Document:

Exhibit 10.38

                          REGISTRATION RIGHTS AGREEMENT

         REGISTRATION RIGHTS AGREEMENT dated this 16th day of November, 2001
(this "Agreement"), between Diamond Entertainment Corporation, a New Jersey
corporation with principal executive offices located at 800 Tucker Lane, Walnut,
California 91789 (the "Company"), and the other signatories hereto (the "Initial
Investors").

W I T N E S S E T H

         WHEREAS, upon the terms and subject to the conditions of the Securities
Purchase Agreement dated as of a date even herewith, between the Initial
Investors and the Company (the "Securities Purchase Agreement"), the Company has
agreed to issue and sell to the Initial Investors (i) 5 shares of Series B
Convertible Preferred Stock, no par value ("Preferred Stock") which, upon the
terms and subject to the conditions set forth in the Articles of Amendment of
the Articles of Incorporation of the Company designating the rights, preferences
and limitations of the Series B Convertible Preferred Stock (the "Certificate of
Designations") are convertible into shares of common stock, no par value, of the
Company ("Common Stock") and (ii) warrants ("Warrants") to purchase 750,000
shares of Common Stock.

         WHEREAS, to induce the Initial Investors to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide with respect to
the Common Stock issued or issuable upon conversion of the Preferred Stock and
exercise of the Warrants certain registration rights under the Securities Act
(as hereinafter defined);

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:

         1.       Definitions.

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

                  (i) "Affiliate" of any specified Person means any other Person
         who directly, or indirectly through one or more intermediaries, is in
         control of, is controlled by, or is under common control with, such
         specified Person. For purposes of this definition, control of a Person
         means the power, directly or indirectly, to direct or cause the
         direction of the management and policies of such Person whether by
         contract, securities, ownership or otherwise; and the terms
         "controlling" and "controlled" have the respective meanings correlative
         to the foregoing.

                  (ii) "Commission" means the Securities and Exchange
Commission.

                  (iii) "Exchange Act" means the Securities Exchange Act of
         1934, as amended, and the rules and regulations of the Commission
         thereunder, or any similar successor statute.

                  (iv) "Investors" means the Initial Investors and any
         transferee or assignee of Registrable Securities who agrees to become
         bound by all of the terms and provisions of this Agreement in
         accordance with Section 8 hereof.

                  (v) "Market Price" on any date of determination means the
         closing bid price of a share of Common Stock on such day as reported on
         the over the counter Bulletin Board ("OTC"BB") or, if such security is
         not listed or admitted to trading on the OTC:BB, on any national
         security exchange or quotation system on which such security is quoted
         or listed or admitted to trading, or, if not quoted or listed or
         admitted to trading on any securities exchange or quotation system, the
         closing bid price of such security on the pink-sheets market on the day
         in question as reported by the National Quotation Bureau Incorporated,
         or a similar generally accepted reporting service, or if not so
         available, in such manner as furnished by any NASDAQ member firm of the
         National Association of Securities Dealers, Inc. selected from time to
         time by the Board of Directors of the Company for that purpose, or a
         price determined in good faith by the Board of Directors of the Company
         as being equal to the fair market value thereof, as the case may be.

                  (vi) "Person" means any individual, partnership, corporation,
         limited liability company, joint stock company, association, trust,
         unincorporated organization, or a government or agency or political
         subdivision thereof.

                  (vii) "Prospectus" means the prospectus (including" without
         limitation, any preliminary prospectus and any final prospectus filed
         pursuant to Rule 424(b) under the Securities Act, including any
         prospectus that discloses information previously omitted from a
         prospectus filed as part of an effective registration statement in
         reliance on Rule 430A under the Securities Act) included in the
         Registration Statement, 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 by
         all other amendments and supplements to such prospectus, including all
         material incorporated by reference in such prospectus and all documents
         filed after the date of such prospectus by the Company under the
         Exchange Act and incorporated by reference therein.

                  (viii) "Registrable Securities" means the Common Stock issued
         or issuable (i) upon conversion of the Preferred Stock or (iii) upon
         exercise of the Warrants; provided, however, a share of Common Stock
         shall cease to be a Registrable Security for purposes of this Agreement
         when it no longer is a Restricted Security.

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                  (ix) "Registration Statement" means a registration statement
         of the Company filed on an appropriate form under the Securities Act
         providing for the registration of, and the sale on a continuous or
         delayed basis by the holders of, all of the Registrable Securities
         pursuant to Rule 415 under the Securities Act, including the Prospectus
         contained therein and forming a part thereof, any amendments to such
         registration statement and supplements to such Prospectus, and all
         exhibits and other material incorporated by reference in such
         registration statement and Prospectus.

                  (x) "Restricted Security" means any share of Common Stock
         issued or issuable upon conversion of the Preferred Stock or exercise
         of the Warrants, except any such share that (i) has been registered
         pursuant to an effective registration statement under the Securities
         Act and sold in a manner contemplated by the Prospectus included in the
         Registration Statement, (ii) has been transferred in compliance with
         the resale provisions of Rule 144 under the Securities Act (or any
         successor provision thereto) or is transferable pursuant to paragraph
         (k) of Rule 144 under the Securities Act (or any successor provision
         thereto), or (iii) otherwise has been transferred and a new share of
         Common Stock not subject to transfer restrictions under the Securities
         Act has been delivered by or on behalf of the Company.

                  (xi) "Securities Act" means the Securities Act of 1933, as
         amended, and the rules and, regulations of the Commission thereunder,
         or any similar successor statute.

         (b) All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Securities Purchase Agreement.

         2.       Registration.

         (a) Filing and Effectiveness of Registration Statement. The Company
shall prepare and file with the Commission by not later than 90 days after the
Closing Date (as defined in the Securities Purchase Agreement), a Registration
Statement relating to the offer and sale of the Registrable Securities and shall
use its best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act as promptly as practicable but not
later than 180 days after the Closing Date, assuming for purposes hereof a
Conversion Price as defined in the Certificate of Designations. The Company
shall notify the Initial Investors by written notice that such Registration
Statement has been declared effective by the Commission within one business day
of such declaration by the Commission.

         (b) Registration Default. If the Registration Statement covering the
Registrable Securities or the Additional Registrable Securities (as defined in
Section 2 (d) hereof) required to be filed by the Company pursuant to Section
2(a) or 2(d) hereof, as the case may be, is not (i) filed with the Commission
within 90 days after the Closing Date or (ii) declared effective by the
Commission within 180 days after the Closing Date, or if the Commission notifies
the Company that it will not review the Registration Statement and the
Registration Statement is not declared effective not later than five business
days thereafter (any of which, without duplication, an "Initial Date"), then the

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Company shall make the payments to the Initial Investors as provided in the next
sentence as liquidated damages and not as a penalty. The amount to be paid by
the Company to the Initial Investors (pro rated on a daily basis) shall be
determined as of each Computation Date, and such amount shall be equal to one
percent (1%) (the "Liquidated Damage Rate") of the Purchase Price per share of
Preferred Stock (as defined in the Securities Purchase Agreement) from the
Initial Date (the date the registration becomes effective or the date that the
Commission notifies the Company that it will not review the Registration
Statement) to the first Computation Date in the event of late filing, and one
percent (1%) of the purchase price per share of Preferred Stock for every thirty
(30) day period thereafter until the Registration Statement has been filed and
in the event of late effectiveness, one percent (1%) of the purchase price per
share of Preferred Stock for every thirty (30) day period thereafter until the
Registration Statement has been declared effective. The full amount of
liquidated damages shall be paid by the Company to the Initial Investors by wire
transfer of immediately available funds within three days after each Computation
Date. The Company may pay the liquidation damages in additional shares of Common
Stock based upon the Market Price (so defined in the Certificate of
Designations), as determined on the date of payment.

         As used in this Section 2 (b), "Computation Date" means the date which
is 30 days after the Initial Date and, if the Registration Statement required to
be filed by the Company pursuant to Section 2(a) has not theretofore been
declared effective by the Commission, each date which is 30 days after the
previous Computation Date until such Registration Statement is so declared
effective.

         If the Company does not remit the damages to the Holder as set forth
above, the Company will pay the Holder reasonable costs of collection, including
attorneys fees, in addition to the liquidated damages. The registration of the
Securities pursuant to this provision shall not affect or limit Holder's other
rights or remedies as set forth in this Agreement.

         (c) Eligibility for Use of Form SB2. The Company agrees that at such
time as it meets all the requirements for the use of Securities Act Registration
Statement on Form SB2 it shall file all reports and information required to be
filed by it with the Commission in a timely manner and take all such other
action so as to maintain such eligibility for the use of such form.

         (d) Additional Registration Statement. File additional Registration
Statements if the number of Registrable Securities at any time exceeds 85% of
the number of shares of Common Stock then registered in all their existing
Registration Statements hereunder which additional Registration Statement shall
cover 120% or more of the number of unregistered Registrable Securities.

         (e) Piggy-back Registrations. (i) If the Company proposes to register
any of its warrants, Common Stock or any other shares of common stock of the
Company under the Securities Act (other than a registration (A) on Form S-8 or
S-4 or any successor or similar forms, (B) relating to Common Stock or any other
shares of common stock of the Company issuable upon exercise of employee share
options or in connection with any employee benefit or similar plan of the
Company or (C) in connection with a direct or indirect acquisition by the
Company of another Person or any transaction with respect to which Rule 145 (or

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any successor provision) under the Securities Act applies), whether or not for
sale for its own account, it will each such time, give prompt written notice at
least 20 days prior to the anticipated filing date of the registration statement
relating to such registration to the Initial Investors, which notice shall set
forth such Initial Investors' rights under this Section 2(e) and shall offer the
Initial Investors the opportunity to include in such registration statement such
number of Registrable Securities as the Initial Investors may request. Upon the
written request of an Initial Investors made within ten (10) days after the
receipt of notice from the Company (which request shall specify the number of
Registrable Securities intended to be disposed of by such Initial Investors),
the Company will use its best efforts to effect the registration under the
Securities Laws of all Registrable Securities that the Company has been so
requested to register by the Initial Investors, to the extent requisite to
permit the disposition of the Registrable Securities so to be registered;
provided, however, that (A) if such registration involves a public offering, the
Initial Investors must sell their Registrable Securities to the underwriters
selected as provided in Section 2(f) hereof on the same terms and conditions as
apply to the Company and (B) if, at any time after giving written notice of its
intention to register any Registrable Securities pursuant to this Section 2 and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason not to
register such Registrable Securities, the Company shall give written notice to
the Initial Investors and, thereupon, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration. The
Company's obligations under this Section 2(e) shall terminate on the date that
the registration statement to be filed in accordance with Section 2(a) is
declared effective by the Commission.

         (ii) If a registration pursuant to this Section 2(e) involves a public
offering and the managing underwriter thereof advises the Company that, in its
view, the number of shares of Common Stock, warrants or other shares of Common
Stock that the Company and the Initial Investors intend to include in such
registration exceeds the largest number of shares of Common Stock or warrants
(including any other shares of Common Stock or warrants of the Company) that can
be sold without having an adverse effect on such public offering (the "Maximum
Offering Size"), the Company will include in such registration, only that number
of shares of Common Stock or warrants, as applicable, such that the number of
Registrable Securities registered does not exceed the Maximum Offering Size,
with the difference between the number of shares in the Maximum Offering Size
and the number of shares to be issued by the Company to be allocated (after
including all shares to be issued and sold by the Company) among the Company and
the Initial Investors pro rata on the basis of the relative number of
Registrable Securities offered for sale under such registration by each of the
Company and the Initial Investors.

         If as a result of the proration provisions of this Section 2 (e)(ii),
any Initial Investors is not entitled to include all such Registrable Securities
in such registration, such Initial Investors may elect to withdraw its request
to include any Registrable Securities in such registration. With respect to
registrations pursuant to this Section 2(e), the number of securities required
to satisfy any underwriters' over-allotment option shall be allocated pro rata
among the Company and the Initial Investors on the basis of the relative number
of securities otherwise to be included by each of them in the registration with
respect to which such over-allotment option relates.

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

         (a) Promptly (i) prepare and file with the Commission such amendments
(including post-effective amendments) to the Registration Statement and
supplements to the Prospectus as may be necessary to keep the Registration
Statement continuously effective and in compliance with the provisions of the
Securities Act applicable thereto so as to permit the Prospectus forming part
thereof to be current and useable by Investors for resales of the Registrable
Securities for a period of one year (such period to be extended by a period
equal to any change in the Mandatory Conversion Date (as defined in the
Certificate of Designations) from the date on which the Registration Statement
is first declared effective by the Commission (the "Effective Time") or such
shorter period that will terminate when all the Registrable Securities covered
by the Registration Statement have been sold pursuant thereto in accordance with
the plan of distribution provided in the Prospectus, capable of being
transferred pursuant to Rule 144 under the Securities Act or otherwise
transferred in a manner that results in the delivery of new securities not
subject to transfer restrictions under the Securities Act (the "Registration
Period") and (ii) take all lawful action such that each of (A) the Registration
Statement and any amendment thereto does not, when it becomes effective, 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 and (B) the
Prospectus forming part of the Registration Statement, and any amendment or
supplement thereto, does not at any time during the Registration Period include
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. Notwithstanding
the foregoing provisions of this Section 3(a), the Company may, during the
Registration Period, suspend the use of the Prospectus for a period not to
exceed 20 days (whether or not consecutive) in any 12-month period if the Board
of Directors of the Company determines in good faith that because of pending
mergers or other business combination transactions, the planned acquisition or
divestiture of assets, pending material corporate developments and similar
events, it is in the best interests of the Company to suspend such use, and
prior to or contemporaneously with suspending such use, the Company provides the
Investors with written notice of such suspension, which notice need not specify
the nature of the event giving rise to such suspension. At the end of any such
suspension period, the Company shall provide the Investors with written notice
of the termination of such suspension;

         (b) During the Registration Period, comply with the provisions of the
Securities Act with respect to the Registrable Securities of the Company covered
by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the Investors as set forth in the Prospectus forming part of the
Registration Statement or are no longer Registrable Securities;

         (c)(i) Prior to the filing with the Commission of any Registration
Statement (including any amendments thereto) and the distribution or delivery of
any Prospectus (including any supplements thereto), provide draft copies thereof
to the Investors and reflect in such documents all such comments as the

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Investors (and their counsel) reasonably may propose with regard to Holder
ownership and the Plan of Distribution included therein and (ii) furnish to each
Investor whose Registrable Securities are included in the Registration Statement
and its legal counsel identified to the Company, (A) promptly after the same is
prepared and publicly distributed, filed with the Commission, or received by the
Company, one copy of the Registration Statement, each Prospectus, and each
amendment or supplement thereto, and (B) such number of copies of the Prospectus
and all amendments and supplements thereto and such other documents, as such
Investor may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor;

         (d)(i) Register or qualify the Registrable Securities covered by the
Registration Statement under such securities or "blue sky" laws of such
jurisdictions as the Investors who hold a majority-in-interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file
in such jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all such other lawful actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d),(B) subject itself to general taxation in any such jurisdiction or
(C) file a general consent to service of process in any such jurisdiction;

         (e) As promptly as practicable after becoming aware of such event,
notify each Investor of the occurrence of any event, as a result of which the
Prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and
promptly prepare an amendment to the Registration Statement and supplement to
the Prospectus to correct such untrue statement or omission, and deliver a
number of copies of such supplement and amendment to each Investor as such
Investor may reasonably request;

         (f) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the Commission of any stop order or other suspension of the effectiveness of the
Registration Statement at the earliest possible time and take all lawful action
to effect the withdrawal, recession or removal of such stop order or other
suspension;

         (g) Cause all the Registrable Securities covered by the Registration
Statement to be listed on the principal national securities exchange, and
included in an inter-dealer quotation system of a registered national securities
association, on or in which securities of the same class or series issued by the
Company are then listed or included;

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         (h) Maintain a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;

         (i) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the Registration Statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts, as the case may be, as the Investors reasonably may
request and registered in such names as the Investor may request; and, within
three business days after a Registration Statement which includes Registrable
Securities is declared effective by the Commission, deliver and cause legal
counsel selected by the Company to deliver to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an appropriate
instruction and, to the extent necessary, an opinion of such counsel;

         (j) Take all such other lawful actions reasonably necessary to expedite
and facilitate the disposition by the Investors of their Registrable Securities
in accordance with the intended methods therefor provided in the Prospectus
which are customary under the circumstances;

         (k) If required, make generally available to its security holders as
soon as practicable (including, without limitation, by means of a filing with
the Commission), but in any event not later than 18 months after (i) the
effective date (as defined in Rule 158(c) under the Securities Act) of the
Registration Statement, and (ii) the effective date of each post-effective
amendment to the Registration Statement, as the case may be, an earnings
statement of the Company and its subsidiaries complying with Section 11(a) of
the Securities Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);

         (1) In the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment;

         (m) Enter into such customary agreements (including an underwriting
agreement in customary form in the event of an underwritten offering) and take
such other lawful and reasonable action to expedite and facilitate the
registration and disposition of the Registrable Securities, and in connection
therewith, if an underwriting agreement is entered into, use its best efforts to
cause the same to contain indemnification provisions and procedures
substantially identical to those set forth in this Agreement;

         (n) (i) Make reasonably available for inspection by Investors, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by such
Investors or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and its

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subsidiaries, and (ii) cause the Company's officers, directors and employees to
supply all information reasonably requested by such Investors or any such
underwriter, attorney, accountant or agent in connection with the Registration
Statement, in each case, as is customary for similar due diligence examinations;
provided, however, that all records, information and documents that are
designated in writing by the Company, in good faith, as confidential,
proprietary or containing any material nonpublic information shall be kept
confidential by such Investors and any such underwriter, attorney, accountant or
agent (pursuant to an appropriate confidentiality agreement in the case of any
such holder or agent), unless such disclosure is made pursuant to judicial
process in a court proceeding (after first giving the Company an opportunity
promptly to seek a protective order or otherwise limit the scope of the
information sought to be disclosed) or is required by law, or such records,
information or documents become available to the public generally or through a
third party not in violation of an accompanying obligation of confidentiality;
and provided further that, if the foregoing inspection and information gathering
would otherwise disrupt the Company's conduct of its business, such inspection
and information gathering shall, to the maximum extent possible, be coordinated
on behalf of the Investors and the other parties entitled thereto by one firm of
counsel designed by and on behalf of the majority in interest of Investors and
other parties;

         (o) In connection with any underwritten offering, make such
representations and warranties to the Investors participating in such
underwritten offering and to the managers, in form, substance and scope as are
customarily made by the Company to underwriters in secondary underwritten
offerings;

         (p) In connection with any underwritten offering, obtain opinions of
counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managers) addressed to the
underwriters, covering such matters as are customarily covered in opinions
requested in secondary underwritten offerings;

         (q) In connection with any underwritten offering, obtain "cold comfort"
letters and updates thereof from the independent public accountants of the
Company (and, if necessary, from the independent public accountants of any
subsidiary of the Company or of any business acquired by the Company, in each
case for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each underwriter
participating in such underwritten offering (if such underwriter has provided
such letter, representations or documentation, if any, required for such cold
comfort letter to be so addressed), in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
secondary underwritten offerings;

         (r) In connection with any underwritten offering, deliver such
documents and certificates as may be reasonably required by the managers, if
any; and

         (s) In the event that any broker-dealer registered under the Exchange
Act shall be an "Affiliate" (as defined in Rule 2729(b)(1) of the rules and
regulations of the National Association of Securities Dealers, Inc. (the "NASD

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Rules") (or any successor provision thereto)) of the Company or has a "conflict
of interest" (as defined in Rule 2720(b)(7) of the NASD Rules (or any successor
provision thereto)) and such broker-dealer shall underwrite, participate as a
member of an underwriting syndicate or selling group or assist in the
distribution of any Registrable Securities covered by the Registration
Statement, whether as a holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such broker-dealer in complying
with the requirements of the NASD Rules, including, without limitation, by (A)
engaging a "qualified independent underwriter" (as defined in Rule 2720(b)(15)
of the NASD Rules (or any successor provision thereto)) to participate in the
preparation of the Registration Statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect thereof and
to recommend the public offering price of such Registrable Securities, (B)
indemnifying such qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 5 hereof, and (C) providing
such information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the NASD Rules.

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

         (a) It shall be a condition precedent to the obligations of the Company
to complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall
promptly furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request. As
least seven days prior to the first anticipated filing date of the Registration
Statement, the Company shall promptly notify each Investor of the information
the Company requires from each such Investor (the "Requested Information") if
such Investor elects to have any of its Registrable Securities included in the
Registration Statement. If at least two business days prior to the anticipated
filing date the Company has not received the Requested Information from an
Investor (a "Non-Responsive Investor"), then the Company may file the
Registration Statement without including Registrable Securities of such
Non-Responsive Investor and have no further obligations to the Non-Responsive
Investor;

         (b) Each Investor by its acceptance of the Registrable Securities
agrees to cooperate with the Company in connection with the preparation and
filing of the Registration Statement hereunder, unless such Investor has
notified the Company in writing of its election to exclude all of its
Registrable Securities from the Registration Statement;

         (c) Each Investor agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in Section 3(e) or
3(f), it shall immediately discontinue its disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 3(e) and, if so directed by the Company, such

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Investor shall deliver to the Company (at the expense of the Company) or destroy
(and deliver to the Company a certificate of destruction) all copies in such
Investor's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice; and

         (d) Enter into such customary agreements (including an underwriting
agreement in customary form in the event of an underwritten offering) and take
such other lawful and reasonable action to expedite and facilitate the
registration and disposition of the Registrable Securities, and in connection
therewith, if an underwriting agreement is entered into, use its best efforts to
cause the same to contain indemnification provisions and procedures
substantially identical to those set forth in Section 6(b) of this Agreement.

         5. Expenses of Registration. All expenses, other than underwriting
discounts and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Section 3, but including, without limitation, all
registration, listing, and qualification fees, printing and engraving fees,
accounting fees, and the fees and disbursements of counsel for the Company and
the reasonable fees and disbursements of one firm of counsel to the holders of a
majority in interest of the Registrable Securities (which fees and disbursements
shall not exceed $30,000) shall be borne by the Company.

         6.  Indemnification and Contribution.

         (a) Indemnification by the Company. The Company shall indemnify and
hold harmless each Investor and each underwriter, if any, which facilitates the
disposition of Registrable Securities, and each of their respective officers and
directors and each person who controls such Investor or underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
(each such person being sometimes hereinafter referred to as an "Indemnified
Person") from and against any losses, claims, damages or liabilities, joint or
several, to which such Indemnified Person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement or an omission or alleged omission to state therein 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, or arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Prospectus or an omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and the Company hereby
agrees to reimburse such Indemnified Person for all reasonable legal and other
expenses incurred by them in connection with investigating or defending any such
action or claim as and when such expenses are incurred; provided, however, that
the Company shall not be liable to any such Indemnified Person in any such case
to the extent that any such loss, claim, damage or liability arises out of or is
based upon (i) an untrue statement or alleged untrue statement made in, or an
omission or alleged omission from, such Registration Statement or Prospectus in
reliance upon and in conformity with written information furnished to the
Company by such Indemnified Person expressly for use therein or (ii) in the case
of the occurrence of an event of the type specified in Section 3(e), the use by

                                       10
<PAGE>

the Indemnified Person of an outdated or defective Prospectus after the Company
has provided to such Indemnified Person an updated Prospectus correcting the
untrue statement or alleged untrue statement or omission or alleged omission
giving rise to such loss, claim, damage or liability.

         (b) Indemnification by the Investors and Underwriters. Each Investor
agrees, as a consequence of the inclusion of any of its Registrable Securities
in a Registration Statement, and each underwriter, if any, which facilitates the
disposition of Registrable Securities shall agree, as a consequence of
facilitating such disposition of Registrable Securities, severally and not
jointly, to (i) indemnify and hold harmless the Company, its directors
(including any person who, with his or her consent, is named in the Registration
Statement as a director nominee of the Company), its officers who sign any
Registration Statement and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any losses, claims, damages or liabilities to which the
Company or such other persons may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (x) an untrue statement or
alleged untrue statement of a material fact contained in such Registration
Statement or Prospectus or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, in the case of the Prospectus), not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
holder or underwriter expressly for use therein, or (y) the use by the Investor
or the underwriter of an outdated or defective Prospectus after the Company has
provided to such Investor or underwriter an updated Prospectus correcting the
untrue statement or alleged untrue statement or omission or alleged omission
giving rise to such loss, claim, damage or liability, and (ii) reimburse the
Company for any legal or other expenses incurred by the Company in connection
with investigating or defending any such action or claim as such expenses are
incurred.

         (c) Notice of Claims, etc. Promptly after receipt by a party seeking
indemnification pursuant to this Section 6 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section 6 is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim, the Indemnifying Party shall be entitled to assume
the defense thereof. Notwithstanding the assumption of the defense of any Claim
by the Indemnifying Party, the Indemnified Party shall have the right to employ
separate legal counsel and to participate in the defense of such Claim, and the
Indemnifying Party shall bear the reasonable fees, out-of-pocket costs and
expenses of such separate legal counsel to the Indemnified Party if (and only
if): (x) the Indemnifying Party shall have agreed to pay such fees, costs and

                                       11
<PAGE>

expenses, (y) the Indemnified Party and the Indemnifying Party shall reasonably
have concluded that representation of the Indemnified Party by the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, (i) potentially
differing interests between such parties in the conduct of the defense of such
Claim, or (ii) if there may be legal defenses available to the Indemnified Party
that are in addition to or disparate from those available to the Indemnifying
Party and which can not be presented by counsel to the Indemnifying Party, or
(z) the Indemnifying Party shall have failed to employ legal counsel reasonably
satisfactory to the Indemnified Party within a reasonable period of time after
notice of the commencement of such Claim. If the Indemnified Party employs
separate legal counsel in circumstances other than as described in clauses (x),
(y) or (z) above, the fees, costs and expenses of such legal counsel shall be
borne exclusively by the Indemnified Party. Except as provided above, the
Indemnifying Party shall not, in connection with any Claim in the same
jurisdiction, be liable for the fees and expenses of more than one firm of
counsel for the Indemnified Party (together with appropriate local counsel). The
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party (which consent shall not unreasonably be withheld), settle or
compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment or which subjects the Indemnified Party
to any continuing obligations.

         (d) Contribution. If the indemnification provided for in this Section 6
is unavailable to or insufficient to hold harmless an Indemnified Person under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), 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 the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such Indemnified Party or by such Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6 (d) were determined by
pro rata allocation (even if the Investors or any underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 6(d).
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Investors and any underwriters in this

                                       12
<PAGE>

Section 6(d) to contribute shall be several in proportion to the percentage of
Registrable Securities registered or underwritten, as the case may be, by them
and not joint.

         (e) Notwithstanding any other provision of Section 6(d), in no event
shall any (i) Investor be required to undertake liability to any person under
Section 6(d) for any amounts in excess of the dollar amount of the proceeds to
be received by such Investor from the sale of such Investor's Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) pursuant to any Registration Statement under which such Registrable
Securities are to be registered under the Securities Act and (ii) underwriter be
required to undertake liability to any Person hereunder for any amounts in
excess of the aggregate discount, commission or other compensation payable to
such underwriter with respect to the Registrable Securities underwritten by it
and distributed pursuant to the Registration Statement; provided, however, in
the event of fraud by the Investor (in the case of (i) above) or underwriter (in
the case of (ii) above), there shall be no such dollar amount limitation.

         (f) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 6 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 6 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity.

         7. Rule 144. With a view to making available to the Investors the
benefits of Rule 144 under the Securities Act or any other similar rule or
regulation of the Commission that may at any time permit the Investors to sell
securities of the Company to the public without registration ("Rule 144"), until
such time as the Registrable Securities may be sold pursuant to the provisions
of Rule 144(k) or its equivalent, the Company agrees to use its best efforts to:

         (a) comply with the provisions of paragraph (c) (1) of Rule 144; and

         (b) file with the Commission in a timely manner all reports and other
documents required to be filed by the Company pursuant to Section 13 or 15(d)
under the Exchange Act; and, if at any time it is not required to file such
reports but in the past had been required to or did file such reports, it will,
upon the request of any Holder, make available other information as required by,
and so long as necessary to permit sales of, its Registrable Securities pursuant
to Rule 144.

         8. Assignment. The rights to have the Company register Registrable
Securities pursuant to this Agreement shall be automatically assigned by the
Investors to any permitted transferee of all or any portion of such securities
(or all or any portion of any Preferred Stock or Warrant of the Company which is
convertible into such securities) of Registrable Securities only if: (a) the
Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (i) the
name, address, and, if applicable, social security or taxpayer identification

                                       13
<PAGE>

number of such transferee or assignee and (ii) the securities with respect to
which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment, the securities so transferred
or assigned to the transferee or assignee constitute Restricted Securities, (d)
at or before the time the Company received the written notice contemplated by
clause (b) of this sentence the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions contained herein and (e) the
Company has received an opinion in form and substance reasonably satisfactory to
the Company of counsel to the Holder reasonably acceptable to the Company to the
effect that the proposed transfer of the Registrable Securities may be effected
pursuant to available exemptions from the registration requirements of the
Securities Act and applicable state securities laws.

         9. Amendment and Waiver. Any provision of this Agreement may be amended
and the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively) , only with the written
consent of the Company and Investors who hold a majority-interest of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 9 shall be binding upon each Investor and the Company.

         10.  Miscellaneous.

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

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

         (1)      if to the Company, to:

                  Diamond Entertainment Corporation
                  800 Tucker Lane
                  Walnut, California 91789
                  Attention: President

         (2)      if to the Initial Investors, as set forth in the signature
                  pages of the Securities Purchase Agreement.

         (3)      if to any other Investor, at such address as such Investor
                  shall have provided in writing to the Company.

The Company, the Initial Investors or any Investor may change the foregoing
address by notice given pursuant to this Section 10(c).

                                       14
<PAGE>

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

         (d) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of California. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of Los Angeles or the state courts of the State of California sitting in
the City of Los Angeles in connection with any dispute arising under this
Agreement and hereby waives, to the maximum extent permitted by law, any
objection including any objection based on forum non conveniens, to the bringing
of any such proceeding in such jurisdictions.

         (e) The remedies provided in this Agreement are cumulative and not
exclusive of any remedies provided by law. 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, provision,
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 best 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.

         (f) The Company shall not enter into any agreement with respect to its
securities that constitutes a breach of any of the provisions hereof. Except as
previously disclosed to the Investors, the Company is not currently a party to
any agreement granting any registration rights with respect to any of its
securities to any person which conflicts with the Company's obligations
hereunder or gives any other party the right to include any securities in any
Registration Statement filed pursuant hereto. The Company shall not file any
registration statement after the date hereof for the resale of any of its
securities at any time prior to the 30th day of the filing of the Registration
Statement, nor shall the Company cause any registration statement for the resale
of its securities to become effective prior to the 30th day after the date the
Registration Statement is declared effective.

         (g) This Agreement, the Securities Purchase Agreement, the Certificate
of Designations and the Warrants constitute the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement, the Securities Purchase Agreement, the
Certificate of Designations and the Warrants supersede all prior agreements and
undertakings among the parties hereto with respect to the subject matter hereof.

         (h) Subject to the requirements of Section 8 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.

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

                                       15
<PAGE>

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

         (k) The Company acknowledges that any failure by the Company to perform
its obligations under Section 3, or any delay in such performance could result
in direct damages to the Investors and the Company agrees that, in addition to
any other liability the Company may have by reason of any such failure or delay,
the Company shall be liable for all direct (but not any special, indirect or
consequential) damages caused by such failure or delay.

         (l) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto.

         IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.

                                    Diamond Entertainment Corporation

                                    By: /s/ James K.T. Lu
                                        -------------------------
                                          James K.T. Lu
                                          President & Chief Executive Officer

                                    Joe Kaufman

                                    By:  /s/ Joe Kaufman
                                        -------------------------
                                          Name: Joe Kaufman
                                          Title:

                                       16Exhibit 10.39

                          SECURITIES PURCHASE AGREEMENT

         THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") dated as of
January 30, 2002, between Diamond Entertainment Corporation, a New Jersey
corporation with principal executive offices located at 800 Tucker Lane, Walnut,
California 91789 (the "Company"), and the persons signatory hereto
(collectively, the "Buyers" and individually, "Buyer").

                              W I T N E S S E T H:

         WHEREAS, Buyers desires to purchase from the Company, and the Company
desires to issue and sell to the Buyers, upon the terms and subject to the
conditions of this Agreement, (i) 15 shares of Series B Convertible Preferred
Stock, no par value (the "Preferred Stock"), having the rights, preferences and
privileges set forth in the Articles of Amendment of the Articles of
Incorporation of the Company designating the rights, preferences, privileges and
restrictions of Series B Preferred Stock attached hereto as Annex I (the
"Certificate of Designations"), and (ii) warrants to purchase an aggregate of
2,250,000 shares (the "Warrants") of the Company's common stock no par value
(the "Common Stock");

         WHEREAS, upon the terms and subject to the conditions set forth in the
Certificate of Designations, the Preferred Stock is convertible into shares of
Common Stock; and

         WHEREAS, the Warrants, upon the terms and subject to the conditions in
the Warrants, will for a period of five (5) years be exercisable to purchase
2,250,000 shares of Common Stock.

         NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:

         I.       PURCHASE AND SALE OF PREFERRED STOCK AND WARRANTS

         A. Transaction. Each Buyer hereby agrees to purchase from the Company,
and the Company hereby agrees to issue and sell to each Buyer, in a transaction
exempt from the registration and prospectus delivery requirements of the
Securities Act of 1933, as amended (the "Securities Act"), the number of shares
of Preferred Stock and Warrants set forth on the signature page hereof. The
purchase and sale of the Preferred Stock and Warrants shall be made pursuant to
the provisions of this Agreement, which is one of several substantially
identical counterparts executed by the Buyers in connection with the offering
("Offering") by the Company of the Preferred Stock and Warrants for an aggregate
purchase price of $150,000 and which together shall govern the purchase and sale
of the shares of Preferred Stock and Warrants. As used herein, the term
"Agreement" shall mean this Agreement and all Exhibits, Annexes, Schedules and
amendments thereto together with all the other Agreements executed by the Buyers
in the Offering.

                                       1
<PAGE>

         B. Purchase Price; Form of Payment. The purchase price for the
Preferred Stock and Warrants to be purchased by each Buyer hereunder shall be
equal to ten thousand dollars ($10,000) times the number of shares of Preferred
Stock purchased (the "Purchase Price"). Each Buyer shall pay the Purchase Price
on the date hereof by wire transfer of immediately available funds to the escrow
agent (the "Escrow Agent") identified in those certain Escrow Instructions of
even date herewith, a copy of which is attached hereto as Annex II (the "Escrow
Instructions").

         Simultaneously against receipt by the Escrow Agent of the Purchase
Price, the Company shall deliver one or more duly authorized, issued and
executed certificates (I/N/O Buyer) evidencing the Securities, to the Escrow
Agent or its designated depository. By executing and delivering this Agreement,
Buyer and the Company each hereby agrees to observe the terms and conditions of
the Escrow Instructions, all of which are incorporated herein by reference as if
fully set forth herein.

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

                           Bank:              Union Bank of California
                                              The Private Bank - Newport Beach
                                              Irvine, CA 92612
                           ABA Routing:       122 000 496
                           Account No:        470 000 1879
                           Account Name:      Owen M. Naccarato
                                              Attorney Fund Account III

Simultaneously with the execution of this Agreement, the Buyer shall deposit
with the Escrow Agent the Purchase Price and the Company shall deposit with the
Escrow Agent the Securities.

         II.      BUYERS' REPRESENTATIONS, WARRANTIES; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.

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

         A. Buyer is purchasing the Preferred Stock, the Warrants, the Common
Stock issuable upon exercise of the Warrants (the "Warrant Shares") and the
shares of Common Stock issuable upon conversion of the Preferred Stock,
including payment of interest for its own account, for investment purposes only
and not with a view towards or in connection with the public sale or
distribution thereof in violation of the Securities Act.

         B. Buyer (i) is an "accredited investor" within the meaning of Rule 501
of Regulation D under the Securities Act, (ii) is experienced in making
investments of the kind contemplated by this Agreement, (iii) is capable, by
reason of its business and financial experience, of evaluating the relative
merits and risks of an investment in the Securities, (iv) acknowledges that and
an investment in the Securities involves a high degree of risk, and (v) is able
to afford the loss of its entire investment in the Securities.

                                       2
<PAGE>

         C. Buyer understands that the Securities are being offered and sold by
the Company in reliance on an exemption from the registration requirements of
the Securities Act and equivalent state securities and "blue sky" laws; the
Securities are "restricted securities" as defined in Rule 144 promulgated under
the Securities Act, and that the Company is relying upon the accuracy of, and
Buyer's compliance with, Buyer's representations, warranties and covenants set
forth in this Agreement to determine the availability of such exemption and the
eligibility of Buyer to purchase the Securities;

         D. Buyer has been furnished with or provided access to all materials
relating to the business, financial position and results of operations of the
Company, and all other materials requested by Buyer to enable it to make an
informed investment decision with respect to the Securities.

         E. Buyer acknowledges that it has been furnished with, or had access to
through the EDGAR system of the Securities and Exchange Commission (the "SEC"),
copies of the Company's Annual Report on Form 10-KSB for the fiscal year ended
March 31, 2001 and all other reports and documents heretofore filed by the
Company with the SEC pursuant to the Securities Act and the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), since March 31, 2001 (collectively
the "SEC Filings").

         F. Buyer acknowledges that in making its decision to purchase the
Securities it has been given an opportunity to ask questions of and to receive
answers from the Company's executive officers, directors and management
personnel concerning the business, financial position and results of operations
of the Company, as well as the terms and conditions of the private placement of
the Securities by the Company.

         G. Buyer understands that the Securities have not been approved or
disapproved by the SEC or any state securities commission and that the foregoing
authorities have not reviewed any documents or instruments in connection with
the offer and sale to it of the Securities and have not confirmed or determined
the adequacy or accuracy of any such documents or instruments.

         H. This Agreement has been duly and validly authorized, executed and
delivered by Buyer and is a valid and binding agreement of Buyer enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally.

         III.     COMPANY'S REPRESENTATIONS

         The Company represents and warrants to Buyer that except as disclosed
on Schedule III hereto:

         A. Capitalization. 1. The authorized capital stock of the Company
consists of 600,000,000 shares of Common Stock, no par value, of which
457,595,650 shares are outstanding on the date hereof and 4,999,950 share of
Convertible Preferred Stock, no par value, of which 483,251 are issued with
172,923 being held in treasury, plus 50 Series A Convertible Preferred Stock, no
par value, of which 40 shares are issued and outstanding. All of the issued and
outstanding shares of Common Stock have been duly authorized and validly issued

                                       3
<PAGE>

and are fully paid and non-assessable. The Conversion Shares and Warrant Shares
have been duly and validly authorized and reserved for issuance by the Company,
and when issued by the Company upon conversion of the Preferred Shares
(including payment of interest), or on exercise of the Warrants in accordance
with their terms, will be duly and validly issued, fully paid and non-assessable
and will not subject the holder thereof to personal liability by reason of being
such holder. There are no preemptive, subscription, "call" or other similar
rights to acquire the Common Stock (including the Conversion Shares and Warrant
Shares) that have been issued or granted to any person.

         2. The Company does have subsidiaries and does own or control, directly
or indirectly, interest in another corporation, partnership, limited liability
company, unincorporated business organization, association, trust or other
business entity.

         B.       Organization; Reporting Company Status.
         1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization and is duly
qualified as a foreign corporation in all jurisdictions in which the failure to
so qualify would have a material adverse effect on the business, properties,
prospects, condition (financial or otherwise) or results of operations of the
Company and its subsidiaries, taken as a whole, or on the consummation of any of
the transactions contemplated by this Agreement (a "Material Adverse Effect").

         2. The Company has registered the Common Stock pursuant to Section 12
of the Exchange Act and has timely filed with the SEC all reports and
information required to be filed by it pursuant to all reporting obligations
under Section 13(a) or 15(d), as applicable, of the Exchange Act for the
12-month period immediately preceding the date hereof. The Common Stock is
currently listed and traded on the NASDAQ, OTC:BB Bulletin Board ("OTC") and the
Company has not received any notice regarding, and to its knowledge there is no
threat, of the termination or discontinuance of the eligibility of the Common
Stock for such listing.

         C. Authorized Shares. The Company has duly and validly authorized and
reserved for issuance shares of Common Stock sufficient in number for the
conversion of the Preferred Stock (assuming for purposes of this Section III.C.
a Conversion Price of the lesser of the fixed price or the floating price (as
defined in the Certificate of Designations) and the exercise of the Warrants,
without regard to the anti-dilution provisions of the Preferred Stock and
Warrants. The Company agrees to increase number of shares on reserve upon the
increase in authorized shares which will be voted upon at the Company's 2002
annual shareholder meeting. The Company understands and acknowledges the
potentially dilutive effect to the Common Stock of the issuance of the
Conversion Shares upon conversion of the Preferred Stock and the Warrant Shares
upon exercise of the Warrants. The Company further acknowledges that its
obligation to issue Conversion Shares upon conversion of the Preferred Stock and
Warrant Shares upon exercise of the Warrants in accordance with this Agreement
is absolute and unconditional regardless of the dilutive effect that such
issuance may have on the ownership interests of other stockholders of the
Company, notwithstanding the commencement of any case under 11 U.S.C. ss. 101 et
seq. (the "Bankruptcy Code"). In the event the Company is a debtor under the
Bankruptcy Code, the Company hereby waives to the fullest extent permitted any

                                       4
<PAGE>

rights to relief it may have under 11 U.S.C. ss. 362 in respect of the
conversion of the Preferred Stock and the exercise of the Warrants. The Company
agrees, without cost or expense to the Buyer, to take or consent to any and all
action necessary to effectuate relief under 11 U.S.C. ss. 362.

         D. Authority; Validity and Enforceability. The Company has the
requisite corporate power and authority to enter into this Agreement, the
Certificate of Designations, the Registration Rights Agreement of even date
herewith between the Company and Buyer, a copy of which is annexed hereto as
Annex IV (the "Registration Rights Agreement") and the Warrants and to perform
all of its obligations hereunder and thereunder (including the issuance, sale
and delivery to Buyer of the Securities). The execution, delivery and
performance by the Company of this Agreement, the Certificate of Designations,
the Warrants and the Registration Rights Agreement, and the consummation by the
Company of the transactions contemplated hereby and thereby (the issuance of the
Preferred Stock, the Warrants and the issuance and reservation for issuance of
the Conversion Shares and Warrant Shares), has been duly authorized by all
necessary corporate action on the part of the Company and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required, except to the extent stockholder approval is required under NASDAQ
rules. Each of this Agreement, the Certificate of Designations, the Warrants and
the Registration Rights Agreement has been duly validly executed and delivered
by the Company and each instrument constitutes a valid and binding obligation of
the Company enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and general equitable principles. The Securities have been duly and validly
authorized for issuance by the Company against receipt of the consideration
thereof, and, when executed and delivered by the Company, will be valid and
binding obligations of the Company enforceable against it in accordance with
their terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and general equitable principles.

         E. Non-contravention. The execution and delivery by the Company of this
Agreement, the Certificate of Designations, the Warrant to Purchase Common Stock
and the Registration Rights Agreement, the issuance of the Securities, and the
consummation by the Company of the other transactions contemplated hereby and
thereby, do not and will not conflict with or result in a breach by the Company
of any of the terms or provisions of, or constitute a default (or an event
which, with notice, lapse of time or both, would constitute a default) under (i)
Articles of Incorporation or by-laws of the Company, (ii) except for such
conflict, breach or default which would not have a Material Adverse Effect, any
indenture, mortgage, deed of trust or other material agreement or instrument to
which the Company is a party or by which their respective properties or assets
are bound, or (iii) any law, rule, regulation, decree, judgment or order of any
court or public or governmental authority having jurisdiction over the Company
or any of the Company's properties or assets, nor is the Company otherwise in
violation of, conflict with or in default under any of the foregoing, except for
such conflict, breach or default which would not have a Material Adverse Affect.

         F. Approvals. Except for the filing of the Certificate of Designations
with the State of New Jersey, no authorization, approval or consent of any court

                                       5
<PAGE>

or public or governmental authority is required to be obtained by the Company
for the issuance and sale of the Preferred Stock and the Warrants (and the
Conversion Shares and Warrant Shares) to Buyer as contemplated by this
Agreement, except such authorizations, approvals and consents that have been
obtained by the Company prior to the date hereof.

         G. SEC Filings. None of the SEC Filings contained at the time they were
filed any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. The Company has not provided to Buyer any information that,
according to applicable law, rule or regulation, should have been disclosed
publicly prior to the date hereof by the Company, but which has not been so
disclosed.

         H. Absence of Certain Changes. Except as disclosed in the SEC Filings
or the Financial Statements (as defined in Section III.L. hereto), since the
Balance Sheet Date (as defined in Section III.L.), there has not occurred any
change, event or development in the business, financial condition, prospects or
results of operations of the Company, and there has not existed any condition
having or reasonably likely to have, a Material Adverse Effect.

         I. Full Disclosure. There is no fact known to the Company (other than
general economic or industry conditions known to the public generally) that has
not been fully disclosed in the SEC Filings or otherwise in writing to the Buyer
that (i) reasonably would be expected to have a Material Adverse Effect or (ii)
reasonably would be expected to materially and adversely affect the ability of
the Company to perform its obligations pursuant to this Agreement, the
Certificate of Designations, the Warrants or the Registration Rights Agreement.

         J. Absence of Litigation. Except as set forth in the SEC Filings or
Schedule III.J, there is no action, suit, claim, proceeding, inquiry or
investigation pending or, to the Company's knowledge, threatened, by or before
any court or public or governmental authority which, if determined adversely to
the Company, would have a Material Adverse Effect.

         K. Absence of Events of Default. No "Event of Default" (as defined in
any agreement or instrument to which the Company is a party) and no event which,
with notice, lapse of time or both, would constitute an Event of Default (as so
defined), has occurred and is continuing, which could have a Material Adverse
Effect.

         L. Financial Statements; No Undisclosed Liabilities. The Company has
delivered or made available to Buyer true and complete copies of its audited
balance sheet as at March 31, 2001 and the related audited statements of
operations and cash flows for the fiscal year ended March 31, 2001 including the
related notes and schedules thereto as well as the same unaudited financial
statements as of and for the six month period ended September 31, 2001
(collectively, the "Financial Statements"), and all management letters, if any,
from the Company's independent auditors relating to the dates and periods
covered by the Financial Statements. Each of the Financial Statements has been
prepared in accordance with United States Generally Accepted Accounting
Principles ("GAAP") (subject, in the case of the interim Financial Statements,

                                       6
<PAGE>

to normal year end adjustments and the absence of footnotes) and in conformity
with the practices consistently applied by the Company without modification of
the accounting principles used in the preparation thereof, and fairly presents
the financial position, results of operations and cash flows of the Company as
at the dates and for the periods indicated. For purposes hereof, the audited
balance sheet of the Company as at March 31, 2001 is hereinafter referred to as
the "Balance Sheet" and March 31, 2001 is hereinafter referred to as the
"Balance Sheet Date". The Company has no indebtedness, obligations or
liabilities of any kind (whether accrued, absolute, contingent or otherwise, and
whether due or to become due) that would have been required to be reflected in,
reserved against or otherwise described in the Balance Sheet or in the notes
thereto in accordance with GAAP, which was not fully reflected in, reserved
against or otherwise described in the Balance Sheet or the notes thereto or was
not incurred in the ordinary course of business consistent with the Company's
past practices since the Balance Sheet Date or was not previously disclosed to
Astor Capital, Inc. as agent for Buyers or Buyer or disclosed in an SEC Filing .

         M. Compliance with Laws; Permits. The Company is in compliance with all
laws, rules, regulations, codes, ordinances and statutes (collectively "Laws")
applicable to it or to the conduct of its business, except for such
non-compliance, which would not have a Material Adverse Effect. The Company
possesses all permits, approvals, authorizations, licenses, certificates and
consents from all public and governmental authorities, which are necessary to
conduct its business, except for those the absence of which would not have a
Material Adverse Effect.

         N. Related Party Transactions. Neither the Company nor any of its
officers, directors or "Affiliates" (as such term is defined in Rule 12b-2 under
the Exchange Act) has borrowed any moneys from or has outstanding any
indebtedness or other similar obligations to the Company. Neither the Company
nor any of its officers, directors or Affiliates (i) owns any direct or indirect
interest constituting more than a one percent equity (or similar profit
participation) interest in, or controls or is a director, officer, partner,
member or employee of, or consultant to or lender to or borrower from, or has
the right to participate in the profits of, any person or entity which is (x) a
competitor, supplier, customer, landlord, tenant, creditor or debtor of the
Company, (y) engaged in a business related to the business of the Company , or
(z) a participant in any transaction to which the Company is a party (other than
in the ordinary course of the Company's business) or (ii) is a party to any
contract, agreement, commitment or other arrangement with the Company, other
than has already been disclosed in its current SEC filings.

         O. Insurance. The Company maintains property and casualty, general
liability and workers' compensation, insurance with financially sound and
reputable insurers that is adequate in light of the Company's historical claims
experience. The Company has not received notice from, and has no knowledge of
any threat by, any insurer (that has issued any insurance policy to the Company)
that such insurer intends to deny coverage under or cancel, discontinue or not
renew any insurance policy presently in force.

         P. Securities Law Matters. Based, in part, upon the accuracy and
completeness of the representations, covenants and warranties of Buyer set forth
in Section II hereof, the offer and sale by the Company of the Securities is

                                       7
<PAGE>

exempt from (i) the registration and prospectus delivery requirements of the
Securities Act and the rules and regulations of the SEC thereunder and (ii) the
registration and/or qualification provisions of all applicable state securities
and "blue sky" laws. Other than pursuant to an effective registration statement
under the Securities Act, the Company has not issued, offered or sold Preferred
Stock or any shares of Common Stock (including for this purpose any securities
of the same or a similar class as the Preferred Stock or Common Stock, or any
securities convertible into or exchangeable or exercisable for Preferred Stock
or Common Stock or any such other securities) within the six-month period next
preceding the date hereof, except as previously publicly disclosed or disclosed
in writing to Buyer or in a SEC Filing, and the Company shall not directly or
indirectly take, and shall not permit any of its directors, officers or
Affiliates directly or indirectly to take, any action (including, without
limitation, any offering or sale to any person or entity of Preferred Stock or
shares of Common Stock), so as to make unavailable the exemption from Securities
Act registration being relied upon by the Company for the offer and sale to
Buyer of the Preferred Stock (and the Conversion Shares) as contemplated by this
Agreement. No form of general solicitation or advertising has been used or
authorized by the Company or any of its officers, directors or Affiliates in
connection with the offer or sale of the Preferred Stock (and the Conversion
Shares) as contemplated by this Agreement or any other agreement to which the
Company is a party.

         Q. Labor Matters. The Company is not party to any labor or collective
bargaining agreement and there are no labor or collective bargaining agreements,
which pertain to employees of the Company. No employees of the Company are
represented by any labor organization and none of such employees has made a
pending demand for recognition, and there are no representation proceedings or
petitions seeking a representation proceeding presently pending or, to the
Company's knowledge, threatened to be brought or filed, with the National Labor
Relations Board or other labor relations tribunal. There is no organizing
activity involving the Company or pending or to the Company's knowledge,
threatened by any labor organization or group of employees of the Company. There
are no (i) strikes, work stoppages, slowdowns, lockouts or arbitrations or (ii)
material grievances or other labor disputes pending or, to the knowledge of the
Company, threatened against or involving the Company. There are no unfair labor
practice charges, grievances or complaints pending or, to the knowledge of the
Company, threatened by or on behalf of any employee or group of employees of the
Company.

         R. ERISA Matters. The Company and its ERISA Affiliates are in
compliance in all material respects with all provisions of ERISA applicable to
it. Neither the Company nor any ERISA Affiliate maintains, contributes,
maintained or contributed to a plan subject to the provisions of Title IV of
ERISA or Section 412 of the Internal Revenue Code.

         For purposes of this Section III.S.:

         "ERISA" means the Employee Retirement Income Security Act of 1974, or
any successor statute, together with the final regulations promulgated
thereunder, as the same may be amended from time to time.

                                       8
<PAGE>

         "ERISA Affiliate" means any trade or business (whether or not
incorporated) that is a member of a group of which the Company is a member and
which is treated as a single employer under ss. 414 of the Internal Revenue Code
of 1986, as amended (the "Internal Revenue Code").

         S. Tax Matters. 1. The Company has filed all Tax Returns which it is
required to file under applicable Laws, except for such Tax Returns in respect
of which the failure to so file does not and could not have a Material Adverse
Effect; all such Tax Returns are true and accurate in all material respects and
have been prepared in compliance with all applicable Laws; the Company has paid
all Taxes due and owing by it (whether or not such Taxes are required to be
shown on a Tax Return) and have withheld and paid over to the appropriate taxing
authorities all Taxes which they are required to withhold from amounts paid or
owing to any employee, stockholder, creditor or other third parties; and since
December 31, 1999, the charges, accruals and reserves for Taxes with respect to
the Company (including any provisions for deferred income taxes) reflected on
the books of the Company are adequate to cover any Tax liabilities of the
Company if its current tax year were treated as ending on the date hereof.

         2. No claim has been made by a taxing authority in a jurisdiction where
the Company does not file tax returns that such corporation is or may be subject
to taxation by that jurisdiction. To the Company's knowledge, there are no
foreign, federal, state or local tax audits or administrative or judicial
proceedings pending or being conducted with respect to the Company; no
information related to Tax matters has been requested by any foreign, federal,
state or local taxing authority; and, except as disclosed above, no written
notice indicating an intent to open an audit or other review has been received
by the Company from any foreign, federal, state or local taxing authority. To
the Company's knowledge, there are no material unresolved questions or claims
concerning the Company's Tax liability. The Company (A) has not executed or
entered into a closing agreement pursuant to ss. 7121 of the Internal Revenue
Code or any predecessor provision thereof or any similar provision of state,
local or foreign law; or (B) has not agreed to or is required to make any
adjustments pursuant to ss. 481 (a) of the Internal Revenue Code or any similar
provision of state, local or foreign law by reason of a change in accounting
method initiated by the Company or has any knowledge that the IRS has proposed
any such adjustment or change in accounting method, or has any application
pending with any taxing authority requesting permission for any changes in
accounting methods that relate to the business or operations of the Company. The
Company has not been a United States real property holding corporation within
the meaning of ss. 897(c)(2) of the Internal Revenue Code during the applicable
period specified in ss. 897(c)(1)(A)(ii) of the Internal Revenue Code.

         3. The Company has not made an election under ss. 341(f) of the
Internal Revenue Code. The Company is not liable for the Taxes of another person
that is not a subsidiary of the Company under (A) Treas. Reg. ss. 1.1502-6 (or
comparable provisions of state, local or foreign law), (B) as a transferee or
successor, (C) by contract or indemnity or (D) otherwise. The Company is not a
party to any tax sharing agreement. The Company has not made any payments, is
obligated to make payments or is a party to an agreement that could obligate it
to make any payments that would not be deductible under ss. 28OG of the Internal
Revenue Code.

                                       9
<PAGE>

         For purposes of this Section III:

         "IRS" means the United States Internal Revenue Service.

         "Tax" or "Taxes" means federal, state, county, local, foreign, or other
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.

         "Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.

         T. Property. The Company does not own any real property. Except as
disclosed in the SEC Filings or the Financial Statements, the Company has good
and marketable title to all personal property owned by it, free and clear of all
liens, encumbrances and defects except such 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 any real property and
buildings held under lease by the Company are held by it 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.

         U. Intellectual Property. The Company owns or possesses adequate and
enforceable rights to use all patents, patent applications, trademarks,
trademark applications, trade names, service marks, copyrights, copyright
applications, licenses, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures) and other similar rights and proprietary knowledge (collectively,
"Intangibles") necessary for the conduct of its business as now being conducted.
To the Company's knowledge, the Company is not infringing upon or in conflict
with any right of any other person with respect to any Intangibles. No claims
have been asserted by any person to the ownership or use of any Intangibles and
the Company has no knowledge of any basis for such claim.

         V. Internal Controls and Procedures. The Company maintains accurate
books and records and internal accounting controls which provide reasonable
assurance that (i) all transactions to which the Company is a party or by which
its properties are bound are executed with management's authorization; (ii) the
reported accountability of the Company's assets is compared with existing assets
at regular intervals; (iii) access to the Company's assets is permitted only in
accordance with management's authorization; and (iv) all transactions to which
the Company is a party or by which its properties are bound are recorded as
necessary to permit preparation of the financial statements of the Company in
accordance with U.S. generally accepted accounting principles.

         W. Payments and Contributions. Neither the Company nor any of its
directors, officers or, to its knowledge, other employees has (i) used any
Company funds for any unlawful contribution, endorsement, gift, entertainment or

                                       10
<PAGE>

other unlawful expense relating to political activity; (ii) made any direct or
indirect unlawful payment of Company funds to any foreign or domestic government
official or employee; (iii) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any bribe,
rebate, payoff, influence payment, kickback or other similar payment to any
person with respect to Company matters.

         X. No Misrepresentation. No representation or warranty of the Company
contained in this Agreement, any schedule, annex or exhibit hereto or any
agreement, instrument or certificate furnished by the Company to Buyer pursuant
to this Agreement, contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.

         Y. Right of First Refusal. The Company has not granted any right of
first refusal to any person with respect to the issuance of the Preferred Stock,
Common Stock or securities convertible into Common Stock.

         IV.      CERTAIN COVENANTS AND ACKNOWLEDGMENTS.

         A. Restrictive Legend. Buyer acknowledges and agrees that it will not
offer, sell or otherwise dispose of any of its Securities in violation of
federal and state securities laws, and upon issuance pursuant to this Agreement,
the certificates or other evidence of the Securities (and any shares of Common
Stock issued upon conversion of the Preferred Stock or upon exercise of the
Warrants) shall have endorsed thereon a legend in substantially the following
form (and a stop-transfer order may be placed against transfer of the Securities
to the same effect):

         "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE,
AND ARE BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE SECURITIES MAY NOT BE
OFFERED, SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS."

         B. Filings. The Company shall make all necessary SEC and "blue sky"
filings required to be made by the Company in connection with the sale of the
Securities to the Buyer as required by all applicable Laws, and shall provide a
copy thereof to the Buyer promptly after such filing.

         C. Reporting Status. So long as the Buyer beneficially owns any of the
Securities, the Company shall use its best efforts to file all reports required
to be filed by it with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act.

         D. Listing. So long as the Buyer beneficially owns any of the
Securities, except to the extent the Company lists its Common Stock on The New
York or American Stock Exchanges, the NASDAQ SmallCap Market or the OTC Bulletin
Board, the Company shall use its best efforts to maintain its listing of the
Common Stock on NASDAQ.

                                       11
<PAGE>

         E.       Reserved Conversion Shares.

         (1) Subject to Section 8 of the Certificate of Designations and Section
2(d) of the Registration Rights Agreement, the Company at all times from and
after the date hereof shall have a sufficient number of shares of Common Stock
duly and validly authorized and reserved for issuance to satisfy the conversion,
in full, of the Preferred Stock, including payment of the Additional Amount
(assuming for purposes of this Section IV.E., a Conversion Price of as defined
in the Certificate of Designations), and upon the exercise of the Warrants.

(2) The Company agrees to increase the percentage of shares on reserve to 200%
upon conclusion of the 2002 annual shareholders meeting, , where the
shareholders will be voting on increasing the number of authorized shares..

         F. Registration Rights Agreement. The Company shall cause the
Registration Rights Agreement to remain in full force and effect and the Company
shall comply in all material respects with the terms thereof.

         G. Notice of Certain Events Affecting Registration. The Company will
immediately notify the Buyer upon the occurrence of any of the following events
in respect of a registration statement or related prospectus in respect of an
offering of the Securities; (i) receipt of any request for additional
information by the SEC or any other federal or state governmental authority
during the period of effectiveness of the Registration Statement to be supplied
by amendments or supplements to the registration statement or related
prospectus; (ii) the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose;
(iii) receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Securities for sale
in any jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) the happening of any event that makes any statement made in the
Registration Statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of the Registration Statement, 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 not misleading, and that in the case of the related prospectus, 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 the light of the circumstances under which they were made, not
misleading; and (v) the Company's reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate; and the Company
will promptly make available to Buyer any such supplement or amendment to the
related prospectus.

         H. Consolidation; Merger. The Company shall not, at any time after the
date hereof, effect any merger or consolidation of the Company with or into, or
a transfer of all or substantially all of the assets of the Company to, another
entity (a "Consolidation Event") unless the resulting successor or acquiring
entity (if not the Company) assumes by written instrument or by operation of law
the obligation to deliver to Buyer such shares of stock and/or securities as
Buyer is entitled to receive pursuant to this Agreement.

                                       12
<PAGE>

         I. Issuance of Preferred Shares and Warrant Shares. The sale of the
Preferred Stock and the issuance of the Warrant Shares pursuant to exercise of
the Warrant and the Conversion Shares upon conversion of the Preferred Stock
shall be made in accordance with the provisions and requirements of Section 4(2)
of the Securities Act and Regulation D promulgated thereunder and any applicable
state securities law. The Company shall make all necessary SEC and "blue sky"
filings required to be made by the Company in connection with the sale of the
Securities to Buyer as required by all applicable Laws, and shall provide a copy
thereof to Buyer promptly after such filing; provided, however, that each Buyer
agrees to furnish all such information as may reasonably be requested by the
Company in order to effect all such filings..

         J. Limitation on Future Financing. The Company agrees that as long as
  the Buyers own Preferred Stock it will not sell or enter into any agreement to
  sell any of its securities or incur any indebtedness outside the ordinary
  course of business, until twelve months after the Closing, without the written
  notice to investors.

         V.       TRANSFER AGENT INSTRUCTIONS.

         A. The Company undertakes and agrees that no instruction other than the
instructions referred to in this Section V and customary stop transfer
instructions prior to the registration and sale of the Common Stock pursuant to
an effective Securities Act registration statement will be given to its transfer
agent for the Common Stock and that the Common Stock issuable upon conversion of
the Preferred Stock, including the payment of interest, and upon exercise of the
Warrants otherwise shall be freely transferable on the books and records of the
Company as and to the extent provided in this Agreement, the Registration Rights
Agreement and applicable Law, including, without limitation, the provisions of
the Securities Act and state securities laws. Nothing contained in this Section
V.A. shall affect in any way Buyer's obligations and agreement to comply with
all applicable securities laws upon resale of such Common Stock. If, at any
time, Buyer provides the Company with an opinion of counsel reasonably
acceptable to the Company in form and substance reasonably satisfactory to the
Company that registration of the resale by Buyer of such Common Stock is not
required under the Securities Act and that the removal of restrictive legends is
permitted under applicable law, the Company shall permit the transfer of such
Common Stock and, promptly instruct the Company's transfer agent to issue one or
more certificates for Common Stock without any restrictive legends endorsed
thereon.

         B. The Company shall permit Buyer to exercise its right to convert the
Preferred Stock by telecopying an executed and completed Notice of Conversion to
the Company. Each date on which a Notice of Conversion is telecopied to and
received by the Company in accordance with the provisions hereof shall be deemed
a Conversion Date. The Company shall transmit the certificates evidencing the
shares of Common Stock issuable upon conversion of any Preferred Stock to Buyer
via express courier, by electronic transfer or otherwise, within five business
days after receipt by the Company of the Notice of Conversion (the "Delivery
Date").

         C. The Company shall permit Buyer to exercise its right to purchase
shares of Common Stock pursuant to exercise of the Warrants in accordance with
its applicable terms of the Warrants. The last date that the Company may deliver

                                       13
<PAGE>

shares of Common Stock issuable upon any exercise of Warrants is referred to
herein as the "Warrant Delivery Date."

         D. The Company understands that a delay in the issuance of the shares
of Common Stock issuable upon the conversion of the Preferred Stock (including
the payment of interest or upon exercise of the Warrants beyond the applicable
Delivery Date or Warrant Delivery Date could result in economic loss to Buyer.
As compensation to Buyer for such loss (and not as a penalty), the Company
agrees to pay to Buyer for late issuance of Common Stock issuable upon
conversion of the Preferred Stock or exercise of the Warrants in accordance with
the following schedule (where "No. Business Days" is defined as the number of
business days beyond five (5) days from the Delivery Date or the Warrant
Delivery Date, as applicable):

                                                     Compensation For Each
                                                       Share of Preferred
                                                      Stock Not Converted
                                                  Timely or Shares of Common
                                                 Stock Issuable Upon Exercise
                                                  of Each 1,000,000 Warrants
         No. Business Days                             Not Issued Timely

                        1                                $ 100
                        2                                $ 200
                        3                                $ 300
                        4                                $ 400
                        5                                $ 500
                        6                                $ 600
                        7                                $ 700
                        8                                $ 800
                        9                                $ 900
                       10                                $1000
             more than 10                                $ 200 for each
                                                         Business Day Late
                                                         beyond 10 days

The Company shall pay to Buyer the compensation described above by the transfer
of immediately available funds upon Buyer's demand. Nothing herein shall limit
Buyer's right to pursue actual damages for the Company's failure to issue and
deliver Common Stock to Buyer (which actual damages shall be reduced by the
amount of any compensation paid by the Company as described above in this
Section V. D.), and in addition to any other remedies which may be available to
Buyer, in the event the Company fails for any reason to effect delivery of such
shares of Common Stock within five business days after the relevant Delivery
Date or the Warrant Delivery Date, as applicable, Buyer shall be entitled to
rescind the relevant Notice of Conversion or exercise of Warrants by delivering
a notice to such effect to the Company whereupon the Company and Buyer shall
each be restored to their respective original positions immediately prior to
delivery of such Notice of Conversion on delivery. The Company may pay the
compensation described above in additional shares of Common Stock based upon the
Market Price (as defined in the Certificate of Designations) as determined on
the date of payment.

                                       14
<PAGE>

         E. Upon the execution and delivery hereof, the Company is issuing to
the transfer agent for its Common Stock (and to any substitute or replacement
transfer agent for its Common Stock upon the Company's appointment of any such
substitute or replacement transfer agent) instructions relating to the
Securities. Such instructions shall be irrevocable by the Company from and after
the date hereof or from and after the issuance thereof to any such substitute or
replacement transfer agent, as the case may be, except as otherwise expressly
provided in the Registration Rights Agreement. It is the intent and purpose of
such instructions, to require the transfer agent for the Common Stock from time
to time upon transfer of Securities by Buyer to issue certificates evidencing
such Registrable Securities free of legends and without consultation by the
transfer agent with the Company or its counsel and without the need for any
further advice or instruction or documentation to the transfer agent by or from
the Company or its counsel or Buyer.

         VI.      DELIVERY INSTRUCTIONS.

         The Securities shall be delivered by the Company on a
"delivery-against-payment basis" at the Closing.

         VII.     CLOSING DATE.

         The date and time of the issuance and sale of the Preferred Shares (the
"Closing Date") shall be the date hereof or such other as shall be mutually
agreed upon in writing. The issuance and sale of the Securities shall occur on
the Closing Date at the offices of the Escrow Agent.

         VIII.    CONDITIONS TO THE COMPANY'S OBLIGATIONS.

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

         A. Delivery by Buyer of the Purchase Price; provided, however, that the
Company shall have received not less that an aggregate of $150,000 in gross
proceeds from the sale of the Preferred Stock and Warrants to the Buyers (the
"Gross Proceeds") as contemplated by the Agreement.

         B. The accuracy in all material respects on the Closing Date of the
representations and warranties of Buyers contained in this Agreement as if made
on the Closing Date (except for representations and warranties which, by their
express terms, speak as of and relate to a specified date, in which case such
accuracy shall be measured as of such specified date) and the performance by
Buyers in all material respects on or before the Closing Date of all covenants
and agreements of Buyers required to be performed by them pursuant to the
Agreement on or before the Closing Date;

         C. There shall not be in effect any Law or order, ruling, judgment or
writ of any court or public or governmental authority restraining, enjoining or
otherwise prohibiting any of the transactions contemplated by this Agreement.

                                       15
<PAGE>

         IX.      CONDITIONS TO BUYER'S OBLIGATIONS.

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

         A. Delivery by the Company of one or more certificates (I/N/O Buyer)
evidencing the Securities to be purchased by Buyer pursuant to this Agreement;

         B. The accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained in this Agreement as if
made on the Closing Date (except for representations and warranties which, by
their express terms, speak as of and relate to a specified date, in which case
such accuracy shall be measured as of such specified date) and the performance
by the Company in all material respects on or before the Closing Date of all
covenants and agreements of the Company required to be performed by it pursuant
to this Agreement on or before the Closing Date;

         C. Buyer having received an opinion of counsel for the Company, dated
the Closing Date, in form, scope and substance reasonably satisfactory to
counsel for Astor Capital, Inc., as agent for the Buyer.

         D. There not having occurred (i) any general suspension of trading in,
or limitation on prices listed for, the Common Stock on the OTC:BB, (ii) the
declaration of a banking moratorium or any suspension of payments in respect of
banks in the United States, (iii) the commencement of a war, armed hostilities
or other international or national calamity directly or indirectly involving the
United States or any of its territories, protectorates or possessions, or (iv)
in the case of the foregoing existing at the date of this Agreement, a material
acceleration or worsening thereof.

         E. There not having occurred any event or development, and there being
in existence no condition, having or which reasonably and foreseeably would have
a Material Adverse Effect.

         F. The Company shall have authorized the Escrow Agent in the Release
Notice annexed to the Escrow Instructions to pay out of the Gross Proceeds
Buyers' out-of-pocket costs and expenses (not to exceed $10,000) incurred in
connection with the transactions contemplated by the Preferred Stock and the
Agreement (including the fees and disbursements of legal counsel).

         G. There shall not be in effect any Law or order, ruling, judgment or
writ of any court or public or governmental authority restraining, enjoining or
otherwise prohibiting any of the transactions contemplated by this Agreement.

         K. Delivery of Irrevocable Instructions to the Transfer Agent.

         X.       TERMINATION.

         A. Termination by Mutual Written Consent. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned, for any
reason and at any time prior to the Closing Date, by the mutual written consent
of the Company and Buyer.

                                       16
<PAGE>

         B. Termination by the Company or Buyer. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned by action
of the Company or Buyer if (i) the Closing shall not have occurred at or prior
to 5:00 p.m., New York City time, on February 28, 2002; provided, however, that
the right to terminate this Agreement pursuant to this Article X.B(i) shall not
be available to any party whose failure to fulfill any of its obligations under
this Agreement has been the cause of or resulted in the failure of the Closing
to occur at or before such time and date or (ii) any court or public or
governmental authority shall have issued an order, ruling, judgment or writ, or
there shall be in effect any Law, restraining, enjoining or otherwise
prohibiting the consummation of any of the transactions contemplated by this
Agreement.

         C. Termination by Buyer. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned by Buyer at any time prior to
the Closing Date, if (i) the Company shall have failed to comply in any material
respect with any of its covenants or agreements contained in this Agreement,
(ii) there shall have been a breach by the Company with respect to any
representation or warranty made by it in this Agreement, or (iii) there shall
have occurred any event or development, or there shall be in existence any
condition, having or reasonably and foreseeably likely to have a Material
Adverse Effect.

J. Termination by the Company. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned by the Company at any time
prior to the Closing Date, if (i) any Buyer shall have failed to comply in any
material respect with any of its covenants or agreements contained in this
Agreement or (ii) there shall have been a breach by any Buyer with respect to
any representation or warranty made by it in this Agreement or (iii) there is a
failure of any condition to the Company's obligations as set forth in Section
VIII hereof .

K. Fees and Expenses of Termination. If this Agreement is terminated for any
reason, the Company shall reimburse    n/a     as agent for the Buyers for
their out-of-pocket costs and expenses incurred in connection with the
transactions contemplated by this Agreement in an amount not to exceed
$    n/a    in the aggregate (including, but not limited to, the fees and
disbursements of Buyers' legal counsel.)

         XI.      SURVIVAL; INDEMNIFICATION.

         A. The representations, warranties and covenants made by each of the
Company and Buyer in this Agreement, the annexes, schedules and exhibits hereto
and in each instrument, agreement and certificate entered into and delivered by
them pursuant to this Agreement, shall survive the Closing and the consummation
of the transactions contemplated hereby until the second anniversary of the
Closing Date. In the event of a breach or violation of any of such
representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have all rights
and remedies for such breach or violation available to it under the provisions
of this Agreement , irrespective of any investigation made by or on behalf of
such party on or prior to the Closing Date.

                                       17
<PAGE>

         B. The Company hereby agrees to indemnify and hold harmless the Buyer,
its Affiliates and their respective officers, directors, partners and members
(collectively, the "Buyer Indemnitees"), from and against any and all losses,
claims, damages, judgments, penalties, liabilities and deficiencies
(collectively, "Losses"), and agrees to reimburse the Buyer Indemnitees for all
out-of-pocket expenses (including the reasonable fees and expenses of legal
counsel), in each case promptly as incurred by the Buyer Indemnitees and to the
extent arising out of or in connection with:

                  1. any material misrepresentation, omission of fact or breach
of any of the Company's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Company pursuant to
this Agreement; or

                  2. any failure by the Company to perform in any material
respect any of its covenants, agreements, undertakings or obligations set forth
in this Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Company pursuant to
this Agreement.

         C. Buyer hereby agrees to indemnify and hold harmless the Company, its
Affiliates and their respective officers, directors, partners and members
(collectively, the "Company Indemnitees"), from and against any and all Losses,
and agrees to reimburse the Company Indemnitees for all out-of-pocket expenses
(including the reasonable fees and expenses of legal counsel), in each case
promptly as incurred by the Company Indemnitees and to the extent arising out of
or in connection with:

                  1. any material misrepresentation, omission of fact, or breach
of any of Buyer's representations or warranties contained in this Agreement, the
annexes, schedules or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by Buyer pursuant to this Agreement; or

                  2. any failure by Buyer to perform in any material respect any
of its covenants, agreements, undertakings or obligations set forth in this
Agreement or any instrument, certificate or agreement entered into or delivered
by Buyer pursuant to this Agreement. Here the amount the Buyer agrees to
indemnify will be limited to the amount of his investment.

         D. Promptly after receipt by either party hereto seeking
indemnification pursuant to this Section XI (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section XI is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim, the Indemnifying Party shall be entitled to assume
the defense thereof. Notwithstanding the assumption of the defense of any Claim

                                       18
<PAGE>

by the Indemnifying Party, the Indemnified Party shall have the right to employ
separate legal counsel (together with appropriate local counsel) and to
participate in the defense of such Claim, and the Indemnifying Party shall bear
the reasonable fees, out-of-pocket costs and expenses of such separate legal
counsel to the Indemnified Party if (and only if): (x) the Indemnifying Party
shall have agreed to pay such fees, out-of-pocket costs and expenses, (y) the
Indemnified Party and the Indemnifying Party reasonably shall have concluded
that representation of the Indemnified Party and the Indemnifying Party by the
same legal counsel would not be appropriate due to actual or, as
reasonably-determined by legal counsel to the Indemnified Party, (i) potentially
differing interests between such parties in the conduct of the defense of such
Claim, or (ii) if there may be legal defenses available to the Indemnified Party
that are in addition to or disparate from those available to the Indemnifying
Party and which can not be presented by counsel to the Indemnifying Party, or
(z) the Indemnifying Party shall have failed to employ legal counsel reasonably
satisfactory to the Indemnified Party within a reasonable period of time after
notice of the commencement of such Claim. If the Indemnified Party employs
separate legal counsel in circumstances other than as described in clauses (x),
(y) or (z) above, the fees, costs and expenses of such legal counsel shall be
borne exclusively by the Indemnified Party. Except as provided above, the
Indemnifying Party shall not, in connection with any Claim in the same
Jurisdiction, be liable for the fees and expenses of more than one firm of legal
counsel for the Indemnified Party (together with appropriate local counsel). The
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party (which consent shall not unreasonably be withheld), settle or
compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment and does involve any continuing
obligations.

         E. In the event one party hereunder should have a claim for
indemnification that does not involve a claim or demand being asserted by a
third party, the Indemnified Party promptly shall deliver notice of such claim
to the Indemnifying Party. If the Indemnified Party disputes the claim, such
dispute shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration in Los Angeles, California
conducted in accordance with the commercial procedures and rules of the American
Arbitration Association. Judgment upon any award rendered by any arbitrators may
be entered in any court having competent jurisdiction thereof.

         F. In no event shall any (i) Investor be required to undertake
liability to any person for any amounts in excess of the dollar amount of the
proceeds to be received by such Investor from the sale of such Investor's
Registrable Securities (after deducting any fees, discounts and commissions
applicable thereto) pursuant to any Registration Statement under which such
Registrable Securities are to be registered under the Securities Act and (ii)
underwriter be required to undertake liability to any Person hereunder for any
amounts in excess of the aggregate discount, commission or other compensation
payable to such underwriter with respect to the Registrable Securities
underwritten by it and distributed pursuant to the Registration Statement;
provided, however, in the event of fraud by the Investor (in the case of (i)
above) or underwriter (in the case of (ii) above), there shall be no such dollar
amount limitation.

                                       19
<PAGE>

         XII. GOVERNING LAW; MISCELLANEOUS.

         This Agreement shall be governed by and interpreted in accordance with
the laws of the State of California, without regard to the conflicts of law
principles of such state. Each of the parties consents to the jurisdiction of
the federal courts whose districts encompass any part of the City of Los Angeles
or the state courts of the State of California sitting in the City of Los
Angeles in connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions. In any action or proceeding brought by a party arising
out of, resulting from or relating to the transactions contemplated by this
Agreement, the prevailing party shall be entitled to recover the reasonable
costs and expenses incurred by it in connection with that action or proceeding,
including but not limited to, attorney's fees. A facsimile transmission of this
signed Agreement shall be legal and binding on all parties hereto. This
Agreement may be signed in one or more counterparts, each of which shall be
deemed an original. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement. If any provision of this Agreement shall be invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.

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

         (1)      if to the Company, to:

                  Diamond Entertainment Corporation
                  800 Tucker Lane
                  Walnut, California 91789
                  Attention:  President

                  with a copy to:
                  Naccarato & Associates
                  19600 Fairchild, Suite 260
                  Irvine, California  92612
                  Attention: Owen Naccarato

         (2)      if to Buyer, to the address set forth on the signature page
                  hereof.

                  with a copy to:

                                       20
<PAGE>

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

         XIV. CONFIDENTIALITY. Each of the Company and Buyer agrees to keep
confidential and not to disclose to or use for the benefit of any third party
the terms of this Agreement or any other information which at any time is
communicated by the other party as being confidential without the prior written
approval of the other party; provided, however, that this provision shall not
apply to information which, at the time of disclosure, is already part of the
public domain (except by breach of this Agreement) and information which is
required to be disclosed by law (including, without limitation, pursuant to Item
10 of Rule 601 of Regulation S-K under the Securities Act and the Exchange Act).

         XV. ASSIGNMENT. This Agreement shall not be assignable by either of the
parties hereto prior to the Closing without the prior written consent of the
other party, and any attempted assignment contrary to the provisions hereby
shall be null and void; provided, however, that Buyer may assign its rights and
obligations hereunder, in whole or in part, to any affiliate of Buyer who
furnishes to the Company the representations and warranties set forth in Section
II hereof and otherwise agrees to be bound by the terms of this Agreement.

         XVI. BROKERS. Each of the parties hereto represents that it has had no
dealings in connection with this transaction with any finder or broker who will
demand payment of any fee or commission from the other party whose fee shall be
paid by the Company. The Company on the one hand, and Buyer, on the other hand,
agree to indemnify the other against and hold the other harmless from any and
all liabilities to any person claiming brokerage commissions or finder's fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.

         XVII. FEES AND EXPENSES. The Company agrees to pay Buyers' expenses
incident to the performance of its obligations hereunder (including, but not
limited to the fees, expenses and disbursements of Buyers' legal counsel) in an
amount not to exceed $5,000 in the aggregate.

                  [THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]

                                       21
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement on the date first above written.

                                DIAMOND ENTERTAINMENT CORPORATION

                                By:  /s/ James K.T. Lu
                                     ----------------------
                                       James K.T. Lu
                                       President & Chief Executive Officer

                                BALMORE S.A.

                                By:  /s/ Gisela Kindle
                                     ----------------------

                                       22
<PAGE>

                                                            Name:
                                                            Title:

Jurisdiction of Incorporation:

Address:
                           --------------------
                           ====================
                           --------------------
Telephone No.              --------------------
Fax No.                    --------------------
e-mail                     --------------------
Social Security or E.I.N Number: --------------------

Amount of Investment:

Number of Preferred Shares to be Purchased:

Number of Warrants to be Purchased:

                                       23
<PAGE>

               Purchaser / Number of Preferred Shares and Warrants

Name and Residence             Number of Shares              Dollar Amount
of Purchaser                 and Warrants Purchased         of Investment

Balmore S.A.                   Preferred Shares: 15           $150,000.00
                               Warrant: to purchase
                               2,250,000 shares of
Fax No.: (212) 586-8244        Common Stock.

                                       24

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