Document:

EXHIBIT 10.4

                         MANAGEMENT EMPLOYMENT AGREEMENT

This Agreement for Employment is made on this First day of August, 2002, by and
between eTotalSource, Inc. (hereinafter referred to as "Employer") and Michael
J. Sullinger (hereinafter referred to as "Employee").

The Employer shall employ Employee subject to the following terms and
conditions.

1. Employment for the above Employee shall commence on August 1, 2002.

2. The following duties and responsibilities shall be competently performed by
Employee: as Chief Operating Officer, responsible for the day to day operations
of the Company, including but not limited to, oversight of the Human Resources
Department, Shareholder Relations Department, Production Department, Maintenance
and Purchasing Department and Shipping Department. In addition to the duties
stated above, the Employee shall perform such further and other duties required
by the Employer.

3. For the first year of this agreement or until such time as the Employer has
been sufficiently funded or is earning sufficient revenues to support its
operations, the Employee shall work Monday through Friday for a minimum of four
hours per day between the hours between the hours of 7:30 A.M. and 5:00 P.M. and
such additional hours as are required by the Employer for the Employee to
competently perform the duties of his position. The Employee shall use his or
her best efforts on behalf of the Employer. Commencing at the earlier time of
sufficient funding or revenues, or August 1, 2003, Employee shall work a minimum
of 50 hours per week and be on site or on company business between the hours of
7:30 AM and 5:30 PM Monday through Friday and any other such time as necessary
to competently perform the duties of his office.

4. The Employee shall comply with all stated standards of performance, policies,
rules, and regulations. A company manual containing a more complete explanation
of many of these standards has been given to the Employee. At this time,
Employee acknowledges receipt of this Company manual. The Employee shall also
comply with such future Employer policies, rules, regulations, performance
standards and manuals as may be published or amended from time to time.

<PAGE>

5. Employment under this Agreement shall commence on January 1, 2002 and end on
December 31, 2007, unless terminated prior to such time for cause, except that
Employee may terminate this agreement on thirty days written notice.

6. The Employer shall make payment to the Employee a set amount as compensation
for services rendered. For the period of time as described in paragraph 3,
above, the Employee agrees to accept stock bonus as described in paragraph 2 of
the Stock Incentive and Noncompetition Agreement attached and incorporated by
reference as compensation.. Upon the commencement of full time hours as provided
in paragraph 3, above, the compensation shall increase to One Hundred Twenty
Thousand Dollars ($120,000.00) per year, payable twice per month in the amount
of Five Thousand ($5,000.00) per pay period. In addition to the above
compensation, the Employee will be entitled to the following "fringe benefits":
fully paid Health Insurance with all of the benefits in force as of the date of
this Agreement and further shall add such additional benefits as may become
available during the term of this Agreement; six weeks per year paid vacation,
accruable to a maximum of twelve weeks; all major Holidays as paid days off or
added day for day to paid vacation time, at employees election; Seven Hundred
Fifty Dollars ($750.00) per month automobile allowance payable by separate check
on the First day of each month commencing August 1, 2002; Stock Incentives as
provided in paragraph 3 of the Stock Incentive and Noncompetition Agreement
attached; An annual bonus plan based upon Company performance as recited in
paragraph 7 following, however to qualify for said annual bonus in full,
Employee must be employed for the entire the fiscal year and be an employee on
the last day of the fiscal year, otherwise, provided Employee is an employee at
least six months of the fiscal year, the bonus shall be pro-rated by the number
of months Employee was employed. During the first year of this agreement it is
contemplated that employer will not have sufficient revenues to pay employee the
cash compensation, including car allowance, and as compensation therefore,
employee agrees to accept one share of common stock for each unpaid dollar of
cash compensation and car allowance unpaid during the first year of this
agreement.

<PAGE>

7. Employer shall provide an annual incentive bonus in the form of stock options
or warrants for 200,000 shares redeemable at $0.10 per share in the manner
provided for in paragraph 3 of the Stock Incentive and Noncompetition Agreement
attached

8. Employee shall be entitled to contract buy-out terms should Employer
terminate Employee for other than, malfeasance, fraud, or criminal conduct
amounting to a crime of moral turpitude. In the event of termination for other
than the aforementioned limited causes, Employee shall be entitled to the full
value of the salary terms of this Agreement and any bonuses then due and bonuses
that may be due at the close of the fiscal year of which the termination takes
effect. In addition, Employee shall retain all stock and stock options and
warrants granted under the terms of the Stock Incentive and Noncompetition
Agreement attached to this Agreement as Exhibit "A", and incorporated by
reference as if fully recited herein.

9. The Employer shall pay for the benefit of Employee all travel and other
expenses related to Employer business activities and shall provide Employee with
or access to a Company American Express Card or other designated Company Credit
Card which shall be utilized exclusively by the Employee for said expenses
unless the card is not accepted by the vendor. In such instances where the
Company credit card is not accepted or circumstances required Employee to pay
cash for and /or charge Employer related expenses to Employee's own credit card,
Employer shall reimburse Employee all such expenses for which Employee has a
receipt or acceptable proof of the expense and files a claim for reimbursement
thereof.

10. This contract of employment may terminate upon the occurrence of any of the
following events: (a) the death of the Employee; (b) the failure of the Employee
to perform his duties satisfactorily after notice or warning thereof; (c) for
just cause based upon nonperformance of duties by Employee; (d) economic reasons
of the Employer which may arise during the term of this Agreement and which may
be beyond the control of the Employer and such termination shall trigger the
buy-out clause.

11. The Employee shall not, at any time, directly or indirectly, engage in, or
become involved in any business competitive or similar to that of the Employer
as provided for in paragraph 3 (a) - (c), inclusive, of the Stock Incentive and
Noncompetition Agreement attached as Exhibit "A" and incorporated by reference
as if fully recited herein, except that employee may compete utilizing the
PresentaPro software as provided in the Stock Incentive and Noncompetition
Agreement.

<PAGE>

12. This Agreement may not be assigned without prior notice by either party.
Such assignment is subject to the mutual consent and approval of any such
assignment.

13. This Agreement constitutes the complete understanding between the parties,
unless amended by a subsequent written instrument signed by the employer and
employee. Any dispute under this contract shall be required to be resolved by
binding arbitration of the parties hereto. Each party shall select one
arbitrator and both arbitrators shall select a third. The arbitration shall be
governed by the rules of the American Arbitration Association then in force and
effect. In the event of such arbitration, the prevailing party shall be entitled
to all such reasonable attorneys' fees and costs as incurred.

14. This Agreement shall be interpreted under the laws of the State of
California and should any dispute arise under the terms of this Agreement, such
disputes shall venue in the County of Sutter, State of California.

15. Should any provision of this Agreement be deemed to violate the Constitution
of the United States, the State of California, violate any federal or state
(California) laws or regulations, or be declared invalid or unenforceable by a
Court of competent jurisdiction, the remaining provisions shall remain valid and
enforceable and the contract shall be construed as those remaining provisions
provide.

IN WITNESS WHEREOF, the parties have executed this Agreement under seal this
___________day of _____________, the year__________.

eTotalSource, Inc.

by
   -------------------------------------
       Terry Eilers, Chairman of the Board

----------------------------------------
       Michael J. Sullinger, Employee

Attest:
       ---------------------------------
       Virgil Baker, Secretary

<PAGE>

                  STOCK INCENTIVE AND NONCOMPETITION AGREEMENT

State of California}

County of Sutter   }

This agreement is made and entered into this First day of August, 2002, by and
between eTotalSource, Inc, a California corporation, designated herein as the
Company, and Michael J. Sullinger designated herein as Employee. Both parties
state and acknowledge as follows:

A. The Company is principally engaged in software development and multi-media
publishing; and

B. The Company desires to provide incentive for Employee to enter into an
employment contract with Company at a time when the Company's ability to pay
cash compensation is uncertain and Employee desires to provide services to the
Company.

Now, therefore, in consideration of the premises and the covenants set forth
herein, it is agreed between the parties as follows:

1. Performance: Employee, during the continuance of his employment by the
Company, shall use his best efforts in the selection and supervision of
personnel, the conception, organization, execution and coordination of
operating, merchandising and expansion programs, and the application thereto of
progressive techniques, controls, systems and procedures, as required to improve
sales, reduce expenses and otherwise increase profitability and protect and
enhance the image of the Company in relation to its personnel and the public.
Employee, in the fulfillment of such responsibilities and the performance of
such duties, shall be accountable to and be subject to the direction and control
of the Company's Board of Directors. Employee shall devote as much of his time
and attention and energies and services as is reasonably needed for the
fulfillment of such responsibilities and performance of such duties, serve on
such committees to which the Company may appoint him from time to time, exert
his best efforts to improve the business and condition of the Company, and not
be or become employed or engaged in any endeavor or business or business
activity during continuance of his employment.

<PAGE>

2. Stock Bonus: Company shall provide Employee with Warrants redeemable for up
to One Hundred Twenty Nine Thousand shares of the Company's outstanding Common
Stock at a redemption price of $0.10 per share and shall be redeemed on or
before December 31, 2007 and may be redeemed in a share by share fashion,
however the redemption period shall terminate on December 31, 2007, unless
extended by the Company. The number of shares for which the warrants shall issue
shall be determined by the amount of cash compensation if the form of salary and
automobile allowance earned but unpaid on the basis of one share for each dollar
unpaid. All warrants for stock distributed under this Agreement shall be
adjusted to preserve the value of the bonus in the event of a stock dividend,
stock split or reverse stock split, recapitalization, merger, consolidation,
reorganization, cash or property dividend, exchange of shares, repurchase of
shares or any other change in corporate structure of or by Company that in any
such event materially affects the outstanding shares of stock. All stock
redeemed under this Agreement shall be subject to that Shareholders Agreement, a
copy of which is attached hereto as Exhibit "B".

3. Stock Option: Company shall provide employee with an option to purchase Two
Hundred Fifty Thousand (250,000), shares of Common Stock, for an aggregate
purchase price of One Hundred Twenty Five Thousand Dollars ($125,000.00). All
stock purchased under this Option shall be adjusted to preserve the value of the
bonus in the event of a stock dividend, stock split or reverse stock split,
recapitalization, merger, consolidation, reorganization, cash or property
dividend, exchange of shares, repurchase of shares or any other change in the
corporate structure of or by the Company that in any such event materially
affects the outstanding shares of stock. All stock purchased under this Option
shall be subject to the Shareholders Agreement attached hereto and included
herein as Exhibit "B". Said purchase price shall be payable at the closing of
purchase in cash, by certified check, or non-interest bearing Note payable in
not longer than 90 days made payable to the Company. Such option may be
exercised by giving the Company written notice of Employees Exercise of such
option prior to December 31, 2007. If such option is not exercised by December
31 2007, such option shall terminate and be of no further force and effect. The
closing of such purchase and sale shall be held at 1510 Poole Blvd. Yuba City,
California or such other address as the Company might at the time of exercising
of the option be situated and shall be held within thirty (30) days after
Employee gives notice of his intention to exercise the option.

<PAGE>

4. As additional compensation, Employer grants Employee a license to utilize
PresentaPro software in a for profit business for which Employer (Company) will
receive a 10% of gross revenues license fee. This license shall be filly
transferable by sale, gift, bequest or devise.

5. Noncompetition: As partial consideration for the issuance of shares to
Employee described in Section 2. above, Employee will not for a period of two
(2) years from the effective date of this Agreement, or for a period of one (1)
year after Employee's employment with Company has been terminated by either
party, whichever period is longer, either directly or indirectly: (a) Own, have
a proprietary interest of any kind in, or in any way enter into or attempt to
enter into the software development or multi-media publishing business as it
relates to corporate formation or structuring, except as such business may be in
affiliation with Employer: (b) Induce or attempt to persuade any former, current
or future employee, agent, manager, consultant, director, or other participant
in Company's business to terminate such employment or other relationship in
order to enter into any relationship with the Employee, any business
organization in which the employee is a participant in any capacity whatsoever,
or any other business organization in competition with Company's business; or
(c) Use contracts, proprietary information, trade secrets~ confidential
information, customer lists, mailing lists~ goodwill, or other intangible
property used or useful in connection with the Company's business. (d) This
clause not effective in such instances where Employee, after termination of
employment, utilized the PresentaPro software for profit under the license
reservation above.

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement under seal this
___________day of _____________, the year__________.

eTotalSource, Inc.

by
   -------------------------------------
Terry Eilers, Chairman of the Board

----------------------------------------
Michael J. Sullinger, Employee

Attest:
       ---------------------------------

Virgil Baker, SecretaryEXHIBIT 10.5

                          SECURITIES PURCHASE AGREEMENT

      THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of October
6, 2004, by and among ETOTALSOURCE, INC., a Colorado corporation, with
headquarters located at 1510 Poole Boulevard, Yuba City, California 95993 (the
"Company"), and the Buyers listed on Schedule I attached hereto (individually, a
"Buyer" or collectively "Buyers").

                                   WITNESSETH:

      WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D ("Regulation D") as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act");

      WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Buyer(s),
as provided herein, and the Buyer(s) shall purchase up to Three Hundred Fifty
Thousand Dollars ($350,000) of secured convertible debentures (the "Convertible
Debentures"), which shall be convertible into shares of the Company's common
stock, no par value per share (the "Common Stock") (as converted, the
"Conversion Shares") of which One Hundred Seventy Five Thousand Dollars
($175,000) shall be funded on the fifth (5th) business day following the date
hereof (the "First Closing") and One Hundred Seventy Five Thousand Dollars
($175,000) shall be funded on the fifth (5th) business day following the date
the registration statement (the "Registration Statement") is filed, pursuant to
the Investor Registration Rights Agreement dated the date hereof, with the
United States Securities and Exchange Commission (the "SEC") (the "Second
Closing"), (individually referred to as a "Closing" collectively referred to as
the "Closings"), for a total purchase price of up to Three Hundred Fifty
Thousand Dollars ($350,000) (the "Purchase Price") in the respective amounts set
forth opposite each Buyer(s) name on Schedule I (the "Subscription Amount"); and

      WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering an Investor
Registration Rights Agreement substantially in the form attached hereto as
Exhibit A (the "Investor Registration Rights Agreement") pursuant to which the
Company has agreed to provide certain registration rights under the 1933 Act and
the rules and regulations promulgated there under, and applicable state
securities laws; and

      WHEREAS, the aggregate proceeds of the sale of the Convertible Debentures
contemplated hereby shall be held in escrow pursuant to the terms of an Escrow
Agreement substantially in the form attached hereto as Exhibit B.

      WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering Irrevocable Transfer
Agent Instructions substantially in the form attached hereto as Exhibit C (the
"Irrevocable Transfer Agent Instructions").

<PAGE>

      WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Security Agreement
substantially in the form attached hereto as Exhibit D (the "Security
Agreement") pursuant to which the Company has agreed to provide the Buyer a
security interest in Pledged Collateral (as this term is defined in the Security
Agreement to secure Company's obligations under this Agreement, the Convertible
Debenture, the Investor Registration Rights Agreement, the Irrevocable Transfer
Agent Instructions, the Security Agreement or any other obligations of the
Company to the Investor; and

      NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Buyer(s)hereby agree
as follows:

      1. PURCHASE AND SALE OF CONVERTIBLE DEBENTURES.

            (a) Purchase of Convertible Debentures. Subject to the satisfaction
(or waiver) of the terms and conditions of this Agreement, each Buyer agrees,
severally and not jointly, to purchase at Closing (as defined herein below) and
the Company agrees to sell and issue to each Buyer, severally and not jointly,
at Closing, Convertible Debentures in amounts corresponding with the
Subscription Amount set forth opposite each Buyer's name on Schedule I hereto.
Upon execution hereof by a Buyer, the Buyer shall wire transfer the Subscription
Amount set forth opposite his name on Schedule I in same-day funds or a check
payable to "David Gonzalez, Esq., as Escrow Agent for eTotalSource, Inc.
/Cornell Capital Partners, LP", which Subscription Amount shall be held in
escrow pursuant to the terms of the Escrow Agreement and disbursed in accordance
therewith. Notwithstanding the foregoing, a Buyer may withdraw his Subscription
Amount and terminate this Agreement as to such Buyer at any time after the
execution hereof and prior to Closing (as hereinafter defined).

            (b) Closing Date. The First Closing of the purchase and sale of the
Convertible Debentures shall take place at 10:00 a.m. Eastern Standard Time on
the fifth (5th) business day following the date hereof, subject to notification
of satisfaction of the conditions to the First Closing set forth herein and in
Sections 6 and 7 below (or such later date as is mutually agreed to by the
Company and the Buyer(s)) (the "First Closing Date") and the Second Closing of
the purchase and sale of the Convertible Debentures shall take place at 10:00
a.m. Eastern Standard Time on the fifth (5th) business day following the date
the Registration Statement is filed with the SEC, subject to notification of
satisfaction of the conditions to the Second Closing set forth herein and in
Sections 6 and 7 below (or such later date as is mutually agreed to by the
Company and the Buyer(s)) (the "Second Closing Date") (collectively referred to
a the "Closing Dates"). The Closings shall occur on the respective Closing Dates
at the offices of Yorkville Advisors, LLC, 101 Hudson Street, Suite 3700, Jersey
City, New Jersey 07302 (or such other place as is mutually agreed to by the
Company and the Buyer(s)).

            (c) Escrow Arrangements; Form of Payment. Upon execution hereof by
Buyer(s) and pending the Closings, the aggregate proceeds of the sale of the
Convertible Debentures to Buyer(s) pursuant hereto shall be deposited in a
non-interest bearing escrow account with David Gonzalez, Esq., as escrow agent
(the "Escrow Agent"), pursuant to the terms of the Escrow Agreement between the
Company, the Buyer(s) and the Escrow Agent. Subject to the satisfaction of the
terms and conditions of this Agreement, on the Closing Dates, (i) the Escrow
Agent shall deliver to the Company in accordance with the terms of the Escrow
Agreement such aggregate proceeds for the Convertible Debentures to be issued
and sold to such Buyer(s), minus the structuring fees and expenses of Yorkville
Advisors Management, LLC of Ten Thousand Dollars ($10,000) shall be paid
directly from the gross proceeds held in escrow of the First Closing and the
retainer of Kirkpatrick & Lockhart LLP of Twenty-Five Thousand Dollars ($25,000)
shall be paid directly from the gross proceeds of the First Closing by wire
transfer of immediately available funds in accordance with the Company's written
wire instructions, and (ii) the Company shall deliver to each Buyer, Convertible
Debentures which such Buyer(s) is purchasing in amounts indicated opposite such
Buyer's name on Schedule I, duly executed on behalf of the Company.

                                       2
<PAGE>

      2. BUYER'S REPRESENTATIONS AND WARRANTIES.

      Each Buyer represents and warrants, severally and not jointly, that:

            (a) Investment Purpose. Each Buyer is acquiring the Convertible
Debentures and, upon conversion of Convertible Debentures, the Buyer will
acquire the Conversion Shares then issuable, for its own account for investment
only and not with a view towards, or for resale in connection with, the public
sale or distribution thereof, except pursuant to sales registered or exempted
under the 1933 Act; provided, however, that by making the representations
herein, such Buyer reserves the right to dispose of the Conversion Shares at any
time in accordance with or pursuant to an effective registration statement
covering such Conversion Shares or an available exemption under the 1933 Act.

            (b) Accredited Investor Status. Each Buyer is an "Accredited
Investor" as that term is defined in Rule 501(a)(3) of Regulation D.

            (c) Reliance on Exemptions. Each Buyer understands that the
Convertible Debentures are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying in part upon the truth and
accuracy of, and such Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility of
such Buyer to acquire such securities.

            (d) Information. Each Buyer and its advisors (and his or, its
counsel), if any, have been furnished with all materials relating to the
business, finances and operations of the Company and information he deemed
material to making an informed investment decision regarding his purchase of the
Convertible Debentures and the Conversion Shares, which have been requested by
such Buyer. Each Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and its management. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
in Section 3 below. Each Buyer understands that its investment in the
Convertible Debentures and the Conversion Shares involves a high degree of risk.
Each Buyer is in a position regarding the Company, which, based upon employment,
family relationship or economic bargaining power, enabled and enables such Buyer
to obtain information from the Company in order to evaluate the merits and risks
of this investment. Each Buyer has sought such accounting, legal and tax advice,
as it has considered necessary to make an informed investment decision with
respect to its acquisition of the Convertible Debentures and the Conversion
Shares.

                                       3
<PAGE>

            (e) No Governmental Review. Each Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Convertible
Debentures or the Conversion Shares, or the fairness or suitability of the
investment in the Convertible Debentures or the Conversion Shares, nor have such
authorities passed upon or endorsed the merits of the offering of the
Convertible Debentures or the Conversion Shares.

            (f) Transfer or Resale. Each Buyer understands that except as
provided in the Investor Registration Rights Agreement: (i) the Convertible
Debentures have not been and are not being registered under the 1933 Act or any
state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder, or (B) such Buyer
shall have delivered to the Company an opinion of counsel, in a generally
acceptable form, to the effect that such securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration requirements; (ii) any sale of such securities made in
reliance on Rule 144 under the 1933 Act (or a successor rule thereto) ("Rule
144") may be made only in accordance with the terms of Rule 144 and further, if
Rule 144 is not applicable, any resale of such securities under circumstances in
which the seller (or the person through whom the sale is made) may be deemed to
be an underwriter (as that term is defined in the 1933 Act) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder. The Company reserves the right to place stop transfer
instructions against the shares and certificates for the Conversion Shares.

            (g) Legends. Each Buyer understands that the certificates or other
instruments representing the Convertible Debentures and or the Conversion Shares
shall bear a restrictive legend in substantially the following form (and a stop
transfer order may be placed against transfer of such stock certificates):

          THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
          REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,  OR
          APPLICABLE  STATE  SECURITIES LAWS. THE SECURITIES HAVE BEEN
          ACQUIRED SOLELY FOR INVESTMENT  PURPOSES AND NOT WITH A VIEW
          TOWARD  RESALE  AND  MAY  NOT BE  OFFERED  FOR  SALE,  SOLD,
          TRANSFERRED  OR  ASSIGNED  IN THE  ABSENCE  OF AN  EFFECTIVE
          REGISTRATION   STATEMENT  FOR  THE   SECURITIES   UNDER  THE
          SECURITIES  ACT OF 1933,  AS AMENDED,  OR  APPLICABLE  STATE
          SECURITIES  LAWS,  OR AN OPINION OF COUNSEL,  IN A GENERALLY
          ACCEPTABLE  FORM,  THAT  REGISTRATION  IS NOT REQUIRED UNDER
          SAID ACT OR APPLICABLE STATE SECURITIES LAWS.

                                       4
<PAGE>

The legend set forth above shall be removed and the Company within two (2)
business days shall issue a certificate without such legend to the holder of the
Conversion Shares upon which it is stamped, if, unless otherwise required by
state securities laws, (i) in connection with a sale transaction, provided the
Conversion Shares are registered under the 1933 Act or (ii) in connection with a
sale transaction, after such holder provides the Company with an opinion of
counsel, which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public
sale, assignment or transfer of the Conversion Shares may be made without
registration under the 1933 Act.

            (h) Authorization, Enforcement. This Agreement has been duly and
validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable in accordance with its
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.

            (i) Receipt of Documents. Each Buyer and his or its counsel has
received and read in their entirety: (i) this Agreement and each representation,
warranty and covenant set forth herein, the Security Agreement, the Investor
Registration Rights Agreement, the Escrow Agreement, and the Irrevocable
Transfer Agent Instructions; (ii) all due diligence and other information
necessary to verify the accuracy and completeness of such representations,
warranties and covenants; (iii) the Company's Form 10-KSB for the fiscal year
ended December 31, 2003; (iv) the Company's Form 10-QSB for the fiscal quarter
ended June 30, 2004 and (v) answers to all questions each Buyer submitted to the
Company regarding an investment in the Company; and each Buyer has relied on the
information contained therein and has not been furnished any other documents,
literature, memorandum or prospectus.

            (j) Due Formation of Corporate and Other Buyers. If the Buyer(s) is
a corporation, trust, partnership or other entity that is not an individual
person, it has been formed and validly exists and has not been organized for the
specific purpose of purchasing the Convertible Debentures and is not prohibited
from doing so.

            (k) No Legal Advice From the Company. Each Buyer acknowledges, that
it had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with his or its own legal counsel and investment
and tax advisors. Each Buyer is relying solely on such counsel and advisors and
not on any statements or representations of the Company or any of its
representatives or agents for legal, tax or investment advice with respect to
this investment, the transactions contemplated by this Agreement or the
securities laws of any jurisdiction.

      3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

      The Company represents and warrants to each of the Buyers that, except as
set forth in the SEC Documents (as defined herein):

                                       5
<PAGE>

            (a) Organization and Qualification. The Company and its subsidiaries
are corporations duly organized and validly existing in good standing under the
laws of the jurisdiction in which they are incorporated, and have the requisite
corporate power to own their properties and to carry on their business as now
being conducted. Each of the Company and its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries taken as a whole.

            (b) Authorization, Enforcement, Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter into
and perform this Agreement, the Security Agreement, the Investor Registration
Rights Agreement, the Escrow Agreement, the Irrevocable Transfer Agent
Instructions, and any related agreements, and to issue the Convertible
Debentures and the Conversion Shares in accordance with the terms hereof and
thereof, (ii) the execution and delivery of this Agreement, the Security
Agreement, the Investor Registration Rights Agreement, the Escrow Agreement, the
Irrevocable Transfer Agent Instructions and any related agreements by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, including, without limitation, the issuance of the Convertible
Debentures and the reservation for issuance and the issuance of the Conversion
Shares issuable upon conversion or exercise thereof, have been duly authorized
by the Company's Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors or its stockholders, (iii) this
Agreement, the Security Agreement, the Investor Registration Rights Agreement,
the Escrow Agreement, the Irrevocable Transfer Agent Instructions and any
related agreements have been duly executed and delivered by the Company, (iv)
this Agreement, the Security Agreement, the Investor Registration Rights
Agreement, the Escrow Agreement, the Irrevocable Transfer Agent Instructions and
any related agreements constitute the valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies. The authorized officer of the Company executing this
Agreement, the Security Agreement, the Investor Registration Rights Agreement,
the Escrow Agreement, the Irrevocable Transfer Agent Instructions and any
related agreements knows of no reason why the Company cannot file the
registration statement as required under the Investor Registration Rights
Agreement or perform any of the Company's other obligations under such
documents.

            (c) Capitalization. The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock, no par value per share and no
shares of Preferred Stock. As of the date hereof, the Company has ____________
shares of Common Stock issued and outstanding. All of such outstanding shares
have been validly issued and are fully paid and nonassessable. Except as
disclosed in the SEC Documents (as defined in Section 3(f)), no shares of Common
Stock are subject to preemptive rights or any other similar rights or any liens
or encumbrances suffered or permitted by the Company. Except as disclosed in the
SEC Documents, as of the date of this Agreement, (i) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, (ii) there are no outstanding debt
securities and (iii) there are no agreements or arrangements under which the
Company or any of its subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act (except pursuant to the Registration Rights
Agreement) and (iv) there are no outstanding registration statements and there
are no outstanding comment letters from the SEC or any other regulatory agency.
There are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Convertible Debentures
as described in this Agreement. The Company has furnished to the Buyer true and
correct copies of the Company's Articles of Incorporation, as amended and as in
effect on the date hereof (the "Articles of Incorporation"), and the Company's
By-laws, as in effect on the date hereof (the "By-laws"), and the terms of all
securities convertible into or exercisable for Common Stock and the material
rights of the holders thereof in respect thereto other than stock options issued
to employees and consultants.

                                       6
<PAGE>

            (d) Issuance of Securities. The Convertible Debentures are duly
authorized and, upon issuance in accordance with the terms hereof, shall be duly
issued, fully paid and nonassessable, are free from all taxes, liens and charges
with respect to the issue thereof. The Conversion Shares issuable upon
conversion of the Convertible Debentures have been duly authorized and reserved
for issuance. Upon conversion or exercise in accordance with the Convertible
Debentures the Conversion Shares will be duly issued, fully paid and
nonassessable.

            (e) No Conflicts. Except as disclosed in the SEC Documents, the
execution, delivery and performance of this Agreement, the Security Agreement,
the Investors Registration Rights Agreement, the Escrow Agreement and the
Irrevocable Transfer Agent Instructions by the Company and the consummation by
the Company of the transactions contemplated hereby will not (i) result in a
violation of the Articles of Incorporation, any certificate of designations of
any outstanding series of preferred stock of the Company or the By-laws or (ii)
conflict with or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations and the
rules and regulations of The National Association of Securities Dealers Inc.'s
OTC Bulletin Board on which the Common Stock is quoted) applicable to the
Company or any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries is bound or affected. Except as disclosed in
the SEC Documents, neither the Company nor its subsidiaries is in violation of
any term of or in default under its Articles of Incorporation or By-laws or
their organizational charter or by-laws, respectively, or any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or
order or any statute, rule or regulation applicable to the Company or its
subsidiaries. The business of the Company and its subsidiaries is not being
conducted, and shall not be conducted in violation of any material law,
ordinance, or regulation of any governmental entity. Except as specifically
contemplated by this Agreement and as required under the 1933 Act and any
applicable state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under or contemplated by this Agreement or the Registration
Rights Agreement in accordance with the terms hereof or thereof. Except as
disclosed in the SEC Documents, all consents, authorizations, orders, filings
and registrations which the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the date
hereof. The Company and its subsidiaries are unaware of any facts or
circumstance, which might give rise to any of the foregoing.

                                       7
<PAGE>

            (f) SEC Documents: Financial Statements. Since January 1, 2002, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC under of the Securities Exchange Act of
1934, as amended (the "1934 Act") (all of the foregoing filed prior to the date
hereof or amended after the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein, being hereinafter referred to as the "SEC Documents"). The
Company has delivered to the Buyers or their representatives, or made available
through the SEC's website at http://www.sec.gov., true and complete copies of
the SEC Documents. As of their respective dates, the financial statements of the
Company disclosed in the SEC Documents (the "Financial Statements") complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such Financial Statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and, fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyer which is not included in the SEC Documents, including, without
limitation, information referred to in this Agreement, contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.

            (g) 10(b)-5. The SEC Documents do not include any untrue statements
of material fact, nor do they omit to state any material fact required to be
stated therein necessary to make the statements made, in light of the
circumstances under which they were made, not misleading.

            (h) Absence of Litigation. Except as disclosed in the SEC Documents,
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending against or affecting the Company, the Common Stock or any of the
Company's subsidiaries, wherein an unfavorable decision, ruling or finding would
(i) have a material adverse effect on the transactions contemplated hereby (ii)
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, this Agreement or any of the
documents contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents, have a material adverse effect on the business, operations,
properties, financial condition or results of operations of the Company and its
subsidiaries taken as a whole.

                                       8
<PAGE>

            (i) Acknowledgment Regarding Buyer's Purchase of the Convertible
Debentures. The Company acknowledges and agrees that the Buyer(s) is acting
solely in the capacity of an arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that the Buyer(s) is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any advice given by the Buyer(s) or any
of their respective representatives or agents in connection with this Agreement
and the transactions contemplated hereby is merely incidental to such Buyer's
purchase of the Convertible Debentures or the Conversion Shares. The Company
further represents to the Buyer that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation by the Company and
its representatives.

            (j) No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 1933 Act) in connection with the offer or sale of the
Convertible Debentures or the Conversion Shares.

            (k) No Integrated Offering. 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 require registration of the
Convertible Debentures or the Conversion Shares under the 1933 Act or cause this
offering of the Convertible Debentures or the Conversion Shares to be integrated
with prior offerings by the Company for purposes of the 1933 Act.

            (l) Employee Relations. Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened. None of the
Company's or its subsidiaries' employees is a member of a union and the Company
and its subsidiaries believe that their relations with their employees are good.

            (m) Intellectual Property Rights. The Company and its subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. The Company and its subsidiaries do not have any
knowledge of any infringement by the Company or its subsidiaries of trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service mark registrations, trade secret or other
similar rights of others, and, to the knowledge of the Company there is no
claim, action or proceeding being made or brought against, or to the Company's
knowledge, being threatened against, the Company or its subsidiaries regarding
trademark, trade name, patents, patent rights, invention, copyright, license,
service names, service marks, service mark registrations, trade secret or other
infringement; and the Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.

                                       9
<PAGE>

            (n) Environmental Laws. The Company and its subsidiaries are (i) in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval.

            (o) Title. Any real property and facilities held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries.

            (p) Insurance. The Company and each of its subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its subsidiaries are
engaged. Neither the Company nor any such subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
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 at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its subsidiaries, taken as a whole.

            (q) Regulatory Permits. The Company and its subsidiaries possess all
material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.

            (r) Internal Accounting Controls. The Company and each of its
subsidiaries maintain 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 generally accepted accounting principles and to maintain asset
accountability, and (iii) the recorded amounts for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.

            (s) No Material Adverse Breaches, etc. Except as set forth in the
SEC Documents, neither the Company nor any of its subsidiaries is subject to any
charter, corporate or other legal restriction, or any judgment, decree, order,
rule or regulation which in the judgment of the Company's officers has or is
expected in the future to have a material adverse effect on the business,
properties, operations, financial condition, results of operations or prospects
of the Company or its subsidiaries. Except as set forth in the SEC Documents,
neither the Company nor any of its subsidiaries is in breach of any contract or
agreement which breach, in the judgment of the Company's officers, has or is
expected to have a material adverse effect on the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its subsidiaries.

                                       10
<PAGE>

            (t) Tax Status. Except as set forth in the SEC Documents, the
Company and each of its subsidiaries has made and filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject and (unless and only to the extent that the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) has paid
all taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.

            (u) Certain Transactions. Except as set forth in the SEC Documents,
and except for arm's length transactions pursuant to which the Company makes
payments in the ordinary course of business upon terms no less favorable than
the Company could obtain from third parties and other than the grant of stock
options disclosed in the SEC Documents, none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company (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 corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.

            (v) Fees and Rights of First Refusal. The Company is not obligated
to offer the securities offered hereunder on a right of first refusal basis or
otherwise to any third parties including, but not limited to, current or former
shareholders of the Company, underwriters, brokers, agents or other third
parties.

      4. COVENANTS.

            (a) Best Efforts. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.

            (b) Form D. The Company agrees to file a Form D with respect to the
Conversion Shares as required under Regulation D and to provide a copy thereof
to each Buyer promptly after such filing. The Company shall, on or before the
Closing Date, take such action as the Company shall reasonably determine is
necessary to qualify the Conversion Shares, or obtain an exemption for the
Conversion Shares for sale to the Buyers at the Closing pursuant to this
Agreement under applicable securities or "Blue Sky" laws of the states of the
United States, and shall provide evidence of any such action so taken to the
Buyers on or prior to the Closing Date.

                                       11
<PAGE>

            (c) Reporting Status. Until the earlier of (i) the date as of which
the Buyer(s) may sell all of the Conversion Shares without restriction pursuant
to Rule 144(k) promulgated under the 1933 Act (or successor thereto), or (ii)
the date on which (A) the Buyer(s) shall have sold all the Conversion Shares and
(B) none of the Convertible Debentures are outstanding (the "Registration
Period"), the Company shall file in a timely manner all reports required to be
filed with the SEC pursuant to the 1934 Act and the regulations of the SEC
thereunder, and the Company shall not terminate its status as an issuer required
to file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would otherwise permit such termination.

            (d) Use of Proceeds. The Company will use the proceeds from the sale
of the Convertible Debentures for general corporate and working capital
purposes.

            (e) Reservation of Shares. The Company shall take all action
reasonably necessary to at all times have authorized, and reserved for the
purpose of issuance, such number of shares of Common Stock as shall be necessary
to effect the issuance of the Conversion Shares. If at any time the Company does
not have available such shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all of the Conversion Shares of the
Company shall call and hold a special meeting of the shareholders within thirty
(30) days of such occurrence, for the sole purpose of increasing the number of
shares authorized. The Company's management shall recommend to the shareholders
to vote in favor of increasing the number of shares of Common Stock authorized.
Management shall also vote all of its shares in favor of increasing the number
of authorized shares of Common Stock.

            (f) Listings or Quotation. The Company shall promptly secure the
listing or quotation of the Conversion Shares upon each national securities
exchange, automated quotation system or The National Association of Securities
Dealers Inc.'s Over-The-Counter Bulletin Board ("OTCBB") or other market, if
any, upon which shares of Common Stock are then listed or quoted (subject to
official notice of issuance) and shall use its best efforts to maintain, so long
as any other shares of Common Stock shall be so listed, such listing of all
Conversion Shares from time to time issuable under the terms of this Agreement.
The Company shall maintain the Common Stock's authorization for quotation on the
OTCBB.

            (g) Fees and Expenses. Each of the Company and the Buyer(s) shall
pay all costs and expenses incurred by such party in connection with the
negotiation, investigation, preparation, execution and delivery of this
Agreement, the Escrow Agreement, the Investor Registration Rights Agreement, the
Security Agreement and the Irrevocable Transfer Agent Instructions. The Buyer(s)
shall be entitled to a ten percent (10%) discount on the Purchase Price.

            (h) The costs and expenses of the Buyer(s) and the structuring fees
of Yorkville Advisors Management, LLC of Ten Thousand Dollars ($10,000) shall be
paid directly from the proceeds of the First Closing and the retainer of
Kirkpatrick & Lockhart LLP of Twenty-Five Thousand Dollars ($25,000), of which
Twelve Thousand Five Hundred Dollars ($12,500) shall be paid for by the Company
directly from the gross proceeds of the First Closing and Twelve Thousand Five
Hundred Dollars ($12,500) shall be paid for by the Company directly from the
gross proceeds of the Second Closing.

                                       12
<PAGE>

            (i) Corporate Existence. So long as any of the Convertible
Debentures remain outstanding, the Company shall not directly or indirectly
consummate any merger, reorganization, restructuring, reverse stock split
consolidation, sale of all or substantially all of the Company's assets or any
similar transaction or related transactions (each such transaction, an
"Organizational Change") unless, prior to the consummation an Organizational
Change, the Company obtains the written consent of each Buyer. In any such case,
the Company will make appropriate provision with respect to such holders' rights
and interests to insure that the provisions of this Section 4(h) will thereafter
be applicable to the Convertible Debentures.

            (j) Transactions With Affiliates. So long as any Convertible
Debentures are outstanding, the Company shall not, and shall cause each of its
subsidiaries not to, enter into, amend, modify or supplement, or permit any
subsidiary to enter into, amend, modify or supplement any agreement,
transaction, commitment, or arrangement with any of its or any subsidiary's
officers, directors, person who were officers or directors at any time during
the previous two (2) years, stockholders who beneficially own five percent (5%)
or more of the Common Stock, or Affiliates (as defined below) or with any
individual related by blood, marriage, or adoption to any such individual or
with any entity in which any such entity or individual owns a five percent (5%)
or more beneficial interest (each a "Related Party"), except for (a) customary
employment arrangements and benefit programs on reasonable terms, (b) any
investment in an Affiliate of the Company, (c) any agreement, transaction,
commitment, or arrangement on an arms-length basis on terms no less favorable
than terms which would have been obtainable from a person other than such
Related Party, (d) any agreement transaction, commitment, or arrangement which
is approved by a majority of the disinterested directors of the Company, for
purposes hereof, any director who is also an officer of the Company or any
subsidiary of the Company shall not be a disinterested director with respect to
any such agreement, transaction, commitment, or arrangement. "Affiliate" for
purposes hereof means, with respect to any person or entity, another person or
entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity, or
(iv) shares common control with that person or entity. "Control" or "controls"
for purposes hereof means that a person or entity has the power, direct or
indirect, to conduct or govern the policies of another person or entity.

            (k) Transfer Agent. The Company covenants and agrees that, in the
event that the Company's agency relationship with the transfer agent should be
terminated for any reason prior to a date which is two (2) years after the
Closing Date, the Company shall immediately appoint a new transfer agent and
shall require that the new transfer agent execute and agree to be bound by the
terms of the Irrevocable Transfer Agent Instructions.

            (l) Restriction on Issuance of the Capital Stock. So long as any
Convertible Debentures are outstanding, the Company shall not, without the prior
written consent of the Buyer(s), issue or sell shares of Common Stock or
Preferred Stock (i) without consideration or for a consideration per share less
than the Bid Price of the Common Stock determined immediately prior to its
issuance, (ii) any warrant, option, right, contract, call, or other security
instrument granting the holder thereof, the right to acquire Common Stock
without consideration or for a consideration less than such Common Stock's Bid
Price value determined immediately prior to it's issuance, (iii) enter into any
security instrument granting the holder a security interest in any and all
assets of the Company, or (iv) file any registration statement on Form S-8.

                                       13
<PAGE>

            (m) Non-Disclosure of Non-Public Information.

                  (i) The Company shall not disclose non-public information to
the Buyer(s), its advisors, or its representatives, unless prior to disclosure
of such information the Company identifies such information as being non-public
information and provides the Buyer(s), such advisors and representatives with
the opportunity to accept or refuse to accept such non-public information for
review. The Company may, as a condition to disclosing any non-public information
hereunder, require the Buyer(s)' advisors and representatives to enter into a
confidentiality agreement in form reasonably satisfactory to the Company and the
Buyer(s).

                  (ii) Nothing herein shall require the Company to disclose
non-public information to the Buyer(s) or its advisors or representatives, and
the Company represents that it does not disseminate non-public information to
any investors who purchase stock in the Company in a public offering, to money
managers or to securities analysts, provided, however, that notwithstanding
anything herein to the contrary, the Company will, as hereinabove provided,
immediately notify the advisors and representatives of the Investor and, if any,
underwriters, of any event or the existence of any circumstance (without any
obligation to disclose the specific event or circumstance) of which it becomes
aware, constituting non-public information (whether or not requested of the
Company specifically or generally during the course of due diligence by such
persons or entities), which, if not disclosed in the prospectus included in the
Registration Statement would cause such prospectus to include a material
misstatement or to omit a material fact required to be stated therein in order
to make the statements, therein, in light of the circumstances in which they
were made, not misleading. Nothing contained in this Section 4(m) shall be
construed to mean that such persons or entities other than the Buyer(s) (without
the written consent of the Buyer(s) prior to disclosure of such information) may
not obtain non-public information in the course of conducting due diligence in
accordance with the terms of this Agreement and nothing herein shall prevent any
such persons or entities from notifying the Company of their opinion that based
on such due diligence by such persons or entities, that the Registration
Statement contains an untrue statement of material fact or omits a material fact
required to be stated in the Registration Statement or necessary to make the
statements contained therein, in light of the circumstances in which they were
made, not misleading.

      5. TRANSFER AGENT INSTRUCTIONS.

      The Company shall issue the Irrevocable Transfer Agent Instructions to its
transfer agent irrevocably appointing David Gonzalez, Esq. as its agent for
purpose of having certificates issued, registered in the name of the Buyer(s) or
its respective nominee(s), for the Conversion Shares representing such amounts
of Convertible Debentures as specified from time to time by the Buyer(s) to the
Company upon conversion of the Convertible Debentures, for interest owed
pursuant to the Convertible Debenture, and for any and all Liquidated Damages
(as this term is defined in the Investor Registration Rights Agreement).
Yorkville Advisors Management, LLC shall be paid a cash fee of Fifty Dollars
($50) for every occasion they act pursuant to the Irrevocable Transfer Agent
Instructions. The Company shall not change its transfer agent without the
express written consent of the Buyer(s), which may be withheld by the Buyer(s)
in its sole discretion. Prior to registration of the Conversion Shares under the
1933 Act, all such certificates shall bear the restrictive legend specified in
Section 2(g) of this Agreement. The Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section 5,
and stop transfer instructions to give effect to Section 2(g) hereof (in the
case of the Conversion Shares prior to registration of such shares under the
1933 Act) will be given by the Company to its transfer agent and that the
Conversion Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
Investor Registration Rights Agreement. Nothing in this Section 5 shall affect
in any way the Buyer's obligations and agreement to comply with all applicable
securities laws upon resale of Conversion Shares. If the Buyer(s) provides the
Company with an opinion of counsel, in form, scope and substance customary for
opinions of counsel in comparable transactions to the effect that registration
of a resale by the Buyer(s) of any of the Conversion Shares is not required
under the 1933 Act, the Company shall within two (2) business days instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by the Buyer. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the Buyer by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 5 will be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of this Section
5, that the Buyer(s) shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic loss and
without any bond or other security being required.

                                       14
<PAGE>

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

      The obligation of the Company hereunder to issue and sell the Convertible
Debentures to the Buyer(s) at the Closings is subject to the satisfaction, at or
before the Closing Dates, of each of the following conditions, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion:

            (a) Each Buyer shall have executed this Agreement, the Security
Agreement, the Escrow Agreement, the Investor Registration Rights Agreement and
the Irrevocable Transfer Agent Instructions and delivered the same to the
Company.

            (b) The Buyer(s) shall have delivered to the Escrow Agent the
Purchase Price for Convertible Debentures in respective amounts as set forth
next to each Buyer as outlined on Schedule I attached hereto and the Escrow
Agent shall have delivered the net proceeds to the Company by wire transfer of
immediately available U.S. funds pursuant to the wire instructions provided by
the Company.

            (c) The representations and warranties of the Buyer(s) shall be true
and correct in all material respects as of the date when made and as of the
Closing Dates as though made at that time (except for representations and
warranties that speak as of a specific date), and the Buyer(s) shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Buyer(s) at or prior to the Closing Dates.

                                       15
<PAGE>

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

      The obligation of the Buyer(s) hereunder to purchase the Convertible
Debentures at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions:

            (a) The Company shall have executed this Agreement, the Security
Agreement, the Convertible Debenture, the Escrow Agreement, the Irrevocable
Transfer Instructions and the Investor Registration Rights Agreement and
delivered the same to the Buyer(s).

            (b) The Common Stock shall be authorized for quotation on the OTCBB,
trading in the Common Stock shall not have been suspended for any reason and all
of the Conversion Shares issuable upon conversion of the Convertible Debentures
shall be approved the OTCBB.

            (c) The representations and warranties of the Company shall be true
and correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
3 above, in which case, such representations and warranties shall be true and
correct without further qualification) as of the date when made and as of the
Closing Dates as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Dates. If requested
by the Buyer, the Buyer shall have received a certificate, executed by the
President of the Company, dated as of the Closing Dates, to the foregoing effect
and as to such other matters as may be reasonably requested by the Buyer
including, without limitation an update as of the Closing Dates regarding the
representation contained in Section 3(c) above.

            (d) The Company shall have executed and delivered to the Buyer(s)
the Convertible Debentures in the respective amounts set forth opposite each
Buyer(s) name on Schedule I attached hereto.

            (e) The Buyer(s) shall have received an opinion of counsel from
Kirkpatrick & Lockhart, LLP in a form satisfactory to the Buyer(s).

            (f) The Company shall have provided to the Buyer(s) a Certificate of
Good Standing from the Secretary of State from the state in which the Company is
incorporated.

            (g) As of the Closing Date, the Company shall have reserved out of
its authorized and unissued Common Stock, solely for the purpose of effecting
the conversion of the Convertible Debentures, shares of Common Stock to effect
the conversion of all of the Conversion Shares then outstanding.

            (h) The Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to the Buyer, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.

                                       16
<PAGE>

            (i) The Company shall have provided to the Buyer(s) an
acknowledgement, to the satisfaction of the Investor, from Gordon, Hughes and
Banks LLP as to its ability to provide all consents required in order to file a
registration statement in connection with this transaction.

            (j) The Company shall have filed a form UCC-1 or such other forms as
may be required to perfect the Buyer's interest in the Pledged Property and
Pledged Collateral as detailed in the Security Agreement and provided proof of
such filing to the Buyer(s).

      8. INDEMNIFICATION.

            (a) In consideration of the Buyer's execution and delivery of this
Agreement and acquiring the Convertible Debentures and the Conversion Shares
hereunder, and in addition to all of the Company's other obligations under this
Agreement, the Company shall defend, protect, indemnify and hold harmless the
Buyer(s) and each other holder of the Convertible Debentures and the Conversion
Shares, and all of their officers, directors, employees and agents (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Buyer Indemnitees") from and
against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Buyer Indemnitee is a party to the action for
which indemnification hereunder is sought), and including reasonable attorneys'
fees and disbursements (the "Indemnified Liabilities"), incurred by the Buyer
Indemnitees or any of them as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in this Agreement, the Convertible Debentures or the Investor
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement, or the Investor
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, or (c) any cause of action, suit or claim
brought or made against such Indemnitee and arising out of or resulting from the
execution, delivery, performance or enforcement of this Agreement or any other
instrument, document or agreement executed pursuant hereto by any of the
Indemnities, any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Convertible
Debentures or the status of the Buyer or holder of the Convertible Debentures
the Conversion Shares, as a Buyer of Convertible Debentures in the Company. To
the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities, which is permissible
under applicable law.

            (b) In consideration of the Company's execution and delivery of this
Agreement, and in addition to all of the Buyer's other obligations under this
Agreement, the Buyer shall defend, protect, indemnify and hold harmless the
Company and all of its officers, directors, employees and agents (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Company Indemnitees") from
and against any and all Indemnified Liabilities incurred by the Indemnitees or
any of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Buyer(s) in this Agreement, any instrument or document contemplated hereby or
thereby executed by the Buyer, (b) any breach of any covenant, agreement or
obligation of the Buyer(s) contained in this Agreement, the Investor
Registration Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby executed by the Buyer, or (c) any cause of
action, suit or claim brought or made against such Company Indemnitee based on
material misrepresentations or due to a material breach and arising out of or
resulting from the execution, delivery, performance or enforcement of this
Agreement, the Investor Registration Rights Agreement or any other instrument,
document or agreement executed pursuant hereto by any of the Company
Indemnities. To the extent that the foregoing undertaking by each Buyer may be
unenforceable for any reason, each Buyer shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.

                                       17
<PAGE>

      9. GOVERNING LAW: MISCELLANEOUS.

            (a) Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Colorado without regard
to the principles of conflict of laws. The parties further agree that any action
between them shall be heard in Hudson County, New Jersey, and expressly consent
to the jurisdiction and venue of the Superior Court of New Jersey, sitting in
Hudson County and the United States District Court for the District of New
Jersey sitting in Newark, New Jersey for the adjudication of any civil action
asserted pursuant to this Paragraph.

            (b) Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which 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. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.

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

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

            (e) Entire Agreement, Amendments. This Agreement supersedes all
other prior oral or written agreements between the Buyer(s), the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.

                                       18
<PAGE>

            (f) Notices. Any notices, consents, waivers, or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon confirmation of receipt, when sent by facsimile;
(iii) three (3) days after being sent by U.S. certified mail, return receipt
requested, or (iv) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:

If to the Company, to:          eTotalSource, Inc.
                                1510 Poole Boulevard
                                Yuba City, California 95993
                                Attention:  Michael Sullinger, President
                                Telephone:  (530) 751-9615
                                Facsimile:  (530) 674-4624

With a copy to:                 Kirkpatrick & Lockhart LLP
                                201 South Biscayne Boulevard - Suite 2000
                                Miami, Florida  33131-2399
                                Attention:  Clayton E. Parker, Esq.
                                Telephone:  (305) 539-3300
                                Facsimile:  (305) 358-7095

If to the Transfer Agent, to:   United Stock Transfer, Inc.
                                3615 South Huron Street, Suite 104
                                Englewood, Colorado 80110
                                Attention:  Laura Bryan
                                Telephone:  (303) 783-2834
                                Facsimile:  (303) 783-2147

With Copy to:                   David Gonzalez, Esq.
                                101 Hudson Street - Suite 3700
                                Jersey City, New Jersey 07302
                                Telephone:  (201) 985-8300
                                Facsimile:  (201) 985-8266

      If to the Buyer(s), to its address and facsimile number on Schedule I,
with copies to the Buyer's counsel as set forth on Schedule I. Each party shall
provide five (5) days' prior written notice to the other party of any change in
address or facsimile number.

            (g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other party
hereto.

            (h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

                                       19
<PAGE>

            (i) Survival. Unless this Agreement is terminated under Section
9(l), the representations and warranties of the Company and the Buyer(s)
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4, 5 and 9, and the indemnification provisions set forth in Section 8,
shall survive the Closing for a period of two (2) years following the date on
which the Convertible Debentures are converted in full. The Buyer(s) shall be
responsible only for its own representations, warranties, agreements and
covenants hereunder.

            (j) Publicity. The Company and the Buyer(s) shall have the right to
approve, before issuance any press release or any other public statement with
respect to the transactions contemplated hereby made by any party; provided,
however, that the Company shall be entitled, without the prior approval of the
Buyer(s), to issue any press release or other public disclosure with respect to
such transactions required under applicable securities or other laws or
regulations (the Company shall use its best efforts to consult the Buyer(s) in
connection with any such press release or other public disclosure prior to its
release and Buyer(s) shall be provided with a copy thereof upon release
thereof).

            (k) Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

            (l) Termination. In the event that the Closing shall not have
occurred with respect to the Buyers on or before five (5) business days from the
date hereof due to the Company's or the Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the non-breaching party's
failure to waive such unsatisfied condition(s)), the non-breaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, that if this Agreement is terminated by the
Company pursuant to this Section 9(l), the Company shall remain obligated to
reimburse the Buyer(s) for the fees and expenses of Yorkville Advisors
Management, LLC described in Section 4(g) above.

            (m) No Strict Construction. 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.

                    [REMAINDER PAGE INTENTIONALLY LEFT BLANK]

                                       20
<PAGE>

      IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.

                                            COMPANY:
                                            ETOTALSOURCE, INC.

                                            By: /s/ Michael Sullinger
                                                ---------------------
                                            Name:  Michael Sullinger
                                            Title: Chief Operating Officer

                                       21
<PAGE>

                                                                       EXHIBIT A

                 FORM OF INVESTOR REGISTRATION RIGHTS AGREEMENT

<PAGE>
                                                                       EXHIBIT B

                            FORM OF ESCROW AGREEMENT

<PAGE>

                                                                       EXHIBIT C

                           TRANSFER AGENT INSTRUCTIONS

<PAGE>

                                   SCHEDULE I

                               SCHEDULE OF BUYERS

<TABLE>
<CAPTION>

                                                                             Address/Facsimile             Amount of
               Name                       Signature                           Number of Buyer             Subscription
----------------------------    --------------------------------     --------------------------------     -------------
<S>                             <C>                                  <C>                                  <C>
Cornell Capital Partners, LP    By:      Yorkville Advisors, LLC     101 Hudson Street - Suite 3700       $     350,000
                                Its:     General Partner             Jersey City, NJ  07303
                                                                     Facsimile:  (201) 985-8266

                                By:
                                   ----------------------------
                                Name:    Mark A. Angelo
                                Its:     Portfolio Manager

Buyers Counsel:                 David Gonzalez, Esq.
                                101 Hudson Street - Suite 3700
                                Jersey City, New Jersey 07302
                                Telephone:  (201) 985-8300
                                Facsimile:  (201) 985-8266
</TABLE>

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