Document:

Pacific Capital Bancorp

Exhibit 10.1 

PACIFIC CAPITAL BANCORP 

MANAGEMENT RETENTION
PLAN
(As Amended and Restated, effective October 25, 2004) 

 

  

PACIFIC CAPITAL BANCORP 

MANAGEMENT RETENTION
PLAN
(As Amended and Restated, effective October 25, 2004) 

TABLE OF CONTENTS 

	  1.	Introduction	 	 	 	1	 
	 	 	 	 	 	 	 
	  2.	Purpose	 	 	 	1	 
	 	 	 	 	 	 	 
	  3.	Eligibility
      to Participate	 	 	 	1	 
	 	 	 	 	 	 	 
	  4.	When
      Participation Ends	 	 	 	2	 
	 	 	 	 	 	 	 
	  5.	Severance
      Benefits	 	 	 	2	 
	 	 	 	 	 	 	 
		           Eligibility
      to Receive Benefits	 	 	 	2	 
		           Involuntarily
      Terminated	 	 	 	2	 
		           Other
      Pay/Benefits	 	 	 	2	 
		           Retiree
      Health Plan Benefits	 	 	 	3	 
		           Exclusion
      of Benefits	 	 	 	3	 
		           Limitation
      on Benefits	 	 	 	3	 
	 	 	 	 	 	 	 
	  6.	Exclusions
      for Severance Payment	 	 	 	3	 
	 	 	 	 	 	 	 
	  7.	Severance
      Payment	 	 	 	4	 
	 	 	 	 	 	 	 
	  8.	Rules
      for Determining Annual Compensation	 	 	 	4	 
	 	 	 	 	 	 	 
		           Annual
      Average Compensation	 	 	 	4	 
		           Cash
      Bonus	 	 	 	4	 
		           Cash
      Commissions	 	 	 	4	 
		           No
      Fringe Benefits	 	 	 	4	 
		           No
      Stock Options	 	 	 	4	 
	 	 	 	 	 	 	 
	  9.	Time
      and Form of Severance Payment	 	 	 	4	 
	 	 	 	 	 	 	 
	10.	Withholding	 	 	 	5	 
	 	 	 	 	 	 	 
	11.	Excise
      Tax and Non-Deductibility Limitations	 	 	 	5	 
	 	 	 	 	 	 	 
	12.	Retiree
      Health Plan	 	 	 	5	 
	 	 	 	 	 	 	 
	13.	Employment
      Status	 	 	 	5	 
	 	 	 	 	 	 	 
		           Transfer
      of Employment	 	 	 	5	 

i 

  

	14.	Successors	 	 	 	6	 
	 	 	 	 	 	 	 
		           Company's
      Successors	 	 	 	6	 
		           Failure
      to Obtain Assumption	 	 	 	6	 
		           Successor
      Fund	 	 	 	6	 
	 	 	 	 	 	 
	Definitions	 	 	 	7-10	 
	 	 	 	 	 	 	 
		           Administration
      of the Plan ERISA Required Information	 	 	 		 
		           Cause	 	 	 		 
		           Change
      of Control	 	 	 		 
		           Change
      of Control Date	 	 	 		 
		           Code	 	 	 		 
		           Determination	 	 	 		 
		           Disability	 	 	 		 
		           Exchange
      Act	 	 	 		 
		           Good
      Reason	 	 	 		 
		           Governing
      Law	 	 	 		 
		           Incumbent
      Directors	 	 	 		 
		           Plan
      Year	 	 	 		 
		           Severance
      Window Period	 	 	 		 

ii 

  

PACIFIC CAPITAL BANCORP 

MANAGEMENT RETENTION
PLAN
(As Amended and Restated, effective October 25, 2004)  

	1.  	Introduction 

On November 24, 1998, Pacific Capital
Bancorp, a California corporation (hereinafter referred to as Pacific Capital),
established a management retention plan entitled “Pacific Capital Bancorp Management
Retention Plan” (hereinafter referred to as the “Plan”) for the benefit of
certain eligible executives of Pacific Capital and its subsidiaries (hereinafter referred
to as “Pacific Capital”). The Compensation & Nominating Committee of the
Board of Directors of Pacific Capital (the “Committee”) approved the amended and
restated Plan on October 25, 2004. 

The Plan shall remain in effect until
terminated by the Board of Directors by resolution adopted by three-fourths of the
Incumbent Directors. 

This document (“Plan
Document”) is intended to give participants an easily understood explanation of the
Plan. This Plan Document, in conjunction with any future amendments, constitutes the
official Plan Document for the Plan. You may request an additional copy of this Plan
Document by sending a written request to the address below. Please note that capitalized
terms have specialized meanings which are defined in either the section where it is first
used or at the end of the Plan Document. 

Neither the receipt of the Plan
Document nor the use of the term “you” indicates that you are eligible for a
retention benefit under the Plan. Only those executives who are selected for participation
and satisfy the requirements for a retention payment contained in the Plan are eligible
for a benefit. 

If you have questions regarding the
Plan, you may contact the Corporate Secretary at: 

Pacific Capital Bancorp

1021 Anacapa Street 
Santa Barbara, CA 93106 
Telephone: 805-564-6298  

 

  

	2.  	Purpose 

The purpose of this Plan is to:  

	    	     •  	enhance
the ability of Pacific Capital to retain existing executive             management and,
if needed, attract new executives;

	    	      •    	provide
reasonable severance benefits for eligible executives in the             event of
termination of employment following a Change of Control of             Pacific Capital,
and;

	    	      •    	enhance
executive morale.

	3.  	Eligibility
to Participate 

You become eligible to participate in
the Plan if Pacific Capital employs you within a position or salary grade (or similar
category) selected by the Compensation & Nominating Committee of the Board of
Directors (“Committee”) to participate in the Plan. If you are among the
executive employees whose rank, position or salary grade (or similar category) is selected
for participation, you will be notified in writing. Employment in an executive capacity
does not entitle you to selection for participation in the Plan. The Committee shall not
select any category of employees for participation unless it determines that each person
in that category is a member of a select group of management or highly-compensated
employees. The Committee’s selection of a category of executive employees for
participation shall be made solely in its discretion and shall be conclusive and binding. 

If you are covered under the terms of
an employment agreement, change in control agreement, or other similar agreement entered
into between you and Pacific Capital, or another subsidiary or entity subsequently
acquired, you are not eligible to participate in this Plan until the terms of such other
agreement expire. 

If you are selected for
participation, you will receive a written Notice of Participation from the Corporate
Secretary to be executed and returned by you. 

	4. 	When
Participation Ends 

You will cease to be a participant in
the Plan as of the first to occur of the following events: 

the date you receive all of the
Severance Payments due under the Plan in the event you are eligible for severance;
 the
date the Committee notifies you that as a result of a change in your employment status,
you are no longer included in a category selected to be a participant in the Plan;
the
date your employment ends for any reason, which does not result in your eligibility for
severance;
 the Board of Directors terminates the Plan; 

 

  

	5.  	Severance
Benefits 

Eligibility  to
Receive Benefits: You are eligible to receive benefits following a Change of
Control only if: 

	•  	you
are a participant in the Plan at the time of your termination of       employment; and 

	•    	you
have signed and returned the Notice of Participation form; 

	•    	your
employment is Involuntarily Terminated by Pacific Capital.       Involuntarily Terminated
shall have the following meaning: 

		      •   	your
employment is terminated by Pacific Capital other than for Cause, 

		      •   	your
employment is terminated by Pacific Capital as a result of your death or your
Disability, or 

		      •   	you
terminate your employment for Good Reason within the Severance             Window Period. 

Other Pay/Benefits. If (1) your
employment is terminated at any time during the Severance Window Period and you are
entitled to receive a Severance Payment, (2) you participate in any Retiree Health Plan,
and/or (3) you timely exercise your rights under Title X of the Consolidated Budget
Reconciliation Act of 1985 (“COBRA”) to continue to participate in Pacific
Capital’s Health/Dental/Vision (“H/D/V”) plans after your termination of
employment, Pacific Capital will continue to pay all premiums and costs associated with
your participation (and your spouse and dependents) in Company H/D/V plans according to
your elections and the terms/conditions of those plans for the period beginning as of the
date of your termination of employment. Payments end the earlier of: 

	• 	the
date you and your spouse and dependents become covered under another employer’s
health and/or dental insurance plans, or 

	• 	the
last day of the period you and/or your spouse and dependents are eligible to participate
in Pacific Capital’s H/V/D plans as provided under COBRA. 

Retiree Health Plan
Benefits 

If you participate in any Retiree
Health Plan, Pacific Capital shall have no obligation to make any payment to you or your
spouse and dependents under this section with respect to their participation. 

Exclusion of Benefits 

In the event your employment is
terminated for any reason, either prior to the occurrence of a Change of Control Date or
after the expiration of the Severance Window Period following a Change of Control Date,
you are not entitled to receive any benefits under this Plan. Other than this Plan, you
may be entitled to receive Severance Benefits that may apply under existing benefit plans
and policies of Pacific Capital. 

 

  

Limitation on Benefits 

By executing and returning to Pacific
Capital a Notice of Participation, you acknowledge that payment of benefits to you under
this Plan, if any, is the only compensation that you are entitled to as a result of
Involuntary Termination following a Change of Control. You have no right to bring or
maintain any suit, action, or other proceeding seeking compensation or damages based on
any alleged wrongful termination of your employment with Pacific Capital. Employee waives
and releases any rights that he/she may have under California Civil Code Section 1542 to
the full extent that all such rights may lawfully be waived. 

	6.  	Exclusions
for Severance Payment 

You are not eligible for Severance
Benefits, if any of the following conditions apply: 

	• 	You
fail to report to work or resign from employment prior to the effective date of your
termination of employment set forth in the notice of termination; 

	• 	You
announce in writing your intention to terminate employment or retire prior to the date
Pacific Capital announces that your employment will terminate; 

	•   	Your
termination of employment is due to Cause;

	•   	You
voluntarily resign or terminate your employment other than for Good       Reason,

	• 	Your
employment ends in connection with the sale of assets or a change in ownership of any
part of Pacific Capital’s operations and you are offered a comparable position with
comparable pay with the acquirer. 

	7.  	Severance
Payment 

The Severance Payment is equal to an
amount multiplied by your Severance Payment Percentage based on your position at the time
of your termination of employment times your Average Annual Compensation. 

	Position
      

    	Severance
      Payment Percentage
      

    
	 	 	 	 	 
	President
      & Chief Executive Officer	 	 	 	300%
	Leadership
      Council	 	 	 	200%
	Executive
      Vice President	 	 	 	150%
	Grade 19
      or T6	 	 	 	100%
	Grade 18
      (grandfathered prior to the amended and	 	 	 		 
	         restated
      October 25, 2004 Plan	 	 	 	100%

 

  

	8.  	Rules
for Determining Annual Compensation 

	 	
Annual
Average Compensation.  The average of your annual base salary, cash bonuses, and
commissions paid for the last three full Plan Years (or your actual full Plan Years of
employment if employed for less than three years). 

	 	
Cash
Bonus. A cash bonus, if any, is determined after the close of a Plan Year and
normally is paid during the first quarter of the following Plan Year. 

	 	
Cash
Commissions. Any cash commission is determined and paid after the close of a Plan
Year, and the amount, if any, is paid during the following Plan Year.  

	 	
No
Fringe Benefits. Your Annual Average Compensation for any Plan Year does not
include any fringe benefits provided by Pacific Capital, including Pacific Capital’s
I & I Plan or Employee Stock Ownership Plan, any matching contributions to any 401(k)
plan, any contributions or accruals to the Retiree Health Plans, and any premiums on
life, disability, or medical insurance. 

	 	
No Stock Options. Your
Annual Average Compensation for any Plan Year does not include any income or gain
realized by any stock options or other securities or rights granted to you by Pacific
Capital under any stock option plan or other incentive plan in effect at any time. 

	9.  	Time
and Form of Severance Payment 

Any Severance Payment that you are
entitled to receive under this Plan will be paid by Pacific Capital in a lump sum by the
later of (1) if no Dispute is made with respect to the Determination, (as those terms are
used in the Plan), 15 business days after the date of the delivery of the Determination,
and (2) if a Dispute is made with respect to the Determination, 15 business days after the
date of the Dispute resolution. 

	10.  	Withholding 

        All
amounts paid by Pacific Capital to you under this Plan are subject to all applicable
federal, state, and local payroll and withholding taxes, including any withholding
obligations under Section 4999 of the Excise Tax. 

	11.  	Excise
Tax and Non-Deductibility Limitations 

If a determination is made that
payments and benefits payable to any participant under this Plan, when aggregated with any
other payments or benefits received or to be received under any other plan by reason of
the occurrence of the Change of Control would be subject to the Excise Tax imposed by
Section 4999 of the Code, the participant is entitled to an additional payment (a
“Gross-Up Payment”) in an amount that will place the participant in the same
after-tax economic position that the participant would have been in if the Excise Tax had
not applied to the payments. The Accountants shall determine the amount of the Gross-Up
Payment. If the Accountants determine that payments are not subject to an Excise Tax, no
Gross-Up Payments will be paid to a participant. 

 

  

	12.  	Retiree
Health Plan 

Your rights and benefits under this
Plan are in addition to any rights under any Retiree Health Plan. Nothing in this Plan
shall limit your rights under any Retiree Health Plan and nothing in any Retiree Health
Plan shall limit your rights under this Plan. 

	13.  	Employment
Status

This Plan does not constitute a
contract of employment or impose on Pacific Capital any obligation to: 

           retain you as an employee,

           change status of your employment, or

           change
Pacific Capital’s policies regarding termination of employment.  

This Plan does not constitute a
contract of employment or impose on you any obligation to continue your employment with
Pacific Capital for any particular period of time. 

Subject to the provisions of any
written employment agreement between you and Pacific Capital, your employment is and
continues to be at-will, as defined under applicable law. If your employment with Pacific
Capital terminates for any reason at any time other than during the Severance Window
Period, including any termination prior to a Change of Control Date, you are not entitled
to any payments, benefits, damages, awards, or other compensation under this Plan. You
will only be entitled to payments, benefits, damages, awards, and other compensation that
are available under Pacific Capital’s established employee plans and practices at the
time of termination. 

Transfer of Employment. Notwithstanding anything in this Plan to the contrary, the reassignment
of your employment from Pacific Capital to any subsidiary, shall not, by itself, be
considered a Termination of Employment. 

	14.  	Successors 

Company’s Successors. Pacific Capital requires any successor to Pacific Capital (whether by
purchase, lease, merger, consolidation, liquidation, or otherwise) or to all (or
substantially all) of Pacific Capital’s business and/or assets, to assume this Plan
and expressly agree to perform all of the obligations of Pacific Capital under this Plan.
For all purposes under this Plan, references to Pacific Capital include any successor to
Pacific Capital and its business and/or assets, as appropriate. Any corporation,
partnership, limited liability company, or other person or entity which is the successor
of Pacific Capital (whether by purchase, lease, merger, consolidation, liquidation or
otherwise) or successor to all (or substantially all) of the business and/or assets of
Pacific Capital (including the stock of any subsidiary of Pacific Capital) is considered
to have assumed all of Pacific Capital’s obligations under this Plan. This assumption
applies regardless of whether or not any successor specifically acknowledges in writing
that it is assuming all obligations under this Plan. 

 

  

Failure to Obtain Assumption. The failure of Pacific Capital to obtain the assumption
of this Plan by its successor prior to the effectiveness of any succession will be
considered to be the Involuntary Termination of the participants in this Plan. The
Involuntary Termination of each effected participant is effective as of the day before the
succession effective date. Effected participants are entitled to receive the same
Severance Payment and other benefits under this Plan that they would have been entitled to
receive had their employment been terminated in an Involuntary Termination after the
succession effective date and after the occurrence of a Change of Control. 

Successor Fund. If a
transaction occurs in which any person or entity is considered a successor to Pacific
Capital and the successor does not specifically assume all of Pacific Capital’s
obligations under this Plan, Pacific Capital: 

	• 	will
retain a sufficient amount to pay, based on the compensation levels of the participants
who are Pacific Capital employees as of the date immediately preceding the close of the
transaction, all of the Severance Payments and other benefits that are then payable, and 

	•   	within
two years from the closing date may be payable to participants, and

	• 	promptly
after the close of the transaction will use the assets and/or consideration to pay the
Severance Payments and other benefits payable to the participants. 

 

  

DEFINITIONS 

Administration of the
Plan ERISA Required Information 

The sponsor and Administrator of
this Plan is: 
Pacific Capital Bancorp 
1021 Anacapa Street 
Santa Barbara, California 93101

Attn:  William S. Thomas, Jr., President & CEO 
(805) 564-6216  

The Designated Agent for service of
process: 
General Counsel 
Pacific Capital Bancorp 
1021 Anacapa Street 
Santa Barbara,
California 9311  

Pacific Capital may change the name and position of the
Administrator or Designated Agent at any time. 

CAUSE 

Cause for termination of the
participant’s employment by Pacific Capital is based upon: 

		• 	the
continued failure by the participant to substantially perform the participant’s
duties (unless such failure is due to participant’s Disability) after written
documentation specifying the participant’s performance failures is delivered to the
participant and a period of at least 14 business days is given to the participant to cure
such failures; 

		      • 	any
act of dishonesty, breach of confidentiality or ethics             violation, or fraud by
the participant;

		• 	the
participant’s conviction of a felony, or commission of a criminal or other act that
will probably cause substantial economic damage to Pacific Capital or substantial injury
to its business reputation; or 

		      • 	the
order of a regulatory agency.

CHANGE OF CONTROL 

Change of Control is the occurrence
of any of the following events: 

	• 	An
acquisition of any voting securities of Pacific Capital by any person (as that term is
used for purposes of Section 13(d) or Section 14(d) of the Exchange Act), immediately
after which such person has beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of the combined voting power of
Pacific Capital’s then outstanding voting securities. 

 

  

	• 	  	
A cumulative change in the composition of the Board of Directors of Pacific Capital
occurring during any two-year period, as a result of which fewer than a majority of the
directors are Incumbent Directors; provided that no individual shall be considered an
Incumbent Director if such individual initially assumed office as a result of either an
actual or threatened Election Contest (as described in Rule 14a-11 promulgated under the
Exchange Act) (an “Election Contest”) or other actual or threatened solicitation
of proxies or consents by or on behalf of a person other than the Board of Directors of
Pacific Capital (a “Proxy Contest”) including by reason of any agreement
intended to avoid or settle any Election Contest or Proxy Contest; or 

	• 	Approval
by the shareholders of Pacific Capital of: 

		a. 	A
merger, consolidation or reorganization involving Pacific Capital. 

		b. 	A
complete liquidation or dissolution of Pacific Capital unless (as evidenced by
               resolution of the Board of Directors of Pacific Capital) (x) such
liquidation or                dissolution is effected primarily for the purpose of
consolidating the business                and assets of Pacific Capital with those of one
or more subsidiaries of Pacific                Capital and (y) the principal business of
Pacific Capital is continued by such                subsidiary immediately after such
liquidation or dissolution; or 

		c. 	An
agreement for the sale or other disposition of all or substantially all of
               the assets of Pacific Capital to any person other than one or more
subsidiaries                of Pacific Capital. 

Change of Control Date 

Change of Control Date is the
earliest of: 

	• 	the
date on which the Change of Control occurs;

	• 	the
date on which Pacific Capital executes an agreement which would result       in the
occurrence of a Change of Control;

	• 	the
date on which the Board of Directors of Pacific Capital approves a transaction which, if
completed, would result in a Change of Control; or 

	• 	the
date Pacific Capital fails to satisfy its obligations to have this Plan assumed by any
successor to Pacific Capital involved in the Change of Control. 

 

  

Code 

Code means the Internal Revenue Code
of 1986, as amended. 

Determination 

Initial Determination. An
initial determination as to whether any payments would be subject to the Excise Tax shall
be made at Pacific Capital’s expense by an accounting firm selected by Pacific
Capital (which firm may be Pacific Capital’s regular outside auditors) (the
“Accountants”). The Accountants shall provide their determination (the
“Determination”), together with supporting calculations and documentation, to
Pacific Capital and the participant within 30 days after the date of the
participant’s Termination of Employment. For purposes of making the calculations, the
Accountants may make reasonable assumptions and approximations concerning applicable taxes
and may rely on reasonable, good faith interpretations concerning the application of
Sections 280G and 4999 of the Code. Pacific Capital and the participant shall furnish
information and documents to the Accountants as they may reasonably request in order to
make a Determination. Pacific Capital shall bear all costs that the Accountants may
reasonably incur in connection with any calculations contemplated by this section. If the
Accountants determine that no Excise Tax is payable by a participant, Pacific Capital
shall cause the Accountants to provide the participant an opinion that the Accountants
have substantial authority under the Code not to report an Excise Tax on the
participant’s federal income tax return. 

     Dispute.
          The Participant and Pacific Capital shall have the right to dispute the
          Determination (the “Dispute”). The participant and/or Pacific Capital
          shall initiate the Dispute, if at all, by delivering to the Administrator
          written notice of the Dispute within 10 days after the delivery of the
          Determination by the Accountants. If a written notice of Dispute is not
          delivered to the Administrator within such 10-day period, it shall be
          conclusively presumed that there is no Dispute and the Determination shall be
          binding, final, and conclusive upon the participant and Pacific Capital. If
          Pacific Capital initiates the Dispute, they shall promptly deliver to the
          participant a copy of the written notice delivered to the Administrator. Pacific
          Capital shall pay the reasonable attorney fees, costs, and expenses incurred in
          good faith by the participant in connection with the resolution of any Dispute,
          regardless of the outcome of the Dispute. 

DISABILITY 

Disability shall have the same
meaning as that term is defined in Pacific Capital’s Long-Term Disability Plan. 

EXCHANGE ACT 

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

 

  

GOOD REASON 

Good Reason is the occurrence of any
of the following events, without the participant’s express written consent: 

	• 	the
assignment to the participant of duties that are inconsistent with the
      participant's position and salary;

	• 	a
significant reduction of the participant's duties or responsibilities;

	• 	a
reduction of the participant’s base pay and annual cash bonuses or commissions,
unless the reduction in such bonuses and commissions results primarily from a
proportionate reduction in the bonus and/or commission pool available to employees based
on the performance of Pacific Capital Bancorp or the performance of the participant, or a
material reduction in the kind or level of employee benefits to which the participant is
entitled; 

	• 	the
termination of the participant's status as a member of the Leadership       Council of
Pacific Capital;

	• 	the
relocation of the participant’s principal place of employment more than 35 miles
from the present principal place of employment. 

GOVERNING LAW 

This Plan Document shall be governed
and interpreted in accordance with California law. 

INCUMBANT DIRECTORS  

Incumbent Directors means directors
of Pacific Capital who are elected (or nominated for election) to the Board by the
affirmative vote of at least a majority of the Incumbent Directors at the time of such
election or nomination. An individual who is elected or nominated in connection with an
actual or threatened Proxy Contest relating to the election of directors shall not be
considered an Incumbent Director. 

PLAN YEAR 

Plan Year means the period beginning
January 1st and ending December 31st of each year. 

SEVERANCE WINDOW PERIOD 

The Severance Window Period is a
period of 24 months immediately following the Change of Control Date.EXHIBIT 10.11

                      STANDBY EQUITY DISTRIBUTION AGREEMENT
                      -------------------------------------

     THIS  AGREEMENT  dated  as  of  the  19th day of May 2004 (the "Agreement")
                                                                     ---------
between  CORNELL  CAPITAL  PARTNERS,  LP,  a  Delaware  limited partnership (the
"Investor"), and NS8 CORPORATION, a corporation organized and existing under the
      ---
laws  of  the  State  of  Delaware  (the  "Company").
                                           -------

     WHEREAS,  the  parties  desire  that,  upon  the  terms  and subject to the
conditions  contained  herein, the Company shall issue and sell to the Investor,
from  time  to time as provided herein, and the Investor shall purchase from the
Company  up  to  Twenty  Million  Dollars  ($20,000,000) of the Company's common
stock,  par  value  $.0001  per  share  (the  "Common  Stock");  and
                                               -------------

WHEREAS,  such  investments  will  be  made  in  reliance upon the provisions of
Regulation D ("Regulation D") of the Securities Act of 1933, as amended, and the
               ------------
regulations  promulgated  thereunder  (the  "Securities  Act"), and or upon such
                                             ---------------
other  exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments to be made hereunder.

WHEREAS,  the  Company  has  engaged  Newbridge  Securities  Corporation  (the
"Placement  Agent"),  to  act  as  the  Company's  exclusive  placement agent in
         --------
connection with the sale of the Company's Common Stock to the Investor hereunder
pursuant to the Placement Agent Agreement dated the date hereof by and among the
Company, the Placement Agent and the Investor (the "Placement Agent Agreement").
                                                    -------------------------

NOW,  THEREFORE,  the  parties  hereto  agree  as  follows:

                                    ARTICLE I
                               CERTAIN DEFINITIONS

Section  1.1  "Advance"  shall  mean  the  portion  of  the  Commitment  Amount
               -------
requested  by  the  Company  in  the  Advance  Notice.

Section 1.2 "Advance  Date"  shall  mean  the  date  Butler  Gonzalez LLP Escrow
             -------------
Account is in receipt of the funds from the Investor and Butler Gonzalez LLP, as
the Investor's Counsel, is in possession of free trading shares from the Company
and  therefore  an Advance by the Investor to the Company can be made and Butler
Gonzalez  LLP  can  release  the free trading shares to the Investor. No Advance
Date  shall  be  less  than  six  (6) Trading Days after an Advance Notice Date.

Section 1.3 "Advance Notice" shall mean a written notice to the Investor setting
             --------------
forth  the  Advance  amount  that the Company requests from the Investor and the
Advance  Date.

Section 1.4 "Advance  Notice  Date" shall mean each date the Company delivers to
             ---------------------
the  Investor  an  Advance Notice requiring the Investor to advance funds to the

                                      E-1
<PAGE>
Company,  subject  to the terms of this Agreement.  No Advance Notice Date shall
be  less  than  seven  (7)  Trading  Days  after  the prior Advance Notice Date.

Section 1.5 "Bid  Price"  shall  mean,  on  any  date, the closing bid price (as
             ----------
reported  by  Bloomberg  L.P.) of the Common Stock on the Principal Market or if
the  Common  Stock is not traded on a Principal Market, the highest reported bid
price  for  the  Common  Stock,  as  furnished  by  the  National Association of
Securities  Dealers,  Inc.

Section 1.6 "Closing"  shall  mean one of the closings of a purchase and sale of
             -------
Common  Stock  pursuant  to  Section  2.3.

Section 1.7 "Commitment  Amount" shall mean the aggregate amount of up to Twenty
             ------------------
Million  Dollars  ($20,000,000)  which the Investor has agreed to provide to the
Company  in  order  to purchase the Company's Common Stock pursuant to the terms
and  conditions  of  this  Agreement.

Section 1.8 "Commitment  Period" shall mean the period commencing on the earlier
             ------------------
to occur of (i) the Effective Date, or (ii) such earlier date as the Company and
the  Investor  may  mutually  agree  in writing, and expiring on the earliest to
occur  of (x) the date on which the Investor shall have made payment of Advances
pursuant  to  this  Agreement  in the aggregate amount of Twenty Million Dollars
($20,000,000),  (y)  the  date  this Agreement is terminated pursuant to Section
2.5, or (z) the date occurring twenty-four (24) months after the Effective Date.

Section 1.9 "Common  Stock"  shall  mean  the  Company's common stock, par value
             -------------
$.001  per  share.

Section 1.10 "Condition  Satisfaction  Date" shall have the meaning set forth in
              -----------------------------
Section  7.2.

Section 1.11 "Damages"  shall mean any loss, claim, damage, liability, costs and
              -------
expenses  (including,  without  limitation,  reasonable  attorney's  fees  and
disbursements  and  costs  and  expenses of expert witnesses and investigation).

Section 1.12  "Effective  Date"  shall  mean  the  date  on  which the SEC first
               ---------------
declares  effective  a  Registration  Statement  registering  the  resale of the
Registrable  Securities  as  set  forth  in  Section  7.2(a).

Section 1.13 "Escrow  Agreement"  shall  mean  the  escrow  agreement  among the
             -----------------
Company,  the  Investor,  and  Butler  Gonzalez  LLP,  dated  the  date  hereof.

Section 1.14 "Exchange  Act"  shall mean the Securities Exchange Act of 1934, as
              -------------
amended,  and  the  rules  and  regulations  promulgated  thereunder.

Section 1.15  "Material Adverse Effect"  shall mean any condition, circumstance,
               -----------------------
or  situation  that  would  prohibit  or otherwise materially interfere with the
ability  of  the  Company to enter into and perform any of its obligations under
this  Agreement  or  the  Registration Rights Agreement in any material respect.

                                      E-2
<PAGE>
Section 1.16  "Market  Price"  shall  mean  the  lowest VWAP of the Common Stock
               ------------
during the  Pricing  Period.

Section 1.17 "Maximum  Advance  Amount"  shall  be  Seven Hundred Fifty Thousand
              ------------------------
Dollars  ($750,000)  per  Advance  Notice.

Section 1.18  "NASD"  shall  mean  the  National  Association  of Securities
               ----
Dealers,  Inc.

Section 1.19 "Person"  shall  mean  an  individual,  a  corporation,  a
              ------
partnership,  an association, a trust or other entity or organization, including
a  government  or political subdivision or an agency or instrumentality thereof.

Section  1.20 "Placement Agent" shall mean Newbridge Securities Corporation,
               ---------------
a  registered  broker-dealer.

Section  1.21 "Pricing  Period"  shall mean the five (5) consecutive Trading
               ---------------
Days  after  the  Advance  Notice  Date.

Section  1.22  "Principal  Market" shall mean the Nasdaq National Market, the
                -----------------
Nasdaq  SmallCap  Market, the American Stock Exchange, the OTC Bulletin Board or
the  New  York  Stock  Exchange,  whichever is at the time the principal trading
exchange  or  market  for  the  Common  Stock.

Section  1.23 "Purchase Price" shall be set at one hundred percent (100%) of
               --------------
the  Market  Price  during  the  Pricing  Period.

Section  1.24 "Registrable Securities" shall mean the shares of Common Stock
               ----------------------
to  be  issued  hereunder (i) in respect of which the Registration Statement has
not  been  declared  effective  by  the SEC, (ii) which have not been sold under
circumstances  meeting  all  of  the  applicable  conditions of Rule 144 (or any
similar  provision then in force) under the Securities Act ("Rule 144") or (iii)
                                                             --------
which  have not been otherwise transferred to a holder who may trade such shares
without  restriction  under  the Securities Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a
restrictive  legend.

Section  1.25 "Registration  Rights  Agreement"  shall mean the Registration
               -------------------------------
Rights Agreement dated the date hereof, regarding the filing of the Registration
Statement for the resale of the Registrable Securities, entered into between the
Company  and  the  Investor.

Section 1.26 "Registration Statement" shall mean a registration statement on
              ----------------------
Form  S-1 or SB-2 (if use of such form is then available to the Company pursuant
to  the  rules of the SEC and, if not, on such other form promulgated by the SEC
for  which  the  Company  then qualifies and which counsel for the Company shall
deem  appropriate,  and  which  form  shall  be  available for the resale of the
Registrable  Securities  to  be  registered  thereunder  in  accordance with the
provisions  of  this  Agreement  and  the  Registration Rights Agreement, and in
accordance with the intended method of distribution of such securities), for the
registration  of  the resale by the Investor of the Registrable Securities under
the  Securities  Act.

                                      E-3
<PAGE>
Section 1.27  "Regulation D" shall have the meaning set forth in the recitals
               ------------
of  this  Agreement.

Section  1.28  "SEC"  shall  mean  the  Securities  and  Exchange Commission.
                ---

Section  1.29  "Securities  Act"  shall  have  the  meaning  set forth in the
                ---------------
recitals  of  this  Agreement.

Section  1.30  "SEC  Documents"  shall  mean  Annual  Reports on Form 10-KSB,
                --------------
Quarterly  Reports  on  Form  10-QSB,  Current  Reports  on  Form  8-K and Proxy
Statements  of  the  Company  as  supplemented  to the date hereof, filed by the
Company  for  a  period of at least twelve (12) months immediately preceding the
date  hereof  or  the  Advance  Date, as the case may be, until such time as the
Company  no  longer  has  an  obligation  to  maintain  the  effectiveness  of a
Registration  Statement  as  set  forth  in  the  Registration Rights Agreement.

Section  1.31  "Trading  Day"  shall  mean  any day during which the New York
                ------------
Stock  Exchange  shall  be  open  for  business.

Section  1.32  "VWAP"     shall mean the volume weighted average price of the
                ----
Company's  Common  Stock  as  reported  by  Bloomberg,  LP.

                                   ARTICLE II
                                    ADVANCES

Section 2.1 Investments.
            -----------

(a)     Advances.  Upon  the terms and conditions set forth herein (including,
        --------
without limitation, the provisions of Article VII hereof), on any Advance Notice
Date  the  Company  may request an Advance by the Investor by the delivery of an
Advance  Notice.  The  number  of shares of Common Stock that the Investor shall
receive  for  each  Advance  shall  be  determined by dividing the amount of the
Advance by the Purchase Price.  No fractional shares shall be issued. Fractional
shares  shall  be  rounded  to  the  next  higher  whole  number of shares.  The
aggregate maximum amount of all Advances that the Investor shall be obligated to
make  under  this  Agreement  shall  not  exceed  the  Commitment  Amount.

Section 2.2 Mechanics.
            ---------

(a)     Advance Notice.  At any time during the Commitment Period, the Company
        --------------
may  deliver  an  Advance  Notice to the Investor, subject to the conditions set
forth  in  Section  7.2;  provided,  however,  the  amount  for  each Advance as
designated  by  the  Company in the applicable Advance Notice, shall not be more
than  the Maximum Advance Amount.  The aggregate amount of the Advances pursuant
to  this  Agreement  shall  not  exceed  the  Commitment  Amount.  The  Company
acknowledges  that  the  Investor  may sell shares of the Company's Common Stock
corresponding  with a particular Advance Notice on the day the Advance Notice is
received  by  the  Investor.  There shall be a minimum of seven (7) Trading Days
between  each  Advance  Notice  Date.

                                      E-4
<PAGE>
(b)     Date  of  Delivery of Advance Notice.  An Advance Notice shall be deemed
        ------------------------------------
delivered on (i) the Trading Day it is received by facsimile or otherwise by the
Investor  if  such  notice is received prior to 12:00 noon Eastern Time, or (ii)
the  immediately  succeeding  Trading  Day  if  it  is  received by facsimile or
otherwise after 12:00 noon Eastern Time on a Trading Day or at any time on a day
which  is not a Trading Day.  No Advance Notice may be deemed delivered on a day
that  is  not  a  Trading  Day.

(c)     Pre-Closing  Share  Credit.  Within  two  (2)  business  days  after the
        --------------------------
Advance  Notice  Date,  the  Company shall credit shares of the Company's Common
Stock  to  the  Investor's  counsel's  balance account with The Depository Trust
Company  through  its Deposit Withdrawal At Custodian system, in an amount equal
to  the  amount of the requested Advance divided by the closing Bid Price of the
Company's Common Stock as of the Advance Notice Date multiplied by one point one
(1.1).  Any  adjustments to the number of shares to be delivered to the Investor
at  the  Closing  as  a  result  of fluctuations in the closing Bid Price of the
Company's  Common Stock shall be made as of the date of the Closing.  Any excess
shares  shall  be credited to the next Advance.  In no event shall the number of
shares issuable to the Investor pursuant to an Advance cause the Investor to own
in  excess  of nine and 9/10 percent (9.9%) of the then outstanding Common Stock
of  the  Company.

(d)     Hardship.  In  the  event  the Investor sells the Company's Common Stock
        --------
pursuant  to  subsection  (c)  above  and  the  Company  fails  to  perform  its
obligations  as  mandated  in Section 2.5 and 2.2 (c), and specifically fails to
provide the Investor with the shares of Common Stock for the applicable Advance,
the  Company  acknowledges that the Investor shall suffer financial hardship and
therefore  shall  be  liable  for  any  and  all  losses,  commissions, fees, or
financial  hardship  caused  to  the  Investor.

Section 2.3 Closings.  On each Advance Date, which shall be six (6) Trading
            --------
Days  after  an  Advance  Notice  Date,  (i)  the  Company  shall deliver to the
Investor's  Counsel,  as defined pursuant to the Escrow Agreement, shares of the
Company's  Common  Stock, representing the amount of the Advance by the Investor
pursuant  to  Section  2.1  herein, registered in the name of the Investor which
shall  be  delivered to the Investor, or otherwise in accordance with the Escrow
Agreement  and  (ii)  the  Investor  shall  deliver  to Butler Gonzalez LLP (the
"Escrow  Agent")  the  amount  of the Advance specified in the Advance Notice by
--------------
wire  transfer  of  immediately  available funds which shall be delivered to the
Company,  or otherwise in accordance with the Escrow Agreement.  In addition, on
or prior to the Advance Date, each of the Company and the Investor shall deliver
to  the  other  through  the  Investor's Counsel, all documents, instruments and
writings  required  to be delivered by either of them pursuant to this Agreement
in  order to implement and effect the transactions contemplated herein.  Payment
of  funds  to  the  Company  and  delivery  of the Company's Common Stock to the
Investor shall occur in accordance with the conditions set forth above and those
contained  in  the  Escrow  Agreement; provided, however, that to the extent the
                                       --------  -------
Company  has  not paid the fees, expenses, and disbursements of the Investor and
the Investor's counsel in accordance with Section 12.4, the amount of such fees,
expenses,  and  disbursements may be deducted by the Investor (and shall be paid
to  the  relevant party) from the amount of the Advance with no reduction in the
amount  of  shares of the Company's Common Stock to be delivered on such Advance
Date.

                                      E-5
<PAGE>
Section 2.4 Termination  of  Investment.  The obligation of the Investor to make
            ---------------------------
an Advance to the Company pursuant to this Agreement shall terminate permanently
(including  with  respect  to  an Advance Date that has not yet occurred) in the
event  that  (i)  there  shall  occur  any  stop  order  or  suspension  of  the
effectiveness  of  the  Registration  Statement  for  an aggregate of fifty (50)
Trading  Days, other than due to the acts of the Investor, during the Commitment
Period,  and  (ii)  the Company shall at any time fail materially to comply with
the  requirements of Article VI and such failure is not cured within thirty (30)
days  after receipt of written notice from the Investor, provided, however, that
                                                         --------  -------
this  termination  provision  shall  not apply to any period commencing upon the
filing  of  a post-effective amendment to such Registration Statement and ending
upon  the  date  on which such post effective amendment is declared effective by
the  SEC.

Section 2.5 Agreement  to  Advance  Funds.
            -----------------------------

(a)     The  Investor  agrees  to  advance the amount specified in the Advance
Notice  to  the Company after the completion of each of the following conditions
and  the  other  conditions  set  forth  in  this  Agreement:

     (i)  the  execution  and delivery by the Company, and the Investor, of this
Agreement  and  the  Exhibits  hereto;

     (ii)  Investor's  Counsel  shall  have  received the shares of Common Stock
applicable  to  the  Advance  in  accordance  with  Section  2.2(c)  hereof;

     (iii)  the  Company's  Registration Statement with respect to the resale of
the  Registrable  Securities  in  accordance  with the terms of the Registration
Rights  Agreement  shall  have  been  declared  effective  by  the  SEC;

     (iv)  the  Company  shall  have  obtained  all  material  permits  and
qualifications  required  by  any applicable state for the offer and sale of the
Registrable  Securities, or shall have the availability of exemptions therefrom.
The  sale  and issuance of the Registrable Securities shall be legally permitted
by  all  laws  and  regulations  to  which  the  Company  is  subject;

     (v) the Company shall have filed with the Commission in a timely manner all
reports, notices and other documents required of a "reporting company" under the
Exchange  Act  and  applicable  Commission  regulations;

     (vi)  the  fees  as set forth in Section 12.4 below shall have been paid or
can  be  withheld  as  provided  in  Section  2.3;  and

     (vii)  the  conditions  set forth in Section 7.2 shall have been satisfied.

     (viii)  The Company shall have provided to the Investor an acknowledgement,
from  Singer  Lewak  Greenbaum  & Goldstein LLP as to its ability to provide all
consents  required  in order to file a registration statement in connection with
this  transaction;

     (ix)  The  Company's  transfer  agent  shall  be  DWAC  eligible.

                                      E-6
<PAGE>
Section 2.6 Lock  Up  Period.
            -----------------

(a)     During  the Commitment Period, the Company shall not issue or sell (i)
any Common Stock or Preferred Stock without consideration or for a consideration
per  share less than the Bid Price on the date of issuance or (ii) issue or sell
any  warrant,  option,  right,  contract,  call, or other security or instrument
granting  the  holder  thereof  the  right  to  acquire  Common  Stock  without
consideration  or  for  a consideration per share less than the Bid Price on the
date  of  issuance.  Notwithstanding  the foregoing the Company may upon fifteen
(15)  business  days  prior  written  notice to the Buyer(s) file a registration
statement  on Form S-8 for the issuance of shares of common stock and/or options
for  consultants and/or attorneys for bona fide services rendered or pursuant to
bona  fide  employee  stock  option  plans..

(b)     On  the  date  hereof,  the  Company  shall obtain from each officer and
director  a  lock-up  agreement, as defined below, in the form annexed hereto as
Schedule  2.6  agreeing to only sell in compliance with the volume limitation of
Rule  144.

                                  ARTICLE III
                   REPRESENTATIONS AND WARRANTIES OF INVESTOR

     Investor  hereby  represents  and warrants to, and agrees with, the Company
that  the  following  are  true and as of the date hereof and as of each Advance
Date:

Section  3.1  Organization  and  Authorization.  The  Investor  is  duly
              --------------------------------
incorporated  or  organized  and  validly  existing  in  the jurisdiction of its
incorporation  or  organization  and  has  all  requisite power and authority to
purchase and hold the securities issuable hereunder.  The decision to invest and
the  execution  and delivery of this Agreement by such Investor, the performance
by  such  Investor  of  its  obligations  hereunder and the consummation by such
Investor  of  the transactions contemplated hereby have been duly authorized and
requires  no other proceedings on the part of the Investor.  The undersigned has
the  right,  power  and  authority to execute and deliver this Agreement and all
other  instruments  (including,  without  limitations,  the  Registration Rights
Agreement),  on  behalf  of the Investor.  This Agreement has been duly executed
and  delivered  by  the Investor and, assuming the execution and delivery hereof
and  acceptance  thereof  by  the  Company, will constitute the legal, valid and
binding  obligations  of  the  Investor,  enforceable  against  the  Investor in
accordance  with  its  terms.

Section 3.2 Evaluation of Risks.  The Investor has such knowledge and experience
            -------------------
in  financial tax and business matters as to be capable of evaluating the merits
and  risks  of, and bearing the economic risks entailed by, an investment in the
Company and of protecting its interests in connection with this transaction.  It
recognizes  that  its  investment in the Company involves a high degree of risk.

Section 3.3 No Legal Advice From the Company.  The Investor acknowledges that it
            --------------------------------
had  the  opportunity to review this Agreement and the transactions contemplated
by  this  Agreement  with  his  or  its own legal counsel and investment and tax
advisors.  The  Investor  is relying solely on such counsel and advisors and not
on  any  statements  or  representations  of  the  Company  or  any  of  its
representatives  or  agents  for legal, tax or investment advice with respect to

                                      E-7
<PAGE>
this  investment,  the  transactions  contemplated  by  this  Agreement  or  the
securities  laws  of  any  jurisdiction.

Section 3.4 Investment  Purpose.  The  securities  are  being  purchased  by the
            -------------------
Investor  for  its  own  account,  for  investment  and  without any view to the
distribution, assignment or resale to others or fractionalization in whole or in
part.  The  Investor  agrees not to assign or in any way transfer the Investor's
rights  to  the  securities  or  any  interest therein and acknowledges that the
Company  will  not  recognize  any  purported  assignment  or transfer except in
accordance  with  applicable Federal and state securities laws.  No other person
has  or  will  have  a direct or indirect beneficial interest in the securities.
The  Investor  agrees  not  to  sell,  hypothecate  or  otherwise  transfer  the
Investor's  securities  unless  the  securities are registered under Federal and
applicable  state  securities  laws  or  unless,  in  the  opinion  of  counsel
satisfactory  to  the  Company,  an  exemption  from  such  laws  is  available.

Section 3.5 Accredited  Investor.  The  Investor  is an "Accredited Investor" as
            --------------------                         -------------------
that  term  is  defined in Rule 501(a)(3) of Regulation D of the Securities Act.

Section 3.6 Information.  The  Investor  and  its advisors (and its counsel), if
            -----------
any,  have  been furnished with all materials relating to the business, finances
and  operations  of  the Company and information it deemed material to making an
informed  investment decision.  The Investor and its advisors, if any, have been
afforded  the  opportunity  to  ask questions of the Company and its management.
Neither  such  inquiries nor any other due diligence investigations conducted by
such  Investor  or  its  advisors,  if any, or its representatives shall modify,
amend  or  affect  the Investor's right to rely on the Company's representations
and  warranties  contained in this Agreement.  The Investor understands that its
investment  involves  a  high  degree  of  risk.  The  Investor is in a position
regarding  the  Company,  which,  based  upon employment, family relationship or
economic  bargaining  power,  enabled  and  enables  such  Investor  to  obtain
information  from  the Company in order to evaluate the merits and risks of this
investment.  The  Investor  has sought such accounting, legal and tax advice, as
it has considered necessary to make an informed investment decision with respect
to  this  transaction.

Section 3.7 Receipt of Documents. The Investor and its counsel have received and
            --------------------
read  in  their  entirety:  (i)  this Agreement and the Exhibits annexed hereto;
(ii)  all  due  diligence and other information necessary to verify the accuracy
and  completeness  of  such representations, warranties and covenants; (iii) the
Company's  Form  10-KSB for the year ended year ended December 31, 2003 and Form
10-QSB  for  the period ended March 31, 2004 ; and (iv) answers to all questions
the  Investor  submitted  to the Company regarding an investment in the Company;
and  the  Investor  has  relied on the information contained therein and has not
been  furnished  any  other  documents,  literature,  memorandum  or prospectus.

Section 3.8 Registration  Rights  Agreement  and  Escrow Agreement.  The parties
            ------------------------------------------------------
have  entered  into  the Registration Rights Agreement and the Escrow Agreement,
each  dated  the  date  hereof.

Section 3.9 No  General  Solicitation.  Neither  the  Company,  nor  any  of its
            -------------------------
affiliates,  nor  any  person  acting on its or their behalf, has engaged in any
form  of  general  solicitation  or  general  advertising (within the meaning of

                                      E-8
<PAGE>
Regulation  D  under the Securities Act) in connection with the offer or sale of
the  shares  of  Common  Stock  offered  hereby.

Section 3.10 Not  an  Affiliate.  The  Investor is not an officer, director or a
             ------------------
person that directly, or indirectly through one or more intermediaries, controls
or  is  controlled  by,  or  is  under  common  control  with the Company or any
"Affiliate"  of  the  Company  (as  that  term  is  defined  in  Rule 405 of the
----------
Securities  Act).  Neither  the  Investor  nor  its Affiliates has an open short
position  in  the  Common  Stock of the Company, and the Investor agrees that it
will  not,  and  that  it  will cause its Affiliates not to, engage in any short
sales of or hedging transactions with respect to the Common Stock, provided that
the  Company  acknowledges and agrees that upon receipt of an Advance Notice the
Investor  will  sell  the  Shares  to  be issued to the Investor pursuant to the
Advance  Notice,  even  if  the  Shares have not been delivered to the Investor.

Section 3.11 Trading Activities.  The Investor's trading activities with respect
             ------------------
to the Company's Common Stock shall be in compliance with all applicable federal
and  state  securities laws, rules and regulations and the rules and regulations
of the Principal Market on which the Company's Common Stock is listed or traded.
Neither the Investor nor its affiliates has an open short position in the Common
Stock  of the Company and, except as set forth below, the Investor shall not and
will  cause  its  affiliates  not  to engage in any short sale as defined in any
applicable  SEC  or  National  Association  of  Securities  Dealers rules on any
hedging  transactions  with  respect  to  the Common Stock. Without limiting the
foregoing,  the Investor agrees not to engage in any naked short transactions in
excess of the amount of shares owned (or an offsetting long position) during the
Commitment  Period.  The  Investor shall be entitled to sell Common Stock during
the  applicable  Pricing  Period.

                                                                      ARTICLE IV
                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     Except  as  stated below, on the disclosure schedules attached hereto or in
the  SEC  Documents  (as  defined  herein),  the  Company  hereby represents and
warrants  to,  and  covenants with, the Investor that the following are true and
correct  as  of  the  date  hereof:

Section  4.1  Organization  and  Qualification.  The  Company  is  duly
              --------------------------------
incorporated  or  organized  and  validly  existing  in  the jurisdiction of its
incorporation  or  organization  and  has  all  requisite  power  and  authority
corporate  power to own its properties and to carry on its business as now being
conducted.  Each  of  the  Company  and  its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in  which  the  nature  of the business conducted by it makes such qualification
necessary,  except  to  the  extent that the failure to be so qualified or be in
good  standing  would  not have a Material Adverse Effect on the Company and its
subsidiaries  taken  as  a  whole.

Section 4.2 Authorization,  Enforcement, Compliance with Other Instruments.  (i)
            --------------------------------------------------------------
The  Company  has  the requisite corporate power and authority to enter into and
perform this Agreement, the Registration Rights Agreement, the Escrow Agreement,
the Placement Agent Agreement and any related agreements, in accordance with the
terms hereof and thereof, (ii) the execution and delivery of this Agreement, the

                                      E-9
<PAGE>
Registration  Rights  Agreement,  the  Escrow  Agreement,  the  Placement  Agent
Agreement  and  any related agreements by the Company and the consummation by it
of  the  transactions contemplated hereby and thereby, have been duly authorized
by  the  Company's Board of Directors and no further consent or authorization is
required  by the Company, its Board of Directors or its stockholders, (iii) this
Agreement,  the  Registration  Rights  Agreement,  the  Escrow  Agreement,  the
Placement Agent Agreement and any related agreements have been duly executed and
delivered  by  the  Company,  (iv)  this  Agreement,  the  Registration  Rights
Agreement,  the Escrow Agreement, the Placement Agent Agreement and assuming the
execution  and  delivery  thereof and acceptance by the Investor and any related
agreements  constitute  the  valid  and  binding  obligations  of  the  Company
enforceable  against  the Company in accordance with their terms, except as such
enforceability  may  be  limited  by  general principles of equity or applicable
bankruptcy,  insolvency, reorganization, moratorium, liquidation or similar laws
relating  to,  or  affecting generally, the enforcement of creditors' rights and
remedies.

Section 4.3 Capitalization.  As of the date hereof, the authorized capital stock
            --------------
of  the Company consists of 205,000,000 shares of Common Stock, par value $.0001
per  share and 5,000,000 shares of Preferred Stock of which 88,278,000 shares of
Common  Stock and no shares of Preferred Stock were issued and outstanding.  All
of  such  outstanding  shares  have  been  validly issued and are fully paid and
nonassessable.  Except  as  disclosed  in the SEC Documents, no shares of Common
Stock  are subject to preemptive rights or any other similar rights or any liens
or  encumbrances  suffered  or permitted by the Company.  Except as disclosed in
the  SEC Documents, as of the date hereof, (i) there are no outstanding options,
warrants,  scrip,  rights to subscribe to, calls or commitments of any character
whatsoever  relating to, or securities or rights convertible into, any shares of
capital  stock  of  the  Company  or  any  of  its  subsidiaries,  or contracts,
commitments,  understandings  or arrangements by which the Company or any of its
subsidiaries  is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe  to,  calls or commitments of any character whatsoever relating to, or
securities  or  rights  convertible  into,  any  shares  of capital stock of the
Company  or  any  of  its  subsidiaries,  (ii)  there  are  no  outstanding debt
securities  (iii) there are no outstanding registration statements other than on
Form  S-8  and  (iv)  there  are  no  agreements or arrangements under which the
Company  or  any of its subsidiaries is obligated to register the sale of any of
their  securities  under the Securities Act (except pursuant to the Registration
Rights  Agreement).  There  are  no  securities  or  instruments  containing
anti-dilution  or similar provisions that will be triggered by this Agreement or
any  related  agreement or the consummation of the transactions described herein
or  therein.  The  Company has furnished to the Investor true and correct copies
of  the  Company's Articles of Incorporation, as amended and as in effect on the
date  hereof (the "Articles of Incorporation"), and the Company's By-laws, as in
                   -------------------------
effect  on  the  date  hereof  (the  "By-laws"), and the terms of all securities
                                      -------
convertible  into or exercisable for Common Stock and the material rights of the
holders  thereof  in  respect  thereto.

Section 4.4 No  Conflict.  The  execution,  delivery  and  performance  of  this
            ------------
Agreement by the Company and the consummation by the Company of the transactions
contemplated  hereby  will  not  (i)  result  in  a violation of the Articles of
Incorporation,  any  certificate  of  designations  of any outstanding series of
preferred  stock of the Company or By-laws or (ii) conflict with or constitute a
default  (or  an event which with notice or lapse of time or both would become a

                                      E-10
<PAGE>
default)  under,  or  give  to  others  any  rights  of  termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the  Company  or any of its subsidiaries is a party, or result in a violation of
any  law,  rule,  regulation,  order,  judgment or decree (including federal and
state  securities  laws  and  regulations  and  the rules and regulations of the
Principal  Market on which the Common Stock is quoted) applicable to the Company
or  any  of  its  subsidiaries or by which any material property or asset of the
Company  or any of its subsidiaries is bound or affected and which would cause a
Material  Adverse Effect.  Except as disclosed in the SEC Documents, neither the
Company  nor its subsidiaries is in violation of any term of or in default under
its  Articles  of  Incorporation  or  By-laws or their organizational charter or
by-laws,  respectively,  or  any  material  contract,  agreement,  mortgage,
indebtedness,  indenture,  instrument, judgment, decree or order or any statute,
rule  or regulation applicable to the Company or its subsidiaries.  The business
of  the  Company and its subsidiaries is not being conducted in violation of any
material  law,  ordinance,  regulation  of  any  governmental entity.  Except as
specifically contemplated by this Agreement and as required under the Securities
Act  and  any  applicable  state securities laws, the Company is not required to
obtain  any  consent,  authorization  or  order  of,  or  make  any  filing  or
registration  with, any court or governmental agency in order for it to execute,
deliver  or  perform  any  of  its  obligations  under  or  contemplated by this
Agreement  or  the  Registration  Rights  Agreement in accordance with the terms
hereof  or  thereof.  All  consents,  authorizations,  orders,  filings  and
registrations  which the Company is required to obtain pursuant to the preceding
sentence  have  been  obtained  or effected on or prior to the date hereof.  The
Company and its subsidiaries are unaware of any fact or circumstance which might
give  rise  to  any  of  the  foregoing.

Section 4.5 SEC  Documents;  Financial  Statements.  Since  May  15,  2002,  the
            --------------------------------------
Company  has filed all reports, schedules, forms, statements and other documents
required  to be filed by it with the SEC under of the Exchange Act.  The Company
has  delivered to the Investor or its representatives, or made available through
the  SEC's  website  at  http://www.sec.gov, true and complete copies of the SEC
Documents.  As  of  their  respective  dates,  the  financial  statements of the
Company  disclosed in the SEC Documents (the "Financial Statements") complied as
                                              --------------------
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto.  Such financial
statements  have  been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be  otherwise  indicated  in  such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes  or may be condensed or summary statements) and, fairly present in all
material  respects the financial position of the Company as of the dates thereof
and  the  results  of  its  operations and cash flows for the periods then ended
(subject,  in  the  case  of  unaudited  statements,  to  normal  year-end audit
adjustments).  No  other  information provided by or on behalf of the Company to
the  Investor  which  is  not  included in the SEC Documents contains any untrue
statement  of  a  material fact or omits to state any material fact necessary in
order  to  make  the statements therein, in the light of the circumstances under
which  they  were  made,  not  misleading.

                                      E-11
<PAGE>
Section  4.6  10b-5.  The  SEC  Documents  do  not include any untrue statements
              -----
of  material  fact,  nor  do they omit to state any material fact required to be
stated  therein  necessary  to  make  the  statements  made,  in  light  of  the
circumstances  under  which  they  were  made,  not  misleading.

Section  4.7  No  Default.  Except  as  disclosed  in  the  SEC  Documents,  the
              -----------
Company  is  not  in  default  in  the performance or observance of any material
obligation,  agreement,  covenant  or  condition  contained  in  any  indenture,
mortgage, deed of trust or other material instrument or agreement to which it is
a  party  or  by which it is or its property is bound and neither the execution,
nor  the  delivery  by  the  Company,  nor the performance by the Company of its
obligations  under  this  Agreement or any of the exhibits or attachments hereto
will  conflict  with or result in the breach or violation of any of the terms or
provisions  of,  or constitute a default or result in the creation or imposition
of  any  lien  or  charge  on  any assets or properties of the Company under its
Articles  of  Incorporation,  By-Laws, any material indenture, mortgage, deed of
trust  or  other  material  agreement applicable to the Company or instrument to
which  the  Company  is  a party or by which it is bound, or any statute, or any
decree, judgment, order, rules or regulation of any court or governmental agency
or  body  having  jurisdiction  over the Company or its properties, in each case
which  default,  lien  or charge is likely to cause a Material Adverse Effect on
the  Company's  business  or  financial  condition.

Section 4.8 Absence  of  Events of Default.  Except for matters described in the
            ------------------------------
SEC  Documents  and/or  this  Agreement,  no Event of Default, as defined in the
respective  agreement  to which the Company is a party, and no event which, with
the  giving  of  notice or the passage of time or both, would become an Event of
Default  (as  so  defined),  has  occurred and is continuing, which would have a
Material  Adverse  Effect  on  the  Company's  business,  properties, prospects,
financial  condition  or  results  of  operations.

Section 4.9 Intellectual  Property Rights.  The Company and its subsidiaries own
            -----------------------------
or  possess  adequate  rights  or licenses to use all material trademarks, trade
names, service marks, service mark registrations, service names, patents, patent
rights,  copyrights,  inventions,  licenses,  approvals,  governmental
authorizations,  trade  secrets and rights necessary to conduct their respective
businesses  as now conducted.   The Company and its subsidiaries do not have any
knowledge  of  any infringement by the Company or its subsidiaries of trademark,
trade  name  rights,  patents,  patent rights, copyrights, inventions, licenses,
service  names, service marks, service mark registrations, trade secret or other
similar  rights  of  others,  and,  to the knowledge of the Company, there is no
claim,  action  or proceeding being made or brought against, or to the Company's
knowledge,  being  threatened against, the Company or its subsidiaries regarding
trademark,  trade  name,  patents, patent rights, invention, copyright, license,
service  names, service marks, service mark registrations, trade secret or other
infringement;  and  the Company and its subsidiaries are unaware of any facts or
circumstances  which  might  give  rise  to  any  of  the  foregoing.

Section 4.10 Employee Relations. Neither the Company nor any of its subsidiaries
             ------------------
is  involved in any labor dispute nor, to the knowledge of the Company or any of
its  subsidiaries, is any such dispute threatened.  None of the Company's or its
subsidiaries'  employees  is  a  member  of  a  union  and  the  Company and its
subsidiaries  believe  that  their  relations  with  their  employees  are good.

                                      E-12
<PAGE>
Section 4.11 Environmental  Laws.  The  Company  and its subsidiaries are (i) in
             -------------------
compliance  with  any  and  all  applicable material foreign, federal, state and
local  laws  and  regulations  relating  to  the  protection of human health and
safety,  the  environment or hazardous or toxic substances or wastes, pollutants
or contaminants ("Environmental Laws"), (ii) have received all permits, licenses
                  ------------------
or  other  approvals  required  of  them  under applicable Environmental Laws to
conduct  their  respective businesses and (iii) are in compliance with all terms
and  conditions  of  any  such  permit,  license  or  approval.

Section 4.12 Title.  Except  as  set forth in the SEC Documents, the Company has
             -----
good  and  marketable  title  to its properties and material assets owned by it,
free  and  clear  of  any pledge, lien, security interest, encumbrance, claim or
equitable  interest  other  than such as are not material to the business of the
Company.  Any  real  property and facilities held under lease by the Company and
its subsidiaries are held by them under valid, subsisting and enforceable leases
with  such exceptions as are not material and do not interfere with the use made
and  proposed  to  be made of such property and buildings by the Company and its
subsidiaries.

Section 4.13 Insurance.  The Company and each of its subsidiaries are insured by
             ---------
insurers  of  recognized  financial responsibility against such losses and risks
and  in  such  amounts  as  management of the Company believes to be prudent and
customary  in  the  businesses  in  which  the  Company and its subsidiaries are
engaged.  Neither  the  Company  nor  any  such  subsidiary has been refused any
insurance  coverage  sought  or applied for and neither the Company nor any such
subsidiary  has  any  reason  to  believe  that it will not be able to renew its
existing  insurance  coverage  as  and  when  such coverage expires or to obtain
similar  coverage  from  similar  insurers  as  may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial  or  otherwise, or the earnings, business or operations of the Company
and  its  subsidiaries,  taken  as  a  whole.

Section 4.14 Regulatory  Permits.  The Company  and its subsidiaries possess all
             -------------------
material  certificates,  authorizations  and  permits  issued by the appropriate
federal,  state  or  foreign  regulatory  authorities necessary to conduct their
respective  businesses,  and  neither  the  Company  nor any such subsidiary has
received any notice of proceedings relating to the revocation or modification of
any  such  certificate,  authorization  or  permit.

Section 4.15 Internal Accounting  Controls.  The  Company  and  each  of  its
             -----------------------------
subsidiaries  maintain  a  system  of internal accounting controls sufficient to
provide  reasonable  assurance  that (i) transactions are executed in accordance
with  management's  general  or  specific  authorizations, (ii) transactions are
recorded  as  necessary  to  permit  preparation  of  financial  statements  in
conformity  with  generally accepted accounting principles and to maintain asset
accountability,  (iii)  access  to  assets  is permitted only in accordance with
management's  general  or  specific  authorization  and  (iv)  the  recorded
accountability  for  assets  is  compared with the existing assets at reasonable
intervals  and  appropriate  action  is  taken  with respect to any differences.

Section 4.16 No  Material Adverse Breaches, etc.  Except as set forth in the SEC
             ----------------------------------
Documents,  neither  the  Company  nor any of its subsidiaries is subject to any
charter,  corporate  or other legal restriction, or any judgment, decree, order,
rule  or  regulation  which  in the judgment of the Company's officers has or is
expected  in  the  future  to  have  a  Material Adverse Effect on the business,

                                      E-13
<PAGE>
properties,  operations, financial condition, results of operations or prospects
of  the  Company or its subsidiaries.  Except as set forth in the SEC Documents,
neither  the Company nor any of its subsidiaries is in breach of any contract or
agreement  which  breach,  in  the judgment of the Company's officers, has or is
expected  to  have  a  Material  Adverse  Effect  on  the  business, properties,
operations,  financial  condition,  results  of  operations  or prospects of the
Company  or  its  subsidiaries.

Section  4.17  Absence  of  Litigation.  Except  as  set  forth  in  the  SEC
               -----------------------
Documents, there is no action, suit, proceeding, inquiry or investigation before
or  by  any court, public board, government agency, self-regulatory organization
or body pending against or affecting the Company, the Common Stock or any of the
Company's subsidiaries, wherein an unfavorable decision, ruling or finding would
(i)  have a Material Adverse Effect on the transactions contemplated hereby (ii)
adversely  affect the validity or enforceability of, or the authority or ability
of  the  Company  to perform its obligations under, this Agreement or any of the
documents contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents,  have  a  Material  Adverse  Effect  on  the  business,  operations,
properties,  financial  condition or results of operation of the Company and its
subsidiaries  taken  as  a  whole.

Section  4.18  Subsidiaries.  Except  as  disclosed  in  the  SEC Documents, the
               ------------
Company  does not presently own or control, directly or indirectly, any interest
in  any  other  corporation,  partnership, association or other business entity.

Section 4.19 Tax  Status.  Except as disclosed in the SEC Documents, the Company
             -----------
and  each of its subsidiaries has made or filed all federal and state income and
all  other tax returns, reports and declarations required by any jurisdiction to
which it is subject and (unless and only to the extent that the Company and each
of  its  subsidiaries  has set aside on its books provisions reasonably adequate
for the payment of all unpaid and unreported taxes) has paid all taxes and other
governmental  assessments  and  charges  that  are  material in amount, shown or
determined  to  be  due  on such returns, reports and declarations, except those
being  contested  in  good  faith  and  has  set  aside  on  its books provision
reasonably  adequate  for the payment of all taxes for periods subsequent to the
periods  to  which  such  returns,  reports or declarations apply.  There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any  jurisdiction, and the officers of the Company know of no basis for any such
claim.

Section 4.20 Certain Transactions. Except as set forth in the SEC Documents none
             --------------------
of  the officers, directors, or employees of the Company is presently a party to
any transaction with the Company (other than for services as employees, officers
and directors), including any contract, agreement or other arrangement providing
for  the  furnishing  of  services  to  or  by,  providing for rental of real or
personal  property  to  or  from, or otherwise requiring payments to or from any
officer,  director  or  such  employee  or, to the knowledge of the Company, any
corporation,  partnership, trust or other entity in which any officer, director,
or  any  such  employee  has  a substantial interest or is an officer, director,
trustee  or  partner.

Section 4.21 Fees  and Rights of First Refusal.  The Company is not obligated to
             ---------------------------------
offer  the  securities  offered  hereunder  on a right of first refusal basis or
otherwise  to any third parties including, but not limited to, current or former
shareholders  of  the  Company,  underwriters,  brokers,  agents  or other third
parties.

                                      E-14
<PAGE>
Section 4.22 Use of Proceeds.  The Company represents that the net proceeds from
             ---------------
this offering will be used for general corporate purposes.  However, in no event
shall the net proceeds from this offering be used by the Company for the payment
(or  loaned  to  any  such  person  for  the  payment) of any judgment, or other
liability,  incurred  by any executive officer, officer, director or employee of
the Company, except for any liability owed to such person for services rendered,
or  if  any  judgment  or other liability is incurred by such person originating
from  services  rendered  to  the  Company,  or the Company has indemnified such
person  from  liability.

Section 4.23 Further  Representation and Warranties of the Company.  For so long
             -----------------------------------------------------
as  any  securities  issuable hereunder held by the Investor remain outstanding,
the  Company acknowledges, represents, warrants and agrees that it will maintain
the  listing  of  its  Common  Stock  on  the  Principal  Market.

Section 4.24 Opinion  of Counsel.  Investor shall receive an opinion letter from
             -------------------
Gottbetter  &  Partners,  LLP,  counsel  to  the  Company,  on  the date hereof.

Section 4.25 Opinion  of Counsel.  The  Company will obtain for the Investor, at
             -------------------
the  Company's  expense, any and all opinions of counsel which may be reasonably
required in order to sell the securities issuable hereunder without restriction.

Section 4.26 Dilution.  The  Company  is aware and acknowledges that issuance of
             --------
shares  of  the  Company's  Common  Stock  could  cause  dilution  to  existing
shareholders  and  could significantly increase the outstanding number of shares
of  Common  Stock.

                                    ARTICLE V
                                 INDEMNIFICATION

     The  Investor  and  the  Company  represent to the other the following with
respect  to  itself:

Section  5.1  Indemnification.
              ---------------

(a)     In  consideration  of  the  Investor's  execution  and  delivery of this
Agreement,  and in addition to all of the Company's other obligations under this
Agreement,  the  Company  shall defend, protect, indemnify and hold harmless the
Investor,  and  all  of  its officers, directors, partners, employees and agents
(including,  without  limitation,  those  retained  in  connection  with  the
transactions  contemplated  by  this  Agreement)  (collectively,  the  "Investor
                                                                        --------
Indemnitees")  from  and  against  any and all actions, causes of action, suits,
-----------
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection  therewith (irrespective of whether any such Investor Indemnitee is a
party  to  the  action  for  which  indemnification  hereunder  is  sought), and
including  reasonable  attorneys'  fees  and  disbursements  (the  "Indemnified
                                                                    -----------
Liabilities"),  incurred  by the Investor Indemnitees or any of them as a result
-----------
of, or arising out of, or relating to (a) any misrepresentation or breach of any
representation  or  warranty  made  by  the  Company  in  this  Agreement or the
Registration  Rights  Agreement or any other certificate, instrument or document
contemplated  hereby  or  thereby,  (b) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement or the Registration Rights
Agreement  or  any other certificate, instrument or document contemplated hereby
or  thereby,  or  (c) any cause of action, suit or claim brought or made against

                                      E-15
<PAGE>
such  Investor  Indemnitee  not  arising  out  of  any  action or inaction of an
Investor  Indemnitee,  and  arising  out  of  or  resulting  from the execution,
delivery,  performance or enforcement of this Agreement or any other instrument,
document  or  agreement  executed  pursuant  hereto  by  any  of  the  Investor
Indemnitees.  To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the  payment  and  satisfaction of each of the Indemnified Liabilities, which is
permissible  under  applicable  law.

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

(c)     The obligations of the parties to indemnify or make contribution under
this  Section  5.1  shall  survive  termination.

                                   ARTICLE VI
                            COVENANTS OF THE COMPANY

Section  6.1  Registration  Rights.  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.

Section 6.2 Listing  of  Common  Stock.  The  Company  shall maintain the Common
            --------------------------
Stock's  authorization  for  quotation  on  the  Principal  Market.

Section 6.3 Exchange  Act Registration.  The Company will cause its Common Stock
            --------------------------
to  continue to be registered under Section 12(g) of the Exchange Act, will file
in a timely manner all reports and other documents required of it as a reporting
company under the Exchange Act and will not take any action or file any document

                                      E-16
<PAGE>
(whether  or not permitted by Exchange Act or the rules thereunder) to terminate
or suspend such registration or to terminate or suspend its reporting and filing
obligations  under  said  Exchange  Act.

Section 6.4 Transfer  Agent  Instructions.  Not later than two (2) business days
            -----------------------------
after  each  Advance Notice Date and prior to each Closing and the effectiveness
of  the  Registration  Statement and resale of the Common Stock by the Investor,
the  Company  will deliver instructions to its transfer agent to issue shares of
Common  Stock  free  of  restrictive  legends.

Section 6.5 Corporate  Existence.  The  Company will take all steps necessary to
            --------------------
preserve  and  continue  the  corporate  existence  of  the  Company.

Section 6.6 Notice of Certain Events Affecting Registration; Suspension of Right
            --------------------------------------------------------------------
to  Make  an Advance.  The Company will immediately notify the Investor upon its
--------------------
becoming  aware of the occurrence of any of the following events in respect of a
registration  statement  or  related  prospectus  relating  to  an  offering  of
Registrable 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 for 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  Registrable  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  of 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
the  Investor  any  such supplement or amendment to the related prospectus.  The
Company  shall  not  deliver  to  the  Investor  any  Advance  Notice during the
continuation  of  any  of  the  foregoing  events.

Section 6.7 Expectations  Regarding Advance Notices.  Within ten (10) days after
            ---------------------------------------
the  commencement  of  each  calendar  quarter  occurring  subsequent  to  the
commencement  of the Commitment Period, the Company must notify the Investor, in
writing, as to its reasonable expectations as to the dollar amount it intends to
raise  during  such  calendar  quarter,  if any, through the issuance of Advance
Notices.  Such  notification  shall  constitute  only  the  Company's good faith
estimate  and  shall in no way obligate the Company to raise such amount, or any
amount,  or otherwise limit its ability to deliver Advance Notices.  The failure
by  the  Company  to  comply  with  this provision can be cured by the Company's
notifying  the  Investor,  in  writing,  at  any  time  as  to  its  reasonable
expectations  with  respect  to  the  current  calendar  quarter.

                                      E-17
<PAGE>
Section 6.8 Restriction on Sale of Capital Stock.  During the Commitment Period,
            ------------------------------------
the  Company  shall  not  issue  or sell (i) any Common Stock or Preferred Stock
without  consideration  or for a consideration per share less than the bid price
of  the Common Stock determined immediately prior to its issuance, (ii) issue or
sell  any  Preferred  Stock  warrant,  option,  right,  contract, call, or other
security  or  instrument granting the holder thereof the right to acquire Common
Stock  without  consideration  or  for  a consideration per share less than such
Common  Stock's Bid Price determined immediately prior to its issuance, or (iii)
file  any  registration  statement on Form S-8 notwithstanding the foregoing the
Company may upon fifteen (15) business days prior written notice to the Buyer(s)
file  a  registration statement on Form S-8 for the issuance of shares of common
stock  and/or  options  for  consultants and/or attorneys for bona fide services
rendered  or  pursuant  to  bona  fide  employee  stock  option  plans.

Section 6.9 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 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 the obligation to
deliver  to  the Investor such shares of stock and/or securities as the Investor
is  entitled  to  receive  pursuant  to  this  Agreement.

Section 6.10 Issuance  of the Company's Common Stock.  The sale of the shares of
             ----------------------------------------
Common Stock shall be made in accordance with the provisions and requirements of
Regulation  D  and  any  applicable  state  securities  law.

                                  ARTICLE VII
                CONDITIONS FOR ADVANCE AND CONDITIONS TO CLOSING

Section  7.1  Conditions  Precedent  to  the  Obligations  of  the  Company. The
              ----------------------------------------------------------
obligation hereunder of the Company to issue and sell the shares of Common Stock
to  the  Investor  incident  to  each Closing is subject to the satisfaction, or
waiver by the Company, at or before each such Closing, of each of the conditions
set  forth  below.

(a)  Accuracy  of  the  Investor's  Representations  and  Warranties.  The
     ---------------------------------------------------------------
representations  and warranties of the Investor shall be true and correct in all
material  respects.

(b)  Performance  by the Investor.  The Investor shall have performed, satisfied
     ----------------------------
and  complied  in  all  respects  with  all covenants, agreements and conditions
required  by  this  Agreement  and  the  Registration  Rights  Agreement  to  be
performed,  satisfied  or  complied  with  by  the  Investor at or prior to such
Closing.

Section  7.2  Conditions  Precedent  to  the  Right of the Company to Deliver an
              ------------------------------------------------------------------
Advance  Notice  and the Obligation of the Investor to Purchase Shares of Common
--------------------------------------------------------------------------------
Stock.  The right of the Company to deliver an Advance Notice and the obligation
-----
of  the Investor hereunder to acquire and pay for shares of the Company's Common
Stock incident to a Closing is subject to the fulfillment by the Company, on (i)
the date of delivery of such Advance Notice and (ii) the applicable Advance Date
(each  a  "Condition  Satisfaction  Date"), of each of the following conditions:
           -----------------------------

                                      E-18
<PAGE>
(a)  Registration of the Common Stock with the SEC.  The Company shall have
     ---------------------------------------------
filed  with  the  SEC a Registration Statement with respect to the resale of the
Registrable  Securities  in accordance with the terms of the Registration Rights
Agreement.  As  set forth in the Registration Rights Agreement, the Registration
Statement  shall  have previously become effective and shall remain effective on
each  Condition  Satisfaction  Date and (i) neither the Company nor the Investor
shall  have  received  notice that the SEC has issued or intends to issue a stop
order  with  respect to the Registration Statement or that the SEC otherwise has
suspended  or  withdrawn the effectiveness of the Registration Statement, either
temporarily  or  permanently,  or intends or has threatened to do so (unless the
SEC's concerns have been addressed and the Investor is reasonably satisfied that
the  SEC  no  longer is considering or intends to take such action), and (ii) no
other  suspension  of  the  use  or  withdrawal  of  the  effectiveness  of  the
Registration  Statement  or  related  prospectus  shall exist.  The Registration
Statement  must  have  been  declared  effective  by  the SEC prior to the first
Advance  Notice  Date.

(b)  Authority.  The  Company shall have obtained all permits and qualifications
     ---------
required  by  any  applicable  state  in accordance with the Registration Rights
Agreement  for  the  offer and sale of the shares of Common Stock, or shall have
the  availability  of exemptions therefrom.  The sale and issuance of the shares
of  Common Stock shall be legally permitted by all laws and regulations to which
the  Company  is  subject.

(c)  Fundamental  Changes.  There shall not exist any fundamental changes to the
     --------------------
information  set  forth  in  the  Registration Statement which would require the
Company  to  file  a  post-effective  amendment  to  the Registration Statement.

(d)  Performance  by  the  Company.  The Company shall have performed, satisfied
     -----------------------------
and  complied  in  all  material  respects  with  all  covenants, agreements and
conditions  required  by  this  Agreement  (including,  without  limitation, the
conditions  specified  in  Section  2.5  hereof)  and  the  Registration  Rights
Agreement to be performed, satisfied or complied with by the Company at or prior
to  each  Condition  Satisfaction  Date.

(e)  No  Injunction.  No  statute,  rule,  regulation,  executive order, decree,
     --------------
ruling  or  injunction shall have been enacted, entered, promulgated or endorsed
by  any court or governmental authority of competent jurisdiction that prohibits
or  directly  and adversely affects any of the transactions contemplated by this
Agreement,  and no proceeding shall have been commenced that may have the effect
of  prohibiting  or  adversely affecting any of the transactions contemplated by
this  Agreement.

(f)  No  Suspension  of Trading in or Delisting of Common Stock.  The trading of
     ----------------------------------------------------------
the  Common  Stock  is  not suspended by the SEC or the Principal Market (if the
Common Stock is traded on a Principal Market).  The issuance of shares of Common
Stock  with  respect  to  the  applicable Closing, if any, shall not violate the
shareholder  approval  requirements of the Principal Market (if the Common Stock
is  traded  on  a  Principal  Market).  The  Company shall not have received any
notice  threatening  the  continued listing of the Common Stock on the Principal
Market  (if  the  Common  Stock  is  traded  on  a  Principal  Market).

(g)  Maximum  Advance Amount.  The amount of an Advance requested by the Company
     -----------------------
shall not exceed the Maximum Advance Amount.  In addition, in no event shall the
number  of  shares  issuable  to  the  Investor pursuant to an Advance cause the

                                      E-19
<PAGE>
Investor  to  own  in  excess  of  nine  and  9/10  percent  (9.9%)  of the then
outstanding  Common  Stock  of  the  Company.

(h)  No  Knowledge.  The  Company  has  no knowledge of any event which would be
     -------------
more  likely  than not to have the effect of causing such Registration Statement
to  be  suspended  or  otherwise  ineffective.

(i)  Other.  On  each  Condition  Satisfaction  Date,  the  Investor  shall have
     -----
received  the  certificate  executed by an officer of the Company in the form of
Exhibit  A  attached  hereto.
----------

                                  ARTICLE VIII
         DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION

Section  8.1  Due  Diligence  Review.  Prior  to  the filing of the Registration
              ---------------------
Statement  the  Company  shall  make  available for inspection and review by the
Investor, its advisors and representatives, and any underwriter participating in
any disposition of the Registrable Securities on behalf of the Investor pursuant
to  the  Registration Statement, any such registration statement or amendment or
supplement  thereto  or  any  blue  sky, NASD or other filing, all financial and
other  records,  all SEC Documents and other filings with the SEC, and all other
corporate documents and properties of the Company as may be reasonably necessary
for  the purpose of such review, and cause the Company's officers, directors and
employees to supply all such information reasonably requested by the Investor or
any  such  representative,  advisor  or  underwriter  in  connection  with  such
Registration  Statement  (including,  without  limitation,  in  response  to all
questions  and  other  inquiries  reasonably  made or submitted by any of them),
prior  to  and  from  time  to  time  after  the filing and effectiveness of the
Registration  Statement  for  the sole purpose of enabling the Investor and such
representatives,  advisors and underwriters and their respective accountants and
attorneys  to  conduct  initial  and  ongoing  due diligence with respect to the
Company  and  the  accuracy  of  the  Registration  Statement.

Section 8.2 Non-Disclosure  of  Non-Public  Information.
            -------------------------------------------
(a)  The Company shall not disclose non-public information to the Investor,
its  advisors,  or  its  representatives,  unless  prior  to  disclosure of such
information  the  Company  identifies  such  information  as  being  non-public
information  and  provides  the Investor, such advisors and representatives with
the  opportunity  to  accept or refuse to accept such non-public information for
review.  The  Company  may,  as  a  condition  to  disclosing  any  non-public
information  hereunder,  require  the Investor's advisors and representatives to
enter  into  a  confidentiality agreement in form reasonably satisfactory to the
Company  and  the  Investor.

(b)  Nothing herein shall require the Company to disclose non-public information
to  the  Investor or its advisors or representatives, and the Company represents
that  it  does  not  disseminate  non-public  information  to  any investors who
purchase  stock  in  the  Company  in a public offering, to money managers or to
securities  analysts, provided, however, that notwithstanding anything herein to
the  contrary, the Company will, as hereinabove provided, immediately notify the
advisors  and  representatives of the Investor and, if any, underwriters, of any
event  or  the existence of any circumstance (without any obligation to disclose

                                      E-20
<PAGE>
the  specific  event  or  circumstance)  of which it becomes aware, constituting
non-public  information (whether or not requested of the Company specifically or
generally  during  the  course  of  due  diligence by such persons or entities),
which, if not disclosed in the prospectus included in the Registration Statement
would  cause  such  prospectus  to  include a material misstatement or to omit a
material  fact  required  to  be stated therein in order to make the statements,
therein,  in light of the circumstances in which they were made, not misleading.
Nothing  contained  in  this  Section  8.2  shall be construed to mean that such
persons  or entities other than the Investor (without the written consent of the
Investor  prior  to  disclosure  of  such information) may not obtain non-public
information  in  the  course  of conducting due diligence in accordance with the
terms  of  this  Agreement  and nothing herein shall prevent any such persons or
entities  from  notifying  the  Company  of their opinion that based on such due
diligence  by such persons or entities, that the Registration Statement contains
an  untrue  statement  of  material fact or omits a material fact required to be
stated  in  the  Registration  Statement  or  necessary  to  make the statements
contained  therein,  in  light of the circumstances in which they were made, not
misleading.

                                   ARTICLE IX
                           CHOICE OF LAW/JURISDICTION

     Section 9.1 Governing  Law.  This  Agreement  shall  be  governed  by  and
                 --------------
interpreted  in accordance with the laws of the State of Delaware without regard
to  the  principles  of  conflict  of  laws.  The parties further agree that any
action  between  them shall be heard in Hudson County, New Jersey, and expressly
consent  to  the  jurisdiction  and  venue  of the Superior Court of New Jersey,
sitting in Hudson County, New Jersey and the United States District Court of New
Jersey,  sitting in Newark, New Jersey, for the adjudication of any civil action
asserted  pursuant  to  this  paragraph.

                                    ARTICLE X
                             ASSIGNMENT; TERMINATION

Section 10.1  Assignment.  Neither  this  Agreement  nor  any  rights  of  the
              ----------
Company  hereunder  may  be  assigned  to  any  other  Person.

Section 10.2 Termination. The obligations of the Investor to make Advances under
             -----------
Article  II  hereof  shall terminate twenty-four (24) months after the Effective
Date.

                                   ARTICLE XI
                                     NOTICES

Section  11.1  Notices.  Any  notices,  consents,  waivers,  or  other
               -------
communications  required  or  permitted  to  be  given  under  the terms of this
Agreement  must be in writing and will be deemed to have been delivered (i) upon
receipt,  when  delivered personally; (ii) upon receipt, when sent by facsimile,
provided  a  copy  is  mailed  by U.S. certified mail, return receipt requested;
(iii)  three  (3)  days  after being sent by U.S. certified mail, return receipt
requested,  or  (iv)  one  (1)  day  after  deposit with a nationally recognized
overnight  delivery  service,  in  each  case properly addressed to the party to

                                      E-21
<PAGE>
receive  the  same.  The addresses and facsimile numbers for such communications
shall  be:
If  to  the  Company, to:    NS8  Corporation
                             Two  Union  Square
                             601  Union  Street  -  Suite  2400
                             Seattle,  WA  98101
                             Attention:      Peter  Hogendoorn
                             Telephone:    (206)  652-3338
                             Facsimile:     (206)  652-3205

                             NS8  Corporation
                             200-1311  Howe  Street
                             Vancouver,  BC  Canada  V6Z  2P3
                             Telephone:  (604)  677-6994
                             Facsimile:   (604)  677-7011

With  a  copy  to:           Gottbetter  &  Partners,  LLP
                             488  Madison  Avenue
                             New  York,  NY  10016
                             Attention:    Adam  S.  Gottbetter,  Esq.
                             Telephone:  (212)  400-6900
                             Facsimile:   (212)  400-6901

If  to  the  Investor(s):    Cornell  Capital  Partners,  LP
                             101  Hudson  Street  -Suite  3700
                             Jersey  City,  NJ  07302
                             Attention:  Mark  Angelo
                             Portfolio  Manager
                             Telephone:  (201)  985-8300
                             Facsimile:  (201)  985-8266

With  a  Copy  to:           Butler  Gonzalez  LLP
                             1416  Morris  Avenue  -  Suite  207
                             Union,  NJ  07083
                             Attention:  David  Gonzalez,  Esq.
                             Telephone:  (908)  810-8588
                             Facsimile:  (908)  810-0973

Each  party shall provide five (5) days' prior written notice to the other party
of  any  change  in  address  or  facsimile  number.

                                      E-22
<PAGE>
                                  ARTICLE XII
                                  MISCELLANEOUS

Section  12.1  Counterparts.  This  Agreement  may  be  executed  in two or more
               ------------
identical  counterparts,  all  of  which  shall  be  considered one and the same
agreement  and shall become effective when counterparts have been signed by each
party  and  delivered  to  the  other party.  In the event any signature page is
delivered  by  facsimile  transmission,  the  party using such means of delivery
shall  cause  four  (4)  additional  original  executed  signature  pages  to be
physically  delivered  to  the other party within five (5) days of the execution
and  delivery hereof, though failure to deliver such copies shall not affect the
validity  of  this  Agreement.

Section 12.2 Entire  Agreement; Amendments.  This Agreement supersedes all other
             -----------------------------
prior  oral  or  written  agreements  between  the  Investor, the Company, their
affiliates  and  persons  acting  on  their  behalf  with respect to the matters
discussed  herein,  and  this  Agreement  and  the instruments referenced herein
contain  the  entire  understanding  of  the parties with respect to the matters
covered  herein  and  therein  and,  except  as specifically set forth herein or
therein,  neither  the  Company  nor  the  Investor  makes  any  representation,
warranty, covenant or undertaking with respect to such matters.  No provision of
this  Agreement  may be waived or amended other than by an instrument in writing
signed  by  the  party  to  be  charged  with  enforcement.

Section 12.3 Reporting Entity for the Common Stock.  The reporting entity relied
             -------------------------------------
upon  for the determination of the trading price or trading volume of the Common
Stock  on  any  given  Trading  Day  for the purposes of this Agreement shall be
Bloomberg,  L.P.  or  any  successor thereto.  The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.

Section 12.4 Fees and  Expenses.  The Company hereby agrees to pay the following
             ------------------
fees:

(a)  Legal  Fees.  Each  of the parties shall pay its own fees and expenses
     -----------
(including  the fees of any attorneys, accountants, appraisers or others engaged
by  such  party)  in  connection  with  this  Agreement  and  the  transactions
contemplated  hereby,  except that the Company will pay Fifteen Thousand Dollars
($15,000)  to  Butler  Gonzalez  LLP  for legal, administrative, and escrow fees
directly  from  the  gross  proceeds  of  the  First  Closing of the Convertible
Debenture  transaction  pursuant  to the Securities Purchase Agreement dated the
date  hereof.  Subsequently  on  each  advance date, the Company will pay Butler
Gonzalez  LLP,  the sum of Five Hundred Dollars ($500) for legal, administrative
and  escrow  fees  directly  out  the  proceeds  of  any  Advances  hereunder.

(b)  Commitment  Fees.
     ----------------

     (i)  On  each  Advance Date the Company shall pay to the Investor, directly
from  the gross proceeds held in escrow, an amount equal to five percent (5%) of
the  amount of each Advance.  The Company hereby agrees that if such payment, as
is described above, is not made by the Company on the Advance Date, such payment
will  be  made  at  the  direction  of  the Investor as outlined and mandated by
Section  2.3  of  this  Agreement.

                                      E-23
<PAGE>
     (ii)  Upon  the  execution of this Agreement the Company shall issue to the
Investor shares of the Company's Common Stock in an amount equal to Nine Hundred
Ninety  Thousand  Dollars ($990,000) divided by the VWAP of the Company's Common
Stock, as quoted by Bloomberg, LP, on the date hereof (the "Investor's Shares").
                                                            -----------------

     (iii)  Fully  Earned. The Investor's Shares shall be deemed fully earned as
            -------------
of  the  date  hereof.

     (iv)  Registration  Rights.  The  Investor's  Shares will have "piggy-back"
           --------------------
registration  rights.

     (v)  Due  Diligence  Fee.  Upon the submission of the due diligence package
          ------------------
to the Company shall pay to the Investor Five Thousand Dollars ($5,000) as a non
refundable  fee  in  order  to  defray  the  costs  of  due  diligence.

Section  12.5  Brokerage.  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.  The
Company on the one hand, and the Investor, 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.

Section  12.6  Confidentiality.  If  for  any  reason  the  transactions
               ---------------
contemplated  by  this Agreement are not consummated, each of the parties hereto
shall  keep  confidential  any information obtained from any other party (except
information  publicly  available  or  in  such  party's domain prior to the date
hereof,  and except as required by court order) and shall promptly return to the
other  parties  all  schedules,  documents,  instruments,  work  papers or other
written information without retaining copies thereof, previously furnished by it
as  a  result  of  this  Agreement  or  in  connection  herein.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                      E-24
<PAGE>
     IN  WITNESS  WHEREOF,  the  parties  hereto have caused this Standby Equity
Distribution  Agreement  to  be  executed  by  the  undersigned,  thereunto duly
authorized,  as  of  the  date  first  set  forth  above.

                                                    COMPANY:
                                                    NS8  CORPORATION

                                                    By:  /s/  Peter  Hogendoorn
                                                         ----------------------
                                                    Name:  Peter  Hogendoorn
                                                    Title:  CEO

                                                    INVESTOR:
                                                    CORNELL CAPITAL PARTNERS, LP

                                                    BY:  YORKVILLE ADVISORS, LLC
                                                    ITS:  GENERAL  PARTNER

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

                                      E-25
<PAGE>

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