Document:

EXHIBIT 10.3

                                Walton C. Vance
                       21141 Canada Road, Apartment 18-C
                             Lake Forest, CA 92630
                                  949/587-9433
                              waltonv@hotmail.com

April 30, 2000

Ilyas Chaudhary, Chairman
Capco Energy, Inc.
2922 East Chapman Avenue, Suite 202
Orange, CA  92869

Dear Ilyas:

This letter  confirms  that the  arrangement  between  Capco  Energy,  Inc.  and
subsidiaries  ("Capco")  and me regarding  settlement  of amounts owed to me for
services  rendered to Capco during the period January 3 to April 14, 2000, is as
follows:

The amount of $20,280.00  (statement  attached) to be paid in three installments
of $5,000.00  each, the first of which is to be paid on May 2, 2000 and the next
two installments on May 25, 2000 and June 26, 2000, respectively;  and one final
installment of $5,280.00 on July 25, 2000.

Issuance of 10,000 shares of registered, fully-paid,  nonassessable common stock
of Capco  Energy,  Inc.  Registration  of such shares will take place as soon as
practicable.

Please indicate  confirmation of this  arrangement by signing this letter in the
space provided below and returning it to my attention.

Sincerely,

/s/ Walton C. Vance
Walton C. Vance

Agreed and accepted:

/s/ Dennis R. Staal                   5-2-00
-------------------                ----------------
(name and title)                   (date)EXHIBIT 10.4

                                 John R. Aitken
                             25022 Hollyberry Lane
                             Laguna Niguel CA 92677
                                  949/448 9810
                          johnaitken@worldnet.att.net

April 30, 2000

Ilyas Chaudhary, Chairman
Capco Energy, Inc.
2922 E. Chapman, Ste.202
Orange, CA  92869

Dear Ilyas:

This letter  confirms  that the  arrangement  between  Capco  Energy,  Inc.  and
subsidiaries  ("Capco")  and me regarding  settlement  of amounts owed to me for
services rendered to Capco during the period to May 1, 2000, is as follows:

The  amount of $35,000 to be paid in 2  installments,  being  $10,000 on May 15,
2000,  and  $25,000 on June 30, 2000  respectively.  Capco will also issue 5,000
shares of registered,  fully paid,  nonassessable  common stock of Capco Energy,
Inc.  Registration  of such  shares  will  take  place  via an S-8  Registration
statement to be filed by June 1, 2000.

Thank you for your agreement on this matter.

Sincerely,

/s/ John R. Aitken
John R. AitkenEXHIBIT 4.2

                SECURED CONVERTIBLE DEBENTURE PURCHASE AGREEMENT

                                      Among

                              SITESTAR CORPORATION

                                       and

                         THE INVESTORS SIGNATORY HERETO

                            Dated as of May 11, 2000

        SECURED  CONVERTIBLE  DEBENTURE PURCHASE  AGREEMENT (this  "Agreement"),
dated as of May 11, 2000, among SITESTAR CORPORATION,  a Nevada corporation (the
"Company"),  and  the  investors  signatory  hereto  (each  such  investor  is a
"Purchaser" and all such investors are, collectively, the "Purchasers").

        WHEREAS,  subject  to  the  terms  and  conditions  set  forth  in  this
Agreement,  the  Company  desires  to issue and sell to the  Purchasers  and the
Purchasers,  severally  and not jointly,  desire to purchase from the Company an
aggregate  principal amount of $500,000 of the Company's 12% Secured Convertible
Debentures,  due May 1,  2001,  which  shall  be in the form of  Exhibit  A (the
"Debentures")  and which are  convertible  into shares of the Company's  Class A
Common Stock, no par value per share (the "Common Stock").

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

                                    ARTICLE I
                                PURCHASE AND SALE

        1.1 The Closing.

               (a)  Subject  to the  terms  and  conditions  set  forth  in this
Agreement, the Company shall issue and sell to the Purchasers and the Purchasers
shall,  severally and not jointly,  purchase from the Company the Debentures for
an aggregate purchase price of $500,000. The closing of the purchase and sale of
the  Debentures  (the  "Closing")  shall  take  place  at the  offices  of  Owen
Naccarato, Esq.("Escrowee"),  immediately following the execution hereof or such
later date as the parties  shall agree.  The date of the Closing is  hereinafter
referred to as the "Closing Date."

                                       1
<PAGE>

               (b) Prior to the Closing Date, the parties shall deliver or shall
cause to be delivered the  following:  (A) the Company shall deliver to Escrowee
for the benefit of the Purchasers (1) the Debentures in the aggregate  principal
amount  indicated  below each  Purchaser's  name on the  signature  page to this
Agreement,  registered in the name of each such Purchaser,  (2) two Common Stock
purchase warrants for every two dollars of principal amount indicated below each
Purchaser's  name on the signature  page of this Agreement , each in the form of
Exhibit D,  registered in the name of the  appropriate  Purchasers,  pursuant to
which  the  Purchasers  shall  have the  right at any time and from time to time
thereafter  through  the 3rd  anniversary  of the  Closing  Date to  acquire  an
aggregate  of 250,000  shares of Common  Stock,  at an exercise  price per share
(subject to adjustment as provided  therein)  equal to $.77  (collectively,  the
"Warrants"),  (3) the legal opinion of Troop, Steuber,  Pasich, Reddick & Tobey,
LLP,  outside  counsel to the  Company,  in the form  acceptable  to the parties
hereto,  and (4) all other documents,  instruments and writings required to have
been  delivered  at or prior to the  Closing  by the  Company  pursuant  to this
Agreement,  including (A) an executed  Registration Rights Agreement,  dated the
date hereof, by and among the Company and the Purchasers, in the form of Exhibit
B (the "Registration  Rights  Agreement"),  (B) an executed Security  Agreement,
dated the date hereof, by and among the Company and the Purchasers,  in the form
of Exhibit F (the  "Security  Agreement"),  (E) the  Irrevocable  Transfer Agent
Instructions,  in the form of Exhibit E,  delivered to and  acknowledged  by the
Company's  transfer  agent (the  "Transfer  Agent  Instructions"),  and (B) each
Purchaser  shall  deliver  toEscrowee,  for delivery to the Company the purchase
price for the Debentures  indicated below such Purchaser's name on the signature
page to this Agreement in United States dollars in immediately  available  funds
by wire  transfer  to an account  designated  in writing by the Company for such
purpose, and to Escrowee for delivery upon funding,  all documents,  instruments
and writings  required to have been delivered at or prior to the Closing Date by
such Purchaser pursuant to this Agreement,  including,  without  limitation,  an
executed Registration Rights Agreement, Security Agreement.

               (c)  The  Company  and  the  Purchasers   agree  that,  upon  the
declaration of effectiveness of the Registration  Statement to be filed pursuant
to the Registration  Rights Agreement (the "Effective Date "), provided that the
trading price of the Common Stock is at least $1.00 for the ten (10) consecutive
trading days  immediately  preceding the Effective  Date, the Purchasers will be
obligated to purchase,  and the Company  shall be obligated to sell and issue to
the Purchasers, additional debentures ("Additional Debentures") in the aggregate
principal  amount of Five Hundred  Thousand  ($500,000) and additional  warrants
("Additional  Warrants")  to purchase an aggregate  of 250,000  shares of Common
Stock  for  an  aggregate  purchase  price  of  Five  Hundred  Thousand  Dollars
($500,000),  with the closing of such  purchase to occur within thirty (30) days
of the Effective Date. The terms of the Additional Debentures and the Additional
Warrants  shall be identical to the terms of the  Debentures and the Warrants to
be issued on the Closing Date,  provided that the Initial  Conversion  Price (as
defined in the Debentures) for the Additional  Debentures shall be seventy-seven
hundredths of one dollar  ($.77).  The Common Stock  underlying  the  Additional
Debentures  and the  Additional  Warrants  shall be  Registrable  Securities (as
defined in the  Registration  Rights  Agreement)  and shall be  included  in the
Registration Statement to be filed pursuant to the Registration Rights Agreement

                                       2
<PAGE>

               1.2  Certain  Defined  Terms.  For  purposes  of this  Agreement,
"Conversion  Price,"  "Original  Issue  Date" and  "Trading  Day" shall have the
meanings set forth in the  Debentures;  "Business Day" shall mean any day except
Saturday,  Sunday and any day which shall be a federal legal holiday or a day on
which banking  institutions  in the State of New York or the State of California
are  authorized  or required by law or other  governmental  action to close.  .2
Certain  Defined  Terms.  For  purposes  of  this  Agreement,   ConversionPrice,
OriginalIssueDate  and  TradingDay  shall  have the  meanings  set  forth in the
Debentures;  BusinessDay shall mean any day except Saturday,  Sunday and any day
which shall be a federal legal holiday or a day on which banking institutions in
the State of New York or the State of California  are  authorized or required by
law or other governmental action to close..2 Certain Defined Terms. For purposes
of this Agreement, ConversionPrice,  OriginalIssueDate and TradingDay shall have
the meanings set forth in the Debentures;  BusinessDay shall mean any day except
Saturday,  Sunday and any day which shall be a federal legal holiday or a day on
which banking  institutions  in the State of New York or the State of California
are  authorized  or  required  by law or other  governmental  action to close..2
Certain  Defined  Terms.  For  purposes  of  this  Agreement,   ConversionPrice,
OriginalIssueDate  and  TradingDay  shall  have the  meanings  set  forth in the
Debentures;  BusinessDay shall mean any day except Saturday,  Sunday and any day
which shall be a federal legal holiday or a day on which banking institutions in
the State of New York or the State of California  are  authorized or required by
law or other governmental action to close.

                                   ARTICLE II
                         REPRESENTATIONS AND WARRANTIES

        2.1  Representations and Warranties of the Company.  The  Company hereby
 hereby makes the following representations and warranties to the Purchasers:

                                       3
<PAGE>

               (a) Organization and Qualification.  The Company is a corporation
duly  incorporated,  validly existing and in good standing under the laws of the
State of Nevada, with the requisite corporate power and authority to own and use
its properties  and assets and to carry on its business as currently  conducted.
The  Company  has no  subsidiaries  other than as set forth in  Schedule  2.1(a)
(collectively the  "Subsidiaries").  Each of the Subsidiaries is an entity, duly
incorporated or otherwise organized, validly existing and in good standing under
the  laws  of  the  jurisdiction  of  its   incorporation  or  organization  (as
applicable), with the full power and authority to own and use its properties and
assets and to carry on its business as currently conducted.  Each of the Company
and the Subsidiaries is duly qualified to do business and is in good standing as
a foreign  corporation in each  jurisdiction in which the nature of the business
conducted or property  owned by it makes such  qualification  necessary,  except
where the failure to be so  qualified or in good  standing,  as the case may be,
could not, individually or in the aggregate,  (x) adversely affect the legality,
validity or  enforceability  of the  Debentures  or any of this  Agreement,  the
Registration  Rights  Agreement,   the  Warrants,   or  the  Security  Agreement
(collectively,  the "Transaction  Documents"),  (y) have or result in a material
adverse effect on the results of  operations,  assets,  prospects,  or condition
(financial or otherwise) of the Company and the Subsidiaries,  taken as a whole,
or (z) adversely impair the Company's ability to perform fully on a timely basis
its obligations under any of the Transaction  Documents (any of (x), (y) or (z),
a "Material Adverse Effect").

               (b)    Authorization; Enforcement.  The Company has the requisite
corporate  power and authority to enter into and to consummate the  transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations  thereunder.  The execution and delivery of each of the  Transaction
Documents  by  the  Company  and  the  consummation  by it of  the  transactions
contemplated  thereby have been duly  authorized by all necessary  action on the
part of the Company and no further  action is required by the  Company.  Each of
the  Transaction  Documents  and the  Debentures  has been duly  executed by the
Company and, when  delivered (or filed,  as the case may be) in accordance  with
the terms  hereof,  will  constitute  the valid and  binding  obligation  of the
Company  enforceable  against the Company in accordance with its terms.  Neither
the Company nor any  Subsidiary is in violation of any of the  provisions of its
respective certificate of incorporation, by-laws or other charter documents.

               (c)   Capitalization.   The  number  of  authorized,  issued  and
outstanding  capital  stock of the Company is set forth in Schedule  2.1(c).  No
shares of Common Stock are entitled to preemptive or similar rights,  nor is any
holder of the Common Stock  entitled to preemptive or similar rights arising out
of any  agreement  or  understanding  with the  Company  by virtue of any of the
Transaction  Documents.  Except  as a  result  of the  purchase  and sale of the
Debentures  and the Warrants and except as disclosed in Schedule  2.1(c),  there
are no outstanding  options,  warrants,  script rights to subscribe to, calls or
commitments of any character  whatsoever  relating to, or securities,  rights or

                                       4
<PAGE>

obligations  convertible  into or  exchangeable  for,  or giving  any Person (as
defined  below)  any right to  subscribe  for or  acquire,  any shares of Common
Stock, or contracts,  commitments,  understandings, or arrangements by which the
Company or any Subsidiary is or may become bound to issue  additional  shares of
Common Stock, or securities or rights convertible or exchangeable into shares of
Common Stock. To the knowledge of the Company,  except as specifically disclosed
in the SEC Documents (as defined below) or Schedule  2.1(c),  no Person or group
of related  Persons  beneficially  owns (as  determined  pursuant  to Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")),  or has the right to acquire by agreement with or by obligation  binding
upon the  Company,  in excess of 5% of the Common  Stock.  A  "Person"  means an
individual or corporation,  partnership,  trust,  incorporated or unincorporated
association,  joint venture,  limited  liability  company,  joint stock company,
government (or an agency or subdivision thereof) or other entity of any kind.

               (d) Issuance of the  Debentures and the  Warrants. The Debentures
and the Warrants are duly authorized and, when issued and paid for in accordance
with  the  terms  hereof,  will be duly  and  validly  issued,  fully  paid  and
nonassessable,  free and clear of all  liens,  encumbrances  and rights of first
refusal of any kind (collectively,  "Liens"). The Company has on the date hereof
and will, at all times while the  Debentures  and the Warrants are  outstanding,
maintain an adequate reserve of duly authorized shares of Common Stock, reserved
for issuance to the holders of the Debentures and the Warrants,  to enable it to
perform its conversion, exercise and other obligations under this Agreement, the
Debentures  and the Warrants.  Such number of reserved and  available  shares of
Common  Stock is not less  than the sum of (i) 200% of the  number  of shares of
Common Stock which would be issuable upon  conversion in full of the Debentures,
assuming such conversion occurred on the Original Issue Date for the Debentures,
the Filing Date or the  Effectiveness  Date (each as defined in the Registration
Rights Agreement), whichever yields the lowest Conversion Price, (ii) the number
of shares of Common Stock issuable upon exercise of the Warrants,  and (iii) the
number of shares  Common Stock which would be issuable  upon payment of interest
on the Debentures,  assuming the Debentures are outstanding for one year and all
interest  is paid in  shares of Common  Stock  (such  number of shares of Common
Stock as contemplated in clauses  (i)-(iii),  the "Initial  Minimum").  All such
authorized  shares of Common  Stock shall be duly  reserved  for issuance to the
holders of the Debentures and the Warrants.  The shares of Common Stock issuable
upon  conversion  of the  Debentures,  as payment of  interest  thereon and upon
exercise of the Warrants are collectively  referred to herein as the "Underlying
Shares." The Debentures, the Warrants and the Underlying Shares are collectively
referred  to herein as, the  "Securities."  When issued in  accordance  with the
Debentures  and the Warrants,  the  Underlying  Shares will be duly  authorized,
validly issued, fully paid and nonassessable, free and clear of all Liens.

                                       5
<PAGE>

               (e) No Conflicts.  The  execution,  delivery  and  performance of
the Transaction  Documents by the Company and the consummation by the Company of
the transactions  contemplated  thereby do not and will not (i) conflict with or
violate any provision of its articles of incorporation,  bylaws or other charter
documents  (each  as  amended  through  the date  hereof),  or (ii)  subject  to
obtaining  the  Required  Approvals  (as  defined  below),   conflict  with,  or
constitute  a default  (or an event  which with  notice or lapse of time or both
would  become a default)  under,  or give to others  any rights of  termination,
amendment,  acceleration or cancellation (with or without notice,  lapse of time
or both) of, any agreement, credit facility, indenture or instrument (evidencing
a Company debt or otherwise)  to which the Company or any  Subsidiary is a party
or by which any property or asset of the Company or any  Subsidiary  is bound or
affected,  or (iii) result in a violation of any law, rule,  regulation,  order,
judgment,  injunction,  decree or other restriction of any court or governmental
authority  to  which  the  Company  is  subject  (including  Federal  and  state
securities  laws and  regulations),  or by which  any  property  or asset of the
Company is bound or  affected,  except in the case of each of  clauses  (ii) and
(iii),  as could  not,  individually  or in the  aggregate,  have or result in a
Material  Adverse Effect.  The business of the Company is not being conducted in
violation of any law,  ordinance or  regulation of any  governmental  authority,
except for violations which, individually or in the aggregate, could not have or
result in a Material Adverse Effect.

               (f) Filings,  Consents  and  Approvals. Neither  the  Company nor
any Subsidiary is required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or  registration  with,  any court or
other Federal,  state, local or other governmental  authority or other Person in
connection  with the execution,  delivery and  performance by the Company of the
Transaction  Documents,  other than (i) the filings required pursuant to Section
3.11,  (ii)  the  filing  with  the  Securities  and  Exchange  Commission  (the
"Commission") of a registration  statement meeting the requirements set forth in
the  Registration  Rights  Agreement  and covering the resale of the  Underlying
Shares by the Purchasers (the "Underlying Shares Registration Statement"), (iii)
the  application(s)  to  the  Nasdaq  National  Market  or  OTC  Bulletin  Board
("NASDAQ") for the listing of the Underlying Shares for trading on the NASDAQ or
OTC Bulletin Board (and with any other national securities exchange or market on
which the Common Stock is then listed), (iv) applicable Blue Sky filings and (v)
in  all  other  cases  where  the  failure  to  obtain  such  consent,   waiver,
authorization  or  order,  or to  give  such  notice  or  make  such  filing  or
registration  could not have or result in,  individually or in the aggregate,  a
Material Adverse Effect (collectively, the "Required Approvals").

               (g)   Litigation;   Proceedings. Except as specifically disclosed
in Schedule 2.1(g), there is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting  the  Company or any of its  Subsidiaries  or any of their  respective
properties  before or by any court,  governmental  or  administrative  agency or
regulatory  authority  (Federal,  state,  county,  local or  foreign)  which (i)
adversely affects or challenges the legality,  validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, individually or in
the aggregate, have or result in a Material Adverse Effect.

                                       6
<PAGE>

               (h)   No Default  or  Violation.   Neither  the  Company  nor any
Subsidiary (i) is in default under or in violation of (and no event has occurred
which has not been waived  which,  with  notice or lapse of time or both,  would
result in a default by the Company or any Subsidiary under), nor has the Company
or any Subsidiary received notice of a claim that it is in default under or that
it is in  violation  of, any  indenture,  loan or credit  agreement or any other
agreement  or  instrument  to  which  it is a party or by which it or any of its
properties is bound, (ii) is in violation of any order of any court,  arbitrator
or  governmental  body,  or  (iii)  is in  violation  of any  statute,  rule  or
regulation of any governmental authority, except as could not individually or in
the  aggregate,  have or result  in a  Material  Adverse  Effect.  The  security
interests  granted to the  Purchasers  pursuant to the Security  Agreement  will
convey and grant to the Purchasers a first priority  security interest in all of
the Collateral (as such terms is defined in such agreements).

               (i)   Private  Offering.    Assuming   the   accuracy   of    the
representations   and  warranties  of  the  Purchasers  set  forth  in  Sections
2.2(b)-(g),  the offer, issuance and sale of the Securities to the Purchasers as
contemplated  hereby  are  exempt  from  the  registration  requirements  of the
Securities Act of 1933, as amended (the "Securities  Act").  Neither the Company
nor any Person  acting on its behalf has taken any action that could subject the
offering, issuance or sale of the Securities to the registration requirements of
the Securities Act.

               (j)  SEC  Documents;  Financial  Statements.  Except as set forth
in Schedule 2.1 (j) attached hereto,  the Company has filed all reports required
to be filed by it under the Exchange Act, including pursuant to Section 13(a) or
15(d)  thereof,  for the three years  preceding the date hereof (or such shorter
period as the Company was required by law to file such  material) (the foregoing
materials  being  collectively  referred to herein as the "SEC  Documents"  and,
together with the Schedules to this Agreement as well as due diligence materials
delivered to Purchasers prior to the date hereof, the "Disclosure Materials") on
a timely basis or has received a valid  extension of such time of filing and has
filed any such SEC Documents prior to the expiration of any such  extension.  As
of their respective  dates, the SEC Documents  complied in all material respects
with the  requirements  of the Securities Act and the Exchange Act and the rules
and regulations of the Commission  promulgated  thereunder,  and none of the SEC
Documents,  when filed,  contained  any untrue  statement of a material  fact or
omitted to state a material fact  required to be stated  therein or necessary in
order to make the statements  therein, in light of the circumstances under which
they were made, not misleading.  All material agreements to which the Company is
a party or to which the  property or assets of the Company are subject have been
filed as exhibits to the SEC Documents as required.  The financial statements of
the Company included in the SEC Documents  comply in all material  respects with
applicable  accounting  requirements  and  the  rules  and  regulations  of  the
Commission  with  respect  thereto  as in  effect  at the time of  filing.  Such
financial  statements have been prepared in accordance  with generally  accepted
accounting  principles applied on a consistent basis during the periods involved
("GAAP"),  except as may be otherwise specified in such financial  statements or
the notes  thereto,  and fairly  present in all material  respects the financial
position  of the  Company and its  consolidated  subsidiaries  as of and for the
dates thereof and the results of operations  and cash flows for the periods then

                                       7
<PAGE>

ended,  subject,  in the case of unaudited  statements,  to normal,  immaterial,
year-end audit adjustments.  As of the date hereof, (a) there has been no event,
occurrence or  development  that has or that could result in a Material  Adverse
Effect,  (b) the  Company  has  not  incurred  any  liabilities  (contingent  or
otherwise)  other  than (x)  liabilities  incurred  in the  ordinary  course  of
business  consistent  with past practice and (y)  liabilities not required to be
reflected in the Company's financial  statements pursuant to GAAP or required to
be  disclosed  in filings  made with the  Commission,  (c) the  Company  has not
altered its method of  accounting  or the  identity of its  auditors and (d) the
Company has not  declared or made any payment or  distribution  of cash or other
property to its  stockholders or officers or directors (other than in compliance
with existing  Company stock option plans) with respect to its capital stock, or
purchased, redeemed (or made any agreements to purchase or redeem) any shares of
its capital stock. The Company last filed audited financial  statements with the
Commission  on April  19,  2000,  and has not  received  any  comments  from the
Commission in respect thereof.

               (k)   Investment   Company.  The  Company  is  not, and is not an
Affiliate (as defined in Rule 405 under the  Securities  Act) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.

               (l)    INTENTIONALLY OMITTED.

               (m)   Solicitation Materials.  Neither the Company nor any Person
acting  on the  Company's  behalf  has  solicited  any  offer to buy or sell the
Securities by means of any form of general solicitation or advertising.

               (n)    INTENTIONALLY OMITTED.

               (o) Exclusivity.  The  Company  shall  not  issue  and  sell  the
Debentures to any Person other than the Purchasers  other than with the specific
prior written consent of Majority in Interest of the Purchasers.

               (p)  Seniority.  No indebtedness of the  Company is senior to the
Debentures  in right of  payment,  whether  with  respect  to  interest  or upon
liquidation, dissolution or otherwise.

               (q) Listing and Maintenance Requirements Compliance.   Except  as
specified  in  Schedule  2.1 (q)  hereto,  the Company has not, in the two years
preceding the date hereof, received notice (written or oral) from the NASDAQ OTC
Bulletin Board or any other stock exchange,  market or trading facility on which
the Common  Stock is or has been listed (or on which it has been  quoted) to the
effect that the  Company is not in  compliance  with the listing or  maintenance
requirements  of such  exchange or market.  The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such maintenance requirements.

                                       8
<PAGE>

               (r)  Patents and Trademarks.  The  Company  has, or has rights to
use, all  patents,  patent  applications,  trademarks,  trademark  applications,
service marks, trade names, copyrights,  licenses and rights which are necessary
or material for use in connection with its business, and which the failure to so
have would have a  Material  Adverse  Effect  (collectively,  the  "Intellectual
Property Rights"). The patents and trademark specified in the Security Agreement
are the only patent or trademark  intellectual  property rights (or applications
therefor) held by the Company and the  Subsidiaries  for which  applications for
patents and trademarks  have been made or granted in the United  States.  To the
best  knowledge  of the  Company  all  such  Intellectual  Property  Rights  are
enforceable  and there is no existing  infringement  by another Person of any of
the Intellectual Property Rights.

               (s) Registration Rights;  Rights of Participation.  Except as set
forth on Schedule 6(b) to the Registration Rights Agreement, the Company has not
granted  or agreed to grant to any Person  any  rights  (including  "piggy-back"
registration  rights) to have any securities of the Company  registered with the
Commission or any other governmental authority which has not been satisfied.  No
Person,   has  any  right  of  first  refusal,   preemptive   right,   right  of
participation,   or  any  similar  right  to  participate  in  the  transactions
contemplated by the Transaction Documents.

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

               (u)  Title.  The  Company  and  the  Subsidiaries  have  good and
marketable title in fee simple to all real property and 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,  except  for  Liens  granted  to the
Purchasers  pursuant to the Security Agreement and IP Security Agreement and for
other Liens 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 and its Subsidiaries.  Any real property and facilities held under lease
by the Company and its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such  property and buildings by the
Company and its Subsidiaries.

                                       9
<PAGE>

               (v) Disclosure. The Company confirms that it has not provided any
of the Purchasers or its agents or counsel with any information that constitutes
or might constitute material non-public information. The Company understands and
confirms that the Purchasers  shall be relying on the foregoing  representations
in effecting  transactions in securities of the Company. All disclosure provided
to the  Purchasers  regarding  the Company,  its  business and the  transactions
contemplated hereby, including the Schedules to this Agreement,  furnished by or
on behalf of the  Company  are true and  correct  and do not  contain any untrue
statement  of a material  fact or omit to state any material  fact  necessary in
order to make the statements made therein,  in light of the circumstances  under
which they were made, not misleading.

        2.2    RINTENTIONALLY OMITTED.

                                   ARTICLE III
                         OTHER AGREEMENTS OF THE PARTIES

        3.1  Transfer  Restrictions.  (a)  Securities  may only be  disposed  of
pursuant to an effective registration statement under the Securities Act, to the
Company or pursuant  to an  available  exemption  from or in a  transaction  not
subject to the  registration  requirements  of the Securities Act. In connection
with any transfer of Securities other than pursuant to an effective registration
statement or to the Company,  except as otherwise set forth herein,  the Company
hereby  consents  to and agrees to register on the books of the Company and with
any transfer  agent for the securities of the Company any transfer of Securities
by a Purchaser  to an  Affiliate  of such  Purchaser  or to one or more funds or
managed accounts under common  management with such Purchaser,  and any transfer
among any such  Affiliates  or one or more funds or managed  accounts,  provided
that the transferee certifies to the Company that it is an "accredited investor"
as defined in Rule 501(a) under the  Securities Act and that it is acquiring the
Securities  solely  for  investment  purposes  (subject  to  the  qualifications
hereof).  Any such transferee shall agree in writing to be bound by the terms of
this Agreement and shall have the rights of a Purchaser under this Agreement and
the Registration Rights Agreement.

               (b)  The  Purchasers  agree  to the  imprinting,  so  long  as is
required by this Section 3.1(b), of the following legend on the Securities:

               NEITHER  THESE  SECURITIES  NOR THE  SECURITIES  INTO WHICH THESE
        SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH THE
        SECURITIES AND EXCHANGE  COMMISSION OR THE SECURITIES  COMMISSION OF ANY
        STATE  IN  RELIANCE  UPON  AN  EXEMPTION  FROM  REGISTRATION  UNDER  THE
        SECURITIES  ACT  OF  1933,  AS  AMENDED  (THE  "SECURITIES  ACT"),  AND,
        ACCORDINGLY,  MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
        REGISTRATION  STATEMENT  UNDER  THE  SECURITIES  ACT OR  PURSUANT  TO AN
        AVAILABLE  EXEMPTION  FROM,  OR IN A  TRANSACTION  NOT  SUBJECT  TO, THE
        REGISTRATION  REQUIREMENTS  OF THE SECURITIES ACT AND IN ACCORDANCE WITH
        APPLICABLE STATE SECURITIES LAWS.

                                       10
<PAGE>

               Underlying  Shares  shall not  contain the legend set forth above
nor any other legend if the  conversion of  Debentures,  the payment of interest
thereon, and exercise of the Warrants or other issuances of Underlying Shares as
contemplated  hereby, by the Debentures or the Warrants occurs at any time while
an Underlying  Shares  Registration  Statement is effective under the Securities
Act or, in the event there is not an effective  Underlying  Shares  Registration
Statement,  at such time, in the opinion of counsel to the Company,  such legend
is not required under  applicable  requirements of the Securities Act (including
judicial   interpretations  and  pronouncements  issued  by  the  staff  of  the
Commission).  The Company  shall  cause its  counsel to issue the legal  opinion
included in the Transfer Agent  Instructions to the Company's  transfer agent on
the day that the Underlying Shares Registration  Statement is declared effective
by the Commission.  The Company agrees that, in the event any Underlying  Shares
are issued with a legend in accordance with this Section 3.1(b), it will, within
three (3) Trading  Days after  request  therefor by a  Purchaser,  provide  such
Purchaser  with a  certificate  or  certificates  representing  such  Underlying
Shares,  free from such legend at such time as such  legend  would not have been
required  under this Section  3.1(b) had such  issuance  occurred on the date of
such  request.  The  Company  may not make any  notation  on its records or give
instructions to any transfer agent of the Company which enlarge the restrictions
of  transfer  set  forth in this  Section.  However,  the  Company  may  provide
appropriate  instructions  to any  transfer  agent of the Company to enforce the
provisions  of this  Section  3.1(b)  when the  Underlying  Shares  Registration
Statement is not effective.

        3.2   Acknowledgment of  Dilution.  The  Company  acknowledges  that the
issuance of the  Underlying  Shares upon (i)  conversion of the  Debentures  and
payment of interest thereon in accordance with the terms of the Debentures,  and
(ii)  exercise of the Warrants in  accordance  with their terms,  will result in
dilution  of the  outstanding  shares of Common  Stock,  which  dilution  may be
substantial under certain market  conditions.  The Company further  acknowledges
that its  obligation  to issue  Underlying  Shares  upon (x)  conversion  of the
Debentures and payment of interest  thereon in accordance  with the terms of the
Debentures,  and (y) exercise of the Warrants in accordance with their terms, is
unconditional  and absolute,  subject to the limitations set forth herein in the
Debentures  or pursuant to the  Warrants,  regardless  of the effect of any such
dilution.

        3.3 Furnishing of Information. As long as the Purchasers own Securities,
the Company  covenants to timely file (or obtain  extensions in respect  thereof
and file within the applicable grace period) all reports required to be filed by
the  Company  after the date hereof  pursuant  to Section  13(a) or 15(d) of the
Exchange Act. As long as the  Purchasers own  Securities,  if the Company is not
required to file reports pursuant to such sections,  it will prepare and furnish
to the  Purchasers  and make publicly  available in accordance  with Rule 144(c)
promulgated  under the  Securities  Act such  information as is required for the
Purchasers  to  sell  the  Securities  under  Rule  144  promulgated  under  the
Securities  Act. The Company  further  covenants  that it will take such further
action as any holder of Securities  may  reasonably  request,  all to the extent
required  from time to time to enable  such  Person  to sell  Underlying  Shares
without  registration  under the  Securities  Act within the  limitation  of the
exemptions  provided by Rule 144 promulgated under the Securities Act, including
the legal opinion referenced above in this Section. Upon the request of any such
Person,  the Company shall deliver to such Person a written  certification  of a
duly authorized officer as to whether it has complied with such requirements.

                                       11
<PAGE>
        3.4  Integration. The Company shall not, and shall use its best  efforts
to ensure  that,  no  Affiliate of the Company  shall,  sell,  offer for sale or
solicit  offers to buy or  otherwise  negotiate  in respect of any  security (as
defined in Section 2 of the  Securities  Act) that would be integrated  with the
offer or sale of the Securities in a manner that would require the  registration
under the Securities Act of the sale of the Securities to the Purchasers.

        3.5 Increase in Authorized  Shares. .5 Increase in Authorized Shares. .5
Increase in Authorized  Shares. .5 Increase in Authorized Shares. If on any date
the Company would be, if a notice of conversion or exercise (as the case may be)
were to be delivered on such date, precluded from (a) issuing 200% of the number
of Underlying  Shares as would then be issuable upon a conversion in full of the
Debentures and as payment of any accrued and unpaid  interest in respect thereof
in shares of Common Stock,  or (b) issuing the number of Underlying  Shares upon
exercise in full of the Warrants (the  "Current  Required  Minimum"),  in either
case,  due to the  unavailability  of a  sufficient  number  of  authorized  but
unissued or reserved shares of Common Stock,  then the Board of Directors of the
Company shall promptly (and in any case, within 30 Business Days from such date)
prepare and mail to the  stockholders of the Company proxy materials  requesting
authorization  to amend the Company's  Articles of Incorporation to increase the
number of shares of Common Stock which the Company is  authorized to issue to at
least such number of shares as reasonably  requested by the  Purchasers in order
to provide for such number of authorized and unissued  shares of Common Stock to
enable  the  Company  to  comply  with its  issuance,  conversion  exercise  and
reservation of shares obligations as set forth in this Agreement, the Debentures
and the  Warrants  (the sum of (x) the  number of shares  of Common  Stock  then
outstanding  plus all  shares of Common  Stock  issuable  upon  exercise  of all
outstanding options,  warrants and convertible instruments,  and (y) the Current
Required Minimum,  shall be a reasonable number). In connection  therewith,  the
Board of Directors shall (a) adopt proper resolutions authorizing such increase,
(b)  recommend to and otherwise use its best efforts to promptly and duly obtain
stockholder  approval to carry out such  resolutions (and hold a special meeting
of the  stockholders  no later  than the 60th day  after  delivery  of the proxy
materials  relating to such  meeting) and (c) within five (5)  Business  Days of
obtaining such stockholder  authorization,  file an appropriate amendment to the
Company's Articles of Incorporation to evidence such increase.

        3.6  Reservation  and Listing of Underlying  Shares3.6  Reservation  and
Listing of Underlying  Shares.6  Reservation and Listing of Underlying  Shares.6
Reservation and Listing of Underlying  Shares.  (a) The Company shall (i) in the
time and manner required by NASDAQ and such other exchange,  market or quotation
system on which the  Common  Stock is traded,  prepare  and file with the NASDAQ
(and such other national  securities  exchange or market or trading or quotation
facility) an additional shares listing  application  covering a number of shares
of Common Stock which is not less than the Initial Minimum,  (ii) take all steps
necessary to cause such shares of Common Stock to be approved for listing in the
OTC Bulletin Board or NASDAQ (as well as on any such other  national  securities
exchange or market or trading or quotation facility on which the Common Stock is
then listed) as soon as possible thereafter, and (iii) provide to the Purchasers
evidence of such  listing,  and the Company  shall  maintain  the listing of its
Common  Stock  thereon.  If  the  number  of  Underlying  Shares  issuable  upon
conversion in full of the then  outstanding  Debentures,  as payment of interest
thereon,  and upon  exercise  of the then  unexercised  portion of the  Warrants
exceeds  85% of the number of  Underlying  Shares  previously  listed on account
thereof with NASDAQ (and any such other  required  exchanges),  then the Company
shall take the  necessary  actions to  immediately  list a number of  Underlying
Shares as equals no less than the then Current Required Minimum.

                                       12
<PAGE>

               (b) The  Company  shall  maintain  a reserve  of shares of Common
Stock for issuance upon conversion of the Debentures and for payment of interest
thereupon in shares of Common Stock and upon exercise in full of the Warrants in
accordance with this Agreement,  the Debentures and the Warrants,  respectively,
in such amount as may be required to fulfill its  obligations  in full under the
Transaction  Documents,  which reserve shall equal no less than the then Current
Required Minimum.

        3.7    Conversion   and  Exercise  Procedures.   The   Transfer    Agent
Instructions,  Conversion  Notice (as defined in Exhibit A) and Form of Election
to Purchase  under the Warrants set forth the  totality of the  procedures  with
respect to the  conversion  of the  Debentures  and  exercise  of the  Warrants,
including the form of legal opinion, if necessary, that shall be rendered to the
Company's  transfer agent and such other  information and instructions as may be
reasonably  necessary to enable the  Purchasers to convert their  Debentures and
exercise their Warrants as  contemplated  in the Debentures and the Warrants (as
applicable). 3.8 Notice of Breaches3.8 Notice of Breaches.8 Notice of Breaches.8
Notice of  Breaches.  Each of the Company and the  Purchasers  shall give prompt
written notice to the other of any breach by it of any representation,  warranty
or other agreement contained in any Transaction  Document, as well as any events
or occurrences arising after the date hereof which would reasonably be likely to
cause any  representation  or warranty or other  agreement of such party, as the
case may be,  contained  therein to be  incorrect  or breached as of the Closing
Date.  However,  no disclosure by either party pursuant to this Section shall be
deemed to cure any breach of any  representation,  warranty  or other  agreement
contained in any Transaction Document.

        3.9  Conversion  and  Exercise  Obligations of the Company.  The Company
shall honor  conversions  of the  Debentures  and  exercises of the Warrants and
shall  deliver  Underlying  Shares  in  accordance  with the  respective  terms,
conditions and time periods set forth in the Debentures and the Warrants.

                                       13
<PAGE>

        3.10  Subsequent  Registrations.  (a) The Company shall not, directly or
indirectly,  without the prior written consent of the Purchasers,  offer,  sell,
grant any option to purchase,  or  otherwise  dispose of (or announce any offer,
sale,  grant or any option to purchase or other  disposition)  any of its or its
Affiliates' equity or  equity-equivalent  securities  (including the issuance of
any debt or other  instrument is at any time over life thereof  convertible into
or exchangeable for Common Stock or any other transaction  intended to be exempt
or  not  subject  to  registration  under  the  Securities  Act  (a  "Subsequent
Placement")  for a  period  of  180  days  after  the  later  to  occur  of  the
Effectiveness  Date (as defined in the  Registration  Rights  Agreement) and the
date  that  the  Commission  first  declares   effective  an  Underlying  Shares
Registration  Statement,  except (i) the  granting  of options  or  warrants  to
employees,  consultants, officers and directors, and the issuance of shares upon
exercise  of  options  granted,  under  any  stock  option  plan  heretofore  or
hereinafter  duly adopted by the Company,  (ii) shares of Common Stock  issuable
upon exercise of any currently  outstanding  warrants and upon conversion of any
currently outstanding  convertible  securities of the Company, in each case only
if such security is disclosed in Schedule  2.1(c),  (iii) shares of Common Stock
or Common  Stock  Equivalents  (as defined in the  Debentures)  permitted  to be
issued without  giving rise to an Event of Default under  Sections  3(a)(xii) or
3(a)(xiii)(a)  of the Debentures,  and (iv) shares of Common Stock issuable upon
conversion of  Debentures,  as payment of interest  thereon and upon exercise of
the Warrants in accordance with the Debentures or the Warrants

               (b)  Except for (x)  Underlying  Shares,  (y) other  "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to be
registered, and securities of the Company permitted pursuant to Schedule 6(b) of
the Registration's  Rights Agreement to be registered,  in the Underlying Shares
Registration Statement in accordance with the Registration Rights Agreement, and
(z) Common Stock permitted to be issued pursuant to paragraph  (a)(i),  (ii) and
(iv) of Section 3.10(a), the Company shall not, for a period of not less than 90
Trading Days after the date that the Underlying Shares Registration Statement is
declared  effective by the Commission,  without the prior written consent of the
Purchasers  (i)  issue or sell any of its or any of its  Affiliates'  equity  or
equity-equivalent  securities  pursuant to  Regulation S  promulgated  under the
Securities  Act, or (ii) register for resale any securities of the Company.  Any
days that a Purchaser  is not  permitted  to sell  Underlying  Shares  under the
Underlying Shares  Registration  Statement shall be added to such 90 Trading Day
period for the purposes of (i) and (ii) above.

        3.11 Certain Securities Laws Disclosures;  Publicity. The Company shall:
(i) on the  Closing  Date issue a press  release  acceptable  to the  Purchasers
disclosing the transactions contemplated hereby, (ii) file with the Commission a
Report on Form 8-K disclosing the  transactions  contemplated  hereby within ten
(10)  Business  Days after the  Closing  Date,  and (iii)  timely  file with the
Commission  a Form D  promulgated  under the  Securities  Act as required  under
Regulation D promulgated  under the Securities Act and provide a copy thereof to
the Purchasers  promptly after the filing  thereof.  The Company shall,  no less
than two (2)  Business  Days prior to the filing of any  disclosure  required by
clauses (ii) and (iii) above, provide a copy thereof to the Purchasers.  No such
filing or disclosure  may be made that  mentions the  Purchasers by name without
the prior  consent of the  Purchasers.  Such filings shall be subject to Section
4.11 hereof.

                                       14
<PAGE>

        3.12 Transfer of Intellectual Property Rights. Except in connection with
the sale of all or  substantially  all of the assets of the Company or licensing
arrangements in the ordinary course of the Company's business, the Company shall
not transfer,  sell or otherwise dispose of any Intellectual Property Rights, or
allow any of the Intellectual Property Rights to become subject to any Liens, or
fail to renew  such  Intellectual  Property  Rights (if  renewable  and it would
otherwise  lapse if not  renewed),  without  the prior  written  consent  of the
Purchasers.

        3.13   INTENTIONALLY OMITTED.

        3.14  Reimbursement. If  any  Purchaser,  other  than  by  reason of its
gross negligence or willful misconduct,  becomes involved in any capacity in any
action,  proceeding or investigation brought by or against any Person, including
stockholders  of  the  Company,  in  connection  with  or  as a  result  of  the
consummation  of the  transactions  contemplated by Transaction  Documents,  the
Company  will  reimburse  such  Purchaser  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 a Purchaser  is a named  party,  the Company
will pay such Purchaser the charges, as reasonably determined by such Purchaser,
for the time of any officers or employees of such Purchaser devoted to appearing
and preparing to appear as  witnesses,  assisting in  preparation  for hearings,
trials or pretrial  matters,  or otherwise with respect to inquiries,  hearings,
trials, and other proceedings  relating to the subject matter of this Agreement.
The  reimbursement  obligations of the Company under this paragraph  shall be in
addition to any  liability  which the Company may otherwise  have,  shall extend
upon the same terms and  conditions to any  Affiliates of the Purchasers who are
actually  named in such  action,  proceeding  or  investigation,  and  partners,
directors,  agents,  employees and controlling persons (if any), as the case may
be, of the  Purchasers  and any such  Affiliate,  and shall be binding  upon and
inure  to  the  benefit  of  any   successors,   assigns,   heirs  and  personal
representatives  of the Company,  the  Purchasers and any such Affiliate and any
such Person.  The Company also agrees that neither the  Purchasers  nor any such
Affiliates,  partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company in connection with or as a result of the consummation of
the Transaction Documents except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the gross negligence
or willful  misconduct of the applicable  Purchaser or entity in connection with
the transactions contemplated by this Agreement.

                                       15
<PAGE>

                                   ARTICLE IV
                                  MISCELLANEOUS

               4.1 Fees and Expenses4.1  Fees and Expenses.1 Fees and Expenses.1
Fees and  Expenses.  Each party shall pay the fees and expenses of its advisers,
counsel,  accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation,  preparation, execution, delivery and
performance of this  Agreement.  The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of the Securities.

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

               4.3  Notices.  Any  and  all   notices   or  other communications
or deliveries required or permitted to be provided hereunder shall be in writing
and  shall be deemed  given and  effective  on the  earliest  of (i) the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile  telephone  number  specified in this Section  prior to 6:30 p.m. (New
York City  time) on a  Business  Day,  (ii) the  Business  Day after the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Agreement later than 6:30 p.m. (New
York City time) on any date and earlier than 11:59 p.m.  (New York City time) on
such date,  (iii) the Business  Day  following  the date of mailing,  if sent by
nationally  recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such  notice is  required  to be given.  The  address for such
notices and communications shall be as follows:

        If to the Company:              16133 Ventura Boulevard
                                        Suite 635
                                        Encino, CA 91436
                                        Facsimile No.:
                                        Attn: Clinton J. Sallee

        If  to a Purchaser:             To the address set forth
                                        under  such   Purchaser's  name  on  the
                                        signature pages hereto.

or such other  address as may be designated  in writing  hereafter,  in the same
manner, by such Person.

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

                                       16
<PAGE>

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

               4.6  Successors and Assigns. This Agreement shall be binding upon
and inure to the  benefit of the  parties  and their  successors  and  permitted
assigns.  The Company may not assign this Agreement or any rights or obligations
hereunder  without the prior written  consent of the  Purchasers.  Except as set
forth in Section 3.1(a),  the Purchasers may not assign this Agreement or any of
the rights or  obligations  hereunder  without the consent of the Company.  This
provision  shall not limit each  Purchaser's  right to  transfer  securities  or
transfer or assign rights under the Registration Rights Agreement.

               4.7 No Third-Party Beneficiaries.  This Agreement is intended for
the benefit of the parties hereto and their respective  successors and permitted
assigns and is not for the benefit of, nor may any provision  hereof be enforced
by, any other Person.

               4.8 Governing  Law. The corporate  laws of the  State  of  Nevada
shall govern all issues  concerning  the relative  rights of the Company and its
stockholders.  All  other  questions  concerning  the  construction,   validity,
enforcement  and  interpretation  of this  Agreement  shall be  governed  by and
construed and enforced in accordance  with the internal laws of the State of New
York,  without regard to the principles of conflicts of law thereof.  Each party
hereby  irrevocably  submits  to the  exclusive  jurisdiction  of the  state and
federal courts sitting in New York County, New York, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein (including with respect to the enforcement of the any
of the Transaction Documents),  and hereby irrevocably waives, and agrees not to
assert in any suit,  action or  proceeding,  any claim that it is not personally
subject  to the  jurisdiction  of any such  court,  that  such  suit,  action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process  and  consents  to  process  being  served in any such  suit,  action or
proceeding  by  mailing a copy  thereof  via  registered  or  certified  mail or
overnight  delivery  (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient  service of process and notice  thereof.  Nothing
contained  herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law.

               4.9   Survival. The representations,  warranties,  agreements and
covenants  contained  herein  shall  survive the Closing  and the  delivery  and
conversion or exercise (as the case may be) of the Debentures and the Warrants.

               4.10  Execution.  This  Agreement  may be executed in two or more
counterparts,  all of which when taken  together shall be considered one and the
same agreement and shall become effective when  counterparts have been signed by
each party and  delivered  to the other  party,  it being  understood  that both
parties need not sign the same  counterpart.  In the event that any signature is
delivered by facsimile  transmission,  such  signature  shall create a valid and
binding  obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.

                                       17
<PAGE>

               4.11  Publicity.  The Company and the  Purchasers  shall  consult
with each  other in  issuing  any press  releases  or  otherwise  making  public
statements  or  filings  and other  communications  with the  Commission  or any
regulatory  agency or stock  market or  trading  facility  with  respect  to the
transactions  contemplated  hereby and neither  party shall issue any such press
release  or  otherwise  make  any  such  public  statement,   filings  or  other
communications  without the prior  written  consent of the other,  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,  filing or other  communication.  Notwithstanding the foregoing,  the
Company shall not publicly disclose the names of the Purchasers,  or include the
names of the  Purchasers in any filing with the  Commission,  or any  regulatory
agency,  trading  facility or stock market without the prior written  consent of
the Purchasers,  except to the extent such disclosure (but not any disclosure as
to the  controlling  Persons  thereof)  is  required  by law,  in which case the
Company shall provide the Purchasers with prior notice of such disclosure.

               4.12     Severability.  In case any one or more of the provisions
of this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affecting or impaired  thereby and the parties will attempt to
agree  upon a valid  and  enforceable  provision  which  shall  be a  reasonable
substitute  therefor,  and upon so agreeing,  shall  incorporate such substitute
provision in this Agreement.

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

               4.14  Independent  Nature  of Purchasers' Obligations and Rights.
The  obligations of each  Purchaser  hereunder is several and not joint with the
obligations of any other  Purchaser  hereunder,  and neither  Purchaser shall be
responsible  in any way for the  performance  of the  obligations  of any  other
Purchaser  hereunder.  Nothing  contained  herein or in any other  agreement  or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto  or  thereto,   shall  be  deemed  to  constitute  the  Purchasers  as  a
partnership,  an  association,  a joint venture or any other kind of entity,  or
create a presumption  that the  Purchasers are in any way acting in concert with
respect to such obligations or the transactions  contemplated by this Agreement.
Each  Purchaser  shall be entitled to protect and enforce its rights,  including
without  limitation  the  rights  arising  out of this  Agreement  or out of the
Transaction Documents,  and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                             SIGNATURE PAGE FOLLOWS]

                                       18
<PAGE>

               IN WITNESS  WHEREOF,  the parties hereto have caused this Secured
Convertible Debenture Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.

                             SITESTAR CORPORATION

                                   /s/ Clinton J. Sallee
                             By:__________________________________
                             Name:  Clinton J. Sallee
                             Title:    President & CEO

                             NEW MILLENNIUM CAPITAL PARTNERS II, LLC
                             By:        FIRST STREET MANAGER II, LLC

                                   /s/ Glenn A. Arbeitman
                             By:_____________________________________
                             Name:      Glenn A. Arbeitman
                             Title:     Manager

                             155 First Street, Suite B
                             Mineola, New York 11501
                             Facsimile No.: 516-739-7115

                             Debentures Purchase Price:       $350,000

                             AJW PARTNERS, LLC

                             By:         SMS GROUP, LLC

                                   /s/ Corey S. Ribotsky
                             By:_____________________________________
                             Name:      Corey S. Ribotsky
                             Title:     Manager

                             155 First Street, Suite B
                             Mineola, New York 11501
                             Facsimile No.: 516-739-7115

                             Debentures Purchase Price:        $150,000

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