereof,  after  giving  effect to such
adjustment  or change.  The Company shall  promptly  cause a signed copy of such
certificate  to be delivered to the Holder in accordance  with Section 14.2. The
Company  shall keep at its office or agency  designated  pursuant  to Section 12
copies  of all  such  certificates  and  cause  the  same  to be  available  for
inspection  at said office  during  normal  business  hours by the  Holder,  its
representatives,  or any  prospective  purchaser of a Warrant  designated by the
Holder.

     5.2. Notice of Corporate Action. If at any time

     (a) the Company  shall take a record of the holders of its Common Stock for
the  purpose  of  entitling  them to receive a  dividend  or other  distribution
(whether in cash, , or any right to subscribe  for or purchase any  evidences of
its  indebtedness,  any shares of stock of any class or any other  securities or
property of any nature  whatsoever,  or to receive any  warrants or other rights
(including,  without  limitation,  rights  to  subscribe  for  or  purchase  any
evidences of its  indebtedness,  any shares of its stock or any other securities
or property of any nature whatsoever), or

     (b)  there  shall  be  any  capital  reorganization  of  the  Company,  any
reclassification  or recapitalization of the capital stock of the Company or any
consolidation  or merger of the  Company  with,  or any sale,  transfer or other
disposition of all or substantially all the property,  assets or business of the
Company to, another corporation, or

     (c) there shall be a voluntary or involuntary  dissolution,  liquidation or
winding up of the Company;

then, in any one or more of such cases,  the Company shall give to Holder (i) at
least thirty (30)  Business  Days' prior  written  notice of the date on which a
record date shall be selected for such  dividend,  distribution  or right or for
determining   rights   to  vote  in   respect   of  any   such   reorganization,
reclassification,    merger,   consolidation,   sale,   transfer,   disposition,
dissolution,  liquidation  or  winding  up,  and  (ii) in the  case of any  such
reorganization,   reclassification,   merger,  consolidation,   sale,  transfer,
disposition,  dissolution,  liquidation  or  winding  up, at least  thirty  (30)
Business  Days' prior written notice of the date when the same shall take place.
Such notice in accordance  with the foregoing  clause also shall specify (i) the
date on which any such record is to be taken for the  purpose of such  dividend,
distribution  or right,  the date on which the holders of Common  Stock shall be
entitled  to any such  dividend,  distribution  or  right,  and the  amount  and
character  thereof,  and  (ii)  the  date  on  which  any  such  reorganization,
reclassification,    merger,   consolidation,   sale,   transfer,   disposition,
dissolution,  liquidation  or winding  up is to take place and the time,  if any
such  time is to be fixed,  as of which the  holders  of Common  Stock  shall be
entitled  to  exchange  their  shares of Common  Stock for  securities  or other
property  deliverable  upon  such  reorganization,   reclassification,   merger,
consolidation, sale, transfer, disposition,  dissolution, liquidation or winding
up. Each such written notice shall be sufficiently  given if addressed to Holder
at the  last  address  of  Holder  appearing  on the  books of the  Company  and
delivered in accordance with Section 14.2.

                                       14
<PAGE>

     A  reclassification  of the Common Stock (other than a change in par value,
or from par value to no par value or from no par value to par value) into shares
of  Common  Stock  and  shares  of any  other  class of stock  shall be deemed a
distribution by the Company to the holders of its Common Stock of such shares of
such  other  class of stock  within  the  meaning of this  Section  and,  if the
outstanding  shares of Common  Stock  shall be changed  into a larger or smaller
number of shares of Common Stock as a part of such reclassification, such change
shall be  deemed  a  subdivision  or  combination,  as the  case may be,  of the
outstanding shares of Common Stock within the meaning of Section 4.1.

6. NO IMPAIRMENT

     The  Company  shall  not  by any  action,  including,  without  limitation,
amending  its  certificate  of  incorporation  or  through  any  reorganization,
transfer  of  assets,  consolidation,  merger,  dissolution,  issue  or  sale of
securities or any other voluntary action,  avoid or seek to avoid the observance
or  performance  of any of the terms of this  Warrant,  but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or  appropriate to protect the rights of Holder
against  impairment.  Without  limiting the  generality  of the  foregoing,  the
Company  will (a) not  increase  the par value of any  shares  of  Common  Stock
receivable  upon the exercise of this Warrant above the amount payable  therefor
upon such exercise immediately prior to such increase in par value, (b) take all
such action as may be  necessary  or  appropriate  in order that the Company may
validly and legally  issue fully paid and  nonassessable  shares of Common Stock
upon the  exercise of this  Warrant,  and (c) use its best efforts to obtain all
such  authorizations,  exemptions  or consents from any public  regulatory  body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.

     Upon the request of Holder,  the Company will at any time during the period
this  Warrant  is  outstanding   acknowledge  in  writing,  in  form  reasonably
satisfactory  to  Holder,  the  continuing  validity  of  this  Warrant  and the
obligations of the Company hereunder.

7. RESERVATION AND AUTHORIZATION OF COMMON STOCK

     From and after the Closing Date, the Company shall at all times reserve and
keep  available  for issue upon the  exercise  of  Warrants  such  number of its
authorized  but unissued  shares of Common Stock as will be sufficient to permit
the  exercise in full of all  outstanding  Warrants.  All shares of Common Stock
which shall be so issuable, when issued upon exercise of any Warrant and payment
therefor in accordance with the terms of such Warrant, shall be duly and validly
issued and fully paid and nonassessable, and not subject to preemptive rights.

     Before  taking any action  which would  cause an  adjustment  reducing  the
Current  Warrant Price below the then par value, if any, of the shares of Common
Stock  issuable  upon  exercise  of the  Warrants,  the  Company  shall take any
corporate  action  which may be  necessary in order that the Company may validly
and legally issue fully paid and  non-assessable  shares of such Common Stock at
such adjusted Current Warrant Price.

     Before  taking any action which would result in an adjustment in the number
of shares  of Common  Stock for which  this  Warrant  is  exercisable  or in the
Current  Warrant  Price,

                                       15
<PAGE>

the Company  shall obtain all such  authorizations  or  exemptions  thereof,  or
consents thereto,  as may be necessary from any public regulatory body or bodies
having jurisdiction thereof.

8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS

     In the case of all dividends or other  distributions  by the Company to the
holders of its Common  Stock with  respect to which any  provision  of Section 4
refers to the taking of a record of such holders,  the Company will in each such
case take  such a record as of the close of  business  on a  Business  Day.  The
Company will not at any time close its stock transfer books or Warrant  transfer
books so as to result in  preventing or delaying the exercise or transfer of any
Warrant.

9. RESTRICTIONS ON TRANSFERABILITY

     The Warrants and the Warrant Stock shall not be  transferred,  hypothecated
or assigned before  satisfaction of the conditions  specified in this Section 9,
which  conditions are intended to ensure  compliance  with the provisions of the
Securities Act with respect to the Transfer of any Warrant or any Warrant Stock.
Holder,  by acceptance of this Warrant,  agrees to be bound by the provisions of
this Section 9.

     9.1.  Restrictive  Legend.  The Holder by  accepting  this  Warrant and any
Warrant  Stock  agrees that this  Warrant and the Warrant  Stock  issuable  upon
exercise  hereof may not be assigned or otherwise  transferred  unless and until
(i) the  Company  has  received  an opinion of counsel  for the Holder that such
securities  may be sold  pursuant to an exemption  from  registration  under the
Securities Act or (ii) a registration  statement relating to such securities has
been filed by the Company and declared effective by the Commission.

     (a) Each  certificate  for Warrant Stock  issuable  hereunder  shall bear a
legend  substantially  worded as follows unless such  securities  have been sold
pursuant to an effective registration statement under the Securities Act:

          "The  securities   represented  by  this  certificate  have  not  been
     registered  under the Securities Act of 1933, as amended (the "Act") or any
     state  securities  laws. The securities may not be offered for sale,  sold,
     assigned,  offered,  transferred or otherwise  distributed for value except
     (i) pursuant to an effective  registration  statement  under the Act or any
     state securities laws or (ii) pursuant to an exemption from registration or
     prospectus delivery requirements under the Act or any state securities laws
     in  respect  of which the  Company  has  received  an  opinion  of  counsel
     satisfactory  to the  Company  to  such  effect.  Copies  of the  agreement
     covering both the purchase of the securities and restricting their transfer
     may be obtained at no cost by written  request made by the holder of record
     of this  certificate  to the  Secretary  of the  Company  at the  principal
     executive offices of the Company."

     (b) Except as otherwise  provided in this  Section 9, the Warrant  shall be
stamped or otherwise  imprinted  with a legend in  substantially  the  following
form:

                                       16
<PAGE>

          "This  Warrant  and the  securities  represented  hereby have not been
     registered  under the  Securities  Act of 1933,  as  amended,  or any state
     securities  laws and may not be  transferred  in violation of such Act, the
     rules  and  regulations  thereunder  or any  state  securities  laws or the
     provisions of this Warrant."

     9.2.  Notice of Proposed  Transfers.  Prior to any  Transfer  or  attempted
Transfer of any Warrants or any shares of Restricted  Common  Stock,  the Holder
shall give five (5) days'  prior  written  notice (a  "Transfer  Notice") to the
Company of Holder's intention to effect such Transfer, describing the manner and
circumstances  of the  proposed  Transfer,  and obtain from counsel to Holder an
opinion that the proposed  Transfer of such Warrants or such  Restricted  Common
Stock may be effected  without  registration  under the  Securities Act or state
securities laws. After the Company's receipt of the Transfer Notice and opinion,
such Holder  shall  thereupon  be entitled  to  Transfer  such  Warrants or such
Restricted  Common Stock, in accordance  with the terms of the Transfer  Notice.
Each  certificate,  if any,  evidencing  such shares of Restricted  Common Stock
issued upon such Transfer and the Warrant  issued upon such Transfer  shall bear
the restrictive  legends set forth in Section 9.1, unless in the opinion of such
counsel  such  legend is not  required  in order to ensure  compliance  with the
Securities Act.

     9.3. Required Registration.  Pursuant to the terms and conditions set forth
in the Registration  Rights  Agreement,  the Company shall prepare and file with
the Commission not later than the thirtieth (30th) day after the Closing Date, a
Registration  Statement  relating  to the  offer  and sale of the  Common  Stock
issuable  upon  exercise of the Warrants and shall use its best efforts to cause
the Commission to declare such  Registration  Statement  effective in accordance
with the terms set forth in Section 2(a) of the Registration Rights Agreement.

     9.4. Termination of Restrictions.  Notwithstanding the foregoing provisions
of Section 9, the restrictions  imposed by this Section upon the transferability
of the Warrants,  the Warrant Stock and the  Restricted  Common Stock (or Common
Stock issuable upon the exercise of the Warrants) and the legend requirements of
Section 9.1 shall  terminate  as to any  particular  Warrant or share of Warrant
Stock or Restricted  Common Stock (or Common Stock issuable upon the exercise of
the Warrants) (i) when and so long as such security shall have been  effectively
registered  under the Securities Act and applicable  state  securities  laws and
disposed of pursuant  thereto or (ii) when the  Company  shall have  received an
opinion of counsel  that such  shares may be  transferred  without  registration
thereof under the Securities Act and applicable state securities laws.  Whenever
the  restrictions  imposed by Section 9 shall  terminate as to this Warrant,  as
hereinabove  provided,  the Holder  hereof shall be entitled to receive from the
Company upon written request of the Holder, at the expense of the Company, a new
Warrant  bearing the  following  legend in place of the  restrictive  legend set
forth hereon:

          "THE RESTRICTIONS ON  TRANSFERABILITY  OF THE WITHIN WARRANT CONTAINED
     IN SECTION 9 HEREOF  TERMINATED  ON ________,  20__,  AND ARE OF NO FURTHER
     FORCE AND EFFECT."

All Warrants issued upon  registration of transfer,  division or combination of,
or in  substitution  for,  any Warrant or Warrants  entitled to bear such legend
shall have a similar legend endorsed

                                       17
<PAGE>

thereon. Whenever the restrictions imposed by this Section shall terminate as to
any share of  Restricted  Common  Stock,  as  hereinabove  provided,  the holder
thereof shall be entitled to receive from the Company, at the Company's expense,
a new  certificate  representing  such Common Stock not bearing the  restrictive
legends set forth in Section 9.1.

     9.5. Listing on Securities  Exchange.  If the Company shall list any shares
of Common  Stock on any  securities  exchange,  it will,  at its  expense,  list
thereon,  maintain and, when necessary,  increase such listing of, all shares of
Common  Stock  issued  or,  to  the  extent  permissible  under  the  applicable
securities exchange rules, issuable upon the exercise of this Warrant so long as
any shares of Common Stock shall be so listed during the Exercise Period.

10. SUPPLYING INFORMATION

     The Company shall  cooperate with Holder in supplying  such  information as
may be  reasonably  necessary  for Holder to complete  and file any  information
reporting forms presently or hereafter required by the Commission as a condition
to the  availability of an exemption from the Securities Act for the sale of any
Warrant or Restricted Common Stock.

11. LOSS OR MUTILATION

     Upon receipt by the Company from Holder of evidence reasonably satisfactory
to it of the ownership of and the loss, theft, destruction or mutilation of this
Warrant and indemnity  reasonably  satisfactory to it (it being  understood that
the written agreement of the Holder shall be sufficient indemnity),  and in case
of mutilation upon surrender and cancellation  hereof,  the Company will execute
and deliver in lieu hereof a new Warrant of like tenor to Holder;  provided,  in
the case of  mutilation,  no  indemnity  shall be  required  if this  Warrant in
identifiable form is surrendered to the Company for cancellation.

12. OFFICE OF THE COMPANY

     As  long as any of the  Warrants  remain  outstanding,  the  Company  shall
maintain an office or agency  (which may be the principal  executive  offices of
the Company) where the Warrants may be presented for exercise,  registration  of
transfer, division or combination as provided in this Warrant, such office to be
initially  located at 7314 Scout  Avenue,  Bell Gardens,  California  90201 fax:
(562) 928-9933,  provided, however, that the Company shall provide prior written
notice to Holder of a change in address no less than  thirty  (30) days prior to
such change.

13. LIMITATION OF LIABILITY

     No  provision  hereof,  in the absence of  affirmative  action by Holder to
purchase  shares of Common  Stock,  and no  enumeration  herein of the rights or
privileges of Holder hereof,  shall give rise to any liability of Holder for the
purchase price of any Common Stock or as a stockholder  of the Company,  whether
such liability is asserted by the Company or by creditors of the Company.

                                       18
<PAGE>

14. MISCELLANEOUS

     14.1. Nonwaiver and Expenses.  No course of dealing or any delay or failure
to exercise any right  hereunder on the part of Holder shall operate as a waiver
of such  right or  otherwise  prejudice  Holder's  rights,  powers or  remedies,
notwithstanding  all rights  hereunder  terminate on the Expiration Date. If the
Company fails to make, when due, any payments  provided for hereunder,  or fails
to comply with any other  provision of this  Warrant,  the Company  shall pay to
Holder  such  amounts as shall be  sufficient  to cover any direct and  indirect
losses,  damages,  costs and expenses including,  but not limited to, reasonable
attorneys' fees, including those of appellate proceedings, incurred by Holder in
collecting any amounts due pursuant hereto or in otherwise  enforcing any of its
rights, powers or remedies hereunder.

     14.2. Notice  Generally.  Except as may be otherwise  provided herein,  any
notice or other  communication or delivery required or permitted hereunder shall
be in writing  and shall be  delivered  personally  or sent by  certified  mail,
postage prepaid, or by a nationally  recognized  overnight courier service,  and
shall be deemed  given when so  delivered  personally  or by  overnight  courier
service,  or, if mailed,  three (3) days after the date of deposit in the United
States mails, as follows:

(a)  if to the Company, to:

                                        USA Biosmass Corporation
                                        7314 Scout Avenue
                                        Bell Gardens, California 90201
                                        Attention:  Mr. Fred Behrens
                                        Phone: (562) 928-9900
                                        Fax: (562) 928-9932

     with a copy to:                    Stepp & Beauchamp LLP
                                        1301 Dove Street, Suite 480
                                        Newport Beach, California 92660-2422
                                        Attention:  Thomas E. Stetpp, Jr., Esq.
                                        Phone: (949) 660-9700
                                        Fax: (949) 660-9010

(b)  if to the Purchaser to:            Siete Investors LLC
                                        c\o WEC Asset Management LLC
                                        110 Colabough Pond Road
                                        Croton-on-the-Hudson, New York  10520
                                        Attention:  Ethan E. Benovitz
                                        Phone:  (914) 271-2211
                                        Fax: (914) 271-0889

     with a copy to:                    Cohen Tauber Spievack & Wagner LLP
                                        1350 Avenue of the Americas, 26th Floor
                                        New York, New York 10019
                                        Attention:  Laurence S. Tauber
                                        Phone:  (212) 519-5195
                                        Fax:  (212) 262-1766

                                       19
<PAGE>

     The Company or the Holder may change the foregoing  address by notice given
pursuant to this Section 14.2.

     14.3.  Indemnification.  The Company  agrees to indemnify and hold harmless
Holder  from  and  against  any  liabilities,   obligations,   losses,  damages,
penalties,  actions,  judgments, suits, claims, costs, attorneys' fees, expenses
and disbursements of any kind which may be imposed upon, incurred by or asserted
against  Holder in any manner  relating  to or arising out of any failure by the
Company to perform or observe in any respect any of its  covenants,  agreements,
undertakings or obligations set forth in this Warrant.

     14.4. Remedies. Holder in addition to being entitled to exercise all rights
granted by law,  including  recovery  of  damages,  will be entitled to specific
performance  of its rights under this Warrant.  The Company agrees that monetary
damages would not be adequate  compensation for any loss incurred by reason of a
breach by it of the  provisions  of this Warrant and hereby  agrees to waive the
defense  in any action for  specific  performance  that a remedy at law would be
adequate.

     14.5. Successors and Assigns. Subject to the provisions of Sections 3.1 and
9, this  Warrant and the rights  evidenced  hereby shall inure to the benefit of
and be binding upon the successors of the Company and the successors and assigns
of Holder.  The provisions of this Warrant are intended to be for the benefit of
all Holders  from time to time of this  Warrant  and,  with respect to Section 9
hereof, holders of Warrant Stock, and shall be enforceable by any such Holder or
holder of Warrant Stock.

     14.6.  Amendment.  This  Warrant and all other  Warrants may be modified or
amended or the provisions  hereof waived only with the prior written  consent of
the Company and the Holder.

     14.7. Severability. Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any  provision of this Warrant  shall be  prohibited  by or invalid under
applicable  law,  such  provision  shall be  ineffective  to the  extent of such
prohibition or invalidity,  without invalidating the remainder of such provision
or the remaining provisions of this Warrant.

     14.8.  Headings.  The headings used in this Warrant are for the convenience
of  reference  only and shall  not,  for any  purpose,  be deemed a part of this
Warrant.

     14.9.  Governing  Law.  This  Warrant  shall be governed by the laws of the
State of New York, without regard to the provisions thereof relating to conflict
of laws. The Company  consents to the  jurisdiction  of the federal courts whose
districts  encompass any part of the City of New York or the state courts of the
State of New York sitting in the City of New York in connection with any dispute
arising under this Warrant or any of the transactions  contemplated  hereby, and
hereby waives, to the maximum extent permitted by law, any objection,  including
any  objections  based on forum  non  conveniens,  to the  bringing  of any such
proceeding in such jurisdictions.

                                       20
<PAGE>

     IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and its corporate  seal to be impressed  hereon and attested by its Secretary or
an Assistant Secretary.

Dated:  March 14, 2000

                                                USA BIOMASS CORPORATION

                                                By:
                                                    ----------------------------
                                                    Name:
                                                    Title:  Chairman
Attest:

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

                                       21
<PAGE>

                                    EXHIBIT A

                                SUBSCRIPTION FORM

[To be executed only upon exercise of Warrant]

The  undersigned  registered  owner of this Warrant  irrevocably  exercises this
Warrant  for the  purchase  of  ______  Shares of  Common  Stock of USA  Biomass
Corporation,  and herewith  makes  payment  therefor in cash or by check or bank
draft  made  payable  to the  Company,  all at the  price  and on the  terms and
conditions  specified  in this Warrant and requests  that  certificates  for the
shares of Common Stock hereby  purchased  (and any  securities or other property
issuable  upon  such  exercise)  be  issued  in the  name  of and  delivered  to
_____________ whose address is  _________________  and, if such shares of Common
Stock shall not include all of the shares of Common  Stock  issuable as provided
in this  Warrant,  that a new  Warrant of like tenor and date for the balance of
the shares of Common Stock issuable hereunder be delivered to the undersigned.

                                              -------------------------------
                                              (Name of Registered Owner)

                                              -------------------------------
                                              (Signature of Registered Owner)

                                              -------------------------------
                                              (Street Address)

                                              -------------------------------
                                              (City)   (State)     Zip Code)

     NOTICE: The signature on this subscription must correspond with the name as
written  upon the  face of the  within  Warrant  in  every  particular,  without
alteration or enlargement or any change whatsoever.

                                       22
<PAGE>

                                    EXHIBIT B

                                 ASSIGNMENT FORM

     FOR VALUE RECEIVED the undersigned  registered owner of this Warrant hereby
sells,  assigns and transfers unto the Assignee named below all of the rights of
the  undersigned  under this  Warrant,  with  respect to the number of shares of
Common Stock set forth below:

     Name and Address of Assignee                         No. of Shares of
     ----------------------------                         ----------------

     Common Stock

and does hereby  irrevocably  constitute  and appoint  _______  ________________
attorney-in-fact  to  register  such  transfer  on  the  books  of  USA  Biomass
Corporation  maintained for the purpose,  with full power of substitution in the
premises.

     Dated:__________________                    Print Name:___________________

                                                 Signature:_____________________

                                                 Witness:______________________

     NOTICE:  The signature on this  assignment must correspond with the name as
written  upon the  face of the  within  Warrant  in  every  particular,  without
alteration or enlargement or any change whatsoever.

                                       23
<PAGE>

                                    EXHIBIT C

                          REGISTRATION RIGHTS AGREEMENT

     THIS  REGISTRATION  RIGHTS  AGREEMENT,  dated as of March  14,  2000  (this
"Agreement"),  is  made by and  between  USA  Biomass  Corporation,  a  Delaware
corporation  (the  "Company")  and  Siete  Investors  LLC,  a  Delaware  limited
liability company (the "Purchaser").

                              W I T N E S S E T H:

     WHEREAS, pursuant to a Securities Purchase Agreement,  dated as of the date
hereof  among  the   Purchaser  and  the  Company  (the   "Securities   Purchase
Agreement"),  the  Company  has agreed to issue and sell to the  Purchaser,  (i)
three thousand (3,000) shares of the Company's 6% Convertible Series C Preferred
Stock,  stated value $1,000 per share (the "Preferred  Stock") and (ii) warrants
(the "Warrants") to purchase one hundred thousand (100,000) shares of the common
stock par value $.001 per share of the Company (the "Common Stock");

     WHEREAS, pursuant to the terms of the Preferred Stock and the Warrants, (i)
upon the conversion of the Preferred Stock, (ii) in lieu of dividend payments on
the Preferred  Stock and (iii) upon  exercise of the Warrants,  the Company will
issue to the  Purchaser  shares of Common  Stock  (such  shares are  referred to
herein as the "Shares"); and

     WHEREAS,  to induce the  Purchaser  to execute and  deliver the  Securities
Purchase  Agreement,  the  Company  has agreed to provide  certain  registration
rights under the Securities Act of 1933, as amended (the "Securities  Act"), and
applicable state securities laws.

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

     1.   Definitions.

     (a) As used in this Agreement, the following terms shall have the following
meanings:

          (i)  "Effectiveness  Deadline"  shall  have the  meaning  set forth in
     section 2(a)(i) hereof.

          (ii)  "Filing  Deadline"  shall have the  meaning set forth in Section
     2(a)(i) hereof.

          (iii) "Purchase Price" means the aggregate  purchase price paid by the
     Purchaser for the Preferred Stock and the Warrants.

          (iv)  "Register,"   "Registered,"  and   "Registration"   refer  to  a
     registration  effected by preparing and filing a Registration  Statement or
     Statements in compliance  with the  Securities Act and pursuant to Rule 415
     under the  Securities  Act or any  successor  rule  providing  for offering
     securities  on a continuous  basis ("Rule  415"),  and the  declaration  or
     ordering of

                                       24
<PAGE>

     effectiveness  of  such   Registration   Statement  by  the  United  States
     Securities and Exchange Commission (the "Commission").

          (v) "Registrable Securities" means the Shares.

          (vi)  "Registration  Statement"  means  a  registration  statement  or
     registration  statements  of the  Company  filed under the  Securities  Act
     covering Registrable Securities relating to the Shares.

     Capitalized  terms used herein and not otherwise  defined herein shall have
the meanings set-forth in the Securities Purchase Agreement.

     2.   Registration.

          (a)  Mandatory Registrations.

          (i) Registration Statement. The Company shall prepare, and, as soon as
     practicable  but in no event  later than thirty (30) days after the Closing
     Date  (as  defined  in the  Securities  Purchase  Agreement)  (the  "Filing
     Deadline"),   file  with  the  Commission  a   Registration   Statement  or
     Registration  Statements (as necessary) on Form S-3, covering the resale of
     all  of  the  Registrable  Securities.  In  the  event  that  Form  S-3  is
     unavailable for such a registration, the Company shall use Form S-1 or such
     other  form as is  available  for  such a  registration.  Any  Registration
     Statement  prepared pursuant hereto shall register for resale at least that
     number of shares of Common  Stock equal to the product of (x) two and,  (y)
     the  sum of (i) the  maximum  number  of  Shares  that  are  issuable  upon
     conversion  of the  Preferred  Stock  on the date of  filing,  and (ii) the
     maximum  number of Shares  issuable upon exercise of the Warrants,  in each
     case,  without regard to any limitation on any holder's  ability to convert
     any of the Warrants or the  Preferred  Stock and without  regard to whether
     any or all of  such  Preferred  Stock  or  Warrants  have  been  issued  to
     Purchaser (on the date calculated,  the "Minimum Conversion Amount").  Such
     Registration  Statement shall state that, in accordance with Rule 416 under
     the Securities Act, it also covers such indeterminate  number of additional
     Shares as may become  issuable upon  conversion of such Preferred  Stock or
     exercise  of  such  Warrants  (i)  resulting  from  any  adjustment  in the
     applicable  Conversion  Price of such Preferred Stock or the Exercise Price
     of such Warrants or (ii) to prevent dilution resulting from stock splits or
     stock dividends.  If at any time the Minimum  Conversion Amount exceeds the
     total number of Shares so registered,  the Company  shall,  within five (5)
     business days after receipt of a written notice from the Purchaser,  either
     (i) amend the  Registration  Statement or Registration  Statements filed by
     the  Company  pursuant  to the  preceding  sentence,  if such  Registration
     Statement has not been declared  effective by the  Commission at that time,
     to  register  all of the  Shares  into  which the  Preferred  Stock and the
     Warrants may be  converted or  exercised,  as  applicable,  or (ii) if such
     Registration  Statement  has been declared  effective by the  Commission at
     that time, file with the Commission an additional Registration Statement on
     Form S-3, or such other  appropriate form, to register the number of shares
     of  Common  Stock  into  which the  Preferred  Stock  and  Warrants  may be
     converted or  exercised,  as  applicable,  that exceed the number of Shares
     already  registered.  The  Company  shall use its best  efforts to have the
     Registration  Statement  declared effective within the earliest to occur of
     (i) ninety  (90) days  following  the Closing  Date (ii) if the  Commission
     elects  not to  conduct a review of the  Registration  Statement,  the date
     which is three (3)  business  days  after the date upon  which  either  the
     Company or its counsel is so  notified,  whether  orally or in writing;  or
     (iii) if the Registration Statement is reviewed by the Commission, the date
     which is three (3)  business  days after the date upon which the Company or
     its counsel is notified by the

                                        2
<PAGE>

     Commission,  whether  orally  or in  writing,  that the  Commission  has no
     further  comments  with respect to the  Registration  Statement or that the
     Registration  Statement  may be declared  effective.  The  earliest of such
     dates  is   referred   to  herein  as  the   "Required   Effective   Date."
     Notwithstanding  the use of the terms "Required  Filing Date" and "Required
     Effective Date" herein, the Company shall at all times use its best efforts
     to file each required Registration Statement or amendment to a Registration
     Statement as soon as possible  after the Closing Date or after the date the
     Company becomes obligated to file such Registration Statement or amendment,
     as the case may be,  and to  cause  each  such  Registration  Statement  or
     amendment to become effective as soon as possible thereafter. No securities
     of the Company other than the Registrable  Securities  shall be included in
     any such Registration Statement.

          (ii) The  Company  shall keep each  Registration  Statement  effective
     pursuant  to Rule 415 at all times until such date as is the earlier of (i)
     the date on which all of the  Registrable  Securities  have been sold, (ii)
     the date on which the Registrable  Securities (in the opinion of counsel to
     the  Purchaser)  may be  immediately  sold without  restriction  (including
     without   limitation  as  to  volume  by  each  holder   thereof)   without
     registration  under the  Securities  Act and (iii) the date which is twenty
     four (24) months following the date on which the Registration Statement was
     declared effective (the "Registration Period").

     (b)  Payments by the Company.

          (i)  (A)  If  the  Registration  Statement  covering  the  Registrable
     Securities  is not filed in proper form with the  Commission on or prior to
     the  Filing  Deadline,  (B)  if the  Registration  Statement  covering  the
     Registrable  Securities is not  effective on or prior to the  Effectiveness
     Deadline,  (C) if the  number of Shares  listed  for  trading on the NASDAQ
     National  Market,  as  applicable,  or reserved by the Company for issuance
     shall be  insufficient,  for any period of five (5) consecutive days at any
     time after the Effectiveness  Deadline, for issuance upon the conversion of
     the Shares and the exercise of the Warrants,  or (D) upon the occurrence of
     a Blackout Event (as described in Section 3(f) or Section 3(g) below),  for
     any period of five (5) consecutive days at any time after the Effectiveness
     Deadline  (each of the events  described in clauses (A) through (D) of this
     paragraph are referred to herein as a "Registration  Default"), the Company
     will make  payments to the  Purchaser  in such amounts and at such times as
     shall be determined pursuant to this Section 2(b).

          (ii) The amount (the  "Periodic  Amount") to be paid by the Company to
     the Purchaser as of each thirty (30) day period during which a Registration
     Default shall be in effect (each such period, a "Default  Period") shall be
     equal to (x) with respect to any Registration  Default described in Section
     2(b)(i)  clause (A) or (B), one percent (1%) of the Purchase  Price paid by
     the  Purchaser for the first thirty (30) day period and two percent (2%) of
     such amount for each thirty (30) day period thereafter and (y) with respect
     to any Registration Default described in Section 2(b)(i) clause (C) or (D),
     one  percent  (1%)  of the  Purchase  Price  paid by the  Purchaser  of any
     securities  affected by such event as described in Section  2(b)(i)  clause
     (C) or (D) for the first  thirty  (30) day period and two  percent  (2%) of
     such amount for each thirty (30) day period thereafter; provided that, with
     respect  to any  Default  Period  during  which the  relevant  Registration
     Defaults shall have been cured,  the Periodic Amount shall be pro rated for
     the  number of days  during  such  period  during  which  the  Registration
     Defaults were  pending;  and  provided,  however,  that the payment of such
     Periodic  Amounts  shall  not  relieve  the  Company  from  its  continuing
     obligations to register the Shares pursuant to Section 2(a).

                                       3
<PAGE>

          (iii) Each Periodic  Amount shall be payable by the Company in cash or
     other immediately available funds to the Purchaser monthly,  without demand
     therefor by the Purchaser.

          (iv) The parties acknowledge that the damages which may be incurred by
     the  Purchaser  if the  Registration  Statement  is not filed by the Filing
     Deadline, if the Registration  Statement has not been declared effective by
     the  Effectiveness  Deadline,  or if the provisions of Section 3(e) or 3(f)
     become  applicable,  may be difficult to ascertain.  The parties agree that
     the Periodic  Amount  represents  a reasonable  estimate on the part of the
     parties, as of the date of this Agreement, of the amount of such damages.

     (c) Piggyback  Registration.  (i) If at any time or from time to time,  the
Company shall determine to register any of its  securities,  for its own account
or the account of any of its  shareholders,  other than a Registration  relating
solely to employee share option plans or pursuant to an acquisition  transaction
on Form S-4, the Company will:

          (A)  provide  to the  Purchaser  written  notice  thereof  as  soon as
     practicable prior to filing the Registration Statement; and

          (B) include in such  Registration  Statement  and in any  underwriting
     involved therein, all of the Registrable  Securities specified in a written
     request by the  Purchaser  made within  fifteen (15) days after  receipt of
     such written notice from the Company.

          (ii) If the Registration is for a registered public offering involving
     an underwriting, the Company shall so advise the Purchaser as a part of the
     written notice given pursuant to this Section. In such event, the rights of
     the Purchaser  hereunder shall include  participation in such  underwriting
     and the inclusion of the Registrable  Securities in the underwriting to the
     extent  provided  herein.  To the extent  that the  Purchaser  proposes  to
     distribute its securities  through such  underwriting,  the Purchaser shall
     (together  with the Company and any other  security  holders of the Company
     distributing  their  securities  through such  underwriting)  enter into an
     underwriting   agreement  in  customary   form  with  the   underwriter  or
     underwriters selected for such underwriting by the Company. Notwithstanding
     any other  provision of this Section,  if the managing  underwriter of such
     underwriting  determines that marketing factors require a limitation of the
     number of shares to be offered in connection  with such  underwriting,  the
     managing  underwriter may limit the number of Registrable  Securities to be
     included in the Registration and underwriting  (provided,  however, (a) the
     Registrable  Securities  shall  not  be  excluded  from  such  underwritten
     offering  prior to any  securities  held by officers  and  directors of the
     Company  or  their  affiliates,  (b) the  Registrable  Securities  shall be
     entitled to at least the same priority in an  underwritten  offering as any
     of the Company's  existing security holders,  and (c) the Company shall not
     enter into any  agreement  that would  provide  any  security  holder  with
     priority in  connection  with an  underwritten  offering  greater  than the
     priority granted to the Purchaser  hereunder).  The Company shall so advise
     any of its other security  holders who are  distributing  their  securities
     through  such   underwriting   pursuant  to  their   respective   piggyback
     registration rights, and the number of shares of Registrable Securities and
     other  securities that may be included in the registration and underwriting
     shall be allocated  among the Purchaser and all other  security  holders of
     the Company in  proportion,  as nearly as  practicable,  to the  respective
     amounts of  Registrable  Securities  held by the  Purchaser  and such other
     security holders at the time of the filing of the  registration  statement.
     If the Purchaser disapproves of the terms of any such underwriting,  it may
     elect  to  withdraw  therefrom  by  written

                                       4
<PAGE>

     notice to the Company. Any Registrable  Securities so excluded or withdrawn
     from such underwriting shall be withdrawn from such Registration.

     (d) Eligibility  for Form S-1. The Company  represents and warrants that it
meets all of the requirements for the use of Form S-1 for the  Registration,  of
the sale by the Purchaser of the  Registrable  Securities and any transferee who
purchases  the  Registrable  Securities,  and the Company shall file all reports
required to be filed by the Company with the Commission in a timely manner,  and
shall take such other actions as may be necessary to maintain  such  eligibility
for the use of Form S-1.

     (e) Priority in filing. From the date hereof until one hundred eighty (180)
days  following the effective  date of the  Registration  Statement  pursuant to
Section 2(a) of this Agreement,  provided, however, that such one hundred eighty
day period shall be extended by the number of days after the  effective  date of
such  Registration  Statement when the Purchaser is not permitted to utilize the
prospectus or otherwise to resell Registrable Securities,  the Company shall not
permit the  registration of any of its securities under the Securities Act to be
filed or to become  effective,  other  than  those  covered  by this  Agreement,
without the prior written approval of the Purchaser.

     3.  Obligations of the Company.  In connection with the registration of the
Registrable Securities, the Company shall do each of the following:

     (a)  Prepare  and file  with the  Commission  the  Registration  Statements
required  by  Section  2  of  this  Agreement  and  such  amendments  (including
post-effective amendments) and supplements to the Registration Statement and the
prospectuses  used in connection with the Registration  Statement,  each in such
form as to which the Purchaser and its counsel shall not have  objected,  as may
be  necessary  to keep  the  Registration  effective  at all  times  during  the
Registration  Period,  and,  during the  Registration  Period,  comply  with the
provisions of the Securities  Act with respect to the  disposition of all of the
Registrable  Securities  and all of the  Warrants of the Company  covered by the
Registration Statement until such time as all of such Registrable Securities and
all of such  Warrants  have been  disposed of in  accordance  with the  intended
methods of  disposition  by the  seller or  sellers  thereof as set forth in the
Registration Statement;

     (b)  Furnish  to  the  Purchaser,  if  the  Registrable  Securities  of the
Purchaser  are included in the  Registration  Statement,  and its legal  counsel
identified  to the  Company,  promptly  after the same is prepared  and publicly
distributed,  filed with the Commission,  or received by the Company,  a copy of
the Registration Statement, each preliminary prospectus,  each final prospectus,
and all  amendments and  supplements  thereto and such other  documents,  as the
Purchaser may reasonably  request in order to facilitate the  disposition of its
Registrable Securities and Warrants;

     (c) Furnish to the Purchaser and its counsel  copies of any  correspondence
between  the  Company  and  the  Commission  with  respect  to any  registration
statement or amendment or supplement thereto filed pursuant to this Agreement;

     (d) Use all best  efforts  to (i)  register  and  qualify  the  Registrable
Securities covered by the Registration  Statement under such other securities or
blue sky laws of such  jurisdictions  as the Purchaser may  reasonably  request,
(ii)  prepare  and  file  in  those  jurisdictions  such  amendments  (including
post-effective   amendments)   and   supplements  to  such   registrations

                                       5
<PAGE>

and qualifications as may be necessary to maintain the effectiveness  thereof at
all times during the Registration  Period,  (iii) take such other actions as may
be necessary to maintain such  registrations and qualifications in effect at all
times during the Registration  Period and (iv) take all other actions  necessary
or  advisable  to  qualify  the   Registrable   Securities   for  sale  in  such
jurisdictions,  provided that in connection therewith,  the Company shall not be
required to qualify as a foreign corporation or to file a general consent to the
service of process in any jurisdiction;

     (e) List such  securities on the Nasdaq  National  Market and all the other
national  securities  exchanges on which any  securities of the Company are then
listed,  and file any filings required by the Nasdaq National Market and/or such
other exchanges.

     (f) As promptly as practicable  after becoming aware of such event,  notify
each  Purchaser  of the  occurrence  of any  event  of  which  the  Company  has
knowledge,  as a result of which the  prospectus  included  in the  Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material  fact  required to be stated  therein in order to make
the  statements  therein,  in light of the  circumstances  under which they were
made,  not  misleading,  and to use its  best  efforts  to  promptly  prepare  a
supplement  or amendment  to the  Registration  Statement  or other  appropriate
filing with the Commission to correct such untrue statement of omission,  and to
deliver a number of copies of such  supplement  or amendment to the Purchaser as
the Purchaser may reasonably request;

     (g) As promptly as practicable  after becoming aware of such event,  notify
the Purchaser who holds  Warrants or Registrable  Securities  being sold (or, in
the event of an underwritten  offering, the underwriters) of the issuance by the
Commission  or any stop order or other  suspension of the  effectiveness  of the
Registration  Statement  at the  earliest  possible  time,  and to use its  best
efforts to promptly obtain the withdrawal of such stop order or other suspension
of effectiveness;

     (h) As promptly as practicable  after becoming aware of such event,  notify
the Purchaser who holds  Registrable  Securities being sold (or, in the event of
an  underwritten  offering,  the managing  underwriters)  of the issuance by the
Commission  or any stop order or other  suspension of the  effectiveness  of the
Registration  Statement  at the  earliest  possible  time,  and to use its  best
efforts to promptly obtain the withdrawal of such stop order or other suspension
of  effectiveness  (the occurrence of any of the events  described in paragraphs
(f) and (g) of this Section 3 is referred to herein as a "Blackout Event");

     (i) During  the period  commencing  upon (i) the  Purchaser's  receipt of a
notification  pursuant to Section 3(f) above,  or (ii) the entry of a stop order
or other suspension of effectiveness of the Registration  Statement described in
Section  3(g)  above,  and  ending at such time as (y) the  Company  shall  have
completed the  applicable  filings (and if  applicable,  such filings shall have
been declared effective) and shall have delivered to the Purchaser the documents
required  pursuant  to  Section  3(f)  above,  or (z),  such stop order or other
suspension of the  effectiveness of the  Registration  Statement shall have been
removed,  the Company shall be liable to remit the payments  required to be paid
pursuant to Section 2(b) above;

     (j) If the  offering is  underwritten,  at the request of a  Purchaser,  to
furnish  on  the  date  that   Registrable   Securities  are  delivered  to  the
underwriters for sale pursuant to such  registration:  (i) an opinion dated such
date of counsel  representing the Company for the purposes of such registration,
addressed  to  the  underwriters  and  to  any  Purchaser  selling   Registrable

                                       6
<PAGE>

Securities in connection with such underwriting,  stating that such registration
statement has become effective under the Securities Act and that (A) to the best
knowledge of such counsel,  no stop order suspending the  effectiveness  thereof
has been issued and no proceedings  for that purpose have been instituted or are
pending  or  contemplated  under  the  Securities  Act and (B) the  registration
statement,  the related  prospectus  and each  amendment or  supplement  thereof
comply  as to  form  in all  material  respects  with  the  requirements  of the
Securities  Act  (except  that such  counsel  need not express any opinion as to
financial  statements  or other  financial  data  contained  therein) and (ii) a
letter  dated  such  date  from the  Company's  independent  public  accountants
addressed  to the  underwriters  and to the  Purchaser,  stating  that  they are
independent  public  accountants  within the meaning of the  Securities  Act and
that,  in the  opinion of such  accountants,  the  financial  statements  of the
Company  included  in  the  registration  statement  or the  prospectus,  or any
amendment or supplement thereof, comply as to form in all material respects with
the applicable  accounting  requirements  of the Securities Act, and such letter
shall additionally cover such other financial matters (including  information as
to the period  ending no more than five (5)  business  days prior to the date of
such  letter)  with  respect  to  such  registration  as such  underwriters  may
reasonably request; and

     (k) Cooperate with the Purchaser to facilitate the timely  preparation  and
delivery of certificates  for the Registrable  Securities to be offered pursuant
to  the  Registration   Statement  and  to  enable  such  certificates  for  the
Registrable  Securities to be in such denominations or amounts,  as the case may
be, as the Purchaser may reasonably request, and registered in such names as the
Purchaser may request;  and, within three (3) business days after a Registration
Statement  which  includes  Registrable  Securities is ordered  effective by the
Commission, the Company shall deliver, and shall cause legal counsel selected by
the Company to deliver,  to the transfer  agent for the  Registrable  Securities
(with copies to the  Purchaser) an appropriate  instruction  and opinion of such
counsel.

     4. Obligations of the Purchaser. In connection with the registration of the
Registrable Securities, the Purchaser shall have the following obligations:

     (a) Take all other reasonable  actions necessary to expedite and facilitate
the disposition by the Purchaser of the Registrable  Securities  pursuant to the
Registration Statement.

     (b)  Furnish  to  the  Company  such  information   regarding  itself,  the
Registrable Securities held by it, and the intended method of disposition of and
the Registrable Securities held by it, as shall be reasonably required to effect
the registration of such Registrable Securities, and the Purchaser shall execute
such  documents  in  connection  with  such  registration  as  the  Company  may
reasonably request. At least five (5) days prior to the first anticipated filing
date of the  Registration  Statement,  the Company shall notify the Purchaser of
the information the Company included in the Registration Statement.

     (c) The Purchaser, by its acceptance of the Registrable Securities,  agrees
to  cooperate  with the  Company  as  reasonably  requested  by the  Company  in
connection  with  the  preparation  and  filing  of any  Registration  Statement
hereunder.

     (d) The Purchaser  agrees that, upon receipt of any notice from the Company
of the  happening  of any event of the kind  described  in Section  3(f) or 3(g)
above, it will immediately discontinue disposition of its Registrable Securities
pursuant to the  Registration  Statement  covering such  Registrable  Securities
until such copies of the  supplemented  or amended  prospectus  contemplated  by
Section 3(f) or 3(g) shall be furnished to the Purchaser.

                                       7
<PAGE>

     5.  Expenses  of  Registration.   All  expenses,  other  than  underwriting
discounts and commissions and other fees and expenses of investment  bankers and
other than brokerage  commissions,  incurred in connection  with  registrations,
filings  or  qualifications  pursuant  to  Section  3,  but  including,  without
limitation,  all registration,  listing,  and qualification  fees,  printing and
accounting fees, and the fees and disbursements of counsel for the Company,  and
the fees of one  counsel to the  Purchaser  with  respect  to each  Registration
Statement filed pursuant hereto, shall be borne by the Company.

     6. Indemnification. In the event any Registrable Securities are included in
a Registration Statement under this Agreement:

     (a) The Company will indemnify and hold harmless the Purchaser, each of its
officers,  directors,  shareholders  and members,  and each person,  if any, who
controls the Purchaser  within the meaning of the Securities Act or the Exchange
Act (each,  an  "Indemnified  Person"),  against  any losses,  claims,  damages,
liabilities or expenses (joint or several) incurred (collectively,  "Claims") to
which any of them may become subject under the Securities  Act, the Exchange Act
or  otherwise,  insofar as such  Claims  (or  actions  or  proceedings,  whether
commenced or threatened, in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement of a material fact contained in
the  Registration  Statement  or any  post-effective  amendment  thereof  or the
omission or alleged  omission to state  therein a material  fact  required to be
stated therein or necessary in order to make the statements therein, in light of
the  circumstances  in which they were  made,  not  misleading,  (ii) any untrue
statement  or alleged  untrue  statement  of a material  fact  contained  in any
preliminary  prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented,  if
the  Company  files  any  amendment  thereof  or  supplement  thereto  with  the
Commission)  or the  omission to state  therein any material  fact  necessary in
order to make the statements made therein,  in light of the circumstances  under
which  they were  made,  not  misleading,  or (iii)  any  violation  or  alleged
violation by the Company of the  Securities  Act, the Exchange Act, any state or
foreign  securities law or any rule or regulation  under the Securities Act, the
Exchange  Act or any state or foreign  securities  law (the matters in foregoing
clauses (i) through (iii) being, collectively, "Violations"). The Company shall,
subject to the  provisions  of Section  6(b)  below,  reimburse  the  Purchaser,
promptly as such  expenses are  incurred and are due and payable,  for any legal
and other costs,  expenses and  disbursements  in giving testimony or furnishing
documents in response to a subpoena or otherwise,  including without limitation,
the costs,  expenses and disbursements,  as and when incurred, of investigating,
preparing  or defending  any such  action,  suit,  proceeding  or  investigation
(whether  or not in  connection  with  litigation  in which the  Purchaser  is a
party),  incurred by it in connection with the  investigation  or defense of any
such Claim.  Notwithstanding  anything to the  contrary  contained  herein,  the
indemnification  agreement contained in this Section 6(a) shall not (i) apply to
any Claim arising out of or based upon a  modification  which occurs in reliance
upon and in conformity with  information  furnished in writing to the Company by
or on behalf of any Indemnified  Person expressly for use in connection with the
preparation  of the  Registration  Statement  or any such  amendment  thereof or
supplement thereto;  (ii) with respect to any preliminary  prospectus,  inure to
the  benefit of any such person  from whom the person  asserting  any such Claim
purchased the  Registrable  Securities  that are the subject  thereof (or to the
benefit of any person  controlling  such  person)  if the  untrue  statement  or
omission of material fact contained in the preliminary  prospectus was corrected
in the  final  prospectus,  as then  amended  or  supplemented,  if  such  final
prospectus  was timely made  available  by the Company  pursuant to Section 3(b)
hereof; (iii) be available to the extent that such Claim is based upon a failure
of the  Purchaser to deliver or to

                                       8
<PAGE>

cause to be delivered  the  prospectus  made  available by the Company,  if such
prospectus  was timely made  available  by the Company  pursuant to Section 3(b)
hereof;  or (iv)  apply  to  amounts  paid in  settlement  of any  Claim if such
settlement is effected  without the prior written consent of the Company,  which
consent shall not be unreasonably withheld.  Such indemnity shall remain in full
force and effect  regardless  of any  investigation  made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable  Securities
by the Purchaser pursuant to Section 9. The Purchaser will indemnify the Company
and its officers and directors against any Claims arising out of or based upon a
Violation  which  occurs in reliance  upon and in  conformity  with  information
furnished in writing to the Company, by or on behalf of the Purchaser, expressly
for use in  connection  with  the  preparation  of the  Registration  Statement,
subject  to  such   limitations   and   conditions  as  are  applicable  to  the
Indemnification provided by the Company in this Section 6.

     (b) Promptly after receipt by an Indemnified Person under this Section 6 of
notice of the commencement of any action  (including any  governmental  action),
such  Indemnified  Person  shall,  if a Claim in  respect  thereof is to be made
against any indemnifying party under this Section 6, deliver to the indemnifying
party a written notice of the commencement  thereof,  and the indemnifying party
shall have the right to participate in, and to the extent that the  indemnifying
party so desires,  jointly with any other indemnifying party similarly notified,
to assume control of the defense thereof with counsel  mutually  satisfactory to
the indemnifying party and the Indemnified Person,  provided,  however,  that an
Indemnified  Person  shall  have the right to retain  its own  counsel  with the
reasonable fees and expenses to be paid by the  indemnifying  party,  if, in the
reasonable   opinion  of  counsel  retained  by  the  indemnifying   party,  the
representation  by such counsel of the Indemnified  Person and the  indemnifying
party would be  inappropriate  due to actual or  potential  differing  interests
between such Indemnified  Person and any other party represented by such counsel
in such  proceeding.  In such event, the Company shall pay for only one separate
legal counsel for the Purchaser, and such legal counsel shall be selected by the
Purchaser. The failure to deliver written notice to an indemnifying party within
a reasonable  time after the  commencement  of any such action shall not relieve
such  indemnifying  party of any liability to the Indemnified  Person under this
Section  6,  except to the  extent  that the  indemnifying  party is  materially
prejudiced in its ability to such action. The  indemnification  required by this
Section 6 shall be made by periodic  payments of the amount  thereof  during the
course  of the  investigation  or  defense,  as such  expense,  loss,  damage or
liability is incurred and is due and payable.

     (c) No indemnifying  party, in the defense of any such claim or litigation,
shall,  except with the consent of each Indemnified  Party,  consent to entry of
any  judgment  or enter  into  any  settlement  which  does  not  include  as an
unconditional  term  thereof  the giving by the  claimant or  plaintiff  to such
Indemnified  Person  of  an  unconditional  and  irrevocable  release  from  all
liability in respect of such claim or litigation.

     (d)  Notwithstanding  the  foregoing,  to the  extent  that any  provisions
relating  to  indemnification  or  contribution  contained  in the  underwriting
agreements entered into among the Company, the underwriters and the Purchaser in
connection  with the  underwritten  public  offering  are in  conflict  with the
foregoing  provisions,  the provisions in such underwriting  agreements shall be
controlling as to the Registrable  Securities  included in the public  offering;
provided, however, that if, as a result of this Section 6(d), the Purchaser, its
officers,  directors,  shareholders,  members  or  any  person  controlling  the
Purchaser  is or are held liable with  respect to any Claim for which they would
be entitled to indemnification  hereunder but for this Section

                                       9
<PAGE>

6(d) in an amount which exceeds the aggregate proceeds received by the Purchaser
from the sale of Registrable  Securities included in a registration  pursuant to
such  underwriting  agreement  (the  "Excess  Liability"),   the  Company  shall
reimburse the Purchaser for such Excess Liability.

     7. Contribution. To the extent any indemnification by an indemnifying party
is prohibited or limited under applicable law, the indemnifying  party agrees to
contribute to the amount paid or payable by such  indemnified  party as a result
of such loss,  claim,  damage,  liability  or expense in such  proportion  as is
appropriate to reflect the relative fault of the  indemnifying  party on the one
hand  and the  Indemnified  Person  on the  other  hand in  connection  with the
statements  or  omissions  which  resulted in such  Claim,  as well as any other
relevant equitable considerations.  The relative fault of the indemnifying party
and the  Indemnified  Person shall be  determined  by reference  to, among other
things, whether the untrue statement of a material fact or the omission to state
a material fact on which such Claim is based relates to information  supplied by
the indemnifying  party or by the Indemnified  Person, and the parties' relative
intent,  knowledge,  access to information and opportunity to correct or prevent
such statement or omission.  Notwithstanding  the forgoing,  (a) no contribution
shall be made under circumstances where the payor would not have been liable for
indemnification  under the fault standards set forth in Section 6, (b) no seller
of Registrable  Securities  guilty of fraudulent  misrepresentation  (within the
meaning  of  Section  11(f)  of  the  Securities   Act)  shall  be  entitled  to
contribution  from any seller of  Registrable  Securities  who was not guilty of
such  fraudulent  misrepresentation  and  (c)  contribution  by  any  seller  of
Registrable  Securities shall be limited in amount to the net proceeds  received
by such seller from the sale of such Registrable Securities. The Company and the
Purchaser agree that it would not be just and equitable if contribution pursuant
to this Section 7 were determined by pro-rata  allocation (even if the Purchaser
and any other party were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable  considerations
referred to in this Section.

     8.   Reports Under Exchange Act.

     With a view to making  available to the  Purchaser the benefits of Rule 144
promulgated  under the Securities Act or any other similar rule or regulation of
the Commission  that may at any time permit the Purchaser to sell  securities of
the Company to the public without  registration ("Rule 144"), the Company agrees
to:

          (i) make and keep  public  information  available,  as those terms are
     understood and defined in Rule 144;

          (ii) file with the Commission in a timely manner all reports and other
     documents required of the Company under the Securities Act and the Exchange
     Act; and

          (iii)  furnish  to  the  Purchaser  so  long  as  the  Purchaser  owns
     Registrable  Securities,  promptly upon request, (i) a written statement by
     the Company that it has complied  with the  reporting  requirements  of the
     Securities  Act and the Exchange Act, (ii) a copy of the most recent annual
     or periodic  report of the Company and such other  reports and documents so
     filed by the Company and (iii) such other  information as may be reasonably
     requested to permit the Purchaser to sell such securities  pursuant to Rule
     144 without registration.

     9. Assignment of the  Registration  Rights.  The rights to have the Company
register   Registrable   Securities   pursuant  to  this   Agreement   shall  be
automatically  assigned by Purchaser to any  transferee of all or any portion of
the Shares,  Warrants or the  underlying

                                       10
<PAGE>

Common  Stock held by  Purchaser  if: (a)  Purchaser  agrees in writing with the
transferee  or assignee to assign such rights,  and a copy of such  agreement is
furnished to the Company within a reasonable time after such assignment; (b) the
Company  is,  within a  reasonable  time  after  such  transfer  or  assignment,
furnished with written notice of (i) the name and address of such  transferee or
assignee and (ii) the Securities with respect to which such registration  rights
are  being  transferred  or  assigned;  (c) at or  before  the time the  Company
receives the written notice  contemplated  by clause (b) of this  sentence,  the
transferee or assignee  agrees in writing with the Company to be bound by all of
the provisions contained herein; and (d) the transfer of the relevant Securities
complies with the restrictions set forth in Section 4 of the Securities Purchase
Agreement.

     10. Amendment of Registration  Rights.  Any provision of this Agreement may
be amended and the observance  thereof may be waived  (either  generally or in a
particular  instance and either  retroactively or prospectively),  only with the
written  consent of the  Company  and the  Purchaser.  Any  amendment  or waiver
effected in accordance  with this Section 10 shall be binding upon Purchaser and
the Company.

     11. Miscellaneous.

     (a) A person or entity is deemed to be a holder of Warrants or  Registrable
Securities  whenever  such  person or entity  owns of record  such  Warrants  or
Registrable  Securities.  If  the  Company  receives  conflicting  instructions,
notices or elections  from two or more  persons or entities  with respect to the
same Warrants or Registrable Securities, the Company shall act upon the basis of
the instructions,  notice or election received from the registered owner of such
Warrants or Registrable Securities.

     (b) Any notice  required or permitted  hereunder  shall be given in writing
(unless  otherwise  specified  herein)  and  shall be  effective  upon  personal
delivery, via facsimile (upon receipt of confirmation of error-free transmission
and  mailing a copy of such  confirmation  postage  prepaid by  certified  mail,
return receipt  requested) or two business days following deposit of such notice
with an  internationally  recognized  courier service,  with postage prepaid and
addressed  to each of the other  parties  thereunto  entitled  at the  following
addresses,  or at such other addresses as a party may designate by ten (10) days
advance written notice to each of the other parties hereto.

COMPANY:           USA Biomass Corporation
                   7314 Scout Avenue
                   Bell Gardens, California 90201
                   Attention:  Mr. Fred Behrens
                   Phone:   (562) 928-9900
                   Fax:  (562) 928-9932

                                       11
<PAGE>

     With a copy to:

                   Stepp & Beauchamp LLP
                   1301 Dove Street, Suite 480
                   Newport Beach, California 92660-2422
                   Attention:  Thomas E. Stetpp, Jr., Esq.
                   Phone: (949) 660-9700
                   Fax: (949) 660-9010

     PURCHASER:

                   Siete Investors LLC
                   110 Colabough Pond Road
                   Croton-on-the-Hudson, New York 10520
                   Attention:  Mr. Ethan E. Benovitz
                   Phone: (914) 271-2211
                   Fax: (914) 271-0889

     With a copy to:

                   Cohen Tauber Spievack & Wagner LLP
                   1350 Avenue of the Americas
                   26th Floor
                   New York, New York  10019
                   Attention:  Laurence S. Tauber
                   Phone:  (212) 519-5195
                   Fax:  (212) 262-1766

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

     (d) This Agreement  shall be governed by and interpreted in accordance with
the laws of the  State of New  York,  except  for  provisions  with  respect  to
internal  corporate  matters  of the  Company  which  shall be  governed  by the
corporate  laws of the State of  Virginia.  Each of the parties  consents to the
jurisdiction  of the federal  courts whose  districts  encompass any part of the
City of New York or the state  courts of the  State of New York  sitting  in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection,  including
any  objection  based on  forum  non  conveniens,  to the  bringing  of any such
proceeding in such  jurisdictions.  This  Agreement may be signed in one or more
counterparts,  each of which shall be deemed an  original.  The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement.  If any provision of this Agreement shall
be  invalid  or   unenforceable   in  any   jurisdiction,   such   validity   or
unenforceability  shall  not  affect  the  validity  or  enforceability  of  the
remainder of this Agreement or the validity or  enforceability of this Agreement
in any other jurisdiction.  Subject to the provisions of Section 10 hereof, this
Agreement may be amended only by an instrument in writing signed by the party to
be charged with enforcement.  This Agreement supersedes all prior agreements and
understandings  among the  parties  hereto with  respect to the  subject  matter
hereof.

                                       12
<PAGE>

     (e) This  Agreement  constitutes  the entire  agreement  among the  parties
hereto with respect to the subject matter hereof. This Agreement  supersedes all
prior agreements and understandings among the parties hereto with respect to the
subject matter hereof.

     (f) Subject to the  requirements of Section 9 hereof,  this Agreement shall
inure for the benefit of and be binding upon the  successors and assigns of each
of the parties hereto.

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

     (h) The Company acknowledges that any failure by the Company to perform its
obligations under Section 2(a), or any delay in such performance could result in
direct damages to the Purchaser, and the Company agrees that, in addition to any
other liability the Company may have by reason of any such failure or delay, the
Company  shall be liable for all direct  damages  caused by any such  failure or
delay.  Nothing  herein  shall limit the  Purchaser's  right to pursue any claim
seeking such direct damages.

        [REMAINDER OF PAGE INTENTIONALLY BLANK, SIGNATURE PAGE FOLLOWS]

                                       13
<PAGE>

     IN  WITNESS  WHEREOF,   this  Agreement  has  been  duly  executed  by  the
undersigned.

                                           "COMPANY"

                                           USA BIOMASS CORPORATION

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

                                           "PURCHASER"

                                           SIETE INVESTORS LLC

                                           By: WEC ASSET MANAGEMENT LLC, Manager

                                           By:
                                              ---------------------------------
                                               Name:  Ethan E. Benovitz
                                               Title:  Managing Director

                                       14
<PAGE>

                                    EXHIBIT D

                          [FORM OF OPINION OF COUNSEL]

                                                 March 14, 2000

Siete Investors LLC
c\o WEC Asset Management LLC
110 Colabough Pond Road
Croton-on-the-Hudson, New York 10520
Attention:  Ethan E. Benovitz

               Re: USA Biomass Corporation
                   -----------------------

Dear Sirs:

     This  opinion  is  delivered  to  you  pursuant  to a  Securities  Purchase
Agreement (the "Purchase  Agreement") dated as of March 14, 2000,  between Siete
Investors LLC,  Delaware  limited  liability  company (the  "Purchaser") and USA
Biomass Corporation,  a Delaware corporation (the "Company"), in connection with
the sale by the Company and purchase by the  Purchaser of the  Company's  Shares
and  Warrants  (as such  terms  are  defined  in the  Purchase  Agreement).  All
capitalized  terms not otherwise  defined  herein shall have the meanings  given
them in the Purchase Agreement.

     I have examined and am familiar with the Certificate of  Incorporation  and
By-laws of the Company any and all amendments  thereto. I have also examined and
am  familiar  with the  Primary  Agreements  and any and all  other  instruments
executed  and  delivered by or on behalf of the Company in  connection  with the
Purchase Agreement and the transactions  contemplated thereunder. In addition to
the foregoing,  I have examined such minutes and other corporate  proceedings of
the  Company  and such  matters of law,  documents  and  certificates  of public
officials  as I have deemed  necessary  in  rendering  my  opinion.  In all such
examinations,  I have assumed the  genuineness of all the signatures on original
documents and the  conformity to original and certified  documents of all copies
submitted to us as conformed or photostatic copies.

     Based upon the foregoing, I am of the opinion that:

     1.  The  Company  and  each  of  its  subsidiaries  is a  corporation  duly
organized,  validly existing and in good standing under the laws of the State of
Delaware,  and  has all  requisite  corporate  power  and  authority  to own its
properties  and to carry on its  business  as now  being  conducted  and is duly
qualified and in good standing as a foreign corporation in, and is authorized to
do business  under the laws of, each  jurisdiction  where the  character  of the
properties  owned or leased by it or the  transaction of its business makes such
qualification or authorization  necessary and in which the failure to so qualify
would have a material adverse effect on the Company and its  subsidiaries  taken
as a whole.

<PAGE>

[________] Investors LLC
March __, 2000
Page 2

     2. The authorized and issued and  outstanding  capital stock of the Company
are as stated in  Section  3(b) of the  Purchase  Agreement.  All  shares of the
outstanding  capital stock of the Company have been validly issued and are fully
paid  and  non-assessable.  To my  knowledge,  Schedule  3 (b) of  the  Purchase
Agreement  accurately sets forth the information to be provided therein pursuant
to Section 3 (b) of the Purchase Agreement.

     3. The  issuance by the Company of the Shares and  Warrants  (collectively,
the  "Initial  Securities"),  and the  shares  of  Common  Stock  issuable  upon
conversion  of, or in lieu of dividend  payments  on, the Shares and  Additional
Shares and exercise of the Warrants (collectively,  the "Shares") have been duly
authorized  and  the  Initial  Securities  have  been  validly  issued  and  the
consideration  to be paid therefor  under the Purchase  Agreement has been fully
paid.  The Common  Stock  issuable  upon  conversion  of, or in lieu of dividend
payments on, the Preferred Stock, and upon exercise of the Warrants, when issued
in  accordance  with the Primary  Documents,  shall be duly and validly  issued,
fully  paid and  non-assessable,  and will not  subject  the  holder  thereof to
personal  liability  by reason of being such a holder.  There are no  preemptive
rights  of any  stockholder  of  the  Company  to  acquire  any  of the  Initial
Securities or the Shares (collectively, the "Collective Securities").

     4. The  Common  Stock is  registered  under  Section  12 of the  Securities
Exchange  Act of 1934,  as amended.  The  Company has duly and timely  filed all
materials  and  documents  required  to  be  filed  pursuant  to  all  reporting
obligations  under either  Section  13(a) or 15(d) of the Exchange  Act, if any,
through the date  hereof  (prior to the offer and sale of the  Securities).  The
Common  Stock is listed  and  traded on the Nasdaq  National  Market,  and to my
knowledge there is no pending or  contemplated  action or proceeding of any kind
to suspend the trading of the Common Stock.

     5. The Company has the  requisite  corporate  power and  authority to enter
into the Purchase Agreement and to issue and deliver the Collective Securities.

     6. The Primary Documents and the transactions  contemplated  thereby,  have
been duly and validly authorized by the Company and are legal, valid and binding
agreements  of the Company,  enforceable  in  accordance  with their  respective
terms,  except  to  the  extent  that  enforcement  thereof  may be  limited  by
bankruptcy,  insolvency,  reorganization,  moratorium,  fraudulent conveyance or
other  similar  laws now or hereafter in effect  relating to  creditors'  rights
generally and to general principles of equity.

     7. The execution and delivery of the Primary Documents and the consummation
by the Company of the other transactions contemplated thereby, does not and will
not  conflict  with or result in a breach by the  Company of any of the terms or
provisions of, or constitute a default under,  the Certificate of  Incorporation
or By-laws of the Company,  or, to my  knowledge,  (i) any  material  indenture,
mortgage, deed of trust or other agreement or instrument to which the Company or
any of its  subsidiaries is a party or by which they or any of their  properties
or assets are bound, or (ii) any existing applicable law, rule, or regulation or
any applicable  decree,  judgment or order of any court or United States Federal
or state regulatory body,  administrative agency, or any other governmental body
having  jurisdiction  over  the  Company,  its  subsidiaries,  or any  of  their
properties  or  assets.  Except as set forth on

<PAGE>

[________] Investors LLC
March __, 2000
Page 3

Schedule 3(h) to the Purchase Agreement,  neither the filing of the registration
statement  required  to be filed by the  Company  pursuant  to the  Registration
Rights  Agreement nor the offering or sale of the  Collective  Securities  gives
rise to any  rights for or  relating  to the  registration  of any shares of the
Common Stock.

     8. No authorization,  approval or consent of any court,  governmental body,
regulatory agency, self-regulatory organization, stock exchange or market or the
stockholders  of the  Company is  required to be obtained by the Company for the
entry into or the performance of the Primary Documents by the Company.

     9. To my  knowledge,  there is no  action,  suit,  proceeding,  inquiry  or
investigation before or by any court, public board or body pending or threatened
against  or  affecting  the  Company  or any of its  subsidiaries,  in  which an
unfavorable decision,  ruling or finding would have a material adverse effect on
the  properties,   business,  condition  (financial  or  other)  or  results  of
operations  of the  Company  and its  subsidiaries,  taken  as a  whole,  or the
transactions  contemplated  by the Primary  Documents,  or which would adversely
affect the  validity or  enforceability  of, or the  authority or ability of the
Company to perform its obligations under, the Primary Documents.

     10. To my knowledge,  neither the Company nor any of its subsidiaries is in
default  in the  performance  or  observance  of  any  obligation,  covenant  or
condition contained in any material indenture,  mortgage, deed of trust or other
instrument  or  agreement  to which it is a party or by which it or its property
may be bound.

     11.  Subject  to  the  accuracy  of  the  Purchaser's  representations  and
warranties set forth in Section 2 of the Purchase Agreement, the offer, sale and
issuance of the  Securities  and the other  securities  as  contemplated  by the
Purchase  Agreement  are  exempt  from  the  registration  requirements  of  the
Securities Act.

     This  opinion is  rendered  only with  regard to the matters set out in the
numbered  paragraphs  above.  No other  opinions are intended nor should they be
inferred.

     The  opinions  expressed  herein  are given to you  solely  for your use in
connection with the transaction  contemplated by the Purchase  Agreement and may
not be relied upon by, or  delivered  to, any other  person or entity or for any
other purpose without my prior written consent.

                                            Sincerely,

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