Document:

Filed by Automated Filing Services Inc. (604) 609-0244 - Park Place Energy Corp. - Exhibit 10.1

AMENDED AND RESTATED REORGANIZATION ASSET AND 
SHARE
PURCHASE AND SALE AGREEMENT 

THIS AGREEMENT is dated effective July 30, 2007 

AMONG: 

  
    
      
        PARK PLACE ENERGY CORP., formerly ST ONLINE
          CORP., a corporation incorporated under the laws of the State of
          Nevada with an address at 1220-666 Burrard Street, Vancouver, BC V6C
          2X8 

        (“ST”) 

      

    

  

AND: 

  
    
      
        SCOTT PEDERSEN, businessperson, c/o 1220-666
          Burrard Street, Vancouver, BC V6C 2X8 

        (“Pedersen”) 

      

    

  

AND: 

  
    
      
        DAVID STADNYK, businessperson, c/o 1220 –
          666 Burrard Street, Vancouver, BC V6C 2X8

        (“Stadnyk”) 

      

    

  

AND: 

  
    
      
        ELENA AVDASSEVA, businessperson, c/o 1220 –
          666 Burrard Street, Vancouver, BC V6C 2X8

        (“Avdasseva”) 

      

    

  

WHEREAS: 

(A)              
 ST has entered into a business combination agreement with Park Place
Energy Inc., a private Alberta energy company (“PPEI”), and 0794403 B.C.
Ltd. (“Subco”), ST’s wholly-owned subsidiary, whereby ST will reorganize
its capital structure through a three-cornered amalgamation between PPEI and
Subco (the “RTO”), and after completion of the RTO, ST will carry on the
business of PPEI; 

- 2 - 

(B)                The
RTO requires certain transactions, including asset divestitures, share transfers
and changes of officers and directors to take place prior to completion of the
RTO;

(C)                ST
is the sole owner and registrant of the domain name “simpletennis.com” (the
“Domain Name”) that is registered with DotRegistrar.com (the
“Registrar”); 

(D)               
The Domain Name and the “www” sub-domain to the Domain Name resolve to a website
currently operated by ST and known as “Simple Tennis” (the “Website”)
hosted by Glide Media Inc., doing business as Glide Hosting (the
“Host”);

(E)               
ST wishes to sell to Pedersen, and Pedersen wishes to purchase from ST, the
Domain Name and the Website and other related content and rights in accordance
with the terms and conditions of this Agreement; 

(F)                Stadnyk
has been appointed as President and Chief Executive Officer of ST in
anticipation of the completion of the RTO; 

(G)                Avdasseva
is the owner of 30,000,000 common shares (on a post-split basis) in the capital
of ST (the “ST Shares”), and as part of the RTO has agreed to sell and
Stadnyk has agreed to buy the ST Shares, on the terms and conditions of this
Agreement;

(H)                The
parties hereto entered into a reorganization asset and share purchase and sale
agreement dated the date hereof (the “Original Agreement”); and 

(I)                The
parties hereto have now determined to enter into this Agreement so as to amend
and restate the terms of the Original Agreement. 

NOW, THEREFORE, in consideration of the foregoing and
the promises provided for herein, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:

PART 1 
INTERPRETATION 

Definitions 

1.1               
In this Agreement, except as otherwise expressly provided or as the context
otherwise: 

(a)        “Business
Day” means any day other than a Saturday or Sunday or statutory holiday in
British Columbia; 

(b)        “Developer”
means Tidal Multimedia Inc., a Vancouver-based web design company; 

(c)        “Domain Name”
has the meaning ascribed thereto in Recital (C); 

- 3 - 

(d)        “Force
Majeure” means an event or circumstance beyond the reasonable control of
a party that prevents or delays that party’s ability to perform its obligations
under this Agreement, including Acts of God, strikes and labour disputes, fires,
epidemics, sabotage, floods, earthquakes, power failure, war, riots, terrorism,
insurrection or civil disturbances and personal incapacity including illness or
death, but not any lack of money, credit or financing; 

(e)        “Host” has
the meaning ascribed thereto in Recital (D); 

(f)        “Intellectual
Property Rights” means all intellectual property, including patents
(including utility patents, design patents, registered industrial designs,
utility models and certificates of addition), patent applications, copyright,
trade marks (including trade names, business names and service marks),
information rights in computer software and databases, know-how, trade secrets,
other similar instruments or rights, whether registered or unregistered, and all
rights in relation to any of the foregoing which are recognized anywhere in the
world; 

(g)        “Registrar”
has the meaning ascribed thereto in Recital (C); 

(h)        “Related
Content” means all 

(i)        videos, images,
audio recordings, multimedia files, customer accounts, scripts, files, text,
stylings, source code, object code, electronic data and other content available
on or accessible from the Website, and 

(ii)        POP addresses,
sub-domains and accounts, data and services available from or resolved to the
Domain Name. 

(i)        “Website” has
the meaning ascribed thereto in Recital (D); 

Interpretation 

1.2              
 In this Agreement, except as otherwise expressly provided or as the
context otherwise: 

(a)        the insertion of
headings in this Agreement is for convenience of reference only and will not
affect the construction or interpretation of this Agreement; 

(b)        the word “or”
is not exclusive and the word “including” is not limiting (whether or not
non-limiting language such as “without limitation” or “but not limited to” or
other words of similar import are used with reference thereto); 

(c)        a reference to a
“Part” is to a Part of this Agreement, and the symbol “§” followed
by a number or some combination of numbers and letters refers to the section,
paragraph, subparagraph, clause or subclause of this Agreement so designated;

(d)        a reference to an
entity includes any successor to that entity; 

- 4 - 

(e)        a word importing the
masculine gender includes the feminine and neuter, a word in the singular
includes the plural, a word importing a corporate entity includes an individual,
and vice versa; 

(f)        “person” will
mean an individual, partnership, corporation (including a business trust), joint
stock company, trust unincorporated association, joint venture, or other entity
or a government or any agency, department or instrumentality thereof and vice
versa; and 

(g)        words, phrases and
acronyms not otherwise defined herein that have a meaning commonly understood
and accepted by persons familiar with the business of Internet or information
technology will be interpreted and understood to have that meaning herein. 

Currency 

1.3               
All references herein to an amount of money or currency shall mean an amount in
Canadian dollars, unless stated to the contrary. 

PART 2 
PURCHASE AND SALE OF WEBSITE 

Transfer of Website 

2.1              
 ST hereby transfers, conveys and assigns to Pedersen all of ST’s right,
title, and interest in and to: 

(a)        the Domain Name;

(b)        the Website and all
Related Content; 

(c)        all Intellectual
Property Rights in connection with (a) and (b) above; and 

(d)        any agreements
between ST and any or all of the Host, the Developer and the Registrar. 

Consideration 

2.2                In
consideration of the transfer, conveyance and assignment described in §2.1,
Pedersen: 

(a)        agrees to resign as
a director and officer of ST effective immediately; and 

(b)        hereby transfers to
ST for cancellation 17,000,000 shares (on a post-split basis) in the authorized
capital of ST (the “Pedersen Shares”) currently held by Pedersen and the
remaining 1,000,000 shares to remain in Pedersen’s name. 

- 5 - 

Complete Transfer, Conveyance and Assignment 

2.3              
 ST acknowledges and agrees that the above transfer, conveyance and
assignment is a complete transfer, conveyance and assignment and that ST retains
no right, title or interest in or to the Domain Name, the Website, the Related
Content and all Intellectual Property Rights in connection therewith, and ST
hereby: 

(a)        waives as against
any person any and all moral rights it may have therein or thereto, such moral
rights including the right to restrain or claim damages for any distortion,
mutilation, or modification of any part thereof whatsoever, and to restrain use
or reproduction thereof in any context, or in connection with any product or
service; and 

(b)        agrees not to
commence any claims or proceedings against any person, corporation, partnership,
or other entity in respect of the ownership or use thereof. 

Injunctive Relief 

2.4               
ST acknowledges and agrees that a breach by it of this Part 2 or §4.6 would
result in immediate and irreparable harm to Pedersen that could not adequately
be compensated by monetary award. Accordingly, in the event of any such breach,
Pedersen shall be entitled as a matter of right to apply to a court of competent
jurisdiction, without necessity of establishing the inadequacy of a monetary
award, for relief by way of injunction, restraining order, decree or otherwise
as may be appropriate to ensure compliance by ST with this Part 2 or §4.6. 

Outstanding Amounts 

2.5               
ST agrees to pay Pedersen, and Pedersen agrees to receive from ST, the sums of
US$10, 000 and Cdn$4,127 in full and final satisfaction of any obligations of ST
owing to Pedersen, except for those set out herein, provided that Pedersen
execute and deliver to ST a full and final release substantially in the form set
out in Schedule A. 

Representations and Warranties of ST 

2.6               
ST represents and warrants to Pedersen that: 

(a)        ST owns all right,
title and interest in the Domain Name, the Website and the Related Content, and
the Intellectual Property Rights in connection therewith, and ST has all
necessary legal power, authority and capacity to execute and deliver this
Agreement and to perform its obligations hereunder and to grant, free and clear
of all encumbrances, all transfers, conveyances and assignments provided
hereunder; 

(b)        this Agreement has
been duly authorized, executed and delivered by ST and constitutes a valid,
binding and legally enforceable agreement of ST; 

(c)        ST does not have any
knowledge of any third party infringement of Intellectual Property Rights with
respect to the Website, the Domain Name or the Related Content; and 

- 6 - 

(d)        ST does not have any
knowledge that the Website, the Domain Name or the Related Content infringe on
any Intellectual Property Rights of any third parties. 

Representations and Warranties of Pedersen 

2.7              
 Pedersen represents and warrants to ST that: 

(a)        he is the registered
holder and the beneficial owner of the Pedersen Shares and the Pedersen Shares
are free and clear of all liens, charges and encumbrances; 

(b)        the Pedersen Shares
represent all shares in the capital of ST legally or beneficially owned or
controlled by Pedersen; 

(c)        he has full legal
right and authority to enter into this Agreement and sell the Pedersen Shares to
ST upon the terms of this Agreement; and 

(d)        this Agreement
constitutes a legal, valid and binding obligation of Pedersen, enforceable
against him in accordance with its terms, except as may be limited by
bankruptcy, insolvency or similar laws of general application affecting the
rights of creditors and except that the availability of equitable remedies is
subject to the discretion of the court before which any proceedings may be
brought. 

PART 3 
SALE OF ST SHARES 

Purchase and Sale of ST Shares 

3.1              
 Avdasseva hereby agrees to sell, assign, transfer and deliver to Stadnyk,
and Stadnyk agrees to purchase and accept from Avdasseva, effective July 30,
2007 (the “Closing Date”), all of the right, title and interest of
Avdasseva in and to the ST Shares, free and clear of all liens, charges and
encumbrances.

Purchase Price 

3.2              
 The aggregate purchase price for the ST Shares is the sum of US$10,000
(the “Purchase Price”).

Payment of Purchase Price and Delivery of ST Shares 

3.3               
The Purchase Price will be paid by Stadnyk by way of cash or cheque or bank
draft payable to Avdasseva on the Closing Date, against delivery by Avdasseva of
share certificates representing the ST Shares, duly endorsed for transfer to
Stadnyk. 

Avdasseva’s Representations and Warranties 

3.4               
Avdasseva represents and warrants that: 

- 7 - 

(a)        she is the
registered holder and the beneficial owner of the ST Shares and the ST Shares
are free and clear of all liens, charges and encumbrances; 

(b)        she has full legal
right and authority to enter into this Agreement and sell the ST Shares to
Stadnyk upon the terms of this Agreement; and 

(c)        this Agreement
constitutes a legal, valid and binding obligation of Avdasseva, enforceable
against her in accordance with its terms, except as may be limited by
bankruptcy, insolvency or similar laws of general application affecting the
rights of creditors and except that the availability of equitable remedies is
subject to the discretion of the court before which any proceedings may be
brought. 

Acknowledgment regarding Cancellation of ST Shares 

3.5              
Avdasseva and Stadnyk acknowledge and agree that following the purchase and sale
of the ST Shares to Stadnyk, as a condition precedent to the RTO, Stadnyk will
return to ST for cancellation 28,000,000 of the ST Shares, with 2,000,000 of the
ST Shares to be retained by Stadnyk. 

Release 

3.6              
Avdasseva aggress, in consideration of the sum of $10.00 and other good and
valuable consideration, the receipt of which is hereby acknowledged, execute and
deliver to Stadnyk and ST a full and final release substantially in the form set
out in Schedule B. 

PART 4 
GENERAL PROVISIONS 

Assignment 

4.1               
No party may assign this Agreement or its rights or obligations hereunder
without the prior written consent of the other parties. 

Notices 

4.2               
Any notice or other communication required to be given under this Agreement will
be deemed properly given if given in writing and delivered in person or sent by
registered mail to the address of such party set out on the first page of this
Agreement. Any party may from time to time change such address by giving the
other parties reasonable notice of such change in accordance with this §4.2. If
delivered in person, such notice will be deemed to be delivered on that day. If
delivered by mail, notice will be deemed to be given on the fifth Business Day
following mailing. 

Amendments 

4.3               
This Agreement may not be amended except by written agreement among the parties
hereto. 

- 8 - 

Survival 

4.4               
Notwithstanding the expiration or termination of this Agreement for any reason,
all payment obligations that have accrued hereunder, all obligations with
respect to the ownership of intellectual property, all obligations and rights
which by their nature are intended to continue or survive and all
representations and warranties will survive the expiration or termination of
this Agreement. 

Inurement 

4.5               
This Agreement will be binding upon and inure to the benefit of each party and
their respective successors and permitted assigns. 

Further Steps 

4.6               
Each party will in a prompt fashion in each case execute and deliver such
further and other agreements, documents and instruments and take such further
acts as are reasonably necessary or desirable to carry out the intent of this
Agreement. Without limiting the generality of the foregoing in connection with
Part 2 above, ST will as soon as reasonably practicable 

(a)        co-operate fully
with Pedersen with respect to signing further documents and doing such acts and
other things reasonably requested by Pedersen to confirm or evidence the matters
set out in Part 2, or to obtain, register or enforce any right in respect
thereof, 

(b)        change or cause the
Registrar to change the registrant of the Domain Name from ST to Pedersen or
such other person as Pedersen directs, and 

(c)        give any notice
required by or obtain any consent required from the Host or the Developer with
respect to the assignment of the agreements described in §2.1(d) . 

Governing Law 

4.7               
This Agreement will be governed by and construed, interpreted, and enforced in
accordance with the laws of the Province of British Columbia and the laws of the
Canada applicable therein. The parties irrevocably submit to the non-exclusive
jurisdiction of the courts of the Province of British Columbia. 

Waivers, Relinquishments 

4.8              
 The failure of a party to insist upon or enforce strict performance of any
of the provisions of this Agreement or to exercise any rights or remedies under
this Agreement will not be construed as a waiver or relinquishment to any extent
of such party’s right to assert or rely upon any such provisions, rights or
remedies in that or any other instance; rather, the same will be and remain in
full force and effect. 

- 9 - 

Severability 

4.9              
 If any provision of this Agreement is determined by a court of competent
jurisdiction to be illegal, invalid, or unenforceable, the remaining provisions
will remain in full force and effect. 

Counterparts 

4.10              
This Agreement may be executed and delivered by facsimile and in any number of
counterparts. Each executed counterpart and each facsimile signature will be
deemed to be an original. All executed counterparts taken together will
constitute one agreement. 

Independent Legal Advice 

4.11              
Each of the parties acknowledges, confirms and agrees that it has had the
opportunity to seek and was not prevented nor discouraged by any party hereto
from seeking independent legal advice prior to the execution and delivery of
this Agreement and that, in the event that such party did not avail itself with
that opportunity prior to signing this Agreement, such party or it did so
voluntarily without any undue pressure and agrees that its failure to obtain
independent legal advice should not be used by it as a defence to the
enforcement of its obligations under this Agreement. 

[Remainder of page left intentionally blank] 

- 10 - 

Entire Agreement 

4.12              
This Agreement, together with all Schedules hereto, sets forth the entire
agreement, and supersedes and replaces any and all prior agreements or
understandings between the parties, whether written or oral, regarding the
subject matter hereof and, without limiting the generality of the foregoing,
this Agreement supersedes and replaces the Original Agreement. No course of
prior dealings, no usage of trade, and no course of performance will be used to
modify, supplement, or explain any terms used in the Agreement. 

IN WITNESS WHEREOF, each of the parties have executed
this Agreement or caused this Agreement to be executed by its duly authorized
representatives as of the date first written above. 

PARK PLACE ENERGY CORP.  

	Per: 	/s/
      David Stadnyk 	 
	  	Authorized Signatory 	 

Signed, Sealed and Delivered by SCOTT

PEDERSEN in the presence of: 

	/s/ Emilia Luca
	 	/s/
      Scott Pedersen 
	Witness (Signature) 	 	SCOTT PEDERSEN 
	 	 	 
	Emilia Luca,
      Notary Public 	 	  
	Name (please print) 	 	  
	 	 	 
	#202 – 4548
      Johnston Rd. 	 	  
	Address 	 	  
	 	 	 
	White Rock, BC V4B
      3Z8 	 	  
	  	 	  
	  	 	  
	Signed, Sealed and Delivered by ELENA 	 	  
	AVDASSEVA in the presence of: 	 	  
	 	 	 
	/s/ JanUrata 	 	  
	Witness (Signature) 	 	/s/
      Elena Avdasseva 
	 	 	ELENA AVDASSEVA 
	Jan Urata 	 	
	Name (please print) 	 	  
	 	 	 
	1500 – 1055 West
      Georgia Street 	 	  
	Address 	 	  
	 	 	 
	Vancouver, BC V6E
      4N7 	 	  

- 11 - 

	Signed, Sealed and Delivered by DAVID 	 	  
	STADNYK in the presence of: 	 	  
	 	 	 
	/s/ JanUrata 	 	  
	  	 	  
	Witness (Signature) 	 	/s/
      David Stadnyk 
	 	 	DAVID STADNYK
  
	Jan Urata 	 	
	Name (please print) 	 	  
	 	 	 
	1500 – 1055 West
      Georgia Street 	 	  
	Address 	 	  
	 	 	 
	Vancouver, BC V6E
      4N7 	 	  

SCHEDULE A 

FORM OF RELEASE 

KNOW ALL MEN BY THESE PRESENTS that, for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by Scott Pedersen (the “Releasor”), the Releasor does hereby
remise, release and forever discharge PARK PLACE ENERGY CORP., formerly
ST. ONLINE CORP. (the “Corporation”) of and from any and all
liabilities, whether contingent or otherwise, debts, sum and sums of money,
accounts, dues, contracts, agreements, covenants, guarantees, actions, suits,
causes of action or complaints, bonds, obligations, claims, counterclaims and
demands whatsoever either at law or in equity or otherwise which against it the
Releasor ever had, now has or which the legal representatives, successors or
assigns of the Releasor hereafter can, shall or may have by reason of any cause,
matter or thing whatsoever, whether known or unknown, that the Releasor now has
or hereafter may have against the Corporation by reason of any cause, act, deed,
matter, thing or omission existing up to and inclusive of July 30, 2007,
including, but not limited to, claims as a shareholder of the Corporation and
the balance of any outstanding fees, expenses, participation in profits,
earnings or other remuneration whether authorized by articles, by-laws,
resolution, contract or otherwise. 

THE RELEASOR FURTHER DECLARES that he has read this
Release and knows and fully understands the contents of the same and that the
Releasor has not assigned to any person, partnership, body corporate or other
entity any claim which the Releasor releases under this Release. 

IN WITNESS WHEREOF the Releasor has duly executed this
Release as of the 9th day of August, 2007. 

 

	/s/ Emilia Luca
	 	  
	Witness (Signature) 	 	  
	 	 	 
	Emilia Luca,
      Notary Public 	 	  
	Name (please print) 	 	  
		 	/s/
      Scott Pedersen 
	#202 – 4548
      Johnston Rd. 	 	SCOTT PEDERSEN 
	Address 	 	  
	 	 	 
	White Rock, BC V4B
      3Z8 	 	  

SCHEDULE B 

FORM OF RELEASE 

KNOW ALL MEN BY THESE PRESENTS that, for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by Elena Avdasseva (the “Releasor”), the Releasor does
hereby remise, release and forever discharge PARK PLACE ENERGY CORP.,
formerly ST. ONLINE CORP. (the “Corporation”) and David Stadnyk
(“Stadnyk”) of and from any and all liabilities, whether contingent or
otherwise, debts, sum and sums of money, accounts, dues, contracts, agreements,
covenants, guarantees, actions, suits, causes of action or complaints, bonds,
obligations, claims, counterclaims and demands whatsoever either at law or in
equity or otherwise which against them the Releasor ever had, now has or which
the legal representatives, successors or assigns of the Releasor hereafter can,
shall or may have by reason of any cause, matter or thing whatsoever, whether
known or unknown, that the Releasor now has or hereafter may have against the
Corporation or David Stadnyk by reason of any cause, act, deed, matter, thing or
omission existing up to and inclusive of July 30, 2007, including, but not
limited to, claims as a shareholder of the Corporation and the balance of any
outstanding fees, expenses, participation in profits, earnings or other
remuneration whether authorized by articles, by-laws, resolution, contract or
otherwise. 

THE RELEASOR FURTHER DECLARES that he has read this
Release and knows and fully understands the contents of the same and that the
Releasor has not assigned to any person, partnership, body corporate or other
entity any claim which the Releasor releases under this Release. 

IN WITNESS WHEREOF the Releasor has duly executed this
Release as of the 9th day of August, 2007. 

Signed, Sealed and Delivered by ELENA AVDASSEVA
in the presence of: 

	/s/ Justin Liu 	 	  
	  	 	  
	Witness (Signature) 	 	/s/
      Elena Avdasseva 
	 	 	ELENA AVDASSEVA
    
	Justin Liu 	 	
	Name (please print) 	 	  
	 	 	 
	1066 Groveland
      Road 	 	  
	Address 	 	  
	 	 	 
	West Vancouver, BC
      V7S 1Z4================================================================================

Exhibit 10.22
-------------

                          SECURITIES PURCHASE AGREEMENT

         SECURITIES PURCHASE AGREEMENT (this "Agreement"),  dated as of June 11,
2007, by and among Paradigm Medical  Industries,  Inc., a Delaware  corporation,
with  headquarters  located at 2355 South 1070 West,  Salt Lake City,  UT, 84119
(the  "Company"),  and each of the purchasers  set forth on the signature  pages
hereto (the "Buyers").

         WHEREAS:

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

         B. Buyers desire to purchase and the Company desires to issue and sell,
upon the  terms  and  conditions  set  forth in this  Agreement  (i) 8%  secured
convertible notes of the Company, in the form attached hereto as Exhibit "A", in
the  aggregate  principal  amount of Five Hundred  Thousand  Dollars  ($500,000)
(together  with any  note(s)  issued in  replacement  thereof  or as a  dividend
thereon or otherwise with respect  thereto in accordance with the terms thereof,
the  "Notes"),  convertible  into  shares of common  stock,  par value $.001 per
share,  of the Company (the "Common  Stock"),  upon the terms and subject to the
limitations  and conditions  set forth in such Notes and (ii)  warrants,  in the
form  attached  hereto as Exhibit "B", to purchase  10,000,000  shares of Common
Stock (the "Warrants").

         C. Each Buyer wishes to purchase,  upon the terms and conditions stated
in this Agreement,  such principal  amount of Notes and number of Warrants as is
set forth immediately below its name on the signature pages hereto; and

         D.  Contemporaneous  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 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.

         NOW  THEREFORE,  the Company and each of the Buyers  severally (and not
jointly) hereby agree as follows:

              1. PURCHASE AND SALE OF NOTES AND WARRANTS.

                     a. Purchase of Notes and Warrants.  On the Closing Date (as
defined  below),  the Company  shall issue and sell to each Buyer and each Buyer
severally agrees to purchase from the Company such principal amount of Notes and
number of Warrants as is set forth  immediately  below such  Buyer's name on the
signature pages hereto.

                                      1 22
<PAGE>

                     b. Form of Payment. On the Closing Date (as defined below),
(i) each Buyer shall pay the purchase price for the Notes and the Warrants to be
issued and sold to it at the Closing (as defined below) (the  "Purchase  Price")
by wire transfer of immediately  available  funds to the Company,  in accordance
with the Company's written wiring instructions, against delivery of the Notes in
the principal  amount equal to the Purchase  Price and the number of Warrants as
is set forth  immediately below such Buyer's name on the signature pages hereto,
and (ii) the Company  shall  deliver  such Notes and Warrants  duly  executed on
behalf of the Company, to such Buyer, against delivery of such Purchase Price.

                     c. Closing Date.  Subject to the  satisfaction  (or written
waiver) of the  conditions  thereto  set forth in Section 6 and Section 7 below,
the  date and  time of the  issuance  and  sale of the  Notes  and the  Warrants
pursuant to this  Agreement  (the "Closing  Date") shall be 12:00 noon,  Eastern
Standard Time on June 11, 2007,  or such other  mutually  agreed upon time.  The
closing of the transactions contemplated by this Agreement (the "Closing") shall
occur on the Closing Date at such location as may be agreed to by the parties.

              2. BUYERS'  REPRESENTATIONS  AND WARRANTIES.  Each Buyer severally
(and not jointly) represents and warrants to the Company solely as to such Buyer
that:

                     a. Investment  Purpose. As of the date hereof, the Buyer is
purchasing the Notes and the shares of Common Stock issuable upon  conversion of
or  otherwise  pursuant  to  the  Notes  (including,  without  limitation,  such
additional  shares of Common  Stock,  if any, as are  issuable (i) on account of
interest on the Notes,  (ii) as a result of the events described in Sections 1.3
and 1.4(g) of the Notes and Section 2(c) of the Registration Rights Agreement or
(iii) in payment  of the  Standard  Liquidated  Damages  Amount  (as  defined in
Section  2(f) below)  pursuant to this  Agreement,  such shares of Common  Stock
being  collectively  referred  to herein  as the  "Conversion  Shares")  and the
Warrants  and the shares of Common Stock  issuable  upon  exercise  thereof (the
"Warrant  Shares" and,  collectively  with the Notes,  Warrants  and  Conversion
Shares,  the  "Securities")  for its own  account  and not with a  present  view
towards  the public  sale or  distribution  thereof,  except  pursuant  to sales
registered or exempted from registration under the 1933 Act; provided,  however,
that by making the representations  herein, the Buyer does not agree to hold any
of 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 under the 1933 Act.

                     b. Accredited  Investor Status. The Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D (an "Accredited
Investor").

                     c. Reliance on Exemptions.  The Buyer  understands that the
Securities are being offered and sold to it 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 the
Buyer's   compliance   with,  the   representations,   warranties,   agreements,
acknowledgments  and  understandings  of the Buyer set forth  herein in order to
determine the  availability  of such exemptions and the eligibility of the Buyer
to acquire the Securities.

                                       2
<PAGE>
                     d.  Information.  The Buyer and its advisors,  if any, have
been, and for so long as the Notes and Warrants remain outstanding will continue
to be,  furnished  with all  materials  relating to the  business,  finances and
operations  of the Company and  materials  relating to the offer and sale of the
Securities which have been requested by the Buyer or its advisors. The Buyer and
its  advisors,  if any,  have  been,  and for so long as the Notes and  Warrants
remain  outstanding  will  continue  to  be,  afforded  the  opportunity  to ask
questions of the Company.  Notwithstanding  the  foregoing,  the Company has not
disclosed to the Buyer any material nonpublic  information and will not disclose
such information  unless such information is disclosed to the public prior to or
promptly following such disclosure to the Buyer.  Neither such inquiries nor any
other due diligence  investigation  conducted by Buyer or any of its advisors or
representatives  shall  modify,  amend or  affect  Buyer's  right to rely on the
Company's representations and warranties contained in Section 3 below. The Buyer
understands that its investment in the Securities  involves a significant degree
of risk.

                     e.  Governmental  Review.  The  Buyer  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.  Transfer or  Re-sale.  The Buyer  understands  that (i)
except as provided in the Registration Rights Agreement,  the sale or re-sale of
the  Securities has not been and is not being  registered  under the 1933 Act or
any applicable  state securities laws, and the Securities may not be transferred
unless  (a) the  Securities  are  sold  pursuant  to an  effective  registration
statement  under the 1933 Act, (b) the Buyer shall have delivered to the Company
an opinion of counsel that 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,  which opinion shall be accepted by the Company, (c) the
Securities are sold or  transferred  to an  "affiliate"  (as defined in Rule 144
promulgated  under the 1933 Act (or a successor rule) ("Rule 144")) of the Buyer
who agrees to sell or otherwise  transfer the Securities only in accordance with
this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold
pursuant to Rule 144, or (e) the  Securities  are sold  pursuant to Regulation S
under the 1933 Act (or a successor rule)  ("Regulation  S"), and the Buyer shall
have  delivered  to the  Company an  opinion  of counsel  that shall be in form,
substance and scope customary for opinions of counsel in corporate transactions,
which opinion shall be accepted by the Company; (ii) any sale of such Securities
made in  reliance on Rule 144 may be made only in  accordance  with the terms of
said Rule and  further,  if said Rule is not  applicable,  any  re-sale  of such
Securities  under  circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the 1933 Act) may require  compliance  with some other  exemption under the 1933
Act or the rules and  regulations of the SEC  thereunder;  and (iii) neither the
Company nor any other person is under any obligation to register such Securities
under the 1933 Act or any state  securities laws or to comply with the terms and
conditions of any exemption thereunder (in each case, other than pursuant to 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.  In the
event that the Company  does not accept the  opinion of counsel  provided by the
Buyer with respect to the transfer of Securities  pursuant to an exemption  from

                                       3
<PAGE>

registration,  such as Rule 144 or  Regulation S, within three (3) business days
of delivery of the opinion to the  Company,  the Company  shall pay to the Buyer
liquidated  damages of three percent (3%) of the outstanding amount of the Notes
per month plus  accrued and unpaid  interest on the Notes,  prorated for partial
months,  in cash or shares at the option of the  Company  ("Standard  Liquidated
Damages  Amount").  If the  Company  elects  to be pay the  Standard  Liquidated
Damages  Amount in shares of Common  Stock,  such shares  shall be issued at the
Conversion Price at the time of payment.

                     g. Legends.  The Buyer  understands  that the Notes and the
Warrants and, until such time as the  Conversion  Shares and Warrant Shares have
been registered  under the 1933 Act as contemplated by the  Registration  Rights
Agreement or otherwise  may be sold pursuant to Rule 144 or Regulation S without
any  restriction as to the number of securities as of a particular date that can
then be immediately  sold,  the Conversion  Shares and Warrant Shares may bear a
restrictive  legend in  substantially  the following  form (and a  stop-transfer
order may be placed against transfer of the certificates for such Securities):

                  "The securities  represented by this certificate have not been
                  registered  under the Securities Act of 1933, as amended.  The
                  securities  may not be sold,  transferred  or  assigned in the
                  absence  of  an  effective   registration  statement  for  the
                  securities under said Act, or an opinion of counsel,  in form,
                  substance  and scope  customary  for  opinions  of  counsel in
                  comparable  transactions,  that  registration  is not required
                  under  said  Act  or  unless  sold  pursuant  to  Rule  144 or
                  Regulation S under said Act."

                     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  applicable  state
securities  laws,  (a) such Security is  registered  for sale under an effective
registration  statement  filed  under  the  1933  Act or  otherwise  may be sold
pursuant to Rule 144 or Regulation S without any restriction as to the number of
securities  as of a particular  date that can then be  immediately  sold, or (b)
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 1933 Act, which opinion shall be accepted by the Company
so that the sale or transfer is effected or (c) such holder provides the Company
with  reasonable  assurances that such Security can be sold pursuant to Rule 144
or  Regulation  S. The Buyer  agrees  to sell all  Securities,  including  those
represented  by a  certificate(s)  from which the legend  has been  removed,  in
compliance with applicable prospectus delivery requirements, if any.

                     h.  Authorization;  Enforcement.  This  Agreement  and  the
Registration  Rights  Agreement  have been  duly and  validly  authorized.  This
Agreement has been duly executed and delivered on behalf of the Buyer,  and this
Agreement  constitutes,  and upon  execution  and  delivery  by the Buyer of the
Registration Rights Agreement, such agreement will constitute, valid and binding
agreements of the Buyer enforceable in accordance with their terms.

                     i. Residency.  The Buyer is a resident of the  jurisdiction
set forth immediately below such Buyer's name on the signature pages hereto.

                                       4
<PAGE>

              3.  REPRESENTATIONS  AND  WARRANTIES  OF THE COMPANY.  The Company
represents and warrants to each Buyer that:

                     a. Organization and Qualification.  The Company and each of
its  Subsidiaries  (as defined below),  if any, is a corporation duly organized,
validly  existing and in good  standing  under the laws of the  jurisdiction  in
which it is incorporated, with full power and authority (corporate and other) to
own,  lease,  use and operate its properties and to carry on its business as and
where now owned, leased, used, operated and conducted.  Schedule 3(a) sets forth
a list of all of the  Subsidiaries of the Company and the  jurisdiction in which
each is incorporated. 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 its  ownership  or use of  property  or the nature of the
business  conducted by it makes such  qualification  necessary  except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect. "Material Adverse Effect" means any of (i) a material and adverse effect
on the  legality,  validity  or  enforceability  of  any  document  executed  in
connection  with this  financing,  (ii) a  material  and  adverse  effect on the
results of operations,  assets,  prospects,  business or condition (financial or
otherwise) of the Company and the  Subsidiaries,  taken as a whole,  or (iii) an
adverse  impairment  to  the  Company's  ability  to  perform  under  any of the
documents executed in connection with this financing.  "Subsidiaries"  means any
corporation or other organization,  whether  incorporated or unincorporated,  in
which the Company owns,  directly or indirectly,  any equity or other  ownership
interest.

                     b.  Authorization;  Enforcement.  (i) The  Company  has all
requisite  corporate  power  and  authority  to  enter  into  and  perform  this
Agreement,  the Registration Rights Agreement, the Notes and the Warrants and to
consummate  the  transactions  contemplated  hereby and thereby and to issue the
Securities,  in accordance with the terms hereof and thereof, (ii) the execution
and delivery of this Agreement, the Registration Rights Agreement, the Notes and
the  Warrants  by the  Company and the  consummation  by it of the  transactions
contemplated hereby and thereby (including without  limitation,  the issuance of
the Notes and the Warrants and the issuance and  reservation for issuance of the
Conversion  Shares and  Warrant  Shares  issuable  upon  conversion  or exercise
thereof) 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 its
shareholders  is  required,  (iii) this  Agreement  has been duly  executed  and
delivered by the Company by its authorized  representative,  and such authorized
representative  is the true and official  representative  with authority to sign
this Agreement and the other documents executed in connection  herewith and bind
the Company accordingly, and (iv) this Agreement constitutes, and upon execution
and delivery by the Company of the Registration Rights Agreement,  the Notes and
the Warrants,  each of such  instruments  will  constitute,  a legal,  valid and
binding obligation of the Company  enforceable against the Company in accordance
with its terms.

                     c.  Capitalization.  As of the date hereof,  the authorized
capital stock of the Company  consists of [ ] shares of common stock, of which [
_________________  ] shares are issued and outstanding,  [ ] shares are reserved
for  issuance  pursuant to the  Company's  stock  option  plans,  [ ] shares are
reserved  for  issuance  pursuant  to  securities  (other than the Notes and the
Warrants)  exercisable  for, or convertible  into or exchangeable  for shares of
Common Stock and 250,000,000 shares are reserved for issuance upon conversion of
the Notes and the Additional  Notes (as defined in Section 4(1)) and exercise of
the Warrants (as defined in Section 4(1) (subject to adjustment  pursuant to the

                                       5
<PAGE>

Company's  covenant  set forth in Section 4(h)  below).  In addition,  there are
seven classes of preferred stock, designated as Series A Preferred Stock, Series
B Preferred Stock,  Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred  Stock,  Series F Preferred Stock and Series G Preferred  Stock. As of
the date  hereof,  the  authorized  preferred  stock of the Company  consists of
5,000,000 shares, of which the Board of Directors has authorized the issuance of
500,000 shares of Series A Preferred Stock, 500,000 shares of Series B Preferred
Stock,  30,000 shares of Series C Preferred Stock,  1,140,000 shares of Series D
Preferred  Stock,  50,000 shares of Series E Preferred  Stock,  50,000 shares of
Series F Preferred Stock, and 2,000,000 shares of Series G Preferred Stock. Each
of the shares of preferred stock are convertible  into shares of Common Stock at
a  different  conversion  price.  As of the date  hereof,  there were issued and
outstanding  5,627  shares of Series A Preferred  Stock  convertible  into 6,753
shares of Common Stock;  80,986 shares of Series B Preferred  Stock  convertible
into 10,783 shares of Common Stock; no shares of Series C Preferred Stock; 5,000
shares of Series D  Preferred  Stock  convertible  into  8,750  shares of Common
Stock;  1,000 shares of Series E Preferred Stock  convertible into 53,333 shares
of Common Stock;  4,598.75 shares of Series F Preferred Stock  convertible  into
245,267 shares of Common Stock; and 1,726,560 shares of Series G Preferred Stock
convertible  into  1,726,560  shares of Common  Stock.  All of such  outstanding
shares of capital stock are, or upon issuance will be, duly authorized,  validly
issued, fully paid and nonassessable.  No shares of capital stock of the Company
are subject to preemptive rights or any other similar rights of the shareholders
of the  Company or any liens or  encumbrances  imposed  through  the  actions or
failure to act of the Company.  Except as disclosed in Schedule  3(c), as of the
effective  date  of  this  Agreement,  (i)  there  are no  outstanding  options,
warrants,  scrip, rights to subscribe for, puts, calls, rights of first refusal,
agreements,  understandings,  claims  or  other  commitments  or  rights  of any
character  whatsoever  relating to, or securities or rights  convertible into or
exchangeable  for any  shares  of  capital  stock of the  Company  or any of its
Subsidiaries, 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,  (ii) there are no agreements 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 1933 Act (except the  Registration
Rights  Agreement)  and (iii)  there are no  anti-dilution  or price  adjustment
provisions  contained in any security issued by the Company (or in any agreement
providing rights to security  holders) that will be triggered by the issuance of
the Notes, the Warrants,  the Conversion  Shares or Warrant Shares.  The Company
has furnished to the Buyer true and correct copies of the Company's  Certificate
of   Incorporation   as  in  effect  on  the  date   hereof   ("Certificate   of
Incorporation"),  the  Company's  By-laws,  as in effect on the date hereof (the
"By-laws"),  and the terms of all securities convertible into or exercisable for
Common  Stock of the Company and the material  rights of the holders  thereof in
respect  thereto.  The Company shall provide the Buyer with a written  update of
this  representation  signed by the Company's Chief Executive or Chief Financial
Officer on behalf of the Company as of the Closing Date.

                     d. Issuance of Shares.  The  Conversion  Shares and Warrant
Shares are duly authorized and reserved for issuance and, upon conversion of the
Notes and exercise of the Warrants in accordance  with their  respective  terms,
will be validly issued, fully paid and non-assessable,  and free from all taxes,
liens,  claims and encumbrances  with respect to the issue thereof and shall not
be subject to preemptive  rights or other similar rights of  shareholders of the
Company and will not impose personal liability upon the holder thereof.

                                       6
<PAGE>

                     e. Acknowledgment of Dilution.  The Company understands and
acknowledges  the  potentially  dilutive  effect to the  Common  Stock  upon the
issuance of the Conversion Shares and Warrant Shares upon conversion of the Note
or  exercise  of  the  Warrants.  The  Company  further  acknowledges  that  its
obligation to issue Conversion  Shares and Warrant Shares upon conversion of the
Notes or exercise of the Warrants in accordance with this  Agreement,  the Notes
and the Warrants is absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership  interests of other shareholders of
the Company.

                     f. No Conflicts. The execution, delivery and performance of
this Agreement, the Registration Rights Agreement, the Notes and the Warrants by
the Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including,  without limitation, the issuance and reservation
for issuance of the Conversion  Shares and Warrant Shares) will not (i) conflict
with  or  result  in  a  violation  of  any  provision  of  the  Certificate  of
Incorporation or By-laws or (ii) violate or conflict with, or result in a breach
of any  provision  of, or constitute a default (or an event which with notice or
lapse of time or both  could  become a  default)  under,  or give to others  any
rights  of  termination,   amendment,   acceleration  or  cancellation  of,  any
agreement,  indenture, patent, patent license or instrument to which the Company
or any of its  Subsidiaries  is a party,  or (iii) to the  Company's  knowledge,
result in a violation of any law, rule,  regulation,  order,  judgment or decree
(including  federal and state securities laws and regulations and regulations of
any  self-regulatory  organizations  to which 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 for such conflicts, defaults, terminations,  amendments,  accelerations,
cancellations  and  violations as would not,  individually  or in the aggregate,
have a Material Adverse Effect). Neither the Company nor any of its Subsidiaries
is  in  violation  of  its  Certificate  of  Incorporation,   By-laws  or  other
organizational  documents and neither the Company nor any of its Subsidiaries is
in default (and no event has occurred which with notice or lapse of time or both
could put the Company or any of its  Subsidiaries in default) under, and neither
the Company nor any of its  Subsidiaries  has taken any action or failed to take
any action  that would  give to others  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 or by which any  property or
assets of the Company or any of its  Subsidiaries  is bound or affected,  except
for possible  defaults as would not,  individually  or in the aggregate,  have a
Material Adverse Effect. The businesses of the Company and its Subsidiaries,  if
any, are not being conducted, and shall not be conducted so long as a Buyer owns
any of the Securities,  in violation of any law,  ordinance or regulation of any
governmental entity.  Except as specifically  contemplated by this Agreement and
as required under the 1933 Act and any  applicable  state  securities  laws, the
Company is not  required to obtain any  consent,  authorization  or order of, or
make any filing or registration with, any court, governmental agency, regulatory
agency, self regulatory organization or stock market or any third party in order
for  it to  execute,  deliver  or  perform  any of its  obligations  under  this
Agreement,  the  Registration  Rights  Agreement,  the Notes or the  Warrants in
accordance  with the terms  hereof or thereof or to issue and sell the Notes and
Warrants in accordance with the terms hereof and to issue the Conversion  Shares
upon  conversion  of the Notes  and the  Warrant  Shares  upon  exercise  of the
Warrants.  Except as disclosed in Schedule 3(f),  all consents,  authorizations,
orders,  filings  and  registrations  which the  Company is  required  to obtain

                                       7
<PAGE>

pursuant to the preceding sentence have been obtained or effected on or prior to
the date hereof. The Company is not in violation of the listing  requirements of
the  Over-the-Counter  Bulletin  Board  (the  "OTCBB")  and does not  reasonably
anticipate  that  the  Common  Stock  will  be  delisted  by  the  OTCBB  in the
foreseeable future. The Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.

                     g. SEC Documents; Financial Statements. Except as disclosed
in Schedule  3(g),  since  December  31,  2004 the Company has timely  filed all
reports,  schedules,  forms, statements and other documents required to be filed
by it with the SEC  pursuant to the  reporting  requirements  of the  Securities
Exchange Act of 1934,  as amended (the "1934 Act") (all of the  foregoing  filed
prior to the  date  hereof  and all  exhibits  included  therein  and  financial
statements  and  schedules  thereto and  documents  (other than exhibits to such
documents)  incorporated by reference  therein,  being  hereinafter  referred to
herein as the "SEC Documents").  As of their respective dates, the SEC Documents
complied in all material  respects with the requirements of the 1934 Act and the
rules and  regulations of the SEC promulgated  thereunder  applicable to the SEC
Documents,  and none of the SEC Documents,  at the time they were filed with the
SEC,  contained  any untrue  statement of a material  fact or omitted to state a
material  fact  required to be stated  therein or necessary 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 prior 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 with respect  thereto.  Such financial  statements have been prepared in
accordance  with  United  States  generally  accepted   accounting   principles,
consistently  applied,  during  the  periods  involved  (except  (i)  as  may be
otherwise  indicated in such financial  statements or the notes thereto, or (ii)
in the case of unaudited interim statements,  to the extent they may 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 year-end audit adjustments).  Except as
set  forth  in the  financial  statements  of the  Company  included  in the SEC
Documents, the Company has no liabilities,  contingent or otherwise,  other than
(i)  liabilities  incurred  in the  ordinary  course of business  subsequent  to
December 31, 2004 and (ii) obligations under contracts and commitments  incurred
in the ordinary  course of business and not required  under  generally  accepted
accounting  principles  to be reflected  in such  financial  statements,  which,
individually or in the aggregate, are not material to the financial condition or
operating results of the Company.

                     h.  Absence of Certain  Changes.  Since  December 31, 2004,
there has been no material adverse change and no material adverse development in
the assets, liabilities,  business, properties, operations, financial condition,
results of operations or prospects of the Company or any of its Subsidiaries.

                     i. Absence of Litigation.  There is no action, suit, claim,
proceeding,  inquiry  or  investigation  before or by any court,  public  board,
government  agency,  self-regulatory  organization  or body  pending  or, to the
knowledge  of the  Company  or any of its  Subsidiaries,  threatened  against or

                                       8
<PAGE>

affecting the Company or any of its Subsidiaries, or their officers or directors
in their capacity as such, that could have a Material  Adverse Effect.  Schedule
3(i)  contains  a  complete  list and  summary  description  of any  pending  or
threatened   proceeding   against  or  affecting  the  Company  or  any  of  its
Subsidiaries, without regard to whether it would have a Material Adverse Effect.
The Company and its Subsidiaries are unaware of any facts or circumstances which
might give rise to any of the foregoing.

                     j.  Patents,  Copyrights,  etc. The Company and each of its
Subsidiaries  owns or  possesses  the  requisite  licenses  or rights to use all
patents,  patent  applications,   patent  rights,  inventions,  know-how,  trade
secrets, trademarks, trademark applications, service marks, service names, trade
names and copyrights ("Intellectual Property") necessary to enable it to conduct
its business as now operated (and,  except as set forth in Schedule 3(j) hereof,
to the best of the Company's knowledge, as presently contemplated to be operated
in the  future);  there is no claim or action by any  person  pertaining  to, or
proceeding pending, or to the Company's knowledge  threatened,  which challenges
the right of the Company or of a  Subsidiary  with  respect to any  Intellectual
Property  necessary to enable it to conduct its  business as now operated  (and,
except  as set  forth in  Schedule  3(j)  hereof,  to the best of the  Company's
knowledge,  as presently contemplated to be operated in the future); to the best
of the  Company's  knowledge,  the  Company's or its  Subsidiaries'  current and
intended  products,  services and processes do not infringe on any  Intellectual
Property or other  rights held by any person;  and the Company is unaware of any
facts or  circumstances  which  might  give  rise to any of the  foregoing.  The
Company and each of its Subsidiaries have taken reasonable  security measures to
protect the secrecy, confidentiality and value of their Intellectual Property.

                     k.  No  Materially  Adverse  Contracts,  Etc.  Neither  the
Company nor any of its  Subsidiaries  is subject to any  charter,  corporate  or
other legal  restriction,  or any judgment,  decree,  order,  rule or regulation
which in the judgment of the Company's officers has or is expected in the future
to  have  a  Material  Adverse  Effect.  Neither  the  Company  nor  any  of its
Subsidiaries  is a party to any contract or  agreement  which in the judgment of
the Company's officers has or is expected to have a Material Adverse Effect.

                     l. Tax Status.  Except as set forth on Schedule  3(l),  the
Company and each of its  Subsidiaries  has made or filed all federal,  state and
foreign 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
the statute of  limitations  relating to the  assessment  or  collection  of any
foreign, federal, state or local tax. Except as set forth on Schedule 3(l), none
of the Company's tax returns is presently being audited by any taxing authority.

                                       9
<PAGE>

                     m.  Certain  Transactions.  Except as set forth on Schedule
3(m) and except for arm's length  transactions  pursuant to which the Company or
any of its  Subsidiaries  makes payments in the ordinary course of business upon
terms no less favorable than the Company or any of its Subsidiaries could obtain
from  third  parties  and other  than the grant of stock  options  disclosed  on
Schedule 3(c), none of the officers,  directors,  or employees of the Company is
presently a party to any transaction with the Company or any of its Subsidiaries
(other than for services as employees,  officers and  directors),  including any
contract,  agreement  or  other  arrangement  providing  for the  furnishing  of
services to or by, providing for rental of real or personal property to or from,
or  otherwise  requiring  payments  to or from  any  officer,  director  or such
employee  or, to the  knowledge of the Company,  any  corporation,  partnership,
trust or other entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.

                     n.  Disclosure.  All information  relating to or concerning
the Company or any of its  Subsidiaries set forth in this Agreement and provided
to the Buyers  pursuant to Section 2(d) hereof and 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  has  occurred or exists with  respect to the Company or any of its
Subsidiaries  or its or their  business,  properties,  prospects,  operations or
financial conditions, which, under applicable law, rule or regulation,  requires
public  disclosure  or  announcement  by the  Company  but which has not been so
publicly  announced or disclosed  (assuming  for this purpose that the Company's
reports  filed  under  the 1934 Act are  being  incorporated  into an  effective
registration statement filed by the Company under the 1933 Act).

                     o. Acknowledgment Regarding Buyers' Purchase of Securities.
The Company  acknowledges  and agrees  that the Buyers are acting  solely in the
capacity of arm's  length  purchasers  with  respect to this  Agreement  and the
transactions contemplated hereby. The Company further acknowledges that no Buyer
is acting as a financial  advisor or fiduciary of the Company (or in any similar
capacity)  with  respect to this  Agreement  and the  transactions  contemplated
hereby  and  any  statement  made  by  any  Buyer  or any  of  their  respective
representatives or agents in connection with this Agreement and the transactions
contemplated  hereby is not advice or a recommendation  and is merely incidental
to the Buyers'  purchase of the Securities.  The Company  further  represents to
each Buyer that the  Company's  decision to enter into this  Agreement  has been
based   solely  on  the   independent   evaluation   of  the   Company  and  its
representatives.

                     p. No Integrated Offering.  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 in any security or solicited  any offers to
buy any security under  circumstances that would require  registration under the
1933 Act of the issuance of the  Securities  to the Buyers.  The issuance of the
Securities to the Buyers will not be integrated  with any other  issuance of the
Company's  securities (past,  current or future) for purposes of any shareholder
approval provisions applicable to the Company or its securities.

                                       10
<PAGE>

                     q. No Brokers.  Except as set forth in Schedule  3(q),  the
Company has taken no action which would give rise to any claim by any person for
brokerage  commissions,  transaction fees or similar  payments  relating to this
Agreement or the transactions contemplated hereby.

                     r.  Permits;  Compliance.  The  Company  and  each  of  its
Subsidiaries  is  in  possession  of  all  franchises,  grants,  authorizations,
licenses, permits, easements,  variances,  exemptions,  consents,  certificates,
approvals and orders  necessary to own,  lease and operate its properties and to
carry on its business as it is now being conducted  (collectively,  the "Company
Permits"),  and there is no action  pending or, to the knowledge of the Company,
threatened  regarding  suspension or cancellation of any of the Company Permits.
Neither the  Company nor any of its  Subsidiaries  is in  conflict  with,  or in
default  or  violation  of,  any of the  Company  Permits,  except  for any such
conflicts, defaults or violations which, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect. Since December 31,
2004,  neither  the  Company  nor  any  of its  Subsidiaries  has  received  any
notification  with  respect to possible  conflicts,  defaults or  violations  of
applicable laws, except for notices relating to possible conflicts,  defaults or
violations,  which  conflicts,  defaults or violations would not have a Material
Adverse Effect.

                     s. Environmental Matters.

                        (i) Except as set forth in Schedule 3(s),  there are, to
the best of the Company's  knowledge,  with respect to the Company or any of its
Subsidiaries or any predecessor of the Company, no past or present violations of
Environmental  Laws  (as  defined  below),  releases  of any  material  into the
environment, actions, activities, circumstances,  conditions, events, incidents,
or contractual  obligations  which may give rise to any common law environmental
liability  or any  liability  under the  Comprehensive  Environmental  Response,
Compensation  and  Liability  Act of 1980 or similar  federal,  state,  local or
foreign  laws and neither the Company nor any of its  Subsidiaries  has received
any notice with respect to any of the  foregoing,  nor is any action pending or,
to the Company's knowledge,  threatened in connection with any of the foregoing.
The term  "Environmental  Laws" means all federal,  state, local or foreign laws
relating  to  pollution  or  protection  of  human  health  or  the  environment
(including,  without limitation,  ambient air, surface water, groundwater,  land
surface or subsurface strata),  including,  without limitation, laws relating to
emissions,  discharges, releases or threatened releases of chemicals, pollutants
contaminants,   or  toxic  or  hazardous  substances  or  wastes  (collectively,
"Hazardous  Materials")  into the  environment,  or  otherwise  relating  to the
manufacture,   processing,  distribution,  use,  treatment,  storage,  disposal,
transport or handling of  Hazardous  Materials,  as well as all  authorizations,
codes, decrees,  demands or demand letters,  injunctions,  judgments,  licenses,
notices  or  notice  letters,  orders,  permits,  plans or  regulations  issued,
entered, promulgated or approved thereunder.

                        (ii) Other than those that are or were  stored,  used or
disposed of in  compliance  with  applicable  law, no  Hazardous  Materials  are
contained on or about any real property  currently owned,  leased or used by the
Company or any of its Subsidiaries,  and no Hazardous Materials were released on
or about any real property  previously  owned,  leased or used by the Company or
any of its Subsidiaries during the period the property was owned, leased or used
by the Company or any of its  Subsidiaries,  except in the normal  course of the
Company's or any of its Subsidiaries' business.

                                       11
<PAGE>

                        (iii) Except as set forth in Schedule  3(s), to the best
of the Company's  knowledge  there are no underground  storage tanks on or under
any  real  property  owned,  leased  or  used  by  the  Company  or  any  of its
Subsidiaries that are not in compliance with applicable law.

                     t. Title to Property. The Company and its Subsidiaries have
good and  marketable  title in fee  simple  to all  real  property  and good and
marketable title to all personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as are described in Schedule 3(t) or
such as  would  not have a  Material  Adverse  Effect.  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 would not
have a Material Adverse Effect.

                     u. Insurance.  The Company and each of its Subsidiaries are
insured by insurers of recognized financial  responsibility  against such losses
and risks and in such  amounts  as  management  of the  Company  believes  to be
prudent  and  customary  in  the   businesses  in  which  the  Company  and  its
Subsidiaries  are engaged.  Neither the Company nor any such  Subsidiary has any
reason  to  believe  that it will not be able to renew  its  existing  insurance
coverage as and when such coverage  expires or to obtain  similar  coverage from
similar  insurers as may be  necessary  to continue  its business at a cost that
would not have a Material Adverse Effect. The Company has provided to Buyer true
and  correct  copies  of all  policies  relating  to  directors'  and  officers'
liability  coverage,  errors and  omissions  coverage,  and  commercial  general
liability coverage.

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

                     w. Foreign Corrupt Practices.  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,  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, as amended, or made any bribe, rebate, payoff,  influence
payment,  kickback  or  other  unlawful  payment  to  any  foreign  or  domestic
government official or employee.

                                       12
<PAGE>

                     x.  Solvency.  The  Company  (after  giving  effect  to the
transactions contemplated by this Agreement) is solvent (i.e., its assets have a
fair  market  value  in  excess  of the  amount  required  to pay  its  probable
liabilities  on its  existing  debts as they become  absolute  and  matured) and
currently  the  Company  has no  information  that would  lead it to  reasonably
conclude  that the Company  would not,  after giving  effect to the  transaction
contemplated by this Agreement,  have the ability to, nor does it intend to take
any action  that would  impair its  ability  to, pay its debts from time to time
incurred  in  connection  therewith  as such debts  mature.  The Company did not
receive a qualified  opinion from its  auditors  with respect to its most recent
fiscal year end and,  after giving effect to the  transactions  contemplated  by
this Agreement, does not anticipate or know of any basis upon which its auditors
might issue a qualified opinion in respect of its current fiscal year.

                     y. No Investment Company.  The Company is not, and upon the
issuance and sale of the Securities as  contemplated  by this Agreement will not
be an  "investment  company"  required  to be  registered  under the  Investment
Company Act of 1940 (an "Investment Company").  The Company is not controlled by
an Investment Company.

                     z. Certain Registration  Matters.  Assuming the accuracy of
the  Buyers'   representations  and  warranties  set  forth  in  Section  3,  no
registration  under the Securities Act is required for the offer and sale of the
Conversion  Shares and  Warrant  Shares by the  Company to the Buyers  under the
transaction documents. Except as specified in Schedule 3(z), the Company has not
granted  or agreed to grant to any Person  any  rights  (including  "piggy-back"
registration  rights) to have any securities of the Company  registered with the
Commission or any other governmental authority that have not been satisfied.

                     aa.  Breach  of  Representations   and  Warranties  by  the
Company.  If the Company breaches any of the  representations  or warranties set
forth in this Section 3, and in addition to any other remedies  available to the
Buyers  pursuant  to this  Agreement,  the  Company  shall  pay to the Buyer the
Standard  Liquidated  Damages Amount in cash or in shares of Common Stock at the
option of the Company,  until such breach is cured. If the Company elects to pay
the Standard  Liquidated  Damages Amounts in shares of Common Stock, such shares
shall be issued at the Conversion Price at the time of payment.

              4. COVENANTS.

                     a. Best  Efforts.  The parties shall use their best efforts
to satisfy  timely each of the  conditions  described in Section 6 and 7 of this
Agreement.

                     b. Form D; Blue Sky Laws. The Company agrees to file a Form
D with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer 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 the Buyers at the
applicable  closing  pursuant to this Agreement under  applicable  securities or
"blue sky" laws of the states of the  United  States (or to obtain an  exemption
from such qualification), and shall provide evidence of any such action so taken
to each Buyer on or prior to the Closing Date.

                                       13
<PAGE>

                     c. Reporting  Status;  Eligibility to Use Form S-3, SB-2 or
Form S-1. The Company's  Common Stock is  registered  under Section 12(g) of the
1934 Act. The Company represents and warrants that it meets the requirements for
the use of Form S-3 (or if the Company is not  eligible  for the use of Form S-3
as of the Filing Date (as defined in the  Registration  Rights  Agreement),  the
Company may use the form of registration  for which it is eligible at that time)
for  registration  of the sale by the Buyer of the  Registrable  Securities  (as
defined in the Registration Rights Agreement). So long as the Buyer beneficially
owns any of the Securities,  the Company shall timely file all reports  required
to be filed with the SEC  pursuant to the 1934 Act,  and the  Company  shall not
terminate  its status as an issuer  required to file reports  under the 1934 Act
even if the 1934 Act or the rules and regulations  thereunder  would permit such
termination. The Company further agrees to file all reports required to be filed
by the Company  with the SEC in a timely  manner so as to become  eligible,  and
thereafter  to maintain  its  eligibility,  for the use of Form S-3. The Company
shall issue a press release  describing  the material  terms of the  transaction
contemplated hereby as soon as practicable  following the Closing Date but in no
event more than two (2) business days of the Closing  Date,  which press release
shall be subject to prior  review by the Buyers.  The  Company  agrees that such
press  release  shall  not  disclose  the name of the  Buyers  unless  expressly
consented to in writing by the Buyers or unless  required by  applicable  law or
regulation, and then only to the extent of such requirement.

                     d. Use of Proceeds.  The Company shall use the net proceeds
from the sale of the Notes and the  Warrants in the manner set forth in Schedule
4(d)  attached  hereto  and  made a part  hereof  and  shall  not,  directly  or
indirectly,  use such  proceeds for (i) any loan to or  investment  in any other
corporation,  partnership, enterprise or other person (except in connection with
its currently existing direct or indirect  Subsidiaries);  (ii) the satisfaction
of any portion of the Company's  debt (other than payment of trade  payables and
accrued expenses in the ordinary course of the Company's business and consistent
with prior past practices), or (iii) the redemption of any Common Stock.

                     e. Future  Offerings.  Subject to the exceptions  described
below,   the  Company  will  not,   without  the  prior  written  consent  of  a
majority-in-interest  of the Buyers,  negotiate  or  contract  with any party to
obtain  additional  equity  financing  (including  debt financing with an equity
component)  that  involves (A) the issuance of Common Stock at a discount to the
market  price of the Common  Stock on the date of issuance  (taking into account
the  value of any  warrants  or  options  to  acquire  Common  Stock  issued  in
connection  therewith) or (B) the issuance of  convertible  securities  that are
convertible  into an  indeterminate  number of shares of Common Stock or (C) the
issuance of warrants during the period (the "Lock-up  Period")  beginning on the
Closing Date and ending on the later of (i) two hundred  seventy (270) days from
the  Closing  Date and (ii) one  hundred  eighty  (180)  days  from the date the
Registration  Statement  (as defined in the  Registration  Rights  Agreement) is
declared effective (plus any days in which sales cannot be made thereunder).  In
addition,  subject to the  exceptions  described  below,  the  Company  will not
conduct any equity financing  (including debt with an equity component) ("Future

                                       14
<PAGE>

Offerings")  during the period  beginning on the Closing Date and ending two (2)
years after the end of the Lock-up  Period unless it shall have first  delivered
to each Buyer,  at least twenty (20)  business days prior to the closing of such
Future  Offering,  written  notice  describing  the  proposed  Future  Offering,
including the terms and conditions thereof and proposed definitive documentation
to be entered into in connection  therewith,  and providing each Buyer an option
during the fifteen (15) day period following delivery of such notice to purchase
its pro rata share (based on the ratio that the  aggregate  principal  amount of
Notes purchased by it hereunder bears to the aggregate principal amount of Notes
purchased  hereunder) of the securities  being offered in the Future Offering on
the same terms as contemplated by such Future Offering (the limitations referred
to in this sentence and the preceding  sentence are collectively  referred to as
the "Capital Raising  Limitations").  In the event the terms and conditions of a
proposed Future Offering are amended in any respect after delivery of the notice
to the Buyers concerning the proposed Future Offering, the Company shall deliver
a new notice to each Buyer  describing  the amended terms and  conditions of the
proposed Future Offering and each Buyer  thereafter  shall have an option during
the fifteen  (15) day period  following  delivery of such new notice to purchase
its pro  rata  share  of the  securities  being  offered  on the  same  terms as
contemplated  by such  proposed  Future  Offering,  as  amended.  The  foregoing
sentence shall apply to successive amendments to the terms and conditions of any
proposed Future Offering. The Capital Raising Limitations shall not apply to any
transaction   involving  (i)  issuances  of  securities  in  a  firm  commitment
underwritten  public offering  (excluding a continuous offering pursuant to Rule
415  under  the  1933  Act,  an  equity  line of  credit  or  similar  financing
arrangement)  resulting  in  net  proceeds  to  the  Company  of  in  excess  of
$1,500,000,  or (ii)  issuances of  securities  as  consideration  for a merger,
consolidation  or  purchase  of  assets,  or in  connection  with any  strategic
partnership  or joint  venture  (the  primary  purpose  of which is not to raise
equity  capital),  or in connection  with the  disposition  or  acquisition of a
business,  product or license by the Company.  The Capital  Raising  Limitations
also shall not apply to the issuance of  securities  upon exercise or conversion
of the Company's options,  warrants or other convertible  securities outstanding
as of the date hereof or to the grant of additional options or warrants,  or the
issuance of additional securities,  under any Company stock option or restricted
stock plan approved by the shareholders of the Company.

                     f. Expenses.  At the Closing,  the Company shall  reimburse
Buyers  for  expenses  incurred  by them in  connection  with  the  negotiation,
preparation, execution, delivery and performance of this Agreement and the other
agreements  to be  executed in  connection  herewith  ("Documents"),  including,
without  limitation,  attorneys' and  consultants'  fees and expenses,  transfer
agent fees, fees for stock quotation  services,  fees relating to any amendments
or  modifications  of the  Documents or any consents or waivers of provisions in
the Documents, fees for the preparation of opinions of counsel, escrow fees, and
costs of  restructuring  the  transactions  contemplated by the Documents.  When
possible,  the Company must pay these fees directly,  otherwise the Company must
make immediate payment for reimbursement to the Buyers for all fees and expenses
immediately  upon written notice by the Buyer or the submission of an invoice by
the Buyer If the Company  fails to reimburse  the Buyer in full within three (3)
business days of the written  notice or submission of invoice by the Buyer,  the
Company  shall pay  interest on the total amount of fees to be  reimbursed  at a
rate of 15% per annum.

                     g.  Financial  Information.  The Company agrees to send the
following  reports to each Buyer until such Buyer transfers,  assigns,  or sells
all of the Securities: (i) within ten (10) days after the filing with the SEC, a
copy of its Annual  Report on Form 10-KSB its  Quarterly  Reports on Form 10-QSB
and any  Current  Reports on Form 8-K;  (ii)  within one (1) day after  release,
copies of all press releases  issued by the Company or any of its  Subsidiaries;
and  (iii)  contemporaneously  with  the  making  available  or  giving  to  the
shareholders  of the  Company,  copies of any notices or other  information  the
Company makes available or gives to such shareholders.

                                       15
<PAGE>

                     h.  Authorization  and  Reservation  of Shares.  Subject to
Stockholder  Approval,  the  Company  shall at all times  have  authorized,  and
reserved  for the purpose of issuance,  a sufficient  number of shares of Common
Stock to provide for the full  conversion or exercise of the  outstanding  Notes
and  Warrants  and  issuance  of the  Conversion  Shares and  Warrant  Shares in
connection  therewith  (based on the  Conversion  Price of the Notes or Exercise
Price of the Warrants in effect from time to time) and as otherwise  required by
the Notes.  The  Company  shall not reduce the number of shares of Common  Stock
reserved  for  issuance  upon  conversion  of Notes and exercise of the Warrants
without the consent of each Buyer.  The Company shall at all times  maintain the
number  of  shares  of  Common  Stock so  reserved  for  issuance  at an  amount
("Reserved  Amount") equal to no less than two (2) times the number that is then
actually  issuable upon full  conversion of the Notes and  Additional  Notes and
upon  exercise  of the  Warrants  and  the  Additional  Warrants  (based  on the
Conversion  Price of the Notes or the  Exercise  Price of the Warrants in effect
from  time to  time).  If at any time the  number  of  shares  of  Common  Stock
authorized and reserved for issuance ("Authorized and Reserved Shares") is below
the  Reserved  Amount,  the Company  will  promptly  take all  corporate  action
necessary to authorize  and reserve a  sufficient  number of shares,  including,
without  limitation,  calling a special  meeting of  shareholders  to  authorize
additional shares to meet the Company's  obligations under this Section 4(h), in
the case of an  insufficient  number of authorized  shares,  obtain  shareholder
approval  of an  increase in such  authorized  number of shares,  and voting the
management  shares of the  Company  in favor of an  increase  in the  authorized
shares  of the  Company  to  ensure  that the  number  of  authorized  shares is
sufficient  to meet the  Reserved  Amount.  If the Company  fails to obtain such
shareholder  approval  within  thirty (30) days  following the date on which the
number of Reserved  Amount  exceeds the  Authorized  and  Reserved  Shares,  the
Company shall pay to the Borrower the Standard  Liquidated  Damages  Amount,  in
cash or in shares  of Common  Stock at the  option  of the  Buyer.  If the Buyer
elects to be paid the  Standard  Liquidated  Damages  Amount in shares of Common
Stock,  such  shares  shall be  issued  at the  Conversion  Price at the time of
payment.  In order to ensure that the Company has authorized a sufficient amount
of shares to meet the Reserved Amount at all times,  the Company must deliver to
the Buyer at the end of every month a list  detailing (1) the current  amount of
shares  authorized by the Company and reserved for the Buyer;  and (2) amount of
shares  issuable upon  conversion of the Notes and upon exercise of the Warrants
and as payment of  interest  accrued on the Notes for one year.  If the  Company
fails to provide  such list  within  five (5)  business  days of the end of each
month, the Company shall pay the Standard  Liquidated Damages Amount, in cash or
in  shares  of  Common  Stock at the  option  of the  Buyer,  until  the list is
delivered. If the Buyer elects to be paid the Standard Liquidated Damages Amount
in shares of Common Stock,  such shares shall be issued at the Conversion  Price
at the time of payment.

                     i. Listing.  The Company shall promptly  secure the listing
of the  Conversion  Shares and  Warrant  Shares  upon each  national  securities
exchange or  automated  quotation  system,  if any,  upon which shares of Common
Stock are then listed  (subject to official  notice of issuance) and, so long as
any  Buyer  owns any of the  Securities,  shall  maintain,  so long as any other

                                       16
<PAGE>

shares of Common Stock shall be so listed, such listing of all Conversion Shares
and Warrant  Shares from time to time issuable  upon  conversion of the Notes or
exercise of the Warrants. The Company will obtain and, so long as any Buyer owns
any of the  Securities,  maintain the listing and trading of its Common Stock on
the OTCBB or any equivalent  replacement  exchange,  the Nasdaq  National Market
("Nasdaq"),  the Nasdaq SmallCap Market ("Nasdaq SmallCap"),  the New York Stock
Exchange  ("NYSE"),  or the American Stock Exchange  ("AMEX") and will comply in
all respects with the Company's  reporting,  filing and other  obligations under
the bylaws or rules of the National  Association of Securities  Dealers ("NASD")
and such exchanges,  as applicable.  The Company shall promptly  provide to each
Buyer copies of any notices it receives  from the OTCBB and any other  exchanges
or  quotation  systems on which the Common  Stock is then listed  regarding  the
continued  eligibility  of the Common  Stock for listing on such  exchanges  and
quotation systems.

                     j.  Corporate  Existence.  So long as a Buyer  beneficially
owns any Notes or Warrants,  the Company shall maintain its corporate  existence
and shall not sell all or substantially all of the Company's  assets,  except in
the event of a merger or consolidation  or sale of all or  substantially  all of
the  Company's  assets,   where  the  surviving  or  successor  entity  in  such
transaction  (i)  assumes  the  Company's  obligations  hereunder  and under the
agreements  and  instruments  entered into in connection  herewith and (ii) is a
publicly  traded  corporation  whose  Common  Stock is listed for trading on the
OTCBB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX.

                     k. No Integration. 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
1933 Act or cause the offering of the Securities to be integrated with any other
offering  of  securities  by the  Company  for the  purpose  of any  stockholder
approval provision applicable to the Company or its securities.

                     l.  Key Man  Insurance.  The  Company  shall  use its  best
efforts to obtain, on or before five (5) business days from the date hereof, key
man life insurance on all of the Company's key executive officers.

                     m.  Restriction  on Short Sales.  The Buyers agree that, so
long as any of the Notes remain  outstanding,  but in no event less than two (2)
years from the date hereof,  the Buyers will not enter into or effect any "short
sales"  (as such term is  defined  in Rule  3b-3 of the 1934 Act) of the  Common
Stock or hedging transaction which establishes a net short position with respect
to the Common Stock.

                     n. Breach of Covenants.  If the Company breaches any of the
covenants  set forth in this  Section 4, and in addition  to any other  remedies
available to the Buyers pursuant to this Agreement, the Company shall pay to the
Buyers the Standard  Liquidated  Damages Amount,  in cash or in shares of Common
Stock at the option of the Company,  until such breach is cured.  If the Company
elects to pay the  Standard  Liquidated  Damages  Amount in shares,  such shares
shall be issued at the Conversion Price at the time of payment.

              5.   TRANSFER   AGENT   INSTRUCTIONS.   The  Company  shall  issue
irrevocable instructions to its transfer agent to issue certificates, registered
in the name of each Buyer or its nominee,  for the Conversion Shares and Warrant
Shares in such  amounts  as  specified  from  time to time by each  Buyer to the
Company upon  conversion  of the Notes or exercise of the Warrants in accordance

                                       17
<PAGE>

with the terms thereof (the "Irrevocable Transfer Agent Instructions"). Prior to
registration  of the Conversion  Shares and Warrant Shares under the 1933 Act or
the date on which the Conversion  Shares and Warrant Shares may be sold pursuant
to Rule 144  without  any  restriction  as to the number of  Securities  as of a
particular date that can then be immediately sold, all such  certificates  shall
bear the restrictive  legend  specified in Section 2(g) of this  Agreement.  The
Company warrants that no instruction  other than the Irrevocable  Transfer Agent
Instructions  referred to in this Section 5, and stop transfer  instructions  to
give  effect to Section  2(f) hereof (in the case of the  Conversion  Shares and
Warrant  Shares,  prior to  registration  of the  Conversion  Shares and Warrant
Shares under the 1933 Act or the date on which the Conversion Shares and Warrant
Shares may be sold pursuant to Rule 144 without any restriction as to the number
of Securities as of a particular date that can then be immediately  sold),  will
be given by the  Company to its  transfer  agent and that the  Securities  shall
otherwise be freely  transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration  Rights Agreement.
Nothing in this  Section  shall  affect in any way the Buyer's  obligations  and
agreement  set  forth in  Section  2(g)  hereof to  comply  with all  applicable
prospectus delivery requirements,  if any, upon re-sale of the Securities.  If a
Buyer provides the Company with (i) an opinion of counsel in form, substance and
scope  customary for opinions in comparable  transactions,  to the effect that a
public sale or  transfer of such  Securities  may be made  without  registration
under  the 1933 Act and such  sale or  transfer  is  effected  or (ii) the Buyer
provides reasonable  assurances that the Securities can be sold pursuant to Rule
144, the Company shall permit the transfer,  and, in the case of the  Conversion
Shares and Warrant Shares,  promptly instruct its transfer agent to issue one or
more  certificates,  free  from  restrictive  legend,  in such  name and in such
denominations as specified by such Buyer. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the Buyers, 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 under this Section 5 may be inadequate and agrees, in the event of a
breach or  threatened  breach by the Company of the  provisions of this Section,
that the Buyers shall be entitled,  in addition to all other available remedies,
to an  injunction  restraining  any breach  and  requiring  immediate  transfer,
without the  necessity  of showing  economic  loss and without any bond or other
security being required.

              6. CONDITIONS TO THE COMPANY'S  OBLIGATION TO SELL. The obligation
of the Company  hereunder to issue and sell the Notes and Warrants to a Buyer at
the Closing is subject to the  satisfaction,  at or before the  Closing  Date of
each of the following conditions thereto, provided that these conditions are for
the  Company's  sole benefit and may be waived by the Company at any time in its
sole discretion:

                     a. The applicable  Buyer shall have executed this Agreement
and the Registration Rights Agreement, and delivered the same to the Company.

                     b. The  applicable  Buyer shall have delivered the Purchase
Price in accordance with Section 1(b) above.

                     c. The  representations  and  warranties of the  applicable
Buyer  shall be true and  correct in all  material  respects as of the date when
made  and as of the  Closing  Date  as  though  made at that  time  (except  for

                                       18
<PAGE>

representations  and  warranties  that  speak as of a  specific  date),  and the
applicable  Buyer shall have  performed,  satisfied and complied in all material
respects  with  the  covenants,  agreements  and  conditions  required  by  this
Agreement to be performed, satisfied or complied with by the applicable Buyer at
or prior to the Closing Date.

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

              7.  CONDITIONS  TO  EACH  BUYER'S  OBLIGATION  TO  PURCHASE.   The
obligation  of each Buyer  hereunder  to purchase  the Notes and Warrants at the
Closing is subject to the satisfaction, at or before the Closing Date of each of
the following  conditions,  provided that these  conditions are for such Buyer's
sole benefit and may be waived by such Buyer at any time in its sole discretion:

                     a. The Company shall have  executed this  Agreement and the
Registration Rights Agreement, and delivered the same to the Buyer.

                     b. The  Company  shall  have  delivered  to such Buyer duly
executed Notes (in such  denominations  as the Buyer shall request) and Warrants
in accordance with Section 1(b) above.

                     c. The Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to a majority-in-interest  of the Buyers, shall have been
delivered to and acknowledged in writing by the Company's Transfer Agent.

                     d. The  representations and warranties of the Company shall
be true and correct in all material  respects as of the date when made and as of
the Closing  Date as though made at such time  (except for  representations  and
warranties  that  speak  as of a  specific  date)  and the  Company  shall  have
performed,  satisfied and complied in all material  respects 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. The Buyer shall
have received a certificate  or  certificates,  executed by the chief  executive
officer of the Company,  dated as of the Closing Date,  to the foregoing  effect
and as to such  other  matters  as may be  reasonably  requested  by such  Buyer
including,  but not  limited  to  certificates  with  respect  to the  Company's
Certificate  of  Incorporation,  By-laws  and  Board of  Directors'  resolutions
relating to the transactions contemplated hereby.

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

                     f. No event shall have occurred  which could  reasonably be
expected to have a Material Adverse Effect on the Company.

                                       19
<PAGE>

                     g. The Conversion Shares and Warrant Shares shall have been
authorized  for  quotation  on the OTCBB and trading in the Common  Stock on the
OTCBB shall not have been suspended by the SEC or the OTCBB.

                     h.  The  Buyer  shall  have  received  an  opinion  of  the
Company's  counsel,  dated as of the Closing Date, in form,  scope and substance
reasonably  satisfactory  to the  Buyer  and in  substantially  the same form as
Exhibit "D" attached hereto.

                     i. The Buyer shall have  received an officer's  certificate
described in Section 3(c) above, dated as of the Closing Date.

              8. GOVERNING LAW; MISCELLANEOUS.

                     a.  Governing  Law.  THIS  AGREEMENT   SHALL  BE  ENFORCED,
GOVERNED BY AND CONSTRUED IN  ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS  MADE AND TO BE PERFORMED  ENTIRELY  WITHIN SUCH STATE,
WITHOUT  REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED
IN NEW YORK, NEW YORK WITH RESPECT TO ANY DISPUTE  ARISING UNDER THIS AGREEMENT,
THE  AGREEMENTS  ENTERED  INTO  IN  CONNECTION   HEREWITH  OR  THE  TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN
INCONVENIENT  FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING.  BOTH PARTIES
FURTHER  AGREE THAT SERVICE OF PROCESS UPON A PARTY MAILED BY  REGISTERED  FIRST
CLASS MAIL SHALL BE DEEMED IN EVERY  RESPECT  EFFECTIVE  SERVICE OF PROCESS UPON
THE PARTY IN ANY SUCH SUIT OR  PROCEEDING.  NOTHING  HEREIN SHALL AFFECT  EITHER
PARTY'S  RIGHT TO SERVE  PROCESS  IN ANY OTHER  MANNER  PERMITTED  BY LAW.  BOTH
PARTIES  AGREE  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.  THE PARTY WHICH DOES NOT
PREVAIL IN ANY DISPUTE ARISING UNDER THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL
FEES  AND  EXPENSES,  INCLUDING  REASONABLE  ATTORNEYS'  FEES,  INCURRED  BY THE
PREVAILING PARTY IN CONNECTION WITH SUCH DISPUTE.

                     b.  Counterparts;  Signatures by Facsimile.  This Agreement
may be  executed in one or more  counterparts,  each of which shall be deemed an
original but all of which shall  constitute 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 party hereto by facsimile  transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.

                     c.  Headings.  The  headings  of  this  Agreement  are  for
convenience  of  reference  only and  shall  not form  part of,  or  affect  the
interpretation of, this Agreement.

                                       20
<PAGE>

                     d.  Severability.  In the event that any  provision of this
Agreement is invalid or  unenforceable  under any applicable  statute or rule of
law, then such provision  shall be deemed  inoperative to the extent that it may
conflict  therewith and shall be deemed modified to conform with such statute or
rule of law. Any provision hereof which may prove invalid or unenforceable under
any law shall not affect the validity or  enforceability  of any other provision
hereof.

                     e. Entire  Agreement;  Amendments.  This  Agreement and the
instruments  referenced  herein contain the entire  understanding of the parties
with  respect  to  the  matters  covered  herein  and  therein  and,  except  as
specifically  set forth  herein or  therein,  neither  the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters.  No provision of this  Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.

                     f. Notices.  Any notices  required or permitted to be given
under the terms of this Agreement  shall be sent by certified or registered mail
(return receipt  requested) or delivered  personally or by courier  (including a
recognized  overnight  delivery  service) or by facsimile and shall be effective
five days after being  placed in the mail,  if mailed by regular  United  States
mail,  or upon  receipt,  if  delivered  personally  or by courier  (including a
recognized  overnight delivery service) or by facsimile,  in each case addressed
to a party. The addresses for such communications shall be:

                           If to the Company:

                           Paradigm Medical Industries, Inc.
                           2355 South 1070 West
                           Salt Lake City, UT 84119
                           Attention: Chief Executive Officer
                           Telephone:       (801) 977-8970
                           Facsimile:       (801) 977-8973

                           With a copy to:

                           Mackey Price Thompson & Ostler
                           350 American Plaza II
                           57 West 200 South
                           Salt Lake City, UT 84101
                           Attention:   Randall A. Mackey, Esq.
                           Telephone:  (801) 575-5000
                           Facsimile:   (801) 575-5006

                     If to a Buyer: To the address set forth  immediately  below
such Buyer's name on the signature pages hereto.

                                       21
<PAGE>

                                    With copy to:

                                    Ballard Spahr Andrews & Ingersoll, LLP
                                    1735 Market Street
                                    51st Floor
                                    Philadelphia, Pennsylvania  19103
                                    Attention:  Gerald J. Guarcini, Esq.
                                    Telephone:  215-864-8625
                                    Facsimile:  215-864-8999

         Each party  shall  provide  notice to the other  party of any change in
address.

                     g. Successors and Assigns.  This Agreement shall be binding
upon and inure to the benefit of the parties and their  successors  and assigns.
Neither the Company nor any Buyer shall  assign this  Agreement or any rights or
obligations   hereunder   without  the  prior  written  consent  of  the  other.
Notwithstanding the foregoing, subject to Section 2(f), any Buyer may assign its
rights  hereunder  to  any  person  that  purchases   Securities  in  a  private
transaction from a Buyer or to any of its  "affiliates," as that term is defined
under the 1934 Act, without the consent of the Company.

                     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
shall  survive  the  closing   hereunder   notwithstanding   any  due  diligence
investigation  conducted  by or on behalf of the Buyers.  The Company  agrees to
indemnify  and  hold  harmless  each  of the  Buyers  and  all  their  officers,
directors,  employees  and agents  for loss or damage  arising as a result of or
related  to  any  breach  or  alleged  breach  by  the  Company  of  any  of its
representations,  warranties  and covenants set forth in Sections 3 and 4 hereof
or any of its covenants and obligations under this Agreement or the Registration
Rights Agreement, including advancement of expenses as they are incurred.

                     j. Publicity. The Company and each of the Buyers shall have
the right to review a  reasonable  period of time  before  issuance of any press
releases,  SEC,  OTCBB or 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 each of the Buyers, to
make any press release or SEC,  OTCBB (or other  applicable  trading  market) or
NASD filings with respect to such  transactions as is required by applicable law
and  regulations  (although each of the Buyers shall be consulted by the Company
in  connection  with any such press  release  prior to its  release and shall be
provided with a copy thereof and be given an opportunity to comment thereon).

                     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

                                       22
<PAGE>

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

                     m. Remedies.  The Company  acknowledges that a breach by it
of its  obligations  hereunder  will  cause  irreparable  harm to the  Buyers by
vitiating  the  intent  and  purpose  of the  transaction  contemplated  hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations  under this Agreement will be inadequate and agrees, in the event of
a  breach  or  threatened  breach  by the  Company  of the  provisions  of  this
Agreement, that the Buyers shall be entitled, in addition to all other available
remedies  at law or in  equity,  and in  addition  to the  penalties  assessable
herein,  to an injunction or injunctions  restraining,  preventing or curing any
breach of this  Agreement and to enforce  specifically  the terms and provisions
hereof,  without the necessity of showing  economic loss and without any bond or
other security being required.

                                       23
<PAGE>

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

PARADIGM MEDICAL INDUSTRIES, INC.

 /s/ Raymond P.L. Cannefax
--------------------------
Raymond P.L. Cannefax
President and Chief Executive Officer

AJW PARTNERS, LLC
By:  SMS Group, LLC

/s/ Corey S. Ribotsky
---------------------
Corey S. Ribotsky
Manager

RESIDENCE:  Delaware

ADDRESS: 1044 Northern Boulevard
                  Suite 302
                  Roslyn, New York 11576
                  Facsimile:  (516) 739-7115
                  Telephone:  (516) 739-7110

AGGREGATE SUBSCRIPTION AMOUNT:

         Aggregate Principal Amount of Notes:                       $________
         Number of Warrants:                                         ________
         Aggregate Purchase Price:                                  $________

                                       24
<PAGE>

AJW MASTER FUND, LTD.
By:  First Street Manager II, LLC

/s/ Corey S. Ribotsky
---------------------
Corey S. Ribotsky
Manager

RESIDENCE:        Cayman Islands

ADDRESS:          AJW Offshore, Ltd.
                  P.O. Box 32021 SMB
                  Grand Cayman, Cayman Island, B.W.I.

AGGREGATE SUBSCRIPTION AMOUNT:

         Aggregate Principal Amount of Notes:                        $_______
         Number of Warrants:                                          _______
         Aggregate Purchase Price:                                   $_______

                                       25
<PAGE>

NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By:  First Street Manager II, LLP

/s/ Corey S. Ribotsky
---------------------
Corey S. Ribotsky
Manager

RESIDENCE:            New York

ADDRESS: 1044 Northern Boulevard
                  Suite 302
                  Roslyn, New York  11576
                  Facsimile:        (516) 739-7115
                  Telephone:        (516) 739-7110

AGGREGATE SUBSCRIPTION AMOUNT:

         Aggregate Principal Amount of Notes:                       $______
         Number of Warrants:                                         ______
         Aggregate Purchase Price:                                  $______

                                       26

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