Document:

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                                                                   EXHIBIT 10.25

                         SKILLED HEALTHCARE GROUP, INC.

                           2004 EQUITY INCENTIVE PLAN
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                                TABLE OF CONTENTS

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1.   PURPOSES OF THE PLAN................................................      1
2.   DEFINITIONS.........................................................      1
3.   STOCK SUBJECT TO THE PLAN...........................................      4
4.   ADMINISTRATION OF THE PLAN..........................................      4
5.   ELIGIBILITY.........................................................      6
6.   LIMITATIONS.........................................................      6
7.   TERM OF PLAN........................................................      7
8.   TERM OF OPTION......................................................      7
9.   OPTION EXERCISE PRICE AND CONSIDERATION.............................      7
10.  EXERCISE OF OPTION..................................................      8
11.  NON-TRANSFERABILITY OF OPTIONS AND RESTRICTED STOCK.................     11
12.  RESTRICTED STOCK....................................................     11
13.  ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR
       ASSET SALE........................................................     11
14.  TIME OF GRANTING OPTIONS............................................     13
15.  AMENDMENT AND TERMINATION OF THE PLAN...............................     14
16.  STOCKHOLDER APPROVAL................................................     14
17.  INABILITY TO OBTAIN AUTHORITY.......................................     14
18.  RESERVATION OF SHARES...............................................     14
19.  INFORMATION TO HOLDERS AND PURCHASERS...............................     14
20.  REPURCHASE PROVISIONS...............................................     15
21.  INVESTMENT INTENT...................................................     15
22.  GOVERNING LAW.......................................................     16
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                         SKILLED HEALTHCARE GROUP, INC.

                           2004 EQUITY INCENTIVE PLAN

      1. Purposes of the Plan. The purposes of the Skilled Healthcare Group,
Inc. 2004 Equity Incentive Plan are to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to Employees, Consultants and Directors, and to promote the success of
the Company's business. Options granted under the Plan may be Incentive Stock
Options or Non-Qualified Stock Options, as determined by the Administrator at
the time of grant. Restricted Stock may also be granted under the Plan.

      2. Definitions. As used herein, the following definitions shall apply:

            (a) "Acquisition" means (1) a dissolution, liquidation or sale of
all or substantially all of the assets of the Company; (2) a merger or
consolidation in which the Company is not the surviving corporation; or (3) a
reverse merger in which the Company is the surviving corporation but the shares
of the Company's common stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise.

            (b) "Administrator" means the Board or the Committee responsible for
conducting the general administration of the Plan, as applicable, in accordance
with Section 4 hereof.

            (c) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Restricted Stock are
granted under the Plan.

            (d) "Board" means the Board of Directors of the Company, as
constituted from time to time.

            (e) "Code" means the Internal Revenue Code of 1986, as amended, or
any successor statute or statutes thereto. Reference to any particular Code
section shall include any successor section.

            (f) "Committee" means a committee appointed by the Board in
accordance with Section 4 hereof.

            (g) "Common Stock" means the Class A Common Stock of the Company,
par value $0.01 per share.

            (h) "Company" means Skilled Healthcare Group, Inc., a Delaware
corporation.

            (i) "Consultant" means any consultant or adviser if: (i) the
consultant or adviser renders bona fide services to the Company or any Parent or
Subsidiary of the Company;
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(ii) the services rendered by the consultant or adviser are not in connection
with the offer or sale of securities in a capital-raising transaction and do not
directly or indirectly promote or maintain a market for the Company's
securities; and (iii) the consultant or adviser is a natural person who has
contracted directly with the Company or any Parent or Subsidiary of the Company
to render such services.

            (j) "Director" means a member of the Board.

            (k) "Employee" means any person, including an Officer or Director,
who is an employee (as defined in accordance with Section 3401(c) of the Code)
of the Company or any Parent or Subsidiary of the Company. A Service Provider
shall not cease to be an Employee in the case of (i) any leave of absence
approved by the Company or (ii) transfers between locations of the Company or
between the Company, its Parent, any Subsidiary, or any successor. For purposes
of Incentive Stock Options, no such leave may exceed ninety (90) days, unless
reemployment upon expiration of such leave is guaranteed by statute or contract.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient, by itself, to constitute "employment" by the Company.

            (l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute or statutes thereto. Reference to any
particular Exchange Act section shall include any successor section.

             (m) "Fair Market Value" means, as of any date, the value of a share
of Common Stock determined as follows:

                  (i) If the Common Stock is listed on any established stock
exchange or a national market system, including, without limitation, the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for a share of such stock (or
the closing bid, if no sales were reported) as quoted on such exchange or system
on the date of such determination, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;

                  (ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for a share of the
Common Stock on the last market trading day on the day of determination; or

                  (iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.

            (n) "Holder" means a person who has been granted or awarded an
Option or Restricted Stock or who holds Shares acquired pursuant to the exercise
of an Option.

            (o) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and
which is designated as an Incentive Stock Option by the Administrator.

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            (p) "Independent Director" means a Director who is not an Employee
of the Company.

            (q) "Non-Qualified Stock Option" means an Option (or portion
thereof) that is not designated as an Incentive Stock Option by the
Administrator, or which is designated as an Incentive Stock Option by the
Administrator but fails to qualify as an incentive stock option within the
meaning of Section 422 of the Code.

            (r) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

            (s) "Option" means a stock option granted pursuant to the Plan.

            (t) "Option Agreement" means a written agreement between the Company
and a Holder evidencing the terms and conditions of an individual Option grant.
The Option Agreement is subject to the terms and conditions of the Plan.

            (u) "Parent" means any corporation, whether now or hereafter
existing (other than the Company), in an unbroken chain of corporations ending
with the Company if each of the corporations other than the last corporation in
the unbroken chain owns stock possessing more than fifty percent of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

            (v) "Plan" means the Skilled Healthcare Group, Inc. 2004 Equity
Incentive Plan, as amended and restated from time to time.

            (w) "Public Trading Date" means the first date upon which Common
Stock of the Company is listed (or approved for listing) upon notice of issuance
on any securities exchange or designated (or approved for designation) upon
notice of issuance as a national market security on an interdealer quotation
system.

            (x) "Restricted Stock" means Shares acquired pursuant to the
exercise of an unvested Option in accordance with Section 10(g) below or awarded
pursuant to Section 12 below.

            (y) "Rule 16b-3" means that certain Rule 16b-3 under the Exchange
Act, as such Rule may be amended from time to time.

            (z) "Securities Act" means the Securities Act of 1933, as amended,
or any successor statute or statutes thereto. Reference to any particular
Securities Act section shall include any successor section.

            (aa) "Service Provider" means an Employee, Consultant or Director.

            (bb) "Share" means a share of Common Stock, as adjusted in
accordance with Section 13 below.

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            (cc) "Subsidiary" means any corporation, whether now or hereafter
existing (other than the Company), in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing more than fifty percent
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.

      3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the shares of stock subject to Options or Restricted Stock shall be
Class A Common Stock, initially shares of the Company's Class A Common Stock,
par value $0.01 per share. Subject to the provisions of Section 13 of the Plan,
the maximum aggregate number of Shares which may be issued upon exercise of
Options and awarded as Restricted Stock is 20,000 Shares. Shares issued upon
exercise of Options or awarded as Restricted Stock may be authorized but
unissued, or reacquired Common Stock. If an Option expires or becomes
unexercisable without having been exercised in full, the unpurchased Shares
which were subject thereto shall become available for future grant or sale under
the Plan (unless the Plan has terminated). Shares which are delivered by the
Holder or withheld by the Company upon the exercise of an Option under the Plan,
in payment of the exercise price thereof or tax withholding thereon, may again
be optioned, granted or awarded hereunder, subject to the limitations of this
Section 3. If shares of Restricted Stock are repurchased by the Company at their
original purchase price, such Shares shall become available for future grant
under the Plan. Notwithstanding the provisions of this Section 3, no Shares may
again be optioned, granted or awarded if such action would cause an Incentive
Stock Option to fail to qualify as an Incentive Stock Option under Section 422
of the Code.

      4. Administration of the Plan.

            (a) Administrator. Unless and until the Board delegates
administration to a Committee as set forth below, the Plan shall be administered
by the Board. The Board may delegate administration of the Plan to a Committee
or Committees of one or more members of the Board, and the term "Committee"
shall apply to any person or persons to whom such authority has been delegated.
If administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, including the power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be to the Committee or subcommittee),
subject, however, to such resolutions, not inconsistent with the provisions of
the Plan, as may be adopted from time to time by the Board. Notwithstanding the
foregoing, however, from and after the Public Trading Date, with respect to
participation by individuals other than Directors, a Committee of the Board
shall administer the Plan and the Committee shall consist solely of two or more
Independent Directors each of whom is both an "outside director," within the
meaning of Section 162(m) of the Code, and a "non-employee director" within the
meaning of Rule 16b-3. Within the scope of such authority, the Board or the
Committee may (i) delegate to a committee of one or more members of the Board
who are not Independent Directors the authority to grant awards under the Plan
to eligible persons who are either (1) not then "covered employees," within the
meaning of Section 162(m) of the Code and are not expected to be "covered
employees" at the time of recognition of income resulting from such award or (2)
not persons with respect to whom the Company wishes to comply with Section
162(m) of the Code and/or (ii) delegate to a committee of one or more members of
the Board who are not "non-employee directors," within the meaning of Rule
16b-3, the authority to grant

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awards under the Plan to eligible persons who are not then subject to Section 16
of the Exchange Act. The Board may abolish the Committee at any time and revest
in the Board the administration of the Plan. Appointment of Committee members
shall be effective upon acceptance of appointment. Committee members may resign
at any time by delivering written notice to the Board. Vacancies in the
Committee may only be filled by the Board.

            (b) Powers of the Administrator. Subject to the provisions of the
Plan and the specific duties delegated by the Board to such Committee, and
subject to the approval of any relevant authorities, the Administrator shall
have the authority in its sole discretion:

                  (i) to determine the Fair Market Value;

                  (ii) to select the Service Providers to whom Options and
Restricted Stock may from time to time be granted hereunder;

                  (iii) to determine the number of Shares to be covered by each
such award granted hereunder;

                  (iv) to approve forms of agreement for use under the Plan;

                  (v) to determine the terms and conditions of any Option or
Restricted Stock granted hereunder (such terms and conditions include, but are
not limited to, the exercise price, the time or times when Options or Restricted
Stock may vest or be exercised (which may be based on performance criteria), any
vesting acceleration or waiver of forfeiture restrictions, and any restriction
or limitation regarding any Option or Restricted Stock or the Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine);

                  (vi) to determine whether to offer to buyout a previously
granted Option as provided in subsection 10(h) and to determine the terms and
conditions of such offer and buyout (including whether payment is to be made in
cash or Shares);

                  (vii) to allow Holders to satisfy withholding tax obligations
by having the Company withhold from the Shares to be issued upon exercise of an
Option that number of Shares having a Fair Market Value equal to the minimum
amount required to be withheld based on the statutory withholding rates for
federal and state tax purposes that apply to supplemental taxable income. The
Fair Market Value of the Shares to be withheld shall be determined on the date
that the amount of tax to be withheld is to be determined;

                  (viii) to amend the Plan or any Option or Restricted Stock
granted under the Plan as provided in Section 15; and

                  (ix) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan and to exercise such powers and perform such
acts as the Administrator deems necessary or desirable to promote the best
interests of the Company which are not in conflict with the provisions of the
Plan.

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            (c) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Holders.

      5. Eligibility. Non-Qualified Stock Options and Restricted Stock may be
granted to Service Providers. Incentive Stock Options may be granted only to
Employees. If otherwise eligible, an Employee or Consultant who has been granted
an Option or Restricted Stock may be granted additional Options or Restricted
Stock.

      6. Limitations.

            (a) Each Option shall be designated by the Administrator as either
an Incentive Stock Option or a Non-Qualified Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of Shares subject to a Holder's Incentive Stock Options and other
incentive stock options granted by the Company, any Parent or Subsidiary, which
become exercisable for the first time during any calendar year (under all plans
of the Company or any Parent or Subsidiary) exceeds $100,000, such excess
Options or other options shall be treated as Non-Qualified Stock Options.

            For purposes of this Section 6(a), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time of grant.

            (b) Neither the Plan, any Option nor any Restricted Stock awarded
hereunder shall confer upon a Holder any right with respect to continuing the
Holder's employment or consulting relationship with the Company, nor shall they
interfere in any way with the Holder's right or the Company's right to terminate
such employment or consulting relationship at any time, with or without cause.

            (c) No Service Provider shall be granted, in any calendar year,
Options to purchase more than and/or awarded Restricted Stock in amount greater
than, 20,000 Shares in the aggregate; provided, however, that the foregoing
limitation shall not apply prior to the Public Trading Date and, following the
Public Trading Date, the foregoing limitation shall not apply until the earliest
of: (i) the first material modification of the Plan (including any increase in
the number of shares reserved for issuance under the Plan in accordance with
Section 3); (ii) the issuance of all of the shares of Common Stock reserved for
issuance under the Plan; (iii) the expiration of the Plan; (iv) the first
meeting of stockholders at which Directors of the Company are to be elected that
occurs after the close of the third calendar year following the calendar year in
which occurred the first registration of an equity security of the Company under
Section 12 of the Exchange Act; or (v) such other date required by Section
162(m) of the Code and the rules and regulations promulgated thereunder. The
foregoing limitation shall be adjusted proportionately in connection with any
change in the Company's capitalization as described in Section 13. For purposes
of this Section 6(c), if an Option is canceled in the same calendar year it was
granted (other than in connection with a transaction described in Section 13),
the canceled Option will be counted against the limit set forth in this Section
6(c). For this purpose, if the exercise price of an Option is reduced, the
transaction shall be treated as a cancellation of the Option and the grant of a
new Option.

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      7. Term of Plan. The Plan shall become effective upon its initial adoption
by the Board and shall continue in effect until it is terminated under Section
15 of the Plan; provided, however, no Options or Restricted Stock may be issued
under the Plan after the tenth (10th) anniversary of the earlier of (i) the date
upon which the Plan is adopted by the Board or (ii) the date the Plan is
approved by the stockholders.

      8. Term of Option. The term of each Option shall be stated in the Option
Agreement; provided, however, that the term shall be no more than ten (10) years
from the date of grant thereof. In the case of an Incentive Stock Option granted
to a Holder who, at the time the Option is granted, owns (or is treated as
owning under Code Section 424) stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Option shall be five (5) years from the date of
grant or such shorter term as may be provided in the Option Agreement.

      9. Option Exercise Price and Consideration.

            (a) Except as provided in Section 13, the per share exercise price
for the Shares to be issued upon exercise of an Option shall be such price as is
determined by the Administrator, but shall be subject to the following:

                  (i) In the case of an Incentive Stock Option

                        (A) granted to an Employee who, at the time of grant of
such Option, owns (or is treated as owning under Code Section 424) stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the per Share exercise price
shall be no less than one hundred ten percent (110%) of the Fair Market Value
per Share on the date of grant.

                        (B) granted to any other Employee, the per Share
exercise price shall be no less than one hundred percent (100%) of the Fair
Market Value per Share on the date of grant.

                  (ii) In the case of a Non-Qualified Stock Option

                        (A) granted to a Service Provider who, at the time of
grant of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the exercise price shall be no less than one hundred ten percent (110%) of the
Fair Market Value per Share on the date of the grant.

                        (B) granted to any other Service Provider, the per Share
exercise price shall be no less than eighty-five percent (85%) of the Fair
Market Value per Share on the date of grant.

                  (iii) Notwithstanding the foregoing, Options may be granted
with a per Share exercise price other than as required above pursuant to a
merger or other corporate transaction.

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            (b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) with the consent of the Administrator, other Shares which (x) in
the case of Shares acquired from the Company, have been owned by the Holder for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which such Option shall be exercised, (4) with the consent of the
Administrator, surrendered Shares then issuable upon exercise of the Option
having a Fair Market Value on the date of exercise equal to the aggregate
exercise price of the Option or exercised portion thereof, (5) property of any
kind which constitutes good and valuable consideration, (6) with the consent of
the Administrator, through the delivery of a notice that the Holder has placed a
market sell order with a broker with respect to Shares then issuable upon
exercise of the Option, and the broker pays a sufficient portion of the net
proceeds of the sale to the Company in satisfaction of the Option exercise
price, or (7) with the consent of the Administrator, any combination of the
foregoing methods of payment; provided, however, that the payment in any manner
prescribed in this paragraph shall not be permitted to the extent that the
Administrator determines that payment in such manner is prohibited by law.

      10. Exercise of Option.

            (a) Vesting; Fractional Exercises. Except as provided in Section 13,
Options granted hereunder shall be vested and exercisable according to the terms
hereof at such times and under such conditions as determined by the
Administrator and set forth in the Option Agreement; provided, however, that,
except with regard to Options granted to Officers, Directors or Consultants, in
no event shall an Option granted hereunder become vested and exercisable at a
rate of less than twenty percent (20%) per year over five (5) years from the
date the Option is granted, subject to reasonable conditions, such as continuing
to be a Service Provider. An Option may not be exercised for a fraction of a
Share.

            (b) Deliveries upon Exercise. All or a portion of an exercisable
Option shall be deemed exercised upon delivery of all of the following to the
Secretary of the Company or his or her office:

                  (i) A written or electronic notice complying with the
applicable rules established by the Administrator stating that the Option, or a
portion thereof, is exercised. The notice shall be signed by the Holder or other
person then entitled to exercise the Option or such portion of the Option;

                  (ii) Such representations and documents as the Administrator,
in its sole discretion, deems necessary or advisable to effect compliance with
Applicable Laws. The Administrator may, in its sole discretion, also take
whatever additional actions it deems appropriate to effect such compliance,
including, without limitation, placing legends on share certificates and issuing
stop transfer notices to agents and registrars;

                  (iii) Upon the exercise of all or a portion of an unvested
Option pursuant to Section 10(g), a Restricted Stock agreement in a form
determined by the

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Administrator and signed by the Holder or other person then entitled to exercise
the Option or such portion of the Option; and

                  (iv) In the event that the Option shall be exercised pursuant
to Section 10(f) by any person or persons other than the Holder, appropriate
proof of the right of such person or persons to exercise the Option.

            (c) Conditions to Delivery of Share Certificates. The Company shall
not be required to issue or deliver any certificate or certificates for Shares
purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:

                  (i) The admission of such Shares to listing on all stock
exchanges on which such class of stock is then listed;

                  (ii) The completion of any registration or other qualification
of such Shares under any state or federal law, or under the rulings or
regulations of the Securities and Exchange Commission or any other governmental
regulatory body which the Administrator shall, in its sole discretion, deem
necessary or advisable;

                  (iii) The obtaining of any approval or other clearance from
any state or federal governmental agency which the Administrator shall, in its
sole discretion, determine to be necessary or advisable;

                  (iv) The lapse of such reasonable period of time following the
exercise of the Option as the Administrator may establish from time to time for
reasons of administrative convenience; and

                  (v) The receipt by the Company of full payment for such
Shares, including payment of any applicable withholding tax, which in the sole
discretion of the Administrator may be in the form of consideration used by the
Holder to pay for such Shares under Section 9(b).

            (d) Termination of Relationship as a Service Provider. If a Holder
ceases to be a Service Provider other than by reason of the Holder's disability
or death, such Holder may exercise his or her Option within such period of time
as is specified in the Option Agreement to the extent that the Option is vested
on the date of termination; provided, however, that prior to the Public Trading
Date, such period of time shall not be less than thirty (30) days (but in no
event later than the expiration of the term of the Option as set forth in the
Option Agreement). In the absence of a specified time in the Option Agreement,
the Option shall remain exercisable for three (3) months following the Holder's
termination. If, on the date of termination, the Holder is not vested as to his
or her entire Option, the Shares covered by the unvested portion of the Option
immediately cease to be issuable under the Option. If, after termination, the
Holder does not exercise his or her Option within the time period specified
herein, the Option shall terminate.

            (e) Disability of Holder. If a Holder ceases to be a Service
Provider as a result of the Holder's disability, the Holder may exercise his or
her Option within such period of time as is specified in the Option Agreement to
the extent the Option is vested on the date of termination; provided, however,
that prior to the Public Trading Date, such period of time shall

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not be less than six (6) months (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for twelve (12) months following the Holder's termination. If such disability is
not a "disability" as such term is defined in Section 22(e)(3) of the Code, in
the case of an Incentive Stock Option such Incentive Stock Option shall
automatically cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Non-Qualified Stock Option from and after the day
which is three (3) months and one (1) day following such termination. If, on the
date of termination, the Holder is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately cease
to be issuable under the Option. If, after termination, the Holder does not
exercise his or her Option within the time specified herein, the Option shall
terminate.

            (f) Death of Holder. If a Holder dies while a Service Provider, the
Option may be exercised within such period of time as is specified in the Option
Agreement; provided, however, that prior to the Public Trading Date, such period
of time shall not be less than six (6) months (but in no event later than the
expiration of the term of such Option as set forth in the Notice of Grant), by
the Holder's estate or by a person who acquires the right to exercise the Option
by bequest or inheritance, but only to the extent that the Option is vested on
the date of death. In the absence of a specified time in the Option Agreement,
the Option shall remain exercisable for twelve (12) months following the
Holder's termination. If, at the time of death, the Holder is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall immediately cease to be issuable under the Option. The Option may
be exercised by the executor or administrator of the Holder's estate or, if
none, by the person(s) entitled to exercise the Option under the Holder's will
or the laws of descent or distribution. If the Option is not so exercised within
the time specified herein, the Option shall terminate.

            (g) Early Exercisability. The Administrator may provide in the terms
of a Holder's Option Agreement that the Holder may, at any time before the
Holder's status as a Service Provider terminates, exercise the Option in whole
or in part prior to the full vesting of the Option; provided, however, that
subject to Section 20, Shares acquired upon exercise of an Option which has not
fully vested may be subject to any forfeiture, transfer or other restrictions as
the Administrator may determine in its sole discretion.

            (h) Buyout Provisions. The Administrator may at any time offer to
buyout for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Holder at the time that such offer is made.

            (i) Acceleration; Extension. Notwithstanding anything in the Plan to
the contrary, at any time after grant of an Option to a Service Provider but
prior to the termination of the Holder's relationship as a Service Provider, the
Committee may, in its sole and absolute discretion and subject to whatever terms
and conditions it selects, (1) accelerate the period during which such Option
vests and (2) subject to Section 8 of the Plan, extend the period of
exercisability of such Option following the termination of the Holder's
relationship as a Service Provider.

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      11. Non-Transferability of Options and Restricted Stock. Options and
Restricted Stock may not be sold, pledged, assigned, hypothecated, transferred,
or disposed of in any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of the Holder, only by
the Holder.

      12. Restricted Stock.

            (a) Grants. After the Administrator determines that it will grant
Restricted Stock to a Service Provider, it shall provide the Service Provider a
Restricted Stock agreement setting forth the terms, conditions and restrictions
related to the Restricted Stock, including the number of shares of Restricted
Stock granted and the purchase price to be paid, if any; provided, however, that
to the extent required to comply with applicable securities laws, the purchase
price of such Restricted Stock shall not be less than the purchase price
requirements set forth in Section 260.140.42 of Title 10 of the California Code
of Regulations.

            (b) Repurchase Right. Unless the Administrator determines otherwise,
the Restricted Stock agreement shall grant the Company the right to repurchase
the shares of Restricted Stock upon the termination of the purchaser's status as
a Service Provider for any reason. Subject to Section 20, the purchase price for
shares of Restricted Stock repurchased by the Company pursuant to such
repurchase right and the rate at which such repurchase right shall lapse shall
be determined by the Administrator in its sole discretion, and shall be set
forth in the Restricted Stock agreement.

            (c) Other Provisions. The Restricted Stock agreement shall contain
such other terms, provisions and conditions not inconsistent with the Plan as
may be determined by the Administrator in its sole discretion.

            (d) Rights as a Stockholder. Upon the grant of Restricted Stock, the
Holder shall have, unless otherwise provided by the Committee, all the rights of
a stockholder with respect to said Shares, subject to the restrictions in his or
her Restricted Stock agreement, including the right to receive all dividends and
other distributions paid or made with respect to the Shares; provided, however,
that in the discretion of the Administrator, any extraordinary distributions
with respect to the Common Stock shall be subject to the restrictions set forth
in subsection (b) above.

      13. Adjustments upon Changes in Capitalization, Merger or Asset Sale.

            (a) In the event that the Administrator determines that any dividend
or other distribution (whether in the form of cash, Common Stock, other
securities, or other property), recapitalization, reclassification, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, liquidation, dissolution, or sale, transfer, exchange
or other disposition of all or substantially all of the assets of the Company,
or exchange of Common Stock or other securities of the Company, issuance of
warrants or other rights to purchase Common Stock or other securities of the
Company, or other similar corporate transaction or event, in the Administrator's
sole discretion, affects the Common Stock such that an adjustment is determined
by the Administrator to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended by the Company to be
made available

                                       11
<PAGE>
under the Plan or with respect to any Option or Restricted Stock granted under
the Plan, then the Administrator shall, in such manner as it may deem equitable,
proportionately adjust any or all of:

                  (i) the number and kind of shares of Common Stock (or other
securities or property) with respect to which Options or Restricted Stock may be
granted or awarded (including, but not limited to, adjustments of the
limitations in Section 3 on the maximum number and kind of shares which may be
issued and adjustments of the maximum number of Shares that may be purchased by
any Holder in any calendar year pursuant to Section 6(c));

                  (ii) the number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Options or Restricted Stock; and

                  (iii) the exercise price or purchase with respect to any
Option or Restricted Stock.

            (b) In the event of any transaction or event described in Section
13(a), the Administrator, in its sole discretion, and on such terms and
conditions as it deems appropriate, either by the terms of the Option or
Restricted Stock or by action taken prior to the occurrence of such transaction
or event and either automatically or upon the Holder's request, is hereby
authorized to take any one or more of the following actions whenever the
Administrator determines that such action is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended by the
Company to be made available under the Plan or with respect to any Option or
Restricted Stock granted or issued under the Plan or to facilitate such
transaction or event:

                  (i) To provide for either the purchase of any such Option for
an amount of cash equal to the amount that could have been obtained upon the
exercise of such Option or realization of the Holder's rights had such Option
been currently exercisable or payable or fully vested or the replacement of such
Option with other rights or property selected by the Administrator in its sole
discretion;

                  (ii) To provide that such Option shall be exercisable as to
all shares covered thereby, notwithstanding anything to the contrary in the Plan
or the provisions of such Option;

                  (iii) To provide that such Option be assumed by the successor
or survivor corporation or entity, or a parent or subsidiary thereof, or shall
be substituted for by similar options, rights or awards covering the stock of
the successor or survivor corporation or entity, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kind of shares and
prices;

                  (iv) To make adjustments in the number and type of shares of
Common Stock (or other securities or property) subject to outstanding Options
and Restricted Stock, and/or in the terms and conditions of (including the
exercise price or purchase price), and the criteria included in, outstanding
Options or Restricted Stock or Options or Restricted Stock which may be granted
in the future; and

                                       12
<PAGE>
                  (v) To provide that immediately upon the consummation of such
event, such Option shall not be exercisable and shall terminate; provided, that
for a specified period of time prior to such event, such Option shall be
exercisable as to all Shares covered thereby, and the restrictions imposed under
an Option Agreement upon some or all Shares may be terminated and, in the case
of Restricted Stock, some or all shares of such Restricted Stock may cease to be
subject to repurchase, notwithstanding anything to the contrary in the Plan or
the provisions of such Option Agreement or Restricted Stock agreement.

            (c) Subject to Section 3, the Administrator may, in its sole
discretion, include such further provisions and limitations in any Option
Agreement or Restricted Stock agreement, or any certificate, as it may deem
equitable and in the best interests of the Company.

            (d) If the Company undergoes an Acquisition, then any surviving
corporation or entity or acquiring corporation or entity, or affiliate of such
corporation or entity, may assume any Options outstanding under the Plan or may
substitute similar stock awards (including an award to acquire the same
consideration paid to the stockholders in the transaction described in this
subsection 13(d)) for those outstanding under the Plan. In the event any
surviving corporation or entity or acquiring corporation or entity in an
Acquisition, or affiliate of such corporation or entity, does not assume such
Options or does not substitute similar stock awards for those outstanding under
the Plan, then with respect to (i) Options held by participants in the Plan
whose status as a Service Provider has not terminated prior to such event, the
vesting of such Options (and, if applicable, the time during which such awards
may be exercised) shall be accelerated and made fully exercisable and all
restrictions thereon shall lapse at least ten (10) days prior to the closing of
the Acquisition (and the Options terminated if not exercised prior to the
closing of such Acquisition), and (ii) any other Options outstanding under the
Plan, such Options shall be terminated if not exercised prior to the closing of
the Acquisition.

            (e) The existence of the Plan, any Option Agreement or Restricted
Stock agreement and the Options or Restricted Stock granted hereunder shall not
affect or restrict in any way the right or power of the Company or the
stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any issue
of stock or of options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are superior to or
affect the Common Stock or the rights thereof or which are convertible into or
exchangeable for Common Stock, or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or otherwise.

      14. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Service Provider to whom an
Option is so granted within a reasonable time after the date of such grant.

                                       13
<PAGE>
      15. Amendment and Termination of the Plan.

            (a) Amendment and Termination. The Board may at any time wholly or
partially amend, alter, suspend or terminate the Plan. However, without approval
of the Company's stockholders given within twelve (12) months before or after
the action by the Board, no action of the Board may, except as provided in
Section 13, increase the limits imposed in Section 3 on the maximum number of
Shares which may be issued under the Plan or extend the term of the Plan under
Section 7.

            (b) Stockholder Approval. The Board shall obtain stockholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.

            (c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Holder,
unless mutually agreed otherwise between the Holder and the Administrator, which
agreement must be in writing and signed by the Holder and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options, Restricted Stock or
Restricted Stock granted or awarded under the Plan prior to the date of such
termination.

      16. Stockholder Approval. The Plan will be submitted for the approval of
the Company's stockholders within twelve (12) months after the date of the
Board's initial adoption of the Plan. Options or Restricted Stock may be granted
or awarded prior to such stockholder approval, provided that such Options and
Restricted Stock shall not be exercisable, shall not vest and the restrictions
thereon shall not lapse prior to the time when the Plan is approved by the
stockholders, and provided further that if such approval has not been obtained
at the end of said twelve-month period, all Options and Restricted Stock
previously granted or awarded under the Plan shall thereupon be canceled and
become null and void.

      17. Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.

      18. Reservation of Shares. The Company, during the term of this Plan,
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

      19. Information to Holders and Purchasers. Prior to the Public Trading
Date and to the extent required by Section 260.140.46 of Title 10 of the
California Code of Regulations, the Company shall provide to each Holder and to
each individual who acquires Shares pursuant to the Plan, not less frequently
than annually during the period such Holder or purchaser has one or more Options
or Restricted Stock outstanding, and, in the case of an individual who acquires
Shares pursuant to the Plan, during the period such individual owns such Shares,
copies of annual financial statements. Notwithstanding the preceding sentence,
the Company shall not be

                                       14
<PAGE>
required to provide such statements to key employees whose duties in connection
with the Company assure their access to equivalent information.

      20. Repurchase Provisions. The Administrator in its sole discretion may
provide that the Company may repurchase shares of Restricted Stock or Shares
acquired upon exercise of an Option upon the occurrence of certain specified
events, including, without limitation, a Holder's termination as a Service
Provider, divorce, bankruptcy or insolvency; provided, however, that any such
repurchase right shall be set forth in the applicable Option Agreement or
Restricted Stock agreement or in another agreement referred to in such agreement
and, provided further, that to the extent required by Section 260.140.41 and
Section 260.140.42 of Title 10 of the California Code of Regulations, any such
repurchase right set forth in an Option or Restricted Stock agreement granted
prior to the Public Trading Date to a person who is not an Officer, Director or
Consultant shall be upon the following terms: (i) if the repurchase option gives
the Company the right to repurchase the shares upon termination as a Service
Provider at not less than the Fair Market Value of the shares to be purchased on
the date of termination of status as a Service Provider, then (A) the right to
repurchase shall be exercised for cash or cancellation of purchase money
indebtedness for the shares within ninety (90) days of termination of status as
a Service Provider (or in the case of shares issued upon exercise of Options
after such date of termination, within ninety (90) days after the date of the
exercise) or such longer period as may be agreed to by the Administrator and the
Plan participant and (B) the right terminates when the shares become publicly
traded; and (ii) if the repurchase option gives the Company the right to
repurchase the Shares upon termination as a Service Provider at the original
purchase price for such Shares, then (A) the right to repurchase at the original
purchase price shall lapse at the rate of at least twenty percent (20%) of the
shares per year over five (5) years from the date the Option or Restricted Stock
is granted (without respect to the date the Option was exercised or became
exercisable) and (B) the right to repurchase shall be exercised for cash or
cancellation of purchase money indebtedness for the shares within ninety (90)
days of termination of status as a Service Provider (or, in the case of shares
issued upon exercise of Options after such date of termination, within ninety
(90) days after the date of the exercise) or such longer period as may be agreed
to by the Company and the Plan participant.

      21. Investment Intent. The Company may require a Plan participant, as a
condition of exercising or acquiring stock under any Option or prior to the
grant of any Restricted Stock, (i) to give written assurances satisfactory to
the Company as to the participant's knowledge and experience in financial and
business matters and/or to employ a purchaser representative reasonably
satisfactory to the Company who is knowledgeable and experienced in financial
and business matters and that he or she is capable of evaluating, alone or
together with the purchaser representative, the merits and risks of acquiring
the Shares; and (ii) to give written assurances satisfactory to the Company
stating that the participant is acquiring the Shares subject to the Option or
the Restricted Stock for the participant's own account and not with any present
intention of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (A) the issuance of the shares upon the exercise or acquisition
of stock under the applicable Option or the shares of Restricted Stock have been
registered under a then currently effective registration statement under the
Securities Act or (B) as to any particular requirement, a determination is made
by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may, upon
advice of counsel to the Company,

                                       15
<PAGE>
place legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the stock.

      22. Governing Law. The validity and enforceability of this Plan shall be
governed by and construed in accordance with the laws of the State of California
without regard to otherwise governing principles of conflicts of law.

                                  * * * * * * *

            I hereby certify that the Plan was duly adopted by the Board of
Directors of Skilled Healthcare Group, Inc. on March 4, 2004.

            Executed at Foothill Ranch, California on this 5th day of March,
2004.

                                       /s/ Roland Rapp
                                       ----------------------------------------
                                       Roland Rapp
                                       General Counsel and Secretary

                                  * * * * * * *

            I hereby certify that the foregoing Plan was approved by the
stockholders of Skilled Healthcare Group, Inc. on March 4, 2004.

            Executed at Foothill Ranch, California on this 5th day of March,
2004.

                                       /s/ Roland Rapp
                                       ----------------------------------------
                                       Roland Rapp
                                       General Counsel and Secretary

                                       16RB DRAFT 20040205A

         SECURITIES  PURCHASE  AGREEMENT,  dated as of  February  __, 2003 (this
"AGREEMENT"),  between  PERFISANS  HOLDINGS  INC., a Maryland  corporation  with
principal  executive offices at 7828 Kennedy Road, Suite 201,  Markham,  Ontario
L3R  5P1,and  SBI  BRIGHTLINE  CONSULTING  V LLC, a Delaware  limited  liability
company with its  principal  offices at 2361 Campus  Drive,  Suite 210,  Newport
Beach, California 92612 (the "PURCHASER").

                                  INTRODUCTION

         Subject to the terms and conditions of this Agreement,  the Company may
issue  and sell to the  Purchaser  and the  Purchaser  shall  purchase  from the
Company  the  following:  (i) up to  2,000,000  shares of the Common  Stock (the
"SHARES"),  par value $0.001 per share (the "COMMON STOCK");  (ii) warrants (the
"$2.00 WARRANTS") exercisable for an aggregate of 300,000 shares of Common Stock
at the exercise price of $2.00 per share, in the form attached hereto as Exhibit
A hereto; and (iii) warrants (the "$3.00 WARRANTS", and, together with the $2.00
Warrants,  the "WARRANTS",  and, together with this Agreement,  the "TRANSACTION
AGREEMENTS")  exercisable  for an aggregate of 300,000 shares of Common Stock at
the exercise price of $3.00 per share, in the form of Exhibit B hereto.

         NOW THEREFORE,  in consideration  of the mutual covenants  contained in
this Agreement, the Company and the Purchaser hereby agree as follows:

                                    ARTICLE I

                            ACQUISITION OF SECURITIES

         SECTION 1.01 THE AGREEMENT.

         (a) Schedule  1.01(a)  attached  hereto  defines two tranches of Shares
that the Purchaser has agreed to purchase from the Company  (each,  a "TRANCHE")
and, with respect to each Tranche,  sets forth the number of Shares constituting
such Tranche  (the  "TRANCHE  SHARES") and the purchase  price per share for the
Tranche Shares in such Tranche (the "TRANCHE PURCHASE PRICE").

         (b) The Company may, in its sole discretion,  elect to sell the Tranche
Shares  of any  Tranche  to the  Purchaser  at any  time  after  the  date  (the
"EFFECTIVE  DATE") on which the  Registration  Statement  (as defined in Section
3.01(a)) of the Company covering the resale of the Shares is declared  effective
under the Securities Act of 1933, as amended (the "SECURITIES  ACT"),  provided,
however,  (i) the Company must elect to sell all of the Tranche Shares  included
in a Tranche  if it elects to sell any of the  Tranche  Shares in such  Tranche;
(ii) the  Company  must elect to sell the  Tranche  Shares in the order that the
Tranches  are  listed on  Schedule  1.01(a);  and  (iii)  the  total  beneficial
ownership  of the  Purchaser  of shares of Common Stock shall not exceed 9.8% of
the Common Stock, giving effect to the acquisition of the Tranche or Tranches in

<PAGE>

question.  Subject to the immediately preceding sentence,  the Company may elect
to sell Tranche  Shares  included in more than one Tranche at the same time.  To
effect its election to sell Shares, the Company must give written notice thereof
(an "ELECTION  NOTICE") to the Purchaser.  The Election Notice shall specify the
Tranche or  Tranches  with  respect to which the  election is being made and the
date on which the closing of the sale and  purchase of the Tranche  Shares shall
occur; provided,  such date shall be a Business Day (as hereinafter defined) and
shall not be earlier than five days after the date such Election Notice is given
to the Purchaser.  An Election Notice shall be irrevocable except as provided in
Section 1.02(c). For purposes hereof, the term "BUSINESS DAY" shall mean any day
which  is not  (i) a  Saturday  or a  Sunday  or  (ii) a day  on  which  banking
institutions  are generally  authorized or obligated to close in the City of Los
Angeles,   California.   Subject  to  the   foregoing   and  provided  that  the
representations  and  warranties  of the Company  set forth  herein are true and
correct as of the date of an  Election  Notice,  in the event  that the  Company
gives an Election  Notice,  the  Purchaser  shall be  obligated  to purchase the
Tranche Shares, covered by such notice.

         (c) Simultaneous  with the purchase of the Tranche shares,  the Company
shall deliver to the Purchaser the Warrants applicable to such Tranche.

         SECTION 1.02      CLOSING PROCEDURES; THE CLOSINGS.

         (a) Subject to the  satisfaction or waiver of the conditions  precedent
set forth in Article IV hereof,  the closing of a purchase of Tranche  Shares by
the Purchaser  pursuant to this  Agreement  (each,  a "CLOSING")  shall occur at
10:00 a.m. on the date specified in the Election Notice delivered by the Company
with respect to such Tranche  Shares unless the Company and the  Purchaser  have
mutually  agreed on a different  time or date with  respect to such Closing (the
time and date of the  Closing of a  particular  Tranche is referred to herein as
the "TRANCHE  CLOSING  DATE").  Unless  otherwise  agreed by the Company and the
Purchaser,  each  Closing  shall occur at the offices of Reitler  Brown LLC, New
York, New York, counsel to the Purchaser.

         (b) At each Closing,  (i) each of the Company and the  Purchaser  shall
deliver to the other, as applicable,  any documents  required to be delivered by
Sections  4.01 and 4.02  hereof  which  have  not been  delivered  prior to such
Closing,  (ii) the Purchaser shall deliver to the Companyan  acknowledgement  of
the applicable  Tranche Purchase Price for the Tranche Shares being purchased at
the Closing and state the date,  not to exceed five Business Days  following the
Tranche  Closing Date, on or prior to which the Tranche  Purchase Price shall be
delivered  by the  Purchaser  to the  Company by wire  transfer  of  immediately
available  funds to an account  designated in writing by the Company at or prior
to the Closing, and (iii) the Company shall deliver to the Purchaser one or more
stock  certificates,  determined  in  accordance  with the  instructions  of the
Purchaser,  representing  the Tranche Shares being  purchased or shall cause the
Tranche  Shares  being  purchased  to  be  electronically   transferred  to  the
Purchaser.  The payment of the Tranche  Purchase Price referenced in clause (ii)
shall be deemed to have been delivered at the Closing for the purposes hereof.

                                       2
<PAGE>

         (c) If a Closing  does not occur on a  proposed  Tranche  Closing  Date
because the  conditions  specified  in  paragraph  (b) of this  Section 1.02 and
Section 4.02 were not satisfied at the time of the applicable  proposed  Tranche
Closing  Date,  the  Election  Notice  with  respect to the  Tranche or Tranches
proposed to be sold on such proposed Tranche Closing Date shall automatically be
revoked;  provided,  however,  such revocation shall not impair the right of the
Company to give another  Election Notice with respect to the Tranche or Tranches
covered by the revoked  Election  Notice or to compel the  Purchaser to purchase
any Tranche Shares included in such Tranche or Tranches on a subsequent  Tranche
Closing Date on which the conditions specified in such paragraphs are satisfied.

                                   ARTICLE II

                          REPRESENATIONS AND WARRANTIES

         SECTION 2.01 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the Purchaser as follows:

         (a) The Common Stock has been  registered  under  Section  12(g) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") and the Company
is subject to the periodic reporting  requirements of Section 13 of the Exchange
Act. The Company has heretofore  provided to the Purchaser true,  complete,  and
correct copies of all forms, reports, schedules, statements, and other documents
required  to be filed by it  under  the  Exchange  Act  since at least  December
19,2003,  as such  documents  have been  amended  since  the time of the  filing
thereof  and a copy  of  the  Registration  Statement  (collectively,  the  "SEC
DOCUMENTS").  The SEC Documents,  including,  without limitation,  any financial
statements and schedules included therein, at the time filed or, if subsequently
amended,  as so amended,  (i) did not contain any untrue statement of a material
fact required to be stated  therein or necessary in order to make the statements
therein not  misleading  and (ii) complied in all respects  with the  applicable
requirements  of the  Exchange  Act and the  applicable  rules  and  regulations
thereunder.

         (b) At the date hereof and at each Tranche Closing Date:

                  (i) the Common  Stock is and shall be traded and quoted in the
over-the-counter Bulletin Board market (the "OTCBB");

                  (ii) the Company has and shall have performed or satisfied all
of its  undertakings  to, and of its  obligations  and  requirements  with,  the
Commission; and

                  (iii) the Company has not, and shall not have taken any action
that would preclude, or otherwise jeopardize,  the inclusion of the Common Stock
for quotation on the OTCBB.

                                       3
<PAGE>

         (c) [SUBSIDIARY], a __________ corporation ("SUBSIDIARY"),  is the sole
subsidiary  of  the  Company.   Other  than  Subsidiary,   the  Company  has  no
subsidiaries  or  affiliated  corporation  or owns  any  interest  in any  other
enterprise  (whether  or not  such  enterprise  is a  corporation).  Each of the
Company and  Subsidiary  has been duly  organized  and is validly  existing as a
corporation in good standing under the laws of the  respective  jurisdiction  of
its  incorporation  with full power and authority  (corporate and other) to own,
lease and operate its respective  properties and conduct its respective business
as described in the SEC  Documents;  each of the Company and  Subsidiary is duly
qualified  to do business as a foreign  corporation  and is in good  standing in
each jurisdiction in which the ownership or leasing of its respective properties
or the conduct of its respective  business requires such  qualification,  except
where the failure to be so  qualified  or be in good  standing  would not have a
material  adverse  effect on the business,  prospects,  condition  (financial or
otherwise),  and results of operations of the Company and Subsidiary  taken as a
whole;  no proceeding has been  instituted in any such  jurisdiction,  revoking,
limiting or curtailing,  or seeking to revoke, limit or curtail,  such power and
authority or qualification;  each of the Company and Subsidiary is in possession
of,  and   operating  in  compliance   with,   all   authorizations,   licenses,
certificates,  consents,  orders and permits  from state,  federal,  foreign and
other  regulatory  authorities that are material to the conduct of its business,
all of which are valid and in full force and  effect;  neither  the  Company nor
Subsidiary  is in  violation  of its  charter  or  bylaws or in  default  in the
performance or observance of any  obligation,  agreement,  covenant or condition
contained  in  any  material  bond,   debenture,   note  or  other  evidence  of
indebtedness, or in any material lease, contract,  indenture,  mortgage, deed of
trust,  loan agreement,  joint venture or other agreement or instrument to which
it is a party or by which  it or its  respective  properties  or  assets  may be
bound,  which  violation or default would have a material  adverse effect on the
business, prospects, financial condition or results of operations of the Company
and  Subsidiary  taken as a whole;  and neither the Company nor Subsidiary is in
violation of any law, order, rule,  regulation,  writ,  injunction,  judgment or
decree of any court,  government  or  governmental  agency or body,  domestic or
foreign,  having  jurisdiction  over  the  Company  or  Subsidiary  or over  its
respective  properties or assets,  which violation would have a material adverse
effect on the business, prospects,  financial condition or results of operations
of the Company and  Subsidiary  taken as a whole.  The SEC Documents  accurately
describe any  corporation,  association  or other  entity  owned or  controlled,
directly or indirectly, by the Company or Subsidiary.

         (d) The Company has full legal right, power and authority to enter into
each of the Transaction Agreements and to perform the transactions  contemplated
hereby and thereby. Each of the Transaction Agreements has been duly authorized,
executed and  delivered  by the Company and is a valid and binding  agreement on
the part of the Company,  enforceable in accordance  with its respective  terms;
the  performance of each of the Transaction  Agreements and the  consummation of
the transactions  herein or therein  contemplated will not result in a breach or
violation of any of the terms and  provisions of, or constitute a default under,
(i) any bond,  debenture,  note or other evidence of indebtedness,  or under any
lease,  contract,  indenture,  mortgage,  deed of trust,  loan agreement,  joint
venture or other agreement or instrument to which

                                       4

<PAGE>

the Company or  Subsidiary is a party or by which its  respective  properties or
assets may be bound, (ii) the charter or bylaws of the Company or Subsidiary, or
(iii) any law, order, rule, regulation, writ, injunction,  judgment or decree of
any court,  government  or  governmental  agency or body,  domestic  or foreign,
having  jurisdiction  over the  Company  or  Subsidiary  or over its  respective
properties or assets,  which violation or default would have a material  adverse
effect on the business, prospects,  financial condition or results of operations
of  the  Company  and  Subsidiary  taken  as  a  whole.  No  consent,  approval,
authorization  or order of, or  qualification  with,  any court,  government  or
governmental agency or body,  domestic or foreign,  having jurisdiction over the
Company or  Subsidiary or over its  respective  properties or assets is required
for the execution and delivery of any Transaction Agreement and the consummation
by the Company of the transactions herein and therein contemplated,  except such
as may be required under the  Securities Act or under state or other  securities
or blue  sky  laws,  all of  which  requirements  have  been,  or in  accordance
therewith will be, satisfied in all material respects.

         (e)  There  is not  any  pending  or,  to  the  best  of the  Company's
knowledge,  threatened, action, suit, claim or proceeding against the Company or
Subsidiary,  or any of its officers or any of its properties,  assets or rights,
before  any  court,  government  or  governmental  agency or body,  domestic  or
foreign, having jurisdiction over the Company or Subsidiary or over its officers
or  properties  or  otherwise  that (i) is  reasonably  likely  to result in any
material  adverse  change in the  business,  prospects,  financial  condition or
results of  operations of the Company and  Subsidiary  taken as a whole or might
materially and adversely  affect their  properties,  assets or rights taken as a
whole, (ii) might prevent  consummation of the transactions  contemplated by the
Transaction  Agreements,  or  (iii)  will be  required  to be  disclosed  in the
Registration  Statement,  except to the extent  heretofore  disclosed in the SEC
Documents.

         (f) The authorized  capital stock of the Company consists of 50,000,000
shares  of  Common  Stock,  of which  37,618,123  shares  of  Common  Stock  are
outstanding,  and  5,000,000  shares of  preferred  stock,  par value $0.001 per
share, none of which is outstanding. All outstanding capital stock of Subsidiary
is owned  beneficially  and of record by the Company.  Each of such  outstanding
shares  of  Common  Stock  and  each  outstanding  share  of  capital  stock  of
Subsidiary,   is  validly   authorized,   validly   issued,   fully  paid,   and
nonassessable,  has not been issued and is not owned or held in violation of any
preemptive  or similar  right of  stockholders.  Except as  disclosed in the SEC
Documents,  (i) there is no commitment,  plan, or  arrangement to issue,  and no
outstanding  option,  warrant,  or other right  calling for the issuance of, any
share of capital stock of or any security or other instrument  convertible into,
exercisable for, or exchangeable for capital stock of the Company or Subsidiary,
except  for  an  aggregate  of  5,627,483  options  and/or  warrants   currently
outstanding to acquire shares of Common Stock,  and (ii) there is outstanding no
security or other instrument  convertible into or exchangeable for capital stock
of the Company or Subsidiary.  The Shares and the Warrant Shares (as hereinafter
defined)  have been  duly  authorized  for  issuance  and sale to the  Purchaser
pursuant hereto and the Warrants,  respectively,  and, when issued and delivered
by the Company  against  payment  therefor in accordance  with the terms of this
Agreement and the relevant Warrant or Warrants,  respectively,  will be duly and
validly issued and fully paid and nonassessable, and will be sold

                                       5

<PAGE>

free and clear of any pledge,  lien,  security interest,  encumbrance,  claim or
equitable  interest of any kind;  and no  preemptive or similar  right,  co-sale
right,  registration  right,  right of first  refusal or other  similar right of
stockholders  exists with respect to any of the Shares or Warrant  Shares or the
issuance and sale thereof other than those that have been expressly waived prior
to the date hereof and those that will  automatically  expire upon the execution
hereof.  No further approval or  authorization of any stockholder,  the Board of
Directors  of the Company or others is  required  for the  issuance  and sale or
transfer of the Shares,  the Warrants,  or the Warrant Shares,  except as may be
required  under  the  Securities  Act,  the rules  and  regulations  promulgated
thereunder or under state or other  securities or blue sky laws. The description
of  the  Company's   stock  option,   stock  bonus  and  other  stock  plans  or
arrangements,  and the options or other rights granted and exercised thereunder,
set forth in the SEC Documents  accurately and fairly  presents the  information
required  to be shown with  respect to such  plans,  arrangements,  options  and
rights under the Securities Act, the Exchange Act, and the rules and regulations
promulgated  thereunder.  The  Company  has  authorized  and  has  reserved  and
covenants to continue to reserve,  free of  preemptive  rights and other similar
contractual rights of stockholders,  a sufficient number of its authorized,  but
unissued,  shares of its  Common  Stock to cover the  Shares  and the  shares of
Common Stock issuable upon the exercise of the Warrants (the "WARRANT SHARES").

         (g) Schwartz Levitsky Feldman LLP and Dohan & Company (the "AUDITORS"),
which has  examined  the  [consolidated]  financial  statements  of the Company,
together with the related  schedules  and notes,  for the period from January 1,
2001 to December 31, 2001, January 1, 2002 to December 31, 2002 and for the nine
month period ended September 30, 2003,  respectively,  filed with the Commission
as a part of the SEC Documents, and which, pursuant to the rules and regulations
of  the  Commission  are  to be  included  in the  Registration  Statement,  are
independent  accountants  within the meaning of the Securities Act, the Exchange
Act,  and  the  rules  and  regulations  promulgated  thereunder;   the  audited
[consolidated]  financial  statements of the Company,  together with the related
schedules and notes, and the unaudited  financial  information,  forming part of
the SEC  Documents,  fairly  present the  financial  position and the results of
operations of the Company at the respective dates and for the respective periods
to which they apply; and all audited [consolidated]  financial statements of the
Company,  together  with the  related  schedules  and notes,  and the  unaudited
[consolidated]  financial information,  filed with the Commission as part of the
SEC  Documents,  complied as to form in all material  respects  with  applicable
accounting  requirements  and with the rules and  regulations  of the Commission
with respect hereto when filed,  have been prepared in accordance with generally
accepted  accounting  principles  consistently  applied  throughout  the periods
involved  except as may be otherwise  stated therein (except as may be indicated
in the  notes  thereto  or as  permitted  by the rules  and  regulations  of the
Commission)  and  fairly   present,   subject  in  the  case  of  the  unaudited
[consolidated]  financial  statements,  to customary year end audit adjustments,
the financial position of the Company as at the dates thereof and the results of
its   operations  and  cash  flows.   The  procedures   pursuant  to  which  the
aforementioned   [comsolidated]  financial  statements  have  been  audited  are
compliant with generally accepted auditing  standards.  The selected and summary
[consolidated]  financial  and  statistical  data  included in the SEC Documents
present fairly the  information  shown therein and have been compiled on a basis
consistent  with  the

                                       6

<PAGE>

audited   [consolidated]   financial  statements  presented  therein.  No  other
financial  statements  or  schedules  are  required  to be  included  in the SEC
Documents.

         (h) Subsequent to the respective dates as of which information is given
in the SEC Documents,  there has not been (i) any material adverse change in the
business, prospects, financial condition or results of operations of the Company
and  Subsidiary  taken  as  a  whole,  (ii)  any  transaction  committed  to  or
consummated  that is material to the  Company and  Subsidiary  taken as a whole,
(iii) any obligation,  direct or contingent, that is material to the Company and
Subsidiary  taken as a whole incurred by the Company or Subsidiary,  except such
obligations as have been incurred in the ordinary  course of business,  (iv) any
change in the  capital  stock or  outstanding  indebtedness  of the  Company  or
Subsidiary  that is material to the Company and Subsidiary  taken as whole,  (v)
any dividend or distribution of any kind declared,  paid, or made on the capital
stock of the Company, or (vi) any loss or damage (whether or not insured) to the
property of the Company or Subsidiary which has a material adverse effect on the
business,   prospects,   condition  (financial  or  otherwise),  or  results  of
operations of the Company and Subsidiary taken as a whole.

         (i) Except as set forth in the SEC  Documents,  (i) each of the Company
and  Subsidiary  has good and  marketable  title to all  properties  and  assets
described  in the SEC  Documents  as owned by it,  free and clear of any pledge,
lien, security interest,  encumbrance,  claim or equitable interest,  other than
such as would not have a material  adverse  effect on the  business,  prospects,
financial condition or results of operations of the Company and Subsidiary taken
as a whole,  (ii) the  agreements to which the Company and Subsidiary is a party
described  in the  SEC  Documents  are  legal,  valid  and  binding  agreements,
enforceable by the Company or  Subsidiary,  as  applicable,  in accordance  with
their terms, and, to the best of the Company's knowledge,  the other contracting
party  or  parties  thereto  are not in  breach  or  default  under  any of such
agreements,  and  (iii)  each  of the  Company  and  Subsidiary  has  valid  and
enforceable  leases for all properties  described in the SEC Documents as leased
by it.  Except  as set  forth  in the SEC  Documents,  each of the  Company  and
Subsidiary owns or leases all such properties as are necessary to its respective
operations as now conducted and as described in the SEC Documents.

         (j) Each of the Company and  Subsidiary has timely filed all respective
federal, state, local and foreign tax returns required to be filed by it and has
paid all taxes shown  thereon as due,  and there is no tax  deficiency  that has
been or,  to the best of the  Company's  knowledge,  is  likely  to be  asserted
against  the  Company or  Subsidiary  if  audited,  which  might have a material
adverse  effect on the business,  prospects,  financial  condition or results of
operations  of the  Company  and  Subsidiary  taken  as a  whole,  and  all  tax
liabilities  are  adequately  provided  for on the  books  of  the  Company  and
Subsidiary.

         (k)  Each  of the  Company  and  Subsidiary  maintains  insurance  with
insurers of recognized financial  responsibility of the types and in the amounts
generally  deemed  adequate  for its  business  including,  but not  limited to,
insurance  covering real and personal property owned or leased by the Company or
Subsidiary,  as  applicable,   against  theft,  damage,  destruction,

                                       7

<PAGE>

acts of vandalism, and all other risks customarily insured against, all of which
insurance is in full force and effect;  neither the Company nor  Subsidiary  has
been  refused any  insurance  coverage  sought or applied  for;  and neither the
Company  does has  reason  to  believe  that it will  not be able to  renew  its
existing  insurance  coverage  as and when such  coverage  expires  or to obtain
similar  coverage  from  similar  insurers as may be  necessary  to continue its
business at a cost that would not materially and adversely  affect the business,
prospects,  condition , or results of operations  of the Company and  Subsidiary
taken as a whole.

         (l) No labor  disturbance by the employees of the Company or Subsidiary
exists or, to the best of the Company's knowledge,  is imminent.  The Company is
not aware of any existing or imminent labor  disturbance by the employees of any
principal  suppliers  or customers  of the Company or  Subsidiary  that might be
expected to result in any material  adverse  change in the business,  prospects,
condition (financial or otherwise),  or results of operations of the Company and
Subsidiary taken as a whole. No collective  bargaining agreement exists with any
of the  Company's or  Subsidiary's  employees  and, to the best of the Company's
knowledge, no such agreement is imminent.

         (m) Each of the  Company  and  Subsidiary  owns or  possesses  adequate
rights to use all patents, patent rights,  inventions,  trade secrets, know-how,
trademarks,  service marks,  trade names,  logos,  and  copyrights  described or
referred to in the SEC Documents as owned by or used by it or that are necessary
to conduct its respective businesses as described in the SEC Documents;  neither
the Company nor  Subsidiary has received any notice of, or has knowledge of, any
infringement of or conflict with asserted rights of the Company or Subsidiary by
others with respect to any patents,  patent rights,  inventions,  trade secrets,
know-how, trademarks, service marks, trade names, logos, or copyrights described
or referred to in the SEC  Documents  as owned by or used by it; and neither the
Company nor  Subsidiary  has  received any notice of, or has  knowledge  of, any
infringement of, or conflict with, asserted rights of others with respect to any
patents, patent rights, inventions, trade secrets, know-how, trademarks, service
marks,  trade names,  logos,  or copyrights  described or referred to in the SEC
Documents as owned by or used by it or which,  individually or in the aggregate,
in the  event of an  unfavorable  decision,  ruling  or  finding,  would  have a
material  adverse  effect on the  business,  prospects,  financial  condition or
results of operations of the Company and Subsidiary taken as a whole.

         (n) The Company has been advised  concerning the Investment Company Act
of  1940,  as  amended  (the  "INVESTMENT  COMPANY  Act"),  and  the  rules  and
regulations  thereunder,  and has in the  past  conducted,  and  intends  in the
future,  to conduct its affairs in such a manner as to ensure that it is not and
will  not  become  an  "investment  company"  or a  company  "controlled"  by an
"investment  company" within the meaning of the Investment  Company Act and such
rules and regulations.

         (o) Neither the Company  nor  Subsidiary  has,  and no person or entity
acting on behalf or at the request of the Company or Subsidiary has, at any time
during the last five years (i) made any unlawful  contribution  to any candidate
for foreign office or failed to disclose fully any

                                       8

<PAGE>

contribution  in  violation  of law,  or (ii) made any payment to any federal or
state  governmental  officer or official,  or other person  charged with similar
public or quasi-public  duties, other than payments required or permitted by the
laws of the United States or any other applicable jurisdiction.

         (p)  Neither  the  Company  nor  Subsidiary,  has  taken or will  take,
directly or  indirectly,  any action  designed to, or that might  reasonably  be
expected  to  cause  or  result  in,  stabilization  in  violation  of  law,  or
manipulation,  of the price of the Common Stock to facilitate the sale or resale
of the Shares or the Warrant Shares.

         (q) Each officer and  director  and of the Company and each  beneficial
owner  of five  percent  (5%) or more of the  Common  Stock  has  entered  into,
executed, and delivered the Escrow Agreement,  dated as of _________, among such
persons and the Purchaser, as escrow agent, and such agreement is a legal, valid
and binding  obligation of all parties  thereto,  enforceable in accordance with
its terms.

         (r) Except as set forth in the SEC  Documents,  (i) each of the Company
and  Subsidiary is in compliance in all material  respects with all rules,  laws
and regulations  relating to the use,  treatment,  storage and disposal of toxic
substances and protection of health or the  environment  ("ENVIRONMENTAL  LAWS")
that are applicable to its business, (ii) neither the Company nor Subsidiary has
received  notice from any  governmental  authority or third party of an asserted
claim under  Environmental  Laws, which claim is required to be disclosed in the
SEC Documents,  (iii) to the best knowledge of the Company,  neither the Company
nor  Subsidiary  is  likely  to be  required  to make  future  material  capital
expenditures to comply with  Environmental Laws (iv) no property which is owned,
leased or  occupied  by the  Company  or  Subsidiary  has been  designated  as a
Superfund  site  pursuant  to  the  Comprehensive  Response,  Compensation,  and
Liability  Act of 1980, as amended (42 U.S.C.  ss. 9601, ET SEQ.),  or otherwise
designated as a contaminated  site under  applicable state or local law, and (v)
neither the Company nor  Subsidiary  is in violation of any federal or state law
or regulation relating to occupational safety or health.

         (s)  The  books,  records  and  accounts  of each  of the  Company  and
Subsidiary accurately and fairly reflect, in reasonable detail, the transactions
in, and  dispositions  of, the assets of, and the results of operations  of, the
Company and Subsidairy,  as applicable,  all to the extent required by generally
accepted accounting  principles.  Each of the Company and Subsidiary maintains a
system  of  internal   accounting  controls  sufficient  to  provide  reasonable
assurances 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 accordance  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.

                                       9
<PAGE>

         (t) There are no outstanding  loans,  advances (except normal advances
for business  expenses in the ordinary  course of  business)  or  guarantees  of
indebtedness  by the Company or Subsidiary to, or for the benefit of, any of the
officers, directors, or director-nominees of the Company or Subsidiary or any of
the  members of the  families  of any of them,  except as  disclosed  in the SEC
Documents.

         (u) Neither the Company nor  Subsidiary  has  incurred  any  liability,
direct or indirect,  for finders' or similar fees on behalf of or payable by the
Company or  Subsidiary  or the  Purchaser  in  connection  with the  Transaction
Agreements or any other transaction involving the Company and the Purchaser.

         (v) No  stockholder  of the Company  has any right  (which has not been
waived or has not expired by reason of lapse of time following  notification  of
the Company's intent to file the  Registration  Statement) to request or require
the Company to register the sale of any shares owned by such  stockholder  under
the Securities Act on the Registration Statement.

         SECTION  2.02   REPRESENTATIONS,   WARRANTIES   AND  COVENANTS  OF  THE
PURCHASER. The Purchaser represents and warrants to the Company as follows:

         (a) The Purchaser is a company duly organized,  validly existing and in
good standing under the laws of its jurisdiction of formation.

         (b) The  Purchaser  has full legal right,  power and authority to enter
into this Agreement and to perform the transactions  contemplated  hereby.  This
Agreement has been duly authorized, executed and delivered by the Purchaser. The
execution,  delivery and  performance of this Agreement by the Purchaser and the
consummation  of the  transactions  herein  contemplated  will not  violate  any
provision of the  organizational  documents of the Purchaser and will not result
in the creation of any lien,  charge,  security interest or encumbrance upon any
assets or property of the Purchaser  pursuant to the terms or provisions  of, or
will not conflict  with,  result in the breach or violation  of, or  constitute,
either by itself or upon notice or the passage of time or both, a default  under
any agreement,  mortgage, deed of trust, lease, franchise,  license,  indenture,
permit or other  instrument  to which the  Purchaser  is a party or by which the
Purchaser  or any of its assets or  properties  may be bound or  affected or any
statute or any authorization, judgment, decree, order, rule or regulation of any
court or any regulatory body,  administrative  agency or other governmental body
applicable  to the  Purchaser or any of its  properties.  No consent,  approval,
authorization  or other  order of any  court,  regulatory  body,  administrative
agency or other  governmental  body is required for the execution,  delivery and
performance  of this  Agreement  or the  consummation  by the  Purchaser  of the
transactions  contemplated  hereby.  Assuming the valid execution  hereof by the
Company,  this Agreement will constitute the legal, valid and binding obligation
of  the  Purchaser,   enforceable  in  accordance  with  its  terms,  except  as

                                       10
<PAGE>

enforceability   may  be   limited   by   applicable   bankruptcy,   insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and except as  enforceability  may be subject  to general  principles  of equity
(regardless  of whether such  enforceability  is  considered  in a proceeding in
equity or at law) and except as the indemnification  agreements of the Purchaser
in Section 3.03 hereof may be legally unenforceable.

         (c) There are no legal or  governmental  actions,  suits or proceedings
pending or, to the Purchaser's  knowledge,  threatened to which the Purchaser is
or  may  be a  party  which  seeks  to  prevent  or  restrain  the  transactions
contemplated  by  this  Agreement  or to  recover  damages  as a  result  of the
consummation  of such  transactions.  To the  knowledge  of the  Purchaser,  the
Purchaser has not been and is not currently the subject of an  investigation  or
inquiry by the Commission,  National  Association of Securities  Dealers,  Inc.,
NASD Regulation, Inc., or any state securities commission.

         (d) The Purchaser is  knowledgeable,  sophisticated  and experienced in
making,  and is qualified to make,  decisions  with  respect to  investments  in
shares representing an investment decision like that involved in the purchase of
the Shares,  the Warrants,  and the Warrant  Shares,  including  investments  in
securities  issued by the Company.  The  Purchaser is an  "accredited  investor"
within  the  meaning  of Rule  501(a)  of  Regulation  D  promulgated  under the
Securities  Act.  The  Purchaser  is not a "dealer"  within  the  meaning of the
Securities Act or a "broker" or "dealer" within the meaning of the Exchange Act.
The  Purchaser  is able to bear  the  economic  risk of loss of the  Purchaser's
entire investment in the Shares, the Warrants, and the Warrant Shares.

         (e) The Purchaser has requested,  received, reviewed and considered all
information  it deems  relevant in making an informed  decision to purchase  the
Shares and the Warrants.  The Purchaser understands that the Company is still in
the development stage and does not have operating revenues.

         (f) The  Purchaser  is  acquiring  the Shares and the  Warrants  in the
ordinary  course of its business and for its own account for investment only and
with no present intention of distributing any of such Shares in violation of the
Securities Act or entering into any arrangement or understanding  with any other
person  regarding the distribution of such Shares in violation of the Securities
Act (it being understood that the foregoing does not limit the Purchaser's right
to sell Shares pursuant to the Registration Statement).

         (g) Except for the  representations  and  warranties  contained in this
Section 2.02, the Purchaser makes no  representation or warranty to the Company,
express or implied,  in connection  with the  transactions  contemplated by this
Agreement.

         SECTION 2.03 SURVIVAL OF  REPRESENTATIONS,  WARRANTIES AND  AGREEMENTS.
Notwithstanding  any  investigation  made by any  party to this  Agreement,  all
covenants,  agreements,  representations  and warranties made by the Company and
the Purchaser  herein and in the  certificates  delivered  pursuant hereto shall
survive the  execution of this  Agreement,  the

                                       11
<PAGE>

delivery to the Purchaser of the Shares and the Warrants being purchased and the
payment therefor.

                                   ARTICLE III

                                    COVENANTS

         SECTION 3.01      COVENANTS OF THE COMPANY.

         (a) (i) As soon as practicable,  but in any event no later than 30 days
following  the date of this  Agreement,  the Company shall prepare and file with
the Commission a registration statement on Form SB-2 or other applicable form as
determined  by the Company  (the  "REGISTRATION  STATEMENT")  for the purpose of
registering  the sale of the  Shares by the  Purchaser  from time to time on the
facilities  of any  securities  exchange  or trading  system on which the Common
Stock is then traded or in privately-negotiated transactions, which Registration
Statement  shall contain all material  non-public  information  disclosed to the
Purchasers  by the  Company  in  connection  with the  issuance  and sale of the
Shares.  For purposes of this Section  3.01(a),  the term "SHARES" shall include
any other  securities  of the Company  issued in exchange  for the Shares,  as a
dividend  on  the  Shares  or  in  connection   with  a  stock  split  or  other
reorganization  transaction  affecting  the Shares.  The  Company  shall use its
commercially  reasonable  efforts to cause the Registration  Statement to become
effective as soon as practicable.

             (ii) The Company  shall prepare and file with the  Commission  such
amendments  and  supplements  to the  Registration  Statement and the prospectus
forming a part thereof as may be necessary  to keep the  Registration  Statement
effective  until the  earliest  date,  after the date on which all of the Shares
have  been  purchased  pursuant  to  this  Agreement  or the  obligation  of the
Purchaser to purchase the Shares pursuant to this Agreement has been terminated,
on which (i) all the Shares have been  disposed of pursuant to the  Registration
Statement,  (ii) all of the Shares then held by the  Purchaser may be sold under
the provisions of Rule 144 without limitation as to volume,  whether pursuant to
Rule 144(k) or otherwise,  or (iii) the Company has  determined  that all Shares
then held by the Purchaser may be sold without  restriction under the Securities
Act and has removed any stop transfer  instructions  relating to such Shares and
offered to cause to be removed any restrictive  legends on the certificates,  if
any  representing  such Shares (the period  between the  Effective  Date and the
earliest of such dates is referred to herein as the "REGISTRATION  PERIOD").  At
any time after the end of the Registration  Period, the Company may withdraw the
Registration  Statement  and its  obligations  under this Section  3.01(a) shall
automatically terminate.

             (iii) The  Company  shall not be  obligated  to prepare  and file a
post-effective  amendment or  supplement  to the  Registration  Statement or the
prospectus  constituting  a part

                                       12
<PAGE>

thereof during the continuance of a Blackout Event. A "BLACKOUT EVENT" means any
of the following: (a) the possession by the Company of material information that
is not ripe  for  disclosure  in a  registration  statement  or  prospectus,  as
determined  in good  faith  by the  Chief  Executive  Officer  or the  Board  of
Directors  of  the  Company  or  that  disclosure  of  such  information  in the
Registration  Statement or the  prospectus  constituting a part thereof would be
materially  detrimental  to the business and affairs of the Company;  or (b) any
material  engagement or activity by the Company  which would,  in the good faith
determination  of the Chief  Executive  Officer or the Board of Directors of the
Company,  be  materially  adversely  affected by  disclosure  in a  registration
statement  or  prospectus  at such time.  In each event that there  should be in
excess of one  Blackout  Event  during any year  commencing  on the date of this
Agreement or any anniversary  hereof,  or in each event that any Blackout Period
should continue in excess of 30 days, for each such Blackout Period and for each
30-day period or portion thereof following the  aforementioned  initial 30 days,
the number of shares of Common  Stock  issuable  upon  exercise of the  Warrants
shall be increased by 2% and the exercise price thereof shall be decreased by 2%
from the number of shares of Common Stock and exercise  price  thereof on effect
immediately prior to such adjustment.

             (iv) At least five (5)  Business  Days prior to the filing with the
Commission  of the  Registration  Statement  (or any  amendment  thereto) or the
prospectus forming a part thereof (or any supplement thereto), the Company shall
provide draft copies thereof to the Purchaser and shall  consider  incorporating
into such documents such comments as the Purchaser (and its counsel) may propose
to  be  incorporated  therein.  Notwithstanding  the  foregoing,  no  prospectus
supplement,  the form of which has  previously  been provided to the  Purchaser,
need be delivered in draft form to the Purchaser.

             (v) The  Company  shall  promptly  notify  the  Purchaser  upon the
occurrence  of  any of the  following  events  in  respect  of the  Registration
Statement or the prospectus  forming a part thereof:  (i) receipt of any request
for  additional  information  from the  Commission or any other federal or state
governmental  authority  during the Registration  Period,  the response to which
would require any  amendments or supplements  to the  Registration  Statement or
related prospectus;  (ii) the issuance by the Commission or any other federal or
state  governmental  authority of any stop order suspending the effectiveness of
the  Registration  Statement  or the  initiation  of any  proceedings  for  that
purpose;  or (iii) receipt of any notification with respect to the suspension of
the qualification or exemption from  qualification of any of the Shares for sale
in any  jurisdiction or the initiation or threatening of any proceeding for such
purpose.

             (vi) The Company shall furnish to the Purchaser with respect to the
Shares registered under the Registration Statement (and to each underwriter,  if
any,  of such  Shares)  such  number of copies of  prospectuses  and such  other
documents as the Purchaser may  reasonably  request,  in order to facilitate the
public sale or other  disposition  of all or any of the Shares by the  Purchaser
pursuant to the Registration Statement.

                                       13
<PAGE>

             (vii) The Company shall file or cause to be filed such documents as
are required to be filed by the Company for normal state securities law or "blue
sky"  clearance  in states  specified  in  writing by the  Purchaser;  PROVIDED,
HOWEVER,  that the  Company  shall not be  required to qualify to do business or
consent to service  of  process  in any  jurisdiction  in which it is not now so
qualified or has not so consented.

             (viii)  With a view  to  making  available  to  the  Purchaser  the
benefits of Rule 144, the Company agrees, throughout the Registration Period and
so long as the Purchaser owns Shares purchased pursuant to this Agreement, to:

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

                           (B) file with the  Commission  in a timely manner all
reports and other  documents  required  to be filed by the  Company  pursuant to
Section 13, 14 or 15(d) under the  Exchange  Act;  and, if at any time it is not
required to file such  reports but in the past had been  required to or did file
such reports,  it will, upon the request of the Purchaser,  make available other
information  as required  by, and so long as  necessary  to permit  sales of its
Shares pursuant to, Rule 144.

             (ix)  The  Company  shall  bear  all  expenses  incurred  by  it in
connection  with the  procedures in paragraphs  (i) through (ix) of this Section
3.01(a)  and  the  registration  of the  Shares  pursuant  to  the  Registration
Statement. The Company shall not be responsible for any expenses incurred by the
Purchaser in connection with its sale of the Shares or its  participation in the
procedures in paragraphs  (i) through (ix) of this Section  3.01(a),  including,
without  limitation,  any fees and expenses of counsel or other  advisers to the
Purchaser  and  any  underwriting  discounts,  brokerage  fees  and  commissions
incurred by the Purchaser.

         (b) (i) The  Company  may refuse to  register  (or permit its  transfer
agent to register) any transfer of any Shares not made in  accordance  with this
Section 3.01(b) and for such purpose may place stop order  instructions with its
transfer agent with respect to the Shares.

         (c) So long as the  Registration  Statement is  effective  covering the
resale of Shares then still owned by the Purchaser, the Company shall furnish to
the Purchaser:

             (i) as soon as  practicable  after  available,  one copy of (A) its
Annual Report to  Stockholders  (which  Annual  Report shall  contain  financial
statements audited in accordance with generally accepted  accounting  principles
by a firm of certified public accountants), (B) upon written request, its Annual
Report on Form 10-KSB,  (C) upon written request,  its Quarterly Reports on Form
10-QSB,  (D) upon written  request,  its Current  Reports on Form 8-K, and (E) a
full copy of the Registration Statement (the foregoing,  in each case, excluding
exhibits); and

             (ii)  upon the  written  request  of the  Purchaser,  all  exhibits
excluded by the parenthetical to subparagraph (i)(E) of this Section 3.01(d).

                                       14
<PAGE>

         (d) The Company will maintain a transfer agent and, if necessary  under
the jurisdiction of incorporation of the Company,  a registrar (which may be the
same entity as the transfer  agent) for its Common Stock,  which  transfer agent
and registration shall be reasonably satisfactory to the Purchaser.

         (e) If at any time prior to the termination of the Registration Period,
any rumor, publication or event relating to or affecting the Company shall occur
as a result of which,  in the reasonable  opinion of the  Purchaser,  the market
price of the  Common  Stock  has been or is  likely  to be  materially  affected
(regardless  of  whether  such  rumor,   publication  or  event  necessitates  a
supplement to, or amendment of, the Prospectus), the Company will, if reasonably
requested  by the  Purchaser,  forthwith  prepare,  and,  if  permitted  by law,
disseminate a press release or other public statement,  reasonably  satisfactory
to the  Purchaser,  responding to or commenting  on such rumor,  publication  or
event.

         (f) The Company shall promptly  comply with the  Sarbanes-Oxley  Act of
2002 and the regulations promulgated pursuant thereto if it is not in compliance
at the date hereof.

         (g)  Simultaneously  with the execution hereof, the Company shall enter
into an escrow  agreement  with the  Purchaser  and Reitler Brown LLC, as escrow
agent, substantially in the form of Exhibit 3.01(g) hereto.

         SECTION 3.02      COVENANTS OF THE PURCHASER.

         (a) The  Purchaser  agrees to comply in all material  respects with all
federal  and state  securities  laws and the rules and  regulations  promulgated
thereunder in connection with any sale by it of the Shares, the Warrants and the
Warrant  Shares,  whether  or not  such  sale is  pursuant  to the  Registration
Statement.   In  connection  with  the  sale  of  any  Shares  pursuant  to  the
Registration  Statement,  but without  limiting the  generality of the foregoing
sentence,  the  Purchaser  shall (i) comply with the  provisions of Regulation M
promulgated  under the Exchange Act, and (ii) deliver to the purchaser of Shares
the  prospectus  forming a part of the  Registration  Statement and all relevant
supplements  thereto which have been provided by the Company to the Purchaser on
or prior to the applicable delivery date.

         (b) The Purchaser  will  cooperate  with the Company in all respects in
connection with the performance by the Company of its obligations  under Section
3.01(a),  including timely supplying all information reasonably requested by the
Company (which shall include all  information  regarding the Purchaser,  and any
person who beneficially  owns Shares held by the Purchaser within the meaning of
Rule 13d-3  promulgated  under the Exchange Act, and the proposed manner of sale
of the Shares  required  to be  disclosed  in the  Registration  Statement)  and
executing and returning all documents  reasonably  requested in connection  with
the  registration  and sale of the Shares.  The Purchaser  hereby consents to be
named  as an  underwriter  in the

                                       15
<PAGE>

Registration  Statement,  if applicable,  in accordance with current  Commission
policy  and,  if  necessary,  to  join in the  request  of the  Company  for the
acceleration of the effectiveness of the Registration Statement.

         (c)  Neither the  Purchaser  nor any entity  controlling  it, under its
control or under  common  control  with it has,  prior to the  execution of this
Agreement,  and will not, for a period of 18 months  following  the execution of
this  Agreement,  carry a net short position in the Common Stock of the Company,
participate  in any short  selling  activities,  recommendations,  or collusion,
directly or  indirectly,  as such  activities  relate to the Common Stock. A net
short  position will include any  derivative  instruments  such as a put option,
collar, swap or any other instrument which would result in a net short position.

         (d)  In  connection  with  the  sale  of  any  Shares  pursuant  to the
Registration Statement, the Purchaser shall deliver to the purchaser thereof the
prospectus  forming  a part  of the  Registration  Statement  and  all  relevant
supplements  thereto which have been provided by the Company to the Purchaser on
or  prior  to  the  applicable   delivery  date,  all  in  accordance  with  the
requirements  of the  Securities Act and the rules and  regulations  promulgated
thereunder and any applicable blue sky laws.

         (e) If at any time or from time to time after the Effective  Date,  the
Company notifies the Purchaser in writing that the Registration Statement or the
prospectus  forming a part thereof (taking into account any prior  amendments or
supplements  thereto)  contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements  therein,  in light of
the circumstances under which they are made, not misleading, the Purchaser shall
not offer or sell any  Shares or engage in any other  transaction  involving  or
relating  to the  Shares  (other  than  purchases  of  Shares  pursuant  to this
Agreement),  from the time of the giving of notice  with  respect to such untrue
statement  or omission  until the  Purchaser  receives  written  notice from the
Company  that such untrue  statement  or  omission no longer  exists or has been
corrected  or  disclosed  in  an  effective   post-effective  amendment  to  the
Registration  Statement  or a  valid  prospectus  supplement  to the  prospectus
forming a part thereof.

         (f) The Purchaser  acknowledges  and understands  that the Shares,  the
Warrants,  and the Warrant  Shares are (or upon the  issuance  thereof  will be)
"restricted  securities" as defined in Rule 144. The Purchaser hereby agrees not
to offer or sell (as such terms are defined in the  Securities Act and the rules
and regulations promulgated thereunder) any Shares,  Warrants, or Warrant Shares
unless such offer or sale is made (a) pursuant to an effective  registration  of
such  securities  under the  Securities  Act, or (b)  pursuant  to an  available
exemption  from  the  registration  requirements  of  the  Securities  Act.  The
Purchaser agrees that it will not engage in hedging  transactions with regard to
the Shares,  the Warrants,  and the Warrant Shares other than in compliance with
the  Securities  Act. A proposed  transfer  shall be deemed to comply  with this
Section 3.02(f) if the Purchaser delivers to the Company a legal opinion in form
and substance  reasonably  satisfactory  to the Company from counsel  reasonably
satisfactory to the Company to the effect that such transfer  complies with this
Section 3.02(f).

                                       16
<PAGE>

         (g) Simultaneously with the execution hereof, the Purchaser shall enter
into an escrow  agreement  with the  Company  and  Reitler  Brown LLC, as escrow
agent,  substantially  in the form of Exhibit 3.01(g) hereto,  and shall deposit
into the escrow created thereby $50,000.

         SECTION 3.03      INDEMNIFICATION.

         (a) For the purpose of this paragraph (a) of this Section 3.03: (i) the
term  "PURCHASER  AFFILIATE"  shall mean any person who controls  the  Purchaser
within the  meaning of  Section  15 of the  Securities  Act or Section 20 of the
Exchange Act; and (ii) the term "REGISTRATION STATEMENT" shall include any final
prospectus,  exhibit,  supplement  or  amendment  included in or relating to the
Registration Statement referred to in Section 3.01(a).

                  (i) The Company  agrees to  indemnify  and hold  harmless  the
Purchaser and each Purchaser  Affiliate,  against any losses,  claims,  damages,
liabilities  or  expenses,  joint or several,  to which such  Purchaser  or such
Purchaser  Affiliate may become subject,  under the Securities Act, the Exchange
Act, or any other federal or state statutory law or regulation, or at common law
or otherwise  (including in settlement of any litigation,  if such settlement is
effected  with the written  consent of the Company,  which  consent shall not be
unreasonably withheld),  insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof as  contemplated  below) arise out of or
are based  upon (A) any untrue  statement  or alleged  untrue  statement  of any
material  fact  contained in the  Registration  Statement,  as amended as of the
Effective Date,  including any information deemed to be a part thereof as of the
time of  effectiveness  pursuant to paragraph  (b) of Rule 430A,  or pursuant to
Rule 434 promulgated  under the Securities  Act, or the prospectus,  in the form
first filed with the Commission  pursuant to Rule 424(b) of the Regulations,  or
filed as part of the  Registration  Statement at the time of effectiveness if no
Rule  424(b)  filing  is  required  (the  "PROSPECTUS"),  or  any  amendment  or
supplement  thereto,  (B) the  omission  or  alleged  omission  to  state in the
Registration  Statement as of the Effective  Date a material fact required to be
stated therein or necessary to make the statements in the Registration Statement
or any post-effective  amendment or supplement  thereto, or in the Prospectus or
any amendment or supplement thereto,  not misleading,  in each case in the light
of the circumstances under which the statements  contained therein were made, or
(C)  any  inaccuracy  in the  representations  and  warranties  of  the  Company
contained  in this  Agreement,  or any  failure of the  Company  to perform  its
obligations hereunder,  and will reimburse the Purchaser and each such Purchaser
Affiliate for any legal and other expenses as such expenses which are reasonably
incurred  by the  Purchaser  or such  Purchaser  Affiliate  in  connection  with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability,  expense or action; PROVIDED,  HOWEVER, that the Company will
not be liable in any such case to the extent that any such loss, claim,  damage,
liability or expense  arises out of or is based upon (A) an untrue  statement or
alleged  untrue   statement  or  omission  or  alleged   omission  made  in  the
Registration  Statement,  the prospectus  included therein,  or any amendment or
supplement thereto in reliance upon, and in conformity with, written information
furnished to the Company by the Purchaser  expressly for use therein, or (B) the
failure of the Purchaser to comply with the

                                       17
<PAGE>

covenants and agreements contained in Section 3.02 hereof, or (C) the inaccuracy
of any  representations  made by the  Purchaser  herein or (D) any  statement or
omission in any  Prospectus  that is corrected  or  disclosed in any  subsequent
Prospectus  that was delivered to the Purchaser  prior to the pertinent  sale or
sales by the Purchaser.

                  (ii)  The  Purchaser  will  indemnify  and hold  harmless  the
Company, each of its directors, each of its officers who signed the Registration
Statement and each person,  if any, who controls the Company  within the meaning
of the Securities Act and the Exchange Act, against any losses, claims, damages,
liabilities or expenses to which the Company, each of its directors, each of its
officers who signed the Registration  Statement or controlling person may become
subject,  under the  Securities  Act, the Exchange  Act, or any other federal or
state statutory law or regulation,  or at common law or otherwise  (including in
settlement of any  litigation,  if such  settlement is effected with the written
consent of such Purchaser) insofar as such losses, claims, damages,  liabilities
or expenses (or actions in respect thereof as  contemplated  below) arise out of
or are based upon (A) any failure to comply with the  covenants  and  agreements
contained in Section 3.02 hereof, (B) the inaccuracy of any representation  made
by the Purchaser  herein,  or (C) any (I) untrue or alleged untrue  statement of
any material fact contained in the Registration  Statement,  the Prospectus,  or
any amendment or  supplement  thereto,  or (II) omission or alleged  omission to
state  in  the  Registration  Statement,  the  Prospectus  or any  amendment  or
supplement thereto a material fact required to be stated therein or necessary to
make the statements in the Registration Statement or any amendment or supplement
thereto,  in the  prospectus  included  therein,  or any amendment or supplement
thereto,  not misleading,  in each case in the light of the circumstances  under
which they were made; provided, that the Purchaser's  indemnification obligation
under this clause (C) shall apply to the  extent,  and only to the extent,  that
such  untrue  statement  or alleged  untrue  statement  or  omission  or alleged
omission  was  made  in the  Registration  Statement,  such  prospectus,  or any
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company by the Purchaser expressly for use therein,
and will reimburse the Company, each of its directors,  each of its officers who
signed the Registration  Statement or controlling person for any legal and other
expense reasonably incurred by the Company,  each of its directors,  each of its
officers  who  signed  the  Registration  Statement  or  controlling  person  in
connection with investigating,  defending, settling,  compromising or paying any
such loss, claim, damage, liability, expense or action.

                  (iii)  Promptly  after receipt by an  indemnified  party under
this Section 3.03 of notice of the threat or  commencement  of any action,  such
indemnified  party will, if a claim in respect  thereof is to be made against an
indemnifying  party under this Section 3.03,  promptly  notify the  indemnifying
party in writing thereof;  provided,  the omission so to notify the indemnifying
party  will  not  relieve  it  from  any  liability  which  it may  have  to any
indemnified  party for  contribution  (except as provided in paragraph  (iv)) or
otherwise than under the indemnity  agreement  contained in this Section 3.03 or
to the extent it is not prejudiced as a result of such failure. In case any such
action is brought against any indemnified party and such indemnified party seeks
or intends to seek indemnity from an indemnifying  party, the

                                       18
<PAGE>

indemnifying  party will be entitled to participate  in, and, to the extent that
it may wish, jointly with all other indemnifying parties similarly notified,  to
assume  the  defense  thereof  with  counsel  reasonably  satisfactory  to  such
indemnified  party.  Upon receipt of notice from the indemnifying  party to such
indemnified  party of its  election  so to assume the defense of such action and
approval by the indemnified party of counsel, the indemnifying party will not be
liable to such indemnified  party under this Section 3.03 for any legal or other
expenses  subsequently incurred by such indemnified party in connection with the
defense  thereof unless the  indemnified  party shall not have employed  counsel
reasonably  satisfactory to the  indemnified  party to represent the indemnified
party within a reasonable time after notice of commencement of action,  in which
case the reasonable  fees and expenses of counsel shall be at the expense of the
indemnifying party or both the Company and Purchaser,  in the reasonable opinion
of counsel to the Purchaser,  have defenses  distinct from, or contradictory to,
the defenses available to the other.

                  (iv) If the indemnification  provided for in this Section 3.03
is  required  by its terms but is for any reason  held to be  unavailable  to or
otherwise  insufficient to hold harmless an indemnified  party under  paragraphs
(i) or (ii) of this  Section  3.03 in respect to any  losses,  claims,  damages,
liabilities  or  expenses  referred  to herein  (subject  to the  limitation  of
paragraph (iii) of this Section 3.03), then each applicable  indemnifying  party
shall  contribute to the amount paid or payable by such  indemnified  party as a
result of any losses,  claims,  damages,  liabilities  or  expenses  referred to
herein (I) in such proportion as is appropriate to reflect the relative benefits
received  by the  Company and the  Purchaser  from the sale of the Common  Stock
contemplated by this Agreement or (II) if the allocation  provided by clause (I)
above is not permitted by applicable  law, in such  proportion as is appropriate
to reflect not only the  relative  benefits  referred to in clause (I) above but
the  relative  fault of the Company and the  Purchaser  in  connection  with the
statements or omissions or inaccuracies in the representations and warranties in
this Agreement  that resulted in such losses,  claims,  damages,  liabilities or
expenses, as well as any other relevant equitable  considerations.  The relative
benefits  received by the Company on the one hand and the Purchaser on the other
shall be deemed to be in the same proportion as the amount paid by the Purchaser
to the  Company  pursuant  to this  Agreement  for the Shares  purchased  by the
Purchaser  that were sold pursuant to the  Registration  Statement  bears to the
difference  (the  "DIFFERENCE")  between the amount such  Purchaser paid for the
Shares that were sold  pursuant  to the  Registration  Statement  and the amount
received by such  Purchaser from such sale. The relative fault of the Company on
the one hand and the Purchaser on the other shall be determined by reference to,
among other things,  whether the untrue or alleged  statement of a material fact
or the omission or alleged  omission to state a material fact or the  inaccurate
or the alleged inaccurate  representation and/or warranty relates to information
supplied by the Company or by the  Purchaser and the parties'  relative  intent,
knowledge,  access to  information  and  opportunity  to correct or prevent such
statement,  omission or  inaccuracy.  The amount paid or payable by a party as a
result of the losses,  claims,  damages,  liabilities  and expenses  referred to
above  shall be deemed  to  include,  subject  to the  limitations  set forth in
paragraph  (iii) of this  Section  3.03,  any  legal or other  fees or  expenses
reasonably  incurred by such party in connection with investigating or defending
any action or claim. The provisions set forth in paragraph (iii) of this Section
3.03 with respect to the notice of the threat or  commencement  of any threat or
action

                                       19
<PAGE>

shall apply if a claim for contribution is to be made under this paragraph (iv);
PROVIDED,  HOWEVER,  that no additional notice shall be required with respect to
any threat or action for which notice has been given under  paragraph  (iii) for
purposes of indemnification.  The Company and each Purchaser agree that it would
not be just and  equitable  if  contribution  pursuant to this Section 3.03 were
determined  solely by pro rata  allocation  or by any other method of allocation
which does not take account of the equitable  considerations referred to in this
paragraph.  Notwithstanding  the  provisions of this Section 3.03, the Purchaser
shall not be required to contribute  any amount in excess of the amount by which
the  Difference  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.

                                   ARTICLE IV

                              CONDITIONS TO CLOSING

         SECTION  4.01  CONDITIONS  TO THE  OBLIGATIONS  OF THE  PURCHASER.  The
obligation  of the  Purchaser to purchase  Tranche  Shares at a Closing shall be
subject to the satisfaction of the following  conditions,  or the waiver of such
conditions by the Purchaser, at or prior to the applicable Tranche Closing Date:

                  (a) the  representations  and  warranties  of the  Company set
forth in Section 2.01 of this Agreement  shall be true and correct with the same
force and  effect as though  expressly  made on and as of such  Tranche  Closing
Date,  except for  representations  or warranties  made as of a particular  date
which representations and warranties shall be true and correct as of such date;

                  (b) the Company shall have  complied  with all the  agreements
hereunder  and  satisfied  all the  conditions  on its part to be  performed  or
satisfied hereunder at or prior to such Tranche Closing Date;

                  (c) the  Company  shall  have  delivered  to the  Purchaser  a
certificate  executed by the  Chairman of the Board or  President  and the chief
financial or accounting  officer of the Company,  dated the  applicable  Tranche
Closing  Date,  to the effect that the  conditions  in clauses (i) and (ii) have
been satisfied;

                  (d) the Registration Statement shall have been declared by the
Securitires and Exchange Commission (the "COMMISSION") to be effective under the
Securities  Act on or prior to  ________________,  2004, and shall not have been
withdrawn,  no stop  order  suspending  the  effectiveness  of the  Registration
Statement  shall be in effect,  and no  proceedings  for the  suspension  of the
effectiveness  of the  Registration  Statement  shall  have been  instituted  or

                                       20
<PAGE>

threatened by the Commission;

                  (e) Gersten Savage Kaplowitz Wolf & Marcus LLP, counsel to the
Company,  shall  have  delivered  its legal  opinion to the  Purchaser  that the
Tranche Shares being issued on such Tranche Closing Date will, upon issuance, be
duly  authorized,  validly  issued,  fully  paid and  non-assessable.  [SCOPE OF
OPINION UNDER DISCUSSION WITH SBI]

         SECTION  4.02  CONDITIONS  TO  THE  OBLIGATIONS  OF  THE  COMPANY.  The
obligation of the Company to sell Tranche Shares at any Closing shall be subject
to  the  satisfaction  of  the  following  conditions,  or the  waiver  of  such
conditions by the Company, at or prior to the applicable Tranche Closing Date:

                  (a) the  representations  and  warranties of the Purchaser set
forth in Section 2.02 of this Agreement  shall be true and correct with the same
force and  effect as though  expressly  made on and as of such  Tranche  Closing
Date,  except for  representations  or warranties  made as of a particular  date
which representations and warranties shall be true and correct as of such date;

                  (b) the Purchaser  shall have complied with all the agreements
hereunder  and  satisfied  all the  conditions  on its part to be  performed  or
satisfied hereunder at or prior to such Tranche Closing Date;

                  (c) the  Purchaser  shall  have  delivered  to the  Company  a
certificate  executed by a duly authorized  officer of the Purchaser,  dated the
applicable  Tranche  Closing Date, to the effect that the  conditions in clauses
(a) and (b) have been satisfied; and

                  (d)  no  stop  order  suspending  the   effectiveness  of  the
Registration Statement shall be in effect, and no proceedings for the suspension
of the effectiveness of the Registration Statement shall have been instituted or
threatened by the Commission.

                                    ARTICLE V

                                  MISCELLANEOUS

         SECTION  5.01  NOTICES.  All  notices,  requests,  consents  and  other
communications  hereunder  shall be in writing,  shall be mailed by  first-class
registered or certified airmail,  confirmed  facsimile or nationally  recognized
overnight  express  courier postage  prepaid,  and shall be deemed given when so
mailed and shall be delivered as addressed as follows:

                                       21
<PAGE>

                  (a)      if to the Company, to:

                                  Perfisans Holdings Inc.
                                  7828 Kennedy Road, Suite 201
                                  Markham, Ontario L3R 5P1
                                  Phone:    905-943-9996
                                  Facsimile:  905-953-7560
                                  Attn:  To-Hon Lam

                                  with a copy to:

                                  Gersten, Savage, Kaplowitz, Wolf & Marcus, LLP
                                  101 East 52nd Street - 9th Floor
                                  New York, New York 10022
                                  Attention:       Arthur Marcus, Esq.
                                  Phone:           212-752-9700
                                  Facsimile:

                           or to such other  person at such  other  place as the
                           Company shall  designate to the Purchaser in writing;
                           and

                  (b)      if to the Purchaser, to:

                                    SBI Brightline V LLC
                                    Address:        2361 Campus Drive, Suite 210
                                                    Irvine, California 92612
                                                    Attention: Shelly Singhal
                                    Phone:          (949) 679-8326
                                    Facsimile:      (949) 679-7280

                                    with a copy to:

                           Reitler Brown LLC
                                    800 Third Avenue
                                    21st Floor
                                    New York, New York 10022
                                    Attention:       Robert Steven Brown, Esq.
                                    Phone: 212-209-3050
                                    Telecopy: 212-371-5500

         SECTION 5.02  ASSIGNMENT.  Neither  party hereto may assign or delegate
any of such  party's  rights or  obligations  under or in  connection  with this
Agreement,  and  any  attempted  assignment  or  delegation  of such  rights  or
obligations  shall be void.  Except as  expressly  provided in Section 3.03 with
respect  to  Purchaser  Affiliates,  directors  and  controlling  persons of the
Company and officers of the Company who signed the  Registration  Statement,  no
person,

                                       22
<PAGE>

including without  limitation any person who purchases or otherwise  acquires or
receives any Shares from the Purchaser,  is an intended third party  beneficiary
of this  Agreement,  and no party to this  Agreement  shall have any  obligation
arising  under this  Agreement  to any person  other than the other party hereto
and, to the extent  expressly  provided in Section 3.03,  Purchaser  Affiliates,
directors and controlling persons of the Company and officers of the Company who
signed the Registration Statement.

         SECTION 5.03  CHANGES.  This  Agreement  may not be modified or amended
except  pursuant  to an  instrument  in writing  signed by the  Company  and the
Purchaser.

         SECTION 5.04  HEADINGS.  The  headings of the various  sections of this
Agreement have been inserted for  convenience of reference only and shall not be
deemed to be part of this Agreement.

         SECTION  5.05  SEVERABILITY.  In case any  provision  contained in this
Agreement  should be  invalid,  illegal or  unenforceable  in any  respect,  the
validity,  legality and  enforceability  of the remaining  provisions  contained
herein shall not in any way be affected or impaired thereby.

         SECTION 5.06 GOVERNING LAW; VENUE.  This Agreement shall be governed by
and  construed  in  accordance  with the laws of the State of New York,  without
regard to its  conflicts  of law  principles,  and the federal law of the United
States of America.  The Company irrevocably  consents to the jurisdiction of the
courts of the State of California and of any federal court, in each case located
in Los Angeles or Orange  County,  California in  connection  with any action or
proceeding  arising out of, or  relating  to, this  Agreement,  any  document or
instrument  delivered  pursuant to, in connection with, or  simultaneously  with
this  Agreement,  or a  breach  of  this  Agreement  or  any  such  document  or
instrument.  In any such  action or  proceeding,  the  Company  waives  personal
service of any  summons,  complaint,  or other  process and agrees that  service
thereof may be made in accordance  with Section 5.01.  Within 30 days after such
service,  or such other time as may be  mutually  agreed  upon in writing by the
attorneys for the parties to such action or proceeding, the Company shall appear
or answer such summons,  complaint, or other process. Should the Company fail to
appear or answer within such 30-day period or such extended period,  as the case
may be, the  Company  shall be deemed in  default  and  judgment  may be entered
against the Company for the amount as  demanded in any  summons,  complaint,  or
other process so served.

         SECTION 5.07  COUNTERPARTS.  This  Agreement  may be executed in two or
more counterparts, each of which shall constitute an original, but all of which,
when taken  together,  shall  constitute  but one  instrument,  and shall become
effective  when one or more  counterparts  have been signed by each party hereto
and delivered to the other parties.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       23
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized  representatives  as of the day and year first
above written.

                                         PERFISANS HOLDINGS INC.

                                         BY:
                                            ------------------------------------
                                               NAME:
                                               TITLE:  CHIEF EXECUTIVE OFFICER

                                         SBI BRIGHTLINE V LLC

                                         BY:
                                            ------------------------------------
                                                 NAME:  SHELLY SINGHAL
                                                 TITLE:  MANAGING MEMBER

                                       24
<PAGE>

                                                                SCHEDULE 1.01(A)

                                    TRANCHES

                     NUMBER OF TRANCHE SHARES        TRANCHE PURCHASE PRICE PER
TRANCHE NO.             INCLUDED IN TRANCHE         TRANCHE SHARE (U.S. DOLLARS)
-----------             -------------------         ----------------------------

     1                       1,000,000                          $2.00
     2                       1,000,000                          $3.00

                                       25

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