Document:

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                                  EXHIBIT 10.12

                          REGISTRATION RIGHTS AGREEMENT

          This Registration Rights Agreement (this "Agreement") is made and
entered into as of December 31, 2003, by and among North American Technologies
Group, Inc., a Delaware corporation (the "Company"), and the purchasers
signatory hereto (each such purchaser, a "Purchaser" and collectively, the
"Purchasers").

          This Agreement is made pursuant to the Securities Purchase Agreement,
dated as of the date hereof among the Company and the Purchasers (the "Purchase
Agreement").

          The Company and the Purchasers hereby agree as follows:

     1.   Definitions.  Capitalized terms used and not otherwise defined herein
that are defined in the Purchase Agreement shall have the meanings given such
terms in the Purchase Agreement. As used in this Agreement, the following terms
shall have the following meanings:

          "Advice" shall have the meaning set forth in Section 6(d).

          "Effectiveness Date" means, with respect to the Registration Statement
     required to be filed hereunder, the earlier of (a) the 150/th/ calendar day
     following the date of the Purchase Agreement, and (b) the fifth Trading Day
     following the date on which the Company is notified by the Commission that
     the Registration Statement will not be reviewed or is no longer subject to
     further review and comments.

          "Effectiveness Period" shall have the meaning set forth in Section
     2(a).

          "Event" shall have the meaning set fort in Section 2(b).

          "Event Date" shall have the meaning set forth in Section 2(b).

          "Filing Date" means, with respect to the Registration Statement
     required to be filed hereunder, the 90/th/ calendar day following the date
     of the Purchase Agreement.

          "Holder" or "Holders" means the holder or holders, as the case may be,
     from time to time of Registrable Securities.

          "Indemnified Party" shall have the meaning set forth in Section 5(c).

          "Indemnifying Party" shall have the meaning set forth in Section 5(c).

          "Losses" shall have the meaning set forth in Section 5(a).

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

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          "Prospectus" means the prospectus included in the Registration
     Statement (including, without limitation, a prospectus that includes any
     information previously omitted from a prospectus filed as part of an
     effective registration statement in reliance upon Rule 430A promulgated
     under the Securities Act), as amended or supplemented by any prospectus
     supplement, with respect to the terms of the offering of any portion of the
     Registrable Securities covered by the Registration Statement, and all other
     amendments and supplements to the Prospectus, including post-effective
     amendments, and all material incorporated by reference or deemed to be
     incorporated by reference in such Prospectus.

          "Registrable Securities" means all of the Shares and the Warrant
     Shares, together with any shares of Common Stock issued or issuable upon
     any stock split, dividend or other distribution, recapitalization or
     similar event with respect to the foregoing.

          "Registration Statement" means the registration statements required to
     be filed hereunder, including (in each case) the Prospectus, amendments and
     supplements to the registration statement or Prospectus, including pre- and
     post-effective amendments, all exhibits thereto, and all material
     incorporated by reference or deemed to be incorporated by reference in the
     registration statement.

          "Rule 415" means Rule 415 promulgated by the Commission pursuant to
     the Securities Act, as such Rule may be amended from time to time, or any
     similar rule or regulation hereafter adopted by the Commission having
     substantially the same effect as such Rule.

          "Rule 424" means Rule 424 promulgated by the Commission pursuant to
     the Securities Act, as such Rule may be amended from time to time, or any
     similar rule or regulation hereafter adopted by the Commission having
     substantially the same effect as such Rule.

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

          "Warrant Shares" shall have the meaning set forth in the Purchase
     Agreement.

     2.   Registration.

          (a) On or prior to the Filing Date, the Company shall prepare and
     file with the Commission the Registration Statement covering the resale of
     all of the Registrable Securities for an offering to be made on a
     continuous basis pursuant to Rule 415. The Registration Statement required
     hereunder shall be on Form S-3 (except if the Company is not then eligible
     to register for resale the Registrable Securities on Form S-3, in which
     case the Registration shall be on another appropriate form in accordance
     herewith). The Registration Statement required hereunder shall contain
     (except if otherwise directed by the Holders) substantially the "Plan of
     Distribution" attached hereto as Annex A. Subject to the terms of this
     Agreement, the Company shall use its best efforts to cause the Registration
     Statement to be declared effective under the Securities Act as promptly as
     possible after the filing thereof, but in any event not later than the
     Effectiveness Date, and shall use its best efforts to keep the Registration
     Statement continuously effective under the Securities Act until the date
     when all Registrable Securities covered by the

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     Registration Statement have been sold or may be sold without volume
     restrictions pursuant to Rule 144(k) as determined by the counsel to the
     Company pursuant to a written opinion letter to such effect, addressed and
     acceptable to the Company's transfer agent and the affected Holders (the
     "Effectiveness Period").

          (b) If: (i) a Registration Statement is not filed on or prior to the
     Filing Date (if the Company files a Registration Statement without
     affording the Holder the opportunity to review and comment on the same as
     required by Section 3(a), the Company shall not be deemed to have satisfied
     this clause (i)), or (ii) the Company fails to file with the Commission a
     request for acceleration in accordance with Rule 461 promulgated under the
     Securities Act, within five Trading Days of the date that the Company is
     notified (orally or in writing, whichever is earlier) by the Commission
     that a Registration Statement will not be "reviewed," or is not subject to
     further review, or (iii) prior to the date when such Registration Statement
     is first declared effective by the Commission, the Company fails to file a
     pre-effective amendment and otherwise respond in writing to comments made
     by the Commission in respect of such Registration Statement within 15
     Trading Days after the receipt of comments by or notice from the Commission
     that such amendment is required in order for a Registration Statement to be
     declared effective, or (iv) a Registration Statement filed or required to
     be filed hereunder is not declared effective by the Commission on or before
     the Effectiveness Date, or (v) after a Registration Statement is first
     declared effective by the Commission, it ceases for any reason to remain
     continuously effective as to all Registrable Securities for which it is
     required to be effective, or the Holders are not permitted to utilize the
     Prospectus therein to resell such Registrable Securities, for in any such
     case 10 consecutive days but no more than an aggregate of 15 days during
     any 12 month period (which need not be consecutive Trading Days)(any such
     failure or breach being referred to as an "Event," and for purposes of
     clause (i) or (iv) the date on which such Event occurs, or for purposes of
     clause (ii) the date on which such five Trading Day period is exceeded, or
     for purposes of clause (iii) the date which such 15 Trading Day period is
     exceeded, or for purposes of clause (v) the date on which such 10 or 15 day
     period, as applicable, is exceeded being referred to as "Event Date"), then
     in addition to any other rights the Holders may have hereunder or under
     applicable law: (x) on each such Event Date the Company shall pay to each
     Holder an amount in cash, as partial liquidated damages and not as a
     penalty, equal to 2.0% of the aggregate purchase price paid by such Holder
     pursuant to the Purchase Agreement for any Registrable Securities then held
     by such Holder; and (y) on each monthly anniversary of each such Event Date
     (if the applicable Event shall not have been cured by such date) until the
     applicable Event is cured, the Company shall pay to each Holder an amount
     in cash, as partial liquidated damages and not as a penalty, equal to 3.0%
     of the aggregate purchase price paid by such Holder pursuant to the
     Purchase Agreement for any Registrable Securities then held by such Holder.
     If the Company fails to pay any liquidated damages pursuant to this Section
     in full within seven days after the date payable, the Company will pay
     interest thereon at a rate of 15% per annum (or such lesser maximum amount
     that is permitted to be paid by applicable law) to the Holder, accruing
     daily from the date such liquidated damages are due until such amounts,
     plus all such interest thereon, are paid in full. The liquidated damages
     pursuant to the terms hereof shall apply on a daily pro-rata basis for any
     portion of a month prior to the cure of an Event.

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     3.   Registration Procedures

          In connection with the Company's registration obligations hereunder,
the Company shall:

          (a) Not less than five Trading Days prior to the filing of the
     Registration Statement or any related Prospectus or any amendment or
     supplement thereto, the Company shall, (i) furnish to the Holders copies of
     all such documents proposed to be filed (including documents incorporated
     or deemed incorporated by reference to the extent requested by such Person)
     which documents will be subject to the review of such Holders, and (ii)
     cause its officers and directors, counsel and independent certified public
     accountants to respond to such inquiries as shall be necessary, in the
     reasonable opinion of respective counsel to conduct a reasonable
     investigation within the meaning of the Securities Act. The Company shall
     not file the Registration Statement or any such Prospectus or any
     amendments or supplements thereto to which the Holders of a majority of the
     Registrable Securities shall reasonably object in good faith, provided that
     the Company is notified of such objection in writing no later than 5
     Trading Days after the Holders have been so furnished copies of such
     documents.

          (b) (i) Prepare and file with the Commission such amendments,
     including post-effective amendments, to the Registration Statement and the
     Prospectus used in connection therewith as may be necessary to keep the
     Registration Statement continuously effective as to the applicable
     Registrable Securities for the Effectiveness Period and prepare and file
     with the Commission such additional Registration Statements in order to
     register for resale under the Securities Act all of the Registrable
     Securities; (ii) cause the related Prospectus to be amended or supplemented
     by any required Prospectus supplement, and as so supplemented or amended to
     be filed pursuant to Rule 424; (iii) respond as promptly as reasonably
     possible to any comments received from the Commission with respect to the
     Registration Statement or any amendment thereto and, as promptly as
     reasonably possible, upon request, provide the Holders true and complete
     copies of all correspondence from and to the Commission relating to the
     Registration Statement; and (iv) comply in all material respects with the
     provisions of the Securities Act and the Exchange Act with respect to the
     disposition of all Registrable Securities covered by the Registration
     Statement during the applicable period in accordance with the intended
     methods of disposition by the Holders thereof set forth in the Registration
     Statement as so amended or in such Prospectus as so supplemented.

          (c) Notify the Holders of Registrable Securities to be sold as
     promptly as reasonably possible and (if requested by any such Person)
     confirm such notice in writing promptly following the day (i)(A) when a
     Prospectus or any Prospectus supplement or post-effective amendment to the
     Registration Statement is proposed to be filed; (B) when the Commission
     notifies the Company whether there will be a "review" of the Registration
     Statement and whenever the Commission comments in writing on the
     Registration Statement (the Company shall upon request provide true and
     complete copies thereof and all written responses thereto to each of the
     Holders); and (C) with

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     respect to the Registration Statement or any post-effective amendment, when
     the same has become effective; (ii) of any request by the Commission or any
     other Federal or state governmental authority during the period of
     effectiveness of the Registration Statement for amendments or supplements
     to the Registration Statement or Prospectus or for additional information;
     (iii) of the issuance by the Commission or any other federal or state
     governmental authority of any stop order suspending the effectiveness of
     the Registration Statement covering any or all of the Registrable
     Securities or the initiation of any Proceedings for that purpose; (iv) of
     the receipt by the Company of any notification with respect to the
     suspension of the qualification or exemption from qualification of any of
     the Registrable Securities for sale in any jurisdiction, or the initiation
     or threatening of any Proceeding for such purpose; and (v) of the
     occurrence of any event or passage of time that makes the financial
     statements included in the Registration Statement ineligible for inclusion
     therein or any statement made in the Registration Statement or Prospectus
     or any document incorporated or deemed to be incorporated therein by
     reference untrue in any material respect or that requires any revisions to
     the Registration Statement, Prospectus or other documents so that, in the
     case of the Registration Statement or the Prospectus, as the case may be,
     it will not contain any untrue statement of a material fact or omit to
     state any material fact required to be stated therein or necessary to make
     the statements therein, in light of the circumstances under which they were
     made, not misleading.

          (d) Use commercially reasonable efforts to avoid the issuance of, or,
     if issued, obtain the withdrawal of (i) any order suspending the
     effectiveness of the Registration Statement, or (ii) any suspension of the
     qualification (or exemption from qualification) of any of the Registrable
     Securities for sale in any jurisdiction, at the earliest practicable
     moment.

          (e) Furnish to each Holder, without charge, at least one conformed
     copy of the Registration Statement and each amendment thereto, including
     financial statements and schedules, all documents incorporated or deemed to
     be incorporated therein by reference to the extent requested by such
     Person, and all exhibits to the extent requested by such Person (including
     those previously furnished or incorporated by reference) promptly after the
     filing of such documents with the Commission.

          (f) Promptly deliver to each Holder, without charge, as many copies
     of the Prospectus or Prospectuses (including each form of prospectus) and
     each amendment or supplement thereto as such Persons may reasonably request
     in connection with resales by the Holder of Registrable Securities. Subject
     to the terms of this Agreement, the Company hereby consents to the use of
     such Prospectus and each amendment or supplement thereto by each of the
     selling Holders in connection with the offering and sale of the Registrable
     Securities covered by such Prospectus and any amendment or supplement
     thereto, except after the giving on any notice pursuant to Section 3(c).

          (g) Prior to any resale of Registrable Securities by a Holder, use
     its commercially reasonable efforts to register or qualify or cooperate
     with the selling Holders in connection with the registration or
     qualification (or exemption from the Registration or qualification) of such
     Registrable Securities for the resale by the Holder

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     under the securities or Blue Sky laws of such jurisdictions within the
     United States as any Holder reasonably requests in writing, to keep each
     such Registration or qualification (or exemption therefrom) effective
     during the Effectiveness Period and to do any and all other acts or things
     reasonably necessary to enable the disposition in such jurisdictions of the
     Registrable Securities covered by the Registration Statement; provided,
     that the Company shall not be required to qualify generally to do business
     in any jurisdiction where it is not then so qualified, subject the Company
     to any material tax in any such jurisdiction where it is not then so
     subject or file a general consent to service of process in any such
     jurisdiction.

          (h) If requested by the Holders, cooperate with the Holders to
     facilitate the timely preparation and delivery of certificates representing
     Registrable Securities to be delivered to a transferee pursuant to the
     Registration Statement, which certificates shall be free, to the extent
     permitted by the Purchase Agreement and applicable law, of all restrictive
     legends, and to enable such Registrable Securities to be in such
     denominations and registered in such names as any such Holders may request.

          (i) Upon the occurrence of any event contemplated by Section 3(c)(v),
     as promptly as reasonably possible, prepare a supplement or amendment,
     including a post-effective amendment, to the Registration Statement or a
     supplement to the related Prospectus or any document incorporated or deemed
     to be incorporated therein by reference, and file any other required
     document so that, as thereafter delivered, neither the Registration
     Statement nor such Prospectus will contain an untrue statement of a
     material fact or omit to state a material fact required to be stated
     therein or necessary to make the statements therein, in light of the
     circumstances under which they were made, not misleading. If the Company
     notifies the Holders in accordance with clauses (ii) through (v) of Section
     3(c) above to suspend the use of the use of any Prospectus until the
     requisite changes to such Prospectus have been made, then the Holders shall
     suspend use of such Prospectus. The Company will use its best efforts to
     ensure that the use of the Prospectus may be resumed as promptly as is
     practicable. The Company shall be entitled to exercise its right under this
     Section 3(i) to suspend the availability of a Registration Statement and
     Prospectus, subject to the payment of liquidated damages pursuant to
     Section 2(b), for a period not to exceed 60 days (which need not be
     consecutive days) in any 12 month period.

          (j) Comply with all applicable rules and regulations of the
     Commission.

          (k) The Company may require each Holder to furnish to the Company a
     certified statement as to the number of shares of Common Stock beneficially
     owned by such Holder and, if required by the Commission, the person thereof
     that has voting and dispositive control over the Shares. During any periods
     that the Company is unable to meet its obligations hereunder with respect
     to the registration of the Registrable Securities solely because any Holder
     fails to furnish such information within three Trading Days of the
     Company's request, any liquidated damages that are accruing at such time as
     to such Holder only shall be tolled and any Event that may otherwise occur
     solely because of such delay shall be suspended as to such Holder only,
     until such information is delivered to the Company.

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     4.   Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to
the Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the Trading Market on which the Common Stock is then
listed for trading, and (B) in compliance with applicable state securities or
Blue Sky laws), (ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities and of printing prospectuses
if the printing of prospectuses is reasonably requested by the holders of a
majority of the Registrable Securities included in the Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if the Company
so desires such insurance, and (vi) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder. In no event shall the Company be
responsible for any broker or similar commissions or, except to the extent
provided for in the Transaction Documents, any legal fees or other costs of the
Holders.

     5.   Indemnification

          (a) Indemnification by the Company. The Company shall,
     notwithstanding any termination of this Agreement, indemnify and hold
     harmless each Holder, the officers, directors, agents and employees of each
     of them, each Person who controls any such Holder (within the meaning of
     Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
     officers, directors, agents and employees of each such controlling Person,
     to the fullest extent permitted by applicable law, from and against any and
     all losses, claims, damages, liabilities, costs (including, without
     limitation, reasonable attorneys' fees) and expenses (collectively,
     "Losses"), as incurred, arising out of or relating to any untrue or alleged
     untrue statement of a material fact contained in the Registration
     Statement, any Prospectus or any form of prospectus or in any amendment or
     supplement thereto or in any preliminary prospectus, or arising out of or
     relating to any omission or alleged omission of a material fact required to
     be stated therein or necessary to make the statements therein (in the case
     of any Prospectus or form of prospectus or supplement thereto, in light of
     the circumstances under which they were made) not misleading, except to the
     extent, but only to the extent, that (1) such untrue statements or
     omissions or alleged untrue statements or omissions are based upon
     information regarding such Holder furnished in writing to the Company by
     such Holder for use therein, or to the extent that such information relates
     to such Holder or such Holder's proposed method of distribution of
     Registrable Securities and was reviewed and expressly approved in writing
     by such Holder for use in the Registration Statement, such Prospectus or
     such form of Prospectus or in any amendment or supplement thereto (it being
     understood that the Holder has approved Annex A hereto for this purpose) or
     (2) in the case of an occurrence of an event of the type specified in
     Section 3(c)(ii)-(v), the use

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     by such Holder of an outdated or defective Prospectus after the Company has
     notified such Holder in writing that the Prospectus is outdated or
     defective and prior to the receipt by such Holder of the Advice
     contemplated in Section 6(d). The Company shall notify the Holders promptly
     of the institution, threat or assertion of any Proceeding of which the
     Company is aware in connection with the transactions contemplated by this
     Agreement.

          (b) Indemnification by Holders. Each Holder shall, severally and not
     jointly, indemnify and hold harmless the Company, its directors, officers,
     agents and employees, each Person who controls the Company (within the
     meaning of Section 15 of the Securities Act and Section 20 of the Exchange
     Act), and the directors, officers, agents or employees of such controlling
     Persons, to the fullest extent permitted by applicable law, from and
     against all Losses, as incurred, to the extent arising out of or based
     solely upon: (x) such Holder's failure to comply with the prospectus
     delivery requirements of the Securities Act or (y) any untrue or alleged
     untrue statement of a material fact contained in any Registration
     Statement, any Prospectus, or any form of prospectus, or in any amendment
     or supplement thereto or in any preliminary prospectus, or arising out of
     or relating to any omission or alleged omission of a material fact required
     to be stated therein or necessary to make the statements therein not
     misleading (i) to the extent, but only to the extent, that such untrue
     statement or omission is contained in any information so furnished in
     writing by such Holder to the Company specifically for inclusion in the
     Registration Statement or such Prospectus or (ii) to the extent that (1)
     such untrue statements or omissions are based solely upon information
     regarding such Holder furnished in writing to the Company by such Holder
     expressly for use therein, or to the extent that such information relates
     to such Holder or such Holder's proposed method of distribution of
     Registrable Securities and was reviewed and expressly approved in writing
     by such Holder expressly for use in the Registration Statement (it being
     understood that the Holder has approved Annex A hereto for this purpose),
     such Prospectus or such form of Prospectus or in any amendment or
     supplement thereto or (2) in the case of an occurrence of an event of the
     type specified in Section 3(c)(ii)-(v), the use by such Holder of an
     outdated or defective Prospectus after the Company has notified such Holder
     in writing that the Prospectus is outdated or defective and prior to the
     receipt by such Holder of the Advice contemplated in Section 6(d). In no
     event shall the liability of any selling Holder hereunder be greater in
     amount than the dollar amount of the net proceeds received by such Holder
     upon the sale of the Registrable Securities giving rise to such
     indemnification obligation.

          (c) Conduct of Indemnification Proceedings. If any Proceeding shall
     be brought or asserted against any Person entitled to indemnity hereunder
     (an "Indemnified Party"), such Indemnified Party shall promptly notify the
     Person from whom indemnity is sought (the "Indemnifying Party") in writing,
     and the Indemnifying Party shall have the right to assume the defense
     thereof, including the employment of counsel reasonably satisfactory to the
     Indemnified Party and the payment of all fees and expenses incurred in
     connection with defense thereof; provided, that the failure of any
     Indemnified Party to give such notice shall not relieve the Indemnifying
     Party of its obligations or liabilities pursuant to this Agreement, except
     (and only) to the extent that it shall be finally determined by a court of
     competent jurisdiction (which determination is not subject to appeal or
     further review) that such failure shall have prejudiced the Indemnifying
     Party.

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          An Indemnified Party shall have the right to employ separate counsel
     in any such Proceeding and to participate in the defense thereof, but the
     fees and expenses of such counsel shall be at the expense of such
     Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed
     in writing to pay such fees and expenses; (2) the Indemnifying Party shall
     have failed promptly to assume the defense of such Proceeding and to employ
     counsel reasonably satisfactory to such Indemnified Party in any such
     Proceeding; or (3) the named parties to any such Proceeding (including any
     impleaded parties) include both such Indemnified Party and the Indemnifying
     Party, and such Indemnified Party shall reasonably believe that a material
     conflict of interest is likely to exist if the same counsel were to
     represent such Indemnified Party and the Indemnifying Party (in which case,
     if such Indemnified Party notifies the Indemnifying Party in writing that
     it elects to employ separate counsel at the expense of the Indemnifying
     Party, the Indemnifying Party shall not have the right to assume the
     defense thereof and the reasonable fees and expenses of one separate
     counsel shall be at the expense of the Indemnifying Party). The
     Indemnifying Party shall not be liable for any settlement of any such
     Proceeding effected without its written consent, which consent shall not be
     unreasonably withheld. No Indemnifying Party shall, without the prior
     written consent of the Indemnified Party, effect any settlement of any
     pending Proceeding in respect of which any Indemnified Party is a party,
     unless such settlement includes an unconditional release of such
     Indemnified Party from all liability on claims that are the subject matter
     of such Proceeding.

          Subject to the terms of this Agreement, all reasonable fees and
     expenses of the Indemnified Party (including reasonable fees and expenses
     to the extent incurred in connection with investigating or preparing to
     defend such Proceeding in a manner not inconsistent with this Section)
     shall be paid to the Indemnified Party, as incurred, within ten Trading
     Days of written notice thereof to the Indemnifying Party; provided, that
     the Indemnified Party shall promptly reimburse the Indemnifying Party for
     that portion of such fees and expenses applicable to such actions for which
     such Indemnified Party is not entitled to indemnification hereunder,
     determined based upon the relative faults of the parties.

          (d) Contribution. If a claim for indemnification under Section 5(a)
     or 5(b) is unavailable to an Indemnified Party (by reason of public policy
     or otherwise), then each Indemnifying Party, in lieu of indemnifying such
     Indemnified Party, shall contribute to the amount paid or payable by such
     Indemnified Party as a result of such Losses, in such proportion as is
     appropriate to reflect the relative fault of the Indemnifying Party and
     Indemnified Party in connection with the actions, statements or omissions
     that resulted in such Losses as well as any other relevant equitable
     considerations. The relative fault of such Indemnifying Party and
     Indemnified Party shall be determined by reference to, among other things,
     whether any action in question, including any untrue or alleged untrue
     statement of a material fact or omission or alleged omission of a material
     fact, has been taken or made by, or relates to information supplied by,
     such Indemnifying Party or Indemnified Party, and the parties' relative
     intent, knowledge, access to information and opportunity to correct or
     prevent such action, statement or omission. The amount paid or payable by a
     party as a result of any Losses shall be deemed to include, subject to the
     limitations set forth in this Agreement, any reasonable attorneys' or other
     reasonable fees

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     or expenses incurred by such party in connection with any Proceeding to the
     extent such party would have been indemnified for such fees or expenses if
     the indemnification provided for in this Section was available to such
     party in accordance with its terms.

          The parties hereto agree that it would not be just and equitable if
     contribution pursuant to this Section 5(d) were determined by pro rata
     allocation or by any other method of allocation that does not take into
     account the equitable considerations referred to in the immediately
     preceding paragraph. Notwithstanding the provisions of this Section 5(d),
     no Holder shall be required to contribute, in the aggregate, any amount in
     excess of the amount by which the proceeds actually received by such Holder
     from the sale of the Registrable Securities subject to the Proceeding
     exceeds the amount of any damages that such Holder has otherwise been
     required to pay by reason of such untrue or alleged untrue statement or
     omission or alleged omission, except in the case of fraud by such Holder.

          The indemnity and contribution agreements contained in this Section
     are in addition to any liability that the Indemnifying Parties may have to
     the Indemnified Parties.

     6.   Miscellaneous

          (a) Remedies. In the event of a breach by the Company or by a Holder,
     of any of their obligations under this Agreement, each Holder or the
     Company, as the case may be, in addition to being entitled to exercise all
     rights granted by law and under this Agreement, including recovery of
     damages, will be entitled to specific performance of its rights under this
     Agreement. The Company and each Holder agree that monetary damages would
     not provide adequate compensation for any losses incurred by reason of a
     breach by it of any of the provisions of this Agreement and hereby further
     agrees that, in the event of any action for specific performance in respect
     of such breach, it shall waive the defense that a remedy at law would be
     adequate.

          (b) No Piggyback on Registrations. Except as set forth on Schedule
     6(b) attached hereto, neither the Company nor any of its security holders
     (other than the Holders in such capacity pursuant hereto) may include
     securities of the Company in a Registration Statement other than the
     Registrable Securities. No Person has any right to cause the Company to
     effect the registration under the Securities Act of any securities of the
     Company. The Company shall not file any other registration statement until
     after the Effective Date.

          (c) Compliance. Each Holder covenants and agrees that it will comply
     with the prospectus delivery requirements of the Securities Act as
     applicable to it in connection with sales of Registrable Securities
     pursuant to the Registration Statement.

          (d) Discontinued Disposition. Each Holder agrees by its acquisition
     of such Registrable Securities that, upon receipt of a notice from the
     Company of the occurrence of any event of the kind described in Section
     3(c), such Holder will forthwith discontinue disposition of such
     Registrable Securities under the Registration Statement until such

                                      -10-

<PAGE>

     Holder's receipt of the copies of the supplemented Prospectus and/or
     amended Registration Statement or until it is advised in writing (the
     "Advice") by the Company that the use of the applicable Prospectus may be
     resumed, and, in either case, has received copies of any additional or
     supplemental filings that are incorporated or deemed to be incorporated by
     reference in such Prospectus or Registration Statement. The Company will
     use its best efforts to ensure that the use of the Prospectus may be
     resumed as promptly as it practicable. The Company agrees and acknowledges
     that any periods during which the Holder is required to discontinue the
     disposition of the Registrable Securities hereunder shall be subject to the
     provisions of Section 2(b).

          (e) Piggy-Back Registrations. If at any time during the Effectiveness
     Period there is not an effective Registration Statement covering all of the
     Registrable Securities and the Company shall determine to prepare and file
     with the Commission a registration statement relating to an offering for
     its own account or the account of others under the Securities Act of any of
     its equity securities, other than on Form S-4 or Form S-8 (each as
     promulgated under the Securities Act) or their then equivalents relating to
     equity securities to be issued solely in connection with any acquisition of
     any entity or business or equity securities issuable in connection with the
     stock option or other employee benefit plans, then the Company shall send
     to each Holder a written notice of such determination and, if within
     fifteen days after the date of such notice, any such Holder shall so
     request in writing, the Company shall include in such registration
     statement all or any part of such Registrable Securities such Holder
     requests to be registered, subject to customary underwriter cutbacks
     applicable to all holders of registration rights.

          (f) Amendments and Waivers. The provisions of this Agreement,
     including the provisions of this sentence, may not be amended, modified or
     supplemented, and waivers or consents to departures from the provisions
     hereof may not be given, unless the same shall be in writing and signed by
     the Company and each Holder of the then outstanding Registrable Securities.

          (g) Notices. Any and all notices or other communications or
     deliveries required or permitted to be provided hereunder shall be made in
     accordance with the provisions of the Purchase Agreement.

          (h) Successors and Assigns. This Agreement shall inure to the benefit
     of and be binding upon the successors and permitted assigns of each of the
     parties and shall inure to the benefit of each Holder. Each Holder may
     assign their respective rights hereunder in the manner and to the Persons
     as permitted under the Purchase Agreement.

          (i) Execution and Counterparts. This Agreement may be executed in any
     number of counterparts, each of which when so executed shall be deemed to
     be an original and, all of which taken together shall constitute one and
     the same Agreement. In the event that any signature is delivered by
     facsimile transmission, such signature shall create a valid binding
     obligation of the party executing (or on whose behalf such signature is
     executed) the same with the same force and effect as if such facsimile
     signature were the original thereof.

                                      -11-

<PAGE>

          (j) Governing Law. All questions concerning the construction,
     validity, enforcement and interpretation of this Agreement shall be
     determined with the provisions of the Purchase Agreement.

          (k) Cumulative Remedies. The remedies provided herein are cumulative
     and not exclusive of any remedies provided by law.

          (l) Severability. If any term, provision, covenant or restriction of
     this Agreement is held by a court of competent jurisdiction to be invalid,
     illegal, void or unenforceable, the remainder of the terms, provisions,
     covenants and restrictions set forth herein shall remain in full force and
     effect and shall in no way be affected, impaired or invalidated, and the
     parties hereto shall use their commercially reasonable efforts to find and
     employ an alternative means to achieve the same or substantially the same
     result as that contemplated by such term, provision, covenant or
     restriction. It is hereby stipulated and declared to be the intention of
     the parties that they would have executed the remaining terms, provisions,
     covenants and restrictions without including any of such that may be
     hereafter declared invalid, illegal, void or unenforceable.

          (m) Headings. The headings in this Agreement are for convenience of
     reference only and shall not limit or otherwise affect the meaning hereof.

          (n) Independent Nature of Purchasers' Obligations and Rights. The
     obligations of each Holder hereunder are several and not joint with the
     obligations of any other Holder hereunder, and no Holder shall be
     responsible in any way for the performance of the obligations of any other
     Holder hereunder. Nothing contained herein or in any other agreement or
     document delivered at any closing, and no action taken by any Holder
     pursuant hereto or thereto, shall be deemed to constitute the Holders as a
     partnership, an association, a joint venture or any other kind of entity,
     or create a presumption that the Holders are in any way acting in concert
     with respect to such obligations or the transactions contemplated by this
     Agreement. Each Holder shall be entitled to protect and enforce its rights,
     including without limitation the rights arising out of this Agreement, and
     it shall not be necessary for any other Holder to be joined as an
     additional party in any proceeding for such purpose.

                            *************************

                                      -12-

<PAGE>

          IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.

                                        NORTH AMERICAN TECHNOLOGIES GROUP, INC.

                                           By: /s/ Henry W. Sullivan
                                               Name: Henry W. Sullivan
                                               Title: Chief Executive Officer

                       [SIGNATURE PAGE OF HOLDERS FOLLOWS]

                                      -13-

<PAGE>

                     [SIGNATURE PAGE OF HOLDERS TO NATK RRA]

Name of Investing Entity: ______________________________________________________

Signature of Authorized Signatory of Investing entity: _________________________

Name of Authorized Signatory: __________________________________________________

Title of Authorized Signatory: _________________________________________________

                           [SIGNATURE PAGE CONTINUED]

                                      -14-

<PAGE>

                     [SIGNATURE PAGE OF HOLDERS TO NATK RRA]

Name of Investing Entity: ______________________________________________________

Signature of Authorized Signatory of Investing entity: _________________________

Name of Authorized Signatory: __________________________________________________

Title of Authorized Signatory: _________________________________________________

                           [SIGNATURE PAGE CONTINUED]

                                      -15-

<PAGE>

                     [SIGNATURE PAGE OF HOLDERS TO NATK RRA]

Name of Investing Entity: ______________________________________________________

Signature of Authorized Signatory of Investing entity: _________________________

Name of Authorized Signatory: __________________________________________________

Title of Authorized Signatory: _________________________________________________

                           [SIGNATURE PAGE CONTINUED]

                                      -16-

<PAGE>

                                     ANNEX A

                              Plan of Distribution
                              --------------------

     The Selling Stockholders (the "Selling Stockholders") of the common stock
("Common Stock") of North American Technologies Group, Inc. (the "Company") and
any of their pledgees, assignees and successors-in-interest may, from time to
time, sell any or all of their shares of Common Stock on any stock exchange,
market or trading facility on which the shares are traded or in private
transactions. These sales may be at fixed or negotiated prices. The Selling
Stockholders may use any one or more of the following methods when selling
shares:

          .  ordinary brokerage transactions and transactions in which the
             broker-dealer solicits purchasers;

          .  block trades in which the broker-dealer will attempt to sell the
             shares as agent but may position and resell a portion of the block
             as principal to facilitate the transaction;

          .  purchases by a broker-dealer as principal and resale by the
             broker-dealer for its account;

          .  an exchange distribution in accordance with the rules of the
             applicable exchange;

          .  privately negotiated transactions;

          .  settlement of short sales;

          .  broker-dealers may agree with the Selling Stockholders to sell a
             specified number of such shares at a stipulated price per share;

          .  a combination of any such methods of sale;

          .  through the writing or settlement of options or other hedging
             transactions, whether through an options exchange or otherwise; or

          .  any other method permitted pursuant to applicable law.

     The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), if available, rather
than under this prospectus.

     Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.

     In connection with the sale of our common stock or interests therein, the
Selling Stockholders may enter into hedging transactions with broker-dealers or
other financial

                                      -17-

<PAGE>

institutions, which may in turn engage in short sales of the common stock in the
course of hedging the positions they assume. The Selling Stockholders may also
sell shares of our common stock short and deliver these securities to close out
their short positions, or loan or pledge the common stock to broker-dealers that
in turn may sell these securities. The Selling Stockholders may also enter into
option or other transactions with broker-dealers or other financial institutions
or the creation of one or more derivative securities which require the delivery
to such broker-dealer or other financial institution of shares offered by this
prospectus, which shares such broker-dealer or other financial institution may
resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction).

     The Selling Stockholders and any broker-dealers or agents that are involved
in selling the shares may be deemed to be "underwriters" within the meaning of
the Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. The Selling Stockholders have informed the
Company that it does not have any agreement or understanding, directly or
indirectly, with any person to distribute the Common Stock.

     The Company is required to pay certain fees and expenses incurred by the
Company incident to the registration of the shares. The Company has agreed to
indemnify the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.

                                      -18-

<PAGE>

                                  SCHEDULE 6(b)

     The Company has granted registration rights to Avalanche Resources, Ltd. in
a Registration Rights Agreement dated as of December 31, 2002 for the
registration of the shares into which the Convertible Debenture issued to
Avalanche on that date may be converted. In addition, the Company has orally
agreed to give piggyback rights to subscribers in its private placement
offerings if the Company files a registration statement more than 60 days before
the time at which such subscribers would be able to sell their restricted shares
of Company common stock under Rule 144 of the Securities Act of 1933.
Approximately 51,934,376 shares issued by the Company would be subject to those
registration rights for subscribers.<PAGE>

                                  EXHIBIT 10.13

                          SECURITIES PURCHASE AGREEMENT

     This Securities Purchase Agreement (this "Agreement") is dated as of
December 31, 2003, among North American Technologies Group, Inc., a Delaware
corporation (the "Company"), and CD Investment Partners, Ltd. (the "Purchaser").

     WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act (as defined below), and Rule
506 promulgated thereunder, the Company desires to issue and sell to the
Purchaser, and the Purchaser desires to purchase from the Company in the
aggregate, $250,000 of Common Stock and Warrants on the Closing Date.

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

                                   ARTICLE I.
                                   DEFINITIONS

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

          "Action" shall have the meaning ascribed to such term in Section
     3.1(j).

          "Affiliate" means any Person that, directly or indirectly through one
     or more intermediaries, controls or is controlled by or is under common
     control with a Person as such terms are used in and construed under Rule
     144. With respect to Purchaser, any investment fund or managed account that
     is managed on a discretionary basis by the same investment manager as
     Purchaser will be deemed to be an Affiliate of Purchaser.

          "Closing" means the closing of the purchase and sale of the Common
     Stock and the Warrants pursuant to Section 2.1.

          "Closing Date" means the date of the Closing, which shall be the date
     hereof.

          "Closing Price" means on any particular date (a) the last reported
     closing bid price per share of Common Stock on such date on the Trading
     Market (as reported by Bloomberg L.P. at 4:15 PM (New York time), or (b) if
     there is no such price on such date, then the closing bid price on the
     Trading Market on the date nearest preceding such date (as reported by
     Bloomberg L.P. at 4:15 PM (New York time) for the closing bid price for
     regular session trading on such day), or (c) if the Common Stock is not
     then listed or quoted on the Trading Market and if prices for the Common
     Stock are then reported in the "pink sheets" published by the National
     Quotation Bureau Incorporated (or a similar organization or agency
     succeeding to its functions of reporting prices), the most recent bid price
     per share of the Common Stock so reported, or (d) if the shares of Common
     Stock are not then publicly traded the fair market value of a share of
     Common

                                       1

<PAGE>

     Stock as determined by an appraiser selected in good faith by the Purchaser
     and the Company.

          "Commission" means the Securities and Exchange Commission.

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

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

          "Company Counsel" means Boyer & Ketchand, a professional corporation,
     Houston, Texas.

          "Disclosure Schedules" means the Disclosure Schedules attached hereto.

          "Effective Date" means the date that the Registration Statement is
     first declared effective by the Commission.

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

          "Intellectual Property Rights" shall have the meaning ascribed to such
     term in Section 3.1(o).

          "Liens" means a lien, charge, security interest, encumbrance, right of
     first refusal, preemptive right or other restriction.

          "Material Adverse Effect" shall have the meaning ascribed to such term
     in Section 3.1(b).

          "Material Permits" shall have the meaning ascribed to such term in
     Section 3.1(m).

          "Per Share Purchase Price" equals $0.60 subject to adjustment for
     reverse and forward stock splits, stock dividends, stock combinations and
     other similar transactions of the Common Stock that occur after the date of
     this Agreement.

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

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

                                       2

<PAGE>

          "Registration Statement" means a registration statement meeting the
     requirements set forth in the Registration Rights Agreement and covering
     the resale by the Purchaser of the Shares and the Warrant Shares.

          "Registration Rights Agreement" means the Registration Rights
     Agreement, dated as of the date of this Agreement, by and between the
     Company and Purchaser, in the form of Exhibit A hereto.

          "Required Approvals" shall have the meaning ascribed to such term in
     Section 3.1(e).

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

          "SEC Reports" shall have the meaning ascribed to such term in Section
     3.1(h).

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

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

          "Shares" means the shares of Common Stock issued or issuable to the
     Purchaser pursuant to this Agreement.

          "Subscription Amount" means $250,000 in United States dollars and in
     immediately available funds.

          "Subsidiary" shall mean the subsidiaries of the Company, if any, set
     forth on Schedule 3.1(a).

          "Trading Day" means (i) a day on which the Common Stock is traded on a
     Trading Market, or (ii) if the Common Stock is not quoted on a Trading
     Market, a day on which the Common Stock is quoted in the over-the-counter
     market as reported by the National Quotation Bureau Incorporated (or any
     similar organization or agency succeeding its functions of reporting
     prices).

          "Trading Market" means the following markets or exchanges on which the
     Common Stock is listed or quoted for trading on the date in question: the
     OTC Bulletin Board, the American Stock Exchange, the New York Stock
     Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market.

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

          "Warrants" means the Common Stock purchase warrants delivered to the
     Purchaser at the Closing in accordance with Section 2.2(a)(iii) hereof.

                                       3

<PAGE>

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

                                   ARTICLE II.
                                PURCHASE AND SALE

     2.1  Closing. On the Closing Date, the Purchaser shall purchase from the
Company, severally and not jointly with the other third party purchasers of the
Company's securities, and the Company shall issue and sell to Purchaser, (a)
Four Hundred Sixteen Thousand Six Hundred Sixty Seven (416,667) Shares and (b)
the Warrants as determined pursuant to Section 2.2(a)(iii). Upon satisfaction of
the conditions set forth in Section 2.2, the Closing shall occur at the offices
of Company Counsel, or such other location as the parties shall mutually agree.

     2.2  Closing Conditions.

          (a)  On the Closing Date, the Company shall deliver or cause to be
     delivered to the Purchaser the following:

               (i)   this Agreement duly executed by the Company;

               (ii)  within 3 Trading Days of the Closing Date, a certificate
          evidencing Four Hundred Sixteen Thousand Six Hundred Sixty Seven
          (416,667) Shares, registered in the name of Purchaser;

               (iii) within 3 Trading Days of the Closing Date, a Warrant
          registered in the name of Purchaser to purchase up to 416,667 shares
          of Common Stock, with a term of 5 years and an exercise price equal to
          $0.60, subject to adjustment therein (the "Series B Warrant"), in the
          form of Exhibit B attached hereto;

               (iv)  the Registration Rights Agreement duly executed by the
          Company; and

               (v)   a legal opinion of Company Counsel, in the form of Exhibit
          C attached hereto.

          (b)  On the Closing Date, Purchaser shall deliver or cause to be
     delivered to the Company the following:

               (i)   this Agreement duly executed by Purchaser;

               (ii)  Purchaser's Subscription Amount by wire transfer to the
          account of the Company; and

               (iii) the Registration Rights Agreement duly executed by
          Purchaser.

          (c)  All representations and warranties of the other party contained
     herein shall remain true and correct as of the Closing Date.

                                       4

<PAGE>

          (d)  All obligations, covenants and agreements of the parties required
     to be performed at or prior to the Closing Date shall have been performed.

          (e)  From the date hereof to the Closing Date, trading in the Common
Stock shall not have been suspended by the Commission, and, at any time prior to
the Closing Date, trading in securities generally as reported by Bloomberg
Financial Markets shall not have been suspended or limited, or minimum prices
shall not have been established on securities whose trades are reported by such
service, or on any Trading Market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities nor shall
there have occurred any material outbreak or escalation of hostilities or other
national or international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case, in the
reasonable judgment of Purchaser, makes it impracticable or inadvisable to
purchase the Shares at the such Closing.

          (f)  Simultaneously with or prior to the Closing, the Company shall
have sold securities to third party purchasers, who are not acting in concert
with Purchaser, for an aggregate of a minimum of one million five hundred
thousand dollars ($1,500,000) or a maximum of five million dollars ($5,000,000).
The securities sold to any such third party purchasers shall be on, and have,
such terms and conditions as the Company shall determine in its sole discretion.

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

     3.1  Representations and Warranties of the Company. Except as set forth
under the corresponding section of the Disclosure Schedules delivered
concurrently herewith, the Company hereby makes the following representations
and warranties as of the date hereof to Purchaser:

          (a)  Subsidiaries. The Company owns, directly or indirectly, all of
     the capital stock or other equity interests of each Subsidiary free and
     clear of any Liens, and all the issued and outstanding shares of capital
     stock of each Subsidiary are validly issued and are fully paid,
     non-assessable and free of preemptive and similar rights to subscribe for
     or purchase securities. If the Company has no subsidiaries, then references
     in the Transaction Documents to the Subsidiaries will be disregarded.

          (b)  Organization and Qualification. Each of the Company and the
     Subsidiaries is an entity duly incorporated or otherwise organized, validly
     existing and in good standing under the laws of the jurisdiction of its
     incorporation or organization (as applicable), with the requisite power and
     authority to own and use its properties and assets and to carry on its
     business as currently conducted. Neither the Company nor any Subsidiary is
     in violation or default of any of the provisions of its respective
     certificate or articles of incorporation, bylaws or other organizational or
     charter documents. Each of the Company and the Subsidiaries is duly
     qualified to conduct business and is in good standing as a foreign
     corporation or other entity in each jurisdiction in which the nature of the
     business conducted or property owned by it makes such qualification
     necessary, except where the failure to be so qualified or in good standing,
     as the case may be, could not have or reasonably be expected to result in
     (i) a material adverse effect on the legality, validity or enforceability
     of any Transaction Document, (ii) a material adverse

                                       5

<PAGE>

     effect on the results of operations, assets, business, prospects or
     financial condition of the Company and the Subsidiaries, taken as a whole,
     or (iii) a material adverse effect on the Company's ability to perform in
     any material respect on a timely basis its obligations under any
     Transaction Document (any of (i), (ii) or (iii), a "Material Adverse
     Effect") and no Proceeding has been instituted in any such jurisdiction
     revoking, limiting or curtailing or seeking to revoke, limit or curtail
     such power and authority or qualification.

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

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

          (e)  Filings, Consents and Approvals. The Company is not required to
     obtain any consent, waiver, authorization or order of, give any notice to,
     or make any filing or registration with, any court or other federal, state,
     local or other governmental authority or other Person in connection with
     the execution, delivery and performance by the

                                       6

<PAGE>

     Company of the Transaction Documents, other than (i) filings required
     pursuant to Section 4.4 of this Agreement, (ii) the filing with the
     Commission of the Registration Statement, (iii) application(s) to each
     applicable Trading Market for the listing of the Shares and Warrant Shares
     for trading thereon in the time and manner required thereby, and (iv) the
     filing of Form D with the Commission and such filings as are required to be
     made under applicable state securities laws (collectively, the "Required
     Approvals").

          (f)  Issuance of the Securities. The Securities are duly authorized
     and, when issued and paid for in accordance with the Transaction Documents,
     will be duly and validly issued, fully paid and nonassessable, free and
     clear of all Liens. The issuance of the Shares is not subject to any
     preemptive or similar rights to subscribe for or purchase securities. The
     Company has reserved from its duly authorized capital stock the maximum
     number of shares of Common Stock issuable pursuant to this Agreement and
     the Warrants.

          (g)  Capitalization. The capitalization of the Company is as described
     in the Company's most recent periodic report filed with the Commission. The
     Company has not issued any capital stock since such filing other than
     pursuant to the exercise of employee stock options under the Company's
     stock option plans, the issuance of shares of Common Stock to employees
     pursuant to the Company's employee stock purchase plan and pursuant to the
     conversion or exercise of outstanding Common Stock Equivalents outstanding.
     No Person has any right of first refusal, preemptive right, right of
     participation, or any similar right to participate in the transactions
     contemplated by the Transaction Documents. Except as a result of the
     purchase and sale of the Securities, there are no outstanding options,
     warrants, script rights to subscribe to, calls or commitments of any
     character whatsoever relating to, or securities, rights or obligations
     convertible into or exchangeable for, or giving any Person any right to
     subscribe for or acquire, any shares of Common Stock, or contracts,
     commitments, understandings or arrangements by which the Company or any
     Subsidiary is or may become bound to issue additional shares of Common
     Stock, or securities or rights convertible or exchangeable into shares of
     Common Stock. The issue and sale of the Securities will not obligate the
     Company to issue shares of Common Stock or other securities to any Person
     (other than the Purchaser) and will not result in a right of any holder of
     Company securities to adjust the exercise, conversion, exchange or reset
     price under such securities. All of the outstanding shares of capital stock
     of the Company are validly issued, fully paid and nonassessable, have been
     issued in compliance with all federal and state securities laws, and none
     of such outstanding shares was issued in violation of any preemptive rights
     or similar rights to subscribe for or purchase securities. No further
     approval or authorization of any stockholder, the Board of Directors of the
     Company or others is required for the issuance and sale of the Securities.
     Except as disclosed in the SEC Reports, there are no stockholders
     agreements, voting agreements or other similar agreements with respect to
     the Company's capital stock to which the Company is a party or, to the
     knowledge of the Company, between or among any of the Company's
     stockholders.

          (h)  SEC Reports; Financial Statements. The Company has filed all
     reports required to be filed by it under the Securities Act and the
     Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the
     two years preceding the date hereof (or such shorter period as the Company
     was required by law to file such material) (the

                                       7

<PAGE>

     foregoing materials, including the exhibits thereto, being collectively
     referred to herein as the "SEC Reports") on a timely basis or has received
     a valid extension of such time of filing and has filed any such SEC Reports
     prior to the expiration of any such extension. As of their respective
     dates, the SEC Reports complied in all material respects with the
     requirements of the Securities Act and the Exchange Act and the rules and
     regulations of the Commission promulgated thereunder, and none of the SEC
     Reports, when filed, contained any untrue statement of a material fact or
     omitted to state a material fact required to be stated therein or necessary
     in order to make the statements therein, in light of the circumstances
     under which they were made, not misleading. The financial statements of the
     Company included in the SEC Reports comply in all material respects with
     applicable accounting requirements and the rules and regulations of the
     Commission with respect thereto as in effect at the time of filing. Such
     financial statements have been prepared in accordance with generally
     accepted accounting principles applied on a consistent basis during the
     periods involved ("GAAP"), except as may be otherwise specified in such
     financial statements or the notes thereto and except that unaudited
     financial statements may not contain all footnotes required by GAAP, and
     fairly present in all material respects the financial position of the
     Company and its consolidated subsidiaries as of and for the dates thereof
     and the results of operations and cash flows for the periods then ended,
     subject, in the case of unaudited statements, to normal, immaterial,
     year-end audit adjustments.

          (i)  Material Changes. Since September 30, 2003 except as disclosed in
     the SEC Reports, (i) there has been no event, occurrence or development
     that has had or that could reasonably be expected to result in a Material
     Adverse Effect, (ii) the Company has not incurred any liabilities
     (contingent or otherwise) other than (A) trade payables and accrued
     expenses incurred in the ordinary course of business consistent with past
     practice and (B) liabilities not required to be reflected in the Company's
     financial statements pursuant to GAAP or required to be disclosed in
     filings made with the Commission, (iii) the Company has not altered its
     method of accounting, (iv) the Company has not declared or made any
     dividend or distribution of cash or other property to its stockholders or
     purchased, redeemed or made any agreements to purchase or redeem any shares
     of its capital stock and (v) the Company has not issued any equity
     securities to any officer, director or Affiliate, except pursuant to
     existing Company stock option plans. The Company does not have pending
     before the Commission any request for confidential treatment of
     information.

          (j)  Litigation. Except as disclosed in the SEC Reports, there is no
     action, suit, inquiry, notice of violation, proceeding or investigation
     pending or, to the knowledge of the Company, threatened against or
     affecting the Company, any Subsidiary or any of their respective properties
     before or by any court, arbitrator, governmental or administrative agency
     or regulatory authority (federal, state, county, local or foreign)
     (collectively, an "Action") which (i) adversely affects or challenges the
     legality, validity or enforceability of any of the Transaction Documents or
     the Securities or (ii) could, if there were an unfavorable decision, have
     or reasonably be expected to result in a Material Adverse Effect. Neither
     the Company nor any Subsidiary, nor any director or officer thereof, is or
     has been the subject of any Action involving a claim of violation of or
     liability under federal or state securities laws or a claim of breach of
     fiduciary duty. There has not been, and to the knowledge of the Company,
     there is not pending or

                                       8

<PAGE>

     contemplated, any investigation by the Commission involving the Company or
     any current or former director or officer of the Company. The Commission
     has not issued any stop order or other order suspending the effectiveness
     of any registration statement filed by the Company or any Subsidiary under
     the Exchange Act or the Securities Act.

          (k)  Labor Relations. No material labor dispute exists or, to the
     knowledge of the Company, is imminent with respect to any of the employees
     of the Company which could reasonably be expected to result in a Material
     Adverse Effect.

          (l)  Compliance. Except as disclosed in the SEC Reports, neither the
     Company nor any Subsidiary (i) is in default under or in violation of (and
     no event has occurred that has not been waived that, with notice or lapse
     of time or both, would result in a default by the Company or any Subsidiary
     under), nor has the Company or any Subsidiary received notice of a claim
     that it is in default under or that it is in violation of, any indenture,
     loan or credit agreement or any other agreement or instrument to which it
     is a party or by which it or any of its properties is bound (whether or not
     such default or violation has been waived), (ii) is in violation of any
     order of any court, arbitrator or governmental body, or (iii) is or has
     been in violation of any statute, rule or regulation of any governmental
     authority, including without limitation all foreign, federal, state and
     local laws applicable to its business except in each case as could not have
     a Material Adverse Effect.

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

          (n)  Title to Assets. The Company and the Subsidiaries have good and
     marketable title in fee simple to all real property owned by them that is
     material to the business of the Company and the Subsidiaries and good and
     marketable title in all personal property owned by them that is material to
     the business of the Company and the Subsidiaries, in each case free and
     clear of all Liens, except for Liens as do not materially affect the value
     of such property and do not materially interfere with the use made and
     proposed to be made of such property by the Company and the Subsidiaries
     and Liens for the payment of federal, state or other taxes, the payment of
     which is neither delinquent nor subject to penalties. Any real property and
     facilities held under lease by the Company and the Subsidiaries are held by
     them under valid, subsisting and enforceable leases of which the Company
     and the Subsidiaries are in compliance.

          (o)  Patents and Trademarks. To the knowledge of the Company and each
     Subsidiary, the Company and the Subsidiaries have, or have rights to use,
     all patents, patent applications, trademarks, trademark applications,
     service marks, trade names, copyrights, licenses and other similar rights
     that are necessary or material for use in connection with their respective
     businesses as described in the SEC Reports and which the failure to so have
     could have or reasonably be expected to result in a Material

                                       9

<PAGE>

     Adverse Effect (collectively, the "Intellectual Property Rights"). Neither
     the Company nor any Subsidiary has received a written notice that the
     Intellectual Property Rights used by the Company or any Subsidiary violates
     or infringes upon the rights of any Person. To the knowledge of the
     Company, all such Intellectual Property Rights are enforceable and do not
     violate or infringe the Intellectual Property Rights of others.

          (p)  Insurance. The Company and the Subsidiaries are insured by
     insurers of recognized financial responsibility against such losses and
     risks and in such amounts as are prudent and customary in the businesses in
     which the Company and the Subsidiaries are engaged. Neither the Company nor
     any Subsidiary has any reason to believe that it will not be able to renew
     its existing insurance coverage as and when such coverage expires or to
     obtain similar coverage from similar insurers as may be necessary to
     continue its business without a significant increase in cost.

          (q)  Transactions With Affiliates and Employees. Except as set forth
     in the SEC Reports, none of the officers or directors of the Company and,
     to the knowledge of the Company, none of the employees of the Company is
     presently a party to any transaction with the Company or any Subsidiary
     (other than for services as employees, officers and directors), including
     any contract, agreement or other arrangement providing for the furnishing
     of services to or by, providing for rental of real or personal property to
     or from, or otherwise requiring payments to or from any officer, director
     or such employee or, to the knowledge of the Company, any entity in which
     any officer, director, or any such employee has a substantial interest or
     is an officer, director, trustee or partner, in each case in excess of
     $60,000 other than (i) for payment of salary or consulting fees for
     services rendered, (ii) reimbursement for expenses incurred on behalf of
     the Company and (iii) for other employee benefits, including stock option
     agreements under any stock option plan of the Company.

          (r)  Sarbanes-Oxley; Internal Accounting Controls. The Company is in
     material compliance with all provisions of the Sarbanes-Oxley Act of 2002
     which are applicable to it as of the Closing Date. The Company and each of
     its subsidiaries maintains a system of internal accounting controls
     sufficient to provide reasonable assurance that (i) transactions are
     executed in accordance with management's general or specific
     authorizations, (ii) transactions are recorded as necessary to permit
     preparation of financial statements in conformity with GAAP and to maintain
     asset accountability, (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 the existing assets
     at reasonable intervals and appropriate action is taken with respect to any
     differences. The Company has established disclosure controls and procedures
     (as defined in Exchange Act Rules 13a-13[(d)][(e)] and 15d-15[(d)][(e)])
     for the Company and designed such disclosure controls and procedures to
     ensure that material information relating to the Company, including its
     Subsidiaries, is made known to the certifying officers by others within
     those entities, particularly during the period in which the Company's Form
     10-K or 10-QSB, as the case may be, is being prepared. The Company's
     certifying officers have evaluated the effectiveness of the Company's
     controls and procedures as of end of the filing period prior to the filing
     date of the Form 10-QSB for the quarter ended September 30, 2003 (such
     date, the "Evaluation Date"). The Company presented in its most recently
     filed Form 10-KSB or Form 10-QSB the

                                       10

<PAGE>

     conclusions of the certifying officers about the effectiveness of the
     disclosure controls and procedures based on their evaluations as of the
     Evaluation Date. Since the Evaluation Date, there have been no significant
     changes in the Company's internal controls (as such term is defined in Item
     307(b) of Regulation S-K under the Exchange Act) or, to the Company's
     knowledge, in other factors that could significantly affect the Company's
     internal controls.

          (s)  Certain Fees. No brokerage or finder's fees or commissions are or
     will be payable by the Company to any broker, financial advisor or
     consultant, finder, placement agent, investment banker, bank or other
     Person with respect to the transactions contemplated by this Agreement. The
     Purchaser shall have no obligation with respect to any fees or with respect
     to any claims made by or on behalf of other Persons for fees of a type
     contemplated in this Section that may be due in connection with the
     transactions contemplated by this Agreement.

          (t)  Private Placement. Assuming the accuracy of the Purchaser's
     representations and warranties set forth in Section 3.2, no registration
     under the Securities Act is required for the offer and sale of the
     Securities by the Company to the Purchaser as contemplated hereby. The
     issuance and sale of the Securities hereunder does not contravene the rules
     and regulations of the Trading Market.

          (u)  Investment Company. The Company is not, and is not an Affiliate
     of, and immediately after receipt of payment for the Shares, will not be or
     be an Affiliate of, an "investment company" within the meaning of the
     Investment Company Act of 1940, as amended. The Company shall conduct its
     business in a manner so that it will not become subject to the Investment
     Company Act.

          (v)  Registration Rights. No Person has any right to cause the Company
     to effect the registration under the Securities Act of any securities of
     the Company.

          (w)  Listing and Maintenance Requirements. The Company's Common Stock
     is registered pursuant to Section 12(g) of the Exchange Act, and the
     Company has taken no action designed to, or which to its knowledge is
     likely to have the effect of, terminating the registration of the Common
     Stock under the Exchange Act nor has the Company received any notification
     that the Commission is contemplating terminating such registration. The
     Company has not, in the 12 months preceding the date hereof, received
     notice from any Trading Market on which the Common Stock is or has been
     listed or quoted to the effect that the Company is not in compliance with
     the listing or maintenance requirements of such Trading Market. The Company
     is, and has no reason to believe that it will not in the foreseeable future
     continue to be, in compliance with all such listing and maintenance
     requirements.

          (x)  Application of Takeover Protections. The Company and its Board of
     Directors have taken all necessary action, if any, in order to render
     inapplicable any control share acquisition, business combination, poison
     pill (including any distribution under a rights agreement) or other similar
     anti-takeover provision under the Company's Certificate of Incorporation
     (or similar charter documents) or the laws of its state of incorporation
     that is or could become applicable to the Purchaser as a result of the
     Purchaser and the Company fulfilling their obligations or exercising their
     rights under the

                                       11

<PAGE>

     Transaction Documents, including without limitation the Company's issuance
     of the Securities and the Purchaser's ownership of the Securities.

          (y)  Disclosure. Other than the terms of the transaction contemplated
     by this Agreement and information which has been disclosed to Purchaser
     subject to the terms of that certain confidentiality agreement between the
     Company and Purchaser, the Company confirms that, neither the Company nor
     any other Person acting on its behalf has provided the Purchaser or its
     agents or counsel with any information that constitutes or might constitute
     material, non-public information. The Company understands and confirms that
     the Purchaser will rely on the foregoing representations and covenants in
     effecting transactions in securities of the Company. All disclosure
     provided to the Purchaser regarding the Company, its business and the
     transactions contemplated hereby, including the Disclosure Schedules to
     this Agreement, furnished by or on behalf of the Company are true and
     correct and do not contain any untrue statement of a material fact or omit
     to state any material fact necessary in order to make the statements made
     therein, in light of the circumstances under which they were made, not
     misleading.

          (z)  No Integrated Offering. Assuming the accuracy of the Purchaser's
     representations and warranties set forth in Section 3.2, neither the
     Company, nor any of its affiliates, nor any Person acting on its or their
     behalf has, directly or indirectly, made any offers or sales of any
     security or solicited any offers to buy any security, under circumstances
     that would cause this offering of the Securities to be integrated with
     prior offerings by the Company for purposes of the Securities Act or any
     applicable shareholder approval provisions, including, without limitation,
     under the rules and regulations of any exchange or automated quotation
     system on which any of the securities of the Company are listed or
     designated.

          (aa) Solvency. Based on the financial condition of the Company as of
     the Closing Date after giving effect to the receipt by the Company of the
     proceeds from the sale of the Securities hereunder, (i) the Company's fair
     saleable value of its assets exceeds the amount that will be required to be
     paid on or in respect of the Company's existing debts and other liabilities
     (including known contingent liabilities) as they mature; (ii) the Company's
     assets do not constitute unreasonably small capital to carry on its
     business for the current fiscal year as now conducted and as proposed to be
     conducted including its capital needs taking into account the particular
     capital requirements of the business conducted by the Company, and
     projected capital requirements and capital availability thereof; and (iii)
     the current cash flow of the Company, together with the proceeds the
     Company would receive, were it to liquidate all of its assets, after taking
     into account all anticipated uses of the cash, would be sufficient to pay
     all amounts on or in respect of its debt when such amounts are required to
     be paid. The Company does not intend to incur debts beyond its ability to
     pay such debts as they mature (taking into account the timing and amounts
     of cash to be payable on or in respect of its debt).

          (bb) Form S-3 Eligibility. The Company is eligible to register the
     resale of its Common Stock by the Purchaser under Form S-3 promulgated
     under the Securities Act and the Company hereby covenants and agrees to use
     its best efforts to maintain its eligibility to use Form S-3 until the
     Registration Statement covering the resale of the Shares shall have been
     filed with, and declared effective by, the Commission.

                                       12

<PAGE>

          (cc) Taxes. Except for matters that would not, individually or in the
     aggregate, have or reasonably be expected to result in a Material Adverse
     Effect, the Company and each Subsidiary has filed all necessary federal,
     state and foreign income and franchise tax returns and has paid or accrued
     all taxes shown as due thereon, and the Company has no knowledge of a tax
     deficiency which has been asserted or threatened against the Company or any
     Subsidiary.

          (dd) General Solicitation. Neither the Company nor any person acting
     on behalf of the Company has offered or sold any of the Shares by any form
     of general solicitation or general advertising. The Company has offered the
     Shares for sale only to the Purchaser.

          (ee) Foreign Corrupt Practices. Neither the Company, nor to the
     knowledge of the Company, any agent or other person acting on behalf of the
     Company, has (i) directly or indirectly, used any corrupt funds for
     unlawful contributions, gifts, entertainment or other unlawful expenses
     related to foreign or domestic political activity, (ii) made any unlawful
     payment to foreign or domestic government officials or employees or to any
     foreign or domestic political parties or campaigns from corporate funds,
     (iii) failed to disclose fully any contribution made by the Company (or
     made by any person acting on its behalf of which the Company is aware)
     which is in violation of law, or (iv) violated in any material respect any
     provision of the Foreign Corrupt Practices Act of 1977, as amended.

          (ff) Accountants. The Company's accountants are set forth on Schedule
     3.1(ff) of the Disclosure Schedule. To the Company's knowledge, such
     accountants, who the Company expects will express their opinion with
     respect to the financial statements to be included in the Company's Annual
     Report on Form 10-K for the year ended March 31, 2004, are independent
     accountants as required by the Securities Act.

          (gg) Acknowledgment Regarding Purchaser's Purchase of the Securities.
     The Company acknowledges and agrees that the Purchaser is not acting as a
     financial advisor or fiduciary of the Company (or in any similar capacity)
     with respect to this Agreement or the transactions contemplated hereby,
     that this Agreement and the transactions contemplated hereby, and the
     relationship between the Purchaser and the Company, are "arms-length," and
     that any statement made by the Purchaser, or any of its representatives or
     agents, in connection with this Agreement or the transactions contemplated
     hereby is not advice or a recommendation, is merely incidental to the
     Purchaser's purchase of the Securities and has not been relied upon in any
     way by the Company, its officers, directors or other representatives. The
     Company further represents to the Purchaser that the Company's decision to
     enter into this Agreement and the transactions contemplated hereby has been
     based solely on an independent evaluation by the Company and its
     representatives. The Company further acknowledges that the Purchaser has
     acted alone and not in concert with any other third party purchaser of
     Company securities and that the Purchaser's attorneys and other advisors
     have only represented the Purchaser and its affiliates and no other third
     party purchaser of Company securities.

                                       13

<PAGE>

     3.2  Representations and Warranties of the Purchaser. Purchaser hereby
represents and warrants as of the date hereof to the Company as follows:

          (a)  Organization; Authority. Purchaser is an entity duly organized,
     validly existing and in good standing under the laws of the jurisdiction of
     its organization with full right, corporate or partnership power and
     authority to enter into and to consummate the transactions contemplated by
     the Transaction Documents and otherwise to carry out its obligations
     thereunder. The execution, delivery and performance by Purchaser of the
     transactions contemplated by this Agreement have been duly authorized by
     all necessary corporate or similar action on the part of Purchaser. Each
     Transaction Document to which it is party has been duly executed by
     Purchaser, and when delivered by Purchaser in accordance with the terms
     hereof, will constitute the valid and legally binding obligation of
     Purchaser, enforceable against it in accordance with its terms, except (i)
     as limited by general equitable principles and applicable bankruptcy,
     insolvency, reorganization, moratorium and other laws of general
     application affecting enforcement of creditors' rights generally, (ii) as
     limited by laws relating to the availability of specific performance,
     injunctive relief or other equitable remedies and (iii) insofar as
     indemnification and contribution provisions may be limited by applicable
     law.

          (b)  Investment Intent. Purchaser understands that the Securities are
     "restricted securities" and have not been registered under the Securities
     Act or any applicable state securities law and is acquiring the Securities
     as principal for its own account for investment purposes only and not with
     a view to or for distributing or reselling such Securities or any part
     thereof, has no present intention of distributing any of such Securities
     and has no arrangement or understanding with any other persons regarding
     the distribution of such Securities (this representation and warranty not
     limiting Purchaser's right to sell the Securities pursuant to the
     Registration Statement or otherwise in compliance with applicable federal
     and state securities laws). Purchaser is acquiring the Securities hereunder
     in the ordinary course of its business. Purchaser does not have any
     agreement or understanding, directly or indirectly, with any Person to
     distribute any of the Securities (this representation and warranty not
     limiting Purchaser's right to sell the Securities pursuant to the
     Registration Statement or otherwise in compliance with applicable federal
     and state securities laws).

          (c)  Purchaser Status. At the time Purchaser was offered the
     Securities, it was, and at the date hereof it is an "accredited investor"
     as defined in Rule 501(a) under the Securities Act. The Purchaser is not
     required to be registered as a broker-dealer under Section 15 of the
     Exchange Act.

          (d)  Experience of the Purchaser. The Purchaser, either alone or
     together with its representatives, has such knowledge, sophistication and
     experience in business and financial matters so as to be capable of
     evaluating the merits and risks of the prospective investment in the
     Securities, and has so evaluated the merits and risks of such investment.
     The Purchaser is able to bear the economic risk of an investment in the
     Securities and, at the present time, is able to afford a complete loss of
     such investment.

          (e)  General Solicitation. The Purchaser is not purchasing the
     Securities as a result of any advertisement, article, notice or other
     communication regarding the

                                       14

<PAGE>

     Securities published in any newspaper, magazine or similar media or
     broadcast over television or radio or presented at any seminar or any other
     general solicitation or general advertisement.

          (f)  Certain Trading Activities. No open Short Sale (defined below)
     involving the Company's securities exists on the date hereof in the name or
     on behalf of, or in conjunction with, Purchaser or its Affiliates and
     Purchaser agrees not to effect any such Short Sale on or prior to the
     second Trading Day after the Closing Date. For purposes of this Section,
     "Short Sale" means all types of direct and indirect stock pledges, forward
     sale contracts, options, puts, calls, short sales, swaps and similar
     arrangements (including on a total return basis), and sales and other
     transactions through non-U.S. broker dealers or foreign regulated brokers,
     but only if executed at a time when the Purchaser has no equivalent
     offsetting long position in the Common Stock. For purposes of determining
     whether the Purchaser has an equivalent offsetting long position in the
     Common Stock of the Company, any shares of Common Stock (other than the
     Shares) held by Purchaser, and any shares issuable upon exercise of any
     warrants (other than the Warrant Shares) held by Purchaser, shall be both
     deemed to be held as "long" by Purchaser.

     The Company acknowledges and agrees that Purchaser does not make or has not
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.

                                   ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

     4.1  Transfer Restrictions.

          (a)  The Securities may only be disposed of in compliance with state
     and federal securities laws. In connection with any transfer of Securities
     other than pursuant to an effective registration statement, to the Company,
     to an Affiliate of the Purchaser or in connection with a pledge as
     contemplated in Section 4.1(b), the Company may require the transferor
     thereof to provide to the Company an opinion of counsel selected by the
     transferor, the counsel, form and substance of opinion shall be reasonably
     satisfactory to the Company, to the effect that such transfer does not
     require registration of such transferred Securities under the Securities
     Act. As a condition of transfer, any such transferee shall agree in writing
     to be bound by the terms of this Agreement and shall have the rights of
     Purchaser under this Agreement and the Registration Rights Agreement.

          (b)  The Purchaser agrees to the imprinting, so long as is required by
     this Section 4.1(b), of a legend on any of the Securities in the following
     form:

          THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
          EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
          RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
          OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
          BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
          STATEMENT UNDER THE SECURITIES ACT OR

                                       15

<PAGE>

          PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
          SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
          ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A
          LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
          SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
          THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
          ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
          INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)
          UNDER THE SECURITIES ACT.

          The Company acknowledges and agrees that Purchaser may from time to
     time pledge pursuant to a bona fide margin agreement with a registered
     broker-dealer or grant a security interest in some or all of the Securities
     to a financial institution that is an "accredited investor" as defined in
     Rule 501(a) under the Securities Act and who agrees to be bound by the
     provisions of this Agreement and the Registration Rights Agreement and, if
     required under the terms of such arrangement, Purchaser may transfer
     pledged or secured Securities to the pledgees or secured parties. Such a
     pledge or transfer would not be subject to approval of the Company and no
     legal opinion of legal counsel of the pledgee, secured party or pledgor
     shall be required in connection therewith. Further, no notice shall be
     required of such pledge. At the Purchaser's expense, the Company will
     execute and deliver such reasonable documentation as a pledgee or secured
     party of Securities may reasonably request in connection with a pledge or
     transfer of the Securities, including, if the Securities are subject to
     registration pursuant to the Registration Rights Agreement, the preparation
     and filing of any required prospectus supplement under Rule 424(b)(3) under
     the Securities Act or other applicable provision of the Securities Act to
     appropriately amend the list of Selling Stockholders thereunder.

          (c)  Certificates evidencing the Shares and Warrant Shares shall not
     contain any legend (including the legend set forth in Section 4.1(b)), (i)
     while a registration statement (including the Registration Statement)
     covering the resale of such security is effective under the Securities Act,
     or (ii) following any sale of such Shares or Warrant Shares pursuant to
     Rule 144, or (iii) if such Shares or Warrant Shares are eligible for sale
     under Rule 144(k), or (iv) if such legend is not required under applicable
     requirements of the Securities Act (including judicial interpretations and
     pronouncements issued by the Staff of the Commission). The Company shall
     cause its counsel to issue a legal opinion to the Company's transfer agent
     promptly after the Effective Date if required by the Company's transfer
     agent to effect the removal of the legend hereunder. If all or any portion
     of a Warrant is exercised at a time when there is an effective registration
     statement to cover the resale of the Warrant Shares, such Warrant Shares
     shall be issued free of all legends. The Company agrees that following the
     Effective Date or at such time as such legend is no longer required under
     this Section 4.1(c), it will, no later than three Trading Days following
     the delivery by Purchaser to the Company or the Company's transfer agent of
     a certificate representing Shares or Warrant Shares, as the case may be,
     issued with a restrictive legend (such date, the "Legend Removal Date"),
     deliver or cause to be delivered to Purchaser a certificate representing
     such Securities that is free from all restrictive and other legends. The
     Company may not make any notation on its records or

                                       16

<PAGE>

     give instructions to any transfer agent of the Company that enlarge the
     restrictions on transfer set forth in this Section, except as is otherwise
     required by law.

          (d)  In addition to Purchaser's other available remedies, the Company
     shall pay to Purchaser, in cash, as liquidated damages and not as a
     penalty, for each $1,000 of Shares or Warrant Shares (based on the Closing
     Price of the Common Stock on the date such Securities are submitted to the
     Company's transfer agent) subject to Section 4.1(c), $10 per Trading Day
     (increasing to $20 per Trading Day five (5) Trading Days after such damages
     have begun to accrue) for each Trading Day after the second Trading Day
     after the Legend Removal Date until such certificate is delivered. Nothing
     herein shall limit the Purchaser's right to pursue actual damages for the
     Company's failure to deliver certificates representing any Securities as
     required by the Transaction Documents, and the Purchaser shall have the
     right to pursue all remedies available to it at law or in equity including,
     without limitation, a decree of specific performance and/or injunctive
     relief.

          (e)  The Purchaser agrees that the removal of the restrictive legend
     from certificates representing Securities as set forth in this Section 4.1
     is predicated upon the Company's reliance that the Purchaser will sell any
     Securities pursuant to either the registration requirements of the
     Securities Act, including any applicable prospectus delivery requirements,
     or an exemption therefrom.

     4.2  Furnishing of Information. As long as the Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. As long as the
Purchaser owns Securities, if the Company is not required to file reports
pursuant to such laws, it will prepare and furnish to the Purchaser and make
publicly available in accordance with Rule 144(c) such information as is
required for the Purchaser to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell such Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.

     4.3  Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchaser or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.

     4.4  Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m.
Eastern time on the Trading Day following the Closing Date, issue a press
release or file a Current Report on Form 8-K, in each case reasonably acceptable
to the Purchaser disclosing the transactions contemplated hereby. The Company
and the Purchaser shall consult with each other in issuing any press releases
with respect to the transactions contemplated hereby, and neither the Company
nor the Purchaser shall issue any such press release or otherwise make any such
public statement without the prior consent of the Company, with respect to any
press release of the

                                       17

<PAGE>

Purchaser, or without the prior consent of the Purchaser, with respect to any
press release of the Company, which consent shall not unreasonably be withheld,
except if such disclosure is required by law, in which case the disclosing party
shall promptly provide the other party with prior notice of such public
statement or communication. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of the Purchaser, or include the name of the
Purchaser in any filing with the Commission or any regulatory agency or Trading
Market, without the prior written consent of the Purchaser, except (i) as
required by federal securities law in connection with the registration statement
contemplated by the Registration Rights Agreement and (ii) to the extent such
disclosure is required by law or Trading Market regulations, in which case the
Company shall provide the Purchaser with prior notice of such disclosure
permitted under subclause (i) or (ii).

     4.5  Shareholders Rights Plan. No claim will be made or enforced by the
Company or, to the knowledge of the Company, any other Person that Purchaser is
an "Acquiring Person" under any shareholders rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that Purchaser
could be deemed to trigger the provisions of any such plan or arrangement, by
virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchaser. The Company shall conduct
its business in a manner so that it will not become subject to the Investment
Company Act.

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

     4.7  Use of Proceeds. Except as set forth on Schedule 4.7 attached hereto,
the Company shall use the net proceeds from the sale of the Securities hereunder
for working capital purposes and not for the satisfaction of any portion of the
Company's debt (other than payment of trade payables in the ordinary course of
the Company's business and prior practices), to redeem any Company equity or
equity-equivalent securities or to settle any outstanding litigation.

     4.8  Reimbursement. If Purchaser becomes involved in any capacity in any
Proceeding by or against any Person who is a stockholder of the Company (except
as a result of sales, pledges, margin sales and similar transactions by
Purchaser to or with any current stockholder), solely as a result of Purchaser's
acquisition of the Securities under this Agreement, the Company will reimburse
Purchaser for its reasonable legal and other expenses (including the cost of any
investigation preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred. The reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same terms
and conditions to Affiliates of the Purchaser who are actually named in such
action, proceeding or investigation, and partners, directors, agents, employees
and controlling persons (if any), as the case may be, of the Purchaser and any
such Affiliate, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Company, the
Purchaser and any such Affiliate and any such Person. The Company also agrees
that neither the Purchaser nor any of its Affiliates, partners, directors,

                                       18

<PAGE>

agents, employees or controlling persons shall have any liability to the Company
or any Person asserting claims on behalf of or in right of the Company solely as
a result of acquiring the Securities under this Agreement.

     4.9  Indemnification of Purchaser. The Company will indemnify and hold the
Purchaser and its directors, officers, shareholders, partners, employees and
agents (each, a "Purchaser Party") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation that any Purchaser Party may suffer
or incur as a result of or relating to: (a) any misrepresentation, breach or
inaccuracy, or any allegation by a third party that, if true, would constitute a
breach or inaccuracy, of any of the representations, warranties, covenants or
agreements made by the Company in this Agreement or in the other Transaction
Documents; or (b) any cause of action, suit or claim brought or made against any
Purchaser Party and arising solely out of or solely resulting from the
execution, delivery, performance or enforcement of this Agreement or any of the
other Transaction Documents, other than directly resulting from the gross
negligence or willful misconduct of the Purchaser. The Company will reimburse a
Purchaser Party for its reasonable legal and other expenses (including the cost
of any investigation, preparation and travel in connection therewith) incurred
in connection therewith, as such expenses are incurred.

     4.10 Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement and Warrant Shares pursuant to any exercise of the Warrants.

     4.11 Listing of Common Stock. The Company hereby agrees to use commercially
reasonable efforts to maintain the listing of the Common Stock on a Trading
Market, and as soon as reasonably practicable following the Closing (but not
later than the earlier of the Effective Date and the first anniversary of the
Closing Date) to list all of the Shares and Warrant Shares on such Trading
Market. The Company further agrees, if the Company applies to have the Common
Stock traded on any other Trading Market, it will include in such application
all of the Shares and Warrant Shares, and will take such other action as is
necessary to cause all of the Shares and Warrant Shares to be listed on such
other Trading Market as promptly as possible. The Company will take all action
reasonably necessary to continue the listing and trading of its Common Stock on
a Trading Market and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Trading Market.

     4.12 Due Diligence Requests. The Company will comply with any reasonable
request for due diligence subject to the execution of any nondisclosure
agreement reasonably required in order to comply with Regulation FD.

                                   ARTICLE V.
                                  MISCELLANEOUS

     5.1  Fees and Expenses. Except as otherwise set forth in the Transaction
Documents, each party hereto shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation,

                                       19

<PAGE>

preparation, execution, delivery and performance of this Agreement. The Company
shall pay all stamp and other taxes and duties levied in connection with the
sale of the Securities.

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

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

     5.4  Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and the Purchaser or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.

     5.5  Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.

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

     5.7  No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.9.

                                       20

<PAGE>

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

     5.9  Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and delivery of the Shares, the
Warrant and the Warrant Shares.

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

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

     5.12 Replacement of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution

                                       21

<PAGE>

therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
customary and reasonable indemnity, if requested. The applicants for a new
certificate or instrument under such circumstances shall also pay any reasonable
third-party costs associated with the issuance of such replacement Securities.

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

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

     5.15 Independent Nature of Purchaser's Obligations and Rights. The
obligations of Purchaser under the Transaction Documents are several and not
joint with the obligations of any other third party purchasers of the Company's
securities, and Purchaser shall not be responsible in any way for the
performance of the obligations of any other third party purchasers of the
Company's securities. Each of Purchaser and the Company agree and acknowledge
that (i) the decision of Purchaser to purchase the Securities pursuant to this
Agreement has been made by Purchaser independently of any other third party
purchasers of the Company's securities and (ii) no other third party purchasers
of the Company's securities have acted as agent for Purchaser in connection with
Purchaser making its investment hereunder and that no such other third party
purchasers will be acting as agent of Purchaser in connection with monitoring
its investment hereunder. Nothing contained in any Transaction Document or any
agreement of any such other third party purchaser, and no action taken by
Purchaser pursuant hereto or any other third party purchaser pursuant thereto,
shall be deemed to constitute Purchaser or any such other third party purchasers
as a partnership, an association, a joint venture or any other kind of entity,
or create a presumption that Purchaser or any such other third party purchasers
are in any way acting in concert or as a group with respect to any matters.
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of any of the Transaction
Documents, and it shall not be necessary for any such other third party
purchasers to be joined as an additional party in any proceeding for such
purpose. To the extent that any such other third party purchasers purchase the
same or similar securities as Purchaser hereunder or on the same or similar
terms and conditions or pursuant to the same or similar documents, all such
matters are solely in the control of the Company, not the action or decision of
Purchaser and are not done with the knowledge of Purchaser hereunder, and would
be solely for the convenience of

                                       22

<PAGE>

the Company and not because it was required or requested to do so by the
Purchaser or any such other third party purchaser.

     5.16 Termination. Purchaser may terminate this Agreement without any
further obligation or liability hereunder or otherwise if the closing of the
transaction contemplated hereby does not occur by December 31, 2003.

                            (Signature Page Follows)

                                       23

<PAGE>

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

NORTH AMERICAN TECHNOLOGIES GROUP, INC.            Address for Notice:

By:/s/ Henry W. Sullivan
   Name: Henry W. Sullivan
   Title: Chief Executive Oficer

With a copy to (which shall not constitute notice):

CD INVESTMENT PARTNERS, LTD.

By:  CD Capital Management LLC
Its: Investment Manager

By: /s/ John D. Ziegelman
        Name: John D. Ziegelman
        Title: President

Address for all notices:
-----------------------

Two North Riverside Plaza
Suite 600
Chicago, Illinois 60606

With copy to (which shall not constitute notice):

Greenberg Traurig
77 W. Wacker Drive, Suite 2500
Chicago, IL 60601
Tel: (312) 456-8417
Fax: (312) 456-8435
Attn: Peter H. Lieberman

Greenberg Traurig
77 W. Wacker Drive, Suite 2500
Chicago, IL 60601
Tel: (312) 456-8448
Fax: (312) 456-8435
Attn: Todd A. Mazur

                                       24

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