Document:

SECURITIES PURCHASE AGREEMENT

     This  Securities  Purchase Agreement (this "Agreement") is dated as of June
__,  2006  among  UC  Hub Group, Inc., a Nevada corporation (the "Company"), and
each  purchaser  identified  on  the signature pages hereto (each, including its
successors and assigns, a "Purchaser" and collectively the "Purchasers").

     WHEREAS,  subject  to  the terms and conditions set forth in this Agreement
and  pursuant  to  Section  4(2)  of the Securities Act of 1933, as amended (the
"Securities  Act")  and  Rule 506 promulgated thereunder, the Company desires to
 ---------------
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires  to  purchase  from the Company, securities of the Company as more fully
described in this Agreement.

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

                                   ARTICLE I.
                                   DEFINITIONS

     1.1     Definitions.  In  addition  to  the terms defined elsewhere in this
             -----------
Agreement:  (a) capitalized terms that are not otherwise defined herein have the
meanings  given to such terms in the Debentures (as defined herein), and (b) the
following terms have the meanings indicated in this Section 1.1:

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

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

          "Business  Day"  means  any day except Saturday, Sunday, any day which
           -------------
     shall  be  a federal legal holiday in the United States or any day on which
     banking institutions in the State of New York are authorized or required by
     law or other governmental action to close.

          "Closing"  means  the  closing  of  the  purchase  and  sale  of  the
           -------
     Securities pursuant to Section 2.1.

          "Closing  Date"  means  the  Trading  Day  when all of the Transaction
           -------------
     Documents  have  been  executed  and  delivered  by  the applicable parties
     thereto, and all conditions

<PAGE>
     precedent to (i) the Purchasers' obligations to pay the Subscription Amount
     and  (ii)  the  Company's  obligations  to deliver the Securities have been
     satisfied or waived.

          "Closing  Price"  means  on  any particular date (a) the last reported
           --------------
     closing  bid  price  per  share of Common Stock on such date on the Trading
     Market  (as  reported by Bloomberg L.P. at 4:15 p.m. (New York City time)),
     or  (b)  if there is no such price on such date, then the closing bid price
     on  the Trading Market on the date nearest preceding such date (as reported
     by  Bloomberg L.P. at 4:15 p.m. (New York City time)), or (c) if the Common
     Stock  is not then listed or quoted on the Trading Market and if prices for
     the  Common  Stock are then reported in the "pink sheets" published by Pink
     Sheets LLC (or a similar organization or agency succeeding to its functions
     of  reporting  prices),  the  most recent bid price per share of the Common
     Stock  so  reported,  or  (d)  if  the  shares of Common Stock are not then
     publicly  traded  the  fair  market  value  of  a  share of Common Stock as
     determined  by  an  appraiser selected in good faith by the Purchasers of a
     majority in interest of the Shares then outstanding.

          "Commission" means the Securities and Exchange Commission.
           ----------

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

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

          "Company Counsel" means Glast, Phillips & Murray, P.C. with offices at
           ---------------
     815 Walker Street, Suite 1250, Houston, Texas 77002.

          "Conversion Price" shall have the meaning ascribed to such term in the
           ----------------
     Debentures.

          "Debentures"  means,  the  Original  Issue  Discount  Self-Liquidating
           ----------
     Convertible  Debentures  due,  subject  to  the terms therein, 2 years from
     their  date of issuance, issued by the Company to the Purchasers hereunder,
     in the form of Exhibit A hereto.
                   ----------

          "Disclosure Schedules" shall have the meaning ascribed to such term in
           --------------------
     Section 3.1.

          "Effective  Date"  means  the  date  that  the  initial  Registration
           ---------------
     Statement  filed  by  the  Company  pursuant  to  the  Registration  Rights
     Agreement is first declared effective by the Commission.

          "Evaluation  Date"  shall  have  the  meaning ascribed to such term in
           ----------------
     Section 3.1(r).

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<PAGE>
          "Exchange  Act" means the Securities Exchange Act of 1934, as amended,
           -------------
     and the rules and regulations promulgated thereunder.

          "Exempt  Issuance" means the issuance of (a) shares of Common Stock or
           ----------------
     options  to employees, officers or directors of the Company pursuant to any
     stock or option plan duly adopted by a majority of the non-employee members
     of  the Board of Directors of the Company or a majority of the members of a
     committee  of  non-employee  directors  established  for  such purpose, (b)
     securities upon the exercise or exchange of or conversion of any Securities
     issued hereunder and/or other securities exercisable or exchangeable for or
     convertible  into shares of Common Stock issued and outstanding on the date
     of  this  Agreement,  provided  that  such securities have not been amended
     since  the date of this Agreement to increase the number of such securities
     or  to  decrease  the  exercise,  exchange  or conversion price of any such
     securities, and (c) securities issued pursuant to acquisitions or strategic
     transactions  approved  by  a  majority  of  the  disinterested  directors,
     provided  that any such issuance shall only be to a Person which is, itself
     or through its subsidiaries, an operating company in a business synergistic
     with the business of the Company and in which the Company receives benefits
     in addition to the investment of funds, but shall not include a transaction
     in  which  the  Company  is issuing securities primarily for the purpose of
     raising  capital  or  to  an  entity whose primary business is investing in
     securities.

          "FWS"  means Feldman Weinstein & Smith LLP with offices located at 420
           ---
     Lexington Avenue, Suite 2620, New York, New York 10170-0002.

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

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

          "Legend  Removal Date" shall have the meaning ascribed to such term in
           --------------------
     Section 4.1(c).

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

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

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

          "Maximum Rate" shall have the meaning ascribed to such term in Section
           ------------
     5.17.

          "Participation  Maximum"  shall have the meaning ascribed to such term
           ----------------------
     in Section 4.13.

                                        3
<PAGE>
          "Person"  means  an  individual  or  corporation,  partnership, trust,
           ------
     incorporated  or  unincorporated  association,  joint  venture,  limited
     liability  company,  joint  stock  company,  government  (or  an  agency or
     subdivision  thereof)  or  other  entity  of  any  kind.

          "Pre-Notice"  shall  have the meaning ascribed to such term in Section
           ----------
     4.13.

          "Principal  Amount"  shall mean, as to each Purchaser, the amounts set
           -----------------
     forth  below such Purchaser's signature block on the signature pages hereto
     and next to the heading "Principal Amount," in United States dollars, which
     shall equal such Purchaser's Subscription Amount multiplied by 1.08.

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

          "Purchaser  Party"  shall  have  the  meaning ascribed to such term in
           ----------------
     Section 4.11.

          "Registration  Rights  Agreement"  means  the  Registration  Rights
           -------------------------------
     Agreement,  dated the date hereof, among the Company and the Purchasers, in
     the form of Exhibit B attached hereto.
                 ---------

          "Registration  Statement"  means  a registration statement meeting the
           -----------------------
     requirements  set  forth  in the Registration Rights Agreement and covering
     the  resale  of  the Underlying Shares by each Purchaser as provided for in
     the Registration Rights Agreement.

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

          "Required Minimum" means, as of any date, the maximum aggregate number
           ----------------
     of shares of Common Stock then issued or potentially issuable in the future
     pursuant  to  the  Transaction  Documents,  including any Underlying Shares
     issuable  upon  exercise  or  conversion  in  full  of  all  Warrants  and
     Debentures,  ignoring  any conversion or exercise limits set forth therein,
     and  assuming  that  the  Conversion Price is at all times on and after the
     date  of  determination 75% of the then Conversion Price on the Trading Day
     immediately prior to the date of determination.

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

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

          "Securities"  means  the  Debentures, the Warrants, the Warrant Shares
           ----------
     and the Underlying Shares.

                                        4
<PAGE>
          "Securities Act" means the Securities Act of 1933, as amended, and the
           --------------
     rules and regulations promulgated hereunder.

          "Short  Sales"  shall include all "short sales" as defined in Rule 200
           ------------
     of  Regulation  SHO  under  the  Exchange  Act  (but shall not be deemed to
     include  the  location  and/or  reservation  of borrowable shares of Common
     Stock).

          "Subscription  Amount"  means,  as  to  each  Purchaser, the aggregate
           --------------------
     amount  to  be  paid  for  Debentures  and  Warrants purchased hereunder as
     specified  below  such  Purchaser's  name  on  the  signature  page of this
     Agreement  and  next to the heading "Subscription Amount", in United States
     dollars  and  in  immediately  available  funds.

          "Subsequent Financing" shall have the meaning ascribed to such term in
           --------------------
     Section 4.13.

          "Subsequent  Financing Notice" shall have the meaning ascribed to such
           ----------------------------
     term in Section 4.13.

          "Subsidiary"  means  any  subsidiary  of  the  Company as set forth on
           ----------
     Schedule 3.1(a).
     ---------------

          "Trading  Day"  means  a  day on which the Common Stock is traded on a
           ------------
     Trading Market.

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

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

          "Transfer  Agent"  means  Corporate  Stock  Transfer,  with  a mailing
           ---------------
     address  of 3200 Cherry Creek Drive, Denver, Colorado 80209 and a facsimile
     number (303) 282-5800, and any successor transfer agent of the Company.

          "Underlying  Shares"  means  the  shares  of  Common  Stock issued and
           ------------------
     issuable  upon conversion or redemption of the Debentures and upon exercise
     of the Warrants.

          "VWAP"  means,  for any date, the price determined by the first of the
           ----
     following  clauses  that applies: (a) if the Common Stock is then listed or
     quoted  on a Trading Market, the daily volume weighted average price of the
     Common Stock for such

                                        5
<PAGE>
     date  (or  the  nearest  preceding date) on the Trading Market on which the
     Common  Stock is then listed or quoted as reported by Bloomberg L.P. (based
     on  a  Trading  Day from 9:30 a.m. New York City time to 4:02 p.m. New York
     City  time);  (b)  if  the  OTC Bulletin Board is not a Trading Market, the
     volume  weighted  average  price  of the Common Stock for such date (or the
     nearest  preceding date) on the OTC Bulletin Board; (c) if the Common Stock
     is  not  then  listed or quoted on the OTC Bulletin Board and if prices for
     the  Common  Stock are then reported in the "Pink Sheets" published by Pink
     Sheets,  LLC  (or  a  similar  organization  or  agency  succeeding  to its
     functions  of reporting prices), the most recent bid price per share of the
     Common  Stock so reported; or (d) in all other cases, the fair market value
     of  a  share  of  Common  Stock  as  determined by an independent appraiser
     selected  in  good  faith  by  the  Holder and reasonably acceptable to the
     Company.

          "Warrants"  means  collectively the Common Stock purchase warrants, in
           --------
     the  form  of  Exhibit  C  delivered  to  the  Purchasers at the Closing in
                    ----------
     accordance  with Section 2.2(a) hereof, which Warrants shall be exercisable
     immediately and have a term of exercise equal to 2 years.

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

                                   ARTICLE II.
                                PURCHASE AND SALE

     2.1     Closing.  On  the  Closing  Date, upon the terms and subject to the
             -------
conditions  set  forth  herein,  substantially concurrent with the execution and
delivery  of  this  Agreement by the parties hereto, the Company agrees to sell,
and  each  Purchaser  agrees  to  purchase  in  the aggregate, severally and not
jointly, up to $350,000 in Subscription Amount of the Debentures. Each Purchaser
shall  deliver to the Company via wire transfer or a certified check immediately
available funds equal to their Subscription Amount and the Company shall deliver
to each Purchaser their respective Debenture and Warrants as determined pursuant
to  Section  2.2(a) and the other items set forth in Section 2.2 issuable at the
Closing.  Upon satisfaction of the conditions set forth in Sections 2.2 and 2.3,
the  Closing  shall  occur  at the offices of FWS, or such other location as the
parties shall mutually agree.

     2.2     Deliveries.
             -----------

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

               (i)      this Agreement duly executed by the Company;

               (ii)     a  legal  opinion  of  Company  Counsel,  in the form of
          Exhibit D attached hereto;
          ---------

               (iii)    a  Debenture  with  a  Principal  Amount  equal  to such
          Purchaser's  Subscription Amount multiplied by 1.08, registered in the
          name of such Purchaser;

               (iv)     a  Warrant  registered  in the name of such Purchaser to
          purchase  up  to  a  number of shares of Common Stock equal to 100% of
          such Purchaser's

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<PAGE>
          Subscription  Amount divided by $0.05, with an exercise price equal to
          $0.075  subject to adjustment therein, and a term of exercise equal to
          2 years;

               (v)     a  Warrant  registered  in  the name of such Purchaser to
          purchase  up  to  a  number of shares of Common Stock equal to 100% of
          such  Purchaser's  Subscription  Amount  divided  by  $0.05,  with  an
          exercise  price  equal  to  $0.05 subject to adjustment therein, and a
          term  of  exercise commencing on the Effective Date and terminating on
          180 calendar days following the Effective Date; and

               (vi)     the  Registration  Rights Agreement duly executed by the
          Company.

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

               (i)     this  Agreement duly executed by such Purchaser;

               (ii)    such Purchaser's  Subscription Amount by wire transfer to
          the account as specified in writing by the Company; and

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

     2.3     Closing  Conditions.
             -------------------

          (a)     The  obligations  of  the Company hereunder in connection with
     the Closing are subject to the following conditions being met:

               (i)     the  accuracy  in  all material respects when made and on
          the  Closing  Date  of  the  representations  and  warranties  of  the
          Purchasers contained herein;

               (ii)     all  obligations,  covenants  and  agreements  of  the
          Purchasers  required  to  be performed at or prior to the Closing Date
          shall have been performed; and

               (iii)     the  delivery  by the Purchasers of the items set forth
          in Section 2.2(b) of this Agreement.

          (b)     The  respective  obligations  of  the  Purchasers hereunder in
     connection  with  the Closing are subject to the following conditions being
     met:

               (i)     the accuracy in all material respects on the Closing Date
          of the representations and warranties of the Company contained herein;

               (ii)     all obligations, covenants and agreements of the Company
          required  to  be  performed at or prior to the Closing Date shall have
          been performed;

               (iii)     the  delivery  by the Company of the items set forth in
          Section

                                        7
<PAGE>
          2.2(a) of this Agreement;

               (iv)     there  shall  have  been no Material Adverse Effect with
          respect to the Company since the date hereof; and

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

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

     3.1     Representations and Warranties of the Company.  Except as set forth
             ---------------------------------------------
under  the  corresponding  section  of the disclosure schedules delivered to the
Purchasers  concurrently  herewith (the "Disclosure Schedules") which Disclosure
                                         --------------------
Schedules  shall  be  deemed  a part hereof and to qualify any representation or
warranty  otherwise  made  herein  to the extent of such disclosure, the Company
hereby  makes  the  representations  and  warranties  set  forth  below  to each
Purchaser.

          (a)     Subsidiaries.  All  of the direct and indirect subsidiaries of
                  ------------
     the Company are set forth on Schedule 3.1(a). The Company owns, directly or
                                  ---------------
     indirectly,  all  of  the  capital  stock or other equity interests of each
     Subsidiary  free and clear of any Liens, and all the issued and outstanding
     shares of capital stock of each Subsidiary are validly issued and are fully
     paid, non-assessable and free of preemptive and similar rights to subscribe
     for  or  purchase  securities. If the Company has no subsidiaries, then all
     other references in the Transaction Documents to the Subsidiaries or any of
     them will be disregarded.

          (b)     Organization  and  Qualification.  The Company and each of the
                  --------------------------------
     Subsidiaries is an entity duly incorporated or otherwise organized, validly
     existing  and  in  good  standing under the laws of the jurisdiction of its
     incorporation or organization (as applicable), with the requisite power and
     authority  to  own  and  use  its properties and assets and to carry on its
     business  as currently conducted. Neither the Company nor any Subsidiary is
     in  violation  or  default  of  any  of  the  provisions  of its respective
     certificate or articles of incorporation, bylaws or other organizational or
     charter  documents.  Each  of  the  Company  and  the  Subsidiaries is duly
     qualified to conduct business and is in good

                                        8
<PAGE>
     standing  as  a foreign corporation or other entity in each jurisdiction in
     which  the  nature  of the business conducted or property owned by it makes
     such  qualification  necessary, except where the failure to be so qualified
     or  in  good  standing, as the case may be, could not have or reasonably be
     expected  to  result  in  (i)  a  material  adverse effect on the legality,
     validity  or  enforceability  of  any Transaction Document, (ii) a material
     adverse effect on the results of operations, assets, business, prospects or
     condition  (financial  or  otherwise)  of the Company and the Subsidiaries,
     taken  as  a  whole,  or  (iii)  a material adverse effect on the Company's
     ability  to  perform  in  any  material  respect  on  a  timely  basis  its
     obligations  under  any  Transaction Document (any of (i), (ii) or (iii), a
     "Material  Adverse  Effect")  and  no Proceeding has been instituted in any
      -------------------------
     such  jurisdiction  revoking,  limiting or curtailing or seeking to revoke,
     limit or curtail such power and authority or qualification.

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

          (d)     No  Conflicts.  The execution, delivery and performance of the
                  -------------
     Transaction  Documents  by  the  Company  and  the  consummation  by  the
     Company  of  the  other transactions contemplated hereby and thereby do not
     and  will  not: (i) conflict with or violate any provision of the Company's
     or  any  Subsidiary's  certificate  or articles of incorporation, bylaws or
     other  organizational  or  charter  documents,  or  (ii)  conflict with, or
     constitute a default (or an event that with notice or lapse of time or both
     would  become a default) under, result in the creation of any Lien upon any
     of  the  properties  or assets of the Company or any Subsidiary, or give to
     others  any  rights of termination, amendment, acceleration or cancellation
     (with  or  without notice, lapse of time or both) of, any agreement, credit
     facility, debt or other instrument (evidencing a Company or Subsidiary debt
     or otherwise) or other understanding to which the Company or any Subsidiary
     is  a  party  or  by  which  any  property  or  asset of the Company or any
     Subsidiary  is  bound  or  affected,  or  (iii)  subject  to  the  Required
     Approvals,  conflict  with  or  result  in  a  violation  of any law, rule,
     regulation, order, judgment, injunction, decree or other restriction of any
     court  or  governmental  authority  to which the Company or a Subsidiary is
     subject

                                        9
<PAGE>
     (including  federal and state securities laws and regulations), or by which
     any  property or asset of the Company or a Subsidiary is bound or affected;
     except  in  the  case  of each of clauses (ii) and (iii), such as could not
     have or reasonably be expected to result in a Material Adverse Effect.

          (e)     Filings,  Consents and Approvals.  The Company is not required
                  --------------------------------
     to  obtain  any consent, waiver, authorization or order of, give any notice
     to,  or  make  any filing or registration with, any court or other federal,
     state,  local or other governmental authority or other Person in connection
     with  the  execution,  delivery  and  performance  by  the  Company  of the
     Transaction  Documents, other than (i) filings required pursuant to Section
     4.6,  (ii)  the  filing  with the Commission of the Registration Statement,
     (iii)  the  notice  and/or application(s) to each applicable Trading Market
     for  the  issuance  and  sale  of  the  Securities  and  the listing of the
     Underlying  Shares  for  trading  thereon  in  the time and manner required
     thereby  and (iv) the filing of Form D with the Commission and such filings
     as  are  required  to  be  made  under  applicable  state  securities  laws
     (collectively, the "Required Approvals").
                         ------------------

          (f)     Issuance  of  the  Securities.  The  Securities  are  duly
                  -----------------------------
     authorized  and, when issued and paid for in accordance with the applicable
     Transaction  Documents,  will  be  duly  and validly issued, fully paid and
     nonassessable,  free  and  clear  of all Liens imposed by the Company other
     than  restrictions  on  transfer provided for in the Transaction Documents.
     The  Underlying  Shares,  when  issued  in accordance with the terms of the
     Transaction  Documents,  will  be  validly  issued,  fully  paid  and
     nonassessable,  free  and  clear  of  all Liens imposed by the Company. The
     Company  has  reserved  from  its duly authorized capital stock a number of
     shares of Common Stock for issuance of the Underlying Shares at least equal
     to the Required Minimum on the date hereof.

          (g)     Capitalization.  The  capitalization  of the Company is as set
                  --------------
     forth  on  Schedule  3.1(g).  The  Company has not issued any capital stock
                ----------------
     since its most recently filed periodic report under the Exchange Act, other
     than pursuant to the exercise of employee stock options under the Company's
     stock  option  plans,  the  issuance of shares of Common Stock to employees
     pursuant  to the Company's employee stock purchase plan and pursuant to the
     conversion  or  exercise  of Common Stock Equivalents outstanding as of the
     date  of the most recently filed periodic report under the Exchange Act. No
     Person  has  any  right  of  first  refusal,  preemptive  right,  right  of
     participation,  or  any  similar  right  to participate in the transactions
     contemplated  by  the  Transaction  Documents.  Except  as  a result of the
     purchase  and  sale  of  the  Securities, there are no outstanding options,
     warrants,  script  rights  to  subscribe  to,  calls  or commitments of any
     character  whatsoever  relating  to,  or  securities, rights or obligations
     convertible  into  or exercisable or exchangeable for, or giving any Person
     any  right  to  subscribe  for  or  acquire, any shares of Common Stock, or
     contracts, commitments, understandings or arrangements by which the Company
     or  any  Subsidiary  is  or  may become bound to issue additional shares of
     Common  Stock  or  Common  Stock  Equivalents. The issuance and sale of the
     Securities will not obligate the Company to issue shares of Common Stock or
     other  securities  to  any  Person (other than the Purchasers) and will not
     result  in  a  right  of  any  holder  of  Company securities to adjust the
     exercise, conversion, exchange or reset

                                       10
<PAGE>
     price  under  any  of  such  securities.  All  of the outstanding shares of
     capital  stock  of  the  Company  are  validly  issued,  fully  paid  and
     nonassessable,  have  been  issued in compliance with all federal and state
     securities  laws,  and  none  of  such  outstanding  shares  was  issued in
     violation  of  any  preemptive rights or similar rights to subscribe for or
     purchase  securities.  No  further  approval  or  authorization  of  any
     stockholder,  the  Board  of Directors of the Company or others is required
     for  the  issuance  and  sale  of the Securities. There are no stockholders
     agreements,  voting  agreements or other similar agreements with respect to
     the  Company's  capital  stock  to  which the Company is a party or, to the
     knowledge  of  the  Company,  between  or  among  any  of  the  Company's
     stockholders.

          (h)     SEC  Reports;  Financial  Statements.  Except  as set forth on
                  ------------------------------------
     Schedule  3.1(h),  the  Company  has  filed  all reports, schedules, forms,
     ----------------
     statements  and  other  documents  required  to  be  filed  by it under the
     Securities Act and the Exchange Act, including pursuant to Section 13(a) or
     15(d) thereof, for the two years preceding the date hereof (or such shorter
     period  as  the  Company  was  required  by  law or regulation to file such
     material)  (the  foregoing  materials,  including  the exhibits thereto and
     documents incorporated by reference therein, being collectively referred to
     herein  as  the  "SEC  Reports")  on a timely basis or has received a valid
                       ------------
     extension  of  such time of filing and has filed any such SEC Reports prior
     to  the expiration of any such extension. As of their respective dates, the
     SEC  Reports complied in all material respects with the requirements of the
     Securities  Act  and  the Exchange Act and the rules and regulations of the
     Commission  promulgated  thereunder,  as  applicable,  and  none of the SEC
     Reports,  when  filed, contained any untrue statement of a material fact or
     omitted to state a material fact required to be stated therein or necessary
     in  order to make the statements therein, in the light of the circumstances
     under which they were made, not misleading. The financial statements of the
     Company  included  in  the SEC Reports comply in all material respects with
     applicable  accounting  requirements  and  the rules and regulations of the
     Commission  with  respect  thereto as in effect at the time of filing. Such
     financial  statements  have  been prepared in accordance with United States
     generally  accepted  accounting  principles  applied  on a consistent basis
     during  the periods involved ("GAAP"), except as may be otherwise specified
                                    ----
     in such financial statements or the notes thereto and except that unaudited
     financial  statements  may  not contain all footnotes required by GAAP, and
     fairly  present  in  all  material  respects  the financial position of the
     Company  and  its consolidated subsidiaries as of and for the dates thereof
     and  the  results  of operations and cash flows for the periods then ended,
     subject,  in  the  case  of  unaudited  statements,  to normal, immaterial,
     year-end audit adjustments.

          (i)     Material  Changes.  Since  the  date  of  the  latest  audited
                  -----------------
     financial  statements  included  within  the  SEC  Reports,  except  as
     specifically  disclosed  in  a subsequent SEC Report, (i) there has been no
     event,  occurrence  or development that has had or that could reasonably be
     expected  to  result in a Material Adverse Effect, (ii) the Company has not
     incurred  any  liabilities  (contingent  or otherwise) other than (A) trade
     payables  and  accrued expenses incurred in the ordinary course of business
     consistent  with  past  practice  and  (B)  liabilities  not required to be
     reflected  in  the  Company's  financial  statements  pursuant  to  GAAP or
     disclosed in filings made with the Commission, (iii) the Company

                                       11
<PAGE>
     has not altered its method of accounting, (iv) the Company has not declared
     or  made  any  dividend  or  distribution  of cash or other property to its
     stockholders  or  purchased, redeemed or made any agreements to purchase or
     redeem  any  shares of its capital stock and (v) the Company has not issued
     any  equity  securities  to  any  officer,  director  or  Affiliate, except
     pursuant  to existing Company stock option plans. The Company does not have
     pending  before  the  Commission  any request for confidential treatment of
     information. Except for the issuance of the Securities contemplated by this
     Agreement  or  as  set  forth  on  Schedule  3.1(i), no event, liability or
                                        ----------------
     development  has  occurred  or  exists  with  respect to the Company or its
     Subsidiaries  or  their  respective  business,  properties,  operations  or
     financial  condition, that would be required to be disclosed by the Company
     under  applicable  securities  laws at the time this representation is made
     that  has not been publicly disclosed at least one Trading Day prior to the
     date that this representation is made.

          (j)     Litigation.  Except  as set forth on Schedule 3.1(j), there is
                  ----------                           ---------------
     no  action, suit, inquiry, notice of violation, proceeding or investigation
     pending  or,  to  the  knowledge  of  the  Company,  threatened  against or
     affecting the Company, any Subsidiary or any of their respective properties
     before  or  by any court, arbitrator, governmental or administrative agency
     or  regulatory  authority  (federal,  state,  county,  local  or  foreign)
     (collectively,  an  "Action") which (i) adversely affects or challenges the
                          ------
     legality, validity or enforceability of any of the Transaction Documents or
     the  Securities  or (ii) could, if there were an unfavorable decision, have
     or  reasonably  be expected to result in a Material Adverse Effect. Neither
     the  Company nor any Subsidiary, nor any director or officer thereof, is or
     has  been  the  subject  of any Action involving a claim of violation of or
     liability  under  federal  or state securities laws or a claim of breach of
     fiduciary  duty.  There  has not been, and to the knowledge of the Company,
     there  is  not pending or contemplated, any investigation by the Commission
     involving  the  Company or any current or former director or officer of the
     Company.  The  Commission  has  not  issued  any  stop order or other order
     suspending  the  effectiveness  of  any registration statement filed by the
     Company or any Subsidiary under the Exchange Act or the Securities Act.

          (k)     Labor  Relations.  No material labor dispute exists or, to the
                  ----------------
     knowledge  of the Company, is imminent with respect to any of the employees
     of  the  Company which could reasonably be expected to result in a Material
     Adverse  Effect.  None of the Company's or its Subsidiaries' employees is a
     member  of  a  union  that relates to such employee's relationship with the
     Company, and neither the Company or any of its Subsidiaries is a party to a
     collective  bargaining  agreement,  and  the  Company  and its Subsidiaries
     believe  that  their  relationships  with  their  employees  are  good.  No
     executive  officer, to the knowledge of the Company, is, or is now expected
     to  be,  in  violation  of  any  material  term of any employment contract,
     confidentiality,  disclosure  or  proprietary  information  agreement  or
     non-competition  agreement,  or  any  other  contract  or  agreement or any
     restrictive  covenant,  and the continued employment of each such executive
     officer  does  not  subject  the  Company or any of its Subsidiaries to any
     liability with respect to any of the foregoing matters. The Company and its
     Subsidiaries  are  in  compliance  with  all U.S. federal, state, local and
     foreign  laws  and  regulations  relating  to  employment  and  employment
     practices, terms and conditions of employment and wages and hours, except

                                       12
<PAGE>
     where  the  failure  to  be in compliance could not, individually or in the
     aggregate, reasonably be expected to have a Material Adverse Effect.

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

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

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

          (o)     Patents  and  Trademarks.  The  Company  and  the Subsidiaries
                  ------------------------
     have,  or have rights to use, all patents, patent applications, trademarks,
     trademark  applications,  service  marks,  trade  names,  trade  secrets,
     inventions, copyrights, licenses and other intellectual property rights and
     similar  rights  necessary  or  material  for  use in connection with their
     respective businesses as described in the SEC Reports and which the failure
     to  so  have  could  have  a  Material  Adverse  Effect  (collectively, the
     "Intellectual Property Rights"). Neither the Company nor any Subsidiary has
      ----------------------------
     received  a  notice  (written  or otherwise) that the Intellectual Property
     Rights used by the Company or any Subsidiary violates or infringes upon the
     rights  of  any  Person.  To  the  knowledge  of  the  Company,  all  such
     Intellectual  Property  Rights  are  enforceable  and  there is no existing
     infringement by

                                       13
<PAGE>
     another  Person of any of the Intellectual Property Rights. The Company and
     its  Subsidiaries  have  taken  reasonable security measures to protect the
     secrecy, confidentiality and value of all of their intellectual properties,
     except  where failure to do so could not, individually or in the aggregate,
     reasonably be expect to have a Material Adverse Effect.

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

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

          (r)     Sarbanes-Oxley;  Internal Accounting Controls.  The Company is
                  ---------------------------------------------
     in  material  compliance  with  all provisions of the Sarbanes-Oxley Act of
     2002 which are applicable to it as of the Closing Date. The Company and the
     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 GAAP and to maintain asset accountability,
     (iii)  access  to  assets is permitted only in accordance with management's
     general or specific authorization, and (iv) the recorded accountability for
     assets  is  compared  with  the existing assets at reasonable intervals and
     appropriate  action  is  taken with respect to any differences. The Company
     has  established disclosure controls and procedures (as defined in Exchange
     Act  Rules  13a-15(e)  and  15d-15(e))  for  the  Company and designed such
     disclosure  controls  and procedures to ensure that information required to
     be  disclosed  by  the Company in the reports it files or submits under the
     Exchange  Act  is  recorded, processed, summarized and reported, within the
     time  periods  specified in the Commission's rules and forms. The Company's
     certifying officers have evaluated the

                                       14
<PAGE>
     effectiveness of the Company's disclosure controls and procedures as of the
     end  of  the  period  covered by the Company's most recently filed periodic
     report  under  the  Exchange  Act  (such  date, the "Evaluation Date"). The
                                                          ---------------
     Company  presented  in  its  most  recently filed periodic report under the
     Exchange  Act  the  conclusions  of  the  certifying  officers  about  the
     effectiveness  of  the  disclosure  controls  and procedures based on their
     evaluations  as  of  the  Evaluation Date. Since the Evaluation Date, there
     have  been  no  changes  in  the  Company's internal control over financial
     reporting (as such term is defined in the Exchange Act) that has materially
     affected,  or  is  reasonably  likely  to  materially affect, the Company's
     internal control over financial reporting.

          (s)     Certain  Fees.  Except  as  set  forth  on Schedule 3.1(s), no
                  -------------                              ---------------
     brokerage  or  finder's  fees  or commissions are or will be payable by the
     Company  to  any broker, financial advisor or consultant, finder, placement
     agent,  investment  banker,  bank  or  other  Person  with  respect  to the
     transactions  contemplated  by  the  Transaction  Documents. The Purchasers
     shall  have  no  obligation with respect to any fees or with respect to any
     claims  made  by  or  on  behalf  of  other  Persons  for  fees  of  a type
     contemplated  in  this  Section  that  may  be  due  in connection with the
     transactions contemplated by the Transaction Documents.

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

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

          (v)     Registration  Rights.  Except as set forth on Schedule 3.1(v),
                  --------------------                          ---------------
     other  than  each  of  the Purchasers, no Person has any right to cause the
     Company  to  effect  the  registration  under  the  Securities  Act  of any
     securities of the Company.

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

                                       15
<PAGE>
          (x)     Application  of  Takeover  Protections.  The  Company  and its
                  --------------------------------------
     Board  of  Directors  have  taken all necessary action, if any, in order to
     render  inapplicable  any  control share acquisition, business combination,
     poison  pill (including any distribution under a rights agreement) or other
     similar  anti-takeover  provision  under  the  Company's  Certificate  of
     Incorporation  (or  similar  charter documents) or the laws of its state of
     incorporation  that  is  or  could become applicable to the Purchasers as a
     result  of  the  Purchasers and the Company fulfilling their obligations or
     exercising  their rights under the Transaction Documents, including without
     limitation  as a result of the Company's issuance of the Securities and the
     Purchasers' ownership of the Securities.

          (y)     Disclosure.  Except  with  respect  to  the material terms and
                  ----------
     conditions  of  the transactions contemplated by the Transaction Documents,
     the  Company  confirms  that  neither it nor any other Person acting on its
     behalf  has  provided any of the Purchasers or their agents or counsel with
     any  information that it believes constitutes or might constitute material,
     nonpublic  information.  The  Company  understands  and  confirms  that the
     Purchasers  will  rely  on  the  foregoing  representation  in  effecting
     transactions  in  securities of the Company. All disclosure furnished by or
     on  behalf  of  the  Company  to  the Purchasers regarding the Company, its
     business and the transactions contemplated hereby, including the Disclosure
     Schedules  to  this  Agreement,  with  respect  to  the representations and
     warranties  made  herein  are  true  and  correct  with  respect  to  such
     representations and warranties and do not contain any untrue statement of a
     material fact or omit to state any material fact necessary in order to make
     the statements made therein, in light of the circumstances under which they
     were  made,  not  misleading.  The  Company acknowledges and agrees that no
     Purchaser  makes or has made any representations or warranties with respect
     to  the  transactions contemplated hereby other than those specifically set
     forth in Section 3.2 hereof.

          (z)     No  Integrated  Offering.  Assuming  the  accuracy  of  the
                  ------------------------
     Purchasers'  representations  and  warranties  set  forth  in  Section 3.2,
     neither  the  Company,  nor any of its affiliates, nor any Person acting on
     its  or  their behalf has, directly or indirectly, made any offers or sales
     of  any  security  or  solicited  any  offers  to  buy  any security, under
     circumstances  that  would  cause  this  offering  of  the Securities to be
     integrated  with  prior  offerings  by  the  Company  for  purposes  of the
     Securities  Act  or  any  applicable  shareholder approval provision of any
     Trading  Market on which any of the securities of the Company are listed or
     designated.

          (aa)     Solvency.  Based on the financial condition of the Company as
                   --------
     of  the  Closing  Date after giving effect to the receipt by the Company of
     the  proceeds  from  the  sale  of  the  Securities hereunder, (i) the fair
     saleable  value  of  the  Company's  assets exceeds the amount that will be
     required  to  be  paid on or in respect of the Company's existing debts and
     other  liabilities (including known contingent liabilities) as they mature;
     (ii)  the  Company's assets do not constitute unreasonably small capital to
     carry  on  its  business  as  now conducted and as proposed to be conducted
     including  its  capital  needs  taking  into account the particular capital
     requirements  of  the  business  conducted  by  the  Company, and projected
     capital  requirements  and  capital  availability  thereof;  and  (iii) the
     current  cash  flow  of the Company, together with the proceeds the Company
     would

                                       16
<PAGE>
     receive,  were it to liquidate all of its assets, after taking into account
     all anticipated uses of the cash, would be sufficient to pay all amounts on
     or in respect of its liabilities when such amounts are required to be paid.
     The  Company  does not intend to incur debts beyond its ability to pay such
     debts as they mature (taking into account the timing and amounts of cash to
     be  payable  on or in respect of its debt). The Company has no knowledge of
     any  facts  or circumstances which lead it to believe that it will file for
     reorganization  or  liquidation under the bankruptcy or reorganization laws
     of any jurisdiction within one year from the Closing Date. Schedule 3.1(aa)
                                                                ----------------
     sets  forth  as  of the dates thereof all outstanding secured and unsecured
     Indebtedness  of the Company or any Subsidiary, or for which the Company or
     any  Subsidiary  has  commitments.  For  the  purposes  of  this Agreement,
     "Indebtedness" shall mean (a) any liabilities for borrowed money or amounts
      ------------
     owed  in  excess  of $50,000 (other than trade accounts payable incurred in
     the  ordinary  course  of  business),  (b) all guaranties, endorsements and
     other  contingent obligations in respect of Indebtedness of others, whether
     or  not  the same are or should be reflected in the Company's balance sheet
     (or  the  notes  thereto),  except  guaranties by endorsement of negotiable
     instruments  for  deposit  or  collection  or  similar  transactions in the
     ordinary  course  of  business;  and  (c)  the  present  value of any lease
     payments  in  excess of $50,000 due under leases required to be capitalized
     in  accordance  with  GAAP.  Neither  the  Company nor any Subsidiary is in
     default with respect to any Indebtedness.

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

          (cc)     No  General  Solicitation. Neither the Company nor any person
                   -------------------------
     acting  on  behalf of the Company has offered or sold any of the Securities
     by any form of general solicitation or general advertising. The Company has
     offered  the  Securities  for sale only to the Purchasers and certain other
     "accredited  investors" within the meaning of Rule 501 under the Securities
     Act.

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

          (ee)     Accountants.  The  Company's  accountants  are  set  forth on
                   -----------
     Schedule  3.1(ee)  of  the  Disclosure  Schedule.  To  the knowledge of the
     -----------------
     Company,  such  accountants,  who  the  Company  expects will express their
     opinion  with  respect  to  the

                                       17
<PAGE>
     financial  statements to be included in the Company's Annual Report on Form
     10-KSB  for the year ended July 31, 2006 are a registered public accounting
     firm as required by the Securities Act.

          (ff)     Seniority.  As  of the Closing Date, no Indebtedness or other
                   ---------
     claim  against the Company is senior to the Debentures in right of payment,
     whether  with  respect  to  interest or upon liquidation or dissolution, or
     otherwise,  other  than  indebtedness  secured  by  purchase money security
     interests  (which  is  senior only as to underlying assets covered thereby)
     and  capital  lease  obligations  (which  is senior only as to the property
     covered thereby).

          (gg)     No Disagreements with Accountants and Lawyers.  Except as set
                   ----------------------------------------------
     forth on Schedule 3.1(gg), there are no disagreements of any kind presently
              ----------------
     existing,  or  reasonably  anticipated by the Company to arise, between the
     Company  and  the accountants and lawyers formerly or presently employed by
     the Company and the Company is current with respect to any fees owed to its
     accountants and lawyers.

          (hh)     Acknowledgment  Regarding Purchasers' Purchase of Securities.
                   ------------------------------------------------------------
     The  Company  acknowledges and agrees that each of the Purchasers is acting
     solely  in  the  capacity  of an arm's length purchaser with respect to the
     Transaction  Documents  and  the  transactions  contemplated  thereby.  The
     Company  further  acknowledges  that  no Purchaser is acting as a financial
     advisor  or  fiduciary  of  the  Company  (or in any similar capacity) with
     respect  to  the  Transaction  Documents  and the transactions contemplated
     thereby  and  any  advice given by any Purchaser or any of their respective
     representatives  or agents in connection with the Transaction Documents and
     the  transactions  contemplated  thereby  is  merely  incidental  to  the
     Purchasers'  purchase  of the Securities. The Company further represents to
     each Purchaser that the Company's decision to enter into this Agreement and
     the  other  Transaction  Documents has been based solely on the independent
     evaluation  of  the transactions contemplated hereby by the Company and its
     representatives.

          (ii)     Acknowledgement  Regarding  Purchasers'  Trading  Activity.
                   ----------------------------------------------------------
     Anything  in  this  Agreement  or  elsewhere  herein  to  the  contrary
     notwithstanding  (except  for  Sections  3.2(f)  and  4.16  hereof),  it is
     understood  and acknowledged by the Company (i) that none of the Purchasers
     have  been  asked  to  agree,  nor has any Purchaser agreed, to desist from
     purchasing  or  selling,  long  and/or short, securities of the Company, or
     "derivative"  securities  based  on  securities issued by the Company or to
     hold  the  Securities for any specified term; (ii) that past or future open
     market  or  other transactions by any Purchaser, including Short Sales, and
     specifically  including,  without  limitation,  Short Sales or "derivative"
     transactions,  before  or  after  the  closing  of  this  or future private
     placement  transactions,  may  negatively  impact  the  market price of the
     Company's  publicly-traded  securities;  (iii)  that  any  Purchaser,  and
     counter-parties in "derivative" transactions to which any such Purchaser is
     a  party,  directly or indirectly, presently may have a "short" position in
     the  Common Stock; and (iv) that each Purchaser shall not be deemed to have
     any  affiliation with or control over any arm's length counter-party in any
     "derivative"  transaction. The Company further understands and acknowledges
     that  (a)  one  or  more

                                       18
<PAGE>
     Purchasers  may  engage  in  hedging activities at various times during the
     period  that the Securities are outstanding, including, without limitation,
     during the periods that the value of the Underlying Shares deliverable with
     respect  to Securities are being determined and (b) such hedging activities
     (if  any)  could  reduce  the  value  of  the existing stockholders' equity
     interests  in the Company at and after the time that the hedging activities
     are  being  conducted.  The  Company  acknowledges that such aforementioned
     hedging  activities  do  not  constitute a breach of any of the Transaction
     Documents.

          (jj)     Manipulation  of  Price.  The  Company  has  not,  and to its
                   -----------------------
     knowledge  no  one  acting  on  its  behalf  has,  (i)  taken,  directly or
     indirectly,  any action designed to cause or to result in the stabilization
     or  manipulation  of the price of any security of the Company to facilitate
     the sale or resale of any of the Securities, (ii) sold, bid for, purchased,
     or paid any compensation for soliciting purchases of, any of the securities
     of  the  Company  or  (iii)  paid  or  agreed  to  pay  to  any  person any
     compensation for soliciting another to purchase any other securities of the
     Company,  other  than,  in the case of clauses (ii) and (iii), compensation
     paid  to  the Company's placement agent in connection with the placement of
     the Securities.

     3.2     Representations and Warranties of the Purchasers.    Each Purchaser
             ------------------------------------------------
hereby, for itself and for no other Purchaser, represents and warrants as of the
date  hereof  and  as  of  the  Closing  Date  to  the  Company  as  follows:

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

          (b)     Own  Account.  Such  Purchaser understands that the Securities
                  ------------
     are  "restricted  securities"  and  have  not  been  registered  under  the
     Securities  Act or any applicable state securities law and is acquiring the
     Securities  as  principal for its own account and not with a view to or for
     distributing  or reselling such Securities or any part thereof in violation
     of  the  Securities  Act  or  any  applicable  state securities law, has no
     present  intention  of  distributing any of such Securities in violation of
     the Securities Act or any applicable state securities law and has no direct
     or indirect arrangement or

                                       19
<PAGE>
     understandings  with  any  other  persons  to  distribute  or regarding the
     distribution  of  such  Securities  (this  representation  and warranty not
     limiting  such  Purchaser's  right  to  sell the Securities pursuant to the
     Registration  Statement  or otherwise in compliance with applicable federal
     and  state  securities  laws)  in  violation  of  the Securities Act or any
     applicable state securities law. Such Purchaser is acquiring the Securities
     hereunder in the ordinary course of its business.

          (c)     Purchaser  Status.  At the time such Purchaser was offered the
                  -----------------
     Securities, it was, and at the date hereof it is, and on each date on which
     it exercises any Warrants or converts any Debentures it will be either: (i)
     an  "accredited  investor"  as  defined  in Rule 501(a)(1), (a)(2), (a)(3),
     (a)(7)  or  (a)(8)  under  the  Securities  Act  or  (ii)  a  "qualified
     institutional  buyer"  as defined in Rule 144A(a) under the Securities Act.
     Such  Purchaser  is  not required to be registered as a broker-dealer under
     Section 15 of the Exchange Act.

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

          (e)     General  Solicitation.  Such  Purchaser  is not purchasing the
                  ---------------------
     Securities  as  a  result  of  any  advertisement, article, notice or other
     communication regarding the Securities published in any newspaper, magazine
     or  similar media or broadcast over television or radio or presented at any
     seminar or any other general solicitation or general advertisement.

          (f)     Short  Sales  and  Confidentiality  Prior  To The Date Hereof.
                  -------------------------------------------------------------
     Other  than  the transaction contemplated hereunder, such Purchaser has not
     directly  or indirectly, nor has any Person acting on behalf of or pursuant
     to  any  understanding  with  such  Purchaser,  executed  any  disposition,
     including  Short  Sales, in the securities of the Company during the period
     commencing  from  the  time that such Purchaser first received a term sheet
     (written  or  oral)  from the Company or any other Person setting forth the
     material  terms  of  the transactions contemplated hereunder until the date
     hereof ("Discussion Time"). Notwithstanding the foregoing, in the case of a
              ---------------
     Purchaser  that  is  a  multi-managed  investment  vehicle whereby separate
     portfolio  managers manage separate portions of such Purchaser's assets and
     the portfolio managers have no direct knowledge of the investment decisions
     made  by the portfolio managers managing other portions of such Purchaser's
     assets, the representation set forth above shall only apply with respect to
     the  portion  of  assets  managed  by  the  portfolio manager that made the
     investment  decision  to purchase the Securities covered by this Agreement.
     Other  than  to  other  Persons party to this Agreement, such Purchaser has
     maintained  the confidentiality of all disclosures made to it in connection
     with  this  transaction  (including  the  existence  and  terms  of  this
     transaction).

                                       20
<PAGE>
                                   ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

     4.1     Transfer  Restrictions.
             ----------------------

          (a)     The  Securities  may  only  be  disposed of in compliance with
     state  and  federal  securities  laws.  In  connection with any transfer of
     Securities  other  than  pursuant to an effective registration statement or
     Rule 144, to the Company or to an affiliate of a Purchaser or in connection
     with  a  pledge  as contemplated in Section 4.1(b), the Company may require
     the  transferor  thereof  to  provide  to the Company an opinion of counsel
     selected  by  the  transferor and reasonably acceptable to the Company, the
     form and substance of which opinion shall be reasonably satisfactory to the
     Company,  to the effect that such transfer does not require registration of
     such  transferred  Securities  under  the Securities Act. As a condition of
     transfer,  any  such  transferee  shall agree in writing to be bound by the
     terms of this Agreement and shall have the rights of a Purchaser under this
     Agreement and the Registration Rights Agreement.

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

     [NEITHER]  THIS  SECURITY  [NOR  THE SECURITIES INTO WHICH THIS SECURITY IS
     [EXERCISABLE]  [CONVERTIBLE]]  HAVE BEEN REGISTERED WITH THE SECURITIES AND
     EXCHANGE  COMMISSION  OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
     UPON  AN  EXEMPTION  FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
     AMENDED  (THE  "SECURITIES  ACT"),  AND, ACCORDINGLY, MAY NOT BE OFFERED OR
     SOLD  EXCEPT  PURSUANT  TO  AN  EFFECTIVE  REGISTRATION STATEMENT UNDER THE
     SECURITIES  ACT  OR  PURSUANT  TO  AN  AVAILABLE  EXEMPTION  FROM,  OR IN A
     TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
     ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY
     A  LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE
     OF  WHICH  SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND
     THE  SECURITIES  ISSUABLE UPON [EXERCISE] [CONVERSION] OF THIS SECURITY MAY
     BE  PLEDGED  IN  CONNECTION  WITH  A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
     SECURED BY SUCH SECURITIES.

          The  Company acknowledges and agrees that a Purchaser may from time to
     time  pledge  pursuant  to  a  bona fide margin agreement with a registered
     broker-dealer or grant a security interest in some or all of the Securities
     to  a  financial institution that is an "accredited investor" as defined in
     Rule  501(a)  under  the  Securities  Act and who agrees to be bound by the
     provisions  of this Agreement and the Registration Rights Agreement and, if
     required  under  the terms of such arrangement, such Purchaser may transfer
     pledged  or  secured  Securities to the pledgees or secured parties. Such a
     pledge  or  transfer would not be subject to approval of the Company and no
     legal opinion of legal

                                       21
<PAGE>
     counsel  of  the  pledgee,  secured  party  or pledgor shall be required in
     connection  therewith. Further, no notice shall be required of such pledge.
     At  the  appropriate  Purchaser's  expense,  the  Company  will execute and
     deliver  such  reasonable  documentation  as  a pledgee or secured party of
     Securities  may  reasonably request in connection with a pledge or transfer
     of the Securities, including, if the Securities are subject to registration
     pursuant  to  the Registration Rights Agreement, the preparation and filing
     of  any  required  prospectus  supplement  under  Rule  424(b)(3) under the
     Securities  Act  or  other  applicable  provision  of the Securities Act to
     appropriately amend the list of Selling Stockholders thereunder.

          (c)     Certificates  evidencing  the  Underlying  Shares  shall  not
     contain  any  legend  (including  the  legend  set  forth in Section 4.1(b)
     hereof):  (i)  while  a  registration statement (including the Registration
     Statement)  covering  the  resale  of  such security is effective under the
     Securities  Act,  or  (ii)  following  any  sale  of such Underlying Shares
     pursuant  to  Rule 144, or (iii) if such Underlying Shares are eligible for
     sale  under  Rule  144(k),  or  (iv)  if  such legend is not required under
     applicable  requirements  of  the  Securities  Act  (including  judicial
     interpretations  and pronouncements issued by the staff of the Commission).
     The  Company  shall  cause  its  counsel  to  issue  a legal opinion to the
     Transfer  Agent  promptly  after  the  Effective  Date  if  required by the
     Transfer Agent to effect the removal of the legend hereunder. If all or any
     portion of a Debenture or Warrant is converted or exercised (as applicable)
     at  a  time  when there is an effective registration statement to cover the
     resale  of  the Underlying Shares, or if such Underlying Shares may be sold
     under  Rule  144(k)  or  if  such  legend  is  not otherwise required under
     applicable  requirements  of  the  Securities  Act  (including  judicial
     interpretations  and  pronouncements issued by the staff of the Commission)
     then  such  Underlying  Shares  shall  be  issued  free of all legends. The
     Company  agrees  that  following the Effective Date or at such time as such
     legend  is  no longer required under this Section 4.1(c), it will, no later
     than  three  Trading  Days  following  the  delivery  by a Purchaser to the
     Company  or  the  Transfer  Agent  of a certificate representing Underlying
     Shares, as applicable, issued with a restrictive legend (such third Trading
     Day,  the  "Legend Removal Date"), deliver or cause to be delivered to such
     Purchaser  a  certificate  representing  such  shares that is free from all
     restrictive and other legends. The Company may not make any notation on its
     records  or  give  instructions  to  Transfer  Agent  that  enlarge  the
     restrictions  on  transfer  set  forth  in  this  Section. Certificates for
     Underlying  Shares subject to legend removal hereunder shall be transmitted
     by  the  Transfer  Agent  to the Purchasers by crediting the account of the
     Purchaser's prime broker with the Depository Trust Company System.

          (d)     In  addition to such Purchaser's other available remedies, the
     Company  shall  pay  to a Purchaser, in cash, as partial liquidated damages
     and  not  as  a penalty, for each $1,000 of Underlying Shares (based on the
     VWAP  of  the Common Stock on the date such Securities are submitted to the
     Transfer Agent) delivered for removal of the restrictive legend and subject
     to Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day 5
     Trading  Days after such damages have begun to accrue) for each Trading Day
     after  the  second Trading Day following the Legend Removal Date until such
     certificate  is delivered without a legend. Nothing herein shall limit such
     Purchaser's  right  to  pursue  actual damages for the Company's failure to
     deliver certificates

                                       22
<PAGE>
     representing  any  Securities as required by the Transaction Documents, and
     such  Purchaser shall have the right to pursue all remedies available to it
     at  law  or  in  equity including, without limitation, a decree of specific
     performance and/or injunctive relief.

          (e)     Each  Purchaser,  severally  and  not  jointly  with the other
     Purchasers,  agrees  that  the  removal  of  the  restrictive  legend  from
     certificates  representing  Securities  as set forth in this Section 4.1 is
     predicated  upon  the  Company's  reliance that the Purchaser will sell any
     Securities  pursuant  to  either  the  registration  requirements  of  the
     Securities  Act, including any applicable prospectus delivery requirements,
     or  an  exemption  therefrom, and that if Securities are sold pursuant to a
     Registration  Statement,  they  will be sold in compliance with the plan of
     distribution set forth therein.

     4.2     Acknowledgment  of  Dilution.  The  Company  acknowledges  that the
             ----------------------------
issuance  of  the Securities may result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain market conditions.
The  Company  further  acknowledges  that  its obligations under the Transaction
Documents,  including  without limitation its obligation to issue the Underlying
Shares pursuant to the Transaction Documents, are unconditional and absolute and
not  subject  to  any  right  of  set  off,  counterclaim,  delay  or reduction,
regardless  of the effect of any such dilution or any claim the Company may have
against  any  Purchaser and regardless of the dilutive effect that such issuance
may have on the ownership of the other stockholders of the Company.

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

     4.4     Integration.  The Company shall not sell, offer for sale or solicit
             -----------
offers  to  buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of  the  Securities  in  a  manner that would require the registration under the
Securities  Act of the sale of the Securities to the Purchasers or that would be
integrated  with  the  offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market.

     4.5     Conversion and Exercise Procedures.  The form of Notice of Exercise
             ----------------------------------
included  in  the  Warrants and the form of Notice of Conversion included in the
Debentures  set  forth the totality of the procedures required of the Purchasers
in order to exercise the Warrants or convert the Debentures. No additional legal
opinion or other information or instructions shall be required of the Purchasers
to exercise their Warrants or convert their Debentures. The Company

                                       23
<PAGE>
shall  honor  exercises  of  the  Warrants and conversions of the Debentures and
shall  deliver  Underlying  Shares  in accordance with the terms, conditions and
time periods set forth in the Transaction Documents.

     4.6     Securities  Laws Disclosure; Publicity.  The Company shall, by 8:30
             --------------------------------------
a.m.  New  York  City time on the Trading Day following the date hereof, issue a
Current  Report  on  Form  8-K disclosing the material terms of the transactions
contemplated hereby and attaching the Transaction Documents thereto. The Company
and  each  Purchaser  shall  consult  with each other in issuing any other press
releases  with  respect to the transactions contemplated hereby, and neither the
Company  nor  any Purchaser shall issue any such press release or otherwise make
any such public statement without the prior consent of the Company, with respect
to  any  press  release  of  any Purchaser, or without the prior consent of each
Purchaser, with respect to any press release of the Company, which consent shall
not  unreasonably  be withheld or delayed, except if such disclosure is required
by  law,  in  which  case  the disclosing party shall promptly provide the other
party  with  prior  notice  of  such  public  statement  or  communication.
Notwithstanding  the foregoing, the Company shall not publicly disclose the name
of  any  Purchaser,  or include the name of any Purchaser in any filing with the
Commission or any regulatory agency or Trading Market, without the prior written
consent  of  such Purchaser, except (i) as required by federal securities law in
connection  with (A) any registration statement contemplated by the Registration
Rights  Agreement  and  (B) the filing of final Transaction Documents (including
signature  pages  thereto)  with  the  Commission  and  (ii)  to the extent such
disclosure  is  required by law or Trading Market regulations, in which case the
Company  shall  provide  the  Purchasers  with  prior  notice of such disclosure
permitted under this clause (ii).

     4.7     Shareholder  Rights Plan.  No claim will be made or enforced by the
             ------------------------
Company  or,  with  the  consent  of  the  Company,  any  other Person, that any
Purchaser is an "Acquiring Person" under any control share acquisition, business
combination,  poison  pill (including any distribution under a rights agreement)
or  similar  anti-takeover plan or arrangement in effect or hereafter adopted by
the  Company, or that any Purchaser could be deemed to trigger the provisions of
any  such  plan  or  arrangement,  by  virtue  of receiving Securities under the
Transaction  Documents  or under any other agreement between the Company and the
Purchasers.

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

     4.9     Use  of  Proceeds.  Except  as  set  forth on Schedule 4.9 attached
             -----------------                             ------------
hereto,  the  Company shall use the net proceeds from the sale of the Securities
hereunder  for  working  capital  purposes  and  not for the satisfaction of any
portion  of  the  Company's  debt  (other  than payment of trade payables in the
ordinary  course  of  the Company's business and prior practices), to redeem any
Common  Stock  or  Common  Stock  Equivalents  or  to  settle  any  outstanding
litigation.

                                       24
<PAGE>
     4.10     Reimbursement.  If  any Purchaser becomes involved in any capacity
              -------------
in  any  Proceeding by or against any Person who is a stockholder of the Company
(except  as a result of sales, pledges, margin sales and similar transactions by
such  Purchaser  to  or  with any other stockholder), solely as a result of such
Purchaser's acquisition of the Securities under this Agreement, the Company will
reimburse  such Purchaser for its reasonable legal and other expenses (including
the  cost  of  any investigation preparation and travel in connection therewith)
incurred  in  connection  therewith,  as  such  expenses  are  incurred.  The
reimbursement  obligations  of  the  Company  under  this  paragraph shall be in
addition  to  any  liability  which the Company may otherwise have, shall extend
upon  the  same terms and conditions to any Affiliates of the Purchasers who are
actually  named  in  such  action,  proceeding  or  investigation, and partners,
directors,  agents,  employees and controlling persons (if any), as the case may
be,  of  the  Purchasers  and  any such Affiliate, and shall be binding upon and
inure  to  the  benefit  of  any  successors,  assigns,  heirs  and  personal
representatives  of  the  Company, the Purchasers and any such Affiliate and any
such  Person.  The  Company also agrees that neither the Purchasers nor any such
Affiliates,  partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in  right  of  the  Company solely as a result of acquiring the Securities under
this Agreement.

     4.11     Indemnification of Purchasers.   Subject to the provisions of this
              -----------------------------
Section  4.11,  the  Company  will  indemnify  and  hold  each Purchaser and its
directors,  officers, shareholders, members, partners, employees and agents (and
any  other  Persons with a functionally equivalent role of a Person holding such
titles notwithstanding a lack of such title or any other title), each Person who
controls  such Purchaser (within the meaning of Section 15 of the Securities Act
and  Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents,  members,  partners  or  employees  (and  any  other  Persons  with  a
functionally  equivalent  role of a Person holding such titles notwithstanding a
lack  of  such  title  or  any  other title) of such controlling person (each, a
"Purchaser  Party")  harmless from any and all losses, liabilities, obligations,
 ----------------
claims,  contingencies,  damages,  costs  and expenses, including all judgments,
amounts  paid  in  settlements,  court  costs and reasonable attorneys' fees and
costs  of  investigation  that any such Purchaser Party may suffer or incur as a
result  of  or  relating  to  (a)  any  breach  of  any  of the representations,
warranties,  covenants or agreements made by the Company in this Agreement or in
the  other  Transaction  Documents  or  (b)  any  action  instituted  against  a
Purchaser,  or any of them or their respective Affiliates, by any stockholder of
the  Company  who  is not an Affiliate of such Purchaser, with respect to any of
the  transactions  contemplated by the Transaction Documents (unless such action
is  based  upon  a  breach  of  such  Purchaser's representations, warranties or
covenants  under  the  Transaction Documents or any agreements or understandings
such  Purchaser  may  have  with  any  such stockholder or any violations by the
Purchaser  of  state or federal securities laws or any conduct by such Purchaser
which  constitutes  fraud, gross negligence, willful misconduct or malfeasance).
If  any  action shall be brought against any Purchaser Party in respect of which
indemnity  may  be sought pursuant to this Agreement, such Purchaser Party shall
promptly  notify the Company in writing, and the Company shall have the right to
assume  the  defense  thereof  with  counsel  of  its  own  choosing  reasonably
acceptable  to  the Purchaser Party. Any Purchaser Party shall have the right to
employ  separate  counsel  in  any  such  action  and participate in the defense
thereof,  but  the  fees and expenses of such counsel shall be at the expense of
such  Purchaser  Party  except to the extent that (i) the employment thereof has
been  specifically  authorized  by  the Company in writing, (ii) the Company has
failed after a

                                       25
<PAGE>
reasonable  period of time to assume such defense and to employ counsel or (iii)
in  such  action there is, in the reasonable opinion of such separate counsel, a
material  conflict on any material issue between the position of the Company and
the  position  of  such  Purchaser  Party,  in  which  case the Company shall be
responsible  for  the  reasonable  fees  and  expenses  of no more than one such
separate  counsel.  The  Company will not be liable to any Purchaser Party under
this  Agreement (i) for any settlement by a Purchaser Party effected without the
Company's  prior  written  consent,  which shall not be unreasonably withheld or
delayed;  or  (ii)  to  the  extent,  but only to the extent that a loss, claim,
damage  or  liability  is attributable to any Purchaser Party's breach of any of
the  representations, warranties, covenants or agreements made by such Purchaser
Party in this Agreement or in the other Transaction Documents.

     4.12     Reservation  and  Listing  of  Securities.
              -----------------------------------------

          (a)     The  Company shall maintain a reserve from its duly authorized
     shares  of  Common Stock for issuance pursuant to the Transaction Documents
     in  such amount as may be required to fulfill its obligations in full under
     the Transaction Documents.

          (b)     If,  on  any  date, the number of authorized but unissued (and
     otherwise  unreserved)  shares  of  Common  Stock is less than the Required
     Minimum  on such date, then the Board of Directors of the Company shall use
     commercially  reasonable  efforts  to  amend  the  Company's certificate or
     articles of incorporation to increase the number of authorized but unissued
     shares  of  Common  Stock to at least the Required Minimum at such time, as
     soon  as  possible  and in any event not later than the 75th day after such
     date.

          (c)     The  Company  shall, if applicable, (i) in the time and manner
     required  by  the  principal  Trading  Market,  prepare  and file with such
     Trading  Market  an additional shares listing application covering a number
     of  shares  of  Common  Stock at least equal to the Required Minimum on the
     date  of  such  application,  (ii)  take  all steps necessary to cause such
     shares of Common Stock to be approved for listing on such Trading Market as
     soon  as  possible  thereafter, (iii) provide to the Purchasers evidence of
     such  listing,  and  (iv)  maintain the listing of such Common Stock on any
     date  at  least  equal to the Required Minimum on such date on such Trading
     Market or another Trading Market

     4.13     Participation  in  Future  Financing.
              ------------------------------------

          (a)     From  the  date  hereof until the date on which such Purchaser
     holds less than 25% in Principal Amount of the Debenture, upon any issuance
     by  the  Company or any of its Subsidiaries of Common Stock or Common Stock
     Equivalents (a "Subsequent Financing"), each Purchaser shall have the right
                     --------------------
     to participate in up to an amount of the Subsequent Financing equal to 100%
     of  the  Subsequent  Financing  (the  "Participation  Maximum") on the same
                                            ----------------------
     terms, conditions and price provided for in the Subsequent Financing.

          (b)     At least 5 Trading Days prior to the closing of the Subsequent
     Financing,  the Company shall deliver to each Purchaser a written notice of
     its  intention  to  effect  a  Subsequent  Financing  ("Pre-Notice"), which
                                                             ----------
     Pre-Notice shall ask such Purchaser if it

                                       26
<PAGE>
     wants  to  review  the details of such financing (such additional notice, a
     "Subsequent  Financing  Notice"). Upon the request of a Purchaser, and only
      -----------------------------
     upon  a  request  by such Purchaser, for a Subsequent Financing Notice, the
     Company shall promptly, but no later than 1 Trading Day after such request,
     deliver  a  Subsequent  Financing  Notice to such Purchaser. The Subsequent
     Financing  Notice shall describe in reasonable detail the proposed terms of
     such  Subsequent  Financing,  the  amount of proceeds intended to be raised
     thereunder,  the  Person  or  Persons  through or with whom such Subsequent
     Financing is proposed to be effected, and attached to which shall be a term
     sheet or similar document relating thereto.

          (c)     Any  Purchaser  desiring  to  participate  in  such Subsequent
     Financing must provide written notice to the Company by not later than 5:30
     p.m.  (New  York  City  time)  on  the  5th  Trading  Day  after all of the
     Purchasers  have  received  the Pre-Notice that the Purchaser is willing to
     participate  in  the  Subsequent  Financing,  the amount of the Purchaser's
     participation,  and  that  the Purchaser has such funds ready, willing, and
     available for investment on the terms set forth in the Subsequent Financing
     Notice.  If  the Company receives no notice from a Purchaser as of such 5th
     Trading  Day,  such  Purchaser shall be deemed to have notified the Company
     that it does not elect to participate.

          (d)     If  by  5:30  p.m. (New York City time) on the 5th Trading Day
     after  all of the Purchasers have received the Pre-Notice, notifications by
     the  Purchasers  of  their  willingness  to  participate  in the Subsequent
     Financing  (or  to  cause  their  designees  to  participate)  is,  in  the
     aggregate, less than the total amount of the Subsequent Financing, then the
     Company  may  effect  the remaining portion of such Subsequent Financing on
     the  terms  and  with  the  Persons  set  forth in the Subsequent Financing
     Notice.

          (e)     If  by  5:30  p.m. (New York City time) on the 5th Trading Day
     after  all  of  the  Purchasers  have  received the Pre-Notice, the Company
     receives responses to a Subsequent Financing Notice from Purchasers seeking
     to  purchase  more  than the aggregate amount of the Participation Maximum,
     each  such  Purchaser  shall  have the right to purchase the greater of (a)
     their  Pro Rata Portion (as defined below) of the Participation Maximum and
     (b)  the  difference  between  the  Participation Maximum and the aggregate
     amount  of participation by all other Purchasers. "Pro Rata Portion" is the
                                                        ----------------
     ratio of (x) the Subscription Amount of Securities purchased on the Closing
     Date  by  a Purchaser participating under this Section 4.13 and (y) the sum
     of  the  aggregate  Subscription  Amounts  of  Securities  purchased on the
     Closing Date by all Purchasers participating under this Section 4.13.

          (f)     The  Company  must  provide  the  Purchasers  with  a  second
     Subsequent  Financing  Notice, and the Purchasers will again have the right
     of  participation  set  forth above in this Section 4.13, if the Subsequent
     Financing  subject  to  the  initial  Subsequent  Financing  Notice  is not
     consummated  for  any  reason  on  the  terms  set forth in such Subsequent
     Financing  Notice  within  60  Trading  Days  after the date of the initial
     Subsequent Financing Notice.

                                       27
<PAGE>
          (g)     Notwithstanding  the  foregoing,  this  Section 4.13 shall not
     apply  in respect of (i) an Exempt Issuance and (ii) an underwritten public
     offering of Common Stock.

     4.14     Subsequent  Equity  Sales.
              -------------------------

          (a)     From  the  date hereof until 90 days after the Effective Date,
     neither  the  Company nor any Subsidiary shall issue shares of Common Stock
     or Common Stock Equivalents; provided, however, the 90 day period set forth
                                  --------  -------
     in  this  Section  4.14  shall  be  extended for the number of Trading Days
     during such period in which (i) trading in the Common Stock is suspended by
     any  Trading Market, or (ii) following the Effective Date, the Registration
     Statement  is  not effective or the prospectus included in the Registration
     Statement  may  not  be  used  by  the  Purchasers  for  the  resale of the
     Underlying Shares.

          (b)     From the date hereof until such time as no Purchaser holds any
     of  the  Securities,  the  Company  shall  be  prohibited from effecting or
     entering  into  an agreement to effect any Subsequent Financing involving a
     "Variable  Rate  Transaction".  The  term "Variable Rate Transaction" shall
      ---------------------------
     mean  a  transaction  in  which the Company issues or sells (i) any debt or
     equity  securities  that  are convertible into, exchangeable or exercisable
     for,  or  include  the  right  to receive additional shares of Common Stock
     either  (A)  at a conversion, exercise or exchange rate or other price that
     is  based  upon  and/or varies with the trading prices of or quotations for
     the  shares  of Common Stock at any time after the initial issuance of such
     debt  or  equity securities, or (B) with a conversion, exercise or exchange
     price  that is subject to being reset at some future date after the initial
     issuance  of  such  debt  or  equity  security  or  upon  the occurrence of
     specified  or  contingent  events  directly  or  indirectly  related to the
     business  of  the Company or the market for the Common Stock or (ii) enters
     into  any  agreement,  including,  but  not  limited  to, an equity line of
     credit,  whereby  the  Company  may  sell securities at a future determined
     price.

          (c)     From the date hereof until such date on which less than 25% of
     the  aggregate  Principal  Amount  of  the  Debentures are outstanding, the
     Company  shall  not  issue  Common  Stock or Common Stock Equivalents at an
     effective price per share that is lower than the then Conversion Price.

          (d)     Notwithstanding  the  foregoing,  this  Section 4.14 shall not
     apply  in  respect  of  an  Exempt  Issuance,  except that no Variable Rate
     Transaction shall be an Exempt Issuance.

     4.15     Equal  Treatment of Purchasers.  No consideration shall be offered
              ------------------------------
or  paid  to  any  Person to amend or consent to a waiver or modification of any
provision  of  any of the Transaction Documents unless the same consideration is
also  offered  to  all of the parties to the Transaction Documents. Further, the
Company  shall  not  make  any payment of principal on the Debentures in amounts
which  are  disproportionate  to the respective principal amounts outstanding on
the  Debentures  at  any  applicable  time.  For  clarification  purposes,  this
provision  constitutes a separate right granted to each Purchaser by the Company
and  negotiated separately by each Purchaser, and is intended for the Company to
treat  the  Purchasers  as  a  class  and  shall

                                       28
<PAGE>
not  in  any  way be construed as the Purchasers acting in concert or as a group
with  respect to the purchase, disposition or voting of Securities or otherwise.

     4.16     Short  Sales  and  Confidentiality  After  The  Date  Hereof. Each
              ------------------------------------------------------------
Purchaser  severally  and  not  jointly with the other Purchasers covenants that
neither  it  nor  any  Affiliate  acting  on  its  behalf  or  pursuant  to  any
understanding  with it will execute any Short Sales during the period commencing
at the Discussion Time and ending at the time that the transactions contemplated
by this Agreement are first publicly announced as described in Section 4.6. Each
Purchaser,  severally  and not jointly with the other Purchasers, covenants that
until  such time as the transactions contemplated by this Agreement are publicly
disclosed  by  the  Company  as  described  in  Section 4.6, such Purchaser will
maintain  the  confidentiality  of all disclosures made to it in connection with
this  transaction  (including the existence and terms of this transaction). Each
Purchaser understands and acknowledges, severally and not jointly with any other
Purchaser,  that  the  Commission  currently takes the position that coverage of
short  sales  of  shares  of  the  Common  Stock  "against the box" prior to the
Effective  Date of the Registration Statement with the Securities is a violation
of  Section  5 of the Securities Act, as set forth in Item 65, Section A, of the
Manual  of  Publicly  Available  Telephone  Interpretations,  dated  July  1997,
compiled  by  the  Office  of  Chief  Counsel,  Division of Corporation Finance.
Notwithstanding  the  foregoing, no Purchaser makes any representation, warranty
or  covenant  hereby that it will not engage in Short Sales in the securities of
the  Company after the time that the transactions contemplated by this Agreement
are  first  publicly  announced as described in Section 4.6. Notwithstanding the
foregoing, in the case of a Purchaser that is a multi-managed investment vehicle
whereby separate portfolio managers manage separate portions of such Purchaser's
assets  and  the  portfolio  managers have no direct knowledge of the investment
decisions  made  by  the  portfolio  managers  managing  other  portions of such
Purchaser's  assets,  the covenant set forth above shall only apply with respect
to  the  portion  of  assets  managed  by  the  portfolio  manager that made the
investment decision to purchase the Securities covered by this Agreement.

     4.17     Form  D;  Blue  Sky  Filings.  The Company agrees to timely file a
              ----------------------------
Form  D  with  respect  to  the Securities as required under Regulation D and to
provide  a  copy  thereof,  promptly  upon request of any Purchaser. The Company
shall take such action as the Company shall reasonably determine is necessary in
order  to obtain an exemption for, or to qualify the Securities for, sale to the
Purchasers  at the Closing under applicable securities or "Blue Sky" laws of the
states of the United States, and shall provide evidence of such actions promptly
upon request of any Purchaser.

     4.18     Capital  Changes.  Until the one year anniversary of the Effective
              ----------------
Date,  the  Company  shall  not  undertake  a  reverse or forward stock split or
reclassification  of  the  Common Stock without the prior written consent of the
Purchasers holding a majority in principal amount outstanding of the Debentures.

                                   ARTICLE V.
                                  MISCELLANEOUS

     5.1     Termination.  This Agreement may be terminated by any Purchaser, as
             -----------
to such Purchaser's obligations hereunder only and without any effect whatsoever
on the obligations

                                       29
<PAGE>
between  the  Company  and  the other Purchasers, by written notice to the other
parties,  if  the  Closing  has not been consummated on or before June __, 2006;
provided,  however,  that no such termination will affect the right of any party
--------   -------
to sue for any breach by the other party (or parties).

     5.2     Fees  and  Expenses.  At the Closing, the Company has agreed (i) to
             -------------------
reimburse  Crescent  International  Ltd. ("Crescent") the non-accountable sum of
                                           --------
$10,000  for  its legal fees and expenses and (ii) to pay a cash arrangement fee
of $35,000 to Cantara (Switzerland) S.A. ("Cantara"). The Company shall deliver,
                                           -------
prior  to  the  Closing, a completed and executed copy of the Closing Statement,
attached  hereto  as  Annex A.  Except as expressly set forth in the Transaction
                      -------
Documents  to  the  contrary,  each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred  by  such  party  incident  to the negotiation, preparation, execution,
delivery  and  performance of this Agreement. The Company shall pay all transfer
agent fees, stamp taxes and other taxes and duties levied in connection with the
delivery of any Securities to the Purchasers.

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

     5.4     Notices.  Any and all notices or other communications or deliveries
             -------
required  or permitted to be provided hereunder shall be in writing and shall be
deemed  given  and effective on the earliest of (a) the date of transmission, if
such  notice or communication is delivered via facsimile at the facsimile number
set  forth  on  the signature pages attached hereto prior to 5:30 p.m. (New York
City  time)  on  a  Trading  Day,  (b)  the  next  Trading Day after the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile  number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day,  (c)  the  2nd  Trading  Day following the date of mailing, if sent by U.S.
nationally  recognized  overnight courier service, or (d) upon actual receipt by
the  party  to  whom  such  notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.

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

     5.6     Headings.  The  headings  herein  are  for convenience only, do not
             --------
constitute  a  part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

                                       30
<PAGE>
     5.7     Successors  and  Assigns.  This Agreement shall be binding upon and
             ------------------------
inure  to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without  the prior written consent of each Purchaser (other than by merger). Any
Purchaser may assign any or all of its rights under this Agreement to any Person
to  whom  such  Purchaser  assigns  or  transfers  any Securities, provided such
transferee  agrees  in  writing  to  be  bound,  with respect to the transferred
Securities,  by  the  provisions  of the Transaction Documents that apply to the
"Purchasers".

     5.8     No  Third-Party  Beneficiaries.  This Agreement is intended for the
             ------------------------------
benefit  of  the  parties  hereto  and their respective successors and permitted
assigns  and is not for the benefit of, nor may any provision hereof be enforced
by,  any  other  Person,  except  as  otherwise  set  forth  in  Section  4.11.

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

     5.10     Survival.  The  representations,  warranties,  covenants and other
              --------
agreements contained herein shall survive the Closing and the delivery, exercise
and/or  conversion of the Securities, as applicable for the applicable statue of
limitations.

     5.11     Execution.  This  Agreement  may  be  executed  in  two  or  more
              ---------
counterparts,  all  of which when taken together shall be considered one and the
same  agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it

                                       31
<PAGE>
being  understood  that  both parties need not sign the same counterpart. In the
event  that  any  signature  is delivered by facsimile transmission or by e-mail
delivery  of  a ".pdf" format data file, such signature shall create a valid and
binding  obligation of the party executing (or on whose behalf such signature is
executed)  with  the  same  force  and  effect  as  if  such facsimile or ".pdf"
signature page were an original thereof.

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

     5.13     Rescission  and Withdrawal Right.  Notwithstanding anything to the
              --------------------------------
contrary  contained  in  (and without limiting any similar provisions of) any of
the  other  Transaction  Documents,  whenever  any  Purchaser exercises a right,
election, demand or option under a Transaction Document and the Company does not
timely perform its related obligations within the periods therein provided, then
such Purchaser may rescind or withdraw, in its sole discretion from time to time
upon  written  notice to the Company, any relevant notice, demand or election in
whole  or  in part without prejudice to its future actions and rights; provided,
                                                                       --------
however,  in the case of a rescission of a conversion of a Debenture or exercise
-------
of  a  Warrant,  the  Purchaser shall be required to return any shares of Common
Stock subject to any such rescinded conversion or exercise notice.

     5.14     Replacement  of  Securities.  If  any  certificate  or  instrument
              ---------------------------
evidencing  any  Securities is mutilated, lost, stolen or destroyed, the Company
shall  issue  or  cause  to  be issued in exchange and substitution for and upon
cancellation thereof (in the case of mutilation), or in lieu of and substitution
therefor,  a  new  certificate  or instrument, but only upon receipt of evidence
reasonably  satisfactory  to the Company of such loss, theft or destruction. The
applicant  for  a  new  certificate or instrument under such circumstances shall
also  pay  any  reasonable  third-party  costs  (including  customary indemnity)
associated with the issuance of such replacement Securities.

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

     5.16     Payment  Set Aside. To the extent that the Company makes a payment
              ------------------
or payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or

                                       32
<PAGE>
exercises its rights thereunder, and such payment or payments or the proceeds of
such  enforcement  or exercise or any part thereof are subsequently invalidated,
declared  to be fraudulent or preferential, set aside, recovered from, disgorged
by  or are required to be refunded, repaid or otherwise restored to the Company,
a  trustee,  receiver  or  any  other  person  under any law (including, without
limitation,  any  bankruptcy  law, state or federal law, common law or equitable
cause  of  action), then to the extent of any such restoration the obligation or
part  thereof originally intended to be satisfied shall be revived and continued
in  full  force  and  effect  as  if  such  payment  had  not  been made or such
enforcement or setoff had not occurred.

     5.17     Usury.  To  the  extent  it may lawfully do so, the Company hereby
              -----
agrees  not  to insist upon or plead or in any manner whatsoever claim, and will
resist  any and all efforts to be compelled to take the benefit or advantage of,
usury  laws  wherever  enacted,  now  or  at  any  time  hereafter  in force, in
connection  with  any  claim,  action  or  proceeding that may be brought by any
Purchaser  in  order  to  enforce  any  right  or  remedy  under any Transaction
Document.  Notwithstanding  any  provision  to  the  contrary  contained  in any
Transaction  Document,  it  is  expressly  agreed  and  provided  that the total
liability  of  the  Company  under the Transaction Documents for payments in the
nature  of  interest  shall  not exceed the maximum lawful rate authorized under
applicable  law (the "Maximum Rate"), and, without limiting the foregoing, in no
                      ------------
event  shall  any  rate  of  interest or default interest, or both of them, when
aggregated with any other sums in the nature of interest that the Company may be
obligated to pay under the Transaction Documents exceed such Maximum Rate. It is
agreed  that  if  the  maximum  contract  rate  of  interest  allowed by law and
applicable  to the Transaction Documents is increased or decreased by statute or
any  official governmental action subsequent to the date hereof, the new maximum
contract  rate of interest allowed by law will be the Maximum Rate applicable to
the  Transaction  Documents  from  the  effective  date  forward,  unless  such
application  is  precluded  by  applicable  law.  If  under  any  circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to any
Purchaser  with  respect to indebtedness evidenced by the Transaction Documents,
such  excess  shall be applied by such Purchaser to the unpaid principal balance
of  any  such indebtedness or be refunded to the Company, the manner of handling
such excess to be at such Purchaser's election.

     5.18     Independent  Nature  of  Purchasers'  Obligations and Rights.  The
              ------------------------------------------------------------
obligations of each Purchaser under any Transaction Document are several and not
joint  with  the  obligations  of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance or non-performance of the obligations
of  any other Purchaser under any Transaction Document. Nothing contained herein
or  in  any  other  Transaction  Document,  and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an  association,  a  joint  venture  or  any  other  kind of entity, or create a
presumption  that  the Purchasers are in any way acting in concert or as a group
with  respect  to  such  obligations  or  the  transactions  contemplated by the
Transaction Documents. Each Purchaser shall be entitled to independently protect
and  enforce  its rights, including without limitation the rights arising out of
this  Agreement  or  out of the other Transaction Documents, and it shall not be
necessary  for  any  other  Purchaser to be joined as an additional party in any
proceeding  for  such  purpose.  Each  Purchaser has been represented by its own
separate  legal  counsel  in  their  review  and  negotiation of the Transaction
Documents.  For reasons of administrative convenience only, Purchasers and their
respective  counsel  have  chosen to communicate with the Company through FW. FW
does

                                       33
<PAGE>
not  represent  all of the Purchasers but only Crescent. The Company has elected
to  provide all Purchasers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or requested to do so
by the Purchasers.

     5.19     Liquidated  Damages.  The Company's obligations to pay any partial
              -------------------
liquidated  damages  or other amounts owing under the Transaction Documents is a
continuing  obligation  of  the Company and shall not terminate until all unpaid
partial  liquidated damages and other amounts have been paid notwithstanding the
fact  that  the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.

     5.20     Construction.  The  parties  agree  that each of them and/or their
              ------------
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities  are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.

                            (Signature Pages Follow)

                                       34
<PAGE>
     IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement  to  be duly executed by their respective authorized signatories as of
the  date  first  indicated  above.

UC HUB GROUP, INC.                              Address for Notice:
                                                -------------------

By:                                             10390 COMMERCE CENTER DRIVE
   -----------------------------------------    SUITE 250
   Name:                                        RANCHO CUCAMONGA, CALIFORNIA
   Title:                                       91730
                                                FACSIMILE:
                                                           ---------------
                                                ATTENTION:
                                                           ---------------

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

Norman T. Reynolds
Glast, Phillips & Murray, P.C.
815 Walker Street, Suite 1250
Houston, Texas 77002
713-237-3135 direct
713-237-3202 fax

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]

                                       35
<PAGE>
        [PURCHASER SIGNATURE PAGES TO UCHB SECURITIES PURCHASE AGREEMENT]

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

Name of Purchaser:
                  ------------------------------------------------------------

Signature of Authorized Signatory of Purchaser:
                                                ------------------------------

Name of Authorized Signatory:
                              ------------------------------------------------

Title of Authorized Signatory:
                               -----------------------------------------------

Email Address of Purchaser:
                            --------------------------------------------------

Facsimile Number of Purchaser:
                               -----------------------------------------------

Address for Notice of Purchaser:

Address for Delivery of Securities for Purchaser (if not same as above):

Subscription Amount:
                     ---------------------------

Principal Amount:
                  ---------------------------

Warrant Shares:
                ---------------------------

EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

                                       36
<PAGE>
                                                                         ANNEX A

                                CLOSING STATEMENT

Pursuant  to  the  attached  Securities Purchase Agreement, dated as of the date
hereto,  the  purchasers shall purchase up to $350,000 in Subscription Amount of
Debentures  and  Warrants from UC Hub Group Inc. (the "Company"). All funds will
                                                       -------
be  wired  into a trust account maintained by FWS, counsel to the Purchaser. All
funds will be disbursed in accordance with this Closing Statement.

DISBURSEMENT DATE: June __, 2006
--------------------------------------------------------------------------------

I.   PURCHASE  PRICE
     ---------------

                    GROSS PROCEEDS TO BE RECEIVED IN TRUST      $

II.  DISBURSEMENTS
     -------------

                    Crescent (legal fees and expenses)          $10,000.00
                    Cantara (arrangement fee)                   $35,000.00
                                                                $
                                                                $
                                                                $

TOTAL AMOUNT DISBURSED:                                         $

WIRE INSTRUCTIONS:
------------------

To:
     -------------------------------------

To:
     -------------------------------------

                                       37NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
HAVE  BEEN  REGISTERED  WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION  OR THE
SECURITIES  COMMISSION  OF  ANY  STATE  IN  RELIANCE  UPON  AN  EXEMPTION  FROM
REGISTRATION  UNDER  THE  SECURITIES  ACT  OF  1933, AS AMENDED (THE "SECURITIES
ACT"),  AND,  ACCORDINGLY,  MAY  NOT  BE  OFFERED  OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE  REGISTRATION  STATEMENT  UNDER  THE  SECURITIES ACT OR PURSUANT TO AN
AVAILABLE  EXEMPTION  FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS  OF  THE  SECURITIES  ACT  AND  IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES  LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH  EFFECT,  THE  SUBSTANCE  OF  WHICH  SHALL  BE REASONABLY ACCEPTABLE TO THE
COMPANY.  THIS  SECURITY  AND  THE  SECURITIES  ISSUABLE UPON CONVERSION OF THIS
SECURITY  MAY  BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN  SECURED  BY  SUCH  SECURITIES.

Original Issue Date: June 7, 2006
Original Conversion Price (subject to adjustment herein):   $0.05

                                                                        $378,000

         ORIGINAL ISSUE DISCOUNT SELF-LIQUIDATING CONVERTIBLE DEBENTURE
                                DUE JUNE 7, 2008

     THIS  ORIGINAL ISSUE DISCOUNT SELF-LIQUIDATING CONVERTIBLE DEBENTURE is one
of  a  series  of  duly  authorized  and  validly issued Original Issue Discount
Self-Liquidating  Convertible  Debentures  of  UC  Hub  Group  Inc.,  a  Nevada
corporation, having its principal place of business at 285 E. Warm Springs Road,
Las  Vegas,  NV 89119 (the "Company"), designated as its Original Issue Discount
                            -------
Self-Liquidating  Convertible  Debenture,  due June 7, 2008 (this debenture, the
"Debenture"  and  collectively  with  the  other  such series of debentures, the
 ---------
"Debentures").
 ----------

     FOR  VALUE  RECEIVED, the Company promises to pay to Crescent International
Ltd.  or  its  registered assigns (the "Holder"), or shall have paid pursuant to
                                        ------
the  terms  hereunder,  the  principal  sum of $378,000 by June 7, 2008, or such
earlier date as this Debenture is required or permitted to be repaid as provided
hereunder  (the  "Maturity  Date").  This  Debenture is subject to the following
                  --------------
additional  provisions:

     Section  1.     Definitions.  For  the  purposes hereof, in addition to the
     ----------      -----------
terms  defined  elsewhere in this Debenture, (a) capitalized terms not otherwise
defined  herein  shall have the meanings set forth in the Purchase Agreement and
(b)  the  following  terms  shall  have  the  following  meanings:

          "Alternate  Consideration" shall have the meaning set forth in Section
           ------------------------
5(e).

                                        1
<PAGE>
          "Bankruptcy  Event" means any of the following events: (a) the Company
           -----------------
     or  any  Significant Subsidiary (as such term is defined in Rule 1-02(w) of
     Regulation  S-X)  thereof  commences  a  case or other proceeding under any
     bankruptcy,  reorganization,  arrangement,  adjustment  of  debt, relief of
     debtors,  dissolution,  insolvency  or  liquidation  or  similar law of any
     jurisdiction relating to the Company or any Significant Subsidiary thereof;
     (b)  there  is  commenced against the Company or any Significant Subsidiary
     thereof  any  such  case or proceeding that is not dismissed within 60 days
     after  commencement;  (c) the Company or any Significant Subsidiary thereof
     is  adjudicated insolvent or bankrupt or any order of relief or other order
     approving  any  such  case or proceeding is entered; (d) the Company or any
     Significant  Subsidiary thereof suffers any appointment of any custodian or
     the  like  for  it  or  any  substantial  part  of its property that is not
     discharged  or  stayed  within 60 calendar days after such appointment; (e)
     the  Company  or  any  Significant  Subsidiary  thereof  makes  a  general
     assignment for the benefit of creditors; (f) the Company or any Significant
     Subsidiary  thereof  calls  a  meeting  of  its  creditors  with  a view to
     arranging  a  composition, adjustment or restructuring of its debts; or (g)
     the Company or any Significant Subsidiary thereof, by any act or failure to
     act, expressly indicates its consent to, approval of or acquiescence in any
     of  the foregoing or takes any corporate or other action for the purpose of
     effecting  any  of  the  foregoing.

          "Base  Conversion  Price"  shall have the meaning set forth in Section
           -----------------------
     5(b).

          "Business  Day"  means  any day except Saturday, Sunday, any day which
           -------------
     shall  be  a federal legal holiday in the United States or any day on which
     banking institutions in the State of New York are authorized or required by
     law  or  other  governmental  action  to  close.

          "Buy-In"  shall  have  the  meaning  set  forth  in  Section  4(d)(v).
           ------

          "Change  of  Control  Transaction" means the occurrence after the date
           --------------------------------
     hereof  of any of (i) an acquisition after the date hereof by an individual
     or  legal  entity  or "group" (as described in Rule 13d-5(b)(1) promulgated
     under  the  Exchange  Act)  of  effective control (whether through legal or
     beneficial  ownership  of  capital  stock  of  the  Company, by contract or
     otherwise)  of  in  excess  of  33% of the voting securities of the Company
     (other  than  by  means of conversion or exercise of the Debentures and the
     Securities issued together with the Debentures), or (ii) the Company merges
     into  or  consolidates  with any other Person, or any Person merges into or
     consolidates with the Company and, after giving effect to such transaction,
     the  stockholders  of the Company immediately prior to such transaction own
     less than 66% of the aggregate voting power of the Company or the successor
     entity  of such transaction, or (iii) the Company sells or transfers all or
     substantially  all  of its assets to another Person and the stockholders of
     the  Company immediately prior to such transaction own less than 66% of the
     aggregate  voting  power  of  the  acquiring  entity  immediately after the
     transaction,  or  (iv)  a  replacement  at  one time or within a three year
     period  of  more  than  one-half  of  the members of the Company's board of
     directors  which  is  not  approved  by  a  majority  of

                                        2
<PAGE>
     those  individuals  who  are  members of the board of directors on the date
     hereof  (or by those individuals who are serving as members of the board of
     directors  on  any  date  whose  nomination  to  the board of directors was
     approved  by  a  majority  of the members of the board of directors who are
     members  on  the  date  hereof),  or (v) the execution by the Company of an
     agreement  to  which  the  Company  is  a  party  or  by which it is bound,
     providing  for  any  of  the  events  set forth in clauses (i) through (iv)
     above.

          "Closing  Price"  means  on  any particular date (a) the last reported
           --------------
     closing  bid  price  per  share of Common Stock on such date on the Trading
     Market  (as  reported by Bloomberg L.P. at 4:15 p.m. (New York City time)),
     or  (b)  if there is no such price on such date, then the closing bid price
     on  the Trading Market on the date nearest preceding such date (as reported
     by  Bloomberg L.P. at 4:15 p.m. (New York City time)), or (c) if the Common
     Stock  is not then listed or quoted on the Trading Market and if prices for
     the  Common  Stock are then reported in the "pink sheets" published by Pink
     Sheets LLC (or a similar organization or agency succeeding to its functions
     of  reporting  prices),  the  most recent bid price per share of the Common
     Stock  so  reported,  or  (d)  if  the  shares of Common Stock are not then
     publicly  traded  the  fair  market  value  of  a  share of Common Stock as
     determined  by  an  appraiser selected in good faith by the Purchasers of a
     majority  in  interest  of  the  Shares  then  outstanding.

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

          "Conversion  Date"  shall  have the meaning set forth in Section 4(a).
           ----------------

          "Conversion  Price"  shall have the meaning set forth in Section 4(b).
           -----------------

          "Conversion  Shares"  means,  collectively, the shares of Common Stock
           ------------------
     issuable  upon  conversion  of  this Debenture in accordance with the terms
     hereof.

          "Debenture Register" shall have the meaning set forth in Section 2(c).
           ------------------

          "Dilutive  Issuance" shall have the meaning set forth in Section 5(b).
           ------------------

          "Dilutive Issuance Notice" shall have the meaning set forth in Section
           ------------------------
     5(b).

          "Effectiveness  Period"  shall  have  the  meaning  set  forth  in the
           ---------------------
     Registration  Rights  Agreement.

          "Equity Conditions" shall mean, during the period in question, (i) the
           -----------------
     Company  shall  have duly honored all conversions and redemptions scheduled
     to occur or occurring by virtue of one or more Notices of Conversion of the
     Holder, if any, (ii) the Company shall have paid all liquidated damages and
     other amounts owing to the Holder in respect of this Debenture, (iii) there
     is  an  effective  Registration  Statement  pursuant to which the Holder is
     permitted  to utilize the prospectus thereunder to resell all of the shares
     issuable

                                        3
<PAGE>
     pursuant  to  the  Transaction Documents (and the Company believes, in good
     faith,  that  such  effectiveness  will  continue  uninterrupted  for  the
     foreseeable  future),  (iv) the Common Stock is trading on a Trading Market
     and  all  of  the shares issuable pursuant to the Transaction Documents are
     listed  for  trading  on  such Trading Market (and the Company believes, in
     good  faith,  that  trading  of  the  Common Stock on a Trading Market will
     continue  uninterrupted  for  the  foreseeable  future),  (v)  there  is  a
     sufficient  number  of  authorized  but  unissued  and otherwise unreserved
     shares  of  Common  Stock  for  the  issuance of all of the shares issuable
     pursuant  to  the Transaction Documents, (vi) there is no existing Event of
     Default  or no existing event which, with the passage of time or the giving
     of  notice, would constitute an Event of Default, (vii) the issuance of the
     shares  in  question (or, in the case of an Optional or Monthly Redemption,
     the  shares  issuable  upon  conversion  in full of the Optional Redemption
     Amount  or  the  Monthly Redemption Amount) to the Holder would not violate
     the  limitations set forth in Section 4(c)(i) herein, (viii) there has been
     no  public announcement of a pending or proposed Fundamental Transaction or
     Change  of  Control  Transaction that has not been consummated and (ix) the
     Holder  is  not  in  possession of any information furnished by the Company
     that  constitutes,  or  may  constitute,  material  non-public information.

          "Event  of  Default"  shall  have  the meaning set forth in Section 8.
           ------------------

          "Exchange  Act" means the Securities Exchange Act of 1934, as amended,
           -------------
     and  the  rules  and  regulations  promulgated  thereunder.

          "Fundamental  Transaction" shall have the meaning set forth in Section
           ------------------------
     5(e).

          "Late  Fees"  shall  have  the  meaning  set  forth  in  Section 2(d).
           ----------

          "Mandatory  Default  Amount"  means  the sum of (i) the greater of (A)
           --------------------------
     130%  of  the  outstanding  principal  amount  of  this Debenture, plus all
     liquidated  damages and other amounts owed to the Holder in connection with
     the  Debenture,  or (B) the outstanding principal amount of this Debenture,
     plus  all  liquidated  damages  and  other  amounts  owed  to the Holder in
     connection  with the Debenture, divided by the Conversion Price on the date
     the Mandatory Default Amount is either (a) demanded (if demand or notice is
     required  to  create  an  Event of Default) or otherwise due or (b) paid in
     full, whichever has a lower Conversion Price, multiplied by the VWAP on the
     date  the  Mandatory Default Amount is either (x) demanded or otherwise due
     or  (y)  paid  in  full,  whichever  has  a higher VWAP, and (ii) all other
     amounts,  costs,  expenses  and  liquidated  damages due in respect of this
     Debenture.

          "Monthly  Conversion  Period"  shall  have  the  meaning  set forth in
           ---------------------------
     Section  6(b)  hereof.

          "Monthly Conversion Price" shall have the meaning set forth in Section
           ------------------------
     6(b)  hereof.

                                        4
<PAGE>
          "Monthly  Redemption"  means the redemption of this Debenture pursuant
           -------------------
     to  Section  6(b)  hereof.

          "Monthly  Redemption  Amount"  means,  as to a Monthly Redemption, the
           ---------------------------
     sum  of  (i)  $21,000  in  principal  amount  of the Debenture and (ii) all
     liquidated  damages and other amounts owed to the Holder in connection with
     the  Debenture.

          "Monthly  Redemption  Date" means the 1st of each month, commencing on
           -------------------------
     the first such date following the earlier of (a) 30 calendar days following
     the Effective Date and (b) 180 calendar days following the Closing Date and
     terminating  upon  the  full  redemption  of  this  Debenture.

          "Monthly  Redemption  Notice"  shall  have  the  meaning  set forth in
           ---------------------------
     Section  6(b)  hereof.

          "Monthly  Redemption  Period"  shall  have  the  meaning  set forth in
           ---------------------------
     Section  6(a)  hereof.

          "Monthly  Redemption Share Amount" shall have the meaning set forth in
           --------------------------------
     Section  6(b)  hereof.

          "New  York  Courts"  shall have the meaning set forth in Section 9(d).
           -----------------

          "Notice  of  Conversion"  shall  have the meaning set forth in Section
           ----------------------
     4(a).

          "Optional  Redemption"  shall  have  the  meaning set forth in Section
           --------------------
     6(a).

          "Optional  Redemption  Amount"  means  the  sum  of  (i)  110%  of the
           ----------------------------
     Principal  Amount of the Debenture then outstanding and (ii) all liquidated
     damages  and  other  amounts  due  in  respect  of  the  Debenture.

          "Optional Redemption Date" shall have the meaning set forth in Section
           ------------------------
     6(a).

          "Optional  Redemption  Notice"  shall  have  the  meaning set forth in
           ----------------------------
     Section  6(a).

          "Optional  Redemption Notice Date" shall have the meaning set forth in
           --------------------------------
     Section  6(a).

          "Original  Issue  Date"  means  the  date of the first issuance of the
           ---------------------
     Debentures,  regardless of any transfers of any Debenture and regardless of
     the  number of instruments which may be issued to evidence such Debentures.

          "Permitted  Indebtedness"  means  (a) the Indebtedness existing on the
           -----------------------
     Original  Issue  Date  and  set  forth  on Schedule 3.1(aa) attached to the
                                                ----------------
     Purchase  Agreement  and  (b)  lease  obligations  and  purchase  money
     indebtedness  of  up  to  $500,000,  in  the  aggregate,

                                        5
<PAGE>
     incurred  in  connection  with  the acquisition of capital assets and lease
     obligations  with  respect  to  newly  acquired  or  leased  assets.

          "Permitted  Lien" means the individual and collective reference to the
           ---------------
     following:  (a) Liens for taxes, assessments and other governmental charges
     or  levies  not  yet  due  or  Liens  for  taxes,  assessments  and  other
     governmental  charges  or  levies  being  contested  in  good  faith and by
     appropriate  proceedings  for  which  adequate  reserves (in the good faith
     judgment  of  the  management  of  the  Company)  have  been established in
     accordance  with  GAAP; (b) Liens imposed by law which were incurred in the
     ordinary  course  of  the  Company's  business,  such  as  carriers',
     warehousemen's  and mechanics' Liens, statutory landlords' Liens, and other
     similar Liens arising in the ordinary course of the Company's business, and
     which  (x)  do not individually or in the aggregate materially detract from
     the  value  of such property or assets or materially impair the use thereof
     in  the  operation  of  the  business  of  the Company and its consolidated
     Subsidiaries  or  (y)  are  being  contested  in  good faith by appropriate
     proceedings,  which  proceedings  have  the  effect  of  preventing for the
     foreseeable  future the forfeiture or sale of the property or asset subject
     to  such  Lien;  and  (c)  Liens  incurred  in  connection  with  Permitted
     Indebtedness  under clause (b) thereunder, provided that such Liens are not
     secured  by assets of the Company or its Subsidiaries other than the assets
     so  acquired  or  leased.

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

           "Pre-Redemption  Conversion  Shares" shall have the meaning set forth
            ----------------------------------
     in  Section  6(a)  hereof.

          "Purchase Agreement" means the Securities Purchase Agreement among the
           ------------------
     Company  and  the  original  Holders, dated as of June 6, 2006, as amended,
     modified  or  supplemented  from time to time in accordance with its terms.

          "Registration  Rights  Agreement"  means  the  Registration  Rights
           -------------------------------
     Agreement  among the Company and the original Holders, dated as of the date
     of  the  Purchase Agreement, as amended, modified or supplemented from time
     to  time  in  accordance  with  its  terms.

          "Registration Statement" means a registration statement that registers
           ----------------------
     the  resale of all Conversion Shares of the Holder, who shall be named as a
     "selling  stockholder"  therein,  and  meets  the  requirements  of  the
     Registration  Rights  Agreement.

          "Securities Act" means the Securities Act of 1933, as amended, and the
           --------------
     rules and regulations promulgated thereunder.

          "Share  Delivery  Date"  shall  have  the meaning set forth in Section
           ---------------------
     4(d).

          "Subsidiary"  shall  have  the  meaning  set  forth  in  the  Purchase
           ----------
     Agreement.

                                        6
<PAGE>
          "Trading  Day"  means  a  day on which the principal Trading Market is
           ------------
     open  for  business.

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

          "Transaction  Documents"  shall  have  the  meaning  set  forth in the
           ----------------------
     Purchase  Agreement.

          "VWAP"  means,  for any date, the price determined by the first of the
           ----
     following  clauses  that applies: (a) if the Common Stock is then listed or
     quoted  on a Trading Market, the daily volume weighted average price of the
     Common  Stock  for such date (or the nearest preceding date) on the Trading
     Market  on  which  the Common Stock is then listed or quoted for trading as
     reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York
     City time) to 4:02 p.m. (New York City time); (b) if the OTC Bulletin Board
     is  not  a  Trading Market, the volume weighted average price of the Common
     Stock  for  such  date  (or the nearest preceding date) on the OTC Bulletin
     Board;  (c)  if  the Common Stock is not then quoted for trading on the OTC
     Bulletin  Board and if prices for the Common Stock are then reported in the
     "Pink  Sheets"  published by Pink Sheets, LLC (or a similar organization or
     agency  succeeding  to  its functions of reporting prices), the most recent
     bid  price  per  share of the Common Stock so reported; or (d) in all other
     cases, the fair market value of a share of Common Stock as determined by an
     independent  appraiser  selected in good faith by the Holder and reasonably
     acceptable  to  the  Company.

     Section 2.     Interest.
     ---------      --------

          a)     No Payment of  Interest.  The Company shall not pay interest to
                 -----------------------
     the  Holder  on  this  Debenture.

          b)     Prepayment.  Except  as  otherwise set forth in this Debenture,
                 ----------
     the  Company  may  not  prepay  any portion of the principal amount of this
     Debenture  without  the  prior  written  consent  of  the  Holder.

     Section3.      Registration  of  Transfers  and  Exchanges.
     ---------      -------------------------------------------

          a)     Different  Denominations. This Debenture is exchangeable for an
                 ------------------------
     equal  aggregate  principal  amount  of  Debentures of different authorized
     denominations, as requested by the Holder surrendering the same. No service
     charge  will  be  payable  for  such  registration of transfer or exchange.

          b)     Investment  Representations.  This  Debenture  has  been issued
                 ---------------------------
     subject  to  certain  investment representations of the original Holder set
     forth  in  the  Purchase

                                        7
<PAGE>
     Agreement  and  may be transferred or exchanged only in compliance with the
     Purchase  Agreement  and  applicable  federal and state securities laws and
     regulations.

          c)     Reliance  on  Debenture  Register. Prior to due presentment for
                 ---------------------------------
     transfer to the Company of this Debenture, the Company and any agent of the
     Company  may  treat  the  Person  in  whose  name  this  Debenture  is duly
     registered on the Debenture Register as the owner hereof for the purpose of
     receiving payment as herein provided and for all other purposes, whether or
     not  this  Debenture is overdue, and neither the Company nor any such agent
     shall  be  affected  by  notice  to  the  contrary.

     Section  4.       Conversion.
     -----------       ----------

          a)     Voluntary Conversion. At any time after the Original Issue Date
                 --------------------
     until  this  Debenture  is  no  longer outstanding, this Debenture shall be
     convertible, in whole or in part, into shares of Common Stock at the option
     of the Holder, at any time and from time to time (subject to the conversion
     limitations  set  forth  in  Section  4(c) hereof). The Holder shall effect
     conversions  by  delivering to the Company a Notice of Conversion, the form
     of  which  is  attached  hereto  as  Annex  A  (a  "Notice of Conversion"),
                                          --------       --------------------
     specifying  therein  the principal amount of this Debenture to be converted
     and  the  date  on  which  such conversion shall be effected (a "Conversion
                                                                      ----------
     Date").  If  no Conversion Date is specified in a Notice of Conversion, the
     ----
     Conversion  Date shall be the date that such Notice of Conversion is deemed
     delivered  hereunder. To effect conversions hereunder, the Holder shall not
     be  required  to  physically surrender this Debenture to the Company unless
     the  entire principal amount of this Debenture, plus all liquidated damages
     and  other amounts owed to the Holder in connection with the Debenture, has
     been  so converted. Conversions hereunder shall have the effect of lowering
     the  outstanding  principal  amount of this Debenture in an amount equal to
     the  applicable  conversion.  The  Holder  and  the  Company shall maintain
     records  showing  the  principal  amount(s)  converted and the date of such
     conversion(s).  The  Company  may  deliver  an  objection  to any Notice of
     Conversion  within 1 Business Day of delivery of such Notice of Conversion.
     In the event of any dispute or discrepancy, the records of the Holder shall
     be  controlling  and  determinative  in  the absence of manifest error. THE
     HOLDER,  AND  ANY ASSIGNEE BY ACCEPTANCE OF THIS DEBENTURE, ACKNOWLEDGE AND
     AGREE  THAT,  BY  REASON  OF  THE  PROVISIONS  OF THIS PARAGRAPH, FOLLOWING
     CONVERSION  OF  A  PORTION  OF  THIS  DEBENTURE, THE UNPAID AND UNCONVERTED
     PRINCIPAL  AMOUNT  OF  THIS DEBENTURE MAY BE LESS THAN THE AMOUNT STATED ON
     THE  FACE  HEREOF.

          b)     Conversion  Price.  The  conversion  price  in  effect  on  any
                 -----------------
     Conversion Date shall be equal to $0.05 (subject to adjustment herein) (the
     "Conversion  Price").
      -----------------

          c)     Conversion  Limitations.
                 -----------------------

               i.     Holder's  Restriction on Conversion. The Company shall not
                      -----------------------------------
          effect  any  conversion of this Debenture, and a Holder shall not have
          the right to convert any portion of this Debenture, to the extent that
          after  giving  effect  to  the  conversion set forth on the applicable
          Notice  of  Conversion,  such  Holder

                                        8
<PAGE>
          (together  with  such  Holder's  Affiliates,  and  any other person or
          entity  acting  as  a  group  together with such Holder or any of such
          Holder's  Affiliates)  would  beneficially  own  in  excess  of  the
          Beneficial  Ownership  Limitation  (as defined below). For purposes of
          the  foregoing  sentence,  the  number  of  shares  of  Common  Stock
          beneficially owned by such Holder and its Affiliates shall include the
          number  of  shares  of  Common  Stock issuable upon conversion of this
          Debenture  with respect to which such determination is being made, but
          shall  exclude the number of shares of Common Stock which are issuable
          upon  (A) conversion of the remaining, unconverted principal amount of
          this  Debenture  beneficially  owned  by  such  Holder  or  any of its
          Affiliates  and  (B)  exercise  or  conversion  of  the unexercised or
          unconverted  portion of any other securities of the Company subject to
          a  limitation  on  conversion  or exercise analogous to the limitation
          contained  herein (including, without limitation, any other Debentures
          or  the  Warrants)  beneficially  owned  by  such Holder or any of its
          Affiliates.  Except  as  set  forth  in  the  preceding  sentence, for
          purposes  of  this  Section  4(c)(i),  beneficial  ownership  shall be
          calculated  in  accordance  with Section 13(d) of the Exchange Act and
          the  rules  and regulations promulgated thereunder. To the extent that
          the  limitation  contained  in  this  Section  4(c)(i)  applies,  the
          determination of whether this Debenture is convertible (in relation to
          other  securities  owned  by such Holder together with any Affiliates)
          and  of  which principal amount of this Debenture is convertible shall
          be  in  the  sole  discretion  of such Holder, and the submission of a
          Notice of Conversion shall be deemed to be such Holder's determination
          of  whether  this  Debenture  may  be  converted (in relation to other
          securities  owned  by  such  Holder  together with any Affiliates) and
          which  principal amount of this Debenture is convertible, in each case
          subject to such aggregate percentage limitations. To ensure compliance
          with  this restriction, each Holder will be deemed to represent to the
          Company  each time it delivers a Notice of Conversion that such Notice
          of  Conversion  has  not  violated  the restrictions set forth in this
          paragraph  and  the  Company  shall  have  no  obligation to verify or
          confirm  the  accuracy  of  such  determination.  In  addition,  a
          determination  as  to  any group status as contemplated above shall be
          determined  in  accordance  with Section 13(d) of the Exchange Act and
          the rules and regulations promulgated thereunder. For purposes of this
          Section  4(c)(i),  in  determining the number of outstanding shares of
          Common Stock, a Holder may rely on the number of outstanding shares of
          Common  Stock  as  stated in the most recent of the following: (A) the
          Company's  most recent Form 10-QSB or Form 10-KSB, as the case may be;
          (B)  a  more  recent public announcement by the Company; or (C) a more
          recent  notice  by the Company or the Transfer Agent setting forth the
          number of shares of Common Stock outstanding. Upon the written or oral
          request of a Holder, the Company shall within two Trading Days confirm
          orally  and  in  writing to such Holder the number of shares of Common
          Stock  then outstanding. In any case, the number of outstanding shares
          of  Common  Stock  shall  be  determined  after  giving  effect to the
          conversion  or  exercise  of securities of the Company, including this
          Debenture, by such Holder or its Affiliates since the date as of which
          such  number  of  outstanding shares of Common Stock was reported. The
          "Beneficial  Ownership  Limitation"  shall  be  4.99% of the number of
           ---------------------------------
          shares  of

                                        9
<PAGE>
          the  Common  Stock  outstanding immediately after giving effect to the
          issuance  of  shares  of Common Stock issuable upon conversion of this
          Debenture  held  by  the  Holder.  The Beneficial Ownership Limitation
          provisions  of  this  Section 4(c)(i) may be waived by such Holder, at
          the  election of such Holder, upon not less than 61 days' prior notice
          to the Company, to change the Beneficial Ownership Limitation to 9.99%
          of  the  number  of shares of the Common Stock outstanding immediately
          after  giving  effect  to  the issuance of shares of Common Stock upon
          conversion  of this Debenture held by the Holder and the provisions of
          this  Section 4(c)(i) shall continue to apply. Upon such a change by a
          Holder  of  the  Beneficial  Ownership  Limitation  from  such  4.99%
          limitation  to  such  9.99%  limitation,  the  Beneficial  Ownership
          Limitation may not be further waived by such Holder. The provisions of
          this  paragraph  shall  be  construed  and  implemented  in  a  manner
          otherwise  than  in  strict  conformity with the terms of this Section
          4(c)(i) to correct this paragraph (or any portion hereof) which may be
          defective  or  inconsistent  with  the  intended  Beneficial Ownership
          Limitation  herein  contained  or  to  make  changes  or  supplements
          necessary or desirable to properly give effect to such limitation. The
          limitations  contained  in  this  paragraph shall apply to a successor
          holder  of  this  Debenture.

          d)     Mechanics  of  Conversion.
                 -------------------------

               i.     Conversion  Shares  Issuable  Upon Conversion of Principal
                      ----------------------------------------------------------
          Amount.  The  number  of  shares  of  Common  Stock  issuable  upon  a
          ------
          conversion  hereunder  shall be determined by the quotient obtained by
          dividing  (x) the outstanding principal amount of this Debenture to be
          converted  by  (y)  the  Conversion  Price.

               ii.     Delivery of Certificate Upon Conversion. Not later than 3
                       ---------------------------------------
          Trading  Days  after each Conversion Date (the "Share Delivery Date"),
                                                          -------------------
          the Company shall deliver, or cause to be delivered, to the Holder (A)
          a  certificate  or  certificates  representing  the  Conversion Shares
          which,  on  or  after the Effective Date, shall be free of restrictive
          legends  and  trading restrictions (other than those which may then be
          required  by the Purchase Agreement) representing the number of shares
          of  Common  Stock being acquired upon the conversion of this Debenture
          and (B) a bank check in the amount of all liquidated damages and other
          amounts  owed  to  the  Holder in connection with the Debenture. On or
          after  the  Effective  Date, the Company shall use its best efforts to
          deliver  any  certificate  or certificates required to be delivered by
          the Company under this Section 4 electronically through the Depository
          Trust  Company  or another established clearing corporation performing
          similar  functions.

               iii.     Failure  to Deliver Certificates.  If in the case of any
                        --------------------------------
          Notice  of  Conversion  such  certificate  or  certificates  are  not
          delivered  to  or  as  directed  by the applicable Holder by the third
          Trading Day after the Conversion Date, the Holder shall be entitled to
          elect  by  written  notice to the Company at any time on or before its
          receipt  of  such  certificate  or  certificates,  to  rescind  such
          Conversion,

                                       10
<PAGE>
          in  which  event  the  Company shall promptly return to the Holder any
          original  Debenture  delivered  to  the  Company  and the Holder shall
          promptly  return  the  Common  Stock  certificates  representing  the
          principal  amount  of  this  Debenture  tendered for conversion to the
          Company.

               iv.     Obligation  Absolute;  Partial  Liquidated  Damages.  The
                       ---------------------------------------------------
          Company's  obligations to issue and deliver the Conversion Shares upon
          conversion  of  this Debenture in accordance with the terms hereof are
          absolute  and unconditional, irrespective of any action or inaction by
          the  Holder to enforce the same, any waiver or consent with respect to
          any  provision hereof, the recovery of any judgment against any Person
          or  any  action  to  enforce  the  same,  or any setoff, counterclaim,
          recoupment, limitation or termination, or any breach or alleged breach
          by  the Holder or any other Person of any obligation to the Company or
          any  violation  or alleged violation of law by the Holder or any other
          Person,  and  irrespective  of  any  other  circumstance  which  might
          otherwise  limit  such  obligation  of  the  Company  to the Holder in
          connection  with  the  issuance  of  such Conversion Shares; provided,
                                                                       --------
          however,  that  such  delivery  shall  not  operate as a waiver by the
          -------
          Company of any such action the Company may have against the Holder. In
          the  event  the Holder of this Debenture shall elect to convert any or
          all  of  the  outstanding principal amount hereof, the Company may not
          refuse  conversion  based  on  any  claim  that  the  Holder or anyone
          associated  or  affiliated  with  the  Holder  has been engaged in any
          violation  of  law,  agreement  or  for  any  other  reason, unless an
          injunction  from  a  court,  on  notice  to Holder, restraining and or
          enjoining  conversion of all or part of this Debenture shall have been
          sought  and  obtained,  and  the  Company  posts a surety bond for the
          benefit  of  the  Holder  in  the  amount  of  150% of the outstanding
          principal  amount  of  this  Debenture,  which  is  subject  to  the
          injunction,  which bond shall remain in effect until the completion of
          arbitration/litigation  of  the underlying dispute and the proceeds of
          which  shall  be  payable  to  such  Holder  to  the extent it obtains
          judgment.  In  the absence of such injunction, the Company shall issue
          Conversion  Shares  or,  if  applicable, cash, upon a properly noticed
          conversion.  If  the  Company  fails  for any reason to deliver to the
          Holder  such  certificate or certificates pursuant to Section 4(d)(ii)
          by  the  Share Delivery Date, the Company shall pay to such Holder, in
          cash,  as  liquidated  damages and not as a penalty, for each $1000 of
          principal  amount  being converted, $10 per Trading Day (increasing to
          $20  per  Trading  Day  on the fifth Trading Day after such liquidated
          damages begin to accrue) for each Trading Day after the Share Delivery
          Date until such certificates are delivered. Nothing herein shall limit
          a  Holder's  right  to  pursue  actual  damages or declare an Event of
          Default  pursuant  to  Section  8  hereof for the Company's failure to
          deliver  Conversion Shares within the period specified herein and such
          Holder  shall  have  the  right to pursue all remedies available to it
          hereunder, at law or in equity including, without limitation, a decree
          of  specific performance and/or injunctive relief. The exercise of any
          such  rights  shall  not  prohibit  the Holder from seeking to enforce
          damages  pursuant to any other Section hereof or under applicable law.

                                       11
<PAGE>
               v.     Compensation  for  Buy-In on  Failure  to  Timely  Deliver
                      ----------------------------------------------------------
          Certificates  Upon  Conversion.   In  addition  to  any  other  rights
          ------------------------------
          available  to  the  Holder,  if  the  Company  fails for any reason to
          deliver  to  the  Holder such certificate or certificates by the Share
          Delivery  Date  pursuant  to Section 4(d)(ii), and if after such Share
          Delivery Date the Holder is required by its brokerage firm to purchase
          (in an open market transaction or otherwise) shares of Common Stock to
          deliver  in  satisfaction  of  a sale by such Holder of the Conversion
          Shares  which  the  Holder was entitled to receive upon the conversion
          relating  to  such  Share Delivery Date (a "Buy-In"), then the Company
                                                      ------
          shall (A) pay in cash to the Holder (in addition to any other remedies
          available  to  or  elected  by the Holder) the amount by which (x) the
          Holder's  total  purchase  price (including any brokerage commissions)
          for  the  Common Stock so purchased exceeds (y) the product of (1) the
          aggregate  number  of  shares  of  Common  Stock  that such Holder was
          entitled to receive from the conversion at issue multiplied by (2) the
          actual sale price at which the sell order giving rise to such purchase
          obligation  was executed (including any brokerage commissions) and (B)
          at  the  option  of  the  Holder, either reissue (if surrendered) this
          Debenture  in  a principal amount equal to the principal amount of the
          attempted  conversion or deliver to the Holder the number of shares of
          Common  Stock  that  would  have been issued if the Company had timely
          complied  with  its  delivery requirements under Section 4(d)(ii). For
          example,  if the Holder purchases Common Stock having a total purchase
          price  of  $11,000  to  cover  a  Buy-In  with respect to an attempted
          conversion  of  this  Debenture  with respect to which the actual sale
          price  of  the Conversion Shares (including any brokerage commissions)
          giving  rise  to such purchase obligation was a total of $10,000 under
          clause (A) of the immediately preceding sentence, the Company shall be
          required  to  pay  the  Holder  $1,000.  The  Holder shall provide the
          Company written notice indicating the amounts payable to the Holder in
          respect  of  the  Buy-In and, upon request of the Company, evidence of
          the  amount  of such loss. Nothing herein shall limit a Holder's right
          to  pursue  any other remedies available to it hereunder, at law or in
          equity including, without limitation, a decree of specific performance
          and/or  injunctive  relief  with  respect  to the Company's failure to
          timely  deliver  certificates representing shares of Common Stock upon
          conversion of this Debenture as required pursuant to the terms hereof.

               vi.     Reservation  of  Shares  Issuable  Upon  Conversion.  The
                       ---------------------------------------------------
          Company covenants that it will at all times reserve and keep available
          out of its authorized and unissued shares of Common Stock for the sole
          purpose  of  issuance  upon  conversion  of  this Debenture, free from
          preemptive  rights  or  any other actual contingent purchase rights of
          Persons  other  than  the  Holder  (and  the  other  holders  of  the
          Debentures),  not  less  than  such  aggregate number of shares of the
          Common  Stock  as shall (subject to the terms and conditions set forth
          in  the  Purchase  Agreement)  be  issuable  (taking  into account the
          adjustments  and restrictions of Section 5) upon the conversion of the
          outstanding  principal amount of this Debenture. The Company covenants
          that  all  shares  of  Common  Stock  that  shall

                                       12
<PAGE>
          be  so issuable shall, upon issue, be duly authorized, validly issued,
          fully  paid  and  nonassessable  and, if the Registration Statement is
          then  effective  under  the  Securities  Act,  shall be registered for
          public  sale  in  accordance  with  such  Registration  Statement.

               vii.     Fractional  Shares.  Upon  a  conversion  hereunder  the
                        ------------------
          Company shall not be required to issue stock certificates representing
          fractions  of  shares of Common Stock, but may if otherwise permitted,
          make  a cash payment in respect of any final fraction of a share based
          on  the VWAP at such time. If the Company elects not, or is unable, to
          make  such a cash payment, the Holder shall be entitled to receive, in
          lieu  of the final fraction of a share, 1 whole share of Common Stock.

               viii.     Transfer  Taxes.   The  issuance  of  certificates  for
                         ---------------
          shares  of  the  Common Stock on conversion of this Debenture shall be
          made  without charge to the Holder hereof for any documentary stamp or
          similar  taxes that may be payable in respect of the issue or delivery
          of  such certificates, provided that the Company shall not be required
          to pay any tax that may be payable in respect of any transfer involved
          in  the  issuance and delivery of any such certificate upon conversion
          in a name other than that of the Holder of this Debenture so converted
          and  the  Company  shall  not  be  required  to  issue or deliver such
          certificates  unless  or  until  the  person or persons requesting the
          issuance thereof shall have paid to the Company the amount of such tax
          or shall have established to the satisfaction of the Company that such
          tax  has  been  paid.

     Section  5.     Certain  Adjustments.
     ----------      --------------------

          a)     Stock Dividends and Stock Splits.  If the  Company, at any time
                 --------------------------------
     while this Debenture is outstanding: (A) pays a stock dividend or otherwise
     makes  a distribution or distributions payable in shares of Common Stock on
     shares  of  Common  Stock  or  any  Common  Stock  Equivalents  (which, for
     avoidance  of doubt, shall not include any shares of Common Stock issued by
     the  Company upon conversion of this Debenture); (B) subdivides outstanding
     shares  of  Common  Stock  into  a  larger  number  of shares; (C) combines
     (including  by  way  of a reverse stock split) outstanding shares of Common
     Stock  into  a  smaller  number of shares; or (D) issues, in the event of a
     reclassification of shares of the Common Stock, any shares of capital stock
     of the Company, then the Conversion Price shall be multiplied by a fraction
     of  which  the  numerator  shall  be  the  number of shares of Common Stock
     (excluding  any  treasury  shares  of  the Company) outstanding immediately
     before  such  event  and  of  which  the denominator shall be the number of
     shares  of  Common  Stock  outstanding  immediately  after  such event. Any
     adjustment made pursuant to this Section shall become effective immediately
     after  the  record  date  for the determination of stockholders entitled to
     receive  such  dividend  or  distribution  and  shall  become  effective
     immediately  after  the  effective  date  in  the  case  of  a subdivision,
     combination  or  re-classification.

                                       13
<PAGE>
          b)     Subsequent  Equity  Sales.  If  the  Company  or any Subsidiary
                 -------------------------
     thereof,  as  applicable,  at any time while this Debenture is outstanding,
     sells  or  grants  any  option  to purchase or sells or grants any right to
     reprice  its  securities,  or otherwise disposes of or issues (or announces
     any  sale, grant or any option to purchase or other disposition) any Common
     Stock or Common Stock Equivalents entitling any Person to acquire shares of
     Common  Stock  at  an effective price per share that is lower than the then
     Conversion  Price  (such  lower price, the "Base Conversion Price" and such
                                                 ---------------------
     issuances collectively, a "Dilutive Issuance") (if the holder of the Common
                                -----------------
     Stock  or  Common Stock Equivalents so issued shall at any time, whether by
     operation  of  purchase  price  adjustments,  reset  provisions,  floating
     conversion,  exercise  or exchange prices or otherwise, or due to warrants,
     options  or  rights  per  share  which  are  issued in connection with such
     issuance,  be  entitled  to  receive shares of Common Stock at an effective
     price  per  share  that  is  lower than the Conversion Price, such issuance
     shall be deemed to have occurred for less than the Conversion Price on such
     date  of the Dilutive Issuance), then the Conversion Price shall be reduced
     to  equal the Base Conversion Price. Such adjustment shall be made whenever
     such  Common  Stock or Common Stock Equivalents are issued. Notwithstanding
     the  foregoing,  no  adjustment  will  be  made  under this Section 5(b) in
     respect  of  an  Exempt  Issuance.  The  Company shall notify the Holder in
     writing,  no  later  than  the  Business  Day following the issuance of any
     Common  Stock  or  Common  Stock  Equivalents subject to this Section 5(b),
     indicating  therein  the  applicable  issuance  price,  or applicable reset
     price,  exchange  price,  conversion  price  and  other pricing terms (such
     notice,  the  "Dilutive  Issuance  Notice"). For purposes of clarification,
                    --------------------------
     whether  or not the Company provides a Dilutive Issuance Notice pursuant to
     this Section 5(b), upon the occurrence of any Dilutive Issuance, the Holder
     is  entitled  to  receive a number of Conversion Shares based upon the Base
     Conversion Price on or after the date of such Dilutive Issuance, regardless
     of whether the Holder accurately refers to the Base Conversion Price in the
     Notice  of  Conversion.

          c)     Subsequent Rights Offerings.  If the Company, at any time while
                 ---------------------------
     the  Debenture  is  outstanding, shall issue rights, options or warrants to
     all  holders  of  Common  Stock  (and  not  to  Holders)  entitling them to
     subscribe  for or purchase shares of Common Stock at a price per share that
     is  lower  than  the  VWAP  on  the  record date referenced below, then the
     Conversion Price shall be multiplied by a fraction of which the denominator
     shall  be  the number of shares of the Common Stock outstanding on the date
     of issuance of such rights or warrants plus the number of additional shares
     of  Common  Stock  offered  for  subscription or purchase, and of which the
     numerator  shall be the number of shares of the Common Stock outstanding on
     the  date  of issuance of such rights or warrants plus the number of shares
     which the aggregate offering price of the total number of shares so offered
     (assuming delivery to the Company in full of all consideration payable upon
     exercise  of such rights, options or warrants) would purchase at such VWAP.
     Such  adjustment shall be made whenever such rights or warrants are issued,
     and  shall  become  effective  immediately  after  the  record date for the
     determination  of  stockholders entitled to receive such rights, options or
     warrants.

                                       14
<PAGE>
          d)     Pro  Rata Distributions. If the Company, at any time while this
                 -----------------------
     Debenture  is  outstanding, distributes to all holders of Common Stock (and
     not to the Holders) evidences of its indebtedness or assets (including cash
     and  cash dividends) or rights or warrants to subscribe for or purchase any
     security  (other  than  the Common Stock, which shall be subject to Section
     5(b)),  then  in  each  such case the Conversion Price shall be adjusted by
     multiplying such Conversion Price in effect immediately prior to the record
     date  fixed  for  determination  of  stockholders  entitled to receive such
     distribution  by  a  fraction  of  which  the denominator shall be the VWAP
     determined  as  of  the  record  date  mentioned  above,  and  of which the
     numerator  shall be such VWAP on such record date less the then fair market
     value  at  such  record  date  of the portion of such assets or evidence of
     indebtedness so distributed applicable to 1 outstanding share of the Common
     Stock as determined by the Board of Directors of the Company in good faith.
     In  either case the adjustments shall be described in a statement delivered
     to the Holder describing the portion of assets or evidences of indebtedness
     so  distributed or such subscription rights applicable to 1 share of Common
     Stock. Such adjustment shall be made whenever any such distribution is made
     and  shall  become  effective  immediately  after the record date mentioned
     above.

          e)     Fundamental  Transaction.  If, at any time while this Debenture
                 ------------------------
     is  outstanding, (A) the Company effects any merger or consolidation of the
     Company  with  or  into another Person, (B) the Company effects any sale of
     all  or  substantially  all of its assets in one transaction or a series of
     related  transactions,  (C)  any tender offer or exchange offer (whether by
     the  Company  or  another Person) is completed pursuant to which holders of
     Common  Stock  are  permitted  to tender or exchange their shares for other
     securities,  cash  or  property,  or  (D)  the  Company  effects  any
     reclassification  of  the  Common  Stock  or  any compulsory share exchange
     pursuant  to  which  the  Common  Stock  is  effectively  converted into or
     exchanged  for  other  securities,  cash  or  property (in any such case, a
     "Fundamental  Transaction"),  then,  upon any subsequent conversion of this
      ------------------------
     Debenture,  the Holder shall have the right to receive, for each Conversion
     Share  that would have been issuable upon such conversion immediately prior
     to the occurrence of such Fundamental Transaction, the same kind and amount
     of  securities,  cash or property as it would have been entitled to receive
     upon  the  occurrence  of  such  Fundamental  Transaction  if  it had been,
     immediately prior to such Fundamental Transaction, the holder of 1 share of
     Common  Stock  (the  "Alternate  Consideration").  For purposes of any such
                           ------------------------
     conversion,  the  determination  of  the  Conversion  Price  shall  be
     appropriately  adjusted  to  apply to such Alternate Consideration based on
     the  amount  of  Alternate  Consideration issuable in respect of 1 share of
     Common  Stock  in  such  Fundamental  Transaction,  and  the  Company shall
     apportion  the  Conversion  Price  among  the  Alternate Consideration in a
     reasonable manner reflecting the relative value of any different components
     of  the  Alternate  Consideration. If holders of Common Stock are given any
     choice  as  to  the  securities,  cash  or  property  to  be  received in a
     Fundamental  Transaction, then the Holder shall be given the same choice as
     to  the  Alternate  Consideration  it  receives upon any conversion of this
     Debenture  following  such Fundamental Transaction. To the extent necessary
     to  effectuate  the  foregoing  provisions, any successor to the Company or
     surviving  entity in such Fundamental Transaction shall issue to the Holder
     a  new

                                       15
<PAGE>
     debenture  consistent  with  the  foregoing  provisions  and evidencing the
     Holder's  right to convert such debenture into Alternate Consideration. The
     terms  of  any  agreement  pursuant  to  which a Fundamental Transaction is
     effected  shall  include  terms  requiring  any such successor or surviving
     entity to comply with the provisions of this Section 5(e) and insuring that
     this  Debenture  (or  any  such  replacement  security)  will  be similarly
     adjusted  upon  any  subsequent  transaction  analogous  to  a  Fundamental
     Transaction.

          f)     Calculations.  All  calculations  under this Section 5 shall be
                 ------------
     made to the nearest cent or the nearest 1/100th of a share, as the case may
     be.  For  purposes  of this Section 5, the number of shares of Common Stock
     deemed  to be issued and outstanding as of a given date shall be the sum of
     the  number of shares of Common Stock (excluding any treasury shares of the
     Company)  issued  and  outstanding.

          g)     Notice  to  the  Holder.
                 -----------------------

               i.     Adjustment to Conversion  Price.  Whenever  the Conversion
                      -------------------------------
          Price  is  adjusted  pursuant  to any provision of this Section 5, the
          Company  shall promptly mail to each Holder a notice setting forth the
          Conversion  Price  after  such  adjustment  and  setting forth a brief
          statement  of  the  facts  requiring  such  adjustment. If the Company
          issues  a  variable  rate security, despite the prohibition thereon in
          the  Purchase  Agreement,  the  Company shall be deemed to have issued
          Common  Stock  or  Common  Stock  Equivalents  at  the lowest possible
          conversion or exercise price at which such securities may be converted
          or exercised in the case of a Variable Rate Transaction (as defined in
          the  Purchase  Agreement).

               ii.     Notice to Allow Conversion by Holder.  If (A) the Company
                       ------------------------------------
          shall  declare a dividend (or any other distribution in whatever form)
          on  the  Common  Stock,  (B)  the  Company  shall  declare  a  special
          nonrecurring cash dividend on or a redemption of the Common Stock, (C)
          the  Company shall authorize the granting to all holders of the Common
          Stock of rights or warrants to subscribe for or purchase any shares of
          capital  stock  of any class or of any rights, (D) the approval of any
          stockholders  of  the Company shall be required in connection with any
          reclassification  of  the Common Stock, any consolidation or merger to
          which  the  Company  is  a  party,  any  sale  or  transfer  of all or
          substantially  all  of  the  assets  of the Company, of any compulsory
          share  exchange  whereby  the  Common  Stock  is  converted into other
          securities,  cash  or  property or (E) the Company shall authorize the
          voluntary or involuntary dissolution, liquidation or winding up of the
          affairs of the Company, then, in each case, the Company shall cause to
          be  filed  at  each  office  or  agency  maintained for the purpose of
          conversion  of  this Debenture, and shall cause to be delivered to the
          Holder  at  its  last  address  as  it shall appear upon the Debenture
          Register,  at least 20 calendar days prior to the applicable record or
          effective date hereinafter specified, a notice stating (x) the date on
          which  a  record  is  to  be  taken  for  the  purpose  of  such

                                       16
<PAGE>
          dividend, distribution, redemption, rights or warrants, or if a record
          is  not  to  be  taken, the date as of which the holders of the Common
          Stock  of  record  to  be  entitled  to  such dividend, distributions,
          redemption, rights or warrants are to be determined or (y) the date on
          which  such reclassification, consolidation, merger, sale, transfer or
          share  exchange is expected to become effective or close, and the date
          as  of which it is expected that holders of the Common Stock of record
          shall  be  entitled  to  exchange their shares of the Common Stock for
          securities,  cash  or  other  property  deliverable  upon  such
          reclassification,  consolidation,  merger,  sale,  transfer  or  share
          exchange,  provided  that  the  failure  to deliver such notice or any
          defect  therein  or  in  the  delivery  thereof  shall  not affect the
          validity  of  the  corporate  action  required to be specified in such
          notice.  The  Holder  is entitled to convert this Debenture during the
          20-day  period  commencing  on  the  date  of  such notice through the
          effective  date  of  the  event  triggering  such  notice.

     Section  6.     Optional  Redemption; Monthly Redemption.
     ----------      ----------------------------------------

          a)     Optional  Redemption  at  Election  of Company.  Subject to the
                 ----------------------------------------------
     provisions of this Section 6, at any time after the 12-month anniversary of
     the  Closing  Date,  the  Company  may  deliver  a notice to the Holder (an
     "Optional  Redemption  Notice" and the date such notice is deemed delivered
      ----------------------------
     hereunder,  the  "Optional  Redemption  Notice  Date")  of  its irrevocable
                       ----------------------------------
     election  to redeem some or all of the then outstanding Debentures for cash
     in  an  amount  equal to the Optional Redemption Amount on the 20th Trading
     Day following the Optional Redemption Notice Date (such date, the "Optional
                                                                        --------
     Redemption  Date"  and  such  redemption,  the  "Optional Redemption"). The
     ----------------                                 -------------------
     Optional  Redemption  Amount  is payable in full on the Optional Redemption
     Date. The Company may only effect an Optional Redemption if on each Trading
     Day  during  the  period  commencing on the Optional Redemption Notice Date
     through  to the Optional Redemption Date and through and including the date
     payment  of  the  Optional  Redemption Amount is actually made, each of the
     Equity  Conditions  shall  have  been  met. If any of the Equity Conditions
     shall  cease  to be satisfied at any time during the 20 Trading Day period,
     then  the  Holder  may  elect  to nullify the Optional Redemption Notice by
     notice  to  the  Company within 3 Trading Days after the first day on which
     any  such  Equity  Condition  has  not  been  met  (provided  that if, by a
     provision  of the Transaction Documents, the Company is obligated to notify
     the  Holder of the non-existence of an Equity Condition, such notice period
     shall  be  extended  to  the third Trading Day after proper notice from the
     Company)  in  which  case  the Optional Redemption Notice shall be null and
     void,  ab  initio.  The Company covenants and agrees that it will honor all
            --  ------
     Notices  of  Conversion  tendered from the time of delivery of the Optional
     Redemption  Notice  through  the date all amounts owing thereon are due and
     paid  in  full.

          b)     Monthly  Redemption.  On  each  Monthly  Redemption  Date,  the
                 -------------------
     Company  shall  redeem  the  Monthly  Redemption  Amount  (the  "Monthly
                                                                      -------
     Redemption").  The  Monthly  Redemption  Amount  payable  on  each  Monthly
     ----------
     Redemption Date shall be paid in cash; provided, however, as to any Monthly
                                            --------  -------
     Redemption  and upon 15 Trading Days' prior written irrevocable notice (the
     "Monthly  Redemption  Notice"  and  the  15  Trading Day period immediately
      ---------------------------
     following  the Monthly Redemption Notice, the "Monthly Redemption Period"),
                                                    -------------------------
     in  lieu  of  a  cash  payment  the  Company  may  elect to pay all or part

                                       17
<PAGE>
     of  a Monthly Redemption Amount in Conversion Shares (such dollar amount to
     be  paid  on  a  Monthly Redemption Date in Conversion Shares, the "Monthly
                                                                         -------
     Redemption  Share  Amount") based on a conversion price equal to the lesser
     -------------------------
     of  (i)  the then Conversion Price and (ii) 80% of the average of the VWAPs
     for  the  10  consecutive  Trading  Days  ending on the Trading Day that is
     immediately  prior  to  the  applicable Monthly Redemption Date (subject to
     adjustment  for any stock dividend, stock split, stock combination or other
     similar event affecting the Common Stock during such 10 Trading Day period)
     (the price calculated during the 10 Trading Day period immediately prior to
     the  Monthly  Redemption  Date,  the "Monthly Conversion Price" and such 10
                                           ------------------------
     Trading  Day  period,  the "Monthly Conversion Period"); provided, further,
                                 -------------------------    --------  -------
     that  the  Company  may not pay the Monthly Redemption Amount in Conversion
     Shares  unless  (y)  from  the  date the Holder receives the duly delivered
     Monthly  Redemption  Notice  through  and  until  the  date  such  Monthly
     Redemption  is  paid  in  full,  the  Equity Conditions have been satisfied
     (unless  waived  in  writing  by  the  Holder)  and  (z) as to such Monthly
     Redemption,  prior  to  such Monthly Redemption Period (but not more than 5
     Trading  Days  prior to the commencement of the Monthly Redemption Period),
     the  Company  shall  have  delivered  to  the  Holder's  account  with  The
     Depository  Trust  Company a number of shares of Common Stock to be applied
     against  such  Monthly Redemption Share Amount equal to the quotient of (x)
     the  applicable  Monthly  Redemption  Share  Amount divided by (y) the then
     Conversion  Price  (the "Pre-Redemption Conversion Shares"). The Holder may
                              --------------------------------
     convert,  pursuant  to Section 4(a), any principal amount of this Debenture
     subject  to  a  Monthly  Redemption  at any time prior to the date that the
     Monthly  Redemption  Amount  is  due  and  paid  in  full. Unless otherwise
     indicated  by  the  Holder  in  the  applicable  Notice  of Conversion, any
     principal  amount of this Debenture converted during the applicable Monthly
     Redemption  Period  until the date the Monthly Redemption Amount is paid in
     full  shall be first applied to the principal amount subject to the Monthly
     Redemption  Amount payable in cash and then to the Monthly Redemption Share
     Amount.  Any  principal  amount  of  this  Debenture  converted  during the
     applicable  Monthly  Redemption  Period in excess of the Monthly Redemption
     Amount shall be applied against the last principal amount of this Debenture
     scheduled to be redeemed hereunder, in reverse time order from the Maturity
     Date;  provided,  however,  if  any such conversion is applied against such
            --------   -------
     Monthly  Redemption  Amount,  the  Pre-Redemption Conversion Shares, if any
     were  issued in connection with such Monthly Redemption or were not already
     applied  to  such  conversions,  shall  be  first  applied  against  such
     conversion.  The Company covenants and agrees that it will honor all Notice
     of  Conversions  tendered  up  until  such  amounts  are  paid in full. The
     Company's  determination  to  pay  a  Monthly Redemption in cash, shares of
     Common  Stock  or  a combination thereof shall be applied ratably to all of
     the  holders  of  the  then outstanding Debentures based on their (or their
     predecessor's)  initial  purchases  of  Debentures pursuant to the Purchase
     Agreement.  At  any time the Company delivers a notice to the Holder of its
     election  to  pay  the Monthly Redemption Amount in shares of Common Stock,
     the  Company  shall  file  a  prospectus  supplement  pursuant  to Rule 424
     disclosing  such  election.

          c)     Redemption  Procedure.  The  payment  of  cash  or  issuance of
                 ---------------------
     Common  Stock, as applicable, pursuant to an Optional Redemption or Monthly
     Redemption,  as

                                       18
<PAGE>
     applicable,  shall  be  made on the Optional Redemption Date or the Monthly
     Redemption  Date.  If  any  portion  of the payment pursuant to an Optional
     Redemption  or  Monthly  Redemption shall not be paid by the Company by the
     applicable  due  date,  interest  shall accrue thereon until such amount is
     paid  in  full  at an interest rate equal to the lesser of 18% per annum or
     the  maximum  rate  permitted  by  applicable law. Notwithstanding anything
     herein contained to the contrary, if any portion of the Optional Redemption
     Amount  or  Monthly  Redemption  Amount remains unpaid after such date, the
     Holder  may  elect,  by  written  notice  to  the Company given at any time
     thereafter,  to  invalidate  ab  initio such Optional Redemption or Monthly
                                  --  ------
     Redemption  and,  with  respect  to the Company's failure to timely pay the
     Optional Redemption Amount, the Company shall forfeit the right to exercise
     such  Optional  Redemption  for  the  remaining  term  of  the  Debenture.
     Notwithstanding  anything  to the contrary in this Section 6, the Company's
     determination  to  redeem in cash or its elections under Section 6(b) shall
     be applied ratably among the Holders of Debentures. The Holder may elect to
     convert  the  outstanding  principal  amount  of  the Debenture pursuant to
     Section  4  prior  to  actual payment in cash for any redemption under this
     Section  6  by  the  delivery  of  a  Notice  of Conversion to the Company.

     Section 7.     Negative Covenants. As long as any portion of this Debenture
     ---------      ------------------
remains  outstanding,  the  Company  shall  not, and shall not permit any of its
Subsidiaries  to,  directly  or  indirectly:

          a)     other  than  Permitted Indebtedness, enter into, create, incur,
     assume, guarantee or suffer to exist any indebtedness for borrowed money of
     any  kind, including but not limited to, a guarantee, on or with respect to
     any  of  its  property  or  assets  now  owned or hereafter acquired or any
     interest  therein  or  any  income  or  profits  therefrom;

          b)     other  than  Permitted Liens, enter into, create, incur, assume
     or  suffer to exist any Liens of any kind, on or with respect to any of its
     property  or assets now owned or hereafter acquired or any interest therein
     or  any  income  or  profits  therefrom;

          c)     amend  its charter documents, including without limitation, the
     certificate  of incorporation and bylaws, in any manner that materially and
     adversely  affects  any  rights  of  the  Holder;

          d)     repay,  repurchase  or  offer to repay, repurchase or otherwise
     acquire  more  than  a  de  minimis number of shares of its Common Stock or
                             --  -------
     Common  Stock  Equivalents  other  than  as to (a) the Conversion Shares or
     Warrant Shares as permitted or required under the Transaction Documents and
     (b)  repurchases  of  Common Stock or Common Stock Equivalents of departing
     officers and directors of the Company, provided that such repurchases shall
     not  exceed  an aggregate of $100,000 for all officers and directors during
     the  term  of  this  Debenture);

          e)     enter  into any agreement with respect to any of the foregoing;
     or

                                       19
<PAGE>
          f)     pay cash dividends or distributions on any equity securities of
     the  Company.

     Section  8.     Events of Default.
     ----------      -----------------

          a)     "Event  of  Default"  means,  wherever  used herein, any of the
                  ------------------
     following events (whatever the reason for such event and whether such event
     shall  be  voluntary  or  involuntary  or  effected  by operation of law or
     pursuant  to any judgment, decree or order of any court, or any order, rule
     or  regulation  of  any  administrative  or  governmental  body):

               i.     any  default in the payment of (A) the principal amount of
          any  Debenture  or (B) liquidated damages and other amounts owing to a
          Holder  on  any  Debenture,  as and when the same shall become due and
          payable  (whether  on  a  Conversion  Date  or the Maturity Date or by
          acceleration or otherwise) which default, solely in the case of clause
          (B)  above,  is  not  cured  within  3  Trading  Days;

               ii.     the  Company  shall  fail to observe or perform any other
          covenant or agreement contained in the Debentures (other than a breach
          by the Company of its obligations to deliver shares of Common Stock to
          the  Holder  upon conversion, which breach is addressed in clause (xi)
          below)  which  failure  is  not cured, if possible to cure, within the
          earlier  to  occur  of (A) 5 Trading Days after notice of such failure
          sent  by  the  Holder  or  by any other Holder and (B) 10 Trading Days
          after  the  Company  has  become  or  should have become aware of such
          failure;

               iii.     a  default  or event of default (subject to any grace or
          cure  period  provided  in  the  applicable  agreement,  document  or
          instrument)  shall occur under (A) any of the Transaction Documents or
          (B)  any  other  material  agreement, lease, document or instrument to
          which  the  Company or any Subsidiary is obligated (and not covered by
          clause  (vi)  below);

               iv.     any  representation  or  warranty made in this Debenture,
          any other Transaction Documents, any written statement pursuant hereto
          or  thereto  or  any  other report, financial statement or certificate
          made or delivered to the Holder or any other Holder shall be untrue or
          incorrect  in  any material respect as of the date when made or deemed
          made;

               v.     the Company or any Significant Subsidiary shall be subject
          to  a  Bankruptcy  Event;

               vi.     the Company or any Subsidiary shall default on any of its
          obligations  under  any  mortgage, credit agreement or other facility,
          indenture  agreement,  factoring  agreement  or other instrument under
          which  there  may  be  issued,  or  by  which  there may be secured or
          evidenced,  any indebtedness for borrowed money or money due under any
          long  term  leasing  or  factoring

                                       20
<PAGE>
          arrangement  that  (a)  involves  an obligation greater than $150,000,
          whether  such  indebtedness  now exists or shall hereafter be created,
          and  (b)  results  in such indebtedness becoming or being declared due
          and  payable  prior to the date on which it would otherwise become due
          and  payable;

               vii.     the  Common  Stock  shall not be eligible for listing or
          quotation for trading on a Trading Market and shall not be eligible to
          resume listing or quotation for trading thereon within 5 Trading Days;

               viii.     the  Company  shall be a party to any Change of Control
          Transaction  or  Fundamental  Transaction  or  shall  agree to sell or
          dispose of all or in excess of 33% of its assets in one transaction or
          a  series  of  related  transactions  (whether  or not such sale would
          constitute  a  Change  of  Control  Transaction);

               ix.     a  Registration  Statement  shall  not have been declared
          effective  by  the  Commission  on  or prior to the 210th calendar day
          after  the  Closing  Date;

               x.     if,  during  the  Effectiveness  Period (as defined in the
          Registration  Rights  Agreement),  either (a) the effectiveness of the
          Registration  Statement  lapses for any reason or (b) the Holder shall
          not  be  permitted to resell Registrable Securities (as defined in the
          Registration  Rights Agreement) under the Registration Statement for a
          period  of more than 20 consecutive Trading Days or 30 non-consecutive
          Trading  Days  during  any 12 month period; provided, however, that if
                                                      --------  -------
          the  Company  is  negotiating  a merger, consolidation, acquisition or
          sale  of  all  or  substantially  all  of  its  assets  or  a  similar
          transaction and, in the written opinion of counsel to the Company, the
          Registration  Statement  would  be  required  to be amended to include
          information  concerning  such  pending  transaction(s)  or the parties
          thereto  which  information  is  not  available or may not be publicly
          disclosed at the time, the Company shall be permitted an additional 10
          consecutive  Trading  Days during any 12 month period pursuant to this
          Section  8(a)(x);

               xi.     the  Company  shall  fail  for  any  reason  to  deliver
          certificates  to  a  Holder  prior  to  the  fifth Trading Day after a
          Conversion  Date pursuant to Section 4(d) or the Company shall provide
          at  any  time  notice  to  the  Holder,  including  by  way  of public
          announcement,  of  the  Company's  intention to not honor requests for
          conversions  of any Debentures in accordance with the terms hereof; or

               xii.     any  monetary  judgment,  writ  or similar final process
          shall  be  entered or filed against the Company, any Subsidiary or any
          of  their  respective  property or other assets for more than $50,000,
          and  such  judgment,  writ  or  similar  final  process  shall  remain
          unvacated,  unbonded  or  unstayed  for  a period of 45 calendar days.

                                       21
<PAGE>
          b)     Remedies Upon Event of Default. If any Event of Default occurs,
                 ------------------------------
     the outstanding principal amount of this Debenture, plus liquidated damages
     and  other  amounts  owing  in  respect  thereof  through  the  date  of
     acceleration,  shall  become, at the Holder's election, immediately due and
     payable  in  cash  at the Mandatory Default Amount. Commencing 5 days after
     the  occurrence  of  any  Event  of  Default  that  results in the eventual
     acceleration  of  this Debenture, a late fee on this Debenture shall accrue
     at  a  rate  equal  to  the  lesser  of  18%  per annum or the maximum rate
     permitted  under  applicable law. Upon the payment in full of the Mandatory
     Default Amount, the Holder shall promptly surrender this Debenture to or as
     directed  by  the  Company.  In connection with such acceleration described
     herein,  the  Holder  need  not provide, and the Company hereby waives, any
     presentment,  demand,  protest  or other notice of any kind, and the Holder
     may  immediately and without expiration of any grace period enforce any and
     all  of  its rights and remedies hereunder and all other remedies available
     to it under applicable law. Such acceleration may be rescinded and annulled
     by  Holder at any time prior to payment hereunder and the Holder shall have
     all  rights  as  a  holder of the Debenture until such time, if any, as the
     Holder  receives  full  payment  pursuant  to  this  Section  8(b). No such
     rescission  or  annulment  shall  affect any subsequent Event of Default or
     impair  any  right  consequent  thereon.

          Section  9.     Miscellaneous.
          ----------      -------------

          a)     Notices.  Any  and  all  notices  or  other  communications  or
                 -------
     deliveries  to  be  provided  by  the  Holder hereunder, including, without
     limitation,  any  Notice  of  Conversion, shall be in writing and delivered
     personally,  by  facsimile,  or  sent  by a nationally recognized overnight
     courier  service, addressed to the Company, at the address set forth above,
     facsimile number (818) 887-2686, ATTN: LARRY WILCOX or such other facsimile
     number  or address as the Company may specify for such purpose by notice to
     the Holder delivered in accordance with this Section 9. Any and all notices
     or  other  communications  or  deliveries  to  be  provided  by the Company
     hereunder  shall  be  in writing and delivered personally, by facsimile, or
     sent by a nationally recognized overnight courier service addressed to each
     Holder  at  the facsimile number or address of such Holder appearing on the
     books of the Company, or if no such facsimile number or address appears, at
     the  principal  place  of  business  of  the  Holder.  Any  notice or other
     communication  or  deliveries hereunder shall be deemed given and effective
     on  the  earliest  of  (i)  the  date  of  transmission,  if such notice or
     communication  is delivered via facsimile at the facsimile number specified
     in  this  Section  9 prior to 5:30 p.m. (New York City time), (ii) the date
     immediately  following  the  date  of  transmission,  if  such  notice  or
     communication  is delivered via facsimile at the facsimile number specified
     in  this  Section  9  between 5:30 p.m. (New York City time) and 11:59 p.m.
     (New  York  City time) on any date, (iii) the second Business Day following
     the  date  of  mailing,  if sent by nationally recognized overnight courier
     service,  or  (iv)  upon actual receipt by the party to whom such notice is
     required  to  be  given.

          b)     Absolute  Obligation.  Except  as expressly provided herein, no
                 --------------------
     provision  of  this  Debenture  shall alter or impair the obligation of the
     Company,  which  is  absolute  and

                                       22
<PAGE>
     unconditional,  to  pay  the  principal  of,  liquidated  damages and other
     amounts  owing,  as  applicable,  on this Debenture at the time, place, and
     rate,  and  in the coin or currency, herein prescribed. This Debenture is a
     direct debt obligation of the Company. This Debenture ranks pari passu with
                                                                 ---- -----
     all  other  Debentures  now  or  hereafter issued under the terms set forth
     herein.

          c)     Lost  or  Mutilated  Debenture.  If  this  Debenture  shall  be
                 ------------------------------
     mutilated,  lost,  stolen  or  destroyed,  the  Company  shall  execute and
     deliver,  in  exchange  and  substitution  for  and  upon cancellation of a
     mutilated Debenture, or in lieu of or in substitution for a lost, stolen or
     destroyed  Debenture,  a  new  Debenture  for  the principal amount of this
     Debenture so mutilated, lost, stolen or destroyed, but only upon receipt of
     evidence  of  such loss, theft or destruction of such Debenture, and of the
     ownership  hereof,  reasonably  satisfactory  to  the  Company.

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

          e)     Waiver.  Any waiver by the Company or the Holder of a breach of
                 ------
     any  provision of this Debenture shall not operate as or be construed to be
     a  waiver  of  any

                                       23
<PAGE>
     other  breach  of such provision or of any breach of any other provision of
     this  Debenture.  The  failure  of the Company or the Holder to insist upon
     strict  adherence  to  any  term of this Debenture on one or more occasions
     shall  not  be  considered  a  waiver  or  deprive  that party of the right
     thereafter  to  insist upon strict adherence to that term or any other term
     of  this  Debenture.  Any  waiver  by  the Company or the Holder must be in
     writing.

          f)     Severability.  If  any  provision of this Debenture is invalid,
                 ------------
     illegal  or  unenforceable,  the  balance of this Debenture shall remain in
     effect, and if any provision is inapplicable to any Person or circumstance,
     it  shall  nevertheless  remain  applicable  to  all  other  Persons  and
     circumstances.  If  it  shall  be  found  that any interest or other amount
     deemed  interest due hereunder violates the applicable law governing usury,
     the  applicable  rate  of  interest  due  hereunder  shall automatically be
     lowered  to  equal  the maximum rate of interest permitted under applicable
     law.  The Company covenants (to the extent that it may lawfully do so) that
     it  shall  not  at any time insist upon, plead, or in any manner whatsoever
     claim or take the benefit or advantage of, any stay, extension or usury law
     or other law which would prohibit or forgive the Company from paying all or
     any  portion  of  the  principal  of  or  interest  on  this  Debenture  as
     contemplated  herein,  wherever  enacted,  now  or at any time hereafter in
     force,  or  which  may  affect  the  covenants  or  the performance of this
     indenture,  and  the  Company  (to the extent it may lawfully do so) hereby
     expressly  waives  all benefits or advantage of any such law, and covenants
     that  it  will not, by resort to any such law, hinder, delay or impeded the
     execution  of  any  power herein granted to the Holder, but will suffer and
     permit  the execution of every such as though no such law has been enacted.

          g)     Next  Business  Day.  Whenever  any payment or other obligation
                 -------------------
     hereunder  shall  be  due  on a day other than a Business Day, such payment
     shall  be  made  on  the  next  succeeding  Business  Day.

          h)     Headings.  The  headings  contained  herein are for convenience
                 --------
     only, do not constitute a part of this Debenture and shall not be deemed to
     limit  or  affect  any  of  the  provisions  hereof.

          i)     Assumption.  Any  successor  to  the  Company  or any surviving
                 ----------
     entity  in  a  Fundamental  Transaction  shall  (i)  assume,  prior to such
     Fundamental  Transaction,  all of the obligations of the Company under this
     Debenture  and  the  other  Transaction  Documents  pursuant  to  written
     agreements  in form and substance satisfactory to the Holder (such approval
     not  to be unreasonably withheld or delayed) and (ii) issue to the Holder a
     new  debenture  of  such successor entity evidenced by a written instrument
     substantially  similar  in form and substance to this Debenture, including,
     without  limitation,  having  a principal amount and interest rate equal to
     the  principal  amount  and  the interest rate of this Debenture and having
     similar  ranking  to  this  Debenture,  which  shall be satisfactory to the
     Holder  (any such approval not to be unreasonably withheld or delayed). The
     provisions  of  this  Section  9(i)  shall  apply  similarly and equally to
     successive  Fundamental Transactions and shall be applied without regard to
     any  limitations  of  this  Debenture.

                                       24
<PAGE>

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

                                       25
<PAGE>
     IN  WITNESS  WHEREOF,  the  Company  has  caused  this Debenture to be duly
executed  by  a  duly  authorized  officer as of the date first above indicated.

                                        UC HUB GROUP, INC.

                                        By:
                                           -------------------------------
                                           Name:
                                           Title:

                                       26
<PAGE>
                                    ANNEX A

                              NOTICE OF CONVERSION

     The undersigned hereby elects to convert principal under the Original Issue
Discount  Self-Liquidating Convertible Debenture of UC Hub Group, Inc., a Nevada
corporation  (the  "Company"), due on June 7, 2008, into shares of common stock,
                    -------
par value $0.001 per share (the "Common Stock"), of the Company according to the
                                 ------------
conditions  hereof, as of the date written below.  If shares are to be issued in
the  name  of  a person other than the undersigned, the undersigned will pay all
transfer  taxes  payable  with  respect  thereto and is delivering herewith such
certificates  and  opinions as reasonably requested by the Company in accordance
therewith.  No  fee will be charged to the holder for any conversion, except for
such  transfer  taxes,  if  any.

     By the delivery of this Notice of Conversion the undersigned represents and
warrants  to  the Company that its ownership of the Common Stock does not exceed
the  amounts  determined  in  accordance with Section 13(d) of the Exchange Act,
specified  under  Section  4  of  this  Debenture.

     The  undersigned agrees to comply with the prospectus delivery requirements
under  the  applicable  securities  laws  in connection with any transfer of the
aforesaid  shares  of  Common  Stock.

Conversion  calculations:
                                Date to Effect Conversion:

                                Principal Amount of Debenture to be Converted:

                                Number of shares of Common Stock to be issued:

                                Signature:

                                Name:

                                Address:

                                       27
<PAGE>
                                   SCHEDULE 1

                              CONVERSION SCHEDULE

The  Original Issue Discount Self-Liquidating Convertible Debentures due on June
7,  2008,  in the aggregate principal amount of $378,000 issued by UC Hub Group,
Inc.  This  Conversion Schedule reflects conversions made under Section 4 of the
above  referenced  Debenture.

                                     Dated:

--------------------------------------------------------------------------------
                                                Aggregate
                                                Principal
                                                 Amount
Date of Conversion         Amount of            Remaining
(or for first entry,       Conversion         Subsequent to      Company Attest
Original Issue Date)                           Conversion
                                              (or original
                                                Principal
                                                 Amount)
---------------------  ------------------  -------------------  ----------------

---------------------  ------------------  -------------------  ----------------

---------------------  ------------------  -------------------  ----------------

---------------------  ------------------  -------------------  ----------------

---------------------  ------------------  -------------------  ----------------

---------------------  ------------------  -------------------  ----------------

---------------------  ------------------  -------------------  ----------------

---------------------  ------------------  -------------------  ----------------

---------------------  ------------------  -------------------  ----------------

--------------------------------------------------------------------------------

                                       28

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