Document:

Ex-10.30

                            STOCK PURCHASE AGREEMENT

                                      AMONG

                 FUSION TELECOMMUNICATIONS INTERNATIONAL, INC.,

                                 EFONICA FZ-LLC

                                       AND

                                  KARAMCO, INC.

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

                                JANUARY 11, 2005

<PAGE>

                            STOCK PURCHASE AGREEMENT

       THIS AGREEMENT dated as of January 11, 2005, is by and among Fusion
Telecommunications International, Inc., a Delaware corporation ("Buyer"),
Efonica, FZ-LLC, a company organized in Dubai Technology, Electric Commerce &
Media Free Zone, Dubai, United Arab Emirates (the "Company"), and Karamco, Inc.,
a company organized in the British Virgin Islands ("Karamco" or the
"Stockholder").

                                   WITNESSETH

       WHEREAS the Stockholder owns the number of the issued and outstanding
shares (collectively, the "Shares") of the common stock, no par value per share
(the "Common Stock"), of the Company set forth opposite such Stockholder's name
on Schedule 1 attached hereto, which Shares in the aggregate represent, on a
fully diluted basis, 49.8% of the authorized, issued and outstanding shares of
the capital stock of the Company;

       WHEREAS Buyer desires to acquire all of the Shares from Karamco, and
Karamco desires to sell all of its Shares to Buyer, upon the terms and subject
to the conditions hereinafter set forth.

       NOW THEREFORE, in consideration of the foregoing and of the covenants set
forth below, the parties hereby agree as follows:

                                     SECTION
                                        1

       PURCHASE AND SALE OF THE SHARES

       1.1    Purchase and Sale. Upon the terms and subject to the conditions of
this Agreement, at the Closing (as defined below), Karamco agrees to sell to
Buyer, and Buyer agrees to purchase from Karamco, the number of Shares owned by
Karamco, as set forth opposite its name on Schedule 1 hereto ([ ] Shares). The
aggregate purchase price for the Shares (the "Final Purchase Price") shall be
set forth and payable as expressed on Section 1.2.

       1.2    Valuation and Purchase Price

              A.     Valuation. The valuation of the Company shall equal 4.5
times the net income before taxes of the Company (the "Net Income") for the
12-month period ending February 28, 2006 (the "Computation Period"). The Net
Income of the Company shall be as set forth on the Company's financial
statements computed in accordance with generally accepted accounting principals,
provided however that in computing the Company's Net Income, there shall be
added back any administrative and mark-up fees paid or payable to the back
office service provider during the Computation Period (the "Valuation"). The
Valuation shall be computed within 60 days of the end of the Computation Period.
In no event shall the Valuation for the Company be less than $11.25 million or
greater than $29.25 million.

              B.     Base Purchase Price. The base purchase price for the Shares
(the "Base Purchase Price") shall be NINE MILLION SEVEN HUNDRED EIGHTY FIVE
THOUSAND SEVEN HUNDRED ($9,785,700) DOLLARS (49.8% of an initial estimated
valuation of

                                       2
<PAGE>

$20,000,000 minus 49.8% of the promissory notes payable (including accrued
interest) that the Company owes to the Buyer as of [DATE] ("Efonica Debt")),
subject to adjustment pursuant to Section 1.2(C)(vii) and Section 8 of the
Agreement, and payable as set forth in Section 1.2(C).

              C.     Payment at Closing. At Closing, Buyer shall deliver to
Karamco:

                     (i)    Stock. [NUMBER] shares of Buyer's common stock at
              the IPO price (exact number of shares will be calculated on the
              effective date of the IPO and will be equal to the Base Purchase
              Price minus the cash payment as set forth in Section 1.2(C)(iii)
              divided by the IPO price per share) (the aggregate number of
              Shares under this Section shall be referred to as the "Base
              Shares");

                     (ii)   Escrow. From the Closing Date until March 30, 2006,
              Buyer's attorney (the "Escrow Agent") shall hold [NUMBER] shares
              of the Base Shares (not to include the Registered Stock) in escrow
              (the "Escrowed Stock") and subject to an Escrow Agreement between
              the parties and the Escrow Agent, a form of which is attached
              hereto as Exhibit "D". The Escrowed Stock will be subject to
              adjustment pursuant to Section 1.2(C)(vii);

                     (iii)  Cash Payment. Within three (3) days of the Closing,
              Buyer will pay Karamco an amount equal to FIVE HUNDRED THOUSAND
              ($500,000.00) DOLLARS as a credit to the Final Purchase Price;

                     (iv)   Registration. The Buyer shall include in its
              Registration Statement for its IPO, 150,000 shares of Common Stock
              (the "Registered Shares"). The Registered Shares shall be part of
              the Base Shares. During the 90 day period following the Closing,
              the Buyer will either allow the Stockholder to sell up to $1
              million in Registered Shares in ordinary brokerage transactions in
              the public market or purchase the Registered Shares as set forth
              herein. The Registered Shares will be subject to a lock-up that
              will allow Karamco to sell 1/2 of the Registered Shares 45 days
              following the effective date of an IPO and 1/2 of the Registered
              Shares 90 days following the effective date of the IPO. In the
              event Karamco elects to sell the Registered Shares in the public
              market as set forth above, Karamco shall provide notice to Buyer
              with at least two business days' notice prior to any sale, and
              Buyer shall have the exclusive option to purchase the Registered
              Shares from Karamco at the higher of the IPO price or the average
              5 day bid price prior to the date of the sale to the Buyer. In the
              event that Karamco's aggregate gross proceeds of a public sale of
              the Registered Shares as set forth in this Section, in the
              aggregate, and within 95 days following the effective date of the
              IPO, does not equal $1,000,000, the Buyer will purchase from
              Karamco an amount of Base Shares, at the IPO price, equal to the
              difference between the aggregate gross proceeds of Karamco's sale
              of the Registered Shares and $1,000,000;

                     (v)    Lock-Up. The unregistered Base Shares issued to
              Karamco will be subject to a lock-up for a one year period
              following the effective date of the IPO ("Lock-Up Period").
              Karamco agrees to execute an agreement to that effect in the form
              attached hereto as Exhibit "B" (the "Lock-Up Agreement"). In the
              event a significant shareholder (owner of 5% or more of the issued
              and outstanding common stock ("Significant Shareholder")) is
              allowed to register all or a portion of his common stock prior to
              the expiration of the Lock-Up Period,

                                       3
<PAGE>

              Karamco will be allowed to register its shares on a pro rata basis
              (will be allowed to sell the same % of shares the Significant
              Shareholder sells). If any Significant Shareholder shall receive
              and determine to accept any bona fide offer from a third party
              (the "Offeror") to purchase all or substantially all of such
              Significant Shareholders' Shares "a "Tag-Along Offer") prior to
              expiration of the Lock-Up Period, Karamco shall have the right to
              participate in such transaction in the manner set forth in this
              Section. The Significant Shareholders shall, promptly after
              receipt of a Tag-Along Offer, send a copy thereof or a summary of
              the terms of any offer to Karamco. Karamco shall have the right to
              cause the Significant Shareholder(s) to condition his or their
              sale of Shares to an Offeror on the sale of all, or a pro-rata
              amount (equal to the percentage of the selling Significant
              Shareholder), of Shares of Karamco to Offeror (the "Tag-Along
              Shareholder"). The purchase price and payment terms for the Shares
              of the Tag-Along Shareholder shall be the same price per Share and
              same payment terms for the Shares as the Significant Shareholders'
              Shares and as set forth in the Tag-Along Offer. Should Karamco
              choose to participate in a sale of Shares pursuant to this
              Section, it shall pay its proportionate share of any expenses
              attributable to the sale of Shares hereunder. In the event Karamco
              sells any stock prior to expiration of the Lock-Up Period, it
              shall cause the purchaser to be bound by the Lock-up Agreement.

                     (vi)   Limitation on Sale Following Lock-Up Period. The
              Lock-Up Agreement will further provide after the Lock-Up Period
              sales by the Stockholder shall be subject to Rule 144. Both
              parties acknowledge that the holding period for Karamco's
              unregistered shares commences at the time of closing.

                     (vii)  Post Closing Adjustments.

                            (a)    Within 60 days of the Computation Period,
                     Buyer will determine the final purchase price which shall
                     equal 49.8% of the actual Valuation minus 49.8% of the
                     Efonica Debt less adjustments in Section 8 of the Agreement
                     (the "Final Purchase Price").

                            (b)    In the event that the Final Purchase Price is
                     less than the Base Purchase Price, the excess Escrowed
                     Stock will be released from escrow to the Buyer, the
                     released shares being valued equal to the IPO price per
                     share. Provided, however, that the Final Purchase Price
                     shall not be less than $5,428,200;

                            (c)    In the event that the Final Purchase Price
                     exceeds the Base Purchase Price (i) the Escrowed Stock will
                     be released from escrow to Karamco, and if applicable, (ii)
                     the Buyer will issue additional Stock to Buyer for the
                     difference between the Final Purchase Price and the Base
                     Purchase Price, the additional stock being valued at the
                     common stock closing price on March 30, 2006. Provided
                     however, that the Final Purchase Price shall not exceed
                     $14,392,200 ("Maximum Purchase Price").

       1.3    Closing. The closing (the "Closing") of the purchase and sale of
the Shares hereunder shall take place at the Buyer's office located at 420
Lexington Avenue, Suite 518, New

                                       4
<PAGE>

York, New York 10170, at 2:00 p.m. (EST) on the closing of the Buyer's initial
public offering ("IPO"), or at such other time or place as Buyer and the
Stockholder agree (the "Closing Date"). If the IPO does not occur by March 1,
2005, Karamco will have the option to deem this Agreement null and void and
maintain its 49.8% equity interest in the Company.

       1.4    Additional Stock. If between January 1, 2006 and February 28, 2006
(the "11th and 12th Month"), the Company receives a contract (or contracts as
the case may be) with pre-payment(s) that within 45 days from February 28, 2006,
the Company is able to record as revenue under GAAP, on May 15, 2006 Karamco
will be issued additional stock equal to (49.8% times (4.5 times the additional
net income before taxes)) (the "Additional Stock").The Additional Stock shall be
valued at the closing price of common stock on May 15, 2006.

Provided however, cash pre-payments collected in the 11th and 12th Month that
exceed 25 % of the average pre-payments for the period of November 1, 2005 to
December 31, 2005, shall not be included in the Additional Stock calculation and
the Additional Stock shall be subject to the Maximum Purchase Price in Section
1.2(vii)(c). This Section shall survive Closing of the Agreement.

                                    SECTION 2

                      REPRESENTATIONS AND WARRANTIES OF THE
                     STOCKHOLDER WITH RESPECT TO THE COMPANY

       The Stockholder represents and warrants to Buyer as of the date hereof
and on and as of the Closing Date as follows:

       2.1    Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the country
of Dubai, UAE and has all requisite corporate power and lawful authority to own,
lease and operate its assets, properties and business and to conduct its
business as and in the places where such properties are now owned, leased or
operated or such business is now conducted or proposed to be conducted.

       2.2    Capitalization; Voting Rights. The authorized capital of the
Company consists of [           ] shares of Common Stock, of which [           ]
shares have been validly subscribed and issued, are outstanding as fully paid
and non-assessable shares as of the date hereof, and represent all of the issued
and outstanding shares of capital stock of the Company, on a fully diluted
basis, as set forth on Schedule 1. There is no: (i) outstanding security of the
Company convertible into or exchangeable for any share or shares of the capital
of the Company; (ii) outstanding subscription, option, warrant, call,
commitment, agreement or understanding (oral or written) obligating the Company
to issue any share or shares of its capital stock or any security or securities
of any class or kind which in any way relate to the authorized or issued capital
stock of the Company or any interest therein; (iii) agreement or understanding
(oral or written) (other than this Agreement) which grants to any Person (as
hereinafter defined) the right to purchase or otherwise acquire any share or
shares of the issued and outstanding shares of the capital stock of the Company
or any interest therein, including without limitation any preemptive right,
right of first refusal or co-sale right; (iv) voting trust or voting agreement
or pooling agreement or proxy (oral or written) with respect to any issued and
outstanding shares of the capital stock of the

                                       5
<PAGE>

Company; or (v) obligation of the Company (oral or written) to purchase, redeem,
or otherwise acquire any shares of its capital stock or any interest therein or
to pay any dividend or distribution with respect thereto.

       2.3    Consents. No consent, approval, waiver or other action by any
individual, corporation, company, partnership, association, trust or other
entity or organization, including any government or political subdivision or
agency or instrumentality thereof (each, a "Person"), under any contract,
agreement, understanding, indenture, lease, instrument or other document (oral
or written) to which the Company is a party or by which it or any of the assets
of the Company is bound, is required or necessary for (i) the execution,
delivery and performance of this Agreement or any Related Agreement by the
Stockholder or the Company or the consummation of the transactions contemplated
hereby or thereby or (ii) the continuation after the consummation of the
transactions contemplated hereby or thereby of any contract, agreement,
indenture, lease, instrument or other document to which the Company is a party
or by which it or its assets are bound.

       2.4    Authorization; No Breach. The execution and delivery by the
Company of this Agreement and all the agreements contemplated herein (the
"Related Agreements"), and the consummation by the Company of all transactions
contemplated hereunder and thereunder by the Company, have been duly authorized
by all requisite corporate action. This Agreement and the Related Agreements
have been duly executed by the Company and the Stockholder (where applicable)
and each other party thereto. This Agreement and the Related Agreements and all
other agreements and obligations entered into and undertaken in connection with
the transactions contemplated hereby or thereby to which the Company or the
Stockholder is a party constitute the valid and legally binding obligations of
the Company and the Stockholder, enforceable against each of them in accordance
with their respective terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights; and (ii) general principles of
equity that restrict the availability of equitable remedies. The execution,
delivery and performance of this Agreement and the Related Agreements and the
consummation of the transactions contemplated hereby and thereby will not: (i)
violate, contravene or breach any provision of the Articles of Incorporation or
By-laws of the Company; (ii) violate, conflict with, contravene, or result in
the breach of any of the terms or conditions of, result in modification of the
effect of, or otherwise give any other contracting party the right to terminate,
accelerate or cancel any right or obligation of the Company or constitute (or
with notice or lapse of time or both constitute) a default under, any
instrument, contract or other agreement to which the Company is a party or by
which it or its assets or properties may be bound or subject; (iii) violate,
contravene or breach any constitution, treaty, law, statute, code, ordinance,
decree, rule, regulation, or municipal by-law, whether domestic, foreign or
international, any judgment, order, writ, injunction, decision, ruling, decree
or award of any governmental authority or body, or any provision of any of the
foregoing applicable to or binding upon, the Company or its properties, assets
or business (each, a "Law," and collectively, "Laws"); (iv) violate any license,
permit, franchise, or order or other approval of any federal, provincial, state,
local or foreign governmental or regulatory body (each, a "Permit", and
collectively, "Permits"); or (v) result in the creation of any mortgage, pledge,
charge, security interest, lien or other encumbrance (each, a "Lien") on the
Shares or on any of the assets or properties of the Company.

       2.5    Subsidiaries and Other Affiliates. The Company has no
subsidiaries. The Company does not directly or indirectly own or have any
investment in any shares of the capital stock of, or any other proprietary
interest in (including without limitation, any partnership or joint venture
interest other than with the Buyer), any other Person. For this purpose, "joint
venture"

                                       6
<PAGE>

means any entity or contractual relationship (written or oral) pursuant to which
the Company shares with any Person the profits and/or losses of any undertaking
or pursuant to which the Company may be liable for the acts or undertakings of
any Person.

       2.6    Corporate Records. The Company has previously delivered to Buyer
true and complete copies of its Articles of Incorporation, as amended, and
By-laws as currently in effect. The minute books of the Company, which have been
furnished to Buyer, are complete and accurate, and contain copies of all by-laws
and resolutions passed by the shareholders and directors of the Company since
the date of its incorporation, all of which by-laws and resolutions have been
duly passed. The share certificate books, register of shareholders, register of
transfers and register of directors of the Company are complete and accurate.
The financial books and records of the Company have been maintained in
accordance with sound business practices and fairly, accurately and completely
present and disclose consistently applied (i) the financial position of the
Company, and (ii) all transactions of the Company.

       2.7    Financial Statements. The Company has delivered to Buyer drafts
dated November 30, 2004 of the unaudited financial statements of the Company for
the fiscal year ended December 31, 2004 (the "Unaudited Financial Statements"),
the unaudited balance sheet (the "Current Balance Sheet") of the Company as of
November 30, 2004 (the "Current Balance Sheet Date") collectively with the
Unaudited Financial Statements and the Current Balance Sheet, the "Financial
Statements"). The Unaudited Financial Statements together with the notes thereto
have been prepared in accordance with past practices, and the Unaudited
Financial Statements together with the notes thereto have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout such period. Except as disclosed therein, such Unaudited
Financial Statements are true, correct and complete, and present fairly and
accurately the financial condition and position of the Company as of the dates
indicated.

       2.8    Absence of Undisclosed Liabilities. Except as set forth in
Schedule 2.8, as of the Closing Date, the Company had/has no liabilities of any
nature, whether direct, indirect, accrued, absolute, contingent or otherwise
(including, without limitation, liabilities as guarantor or otherwise with
respect to obligations of others or liabilities for Taxes due or then accrued or
to become due), that were not fully and adequately reflected or reserved against
on the Financial Statements of the Company. There is no existing condition,
situation or set of circumstances (excluding possible changes in the Tax laws of
any jurisdiction) that could reasonably be expected to result in any such
liability, other than liabilities (i) fully and adequately reflected or reserved
against on the Financial Statements or (ii) incurred since the Current Balance
Sheet Date in the ordinary course of business consistent with past practice,
which in the aggregate are not material to the Company. For purposes of this
Section 2.8, "material" shall mean any amount in excess of $5,000.00.

       2.9    No Material Adverse Change. To the best knowledge of the Company,
since the Current Balance Sheet dated November 30, 2004, there have been no
changes in the assets, properties, business, operations, prospects or condition
(financial or otherwise) of the Company that, individually or in the aggregate,
materially and adversely affect the Company, nor does any Stockholder or
executive of the Company know of any such change that is reasonably likely to
occur, nor has there been any damage, destruction or loss materially and
adversely affecting the assets, properties, business, operations, prospects or
condition (financial or otherwise) of the Company, whether or not covered by
insurance. Without limiting the generality of the foregoing since the Current
Balance Sheet Date, the Company has not:

              (i)    incurred any indebtedness for borrowed money, assumed or
guaranteed or otherwise

                                       7
<PAGE>

become responsible for the obligations of any Person, or otherwise made or
assumed any commitment, obligation or liability outside the ordinary course of
business;

              (ii)   declared or paid any dividend or declared or made any other
distribution of any kind to its shareholders, or made any direct or indirect
redemption, retirement, purchase or other acquisition of any shares of its
capital stock or entered into any agreement or made any commitment with respect
to the same;

              (iii)  made any loan, advance or capital contribution to or
investment in any Person;

              (iv)   made any payment or commitment to pay any severance or
termination pay to any of its officers, directors, shareholders, employees,
consultants, agents or other representatives;

              (v)    entered into any lease (as lessor or lessee), sold,
abandoned or made any other disposition of any of its assets, properties or
rights, granted or suffered any Lien or other encumbrance on any of its assets
or properties, or entered into or amended any contract or other arrangement to
do any of the foregoing or pursuant to which the Company agreed to indemnify any
party or to refrain from competing with any party;

              (vi)   except for inventory or equipment acquired in the ordinary
course of business, made any acquisition of all or any part of the assets,
properties, capital stock or business of any other Person or entered into or
amended any contract or other arrangement to do the same;

              (vii)  made any change in any method of accounting or accounting
practice, waived or cancelled any material claim, account receivable, or right,
or changed its pricing, credit, or payment policies;

              (viii) paid any long-term liability otherwise than in accordance
with its terms;

              (ix)   (A)    entered into any employment, deferred compensation
or other similar agreement (or any amendment to any such existing agreement)with
any director, officer, shareholder, consultant, agent or employee of the
Company, (B) increased the benefits payable under any existing severance or
termination pay policies or employment agreement or (C) increased the
compensation, bonus or other benefits payable to directors, officers or
employees of the Company;

              (x)    suffered any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or representative
thereof to organize any employees of the Company, which employees were not
subject to a collective bargaining agreement at the Current Balance Sheet Date,
or any lockouts, strikes, slowdowns, work stoppages or threats thereof by or
with respect to any employees of the Company; or

              (xi)   failed to comply with any Law in any respect that,
individually or in the aggregate, has had or is reasonably likely to have a
material adverse effect on the assets, properties, business, operations,
prospects or conditions (financial or otherwise) of the Company.

       2.10   Accounts and Notes Receivable. All accounts and notes receivable
reflected in the Financial Statements and all accounts receivable arising after
the Current Balance Sheet Date (collectively, the "Accounts Receivable") have
arisen in the ordinary course of business of the Company, represent valid and
enforceable obligations due to the Company, and are not subject to any discount,
set-off or counter-claim. All such Accounts Receivable have been collected or,
to

                                       8
<PAGE>

the best knowledge of the Company, are fully collectible in the ordinary course
of business of the Company in the aggregate recorded amounts thereof in
accordance with their terms.

       2.11   Tax Matters.

       (a)    As used in this Agreement, "Taxes" shall mean all taxes, including
without limitation income taxes, corporation taxes, capital taxes, excise taxes,
value added and sales taxes, use taxes, gross receipts taxes, franchise taxes,
employment and payroll related taxes, goods and services taxes, stamp taxes,
transfer taxes, withholding taxes, property taxes and import duties, whether or
not measured in whole or in part by net income, all imposts, levies, duties,
deductions, withholdings, charges, public and private pension plan
contributions, social security contributions, workmen's compensation, public
health contributions, regulatory fees and taxes, assessments, reassessments or
fees of any nature, and all deficiencies or other additions to tax, interest and
penalties owed by it; and "Tax" shall mean any one of them. The Company has paid
all Taxes required to be paid by it through the date hereof (other than Taxes
not yet due and payable the liability for which is adequately reserved for by
the Company in the Financial Statements and other than possible adjustments as
set forth in Schedule 2.8). The provisions for Taxes reflected in the Financial
Statements are adequate to cover any and all Tax liabilities of the Company in
respect of their respective assets, properties, business and operations during
the periods covered by said Financial Statements and all prior periods.

       (b)    The Company has timely filed all Tax returns required to be filed
by it through the date hereof. Each of the Tax returns filed by the Company
completely, correctly and accurately reflects the amount of the Company's Tax
liability for the period covered thereby.

       (c)    There has not been any audit of any Tax return filed by the
Company, no audit of any Tax return of the Company is in progress, and the
Company has not been notified by any Tax authority that any such audit is
contemplated or pending. No taxing authority is now asserting or, to the best
knowledge of any Stockholder, threatening to assert any Tax deficiency or claim
for additional Taxes or interest thereon or penalties in connection therewith.
All Tax returns of the Company have been assessed through and including the date
hereof, and there are no outstanding waivers of any limitation periods or
agreements providing for an extension of time for the filing of any Tax return
or the payment of any Tax or for the issue of an assessment or reassessment
against the Company. All deficiencies proposed as a result of such assessments
of the Tax returns have been paid and settled.

       (d)    The Company has withheld from each payment made to any of its past
and present shareholders, directors, officers, employees and agents the amount
of all Taxes and other deductions required to be withheld and has paid or made
adequate provision for the payment of such amounts to the proper receiving
authorities.

       (e)    The Company is not subject to and shall not be subject after the
Closing Date to any assessments, levies, penalties or interest with respect to
Taxes which shall result in any liability on its part in respect of any period
ending on or prior to the Closing Date in excess of the amount provided for and
reserved against in the Financial Statements.

       2.12   Compliance with Laws; Permits.

       (a)    The Company is not in violation or default of any term of its
Articles of Incorporation or Bylaws, or of any provision of any mortgage,
indenture, contract, agreement, instrument or contract to which it is party or
by which it is bound or of any judgment, decree,

                                       9
<PAGE>

order, writ or, to its knowledge, any Law applicable to the Company which would
materially and adversely affect the business, assets, liabilities, financial
condition, operations or prospects of the Company.

       (b)    Schedule 2.12 sets forth a complete list (including detailed
description of the authority granted under each) of (i) all Permits and Licenses
(collectively referred to as "Permits") that are material to the conduct of the
Company's business (including but not limited to all telecommunications and
Voice over Internet Protocol ("VoIP") licenses))

       (c)    The Company has, is in full compliance with, and is entitled to
all the benefits under, all Permits that are material to the conduct of its
business and the uses of its assets; such Permits have been validly issued and
are in full force and effect and will continue in full force and effect upon
consummation of the transactions contemplated hereunder; no violations are or
have been recorded with any governmental or regulatory body in respect of any
Permit; and no proceeding is pending or, to the best knowledge of the
Stockholder threatened to revoke or limit any Permit.

       2.13   Actions and Proceedings. There are no outstanding orders,
judgments, injunctions, awards or decrees of any court, governmental or
regulatory body or arbitration tribunal against or involving the Company or any
of its securities, assets, or properties or any Stockholder or Employee of the
Company. There are no actions, proceedings (or any basis therefor), suits or
claims or legal, administrative or arbitral proceedings pending against or, to
the best knowledge of the Company, threatened against or affecting (whether or
not the defense thereof or liabilities in respect thereof are covered by
insurance) the Company or any of its securities, assets or properties, or any
Stockholder or Employee of the Company, nor, to the best knowledge of the
Company, is there any investigation pending or threatened against or affecting
the Company or any Stockholder or Employee of the Company, that questions the
validity of this Agreement, or any of the Related Agreements or any of the
Schedules or Exhibits attached hereto or the right of the Company or any
Stockholder or other party to enter into any of such agreements, or to
consummate the transactions contemplated hereby or thereby, or which might
result, either individually or in the aggregate, in any material adverse change
in the business, assets, intellectual property rights, liabilities, financial
condition, operations, affairs or prospects of the Company, financially or
otherwise, or any change in the current equity ownership of the Company. To the
best knowledge of the Company, there is no fact, event or circumstance that may
give rise to any suit, action, claim, investigation or proceeding that
individually or in the aggregate could have a material adverse effect on the
transactions contemplated hereby or on the assets, properties, business,
operations, prospects or condition (financial or otherwise) of the Company.

       2.14   Contracts and Other Agreements.

       (a)    Schedule 2.14 sets forth a list of all of the following contracts
and other agreements (oral or written) to which the Company is a party or by or
to which it or its assets or properties are bound or subject (collectively, the
"Material Contracts"): (i) contracts and other agreements with any current or
former officer, director, shareholder, employee, consultant, agent or other
representative of the Company and contracts and other agreements for the payment
of fees or other consideration to any entity in which any officer or director of
the Company has an interest; (ii) contracts and other agreements with any labor
union or association representing any employee of the Company or otherwise
providing for any form of collective bargaining; (iii) contracts and other
agreements for the purchase or sale of materials, supplies, equipment,
merchandise, products or services providing in each instance for a purchase or
sale price exceeding $10,000;

                                       10
<PAGE>

(iv) contracts and other agreements for the sale of any of the assets or
properties of the Company other than in the ordinary course of business or for
the grant to any person of any options, rights of first refusal, or referential
or similar rights to purchase any of such assets or properties; (v) partnership
or joint venture agreements; (vi) contracts or other agreements under which the
Company agrees to indemnify any party or to share the tax liability of any
party; (vii) contracts, options and other agreements for the purchase of any
asset, tangible or intangible, calling for an aggregate purchase price or
payments in any one year of more than $25,000 in any one case (or in the
aggregate, in the case of any related series of contracts and other agreements;
(viii) contracts and other agreements that cannot by their terms be canceled by
the Company and any successor or assignee of the Company without liability,
premium or penalty on no less than thirty (30) days' notice and which provide
for payments in any one year in excess of $5,000 and $10,000 in the aggregate;
(ix) contracts and other agreements with customers or suppliers for the sharing
of fees, the rebating of charges or other similar arrangements; (x) contracts
and other agreements containing obligations or liabilities of any kind to
holders of the securities of the Company as such (including, without limitation,
an obligation to register any of such securities under any federal or state
securities laws); (xi) contracts and other agreements containing covenants of
the Company not to compete in any line of business or with any person or
covenants of any other person not to compete with the Company in any line of
business; (xii) contracts and other agreements relating to the acquisition by
the Company of any operating business or the capital stock of any other person;
(xiii) contracts and other agreements requiring the payment to any person of a
commission or fee, including contracts or other agreements with consultants
which provide for aggregate payments in excess of $10,000; (xiv) contracts,
indentures, mortgages, promissory notes, loan agreements, guaranties, security
agreements, pledge agreements, and other agreements relating to the borrowing of
money or securing any such liability; (xv) distributorship or licensing
agreements; (xvi) contracts under which the Company will acquire or has acquired
ownership of, or license to, intangible property, including software (other than
software licensed by the Company as an end user for less than $10,000 and not
distributed by it); (xvii) leases, subleases or other agreements under which the
Company is lessor or lessee of any real property or personal property and which
provide for payments in any one year in excess of $5,000 and $10,000 in the
aggregate; (xviii) any other material contracts or other agreements whether or
not made in the ordinary course of business that are in each instance material
to the Company or the terms of which in each instance would have a material
adverse effect on the Company's business or prospects, condition, financial or
otherwise, or any of its assets or properties of the Company; or (xix) contracts
or agreements for any pension, profit sharing, retirement, deferred
compensation, stock purchase, stock option, incentive, bonus, sales commission,
vacation, severance, disability, life insurance, group insurance, multi-employer
or other employee benefit plans, programs or other contractual arrangements, in
respect of, or that otherwise cover, any of the current or former officers or
employees of the Company, or their heirs or beneficiaries.

       (b)    There have been delivered or made available to Buyer true and
complete copies of all such Material Contracts (and all amendments, waivers or
other modifications thereto) and, with respect to any oral Material Contracts,
complete and accurate summaries thereof. Except as set forth on Schedule 2.14,
making specific reference to the Material Contract as to which exception is
taken and explaining the exception, all of such Material Contracts are valid,
subsisting, in full force and effect, binding upon the Company, and to the best
knowledge of the Company, binding upon the other parties thereto in accordance
with their terms. The Company, and to the best knowledge of each employee of the
Company each other party thereto has in all material respects performed all the
obligations required to be performed by them to date, has received no notice of
default and is not in default under any such Material Contracts. The Company has
no present expectation or intention of not fully performing all its obligations
under

                                       11
<PAGE>

each Material Contract, and no employee of the Company has any knowledge of any
breach or anticipated breach by the Company or any other party to any such
Material Contract.

       (c)    Except as set forth on Schedule 2.14(c), the Company has not (i)
declared or paid any dividends, or authorized or made any distribution upon or
with respect to any class or series of its capital stock, (ii) incurred any
indebtedness for money borrowed or any other liabilities or mortgaged or
pledged, or otherwise placed or agreed to place a lien or security interest on
any asset of the Company individually in excess of $10,000.00, (iii) made any
loans or advances to any person, other than ordinary advances for travel or
other expenses, or (iv) sold, exchanged, licensed, encumbered, mortgaged,
pledged or otherwise disposed of any of its assets or rights, other than in the
ordinary course of business.

       2.15   Real Estate. The Company does not own any real property or any
buildings or other structures and does not have any options or any contractual
obligations to purchase or acquire any interest in real property. The leasehold
interests of the Company set forth in Schedule 2.15 are subject to no Lien
(other than Liens on the interests of the respective lessors that indirectly
burden such leasehold interests). All such leases are in good standing and in
full force and effect without amendment thereto, and the Company is entitled to
all benefits under such leases.

       2.16   Personal Property. Schedule 2.16 attached hereto sets forth (i) a
true, correct and complete list of all items of tangible personal property (A)
owned by the Company as of the date hereof having either a net book value per
unit or an estimated fair market value per unit in excess of $5,000 or (B) not
owned by the Company but in the possession of or used or useful in the business
of the Company and having rental payments therefor in excess of $250 per month
or $3,000 per year (collectively, the "Personal Property") as well as other
assets (i.e. cash, etc.); and (ii) a description of the owner of, and any
agreement relating to the use of, each item of Personal Property not owned by
the Company and the circumstances under which such Personal Property is used.
Except as disclosed in Schedule 2.16:

       (a)    no officer, director, stockholder or employee of the Company, nor
any spouse, child or other relative or affiliate thereof, owns directly or
indirectly, in whole or in part, any of the Personal Property;

       (b)    each item of Personal Property not owned by the Company is in such
condition that upon the return of such Personal Property to its owner in its
present condition at the end of the relevant lease term or as otherwise
contemplated by the applicable agreement between the Company and the owner or
lessor thereof, the obligations of the Company to such owner or lessor will be
discharged;

       (c)    the Personal Property is in good operating condition and repair,
normal wear and tear excepted, is currently used by the Company in the ordinary
course of its business and normal maintenance has been consistently performed
with respect to the Personal Property; and

       (d)    the Company owns or otherwise has the right to use all of the
Personal Property now used or useful in the operation of its business or the use
of which is necessary for or useful in the performance of any material contract,
letter of intent or proposal to which the Company is a party.

                                       12
<PAGE>

       2.17   Proprietary Rights.

       (i)    As used in this Agreement, the term "Proprietary Rights" means
all:

              (a)    trademarks, service marks, trade names, franchises and
copyrights and all registrations and applications to register any of the
foregoing with any agency or authority;

              (b)    patents, patent applications, inventions and designs, and
any registration thereof with any agency or authority;

              (c)    trade secrets, including all processes, know-how, technical
data, shop rights, and any media or other tangible embodiment thereof and all
descriptions thereof; and

              (d)    other technology and intangible property, including without
limitation computer programs, databases, and documentation and flow charts.

       (ii)   The Company's Proprietary Rights are listed on Schedule 2.17.

              (a)    (i)    None of the present activities or, to the best
knowledge of the Company, the proposed activities, of the Company or its
products or assets infringe on any Proprietary Rights of others, (ii) the
Company has not received any claim or notice of any claim to that effect, and
(iii) to the best knowledge of the Company, there is no existing or threatened
infringement or violation by others of the Proprietary Rights of the Company.

              (b)    To the best knowledge of the Company, there is no existing
or threatened violation of the confidentiality of the Company's confidential
information or trade secrets. The Company is not making unauthorized use of any
confidential information or trade secrets of any Person, including without
limitation any former employer of any past or present employees or consultants
of the Company.

              (c)    To the best knowledge of the Company, none of the
activities of the employees or consultants of the Company on behalf of the
Company violates or has violated any agreements or arrangements that any such
employees or consultants have or have had with former employers. Each of the
employees and consultants who contributed to the discovery or development of any
of the Proprietary Rights (other than Proprietary Rights licensed to the Company
by any party other than a consultant to the Company) did so in each case within
the scope of his or her employment or contractual relationship with the Company.

       2.18   Title to Assets; Liens. Except as set forth on Schedule 2.18, the
Company owns outright and has good, valid and marketable title to all of its
assets and properties of every nature whatsoever, including Proprietary Rights
and Personal Property, used in the business, including, without limitation, all
of the assets and properties reflected in the Financial Statements, free and
clear of any Lien, except for (i) assets and properties disposed of, or subject
to purchase or sales orders, in the ordinary course of business consistent with
past practice since the Current Balance Sheet Date or (ii) liens or other
encumbrances securing the claims of materialmen, carriers, landlords and like
persons, all of which are not yet due and payable. There are no developments
affecting any of such properties or assets pending or, to the best knowledge of
the Company, threatened, that might materially detract from the value of such
property or assets, materially interfere with any present or intended use of any
such property or assets or materially and adversely affect the marketability of
such properties or assets.

       2.19   Employees and Consultants. Set forth on Schedule 2.19 is a
complete list of the Company's (i) employees, (ii) consultants and (iii)
independent contractors who spend at least

                                       13
<PAGE>

fifty percent (50%) of their professional time working for the Company, with
names, current salaries and, with respect to employees, current positions with
the Company. The Company generally enjoys a good employer-employee relationship
with its employees. The Company is not delinquent in payments to any of its
employees or consultants for any wages, salaries, commissions, bonuses or other
direct compensation for any services performed by them to the date hereof or
amounts required to be reimbursed to such employees and the Company enjoys good
relations with its employees.

       2.20   Insurance. Schedule 2.20 sets forth a list of all policies or
binders of fire, liability, product liability, workmen's compensation,
vehicular, directors and officers and other insurance held by or on behalf of
the Company. Such policies and binders are in full force and effect, are
reasonably believed to be adequate for the businesses engaged in by the Company
and are in conformity with the requirements of all leases to which the Company
is a party and, to the best knowledge of the Company, are valid and enforceable
in accordance with their terms. The Company is not in default with respect to
any provision contained in any such policy or binder, nor has the Company failed
to give any notice or present any claim under any such policy or binder in due
and timely fashion. There are no outstanding unpaid claims in excess of $1,000
in the aggregate under all such policies and binders. The Company has not
received notice of cancellation or non-renewal of any such policy or binder.

       2.21   Banks, Brokers and Proxies. Schedule 2.21 sets forth (i) the name
of each bank, trust company, securities or other broker or other financial
institution with which the Company has an account, credit line, or safe deposit
box or vault or otherwise maintains relations; (ii) the name of each person
authorized by the Company to draw on any such account or credit line, to
transfer securities, or to have access to any safe deposit box or vault; (iii)
the purpose of each such account, safe deposit box or vault; and (iv) the names
of all persons authorized by proxies, powers of attorney or other like
instruments to act on behalf of the Company in matters concerning its business
or affairs. All such accounts, credit lines, safe deposit boxes and vaults are
maintained by the Company for normal business purposes, and no such proxies,
powers of attorney or other like instruments are irrevocable.

       2.22   Brokerage. No broker, finder, agent or similar intermediary has
acted on behalf of the Company in connection with this Agreement or the
transactions contemplated hereby, and there are no brokerage commissions,
finders fees or similar fees or commissions payable by the Company, Buyer or any
subsidiary that acquires the Shares in connection therewith based on any
agreement, arrangement or understanding with the Company or any Stockholder or
any action taken by it or any of them.

       2.23   FCPA. The Stockholder represents and warrants to Buyer that it is
are familiar with the U.S. Foreign Corrupt Practices Act, as amended, and the
regulations adopted thereunder (the ""ct"), and that the Company has conducted
all of its activities in full compliance with such Act and regulations. The
Company, nor anyone acting on its behalf, has made or offered any payment or
given anything of value directly or indirectly to any government official or to
any official of a political party or candidate for public office in violation of
the Act.

       2.24   Full Disclosure. Now and as of the date of Closing, the Schedules
hereto and all documents and other papers listed therein or required to be
delivered pursuant to this Agreement and the Related Agreements are true,
complete, correct and authentic. No representation or warranty of the
Stockholder contained in this Agreement, and, to the best knowledge of the
Company and the Stockholder or executive of the Company, no document or other
paper furnished by or on behalf of the Company to Buyer (or any of its agents)
pursuant to this

                                       14
<PAGE>

Agreement or in connection with the transactions contemplated hereby, taken as a
whole, contains an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
made, in the context in which made, not false or misleading. There is no fact
known to the Stockholder or executive of the Company that has not been disclosed
to Buyer in this Agreement and the Related Agreements or the Schedules hereto
and thereto that has or will have a material adverse effect on the Company or
its assets, properties, business, operations, prospects or condition (financial
or otherwise), or is reasonably likely to have such an effect.

       2.28   Best Knowledge. As used herein, an individual will be deemed to
have "best knowledge" of a particular fact or other matter if:

       (a)    such individual is actually aware of such fact or other matter;

       (b)    a reasonable individual could be expected to discover or otherwise
become aware of such fact or other matter in the course of conducting a
reasonably comprehensive investigation concerning the existence of such fact or
other matter; or

       (c)    it relates to any matter of Law.

       A corporation or entity (other than an individual) will be deemed to have
"best knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director, officer, employee, agent,
partner, executor, or trustee of such corporation or entity (or in any similar
capacity) has, or at any time had, knowledge of such fact or other matter.

                                    SECTION 3

                REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER

       The Stockholder represents and warrants to Buyer as of the date hereof
and on and as of the Closing Date as follows:

       3.1    Title to Shares.

              (a)    The Stockholder is and will be at the Closing the holder of
record and the owner of the entire beneficial interest in the Shares set forth
opposite such Stockholder's name on Schedule 1 hereto, free and clear of any
Lien whatsoever and without any exception whatsoever.

              (b)    The Stockholder will transfer and deliver to Buyer or its
designee at the Closing a good and valid title to all of the Shares set forth
opposite its name on Schedule 1, free and clear of any Lien or claim of any
kind, and the entire beneficial interest therein without any exception
whatsoever.

       3.2    Authority to Execute and Perform Agreements. The Stockholder has
full legal right and power to enter into, execute and deliver this Agreement and
to perform in full such Stockholder's obligations hereunder. The execution,
delivery and performance of this Agreement or any Related Agreement (where
applicable) by the Stockholder requires no consent, approval, waiver or other
action by or in respect of, or filing with, any governmental body, agency,
official or authority, the landlord or any other Person. This Agreement or any
Related Agreement (where

                                       15
<PAGE>

applicable) has been duly executed and delivered and is the valid and binding
obligation of each Stockholder, enforceable against each Stockholder in
accordance with its terms.

       3.3    No Breach. The execution, delivery and performance of this
Agreement and the Related Agreements and the consummation of the transactions
contemplated hereby and thereby will not violate, conflict with, contravene, or
result in the breach of or constitute (or with notice or lapse of time or both
constitute) a default under, any instrument, contract or other agreement to
which each Stockholder is a party or to which each Stockholder or each
Stockholder's Shares may be bound or subject; or violate, conflict with or
contravene any order, judgment, injunction, award or decree or other requirement
of any court, arbitrator or governmental or regulatory body against, or binding
upon, each Stockholder or each Stockholder's Shares; or violate, contravene or
conflict with any statute, law, ordinance or regulation of any jurisdiction
binding upon or applicable to each Stockholder or each Stockholder's Shares.

       3.4    Actions and Proceedings. There are no actions, investigations,
proceedings (or any basis therefor), suits or claims or legal, administrative or
arbitral proceedings pending against or, to the best knowledge of the
Stockholder, threatened against or affecting the Stockholder or the
Stockholder's Shares that have or may have (a) the effect of restraining,
modifying or preventing the consummation of the transactions contemplated hereby
or (b) a materially adverse effect on the assets, properties, business,
operations, prospects, or condition (financial or otherwise) of the Company or
Buyer

       3.5    Brokerage. There are no brokerage commissions, finders' fees or
similar fees or commissions payable in connection therewith based on any
agreement, arrangement or understanding with the Stockholder or any action taken
by such Stockholder, the liability for which is or will be on the Company or
Buyer.

                                    SECTION 4

                     REPRESENTATIONS AND WARRANTIES OF BUYER

   Buyer represents and warrants to the Stockholder as follows:

       4.1    Organization. Buyer is duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, and has the
corporate power and lawful authority to own, lease and operate its assets,
properties and business and to carry on its business as now being and as
heretofore conducted.

       4.2    Authority to Execute and Perform Agreements. Buyer has the full
legal right and power and all authority required to enter into, execute and
deliver this Agreement and to perform fully its respective obligations
hereunder, and this Agreement has been duly executed and delivered and is the
valid and binding obligation of Buyer enforceable in accordance with its terms
except, (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights; and (ii) general principles of equity that restrict the
availability of equitable remedies.

       4.3    No Breach. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not
(i) violate any provision of the respective charter or By-laws of Buyer; (ii)
violate any order, judgment, injunction, award or decree of any court,
arbitrator or governmental or regulatory body against, or binding upon,

                                       16
<PAGE>

Buyer or upon the securities, properties, assets or business of Buyer; (iii)
violate any Law which relates to Buyer or to the securities, properties, assets
or business of Buyer; (iv) violate any Permit of the Buyer; or (v) except as set
forth on Schedule 4.3, require any filing with, notice to, or permit, approval
or consent of any foreign, federal, state, local or other governmental or
regulatory body or of any other person.

                                    SECTION 5

                            COVENANTS AND AGREEMENTS

   The parties covenant and agree as follows:

       5.1    Consummation of Agreement. Buyer and the Stockholder shall use
their best efforts to perform and fulfill all conditions and obligations to be
performed and fulfilled by it under this Agreement and the Stockholder shall use
its best efforts further to ensure that to the extent within the Stockholder's
control, no breach of any of the Stockholder's representations, warranties, and
agreements hereunder or contemplated hereby occurs or exists on or before the
Closing Date to the end that the transactions contemplated by this Agreement
shall be fully carried out.

       5.2    Further Assurances. Each of the parties shall execute such
documents, further instruments and other papers and take such further actions as
may be reasonably required or desirable to carry out the provisions hereof and
the transactions contemplated hereby.

       5.3    Survival. Each of the parties agrees that following Closing, the
following action shall be taken:

              (i)    The back office service provider administrative and mark-up
fees (if any) shall be added to the Company's net income starting March 1, 2005;

              (ii)   Beginning [DATE], Buyer will not impose any additional
expenses on the Company and its management without prior mutual agreement with
the Company. Prior to Closing, Buyer and the Company will mutually determine
what the anticipated cost elements are and incorporate these costs into the
Company's financial statements;

              (iii)  Roger Karam shall enter into an employment agreement with
the Buyer for a period of three years. Mr. Karam shall be appointed CEO of
Efonica and President of VoIP. A form of Employment Agreement is attached hereto
as Exhibit "A".

              (iv)   The Stockholder agrees to execute a lock up agreement
covering the Base Shares (as defined in Section 1.2(c)(i)) in form and substance
satisfactory to Kirlin Securities. A form of Lock-Up Agreement is attached
hereto as Exhibit "B".

              (v)    The Stockholder agrees to execute a lock up agreement
covering the Registered Shares as defined in Section 1.2(c)(iv).. A form of
Lock-Up Agreement for Registered Shares is attached hereto as Exhibit "C".

                                       17
<PAGE>

                                    SECTION 6

            CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYER TO CLOSE

       The obligations of Buyer to enter into and complete the Closing is
subject, at the option of Buyer acting in accordance with the provisions of this
Agreement with respect to termination hereof, to the fulfillment of the
following conditions, each of which is for the exclusive benefit of Buyer and
not of the Stockholder and any one or more of which may be waived by Buyer
alone:

       6.1    Representations, Warranties and Covenants. The representations and
warranties of the Company and the Stockholder contained in this Agreement shall
be true and correct in all material respects on and as of the Closing Date with
the same force and effect as though made on and as of the Closing Date. The
Company and each Stockholder shall have performed and complied in all material
respects with all covenants and agreements required by this Agreement to be
performed or complied with by it on or before the Closing Date. The Company and
each Stockholder shall have delivered to Buyer a certificate, dated the Closing
Date, to the foregoing effect and stating that all conditions to Buyer's
obligations hereunder have been satisfied.

       6.2    Consents and Approvals. All consents, Permits and approvals from
all Persons, including without limitation all governmental authorities and all
parties to contracts or other agreements with any Stockholder or the Company,
that may be required in connection with the performance by each Stockholder of
his or her obligations under this Agreement, the continuance (without
modification, amendment, variation or renegotiation) after the Closing of such
contracts or other agreements with the Company or Buyer or any subsidiary of
Buyer that acquires the Shares, and/or the acquisition and ownership of the
Shares by Buyer or its subsidiary shall have been obtained.

       6.3    Litigation. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body or instituted or
threatened by any governmental or regulatory body to restrain, modify or prevent
the consummation of the transactions contemplated hereby, or to seek damages or
a discovery order in connection with such transactions, or that has or may have,
in the reasonable opinion of the Buyer, (a) the effect of restraining, modifying
or preventing the consummation of such transactions or (b) a materially adverse
effect on the assets, properties, business, operations or condition (financial
or otherwise) of the Company or Buyer.

       6.4    Delivery of Share Certificates. The Stockholder shall have
delivered or caused to be delivered to Buyer or its designee the certificates
for all of the Shares, which shall be all of the issued and outstanding capital
shares of the Company not owned by the Buyer, duly endorsed for transfer to
Buyer or its designee, free and clear of any Liens or beneficial interests of
any party.

       6.5    Releases. The Stockholder shall, in form satisfactory to Buyer's
counsel, have released and discharged the Company from any and all claims,
demands and liabilities whatsoever arising or accruing before the Closing under
each and every agreement, arrangement, Law or other state of facts.

       6.6    Certificates as to Representations and Warranties. The Stockholder
shall have delivered to Buyer a certificate in form and substance reasonably
satisfactory to Buyer certifying as to his or her knowledge of certain
representations and warranties of the Company.

       6.7    Documents. The Stockholder shall have delivered or caused the
Company to deliver such documents as are set forth in Section 5.

                                       18
<PAGE>

       6.8    Additional Action. The Stockholder shall have delivered or caused
the Company to deliver such additional certificates, and shall have taken such
additional actions, as Buyer shall reasonably require to evidence and confirm
the authorization and approval of the sale of the Shares, their assignment and
transfer to Buyer or its designee, and their registration in the name of the
Buyer or its designee.

       6.9    Board Approval. This Agreement and the transactions contemplated
hereby shall have been approved by the Board of Directors of Buyer.

       6.10   Government Approval. In the event that governmental approval is
required, the government of Dubai, UAE shall have provided Buyer counsel with
approval of the transactions contemplated herein.

       6.11   Attorney Approval. The Buyer receives approval from its [ ]
counsel that this Agreement meets the requirements of the government of Dubai,
UAE and the United States of America and contains the necessary terms and
conditions of similar stock sales transactions within Dubai, UAE and the United
States of America.

                                    SECTION 7

       CONDITIONS PRECEDENT TO THE OBLIGATION OF THE STOCKHOLDER TO CLOSE

       The obligation of the Stockholder to enter into and complete the Closing
is subject to the fulfillment of the following conditions, each of which is for
the exclusive benefit of the Stockholder and not of Buyer and any one or more of
which may be waived by the Stockholder:

       7.1    Representations, Warranties and Covenants. The representations and
warranties of Buyer contained in this Agreement shall be true in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date. Buyer shall have performed and complied in
all material respects with all covenants and agreements required by this
Agreement to be performed or complied with by it on or before the Closing Date.
Buyer shall have delivered to the Stockholder a certificate, dated the Closing
Date and signed by an officer of the Buyer, to the foregoing effect and stating
that all conditions to the obligations of the Stockholder hereunder have been
satisfied.

       7.2    Litigation. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted by
any governmental or regulatory body, to restrain, modify or prevent the carrying
out of the transactions contemplated hereby, which such action, suit or
proceeding shall not have been stayed.

       7.3    Consents and Approvals. All consents, permits and approvals from
parties to contracts or other agreements with Buyer that may be required in
connection with the performance by Buyer of its obligations under this Agreement
shall have been obtained

       7.4    Board Approval. This Agreement and the transactions contemplated
hereby shall have been approved by the Board of Directors of the Company.

       7.5    Delivery of Share Certificates. As soon as practicable after the
Closing, the Buyer shall have delivered or caused to be delivered to
Stockholder, its designee or the Escrow Agent, as the case may be, the
certificates for all of the Base Shares, duly endorsed for transfer to

                                       19
<PAGE>

Stockholder or its designee, free and clear of any Liens or beneficial interests
of any party (provided however, this Section 7.5 is not a condition to Close).

                                    SECTION 8

                                 INDEMNIFICATION

              8.1    Survival. Notwithstanding any right of any party to
investigate fully the affairs of the other party and notwithstanding any
knowledge of facts determined or determinable by such party pursuant to such
investigation or right of investigation, each party has the right to rely fully
upon the representations, warranties, covenants and agreements of each other
party in this Agreement or in any Schedule, certificate or financial statement
delivered by any party pursuant hereto. All such representations, warranties,
covenants and agreements shall survive the execution and delivery hereof and the
Closing hereunder and be indemnified in accordance with this Section 8, and,
except as otherwise specifically provided in this Agreement, shall thereafter:

       (a)    except as provided in clauses (b) and (c) hereof, terminate and
expire at the end of the twelfth (12th) full calendar month after the Closing
Date with respect to any claim based upon, arising out of or otherwise in
respect of any inaccuracy in or any breach of any representation or warranty of
the Stockholder contained in Sections 2 or 3 hereof or of Buyer contained in
Section 4 hereof, of which the party asserting such claim shall have given no
notice on or before the end of such twelfth (12th) month, except for any claim
based upon fraud willfulful misconduct by the Stockholder or the Company, which
shall survive until the end of the twenty- fourth (24th) full calendar month
after the Closing Date;

       (b)    survive forever, with respect to the representations and
warranties of the Stockholder contained in Section 2.24 hereof and the
representations and warranties of the Stockholder contained in Sections 3.1
hereof; and

       (c)    terminate and expire, with respect to any Tax Claim (as
hereinafter defined), on the later of (i) the date upon which the assessment of
any taxes to which any such Tax Claim may relate is barred by all applicable
statutes of limitations and (ii) the date upon which any claim for refund or
credit related to such Tax Claim is barred by all applicable statutes of
limitations. As used herein, "Tax Claim" means any claim based upon, arising out
of or otherwise in respect of (A) issues raised on audit of the Company by
taxing authorities with respect to any period ending on or before the Closing
Date, (B) any inaccuracy in or any breach of any representation, warranty,
covenant or agreement of the Stockholder contained in this Agreement related to
Taxes or (C) any other Tax liabilities of the Company other than Taxes of the
Company that are properly allocable to periods of time beginning after the
Closing Date; provided that the "Tax Claim" shall exclude any such claim arising
out of any Tax return filed by the Company after the Closing which claim (x) is
not based on incorrect or incomplete information compiled by the Company before
the Closing and (y) does not result from any misconduct or bad faith of the
Stockholder or of the Company prior to the Closing.

              8.2    Obligation of the Stockholder to Indemnify. Subject to the
limitations set forth below and to the termination provisions set forth in
Section 8.1, the Stockholder agrees, jointly and severally, to indemnify, defend
and hold harmless Buyer (and its subsidiaries, directors, officers, employees,
affiliates and assigns) from and against all losses, liabilities, damages, costs
or expenses (including interest and penalties imposed or assessed by any
judicial or administrative body and reasonable attorneys fee" ("Losses") based
upon, arising out of or otherwise in respect of any inaccuracy in or any breach
of any representation, warranty,

                                       20
<PAGE>

covenant or agreement of any Stockholder contained in this Agreement or in any
Schedule delivered pursuant hereto;

              (ii)   any Tax Claim, whether or not included in clause (i);
compensation by any broker, finder, agent or similar intermediary claiming to
have been employed or retained by or on behalf of the Company or the
Stockholder, whether or not included in clause (i), (b) based upon any fraud
willful misconduct by the Stockholder.

              8.3    Obligation of Buyer to Indemnify. Subject to the
limitations set forth below and to the termination provisions set forth in
Section 8.1, Buyer agrees to indemnify, defend and hold harmless the Stockholder
from and against any Losses based upon, arising out of or otherwise in respect
of (i) any material inaccuracy in or breach of any representation, warranty,
covenant or agreement of Buyer contained in this Agreement or in any Schedule,
certificate, document or other papers delivered pursuant hereto, or (ii) any
claim or demand for commission or other compensation by any broker, finder,
agent or similar intermediary claiming to have been employed by or on behalf of
Buyer.

              8.4    Notice and Opportunity to Defend.

       (a)    Notice of Asserted Liability. Promptly after receipt by any party
entitled to indemnification (the "Indemnitee") of notice of any demand, claim or
circumstances that, with or without the lapse of time, would give rise to a
claim or the commencement (or threatened commencement) of any action, proceeding
or investigation ("Asserted Liability") that may result in a Loss, the
Indemnitee shall give notice thereof (the "Claims Notice") to any other party or
parties obligated to provide indemnification pursuant to Sections 8.2 or 8.3
hereof (the "Indemnifying Party"). The Claims Notice shall describe the Asserted
Liability in reasonable detail, and shall indicate the amount (estimated, if
necessary) of the Loss that has been or may be suffered by the Indemnitee. If
the Indemnitee fails to give the Indemnifying Party timely and reasonable notice
of an Asserted Liability that might result in a Loss, such failure to so notify
Indemnitee shall relieve the Indemnifying Party from liability hereunder with
respect to such claim if such failure to so notify the Indemnifying Party
results in the forfeiture by the Indemnifying Party of any material rights and
defenses otherwise available to the Indemnifying Party with respect to such
Asserted Liability.

       (b)    Opportunity to Defend. The Indemnifying Party may elect to
compromise or defend, and control the defense of, at its own expense and by
counsel reasonably satisfactory to the Indemnitee, any Asserted Liability,
provided that the Indemnitee shall have no liability or obligation, and shall be
subject to no restriction, under any compromise or settlement agreed to by the
Indemnifying Party that it has not approved in writing.

                                    SECTION 9

                                  MISCELLANEOUS

              9.1    Publicity. No public release or announcement concerning
this Agreement or the transactions contemplated hereby shall be made without
advance approval thereof by the Stockholder Representative and Buyer. No party
shall disclose any term or terms of this Agreement to any third party without
advance approval thereof by the other party except as necessary or desirable for
either party to enforce its rights hereunder or as may otherwise be required by
law, or as contemplated by the Confidentiality Agreement.

                                       21
<PAGE>

              9.2    Expenses. All costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such cost or expense.

              9.3    Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, two days after the date of deposit in the mails, as
follows:

If to Buyer:

                     Fusion Telecommunications International, Inc.
                     c/o Matthew D. Rosen
                     420 Lexington Avenue
                     Suite 520
                     New York, New York 10170
                     Telephone: 212-972-2000
                     Facsimile: 212-972-7884

               with a copy to:

                     Heitz & Associates, P.C.
                     345 Woodcliff Drive
                     Fairport, New York 14450
                     Telephone: 585-387-0000
                     Facsimile: 585-387-0130

If to Stockholder or the Company:

                     Efonica FZ-LLC
                     P.O.Box: 500322 Dubai, UAE
                     Dubai Internet City, DIC Bldg. 9, Offices G02 & G03,
                     Dubai, UAE
                     Telephone: +971.4.3910333
                     Facsimile: +971.4.3908872

Any party may by notice given in accordance with this Section 9.3 to the other
parties designate another address or person for receipt of notices hereunder.

              9.4    Entire Agreement. This Agreement (including the Related
Agreements, Exhibits and Schedules) and the Confidentiality Agreement contain
the entire agreement among the parties with respect to the transactions
contemplated hereby, and supersedes all prior agreements, written or oral, with
respect thereto.

              9.5    Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies. This Agreement may be amended, superseded, cancelled,
renewed or extended, and any term hereof may be waived, only by a written
instrument signed by Buyer and the Stockholder or, in the case of a waiver, by
Buyer or the Stockholder, as the case may be, waiving compliance. No delay on
the part of any party in exercising any right, power or privilege

                                       22
<PAGE>

hereunder shall operate as a waiver thereof nor shall any waiver on the part of
any party of any such right, power or privilege, nor any single or partial
exercise of any such right, power or privilege, preclude any further exercise
thereof or the exercise of any other such right, power or privilege. The rights
and remedies herein provided are cumulative and are not exclusive of any rights
or remedies that any party may otherwise have at law or in equity. The rights
and remedies of any party based upon, arising out of or otherwise in respect of
any inaccuracy in or breach of any representation, warranty, covenant or
agreement contained in this Agreement shall in no way be limited by the fact
that the act, omission, occurrence or other state of facts upon which any claim
of any such inaccuracy or breach is based may also be the subject matter of any
other representation, warranty, covenant or agreement contained in this
Agreement (or in any other agreement between the parties) as to which there is
no inaccuracy or breach.

              9.6    Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New York without regard to
its conflict of laws provisions. The parties hereto specifically submit to the
exclusive jurisdiction of the courts of the State of New York in respect of any
litigation arising out of this Agreement or the nonperformance hereof. The
prevailing party of any litigation shall be entitled to receive from the losing
party reasonable attorneys' fees and costs.

              9.7    Binding Effect; No Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and legal representatives. This Agreement is not assignable except by
operation of law or by Buyer to any of its affiliates.

              9.8    Variations in Pronouns. All pronouns and any variations
thereof refer to the masculine, feminine or neuter, singular or plural, as the
context may require.

              9.9    Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.

              9.10   Exhibits and Schedules. The Exhibits and Schedules are a
part of this Agreement as if fully set forth herein. All references herein to
Sections, subsections, clauses, Exhibits and Schedules shall be deemed
references to such parts of this Agreement, unless the context shall otherwise
require.

              9.11   Headings. The headings in this Agreement are for reference
only, and shall not affect the interpretation of this Agreement.

              9.12   Severability. Any Section, subsection or other subdivision
of this Agreement or any other provision of this Agreement which is, or becomes,
illegal, invalid or unenforceable shall be severed herefrom and shall be
ineffective to the extent of such illegality, invalidity or unenforceability and
shall not affect or impair the remaining provisions hereof, which provisions
shall (a) be severed from any illegal, invalid or unenforceable Section or other
subdivision of this Agreement, and (b) otherwise remain in full force and
effect.

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

                                       23
<PAGE>

                                         BUYER
                                         FUSION
                                         TELECOMMUNICATIONS
                                         INTERNATIONAL, INC.

                                         By:

                                         ---------------------------------------
                                         Name: Matthew D. Rosen
                                         Title: President

                                         STOCKHOLDER:
                                         KARAMCO, INC.

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

                                         COMPANY
                                         EFONICA FZ-LLC

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

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

                                       24
<PAGE>

                                   SCHEDULE 1

SELLING STOCKHOLDER       PERCENTAGE OWNERSHIP (PRE-SALE)       NUMBER OF SHARES
--------------------------------------------------------------------------------

    Karamco, Inc.                     49.8%                          [     ]

                                       25
<PAGE>

                                  SCHEDULE 2.17

                               Proprietary Rights

Pending applications to register Trademarks:

         1.    Mark: Efonica
               Serial Number: 76/572173.
         2.    Mark: O Efonica (drawing)
               Serial Number: 76/572172

Software Licenses:

         1.

         2.

                                       26
<PAGE>

                                  SCHEDULE 2.14

                               MATERIAL CONTRACTS

                ALL CUSTOMERS WERE PREVIOUSLY DISCLOSED TO BUYER

                                       27
<PAGE>

                                SCHEDULE 2.14(C)

                                       28
<PAGE>

                                  SCHEDULE 2.19
                                    EMPLOYEES

                                       29
<PAGE>

                                  SCHEDULE 2.20

                                    INSURANCE

                                       30
<PAGE>

                                   EXHIBIT "A"

                          Form of Employment Agreement

                        (TO BE PROVIDED AT A LATER DATE)

                                       31
<PAGE>

                                   EXHIBIT "B"

                            FORM OF LOCK-UP AGREEMENT

                                12 MONTH LOCK-UP

Fusion Telecommunications International, Inc.
420 Lexington Avenue
Suite 518
New York, NY 10170

Ladies and Gentlemen:

        The undersigned, a beneficial owner(1) of the common stock, no par value
(the "Common Stock"), of Fusion Telecommunications International, Inc. (the
"Company") aagrees, for the benefit of the Company and Kirlin, that the
undersigned will not, without Kirlin's prior written consent (and, if required
by applicable state blue sky laws, the securities commissions in any such
states), offer, sell, assign, hypothecate, pledge, transfer or otherwise dispose
of, directly or indirectly, any shares of Common Stock owned by him/her, or
subsequently acquired through the exercise of any options, warrants or other
rights, or the conversion of any other security, or by reason of any stock split
or other distribution of stock, or grant options, warrants or other rights with
respect to any such securities, all during the 12-month period commencing on the
"Effective Date" of the Company's Registration Statement. This lock-up will not
be applicable to any shares of Common Stock in the Registration Statement.
Furthermore, the undersigned will permit all certificates evidencing any such
securities to be endorsed with the appropriate restrictive legends, and consents
to the placement of appropriate stop transfer orders with the transfer agent for
the Company. A copy of this Agreement will be available from the Company or the
Company's transfer agent upon request and without charge.

    The undersigned hereby agrees to be bound by the applicable provisions of
the Underwriting Agreement.

    The terms and conditions of this Agreement only can be modified (including
premature termination of this Agreement) with the prior written consent of
Kirlin.

---------------------------------------     ------------------------------------
Number of shares beneficially owned         Shareholder Name

---------------------------------------
Number of shares subject to options,     By:
warrants, rights and/or convertible         ------------------------------------
securities                                  Signature

                                            ------------------------------------
                                            Printed Name

            * sales by the Stockholder will be subject to rule 144.
  Both parties acknowledge that the holding period for Karamco's unregistered
                   shares commence at the time of the closing

----------
(1) It is agreed that, for purposes of this letter, the undersigned beneficially
owns, among other shares, any shares owned by (i) members of his or her family
and (ii) any person or entity controlled by the undersigned or under common
control with the undersigned.

                                       32
<PAGE>

                                   Exhibit "C"

                 Form of Lock-Up Agreement for Registered Shares

Fusion Telecommunications International, Inc.
420 Lexington Avenue
Suite 518
New York, NY 10170

Ladies and Gentlemen:

        During the 90 day period following the Closing of the Stock Purchase
Agreement (as defined herein), the Company (as defined herein) will either allow
the Stockholder to sell up to $1 million in Registered Shares in ordinary
brokerage transactions in the public market or purchase the Registered Shares as
more particularly set forth in the Stock Purchase Agreement.

        The undersigned, a beneficial owner(2) of the registered common stock,
no par value (the "Registered Shares"), of Fusion Telecommunications
International, Inc. (the "Company") issued pursuant to Section 1.2(C)(iv) of the
Stock Purchase Agreement dated January 10, 2005 ("Stock Purchase Agreement")
agrees, for the benefit of the Company, it will not, without the Company's prior
written consent, offer, sell, assign, hypothecate, pledge, transfer or otherwise
dispose of, directly or indirectly, any of the Registered Shares other than as
set forth in the following schedule:

        (i)     0-44 days following the effective date of an IPO- 0 Registered
Shares;

        (ii)    45-89 days following the effective date of an IPO- up to 1/2 of
the Registered Shares; and

        (iii)   90 days following the effective date of the IPO- the remaining
Registered Shares.

        The undersigned hereby agrees to be bound by the applicable provisions
of the Stock Purchase Agreement.

        The terms and conditions of this Agreement only can be modified with the
prior written consent of the Company.

---------------------------------------     ------------------------------------
Number of shares beneficially owned         Shareholder Name

---------------------------------------
                                         By:
                                            ------------------------------------
                                            Signature

                                            ------------------------------------
                                            Printed Name

----------
(2)     It is agreed that, for purposes of this letter, the undersigned
beneficially owns, among other shares, any shares owned by (i) members of his or
her family and (ii) any person or entity controlled by the undersigned or under
common control with the undersigned.

                                       33
<PAGE>

                                   EXHIBIT "D"

                            Form of Escrow Agreement

                                ESCROW AGREEMENT

        This Escrow Agreement ("Escrow Agreement") is made and entered into this
_______ day of __________, 2005 ("Effective Date"), by and between Fusion
Telecommunications International, Inc. ("Fusion"), Karamco, Inc. ("Karamco") and
Heitz & Associates, P.C., a professional corporation in good standing in the
state of New York ("Disbursement Manager").

        WHEREAS, Fusion, Karamco and Efonica FL-LLC entered into a Stock
Purchase Agreement dated __________, 2005 (the "Agreement"); and

        WHEREAS, Pursuant to the Agreement, Fusion is required to place
__________ Escrowed Shares (as defined in the Agreement) in escrow to be held by
Disbursement Manager under the terms of the Agreement and this Escrow Agreement;

        WHEREAS, Fusion and Karamco hereby employ Disbursement Manager to escrow
the Escrowed Stock pursuant to the Agreement which is attached hereto and made a
part hereof as EXHIBIT 1;

        NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the adequacy and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:

ITEM 1          SERVICE. Disbursement Manager will provide to Fusion and Karamco
the escrow services as hereinafter set forth.

ITEM 2          EXHIBITS. In the event of a conflict between the provisions of
any Exhibit attached hereto and the provisions of the body of this Escrow
Agreement, the provisions of such Exhibit shall control and prevail.

ITEM 3          TERM. The term of this Escrow Agreement shall commence on the
Effective Date and expire subsequent to the Agreement.

ITEM 4          SECURITY/PRE-PAYMENT. Upon Closing of the Agreement, Fusion
shall deliver to the Disbursement Manager the Escrowed Stock. The Disbursement
Manager will hold the Escrowed Stock in escrow.

ITEM 5          ARBITRATION. The parties agree to binding arbitration in the
state of New York, County of New York, with respect to any issue. Any proceeding
shall be by and pursuant to the Commercial Arbitration Rules then in effect of
the American Arbitration Association. Either party may make a demand for
arbitration by delivering a written demand for arbitration to the other
party(s), provided, however, such written demand shall not be delivered earlier
than twenty (23) days, nor later than thirty-five (35) days, following the date
of the invoice in question. The parties may agree on one arbitrator, but in the
event they cannot so agree, the arbitrator shall be named by the American
Arbitration Association. The hearing before the arbitrator of the matter to
arbitrate may be selected by the arbitrator, at a time and place in New York
County, New York. The arbitrator shall determine the matter, execute and
acknowledge their award in writing,

                                       34
<PAGE>

and deliver a copy of the award to each of the parties by registered or
certified mail. Any court having jurisdiction may enter a judgment confirming
the award, or the court may vacate, modify or correct the award as provided by
law. If the arbitrator shall fail to reach an agreement within thirty (30) days
following the arbitration hearing, they shall be discharged, and a new
arbitrator shall be appointed and shall proceed in the same manner, and the
process shall be repeated until a decision is finally reached. All cost and
expense of arbitration, including the fees of arbitration, shall be borne by
each party(s) or in such proportions, as the arbitrator shall determine.

ITEM 6          OBLIGATION OF DISBURSEMENT MANAGER.

                a.      POWERS. Fusion and Karamco hereby authorize and direct
Disbursement Manager to receive, hold, pay and disburse the Escrowed Stock in
accordance with the provisions of the Agreement and this Escrow Agreement.

ITEM 7          MISCELLANEOUS.

                a.      NO AGENCY. This Agreement does not in any way create the
relationship of principal and agency, joint, venture, partner or employer and
employee between Customer, Disbursement Manager and Supplier.

                b.      NOTICES. Any notice required or permitted to be given
hereunder shall be in writing and shall be deemed given and effective when
delivered personally, or by private express service such as, without limitation,
Federal Express and addressed to the parties as follows:

                        As to Fusion:

                             Fusion Telecommunications International, Inc.
                             c/o Matthew D. Rosen
                             420 Lexington Avenue
                             Suite 520
                             New York, New York 10170
                             Telephone: 212-972-2000
                             Facsimile: 212-972-7884

                        As to Karamco:

                             Efonica FZ-LLC
                             P.O.Box: 500322 Dubai, UAE
                             Dubai Internet City, DIC Bldg. 9, Offices G02 & G03
                             Dubai, UAE
                             Telephone: +971.4.3910333
                             Facsimile: +971.4.3908872

                        As to Disbursement Manager:

                             Heitz & Associates, P.C.
                             c/o William R. Heitz, Esq.
                             345 Woodcliff Drive
                             Fairport, New York 14450
                             Phone:  585-387-0000
                             Fax:    585-387-0130

                                       35
<PAGE>

                c.      WAIVER. No failure on the part of any party hereto to
exercise, and no delay in exercising any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or remedy by any such party preclude any other right, power or
remedy. No express waiver or assent is given by any party hereto to any breach
of or default in the same or any other term or condition hereof.

                d.      HEADINGS. The captions heading the various paragraphs of
this Agreement are for convenience of reference only and shall not be deemed to
limit, expand, or define the contents of the respective paragraphs.

                e.      GOVERNING LAW. This Agreement shall be construed in
accordance with and be governed by the laws of the State of New York.

                f.      ENTIRE AGREEMENT. This Agreement supersedes all prior
discussions, negotiations and agreements between the parties with respect to the
subject matter hereof and this Agreement contains the sole and entire agreement
between the parties with respect to the matters covered hereby. There are no
promises, agreements, conditions or undertakings, either oral or written,
between the parties and relating to the subject matter of this Agreement other
than those set forth or referred to herein.

                g.      SEVERABILITY. In the event any portion of this Agreement
may be determined by a court of competent jurisdiction to be unenforceable, the
balance of the Agreement shall be severed therefrom and shall remain in full
force and effect unless a failure of consideration would thereby result.

                h.      MODIFICATIONS. No amendment or modifications of the
terms or provisions of this Agreement shall be valid, unless same shall be in
writing and signed by both of the parties hereto.

                i.      INTERPRETATION. Should any provision of this Agreement
require judicial interpretation, it is agreed that the court interpreting or
construing the same shall not apply a presumption that the terms hereof shall be
more strictly construed against one party be reason of the rule of construction
that a document is to be construed more strictly against the party who itself or
through its agent prepared the same, it being agreed that the agents of all
parties have participated in the preparation hereof.

                j.      AUTHORITY TO EXECUTE. Each person executing this
Agreement on behalf of such person or organization represents and warrants that
he or she is fully authorized to execute and deliver this Agreement on behalf of
such person or organization. Each member of each party represents and warrants
to all members of all other parties that no consent of any person not a party to
this Agreement is necessary in order for this Agreement to be fully and
completely binding upon each member of the parties hereto.

                                       36
<PAGE>

                k.      NO THIRD-PARTY BENEFICIARIES. This Agreement is not
intended nor shall be construed to create, vest or convert any right in or upon
any entity or person not a party to this Agreement.

                l.      ASSIGNMENT. Fusion or Karamco may assign, in whole or in
part, its rights and/or duties under this Agreement, with notice to Disbursement
Manager. Disbursement Manager may not assign this Agreement.

                m.      ATTORNEYS' FEES. If any action or other proceeding is
brought for the enforcement or interpretation of this Agreement, or because of
any alleged dispute, breach or default in connection with any of the provisions
of this Agreement, the successful or prevailing party and the Disbursement
Manager shall be entitled to recover reasonable attorneys' fees and other costs
incurred in that action or proceeding (including, without limitation, reasonable
attorneys' fees and costs incurred in all appellate proceedings), in addition to
any other relief to which it may be entitled.

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

                o.      GENDER. Word or any gender used in this Agreement shall
be held and construed to include the other gender, and words in the singular
shall be held to include the plural and vice versa, unless the context requires
otherwise.

                p.      SURVIVAL. Any obligations and covenants of the Customer
hereunder which, by their nature, would continue beyond the termination,
cancellation or expiration of the Agreement, shall survive such termination,
cancellation or expiration.

                q.      BINDING EFFECT. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto and their respective
heirs, legal representatives, executors, administrators, successors and
permitted assigns.

                r.      INDUSTRY TERMS. Words having well-known technical or
trade meanings shall be so construed.

IN WITNESS WHEREOF, the parties hereto have set their hands and seals the day
and year first above-written.

                                      Fusion:

                                      By:
                                         ---------------------------------------
                                      Date

                                      Name:
                                      Title: President

                                      Karamco:

                                      By:
                                         ---------------------------------------
                                      Date

                                      Name:
                                      Title:

                                      Disbursement Manager:

                                      By:
                                         ---------------------------------------
                                      Date

                                      Name:
                                      Title:

                                       38
<PAGE>

                    AMENDMENT TO THE STOCK PURCHASE AGREEMENT

         THIS AMENDMENT  ("Amendment")  to the Stock Purchase  Agreement is made
and entered  into as of February 9, 2005 (the "Effective Date"),  by and between
Fusion Telecommunications International, Inc., a Delaware corporation ("Fusion")
and  Efonica,  FZ-LLC,  a  company  organized  in Dubai  Technology,  Electronic
Commerce & Media Free Zone, Dubai, United Arab Emirates ("Efonica") and Karamco,
Inc., a company organized in the British Virgin Islands ("Karamco").

         WHEREAS,  on or about  January 11,  2005,  Fusion  entered into a Stock
Purchase Agreement with Efonica and Karamco (the "Agreement") a copy of which is
attached to and made a part of this Amendment as Schedule A ; and

         WHEREAS,  Fusion,  Efonica  and  Karamco  desire  to  enter  into  this
Amendment for the purpose of amending the Agreement.

         NOW  THEREFORE,  in  consideration  of the foregoing and other good and
valuable  consideration,  the  receipt,  adequacy  and  sufficiency  of which is
acknowledged, the parties agree as follows:

         1. Beginning the Effective  Date, the Agreement  shall be amended so as
to amend paragraph 1.2(C)(iv) as follows:

         Buyer  shall use its  reasonable  efforts to cause  150,000 of the Base
Shares to be registered (the "Registered  Shares") within 60 days of the Buyer's
initial public  offering,  unless said date is extended with Karamco's  consent.
The date the Registered  Shares are effectively  registered  shall be defined as
the  "Registration  Date."  Following  registration,  Karamco  may sell up to an
aggregate of $1 million in Registered Shares in ordinary brokerage  transactions
in the public market (1/2 of the Registered  Shares on the Registration Date and
1/2 90 days following the effective date of the initial public offering). In the
event Buyer is unable to cause the  Registered  Shares to be  registered  as set
forth above,  Buyer shall  purchase the  Registered  Shares from Karamco (in the
amount Karamco would have been  otherwise  entitled to sell in the public market
as set  forth  above) at the  higher  of the IPO price or the  average 5 day bid
price  prior to the date  Buyer  notifies  Karamco  that is  unable to cause the
Registered  Shares to be registered.  Any provision in Paragraph  1.2(C)(iv) not
changed  herein will  remain the same  (Buyer's  right to buy back and  Seller's
right to cause Buyer to purchase).

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

FUSION TELECOMMUNICATIONS INTERNATIONAL, INC.

By:_________________________
Matthew D. Rosen, as its President

EFONICA, FZ-LLC

BY:_________________________

KARAMCO, INC.

BY:_________________________AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT

      This Amended and Restated Securities Purchase Agreement (this "AGREEMENT")
is dated as of December  23, 2004 by and between  Utix Group,  Inc.,  a Delaware
corporation  (the  "COMPANY"),  Great  Court  Capital  LLC,  a New York  limited
liability  company  ("GREAT  COURT") and each  purchaser  who has executed  this
Agreement on the signature  page hereto (each, a "PURCHASER"  and  collectively,
the "PURCHASERS").  The Company,  Great Court and the Purchasers are hereinafter
sometimes collectively referred to as the "PARTIES."

      WHEREAS,  pursuant to the provisions of the securities purchase agreement,
dated as of May 21, 2004, among the Company, Great Court and the Purchasers (the
"ORIGINAL PURCHASE AGREEMENT"),  the Company sold to the Purchasers an aggregate
of  $1,250,000  of 15% senior  secured  promissory  notes due May 28,  2005 (the
"ORIGINAL NOTES") and the Original Warrants; and

      WHEREAS,  the Parties  hereto  desire to amend and  restate  the  Original
Purchase  Agreement,  in order to inter alia (i) modify the terms and conditions
of the Original Notes, (ii) issue additional  securities to the Purchasers,  and
(iii) modify the terms and  conditions of the Security  Agreement,  all upon the
terms and subject to the conditions set forth in this Agreement and the Exhibits
hereto.

      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  of the
Purchasers agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

      1.1     DEFINITIONS. In addition to the terms  defined  elsewhere  in this
Agreement, the following terms have the _____________ meanings indicated:

      1.1.1   "ADDITIONAL  WARRANTS"  means one or more  warrants,  each with an
exercise  price of $0.48 per share,  to purchase up to an aggregate of 2,604,167
shares of Common  Stock to be issued  to the  Purchasers  simultaneous  with the
Closing Date on a proportional basis (an Additional Warrant entitling the holder
to purchase  2.0833335 shares of Common Stock for each $1.00 principal amount of
Restated  Notes  exchanged  for  Original  Notes) to such  Investor's  aggregate
exchange of Restated Notes contemplated by this Agreement;  which Warrants shall
be in the form of SCHEDULE 1.1.1.

      1.1.2  "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.

      1.1.3   "BUSINESS DAY" means any day other than  Saturday, Sunday or other
day on which commercial banks in The City of New York are authorized or required
by law to remain closed.

<PAGE>

      1.1.4   "COMMISSION" OR "SEC"  means  the  United  States  Securities  and
Exchange Commission.

      1.1.5   "COMMON STOCK" means the common  stock of the  Company,  par value
$0.001 per share.

      1.1.6   "COMMON  STOCK  EQUIVALENTS"  means,   collectively,  Options  and
Convertible Securities.

      1.1.7   "COMPANY COUNSEL" means Gersten Savage Kaplowitz Wolf & Marcus LP.

      1.1.8   "CONVERTIBLE   SECURITIES"   means  any  capital  stock  or  other
securities, including warrants (other than Options) that are convertible into or
exercisable or exchangeable for Common Stock.

      1.1.9  "EFFECTIVE  DATE" means the date that the Registration Statement is
first declared effective by the Commission.

      1.1.10  "ELIGIBLE  MARKET"  means any of the New York Stock  Exchange (the
"NYSE"),  the American Stock Exchange (the "AMEX"),  the Nasdaq  National Market
("NASDAQ  NNM"),  the Nasdaq  Small Cap Market  ("NASDAQ  SCM") or the  National
Association  of Securities  Dealers,  Inc. OTC Bulletin Board (the "OTC BULLETIN
BOARD").

      1.1.11  "EXCHANGE  ACT"  means the  Securities  Exchange  Act of 1934,  as
amended.

      1.1.12  "LIEN"  means  any  lien,   charge,   claim,   security  interest,
encumbrance, right of first refusal or other restriction.

      1.1.13  "LOSSES" means any and all losses, claims,  damages,  liabilities,
settlement  costs  and  expenses,   including,   without  limitation,  costs  of
preparation and reasonable attorneys' fees.

      1.1.14  "OPTIONS" means any rights, warrants or options to  subscribe  for
or purchase Common Stock or Convertible Securities.

      1.1.15  "ORIGINAL  NOTES"  shall have the  meaning  set forth in the first
WHEREAS clause of this Agreement.

      1.1.16  "ORIGINAL  WARRANTS"  means one or more warrants  issued under the
Original  Purchase  Agreement,  with an  exercise  price of $0.35 per share,  to
purchase up to an aggregate  of  3,571,429  shares of Common Stock issued to the
Purchasers on a proportional  basis (a Warrant  entitling the holder to purchase
2.8571432  shares  of  Common  Stock  for each  $1.00  principal  amount of Note
purchased) to such Investor's  aggregate  purchase of Original Notes pursuant to
the Original Purchase Agreement.

                                       2
<PAGE>

      1.1.17  "PERSON" means any 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 any court or other federal,  state, local or other governmental  authority or
other entity of any kind.

      1.1.18  "PURCHASER  DESIGNEE" shall mean Great Court Capital, or any other
Person  designated  in writing from time to time by the holders of a majority of
the Notes and who shall be reasonably acceptable to the Company.

      1.1.19  "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.

      1.1.20  "PROSPECTUS"  means the  prospectus  included in the  Registration
Statement  (including,  without  limitation,  a  prospectus  that  includes  any
information  previously  omitted from a prospectus filed as part of an effective
registration  statement  in  reliance  upon  Rule  430A  promulgated  under  the
Securities Act), as amended or supplemented by any prospectus  supplement,  with
respect  to  the  terms  of  the  offering  of any  portion  of the  Registrable
Securities covered by the Registration  Statement,  and all other amendments and
supplements to the  Prospectus,  including  post-effective  amendments,  and all
material  incorporated by reference or deemed to be incorporated by reference in
such Prospectus.

      1.1.21  "REGISTRABLE SECURITIES" means: (i) any Common Stock issuable upon
conversion of the Restated  Notes,  (ii) any Common Stock issuable upon exercise
of the Warrant  Shares,  (iii)  1,125,000  shares of Common  Stock  issued to SD
Partners or its Affiliates under an advisory  agreement  between the Company and
SD Partners,  dated as of May 21, 2004,  as amended of even date  herewith  (the
"ADVISORY AGREEMENT");  (iv) any Common Stock issuable upon exercise of warrants
issued to SD Partners to purchase up to 1,125,000 shares of Company Common Stock
at $0.48 per share issued under the Advisory  Agreement;  and (v) any securities
issued  or  issuable  upon any  stock  split,  dividend  or other  distribution,
recapitalization or similar event with respect to the foregoing.

      1.1.22  "REGISTRATION STATEMENT" means the registration statement required
to be filed under  Article VI below,  including  (in each case) the  Prospectus,
amendments  and  supplements  to  such  registration  statement  or  Prospectus,
including pre- and  post-effective  amendments,  all exhibits  thereto,  and all
material  incorporated by reference or deemed to be incorporated by reference in
such registration statement.

      1.1.23  "REQUIRED CHARTER  AMENDMENT DATE" means February 15, 2005, unless
such date shall be extended by mutual  agreement of the  Purchaser  Designee and
the Company.

      1.1.24  "REQUIRED  EFFECTIVENESS  DATE" means April 15, 2005,  unless such
date shall be extended by mutual  agreement  of the  Purchaser  Designee and the
Company, or otherwise as provided in this Agreement.

      1.1.25  "REQUIRED  FILING DATE" means  January 31, 2005,  unless such date
shall be extended by mutual agreement of the Purchaser Designee and the Company.

                                       3
<PAGE>

      1.1.26  "RESTATED  NOTES" means one or more 15% senior secured  promissory
notes aggregating up to $1,250,000 in principal  amount,  that amend and restate
in their entirety the Original Notes;  which Restated Notes shall be in the form
of SCHEDULE 1.1.25.

      1.1.27  "RESTATED SECURITY AGREEMENT" means the security  agreement, dated
of even date that amends and restates in its entirety the  "Security  Agreement"
issued under the Original  Agreement,  granting  Purchasers a perfected security
interest in all the assets of the Company and its Subsidiaries  (subordinated to
the "Senior Lien" as defined  therein) in which such lien may be perfected under
the Uniform Commercial Code as in force in Massachusetts, to secure repayment of
the Restated Notes, in the form of SCHEDULE 1.1.26.

      1.1.28  "RESTATED  WARRANTS" means the  non-redeemable  warrants, dated of
even date  herewith,  with an exercise  price of $0.35 per share  (inclusive  of
"cashless  exercise"  provisions),  to purchase up to an  aggregate of 3,571,429
shares of  Common  Stock  issued to the  Purchasers  at the  Exchange  Date on a
proportional  basis (a Warrant entitling the holder to purchase 2.8571432 shares
of Common  Stock for each  $1.00  principal  amount of Note  purchased)  to such
Investor's  aggregate  purchase  of  Original  Notes  pursuant  to the  Original
Purchase  Agreement;  which Restated  Warrants,  in the form of SCHEDULE 1.1.27,
amends and restates in its entirety the Original Warrants.

      1.1.29  "RULE 144,"  "RULE 415,"  and "RULE 424"  means Rule 144, Rule 415
and Rule  424,  respectively,  promulgated  by the  Commission  pursuant  to the
Securities  Act, as such Rules 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.

      1.1.30  "SECURITIES" means the collective reference to the Restated Notes,
the Restated Warrants and the Additional Warrants.

      1.1.31  "SECURITIES ACT" means the Securities Act of 1933, as amended.

      1.1.32  "SUBSIDIARY"  means any Person in which the  Company,  directly or
indirectly, owns capital stock or holds an equity or similar interest.

      1.1.33  "TRADING DAY"  means  (a) any  day  on  which  the Common Stock is
listed or quoted and traded on any Eligible  Market,  or (b) if the Common Stock
is not then listed or quoted and traded on any  Eligible  Market,  then a day on
which trading occurs on the Over-the-Counter Pink Sheets.

      1.1.34  "TRADING  MARKET"  means the  Over-the-Counter  Pink Sheets or any
Eligible Market on which the Common Stock is then listed or quoted.

      1.1.35  "TRANSACTION  DOCUMENTS" means this Agreement, the Restated Notes,
the Restated Warrants,  the Additional Warrants, the Restated Security Agreement
and  any  other  documents  or  agreements   executed  in  connection  with  the
transactions contemplated hereunder.

      1.1.36  "UCC FILINGS" means the filings within Delaware, New Hampshire and
Massachusetts  required by law to grant a first perfected  security  interest as
contemplated  by the  Security  Agreement  in the assets of the  Company and its
Subsidiary, respectively.

                                       4
<PAGE>

      1.1.37  "WARRANTS" means the collective reference to the Restated Warrants
and the Additional Warrants.

      1.1.38  "WARRANT SHARES" means the aggregate of up to 6,175,596  shares of
Common  Stock,  represented  by (a) the  aggregate of up to 3,571,429  shares of
Common  Stock  issuable  upon  exercise of the  Restated  Warrants,  and (b) the
aggregate of up to 2,604,167  shares of Common Stock  issuable  upon exercise of
the  Additional  Warrants,  in each case,  subject  to  adjustment  as  provided
therein.

                                   ARTICLE II
                  EXCHANGE OF ORIGINAL NOTES FOR RESTATED NOTES

  2.1   EXCHANGE OF NOTES AND ISSUANCE OF RESTATED WARRANTS AND ADDITIONAL
        WARRANTS.
--------------------------------------------------------------------------------

      2.1.1   EXCHANGE OF NOTES. Subject to the terms and  conditions  set forth
herein,  on one or more  occasions  up to a date that  shall be not  later  than
January  14,  2005 (each an  "EXCHANGE  DATE" and  collectively,  the  "EXCHANGE
DATES"),  the Company shall issue to each of those Purchasers  listed on and who
shall have executed the signature  page to this Agreement  entitled  "PURCHASERS
SIGNATURE  PAGE," and each of such  Purchasers  shall  receive from the Company,
severally  and not  jointly,  such  principal  amount  of  Restated  Notes as is
indicated below such Purchaser's name on the Purchasers  Signature Page. On such
Exchange Dates,  those Purchasers  electing to exchange their Original Notes for
the Restated Notes,  shall deliver to the Company,  the Original  Notes,  marked
"cancelled,"  and the Company shall deliver to each such Purchaser,  an original
Restated  Note in a like  principal  amount.  The  closings  of the  exchange of
Original Notes for Restated Notes (each a "NOTE EXCHANGE" and collectively,  the
"NOTE  EXCHANGES")  shall take place at the offices of Gersten Savage  Kaplowitz
Wolf & Marcus LP, 101 East 52nd  Street,  New York,  New York 10022,  or at such
other location or time as all parties may agree.

      2.1.2   ISSUANCE OF THE RESTATED WARRANTS AND ADDITIONAL WARRANTS.

              (a) In partial  consideration  of  its or his exchange of Original
Notes for Restated Notes, on each Exchange Date, the Company shall issue to each
such Purchaser exchanging such Original Notes for Restated Notes, that number of
Restated Warrants entitling such Purchaser to purchase,  at an exercise price of
$0.35 per share,  2.8571432  Warrant Shares for each $1.00  principal  amount of
Original Notes exchanged for Restated Notes,  which Warrant Shares issuable upon
exercise of the Restated  Warrants  shall be free and clear of all  restrictions
and other legends (except as expressly provided in Section 4.1.2).

              (b) In partial consideration  of its or his exchange  of  Original
Notes for Restated Notes, on each Exchange Date, the Company shall issue to each
such Purchaser exchanging such Original Notes for Restated Notes, in addition to
(and not in lieu of) the Restated Warrants,  that number of Additional  Warrants
entitling  such  Purchaser to purchase  2.0833335  Warrant Shares for each $1.00
principal  amount of Original Notes exchanged for Restated Notes,  which Warrant
Shares issuable upon exercise of the Additional Warrants shall be free and clear
of all restrictions  and other legends (except as expressly  provided in Section
4.1.2).

                                       5
<PAGE>

      2.1.3   DELIVERABLES.

              (a) On each Exchange  Date, the Company shall deliver or cause to
be delivered to each Purchaser, against delivery by such Purchaser of his or its
Original Note, marked "cancelled", the following documents:

                  (i)   a duly  executed   Restated  Note  in  principal  amount
identical to the Original Note so exchanged;

                  (ii)  the   applicable   number  of   Restated   Warrants  and
Additional Warrants contemplated by Section 2.1.2 above; and

                  (iii) a duly executed copy of the Restated Security Agreement.

              (b) On each Exchange Date, the  Purchaser(s)  electing to exchange
his or its Original Notes for Restated  Notes shall deliver to the Company,  the
following documents:

                  (i)  his or its Original Notes marked "cancelled;"

                  (ii) his or its Original Warrant marked "cancelled;" and

                  (iii) a duly executed copy of the Restated Security Agreement.

                                  ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

  3.1   REPRESENTATIONS AND  WARRANTIES  OF  THE  COMPANY.  The  Company  hereby
represents  and warrants to each of the Purchasers as follows:

      3.1.1   SUBSIDIARIES. The Company  has one  Subsidiary,  Corporate  Sports
Incentives, Inc.

      3.1.2   ORGANIZATION  AND  QUALIFICATION. The  Company  is an entity  duly
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. The Company is not in violation of
any  of  the   provisions  of  its   respective   certificate   or  articles  of
incorporation,  bylaws or other organizational or charter documents. The Company
is  duly  qualified  to  do  business  and  is in  good  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,  individually  or in the  aggregate,  (i)  adversely  affect the
legality,  validity or enforceability of any Transaction Document,  (ii) have or
result in a  material  adverse  effect on the  results  of  operations,  assets,
prospects,  business or condition (financial or otherwise) of the Company, taken
as a whole, or (iii) adversely impair the Company's  ability to perform fully on
a timely basis its obligations  under any of the  Transaction  Documents (any of
(i), (ii) or (iii), a "MATERIAL ADVERSE EFFECT").

                                       6
<PAGE>

      3.1.3   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 and thereby have been duly  authorized by all
necessary  action on the part of the Company and no further consent or action is
required by the Company, its Board of Directors or its stockholders. Each of the
Transaction  Documents  has been (or upon delivery will be) duly executed by the
Company and is, or when  delivered in  accordance  with the terms  hereof,  will
constitute,  the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms.

      3.1.4   NO  CONFLICTS. The  execution,  delivery  and  performance  of the
Transaction  Documents by the Company and the consummation by the Company of the
transactions  contemplated  hereby and thereby do not and will not (i)  conflict
with or violate  any  provision  of the  Company's  certificate  or  articles of
incorporation,  bylaws  or  other  organizational  or  charter  documents,  (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both  would  become a  default)  under,  or give to others any rights of
termination,  amendment,  acceleration or cancellation  (with or without notice,
lapse  of time or  both)  of,  any  agreement,  credit  facility,  debt or other
instrument  (evidencing a Company debt or otherwise) or other  understanding  to
which the Company is a party or by which any property or asset of the Company is
bound  or  affected,  except  to the  extent  that  such  conflict,  default  or
termination  right could not  reasonably be expected to have a Material  Adverse
Effect,  or (iii) 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  is  subject  (including  federal  and  state
securities   laws  and   regulations  and  the  rules  and  regulations  of  any
self-regulatory  organization  to  which  the  Company  or  its  securities  are
subject), or by which any property or asset of the Company is bound or affected.

      3.1.5   ISSUANCE OF THE  RESTATED  NOTES, ADDITIONAL  WARRANTS AND WARRANT
SHARES. The Restated Notes,  Additional Warrants and all Warrant Shares each are
duly authorized and, when issued and paid for in accordance with the Transaction
Documents,  will be duly and validly issued, fully paid and nonassessable,  free
and clear of all Liens and shall not be subject to preemptive  rights or similar
rights of stockholders.

      3.1.6   CAPITALIZATION.  The number of shares and type of all  authorized,
issued and  outstanding  capital  stock,  options  and other  securities  of the
Company   (whether  or  not  presently   convertible   into  or  exercisable  or
exchangeable  for  shares of  capital  stock of the  Company)  is set forth on a
fully-diluted  basis in SCHEDULE 3.1.6. All outstanding  shares of capital stock
are duly authorized,  validly issued, fully paid and nonassessable and have been
issued in compliance with all applicable securities laws. Except as disclosed in
SCHEDULE 3.1.6,  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 is or may become  bound to issue  additional
shares of Common Stock, or securities or rights convertible or exchangeable into
shares of Common  Stock.  Except as disclosed in SCHEDULE  3.1.6 of the Original
Purchase  Agreement,  there are no anti-dilution or price

                                       7
<PAGE>

adjustment provisions contained in any security issued by the Company (or in any
agreement  providing  rights to security  holders) and the issue 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 price under such securities.  To the knowledge of
the Company,  except as specifically disclosed in SCHEDULE 3.1.6 of the Original
Purchase Agreement,  no Person or group of related Persons beneficially owns (as
determined  pursuant to Rule 13d-3 under the Exchange  Act), or has the right to
acquire, by agreement with or by obligation binding upon the Company, beneficial
ownership of in excess of 5% of the outstanding Common Stock,  ignoring for such
purposes  any  limitation  on the  number of shares of Common  Stock that may be
owned at any single time. In addition,  (i) on or before  December 31, 2004, the
Company shall have obtained the written consents of the holders of a majority of
its outstanding  shares of Common Stock, (ii) on or before January 15, 2005, the
Company  shall have filed a  preliminary  Form 14C with the SEC, and (iii) on or
before the Required  Charter  Amendment Date, the Company shall have amended its
certificate  of  incorporation,  increasing  the  aggregate  number of shares of
authorized Common Stock from 50.0 million shares to 100.0 million shares.

      3.1.7   SEC REPORTS; FINANCIAL  STATEMENTS.  The  Company  has  filed  all
reports  required to be filed by it under the  Securities  Act and the  Exchange
Act,  including  pursuant to Section 13(a) or 15(d) thereof,  since February 12,
2004 (the foregoing materials being collectively  referred to herein as the "SEC
REPORTS" and,  together with this Agreement and the Schedules to this Agreement,
the "DISCLOSURE  MATERIALS") 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.  The  Company  has  made  available  to the
Purchasers true, correct and complete copies of all SEC Reports filed within the
ten (10) days preceding the date hereof.  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,  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 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.  All material
agreements  to which the  Company or any  Subsidiary  is a party or to which the
property or assets of the Company or any  Subsidiary  is subject are included as
part of or specifically identified in the SEC Reports.

      3.1.8   MATERIAL CHANGES. Since the date of the latest  audited  financial
statements included within the SEC Reports,  except as specifically disclosed in
the SEC Reports or in the Company's registration statement on Form SB-2 declared
effective by the Commission on

                                       8
<PAGE>

September 8, 2004 (the "EFFECTIVE  REGISTRATION"),  (i) there has been no event,
occurrence or development  that,  individually  or in the aggregate,  has had or
that  could  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 required to be  disclosed  in filings
made with the  Commission,  (iii) the  Company  has not  altered  its  method of
accounting or the identity of its auditors, (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;  provided  that the Company may issue capital stock in accordance
with Sections 5.3.4 and 5.3.5. At the time the  Registration  Statement  becomes
effective,  the Company  will have all  necessary  procedures  in place that are
required by the Commission and will be in compliance with the Sarbanes-Oxley Act
of 2002, as amended,  to the extent then binding upon the Company as a matter of
law.

      3.1.9   ABSENCE   OF   LITIGATION.   There  is  no  action,  suit,  claim,
proceeding,  inquiry  or  investigation  before or by any court,  public  board,
government  agency,  self-regulatory  organization  or body  pending  or, to the
knowledge  of the  Company,  threatened  against or  affecting  the Company that
could, individually or in the aggregate, have a Material Adverse Effect.

      3.1.10  COMPLIANCE.  Except in each case as could not,  individually or in
the aggregate,  have or result in a Material Adverse Effect,  the Company (i) is
not 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  under),  nor has the Company  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 not in violation of any order of any court,
arbitrator or governmental body, or (iii) is not or has not been in violation of
any statute, rule or regulation of any governmental authority, including without
limitation  all  foreign,  federal,  state and  local  laws  relating  to taxes,
environmental  protection,  occupational health and safety,  product quality and
safety and employment and labor matters.

      3.1.11  TITLE TO ASSETS.  Neither the Company nor any  Subsidiary owns any
real property.  The Company and the Subsidiary have good and marketable title in
all personal property owned by them that is material to their business,  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 or  Subsidiary.  Any real
property and  facilities  held under lease by the Company or the  Subsidiary  is
held by it under valid,  subsisting and enforceable  leases of which the Company
or any Subsidiary are in compliance.

      3.1.12  CERTAIN FEES. 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 exchange of Original Notes for

                                       9
<PAGE>

Restated Notes and other related  transactions  contemplated  by this Agreement,
and the Company has not taken any action  that would cause any  Purchaser  to be
liable for any such fees or commissions.

      3.1.13  PRIVATE PLACEMENT. Neither the Company nor any Person acting on
the  Company's  behalf has sold or offered to sell or solicited any offer to buy
the Restated Notes by means of any form of general  solicitation or advertising.
Neither  the  Company  nor any of its  Affiliates  nor any Person  acting on the
Company's  behalf has,  directly or indirectly,  at any time within the past six
months,  made any offer or sale of any security or  solicitation of any offer to
buy any security under  circumstances  that would eliminate the  availability of
the exemption from  registration  under Regulation D under the Securities Act in
connection  with the  offer and sale of the Notes as  contemplated  hereby.  The
Company is not, and is not an Affiliate of, an "investment  company"  within the
meaning of the Investment Company Act of 1940, as amended.  The Company is not a
United  States  real  property  holding  corporation  within the  meaning of the
Foreign Investment in Real Property Tax Act of 1980.

      3.1.14  TRADING.  The Company's Common Stock currently is traded on the
NASD OTC- Bulletin Board.

      3.1.15  REGISTRATION RIGHTS. Except as described in SCHEDULE 3.1.16 to the
Original Purchase  Agreement,  the Company has not granted or agreed to grant to
any Person any rights (including  "piggy-back"  registration rights) to have any
securities  of  the  Company   registered  with  the  Commission  or  any  other
governmental authority that have not been satisfied.

      3.1.16  APPLICATION  OF TAKEOVER  PROTECTIONS.  There is no control  share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company's
charter documents that is or could become applicable to any of 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 Restated Notes and the
Purchasers' ownership of the Restated Notes.

      3.1.17  DISCLOSURE.   Except  for   SD  Partners   and   pursuant  to  the
Confidentiality  Agreement,  the Company  confirms that neither it nor any other
Person  authorized  to act on its behalf has provided any of the  Purchasers  or
their  agents  or  counsel  with  any  information  that  constitutes  or  might
constitute material, nonpublic information. The Company understands and confirms
that  each of the  Purchasers  will  rely on the  foregoing  representations  in
effecting  transactions in securities of the Company. All disclosure provided to
the  Purchasers  regarding  the  Company,  its  business  and  the  transactions
contemplated hereby, including the Schedules to this Agreement,  furnished by or
on behalf of the  Company  are true and  correct  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 the light of the  circumstances
under  which  they were  made,  not  misleading.  No event or  circumstance  has
occurred or information  exists with respect to the Company or the Subsidiary or
its  or  their  business,   properties,   prospects,   operations  or  financial
conditions,  which,  under  applicable law, rule or regulation,  requires public
disclosure  or  announcement  by the  Company but which has not been so publicly
announced or disclosed.  The Company  acknowledges  and agrees that no Purchaser
makes  or has

                                       10
<PAGE>

made  any  representations  or  warranties  with  respect  to  the  transactions
contemplated hereby other than those specifically set forth in Section 3.2.

      3.1.18  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 this Agreement and the
transactions  contemplated  hereby.  The Company  further  acknowledges  that no
Purchaser  is acting as a financial  advisor or  fiduciary of the Company or any
other Purchaser (or in any similar  capacity) with respect to this Agreement and
the  transactions  contemplated  hereby and any advice given by any Purchaser or
any of their  respective  representatives  or  agents  in  connection  with this
Agreement and the transactions  contemplated hereby is merely incidental to such
Purchaser's  purchase of the Securities.  The Company further represents to each
Purchaser  that the  Company's  decision to enter into this  Agreement  has been
based solely on the  independent  evaluation  of the  transactions  contemplated
hereby by the Company and its representatives.

      3.1.19  PATENTS AND  TRADEMARKS. The Company and its  Subsidiary  have, or
have rights to use,  all patents,  patent  applications,  trademarks,  trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights  that  are  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 its  Subsidiary  have  received a
written notice that the  Intellectual  Property  Rights used by them 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 another Person of any of the Intellectual Property Rights.

      3.1.20  INSURANCE.  The Company and its Subsidiary 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
Subsidiary are engaged.  Neither the Company nor its  Subsidiary  have reason to
believe that they will not be able to renew their 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.

      3.1.21  REGULATORY  PERMITS.  The Company and its  Subsidiary  possess all
certificates,  authorizations  and permits  issued by the  appropriate  federal,
state,  local or foreign  regulatory  authorities  necessary  to  conduct  their
business as described  in the SEC  Reports,  except where the failure to possess
such permits could not,  individually  or in the aggregate,  have or result in a
Material Adverse Effect ("MATERIAL PERMITS"), and the Company and its Subsidiary
have not  received  any notice of  proceedings  relating  to the  revocation  or
modification of any Material Permit.

      3.1.22  TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as set forth in
the SB-2 registration  statement  declared  effective by the SEC on September 8,
2004 (the  "September  2004  Registration  Statement"),  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 its  Subsidiary  (other than for services as employees,  officers and
directors), including any contract, agreement or other arrangement providing for
the

                                       11
<PAGE>

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.

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

  3.2   REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser hereby,
as to itself only and for no other  Purchaser,  represents  and  warrants to the
Company as follows:

      3.2.1   ORGANIZATION;  AUTHORITY.  Such  Purchaser  is  an  individual  or
entity duly organized,  validly  existing and in good standing under the laws of
the jurisdiction of its organization with the requisite 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 purchase by such  Purchaser of the
Restated Notes and Additional Warrants hereunder has been duly authorized by all
necessary  action on the part of such  Purchaser.  This  Agreement has been duly
executed and delivered by such Purchaser and  constitutes  the valid and binding
obligation of such  Purchaser,  enforceable  against it in  accordance  with its
terms.

      3.2.2   INVESTMENT  INTENT. Such Purchaser is acquiring the Restated Notes
and Additional Warrants as principal for its own account for investment purposes
only and not with a view to or for distributing or reselling such Restated Notes
and Additional Warrants or any part thereof, without prejudice, however, to such
Purchaser's right, subject to the provisions of this Agreement,  at all times to
sell or otherwise  dispose of all or any part of such Restated Notes pursuant to
an  effective  registration  statement  under  the  Securities  Act or  under an
exemption from such  registration and in compliance with applicable  federal and
state securities laws. Nothing contained herein shall be deemed a representation
or warranty by such Purchaser to hold Restated Notes and Warrants for any period
of time. Such Purchaser does not have any agreement or  understanding,  directly
or  indirectly,  with any Person to  distribute  any of the  Restated  Notes and
Warrants.

      3.2.3   PURCHASER  STATUS.  At the time  such Purchaser  was  offered  the
Restated Notes and Warrants it was, and at the date hereof it is, an "accredited
investor" as defined in Rule 501(a) under the Securities Act.

      3.2.4   EXPERIENCE  OF SUCH  PURCHASER. Such  Purchaser,  either  alone or
together  with its  representatives,  has  such  knowledge,  sophistication  and
experience in business and financial matters,  including investments in entities
that are listed on the "Pink Sheets" or OTC Bulletin  Board, so as to be capable
of evaluating the merits and risks of the prospective

                                       12
<PAGE>

investment  in the  Restated  Notes,  Warrants  and Warrant  Shares,  and has so
evaluated the merits and risks of such  investment.  Such Purchaser is (i) aware
that the  volume  of the  trading  market  for the  Notes is  limited  or may be
non-existent for a period of time; and (ii) able to bear the economic risk of an
investment  in the  Restated  Notes,  Warrants and Warrant  Shares,  and, at the
present time, is able to afford a complete loss of such investment.

      3.2.5   ACCESS TO  INFORMATION.  Such Purchaser  acknowledges  that it has
reviewed the Disclosure  Materials and has been afforded (i) the  opportunity to
ask such questions as it has deemed  necessary of, and to receive  answers from,
representatives  of the  Company  concerning  the  terms and  conditions  of the
offering  of the  Restated  Notes  and  Warrants  and the  merits  and  risks of
investing in the Restated Notes and Warrants;  (ii) access to information  about
the Company  and the  Subsidiaries  and their  respective  financial  condition,
results of operations, business, properties, management and prospects sufficient
to enable it to evaluate its  investment;  and (iii) the  opportunity  to obtain
such additional  information  that the Company  possesses or can acquire without
unreasonable  effort or expense that is necessary to make an informed investment
decision with respect to the  investment.  Neither such  inquiries nor any other
investigation conducted by or on behalf of such Purchaser or its representatives
or counsel shall modify,  amend or affect such Purchaser's  right to rely on the
truth,  accuracy and completeness of the Disclosure  Materials and the Company's
representations and warranties contained in the Transaction Documents.

                                       13
<PAGE>

                                   ARTICLE IV
                         OTHER AGREEMENTS OF THE PARTIES

  4.1   TRANSFER RESTRICTIONS.

      4.1.1   The restated  Notes,  Warrants  or  Warrant  Shares  may  only  be
disposed of pursuant to an effective registration statement under the Securities
Act or pursuant to an available exemption from the registration  requirements of
the Securities Act, and in compliance with any applicable state securities laws.
In connection  with any transfer of Restated  Notes,  Warrants or Warrant Shares
other than pursuant to an effective  registration statement or to the Company or
pursuant to Rule 144(k),  except as otherwise set forth herein,  the Company may
require the transferor to provide to the Company an opinion of counsel  selected
by the transferor (with the costs associated with the production of such opinion
borne by 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  under  the  Securities  Act.   Notwithstanding  the
foregoing, the Company hereby consents to and agrees to register on the books of
the Company and with its Transfer  Agent,  without any such legal  opinion,  any
transfer of Restated  Notes,  Warrants  or Warrant  Shares by a Purchaser  to an
Affiliate  of such  Purchaser,  provided  that the  transferee  certifies to the
Company that it is an "accredited  investor" as defined in Rule 501(a) under the
Securities Act. In addition,  if a Purchaser reasonably believes that a transfer
may be made in compliance with the rules and regulations of the Commission,  the
Purchaser may request a transfer of Restated  Notes,  Warrants or Warrant Shares
without  obtaining  such  legal  opinion,  but the  Company  (if it is unsure of
transferability)  may itself seek a legal opinion  before being required to take
any action.

      4.1.2   The Purchasers agree to the imprinting,  so long as is required by
this  SECTION  4.1.2,  of the  following  legend on any Notes,  Warrants  or any
certificate evidencing Warrant Shares:

         THESE  SECURITIES HAVE NOT 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.   NOTWITHSTANDING   THE  FOREGOING,   THESE
         SECURITIES  MAY BE  PLEDGED  IN  CONNECTION  WITH A BONA  FIDE
         MARGIN ACCOUNT OR OTHER LOAN OR FINANCING  ARRANGEMENT SECURED
         BY SUCH SECURITIES.

Certificates  evidencing  Restated  Notes shall not be required to contain  such
legend or any other  legend  (i) while a  Registration  Statement  covering  the
resale of such Restated  Notes is effective

                                       14
<PAGE>

under the  Securities  Act, or (ii)  following any sale of such  Restated  Notes
pursuant  to Rule 144, or (iii) if such  Restated  Notes are  eligible  for sale
under Rule 144(k),  or (iv) if (in the written  opinion of competent  securities
counsel  rendered to the Company,  with the costs associated with the production
of such  opinion  borne  by the  Company)  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 Company  Counsel to issue the legal opinion  included in the
Transfer  Agent  Instructions  to the  Transfer  Agent  on the  Effective  Date.
Following  the  Effective  Date or at such earlier time as a legend is no longer
required for certain  Notes,  the Company will no later than three  Trading Days
following the delivery by a Purchaser to the Company or the Transfer  Agent of a
legended  certificate  representing such Restated Notes,  deliver or cause to be
delivered to such Purchaser a certificate  representing such Restated Notes that
is free from all  restrictive  and other  legends.  The Company may not make any
notation  on its  records  or give  instructions  to any  transfer  agent of the
Company that enlarge the restrictions on transfer set forth in this Section.

      4.1.3  The Company  acknowledges and agrees that a Purchaser may from time
to time pledge or grant a security interest in some or all of the Restated Notes
in  connection  with a bona fide  margin  agreement  or other loan or  financing
arrangement  secured by the Restated  Notes and, if required  under the terms of
such  agreement,  loan or  arrangement,  such Purchaser may transfer  pledged or
secured  Restated  Notes 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
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 Notes may reasonably  request in
connection with a pledge or transfer of the Notes, including the preparation and
filing  of any  required  prospectus  supplement  under  Rule  424(b)(3)  of the
Securities  Act  or  other  applicable   provision  of  the  Securities  Act  to
appropriately amend the list of selling stockholders thereunder.

  4.2   FURNISHING OF INFORMATION. As long as any Purchaser owns Restated Notes,
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. Upon the request
of any  Purchaser,  the  Company  shall  deliver  to such  Purchaser  a  written
certification  of a duly  authorized  officer as to whether it has complied with
the preceding  sentence.  As long as any Purchaser owns Restated  Notes,  if the
Company is not required to file reports  pursuant to such laws,  it will prepare
and furnish to the  Purchasers  and make publicly  available in accordance  with
paragraph (c) of Rule 144 such  information as is required for the Purchasers to
sell the Restated  Notes under Rule 144. The Company  further  covenants that it
will take such  further  action as any holder of Restated  Notes may  reasonably
request  to  satisfy  the  provisions  of Rule 144  applicable  to the issuer of
securities  relating to transactions for the sale of securities pursuant to Rule
144.

  4.3     RESERVATION AND LISTING OF COMMON STOCK; BLUE SKY.

      4.3.1   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.  In the event that at

                                       15
<PAGE>

any time the then  authorized  shares of Common Stock are  insufficient  for the
Company to satisfy its obligations in full under the Transaction Documents,  the
Company  shall  promptly  take such  actions as may be required to increase  the
number of authorized shares.

      4.3.2   Following the Exchange  Date, the Company  shall use  commercially
reasonable  best efforts to cause its Common Stock to be approved for listing on
an  Eligible  Market  and  maintain  the  listing of such  Common  Stock on such
Eligible Market. The Company covenants to promptly file any listing  application
required by the OTC Bulletin Board with respect to the Warrant Shares.

  4.4   SECURITIES LAWS DISCLOSURE; PUBLICITY. The Company shall, on the earlier
of (i) January  17,  2005,  or (ii) the date of exchange of all of the  Original
Notes for Restated  Notes (the "FINAL  EXCHANGE  DATE"),  issue a press  release
reasonably  acceptable to the  Purchasers  disclosing  all material terms of the
transactions  contemplated  hereby.  Not later  than  five days  after the Final
Exchange  Date,  the  Company  shall file a Current  Report on Form 8-K with the
Commission (the "8-K FILING")  describing the material terms of the transactions
contemplated  by the  Transaction  Documents  and  including as exhibits to such
Current  Report on Form 8-K this  Agreement in the form required by the Exchange
Act. Thereafter,  the Company shall timely file any filings and notices required
by  the  Commission  or  applicable   law  with  respect  to  the   transactions
contemplated  hereby and provide copies thereof to the Purchasers promptly after
filing.  Except with respect to the 8-K Filing,  the Company shall, at least two
Trading Days prior to the filing or dissemination of any disclosure  required by
this  paragraph,  provide a copy thereof to the Purchaser  Designee on behalf of
the  Purchasers  for their  review.  The Company and the  Purchaser  Designee on
behalf of the  Purchasers  shall  consult  with each other in issuing  any press
releases  or  otherwise   making   public   statements   or  filings  and  other
communications  with the Commission or any  regulatory  agency or Trading Market
with respect to the transactions  contemplated  hereby,  and neither party shall
issue any such press release or otherwise make any such public statement, filing
or other  communication  without the prior consent of the other,  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,  filing or
other  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 to the
extent such  disclosure  (but not any disclosure as to the  controlling  Persons
thereof)  is required by law or Trading  Market  regulations,  in which case the
Company shall provide the Purchasers with prior notice of such  disclosure.  The
Company shall not, and shall cause each of its  Subsidiaries and its and each of
their respective officers,  directors,  employees and agents not to, provide any
Purchaser with any material nonpublic  information  regarding the Company or any
of its  Subsidiaries  from and after the  filing of the 8-K Filing  without  the
express  written  consent  of such  Purchaser.  In the  event of a breach of the
foregoing  covenant by the Company,  any of its  Subsidiaries,  or any of its or
their respective officers,  directors,  employees and agents, in addition to any
other remedy provided herein or in the Transaction  Documents, a Purchaser shall
have  the  right to make a public  disclosure,  in the form of a press  release,
public  advertisement  or  otherwise,  of such  material  nonpublic  information
without the prior approval by the Company,  its  Subsidiaries,  or any of its or
their respective  officers,  directors,  employees or agents. No Purchaser shall
have any  liability to the  Company,  its  Subsidiaries,  or any of its or their
respective officers, directors,  employees,  stockholders or agents for any such
disclosure.

                                       16
<PAGE>

Subject to the foregoing,  neither the Company nor any Purchaser shall issue any
press releases or any other public  statements with respect to the  transactions
contemplated  hereby;  provided,  however,  that the Company  shall be entitled,
without the prior approval of any Purchaser,  to make any press release or other
public   disclosure  with  respect  to  such  transactions  (i)  in  substantial
conformity  with the 8-K Filing and  contemporaneously  therewith and (ii) as is
required by applicable law and regulations  (provided that in the case of clause
(i) each Purchaser shall be consulted by the Company in connection with any such
press  release or other  public  disclosure  prior to its  release).  Each press
release  disseminated  during the 12 months preceding the date of this Agreement
did not at the time of release  contain any untrue  statement of a material fact
or omit to state a material fact  required to be stated  therein or necessary in
order to make the statements  therein, in light of the circumstances under which
they are made, not misleading.

  4.5   REIMBURSEMENT. If any Purchaser or any of its Affiliates or any officer,
director,  partner,  controlling Person, employee or agent of a Purchaser or any
of its Affiliates (a "RELATED  PERSON")  becomes involved in any capacity in any
Proceeding brought by or against any Person in connection with or as a result of
the  transactions  contemplated by the Transaction  Documents,  the Company will
indemnify and hold harmless such  Purchaser or Related Person for its reasonable
legal and other expenses (including the costs of any investigation,  preparation
and  travel)  and for any  Losses  incurred  in  connection  therewith,  as such
expenses or Losses are incurred, excluding only Losses that result directly from
such  Purchaser's  or Related  Person's  negligence  or willful  misconduct.  In
addition,  the Company shall  indemnify  and hold  harmless  each  Purchaser and
Related Person from and against any and all Losses, as incurred,  arising out of
or  relating  to any  breach  by  the  Company  of  any of the  representations,
warranties  or  covenants  made by the  Company in this  Agreement  or any other
Transaction  Document,  or any allegation by a third party that, if true,  would
constitute   such  a  breach.   The  conduct  of  any   Proceedings   for  which
indemnification  is available  under this paragraph shall be governed by Section
6.4(c)  below.  The  indemnification  obligations  of  the  Company  under  this
paragraph  shall be in addition to any liability  that the Company may otherwise
have and shall be  binding  upon and  inure to the  benefit  of any  successors,
assigns,  heirs and  personal  representatives  of the  Purchasers  and any such
Related  Persons.  The Company also agrees that neither the  Purchasers  nor any
Related Persons shall have any liability to the Company or any Person  asserting
claims on behalf of or in right of the Company in connection with or as a result
of the  transactions  contemplated by the Transaction  Documents,  except to the
extent that any Losses  incurred by the Company  result from the  negligence  or
willful  misconduct of the applicable  Purchaser or Related Person in connection
with such  transactions.  If the  Company  breaches  its  obligations  under any
Transaction Document, then, in addition to any other liabilities the Company may
have under any Transaction  Document or applicable law, the Company shall pay or
reimburse the Purchasers on demand for all costs of collection  and  enforcement
(including  reasonable  attorneys  fees  and  expenses).  Without  limiting  the
generality of the foregoing,  the Company  specifically  agrees to reimburse the
Purchasers on demand for all costs of enforcing the indemnification  obligations
in this paragraph.

  4.6   FUTURE EQUITY OFFERINGS.

        Subject  to  the  exceptions  described  below, for  a period of six (6)
months  following the Required  Filing Date,  the Company will not,  without the
prior written consent of

                                       17
<PAGE>

the  Purchaser  Designee,  sell,  offer to sell or  contract  with any Person to
obtain  proceeds  from the sale of Equity  Equivalents  that are not  subject to
restrictions  on the public resale or  distribution  thereof of for at least six
(6) months  following  the effective  date of the  Registration  Statement.  The
foregoing  shall not,  however,  apply to the public resale or  distribution  of
securities by:

                  (i)  employees,  directors  or  consultants  of the Company of
      currently  outstanding  or  authorized  options or warrants  pursuant to a
      Company stock option plan;

                  (ii) Persons upon the exercise or conversion,  as the case may
      be, of currently outstanding options, warrants or convertible securities;

                  (iii)  Purchasers  upon the  exercise of the Warrants or other
      Registrable Securities issued pursuant to the Transaction Documents;

                  (iv) Persons in  connection  with any  business  acquisitions,
      mergers or strategic partnerships;

                  (v) Persons who purchase,  in a private  placement exempt from
      the  registration  requirements  of the  Securities  Act,  not  more  than
      $3,000,000 of shares of Company  Common Stock or other Equity  Equivalents
      at a per share purchase price,  conversion  price and/or exercise price of
      not less than $0.45 per share; or

                  (vi)  Persons who purchase  shares of Company  Common Stock or
      other Equity  Equivalents,  pursuant to any public  offering of securities
      for the  account of the  Company  now or  hereafter  registered  under the
      Securities Act, at per share prices that shall be equal to or greater than
      $0.45 per share  (unless,  in each such case,  the Company  shall offer to
      reduce the exercise price of the Warrants to such lower exercise price).

                                    ARTICLE V
                                   CONDITIONS

  5.1   CONDITIONS   PRECEDENT   TO  THE  OBLIGATIONS  OF  THE  PURCHASERS.  The
obligation  of each  Purchaser  to acquire  Restated  Notes and  Warrants on any
Exchange Date is subject to the satisfaction or waiver by such Purchaser,  on or
before each Exchange Date, as applicable, of each of the following conditions:

      5.1.1   REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the  Company  contained  herein  shall be true and  correct  in all  material
respects as of the date when made on each  Exchange  Date, as though made on and
as of such dates; and

      5.1.2   PERFORMANCE. The  Company  and each  other  Purchaser  shall  have
performed,  satisfied and complied in all material  respects with all covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by it at or prior to the Exchange Date.

                                       18
<PAGE>

  5.2   CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY.  The  obligation
of the Company to sell the Restated  Notes at each  Exchange  Date is subject to
the satisfaction or waiver by each Purchaser, at or before each such Closing, of
each of the following conditions:

      5.2.1   REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the  Purchasers  contained  herein  shall  be  true  and  correct  as to such
Purchaser  in all  material  respects  as of the  date  when  made and as of the
applicable Exchange Date as though made on and as of such date; and

      5.2.2   PERFORMANCE.  The Purchasers  shall have  performed, satisfied and
complied in all material respects with all covenants,  agreements and conditions
required by the  Transaction  Documents to be  performed,  satisfied or complied
with by the Purchasers at or prior to such Exchange.

                                   ARTICLE VI
                               REGISTRATION RIGHTS

  6.1   REGISTRATION

      6.1.1   By  a  date that shall be not later than the Required Filing Date,
the Company shall have prepared and filed with the Commission  the  Registration
Statement covering the sale to the Purchasers,  and the resale by the Purchasers
of all Registrable  Securities for an offering to be made on a continuous  basis
pursuant  to Rule 415.  The  Company  shall  have the right to  include  in such
Registration  Statement,  securities  of the Company (a)  registered  for resale
pursuant to the Pending Registration Statement,  and/or (b) previously issued or
committed to be issued,  to the extent and to the Persons  disclosed on SCHEDULE
3.1.16.

      6.1.2   The Company  shall use its best  efforts  to file with the SEC the
Registration  Statement in January 2005 prior to the Required  Filing Date.  The
Company shall promptly  respond to all letters of comment that the Company shall
receive  from the staff of the SEC with respect to such  Registration  Statement
and shall use its commercially reasonable best efforts to cause the Registration
Statement to be declared effective by the SEC as soon as practicable thereafter;
provided,  that the Purchasers acknowledge that such registration efforts may be
delayed in the event that the Company  enters into any  agreement or  commitment
for the  acquisition  of any assets or  securities  of any  Person  prior to the
effectiveness of such Registration Statement,  and is required to cause an audit
to be conducted in accordance with the rules and regulations  promulgated by the
SEC. By his execution of this Agreement,  Anthony G. Roth does hereby personally
guaranty that, for long as he shall be the President and CEO of the Company,  he
shall use his best efforts to cause the Company  shall comply with its covenants
and agreements contained in this Section 6.1.2.

      6.1.3   The Company shall use its commercially reasonable  best efforts to
keep the Registration  Statement continuously effective under the Securities Act
until the second anniversary of the Effective Date or such earlier date when all
Registrable  Securities  covered by such  Registration  Statement have been sold
(the "EFFECTIVENESS PERIOD").

                                       19
<PAGE>

      6.1.4   The  Company  shall  deliver  to each Purchaser at his or its last
known address, a final prospectus promptly after receiving notification from the
Commission that the Registration Statement has been declared effective.

      6.1.5   Upon  the  occurrence  of  any   Registration   Default  Event (as
defined  below) and on every monthly  anniversary  thereof until the  applicable
Registration  Default Event is cured, as partial relief for the damages suffered
therefrom  by any  Purchaser  (which  remedy shall not be exclusive of any other
remedies available under this Agreement, at law or in equity), the Company shall
pay or issue,  as the case may be, to each  Purchaser as to which a Registration
Default Event relates, as liquidated damages and not as a penalty, cash or, upon
the payment of the par value  thereof,  such number of shares of Common Stock as
shall equal three percent (3%) of the aggregate  outstanding principal amount of
the Restated  Notes  purchased by such  Purchasers at the Exchange  Dates.  Such
additional shares are designated "REGISTRATION DEFAULT EVENT SHARES" and will be
treated by all parties,  after issuance,  in the same manner as all other Shares
of  Common  Stock  and  shall  thereafter  be  included  in  the  definition  of
"Registrable  Securities." Registration Default Event Shares will be issued on a
pro-rata  basis for any portion of a month  prior to the cure of a  Registration
Default Event. If any Registration Default Event shall occur, the Restated Notes
shall become  immediately  convertible,  at the sole option of the Holder,  into
shares of Common Stock,  at a conversion  price of $0.35 per share.  In addition
(and not in  limitation  of the foregoing  sentence) if a  Registration  Default
Event  contemplated  by clause (ii) below shall  occur,  the three  percent (3%)
percent  financial  penalty referred to herein shall be increased to six percent
(6%);  it  being  understood  and  agreed  by the  parties  that  the  foregoing
represents a reasonable amount of the Purchaser's  actual damages resulting from
such Registration Default Event, and not a penalty or punitive damages.

For such  purposes,  each of the  following if occurring  prior to or during the
Effectiveness Period shall constitute a "REGISTRATION DEFAULT EVENT":

            (i)   the  Registration  Statement  shall  not  be  filed  with  the
Commission on or prior to the Required Filing Date; or

            (ii) the  Registration  Statement is not  declared  effective by the
Commission on or prior to the Required  Effectiveness Date,  provided,  however,
that if the effectiveness of such  Registration  Statement shall be delayed as a
result of a pending  acquisition  or other  material  transaction  that requires
public  disclosure,  for so long as the  Company  is using its best  effects  to
accelerate  the  effectiveness  of such  Registration  Statement,  the  Required
Effectiveness Date may be extended on one occasion only by the Company for up to
an additional 45 days;

            (iii)  the  Company  shall  not  have  amended  its  certificate  of
incorporation  to,  INTER ALIA,  increase its  authorized  Common Stock to 100.0
million shares of Common Stock by the Required Charter Amendment Date;

            (iv)   after the Effective Date, a Purchaser  (without  fault on the
part of any Purchaser) is not permitted to sell Registrable Securities under the
Registration  Statement  (or  a  subsequent   Registration  Statement  filed  in
replacement  thereof) for any reason for five or more

                                       20
<PAGE>

Trading Days (whether or not  consecutive),  unless due to circumstances  beyond
the reasonable control of the Company; or

            (v)    after the Effective Date, any Registrable  Securities covered
by such Registration  Statement are not listed on an Eligible Market, unless due
to circumstances beyond the reasonable control of the Company; or

            (vi)   after the  Effective Date, the Common  Stock is not listed or
quoted,  or is suspended  from  trading,  on an Eligible  Market for a period of
three Trading Days (which need not be consecutive  Trading Days),  unless due to
circumstances beyond the reasonable control of the Company; or

            (vii)  the Company  fails for any  reason to  deliver a  certificate
evidencing  any Shares of Common Stock to a Purchaser  within three Trading Days
after  delivery  of such  certificate  is required  pursuant to any  Transaction
Document or the exercise  rights of the Purchasers  pursuant to the  Transaction
Documents are otherwise suspended for any reason.

In connection with the foregoing, it is understood that the Company will, at all
times, use its reasonable best efforts to comply with covenants and agreements
contained in this Article VI.

  6.2   REGISTRATION PROCEDURES. In connection with the  Company's  registration
obligations  hereunder,  the Company shall:

      6.2.1   Not less  than  three  Trading  Days  prior  to  the  filing  of a
Registration  Statement or any related Prospectus or any amendment or supplement
thereto  (including  any  document  that would be  incorporated  or deemed to be
incorporated  therein  by  reference),  the  Company  shall (i)  furnish to each
Purchaser  and any counsel  designated  by any  Purchaser  (each,  a  "PURCHASER
COUNSEL"),  copies of all such documents  proposed to be filed,  which documents
(other than those  incorporated  or deemed to be incorporated by reference) will
be subject to the review of such Purchasers and each Purchaser Counsel, and (ii)
cause its officers  and  directors,  counsel and  independent  certified  public
accountants  to  respond  to  such  inquiries  as  shall  be  necessary,  in the
reasonable  opinion  of  each  Purchaser   Counsel,   to  conduct  a  reasonable
investigation  within the meaning of the  Securities  Act. The Company shall not
file a  Registration  Statement  or any such  Prospectus  or any  amendments  or
supplements  thereto to which  Purchasers  holding a majority of the Registrable
Securities  shall  reasonably  object;  provided,  that  (i) a  review  of  such
Registration  Statement or any such  Prospectus or any amendments or supplements
thereto shall not be unreasonably  delayed,  and (ii) any such objections  shall
apply only to  disclosures  regarding  such  Purchasers or a description of this
Agreement and the transactions contemplated hereby.

      6.2.2   (i)  Prepare  and  file   with  the  Commission  such  amendments,
including  post-effective  amendments,  to each  Registration  Statement and the
Prospectus  used  in  connection  therewith  as may be  necessary  to  keep  the
Registration  Statement  continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission
such  additional  Registration  Statements in order to register for resale under
the Securities  Act all of the  Registrable  Securities;  (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus  supplement,
and as so  supplemented  or

                                       21
<PAGE>

amended  to be  filed  pursuant  to Rule  424;  (iii)  respond  as  promptly  as
reasonably possible,  and in any event within ten days, to any comments received
from the Commission with respect to the Registration  Statement or any amendment
thereto and as promptly as reasonably  possible  provide the Purchasers true and
complete copies of all correspondence from and to the Commission relating to the
Registration  Statement;  and (iv)  comply  in all  material  respects  with the
provisions  of the  Securities  Act and the  Exchange  Act with  respect  to the
disposition of all Registrable  Securities covered by the Registration Statement
during  the  applicable  period  in  accordance  with the  intended  methods  of
disposition by the Purchasers thereof set forth in the Registration Statement as
so amended or in such Prospectus as so supplemented.

      6.2.3 Notify the  Purchasers of  Registrable  Securities to be sold (as to
clauses (iv) through  (vii) below) and Great Court or its Counsel (as to clauses
(i) through (iii) below) as promptly as reasonably  possible,  and (if requested
by any such Person) confirm such notice in writing no later than one Trading Day
thereafter,  of any of the following  events:  (i) the  Commission  notifies the
Company whether there will be a "review" of any Registration Statement; (ii) the
Commission comments in writing on any Registration  Statement (in which case the
Company  shall  deliver to each  Purchaser  a copy of such  comments  and of all
written   responses   thereto);   (iii)  any   Registration   Statement  or  any
post-effective amendment is declared effective; (iv) the Commission or any other
Federal or state governmental  authority requests any amendment or supplement to
any  Registration  Statement or  Prospectus or requests  additional  information
related  thereto;  (v) the  Commission  issues  any stop  order  suspending  the
effectiveness  of any  Registration  Statement or initiates any  Proceedings for
that  purpose;  (vi)  the  Company  receives  notice  of any  suspension  of the
qualification or exemption from qualification of any Registrable  Securities for
sale in any jurisdiction, or the initiation or threat of any Proceeding for such
purpose;  or  (vii)  the  financial  statements  included  in  any  Registration
Statement become  ineligible for inclusion  therein or any statement made in any
Registration  Statement or Prospectus or any document  incorporated or deemed to
be  incorporated  therein by reference is untrue in any material  respect or any
revision to a Registration  Statement,  Prospectus or other document is required
so that it will not contain any untrue  statement of a material  fact or omit to
state any material fact  required to be stated  therein or necessary to make the
statements  therein,  in the light of the  circumstances  under  which they were
made, not misleading.

      6.2.4   Use  its  commercially  reasonable  best  efforts   to  avoid  the
issuance of or, if issued, obtain the withdrawal of (i) any order suspending the
effectiveness  of any  Registration  Statement,  or (ii) any  suspension  of the
qualification  (or  exemption  from  qualification)  of any  of the  Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.

      6.2.5   Furnish  to each  Purchaser and each  Purchaser  Counsel,  without
charge,  at least one  conformed  copy of each  Registration  Statement and each
amendment thereto,  including financial statements and schedules,  all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously  furnished or
incorporated by reference)  promptly after the filing of such documents with the
Commission.

      6.2.6   Promptly deliver to each  Purchaser  and each  Purchaser  Counsel,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such Persons may
reasonably  request.  The

                                       22
<PAGE>

Company  hereby  consents to the use of such  Prospectus  and each  amendment or
supplement  thereto by each of the selling  Purchasers  in  connection  with the
offering and sale of the Registrable  Securities  covered by such Prospectus and
any amendment or supplement thereto.

      6.2.7   Once applicable: (i)  in  the  time  and  manner  required by each
Trading Market,  prepare and file with such Trading Market an additional  shares
listing application  covering all of the Registrable  Securities;  (ii) take all
steps necessary to cause such Registrable  Securities to be approved for listing
on each  Trading  Market as soon as possible  thereafter;  (iii)  provide to the
Purchasers  evidence  of such  listing;  and (iv)  maintain  the listing of such
Registrable Securities on each such Trading Market or another Eligible Market.

      6.2.8   Prior to  any  public  offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Purchasers and
each  applicable  Purchaser  Counsel  in  connection  with the  registration  or
qualification  (or exemption from such  registration or  qualification)  of such
Registrable  Securities for offer and sale under the securities or blue sky laws
of such  jurisdictions  within the United  States as any  Purchaser  requests in
writing,   to  keep  each  such  registration  or  qualification  (or  exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or  things  necessary  or  advisable  to  enable  the  disposition  in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
PROVIDED,  HOWEVER,  that the Company shall not be obligated to file any general
consent to service  of  process or to qualify as a foreign  corporation  or as a
dealer in securities in any  jurisdiction  in which it is not so qualified or to
subject  itself to taxation  in any  jurisdiction  in which it is not  otherwise
subject.

      6.2.9   Cooperate with the Purchasers to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be delivered
to a transferee pursuant to a Registration  Statement,  which certificates shall
be free, to the extent permitted by this Agreement,  of all restrictive legends,
and to  enable  such  Registrable  Securities  to be in such  denominations  and
registered in such names as any such Purchasers may request.

      6.2.10  Upon the occurrence of any event described in Section  6.2.3(vii),
as promptly as reasonably possible, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to the
related  Prospectus or any document  incorporated  or deemed to be  incorporated
therein  by  reference,  and file  any  other  required  document  so  that,  as
thereafter  delivered,  neither the  Registration  Statement nor such Prospectus
will contain an untrue  statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements  therein,
in the light of the circumstances under which they were made, not misleading.

      6.2.11  Cooperate with any due diligence  investigation  undertaken by the
Purchasers  in connection  with the sale of  Registrable  Securities,  including
without  limitation by making available any documents and information;  provided
that the Company will not deliver or make  available to any Purchaser  material,
nonpublic information unless such Purchaser  specifically requests in advance to
receive  material,  nonpublic  information in writing and agrees to utilize such
information in a manner consistent with applicable law.

                                       23
<PAGE>

      6.2.12  If  Holders of a  majority  of the  Registrable  Securities  being
offered  pursuant  to a  Registration  Statement  select  underwriters  for  the
offering,  the Company  shall enter into and  perform its  obligations  under an
underwriting  agreement,  in  usual  and  customary  form,  including,   without
limitation,   by  providing  customary  legal  opinions,   comfort  letters  and
indemnification and contribution obligations.

      6.2.13  Comply   with  all  applicable  rules  and   regulations  of   the
Commission.

  6.3   REGISTRATION   EXPENSES.   The  Company  shall  pay  (or  reimburse  the
Purchasers  for)  all  fees  and  expenses  incident  to the  performance  of or
compliance with this Agreement by the Company,  including without limitation (a)
all  registration  and filing fees and expenses,  including  without  limitation
those  related  to  filings  with the  Commission,  any  Trading  Market  and in
connection  with  applicable  state  securities  or Blue Sky laws,  (b) printing
expenses  (including  without limitation  expenses of printing  certificates for
Registrable   Securities   and  of  printing   prospectuses   requested  by  the
Purchasers),  (c)  messenger,  telephone  and  delivery  expenses,  (d) fees and
disbursements  of counsel for the Company and up to $10,000 in the aggregate for
the fees and expenses of one legal  counsel  designated by the  Purchasers,  (e)
fees and  expenses of all other  Persons  retained by the Company in  connection
with the  consummation of the transactions  contemplated by this Agreement,  and
(f) all listing fees to be paid by the Company to the Trading Market.

  6.4   INDEMNIFICATION

      6.4.1   INDEMNIFICATION BY THE COMPANY. The Company shall, notwithstanding
any termination of this  Agreement,  indemnify and hold harmless each Purchaser,
the officers,  directors,  partners, members, agents, brokers (including brokers
who offer and sell  Registrable  Securities as principal as a result of a pledge
or any  failure  to perform  under a margin  call of Common  Stock),  investment
advisors  and  employees  of each of them,  each  Person who  controls  any such
Purchaser  (within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) and the officers, directors,  partners, members, agents and
employees of each such  controlling  Person,  to the fullest extent permitted by
applicable law, from and against any and all Losses, as incurred, arising out of
or  relating  to any  untrue or alleged  untrue  statement  of a  material  fact
contained  in  the  Registration  Statement,  any  Prospectus  or  any  form  of
prospectus  or in any  amendment  or  supplement  thereto or in any  preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
a  material  fact  required  to be  stated  therein  or  necessary  to make  the
statements  therein  (in the case of any  Prospectus  or form of  prospectus  or
supplement  thereto,  in the light of the  circumstances  under  which they were
made) not  misleading,  except to the extent,  but only to the extent,  that (i)
such  untrue  statements,  alleged  untrue  statements,   omissions  or  alleged
omissions are based solely upon information  regarding such Purchaser  furnished
in writing to the Company by such Purchaser expressly for use therein, or to the
extent  that such  information  relates to such  Purchaser  or such  Purchaser's
proposed method of  distribution of Registrable  Securities and was reviewed and
expressly  approved  in  writing  by  such  Purchaser  expressly  for use in the
Registration  Statement,  such  Prospectus  or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an event
of the type specified in Section 6.2.3(v)-(vii), the use by such Purchaser of an
outdated or defective  Prospectus  after the Company has notified such Purchaser
in writing that the Prospectus is outdated or defective and prior to the receipt
by such Purchaser of the

                                       24
<PAGE>

Advice  contemplated  in Section  6.5. The Company  shall notify the  Purchasers
promptly of the institution,  threat or assertion of any Proceeding of which the
Company  is  aware in  connection  with the  transactions  contemplated  by this
Agreement.

      6.4.2   INDEMNIFICATION BY PURCHASERS. Each Purchaser shall, severally and
not jointly,  indemnify and hold harmless the Company, its directors,  officers,
agents and employees,  each Person who controls the Company  (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors,  officers,  agents or employees of such controlling  Persons,  to the
fullest  extent  permitted by  applicable  law,  from and against all Losses (as
determined by a court of competent  jurisdiction in a final judgment not subject
to appeal or review)  arising  solely out of any untrue  statement of a material
fact contained in the  Registration  Statement,  any Prospectus,  or any form of
prospectus,  or in any amendment or supplement thereto, or arising solely out of
any omission of a material  fact  required to be stated  therein or necessary to
make the statements therein (in the case of any Prospectus or form of prospectus
or supplement  thereto,  in the light of the circumstances under which they were
made) not  misleading  to the extent,  but only to the extent,  that such untrue
statement or omission is contained in any information so furnished in writing by
such Purchaser to the Company  specifically  for inclusion in such  Registration
Statement or such Prospectus or to the extent that (i) such untrue statements or
omissions are based solely upon information  regarding such Purchaser  furnished
in writing to the Company by such Purchaser expressly for use therein, or to the
extent  that such  information  relates to such  Purchaser  or such  Purchaser's
proposed method of  distribution of Registrable  Securities and was reviewed and
expressly  approved  in  writing  by  such  Purchaser  expressly  for use in the
Registration  Statement,  such  Prospectus  or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an event
of the type specified in SECTION 6.2.3(v)-(vii), the use by such Purchaser of an
outdated or defective  Prospectus  after the Company has notified such Purchaser
in writing that the Prospectus is outdated or defective and prior to the receipt
by such Purchaser of the Advice  contemplated  in SECTION 6.5. In no event shall
the liability of any selling  Purchaser  hereunder be greater in amount than the
dollar  amount  of the net  proceeds,  in  excess  of the  amount  paid for such
Registrable  Securities,  received  by  such  Purchaser  upon  the  sale  of the
Registrable Securities giving rise to such indemnification obligation.

      6.4.3   CONDUCT OF INDEMNIFICATION  PROCEEDINGS.  If  any Proceeding shall
be brought or asserted  against any Person  entitled to indemnity  hereunder (an
"INDEMNIFIED  PARTY"),  such Indemnified  Party shall promptly notify the Person
from whom  indemnity is sought (the  "INDEMNIFYING  PARTY") in writing,  and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably  satisfactory to the Indemnified Party and the payment of all
fees and expenses  incurred in connection with defense thereof;  provided,  that
the failure of any  Indemnified  Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally  determined  by a court
of  competent  jurisdiction  (which  determination  is not  subject to appeal or
further  review)  that  such  failure  shall  have  proximately  and  materially
adversely prejudiced the Indemnifying Party.

      An Indemnified  Party shall have the right to employ  separate  counsel in
any such Proceeding and to participate in the defense thereof,  but the fees and
expenses of such counsel  shall be at the expense of such  Indemnified  Party or
Parties unless: (i) the Indemnifying Party

                                       25
<PAGE>

has agreed in writing to pay such fees and  expenses;  or (ii) the  Indemnifying
Party shall have failed promptly to assume the defense of such Proceeding and to
employ counsel  reasonably  satisfactory to such  Indemnified  Party in any such
Proceeding;  or (iii) the named parties to any such  Proceeding  (including  any
impleaded  parties)  include both such  Indemnified  Party and the  Indemnifying
Party,  and such  Indemnified  Party shall have been  advised by counsel  that a
conflict of interest is likely to exist if the same  counsel  were to  represent
such  Indemnified  Party and the  Indemnifying  Party (in  which  case,  if such
Indemnified  Party notifies the Indemnifying  Party in writing that it elects to
employ  separate  counsel  at  the  expense  of  the  Indemnifying   Party,  the
Indemnifying  Party shall not have the right to assume the  defense  thereof and
such  counsel  shall  be  at  the  expense  of  the  Indemnifying   Party).  The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected  without its written  consent,  which consent shall not be unreasonably
withheld.  No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any  Indemnified  Party is a party,  unless  such  settlement  includes an
unconditional  release of such  Indemnified  Party from all  liability on claims
that are the subject matter of such Proceeding.

      All fees and expenses of the Indemnified Party (including  reasonable fees
and  expenses  to the  extent  incurred  in  connection  with  investigating  or
preparing  to defend  such  Proceeding  in a manner not  inconsistent  with this
Section)  shall  be paid to the  Indemnified  Party,  as  incurred,  within  ten
calendar days of written notice thereof to the Indemnifying Party (regardless of
whether it is ultimately determined that an Indemnified Party is not entitled to
indemnification  hereunder;  provided,  that the Indemnifying  Party may require
such  Indemnified  Party to undertake to reimburse all such fees and expenses to
the extent it is finally  judicially  determined that such Indemnified  Party is
not entitled to indemnification hereunder).

      6.4.4   CONTRIBUTION. If a  claim  for indemnification under SECTION 6.4.1
or .2 is  unavailable  to an  Indemnified  Party  (by  reasons  other  than  the
specified exclusions to indemnification),  then each Indemnifying Party, in lieu
of indemnifying such Indemnified  Party,  shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses, in such proportion
as is appropriate to reflect the relative  fault of the  Indemnifying  Party and
Indemnified  Party in connection with the actions,  statements or omissions that
resulted in such Losses as well as any other relevant equitable  considerations.
The relative fault of such  Indemnifying  Party and  Indemnified  Party shall be
determined by reference to, among other things,  whether any action in question,
including any untrue or alleged untrue  statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information  supplied by, such Indemnifying  Party or Indemnified Party, and the
parties'  relative intent,  knowledge,  access to information and opportunity to
correct or prevent  such  action,  statement  or  omission.  The amount  paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the  limitations  set forth in SECTION 6.4.3,  any  reasonable  attorneys' or
other reasonable fees or expenses  incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the  indemnification  provided for in this Section was  available to
such party in accordance with its terms.

      The  parties  hereto  agree  that it would  not be just and  equitable  if
contribution  pursuant  to  this  SECTION  6.4.4  were  determined  by pro  rata
allocation or by any other method of

                                       26
<PAGE>

allocation that does not take into account the equitable considerations referred
to in the immediately  preceding  paragraph.  Notwithstanding  the provisions of
this  SECTION  6.4.4,  no  Purchaser  shall be  required to  contribute,  in the
aggregate, any amount in excess of the amount by which the net proceeds actually
received by such Purchaser from the sale of the Registrable  Securities  subject
to the  Proceeding  exceeds the amount of any damages  that such  Purchaser  has
otherwise  been  required  to pay by reason of such  untrue  or  alleged  untrue
statement  or  omission  or alleged  omission.  No Person  guilty of  fraudulent
misrepresentation  (within the meaning of Section 11(f) of the  Securities  Act)
shall be  entitled  to  contribution  from any Person who was not guilty of such
fraudulent misrepresentation.

      The indemnity and contribution agreements contained in this Section are in
addition  to any  liability  that  the  Indemnifying  Parties  may  have  to the
Indemnified Parties.

  6.5    DISPOSITIONS.  Each  Purchaser  agrees  that  it  will  comply with the
prospectus  delivery  requirements  of the Securities Act as applicable to it in
connection  with sales of Registrable  Securities  pursuant to the  Registration
Statement. Each Purchaser further agrees that, upon receipt of a notice from the
Company  of the  occurrence  of any  event of the  kind  described  in  SECTIONS
6.2.3(v),  (vi) or (vii),  such Purchaser will  discontinue  disposition of such
Registrable  Securities under the Registration  Statement until such Purchaser's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by SECTION 6.2.10, or until it is advised in writing (the
"ADVICE")  by the  Company  that  the use of the  applicable  Prospectus  may be
resumed,  and,  in  either  case,  has  received  copies  of any  additional  or
supplemental  filings  that are  incorporated  or deemed to be  incorporated  by
reference in such Prospectus or Registration Statement.  The Company may provide
appropriate stop orders to enforce the provisions of this paragraph.

  6.6    PURCHASERS'  PIGGY-BACK  REGISTRATIONS.  If  at  any  time  during  the
Effectiveness Period there is not an effective  Registration  Statement covering
all of the Registrable Securities and the Company shall determine to prepare and
file with the  Commission a registration  statement  relating to an offering for
its own account or the account of others under the  Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under
the Securities Act) or their then equivalents  relating to equity  securities to
be issued solely in connection with any acquisition of any entity or business or
equity  securities  issuable in connection  with stock option or other  employee
benefit plans,  then the Company shall send to each Purchaser  written notice of
such determination and if, within fifteen days after receipt of such notice, any
such  Purchaser  shall so request in writing,  the Company shall include in such
registration  statement  all or any  part of such  Registrable  Securities  such
Purchaser requests to be registered.  In such event, the following provisions of
this Agreement shall apply: Sections 6.2.5, 6.2.6, 6.4 and 6.5.

                                   ARTICLE VII
                                  MISCELLANEOUS

  7.1    FEES AND EXPENSES. On  or  before  December 31, 2004, the Company shall
pay to counsel for all Purchasers  $10,000 for legal fees and expenses  incurred
in connection with the preparation and negotiation of the Transaction Documents.
Except  as  otherwise  set forth  herein,  the  Company  shall  have no  further
obligation to pay fees of counsel for any Purchaser at any

                                       27
<PAGE>

other time.  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 issuance of
the Notes.

  7.2   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  (including,
without  limitation,  the Original Purchase  Agreement,  the Original Notes, the
Original  Warrants  and the  Original  Security  Agreement),  which the  parties
acknowledge  are of no further  force or effect and have been  merged  into such
documents,  exhibits and  schedules.  At or after the Final  Exchange  Date, and
without  further  consideration,  the parties  will  execute and deliver to each
other such  further  documents as may be  reasonably  requested in order to give
practical  effect  to  the  intention  of  the  parties  under  the  Transaction
Documents.

  7.3   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
specified in this Section  prior to 6:30 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  specified in
this  Section on a day that is not a Trading  Day or later  than 6:30 p.m.  (New
York City time) on any Trading  Day, (c) the 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  addresses  and facsimile  numbers for such notices and  communications  are
those  set  forth on the  signature  pages  hereof,  or such  other  address  or
facsimile number as may be designated in writing hereafter,  in the same manner,
by such Person. Any party providing notice to the Company  simultaneously  shall
provide a copy of that notice and all  accompanying  materials to Gersten Savage
Kaplowitz Wolf & Marcus, LP, at the address shown on the signature page hereto.

  7.4    AMENDMENTS; WAIVERS. No  provision  of  this Agreement may be waived or
amended except in a written instrument  signed, in the case of an amendment,  by
the Company and each of the Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waiver 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 either party to exercise  any right  hereunder in
any manner impair the exercise of any such right. Notwithstanding the foregoing,
a waiver or consent  to depart  from the  provisions  hereof  with  respect to a
matter that relates exclusively to the rights of Purchasers under ARTICLE VI and
that does not directly or indirectly  affect the rights of other  Purchasers may
be given by Purchasers holding at least a majority of the Registrable Securities
to which such waiver or consent relates.

                                       28
<PAGE>

  7.5   CONSTRUCTION.  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. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent,  and no
rules of strict construction will be applied against any party.

  7.6   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 the  Purchasers.  Any Purchaser may assign
its rights under this Agreement to any Person to whom such Purchaser  assigns or
transfers any Restated Notes,  provided such transferee  agrees in writing to be
bound, with respect to the transferred  Restated Notes, by the provisions hereof
that apply to the "Purchasers." Notwithstanding anything to the contrary herein,
Restated  Notes may be  assigned  to any Person in  connection  with a bona fide
margin account or other loan or financing  arrangement  secured by such Restated
Notes.

  7.7    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 that each Related Person is an intended third party
beneficiary of Section 4.8 and each Indemnified Party is an intended third party
beneficiary of Section 6.4 and (in each case) may enforce the provisions of such
Sections directly against the parties with obligations thereunder.

  7.8   GOVERNING LAW;  VENUE;  WAIVER OF JURY TRAIL.  ALL QUESTIONS  CONCERNING
THE  CONSTRUCTION,  VALIDITY,  ENFORCEMENT AND  INTERPRETATION OF THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED  AND ENFORCED IN ACCORDANCE  WITH THE LAWS OF
THE STATE OF NEW YORK. THE COMPANY AND PURCHASERS HEREBY  IRREVOCABLY  SUBMIT TO
THE EXCLUSIVE  JURISDICTION  OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY
OF NEW YORK,  STATE OF NEW YORK, FOR THE  ADJUDICATION OF ANY DISPUTE BROUGHT BY
THE  COMPANY OR ANY  PURCHASER  HEREUNDER,  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
WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING  BROUGHT BY THE
COMPANY OR ANY  PURCHASER,  ANY CLAIM THAT IT IS NOT  PERSONALLY  SUBJECT TO THE
JURISDICTION  OF ANY SUCH  COURT,  OR THAT SUCH SUIT,  ACTION OR  PROCEEDING  IS
IMPROPER.  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  MANNER
PERMITTED BY LAW. THE COMPANY AND PURCHASERS  HEREBY WAIVE ALL RIGHTS TO A TRIAL
BY JURY.

                                       29
<PAGE>

  7.9   SURVIVAL.   The  representations, warranties, agreements  and  covenants
contained  herein  shall  survive  all  Closings  hereunder,  including  without
limitation  the  delivery  of the Notes and the  exercise  of all  Warrants,  as
applicable.

  7.10  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 being  understood  that both parties need not
sign the same  counterpart.  In the event that any  signature  is  delivered  by
facsimile  transmission,  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  signature  page
were an original thereof.

  7.11  SEVERABILITY.  If  any provision of this Agreement is held to be invalid
or  unenforceable  in  any  respect,  the  validity  and  enforceability  of the
remaining  terms  and  provisions  of  this  Agreement  shall  not in any way be
affected or impaired  thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor,  and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

  7.12   REPLACEMENT  OF RESTATED NOTES, WARRANTS  OR  WARRANT  SHARES.  If  any
certificate  or instrument  evidencing any Restated  Notes,  Warrants or Warrant
Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause
to be issued in exchange and substitution for and upon cancellation  thereof, 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 and customary and reasonable indemnity,  if requested.  The
applicants for a new certificate or instrument  under such  circumstances  shall
also pay any reasonable  third-party  costs associated with the issuance of such
replacement.

  7.13   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
described in the foregoing sentence and hereby agrees to waive in any action for
specific  performance  of any such  obligation  the defense that a remedy at law
would be  adequate.  The parties  further  agree that no bond or other  security
shall be required in  obtaining  such  equitable  relief and the parties  hereby
consent to the ordering of specific  performance.  The parties  also  understand
that other  action may be taken and  remedies  enforced  against  the  breaching
party.

  7.14   PAYMENT  SET ASIDE.  To the extent that the Company  makes a payment or
payments to any Purchaser  hereunder or any Purchaser  enforces or exercises its
rights hereunder or 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
by 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

                                       30
<PAGE>

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.

  7.15    ADJUSTMENTS IN SHARE  NUMBERS  AND  PRICES.  In the event of any stock
split,  subdivision,  dividend or distribution payable in shares of Common Stock
(or other securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly shares of Common Stock),  combination or other
similar  recapitalization  or  event  occurring  after  the  date  hereof,  each
reference in any Transaction Document to a number of shares or a price per share
shall be amended to appropriately account for such event.

  7.16    LIMITATION OF OWNERSHIP OF COMPANY COMMON STOCK. Each Purchaser agrees
that  neither he nor his  Affiliate  shall  convert into Common Stock his or its
Restated  Note or  exercise  any of his or its  Warrants if such  conversion  or
exercise  would  have the  effect  or cause  such  Person  to be the  record  or
beneficial  owner of more than  4.99% of the issued  and  outstanding  shares of
Common Stock of the Company.

  7.17    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  of the  obligations  of any  other
Purchaser  under any  Transaction  Document.  The decision of each  Purchaser to
purchase  Notes  pursuant  to this  Agreement  has been  made by such  Purchaser
independently  of any other  Purchaser  and  independently  of any  information,
materials,  statements  or opinions  as to the  business,  affairs,  operations,
assets, properties,  liabilities, results of operations, condition (financial or
otherwise)  or prospects of the Company which may have been made or given by any
other  Purchaser  or by any agent or  employee  of any other  Purchaser,  and no
Purchaser  or any of its agents or  employees  shall have any  liability  to any
other  Purchaser  (or any other  Person)  relating  to or arising  from any such
information,  materials,  statements or opinions. Nothing contained herein or in
any 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 Document.  Each
Purchaser  acknowledges  that no other  Purchaser  has  acted as agent  for such
Purchaser in connection  with making its investment  hereunder and that no other
Purchaser  will  be  acting  as  agent  of such  Purchaser  in  connection  with
monitoring  its  investment  hereunder.  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.

  7.18    WAIVER OF DEFAULTS. By their execution and delivery of this Agreement,
each of the Purchasers and Great Court do hereby waive all defaults or Events of
Default under the Original Purchase Agreement,  the Original Notes, the Original
Warrants  and/or the  Security  Agreement  issued  under the  Original  Purchase
Agreement.

[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                       31
<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.

                                     UTIX GROUP, INC.

                                     By:
                                              --------------------------
                                     Name:    Anthony G. Roth
                                     Title:   President and CEO

                                     AS TO THE PROVISIONS OF SECTION 6.1.2 ONLY:

                                     ---------------------------------
                                              Anthony G. Roth

                                     Address for Notice:

                                     Anthony G. Roth
                                     Utix Group, Inc.
                                     170 Cambridge Street
                                     Burlington, MA 01803
                                     Facsimile No.: 781-229-8886
                                     Telephone No.: 781-229-2589

                 With a copy to:     Gersten Savage Kaplowitz
                                     Wolf & Marcus LP
                                     101 East 52nd Street
                                     New York, NY 10022
                                     Facsimile No.: 212-980-5192
                                     Telephone No.: 212-752-9700
                                     Attn: Stephen A. Weiss, Esq.

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                     SIGNATURE PAGES FOR PURCHASERS FOLLOW]

<PAGE>

                            PURCHASER SIGNATURE PAGE

New York Holdings, Ltd

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

New York Holdings, Ltd.
Address:
3 Daniel Frisch Street
Tel Aviv 64731, Israel

$400,000
Dollar Amount of Notes Purchased

<PAGE>

                            PURCHASER SIGNATURE PAGE

--------------------------------------
         SOL KEST

Address:
5150 Overland Avenue
Culver City, CA 90230l

$250,000
Dollar Amount of Notes Purchased

<PAGE>

                            PURCHASER SIGNATURE PAGE

--------------------------------------
         ROBERT KORNSTEIN

Address:
15 West 72nd St., 15K
New York, NY 10023

$100,000
Dollar Amount of Notes Purchased

<PAGE>

                            PURCHASER SIGNATURE PAGE

--------------------------------------
         AVNER MALOUL

Address:
155 E. 34 St., #3S
New York, NY 10010

$110,000
Dollar Amount of Notes Purchased

<PAGE>

                            PURCHASER SIGNATURE PAGE

--------------------------------------
         ALLEN LOWY

Address:
1776 Broadway, 11th floor
New York, NY 10019

$90,000
Dollar Amount of Notes Purchased

<PAGE>

                            PURCHASER SIGNATURE PAGE

--------------------------------------
         SHAYKIN FAMILY FOUNDATION

By:  _______________________________
       Leonard P. Shaykin
       President/Treasurer

Address:
630 Fifth Ave., Suite 3110
New York, NY 10111

$100,000
Dollar Amount of Notes Purchased

<PAGE>

                            PURCHASER SIGNATURE PAGE

--------------------------------------
         SIDNEY KESSOUS

Address:
7 Hidden Springs Lane
East Windsor, NJ  08520

$200,000
Dollar Amount of Notes Purchased

<PAGE>

                                   SCHEDULES:

--------------------------------------------------------------------------------
NUMBER                          DESCRIPTION
--------------------------------------------------------------------------------
1.1.17                          Form of Note
--------------------------------------------------------------------------------
1.1.18                          Form of Warrant
--------------------------------------------------------------------------------
1.1.27                          Security Agreement
--------------------------------------------------------------------------------
2.1.2(b)                        Opinion of Company's Counsel
--------------------------------------------------------------------------------
3.1.6                           Capitalization
--------------------------------------------------------------------------------
3.1.12                          Certain Finders Fee Agreements
--------------------------------------------------------------------------------
3.1.16                          Existing Registration Rights
--------------------------------------------------------------------------------

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00078-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00078-of-00352.parquet"}]]