Document:

SECURITIES PURCHASE AGREEMENT

     This SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of
September 1, 2004, is made by and among iMedia International, Inc., a
corporation organized under the laws of Delaware (the "Company"), and each of
the purchasers (individually, a "Purchaser" and collectively the "Purchasers")
set forth on the execution pages hereof (each, an "Execution Page" and
collectively the "Execution Pages").

                            BACKGROUND

     A.  The Company and each Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D"), as promulgated by the
United States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "Securities Act").

     B.  Upon the terms and conditions stated in this Agreement, the Company
desires to issue and sell to the Purchasers, and each Purchaser desires to
purchase units (each a "Unit") consisting of (i) a convertible bridge note, in
the form attached hereto as Exhibit A (collectively the "Notes"), in the
principal face amount of one thousand dollars ($1,000), which Notes shall be
initially convertible into one thousand six hundred sixty seven (1,667) shares
of the Company's common stock, $0.001 par value per share (the "Common Stock
and (ii) 1,111 non-redeemable warrants, in the form attached hereto as Exhibit
B, each to purchase, for a period of five (5) years, one share of the
Company's Common Stock, $0.001 par value per share, initially at ninety cents
($0.90) per share (the "Warrants").  The shares of Common Stock issuable upon
conversion of or otherwise pursuant to the Notes and Warrants are referred to
herein as the "Conversion Shares."  The Notes, Warrants and the Conversion
Shares are collectively referenced herein as the "Securities" and each of them
may individually be referred to herein as a "Security."

     C.  Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights
Agreement, in the form attached hereto as Exhibit C (the "Registration Rights
Agreement"), pursuant to which the Company has agreed to provide certain
registration rights under the Securities Act and the rules and regulations
promulgated thereunder, and applicable state securities laws.  This Agreement,
the Notes, the Warrants and the Registration Rights Agreement are collectively
referred to herein as the "Transaction Documents."

     NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Purchasers,
intending to be legally bound, hereby agree as follows:

     1.  PURCHASE AND SALE OF SECURITIES.

    (a)  Purchase and Sale of Securities.  Subject to the terms and conditions
hereof, at the Closing (as defined in Section 1(b) below), the Company shall
issue and sell to each Purchaser, and each Purchaser, severally and not
jointly, shall purchase from the Company, such number of Units as is set forth
on such Purchaser's Execution Page, for a purchase price (as to each
Purchaser, the "Purchase Price") per Unit equal to One Thousand Dollars
($1,000.00).  The aggregate amount of Units to be issued and sold by the
Company to all Purchasers pursuant to this Agreement shall not exceed Two
Million Dollars ($2,000,000.00).

     (b)  The Closing.  Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 6 and 7 below, the closing of the
transactions contemplated hereby (the "Closing") shall take place at the
offices of MicroCapital LLC at 201 Post Street, Suite 1001, San Francisco
California, 94108 at 10:00 a.m., Pacific Time on the date hereof or such other
time and place as the Company and the Purchasers may mutually agree (the
"Closing Date").

     2.  PURCHASER'S REPRESENTATIONS AND WARRANTIES.

     Each Purchaser severally, but not jointly, represents and warrants to the
Company as follows:

     (a)  Purchase for Own Account, Etc.  Such Purchaser is purchasing the
Securities for such Purchaser's own account for investment purposes only and
not with a present view towards the public sale or distribution thereof,
except pursuant to sales that are exempt from the registration requirements of
the Securities Act and/or sales registered under the Securities Act.  Such
Purchaser understands that such Purchaser must bear the economic risk of this
investment indefinitely, unless the Securities are registered pursuant to the
Securities Act and any applicable state securities or blue sky laws or an
exemption from such registration is available, and that the Company has no
present intention of registering the resale of any such Securities other than
as contemplated by the Registration Rights Agreement.  Notwithstanding
anything in this Section 2(a) to the contrary, by making the representations
herein, such Purchaser does not agree to hold the Securities for any minimum
or other specific term and reserves the right to dispose of the Securities at
any time in accordance with or pursuant to a registration statement or an
exemption from the registration requirements under the Securities Act.

     (b)  Accredited Investor Status.  Such Purchaser is an "Accredited
Investor" as that term is defined in Rule 501(a) of Regulation D.

     (c)  Reliance on Exemptions.  Such Purchaser understands that the
Securities are being offered and sold to such Purchaser in reliance upon
specific exemptions from the registration requirements of United States
federal and state securities laws and that the Company is relying upon the
truth and accuracy of, and such Purchaser's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
such Purchaser set forth herein in order to determine the availability of such
exemptions and the eligibility of such Purchaser to acquire the Securities.

     (d)  Information.  Such Purchaser and its counsel, if any, have been
furnished all materials relating to the business, finances and operations of
the Company and materials relating to the offer and sale of the Securities
that have been specifically requested by such Purchaser or its counsel.
Neither such inquiries nor any other investigation conducted by such Purchaser
or its counsel or any of its representatives shall modify, amend or affect
such Purchaser's right to rely on the Company's representations and warranties
contained in Section 3 below.  Such Purchaser understands that such
Purchaser's investment in the Securities involves a high degree of risk.

     (e)  Governmental Review.  Such Purchaser understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.

     (f)  Authorization; Enforcement.  This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of such Purchaser and are valid and binding agreements of such
Purchaser enforceable against such Purchaser in accordance with their
respective terms.

     (g)  Residency.  Such Purchaser is a resident of the jurisdiction set
forth under such Purchaser's name on the Execution Page hereto executed by
such Purchaser.

     (h)  Transactions in the Company's Common Stock.  Such Purchaser has not
effected any purchases or sales of the Company's Common Stock during the five
trading days (as hereinafter defined) prior to the date hereof.  For purposes
of this subsection (h), the term "trading day" means any day on which the
principal United States securities exchange or trading market where the Common
Stock is then listed or traded, is open for trading.

     Each Purchaser's representations and warranties made in this Article 2
are made solely for the purpose of permitting the Company to make a
determination that the offer and sale of the Securities pursuant to this
Agreement comply with applicable U.S. federal and state securities laws and
not for any other purpose.  Accordingly, the Company may not rely on such
representations and warranties for any other purpose.  No Purchaser has made
or hereby makes any other representations or warranties, express or implied,
to the Company in connection with the transactions contemplated hereby.

     3.  REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

     Except as set forth on the Disclosure Schedule attached hereto as Exhibit
D executed and delivered by the Company to each Purchaser dated the date
hereof (the "Disclosure Schedule"), the Company represents and warrants to
each Purchaser as follows:

     (a)  Organization and Qualification.  The Company and each of its direct
and indirect subsidiaries (collectively, the "Subsidiaries") is a corporation
duly organized and existing in good standing under the laws of the
jurisdiction in which it is incorporated or organized, and has the requisite
corporate power to own its properties and to carry on its business as now
being conducted.  The Company and each of its Subsidiaries is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted by it makes such
qualification necessary and where the failure so to qualify or be in good
standing would have a Material Adverse Effect.  For purposes of this
Agreement, "Material Adverse Effect" means any effect which, individually or
in the aggregate with all other effects, reasonably would be expected to be
materially adverse to (i) the Securities, (ii) the ability of the Company to
perform its obligations under this Agreement or the other Transaction
Documents or (iii) the business, operations, properties, prospects, financial
condition or results of operations of the Company and its Subsidiaries, taken
as a whole.

     (b)  Authorization; Enforcement.  (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement and the other Transaction Documents, to issue and sell the
Units in accordance with the terms hereof, to issue the Conversion Shares upon
conversion of the Notes in accordance with the terms thereof; (ii) the
execution, delivery and performance of this Agreement and the other
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including, without limitation,
the issuance of the Units and the issuance and reservation for issuance of the
Conversion Shares) have been duly authorized by the Company's Board of
Directors and no further consent or authorization of the Company, its Board of
Directors, or any committee of the Board of Directors is required, and (iii)
this Agreement constitutes, and, upon execution and delivery by the Company of
the other Transaction Documents, such Transaction Documents will constitute,
valid and binding obligations of the Company enforceable against the Company
in accordance with their respective terms.  Neither the execution, delivery or
performance by the Company of its obligations under this Agreement or the
other Transaction Documents, nor the consummation by it of the transactions
contemplated hereby or thereby (including, without limitation, the issuance of
the Units or the issuance or reservation for issuance of the Conversion
Shares) requires any consent or authorization of the Company's stockholders
(including, without limitation, any consent under Rule 4350(i) of the National
Association of Securities Dealers, Inc.).

     (c)  Capitalization.  The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued
and outstanding, the number of shares issuable and reserved for issuance
pursuant to the Company's stock option plans, the number of shares issuable
and reserved for issuance pursuant to securities (other than the Notes)
exercisable or exchangeable for, or convertible into, any shares of capital
stock and the number of shares to be reserved for issuance upon conversion of
the Notes is set forth in Section 3(c) of the Disclosure Schedule.  All of
such outstanding shares of capital stock have been, or upon issuance in
accordance with the terms of any such exercisable, exchangeable or convertible
securities will be, validly issued, fully paid and non-assessable.  No shares
of capital stock of the Company (including the Conversion Shares) are subject
to preemptive rights or any other similar rights of the stockholders of the
Company or any liens or encumbrances.  Except for the Securities and as set
forth in Section 3(c) of the Disclosure Schedule, (i) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exercisable or exchangeable for, 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, nor are any such issuances, contracts, commitments,
understandings or arrangements contemplated, (ii) there are no contracts,
commitments, understandings or arrangements under which the Company or any of
its Subsidiaries is obligated to register the sale of any of its or their
securities under the Securities Act (except the Registration Rights
Agreement); (iii) there are no outstanding securities or instruments 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 or otherwise acquire any security of the Company or any of its
Subsidiaries; and (iv) the Company does not have any shareholder rights plan,
"poison pill" or other anti-takeover plans or similar arrangements.  Section
3(c) of the Disclosure Schedule sets forth all of the securities or
instruments issued by the Company or any of its Subsidiaries that contain
anti-dilution or similar provisions, and, except as and to the extent set
forth thereon, the sale and issuance of the Securities will not trigger any
anti-dilution adjustments to any such securities or instruments.  The Company
has furnished to each Purchaser true and correct copies of the Company's
organizational documents ("Organizational Documents") as in effect on the date
hereof and all other instruments and agreements governing securities
convertible into or exercisable or exchangeable for capital stock of the
Company, all of which instruments and agreements are set forth in Section 3(c)
of the Disclosure Schedule.  The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or any such Subsidiary.

     (d)  Issuance of Securities.  The Units are duly authorized and, upon
issuance in accordance with the terms of this Agreement, (i) will be validly
issued, fully paid and non-assessable and free from all taxes, liens, claims
and encumbrances, (ii) will not be subject to preemptive rights, rights of
first refusal or other similar rights of stockholders of the Company or any
other person and (iii) will not impose personal liability on the holder
thereof.  The Conversion Shares are duly authorized and reserved for issuance,
and, upon conversion of the Notes in accordance with the terms thereof, (x)
will be validly issued, fully paid and non-assessable, and free from all
taxes, liens, claims and encumbrances, (y) will not be subject to preemptive
rights, rights of first refusal or other similar rights of stockholders of the
Company or any other person and (III) will not impose personal liability upon
the holder thereof.

     (e)  No Conflicts.  The execution, delivery and performance of this
Agreement and the other Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the issuance of the Units and the
issuance and reservation for issuance of the Conversion Shares) will not (i)
result in a violation of the Organizational Documents, (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment (including, without limitation, the triggering of any anti-dilution
provisions), acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or
(iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including United States federal and state securities laws, rules and
regulations and rules and regulations of any self-regulatory organizations to
which either the Company or its securities are subject) 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, with respect
to clauses (ii) and (iii), for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations that would not,
individually or in the aggregate, have a Material Adverse Effect).

     (f)  Compliance.  The Company is not in violation of the Organizational
Documents, and no Subsidiary is in violation of its organizational documents.
Neither the Company nor any of its Subsidiaries is in default (and no event
has occurred that with notice or lapse of time or both would put the Company
or any of its Subsidiaries in default) under, nor has there occurred any event
giving others (with notice or lapse of time or both) any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party (including, without limitation, the Contracts (as defined in Section
3(g) below)), except for actual or possible violations, defaults or rights
that would not, individually or in the aggregate, have a Material Adverse
Effect.  The businesses of the Company and its Subsidiaries are not being
conducted, and shall not be conducted so long as any Purchaser owns any of the
Securities, in violation of any law, ordinance or regulation of any
governmental entity, except for possible violations the sanctions for which
either individually or in the aggregate have not had and would not have a
Material Adverse Effect.  Neither the Company, nor any of its Subsidiaries,
nor any director, officer, agent, employee or other person acting on behalf of
the Company or any Subsidiary has, in the course of his actions for, or on
behalf of, the Company or any Subsidiary, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity, made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds,
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee.  The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, provincial or foreign regulatory authorities that are material to the
conduct of its business, and neither the Company nor any of its Subsidiaries
has received any notice of proceeding relating to the revocation or
modification of any such certificate, authorization or permit.  Except (i) as
may be required under the Securities Act in connection with the performance of
the Company's obligations under the Registration Rights Agreement, (ii) for
the filing of a Form D with the SEC, (iii) as may be required for compliance
with applicable state securities or "blue sky" laws, or (iv) as otherwise set
forth in Section 3(f) of the Disclosure Schedule, the Company is not required
to obtain any consent, approval, authorization or order of, or make any filing
or registration with, any court or governmental agency or any regulatory or
self-regulatory agency or other third party in order for it to execute,
deliver or perform any of its obligations under this Agreement or any of the
other Transaction Documents.

     (g)  SEC Documents, Financial Statements.  Since January 1, 2000, the
Company has timely filed (within applicable extension periods) all reports,
schedules, forms, statements and other documents required to be filed by it
with the SEC pursuant to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange 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, the
"SEC Documents").  The Company has delivered, or has made available, to each
Purchaser true and complete copies of the SEC Documents.  As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act or the Securities Act, as the case may be,
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 in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading.  None of the statements made in any such SEC
Documents is, or has been, required to be amended or updated under applicable
law (except for such statements as have been amended or updated in subsequent
filings made prior to the date hereof).  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 applicable with respect
thereto.  Such financial statements have been prepared in accordance with U.S.
generally accepted accounting principles ("GAAP"), consistently applied,
during the periods involved (except as may be otherwise indicated in such
financial statements or the notes thereto or, in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed
or summary statements) and fairly present in all material respects the
consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal, immaterial year-end audit adjustments).
Except as set forth in Section 3(g) of the Disclosure Statements, the Company
has no liabilities, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to the date of such
financial statements and (ii) obligations under contracts and commitments
incurred in the ordinary course of business and not required under GAAP to be
reflected in such financial statements, which liabilities and obligations
referred to in clauses (i) and (ii), individually or in the aggregate, are not
material to the financial condition or operating results of the Company.  To
the extent required by the rules and regulations of the SEC applicable
thereto, the Section 3(g) of the Disclosure Statements contains a complete and
accurate list of all material undischarged written or oral contracts,
agreements, leases or other instruments to which the Company or any Subsidiary
is a party or by which the Company or any Subsidiary is bound or to which any
of the properties or assets of the Company or any Subsidiary is subject (each,
a "Contract").  Except as set forth in Section 3(g) of the Disclosure
Statements, none of the Company, its Subsidiaries or, to the best knowledge of
the Company, any of the other parties thereto is in breach or violation of any
Contract, which breach or violation would have a Material Adverse Effect.

     (h)  Internal Accounting Controls.  The Company and each of its
Subsidiaries maintains a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.  The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 15a-14 and 15d-14)
for the Company and designed such disclosures controls and procedures to
ensure that material information relating to the Company, including its
Subsidiaries, is made known to the certifying officers by others within those
entities, particularly during the period in which the Company's Annual Report
on Form 10-K or Quarterly Report on Form 10-QSB, as the case may be, is being
prepared.  The Company's certifying officers have evaluated the effectiveness
of the Company's controls and procedures as of a date within 90 days prior to
the filing date of the 2003 Annual Report and the Company's most recently
filed Quarterly Report on Form 10-QSB (each such date, an "Evaluation Date").
The Company presented in the 2003 Annual Report and its most recently filed
Quarterly Report on Form 10-QSB the conclusions of the certifying officers
about the effectiveness of the disclosure controls and procedures based on
their evaluations as of the respective Evaluation Date.  Since the Evaluation
Date for the 2003 Annual Report, there have been no significant changes in the
Company's internal controls (as such term is defined in Item 307(b) of
Regulation S-K under the Exchange Act) or, to the Company's knowledge, in
other factors that could significantly affect the Company's internal controls.

     (i)  Absence of Certain Changes.  Except as set forth in Section 3(i) of
the Disclosure Schedule, since December 31, 2003, there has been no material
adverse change and no material adverse development in the business,
properties, operations, prospects, financial condition or results of
operations of the Company and its Subsidiaries, taken as a whole.  The Company
has not taken any steps, and does not currently expect to take any steps, to
seek protection pursuant to any bankruptcy or receivership law, nor does the
Company or any of its Subsidiaries have any knowledge or reason to believe
that its creditors intend to initiate involuntary bankruptcy proceedings with
respect to the Company or any of its Subsidiaries.

     (j)  Transactions With Affiliates.  Except as set forth in Section 3(j)
of the Disclosure Schedule, none of the officers, directors, or employees of
the Company or any of its Subsidiaries is presently a party to any transaction
with the Company or any of its Subsidiaries (other than for ordinary course
services solely in their capacity as officers, directors or employees),
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 such
officer, director or employee or any corporation, partnership, trust or other
entity in which any such officer, director, or employee has an ownership
interest of five percent or more or is an officer, director, trustee or
partner.

     (k)  Absence of Litigation.  Except as disclosed in Section 3(k) of the
Disclosure Schedule, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body (including, without limitation, the SEC)
pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company, any of its Subsidiaries, or any
of their respective directors or officers in their capacities as such.  There
are no facts which, if known by a potential claimant or governmental
authority, could give rise to a claim or proceeding which, if asserted or
conducted with results unfavorable to the Company or any of its Subsidiaries,
could reasonably be expected to have a Material Adverse Effect.  The SEC has
not issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the
Securities Act or the Exchange Act.

     (l)  Intellectual Property.  Each of the Company and its Subsidiaries
owns or is duly licensed (and, in such event, has the unfettered right to
grant sublicenses) to use all patents, patent applications, trademarks,
trademark applications, trade names, service marks, copyrights, copyright
applications, licenses, permits, inventions, discoveries, processes,
scientific, technical, engineering and marketing data, object and source
codes, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures)
and other similar rights and proprietary knowledge (collectively,
"Intangibles") necessary for the conduct of its business as now being
conducted and as presently contemplated to be conducted in the future.
Section 3(l) of the Disclosure Schedule sets forth a list of all Intangibles
owned and/or used by the Company in its business.  To the knowledge of the
Company and its Subsidiaries, neither the Company nor any Subsidiary of the
Company infringes or is in conflict with any right of any other person with
respect to any third party Intangibles.  Neither the Company nor any of its
Subsidiaries has received written notice of any pending conflict with or
infringement upon such third party Intangibles.  Neither the Company nor any
of its Subsidiaries has entered into any consent agreement, indemnification
agreement, forbearance to sue or settlement agreement with respect to the
validity of the Company's or its Subsidiaries' ownership of or right to use
its Intangibles.  To the best of the Company's knowledge, the Intangibles are
valid and enforceable and no registration relating thereto has lapsed, expired
or been abandoned or canceled or is the subject of cancellation or other
adversarial proceedings, and all applications therefor are pending and in good
standing.  The Company and its Subsidiaries have complied, in all material
respects, with their respective contractual obligations relating to the
protection of the Intangibles used pursuant to licenses.  To the best of
Company's knowledge, no person is infringing on or violating the Intangibles
owned or used by the Company or its Subsidiaries.

     (m)  Title.  The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and merchantable title to
all personal property owned by them that 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 do not materially affect the value of
such property and do not materially interfere with the use made and proposed
to be made of such property by the Company and 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 materially interfere with the use
made and proposed to be made of such property and buildings by the Company and
its Subsidiaries.

     (n)  Tax Status. Except as set forth in the Disclosure Schedule, the
Company and each of its Subsidiaries has made or filed all foreign, U.S.
federal, state, provincial and local 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 provisions 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.  The
Company has not executed a waiver with respect to any statute of limitations
relating to the assessment or collection of any foreign, federal, state,
provincial or local tax. None of the Company's tax returns is presently being
audited by any taxing authority.

     (o)  Key Employees.  Each of the Company's directors and officers and any
Key Employee (as defined below) is currently serving the Company in the
capacity disclosed in the Company's current SEC filings.  To the best of
Company's knowledge, no Key Employee is, or is now expected to be, in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or
any other contract or agreement or any restrictive covenant, and the continued
employment of each Key Employee does not subject the Company or any of its
Subsidiaries to any material liability with respect to any of the foregoing
matters.  No Key Employee has, to the knowledge of the Company and its
Subsidiaries, any intention to terminate or limit his employment with, or
services to, the Company or any of its Subsidiaries, nor is any such Key
Employee subject to any constraints which would cause such employee to be
unable to devote his full time and attention to such employment or services.
For purposes of this Agreement, "Key Employee" means the persons listed in
Section 3(o) of the Disclosure Schedule and any individual who assumes or
performs any of the duties of a Key Employee.

     (p)  Employee Relations.  (i) Neither the Company nor any of its
Subsidiaries is involved in any material union labor dispute nor, to the
knowledge of the Company or any of its Subsidiaries, is any such dispute
threatened. The Company and its Subsidiaries believe that their relations with
their employees are good; (ii) no executive officer (as defined in Rule 501(f)
of the Securities Act) has notified the Company that such officer intends to
leave the Company or otherwise terminate such officer's employment with the
Company; and (iii) the Company and its Subsidiaries are in compliance with all
federal, state, local and foreign laws and regulations respecting employment
and employment practices, terms and conditions of employment and wages and
hours, except where failure to be in compliance would not, either individually
or in the aggregate, result in a Material Adverse Effect.

     (q)  Insurance.  The Company and each of its Subsidiaries has in force
fire, casualty, product liability and other insurance policies, with extended
coverage, sufficient in amount to allow it to replace any of its material
properties or assets which might be damaged or destroyed or sufficient to
cover liabilities to which the Company may reasonably become subject, and such
types and amounts of other insurance with respect to its business and
properties, on both a per occurrence and an aggregate basis, as are
customarily carried by persons engaged in the same or similar business as the
Company.  No default or event has occurred that could give rise to a default
under any such policy.

     (r)  Environmental Matters.  There is no environmental litigation or
other environmental proceeding pending or, to the knowledge of the Company or
any of its Subsidiaries, threatened by any governmental regulatory authority
or others with respect to the current or any former business of the Company or
any of its Subsidiaries or any partnership or joint venture currently or at
any time affiliated with the Company or any of its Subsidiaries.  No state of
facts exists as to environmental matters or Hazardous Substances (as defined
below) that involves the reasonable likelihood of a material capital
expenditure by the Company or any of its Subsidiaries that may otherwise have
a Material Adverse Effect.  No Hazardous Substances have been treated, stored
or disposed of, or otherwise deposited, in or on the properties owned or
leased by the Company or any of its Subsidiaries or by any partnership or
joint venture currently or at any time affiliated with the Company or any of
its Subsidiaries in violation of any applicable environmental laws.  The
environmental compliance programs of the Company and each of its Subsidiaries
comply in all material respects with all environmental laws, whether foreign,
federal, state, provincial or local, currently in effect.  For purposes of
this Agreement, "Hazardous Substances" means any substance, waste,
contaminant, pollutant or material that has been determined by any
governmental authority to be capable of posing a risk of injury to health,
safety, property or the environment.

     (s)  Solvency.  The Company's ability to pay all outstanding
indebtedness, after the Closing Date, is dependent on its ability to secure
additional capital and increase its revenue as more fully described in Section
3(s) of the Disclosure Schedule.  The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be payable on or in respect of its debt).

     (t)  Listing.  The Common Stock is currently listed for trading in the
Pink Sheets (the "Pink Sheets").  The Company is not in violation of the
listing requirements of the Pink Sheets, does not reasonably anticipate that
the Common Stock will be delisted from the Pink Sheets for the foreseeable
future, and has not received any notice regarding the possible delisting of
the Common Stock from the Pink Sheets.  The Company will attempt to secure
(subject to the Registration Rights Agreement) the listing of the Conversion
Shares on the American Stock Exchange and on each other national securities
exchange, automated quotation system or over-the-counter market upon which
shares of Common Stock are currently listed (subject to official notice of
issuance).

     (u)  Form SB-2 Eligibility.  The Company is eligible to register the
resale of its Common Stock on a registration statement on Form SB-2 under the
Securities Act.  There exist no facts or circumstances that would prohibit or
delay the preparation and filing of a registration statement on Form SB-2 with
respect to the Registrable Securities (as defined in the Registration Rights
Agreement).  The Company has no basis to believe that its past or present
independent public auditors will withhold their consent to the inclusion, or
incorporation by reference, of their audit opinion concerning the Company's
financial statements that are included in the Registration Statement required
to be filed pursuant to the Registration Rights Agreement.

     (v)  Anti-Takeover Provisions.  The Company and its board of directors
have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover
provision under its Organizational Documents or the laws of the jurisdiction
of its organization which is or could become applicable to any Purchaser as a
result of the transactions contemplated by this Agreement, including, without
limitation, the Company's issuance of the Securities or any other securities
pursuant to the terms of this Agreement and any and all Purchaser's ownership
of the Securities or any such other securities.

     (w)  Acknowledgment Regarding Each Purchaser's Purchase of the
Securities.  The Company acknowledges and agrees that each Purchaser is acting
solely in the capacity of arm's length purchaser with respect to this
Agreement and the other Transaction Documents and the transactions
contemplated hereby and thereby, and that no Purchaser is (i) an officer or
director of the Company, (ii) an "affiliate" of the Company (as defined in
Rule 144) or (iii) a "beneficial owner" of more than 5% of the Common Stock
(as defined for purposes of Rule 13d-3 of the Exchange Act).  The Company
further acknowledges that no Purchaser is acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to this
Agreement or the other Transaction Documents and the transactions contemplated
hereby and thereby, and any advice given by a Purchaser or any of its
representatives or agents in connection with this Agreement or the other
Transaction Documents and the transactions contemplated hereby and thereby is
merely incidental to such Purchaser's purchase of the Securities.  The Company
further represents to each Purchaser that the Company's decision to enter into
this Agreement and the other Transaction Documents has been based solely on
the independent evaluation by the Company and its representatives.

     (x)  No General Solicitation or Integrated Offering.  Neither the Company
nor any distributor participating on the Company's behalf in the transactions
contemplated hereby (if any) nor any person acting for the Company, or any
such distributor, has conducted any "general solicitation" (as such term is
defined in Regulation D) with respect to any of the Securities being offered
hereby.  Neither the Company nor any of its affiliates, nor any person acting
on its or their behalf, has directly or indirectly made any offers or sales of
any security or solicited any offers to buy any security under circumstances
that would require registration of the Securities being offered hereby under
the Securities Act or cause this offering of Securities to be integrated with
any prior offering of securities of the Company for purposes of the Securities
Act, which result of such integration would require registration under the
Securities Act, or any applicable stockholder approval provisions.

     (y)  No Brokers.  Except for the investment banking agreement that
Company has entered into with the Shemano Group, as disclosed to Purchasers,
Company has taken no action that would give rise to any claim by any person
for brokerage commissions, finder's fees or similar payments by any Purchaser
relating to this Agreement or the transactions contemplated hereby.

     (z)  Acknowledgment Regarding Securities.  The number of Conversion
Shares issuable upon conversion of the Notes may increase in certain
circumstances.  The Company's directors and executive officers have studied
and fully understand the nature of the Securities being sold hereunder.  The
Company acknowledges that its obligation to issue Conversion Shares upon
conversion of the Notes in accordance with the terms thereof is absolute and
unconditional, regardless of the dilution that such issuance may have on the
ownership interests of other stockholders and the availability of remedies
provided for in any of the Transaction Documents relating to a failure or
refusal to issue Conversion Shares.  Taking the foregoing into account, the
Company's Board of Directors has determined in its good faith business
judgment that the issuance of the Units hereunder and the consummation of the
other transactions contemplated hereby are in the best interests of the
Company and its stockholders.

     (aa)  Disclosure.  All information relating to or concerning the Company
and/or any of its Subsidiaries set forth in this Agreement or provided to the
Purchasers pursuant to Section 2(d) hereof or otherwise in connection with the
transactions contemplated hereby is true and correct in all material respects
and the Company has not omitted to state any material fact necessary in order
to make the statements made herein or therein, in light of the circumstances
under which they were made, not misleading.  No event or circumstance known by
the Company has occurred or exists with respect to the Company or its
Subsidiaries or their respective businesses, properties, prospects, operations
or financial conditions, which has not been publicly disclosed but, under
applicable law, rule or regulation, would be required to be disclosed by the
Company in a registration statement filed on the date hereof by the Company
under the Securities Act with respect to a primary issuance of the Company's
securities.

     4.  COVENANTS.

     (a)  Best Efforts.  The parties shall use their respective commercially
reasonable efforts timely to satisfy each of the conditions described in
Sections 6 and 7 of this Agreement.

     (b)  Form D; Blue Sky Laws.  The Company shall file with the SEC a Form D
with respect to the Securities as required under Regulation D and provide a
copy thereof to each Purchaser promptly after such filing.  The Company shall,
on or before the Closing Date, take such action as the Company shall
reasonably determine is necessary to qualify the Securities for sale to each
Purchaser pursuant to this Agreement under applicable securities or "blue sky"
laws of the states of the United States or obtain exemption therefrom, and
shall provide evidence of any such action so taken to each Purchaser on or
prior to the Closing Date.  Within three days after the Closing Date, the
Company shall file a Form 8-K with the SEC concerning this Agreement and the
transactions contemplated hereby, which Form 8-K shall attach this Agreement
and its Exhibits as exhibits to such Form 8-K (the "8-K Filing").  From and
after the 8-K Filing, the Company hereby acknowledges that no Purchaser shall
be in possession of any material nonpublic information received from the
Company, any of its Subsidiaries or any of its respective officers, directors,
employees or agents that is not disclosed in the 8-K Filing. The Company shall
not, and shall cause each of its Subsidiaries and its and each of their
respective officers, directors, employees and agents not to, provide any
Purchaser with any material nonpublic information regarding the Company or any
of its Subsidiaries from and after the 8-K Filing without the express written
consent of such Purchaser; provided, however, that a Purchaser that exercises
its rights under Section 4(m) and/or 4(d) hereof shall be deemed to have given
such express written consent.  In the event of a breach of the foregoing
covenant by the Company, any of its Subsidiaries or any of its or their
respective officers, directors, employees and agents, in addition to any other
remedy provided herein or in the other Transaction Documents, a Purchaser
shall have the right to make a public disclosure, in the form of a press
release, public advertisement or otherwise, of such material nonpublic
information without the prior approval by the Company, its Subsidiaries or any
of its or their respective officers, directors, employees or agents.  No
Purchaser shall have any liability to the Company, its Subsidiaries or any of
its or their respective officers, directors, employees, shareholders or agents
for any such disclosure.  Subject to the foregoing, neither the Company nor
any Purchaser shall issue any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of any Purchaser, to
make any press release or other public disclosure with respect to such
transactions (i) in substantial conformity with the 8-K Filing and
contemporaneously therewith and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) each Purchaser shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release).

     (c)  Reporting Status.  So long as any Purchasers (or any of their
respective affiliates) beneficially own any of the Securities, the Company
shall timely file all reports required to be filed with the SEC pursuant to
the Exchange Act, and the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or
the rules and regulations thereunder would permit such termination.  In
addition, the Company shall take all actions necessary to meet the "registrant
eligibility" requirements set forth in the general instructions to Form SB-2
or any successor form thereto, to continue to be eligible to register the
resale of its Common Stock on a registration statement on Form SB-2 under the
Securities Act.

     (d)  Participation Right.  Subject to the terms and conditions specified
in this Section 4(d), until the third anniversary of the date hereof, the
Purchasers shall have a right to participate in any issuance by the Company of
(i) equity or equity-linked securities, or (ii) debt which is convertible into
equity or in which there is an equity component ("Additional Securities") on
the same terms and conditions as offered by the Company to the other
purchasers of such Additional Securities.  Each time the Company proposes to
offer any Additional Securities, the Company shall make an offering of such
Additional Securities to each Purchaser in accordance with the following
provisions:

          (i)  The Company shall deliver a notice (the "Notice") to the
Purchasers, at least ten (10) business days prior to the date on which it
proposes to offer such Additional Securities, stating (A) its bona fide
intention to offer such Additional Securities, (B) the number of such
Additional Securities to be offered, (C) the price and terms, if any, upon
which it proposes to offer such Additional Securities, and (D) the anticipated
closing date of the sale of such Additional Securities.

          (ii)  Each Purchaser shall have the right, exercisable by delivering
written notice to such effect to the Company within five business (5) days
after such Purchaser's receipt of the Notice, to purchase, at the price and on
the terms specified in the Notice, up to that portion of such Additional
Securities which equals the proportion that the number of Conversion Shares
that such Purchaser then owns or has the right to acquire (upon conversion of
the Notes) bears to the total number of shares of Common Stock then
outstanding (assuming full conversion, exercise or exchange of all
convertible, exercisable or exchangeable securities then outstanding).  The
Company shall promptly, in writing, inform each Purchaser that elects to
purchase all of the Additional Shares available to it (each, a
"Fully-Exercising Purchaser") of any other Purchaser's failure to do likewise,
and, during the five-day period commencing after such information is given,
each Fully-Exercising Purchaser shall be entitled to purchase up to that
portion of the Additional Securities for which the Purchasers were entitled to
subscribe but which were not subscribed for by the Purchasers which is equal
to the proportion that the number of shares of Conversion Shares that such
Fully-Exercising Purchaser then owns or has the right to acquire (upon
conversion of the Notes) bears to the total number of shares of Conversion
Shares that all Fully-Exercising Purchasers who wish to purchase some of the
unsubscribed shares then own or have the right to acquire (upon conversion of
the Notes).

          (iii)  If all Additional Securities which the Purchasers are
entitled to purchase pursuant to this Section 4(d) are not purchased as
provided herein, the Company may, during the 75-day period following the
expiration of the 5-day period (and, if necessary, such additional five-day
period) provided in clause (ii), offer the remaining unsubscribed portion of
such Additional Securities to any person at a price not less than, and upon
terms no more favorable to the offeree than, as specified in the Notice.  If
the Company does not consummate the sale of such Additional Securities within
such period, the right provided hereunder shall be deemed to be revived and
such Additional Securities shall not be offered or sold unless first reoffered
to the Purchasers in accordance herewith.

          (iv)  Notwithstanding the foregoing, the participation rights
granted in this Section 4(d) shall not be applicable to: (A) the issuance of
shares of Common Stock upon the exercise or conversion of the Company's
options, warrants or convertible securities outstanding as of the date hereof
and disclosed in Section 3(c) of the Disclosure Schedule in accordance with
the terms of such options, warrants or other securities as in effect on the
date hereof; (B) the grant of options to purchase Common Stock, with exercise
prices not less than the market price of the Common Stock on the date of
grant, or the grant of restricted shares of Common Stock, in each case which
are issued to employees, officers, directors or consultants of the Company for
the primary purpose of soliciting or retaining their employment or service
pursuant to an equity compensation plan approved by the Company's Board of
Directors, and the issuance of shares of Common Stock upon the exercise of any
such options; (C) the issuance of securities pursuant to a bona fide
underwritten public offering; (D) the issuance of the Notes, the Conversion
Shares upon conversion of the Notes; or (E) the issuance of securities in a
bona fide business acquisition.

     (e)  Use of Proceeds.  The Company shall use the proceeds from the sale
and issuance of the Units for general corporate purposes and working capital.
Such proceeds shall not be used to (i) pay dividends; (ii) pay for any
increase in executive compensation or make any loan or other advance to any
officer, employee, shareholder, director or other affiliate of the Company,
without the express approval of the Board of Directors acting in accordance
with past practice; (iii) purchase debt or equity securities of any entity
(including redeeming the Company's own securities), except for (A) evidences
of indebtedness issued or fully guaranteed by the United States of America and
having a maturity of not more than one year from the date of acquisition, (B)
certificates of deposit, notes, acceptances and repurchase agreements having a
maturity of not more than one year from the date of acquisition issued by a
bank organized in the United States having capital, surplus and undivided
profits of at least $500,000,000, (C) the highest-rated commercial paper
having a maturity of not more than one year from the date of acquisition, and
(D) "Money Market" fund shares, or money market accounts fully insured by the
Federal Deposit Insurance Corporation and sponsored by banks and other
financial institutions, provided that the investments consist principally of
the types of investments described in clauses (A), (B), or (C) above; or (iv)
make any investment not directly related to the current business of the
Company.

      (f)  Financial Information.  So long as any Purchasers (or any of their
respective affiliates) beneficially own any Securities, the Company shall send
(via electronic transmission or otherwise) the following reports to such
Purchaser:  (i) within ten days after the filing with the SEC, a copy of its
Annual Report on Form 10-K, its Quarterly Reports on Form 10-QSB, its proxy
statements and any Current Reports on Form 8-K; and (ii) within one day after
release, copies of all press releases issued by the Company or any of its
Subsidiaries.

     (g)  Reservation of Shares.  The Company currently has authorized and
reserved for the purpose of issuance a minimum of 2,778,000 shares of Common
Stock to provide for the full conversion of the Notes and Warrants and
issuance of the Conversion Shares in connection therewith and as otherwise
required by the Notes, the Warrants and the Registration Rights Agreement
(collectively, the "Issuance Obligations").  In the event such number of
shares becomes insufficient to satisfy the Issuance Obligations, the Company
shall take all necessary action to authorize and reserve such additional
shares of Common Stock necessary to satisfy the Issuance Obligations.

     (h)  Listing.  So long as any Purchasers (or any of their respective
affiliates) beneficially own any Securities, the Company shall maintain the
listing of all Conversion Shares from time to time issuable upon conversion of
the Notes and Warrants on each national securities exchange, automated
quotation system or electronic bulletin board on which shares of Common Stock
are currently listed.  The Company shall use its commercially reasonable
efforts to continue the listing and trading of its Common Stock on the Pink
Sheets, the OTC Bulletin Board, the Nasdaq SmallCap Market (the "SmallCap
Market"), or on the Nasdaq National Market (the "National Market"), the New
York Stock Exchange (the "NYSE") or the American Stock Exchange (the "AMEX")
and shall comply in all respects with the reporting, filing and other
obligations under the bylaws or rules of the National Association of
Securities Dealers, Inc. (the "NASD"), such exchanges, or such electronic
system, as applicable.  The Company shall promptly provide to each Purchaser
copies of any notices it receives regarding the continued eligibility of the
Common Stock for trading on any securities exchange or automated quotation
system on which securities of the same class or series issued by the Company
are then listed or quoted, if any.

     (i)  Corporate Existence.  So long as any Purchasers (or any of their
respective affiliates) beneficially owns any Securities, the Company shall
maintain its corporate existence, and in the event of a merger, consolidation
or sale of all or substantially all of the Company's assets, the Company shall
ensure that the surviving or successor entity in such transaction (i) assumes
the Company's obligations under this Agreement and the other Transaction
Documents and the agreements and instruments entered into in connection
herewith and therewith regardless of whether or not the Company would have had
a sufficient number of shares of Common Stock authorized and available for
issuance in order to effect the conversion of all the Notes outstanding as of
the date of such transaction and (ii) except in the event of a merger,
consolidation of the Company into any other corporation, or the sale or
conveyance of all or substantially all of the assets of the Company where the
consideration consists solely of cash, the surviving or successor entity is a
publicly traded corporation whose common stock is listed for trading on the
SmallCap Market, the National Market, the NYSE or the AMEX.

     (j)  No Integrated Offerings.  The Company shall not make any offers or
sales of any security (other than the Securities) under circumstances that
would require registration of the Securities being offered or sold hereunder
under the Securities Act or cause this offering of the Securities to be
integrated with any other offering of securities by the Company for purposes
of any stockholder approval provision applicable to the Company or its
securities.

     (k)  Legal Compliance.  The Company shall conduct its business and the
business of its Subsidiaries in compliance with all laws, ordinances or
regulations of governmental entities applicable to such businesses, except
where the failure to do so would not have a Material Adverse Effect.

     (l)  Information.  So long as any Purchasers (or any of their respective
affiliates) beneficially own any Securities, the Company shall furnish to each
such Purchaser:

          (i)  Intentionally deleted; and

          (ii) the information the Company must deliver to any holder or to
any prospective transferee of Securities in order to permit the sale or other
transfer of such Securities pursuant to Rule 144A of the SEC or any similar
rule then in effect.

The Company shall keep at its principal executive office a true copy of this
Agreement (as at the time in effect), and cause the same to be available for
inspection at such office during normal business hours by any holder of
Securities or any prospective transferee of Securities designated by a holder
thereof.

     (m)  Inspection of Properties and Books.  So long as any Purchasers (or
any of their respective affiliates) beneficially own any Securities, each such
Purchaser and its representatives and agents (collectively, the "Inspectors")
shall have the right, at such Purchaser's expense, to visit and inspect any of
the properties of the Company and of its Subsidiaries, to examine the books of
account and records of the Company and of its Subsidiaries, to make or be
provided with copies and extracts therefrom, to discuss the affairs, finances
and accounts of the Company and of its Subsidiaries with, and to be advised as
to the same by, its and their officers, employees and independent public
accountants (and by this provision the Company authorizes such accountants to
discuss such affairs, finances and accounts, whether or not a representative
of the Company is present) all at such reasonable times and intervals and to
such reasonable extent as the Purchasers may desire; provided, however, that
each Inspector shall hold in confidence and shall not make any disclosure
(except to such Purchaser) of any such information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (i) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in any Registration
Statement filed pursuant to the Registration Rights Agreement, (ii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or government body of competent jurisdiction, or (iii) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement.  Each Purchaser agrees
that it shall, upon learning that disclosure of such information is sought in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to the Company and allow the Company, at its
expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, the information deemed confidential.

     (n)  Shareholders Rights Plan.  No claim shall be made or enforced by the
Company or any other person that any Purchaser is an "Acquiring Person" under
any shareholders rights plan or similar plan or arrangement in effect or
hereafter adopted by the Company, or that any Purchaser could be deemed to
trigger the provisions of any such plan or arrangement, by virtue of receiving
Securities under this Agreement or any other Transaction Documents or under
any other agreement between the Company and the Purchasers.

     (o)  Pledge of Securities. The Company acknowledges and agrees that the
Securities may be pledged by any Purchaser in connection with a bona fide
margin agreement or other loan or financing arrangement that is secured by the
Securities.  The pledge of Securities shall not be deemed to be a transfer,
sale or assignment of the Securities hereunder, and no Purchaser effecting a
pledge of Securities shall be required to provide the Company with any notice
thereof or otherwise make any delivery to the Company pursuant to this
Agreement or any other Transaction Document.  The Company shall execute and
deliver such documentation as a pledgee of the Securities may reasonably
request in connection with a pledge of the Securities to such pledgee by a
Purchaser.

     (p)  Variable Securities.  So long as any Purchasers (or any of their
respective affiliates) beneficially own any Securities, the Company shall not,
without first obtaining the written approval of the holders of a majority of
the aggregate principal face amount of the Notes then outstanding (which
approval may be given or withheld by such holders in their sole and absolute
discretion), issue or sell any rights, warrants or options to subscribe for or
purchase Common Stock, or any other securities directly or indirectly
convertible into or exchangeable or exercisable for Common Stock, at an
effective conversion, exchange or exercise price that varies or may vary with
the market price of the Common Stock, including by way of one or more reset(s)
to any fixed price.  Notwithstanding the foregoing, nothing in this paragraph
is intended to prohibit Company in the future from issuing securities at a
discount from market, so long as the discount is fixed; i.e. no toxic
financings.

     (q)  Expenses.  At the Closing, the Company shall pay to MicroCapital LLC
("MicroCapital") reimbursement for the out-of-pocket expenses reasonably
incurred by MicroCapital, its affiliates and its or their advisors in
connection with the negotiation, preparation, execution and delivery of this
Agreement and the other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby, including, without limitation,
MicroCapital's and its affiliates' and advisors' reasonable due diligence and
attorneys' fees and expenses (the "Expenses"); provided, however, that the
aggregate amount of the Expenses payable to MicroCapital shall not exceed
$10,000 (the "Expense Cap") unless prior approval is obtained from the
Company.

     5.  SECURITIES TRANSFER MATTERS.

     (a)  Conversion and Exercise.  Upon conversion of the Notes or Warrants
by any person, (i) if the DTC Transfer Conditions (as defined below) are
satisfied, the Company shall cause its transfer agent to electronically
transmit all Conversion Shares by crediting the account of such person or its
nominee with the Depository Trust Company ("DTC") through its Deposit
Withdrawal Agent Commission system; or (ii) if the DTC Transfer Conditions are
not satisfied, the Company shall issue and deliver, or instruct its transfer
agent to issue and deliver, certificates (subject to the legend and other
applicable provisions hereof), registered in the name of such person its
nominee, physical certificates representing the Conversion Shares.  Even if
the DTC Transfer Conditions are satisfied, any person effecting a conversion
of Notes or Warrants may instruct the Company to deliver to such person or its
nominee physical certificates representing the Conversion Shares in lieu of
delivering such shares by way of DTC Transfer.  For purposes of this
Agreement, "DTC Transfer Conditions" means that (A) the Company's transfer
agent is participating in the DTC Fast Automated Securities Transfer program
and (B) the certificates for the Conversion Shares required to be delivered do
not bear a legend and the person effecting such conversion or exercise is not
then required to return such certificate for the placement of a legend
thereon.

     (b)  Transfer or Resale.  Each Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the sale or resale of the
Securities have not been and are not being registered under the Securities Act
or any state securities laws, and the Securities may not be transferred unless
(A) the transfer is made pursuant to and as set forth in an effective
registration statement under the Securities Act covering the Securities; or
(B) such Purchaser shall have delivered to the Company an opinion of counsel
(which opinion shall be in form, substance and scope customary for opinions of
counsel in comparable transactions) to the effect that the Securities to be
sold or transferred may be sold or transferred pursuant to an exemption from
such registration; or (C) sold under and in compliance with Rule 144; or (D)
sold or transferred to an affiliate of such Purchaser that is an Accredited
Investor and agrees to sell or otherwise transfer the Securities only in
accordance with the provisions of this Section 5(b); and (ii) neither the
Company nor any other person is under any obligation to register such
Securities under the Securities Act or any state securities laws (other than
pursuant to the terms of the Registration Rights Agreement).  Notwithstanding
the foregoing or anything else contained herein to the contrary, the
Securities may be pledged as collateral in connection with a bona fide margin
account or other lending arrangement, provided such pledge is consistent with
applicable laws, rules and regulations.

     (c)  Legends.  Each Purchaser understands that the Notes and Warrants,
until such time as the Conversion Shares have been registered under the
Securities Act (including registration pursuant to Rule 416 thereunder) as
contemplated by the Registration Rights Agreement or otherwise may be sold by
such Purchaser under Rule 144, the certificates for the Conversion Shares may
bear a restrictive legend in substantially the following form:

      The securities represented by this certificate have not been
      registered under the Securities Act of 1933, as amended, or
      the securities laws of any state of the United States or in
      any other jurisdiction.  The securities represented hereby
      may not be offered, sold or transferred in the absence of an
      effective registration statement for the securities under
      applicable securities laws unless offered, sold or transferred
      pursuant to an available exemption from the registration
      requirements of those laws.

     The Company shall, immediately prior to a registration statement covering
the Securities (including, without limitation, the Registration Statement
contemplated by the Registration Rights Agreement) being declared effective,
deliver to its transfer agent an opinion letter of counsel, opining that at
any time such registration statement is effective, the transfer agent shall
issue, in connection with the issuance of the Conversion Shares, certificates
representing such Conversion Shares without the restrictive legend above,
provided such Conversion Shares are to be sold pursuant to the prospectus
contained in such registration statement.  Upon receipt of such opinion, the
Company shall cause the transfer agent to confirm, for the benefit of the
holders, that no further opinion of counsel is required at the time of
transfer in order to issue such shares without such restrictive legend.

     The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by state securities laws, (i) the sale
of such Security is registered under the Securities Act (including
registration pursuant to Rule 416 thereunder); (ii) such holder provides the
Company with an opinion of counsel, in form, substance and scope customary for
opinions of counsel in comparable transactions, to the effect that a public
sale or transfer of such Security may be made without registration under the
Securities Act; or (iii) such holder provides the Company with reasonable
assurances that such Security can be sold under Rule 144.  In the event the
above legend is removed from any Security and thereafter the effectiveness of
a registration statement covering such Security is suspended or the Company
determines that a supplement or amendment thereto is required by applicable
securities laws, then upon reasonable advance written notice to such Purchaser
the Company may require that the above legend be placed on any such Security
that cannot then be sold pursuant to an effective registration statement or
under Rule 144 and such Purchaser shall cooperate in the replacement of such
legend.  Such legend shall thereafter be removed when such Security may again
be sold pursuant to an effective registration statement or under Rule 144.

     (d)  Transfer Agent Instructions.  Upon compliance by any Purchaser with
the provisions of this Section 5 with respect to the transfer of any
Securities, the Company shall permit the transfer of such Securities and, in
the case of the transfer of Conversion Shares, promptly instruct its transfer
agent to issue one or more certificates (or effect a DTC Transfer) in such
name and in such denominations as specified by such Purchaser.  The Company
shall not give any instructions to its transfer agent with respect to the
Securities, other than any permissible or required instructions provided in
this Section 5, and the Securities shall otherwise be freely transferable on
the books and records of the Company as and to the extent provided in this
Agreement.

     6.  CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.

     The obligation of the Company hereunder to issue and sell the Units to
each Purchaser hereunder is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions as to such Purchaser,
provided that such conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion:

     (a)  Execution of Transaction Documents.  Each Purchaser shall have
executed such Purchaser's Execution Page to this Agreement and each other
Transaction Document to which such Purchaser is a party and delivered the same
to the Company.

     (b)  Payment of Purchase Price.  Each Purchaser shall have delivered the
full amount of such Purchaser's Purchase Price to the Company by wire transfer
in accordance with the Company's written wiring instructions.

     (c)  Representations and Warranties True; Covenants Performed.  The
representations and warranties of each Purchaser shall be true and correct as
of the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date,
which representations and warranties shall be true and correct as of such
date), and such Purchaser shall have performed, satisfied and complied with
the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Purchaser at or prior to the
Closing Date.

     (d)  No Legal Prohibition.  No statute, rule, regulation, executive
order, decree, ruling, injunction, action or proceeding shall have been
enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which restricts or prohibits
the consummation of any of the transactions contemplated by this Agreement.

     7.  CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE.

     The obligation of each Purchaser hereunder to purchase the Units for
which it is subscribing from the Company hereunder is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that such conditions are for each Purchaser's individual
and sole benefit and may be waived by any Purchaser as to such Purchaser at
any time in such Purchaser's sole discretion:

     (a)  Execution of Transaction Documents.  The Company shall have executed
such Purchaser's Execution Page to this Agreement and each other Transaction
Document to which the Company is a party and delivered executed originals of
the same to such Purchaser.

     (b)  Delivery of Securities.  The Company shall have delivered to such
Purchaser duly executed Notes for the number of Units being purchased by such
Purchaser (each in such denominations as such Purchaser shall request),
registered in such Purchaser's name.

     (c)  Listing.  The Common Stock shall be authorized for quotation and
listed in the Pink Sheets and trading in the Common Stock (or on the Pink
Sheets generally) shall not have been suspended by the SEC, the NASD or
otherwise.

     (d)  Representations and Warranties True; Covenants Performed.  The
representations and warranties of the Company shall be true and correct as of
the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date,
which representations and warranties shall be true and correct as of such
date) and the Company shall have performed, satisfied and complied with the
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the
Closing Date.  Such Purchaser shall have received a certificate, executed by
the Chief Executive Officer of the Company after reasonable investigation,
dated as of the Closing Date, to the foregoing effect and as to such other
matters as may reasonably be requested by such Purchaser.

     (e)  No Legal Prohibition.  No statute, rule, regulation, executive
order, decree, ruling, injunction, action or proceeding shall have been
enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which restricts or prohibits
the consummation of any of the transactions contemplated by this Agreement.

     (f)  Legal Opinion.  Such Purchaser shall have received an opinion of the
Company's counsel, dated as of the Closing Date, in the form attached hereto
as Exhibit E.

     (g)  Corporate Approvals.  Such Purchaser shall have received a copy of
resolutions, duly adopted by the Board of Directors of the Company, which
shall be in full force and effect at the time of the Closing, authorizing the
execution, delivery and performance by the Company of this Agreement and the
other Transaction Documents and the consummation by the Company of the
transactions contemplated hereby and thereby, certified as such by the
Secretary or Assistant Secretary of the Company, and such other documents they
reasonably request in connection with the Closing, in the form attached hereto
as Exhibit F.

     8.  GOVERNING LAW; MISCELLANEOUS.

     (a)  Governing Law; Jurisdiction.  This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware applicable
to contracts made and to be performed in the State of Delaware.  The Company
and each Purchaser irrevocably consent to the jurisdiction of the United
States federal courts and the state courts located in the City and County of
San Francisco, California, in any suit or proceeding based on or arising under
this Agreement and irrevocably agree that all claims in respect of such suit
or proceeding may be determined in such courts. The Company irrevocably waives
the defense of an inconvenient forum to the maintenance of such suit or
proceeding in such forum.  The Company further agrees that service of process
upon the Company mailed by first class mail shall be deemed in every respect
effective service of process upon the Company in any such suit or proceeding.
Nothing herein shall affect the right of any Purchaser to serve process in any
other manner permitted by law.  The Company agrees that a final non-appealable
judgment in any such suit or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.

     (b)  Counterparts.  This Agreement may be executed in two or more
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.  This Agreement, once executed by a party, may
be delivered to the other parties hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.  In the event any signature is delivered by facsimile transmission,
the party using such means of delivery shall cause the manually executed
execution page(s) hereof to be physically delivered to the other party within
five days of the execution hereof, provided that the failure to so deliver any
manually executed execution page shall not affect the validity or
enforceability of this Agreement.

     (c)  Construction.  Whenever the context requires, the gender of any word
used in this Agreement includes the masculine, feminine or neuter, and the
number of any word includes the singular or plural.  Unless the context
otherwise requires, all references to articles and sections refer to articles
and sections of this Agreement, and all references to schedules are to
schedules attached hereto, each of which is made a part hereof for all
purposes.  The descriptive headings of the several articles and sections of
this Agreement are inserted for purposes of reference only, and shall not
affect the meaning or construction of any of the provisions hereof.

     (d)  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 or the validity or enforceability of this Agreement in any other
jurisdiction.

     (e)  Entire Agreement; Amendments.  This Agreement and the other
Transaction Documents (including any schedules and exhibits hereto and
thereto) contain the entire understanding of the Purchasers, the Company,
their affiliates and persons acting on their behalf with respect to the
matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Purchasers make any
representation, warranty, covenant or undertaking with respect to such
matters.  No provision of this Agreement may be waived other than by an
instrument in writing signed by the party to be charged with enforcement, and
no provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and each Purchaser.

     (f)  Notices.  Any notices required or permitted to be given under the
terms of this Agreement shall be in writing and sent by certified or
registered mail (return receipt requested) or delivered personally, by
nationally recognized overnight carrier or by confirmed facsimile
transmission, and shall be effective five days after being placed in the mail,
if mailed, or upon receipt or refusal of receipt, if delivered personally or
by nationally recognized overnight carrier or confirmed facsimile
transmission, in each case addressed to a party as provided herein.  The
initial addresses for such communications shall be as follows, and each party
shall provide notice to the other parties of any change in such party's
address:

          (i)  If to the Company:

               iMedia International, Inc.
               1721 Twenty First Street
               Santa Monica, CA 90404
               Telephone: (310) 453-4499
               Facsimile: (310) 453-6120
               Attention: David MacEachern, Chairman & Chief Executive Officer

          (ii) If to any Purchaser, to the address set forth under such
               Purchaser's name on the Execution Page hereto executed by such
               Purchaser.

     (g)  Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns.  Except
as provided herein, the Company shall not assign this Agreement or any rights
or obligations hereunder.  Any Purchaser may assign or transfer the Securities
pursuant to the terms of this Agreement and of such Securities, or assign such
Purchaser's rights hereunder to any other person or entity.

     (h)  Third Party Beneficiaries.  This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.

     (i)  Survival.  The representations and warranties of the Company and the
agreements and covenants set forth in Sections 3, 4, 5 and 8 hereof shall
survive the Closing notwithstanding any due diligence investigation conducted
by or on behalf of any Purchaser.  Moreover, none of the representations and
warranties made by the Company herein shall act as a waiver of any rights or
remedies any Purchaser may have under applicable U.S. federal or state
securities laws.

     (j)  Publicity.  The Company and each Purchaser shall have the right to
approve before issuance any press releases, SEC or, to the extent applicable,
NASD filings, or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of the Purchasers, to make any press release or SEC
or, to the extent applicable, NASD filings with respect to such transactions
as is required by applicable law and regulations (although the Purchasers
shall be consulted by the Company in connection with any such press release
and filing prior to its release and shall be provided with a copy thereof and
must provide specific consent to the use of their name in connection
therewith).

     (k)  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.

     (l)  Indemnification.  In consideration of each Purchaser's execution and
delivery of this Agreement and the other Transaction Documents and purchase of
the Securities hereunder, and in addition to all of the Company's other
obligations under this Agreement and the other Transaction Documents, from and
after the Closing, the Company shall defend, protect, indemnify and hold
harmless each Purchaser and each other holder of the Securities and all of
their stockholders, partners, members, officers, directors, employees and
direct or indirect investors and any of the foregoing persons' 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 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 Company in this Agreement, any other Transaction Document
or any other certificate, instrument or document contemplated hereby or
thereby, (ii) any breach of any covenant, agreement or obligation of the
Company contained in this Agreement, any other Transaction Document 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 (including for these purposes a derivative action
brought on behalf of the Company) and arising out of or resulting from (A) the
execution, delivery, performance or enforcement of this Agreement, any other
Transaction Document or any other certificate, instrument or document
contemplated hereby or thereby, (B) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
and sale of the Securities, (C) any disclosure made by such Purchaser pursuant
to Section 4(b) or 4(m) hereof, or (D) the status of such Purchaser or holder
of the Securities as an investor in the Company. To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities that is permissible under applicable law.
Except as otherwise set forth herein, the mechanics and procedures with
respect to the rights and obligations under this Section 8(l) shall be the
same as those set forth in the Registration Rights Agreement.

      (m)  Payment Set Aside. To the extent that the Company makes a payment
or payments to any Purchaser hereunder or pursuant to any of the other
Transaction Documents or any Purchaser enforces or exercises its rights
hereunder or thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from,
disgorged by or are required to be refunded, repaid or otherwise restored to
the Company, 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.

     (n)  Joint Participation in Drafting.  Each party to this Agreement has
participated in the negotiation and drafting of this Agreement and the other
Transaction Documents.  As such, the language used herein and therein shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party
to this Agreement.

     (o)  Remedies.  No provision of this Agreement or any other Transaction
Document providing for any remedy to a Purchaser shall limit any other remedy
which would otherwise be available to such Purchaser at law, in equity or
otherwise.  Nothing in this Agreement or any other Transaction Document shall
limit any rights any Purchaser may have under any applicable federal or state
securities laws with respect to the investment contemplated hereby.  The
Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Purchasers by vitiating the intent and purpose
of the transactions contemplated hereby.  Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations hereunder
(including, but not limited to, its obligations pursuant to Section 5 hereof)
will be inadequate and agrees, in the event of a breach or threatened breach
by the Company of the provisions of this Agreement (including, but not limited
to, its obligations pursuant to Section 5 hereof), that each Purchaser shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer of the
Securities, without the necessity of showing economic loss and without any
bond or other security being required.

     (p)  Knowledge.  As used in this Agreement, the term "knowledge" of any
person or entity shall mean and include (i) actual knowledge and (ii) that
knowledge which a reasonably prudent business person could have obtained in
the management of his or her business affairs after making due inquiry and
exercising due diligence which a prudent business person should have made or
exercised, as applicable, with respect thereto.

     IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused
this Agreement to be duly executed as of the date first above written.

iMEDIA INTERNATIONAL, INC.

By:    /s/ David MacEachern
-------------------------------------------
Name:  David MacEachern
Title:  Chairman & Chief Executive Officer

PURCHASER:

MicroCapital Fund LP

By:   /s/ Christopher Swenson
-------------------------------------------
Name:  Christopher P. Swenson
Title:  Vice President

ADDRESS:  201 Post Street
          Suite 1001
          San Francisco, CA 94108
          Telephone:   (415) 625-6835
          Facsimile:  (415) 625-0836
          Attention: Christopher P. SwensonBASIC LEASE INFORMATION:

LEASE DATE:             July 12, 2004

LANDLORD:               F.G.B.P. L.L.C., A Utah Limited Liability Company

ADDRESS OF LANDLORD:    12185 So. Business Park Dr. 102 West, Utah 84020

TENANT:                 Flexpoint Sensor Systems, Inc.   [Initials] [9/13/04]
ADDRESS OF TENANT:      12200 So. Business Park Dr. 106 West, Utah 84020
CONTACT:                John Sindt, President
TELEPHONE:              801 568-5111

PREMISES:               Approximately 11,639 rentable square feet

LEASE TERM:             Five (5) years Commencing October 1, 2004 [Initials]
                        Terminating September 30, 2009  [Initials]
BASE RENT:              $  6,500.00  per month

BASE RENT ANNUAL INCREASE:  2% Per Year

ESTIMATED BASIC OPERATING COSTS:  $1,876.00  per month (assumes Tenant
                                   provides own janitorial services and pays
                                   own utilities, and own maintenance)

TOTAL RENT:             $ 8,376.00 per month

TENANT'S PERCENTAGE SHARE OF OPERATING COSTS:    33.50 %

LANDLORD'S WORK- (Tenant Improvement Allowance): $00.00 Per rentable sq. ft.

        The foregoing Basic Lease Information is hereby incorporated into and
made a part of this Lease. In the event of any conflict between any Basic
Lease Information and the Lease, the latter shall control.

LANDLORD:                         TENANT:

F.G.B.P. L.L.C.                   Flexpoint Sensor Systems, Inc. <Initials
                                                                  OK 9/13/04>

     /s/ Alan Wheatley                 /s/ John Sindt, President
By:______________________         By:_____________________________
         Alan Wheatley                    John Sindt

     /s/ Gary Deaton
By:______________________         By:_____________________________
     Gary Deaton

     /s/ Don Watkins
By:_______________________
     Don Watkins

    /s/ David Blake
By:_____________________________
    David Blake

<PAGE>

                         LEASE AGREEMENT

        THIS LEASE made as of this 12TH day ofJuly, 2004 Between F.G.B.P.
L.L.C. ("Landlord") and  FLEXPOINT SENSOR SYSTEMS, INC. ("Tenant").

        Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord those Premises ("Premises") as shown on Exhibit A attached hereto and
made a part hereof, specified in the Basic Lease Information attached hereto.

    1.    Occupancy.  Tenant shall use and occupy the Premises for general
office, manufacturing, assembly, and storage  purposes and for no other use or
purpose without the prior written consent of Landlord.

    2.    Term and Possession.

          a.    The term of this Lease ("Lease Term") shall be for the period
specified in the Basic Lease Information commencing on the Commencement Date,
and ending thereafter as specified in the Basic Lease Information (or until
sooner terminated as herein provided).

    3.    Rent.

          a.    Tenant shall pay to Landlord throughout the term of this Lease
rent as specified in the Basic Lease Information, payable in monthly
installments in advance on the first day of each month during every year of
the term, without deduction or offset whatsoever, to Landlord at the address
specified in the Basic Lease Information, or to such other firm or to such
other place as Landlord may from time to time designate in writing.  Said
rental is subject to adjustment as provided in Paragraph 27 hereof.  If this
Lease commences on a day other than the first day of a calendar month or ends
on a day other than the last day of a calendar month, the monthly rental for
the fractional month shall be appropriately prorated.  Base Rent shall be
increased by 2% on the first day of each anniversary of the Commencement Date.

          b.     Tenant agrees that if rent or any other payment due hereunder
from Tenant to Landlord remains unpaid ten (10) days after said amount is due,
the amount of such unpaid rent or other payment shall be increased by a late
charge to be paid Landlord by Tenant in an amount equal to five percent (5%)
of the amount of the delinquent rent or other payment.

    4.    Restrictions on Use.  Tenant shall not do or permit anything to be
done in or about the Premises which will in any way obstruct or interfere with
the rights of other tenants or occupants of the building or injure or annoy
them.   Tenant shall not do nor permit anything to be done on or about the
Premises or bring or keep anything therein which will in any way increase the
rate of any insurance upon the building in which the Premises are situated or
any of its contents or cause a cancellation of said insurance.

    5.    Compliance with Laws.  Tenant shall not use the Premises or permit
anything to be done in or about the Premises which will in any way conflict
with any law, or governmental rule now in force or which may hereafter be
enacted. Tenant shall at its sole cost promptly comply with all laws, and
governmental rules, now in force or which may hereafter be in force excluding
structural changes not related to alterations made by or for Tenant.

    6.    Alterations.  Tenant shall not make or suffer to be made any
alterations, to the Premises without the prior  written consent of Landlord.
Upon the expiration or sooner termination of the term herein provided, Tenant
shall upon demand by Landlord, at Tenant's sole cost remove all alterations,
made by  Tenant, designated by Landlord to be removed, and Tenant shall repair
and restore the Premises to their original condition.

    7.    Repair.  By signing this Lease, Tenant accepts the Premises as being
in the condition in which Landlord is obligated to deliver them. Tenant shall,
during the term hereof at Tenant's sole cost, keep the Premises in good
condition.

    8.    Liens.  Tenant shall keep the Premises free from any liens arising
out of any work performed, material furnished, or obligations incurred by
Tenant.  In the event that Tenant shall not, within twenty (20) days following
the imposition of any such lien, cause the same to be released of record by
payment or posting of a property bond, Landlord shall have, in addition to all
other remedies provided herein and by law, the right, but no obligation, to
cause the same to be released by such means as it shall deem proper, including
payment of the claim giving rise to such lien.  All such sums paid by Landlord
and all expenses incurred by it in connection therewith shall be considered
additional rent and shall be payable to it by Tenant on demand with interest
at the rate payable of eighteen percent (18%) per annum or two percent (2%)
above the prime rate of U. S. Bank, whichever is more. Tenant shall give
Landlord at least five (5) business days' prior notice of commencement of any
material construction on the Premises.

    9.    Assignment and Subletting.

          a.    Tenant shall not assign, encumber, or otherwise transfer  this
Lease or any interest herein, sublet the Premises or any part thereof without
the prior written consent of Landlord  which consent shall not be unreasonably
withheld.   A transfer by the present majority shareholders of ownership and
control of the voting stock of a corporate tenant, or a transfer of a
controlling interest in a partnership or proprietorship, as applicable, shall
be deemed an assignment for the purposes of this Paragraph.

          b.    Any subletting hereunder by Tenant shall not result in Tenant
being released or discharged from any liability under this Lease.

          c.    Landlord's consent to any assignment, encumbrances,
subletting, occupation, lien or other transfer shall not release Tenant from
any of Tenant's obligations hereunder or be deemed to be a consent to any
subsequent occurrence.

    10.   Insurance and Indemnification.

          a.    Landlord shall not be liable to Tenant and Tenant hereby
waives all claims against Landlord for any injury or damage to any person or
property in or about the Premises by any cause, other than Landlord's
negligence or willful acts.

          b.    Except for claims or liability resulting from the negligence
of Landlord, Tenant shall hold Landlord harmless from and defend Landlord
against any and all claims or liability for any injury or damage to any person
or property whatsoever:  (i) occurring in, on, or about the Premises, (ii)
occurring in, on, or about any facilities (including, without prejudice to the
generality of the term "facilities," elevators, stairways, passageways, or
hallways), the use of which Tenant may have in conjunction with other tenants
of the Building, when such injury or damage shall be caused in part or in
whole by the act, negligence, fault of, or omission of any duty with respect
to the same by Tenant, its agents, servants, employees, or invitees, and in
such case any action or proceeding brought against Landlord by reason of any
such claims or liability, Tenant agrees to defend such action or proceeding at
Tenant's sole expense by counsel reasonably satisfactory to Landlord.  The
provisions of this Paragraph 10 shall survive the expiration or termination of
this Lease with respect to any claims or liability occurring prior to such
expiration or termination.

          c.    Tenant agrees to purchase at its own expense and to keep in
force during the term of this Lease a policy or policies of worker's
compensation and comprehensive liability insurance, including personal injury
and property damage, in the amount of FIVE HUNDRED THOUSAND DOLLARS ($500,000)
for property damage and FIVE HUNDRED THOUSAND DOLLARS ($500,000) per person
and ONE MILLION DOLLARS  ($1,000,000) per occurrence for personal injuries or
deaths of person occurring in or about the Premises, or such other amount as
Landlord shall deem necessary, based on periodic insurance reviews in respect
to injury or damage to persons or property.  Said policies shall:  (i) name
Landlord as an additional insured and insure Landlord's contingent liability
under this Lease; (ii) be issued by an insurance company which is acceptable
to Landlord and licensed to do business in the state of Utah; and (iii)
provide that such insurance shall not be canceled unless thirty (30) days'
prior written notice shall have been given to Landlord.  Said policy or
policies or certificates thereof shall be delivered to Landlord by Tenant upon
commencement of the term of the Lease and upon each renewal of said insurance.

    11.   Waiver of Subrogation.  Landlord and Tenant hereby waive any right
that each may have against the other on account of any loss or damage arising
in any manner which is covered by policies of insurance for fire and extended
coverage, theft, public liability, worker's compensation, or other insurance
now or hereafter existing during the term hereof, provided, however, the
parties each shall first have their respective insurance companies waive any
rights of subrogation that such companies may have against Landlord or Tenant,
as the case may be.

    12.   Services and Utilities.

          a.    Subject to paragraph c below, Landlord shall maintain the
landscaped areas of the Building, the exterior of the Building, and the
structure itself, in reasonably good order and condition except for damage
occasioned by the act of the Tenant, which damage shall be repaired by
Landlord at Tenant's expense.

          b.    Provided the Tenant shall not be in default hereunder,
Landlord agrees to furnish to the Premises during ordinary business hours of
generally recognized business days, to be determined by Landlord , water and
electricity suitable for the intended use of the Premises, Tenant agrees at
all times to cooperate fully with Landlord and to abide by all the regulations
and requirements which Landlord may prescribe for the proper functioning and
protection of the heating, ventilating, and air-conditioning system.  Landlord
shall in no event be liable for any interruption or failure of utility
services on the Premises for conditions beyond its control.

          c.    If Tenant shall require water or electric current or any other
resource in excess of that usually furnished or supplied for use of the
Premises as general office space,   Landlord may cause a special meter to be
installed in the Premises so as to measure the amount of water, electric
current, or other resource consumed.  The cost of any such meters and of
installation, maintenance, and repair thereof shall be paid for by Tenant, and
Tenant agrees to pay Landlord promptly upon demand by Landlord for all such
water, electric current, or other resource consumed, as shown by said meters,
at the rate charged by the local public utility, furnishing the same, plus any
additional expense incurred in keeping account of the water, electric current,
or other resource so consumed.

          d.    Any sums payable under this Paragraph 12 shall be considered
additional rent and may be added to any installment or rent thereafter
becoming due, and Landlord shall have the same remedies for a default in
payment of such sum as for a default in the payment of rent.

    13.   Estoppel Certificate.

          a.    Within ten (10) days following any written request which
Landlord may make from time to time, Tenant shall execute and deliver to
Landlord a certificate substantially in the form attached hereto as Exhibit C
and made a part hereof, indicating thereon any exceptions thereto which may
exist at that time.  Failure of the Tenant to execute and deliver such
certificate shall constitute an acceptance of the Premises and acknowledgment
by Tenant that the statements included in Exhibit C are true and correct
without exception.

    14.   Holding Over.

          a.    Any holding over after the expiration of the term of this
Lease with the written consent of Landlord shall be a tenancy from month to
month.  The terms, covenants, and conditions of such tenancy shall be the same
as provided herein, and the monthly rental shall be the current rate plus 10%.
Acceptance by Landlord of rent after such expiration shall not result in any
tenancy or any renewal of the term of this Lease, and the provisions of this
Paragraph are in addition to and do not affect Landlord's right of reentry or
other rights provided under this Lease or by applicable law.

          b.    If Tenant shall retain possession of the Premises or any part
thereof without Landlord's consent following the expiration or sooner
termination of this Lease for any reason, then Tenant shall pay to Landlord
for each day of such retention one-hundred and fifty percent (150%) of the
daily rental for the last period prior to the date of such expiration or
termination, subject to adjustment as provided in Paragraph 27.  Tenant shall
also indemnify and hold Landlord harmless from any loss or liability resulting
from delay by Tenant in surrendering the Premises including, without
limitation, any claims made by any succeeding tenant founded on such delay.
Acceptance of rent by Landlord following expiration or termination shall not
constitute a renewal of this Lease, and nothing contained in this Paragraph
shall waive Landlord's right of reentry or any other right.

    15.   Subordination.  Without the necessity of any additional document
being executed by Tenant for the purpose of effecting a subordination, this
Lease shall be subject and subordinate at all times to the lien of any
mortgage or deed of trust which may now exist or hereafter be executed in any
amount for which said Building, land, or Landlord's interest or estate in any
of said items, is specified as security.  Notwithstanding the foregoing,
Landlord shall have the right to subordinate or cause to be subordinated any
such ground leases or underlying leases to this Lease.  In the event that any
ground lease or underlying lease terminates for any reason or any mortgage or
deed of trust is foreclosed or a conveyance in lieu of foreclosure is made for
any reason, Tenant shall, notwithstanding any subordination, attorn to and
become the Tenant of the successor in interest to Landlord at the option of
such successor in interest.  Tenant covenants and agrees to execute and
deliver, upon demand by Landlord and in the form reasonably requested by
Landlord, any additional documents evidencing the priority or subordination of
this Lease with respect to any such ground leases or the lien of any such
mortgage or deed of trust.

    16.   Rules and Regulations.  Tenant shall faithfully observe and comply
with the rules and regulations printed on or annexed to this Lease and all
reasonable modifications thereof and additions thereto from time to time put
into effect by Landlord.  Landlord shall not be responsible for the
nonperformance by any other tenant or occupant of the Building of any said
rules and regulations.

    17.   Reentry by Landlord.  Landlord reserves and shall at all times have
the right to reenter the Premises to inspect the same, to supply janitor
service and any other service to be provided by Landlord to Tenant hereunder.
For each of the aforesaid purposes, Landlord shall at all times have and
retain a key with which to unlock all of the doors in, upon, and about the
Premises, excluding Tenant's vaults and safes, or special security areas
(designated in advance), and Landlord shall have the right to use any and all
means which Landlord may deem necessary or proper to open said doors in an
emergency, in order to obtain entry to any portion of the Premises, and any
entry to the Premises, or portions thereof obtained by Landlord by any of said
means, or otherwise, shall not under any circumstances be construed or deemed
to be a forcible or unlawful entry into, or a detainer of, the Premises, or an
eviction, actual or constructive, of Tenant from the Premises or any portions
thereof.  After reasonable notice to Tenant, Landlord shall also have the
right, and without incurring any liability to Tenant therefore, to change the
arrangement and/or location of passageways, corridors, stairs, toilets, or
other public parts of the Building and to change the name, by which the
Building is commonly known.

    18.   Insolvency or Bankruptcy.  The appointment of a receiver to take
possession of all or substantially all of the assets of Tenant, or an
assignment of Tenant for the benefit of creditors, or any action taken or
suffered by Tenant under any insolvency, bankruptcy, or reorganization act,
shall at Landlord's option constitute a breach of this Lease by Tenant.  Upon
the happening of any such event or at any time thereafter, this Lease shall
terminate five (5) days after written notice of termination from Landlord to
Tenant.  In no event shall this Lease be assigned or assignable by operation
of law or by voluntary or involuntary bankruptcy proceedings or otherwise and
in no event shall this Lease or any rights or privileges hereunder be an asset
of Tenant under any bankruptcy, insolvency, or reorganization proceedings.

    19.1   Default by Tenant.

           The failure to perform or honor any covenant, condition, or
representation made under this Lease shall constitute a default hereunder by
Tenant.  Except as provided in Paragraph 3 above, Tenant shall not have any
grace period within which to cure any default in the payment of rental or
adjustment thereto, and Landlord shall not be required to give any notice to
Tenant of any such default before exercising any remedies available to
Landlord.  Tenant shall have a reasonable time from the date of written notice
from Landlord within which to cure any default under this Lease other than a
default in the payment of rental or adjustments thereto. Upon a default under
this Lease by Tenant, and failure to cure the default by Tenant within the
permissible time period, if any, Landlord shall have the following rights and
remedies in addition to, or as an alternative to, any other rights or remedies
available to Landlord at law or in equity:

           a.    Re-enter the Premises, take possession thereof, eject all
persons therefrom, and with or without re-entry, declare this Lease
terminated, in which event Tenant shall immediately pay Landlord a sum of
money equal to the amount, if any, by which the then discounted value of the
rent reserved under this Lease for the balance of the Lease Term exceeds the
then discounted reasonable rental value of the Premises for the balance of the
Lease Term (discounted to the date of termination at the rate of six percent
(6%) per annum) plus costs, expenses and reasonable attorney's fees.

           b.    Re-enter the Premises, take possession thereof, eject all
persons therefrom, and with or without terminating this Lease, relet the
Premises or any part thereof, for the account of Tenant upon such terms and
conditions as Landlord deems advisable, in which event the rents received from
such reletting shall be applied first to the expenses of such reletting and
collection, including clean-up, repair, and renovation or alteration of the
Premises, reasonable attorneys' fees, and real estate commissions paid, and
thereafter to payment of all sums due or to become due landlord under this
Lease.   Tenant shall pay landlord monthly, on or before the first day of each
month, any deficiency between the rent due under this Lease and the rent
received from such reletting less Landlord's expenses as set forth above in
subparagraph (a).

           c.    After terminating or without terminating this Lease, Landlord
may re-enter the Premises and take possession of any and all property
whatsoever found there and place such property in a public warehouse or
elsewhere for the account  and at the expense of Tenant. In the event of
default Tenant hereby grants Landlord a lien upon all  of Tenant's property in
the Premises.  Landlord may thereafter sell any or all of such property at
public or private sale in such manner and at such times and places as Landlord
in its sole discretion may deem proper, and shall apply the proceeds of such
sale; first, to the cost  and expenses of such sale, including reasonable
attorneys' fees; second, to the payment of the costs of or charges for storing
any such property; third, to the payment of any other sums of money which may
then or thereafter be due to Landlord from Tenant under any of the provisions
of this Lease; and fourth, the balance, if any, to Tenant.  Tenant hereby
waives all claims for damages that may be caused by Landlord's reentering and
taking possession of the Premises and/or removing, storing and disposing of
any property therein, and will hold Landlord harmless from all loss, costs
and/or damages occasioned thereby.

           d.    All of Landlord's rights and remedies are cumulative and not
exclusive, and the exercise of any right or remedy at any one time shall not
preclude the exercise of the same or any other right or remedy at any other
time.  No re-entry or taking possession of the Premises or any property
therein shall be construed as an election on Landlord's part to terminate this
Lease.
Termination of this Lease may only be by written notice of termination given
by Landlord to Tenant.  Landlord may, in its sole discretion, sue periodically
to recover damages, and  no action for damages shall bar a later action for
damages or any other remedy.  Unless and until this Lease is terminated as
provided in subparagraph (a) above, Tenant shall continue to be liable to
Landlord for rent and all other amounts owing under this Lease when and as
they become due, whether or not Tenant's possessions of the Premises has been
terminated, and whether or not the Premises are sublet by Landlord.

    19.2   Default by Landlord

           Landlord shall not be in default unless Landlord fails to perform
obligations of Landlord required under this Lease within a reasonable time,
but not less than thirty (30) days after written notice by Tenant to Landlord
and to the holder of any mortgage or deed of trust covering the Premise or
building in which the Premises is located whose name and address shall have
been furnished to Tenant.  Such notice must specify wherein Landlord has
failed to perform such obligation.  Notwithstanding the foregoing or any thing
herein to the contrary, if the nature of Landlord's obligation is such that
more than thirty (30) days are required for performance, then Landlord shall
not be in default if Landlord commences performance within such thirty (30)
day period and thereafter diligently prosecutes the same to completion.

    19.3  Consent to Notice Being Given to Principal of Tenant Affiliated
          With Landlord

            Tenant hereby consents that Landlord may, but shall not be
obligated to, give any notice required or permitted to be given to Tenant
pursuant to this Lease to any principal of Tenant who is also  affiliated,
directly or indirectly, in any way with Landlord, including Guarantors of this
Lease, and Members of F.G.B.P., LLC, and Tenant hereby releases Landlord, and
agrees to hold Landlord harmless from, any and all liability of any kind or
nature in any way arising out of or connected with giving such notice.

    20.   Damage by Fire, Etc.

          a.    If the Premises or the Building are damaged by fire or other
casualty, Landlord shall forthwith repair the same as speedily as possible as
possible at the expense of Landlord, unless Landlord shall elect not to
rebuild, as hereinafter provided and an equitable part of the rent shall be
abated until so repaired, based upon the time and to the extent the leased
premises are untenantable.

          b.    In case the Premises or the Building shall be destroyed or so
damaged by fire or other casualty, as to render more than twenty five percent
(25%) thereof untenantable, or in the event of any uninsured loss, or if the
unexpired term of this Lease is one and one-half (1-1/2) years or less on the
date of any destruction or damage, then either party may, if it so elects, by
notice in writing to the other party, within thirty (30) days after such
destruction or damage, terminate this Lease.

          c.    Landlord's obligation to repair or rebuild shall be limited to
basic building and the replacement of any original installations as Landlord's
Work.  In no event, in the case of any such destruction, shall Landlord be
required to repair or replace Tenant's inventory or Tenant Nonstandard Work.
Tenant covenants to make such repairs and replacements and to furnish
Landlord, on demand, evidence of insurance assuring its ability to do so.

    21.   Eminent Domain.

          a.    If the whole of the Premises shall be taken under the power of
eminent domain, then the term of this Lease shall cease as of the day
possession shall be taken and the rent shall be paid up to that date.

          b.      In the event more than forty percent (40%) of the Premises
shall be so taken, either party shall have the right to terminate this Lease
effective at the time provided in Subsection A above  upon giving the other
party written notice of termination within sixty (60)
days after the taking of possession by such authority.

          c.    If any of the floor area of the Premises shall be so taken,
then Tenant shall have the right either to terminate this Lease or, subject to
Landlord's right to termination as set forth in Subsection B above, to
continue in possession of the remainder of the Premises
upon notice in writing to landlord of Tenant's intention given within thirty
(30) days after such taking of possession, and if Landlord does not terminate,
all of the terms herein provided shall continue in effect except that the rent
shall be equitably abated as to any portion of the Premises so taken and
Landlord shall restore the Premises to a complete architectural unit but shall
not be required to expend any amounts in excess of its award nor be obligated
for any work excluded pursuant to this Lease.

          d.      All damages awarded for such taking under the power of
eminent domain, whether for the whole or part of the Premises, shall be the
property of Landlord, whether such damages shall be awarded as compensation
for diminution in value of the leasehold or to the fee of the Premises;
provided, however, that Landlord shall not be entitled to any separate award
made to Tenant for loss of business, depreciation to and cost of removal of
inventory, or to other separate awards payable to Tenant.

     22.  Sale by Landlord.  In the event of a sale or conveyance by Landlord
of the Building, the same shall operate to release Landlord from any future
liability upon any of the covenants or conditions, express or implied, herein
contained in favor of Tenant, and in such event Tenant agrees to look solely
to the responsibility of the successor in interest of Landlord in and to this
Lease.  This Lease shall not be affected by any such sale, and Tenant agrees
to attorn to the purchaser or assignee.

    23.   Right of Landlord to Perform.    If Tenant shall fail to pay any sum
of money, other than rent, required to be paid by it thereunder or shall fail
to perform any other act on its part to be performed hereunder, and such
failure shall continue for thirty (30) days after notice thereof by Landlord,
Landlord may, without thereby waiving or curing such failure and without
waiving or releasing Tenant from any obligation of Tenant, make any such
payment or perform any such act for the account of Tenant.

    24.   Surrender of Premises.

          a.    Tenant shall, at least thirty (30) days before the last day of
the term hereof, give to Landlord a written notice of intention to surrender
the Premises on that date, but nothing contained herein shall be construed as
an extension of the term hereof or as consent of Landlord to a holding over by
Tenant.

          b.    At the end of the term or any renewal thereof, or upon
termination of Tenant's right to possession, Tenant will deliver up to
Landlord possession of the Premises in good condition reasonable wear and tear
excepted. Tenant shall, prior to the termination of this Lease or termination
of Tenant's right to possession, remove all movable furniture and equipment
belonging to Tenant, at Tenant's sole cost, title to which shall be in Tenant
until such termination, repairing any damage caused by such removal.  Property
not so removed upon the termination of this Lease or upon termination of
Tenant's right to possession shall be deemed abandoned by Tenant, and title to
the same shall thereupon pass to Landlord.  Upon request by Landlord, unless
otherwise agreed to in writing by Landlord, Tenant shall remove, at Tenant's
sole cost, any or all permanent improvements or additions to the Premises
installed by or at the expense of Tenant.

    25.  Waiver.  If either Landlord or Tenant waives the performance of any
term, covenant, or condition contained in this Lease, such waiver shall not be
deemed to be a waiver of any subsequent breach of the same or any other term,
covenant, or condition contained herein.  Furthermore, the acceptance of rent
by Landlord shall not constitute a waiver of any preceding breach by Tenant of
any term, covenant, or condition of this Lease, regardless of Landlord's
knowledge of such preceding breach at the time Landlord accepted such rent.
Failure by Landlord to enforce any of the terms, covenants, or conditions of
this Lease for any length of time shall not be deemed to waive or to decrease
the right of Landlord to insist thereafter upon strict performance by Tenant.
Waiver by Landlord of any term, covenant, or condition contained in this Lease
may only be made by a written document signed by Landlord.

    26.   Notices.  All notices and demands which may be or are required to be
given by either party to the other hereunder shall be in writing.  All notices
and demands by Landlord to Tenant shall be sent by United States certified or
registered mail, postage prepaid, addressed to Tenant at the Premises, or to
such other place as Tenant may from time to time designated in a notice to
Landlord.  All notices and demands by Tenant to Landlord shall be sent by
United States certified or registered mail, postage prepaid, addressed to
Landlord at the address specified in the Basic Lease Information, or to such
other firm or to such other place as Landlord may from time to time designate
in a notice to Tenant.  All notices and demands shall be deemed given on the
date personally delivered to the address designated above or on the date
mailed as provided above.

    27.   Rental Adjustments.  In addition to Basic Rent provided to be paid
hereunder, Tenant shall pay, as Rent, Tenant's Proportionate Share of Basic
Operating Cost in the manner set forth below.

          a.    Definition:  For purposes hereof, the terms used in this
Paragraph 27 shall have the following meanings:

            (1)    "Basic Operating Cost" shall mean all expenses and costs of
every kind and nature which Landlord shall pay or become obligated to pay
because of or in connection with the operation of the Building:

                (i)    All wages of all employees engaged directly in the
operation, management, maintenance, engineering, and security of the Building;
provided, however, that Basic Operating Cost shall not include leasing
commissions paid to any real estate broker, salesperson, or agent.

                (ii)   Supplies, materials, tools, and rental of equipment
used in the operation, management, and maintenance of the Building.

                (iii)  Utilities, including water and power, gas, sewer,
heating, lighting, air conditioning and ventilating servicing the Building.

                (iv)   All maintenance, janitorial, and service agreements for
the Building and the equipment therein, including without limitation, alarm
services, garbage and waste disposal, security service, water treatment,
facade maintenance, roof maintenance, landscaping, window cleaning, and
heating and air conditioning equipment maintenance.

                (v)    A management cost recovery equal to five percent (5%)
of Gross Rent derived from the Building.

                (vi)   Legal expenses, accounting expenses, and the cost of
audits by certified public accountants:  provided, however, that legal
expenses chargeable as Basic Operating Cost shall not include the cost of
negotiating leases, collecting rents, evicting tenants, nor shall it include
costs incurred in legal proceedings with or against any tenant or to enforce
the provisions of any lease.

                (vii)  All insurance premiums and costs including, but not
limited to, the premiums and cost of fire, casualty and liability coverage and
rental abatement and earthquake insurance (if Landlord elects to provide such
coverage) applicable to the Building and Landlord's personal property used in
connection therewith.

                (viii) Repairs, replacements, and general maintenance
(excluding repairs and general maintenance paid by proceeds of insurance or by
Tenant or other third parties, and the alterations attributable solely to
tenants of the Building other than Tenant).

                (ix)   All maintenance costs relating to public and service
areas of the Building including (but without limitation) sidewalks,
landscaping, service areas, mechanical rooms, and Building exteriors.

                (x)    All taxes and assessments and governmental charges,
whether federal, state, county, or municipal, and whether by taxing districts
or authorities presently taxing the Building or by others, whether
subsequently created or otherwise.

                (xi)   Amortization (together with reasonable financing
charges) of capital improvements made to the Building subsequent to the Term
Commencement Date which will improve the operating efficiency of the Building
or which may be required to comply with laws, ordinances, rules or regulations
promulgated, adopted, or enforced after completion of the initial construction
of the Building and improvements of the Premises pursuant to the Office Lease
Improvement Agreement.

                (xii)  All costs of contesting any law applicable to the
Building or the amount of any taxes affecting the Building.

         Notwithstanding anything to the contrary herein contained, Basic
Operating Cost shall not include (aa) the initial construction cost of the
Building; (bb) depreciation on the initial construction of the Building; (cc)
the cost of providing Tenant Improvements to Tenant or any other tenant; (dd)
debt service (including, but without limitation, interest, principal, and any
impound payments) required to be made on any mortgage or deed of trust
recorded with respect to the Building and/or the real property on which the
Building is located other than debt service and financing charges imposed
pursuant to Paragraph 27 a.(1)(xi) above; and (ee) the cost of special
services, goods, or materials provided to any tenant.  In the event that the
Building is not fully occupied during any fiscal year of the Term, an
adjustment shall be made in computing the Basic Operating Cost for such year
so that Basic Operating Cost shall be computed as though the Building had been
one hundred percent (100%) occupied.

            (2)  "Estimated Basic Operating Cost" for any particular year
shall mean Landlord's estimate of the Basic Operating Cost for such fiscal
year as hereinafter provided.

            (3)  "Basic Operating Cost Adjustment" shall mean the difference
between Basic Operating Cost and Estimated Basic Operating Cost for any
calendar year determined as hereinafter provided.

            (4)  "Building" shall mean the Building described in the Basic
Lease Information, plus all land on which it is located or which is used in
connection with the Building.

         b.    Payment of Estimated Basic Operating Cost.  During the last
month of each fiscal year during the Term, or as soon thereafter as
practicable, Landlord shall give Tenant written notice of the Estimated Basic
Operating cost for the ensuing fiscal year.  The fiscal year is as specified
in the Basic Lease Information.  The Estimated Basic Operating Cost for the
fiscal year in which the Scheduled Term Commencement Date falls is set forth
in the Basic Lease Information sheet.  Tenant shall pay Tenant's Proportionate
Share of the Estimated Basic Operating Costs with installments of Basic Rent
required to be paid pursuant to Paragraph 3 above for the fiscal year to which
the estimate applies in monthly installments on the first day of each calendar
month during such year, in advance.  Such payment shall be construed to be
Rent for all purposes hereof.

         c.    Computation of Basic Operating Cost Adjustment.   After the end
of each fiscal year, Landlord shall deliver to Tenant a statement of Basic
Operating Cost for the fiscal year just ended, accompanied by a computation of
Basic Operating Cost Adjustment.  If such statement shows that Tenant's
payment based upon Estimated Basic Operating Costs is less than Tenant's
Proportionate Share of Basic Operating Cost, then Tenant shall pay the
difference within twenty (20) days after receipt of such statement, such
payment to constitute additional rent hereunder.  If such statement shows that
Tenant's payments of Estimated Basic Operating Cost exceed Tenant's
Proportionate Share of Basic Operating Costs, then (provided that Tenant is
not in default under this Lease) Tenant shall receive a credit for the amount
of such payment against Tenant's obligation for payment of Tenant's
Proportionate Share of Estimated Basic Operating Cost next becoming due
hereunder.  If this Lease has been terminated or the Term hereof has expired
prior to the date of such statement, then the Basic Operating Cost Adjustment
shall be paid by the appropriate party within twenty (20) days after the date
of delivery of the statement.

         d.    Net Lease.  This shall be a net lease and Base Rent shall be
paid to Landlord absolutely net of all costs and expenses.  The provisions for
payment of Basic Operating Cost by means of periodic payments of Tenant's
Proportionate Share of estimated Basic Operating Cost and the Basic Operating
Cost Adjustment are intended to pass on to Tenant and reimburse Landlord for
all cost and expenses of the nature described in Paragraph 27 a.(1) above
incurred in connection with operation of the Building.

    28.  Taxes Payable by Tenant.  Tenant shall pay before delinquency all
taxes levied or assessed during the term of this Lease (excluding, however,
state and federal personal or corporate income taxes measured by the income of
Landlord from all sources, capital stock taxes, and estate and inheritance
taxes), whether by or otherwise calculated with respect to: (a) the gross or
net payable under this Lease including, without limitation, any gross receipts
tax levied by any taxing authority, or any other gross income tax or excise
tax levied by any taxing authority with respect to the receipt of the rental
hereunder; (b) the value of Tenant's equipment, furniture, fixtures, or other
personal property located in the Premises; or (c) the value of any leasehold
improvements, alterations or additions made in or to the Premises, regardless
of whether title to such improvements, alterations, or additions shall be in
Tenant or Landlord.

    29.  Abandonment.  Tenant shall not vacate or abandon the Premises at any
time during the term, and any such vacation or abandonment shall be a breach
of this Lease.  If Tenant shall abandon, vacate, or surrender said Premises or
be dispossessed by process of law, or otherwise, any personal property
belonging to Tenant and left on the Premises shall, at the option of Landlord,
be deemed to be abandoned and title thereto shall pass to Landlord.

    30.  Successors and Assigns.  Subject to the provisions of Paragraph 9
hereof, the terms, covenants, and conditions contained herein shall be binding
upon and inure to the benefit of the heirs, successors, executors,
administrators, and assigns of the parties hereto.

    31.  Attorneys' Fees.  In the event that any action must be taken to
enforce any term, covenant, or condition of this Lease, Landlord shall be
entitled to payment by Tenant of all reasonable costs incurred in connection
with such enforcement, whether or not litigation is commenced including,
without limitation, reasonable attorneys' fees.

    32.  Lease Consideration.  Upon occupancy in the Premises, Tenant has paid
the sum of $6,500.00 as lease consideration.  Landlord may apply the lease
consideration to pay the cost of performing any obligation which Tenant fails
to perform within the time required by this Lease, but such application by
Landlord shall not be the exclusive remedy for Tenant's default.  If the lease
consideration is applied by Landlord, Tenant shall on demand pay the sum
necessary to replenish the lease consideration to its original amount.

    33.  [Intentionally Deleted]

    34.  Corporate Authority.  If Tenant signs as a corporation, each of the
persons executing this Lease on behalf of Tenant does hereby covenant and
warrant that Tenant is a duly authorized and existing corporation, that Tenant
has and is qualified to do business in Utah, that the corporation has full
right and authority to enter into this Lease, and that each and both of the
persons signing on behalf of the corporation were authorized to do so.  Upon
Landlord's request, Tenant shall provide Landlord with evidence reasonably
satisfactory to Landlord confirming the foregoing covenants and warranties.

    35.  Lease Effective Date.  Submission of this instrument for examination
or signature by Tenant does not constitute a reservation of or option for
lease, and it is not effective as a lease or otherwise until execution and
delivery by both Landlord and Tenant.

    36.  Brokerage.  Tenant represents and warrants that it has dealt with no
broker, agent or other person in connection with this transaction and/or that
no broker, agent or other person brought about this transaction. Tenant agrees
to indemnify and hold Landlord harmless from and against any claims by any
other broker, agent or other person claiming a commission or other form of
compensation by virtue of having dealt with Tenant with regard to this leasing
transaction.

    37.  Force Majeure.  Except in the case of the payment of Rent by Tenant,
whenever a period of time is herein prescribed for action to be taken by
Landlord or Tenant, Landlord or Tenant as the case may be shall not be liable
or responsible for, and there shall be excluded from the computation for any
such period of time, any delays due to strikes, riots, Acts of God, shortages
of labor or materials, war, governmental laws, regulations or restrictions or
any other causes of any kind whatsoever which are beyond the control of
Landlord or Tenant as the case may be.

    38.  Certain Rights Reserved by Landlord.  Landlord shall have the
following rights, exercisable without notice and without liability to Tenant
for damage or injury to property, persons or business and without effecting an
eviction, constructive or actual, or disturbance of Tenant's use or possession
or giving rise to any claim for setoff or abatement of rent:

         a.    To decorate and make repairs, alterations, or improvements,
whether structural or otherwise, in and about the Building, and to change the
arrangement and location of entrances, doors, corridors, elevators, stairs,
toilets, or other public parts of the Building, without affecting any of
Tenant's obligations hereunder, so long as the leased Premises are reasonably
accessible.

         b.    To have and retain a paramount title to the leased Premises
free and clear of any act of Tenant purporting to burden the encumber them.

         c.    To change the name of which the Building is designated.

         d.    To grant to anyone the exclusive right to conduct any business
or render any service in or to the Building, provided such exclusive right
shall not operate to exclude Tenant from the use expressly permitted herein.

         e.    [Intentionally Deleted]

         f.    To have access for Landlord and other tenants of the Building
to any mail chutes located on the leased Premises according to the rules of
the United States Postal Service.

         g.    To take all such reasonable measures as Landlord may deem
advisable for the security of the Building and its occupants including,
without limitation, the search of all persons entering or leaving the
Building, the evacuation of the Building for cause, suspected cause, or for
drill purposes, the temporary denial of access to the Building, and the
closing of the Building after normal business hours and on Saturdays, Sundays,
and holidays subject, however, to Tenant's right to admittance when the
Building is closed after normal business hours under such reasonable
regulations as Landlord may prescribe from time to time.

    39.  [Intentionally Deleted]

    40.  Miscellaneous.

         a.    The term "Premises" wherever it appears herein includes and
shall be deemed or taken to include the office space demised and improvements
now or at any time hereinafter comprising or built in the space hereby
demised.  The term "Landlord" shall include the Landlord, its successors, and
assigns.  In any case where this Lease is signed by more than one person, the
obligations hereunder shall be joint and several.  The term "Tenant" or any
pronoun used in place thereof shall indicated and include the masculine or
feminine, the singular or plural number, individuals, firms or corporations,
and their and each of their respective successors, executors, administrators,
and permitted assigns, according to the context hereof.

         b.    Time is of the essence of this Lease and all its provisions.
This Lease, in all respects, shall be governed by the laws of the state of
Utah.  The Lease, together with its exhibits, contains all the agreements of
the parties hereto and supersedes any previous negotiations.  There have been
no representations made by the Landlord or understandings made between the
parties other than those set forth in this Lease and its exhibits.  This Lease
may not be modified except by a written instrument by the parties hereto.

         c.    If, for any reason whatsoever, any of the provisions hereof
shall be unenforceable or ineffective, all of the other provisions shall be
and remain in full force and effect.

         d.    Exhibits attached hereto are hereby incorporated into this
Lease.

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

LANDLORD:                             TENANT:

 F.G.B.P. L.L.C.        [initials]    FLEXPOINT SENSOR SYSTEMS, INC.

    /s/ Alan Wheatley                      /s/ John Sindt, President
By:_____________________________      By:_____________________________
    Alan Wheatley                          John Sindt

    /s/ Gary Deaton
By:_____________________________      By:_____________________________
    Gary Deaton

    /s/ Don Watkins
By:_____________________________
    Don Watkins                                    9/13/04

    /s/ David Blake
By:_____________________________
    David Blake

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