Document:

ASSET PURCHASE AGREEMENT

                  ASSET PURCHASE AGREEMENT (this "Agreement") dated August 4,
2001, between CDEX Inc., a Nevada corporation ("Buyer"), and Loch Harris, Inc.,
a Nevada corporation ("Loch") and Chem Tech, Inc., a subsidiary of Loch
("ChemTech") (jointly and severally, "Company").

                                    RECITALS

                  A.  Company is or has been  engaged in the  Business,  as that
term is defined herein below.

                  B. ChemTech is a wholly owned subsidiary of Loch, having been
created for the purpose of assisting Loch in the Business.

                  C. The Business is carried on by Company at one or more
facilities operated by Company and by contractors (the "Contractors") performing
services on behalf of Company.

                  D. Buyer desires to purchase from Company, and Company desires
to sell to Buyer,  all of the property and assets of Company that are related to
the Business, as are more particularly set forth herein.

                  NOW  THEREFORE,  in  consideration  of the  foregoing  and the
respective  representations,  warranties,  covenants,  agreements and conditions
hereinafter  set forth,  and intending to be legally  bound hereby,  the parties
hereto agree as follows:

1.       PURCHASE AND SALE OF ASSETS

         1.1.  DEFINITION OF "BUSINESS".  As used herein,  "Business" shall mean
(i) any and  all  research,  development,  manufacture,  production,  marketing,
distribution,   exploitation,   use,  and  sale  of  any  and  all   proprietary
technologies,  processes  and related  products in all fields of use of chemical
detection and nanometrology,  and technical processes related thereto, which the
Company and its affiliates,  including all  Contractors  acting on behalf of the
Company, have at any time undertaken, investigated, performed conducted, planned
to  conduct  or  perform,   or  attempted  to  conduct  or  perform,   (ii)  the
technical/business  services and various  operations carried on by or related to
the chemical detection technologies,  nanometrology technologies,  processes and
related  products and  associated by trade name or otherwise with the Company on
the date  hereof;  and (iii)  any and all  research,  development,  manufacture,
production, marketing, distribution,  exploitation, use, and sale of any and all
proprietary technologies, processes and related products in all fields of use in
which Wade  Poteet,  Harold  Cauthen,  and Henry  Blair,  acting as  independent
contractors  for Company and the Operations  Team as defined in the June 1, 2001
Agreement with Loch Harris had been  performing  for Company at any time.  Where
the context allows,  the term "Business"  shall also mean Company insofar as the
operation of the Business, as above defined, is concerned.

         1.2. ASSETS TO BE  TRANSFERRED.  Subject to the terms and conditions of
this Agreement, on the Closing Date (as hereinafter defined) Company shall sell,
transfer,  convey,  assign,  and deliver to Buyer,  and Buyer shall purchase and
accept,  all of the  business,  rights,  and  assets  (of  every  kind,  nature,
character  and  description,  whether  real,  personal  or  mixed,  tangible  or
intangible, accrued,

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contingent or otherwise, and wherever situated) of Company, used, held for use
of acquired or developed for use in the Business, or developed by Company in the
course of conducting the Business or by persons employed in the Business or by
Contractors for the Business (collectively the "Purchased Assets"). The
Purchased Assets include those noted in Exhibit A to this document.

2.       NO ASSUMPTION OF LIABILITIES

         2.1. NO LIABILITIES TO BE ASSUMED. As used in this Agreement,  the term
"Liability shall mean and include any direct or indirect indebtedness, guaranty,
endorsement, claim, loss, damage, deficiency, cost, expense, penalty, obligation
or responsibility,  fixed or unfixed, known or unknown,  asserted or unasserted,
liquidated  or  unliquidated,  secured or  unsecured.  Buyer is not assuming and
shall not assume or perform or discharge any Liability of Company,  and all such
Liabilities  shall  be and  remain  the  responsibility  of  Company,  expressly
including  but not  limited to (i) any and all  Liabilities  in  relation to any
agreement  between  Company and Henry  Blair or any person or entity  affiliated
with Henry Blair  (Henry  Blair and any person or entity  affiliated  with Henry
Blair shall be referred to herein collectively as the "Blair Affiliates");  (ii)
any and all taxes  applicable  to,  imposed  upon or arising  out of the sale or
transfer  of  the  Purchased   Assets  to  Buyer  and  the  other   transactions
contemplated  by this  Agreement,  including  but  not  limited  to any  income,
transfer,  sales, use, gross receipts or documentary stamp taxes relating to the
transaction  contemplated  herein;  (iii) any and all Liabilities of Company for
federal  income taxes and any state or local income,  profit or franchise  taxes
(and  any  penalties  or  interest  due on  account  thereof);  (iv) any and all
Liabilities  with  respect  to  any  action,  suit,   proceeding,   arbitration,
investigation or inquiry,  whether civil, criminal or administrative,  including
any third-party  claims for personal injury or property damage, now or hereafter
asserted, relating to or arising out of the operation of the Business by Company
prior to the Closing or Company's  use of, or Company's  ability to transfer the
use of, any of the Purchased Assets ("Litigation");  (v) any and all Liabilities
to a third party for infringement of such third party's rights; (vi) any and all
Liabilities  of Company  for any  violation  of or  failure  to comply  with any
statue, law, ordinance, rule or regulation (collectively,  "Laws") or any order,
writ,  injunction,  judgment,  plan or decree  (collectively,  "Orders")  of any
court, arbitrator,  department,  commission,  board, bureau, agency,  authority,
instrumentality or other body,  whether federal,  state,  municipal,  foreign or
other; (vii) any and all Liabilities  arising under or related in any way to any
contract or agreement  between Company and a Contractor or between Company and a
vendor,  or to the  performance of services for, or the providing of material or
equipment to,  Company by a Contractor or other third party,  and (viii) any and
all Liabilities  arising under agreements  between Loch Harris and/or Chem. Tech
related to ownership interests in the Business in any form.

         2.2. INDEPENDENT CONTRACTORS. Company acknowledges that Company entered
into  Independent  Contractor  Agreements  dated  September 1, 1999, with Harold
Cauthen  and  Wade  Poteet  (the  "Independent   Consultants"),   who  serve  as
independent  consultants to the Company.  Company  affirms that the  Independent
Contractor  Agreements have been  terminated by mutual  agreement as of July 24,
2001. Company expressly affirms and agrees that Buyer may engage the Independent
Consultants  to perform  services for Buyer  without any liability to Company or
Consultants for such engagement.  Company expressly agrees that each Independent
Consultant  shall be  permitted to entered into  agreements  with Buyer  without
having any liability to Company under any  agreements  between such  Independent
Consultant and Company, it being the intent of this provision to allow Buyer and
each  Independent  Consultant  to freely enter into such  agreements as they may
desire without any interference from Company,  without any restrictions  imposed
by Company,  and without any  liability to Company  therefore.  The  Independent
Consultants  are intended as third-party  beneficiaries  of this provision as to
their ability to freely enter into an agreement with Buyer.

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3.       PURCHASE PRICE - PAYMENT

         3.1 PURCHASE PRICE.

                  The purchase  price (the  "Purchase  Price") for the Purchased
Assets  shall be the  payment by Buyer to Loch of the  shares of Buyer's  Common
Stock,  par value $0.001 per share, in the amount set forth below and payable in
accordance herewith:

         3.2 PAYMENT OF PURCHASE PRICE.

                  At the Closing (as that term is  hereinafter  defined),  Buyer
shall  deliver to Loch  35,000,000  shares of Buyer's  Restricted  Common Stock.
Buyer had previously  delivered to Loch 13,000,000 shares of Buyer's  Restricted
Common  Stock,  which is  affirmed  by Buyer and  Company to be  included in the
overall consideration  received by Company. The 35,000,000 and 13,000,000 shares
of  Buyer's  Restricted  Common  Stock  are  collectively  referred  to  as  the
"Shareholders  Shares". In addition at the Closing,  Buyer shall deliver to Loch
13,000,000  shares of Buyer's  Restricted  Common Stock  ("Loch's  Share").  The
61,000,000 shares being collectively called the "Loch and Shareholders Shares").

                  The Shareholders Share shall be made available to the transfer
agent for distribution to the Loch  shareholders on a one for ten pro-rata basis
described below as soon as practical.  If the delivery to the transfer agent has
not  occurred  by October 1, 2001,  the voting  rights of these  shares,  unless
waiver by Buyer at its  discretion  from time to time,  shall be  assigned  in a
proxy to the Board of Directors of Buyer until such shares have been distributed
to shareholders of Loch on a one for ten pro-rata basis described  below.  After
October 1, 2001, if the  Shareholders  Shares have not been  distributed  to the
Loch  shareholders  and  it is  determined  that  it is  legally  impossible  or
economically  impractical  to do so, the  voting  proxy for those  shares  shall
remain  with the  Board of  Directors  of CDEX  until  those  shares  are  sold,
transferred  or assigned to parties not controlled in any fashion by Loch or its
Officers or  Directors.  If the number of shares of  Shareholder  Shares are not
sufficient to accomplish a  distribution  of one share of Buyer's stock for each
ten shares of Loch  stock,  then  shares  shall be taken from the Loch Shares to
accomplish  that  objective.  If the  number of shares  of  Shareholders  Shares
exceeds  the  number  of  shares   required  to   accomplished  a  one  for  ten
distribution, such excess shall be added to the Loch Shares.

                  In addition, Buyer shall provide a combined total of 8,325,000
shares of  Buyer's  Restricted  Common  Stock to those  listed in Exhibit B (the
"Obligation  Stock"), as directed by the Company as part of the compensation for
assets  transferred  under this Agreement.  The Obligation  Stock is provided to
discharge  certain  loans and other  obligations  of the Company  related to the
Business  and  Purchased  Assets,  to obtain a  release  of any lien or claim of
whatever  nature to the  technology  by such  persons  who had  provided  funds,
property or services  in  connection  with the  development  of the  technology,
Business  and  Purchased  Asset,  and to  acquire  the entire  interest,  if any
(including but not limited to ownership  percentage  and royalty  rights) in the
Business or Purchased Assets originally  acquired by Coldwater Capital,  LLC and
its  affiliates.  Buyer did not and was not  required  to review the  underlying
bases for these  payments  of  stock,  other  than to  understand  that  Company
warrants  that the  payments  are  necessary  and  adequate to secure  clear and
unencumbered title (including
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complete  ownership  interest  with  no  royalty  rights)  to the  Business  and
Purchased  Assets.  Company  shall  indemnify  Buyer  against  all claims to the
contrary.

                  Buyer and Loch shall make every  effort to complete the prompt
registration  of  these  shares  (the  Loch  and  Shareholders  Shares  and  the
Obligation Stock) as soon as practical and pursuant to appropriate  filings with
the Securities and Exchange  Commission  (the "SEC").  The Loch Shares are to be
used by Loch Harris for the benefit of Loch Harris as it sees fit.  However,  it
is agreed that as long as Loch owns these Loch Shares the voting rights of these
shares shall be assigned in a proxy to the Board of Directors of Buyer. Further,
the voting rights of all stock provided to any of the current Board of Directors
of Loch or persons or parties  under their  control  pursuant to this  Agreement
shall be assigned in a proxy to the Board of  Directors of Buyer until the stock
is sold, transferred,  assigned or conveyed to persons or parties not controlled
by such Board  Member.  Applicable  restrictions  shall be placed on these stock
certificates to this effect.  Loch agrees to comply strictly with all applicable
federal and state laws, rules and regulations relating to the Shares. Loch shall
provide  and  deliver  to  Buyer  all  information,  certifications,  and  other
documentation  as may be requested by Buyer as part of Buyer's  compliance  with
any applicable Laws and regulations relating to the issuance and/or registration
of any of the Shares.  All certificates for shares of CDEX prior to registration
by the SEC shall bear an appropriate  legend indicating the restriction.  FILING
COSTS.  Company shall reimburse Buyer for all costs and expenses relating to the
preparation, filing and processing of a statements to secure registration of the
Registered  Shares,  as may be  applicable,  including but not limited to filing
fees,  attorneys' fees,  accountants' fees, and printing  expenses,  except that
Buyer shall be responsible for providing financial auditing of Buyer.

         3.3. PRORATIONS.  The parties shall make such prorations, if any, as of
the Closing Date  hereunder as shall be normally  adjusted in  connections  with
similar transactions, with Company liable to the extent such items relate to any
time period up to and  including the Closing Date and Buyer liable to the extent
such items relate to periods subsequent thereto.

4. REPRESENTATIONS AND WARRANTIES OF COMPANY

                  Company makes the following  representations and warranties to
Buyer,  each of which is true and correct on the date hereof,  shall remain true
and  correct to and  including  the Closing  Date,  shall be  unaffected  by any
investigation  heretofore or hereafter made by Buyer, or any knowledge of Buyer,
and shall survive the Closing of the transactions provided for herein;  provided
however and notwithstanding the foregoing,  if Buyer had actual knowledge that a
representation  or  warranty of Company is false,  Buyer shall be estopped  from
asserting a claim based on such representation or warranty.

         4.1. LOCH  CORPORATE.  Loch  represents  that it is a corporation  duly
organized,  validly existing and in good standing under the laws of the State of
Nevada;  it  has  all  requisite  corporate  power  and  authority  to  own  its
properties,  to carry on its business as and where such is now being  conducted,
to enter into this  Agreement  and the other  documents  and  instruments  to be
executed and delivered by Loch pursuant hereto and to carry out the transactions
contemplated  hereby;  and no portion of the Business is conducted by Company by
means of any subsidiary or any other interest in any corporation, partnership or
other entity.

         4.2. CHEMTECH  CORPORATE.  ChemTech represents that it is a corporation
duly  organized,  validly  existing and in good  standing  under the laws of the
State of Nevada;  it has all requisite

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corporate power and authority to own its properties, to carry on its business as
and where  such is now being  conducted,  to enter into this  Agreement  and the
other  documents  and  instruments  to be  executed  and  delivered  by ChemTech
pursuant hereto and to carry out the transactions  contemplated  hereby;  and no
portion of the Business is conducted  by Company by means of any  subsidiary  or
any other interest in any corporation, partnership or other entity.

         4.3.  AUTHORITY.  The execution and delivery of this  Agreement and the
other documents and instruments to be executed and delivered by Company pursuant
hereto and the  consummation  of the  transactions  contemplated  have been duly
authorized  by the Board of Directors of Loch and ChemTech,  respectively.  This
Agreement  constitutes,  and when executed and delivered the other documents and
instruments  to be  executed  and  delivered  by Company  pursuant  hereto  will
constitute,  valid  binding  agreements  of  Loch  and  ChemTech,  respectively,
enforceable in accordance with their respective terms.

         4.4.  DISCLOSURE  OF  LIABILITIES.  The  Business  does  not  have  any
Liabilities,  other than (i) the  Liabilities  discussed  with  Buyer,  and (ii)
commercial  liabilities  and  obligations  incurred  in the  ordinary  course of
business and consistent with past practice, and none of which has or will have a
material  adverse  effect on the  financial  condition  or  results  of  Buyer's
development,  marketing,  sales,  and  use of the  Purchased  Assets  after  the
Closing.  Other  than as set forth in  clauses  (i) and (ii) in the  immediately
preceding  sentence,  Company has no  knowledge  of any basis for the  assertion
against Company of any liability in connection with or affecting the Business or
the Purchased Assets,  and there are no circumstances,  conditions,  happenings,
events or  arrangements,  contractual or otherwise,  which may give rise to such
Liabilities,  except  commercial  liabilities  and  obligations  incurred in the
ordinary  course of the  Business and  consistent  with past  practice.  Company
agrees  that it shall  indemnify,  defend,  and  hold  harmless  Buyer,  and its
directors,   officers,   employees,  agents,  contractors,  and  controlled  and
controlling persons  (hereinafter  "Buyer's  affiliates"),  from and against all
Claims  (as that term is  defined  in  Section  7.1  herein)  asserted  against,
resulting to,  imposed upon, or incurred by Buyer and Buyer's  affiliates or the
Purchased  Assets,  directly  or  indirectly,  by reason of,  arising  out of or
resulting  from in any way claims against the Company,  the Purchased  Assets or
Business  resulting from actions occurring prior to Closing,  in accordance with
the provisions of Section 7.

         4.5. PENDING INVESTIGATIONS AND LITIGATION.  Except as set forth in the
Schedule of Disclosed  Pending  Investigation  and Litigation  (Schedule C), the
Company is not aware of any Litigation or  Investigations  pending or threatened
against Company or its directors (in such capacity) that in any way involves the
Business or the  Purchased  Assets,  nor does Company  know,  or have grounds to
know, of any basis for any Investigations or Litigation.  Except as set forth in
the  Schedule C,  neither  Company nor the  Purchased  Assets are subject to any
Order of any Government Entity. Company agrees that it shall indemnify,  defend,
and  hold  harmless  Buyer,  and its  directors,  officers,  employees,  agents,
contractors,  and  controlled  and  controlling  persons  (hereinafter  "Buyer's
affiliates"),  from and  against  all Claims  asserted  against,  resulting  to,
imposed  upon,  or  incurred by Buyer and Buyer's  affiliates  or the  Purchased
Assets,  directly or indirectly,  by reason of, arising out of or resulting from
in any way the pending  Investigations  and Litigation set forth in the Schedule
of Disclosed Pending  Investigations and Litigation,  or any aspect thereof,  in
accordance with the provisions of Section 7.

         4.6. TITLE TO PROPERTIES.  Except as to claims which are to be released
and  resolved by payment of the  Obligation  Stock at Exhibit B,  Company is the
owner of, has sole and  exclusive

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possession  of, and has good and marketable  title to all the Purchased  Assets,
free and  clear of all  mortgages,  liens  (statutory  or  otherwise),  security
interests,  claims,  pledges,  licenses,  equities,  options,  conditional sales
contracts,    assessments,    levies,   easements,   covenants,    reservations,
restrictions,  rights-of-way,  exceptions, limitations, claims, actions, charges
or encumbrances of any nature whatsoever, whether pending, threatened, or actual
(collectively,  "Liens").  Company  knows of no basis for the  assertion  of any
Lien. None of the Purchased Assets are subject to any restrictions  with respect
to the  transferability  thereof.  None of the  Trade  Rights,  as that  term is
defined in Exhibit A,  infringes or  conflicts  with any  proprietary  rights or
other  rights of any other  person,  and neither the use of the Trade Rights nor
the  development,  use,  manufacture or sale of any product related to the Trade
Rights will  infringe or conflict with any  proprietary  right or other right of
any  person.  Company has  complete  and  unrestricted  power and right to sell,
assign, convey and deliver the Purchased Assets to Buyer as contemplated hereby.
At Closing,  Buyer will receive good and  marketable  title to all the Purchased
Assets, free and clear of all Liens of any nature whatsoever.

         4.7. NO BROKERS OR FINDERS.  Neither  Company nor any of its directors,
officers, employees,  shareholders or agents have retained, employed or used any
broker or finder in connection  with the  transaction  provided for herein or in
connection with the negotiation thereof.

         4.8.  DISCLOSURE.  No  representation  or  warranty  by Company in this
Agreement  contains or shall  contain any untrue  statement of material  fact or
omits or shall omit a material fact necessary to make the  statements  contained
therein not misleading.

         4.9. RESTRICTED  SECURITIES.  Company acknowledges that the Shares have
not been  registered  under  Securities Act of 1933 and  constitute  "restricted
securities"  pursuant to Rule 144 thereunder.  Company represents that Buyer has
given Company the  opportunity  to ask questions and receive  answers from Buyer
regarding the Shares and the terms of the issuance thereof.

5. REPRESENTATIONS AND WARRANTIES OF BUYER

         Buyer makes the following  representations  and  warranties to Company,
each of which is true and  correct on the date  hereof,  shall  remain  true and
correct  to  and  including  the  Closing  Date,  shall  be  unaffected  by  any
investigation  heretofore or hereafter made by Company or any notice to Company,
and shall survive the Closing of the transactions provided for herein; provided,
however and notwithstanding the foregoing,  if Company had actual knowledge that
a representation  or warranty of Buyer is false,  Company shall be estopped from
asserting a claim based on such representation or warranty.

         5.1  CORPORATE.   Buyer  represents  that  it  is  a  corporation  duly
organized,  validly existing and in good standing under the laws of the State of
Nevada,  and  that it has all  requisite  corporate  power to  enter  into  this
Agreement and the other documents and instruments and instruments to be executed
and delivered by Buyer and to carry out the transactions contemplated hereby.

<PAGE>

         5.2  AUTHORITY.  The execution  and delivery of this  Agreement and the
other  documents and  instruments to be executed and delivered by Buyer pursuant
hereto and the consummation of the transactions  contemplated hereby and thereby
have been duly  authorized  by the Board of Directors of Buyer.  This  Agreement
constitutes, and when executed and delivered the other documents and instruments
to be executed and delivered by Buyer pursuant hereto will constitute, valid and
binding  agreements of Buyer,  enforceable in accordance  with their  respective
terms, except as such may be limited by bankruptcy,  insolvency,  reorganization
or other laws affecting  creditors' rights  generally,  and by general equitable
principles.

         5.3 NO  BROKERS OR  FINDERS.  Neither  Buyer nor any of its  directors,
officers,  employees  or agents  have  retained,  employed or used any broker or
finder in connection with the  transaction  provided for herein or in connection
with the negotiation thereof.

         5.4 VALIDITY OF SHARES. Buyer represents that the Shares have been duly
authorized,  and that when issued under the terms of this Agreement,  the Shares
will be validly issued, fully paid, and nonassessable shares.

         5.5  DISCLOSURE.  No  representation  or  warranty  by  Buyer  in  this
Agreement  contains or shall  contain any untrue  statement of material  fact or
omits or shall a  material  fact  necessary  to make  the  statements  contained
therein not misleading.

6. OTHER MATTERS

         6.1. NON-DISCLOSURE AND NONCOMPETITION  AGREEMENTS.  Within twenty days
of the Closing,  Company shall cause to be delivered to Buyer two Non-Disclosure
Agreements and Noncompetition Agreements,  acceptable to Buyer, one of each duly
executed by Rodney A. Boone and by Mark E. Baker.

         6.2. NONCOMPETITION; CONFIDENTIALITY. Subject to the Closing, and as an
inducement  to Buyer to execute this  Agreement  and  complete the  transactions
contemplated  hereby, and in order to preserve the goodwill  associated with the
Business, and in addition to and not in limitation of any covenants contained in
any  agreement  executed and delivered  pursuant to Section 6.1 hereof,  Company
hereby covenants and agrees as follows:

         6.2.1 COVENANT NOT TO COMPETE.  For a period of five (5) years from the
Closing Date, Company will not, directly or indirectly:

                  (i)  engage in,  continue  in or carry on any  business  which
competes with the Business or is substantially similar thereto, including owning
or controlling any financial interest in any corporation,  partnership,  firm or
other form of business organization which is so engaged;

<PAGE>

                  (ii) consult with, advise or assist in any way, whether or not
for  consideration,  any  corporation,   partnership,  firm  or  other  business
organization  which is now or becomes a  competitor  of Buyer in any aspect with
respect to the Business or Purchased  Assets which Buyer is acquiring  hereunder
including but not limited to, advertising or otherwise endorsing the products of
any  such  competitor;   soliciting   customers  or  otherwise   serving  as  an
intermediary for any such competitor;  loaning money or rendering any other form
of financial  assistance to or engaging in any form of business  transaction  on
other than an arms' length basis with any such competitor;

                  (iii)  offer  employment  to any  employee  of  the  Business,
without the prior written consent of Buyer; or

                  (iv) engage in any  practice  the purpose of which is to evade
the  provisions  of this  covenant  not to  compete  or to commit  any act which
adversely  affects  the  Business,  Purchased  Assets  or  Assumed  Liabilities;
provided,  however,  that except as provided for in this Agreement the foregoing
shall not prohibit the  Company's  ownership  of  securities  of Buyer or of any
corporations which are listed on a national securities exchange or traded in the
national  over-the-counter  market in an amount which shall not exceed 5% of the
outstanding  shares  of  any  such  corporation.  The  parties  agree  that  the
geographic  scope of this  covenant not to compete shall extend  worldwide.  The
parties  agree that Buyer may sell,  assign or otherwise  transfer this covenant
not to compete, in whole or in part, to any person, corporation,  firm or entity
that purchases all or part of the Business or the Purchased Assets. In the event
a court  of  competent  jurisdiction  determines  that  the  provisions  of this
covenant not to compete are excessively broad as to duration, geographical scope
or activity,  it is expressly agreed that this covenant not to complete shall be
construed so that the  remaining  provisions  shall not be  affected,  but shall
remain in full force and  effect,  and any such over broad  provisions  shall be
deemed,  without  further  action  on the part of any  person,  to be  modified,
amended  and/or  limited,  but only to the extent  necessary  to render the same
valid and enforceable in such jurisdiction.

         6.2.2.  COVENANT  OF  CONFIDENTIALITY.  Company  shall  not at any time
subsequent to the Closing,  except as explicitly requested by Buyer, (i) use for
any purpose,  (ii) disclose to any person,  expressly including any of the Blair
Affiliates  or to any  Independent  Contractor,  or (iii) keep or make copies of
documents,  tapes, discs or programs containing,  any Confidential  Information.
For purposes hereof,  "Confidential Information" shall mean and include, without
limitation, all Trade Rights, trade secrets, confidential business or commercial
information, business plans, marketing strategies, customer lists, vendor lists,
technical information,  know-how,  inventions,  patents, discoveries (whether or
not  patentable),  copyrights,  trademarks,  service  marks,  techniques,  data,
systems  methods,  processes,  improvements,   developments,  enhancements,  and
modifications,  and other

<PAGE>

proprietary  rights,  whether oral or written,  or in recorded form, tangible or
intangible,  that relate in any way or manner to, or arise out of, the  Business
and the Purchased  Assets.  The Confidential  Information shall also include (i)
all right, title and interest to the Confidential  Information arising under any
laws of any  country,  and (ii) all right,  title and  interest in all causes of
action  relating  to the  Confidential  Information  arising  under the  patent,
copyright,  trademark,  service  mark,  trade  secret,  or  other  laws  of  any
jurisdiction,  which causes of action have not been asserted as of the Effective
Date, that have not previously been disclosed to the public directly by Company.
The obligations of Company with respect to this Section 6.2.2 shall not apply to
Confidential Information:

                  (i) which at the time of disclosure is, or thereafter becomes,
available to the trade or the public without  restriction other than through the
fault, negligence, or other acts of Company; or

                  (ii) which is lawfully  and in good faith  obtained by Company
from an independent  third party without breach of this  Agreement,  as shown by
documentation  sufficient  to  established  the  third  party as a source of the
Confidential  Information,  and not obtained by the third party from Buyer or by
unlawful or improper means; or

         Notwithstanding  the above,  however,  Company and Buyer  further agree
that  individual  elements  of the  Confidential  Information  may be or  become
available  to the general  public or a third party  through no fault of Company,
but that such  availability of individual  elements of knowledge may not produce
cognizant  appreciation of the value of elements of knowledge and may not render
known  an  integrated  package  of  information  having  the  value  of  Buyer's
integrated  package of know-how with its various  parameters  already reconciled
and optimized in substantial part. Accordingly,  Company understands that public
availability, or the availability from a third party, of the individual parts of
the  Confidential  Information does not release its obligation of confidence for
Confidential  Information  that  is not  already  publicly  available.  Further,
Company  will not be  permitted  to  justify  disregard  of the  obligations  of
confidence by use of the  Confidential  Information  or parts thereof to guide a
search  to piece  together  a series  of items  of  knowledge  from  unconnected
sources,  fitting  them  together  by use of  Buyer's  package  of  Confidential
Information to make a showing of nonsecrecy of such  information.  The foregoing
provisions  of this Section  6.2.3  notwithstanding,  Company  shall not be more
burdened  against use of information  from public sources or third party sources
than a third party competitor would be, had it not received disclosure of either
the  Confidential  Information  or any of its  parts,  and  had it not  had  its
interest  therein  sponsored  or  initiated  by  knowledge  of the  Confidential
Information  or any part  thereof  or its  value.  Accordingly,  subject  to the
restrictions set forth herein,  Company remains free to act on and use available
information  from  public  sources or from third party  sources  when and to the
extent a  competitor  of Buyer,  otherwise  disinterested,  would in the natural
course of business learn of, appreciate the value of, and use such public source
or third party source  information  without  having  responded to  initiative or
interest  suggested by knowledge of the Confidential  Information,  its parts or
the value thereof.

<PAGE>

         6.2.3.  EQUITABLE  RELIEF  FOR  VIOLATIONS.  Company  agrees  that  the
provisions and restrictions contained in this Article 6 are necessary to protect
the legitimate  continuing interests of Buyer in acquiring the Purchased Assets,
and that any violation or breach of these  provisions will result in irreparable
injury  to Buyer for which a remedy  at law  would be  inadequate  and that,  in
addition to any relief at law which may be available to Buyer for such violation
or breach and  regardless of any other  provision  contained in this  Agreement,
Buyer shall be entitled to injunctive and other equitable  relief as a court may
grant after  considering  the intent of this Article 6, without the necessity of
posting bond.

         6.3.  USE OF NAME.  Following  the  Closing,  neither  Company  nor any
Affiliate shall, without the prior written consent of Buyer, make any use of the
names  "Chemical   Detection   Technology,"   "Chemical   Detection   Technology
Excellence",  "CDEX", "ChemTech" or any other names confusingly similar thereto,
except as may be  necessary  for  Company to pay its  liabilities,  prepare  tax
returns and other  reports,  and to otherwise wind up and conclude its operation
of the Business.

7.       INDEMNIFICATION

         7.1. BY COMPANY. Subject to the terms and conditions of this Article 7,
Company  hereby agrees to indemnify,  defend and hold harmless Buyer and Buyer's
affiliates from and against all Claims asserted  against,  resulting to, imposed
upon,  or  incurred  by Buyer,  Buyer's  affiliates,  or the  Purchased  Assets,
directly or  indirectly,  by reason of, arising out of or resulting from (a) the
inaccuracy or breach of any  representation  or warranty of Company contained in
or made pursuant to this Agreement  (regardless of whether such breach is deemed
"material");  (b) the  breach  of any  covenant  of  Company  contained  in this
Agreement  (regardless of whether such breach is deemed "material");  or (c) any
Claim of or against Company, the Purchased Assets or the Business resulting from
actions  prior to closing.  As used in this  Agreement,  the term "Claim"  shall
include  (i) all  Liabilities;  (ii) all  losses,  damages  (including,  without
limitation,  consequential damages),  judgments, awards, settlements,  costs and
expenses  (including,   without  limitation,   interest  (including  prejudgment
interest in any litigated matter), penalties, court costs and attorneys fees and
expenses),  whether  arising  from or related to a Liability  or  Litigation  or
otherwise;  and (iii) all  demands,  claims,  actions,  costs of  investigation,
causes  of  action,  proceedings  and  assessments,  whether  or not  ultimately
determined  to be valid,  and whether  arising from or related to a Liability or
Litigation or otherwise.

         7.2. BY BUYER.  Subject to the terms and  conditions of this Article 7,
Buyer  hereby  agrees  to  indemnify,  defend  and hold  harmless  Company,  its
directors,  officers,  employees and controlling  persons,  from and against all
Claims  asserted  against,  resulting  to,  imposed upon or incurred by any such
person,  directly  or  indirectly,  by  reason  of or  resulting  from  (a)  the
inaccuracy or breach of any  representation or warranty of Buyer contained in or
made  pursuant to this  Agreement  (regardless  of whether such breach is deemed
"material"); (b) the breach of any covenant of Buyer contained in this Agreement
(regardless of whether such breach is deemed "material") and (c) claims relating
to use or operations of the Purchased Assets or Business after Closing.

<PAGE>

         7.3.  LIMITATION ON  INDEMNIFICATION  AND LIABILITY.  Except for claims
based on  intentional  fraud,  the period of  liability  of Company to Buyer and
Buyer to Company  for any loss or claim,  by way of  indemnification  or for any
other  loss,  claim or remedy in  connection  with any  matter  related  to this
Agreement  shall begin on the Closing Date and terminate on the earlier to occur
to of the expiration of the applicable statute of limitations or three (3) years
following the Closing.  For a claim based on intentional  fraud,  the three-year
period shall be extended pursuant to the applicable tolling provisions,  if any,
in effect in Maryland  (all the  foregoing  in the  previous  two  sentences  is
referred to as the  `'Survival  Period").  The parties  agree that any claim for
indemnification or liability of whatever nature shalt be pursued  exclusively as
provided in Section  7.4 or 7.5.  The  parties  agree that the  representations,
warranties and covenants  contained in this Section 7.3 between the parties is a
significant inducement for them to approve and consummate this Agreement.

         7.4.  NOTICE AND  ARBITRATION OF CLAIMS FOR  INDEMNIFICATION  AMONG THE
PARTIES.

            7.4.1 NOTICE.  The Person or Persons seeking  indemnification  under
this Article?  (the "Indemnified Party") shall notify the Person or Persons from
whom  indemnification  is sought  (the  "Indemnifying  Party") in writing of its
claim for  indemnification  (including the amount thereof) within the applicable
Survival Period. Notices shall be sent as provided for in this Agreement.

            7.4.2 OBJECTION TO NOTICE.  The Indemnifying Party shall have thirty
(30) Business Days (the  "Arbitration  Review Period") after receipt of a notice
under this  section  within which to accept such claim or to  reasonably  object
thereto in writing.  Failure of the  Indemnifying  Party to so object in writing
within the Arbitration  Review Period shall  conclusively be deemed its approval
to the claim for  indemnification  submitted by the  Indemnified  Party.  In the
event the Indemnifying  party timely objects in writing,  the Indemnifying Party
and the Indemnified Party shall attempt to agree upon the appropriate amount, if
any, of such claim for  indemnification  using their best good faith efforts. If
the parties fail to reach agreement  within fifteen (15) Business Days following
the Arbitration  Review Period (the "Outside  Agreement  Date") then the parties
shall submit the dispute to arbitration as provided herein.

         7.5 INDEMNIFICATION FOR MATTERS INVOLVING THIRD PARTIES.

            7.5.1 Each of the parties shall promptly notify the other parties of
any matter asserted by any Person other than a party to this Agreement (a "Third
Party") which may give rise to a claim for indemnification  under this Article 7
(a "Third Party  Claim");  provided that any delay by the  Indemnified  Party in
providing  notice  shall not  affect  the right of  indemnification  unless  the
Indemnifying Party's interests have been materially prejudiced by the delay, and
any such notice shall comply with Section 7.4.1.

            7.5.2 An Indemnifying  Party may defend an Indemnified Party against
any Third  Party  Claim  giving  rise to a right of  indemnification  under this
Article 7 provided (i) the Indemnifying  Party notifies the Indemnified Party in
writing within fifteen (15) days after receipt of the notice required in Section
7.5.1  that the  Indemnifying  Party will  indemnify  the  Indemnified  Party as
required by this Agreement, (ii) the Indemnifying Party provides the Indemnified
Party  with  reasonable  evidence  that the  Indemnifying  Party  will  have the
financial resources to both undertake the defense and fulfill its

<PAGE>

indemnification  obligations,  (iii) the Third Party Claim  involves  only money
damages  and does not seek  equitable  relief,  (iv) the  settlement  of,  or an
adverse  judgment  with  respect  to, the Third  Party Claim is not, in the good
faith  judgment of the  Indemnified  Party,  likely to establish a  precedential
custom or practice  materially  adverse to the continuing  business interests of
the Indemnified  Party, and (v) the  Indemnifying  Party conducts the defense of
the Third Party Claim actively and diligently.  The Indemnifying  Party's choice
of legal  counsel for a defense  under this  Section  7.5.2 shall be  reasonably
satisfactory to the Indemnified Party.

            7.5.3 At any time an Indemnifying Party is conducting the defense of
a Third Party Claim in accordance with Section 7.5.2, the Indemnified  Party may
retain  separate  co-counsel  at its  own  expense  and  participate  in its own
defense.   If  both  the  Indemnifying  Party  and  the  Indemnified  Party  are
participating in the defense,  neither will consent to the entry of any judgment
or enter into any  settlement  with respect to the Third Party Claim without the
other's prior written consent, which shall not be withheld unreasonably.

            7.5.4 If, however,  at any time an Indemnifying  Party is conducting
the defense of the Third Party Claim but not in accordance  with Section  7.5.2,
the  Indemnified  Party may conduct its own defense and may consent to the entry
of any  judgment or enter into any  settlement  with  respect to the Third Party
Claim in any manner it may reasonably  determine  without  consulting  Nvith the
Indemnifying  Party or obtaining  its approval,  in which case the  Indemnifying
Party shall  promptly and at  reasonable  intervals  periodically  reimburse the
Indemnified Party for the costs of its defense.

8. CLOSING

         The closing of this  transaction  ("the  Closing")  shall take place on
August 4, 2001.  Such date is  referred  to in this  Agreement  as the  "Closing
Date".

         8.1. DOCUMENTS TO BE DELIVERED BY COMPANY.

                  At the Closing at a later time specified below,  Company shall
deliver  to Buyer  the  following  documents,  in each  case  duly  executed  or
otherwise in proper form:

            8.1.1.  Bill of Sale.  Bill of sale and such  other  instruments  of
assignment,  transfer,  conveyance  and  endorsement  as will be  sufficient  to
transfer,   assign,  convey  and  deliver  to  Buyer  the  Purchased  Assets  as
contemplated hereby.

            8.1.2.  NON-DISCLOSURE AND NONCOMPETITION AGREEMENTS.  Within twenty
days of the  Closing,  the  Non-Disclosure  Agreements  and  the  Noncompetition
Agreements referred to in Section 6. 1, duly executed by the persons referred to
in such Section.

            8.1.3. CERTIFIED  RESOLUTIONS.  Within twenty days of the Closing, a
certified  copy  of the  resolutions  of  the  Board  of  Directors  of  Company
authorizing   and  approving  this  Agreement  and  the   consummation   of  the
transactions contemplated by this Agreement.

            8.1.4. OTHER DOCUMENTS. All other documents, instruments or writings
required to be  delivered  to Buyer at or prior to the Closing  pursuant to this
Agreement  and such other  certificates  of authority and documents as Buyer may
reasonably request.

<PAGE>

         8.2. DOCUMENTS TO BE DELIVERED BY BUYER.

                   At the Closing or a later time specified  below,  Buyer shall
deliver  to Company  the  following  documents,  in each case duly  executed  or
otherwise in proper form:

            8.2.1.  PURCHASE PRICE.  Within twenty days of Closing, to the Chief
Financial  Officer of Loch  Harris  for  disposition,  one or more  certificates
representing, in the aggregate, the Shares as required by Section 3.2 hereof.

            8.2.2. OTHER DOCUMENTS. All other documents, instruments or writings
required to be delivered to Company at or prior to the Closing  pursuant to this
Agreement and such other  certificates of authority and documents as Company may
reasonably request.

            8.2.3.  CERTIFIED  RESOLUTIONS.  Within  twenty days of  Closing,  a
certified copy of the resolutions of the Board of Directors of Buyer authorizing
and  approving  this  Agreement  and  the   consummation  of  the   transactions
contemplated by this Agreement.

9.  TERMINATION

         9.1. RIGHT OF TERMINATION WITHOUT BREACH.

                  This Agreement may be terminated  without further liability of
any party at any time prior to the Closing:

            9.1.1. by mutual written agreement of Buyer and Company; or

            9.1.2.  by either  Buyer or  Company if the  Closing  shall not have
occurred on or before August 15, 2001,  provided the terminating  party has not,
through breach of a representation,  warranty or covenant, prevented the Closing
from occurring on or before such date.

         9.2. EFFECT OF TERMINATION.  Termination of this Agreement shall not in
any way terminate, limit or restrict the rights and remedies of any party hereto
against any other party which has violated, breached or failed to satisfy any of
the  representations,  warranties,  covenants,  agreements,  conditions or other
provisions of this  Agreement  prior to termination  hereof.  In addition to the
right of any party under common law to redress for any such breach or violation,
each party whose breach or violation  has occurred  prior to  termination  shall
jointly  and  severally  indemnify  each  other  party  for whose  benefit  such
representation,  warranty,  covenant,  agreement  or  other  provision  was made
("indemnified party") from and against all losses,  damages (including,  without
limitation,  consequential  damages),  costs and  expenses  (including,  without
limitation,  interest (including  prejudgment interest in any litigated matter),
penalties,  court costs,  and  attorneys  fees and expenses)  asserted  against,
resulting to, imposed upon, or incurred by the  indemnified  party,  directly or
indirectly,  by reason  of,  arising  out of or  resulting  from such  breach or
violation.  Subject to the foregoing, the parties' obligations under Articles 3,
4, 5, 6,  and 7 and  Sections  10.1 and 10.6 of this  Agreement,  and any  other
provision  for  which   survivorship  is  expressly   provided,   shall  survive
termination.

<PAGE>

10.    MISCELLANEOUS

         10.1.  Further  Assurance.  From time to time,  at Buyer's  request and
without  further  consideration,  Company will execute and deliver to Buyer such
documents and take such other action as Buyer may reasonably request in order to
consummate more effectively the transactions  contemplated hereby and to vest in
Buyer  good,  valid  and  marketable  title to the  business  and  assets  being
transferred hereunder.  And, from time to time, at Company's request and without
further consideration,  Buyer will execute and deliver to Company such documents
and take such  other  action  as  Company  may  reasonably  request  in order to
consummate more effectively the transactions  contemplated  hereby. If any Trade
Rights can be protected by copyrights,  patents,  trademarks,  or service marks,
then such copyright,  patent,  trademark, or service mark, as may be applicable,
shall be owned solely,  completely and  exclusively by Buyer,  and Company shall
each execute such assignments and other documents and provide such assistance as
Buyer may reasonably  request in order to protect Buyer's ownership of the Trade
Rights.  Company hereby  appoints Buyer as its  attorney-in-fact  to execute any
document that the U.S. Patent and Trademark Office,  the U.S.  Copyright Office,
or any other similar governmental or  quasi-governmental  entity in any state or
foreign country shall require in order to establish, protect, and record Buyer's
ownership of all of the rights,  title and interests in and to the Trade Rights.
This appointment of Buyer as the  attorney-in-fact  for Company to act hereunder
is irrevocable.  The terms of this Section 10.1 shall survive the termination of
this  Agreement  and shall  continue for fifty (50) years after the  termination
hereof.

         10.2. ASSIGNMENT, PARTIES IN INTEREST.

            10.2.1. ASSIGNMENT.  Except as expressly provided herein, the rights
and  obligations  of a party  hereunder  may  not be  assigned,  transferred  or
encumbered without the prior written consent of the other party. Notwithstanding
the foregoing,  Buyer may, without consent of the other party, cause one or more
subsidiaries of Buyer to carry out all or part of the transactions  contemplated
hereby; provided, however, that Buyer shall, nevertheless, remain liable for all
of its obligations, and those of any such subsidiary, to Company hereunder.

            10.2.2.  PARTIES IN INTEREST.  This Agreement shall be binding upon,
inure to the benefit of, and be  enforceable  by the  respective  successors and
permitted  assigns of the parties  hereto.  Nothing  contained  herein  shall be
deemed to confer upon any other person any right or remedy under or by reason of
this Agreement.

         10.3.  LAW GOVERNING  AGREEMENT.  This Agreement may not be modified or
terminated  orally,  and shall be  construed  and  interpreted  according to the
internal  laws of the State of Maryland , excluding any choice of law rules that
may direct the application of the laws of another jurisdiction.

         10.4.  AMENDMENT AND MODIFICATION.  Buyer and Company may amend, modify
and  supplement  this  Agreement in such manner as may be agreed upon by them in
writing.

         10.5. NOTICE. All notices,  requests,  demands and other communications
hereunder  shall be given in writing and shall be (a) personally  delivered,  or
(b) sent to the parties at their respective

<PAGE>

addresses by registered or certified  U.S. mail,  return  receipt  requested and
postage prepaid,  or by private  overnight mail courier  service.  If personally
delivered,  such communication shall be deemed delivered upon actual receipt; if
sent by overnight courier pursuant to this paragraph,  such communication  shall
be deemed  delivered  upon  receipt;  and if sent by U.S.  mail pursuant to this
paragraph,  such  communication  shall  be  deemed  delivered  as of the date of
delivery indicated on the receipt issued by the relevant postal service,  or, if
the  addressee  fails or  refuses  to  accept  delivery,  as of the date of such
failure or refusal.

         10.6. EXPENSES.

                  Regardless  of  whether or not the  transactions  contemplated
hereby are consummated:

            10.6.1.  EXPENSES  OF  TRANSACTION.  Except  as  otherwise  provided
herein,  each of the parties shall bear its own expenses and the expenses of its
counsel  and  other  agents in  connection  with the  transactions  contemplated
hereby.

            10.6.2.  COSTS OF LITIGATION OR ARBITRATION.  The parties agree that
the  prevailing  party in any action  brought  with respect to or to enforce any
right or remedy under this  Agreement,  regardless  of whether suit has actually
been filed,  shall be  entitled  to recover  from the other party or parties all
reasonable  costs  and  expenses  of  any  nature  whatsoever  incurred  by  the
prevailing party in connection with such action,  including  without  limitation
attorneys'  fees  and  prejudgment  interest,  unless  ordered  otherwise  by an
applicable court or arbitrating authority..

         10.7. ENTIRE AGREEMENT.  This instrument  embodies the entire agreement
between the parties hereto with respect to the transactions contemplated herein,
and there have been and are no agreements, representations or warranties between
the parties other than those set forth or provided for herein.

         10.8.  COUNTERPARTS.  This  Agreement  may be  executed  in one or more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same instrument.

         10.9.  HEADINGS.  The  headings  in this  Agreement  are  inserted  for
convenience only and shall not constitute a part hereof

         10.10.  DISCLOSURES AND ANNOUNCEMENTS.  Both the timing and the content
of all  disclosures  to third parties and public  announcements  concerning  the
transactions  provided for in this Agreement by either Company or Buyer shall be
subject to the prior  disclosure  to and approval of the other in all  essential
respects,  except  that  Buyer's  approval  shall  not  be  required  as to  any
statements  and other  information  which the Company is required  submit to the
SEC, or the Company's stockholders,  or be required to make pursuant to any rule
or  regulation  of the SEC or  otherwise  required  by law,  provided  that such
statement  or  other  information  may  not  include  any  of  the  Confidential
Information.

            10.1 1. SEVERABILITY.  The invalidity or unenforceability of any one
or  more  provisions  of  this  Agreement  shall  not  affect  the  validity  or
enforceability of the other provisions of this Agreement,  which shall remain in
full force and effect.

<PAGE>

         10.12.  FUNDING AND EXPENSES.  The Company and Buyer agree that subject
to the  Company  securing  certain  funding  acceptable  to  Buyer,  as has been
discussed  between Buyer and the Company,  Buyer will pay and reimburse  certain
expenses as have been discussed  related to the Business,  the Purchased  Assets
and  registration of Buyer's stock that has been or will be provided in relation
to this Agreement.

11.      ARBITRATION.

Any failure to perform,  controversy or claim arising out of or relating to this
Agreement or the breach,  termination or validity  thereof,  shall be determined
exclusively by arbitration in accordance with the provisions of this Section and
in  accordance  with  the  rules of the  American  Arbitration  Association  for
arbitrating  commercial  matters.  The arbitration  shall be held in Washington,
D.C., the surrounding  metropolitan area of Maryland,  or such other location as
the parties shall  mutually  agree.  The  arbitrators  shall base their award on
applicable Maryland law and judicial precedent,  and shall accompany their award
with  written  findings  of fact and  conclusions  of law.  The  decision of the
arbitrators  shall be binding on the  parties,  except that any party may appeal
the arbitrators'  decision by filing an action to reconsider the decision of the
arbitrators  in a court having  jurisdiction  hereunder.  In any such action the
arbitrators'  findings of fact shall be  conclusive  and binding on both parties
and the sole questions to be determined by the court shall be (i) whether or not
the arbitrators'  decision was contrary to Maryland law and judicial  precedent,
and (ii) if the court determines that the arbitrators'  decision was contrary to
Maryland  law and  judicial  precedent,  then how the dispute  shall be resolved
based on the  arbitrators'  findings  of facts  and  Maryland  law and  judicial
precedent.  The decision of the court as to the  resolution of the dispute under
Maryland law and judicial  precedent shall supercede the arbitrators'  decision.
Judgment upon the award rendered by the  arbitrators,  as modified by the court,
if  applicable,  may be entered in any court having  jurisdiction  in accordance
herewith.

         11.1 SELECTION OF ARBITRATORS.  One arbitrator shall be selected by the
Company and one by the  Consultant,  and the  arbitrators  shall mutually select
another  arbitrator  to serve with them so that there  shall be an odd number of
arbitrators.  Alternatively, the parties may agree to accept a single arbitrator
to be mutually agreed upon by the parties.  Each person serving as an arbitrator
hereunder  shall be a  professional  with  excellent  academic and  professional
credentials  who has had  experience  as an  arbitrator  and at least  ten years
experience  in the field of  resolving  commercial  disputes  in the  Washington
Metropolitan area.

         11.2 DISCOVERY. Each party shall, upon the written request of the other
party,  provide the other with copies of documents relevant to the issues raised
thereby.  Other  discovery may be ordered by the  arbitrators  to the extent the
arbitrators deem additional  discovery  appropriate,  and any dispute  regarding
discovery,  including disputes as to the need therefor or the relevance or scope
thereof,  shall be determined by the arbitrators,  which  determination shall be
conclusive.

         11.3  EXPENSES.  Each party shall pay its own expenses  incurred in any
arbitration proceeding,  except as may be otherwise provided by the rules of the
American Arbitration Association.

         11.4 CONFIDENTIALITY OF PROCEEDINGS. The arbitrators, expert witnesses,
stenographic  reporters  and any other  third  parties  shall  sign  appropriate
nondisclosure  agreements  in the event  that any  confidential  or  proprietary
information is or may be disclosed in the arbitration proceedings.

<PAGE>

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

                                    CDEX INC.
                                    By:     /s/ Malcolm H. Philips, Jr.
                                            ------------------------------------
                                             Malcolm H. Philips, Jr.
                                             Chief Executive Officer

                                    LOCH ILXRRIS, INC.

                                    By:     /s/ Rodney A. Boone
                                            ------------------------------------
                                             Rodney A. Boone
                                             Chief Executive Officer

                                    CHEM TECH, INC.

                                    By:     /s/ Rodney A. Boone
                                            ------------------------------------
                                             Rodney A. Boone
                                             Chief Executive Officer

<PAGE>

                                    EXHIBIT A

                                PURCHASED ASSETS

         1. All  Company's  rights,  title and  interests  in and to any and all
Trade Rights. As used herein, the term "Trade Rights" shall mean and include, in
relation  to the  Business,  whether  operated  or  conducted  by  Company or by
Contractors  on  behalf  of  Company:   (i.)  all  trademark  rights,   business
identifiers,  trade dress,  service  marks,  trade names,  and brand names,  all
registrations thereof and applications therefor and all goodwill associated with
the  foregoing;  (ii) all  copyrights,  copyright  registrations  and  copyright
applications,  and all  other  rights  associated  with  the  foregoing  and the
underlying  works of authorship,  (iii) all patents and patent  applications and
all international proprietary rights associated therewith; (iv) all contracts or
agreements   granting  any  right,   title,   license  or  privilege  under  the
intellectual property rights of any third party; (v) all inventions,  mask works
and mask work registrations,  know-how,  improvements,  designs,  trade secrets,
shop  and  royalty  rights,   employee   covenants  and  agreements   respecting
intellectual property and non-competition  trade secrets,  confidential business
or commercial information, business plans, marketing strategies, customer lists,
vendor lists,  technical  information,  inventions,  discoveries (whether or not
patentable),   techniques,  data  systems,  methods,  processes,   developments,
enhancements, and modifications,  and all other proprietary rights, whether oral
or written, or in recorded form, tangible or intangible,  and all other types of
intellectual  property  which are or have been  conceived,  reduced to practice,
developed,  designed or otherwise created, modified or improved by Company or by
employees and agents of Company;  and (vi) all claims for infringement or breach
of any of the foregoing. The Trade Rights shall expressly include, but shall not
be limited  to, the  technology  described  in  Attachment  1, which is attached
hereto and incorporated  herein as a part hereof.

         2. All the rights,  title and interest in and to those assets listed in
Sections 1.1 and 1.2 of that certain  agreement  dated September 1, 1999 between
and among System Specialists, Inc., Harold Cauthen, and Wade Poteet, and Company
(the "SSI Agreement") except for any equipment already  transferred to the Buyer
or sold or  transferred  or discarded by mutual  agreement of Buyer and Company,
which assets are referred to therein as the Purchased Assets.

         3.  All the  rights,  title  and  interest  in and to the  Intellectual
Property Rights  purchased by and assigned to Company pursuant to all agreements
between  Company  and Henry  Blair  and/or HM Blair  Consulting  including  that
certain  Purchase and Assignment of Intellectual  Property Rights dated February
22, 1998 by and between Dr. Henry Blair and HM Blair Consulting and Company (the
"1998 Blair  Agreement").

         4. All the  rights,  title  and  interests  in and to the  Intellectual
Property  Rights  purchased by and assigned to Company  pursuant to that certain
Purchase and Assignment of  Intellectual  Property Rights dated June 25, 1999 by
and between Dr. Henry Blair and HM Blair Consulting and Company (the "1999 Blair
Agreement").

<PAGE>

                  5.  All  the  rights,  title  and  interests  in  and  to  the
Intellectual  Property Rights  purchased by and assigned to Company  pursuant to
that certain Agreement dated June 1, 2001 by and among Loch Harris and Operating
Team, as defined in that Agreement.

<PAGE>

                                    EXHIBIT B

          STOCK RELATING TO UNDERLYING OBLIGATIONS OF COMPANY REGADING
                                  THETECHNOLOGY

This Exhibit B sets forth the listing of the recipients of the Obligation Shares
of Buyer to be provided at the  direction  of the Company to fulfill  underlying
obligations of the Company with respect to establishing  complete  ownership and
clear title to the Business and Purchased Assets,  referenced herein.  Buyer did
not conduct an  independent  investigation  of the  underlying  obligations  and
claims.  However,  Company provided information that was sufficient to establish
the desirability of satisfying the claims.

         1. Frank  Jakovac,  or his  designee  -- 325,000  shares of  restricted
common stock:

         2. Mark E.  Baker,  or his  designee - 2,500,000  shares of  restricted
common  stock:

         3. Rodney A. Boone,  or his designee - 1,600,000  shares of  restricted
common stock.

         4. Coldwater Capital - 3,900,000 shares of restricted common stock.

<PAGE>

                                    EXHIBIT C

SCHEDULE OF DISCLOSED  PENDING  INVESTIGATIONS  AND LITIGATION
(THE COMPANY  DOES NOT IMPLY OR INFER THAT ANY OF THE MATTERS  LISTED BELOW HAVE
ANY MERIT.)

PENDING INVESTIGATIONS:

Company  represents  to the  best  of its  knowledge  that  there  is a  pending
investigation against Loch, certain of its Officers and Directors,  Henry Blair,
and  possibly  others by the  Securities  and Exchange  Commission,  the Federal
Bureau of  Investigation  and the  Department  of  Justice.  The nature of these
investigations  involves both  questions  related to the validity of the ELF and
VAAMP technologies that were being  demonstrated  and/or reported by Loch in the
past and the actions of Loch Harris and its Officers and Affiliates with respect
to information  provided to the public relating to the technologies and issuance
and sale of securities.

PENDING LITIGATION:

GARY MURPHY AND DAVID JONES V. LOCH HARRIS,  INC., Cause No.  GN0033151,  in the
District Court of Travis County, Texas

<PAGE>

                   AGREEMENT REGARDING ASSUMPTION OF LIABILITY

This Agreement is entered into to be effective  this 1st day of March,  2002, by
and between Loch Harris,  Inc., a Nevada  corporation  (Loch) and CDEX,  Inc., a
Nevada corporation (CDEX).

Whereas,  CDEX and Loch entered into an Asset Purchase Agreement dated August 4,
2001 (APA) In which CDEX  purchased  from Loch all rights that it had to certain
technologies (the "Technology"); and

Whereas,  Section 3.2 of the APA provides that Loch would reimburse CDEX for all
costs and  expenses  relating  to the  preparation,  filing  and  processing  of
statements  to secure  registration  of the  shares  except  that CDEX  would be
responsible for providing financial auditing of CDEX; and

Whereas,  pursuant to Section 3.2 of the APA, among other things,  CDEX provided
13,400,000 shares of "Loch's Shares" to Loch; and

Whereas,  pursuant  to another  earlier  agreement,  Loch has an  obligation  it
assumed  to pay  $59,930  to MPR  Associates,  a firm  which  performed  certain
software work; and

Whereas,  pursuant  to another  earlier  agreement,  Loch has an  obligation  it
assumed to use its best efforts to resolve a purported $62,585 bill from the law
firm of Foley and Lardner; and

Whereas,  not required by the APA, pursuant to a verbal agreement in relation to
the Asset  Purchase,  Loch had an obligation to provide funds to CDEX. Loch paid
$88,900 of that obligation leaving an outstanding balance of $16,404; and

Whereas, Loch and CDEX desire that such obligations be resolved

NOW, THEREFORE for good and valuable  consideration  hereby acknowledged and the
mutual covenants stated herein,  the parties agree as follows:

    (1)  CDEX assumes the liability of $59,930 to MPR  Associates  that Loch had
         assumed and WILL hold Loch harmless  from any claim by MPR  Associates,
         its successors,  assigns,  officers,  directors,  consultants,  agents,
         employees and partners regarding such liability. CDEX is unaware of any
         other liability that Loch has with regard to MPR.

    (2)  CDEX assumes any liability  Loch had in  connection  with the Foley and
         Lardner bill and will hold Loch harmless from any claims from Foley and
         Lardner, its successors,  assigns,  officers,  directors,  consultants,
         agents,  employees  and  partners  regarding  such  liability.  CDEX is
         unaware of any other  liability  that Loch has with regard to Foley and
         Lardner.

    (3)  CDEX agrees that Loch is not obligated to advance an additional $16,400
         in  funds,  or,  except  as  provided  in this  Agreement  and the APA,
         advance,  reimburse or otherwise  provide any other  additional  funds,
         assets,  goods or  services  to or on behalf of CDEX,  its  successors,
         assigns,  officers,  or directors  pursuant to any  agreement,  oral or
         written, and will hold Loch harmless from any such claims.

<PAGE>

    (4)  Loch agrees that CDE7, its officers,  directors,  consultants,  agents,
         employees  and  partners  have  no  obligation  to  pay  or  repay  any
         additional  funds,  assets,  goods,  or services other than provided in
         this  Agreement  to or on  behalf  of Loch,  its  successors,  assigns,
         officers,  directors,  consultants,  agents,  employees,  and  partners
         pursuant to any agreement, oral or written, and will hold CDEX harmless
         from any such claims.

    (5)  CDEX releases Loch from any obligation to fund CDEX's efforts to obtain
         the registration of CDEX stock as contemplated by the provisions of the
         APA.  CDEX has  represented  to Loch that it estimates  this could cost
         anywhere  from  $150,000 to 5300,000.  Subject to the  foregoing,  this
         release does not relieve Loch of any obligation or liability  regarding
         distribution of CDEX shares that it owns to its shareholders.

    (6)  Loch agrees that it will continue to use  reasonable  efforts to assist
         CDEX in connection  with CDEX's effort to obtain  registration  of CDEX
         stock. CDEX agrees to use reasonable  efforts to cooperate with Loch in
         the  distribution  of  Loch's  CDEX  stack  to its  shareholders.  CDEX
         acknowledges  that Loch has provided  accounting and other  information
         relating to the Technology and agrees than Loch will not be required to
         provide funds for or produce an audit of such  numbers.  Subject to the
         foregoing, however, Loch agrees that it will cooperate in continuing to
         provide information  reasonably  necessary for the registration process
         and will  cooperate in responding to reasonable  inquiries from CDEX in
         relation to the  registration of the CDEX stock.

    (7)  In consideration for CDEX's obligations  assumed herein and the release
         of Loch from obligations as expressed  herein,  Loch agrees to transfer
         back to CDEX 1,000,000  shares of CDEX stock  currently  owned by Loch.

    (8)  Loch and CDEX both agree that the  provisions  contained  herein do not
         relieve  either  Loch  or  CDEX  from  any  other  written  obligations
         contained  in the  APA  including  those  related  to  representations,
         warranties,   indemnification,   nondisclosure   of   information   and
         non-competition,   it  being  expressly   understood  and  agreed  that
         provisions of the APA not addressed  herein remain  unchanged.

    (9)  Any term used herein, unless defined differently herein, shall have the
         meaning as defined in the APA.

    (10) Loch warrants to CDEX that the Loot Board of Directors by majority vote
         has approved the terms of this Agreement.  CDEX warranties to Loch that
         the CDEX Board of Directors has approved the terms of this Agreement.

This Agreement may be executed in two or more counterparts,  each of which shall
be an original and all of which shall be deemed to  constitute  one and the same
instrument.

                                                                        RAB
                                                                   -------------
                                                                       3/1/02

                                                                        MHP
                                                                   -------------
                                                                       3/1/02EXHIBIT 10.1

                      STANDBY EQUITY DISTRIBUTION AGREEMENT

         THIS  AGREEMENT  dated  as of the 3 day of May 2004  (the  "Agreement")
between  CORNELL  CAPITAL  PARTNERS,  LP, a Delaware  limited  partnership  (the
"Investor"),  and VIDEOLOCITY  INTERNATIONAL  INC., a corporation  organized and
existing under the laws of the State of Nevada (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 $0.001 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 more than one (1)  Trading  Day after  expiration  of the
Pricing Period for the applicable Advance.

         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 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.

                                       1
<PAGE>

         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 $0.001 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.

                                       2
<PAGE>

         Section 1.16. "Market Price" shall mean the lowest closing Bid Price of
the Common Stock during the Pricing Period.

         Section  1.17.  "Maximum  Advance  Amount" shall be Three Hundred Fifty
Thousand  Dollars   ($350,000)  per  Advance  Notice  and  One  Million  Dollars
($1,000,000) in any thirty (30) day period.

         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 ninety  eight  percent
(98%) 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.

                                       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.

                                   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.

                  (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.

                                       4
<PAGE>

                  (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 the first
(1st)  Trading Day after  expiration  of the Pricing  Period for the  applicable
Advance  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, the
Investor's  counsel,  and  Kirkpatrick & Lockhart LLP 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.

         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

                                       5
<PAGE>

(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 Madsen & Associates, Inc. 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.
                                       6
<PAGE>

         Section 2.6.      Lock Up Period.

                           (i) 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.

                           (ii) 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 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

                                       7
<PAGE>

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 October 31, 2003
and Form 10-QSB for the period  ended  January 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
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.

                                       8
<PAGE>
         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 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.
                                       9
<PAGE>

         Section  4.3.  Capitalization.  As of April 30,  2004,  the  authorized
capital stock of the Company consists of 50,000,000  shares of Common Stock, par
value  $0.001  per  share  and  1,000,000  shares  of  Preferred  Stock of which
15,012,952  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 a  Registration  Statement  on Form SB-2
relating  to a prior  transaction  with  the  Investor  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 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

                                       10
<PAGE>

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  January 1,
2003, 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.

         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

                                       11
<PAGE>

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.

         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.

                                       12
<PAGE>

         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,
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.

                                       13
<PAGE>

         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.

         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.

                                       14
<PAGE>

         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  Kirkpatrick  & Lockhart  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
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.

                                       15
<PAGE>

                  (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 National  Association  of
Securities Dealers Inc.'s Over the Counter Bulletin Board.

         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  (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.

                                       16
<PAGE>

         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.

         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.

                                       17
<PAGE>

         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:

                  (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

                                       18
<PAGE>

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 any  individual
Advance requested by the Company and the amount of the Advances requested by the
Company in any  thirty  (30) day period  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 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.

                                       19
<PAGE>
                  (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 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.

                                       20
<PAGE>

                                   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 Nevada 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
receive the same.  The addresses and facsimile  numbers for such  communications
shall be:

If to the Company, to:              Videolocity International Inc.
                                    1762A Prospector Avenue
                                    Park City, UT  84060
                                    Attention:        Robert E. Holt
                                                      President
                                    Telephone:        435-615-8338
                                    Facsimile:        435-615-9779

                                       21
<PAGE>

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

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.

                                  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.  Other than  agreements
relating to a prior  transaction  between the  Company  and the  Investor,  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.

                                       22
<PAGE>

         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 upon the  execution  of this  Agreement  the
Company will pay Fifteen Thousand  Dollars  ($15,000) to Butler Gonzalez LLP for
legal, administrative,  and escrow fees and Twelve Thousand Five Hundred Dollars
($12,500) to  Kirkpatrick & Lockhart LLP for legal fees and  expenses.  Prior to
the filing of the  Registration  Statement,  the Company shall pay an additional
amount of Twelve Thousand Five Hundred Dollars  ($12,500).  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 and any  outstanding
fees of  Kirkpatrick  & Lockhart  LLP  directly out the proceeds of any Advances
hereunder 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.

                           (ii) Upon the execution of this Agreement the Company
shall pay to the Investor a Commitment  Fee in an amount equal to Three  Hundred
Ninety  Thousand  Dollars  ($390,000),  which shall be paid by the issuance of a
convertible  debenture  in such amount and in  accordance  with the terms of the
debenture dated the date hereof (the  "Compensation  Debenture").  As more fully
set forth in its terms,  the Debenture shall have a three (3) year term,  accrue
interest at five percent (5%) into shares of the Company's common stock.

                           (iii) Fully Earned. The Compensation  Debenture shall
be deemed fully earned as of the date hereof.

                           (iv) Registration Rights. The shares of the Company's
Common Stock issuable upon  conversion of the  Compensation  Debenture will have
"piggy-back" registration rights.

         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.

                                       23
<PAGE>

         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]

                                       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:
                             VIDEOLOCITY INTERNATIONAL INC.

                             By:      /s/ Robert E. Holt
                                      -------------------------------------
                             Name:    Robert E. Holt
                             Title:   President and Chief Executive Officer

                             INVESTOR:
                             CORNELL CAPITAL PARTNERS, LP

                             By:      Yorkville Advisors, LLC
                             Its:     General Partner

                             By:      /s/ Mark Angelo
                                      -------------------------------------
                             Name:    Mark Angelo
                             Title:   Portfolio Manager

                                       25
<PAGE>

                                    EXHIBIT A
                                    ---------

                      ADVANCE NOTICE/COMPLIANCE CERTIFICATE
                      -------------------------------------

                         VIDEOLOCITY INTERNATIONAL INC.
                         ------------------------------

         The undersigned, _______________________ hereby certifies, with respect
to the sale of shares of Common Stock of Videolocity  International  Inc.,  (the
"Company"),  issuable in  connection  with this  Advance  Notice and  Compliance
Certificate dated ___________________ (the "Notice"),  delivered pursuant to the
Standby Equity Distribution Agreement (the "Agreement"), as follows:

         1. The undersigned is the duly elected President of the Company.

         2. There are no 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.

         3. The Company has performed in all material respects all covenants and
agreements  to be  performed  by the  Company  on or prior to the  Advance  Date
related  to the  Notice  and has  complied  in all  material  respects  with all
obligations and conditions contained in the Agreement.

         4. The Advance requested is _____________________.

         The undersigned has executed this Certificate this ____ day of _______.

                                   VIDEOLOCITY INTERNATIONAL INC.

                                   By:
                                      ------------------------------------------
                                   Name:      Robert E. Holt
                                   Title:     President

<PAGE>

                                  SCHEDULED 2.6
                                  -------------

                         VIDEOLOCITY INTERNATIONAL INC.
                         ------------------------------

         The undersigned  hereby agrees that for a period commencing on the date
hereof and  expiring  on the  termination  of the  Agreement  dated May __, 2004
between  Videolocity  International  Inc., (the "Company"),  and Cornell Capital
Partners,  LP, (the "Investor") (the "Lock-up Period"),  he, she or it will not,
directly or  indirectly,  without  the prior  written  consent of the  Investor,
issue,  offer, agree or offer to sell, sell, grant an option for the purchase or
sale of, transfer, pledge, assign, hypothecate, distribute or otherwise encumber
or dispose of except  pursuant to Rule 144 of the General Rules and  Regulations
under the  Securities  Act of 1933,  any  securities  of the Company,  including
common  stock or  options,  rights,  warrants  or other  securities  underlying,
convertible  into,  exchangeable  or exercisable  for or evidencing any right to
purchase or subscribe for any common stock (whether or not beneficially owned by
the  undersigned),  or  any  beneficial  interest  therein  (collectively,   the
"Securities").

         In  order  to  enable  the  aforesaid  covenants  to be  enforced,  the
undersigned  hereby  consents  to the  placing of legends  and/or  stop-transfer
orders with the transfer agent of the Company's  securities  with respect to any
of the  Securities  registered in the name of the  undersigned  or  beneficially
owned by the undersigned,  and the undersigned hereby confirms the undersigned's
investment in the Company.

Dated: _______________, 2004

                                Signature

                                Address:
                                        ----------------------------------------
                                City, State, Zip Code:
                                                      --------------------------

                                ------------------------------------------------
                                Print Social Security Number
                                or Taxpayer I.D. Number

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