Document:

EXHIBIT 10.1

                              INVESTMENT AGREEMENT

INVESTMENT  AGREEMENT  (this  "AGREEMENT"),  dated  as of June  14,  2007 by and
between ERF Wireless,  Inc. a Nevada  corporation (the "Company"),  and Dutchess
Private Equities Fund, Ltd., a Cayman Islands exempted company (the "Investor").

WHEREAS,  the parties desire that,  upon the terms and subject to the conditions
contained  herein,   the  Investor  shall  invest  up  to  Ten  Million  dollars
($10,000,000) to purchase the Company's Common Stock,  $.001 par value per share
(the "Common Stock");

WHEREAS,  such  investments  will be made in  reliance  upon the  provisions  of
Section 4(2) under the Securities Act of 1933, as amended (the "1933 Act"), Rule
506 of  Regulation  D, and the rules  and  regulations  promulgated  thereunder,
and/or upon such other exemption from the registration  requirements of the 1933
Act as may be available with respect to any or all of the  investments in Common
Stock to be made hereunder; and

WHEREAS,  contemporaneously  with the execution and delivery of this  Agreement,
the parties hereto are executing and delivering a Registration  Rights Agreement
substantially in the form attached hereto (the "Registration  Rights Agreement")
pursuant to which the Company has agreed to provide certain  registration rights
under the 1933 Act, and the rules and regulations  promulgated  thereunder,  and
applicable state securities laws.

NOW  THEREFORE,  in  consideration  of the  foregoing  recitals,  which shall be
considered an integral part of this Agreement,  the covenants and agreements set
forth  hereafter,  and other good and  valuable  consideration,  the receipt and
sufficiency of which is hereby acknowledged, the Company and the Investor hereby
agree as follows:

SECTION 1. DEFINITIONS.

     As used in this  Agreement,  the  following  terms shall have the following
meanings  specified  or  indicated  below,  and such  meanings  shall be equally
applicable to the singular and plural forms of such defined terms.

     "1933 Act" shall have the meaning set forth in the preamble of this
agreement.

     "1934 Act" shall mean the Securities Exchange Act of 1934, as it may be
amended.

     "Affiliate" shall have the meaning specified in Section 5(H), below.

     "Agreement" shall mean this Investment Agreement.

     "Best Bid" shall mean the highest posted bid price of the Common Stock
during a given period of time.

     "By-laws" shall have the meaning specified in Section 4(C).

     "Certificate of Incorporation" shall have the meaning specified in Section
4(C).

     "Closing" shall have the meaning specified in Section 2(G).

     "Closing Date" shall mean no more than seven (7) Trading Days following the
Put Notice Date.

     "Common Stock" shall have the meaning set forth in the preamble of this
Agreement.

     "Control" or "Controls" shall have the meaning specified in Section 5(H).

     "Effective Date" shall mean the date the SEC declares effective under the
1933 Act the Registration Statement covering the Securities.

<PAGE>

     "Environmental Laws" shall have the meaning specified in Section 4(M).

     "Equity Line Transaction Documents" shall mean this Agreement, the
Registration Rights Agreement.

     "Execution Date" shall mean the date indicated in the preamble to this
Agreement.

     "Indemnities" shall have the meaning specified in Section 11.

     "Indemnified Liabilities" shall have the meaning specified in Section 11.

     "Ineffective Period" shall mean any period of time that the Registration
Statement or any Supplemental Registration Statement (as defined in the
Registration Rights Agreement between the parties) becomes ineffective or
unavailable for use for the sale or resale, as applicable, of any or all of the
Registrable Securities (as defined in the Registration Rights Agreement) for any
reason (or in the event the prospectus under either of the above is not current
and deliverable) during any time period required under the Registration Rights
Agreement.

     "Investor" shall have the meaning indicated in the preamble of this
Agreement.

     "Material Adverse Effect" shall have the meaning specified in Section 4(A).

     "Maximum Common Stock Issuance" shall have the meaning specified in Section
2(H).

     "Minimum Acceptable Price" with respect to any Put Notice Date shall mean
seventy-five percent (75%) of the lowest closing bid prices for the ten (10)
Trading Day period immediately preceding each Put Notice Date.

     "Open Market Adjustment Amount" shall have the meaning specified in Section
2(I).

     "Open Market Purchase" shall have the meaning specified in Section 2(I)

     "Open Market Share Purchase" shall have the meaning specified in Section
2(I).

     "Open Period" shall mean the period beginning on and including the Trading
Day immediately following the Effective Date and ending on the earlier to occur
of (i) the date which is thirty-six (36) months from the Effective Date; or (ii)
termination of the Agreement in accordance with Section 9, below.

     "Pricing Period" shall mean the period beginning on the Put Notice Date and
ending on and including the date that is five (5) Trading Days after such Put
Notice Date.

     "Principal Market" shall mean the American Stock Exchange, Inc., the
National Association of Securities Dealers, Inc. Over-the-Counter Bulletin
Board, the NASDAQ National Market System or the NASDAQ Small Cap Market,
whichever is the principal market on which the Common Stock is listed.

     "Prospectus" shall mean the prospectus, preliminary prospectus and
supplemental prospectus used in connection with the Registration Statement.

     "Purchase Amount" shall mean the total amount being paid by the Investor on
a particular Closing Date to purchase the Securities.

     "Purchase Price" shall mean ninety-three percent (93%) of the lowest
closing Best Bid price of the Common Stock during the Pricing Period.

     "Put" shall have the meaning set forth in Section 2(B)(1) hereof.

<PAGE>

     "Put Amount" shall have the meaning set forth in Section 2(B)(1) hereof.

     "Put Notice" shall mean a written notice sent to the Investor by the
Company stating the Put Amount in U.S. dollars the Company intends to sell to
the Investor pursuant to the terms of the Agreement and stating the current
number of Shares issued and outstanding on such date.

     "Put Notice Date" shall mean the Trading Day, as set forth below,
immediately following the day on which the Investor receives a Put Notice,
however a Put Notice shall be deemed delivered on (a) the Trading Day it is
received by facsimile or otherwise by the Investor if such notice is received
prior to 9:00 am Eastern Time, or (b) the immediately succeeding Trading Day if
it is received by facsimile or otherwise after 9:00 am Eastern Time on a Trading
Day. No Put Notice may be deemed delivered on a day that is not a Trading Day.

     "Put Restriction" shall mean the days between the beginning of the Pricing
Period and Closing Date. During this time, the Company shall not be entitled to
deliver another Put Notice.

     "Put Shares Due" shall have the meaning specified in Section 2(I).

     "Registration Period" shall have the meaning specified in Section 5(C),
below.

     "Registration Rights Agreement" shall have the meaning set forth in the
recitals, above.

     "Registration Statement" means the registration statement of the Company
filed under the 1933 Act covering the Common Stock issuable hereunder.

     "Related Party" shall have the meaning specified in Section 5(H).

     "Resolution" shall have the meaning specified in Section 8(E).

     "SEC" shall mean the U.S. Securities & Exchange Commission.

     "SEC Documents" shall have the meaning specified in Section 4(F).

     "Securities" shall mean the shares of Common Stock issued pursuant to the
terms of the Agreement.

     "Shares" shall mean the shares of the Company's Common Stock.

     "Subsidiaries" shall have the meaning specified in Section 4(A).

     "Trading Day" shall mean any day on which the Principal Market for the
Common Stock is open for trading, from the hours of 9:30 am until 4:00 pm.

SECTION 2. PURCHASE AND SALE OF COMMON STOCK.

(A) PURCHASE AND SALE OF COMMON STOCK.  Subject to the terms and  conditions set
forth herein, the Company shall issue and sell to the Investor, and the Investor
shall purchase from the Company, up to that number of Shares having an aggregate
Purchase Price of Ten Million dollars ($10,000,000).

(B) DELIVERY OF PUT NOTICES.

(I)  Subject  to the  terms  and  conditions  of  the  Equity  Line  Transaction
Documents, and from time to time during the Open Period, the Company may, in its
sole  discretion,  deliver a Put Notice to the Investor  which states the dollar
amount  (designated  in U.S.  Dollars)  (the "Put  Amount"),  which the  Company
intends to sell to the Investor on a Closing  Date (the  "Put").  The Put Notice
shall be in the form  attached  hereto as Exhibit C and  incorporated  herein by
reference.  The amount that the Company shall be entitled to Put to the Investor
(the "Put Amount") shall be equal to, at the Company's election, either: (A) Two
Hundred  percent  (200%) of the average  daily volume (U.S.  market only) of the
Common Stock for the Ten (10) Trading  Days prior to the  applicable  Put Notice
Date,  multiplied  by the  average  of the three (3) daily  closing  bid  prices
immediately  preceding the Put Date, or (B) two hundred fifty  thousand  dollars
($250,000).  During the Open Period, the Company shall not be entitled to submit
a Put Notice until after the previous  Closing has been completed.  The Purchase
Price  for the  Common  Stock  identified  in the Put  Notice  shall be equal to
ninety-three  percent  (93%) of the lowest  closing Best Bid price of the Common
Stock during the Pricing Period.

<PAGE>

(C) COMPANY'S RIGHT TO WITHDRAWAL.  The Company shall reserve the right, but not
the  obligation,  to withdraw  that portion of the Put that is below the Minimum
Acceptable Price, by submitting to the Investor,  in writing, a notice to cancel
that portion of the Put. Any shares  above the Minimum  Acceptable  price due to
the  Investor  shall be  carried  out by the  Company  under  the  terms of this
Agreement.

(D) INTENTIONALLY OMITTED

(E)  CONDITIONS TO INVESTOR'S  OBLIGATION  TO PURCHASE  SHARES.  Notwithstanding
anything to the contrary in this Agreement, the Company shall not be entitled to
deliver a Put Notice and the  Investor  shall not be  obligated  to purchase any
Shares at a Closing (as defined in Section  2(G))  unless each of the  following
conditions are satisfied:

     (I) a Registration  Statement shall have been declared  effective and shall
remain effective and available for the resale of all the Registrable  Securities
(as defined in the Registration Rights Agreement) at all times until the Closing
with respect to the subject Put Notice;

     (II) at all times  during the period  beginning  on the  related Put Notice
Date and ending on and  including  the related  Closing  Date,  the Common Stock
shall have been listed on the Principal Market and shall not have been suspended
from trading thereon for a period of two (2) consecutive Trading Days during the
Open  Period and the  Company  shall not have been  notified  of any  pending or
threatened  proceeding  or other  action to  suspend  the  trading of the Common
Stock;

     (III) the Company has complied with its obligations and is otherwise not in
breach of or in default under, this Agreement, the Registration Rights Agreement
or any other agreement executed in connection  herewith which has not been cured
prior to delivery of the Investor's Put Notice Date;

     (IV) no  injunction  shall have been issued and remain in force,  or action
commenced by a  governmental  authority  which has not been stayed or abandoned,
prohibiting the purchase or the issuance of the Securities; and

     (V) the  issuance  of the  Securities  will  not  violate  any  shareholder
approval requirements of the Principal Market.

If any of the events  described in clauses (I) through (V) above occurs during a
Pricing  Period,  then the Investor shall have no obligation to purchase the Put
Amount of Common Stock set forth in the applicable Put Notice.

(F) RESERVED

(G) MECHANICS OF PURCHASE OF SHARES BY INVESTOR.  Subject to the satisfaction of
the  conditions set forth in Sections 2(E), 7 and 8, the closing of the purchase
by the  Investor  of Shares (a  "Closing")  shall  occur on the date which is no
later than seven (7) Trading Days following the applicable Put Notice Date (each
a "Closing Date").  Prior to each Closing Date, (I) the Company shall deliver to
the Investor pursuant to this Agreement, certificates representing the Shares to
be  issued  to the  Investor  on such  date  and  registered  in the name of the
Investor;  and (II) the Investor shall deliver to the Company the Purchase Price
to be paid for such Shares,  determined as set forth in Section 2(B). In lieu of
delivering physical  certificates  representing the Securities and provided that
the Company's  transfer  agent then is  participating  in The  Depository  Trust
Company  ("DTC") Fast  Automated  Securities  Transfer  ("FAST")  program,  upon
request of the  Investor,  the  Company  shall use all  commercially  reasonable
efforts to cause its transfer agent to electronically transmit the Securities by
crediting  the  account of the  Investor's  prime  broker (as  specified  by the
Investor  within a  reasonably  in advance of the  Investor's  notice)  with DTC
through its Deposit Withdrawal Agent Commission ("DWAC") system.

<PAGE>

The Company  understands  that a delay in the issuance of Securities  beyond the
Closing  Date  could  result  in  economic  damage  to the  Investor.  After the
Effective  Date,  as  compensation  to the Investor  for such loss,  the Company
agrees to make late  payments to the  Investor for late  issuance of  Securities
(delivery of Securities  after the applicable  Closing Date) in accordance  with
the  following  schedule  (where  "No. of Days Late" is defined as the number of
trading days beyond the Closing Date, with the Amounts as set forth in the table
immediately below):

   LATE PAYMENT FOR EACH
     NO. OF DAYS LATE              $10,000 WORTH OF COMMON STOCK

           1                       $100
           2                       $200
           3                       $300
           4                       $400
           5                       $500
           6                       $600
           7                       $700
           8                       $800
           9                       $900
           10                      $1,000
           Over 10                 $1,000 + $200 for each
                                   Business Day late beyond 10 days

The Company shall make any payments  incurred  under this Section in immediately
available  funds upon demand by the  Investor.  Nothing  herein  shall limit the
Investor's right to pursue actual damages for the Company's failure to issue and
deliver the  Securities  to the Investor,  except that such late payments  shall
offset any such actual  damages  incurred by the  Investor,  and any Open Market
Adjustment Amount, as set forth below.

(H) OVERALL LIMIT ON COMMON STOCK ISSUABLE.  Notwithstanding  anything contained
herein to the contrary,  if during the Open Period the Company becomes listed on
an exchange  that limits the number of shares of Common Stock that may be issued
without shareholder approval,  then the number of Shares issuable by the Company
and  purchasable by the Investor,  shall not exceed that number of the shares of
Common Stock that may be issuable  without  shareholder  approval  (the "Maximum
Common Stock Issuance").  If such issuance of shares of Common Stock could cause
a delisting on the  Principal  Market,  then the Maximum  Common Stock  Issuance
shall  first be  approved  by the  Company's  shareholders  in  accordance  with
applicable  law  and  the  By-laws  and  Amended  and  Restated  Certificate  of
Incorporation  of the Company,  if such issuance of shares of Common Stock could
cause a delisting on the Principal Market. The parties understand and agree that
the Company's  failure to seek or obtain such  shareholder  approval shall in no
way adversely affect the validity and due authorization of the issuance and sale
of Securities  or the  Investor's  obligation  in accordance  with the terms and
conditions  hereof to  purchase  a number of Shares in the  aggregate  up to the
Maximum Common Stock Issuance  limitation,  and that such approval pertains only
to the applicability of the Maximum Common Stock Issuance limitation provided in
this Section 2(H).

(I) If, by the third  (3rd)  business  day after the Closing  Date,  the Company
fails to deliver any portion of the shares of the Put to the Investor  (the "Put
Shares  Due") and the  Investor  purchases,  in an open  market  transaction  or
otherwise,  shares of Common Stock  necessary  to make  delivery of shares which
would have been  delivered  if the full amount of the shares to be  delivered to
the  Investor by the  Company  (the "Open  Market  Share  Purchase")  , then the
Company  shall pay to the  Investor,  in  addition  to any other  amounts due to
Investor  pursuant  to the  Put,  and  not in  lieu  thereof,  the  Open  Market
Adjustment Amount (as defined below). The "Open Market Adjustment Amount" is the
amount equal to the excess,  if any, of (x) the Investor's  total purchase price
(including  brokerage  commissions,  if any) for the Open Market Share  Purchase
minus (y) the net proceeds (after brokerage commissions, if any) received by the
Investor  from the sale of the Put Shares Due.  The  Company  shall pay the Open
Market Adjustment  Amount to the Investor in immediately  available funds within
five (5) business days of written demand by the Investor. By way of illustration
and not in  limitation of the  foregoing,  if the Investor  purchases  shares of
Common Stock having a total purchase price (including brokerage  commissions) of
$11,000 to cover an Open Market  Purchase with respect to shares of Common Stock
it sold for net proceeds of $10,000,  the Open Market Purchase Adjustment Amount
which the Company will be required to pay to the Investor will be $1,000.

(J) LIMITATION ON AMOUNT OF OWNERSHIP.  Notwithstanding anything to the contrary
in this  Agreement,  in no event shall the Investor be entitled to purchase that
number of Shares,  which when added to the sum of the number of shares of Common
Stock  beneficially  owned (as such term is defined under Section 13(d) and Rule
13d-3 of the 1934 Act),  by the  Investor,  would  exceed 4.99% of the number of
shares of Common  Stock  outstanding  on the  Closing  Date,  as  determined  in
accordance with Rule 13d-1(j) of the 1934 Act.

<PAGE>

SECTION 3. INVESTOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS.

The Investor represents and warrants to the Company, and covenants, that:

(A)  SOPHISTICATED  INVESTOR.  The  Investor  has, by reason of its business and
financial experience, such knowledge, sophistication and experience in financial
and business matters and in making investment  decisions of this type that it is
capable  of  (I)  evaluating  the  merits  and  risks  of an  investment  in the
Securities and making an informed investment  decision;  (II) protecting its own
interest;  and  (III)  bearing  the  economic  risk  of such  investment  for an
indefinite period of time.

(B)  AUTHORIZATION;  ENFORCEMENT.  This  Agreement  has been  duly  and  validly
authorized,  executed and delivered on behalf of the Investor and is a valid and
binding agreement of the Investor enforceable against the Investor in accordance
with its terms, subject as to enforceability to general principles of equity and
to applicable bankruptcy,  insolvency,  reorganization,  moratorium, liquidation
and other similar laws relating to, or affecting  generally,  the enforcement of
applicable creditors' rights and remedies.

(C) SECTION 9 OF THE 1934 ACT. During the term of this  Agreement,  the Investor
will  comply  with the  provisions  of Section 9 of the 1934 Act,  and the rules
promulgated thereunder, with respect to transactions involving the Common Stock.
The Investor  agrees not to sell the Company's  stock short,  either directly or
indirectly through its affiliates,  principals or advisors, the Company's common
stock during the term of this Agreement.

(D) ACCREDITED  INVESTOR.  Investor is an "Accredited  Investor" as that term is
defined in Rule 501(a) of Regulation D of the 1933 Act.

(E) NO CONFLICTS.  The execution,  delivery and  performance of the  Transaction
Documents  by  the  Investor  and  the  consummation  by  the  Investor  of  the
transactions  contemplated  hereby and thereby will not result in a violation of
Partnership Agreement or other organizational documents of the Investor.

(F) OPPORTUNITY TO DISCUSS.  The Investor has received all materials relating to
the Company's  business,  finance and  operations  which it has  requested.  The
Investor  has  had an  opportunity  to  discuss  the  business,  management  and
financial affairs of the Company with the Company's management.

(G) INVESTMENT  PURPOSES.  The Investor is purchasing the Securities for its own
account for  investment  purposes and not with a view towards  distribution  and
agrees to resell or otherwise  dispose of the  Securities  solely in  accordance
with the  registration  provisions  of the 1933 Act (or pursuant to an exemption
from such registration provisions).

(H) NO REGISTRATION AS A DEALER. The Investor is not and will not be required to
be  registered  as a  "dealer"  under  the 1934  Act,  either as a result of its
execution and performance of its obligations under this Agreement or otherwise.

(I) GOOD  STANDING.  The  Investor  is a Limited  Partnership,  duly  organized,
validly existing and in good standing in the State of Delaware.

(J) TAX LIABILITIES.  The Investor understands that it is liable for its own tax
liabilities.

(K) REGULATION M. The Investor will comply with Regulation M under the 1934 Act,
if applicable.

SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

Except as set forth in the  Schedules  attached  hereto,  or as disclosed on the
Company's SEC  Documents,  the Company  represents  and warrants to the Investor
that:

(A) ORGANIZATION AND QUALIFICATION.  The Company is a corporation duly organized
and validly existing in good standing under the laws of the State of Nevada, and
has the requisite corporate power and authorization to own its properties and to
carry on its business as now being conducted. Both the Company and the companies
it owns or controls  ("Subsidiaries")  are duly qualified to do business and are
in good standing in every jurisdiction in which its ownership of property or the
nature of the  business  conducted  by it makes  such  qualification  necessary,
except to the extent that the failure to be so qualified or be in good  standing
would not have a Material Adverse Effect.  As used in this Agreement,  "Material
Adverse Effect" means any material  adverse effect on the business,  properties,
assets, operations,  results of operations,  financial condition or prospects of
the  Company  and  its  Subsidiaries,  if  any,  taken  as a  whole,  or on  the
transactions  contemplated  hereby or by the  agreements  and  instruments to be
entered  into in  connection  herewith,  or on the  authority  or ability of the
Company to perform its obligations  under the Equity Line Transaction  Documents
(as defined in Section 1 and 4(B), below).

<PAGE>

(B) AUTHORIZATION; ENFORCEMENT; COMPLIANCE WITH OTHER INSTRUMENTS.

     (I) The Company has the  requisite  corporate  power and authority to enter
into and perform this Investment Agreement and the Registration Rights Agreement
(collectively,  the  "Equity  Line  Transaction  Documents"),  and to issue  the
Securities in accordance with the terms hereof and thereof.

     (II) The execution and delivery of the Equity Line Transaction Documents by
the Company and the consummation by it of the transactions  contemplated  hereby
and thereby,  including without  limitation the reservation for issuance and the
issuance  of the  Securities  pursuant  to this  Agreement,  have  been duly and
validly authorized by the Company's Board of Directors and no further consent or
authorization  is  required  by the  Company,  its  Board of  Directors,  or its
shareholders.

     (III) The Equity  Line  Transaction  Documents  have been duly and  validly
executed and delivered by the Company.

     (IV) The Equity Line Transaction Documents constitute the valid and binding
obligations of the Company  enforceable  against the Company in accordance  with
their terms,  except as such enforceability may be limited by general principles
of equity or  applicable  bankruptcy,  insolvency,  reorganization,  moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of creditors' rights and remedies.

(C)  CAPITALIZATION.  As of the date hereof, the authorized capital stock of the
Company  consists of  475,000,000  shares of Common  Stock,  $.001 par value per
share,  of  which  as  of  May  16,  2007,  35,026,812  shares  are  issued  and
outstanding;  25,000,000  shares of Preferred  Stock  authorized  with 3,615,928
shares  issued or  outstanding,  as of March 31,  2007,  and  32,098,465  shares
reserved for issuance during the next 12 months  pursuant to options,  warrants,
Series A Preferred Stock and other convertible  securities.  With respect to the
Series A Preferred  Stock  outstanding  at March 31,  2007,  the maximum  common
shares converted from Series A Preferred shares are contractually  restricted to
five  percent a quarter or twenty  percent a year of the  authorized  and issued
common  shares  outstanding  at  December  31,  2006;  resulting  in  a  maximum
14,196,448 shares of common stock issuable upon conversion of Series A Preferred
Stock during  calendar 2007. All of such  outstanding  shares have been, or upon
issuance will be, validly issued and are fully paid and nonassessable

Except as disclosed in the Company's publicly available filings with the SEC:

(I) no shares of the Company's capital stock are subject to preemptive rights or
any other similar rights or any liens or  encumbrances  suffered or permitted by
the Company;  (II) there are no outstanding debt securities;  (III) there are no
outstanding  shares  of  capital  stock,  options,  warrants,  scrip,  rights to
subscribe to, calls or commitments of any character  whatsoever  relating to, or
securities  or rights  convertible  into,  any  shares of  capital  stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements  by which the Company or any of its  Subsidiaries  is or may become
bound to issue  additional  shares of capital stock of the Company or any of its
Subsidiaries  or options,  warrants,  scrip,  rights to  subscribe  to, calls or
commitments  of any  character  whatsoever  relating to, or securities or rights
convertible  into,  any  shares of  capital  stock of the  Company or any of its
Subsidiaries;  (IV) there are no  agreements  or  arrangements  under  which the
Company or any of its  Subsidiaries  is obligated to register the sale of any of
their securities under the 1933 Act (except the Registration  Rights Agreement);
(V)  there  are  no  outstanding  securities  of  the  Company  or  any  of  its
Subsidiaries which contain any redemption or similar  provisions,  and there are
no contracts,  commitments,  understandings or arrangements by which the Company
or any of its  Subsidiaries  is or may become  bound to redeem a security of the
Company or any of its Subsidiaries;  (VI) there are no securities or instruments
containing  anti-dilution  or similar  provisions  that will be triggered by the
issuance of the  Securities  as described in this  Agreement;  (VII) the Company
does not  have  any  stock  appreciation  rights  or  "phantom  stock"  plans or
agreements or any similar plan or  agreement;  and (VIII) there is no dispute as
to the classification of any shares of the Company's capital stock.

     The Company has furnished to the  Investor,  or the Investor has had access
through EDGAR to, true and correct copies of the Company's  Amended and Restated
Certificate of Incorporation,  as in effect on the date hereof (the "Certificate
of  Incorporation"),  and the Company's By-laws, as in effect on the date hereof
(the "By-laws"), and the terms of all securities convertible into or exercisable
for  Common  Stock and the  material  rights of the  holders  thereof in respect
thereto.

(D) ISSUANCE OF SHARES. The Company has reserved  40,000,000 Shares for issuance
pursuant to this  Agreement,  which have been duly authorized and reserved those
Shares for issuance  (subject to adjustment  pursuant to the Company's  covenant
set forth in Section 5(F) below)  pursuant to this  Agreement.  Upon issuance in
accordance  with this Agreement,  the Securities  will be validly issued,  fully
paid for and  non-assessable  and free from all taxes,  liens and  charges  with
respect  to the issue  thereof.  In the  event the  Company  cannot  register  a
sufficient number of Shares for issuance pursuant to this Agreement, the Company
will use its best  efforts to  authorize  and reserve for issuance the number of
Shares required for the Company to perform its obligations  hereunder as soon as
reasonably practicable.

(E) NO CONFLICTS.  The  execution,  delivery and  performance of the Equity Line
Transaction  Documents by the Company and the consummation by the Company of the
transactions  contemplated hereby and thereby will not (I) result in a violation
of  the  Certificate  of   Incorporation,   any  Certificate  of   Designations,
Preferences  and  Rights of any  outstanding  series of  preferred  stock of the
Company or the By-laws;  or (II) conflict with, or constitute a material default
(or an event which with notice or lapse of time or both would  become a material
default)  under,  or  give to  others  any  rights  of  termination,  amendment,
acceleration or cancellation  of, any material  agreement,  contract,  indenture
mortgage,  indebtedness  or  instrument  to  which  the  Company  or  any of its
Subsidiaries is a party, or to the Company's  knowledge result in a violation of
any law, rule,  regulation,  order,  judgment or decree (including United States
federal and state  securities laws and regulations and the rules and regulations
of the Principal  Market or principal  securities  exchange or trading market on
which the Common Stock is traded or listed)  applicable to the Company or any of
its  Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected. Except as disclosed in Schedule 4(e), neither
the Company nor its  Subsidiaries  is in violation of any term of, or in default
under,  the  Certificate of  Incorporation,  any  Certificate  of  Designations,
Preferences  and  Rights of any  outstanding  series of  preferred  stock of the
Company or the By-laws or their organizational charter or by-laws, respectively,
or any  contract,  agreement,  mortgage,  indebtedness,  indenture,  instrument,
judgment,  decree or order or any statute,  rule or regulation applicable to the
Company  or  its  Subsidiaries,   except  for  possible   conflicts,   defaults,
terminations, amendments, accelerations, cancellations and violations that would
not  individually  or in the  aggregate  have or  constitute a Material  Adverse
Effect. The business of the Company and its Subsidiaries is not being conducted,
and shall not be conducted, in violation of any law, statute,  ordinance,  rule,
order or  regulation  of any  governmental  authority or agency,  regulatory  or
self-regulatory  agency, or court,  except for possible violations the sanctions
for which  either  individually  or in the  aggregate  would not have a Material
Adverse  Effect.  Except as  specifically  contemplated by this Agreement and as
required  under  the  1933  Act or any  securities  laws of any  states,  to the
Company's  knowledge,  the  Company  is not  required  to  obtain  any  consent,
authorization,  permit or order of, or make any filing or  registration  (except
the filing of a registration  statement as outlined in the  Registration  Rights
Agreement  between the  Parties)  with,  any court,  governmental  authority  or
agency,  regulatory or self-regulatory  agency or other third party in order for
it to execute,  deliver or perform any of its obligations under, or contemplated
by, the Equity Line Transaction Documents in accordance with the terms hereof or
thereof.   All   consents,   authorizations,   permits,   orders,   filings  and
registrations  which the Company is required to obtain pursuant to the preceding
sentence  have been  obtained or effected on or prior to the date hereof and are
in full force and effect as of the date hereof.  Except as disclosed in Schedule
4(e), the Company and its Subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing.  The Company is not, and will not
be, in  violation  of the listing  requirements  of the  Principal  Market as in
effect on the date hereof and on each of the  Closing  Dates and is not aware of
any facts which would  reasonably  lead to  delisting of the Common Stock by the
Principal Market in the foreseeable future.

<PAGE>

(F) SEC DOCUMENTS;  FINANCIAL STATEMENTS. As of the date hereof, the Company has
filed all reports,  schedules, forms, statements and other documents required to
be filed by it with the SEC pursuant to the reporting  requirements  of the 1934
Act  (all of the  foregoing  filed  prior to the date  hereof  and all  exhibits
included  therein and financial  statements and schedules  thereto and documents
incorporated  by reference  therein  being  hereinafter  referred to as the "SEC
Documents").  The Company has delivered to the Investor or its  representatives,
or they have had access  through  EDGAR to, true and complete  copies of the SEC
Documents.  As of their respective  filing dates, the SEC Documents  complied in
all material  respects with the  requirements  of the 1934 Act and the rules and
regulations of the SEC promulgated  thereunder  applicable to the SEC Documents,
and  none of the SEC  Documents,  at the  time  they  were  filed  with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements  therein,
in light of the circumstances under which they were made, not misleading.  As of
their respective dates, the financial  statements of the Company included in the
SEC  Documents  complied as to form in all  material  respects  with  applicable
accounting  requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally  accepted  accounting  principles,  by a firm  that is a member of the
Public  Companies  Accounting  Oversight Board ("PCAOB")  consistently  applied,
during the periods  involved  (except (I) as may be otherwise  indicated in such
financial  statements  or the notes  thereto,  or (II) in the case of  unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial
position  of  the  Company  as of the  dates  thereof  and  the  results  of its
operations  and cash flows for the periods then ended  (subject,  in the case of
unaudited  statements,  to normal year-end audit adjustments).  No other written
information provided by or on behalf of the Company to the Investor which is not
included  in the  SEC  Documents,  including,  without  limitation,  information
referred to in Section 4(D) of this Agreement,  contains any untrue statement of
a  material  fact or omits to state  any  material  fact  necessary  to make the
statements  therein,  in the light of the  circumstance  under which they are or
were made, not  misleading.  Neither the Company nor any of its  Subsidiaries or
any of their officers, directors, employees or agents have provided the Investor
with any material,  nonpublic information which was not publicly disclosed prior
to the date  hereof and any  material,  nonpublic  information  provided  to the
Investor by the Company or its Subsidiaries or any of their officers, directors,
employees or agents prior to any Closing Date shall be publicly disclosed by the
Company prior to such Closing Date.

(G)  ABSENCE  OF  CERTAIN  CHANGES.  Except  as  otherwise  set forth in the SEC
Documents,  the Company does not intend to change the business operations of the
Company in any material  way. The Company has not taken any steps,  and does not
currently  expect  to  take  any  steps,  to  seek  protection  pursuant  to any
bankruptcy  law nor does the Company or its  Subsidiaries  have any knowledge or
reason to believe that its creditors intend to initiate  involuntary  bankruptcy
proceedings.

(H) ABSENCE OF LITIGATION AND/OR REGULATORY PROCEEDINGS.  Except as set forth in
the  SEC  Documents,   there  is  no  action,  suit,   proceeding,   inquiry  or
investigation  before  or  by  any  court,  public  board,   government  agency,
self-regulatory  organization  or  body  pending  or,  to the  knowledge  of the
executive officers of Company or any of its Subsidiaries,  threatened against or
affecting the Company, the Common Stock or any of the Company's  Subsidiaries or
any of the  Company's or the  Company's  Subsidiaries'  officers or directors in
their  capacities  as such, in which an adverse  decision  could have a Material
Adverse Effect.

(I)  ACKNOWLEDGMENT   REGARDING  INVESTOR'S  PURCHASE  OF  SHARES.  The  Company
acknowledges and agrees that the Investor is acting solely in the capacity of an
arm's  length  purchaser  with  respect  to the  Transaction  Documents  and the
transactions  contemplated hereby and thereby.  The Company further acknowledges
that the  Investor  is not acting as a  financial  advisor or  fiduciary  of the
Company (or in any similar capacity) with respect to the Equity Line Transaction
Documents and the  transactions  contemplated  hereby and thereby and any advice
given by the  Investor  or any of its  respective  representatives  or agents in
connection  with the Equity  Line  Transaction  Documents  and the  transactions
contemplated  hereby and thereby is merely incidental to the Investor's purchase
of the  Securities,  and is not being  relied  on by the  Company.  The  Company
further represents to the Investor that the Company's decision to enter into the
Equity  Line  Transaction  Documents  has been based  solely on the  independent
evaluation by the Company and its representatives.

(J) NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES. Except as
set forth in the SEC  Documents,  as of the date  hereof,  no event,  liability,
development  or  circumstance  has  occurred  or  exists,  or to  the  Company's
knowledge  is  contemplated  to  occur,  with  respect  to  the  Company  or its
Subsidiaries  or  their  respective  business,  properties,  assets,  prospects,
operations or financial condition, that would be required to be disclosed by the
Company under applicable securities laws on a registration  statement filed with
the SEC  relating to an issuance and sale by the Company of its Common Stock and
which has not been publicly announced.

<PAGE>

(K)  EMPLOYEE  RELATIONS.  Neither the Company  nor any of its  Subsidiaries  is
involved in any union labor  dispute nor, to the knowledge of the Company or any
of its Subsidiaries, is any such dispute threatened. Neither the Company nor any
of its  Subsidiaries is a party to a collective  bargaining  agreement,  and the
Company and its  Subsidiaries  believe that relations  with their  employees are
good.  No  executive  officer  (as  defined in Rule  501(f) of the 1933 Act) has
notified the Company that such officer intends to leave the Company's  employ or
otherwise terminate such officer's employment with the Company.

(L)  INTELLECTUAL  PROPERTY  RIGHTS.  The  Company and its  Subsidiaries  own or
possess adequate rights or licenses to use all trademarks,  trade names, service
marks,  service mark  registrations,  service  names,  patents,  patent  rights,
copyrights, inventions, licenses, approvals, governmental authorizations,  trade
secrets and rights  necessary  to conduct  their  respective  businesses  as now
conducted.  Except  as set  forth in the SEC  Documents,  none of the  Company's
trademarks,  trade names,  service marks,  service mark  registrations,  service
names, patents,  patent rights,  copyrights,  inventions,  licenses,  approvals,
government  authorizations,  trade secrets or other intellectual property rights
necessary  to conduct its  business as now or as proposed to be  conducted  have
expired or  terminated,  or are expected to expire or  terminate  within two (2)
years from the date of this Agreement.  The Company and its  Subsidiaries do not
have any knowledge of any  infringement  by the Company or its  Subsidiaries  of
trademark,  trade name rights, patents, patent rights,  copyrights,  inventions,
licenses, service names, service marks, service mark registrations, trade secret
or other  similar  rights of others,  or of any such  development  of similar or
identical  trade secrets or technical  information by others and,  except as set
forth in the SEC Documents,  there is no claim,  action or proceeding being made
or brought against, or to the Company's knowledge, being threatened against, the
Company or its Subsidiaries  regarding  trademark,  trade name, patents,  patent
rights,  invention,  copyright,  license,  service names, service marks, service
mark registrations,  trade secret or other infringement; and the Company and its
Subsidiaries are unaware of any facts or circumstances  which might give rise to
any of the foregoing.  The Company and its Subsidiaries have taken  commercially
reasonable  security measures to protect the secrecy,  confidentiality and value
of all of their intellectual properties.

(M)  ENVIRONMENTAL  LAWS.  The  Company  and its  Subsidiaries  (I) are,  to the
knowledge of the management  and directors of the Company and its  Subsidiaries,
in compliance with any and all applicable foreign, federal, state and local laws
and  regulations  relating to the  protection  of human  health and safety,  the
environment  or  hazardous  or  toxic   substances  or  wastes,   pollutants  or
contaminants  ("Environmental  Laws");  (II)  have,  to  the  knowledge  of  the
management and directors of the Company, received all permits, licenses or other
approvals required of them under applicable  Environmental Laws to conduct their
respective  businesses;  and (III) are in  compliance,  to the  knowledge of the
management  and directors of the Company,  with all terms and  conditions of any
such  permit,  license or  approval  where,  in each of the three (3)  foregoing
cases, the failure to so comply would have,  individually or in the aggregate, a
Material Adverse Effect.

(N) TITLE.  The Company and its  Subsidiaries  have good and marketable title to
all  personal  property  owned by them which is material to the  business of the
Company  and its  Subsidiaries,  in each  case  free  and  clear  of all  liens,
encumbrances  and defects  except such as are  described in the SEC Documents or
such as do not materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company or any
of its  Subsidiaries.  Any real property and facilities  held under lease by the
Company or any of its Subsidiaries are held by them under valid,  subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such  property and buildings by the
Company and its Subsidiaries.

(O)  INSURANCE.  Each of the Company's  Subsidiaries  are insured by insurers of
recognized  financial  responsibility  against such losses and risks and in such
amounts as  management  of the  Company  reasonably  believes  to be prudent and
customary  in the  businesses  in which the  Company  and its  Subsidiaries  are
engaged.  Neither the Company nor any of its  Subsidiaries  has been refused any
insurance  coverage  sought or  applied  for and  neither  the  Company  nor its
Subsidiaries  has any  reason to  believe  that it will not be able to renew its
existing  insurance  coverage  as and when such  coverage  expires  or to obtain
similar  coverage  from  similar  insurers as may be  necessary  to continue its
business at a cost that would not have a Material Adverse Effect.

<PAGE>

(P) REGULATORY PERMITS.  The Company and its Subsidiaries have in full force and
effect  all  certificates,   approvals,  authorizations  and  permits  from  the
appropriate  federal,   state,  local  or  foreign  regulatory  authorities  and
comparable foreign regulatory agencies, necessary to own, lease or operate their
respective  properties and assets and conduct their respective  businesses,  and
neither  the  Company  nor any  such  Subsidiary  has  received  any  notice  of
proceedings  relating to the revocation or modification of any such certificate,
approval,  authorization  or permit,  except for such  certificates,  approvals,
authorizations  or  permits  which  if not  obtained,  or  such  revocations  or
modifications which, would not have a Material Adverse Effect.

(Q)  INTERNAL  ACCOUNTING  CONTROLS.  The Company  and each of its  Subsidiaries
maintain  a  system  of  internal  accounting  controls  sufficient  to  provide
reasonable  assurance  that (I)  transactions  are executed in  accordance  with
management's general or specific authorizations;  (II) transactions are recorded
as necessary to permit  preparation of financial  statements in conformity  with
generally accepted accounting  principles by a firm with membership to the PCAOB
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.

(R) NO MATERIALLY  ADVERSE  CONTRACTS,  ETC.  Neither the Company nor any of its
Subsidiaries is subject to any charter, corporate or other legal restriction, or
any judgment,  decree,  order,  rule or regulation  which in the judgment of the
Company's  officers has or is expected in the future to have a Material  Adverse
Effect.  Neither  the  Company  nor any of its  Subsidiaries  is a party  to any
contract or agreement which in the judgment of the Company's  officers has or is
expected to have a Material Adverse Effect.

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

(T)  CERTAIN  TRANSACTIONS.  Except as set forth in the SEC  Documents  filed at
least  ten (10) days  prior to the date  hereof  and  except  for  arm's  length
transactions pursuant to which the Company makes payments in the ordinary course
of business  upon terms no less  favorable  than the Company  could  obtain from
disinterested  third parties and other than the grant of stock options disclosed
in the SEC  Documents,  none of the  officers,  directors,  or  employees of the
Company is presently a party to any  transaction  with the Company or any of its
Subsidiaries  (other than for services as  employees,  officers and  directors),
including  any  contract,  agreement  or  other  arrangement  providing  for the
furnishing  of  services  to or by,  providing  for  rental of real or  personal
property to or from,  or  otherwise  requiring  payments to or from any officer,
director or such employee or, to the knowledge of the Company,  any corporation,
partnership,  trust or other entity in which any officer,  director, or any such
employee  has a  substantial  interest  or is an officer,  director,  trustee or
partner.

(U) DILUTIVE EFFECT. The Company understands and acknowledges that the number of
shares of Common Stock issuable upon  purchases  pursuant to this Agreement will
increase in certain circumstances including, but not necessarily limited to, the
circumstance  wherein the trading price of the Common Stock declines  during the
period between the Effective Date and the end of the Open Period.  The Company's
executive officers and directors have studied and fully understand the nature of
the  transactions  contemplated by this Agreement and recognize that they have a
potential  dilutive  effect on the  shareholders  of the  Company.  The Board of
Directors of the Company has concluded, in its good faith business judgment, and
with full  understanding of the implications,  that such issuance is in the best
interests of the Company. The Company specifically acknowledges that, subject to
such  limitations  as are  expressly  set forth in the Equity  Line  Transaction
Documents,  its  obligation  to issue  shares of  Common  Stock  upon  purchases
pursuant to this  Agreement  is absolute  and  unconditional  regardless  of the
dilutive effect that such issuance may have on the ownership  interests of other
shareholders of the Company.

(V) LOCK-UP.  The Company shall cause its  officers,  insiders,  directors,  and
affiliates  or other related  parties  under control of the Company,  to refrain
from selling Common Stock during each Pricing Period.

<PAGE>

(W) NO GENERAL SOLICITATION. Neither the Company, nor any of its affiliates, nor
any person acting on its behalf, has engaged in any form of general solicitation
or general  advertising  (within the meaning of Regulation D) in connection with
the  offer  or sale of the  Common  Stock  to be  offered  as set  forth in this
Agreement.

(X) NO BROKERS,  FINDERS OR FINANCIAL ADVISORY FEES OR COMMISSIONS.  No brokers,
finders  or  financial  advisory  fees or  commissions  will be  payable  by the
Company,  it's  agents  or  Subsidiaries,   with  respect  to  the  transactions
contemplated by this Agreement, except as otherwise disclosed in this Agreement.

SECTION 5. COVENANTS OF THE COMPANY

(A) BEST EFFORTS.  The Company shall use all commercially  reasonable efforts to
timely satisfy each of the conditions set forth in Section 7 of this Agreement.

(B) BLUE SKY. The Company shall, at its sole cost and expense, on or before each
of the Closing Dates, take such action as the Company shall reasonably determine
is  necessary  to  qualify  the  Securities  for,  or obtain  exemption  for the
Securities  for,  sale to the Investor at each of the Closings  pursuant to this
Agreement under  applicable  securities or "Blue Sky" laws of such states of the
United  States,  as  reasonably  specified by the  Investor,  and shall  provide
evidence of any such action so taken to the  Investor on or prior to the Closing
Date.

(C) REPORTING STATUS.  Until one of the following occurs, the Company shall file
all reports  required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not  terminate  its status,  or take an action or fail to take any
action,  which would terminate its status as a reporting  company under the 1934
Act: (i) this  Agreement  terminates  pursuant to Section 9 and the Investor has
the right to sell all of the Securities  without  restrictions  pursuant to Rule
144(k)  promulgated under the 1933 Act, or such other exemption (ii) the date on
which the  Investor  has sold all the  Securities  and this  Agreement  has been
terminated pursuant to Section 9.

(D) USE OF  PROCEEDS.  The Company  will use the  proceeds  from the sale of the
Shares  (excluding  amounts  paid by the  Company  for fees as set  forth in the
Equity Line  Transaction  Documents) for general  corporate and working  capital
purposes and  acquisitions  or assets,  businesses  or  operations  or for other
purposes that the Board of  Directors,  in its good faith deem to be in the best
interest of the Company.

(E) FINANCIAL  INFORMATION.  During the Open Period,  the Company agrees to make
available  to the  Investor via EDGAR or other  electronic  means the  following
documents and  information  on the forms set forth:  (I) within five (5) Trading
Days after the filing thereof with the SEC, a copy of its Annual Reports on Form
10-KSB,  its Quarterly  Reports on Form 10-QSB,  any Current Reports on Form 8-K
and any  Registration  Statements or amendments  filed pursuant to the 1933 Act;
(II) copies of any notices and other  information made available or given to the
shareholders  of  the  Company  generally,  contemporaneously  with  the  making
available  or giving  thereof  to the  shareholders;  and (III)  within  two (2)
calendar days of filing or delivery thereof, copies of all documents filed with,
and all correspondence sent to, the Principal Market, any securities exchange or
market,  or the National  Association of Securities  Dealers,  Inc., unless such
information is material nonpublic information.

(F) RESERVATION OF SHARES. The Company shall take all action necessary to at all
times have  authorized,  and reserved for the purpose of issuance,  a sufficient
number of shares of Common Stock to provide for the  issuance of the  Securities
to the Investor as required hereunder.  In the event that the Company determines
that it does not have a sufficient  number of authorized  shares of Common Stock
to reserve and keep  available  for issuance as described in this Section  5(F),
the Company shall use all commercially reasonable efforts to increase the number
of  authorized  shares of Common Stock by seeking  shareholder  approval for the
authorization of such additional shares.

(G) LISTING.  The Company shall promptly  secure and maintain the listing of all
of the Registrable  Securities (as defined in the Registration Rights Agreement)
on the  Principal  Market  and  each  other  national  securities  exchange  and
automated  quotation  system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall maintain, such listing
of all Registrable  Securities from time to time issuable under the terms of the
Equity  Line  Transaction  Documents.   Neither  the  Company  nor  any  of  its
Subsidiaries shall take any action which would be reasonably  expected to result
in the  delisting  or  suspension  of the Common Stock on the  Principal  Market
(excluding  suspensions  of not more than one (1)  trading  day  resulting  from
business  announcements  by the Company).  The Company shall promptly provide to
the  Investor  copies of any  notices  it  receives  from the  Principal  Market
regarding  the  continued  eligibility  of the Common  Stock for listing on such
automated  quotation  system or securities  exchange.  The Company shall pay all
fees and expenses in  connection  with  satisfying  its  obligations  under this
Section 5(G).

<PAGE>

(H) TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall cause each of
its Subsidiaries not to, enter into, amend, modify or supplement,  or permit any
Subsidiary  to  enter  into,  amend,   modify  or  supplement,   any  agreement,
transaction,  commitment  or  arrangement  with  any of its or any  Subsidiary's
officers,  directors,  persons who were officers or directors at any time during
the previous two (2) years,  shareholders who beneficially own 5% or more of the
Common Stock, or Affiliates or with any individual related by blood, marriage or
adoption to any such  individual  or with any entity in which any such entity or
individual  owns a 5% or more  beneficial  interest  (each a  "Related  Party"),
except  for (I)  customary  employment  arrangements  and  benefit  programs  on
reasonable terms, (II) any agreement, transaction,  commitment or arrangement on
an arms-length basis on terms no less favorable than terms which would have been
obtainable  from a  disinterested  third party other than such Related Party, or
(III) any agreement, transaction, commitment or arrangement which is approved by
a majority of the disinterested  directors of the Company.  For purposes hereof,
any  director  who is also an officer of the  Company or any  Subsidiary  of the
Company  shall  not  be a  disinterested  director  with  respect  to  any  such
agreement,  transaction,  commitment or  arrangement.  "Affiliate"  for purposes
hereof  means,  with respect to any person or entity,  another  person or entity
that, directly or indirectly,

(I) has a 5% or more equity  interest  in that person or entity,  (II) has 5% or
more common ownership with that person or entity,  (III) controls that person or
entity, or (IV) is under common control with that person or entity. "Control" or
"Controls"  for  purposes  hereof  means  that a person or entity has the power,
directly or  indirectly,  to conduct or govern the policies of another person or
entity.  (I) FILING OF FORM 8-K. On or before the date which is four (4) Trading
Days after the Execution  Date,  the Company shall file a Current Report on Form
8-K with the SEC describing  the terms of the  transaction  contemplated  by the
Equity Line Transaction  Documents in the form required by the 1934 Act, if such
filing is required.

(J)  CORPORATE  EXISTENCE.  The Company  shall use all  commercially  reasonable
efforts to preserve and continue the corporate existence of the Company.

(K) NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF RIGHT TO MAKE
A PUT. The Company shall promptly notify the Investor upon the occurrence of any
of the  following  events in  respect  of a  Registration  Statement  or related
prospectus  in respect of an  offering  of the  Securities:  (I)  receipt of any
request  for  additional  information  by the SEC or any other  federal or state
governmental  authority  during the period of  effectiveness of the Registration
Statement for amendments or supplements to the Registration Statement or related
prospectus;  (II)  the  issuance  by the  SEC  or any  other  federal  or  state
governmental  authority of any stop order  suspending the  effectiveness  of any
Registration  Statement or the initiation of any  proceedings  for that purpose;
(III)  receipt  of  any  notification  with  respect  to the  suspension  of the
qualification or exemption from  qualification of any of the Securities for sale
in any  jurisdiction  or the  initiation  or notice of any  proceeding  for such
purpose;  (IV) the happening of any event that makes any statement  made in such
Registration  Statement or related  prospectus or any document  incorporated  or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration  Statement,  related
prospectus or documents so that,  in the case of a  Registration  Statement,  it
will not contain any untrue  statement  of a material  fact or omit to state any
material fact required to be stated  therein or necessary to make the statements
therein not misleading,  and that in the case of the related prospectus, it will
not  contain  any  untrue  statement  of a  material  fact or omit to state  any
material fact required to be stated  therein or necessary to make the statements
therein,  in the light of the  circumstances  under  which they were  made,  not
misleading; and (V) the Company's reasonable determination that a post-effective
amendment to the  Registration  Statement would be appropriate,  and the Company
shall  promptly make  available to Investor any such  supplement or amendment to
the related prospectus. The Company shall not deliver to Investor any Put Notice
during the continuation of any of the foregoing events in this Section 5(K).

<PAGE>

(L)  REIMBURSEMENT.  If (I) the Investor becomes involved in any capacity in any
action,  proceeding or investigation  brought by any shareholder of the Company,
in  connection  with or as a  result  of the  consummation  of the  transactions
contemplated  by the Equity Line  Transaction  Documents,  or if the Investor is
impleaded in any such action,  proceeding or  investigation by any person (other
than as a result of a breach of the  Investor's  representations  and warranties
set forth in this  Agreement);  or (II) the  Investor  becomes  involved  in any
capacity in any action,  proceeding or investigation  brought by the SEC against
or  involving  the  Company  or  in  connection  with  or  as a  result  of  the
consummation of the  transactions  contemplated  by the Equity Line  Transaction
Documents (other than as a result of a breach of the Investor's  representations
and warranties set forth in this Agreement), or if this Investor is impleaded in
any such action,  proceeding or  investigation  by any person,  then in any such
case, the Company will reimburse the Investor for its reasonable legal and other
expenses  (including the cost of any investigation and preparation)  incurred in
connection  therewith,  as such expenses are incurred.  In addition,  other than
with respect to any matter in which the  Investor is a named party,  the Company
will pay to the Investor the charges, as reasonably  determined by the Investor,
for the time of any officers or  employees of the Investor  devoted to appearing
and preparing to appear as  witnesses,  assisting in  preparation  for hearings,
trials or pretrial  matters,  or otherwise  with respect to inquiries,  hearing,
trials, and other proceedings  relating to the subject matter of this Agreement.
The  reimbursement  obligations  of the Company  under this section  shall be in
addition to any  liability  which the Company may otherwise  have,  shall extend
upon the same terms and  conditions  to any  affiliates of the Investor that are
actually  named in such  action,  proceeding  or  investigation,  and  partners,
directors, agents, employees, attorneys,  accountants,  auditors and controlling
persons (if any),  as the case may be, of Investor and any such  affiliate,  and
shall be binding upon and inure to the benefit of any successors of the Company,
the Investor and any such affiliate and any such person.

(M) TRANSFER AGENT. Upon effectiveness of the Registration Statement, and for so
long as the  Registration  Statement is  effective,  the Company  shall  deliver
instructions  to its transfer  agent to issue  Shares to the  Investor  that are
covered for resale by the Registration Statement free of restrictive legends.

(N)  ACKNOWLEDGEMENT  OF TERMS. The Company hereby represent and warrants to the
Investor that: (i) it is voluntarily  issuing entering this Agreement of its own
freewill,  (ii) it is not entering this Agreement under economic  duress,  (iii)
the terms of this Agreement are reasonable and fair to the Company, and (iv) the
Company  has had  independent  legal  counsel of its own  choosing  review  this
Agreement,  advise the Company with respect to this Agreement, and represent the
Company in connection with this Agreement.

SECTION 6. INTENTIONALLY OMITTED

SECTION 7. CONDITIONS OF THE COMPANY'S OBLIGATION TO SELL.

The obligation  hereunder of the Company to issue and sell the Securities to the
Investor is further subject to the satisfaction, at or before each Closing Date,
of each of the following  conditions set forth below.  These  conditions are for
the  Company's  sole benefit and may be waived by the Company at any time in its
sole discretion.

(A) The Investor shall have executed this Agreement and the Registration  Rights
Agreement and delivered the same to the Company.

(B) The Investor  shall have delivered to the Company the Purchase Price for the
Securities being purchased by the Investor between the end of the Pricing Period
and the Closing Date via a Put Settlement  Sheet (hereto attached as Exhibit D).
After receipt of  confirmation  of delivery of such  Securities to the Investor,
the Investor,  by wire transfer of immediately  available  funds pursuant to the
wire instructions  provided by the Company will disburse the funds  constituting
the Purchase Amount.

(C) No statute, rule, regulation,  executive order, decree, ruling or injunction
shall  have been  enacted,  entered,  promulgated  or  endorsed  by any court or
governmental   authority  of  competent   jurisdiction   which   prohibits   the
consummation of any of the transactions contemplated by this Agreement.

SECTION 8. FURTHER CONDITIONS OF THE INVESTOR'S OBLIGATION TO PURCHASE.

The  obligation of the Investor  hereunder to purchase  Shares is subject to the
satisfaction,  on or  before  each  Closing  Date,  of  each  of  the  following
conditions set forth below.

(A) The Company  shall have executed the Equity Line  Transaction  Documents and
delivered the same to the Investor.

(B) The Common Stock shall be authorized  for quotation on the Principal  Market
and trading in the Common Stock shall not have been  suspended by the  Principal
Market or the SEC,  at any time  beginning  on the date  hereof and  through and
including the respective  Closing Date  (excluding  suspensions of not more than
one (1)  Trading Day  resulting  from  business  announcements  by the  Company,
provided that such suspensions occur prior to the Company's  delivery of the Put
Notice related to such Closing).

<PAGE>

(C) The  representations and warranties of the Company shall be true and correct
as of the date when made and as of the applicable Closing Date as though made at
that time and the Company shall have performed,  satisfied and complied with the
covenants,  agreements  and conditions  required by the Equity Line  Transaction
Documents  to be  performed,  satisfied  or  complied  with by the Company on or
before such Closing Date.  The Investor may request an update as of such Closing
Date regarding the representation contained in Section 4(C) above.

(D)  The  Company  shall  have  executed  and  delivered  to  the  Investor  the
certificates  representing,  or have executed electronic book-entry transfer of,
the  Securities  (in such  denominations  as the Investor  shall  request) being
purchased by the Investor at such Closing.

(E) The  Board of  Directors  of the  Company  shall  have  adopted  resolutions
consistent with Section 4(B)(II) above (the  "Resolutions") and such Resolutions
shall not have been amended or rescinded prior to such Closing Date.

(F) Reserved

(G) No statute, rule, regulation,  executive order, decree, ruling or injunction
shall  have been  enacted,  entered,  promulgated  or  endorsed  by any court or
governmental   authority  of  competent   jurisdiction   which   prohibits   the
consummation of any of the transactions contemplated by this Agreement.

(H) The  Registration  Statement  shall be effective on each Closing Date and no
stop order suspending the  effectiveness of the Registration  statement shall be
in  effect  or to the  Company's  knowledge  shall  be  pending  or  threatened.
Furthermore, on each Closing Date (I) neither the Company nor the Investor shall
have  received  notice  that the SEC has issued or intends to issue a stop order
with  respect  to such  Registration  Statement  or that the SEC  otherwise  has
suspended or withdrawn the effectiveness of such Registration Statement,  either
temporarily  or  permanently,  or intends or has threatened to do so (unless the
SEC's concerns have been addressed and Investor is reasonably satisfied that the
SEC no longer is considering or intends to take such action),  and (II) no other
suspension of the use or withdrawal of the  effectiveness  of such  Registration
Statement or related prospectus shall exist.

(I)  At  the  time  of  each  Closing,  the  Registration  Statement  (including
information or documents  incorporated by reference  therein) and any amendments
or supplements thereto shall not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the  statements  therein  not  misleading  or which  would  require  public
disclosure or an update supplement to the prospectus.

(J) If  applicable,  the  shareholders  of the Company  shall have  approved the
issuance  of any  Shares in excess  of the  Maximum  Common  Stock  Issuance  in
accordance  with Section  2(H) or the Company  shall have  obtained  appropriate
approval  pursuant to the requirements of Nevada law and the Company's  Articles
of Incorporation and By-laws.

(K) The  conditions  to such  Closing set forth in Section  2(E) shall have been
satisfied on or before such Closing Date.

(L) The Company  shall have  certified  to the  Investor the number of Shares of
Common  Stock  outstanding  when a Put  Notice  is  given to the  Investor.  The
Company's  delivery of a Put Notice to the Investor  constitutes  the  Company's
certification of the existence of the necessary number of shares of Common Stock
reserved for issuance.

SECTION 9. TERMINATION. This Agreement shall terminate upon any of the following
events:

(I)  when the  Investor  has  purchased  an  aggregate  of Ten  Million  dollars
($10,000,000) in the Common Stock of the Company pursuant to this Agreement; or,

(II) on the date which is thirty-six (36) months after the Effective Date; or,

(III) upon written notice of the Company to the Investor. Any and all shares, or
penalties, if any, due under this Agreement shall be immediately payable and due
upon termination of the Line.

SECTION 10. SUSPENSION

<PAGE>

This Agreement  shall be suspended upon any of the following  events,  and shall
remain suspended until such event is rectified:

     (I) the trading of the Common Stock is suspended by the SEC, the  Principal
Market or the NASD for a period of two (2)  consecutive  Trading Days during the
Open Period; or,

     (II) The Common Stock ceases to be registered  under the 1934 Act or listed
or traded on the Principal Market. Immediately upon the occurrence of one of the
above-described  events,  the Company shall send written notice of such event to
the Investor.

SECTION 11. INDEMNIFICATION.

In consideration of the parties mutual  obligations set forth in the Transaction
Documents, each of the parties (in such capacity, an "Indemnitor") shall defend,
protect,  indemnify  and hold  harmless  the other and all of the other  party's
shareholders,  officers,  directors,  employees, counsel, and direct or indirect
investors  and any of the  foregoing  person's  agents or other  representatives
(including,   without   limitation,   those  retained  in  connection  with  the
transactions contemplated by this Agreement)  (collectively,  the "Indemnitees")
from and against any and all actions,  causes of action, suits, claims,  losses,
costs,  penalties,  fees,  liabilities and damages,  and reasonable  expenses in
connection therewith  (irrespective of whether any such Indemnitee is a party to
the  action  for which  indemnification  hereunder  is  sought),  and  including
reasonable  attorneys' fees and disbursements  (the "Indemnified  Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (I)
any  misrepresentation  or breach of any  representation or warranty made by the
Indemnitor or any other certificate,  instrument or document contemplated hereby
or thereby;  (II) any breach of any  covenant,  agreement or  obligation  of the
Indemnitor  contained  in the Equity  Line  Transaction  Documents  or any other
certificate, instrument or document contemplated hereby or thereby; or (III) any
cause of action,  suit or claim  brought or made  against such  Indemnitee  by a
third  party and  arising  out of or  resulting  from the  execution,  delivery,
performance or enforcement of the Equity Line Transaction Documents or any other
certificate,  instrument  or document  contemplated  hereby or  thereby,  except
insofar as any such misrepresentation,  breach or any untrue statement,  alleged
untrue  statement,  omission or alleged omission is made in reliance upon and in
conformity  with  information  furnished  to  Indemnitor  which is  specifically
intended  for  use  in  the  preparation  of any  such  Registration  Statement,
preliminary  prospectus,  prospectus  or amendments  to the  prospectus.  To the
extent that the foregoing undertaking by the Indemnitor may be unenforceable for
any reason,  the Indemnitor  shall make the maximum  contribution to the payment
and  satisfaction  of each of the Indemnified  Liabilities  which is permissible
under  applicable  law. The indemnity  provisions  contained  herein shall be in
addition to any cause of action or similar  rights  Indemnitor may have, and any
liabilities the Indemnitor or the Indemnitees may be subject to.

SECTION 12. GOVERNING LAW; DISPUTES SUBMITTED TO ARBITRATION.

     All  disputes  arising  under  this  agreement  shall  be  governed  by and
interpreted in accordance with the laws of the  Commonwealth  of  Massachusetts,
without  regard to principles of conflict of laws. The parties to this agreement
will submit all disputes  arising under this agreement to arbitration in Boston,
Massachusetts before a single arbitrator of the American Arbitration Association
("AAA").  The  arbitrator  shall be selected by  application of the rules of the
AAA, or by mutual agreement of the parties, except that such arbitrator shall be
an attorney  admitted to practice law in the Commonwealth of  Massachusetts.  No
party to this agreement will challenge the  jurisdiction or venue  provisions as
provided  in this  section.  No  party  to this  agreement  will  challenge  the
jurisdiction or venue provisions as provided in this section.  Nothing contained
herein shall prevent the party from obtaining an injunction.

(B) LEGAL FEES;  AND  MISCELLANEOUS  FEES.  Except as otherwise set forth in the
Equity Line Transaction Documents, each party shall pay the fees and expenses of
its advisers,  counsel, the accountants and other experts, if any, and all other
expenses  incurred  by such  party  incident  to the  negotiation,  preparation,
execution,  delivery and performance of this Agreement.  Any attorneys' fees and
expenses  incurred by either the Company or the Investor in connection  with the
preparation,  negotiation,  execution  and  delivery of any  amendments  to this
Agreement or relating to the  enforcement of the rights of any party,  after the
occurrence of any breach of the terms of this  Agreement by another party or any
default by another party in respect of the transactions  contemplated hereunder,
shall be paid on  demand  by the  party  which  breached  the  Agreement  and/or
defaulted,  as the case may be. The Company  shall pay all stamp and other taxes
and duties levied in connection with the issuance of any Securities.

<PAGE>

(C)  COUNTERPARTS.  This  Agreement  may be  executed  in two or more  identical
counterparts,  all of which shall be considered  one and the same  agreement and
shall  become  effective  when  counterparts  have been signed by each party and
delivered  to the other  party;  provided  that a facsimile  signature  shall be
considered  due execution  and shall be binding upon the signatory  thereto with
the same force and effect as if the signature were an original signature.

(D)  HEADINGS;   SINGULAR/PLURAL.   The  headings  of  this  Agreement  are  for
convenience   of   reference   and  shall  not  form  part  of,  or  affect  the
interpretation  of,  this  Agreement.  Whenever  required by the context of this
Agreement, the singular shall include the plural and masculine shall include the
feminine.

(E)  SEVERABILITY.  If any  provision  of this  Agreement  shall be  invalid  or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction  or the  validity  or  enforceability  of  any  provision  of  this
Agreement in any other jurisdiction.

(F) ENTIRE AGREEMENT;  AMENDMENTS. This Agreement is the FINAL AGREEMENT between
the Company and the Investor with respect to the terms and  conditions set forth
herein,  and, the terms of this Agreement may not be contradicted by evidence of
prior,  contemporaneous,  or  subsequent  oral  agreements  of the  Parties.  No
provision  of this  Agreement  may be  amended  other than by an  instrument  in
writing signed by the Company and the Investor,  and no provision  hereof may be
waived other than by an instrument  in writing  signed by the party against whom
enforcement is sought. The execution and delivery of the Equity Line Transaction
Documents shall not alter the force and effect of any other  agreements  between
the Parties, and the obligations under those agreements.

(G)  NOTICES.  Any notices or other  communications  required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been  delivered  (I) upon receipt,  when  delivered  personally;  (II) upon
receipt,  when sent by  facsimile  (provided  confirmation  of  transmission  is
mechanically or electronically generated and kept on file by the sending party);
or (III)  one (1) day  after  deposit  with a  nationally  recognized  overnight
delivery  service,  in each case properly  addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:

If to the Company:

ERF Wireless, Inc.
2911 South Shore Blvd., Suite 100
League City, TX 77573
Telephone: (281) 538-2101
Facsimile: (281) 538-2121

If to the Investor:

Dutchess Private Equities Fund, Ltd.,
50 Commonwealth Avenue, Suite 2
Boston, MA 02116
Telephone: 617-301-4700
Facsimile: 617-249-0947

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

(H) NO ASSIGNMENT. This Agreement may not be assigned.

(I) NO THIRD PARTY BENEFICIARIES.  This Agreement is intended for the benefit of
the parties  hereto and is not for the benefit of, nor may any provision  hereof
be enforced by, any other person,  except that the Company acknowledges that the
rights of the Investor may be enforced by its general partner.

<PAGE>

(J) SURVIVAL. The representations and warranties of the Company and the Investor
contained  in  Sections  2 and 3, the  agreements  and  covenants  set  forth in
Sections 4 and 5, and the  indemnification  provisions  set forth in Section 11,
shall survive each of the Closings and the termination of this Agreement.

(K)  PUBLICITY.  The Company and the Investor  shall  consult with each other in
issuing any press releases or otherwise making public statements with respect to
the  transactions  contemplated  hereby and no party  shall issue any such press
release or otherwise make any such public statement without the prior consent of
the other party,  which consent shall not be  unreasonably  withheld or delayed,
except that no prior consent shall be required if such disclosure is required by
law, in which such case the disclosing  party shall provide the other party with
prior  notice of such  public  statement.  Notwithstanding  the  foregoing,  the
Company shall not publicly  disclose the name of the Investor  without the prior
consent of the  Investor,  except to the extent  required by law.  The  Investor
acknowledges  that this Agreement and all or part of the Equity Line Transaction
Documents  may be deemed to be "material  contracts"  as that term is defined by
Item  601(b)(10)  of  Regulation  S-B,  and that the  Company may  therefore  be
required  to  file  such  documents  as  exhibits  to  reports  or  registration
statements filed under the 1933 Act or the 1934 Act. The Investor further agrees
that the status of such documents and materials as material  contracts  shall be
determined solely by the Company, in consultation with its counsel.

(L) FURTHER ASSURANCES. Each party shall do and perform, or cause to be done and
performed,  all such further acts and things,  and shall execute and deliver all
such other  agreements,  certificates,  instruments and documents,  as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

(N) NO STRICT  CONSTRUCTION.  The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent,  and no
rules of strict  construction  will be applied against any party, as the parties
mutually  agree  that each has had a full and fair  opportunity  to review  this
Agreement and seek the advice of counsel on it.

(O) REMEDIES.  The Investor shall have all rights and remedies set forth in this
Agreement  and the  Registration  Rights  Agreement  and all rights and remedies
which such holders  have been  granted at any time under any other  agreement or
contract and all of the rights which the Investor has by law. Any person  having
any rights under any  provision of this  Agreement  shall be entitled to enforce
such rights specifically (without posting a bond or other security),  to recover
damages by reason of any default or breach of any  provision of this  Agreement,
including the recovery of reasonable  attorneys fees and costs,  and to exercise
all other rights granted by law.

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

(Q) PRICING OF COMMON STOCK.  For purposes of this  Agreement,  the bid price of
the Common Stock shall be as reported on Bloomberg.

SECTION 13. NON-DISCLOSURE OF NON-PUBLIC INFORMATION.

(a) The Company shall not disclose non-public  information to the Investor,  its
advisors, or its representatives.

<PAGE>

(b) Nothing herein shall require the Company to disclose non-public  information
to the Investor or its advisors or  representatives,  and the Company represents
that it  does  not  disseminate  non-public  information  to any  investors  who
purchase  stock in the  Company in a public  offering,  to money  managers or to
securities analysts,  provided, however, that notwithstanding anything herein to
the contrary, the Company will, as hereinabove provided,  immediately notify the
advisors and representatives of the Investor and, if any,  underwriters,  of any
event or the existence of any  circumstance  (without any obligation to disclose
the specific  event or  circumstance)  of which it becomes  aware,  constituting
non-public  information (whether or not requested of the Company specifically or
generally  during  the course of due  diligence  by such  persons or  entities),
which, if not disclosed in the prospectus included in the Registration Statement
would  cause such  prospectus  to include a material  misstatement  or to omit a
material  fact  required to be stated  therein in order to make the  statements,
therein,  in light of the circumstances in which they were made, not misleading.
Nothing  contained  in this  Section  13 shall be  construed  to mean  that such
persons or entities other than the Investor  (without the written consent of the
Investor  prior to disclosure  of such  information)  may not obtain  non-public
information  in the course of conducting  due  diligence in accordance  with the
terms of this  Agreement  and nothing  herein shall  prevent any such persons or
entities  from  notifying  the Company of their  opinion  that based on such due
diligence by such persons or entities,  that the Registration Statement contains
an untrue  statement of material  fact or omits a material  fact  required to be
stated  in the  Registration  Statement  or  necessary  to make  the  statements
contained  therein,  in light of the  circumstances in which they were made, not
misleading.

ARTICLE 14 ACKNOWLEDGEMENTS OF THE PARTIES.

Notwithstanding  anything in this Agreement to the contrary,  the parties hereto
hereby  acknowledge  and  agree  to the  following:  (i) the  Investor  makes no
representations  or  covenants  that  it  will  not  engage  in  trading  in the
securities  of the  Company,  other  than the  Investor  will no sell  short the
Company's  common  stock at any time  during  this  Agreement;  (ii) the Company
shall,  by 8:30 a.m.  Boston Time on the trading day  following the date hereof,
file a  current  report  on  Form  8-K  disclosing  the  material  terms  of the
transactions  contemplated  hereby  and in the  other  Equity  Line  Transaction
Documents;  (iii) the Company has not and shall not provide material  non-public
information  to the  Investor  unless  prior  thereto  the  Investor  shall have
executed  a written  agreement  regarding  the  confidentiality  and use of such
information;  and (iv) the Company  understands  and confirms  that the Investor
will be relying on the  acknowledgements  set forth in clauses (i) through (iii)
above if the Investor effects any transactions in the securities of the Company.

<PAGE>

SIGNATURE PAGE OF INVESTMENT AGREEMENT

Your  signature on this  Signature  Page evidences your agreement to be bound by
the terms and conditions of the Investment Agreement and the Registration Rights
Agreement as of the date first written above.

The undersigned  signatory hereby certifies that he has read and understands the
Investment  Agreement,  and the representations  made by the undersigned in this
Investment Agreement are true and accurate, and agrees to be bound by its terms.

DUTCHESS PRIVATE EQUITIES FUND, LTD.

By:______________________________
    Douglas H. Leighton, Director

ERF WIRELESS, INC.

By:_______________________________________
    R. Greg Smith, Chief Financial Officer

LIST OF EXHIBITS
----------------

     EXHIBIT A    Registration Rights Agreement
     EXHIBIT B    Opinion of Company's Counsel
     EXHIBIT C    Put Notice
     EXHIBIT D    Put Settlement Sheet

<PAGE>

LIST OF SCHEDULES
-----------------

Schedule 4(a) Subsidiaries

     1. ERF Enterprise Network Services, Inc.

     2. ERF Wireless Bundled Services, Inc.

     3. ERF Wireless Messaging Services, Inc.

     4. ERF Network Operations, Inc.

<PAGE>

--------------------------------------------------------------------------------
EXHIBIT A

<PAGE>

--------------------------------------------------------------------------------
EXHIBIT B

FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
                                                     Date: __________
[TRANSFER AGENT]

     Re: ERF Wireless, Inc.
         ------------------

Ladies and Gentlemen:

     We are counsel to ERF Wireless, Inc., a Nevada corporation (the "Company"),
and have  represented  the Company in  connection  with that certain  Investment
Agreement (the "Investment Agreement") entered into by and among the Company and
_________________________  (the  "Investor")  pursuant  to which the Company has
agreed to issue to the Investor shares of the Company's common stock,  $.001 par
value per share (the "Common  Stock") on the terms and  conditions  set forth in
the Investment Agreement. Pursuant to the Investment Agreement, the Company also
has  entered  into a  Registration  Rights  Agreement  with  the  Investor  (the
"Registration  Rights  Agreement")  pursuant to which the Company agreed,  among
other  things,  to  register  the  Registrable  Securities  (as  defined  in the
Registration  Rights Agreement),  including the shares of Common Stock issued or
issuable  under the  Investment  Agreement  under the Securities Act of 1933, as
amended (the "1933 Act"). In connection with the Company's obligations under the
Registration  Rights  Agreement,  on ____________ ___, 2006, the Company filed a
Registration Statement on Form S- ___ (File No. 333-________) (the "Registration
Statement") with the Securities and Exchange  Commission (the "SEC") relating to
the  Registrable  Securities  which names the Investor as a selling  shareholder
thereunder.

     In connection with the foregoing, we advise you that [a member of the SEC's
staff has advised us by  telephone  that the SEC has entered an order  declaring
the Registration  Statement  effective] [the  Registration  Statement has become
effective] under the 1933 Act at [enter the time of effectiveness] on [enter the
date of  effectiveness]  and to the  best  of our  knowledge,  after  telephonic
inquiry  of  a  member  of  the  SEC's  staff,  no  stop  order  suspending  its
effectiveness  has been issued and no  proceedings  for that purpose are pending
before,  or threatened by, the SEC and the Registrable  Securities are available
for resale under the 1933 Act pursuant to the Registration Statement.

                                                     Very truly yours,

                                                     [Company Counsel]

<PAGE>

--------------------------------------------------------------------------------
EXHIBIT C

Date:

RE: Put Notice Number __

Dear Mr. Leighton,

This is to inform you that as of today, ERF Wireless, Inc., a Nevada corporation
(the "Company"),  hereby elects to exercise its right pursuant to the Investment
Agreement to require  Dutchess Private Equities Fund, Ltd. to purchase shares of
its common stock. The Company hereby certifies that:

The amount of this put is $__________.

The Pricing Period runs from ________ until _______.

The current number of shares issued and outstanding as of the Company are:

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

The number of shares currently available for issuance on the SB-2 for the Equity
Line are:

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

Regards,

-------------------------
R. Greg Smith, CFO
ERF Wireless, Inc.

<PAGE>

--------------------------------------------------------------------------------
EXHIBIT D
PUT SETTLEMENT SHEET

Date:

Dear Mr. Smith,

Pursuant to the Put given by ERF  Wireless,  Inc. to Dutchess  Private  Equities
Fund, Ltd. on _________________ 200_, we are now submitting the amount of common
shares for you to issue to Dutchess.

Please have a certificate  bearing no  restrictive  legend  totaling  __________
shares issued to Dutchess Private  Equities Fund, Ltd.  immediately and send via
DWAC to the following account:

XXXXXX

If not DWAC eligible, please send FedEx Priority Overnight to:

XXXXXX

Once these shares are received by us, we will have the funds wired to the
Company.

Regards,

Douglas H. Leighton

<PAGE>

           DATE..........................PRICE

           Date of Day 1 ............... Closing Bid of Day 1
           Date of Day 2 ............... Closing Bid of Day 2
           Date of Day 3 ............... Closing Bid of Day 3
           Date of Day 4 ............... Closing Bid of Day 4
           Date of Day 5 ............... Closing Bid of Day 5

           LOWEST 1 (ONE) CLOSING BID IN PRICING PERIOD
                                                        ------------
           PUT AMOUNT
                      ------------

           AMOUNT WIRED TO COMPANY
                                   ------------

           PURCHASE PRICE (93)% (NINETY-THREE PERCENT))
                                                        ------------

           AMOUNT OF SHARES DUE
                                ------------

The undersigned has completed this Put as of this ___th day of _________,  200_.
ERF WIRELESS, INC.

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

R. Greg Smith, CFO

<PAGE>

--------------------------------------------------------------------------------
SCHEDULE 4(c) CAPITALIZATION

COMMON STOCK, PREFERRED STOCK AND WARRANTS

The total number of shares of stock of all classes  which the Company shall have
the authority to issue is five hundred  million  (500,000,000),  of which twenty
five million (25,000,000) shall be shares of Preferred Stock with a par value of
$.001 per share  ("Preferred  Stock"),  and four  hundred  seventy  five million
(475,000,000)  shall be  shares of  Common  Stock  with a par value of $.001 per
share ("Common Stock").

COMMON STOCK

As of March 31, 2007, the Company had  31,284,245  shares of its $.001 par value
common stock issued and outstanding.

PREFERRED STOCK

The Company has  25,000,000  shares of Series A Preferred  Stock  authorized  of
which  3,615,928  shares were issued and  outstanding  as of March 31, 2007. The
Series A Preferred  Stock is  convertible  at holder's  option at one  preferred
share for 18.676347  shares Common Stock and has a 2:1  liquidation  preference.
The holder of Series A Preferred  Stock is  required to give a 65-day  notice of
conversion  to the  company.  With  respect  to the  Series  A  Preferred  Stock
outstanding at March 31, 2007, the maximum common shares converted from Series A
Preferred  shares  are  contractually  restricted  to five  percent a quarter or
twenty percent a year of the authorized and issued common shares  outstanding at
December 31,  2006;  resulting  in a maximum  14,196,448  shares of common stock
issuable upon conversion of Series A Preferred Stock during calendar 2007.

WARRANTS

The Company had  warrants  outstanding  to third  parties to purchase  2,067,257
common shares as of March 31, 2007.

Warrants  for  880,000   shares  were  issued  by  the  Company  in  June  2003.
Specifically,  the Company sold 120,000 shares of Common Stock for $25,000 to an
accredited  investor of the Securities Act and issued such a warrant to purchase
880,000  shares of Common Stock at an exercise price of $0.20 per share expiring
December 31, 2007. The Company attributed no value to these warrants in the June
2003 period in which they were  issued,  given that the warrants had an exercise
price of $0.20 per share as compared  to the market  value of $0.01 per share in
June 2003 on a total  volume  of 300  shares  traded in the open  market in June
2003. In January 2006, the Company and the holders of the warrants agreed to (i)
limit the amount of shares that can be sold upon  exercise  and (ii)  purchase a
certain  amount of shares  of  originally  issued  common  stock  within 60 days
(subject  to  extension)  of the  effective  date of the  February  2006  resale
registration  statement.  The  Investor  exercised  100,000  warrants  leaving a
remaining balance of 780,000 warrants to be exercised.

Warrants for 208,339  shares of common stock at $5.00 per share and warrants for
208,339  shares at $7.50 per share were  issued by the  Company  during 2005 and
2006. Specifically, the Company sold 208,312 shares of Common Stock for $312,500
to  accredited  investors  of the  Securities  Act and issued  such  warrants to
purchase 208,339 shares of Common Stock at $5.00 per share and 208,339 shares of
common stock at $7.50 per share expiring August 2007. The Company  attributed no
value to these  warrants in the quarters in which they were  issued.  During the
4th quarter of 2006, management offered the Private Placement Memorandum Holders
an  opportunity  to exchange  their stock for  E-Series  Bonds of which  several
investors  agreed  to in  aggregate  in the  amount  of  $100,000  resulting  in
canceling  66,667  of  the  $7.50  warrants  and  $5.00  warrants  reducing  the
outstanding class warrants from 208,339 to 141,670.

Warrants  for 389,999 at $3.57 per share were issued by the Company in September
2005 and November 2005.  Specifically,  the Company issued convertible notes for
$1,500,000  to  accredited  investors  of the  Securities  Act and  issued  such
warrants to purchase 389,999 shares of Common Stock at $3.57 per share,  subject
to  adjustment  upon  issuance  of shares or  warrants  below  market,  expiring
September 2010. See Note 9 for valuation and marked-to-market activity.

Warrants  for 613,918  shares of common  stock at $5.00 per share were issued by
the Company  during the year end 2006 and 1st quarter  2007.  Specifically,  the
Company  sold  $587,500  of  E-series  bonds  to  accredited  investors  of  the
Securities Act. According to the agreement if the Bondholder converts within one
year from  investment;  the  conversion  includes  a  warrant  to  purchase  one
additional  share of common  stock at a price of $5.00 for every share of common
stock that has been received  from the  conversion  of the Bond  principal.  The
Company has had twenty-five  units  converted and has attributed  $3,000 in 2007
and $76,000 in 2006 to warrant  expense  using the Black  Scholes  option  price
model in the quarter in which the unit was converted.

<PAGE>

The following table summarizes warrants that are issued, outstanding and
exercisable.

                                              Options/Warrants
                                            Issued & Outstanding
                                          -----------------------
           Exercise      Expiration       March 31,     March 31,
            Price           Date             2007          2006
           --------      ----------       ---------     ---------
            0.20           Dec-07           780,000       780,000
            5.00           Aug-07           141,670       191,672
            7.50           Aug-07           141,670       191,672
            3.57           Sep-10           389,999       389,999
            5.00           Aug-09           613,918             -
                                          ---------     ---------
                                          2,067,257     1,553,343
                                          =========     =========
<PAGE>

--------------------------------------------------------------------------------
SCHEDULE 4(e) CONFLICTS

None

<PAGE>

--------------------------------------------------------------------------------
SCHEDULE 4(g) MATERIAL CHANGES

None

<PAGE>

--------------------------------------------------------------------------------
SCHEDULE 4(h) LITIGATION

None

<PAGE>

--------------------------------------------------------------------------------
SCHEDULE 4(l) INTELLECTUAL PROPERTY

The Company has filed three patent applications on its CryptoVue(TM) technology.
The   abstract  of  the  patent   application   filing   included   the  secure,
triple-controlled  system for data over a network,  which protects  against data
theft or  alteration  by one or more  ("e.g.,  two")  corrupt  insiders  working
together with outsiders. A combination of dual-control tamper-resistant routers,
physical hardware keys and encryption keys enforces what the Company believes to
be best practice security protocols with thorough auditing.  A remote monitoring
center provides a third level of control along with remote auditing and detailed
change-control alerts.

<PAGE>

--------------------------------------------------------------------------------
SCHEDULE 4(n) LIENS

NOTES PAYABLE AND LONG-TERM DEBT

Notes payable and long-term  debts consist of the following as of March 31, 2007
(in thousands):
<TABLE>
<CAPTION>
<S>     <C>                         <C>                                <C>            <C>    <C>       <C>       <C>
                                                                                              Interest   Gross    Debt
                                                  Terms                 Maturity Date   Rate  Balance   Discount  Net Balance
                                     ---------------------------------  -------------  ------ --------  --------  ------------
  Taylor Economic Development Corp.  $1,119 / Month including interest  June-07         7.00%        2         -            2
  Vangard Wireless, Inc.             $200 / Month including interest    December-10     6.00%        8         -            8
  Axis Capital, Inc                  $347 / Month including interest    August-08       8.60%        5         -            5
  Insurance notes                    $1,993 / Month including interest  September-07    9.00%       18         -           18
  Investor notes                      2 years (See below)               Demand          6.00%      790       278          512
  Line of credit                      2 years/ Quarterly interest       February-08     6.00%    2,213         -        2,213
                                                                         (See below)
  E-bond investor notes               3 years/ Semiannual interest      Various        10.00%      450        89          361
                                      (See below)                                      ------ --------  --------  ------------
  Total debt                                                                                  $  3,486  $    367        3,119
                                                                                              ========  ========
                                                                                                                          876
  Less current maturities                                                                                                (314)
  Less debt discount current maturities                                                                           ------------
                                                                                                                  $     2,557
  Long-term debt
</TABLE>
   The gross maturities of these debts are $876,000, $393,000, $2,215,000 and
$2,000 for the years ended December 31, 2007, 2008, 2009 and 2010, respectively.

INVESTOR NOTES

0n September 13, 2005,  the Company closed a financing  arrangement  with Global
Capital    Funding   L.P.    ("Global"),    GCA   Strategic    Investment   Fund
Limited("GCASIF"),   HIPL  Family  Trust   ("HIPL"),   and  DP  Securities  Inc.
("DPS")("Global,"  "GCASIF," HIPL" and "DPS," collectively,  the "Investors") in
which it issued to: (i) Global,  a  convertible  secured  note in the  principal
amount of $1,285,000  ("Global  Note") and a common stock purchase  warrant (the
"Global  Warrant") to purchase  300,000  shares of Company  common  stock;  (ii)
GCASIF,  a  convertible  secured  note in the  principal  amount of $50,000 (the
"GCASIF  Note") and a common stock  purchase  warrant (the "GCASIF  Warrant") to
purchase up to 13,953  shares of the Company  common  stock;  and (iii) HIPL,  a
convertible secured note in the principal amount of $66,750 (the HIPL Note") and
common  stock  purchase  warrant  (the "HIPL  warrant") to purchase up to 20,930
shares of the  common  stock;  and (iv) DPS a  convertible  secured  note in the
principal amount of $98,250 (the "DPS Note") and a common stock purchase warrant
(the "DPS Warrant") to purchase up to 55,116 shares of common stock.  The Global
Note,  GCASIF Note, HIPL Note and DPS Note,  collectively,  "Investor Notes" and
the Global Warrant,  GCASIF Warrant,  and DPS Warrant,  collectively,  "Investor
Warrants".

The Investor Notes accrue  interest at a rate per annum equal to six percent and
are secured by substantially all of the Company's assets. The Investor Notes are
convertible  into shares of the Company common stock at a conversion price equal
to the lesser of (i) $3.50 or (ii) 85% of the average of the three lowest VWAPs,
as reported by Bloomberg,  during the ten trading days immediately preceding the
date of the related notice of conversion; provided further, however, that, until
six months  following the  effective  date of the  registration  statement in no
event will the conversion price be lower than the lesser of (y) $1.50 or (z) 50%
of the VWAP, as reported by Bloomberg,  on January 13, 2006,  the effective date
of the registration statement.  Upon expiration of such six-month period or upon
occurrence  of an event of  default  which is not  cured,  the  foregoing  floor
calculation  shall no longer be effective.  The six months expired on June 13th,
2006.  The Company has registered the resale of the shares of the Company common
stock underlying the Investor Notes and the shares issuable upon exercise of the
Investor Warrants.

The Company has the ability to prepay in company common stock amounts owed under
these  Investors  Notes for a price equal to the greater of: (i) the outstanding
principal  amount of the Investor  Note,  plus all accrued but unpaid  interest,
including default interest,  if any; and (ii) (x) the number of shares of common
stock into which the Investor  Note,  including all accrued but unpaid  interest
and default interest, if any, is then convertible, times (y) the average VWAP of
the common stock for the five trading  days  immediately  prior to the date that
the Investor Note is called for prepayment.  The Company has the right to prepay
the notes in cash at 102% of the outstanding principal and interest in the first
year or 101% of the  outstanding  principal and interest in the second year. The
associated  Investor Warrants are exercisable by the Investors for five years at
$3.57 per share, subject to adjustment upon issuance of shares or warrants below
market, of Company common stock.

LINE OF CREDIT

Effective  March 10, 2006, ERF Wireless,  Inc. (the  "Company"),  entered into a
two-year unsecured revolving credit facility with certain private investors that
provides a $2 million dollar line of credit. The terms of the two-year unsecured
revolving  credit  facility  allow ERF  Wireless  to draw upon the  facility  as
financing  requirements dictate and provide for quarterly interest payments at a
6% rate. The loan may be prepaid without penalty or repaid at maturity. At March
31, 2007, the balance of the credit line was  $2,213,041.  On April 5, 2007, the
Company amended its two-year  $3,000,000  revolving credit facility to mature on
February  28, 2009 and granted the lender a security  interest in all the assets
of the Door.  The  amendment  also  included a  provision  that in the event the
Company  draws down the full $3 million  amount  available  under the  revolving
credit  facility  on or prior to December  31,  2007,  and the Company  requires
additional  working  capital to pursue its business  strategy and operations and
has not closed on alternative debt or equity  financing  aggregating at least $1
million,  the lender has agreed to fund up to an  additional  $1 million  during
2007 under the same terms and  conditions.  The line of credit is secured by the
assets of the Company's Lubbock wireless ISP operations.

<PAGE>

--------------------------------------------------------------------------------
SCHEDULE 4(t) CERTAIN TRANSACTIONS

NoneExhibit 10.2

                          REGISTRATION RIGHTS AGREEMENT

     Registration Rights Agreement (the "Agreement"), dated as of June 14, 2007,
by and between ERF  Wireless,  Inc., a corporation  organized  under the laws of
State of Nevada,  with its principal executive office at 2911 South Shore Blvd.,
Suite 100, League City, TX 77573 (the "Company"),  and Dutchess Private Equities
Fund, Ltd., a Cayman Islands exempted  company,  with its principal office at 50
Commonwealth Avenue, Suite 2, Boston, MA 02116 (the "Holder").

     Whereas,  in connection  with the  Investment  Agreement by and between the
Company and the Investor of this date (the "Investment Agreement"),  the Company
has agreed to issue and sell to the Investor an  indeterminate  number of shares
of the Company's  Common Stock,  $.001 par value per share (the "Common Stock"),
to be purchased pursuant to the terms and subject to the conditions set forth in
the Investment Agreement; and

     Whereas,  to induce the  Investor to execute  and  deliver  the  Investment
Agreement,  the Company has agreed to provide certain  registration rights under
the  Securities  Act  of  1933,  as  amended,  and  the  rules  and  regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable  state  securities  laws,  with respect to the shares of Common Stock
issuable pursuant to the Investment Agreement.

     Now therefore,  in consideration  of the foregoing  promises and the mutual
covenants contained hereinafter and other good and valuable  consideration,  the
receipt and  sufficiency of which are hereby  acknowledged,  the Company and the
Investor hereby agree as follows:

Section 1. DEFINITIONS.

     As used in this  Agreement,  the  following  terms shall have the following
meanings:

     "Execution Date" means the date of this Agreement set forth above.

     "Investor"  means Dutchess  Private  Equities Fund,  Ltd., a Cayman Islands
exempted company.

     "Person" means a corporation,  a limited liability company, an association,
a partnership,  an organization,  a business,  an individual,  a governmental or
political subdivision thereof or a governmental agency.

     "Potential  Material Event" means any of the following:  (i) the possession
by  the  Company  of  material  information  not  ripe  for  disclosure  in  the
Registration Statement, which shall be evidenced by determinations in good faith
by the Board of Directors of the Company that disclosure of such  information in
the  Registration  Statement would be detrimental to the business and affairs of
the Company,  or (ii) any material  engagement  or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company,
be adversely affected by disclosure in the Registration  Statement at such time,
which  determination  shall be accompanied by a good faith  determination by the
Board of  Directors  of the Company  that the  Registration  Statement  would be
materially misleading absent the inclusion of such information.

     "Principal  Market"  shall  mean  The  American  Stock  Exchange,  National
Association of Securities Dealer's, Inc.,  Over-the-Counter  electronic bulletin
board, the Nasdaq National Market or The Nasdaq SmallCap Market whichever is the
principal market on which the Common Stock of the Company is listed.

     "Register,"  "Registered,"  and  "Registration"  refer to the  Registration
effected by  preparing  and filing one (1) or more  Registration  Statements  in
compliance  with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any
successor  rule providing for offering  securities on a continuous  basis ("Rule
415"),  and the declaration or ordering of  effectiveness  of such  Registration
Statement(s)  by the United  States  Securities  and  Exchange  Commission  (the
"SEC").

<PAGE>

     "Registrable  Securities"  means (i) the shares of Common  Stock  issued or
issuable  pursuant to the Investment  Agreement,  and (ii) any shares of capital
stock issued or issuable with respect to such shares of Common Stock, if any, as
a result of any stock  split,  stock  dividend,  recapitalization,  exchange  or
similar event or otherwise, which have not been (x) included in the Registration
Statement  that has  been  declared  effective  by the  SEC,  or (y) sold  under
circumstances  meeting  all of the  applicable  conditions  of Rule  144 (or any
similar provision then in force) under the 1933 Act.

     "Registration  Statement" means the  registration  statement of the Company
filed under the 1933 Act covering the Registrable Securities.

     All  capitalized  terms used in this  Agreement and not  otherwise  defined
herein  shall  have  the  same  meaning  ascribed  to them as in the  Investment
Agreement.

Section 2. REGISTRATION.

     (a)  The  Company  shall,  within  thirty  (30)  days  of the  date of this
Agreement,  file  with  the  SEC  the  Registration  Statement  or  Registration
Statements (as is necessary) on Form SB-2 (or, if such form is  unavailable  for
such a registration,  on such other form as is available for such registration),
covering the resale of all of the  Registrable  Securities,  which  Registration
Statement(s) shall state that, in accordance with Rule 416 promulgated under the
1933 Act, such Registration  Statement also covers such indeterminate  number of
additional  shares of Common  Stock as may become  issuable  upon stock  splits,
stock dividends or similar  transactions.  The Company shall initially  register
for  resale  10,000,000   shares  of  Common  Stock  and,   subsequent  to  this
Registration  Statement being deemed effective and all such shares being resold,
the Company  will  register  such  additional  shares as may be set forth in the
Investment Agreement.

     (b) The Company shall use all commercially  reasonable  efforts to have the
Registration  Statement(s)  declared  effective  by the SEC  within  one-hundred
twenty (120) calendar days after the Execution Date.

     (c) With the exception of the Company's existing obligation to register and
keep current an effective  registration  statement (file # 333-____) for certain
convertible  debt  instruments  held  by  Global  Capital  Advisors,  until  the
termination of the Investment  Agreement,  the Company agrees not to include any
other  securities  in  the  Registration   Statement  covering  the  Registrable
Securities  without Investor's prior written consent which Investor may withhold
in its sole  discretion.  Furthermore,  the Company agrees that it will not file
any other  Registration  Statement for other  securities,  until thirty calendar
days after the Registration Statement for the Registrable Securities is declared
effective by the SEC.

Section 3. RELATED OBLIGATIONS.

     At  such  time  as the  Company  is  obligated  to  prepare  and  file  the
Registration  Statement  with the SEC pursuant to Section 2(a), the Company will
effect the  registration  of the  Registrable  Securities in accordance with the
intended method of disposition  thereof and, with respect  thereto,  the Company
shall have the following obligations:

     (a) The Company shall use all commercially reasonable efforts to cause such
Registration   Statement  relating  to  the  Registrable  Securities  to  become
effective  within  one-hundred  twenty (120) days after the  Execution  Date and
shall keep such Registration  Statement  effective until the earlier to occur of
the  date  on  which  (A) the  Investor  shall  have  sold  all the  Registrable
Securities; or (B) the Investor has no right to acquire any additional shares of
Common Stock under the Investment  Agreement (the  "Registration  Period").  The
Registration  Statement  (including any  amendments or  supplements  thereto and
prospectuses  contained  therein)  shall not contain any untrue  statement  of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they  were  made,  not  misleading.  The  Company  shall  use  all  commercially
reasonable efforts to respond to all SEC comments within seven (7) business days
from  receipt  of such  comments  by the  Company.  The  Company  shall  use all
commercially  reasonable efforts to cause the Registration Statement relating to
the Registrable  Securities to become  effective no later than five (5) business
days after notice from the SEC that the  Registration  Statement may be declared
effective.  The Investor agrees to provide all information  which it is required
by law to provide to the Company,  including the intended  method of disposition
of the  Registrable  Securities,  and the Company's  obligations set forth above
shall be conditioned on the receipt of such information.

<PAGE>

     (b) The  Company  shall  prepare  and file  with  the SEC  such  amendments
(including  post-effective  amendments)  and  supplements  to  the  Registration
Statement  and  the  prospectus  used  in  connection  with  such   Registration
Statement,  which  prospectus  is to be filed  pursuant to Rule 424  promulgated
under the 1933 Act,  as may be  necessary  to keep such  Registration  Statement
effective during the Registration  Period, and, during such period,  comply with
the  provisions  of  the  1933  Act  with  respect  to  the  disposition  of all
Registrable  Securities of the Company  covered by such  Registration  Statement
until such time as all of such  Registrable  Securities shall have been disposed
of in  accordance  with the  intended  methods of  disposition  by the  Investor
thereof as set forth in such Registration  Statement. In the event the number of
shares of Common Stock covered by the  Registration  Statement filed pursuant to
this  Agreement  is at any time  insufficient  to cover  all of the  Registrable
Securities,  the Company shall amend such Registration  Statement, or file a new
Registration Statement (on the short form available therefor, if applicable), or
both, so as to cover all of the Registrable Securities, in each case, as soon as
practicable,  but in any  event  within  thirty  (30)  calendar  days  after the
necessity  therefor arises (based on the then Purchase Price of the Common Stock
and other  relevant  factors on which the  Company  reasonably  elects to rely),
assuming the Company has  sufficient  authorized  shares at that time, and if it
does not, within thirty (30) calendar days after such shares are authorized. The
Company shall use commercially reasonable efforts to cause such amendment and/or
new Registration  Statement to become effective as soon as practicable following
the filing thereof.

     (c) The Company  shall make  available  to the Investor  whose  Registrable
Securities  are included in any  Registration  Statement  and its legal  counsel
without charge (i) promptly after the same is prepared and filed with the SEC at
least one (1) copy of such Registration  Statement and any amendment(s) thereto,
including financial statements and schedules, all documents incorporated therein
by reference  and all exhibits,  the  prospectus  included in such  Registration
Statement  (including  each  preliminary  prospectus)  and, with regards to such
Registration Statement(s),  any correspondence by or on behalf of the Company to
the SEC or the staff of the SEC and any correspondence from the SEC or the staff
of the SEC to the Company or its representatives; (ii) upon the effectiveness of
any  Registration  Statement,  the Company  shall make  available  copies of the
prospectus,   via  EDGAR,  included  in  such  Registration  Statement  and  all
amendments and supplements  thereto;  and (iii) such other documents,  including
copies of any  preliminary or final  prospectus,  as the Investor may reasonably
request  from  time  to time in  order  to  facilitate  the  disposition  of the
Registrable Securities.

     (d) The Company shall use commercially  reasonable  efforts to (i) register
and qualify the Registrable  Securities  covered by the  Registration  Statement
under such  other  securities  or "blue  sky" laws of such  states in the United
States as the  Investor  reasonably  requests;  (ii)  prepare  and file in those
jurisdictions,   such  amendments  (including  post-effective   amendments)  and
supplements  to such  registrations  and  qualifications  as may be necessary to
maintain the effectiveness  thereof during the Registration  Period;  (iii) take
such other  actions as may be  necessary  to  maintain  such  registrations  and
qualifications in effect at all times during the Registration  Period,  and (iv)
take all  other  actions  reasonably  necessary  or  advisable  to  qualify  the
Registrable Securities for sale in such jurisdictions;  provided,  however, that
the  Company  shall not be required in  connection  therewith  or as a condition
thereto to (x)  qualify to do business  in any  jurisdiction  where it would not
otherwise  be  required  to qualify but for this  Section  3(d),  or (y) subject
itself to general taxation in any such jurisdiction.  The Company shall promptly
notify the  Investor  who holds  Registrable  Securities  of the  receipt by the
Company of any  notification  with respect to the suspension of the registration
or  qualification  of any of the  Registrable  Securities  for  sale  under  the
securities  or "blue sky" laws of any  jurisdiction  in the United States or its
receipt of actual notice of the  initiation or threatening of any proceeding for
such purpose.

     (e) As promptly as  practicable  after  becoming  aware of such event,  the
Company  shall  notify  Investor in writing of the  happening  of any event as a
result of which the prospectus included in the Registration  Statement,  as then
in effect,  includes an untrue statement of a material fact or omission to state
a  material  fact  required  to be  stated  therein  or  necessary  to make  the
statements  therein,  in light of the circumstances  under which they were made,
not misleading ("Registration Default") and use all diligent efforts to promptly
prepare a supplement  or amendment to such  Registration  Statement and take any
other  necessary  steps  to  cure  the  Registration  Default  (which,  if  such
Registration  Statement is on Form S-3, may consist of a document to be filed by
the Company with the SEC pursuant to Section  13(a),  13(c),  14 or 15(d) of the
1934  Act  (as  defined  below)  and  to be  incorporated  by  reference  in the
prospectus)  to correct such untrue  statement or omission,  and make  available
copies of such  supplement or amendment to the Investor.  The Company shall also
promptly notify the Investor (i) when a prospectus or any prospectus  supplement
or post-effective  amendment has been filed, and when the Registration Statement
or any  post-effective  amendment has become effective (the Company will prepare
notification of such  effectiveness  which shall be delivered to the Investor on
the same day of such  effectiveness  and by overnight mail),  additionally,  the
Company will promptly provide to the Investor, a copy of the effectiveness order
prepared by the SEC once it is received by the  Company;  (ii) of any request by
the SEC for amendments or supplements to the  Registration  Statement or related
prospectus  or  related   information,   (iii)  of  the   Company's   reasonable
determination  that a  post-effective  amendment to the  Registration  Statement
would be appropriate,  (iv) in the event the Registration Statement is no longer
effective,  or (v) if the  Registration  Statement  is stale as a result  of the
Company's  failure to timely  file its  financials  or  otherwise.  The  Company
acknowledges  that its failure to cure the Registration  Default within ten (10)
business  days will cause the Investor to suffer  damages in an amount that will
be difficult to ascertain. Accordingly, the parties agree that it is appropriate
to include a provision for liquidated damages. The parties acknowledge and agree
that the liquidated  damages provision set forth in this section  represents the
parties' good faith effort to quantify such damages and, as such, agree that the
form  and  amount  of such  liquidated  damages  are  reasonable  and  will  not
constitute a penalty.  It is the intention of the parties that interest  payable
under any of the terms of this  Agreement  shall not exceed the  maximum  amount
permitted  under any applicable  law. If a law, which applies to this Agreement,
which sets the  maximum  interest  amount,  is finally  interpreted  so that the
interest in connection with this Agreement exceeds the permitted  limits,  then:
(1) any such  interest  shall be reduced by the amount  necessary  to reduce the
interest to the  permitted  limit;  and (2) any sums already  collected (if any)
from the  Company  which  exceed the  permitted  limits  will be refunded to the
Company. The Investor may choose to make this refund by reducing the amount that
the  Company  owes under  this  Agreement  or by making a direct  payment to the
Company. If a refund reduces the amount that the Company owes the Investor,  the
reduction will be treated as a partial payment.

<PAGE>

     (f) The Company shall use all  commercially  reasonable  efforts to prevent
the  issuance  of any stop order or other  suspension  of  effectiveness  of the
Registration  Statement,  or the suspension of the  qualification  of any of the
Registrable  Securities  for sale in any  jurisdiction  and, if such an order or
suspension  is issued,  to obtain the  withdrawal of such order or suspension at
the  earliest  possible  moment and to notify the Investor  holding  Registrable
Securities  being sold of the issuance of such order and the resolution  thereof
or its receipt of actual notice of the  initiation  or threat of any  proceeding
concerning the effectiveness of the registration statement.

     (g) The  Company  shall  permit  the  Investor  and one (1) legal  counsel,
designated  by the  Investor,  to  review  and  comment  upon  the  Registration
Statement and all amendments and  supplements  thereto at least one (1) calendar
day prior to their filing with the SEC. However, any postponement of a filing of
a Registration  Statement or any  postponement of a request for  acceleration or
any  postponement  of the  effective  date or  effectiveness  of a  Registration
Statement by written  request of the  Investor  (collectively,  the  "Investor's
Delay") shall not act to trigger any penalty of any kind, or any cash amount due
or any  in-kind  amount  due the  Investor  from the  Company  under any and all
agreements  of any nature or kind  between  the Company  and the  Investor.  The
event(s) of an Investor's Delay shall act to suspend all obligations of any kind
or nature of the  Company  under any and all  agreements  of any  nature or kind
between the Company and the Investor.

     (h) At the request of the Investor,  the Company's counsel shall furnish to
the Investor an opinion letter  confirming the effectiveness of the registration
statement.  Such  opinion  letter  shall  be  issued  as  of  the  date  of  the
effectiveness  of the  registration  statement  and be in a form suitable to the
Investor.

     (i) The Company  shall hold in  confidence  and not make any  disclosure of
information concerning the Investor unless (i) disclosure of such information is
necessary to comply with federal or state  securities  laws, (ii) the disclosure
of such  information is necessary to avoid or correct a misstatement or omission
in any Registration Statement,  (iii) the release of such information is ordered
pursuant  to a subpoena  or other  final,  non-appealable  order from a court or
governmental body of competent  jurisdiction,  or (iv) such information has been
made generally  available to the public other than by disclosure in violation of
this Agreement or any other  agreement.  The Company agrees that it shall,  upon
learning that disclosure of such  information  concerning the Investor is sought
in or by a court or governmental body of competent jurisdiction or through other
means, give prompt written notice to the Investor and allow the Investor, at the
Investor's expense, to undertake appropriate action to prevent disclosure of, or
to obtain a protective order covering such information.

     (j) The Company shall use all commercially  reasonable  efforts to maintain
designation  and  quotation  of all the  Registrable  Securities  covered by any
Registration  Statement  on the  Principal  Market.  If,  despite the  Company's
commercially  reasonable efforts,  the Company is unsuccessful in satisfying the
preceding  sentence,  it shall use commercially  reasonable efforts to cause all
the Registrable Securities covered by any Registration Statement to be listed on
each other national  securities exchange and automated quotation system, if any,
on which  securities  of the same class or series issued by the Company are then
listed, if any, if the listing of such Registrable  Securities is then permitted
under the rules of such  exchange or system.  The Company shall pay all fees and
expenses in connection with satisfying its obligation under this Section 3(j).

     (k) The Company shall  cooperate with the Investor to facilitate the prompt
preparation and delivery of certificates representing the Registrable Securities
to  be  offered  pursuant  to  the   Registration   Statement  and  enable  such
certificates to be in such denominations or amounts,  as the case may be, as the
Investor  may  reasonably  request  (and  after  any  sales of such  Registrable
Securities  by the  Investor,  such  certificates  not bearing  any  restrictive
legend).

<PAGE>

     (l) The  Company  shall  provide a transfer  agent for all the  Registrable
Securities not later than the effective date of the first Registration Statement
filed pursuant hereto.

     (m) If  requested  by the  Investor,  the  Company  shall  (i) as  soon  as
reasonably  practical  incorporate in a prospectus  supplement or post-effective
amendment  such  information  as the Investor  reasonably  determines  should be
included   therein   relating  to  the  sale  and  distribution  of  Registrable
Securities,  including,  without  limitation,  information  with  respect to the
offering of the  Registrable  Securities to be sold in such offering;  (ii) make
all required filings of such prospectus  supplement or post-effective  amendment
as soon as  reasonably  possible  after  being  notified  of the  matters  to be
incorporated  in such prospectus  supplement or  post-effective  amendment;  and
(iii) supplement or make amendments to any Registration  Statement if reasonably
requested by the Investor.

     (n) The Company shall use all commercially  reasonable efforts to cause the
Registrable  Securities covered by the applicable  Registration  Statement to be
registered with or approved by such other  governmental  agencies or authorities
as  may  be  necessary  to  facilitate  the  disposition  of  such   Registrable
Securities.

     (o) The Company shall otherwise use all commercially  reasonable efforts to
comply with all applicable  rules and  regulations of the SEC in connection with
any registration hereunder.

     (p) Within one (1)  business  day after the  Registration  Statement  which
includes  Registrable  Securities is declared  effective by the SEC, the Company
shall deliver to the transfer agent for such Registrable Securities, with copies
to the Investor, confirmation that such Registration Statement has been declared
effective by the SEC.

     (q) The  Company  shall  take all other  reasonable  actions  necessary  to
expedite and facilitate  disposition  by the Investor of Registrable  Securities
pursuant to the Registration Statement.

Section 4. OBLIGATIONS OF THE INVESTOR.

     (a) At least five (5) calendar days prior to the first  anticipated  filing
date of the  Registration  Statement  the Company  shall  notify the Investor in
writing of the  information  the  Company  requires  from the  Investor  for the
Registration  Statement. It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable  Securities and the Investor agrees to furnish to the Company
that information  regarding itself, the Registrable  Securities and the intended
method of  disposition  of the  Registrable  Securities  as shall  reasonably be
required  to effect the  registration  of such  Registrable  Securities  and the
Investor shall execute such documents in connection  with such  registration  as
the Company may reasonably  request.  The Investor covenants and agrees that, in
connection  with  any  sale of  Registrable  Securities  by it  pursuant  to the
Registration  Statement, it shall comply with the "Plan of Distribution" section
of the then current prospectus relating to such Registration Statement.

     (b) The Investor, by its acceptance of the Registrable  Securities,  agrees
to  cooperate  with the  Company  as  reasonably  requested  by the  Company  in
connection  with  the  preparation  and  filing  of any  Registration  Statement
hereunder,  unless  the  Investor  has  notified  the  Company  in writing of an
election  to exclude  all of the  Investor's  Registrable  Securities  from such
Registration Statement.

     (c) The  Investor  agrees  that,  upon  receipt of written  notice from the
Company of the  happening of any event of the kind  described in Section 3(f) or
the  first  sentence  of  3(e),  the  Investor  will   immediately   discontinue
disposition of Registrable Securities pursuant to any Registration  Statement(s)
covering such Registrable  Securities until the Investor's receipt of the copies
of the  supplemented or amended  prospectus  contemplated by Section 3(f) or the
first sentence of 3(e).

     Section 5. EXPENSES OF REGISTRATION.

     All expenses, other than as set forth in the Investment Agreement, incurred
in connection with registrations  including comments,  filings or qualifications
pursuant to Sections 2 and 3, including,  without limitation,  all registration,
listing and  qualifications  fees,  printing and  accounting  fees, and fees and
disbursements  of counsel for the Company or for the  Investor  shall be paid by
the Company.  All such fees and expenses  shall be itemized and shall be limited
to no more than $5,000.

     Section 6. INDEMNIFICATION.

<PAGE>

     In the event any  Registrable  Securities are included in the  Registration
Statement under this Agreement:

     (a) To the  fullest  extent  permitted  by law,  the  Company,  under  this
Agreement,  will,  and hereby  does,  indemnify,  hold  harmless  and defend the
Investor who holds Registrable Securities,  the directors,  officers,  partners,
employees,  counsel,  agents,  representatives  of, and each Person, if any, who
controls,  any  Investor  within the  meaning of the 1933 Act or the  Securities
Exchange  Act of 1934,  as  amended  (the "1934  Act")  (each,  an  "Indemnified
Person"), against any losses, claims, damages,  liabilities,  judgments,  fines,
penalties,  charges,  costs,  attorneys'  fees,  amounts paid in  settlement  or
expenses, joint or several (collectively,  "Claims"), incurred in investigating,
preparing  or  defending  any  action,   claim,   suit,   inquiry,   proceeding,
investigation  or appeal  taken  from the  foregoing  by or before  any court or
governmental,  administrative  or  other  regulatory  agency,  body or the  SEC,
whether pending or threatened,  whether or not an indemnified party is or may be
a party thereto ("Indemnified Damages"), to which any of them may become subject
insofar  as such  Claims  (or  actions  or  proceedings,  whether  commenced  or
threatened,  in respect  thereof) arise out of or are based upon: (i) any untrue
statement or alleged  untrue  statement of a material  fact in the  Registration
Statement  or any  post-effective  amendment  thereto or in any  filing  made in
connection with the  qualification of the offering under the securities or other
"blue sky" laws of any  jurisdiction  in which the  Investor  has  requested  in
writing that the Company register or qualify the Shares ("Blue Sky Filing"),  or
the omission or alleged  omission to state a material fact required to be stated
therein  or  necessary  to  make  the  statements   therein,  in  light  of  the
circumstances under which the statements therein were made, not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
the final  prospectus  (as amended or  supplemented,  if the  Company  files any
amendment thereof or supplement thereto with the SEC) or the omission or alleged
omission to state  therein any material  fact  necessary to make the  statements
made therein,  in light of the circumstances  under which the statements therein
were made, not  misleading,  or (iii) any violation or alleged  violation by the
Company  of the 1933  Act,  the 1934  Act,  any other  law,  including,  without
limitation,  any state  securities  law,  or any rule or  regulation  thereunder
relating  to the offer or sale of the  Registrable  Securities  pursuant  to the
Registration  Statement (the matters in the foregoing  clauses (i) through (iii)
being,  collectively,  "Violations").  Subject to the  restrictions set forth in
Section 6(c) the Company shall reimburse the Investor and each such  controlling
person,  promptly as such expenses are incurred and are due and payable, for any
reasonable  legal  fees  or  other  reasonable  expenses  incurred  by  them  in
connection  with  investigating  or  defending  any such Claim.  Notwithstanding
anything  to  the  contrary  contained  herein,  the  indemnification  agreement
contained in this Section 6(a): (i) shall not apply to a Claim arising out of or
based  upon a  Violation  which  is due to  the  inclusion  in the  Registration
Statement of the information  furnished to the Company by any Indemnified Person
expressly  for  use in  connection  with  the  preparation  of the  Registration
Statement or any such amendment thereof or supplement thereto; (ii) shall not be
available  to the extent such Claim is based on (a) a failure of the Investor to
deliver or to cause to be delivered the prospectus made available by the Company
or (b) the  Indemnified  Person's use of an incorrect  prospectus  despite being
promptly  advised in advance by the Company in writing not to use such incorrect
prospectus;  (iii) any  claims  based on the  manner of sale of the  Registrable
Securities by the Investor or of the Investor's  failure to register as a dealer
under  applicable  securities  laws; (iv) any omission of the Investor to notify
the  Company  of any  material  fact that  should be stated in the  Registration
Statement or prospectus  relating to the Investor or the manner of sale; and (v)
any  amounts  paid in  settlement  of any Claim if such  settlement  is effected
without the prior  written  consent of the Company,  which  consent shall not be
unreasonably  withheld.  Such  indemnity  shall  remain in full force and effect
regardless of any investigation  made by or on behalf of the Indemnified  Person
and shall  survive  the resale of the  Registrable  Securities  by the  Investor
pursuant to the Registration Statement.

     (b) In  connection  with any  Registration  Statement in which  Investor is
participating,  the Investor  agrees to severally  and jointly  indemnify,  hold
harmless  and defend,  to the same extent and in the same manner as is set forth
in Section 6(a), the Company,  each of its  directors,  each of its officers who
signs the Registration Statement,  each Person, if any, who controls the Company
within  the  meaning  of the 1933 Act or the 1934 Act and the  Company's  agents
(collectively and together with an Indemnified Person, an "Indemnified  Party"),
against  any  Claim  or  Indemnified  Damages  to which  any of them may  become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or
Indemnified  Damages arise out of or are based upon any Violation,  in each case
to the  extent,  and  only to the  extent,  that  such  Violation  is due to the
inclusion in the Registration  Statement of the written information furnished to
the  Company  by  the  Investor  expressly  for  use  in  connection  with  such
Registration  Statement;  and,  subject  to  Section  6(c),  the  Investor  will
reimburse any legal or other expenses  reasonably incurred by them in connection
with  investigating  or defending any such Claim;  provided,  however,  that the
indemnity  agreement  contained  in this  Section  6(b) and the  agreement  with
respect to  contribution  contained in Section 7 shall not apply to amounts paid
in  settlement  of any Claim if such  settlement  is effected  without the prior
written  consent  of the  Investor,  which  consent  shall  not be  unreasonably
withheld;  provided,  further,  however,  that the Investor shall only be liable
under this  Section  6(b) for that amount of a Claim or  Indemnified  Damages as
does not exceed the net  proceeds  to such  Investor  as a result of the sale of
Registrable Securities pursuant to such Registration  Statement.  Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on  behalf  of such  Indemnified  Party  and  shall  survive  the  resale of the
Registrable  Securities by the Investor pursuant to the Registration  Statement.
Notwithstanding  anything to the contrary contained herein, the  indemnification
agreement  contained  in this  Section  6(b)  with  respect  to any  preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the  preliminary  prospectus
were  corrected  on a  timely  basis  in the  prospectus,  as  then  amended  or
supplemented.  This  indemnification  provision  shall apply  separately to each
Investor and liability hereunder shall not be joint and several.

<PAGE>

     (c) Promptly  after receipt by an Indemnified  Person or Indemnified  Party
under this Section 6 of notice of the  commencement  of any action or proceeding
(including  any  governmental  action or  proceeding)  involving  a Claim,  such
Indemnified  Person or Indemnified Party shall, if a Claim in respect thereof is
to be made against any  indemnifying  party under this Section 6, deliver to the
indemnifying  party  a  written  notice  of the  commencement  thereof,  and the
indemnifying  party shall have the right to  participate  in, and, to the extent
the indemnifying  party so desires,  jointly with any other  indemnifying  party
similarly  noticed,  to assume  control  of the  defense  thereof  with  counsel
mutually  satisfactory to the indemnifying  party and the Indemnified  Person or
the  Indemnified  Party,  as  the  case  may  be;  provided,  however,  that  an
Indemnified  Person or Indemnified  Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying  party, if, in
the  reasonable  opinion  of  counsel  retained  by the  Indemnified  Person  or
Indemnified  Party, the  representation by counsel of the Indemnified  Person or
Indemnified  Party and the  indemnifying  party  would be  inappropriate  due to
actual or  potential  differing  interests  between such  Indemnified  Person or
Indemnified  Party and any  other  party  represented  by such  counsel  in such
proceeding.  The  indemnifying  party shall pay for only one (1) separate  legal
counsel for the Indemnified  Persons or the Indemnified  Parties, as applicable,
and such counsel shall be selected by the Investor,  if the Investor is entitled
to  indemnification  hereunder,  or the  Company,  if the Company is entitled to
indemnification  hereunder, as applicable.  The Indemnified Party or Indemnified
Person shall cooperate fully with the indemnifying  party in connection with any
negotiation or defense of any such action or Claim by the indemnifying party and
shall furnish to the indemnifying party all information  reasonably available to
the  Indemnified  Party or  Indemnified  Person which  relates to such action or
Claim.  The indemnifying  party shall keep the Indemnified  Party or Indemnified
Person  fully  apprised  at all  times as to the  status of the  defense  or any
settlement  negotiations  with respect thereto.  No indemnifying  party shall be
liable for any settlement of any action,  claim or proceeding  affected  without
its written consent,  provided,  however,  that the indemnifying party shall not
unreasonably  withhold,  delay or condition its consent.  No indemnifying  party
shall,  without  the consent of the  Indemnified  Party or  Indemnified  Person,
consent  to  entry  of any  judgment  or  enter  into  any  settlement  or other
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified  Party or Indemnified  Person of a
release from all liability in respect to such Claim.  Following  indemnification
as provided for  hereunder,  the  indemnifying  party shall be subrogated to all
rights of the Indemnified Party or Indemnified  Person with respect to all third
parties,  firms or corporations relating to the matter for which indemnification
has been made. The failure to deliver written notice to the  indemnifying  party
within a  reasonable  time of the  commencement  of any such  action  shall  not
relieve such  indemnifying  party of any liability to the Indemnified  Person or
Indemnified  Party  under  this  Section  6,  except  to  the  extent  that  the
indemnifying party is prejudiced in its ability to defend such action.

     (d) The indemnity  agreements  contained herein shall be in addition to (i)
any cause of action or similar  right of the  Indemnified  Party or  Indemnified
Person against the  indemnifying  party or others,  and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.

Section 7. CONTRIBUTION.

     To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying  party agrees to make the maximum  contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest  extent  permitted  by law;  provided,  however,  that:  (i) no
contribution  shall be made under  circumstances  where the maker would not have
been liable for  indemnification  under the fault standards set forth in Section
6;  (ii)  no   seller   of   Registrable   Securities   guilty   of   fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution  from any seller of Registrable  Securities who was not
guilty of fraudulent misrepresentation;  and (iii) contribution by any seller of
Registrable  Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.

Section 8. REPORTS UNDER THE 1934 ACT.

     With a view to making  available  to the  Investor the benefits of Rule 144
promulgated  under the 1933 Act or any other  similar rule or  regulation of the
SEC that may at any time permit the Investor to sell  securities  of the Company
to the public  without  registration  ("Rule  144"),  provided that the Investor
holds any Registrable Securities are eligible for resale under Rule 144 (k), the
Company agrees to:

     (a)  make  and keep  public  information  available,  as  those  terms  are
understood and defined in Rule 144;

     (b) file with the SEC in a timely  manner all reports  and other  documents
required  of the  Company  under  the  1933  Act and the 1934 Act so long as the
Company remains subject to such  requirements  (it being understood that nothing
herein  shall  limit  the  Company's  obligations  under  Section  5(c)  of  the
Investment  Agreement)  and the filing of such  reports and other  documents  is
required for the applicable provisions of Rule 144; and

<PAGE>

     (c) furnish to the Investor, promptly upon request, (i) a written statement
by the Company that it has complied with the reporting requirements of Rule 144,
the  1933  Act and the  1934  Act,  (ii) a copy of the  most  recent  annual  or
quarterly report of the Company and such other reports and documents so filed by
the Company,  and (iii) such other information as may be reasonably requested to
permit  the  Investor  to sell  such  securities  pursuant  to Rule 144  without
registration.

Section 9. NO ASSIGNMENT OF REGISTRATION RIGHTS.

     The rights and obligations under this Agreement shall not be assignable.

Section 10. AMENDMENT OF REGISTRATION RIGHTS.

     The  provisions  of this  Agreement  may be amended  only with the  written
consent of the Company and Investor.

Section 11. MISCELLANEOUS.

     (a) Any notices or other  communications  required or permitted to be given
under the terms of this Agreement that must be in writing will be deemed to have
been delivered (i) upon receipt, when delivered  personally;  (ii) upon receipt,
when sent by facsimile  (provided a confirmation of transmission is mechanically
or electronically generated and kept on file by the sending party); or (iii) one
(1) day after deposit with a nationally  recognized  overnight delivery service,
in each case properly  addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:

         If to the Company:

            ERF Wireless, Inc.
            2911 South Shore Blvd., Suite 100
            League City, TX  77573
            Telephone: (281) 538-2101
            Facsimile:

         If to the Investor:

            Dutchess Private Equities Fund, Ltd.
            50 Commonwealth Ave, Suite 2
            Boston, MA 02116
            Telephone: (617) 301-4700
            Facsimile:  (617) 249-0947

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

     (b)  Failure  of any  party to  exercise  any right or  remedy  under  this
Agreement or otherwise,  or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

     (c) This  Agreement and the  Transaction  Documents  constitute  the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions,  promises, warranties or undertakings, other
than those set forth or referred to herein and therein.

     (d) This  Agreement  and the  Transaction  Documents  supersede  all  prior
agreements  and  understandings  among the parties  hereto  with  respect to the
subject matter hereof and thereof.

<PAGE>

     (e) The headings in this  Agreement are for  convenience  of reference only
and shall not limit or otherwise affect the meaning hereof. Whenever required by
the  context  of this  Agreement,  the  singular  shall  include  the plural and
masculine  shall include the feminine.  This Agreement shall not be construed as
if it had been prepared by one of the parties,  but rather as if all the parties
had prepared the same.

     (f) This Agreement may be executed in two or more  identical  counterparts,
each of which shall be deemed an original but all of which shall  constitute one
and the same  agreement.  This  Agreement,  once  executed  by a  party,  may be
delivered to the other party hereto by facsimile  transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.

     (g) Each party shall do and perform, or cause to be done and performed, all
such  further  acts and  things,  and shall  execute  and deliver all such other
agreements,  certificates,  instruments  and  documents,  as the other party may
reasonably  request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.

     (h) In case any provision of this Agreement is held by a court of competent
jurisdiction  to be excessive in scope or  otherwise  invalid or  unenforceable,
such provision shall be adjusted rather than voided, if possible,  so that it is
enforceable to the maximum extent possible,  and the validity and enforceability
of the remaining provisions of this Agreement will not in any way be affected or
impaired thereby.

Section 12. DISPUTES SUBJECT TO ARBITRATION GOVERNED BY MASSACHUSETTS LAW

     All  disputes  arising  under  this  agreement  shall  be  governed  by and
interpreted in accordance with the laws of the  Commonwealth  of  Massachusetts,
without  regard to principles of conflict of laws. The parties to this agreement
will submit all disputes  arising under this agreement to arbitration in Boston,
Massachusetts before a single arbitrator of the American Arbitration Association
("AAA").  The  arbitrator  shall be selected by  application of the rules of the
AAA, or by mutual agreement of the parties, except that such arbitrator shall be
an attorney  admitted to practice law in the Commonwealth of  Massachusetts.  No
party to this agreement will challenge the  jurisdiction or venue  provisions as
provided in this section.  Nothing contained herein shall prevent the party from
obtaining an injunction.

                                      *.*.*
<PAGE>

SIGNATURE PAGE OF REGISTRATION RIGHTS AGREEMENT

Your  signature on this  Signature  Page evidences your agreement to be bound by
the terms and conditions of the Investment Agreement and the Registration Rights
Agreement as of the date first written above.

The undersigned  signatory hereby certifies that he has read and understands the
Registration Rights Agreement,  and the representations  made by the undersigned
in this  Registration  Rights Agreement are true and accurate,  and agrees to be
bound by its terms.

                                           DUTCHESS PRIVATE EQUITIES FUND, LTD.,

                                           By: _________________________________
                                               Douglas H. Leighton, Director

                                           ERF WIRELESS, INC.

                                           By: _________________________________
                                               R. Greg Smith, CFO

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