Document:

NOTE AND WARRANT PURCHASE

                                    AGREEMENT

                          Dated as of February 13, 2006

                                  by and among

                             FINANCIALCONTENT, INC.

                                       and

                       THE PURCHASERS LISTED ON EXHIBIT A

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<TABLE>
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                                TABLE OF CONTENTS

                                                                                                                Page
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ARTICLE I           Purchase and Sale of Notes and Warrants.......................................................1
         Section 1.1          Purchase and Sale of Notes and Warrants.............................................1
         Section 1.2          Purchase Price and Closing..........................................................1
         Section 1.3          Conversion Shares / Warrant Shares..................................................2

ARTICLE II          Representations and Warranties................................................................2
         Section 2.1          Representations and Warranties of the Company.......................................2
         Section 2.2          Representations and Warranties of the Purchasers...................................13

ARTICLE III         Covenants....................................................................................15
         Section 3.1          Securities Compliance..............................................................15
         Section 3.2          Registration and Listing...........................................................15
         Section 3.3          Inspection Rights..................................................................16
         Section 3.4          Compliance with Laws...............................................................16
         Section 3.5          Keeping of Records and Books of Account............................................16
         Section 3.6          Reporting Requirements.............................................................16
         Section 3.7          Other Agreements...................................................................17
         Section 3.8          Use of Proceeds....................................................................17
         Section 3.9          Reporting Status...................................................................17
         Section 3.10         Disclosure of Transaction..........................................................17
         Section 3.11         Disclosure of Material Information.................................................18
         Section 3.12         Pledge of Securities...............................................................18
         Section 3.13         Amendments.........................................................................18
         Section 3.14         Distributions......................................................................18
         Section 3.15         Reservation of Shares..............................................................18
         Section 3.16         Transfer Agent Instructions........................................................18
         Section 3.17         Disposition of Assets..............................................................19
         Section 3.18         Form SB-2 Eligibility..............................................................19
         Section 3.19         Subsequent Financings..............................................................19

ARTICLE IV          Conditions...................................................................................20
         Section 4.1          Conditions Precedent to the Obligation of the Company to Close and to Sell the
                              Securities.........................................................................20
         Section 4.2          Conditions Precedent to the Obligation of the Purchasers to Close and to Purchase the
                              Securities.........................................................................21

ARTICLE V           Certificate Legend...........................................................................23
         Section 5.1          Legend.............................................................................24

ARTICLE VI          Indemnification..............................................................................24
         Section 6.1          General Indemnity..................................................................24
         Section 6.2          Indemnification Procedure..........................................................25

ARTICLE VII         Miscellaneous................................................................................26
         Section 7.1          Fees and Expenses..................................................................26
         Section 7.2          Specific Performance; Consent to Jurisdiction; Venue...............................26
         Section 7.3          Entire Agreement; Amendment........................................................26
         Section 7.4          Notices............................................................................27
         Section 7.5          Waivers............................................................................28
         Section 7.6          Headings...........................................................................28
         Section 7.7          Successors and Assigns.............................................................28
         Section 7.8          No Third Party Beneficiaries.......................................................28
         Section 7.9          Governing Law......................................................................28
         Section 7.10         Survival...........................................................................28
         Section 7.11         Counterparts.......................................................................28
         Section 7.12         Publicity..........................................................................28
         Section 7.13         Severability.......................................................................29
         Section 7.14         Further Assurances.................................................................29
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<PAGE>
                       NOTE AND WARRANT PURCHASE AGREEMENT

         This NOTE AND WARRANT PURCHASE  AGREEMENT dated as of February 13, 2006
(this "Agreement") by and among  FinancialContent,  Inc., a Delaware corporation
(the  "Company"),  and each of the purchasers of the senior secured  convertible
promissory  notes of the Company whose names are set forth on Exhibit A attached
hereto (each a "Purchaser" and collectively, the "Purchasers").

         The parties hereto agree as follows:

                                   ARTICLE I

                     PURCHASE AND SALE OF NOTES AND WARRANTS

Section 1.1       Purchase and Sale of Notes and Warrants.
                  ---------------------------------------

(a) Upon the following terms and conditions, the Company shall issue and sell to
the  Purchasers,  and the  Purchasers  shall  purchase from the Company,  senior
secured  convertible  promissory notes in the aggregate  principal amount of One
Million Dollars  ($1,000,000)  bearing interest at the rate of nine percent (9%)
per annum,  convertible  into shares of the Company's  common stock,  $0.001 par
value per share (the "Common Stock"),  in substantially the form attached hereto
as Exhibit B (the  "Notes").  The Company and the  Purchasers  are executing and
delivering  this Agreement in accordance with and in reliance upon the exemption
from securities registration afforded by Section 4(2) of the U.S. Securities Act
of 1933, as amended, and the rules and regulations  promulgated  thereunder (the
"Securities  Act"),  including  Regulation D ("Regulation  D"), and/or upon such
other exemption from the registration  requirements of the Securities Act as may
be available with respect to any or all of the investments to be made hereunder.

(b) Upon the following terms and conditions,  the Purchasers shall be issued (i)
Series A Warrants,  in substantially  the form attached hereto as Exhibit C (the
"Series A Warrants"), to purchase the number of shares of Common Stock set forth
opposite such Purchaser's name on Exhibit A attached hereto at an exercise price
per share equal to $1.00 and (ii) Series B Warrants,  in substantially  the form
attached  hereto as Exhibit D (the "Series B Warrants"  and,  together  with the
Series A Warrants,  the "Warrants"),  to purchase the number of shares of Common
Stock set forth opposite such  Purchaser's  name on Exhibit A attached hereto at
an exercise price per share equal to $1.25.  Each Purchaser shall be entitled to
receive  Series A Warrants  and Series B Warrants to purchase a number of shares
of Common Stock equal to  twenty-five  percent  (25%) of the number of shares of
Common Stock  issuable upon  conversion of such  Purchaser's  Note. The Warrants
shall expire five (5) years following the issuance thereof.

Section   1.2       Purchase  Price  and  Closing.  Subject  to  the  terms  and
conditions  hereof,  the Company agrees to issue and sell to the Purchasers and,
in  consideration   of  and  in  express  reliance  upon  the   representations,
warranties,  covenants,  terms and conditions of this Agreement, the Purchasers,

                                      -1-
<PAGE>

severally  but not  jointly,  agree to purchase  the Notes and  Warrants  for an
aggregate  purchase  price of One Million  Dollars  ($1,000,000)  (the "Purchase
Price").  The  Notes and  Warrants  shall be sold and  funded in three  separate
closings  (each,  a "Closing").  The initial  Closing under this  Agreement (the
"Initial  Closing") shall take place on or about February 13, 2006 (the "Initial
Closing Date") and shall be funded in the amount of Three Hundred Fifty Thousand
Dollars  ($350,000).  The second  Closing  under  this  Agreement  (the  "Second
Closing")  shall take place no later than five (5) business  days after the date
that the Company files the registration statement (the "Registration Statement")
with the Securities and Exchange Commission (the "Commission") providing for the
resale of the  Conversion  Shares (as defined  below) and the Warrant Shares (as
defined below) (the "Second  Closing Date") and shall be funded in the amount of
Three Hundred Fifty Thousand  Dollars  ($350,000).  The final Closing under this
Agreement (the "Final Closing") shall take place no later than five (5) business
days after the Commission  declares the  Registration  Statement  effective (the
"Final  Closing  Date")  and  shall be funded  in the  amount  of Three  Hundred
Thousand Dollars  ($300,000).  The Initial Closing Date, the Second Closing Date
and the Final  Closing Date are sometimes  referred to in this  Agreement as the
"Closing Date".  Each Closing of the purchase and sale of the Notes and Warrants
to be acquired by the  Purchasers  from the Company under this  Agreement  shall
take place at the offices of Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of
the Americas,  New York, New York 10036 at 10:00 a.m., New York time;  provided,
that all of the conditions set forth in Article IV hereof and applicable to each
Closing shall have been fulfilled or waived in accordance  herewith.  Subject to
the terms and conditions of this Agreement,  at each Closing,  the Company shall
deliver  or  cause  to be  delivered  to each  Purchaser  (x) its  Note  for the
principal  amount set forth  opposite  the name of such  Purchaser  on Exhibit A
hereto,  (y) a Series A Warrant and Series B Warrant to purchase  such number of
shares of Common Stock as is set forth  opposite  the name of such  Purchaser on
Exhibit A attached  hereto and (z) any other  deliveries  as required by Article
IV. At each Closing,  each  Purchaser  shall deliver its Purchase  Price by wire
transfer to an account designated by the Company.

Section 1.3       Conversion Shares / Warrant Shares. The Company has authorized
and has reserved and covenants to continue to reserve, free of preemptive rights
and other similar contractual rights of stockholders, a number of its authorized
but unissued shares of Common Stock equal to one hundred fifty percent (150%) of
the aggregate  number of shares of Common Stock to effect the  conversion of the
Notes and any  interest  accrued and  outstanding  thereon  and  exercise of the
Warrants  as of the  Closing  Date.  Any shares of Common  Stock  issuable  upon
conversion of the Notes and any interest  accrued and  outstanding  on the Notes
are herein  referred to as the "Conversion  Shares".  Any shares of Common Stock
issuable  upon exercise of the Warrants (and such shares when issued) are herein
referred to as the "Warrant  Shares".  The Notes,  the Warrants,  the Conversion
Shares and the Warrant Shares are sometimes  collectively  referred to herein as
the "Securities".

                                   ARTICLE II

                         REPRESENTATIONS AND WARRANTIES

Section  2.1       Representations  and  Warranties of the Company.  The Company
hereby represents and warrants to the Purchasers, as of the date hereof and each
Closing Date (except as set forth on the Schedule of Exceptions  attached hereto
with each numbered  Schedule  corresponding  to the section number  herein),  as
follows:
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<PAGE>

(a)  Organization,  Good Standing and Power.  The Company is a corporation  duly
incorporated,  validly existing and in good standing under the laws of the State
of Delaware and has the requisite  corporate power to own, lease and operate its
properties and assets and to conduct its business as it is now being  conducted.
The Company does not have any Subsidiaries (as defined in Section 2.1(g)) or own
securities  of any kind in any other  entity  except  as set  forth on  Schedule
2.1(g) hereto.  Except as set forth on Schedule  2.1(g) hereto,  the Company and
each such  Subsidiary  (as  defined in Section  2.1(g)) is duly  qualified  as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification  necessary  except  for  any  jurisdiction(s)  (alone  or  in  the
aggregate)  in which the  failure  to be so  qualified  will not have a Material
Adverse Effect.  For the purposes of this Agreement,  "Material  Adverse Effect"
means any  material  adverse  effect on the  business,  operations,  properties,
prospects, or financial condition of the Company and its Subsidiaries and/or any
condition,   circumstance,   or  situation  that  would  prohibit  or  otherwise
materially  interfere  with the  ability of the  Company  to perform  any of its
obligations under this Agreement in any material respect.

(b) Authorization;  Enforcement.  The Company has the requisite  corporate power
and authority to enter into and perform this Agreement, the Notes, the Warrants,
the  Registration  Rights Agreement by and among the Company and the Purchasers,
dated as of the date  hereof,  substantially  in the form of  Exhibit E attached
hereto (the  "Registration  Rights  Agreement"),  the Security  Agreement by and
among the Company and the Purchasers, dated as of the date hereof, substantially
in the form of Exhibit F attached  hereto (the  "Security  Agreement"),  and the
Irrevocable  Transfer  Agent  Instructions  (as defined in Section  3.16 hereof)
(collectively, the "Transaction Documents") and to issue and sell the Securities
in accordance with the terms hereof. The execution,  delivery and performance of
the  Transaction  Documents  by the  Company and the  consummation  by it of the
transactions  contemplated  thereby have been duly and validly authorized by all
necessary  corporate  action,  and, except as set forth on Schedule  2.1(b),  no
further  consent or  authorization  of the  Company,  its Board of  Directors or
stockholders  is required.  When executed and delivered by the Company,  each of
the Transaction Documents shall constitute a valid and binding obligation of the
Company  enforceable against the Company in accordance with its terms, except as
such  enforceability  may be limited by applicable  bankruptcy,  reorganization,
moratorium, liquidation, conservatorship,  receivership or similar laws relating
to, or affecting generally the enforcement of, creditor's rights and remedies or
by other equitable principles of general application.

(c) Capitalization.  The authorized capital stock and the issued and outstanding
shares of capital  stock of the  Company  as of the date  hereof is set forth on
Schedule 2.1(c) hereto.  All of the  outstanding  shares of the Common Stock and
any other  outstanding  security  of the  Company  have  been  duly and  validly
authorized.  Except as set forth in this Agreement, the Commission Documents (as
defined in Section 2.1(f)) or as set forth on Schedule 2.1(c) hereto,  no shares
of Common Stock or any other  security of the Company are entitled to preemptive
rights or registration  rights and there are no outstanding  options,  warrants,

                                      -3-
<PAGE>

scrip,  rights to subscribe to, call or commitments of any character  whatsoever
relating to, or securities  or rights  convertible  into,  any shares of capital
stock of the Company. Furthermore,  except as set forth in this Agreement and as
set  forth on  Schedule  2.1(c)  hereto,  there are no  contracts,  commitments,
understandings,  or  arrangements by which the Company is or may become bound to
issue  additional  shares  of the  capital  stock  of the  Company  or  options,
securities  or rights  convertible  into shares of capital stock of the Company.
Except for customary transfer restrictions  contained in agreements entered into
by the Company in order to sell restricted securities or as provided on Schedule
2.1(c)  hereto,  the  Company  is not a party to or bound  by any  agreement  or
understanding  granting  registration or anti-dilution rights to any person with
respect to any of its equity or debt securities. Except as set forth on Schedule
2.1(c), the Company is not a party to, and it has no knowledge of, any agreement
or understanding restricting the voting or transfer of any shares of the capital
stock of the Company.

(d)  Issuance  of  Securities.  The Notes and the  Warrants to be issued at each
Closing have been duly  authorized by all necessary  corporate  action and, when
paid for or  issued in  accordance  with the terms  hereof,  the Notes  shall be
validly issued and  outstanding,  free and clear of all liens,  encumbrances and
rights of refusal of any kind. When the Conversion Shares and Warrant Shares are
issued and paid for in  accordance  with the terms of this  Agreement and as set
forth in the Notes and  Warrants,  such  shares will be duly  authorized  by all
necessary  corporate action and validly issued and  outstanding,  fully paid and
nonassessable,  free and clear of all liens,  encumbrances and rights of refusal
of any kind and the holders shall be entitled to all rights accorded to a holder
of Common Stock.

(e) No Conflicts.  The execution,  delivery and  performance of the  Transaction
Documents  by the Company,  the  performance  by the Company of its  obligations
under  the  Notes  and  the  consummation  by the  Company  of the  transactions
contemplated  hereby  and  thereby,  and  the  issuance  of  the  Securities  as
contemplated  hereby,  do not and  will not (i)  violate  or  conflict  with any
provision of the Company's  Certificate of Incorporation (the  "Certificate") or
Bylaws (the "Bylaws"),  each as amended to date, or any Subsidiary's  comparable
charter  documents,  (ii)  conflict  with,  or constitute a default (or an event
which with  notice or lapse of time or both would  become a default)  under,  or
give  to  others  any  rights  of   termination,   amendment,   acceleration  or
cancellation of, any agreement,  mortgage, deed of trust, indenture, note, bond,
license,  lease agreement,  instrument or obligation to which the Company or any
of  its  Subsidiaries  is a  party  or by  which  the  Company  or  any  of  its
Subsidiaries'  respective  properties or assets are bound,  or (iii) result in a
violation of any federal,  state,  local or foreign statute,  rule,  regulation,
order,  judgment  or decree  (including  federal and state  securities  laws and
regulations)  applicable to the Company or any of its  Subsidiaries  or by which
any  property  or asset of the Company or any of its  Subsidiaries  are bound or
affected,  except,  in all cases,  for such conflicts,  defaults,  terminations,
amendments,   acceleration,   cancellations   and   violations   as  would  not,
individually  or in the  aggregate,  have a Material  Adverse Effect (other than
violations  pursuant to clauses (i) or (iii) (with  respect to federal and state
securities  laws)).  Neither the Company nor any of its Subsidiaries is required
under  federal,  state,  foreign or local law,  rule or regulation to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute,  deliver or perform any
of its  obligations  under  the  Transaction  Documents  or  issue  and sell the
Securities in accordance with the terms hereof (other than any filings, consents
and approvals  which may be required to be made by the Company under  applicable
state and federal  securities  laws,  rules or regulations  or any  registration
provisions provided in the Registration Rights Agreement).

                                      -4-
<PAGE>

(f) Commission Documents,  Financial Statements. The Common Stock of the Company
is registered  pursuant to Section 12(b) or 12(g) of the Securities Exchange Act
of 1934, as amended (the  "Exchange  Act"),  and except as set forth on Schedule
2.1(f)  hereto,  the Company has timely  filed all  reports,  schedules,  forms,
statements  and other  documents  required to be filed by it with the Commission
pursuant to the reporting requirements of the Exchange Act (all of the foregoing
including filings  incorporated by reference therein being referred to herein as
the "Commission  Documents").  Except as set forth on Schedule 2.1(f) hereto, at
the times of their respective  filings,  the Form 10-QSB for the fiscal quarters
ended  September 30, 2005,  March 31, 2005 and December 31, 2004  (collectively,
the "Form  10-QSB")  and the Form 10-KSB for the fiscal year ended June 30, 2005
(the "Form 10-KSB")  complied in all material  respects with the requirements of
the Exchange Act and the rules and  regulations  of the  Commission  promulgated
thereunder  and  other  federal,  state and local  laws,  rules and  regulations
applicable  to such  documents,  and the Form  10-QSB  and Form  10-KSB  did not
contain any untrue statement of a material fact or omit 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. As of their respective dates, except as set forth on Schedule 2.1(f)
hereto,  the  financial  statements  of the Company  included in the  Commission
Documents  complied  as  to  form  in  all  material  respects  with  applicable
accounting   requirements  and  the  published  rules  and  regulations  of  the
Commission or other applicable rules and regulations with respect thereto.  Such
financial  statements have been prepared in accordance  with generally  accepted
accounting  principles ("GAAP") applied on a consistent basis 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 financial position
of the Company and its  Subsidiaries  as of the dates thereof and the results of
operations  and cash flows for the periods then ended  (subject,  in the case of
unaudited statements, to normal year-end audit adjustments).

(g)  Subsidiaries.  Schedule  2.1(g)  hereto sets forth each  Subsidiary  of the
Company,  showing the  jurisdiction of its  incorporation  or  organization  and
showing the percentage of each person's  ownership of the  outstanding  stock or
other  interests  of such  Subsidiary.  For  the  purposes  of  this  Agreement,
"Subsidiary"  shall  mean any  corporation  or other  entity of which at least a
majority of the securities or other  ownership  interest  having ordinary voting
power  (absolutely  or  contingently)  for the  election of  directors  or other
persons  performing  similar  functions  are  at  the  time  owned  directly  or
indirectly  by the  Company  and/or  any of its other  Subsidiaries.  All of the
outstanding shares of capital stock of each Subsidiary have been duly authorized
and validly issued, and are fully paid and nonassessable. Except as set forth on
Schedule 2.1(g) hereto, there are no outstanding preemptive, conversion or other
rights, options, warrants or agreements granted or issued by or binding upon any
Subsidiary for the purchase or acquisition of any shares of capital stock of any
Subsidiary  or  any  other  securities  convertible  into,  exchangeable  for or
evidencing the rights to subscribe for any shares of such capital stock. Neither
the Company  nor any  Subsidiary  is subject to any  obligation  (contingent  or
otherwise)  to  repurchase  or  otherwise  acquire  or retire  any shares of the
capital stock of any Subsidiary or any convertible securities,  rights, warrants
or options of the type described in the preceding  sentence  except as set forth
on Schedule  2.1(g) hereto.  Neither the Company nor any Subsidiary is party to,
nor has any knowledge of, any  agreement  restricting  the voting or transfer of
any shares of the capital stock of any Subsidiary.

                                      -5-
<PAGE>

(h) No  Material  Adverse  Change.  Since June 30,  2005,  the  Company  has not
experienced  or suffered any  Material  Adverse  Effect,  except as disclosed on
Schedule 2.1(h) hereto.

(i) No Undisclosed  Liabilities.  Except as disclosed on Schedule 2.1(i) hereto,
neither the Company nor any of its  Subsidiaries  has incurred any  liabilities,
obligations,  claims or losses (whether  liquidated or unliquidated,  secured or
unsecured, absolute, accrued, contingent or otherwise) other than those incurred
in  the  ordinary  course  of  the  Company's  or  its  Subsidiaries  respective
businesses or which, individually or in the aggregate, are not reasonably likely
to have a Material Adverse Effect.

(j) No  Undisclosed  Events or  Circumstances.  Since June 30,  2005,  except as
disclosed on Schedule 2.1(j) hereto,  no event or  circumstance  has occurred or
exists  with  respect to the  Company or its  Subsidiaries  or their  respective
businesses,  properties,  prospects,  operations or financial condition,  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.

(k)  Indebtedness.  Schedule  2.1(k) hereto sets forth as of the date hereof all
outstanding secured and unsecured Indebtedness of the Company or any Subsidiary,
or for which the Company or any Subsidiary has commitments.  For the purposes of
this Agreement, "Indebtedness" shall mean (a) any liabilities for borrowed money
or  amounts  owed in excess of  $100,000  (other  than  trade  accounts  payable
incurred in the ordinary course of business),  (b) all guaranties,  endorsements
and other contingent  obligations in respect of Indebtedness of others,  whether
or not the same are or should be reflected in the  Company's  balance  sheet (or
the notes thereto),  except guaranties by endorsement of negotiable  instruments
for deposit or  collection  or similar  transactions  in the ordinary  course of
business;  and (c) the present value of any lease  payments in excess of $25,000
due under leases required to be capitalized in accordance with GAAP. Neither the
Company nor any Subsidiary is in default with respect to any Indebtedness.

(l) Title to Assets. Each of the Company and the Subsidiaries has good and valid
title to all of its real  and  personal  property  reflected  in the  Commission
Documents,  free and clear of any mortgages,  pledges,  charges, liens, security
interests or other  encumbrances,  except for those indicated on Schedule 2.1(l)
hereto or such that,  individually or in the aggregate,  do not cause a Material
Adverse Effect. Any leases of the Company and each of its Subsidiaries are valid
and subsisting and in full force and effect.

(m)  Actions  Pending.   There  is  no  action,   suit,  claim,   investigation,
arbitration, alternate dispute resolution proceeding or other proceeding pending
or, to the  knowledge  of the  Company,  threatened  against  the Company or any
Subsidiary  which  questions the validity of this  Agreement or any of the other
Transaction Documents or any of the transactions  contemplated hereby or thereby
or any action  taken or to be taken  pursuant  hereto or thereto.  Except as set
forth in the  Commission  Documents or on Schedule  2.1(m)  hereto,  there is no
action, suit, claim,  investigation,  arbitration,  alternate dispute resolution
proceeding  or other  proceeding  pending or, to the  knowledge  of the Company,
threatened  against or involving  the Company,  any  Subsidiary  or any of their
respective  properties or assets, which individually or in the aggregate,  would
reasonably  be expected,  if adversely  determined,  to have a Material  Adverse
Effect.  There are no  outstanding  orders,  judgments,  injunctions,  awards or

                                      -6-
<PAGE>

decrees of any court,  arbitrator or governmental or regulatory body against the
Company  or any  Subsidiary  or any  officers  or  directors  of the  Company or
Subsidiary in their capacities as such, which  individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.

(n) Compliance  with Law. The business of the Company and the  Subsidiaries  has
been and is presently being conducted in accordance with all applicable federal,
state and local governmental laws, rules, regulations and ordinances,  except as
set forth in the Commission Documents or on Schedule 2.1(n) hereto or such that,
individually  or  in  the  aggregate,  the  noncompliance  therewith  could  not
reasonably be expected to have a Material  Adverse Effect.  The Company and each
of its Subsidiaries have all franchises,  permits, licenses,  consents and other
governmental  or  regulatory  authorizations  and  approvals  necessary  for the
conduct of its  business  as now being  conducted  by it unless  the  failure to
possess such franchises,  permits, licenses,  consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.

(o) Taxes.  Except as set forth on Schedule 2.1(o) hereto,  the Company and each
of the  Subsidiaries  has accurately  prepared and filed all federal,  state and
other tax returns required by law to be filed by it, has paid or made provisions
for the payment of all taxes shown to be due and all additional assessments, and
adequate  provisions have been and are reflected in the financial  statements of
the Company and the  Subsidiaries  for all  current  taxes and other  charges to
which the Company or any  Subsidiary  is subject and which are not currently due
and payable.  Except as disclosed on Schedule 2.1(o) hereto or in the Commission
Documents,  none  of the  federal  income  tax  returns  of the  Company  or any
Subsidiary have been audited by the Internal Revenue Service. The Company has no
knowledge of any additional assessments, adjustments or contingent tax liability
(whether  federal  or  state)  of any  nature  whatsoever,  whether  pending  or
threatened  against the  Company or any  Subsidiary  for any period,  nor of any
basis for any such assessment, adjustment or contingency.

(p) Certain Fees. Except as set forth on Schedule 2.1(p) hereto, the Company has
not employed any broker or finder or incurred any liability for any brokerage or
investment  banking fees,  commissions,  finders'  structuring  fees,  financial
advisory  fees  or  other  similar  fees  in  connection  with  the  Transaction
Documents.

(q) Disclosure.  Except for the transactions contemplated by this Agreement, the
Company  confirms  that neither it nor any other person acting on its behalf has
provided any of the  Purchasers or their agents or counsel with any  information
that constitutes or might constitute  material,  nonpublic  information.  To the
best of the Company's knowledge,  neither this Agreement or the Schedules hereto
nor any other documents, certificates or instruments furnished to the Purchasers
by or on  behalf  of the  Company  or any  Subsidiary  in  connection  with  the
transactions  contemplated by this Agreement  contain any untrue  statement of a
material  fact or omit to state a material  fact  necessary in order to make the
statements made herein or therein, in the light of the circumstances under which
they were made herein or therein, not misleading.

(r) Operation of Business.  Except as set forth on Schedule  2.1(r) hereto,  the
Company  and  each of the  Subsidiaries  owns or  possesses  the  rights  to all
patents, trademarks, domain names (whether or not registered) and any patentable

                                      -7-
<PAGE>

improvements   or   copyrightable   derivative   works  thereof,   websites  and
intellectual  property  rights  relating  thereto,  service marks,  trade names,
copyrights,  licenses and authorizations  which are necessary for the conduct of
its business as now conducted without any conflict with the rights of others.

(s) Environmental  Compliance.  To the best knowledge of the Company,  except as
set forth on Schedule 2.1(s) hereto or in the Commission Documents,  the Company
and  each  of  its   Subsidiaries   have   obtained  all   material   approvals,
authorization,  certificates,  consents,  licenses,  orders and permits or other
similar  authorizations  of all  governmental  authorities,  or from  any  other
person,  that are required under any Environmental  Laws.  "Environmental  Laws"
shall mean all  applicable  laws relating to the  protection of the  environment
including,   without  limitation,  all  requirements  pertaining  to  reporting,
licensing,  permitting,  controlling,  investigating  or remediating  emissions,
discharges,  releases or threatened releases of hazardous  substances,  chemical
substances,  pollutants,  contaminants or toxic substances, materials or wastes,
whether  solid,  liquid or  gaseous  in  nature,  into the air,  surface  water,
groundwater or land, or relating to the manufacture,  processing,  distribution,
use,  treatment,   storage,   disposal,   transport  or  handling  of  hazardous
substances, chemical substances,  pollutants,  contaminants or toxic substances,
material or wastes,  whether solid,  liquid or gaseous in nature. To the best of
the Company's knowledge,  the Company has all necessary  governmental  approvals
required under all Environmental Laws as necessary for the Company's business or
the business of any of its subsidiaries. To the best of the Company's knowledge,
the Company and each of its  subsidiaries  are also in compliance with all other
limitations,  restrictions,  conditions, standards, requirements,  schedules and
timetables  required or imposed under all  Environmental  Laws.  Except for such
instances as would not  individually or in the aggregate have a Material Adverse
Effect,  there  are  no  past  or  present  events,  conditions,  circumstances,
incidents,  actions or omissions relating to or in any way affecting the Company
or its Subsidiaries  that violate or may violate any Environmental Law after the
Initial Closing Date or that may give rise to any  environmental  liability,  or
otherwise  form the  basis  of any  claim,  action,  demand,  suit,  proceeding,
hearing,  study or investigation (i) under any Environmental  Law, or (ii) based
on or related to the  manufacture,  processing,  distribution,  use,  treatment,
storage  (including  without limitation  underground  storage tanks),  disposal,
transport or handling, or the emission, discharge, release or threatened release
of any hazardous substance.

(t) Books and Records;  Internal Accounting Controls.  The records and documents
of the Company and its Subsidiaries  accurately reflect in all material respects
the  information  relating to the business of the Company and the  Subsidiaries,
the location and collection of their assets,  and the nature of all transactions
giving  rise to the  obligations  or accounts  receivable  of the Company or any
Subsidiary.  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  actions  are taken with  respect to any
differences.

                                      -8-
<PAGE>

(u) Material Agreements.  Except for the Transaction  Documents (with respect to
clause (i) only),  as disclosed in the  Commission  Documents or as set forth on
Schedule 2.1(u) hereto,  or as would not be reasonably likely to have a Material
Adverse Effect,  (i) the Company and each of its Subsidiaries have performed all
obligations  required to be  performed by them to date under any written or oral
contract, instrument,  agreement,  commitment,  obligation, plan or arrangement,
filed or required to be filed with the Commission  (the "Material  Agreements"),
(ii) neither the Company nor any of its  Subsidiaries has received any notice of
default  under any Material  Agreement  and,  (iii) to the best of the Company's
knowledge,  neither the Company nor any of its  Subsidiaries is in default under
any Material Agreement now in effect.

(v) Transactions with Affiliates.  Except as set forth on Schedule 2.1(v) hereto
and  in the  Commission  Documents,  there  are no  loans,  leases,  agreements,
contracts,  royalty  agreements,  management  contracts or arrangements or other
continuing  transactions between (a) the Company, any Subsidiary or any of their
respective  customers or  suppliers on the one hand,  and (b) on the other hand,
any officer,  employee,  consultant  or director of the  Company,  or any of its
Subsidiaries,  or any person owning at least 5% of the outstanding capital stock
of the Company or any  Subsidiary or any member of the immediate  family of such
officer,  employee,  consultant,  director or stockholder or any  corporation or
other entity  controlled  by such  officer,  employee,  consultant,  director or
stockholder,  or a member of the  immediate  family of such  officer,  employee,
consultant,  director  or  stockholder  which,  in each case,  is required to be
disclosed in the  Commission  Documents or in the Company's  most recently filed
definitive  proxy  statement  on Schedule  14A,  that is not so disclosed in the
Commission Documents or in such proxy statement.

(w)  Securities  Act of 1933.  Based in material  part upon the  representations
herein of the  Purchasers,  the  Company has  complied  and will comply with all
applicable  federal  and state  securities  laws in  connection  with the offer,
issuance and sale of the  Securities  hereunder.  Neither the Company nor anyone
acting on its behalf, directly or indirectly, has or will sell, offer to sell or
solicit offers to buy any of the Securities or similar securities to, or solicit
offers  with  respect  thereto  from,  or enter into any  negotiations  relating
thereto  with,  any person,  or has taken or will take any action so as to bring
the issuance and sale of any of the Securities under the registration provisions
of the  Securities  Act and applicable  state  securities  laws, and neither the
Company nor any of its affiliates, nor any person acting on its or their behalf,
has engaged in any form of general  solicitation or general  advertising (within
the meaning of Regulation D under the  Securities  Act) in  connection  with the
offer or sale of any of the Securities.

(x)  Employees.  Neither  the  Company  nor any  Subsidiary  has any  collective
bargaining  arrangements or agreements covering any of its employees,  except as
set forth on Schedule  2.1(x)  hereto.  Except as set forth on  Schedule  2.1(x)
hereto,  neither the Company nor any  Subsidiary  has any  employment  contract,
agreement  regarding   proprietary   information,   non-competition   agreement,
non-solicitation  agreement,  confidentiality  agreement,  or any other  similar
contract or restrictive covenant, relating to the right of any officer, employee
or  consultant  to be  employed  or  engaged by the  Company or such  Subsidiary
required to be disclosed in the  Commission  Documents that is not so disclosed.
No officer,  consultant or key employee of the Company or any  Subsidiary  whose
termination, either individually or in the aggregate, would be reasonably likely

                                      -9-
<PAGE>

to have a Material  Adverse  Effect,  has terminated or, to the knowledge of the
Company,  has any present  intention of  terminating  his or her  employment  or
engagement with the Company or any Subsidiary.

(y)  Absence  of  Certain  Developments.  Except as set forth in the  Commission
Documents or provided on Schedule  2.1(y) hereto,  since June 30, 2005,  neither
the Company nor any Subsidiary has:

(i) issued any stock, bonds or other corporate  securities or any right, options
or warrants with respect thereto;

(ii) borrowed any amount in excess of $100,000 or incurred or become  subject to
any other  liabilities  in excess of $100,000  (absolute or  contingent)  except
current  liabilities  incurred  in the  ordinary  course of  business  which are
comparable  in nature  and amount to the  current  liabilities  incurred  in the
ordinary  course of business  during the comparable  portion of its prior fiscal
year,  as adjusted to reflect the current  nature and volume of the  business of
the Company and its Subsidiaries;

(iii)  discharged or satisfied any lien or  encumbrance in excess of $100,000 or
paid any obligation or liability (absolute or contingent) in excess of $100,000,
other than current liabilities paid in the ordinary course of business;

(iv) declared or made any payment or  distribution  of cash or other property to
stockholders  with respect to its stock,  or purchased or redeemed,  or made any
agreements so to purchase or redeem,  any shares of its capital  stock,  in each
case in excess of $50,000 individually or $100,000 in the aggregate;

(v) sold,  assigned or transferred  any other tangible  assets,  or canceled any
debts or  claims,  in each case in excess of  $100,000,  except in the  ordinary
course of business;

(vi) sold, assigned or transferred any patent rights,  trademarks,  trade names,
copyrights,  trade secrets or other intangible  assets or intellectual  property
rights  in  excess  of  $100,000,  or  disclosed  any  proprietary  confidential
information to any person except to customers in the ordinary course of business
or to the Purchasers or their representatives;

(vii)  suffered  any  material  losses or waived any rights of  material  value,
whether or not in the ordinary  course of business,  or suffered the loss of any
material amount of prospective business;

(viii) made any changes in employee  compensation  except in the ordinary course
of business and consistent with past practices;

(ix) made capital  expenditures or commitments therefor that aggregate in excess
of $100,000;

                                      -10-
<PAGE>

(x) entered into any material transaction, whether or not in the ordinary course
of business;

(xi) made charitable contributions or pledges in excess of $10,000;

(xii) suffered any material damage, destruction or casualty loss, whether or not
covered by insurance;  (xiii)  experienced  any material  problems with labor or
management in connection with the terms and conditions of their employment; or

(xiv)  entered  into an  agreement,  written  or  otherwise,  to take any of the
foregoing actions.

(z) Public Utility  Holding Company Act and Investment  Company Act Status.  The
Company is not a "holding  company" or a "public utility  company" as such terms
are defined in the Public Utility Holding  Company Act of 1935, as amended.  The
Company is not, and as a result of and immediately upon the Closing will not be,
an "investment  company" or a company  "controlled" by an "investment  company,"
within the meaning of the Investment Company Act of 1940, as amended.

(aa) ERISA.  No liability to the Pension Benefit  Guaranty  Corporation has been
incurred  with  respect to any Plan by the  Company  or any of its  Subsidiaries
which is or would be materially adverse to the Company and its Subsidiaries. The
execution  and  delivery  of this  Agreement  and the  issuance  and sale of the
Securities will not involve any transaction which is subject to the prohibitions
of Section  406 of the  Employee  Retirement  Income  Security  Act of 1974,  as
amended ("ERISA") or in connection with which a tax could be imposed pursuant to
Section 4975 of the Internal Revenue Code of 1986, as amended, provided that, if
any of the Purchasers,  or any person or entity that owns a beneficial  interest
in any of the  Purchasers,  is an "employee  pension  benefit  plan" (within the
meaning of Section  3(2) of ERISA) with respect to which the Company is a "party
in interest" (within the meaning of Section 3(14) of ERISA), the requirements of
Sections 407(d)(5) and 408(e) of ERISA, if applicable,  are met. As used in this
Section 2.1(aa),  the term "Plan" shall mean an "employee  pension benefit plan"
(as  defined  in  Section  3 of  ERISA)  which  is or has  been  established  or
maintained,  or to which  contributions are or have been made, by the Company or
any Subsidiary or by any trade or business, whether or not incorporated,  which,
together  with the  Company  or any  Subsidiary,  is under  common  control,  as
described in Section 414(b) or (c) of the Code.

(bb)  Independent  Nature  of  Purchasers.  The  Company  acknowledges  that the
obligations of each Purchaser  under the  Transaction  Documents are several and
not joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible  in any way for the  performance  of the  obligations  of any  other
Purchaser under the Transaction  Documents.  The Company  acknowledges  that the
decision of each Purchaser to purchase Securities pursuant to this Agreement has
been  made  by  such  Purchaser   independently   of  any  other  Purchaser  and
independently  of any information,  materials,  statements or opinions as to the
business,  affairs,  operations,  assets,  properties,  liabilities,  results of
operations, condition (financial or otherwise) or prospects of the Company or of

                                      -11-
<PAGE>

its  Subsidiaries  which may have made or given by any other Purchaser or by any
agent or employee of any other Purchaser,  and no Purchaser or any of its agents
or employees  shall have any  liability to any  Purchaser  (or any other person)
relating  to or arising  from any such  information,  materials,  statements  or
opinions.  The Company  acknowledges  that nothing  contained  herein, or in any
Transaction  Document,  and no action taken by any Purchaser  pursuant hereto or
thereto,  shall be deemed to  constitute  the  Purchasers as a  partnership,  an
association,  a  joint  venture  or any  other  kind  of  entity,  or  create  a
presumption  that the  Purchasers are in any way acting in concert or as a group
with  respect  to  such  obligations  or the  transactions  contemplated  by the
Transaction   Documents.   The   Company   acknowledges   that  for  reasons  of
administrative convenience only, the Transaction Documents have been prepared by
counsel for one of the Purchasers and such counsel does not represent all of the
Purchasers but only such Purchaser and the other  Purchasers have retained their
own individual counsel with respect to the transactions contemplated hereby. The
Company acknowledges that it has elected to provide all Purchasers with the same
terms and  Transaction  Documents  for the  convenience  of the  Company and not
because it was  required or requested  to do so by the  Purchasers.  The Company
acknowledges that such procedure with respect to the Transaction Documents in no
way creates a presumption  that the  Purchasers are in any way acting in concert
or as a group with  respect to the  Transaction  Documents  or the  transactions
contemplated hereby or thereby.

(cc) 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 of any  security  or  solicited  any offers to buy any  security
under  circumstances that would cause the offering of the Securities pursuant to
this Agreement to be integrated with prior offerings by the Company for purposes
of the  Securities  Act  which  would  prevent  the  Company  from  selling  the
Securities  pursuant to Regulation D and Rule 506 thereof  under the  Securities
Act, or any applicable  exchange-related  stockholder approval  provisions,  nor
will the Company or any of its  affiliates  or  subsidiaries  take any action or
steps that would cause the  offering of the  Securities  to be  integrated  with
other offerings.  The Company does not have any registration  statement  pending
before the Commission or currently under the  Commission's  review and except as
set forth on Schedule  2.1(cc)  hereto,  and since July 1, 2005, the Company has
not offered or sold any of its equity securities or debt securities  convertible
into shares of Common Stock.

(dd)  Sarbanes-Oxley  Act.  The  Company is in  compliance  with the  applicable
provisions of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), and the
rules and regulations promulgated thereunder, that are effective, and intends to
comply with other applicable provisions of the Sarbanes-Oxley Act, and the rules
and  regulations  promulgated   thereunder,   upon  the  effectiveness  of  such
provisions.

(ee)  Dilutive  Effect.  The  Company  understands  and  acknowledges  that  its
obligation to issue Conversion Shares upon conversion of the Notes in accordance
with  this  Agreement  and the Notes and its  obligations  to issue the  Warrant
Shares upon the exercise of the Warrants in accordance  with this  Agreement and
the Warrants,  is, in each case,  absolute and  unconditional  regardless of the
dilutive  effect that such issuance may have on the ownership  interest of other
stockholders of the Company.

                                      -12-
<PAGE>

(ff) DTC Status. The Company's transfer agent is a participant in and the Common
Stock  is  eligible  for  transfer  pursuant  to the  Depository  Trust  Company
Automated Securities Transfer Program. The name, address,  telephone number, fax
number,  contact person and email address of the Company's transfer agent is set
forth on Schedule 2.1(ff) hereto.

(gg) Solvency. Based on the financial condition of the Company as of the Closing
Date (after giving  effect to the  transactions  contemplated  herein and in the
other  Transaction  Documents),  (i) the Company's  fair  saleable  value of its
assets  exceeds  the amount that will be required to be paid on or in respect of
the Company's  existing debts and other liabilities  (including known contingent
liabilities)  as they  mature;  (ii)  the  Company's  assets  do not  constitute
unreasonably  small capital to carry on its business for the current fiscal year
as now  conducted  and as proposed to be conducted  including  its capital needs
taking  into  account  the  particular  capital  requirements  of  the  business
conducted  by the  Company,  and  projected  capital  requirements  and  capital
availability  thereof; and (iii) the current cash flow of the Company,  together
with the proceeds the Company  would  receive,  were it to liquidate  all of its
assets,  after taking into account all  anticipated  uses of the cash,  would be
sufficient to pay all amounts on or in respect of its debt when such amounts are
required  to be paid.  The  Company  does not intend to incur  debts  beyond its
ability to pay such debts as they  mature  (taking  into  account the timing and
amounts of cash to be payable on or in respect of its debt).

Section  2.2.......Representations and Warranties of the Purchasers. Each of the
Purchasers  hereby represents and warrants to the Company with respect solely to
itself  and not with  respect to any other  Purchaser  as follows as of the date
hereof and as of each Closing Date:

(a) Organization and Standing of the Purchasers.  If the Purchaser is an entity,
such Purchaser is a corporation,  limited  liability company or partnership duly
incorporated or organized,  validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization.

(b)  Authorization  and  Power.  Each  Purchaser  has the  requisite  power  and
authority to enter into and perform the  Transaction  Documents  and to purchase
the  Securities  being  sold  to  it  hereunder.  The  execution,  delivery  and
performance of the Transaction  Documents by each Purchaser and the consummation
by it of the transactions  contemplated  hereby have been duly authorized by all
necessary   corporate  or  partnership   action,   and  no  further  consent  or
authorization  of such  Purchaser or its Board of  Directors,  stockholders,  or
partners,  as the case may be, is required.  When  executed and delivered by the
Purchasers,  the other Transaction  Documents shall constitute valid and binding
obligations of each Purchaser  enforceable  against such Purchaser in accordance
with their terms,  except as such  enforceability  may be limited by  applicable
bankruptcy,     insolvency,     reorganization,     moratorium,     liquidation,
conservatorship,   receivership  or  similar  laws  relating  to,  or  affecting
generally  the  enforcement  of,  creditor's  rights  and  remedies  or by other
equitable principles of general application.

(c) No Conflict.  The execution,  delivery and  performance  of the  Transaction
Documents  by  the  Purchaser  and  the  consummation  by the  Purchaser  of the
transactions contemplated thereby and hereby do not and will not (i) violate any
provision of the Purchaser's charter or organizational  documents, (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or

                                      -13-
<PAGE>

both would become a default) under, or give to others any rights of termination,
amendment,  acceleration or cancellation  of, any agreement,  mortgage,  deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation
to  which  the  Purchaser  is a party  or by which  the  Purchaser's  respective
properties  or assets are bound,  or (iii) result in a violation of any federal,
state, local or foreign statute,  rule,  regulation,  order,  judgment or decree
(including federal and state securities laws and regulations)  applicable to the
Purchaser  or by which  any  property  or asset of the  Purchaser  are  bound or
affected, except, in all cases, other than violations pursuant to clauses (i) or
(iii) (with respect to federal and state  securities  laws) above,  except,  for
such conflicts, defaults, terminations, amendments, acceleration,  cancellations
and violations as would not,  individually  or in the aggregate,  materially and
adversely  affect the Purchaser's  ability to perform its obligations  under the
Transaction Documents.

(d)  Acquisition  for  Investment.  Each  Purchaser is purchasing the Securities
solely for its own account and not with a view to or for sale in connection with
distribution.  Each Purchaser  does not have a present  intention to sell any of
the Securities,  nor a present  arrangement  (whether or not legally binding) or
intention to effect any  distribution of any of the Securities to or through any
person or entity; provided,  however, that by making the representations herein,
such  Purchaser  does not agree to hold the  Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance   with  Federal  and  state   securities   laws  applicable  to  such
disposition.  Each  Purchaser  acknowledges  that it (i) has such  knowledge and
experience in financial and business  matters such that  Purchaser is capable of
evaluating the merits and risks of Purchaser's  investment in the Company,  (ii)
is able  to bear  the  financial  risks  associated  with an  investment  in the
Securities  and (iii) has been given full access to such  records of the Company
and the  Subsidiaries and to the officers of the Company and the Subsidiaries as
it  has  deemed   necessary  or   appropriate   to  conduct  its  due  diligence
investigation.

(e) Rule  144.  Each  Purchaser  understands  that the  Securities  must be held
indefinitely  unless such Securities are registered  under the Securities Act or
an exemption from  registration is available.  Each Purchaser  acknowledges that
such  person is  familiar  with Rule 144 of the  rules  and  regulations  of the
Commission, as amended, promulgated pursuant to the Securities Act ("Rule 144"),
and that such  Purchaser  has been  advised  that Rule 144 permits  resales only
under certain circumstances.  Each Purchaser understands that to the extent that
Rule 144 is not available,  such Purchaser will be unable to sell any Securities
without either registration under the Securities Act or the existence of another
exemption from such registration requirement.

(f) General.  Each Purchaser  understands  that the Securities are being offered
and  sold  in  reliance  on a  transactional  exemption  from  the  registration
requirements  of federal  and state  securities  laws and the Company is relying
upon the truth and  accuracy  of the  representations,  warranties,  agreements,
acknowledgments  and  understandings of such Purchaser set forth herein in order
to determine the  applicability  of such  exemptions and the suitability of such
Purchaser to acquire the Securities.  Each Purchaser  understands that no United
States  federal or state agency or any  government  or  governmental  agency has
passed upon or made any recommendation or endorsement of the Securities.

                                      -14-
<PAGE>

(g) No General  Solicitation.  Each Purchaser  acknowledges  that the Securities
were not  offered  to such  Purchaser  by means of any form of general or public
solicitation or general advertising,  or publicly disseminated advertisements or
sales  literature,  including (i) any  advertisement,  article,  notice or other
communication  published  in any  newspaper,  magazine,  or  similar  media,  or
broadcast over television or radio, or (ii) any seminar or meeting to which such
Purchaser  was invited by any of the  foregoing  means of  communications.  Each
Purchaser,  in making the decision to purchase the  Securities,  has relied upon
independent  investigation  made by it and has not relied on any  information or
representations made by third parties.

(h) Accredited Investor.  Each Purchaser is an "accredited investor" (as defined
in Rule 501 of Regulation D), and such Purchaser has such experience in business
and financial  matters that it is capable of evaluating  the merits and risks of
an investment in the Securities. Such Purchaser is not required to be registered
as a  broker-dealer  under Section 15 of the Exchange Act and such  Purchaser is
not a  broker-dealer.  Each  Purchaser  acknowledges  that an  investment in the
Securities is speculative and involves a high degree of risk.

(i) Certain  Fees.  The  Purchasers  have not  employed  any broker or finder or
incurred  any  liability   for  any   brokerage  or  investment   banking  fees,
commissions, finders' structuring fees, financial advisory fees or other similar
fees in connection with the Transaction Documents.

(j)  Independent  Investment.  No  Purchaser  has  agreed  to act with any other
Purchaser  for the purpose of  acquiring,  holding,  voting or  disposing of the
Securities  purchased hereunder for purposes of Section 13(d) under the Exchange
Act, and each Purchaser is acting  independently  with respect to its investment
in the Securities.

                                  ARTICLE III

                                    COVENANTS

         The Company  covenants with each Purchaser as follows,  which covenants
are for the benefit of each Purchaser and their respective permitted assignees.

Section 3.1.......Securities Compliance. The Company shall notify the Commission
in accordance with its rules and regulations,  of the transactions  contemplated
by any of the Transaction  Documents and shall take all other  necessary  action
and  proceedings  as may be required and permitted by  applicable  law, rule and
regulation,  for  the  legal  and  valid  issuance  of  the  Securities  to  the
Purchasers, or their respective subsequent holders.

Section  3.2.......Registration and Listing. So long as a Purchaser beneficially
owns any of the Securities, the Company shall cause its Common Stock to continue
to be registered under Sections 12(b) or 12(g) of the Exchange Act, to comply in
all respects with its reporting and filing  obligations  under the Exchange Act,
to comply with all  requirements  related to any  registration  statement  filed
pursuant  to this  Agreement,  and to not take any  action or file any  document
(whether  or not  permitted  by the  Securities  Act  or the  rules  promulgated
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing  obligations  under the Exchange Act or Securities Act,
except as  permitted  herein.  The  Company  will take all action  necessary  to
continue the listing or trading of its Common Stock on the OTC Bulletin Board or
other  exchange or market on which the Common  Stock is trading.  Subject to the
terms of the Transaction  Documents,  the Company further covenants that it will
take such further action as the Purchasers  may reasonably  request,  all to the
extent  required  from  time  to time  to  enable  the  Purchasers  to sell  the
Securities  without  registration under the Securities Act within the limitation
of the exemptions  provided by Rule 144  promulgated  under the Securities  Act.
Upon the request of the Purchasers,  the Company shall deliver to the Purchasers
a written  certification  of a duly  authorized  officer  as to  whether  it has
complied with such requirements.

                                      -15-
<PAGE>

Section  3.3.......Inspection Rights. Provided same would not be in violation of
Regulation FD, the Company shall permit,  during normal  business hours and upon
reasonable  request and  reasonable  notice,  each  Purchaser or any  employees,
agents or representatives  thereof, so long as such Purchaser shall be obligated
hereunder to purchase the Notes or shall  beneficially own any Conversion Shares
or Warrant Shares, for purposes reasonably related to such Purchaser's interests
as a stockholder,  to examine the publicly available,  non-confidential  records
and  books of  account  of,  and  visit  and  inspect  the  properties,  assets,
operations  and business of the Company and any  Subsidiary,  and to discuss the
publicly  available,  non-confidential  affairs,  finances  and  accounts of the
Company and any Subsidiary with any of its officers, consultants, directors, and
key employees.

Section 3.4.......Compliance with Laws. The Company shall comply, and cause each
Subsidiary to comply,  with all applicable laws, rules,  regulations and orders,
noncompliance  with which would be reasonably  likely to have a Material Adverse
Effect.

Section  3.5.......Keeping  of Records and Books of Account.  The Company  shall
keep and cause each Subsidiary to keep adequate records and books of account, in
which  complete  entries  will be  made in  accordance  with  GAAP  consistently
applied,   reflecting  all  financial   transactions  of  the  Company  and  its
Subsidiaries,  and in which,  for each  fiscal  year,  all proper  reserves  for
depreciation, depletion, obsolescence,  amortization, taxes, bad debts and other
purposes in connection with its business shall be made.

Section  3.6.......Reporting  Requirements.  If the  Company  ceases to file its
periodic reports with the Commission,  or if the Commission  ceases making these
periodic  reports  available via the Internet  without charge,  then the Company
shall furnish the following to each Purchaser so long as such Purchaser shall be
obligated  hereunder  to  purchase  the  Securities  or shall  beneficially  own
Securities:

(a)  Quarterly  Reports  filed  with the  Commission  on Form  10-QSB as soon as
practical  after the  document  is filed with the  Commission,  and in any event
within five (5) days after the document is filed with the Commission;

(b) Annual Reports filed with the Commission on Form 10-KSB as soon as practical
after the  document is filed with the  Commission,  and in any event within five
(5) days after the document is filed with the Commission; and

                                      -16-
<PAGE>

(c) Copies of all notices,  information and proxy  statements in connection with
any  meetings,  that are, in each case,  provided to holders of shares of Common
Stock,  contemporaneously  with the delivery of such notices or  information  to
such holders of Common Stock.

Section  3.7.......Other  Agreements.  The  Company  shall  not  enter  into any
agreement  in which the terms of such  agreement  would  restrict  or impair the
right  or  ability  to  perform  of the  Company  or any  Subsidiary  under  any
Transaction Document.

Section  3.8.......Use  of  Proceeds.  The net  proceeds  from  the  sale of the
Securities  shall  be  used by the  Company  for  working  capital  and  general
corporate purposes and not to redeem any Common Stock or securities convertible,
exercisable  or  exchangeable  into  Common  Stock or to settle any  outstanding
litigation.

Section 3.9.......Reporting Status. So long as a Purchaser beneficially owns any
of the  Securities,  the Company  shall  timely file all reports  required to be
filed with the  Commission  pursuant to the Exchange  Act, and the Company shall
not  terminate  its  status  as an issuer  required  to file  reports  under the
Exchange Act even if the Exchange  Act or the rules and  regulations  thereunder
would permit such termination.

Section  3.10......Disclosure  of  Transaction.  The Company shall issue a press
release  describing the material terms of the transactions  contemplated  hereby
(the "Press  Release")  on the day of the Initial  Closing but in no event later
than one hour after the Initial Closing; provided,  however, that if the Initial
Closing  occurs  after 4:00 P.M.  Eastern  Time on any Trading  Day, the Company
shall issue the Press Release no later than 9:00 A.M.  Eastern Time on the first
Trading Day following the Initial Closing Date. The Company shall also file with
the  Commission  a Current  Report on Form 8-K (the "Form 8-K")  describing  the
material  terms  of the  transactions  contemplated  hereby  (and  attaching  as
exhibits  thereto this  Agreement,  the form of Note,  the  Registration  Rights
Agreement,  the Security  Agreement,  the form of each series of Warrant and the
Press Release) as soon as practicable  following the Initial Closing Date but in
no event more than two (2) Trading  Days  following  the Initial  Closing  Date,
which Press Release and Form 8-K shall be subject to prior review and comment by
the Purchasers.  "Trading Day" means any day during which the principal exchange
on which the Common Stock is traded shall be open for trading.

Section  3.11......Disclosure of Material Information. The Company covenants and
agrees that neither it nor any other person acting on its behalf has provided or
will provide any  Purchaser or its agents or counsel with any  information  that
the Company believes constitutes material non-public  information,  unless prior
thereto such  Purchaser  shall have executed a written  agreement  regarding the
confidentiality  and  use of  such  information.  The  Company  understands  and
confirms that each Purchaser  shall be relying on the foregoing  representations
in effecting transactions in securities of the Company.

Section 3.12......Pledge of Securities. The Company acknowledges and agrees that
the  Securities  may be pledged by a Purchaser  in  connection  with a bona fide
margin  agreement or other loan or financing  arrangement that is secured by the
Securities.  The pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities  hereunder,  and no Purchaser effecting a pledge

                                      -17-
<PAGE>

of the  Securities  shall be required  to provide  the  Company  with any notice
thereof or otherwise make any delivery to the Company pursuant to this Agreement
or any other  Transaction  Document;  provided  that a Purchaser and its pledgee
shall be required to comply with the  provisions of Article V hereof in order to
effect a sale,  transfer or assignment  of  Securities  to such pledgee.  At the
Purchasers'  expense,  the Company  hereby  agrees to execute  and deliver  such
documentation  as  a  pledgee  of  the  Securities  may  reasonably  request  in
connection with a pledge of the Securities to such pledgee by a Purchaser.

Section 3.13......Amendments. The Company shall not amend or waive any provision
of the  Certificate  or Bylaws of the  Company in any way that  would  adversely
affect exercise rights, voting rights,  conversion rights,  prepayment rights or
redemption rights of the holder of the Notes.

Section  3.14......Distributions.  So  long  as any  Notes  or  Warrants  remain
outstanding,  the  Company  agrees  that it  shall  not (i)  declare  or pay any
dividends  or make any  distributions  to any  holder(s) of Common Stock or (ii)
purchase or  otherwise  acquire for value,  directly or  indirectly,  any Common
Stock or other equity security of the Company.

Section 3.15......Reservation of Shares. So long as any of the Notes or Warrants
remain outstanding,  the Company shall take all action necessary to at all times
have  authorized  and reserved for the purpose of  issuance,  one hundred  fifty
percent  (150%) of the  aggregate  number of  shares of Common  Stock  needed to
provide for the issuance of the Conversion Shares and the Warrant Shares.

Section   3.16......Transfer   Agent  Instructions.   The  Company  shall  issue
irrevocable  instructions  to its transfer  agent,  and any subsequent  transfer
agent,  to issue  certificates,  registered in the name of each Purchaser or its
respective nominee(s),  for the Conversion Shares and the Warrant Shares in such
amounts as  specified  from time to time by each  Purchaser  to the Company upon
conversion  of the Notes or  exercise  of the  Warrants in the form of Exhibit G
attached  hereto  (the  "Irrevocable  Transfer  Agent  Instructions").  Prior to
registration  of  the  Conversion  Shares  and  the  Warrant  Shares  under  the
Securities  Act,  all  such  certificates  shall  bear  the  restrictive  legend
specified  in  Section  5.1 of this  Agreement.  The  Company  warrants  that no
instruction other than the Irrevocable  Transfer Agent Instructions  referred to
in this Section 3.17 will be given by the Company to its transfer agent and that
the Conversion Shares and Warrant Shares 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 3.16
shall affect in any way each Purchaser's obligations and agreements set forth in
Section 5.1 to comply with all applicable prospectus delivery  requirements,  if
any, upon resale of the Conversion Shares and the Warrant Shares. If a Purchaser
provides the Company with an opinion of counsel, in a generally acceptable form,
to the effect that a public  sale,  assignment  or  transfer  of the  Conversion
Shares or Warrant Shares may be made without  registration  under the Securities
Act or the Purchaser  provides the Company with  reasonable  assurances that the
Conversion Shares or Warrant Shares can be sold pursuant to Rule 144 without any
restriction as to the number of securities acquired as of a particular date that
can then be immediately sold, the Company shall permit the transfer, and, in the
case of the  Conversion  Shares and the Warrant  Shares,  promptly  instruct its
transfer  agent  to  issue  one or more  certificates  in such  name and in such
denominations as specified by such Purchaser and without any restrictive legend.

                                      -18-
<PAGE>

The  Company  acknowledges  that a breach by it of its  obligations  under  this
Section 3.16 will cause  irreparable  harm to the  Purchasers  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 Section 3.16 will be inadequate and agrees,  in the event of a breach
or threatened breach by the Company of the provisions of this Section 3.16, that
the Purchasers shall be entitled,  in addition to all other available  remedies,
to an order and/or  injunction  restraining  any breach and requiring  immediate
issuance  and  transfer,  without the  necessity  of showing  economic  loss and
without any bond or other security being required.

Section   3.17......Disposition   of  Assets.   So  long  as  the  Notes  remain
outstanding,  neither  the Company nor any  subsidiary  shall sell,  transfer or
otherwise dispose of any of its properties, assets and rights including, without
limitation,  its software and  intellectual  property,  to any person except for
sales of  obsolete  assets  and sales to  customers  in the  ordinary  course of
business or with the prior  written  consent of the holders of a majority of the
principal amount of the Notes then outstanding.

Section  3.18......Form SB-2 Eligibility.  The Company currently meets, and will
take all necessary action to continue to meet, the "registrant  eligibility" and
transaction  requirements  set forth in the  general  instructions  to Form SB-2
applicable  to  "resale"  registrations  on Form SB-2  during the  Effectiveness
Period (as defined in the Registration  Rights  Agreement) and the Company shall
file all reports  required to be filed by the Company with the  Commission  in a
timely manner so as to maintain such eligibility for the use of Form SB-2.

Section 3.19......Subsequent Financings.

(a) So long as the Notes remain outstanding, during the period commencing on the
Final  Closing  Date and  ending on the date  that is  twenty-four  (24)  months
following the Final Closing Date,  the Company  covenants and agrees to promptly
notify  (in no event  later  than five (5) days  after  making or  receiving  an
applicable offer) in writing (a "Rights Notice") each Purchaser of the terms and
conditions  of any proposed any proposed  offer or sale to, or exchange with (or
other type of distribution  to) any third party (a "Subsequent  Financing"),  of
Common Stock or any securities  convertible,  exercisable or  exchangeable  into
Common  Stock,   including  convertible  debt  securities   (collectively,   the
"Financing Securities"). The Rights Notice shall describe, in reasonable detail,
the  proposed  Subsequent  Financing,  the names and  investment  amounts of all
investors  participating in the Subsequent Financing,  the proposed closing date
of the  Subsequent  Financing,  which shall be within  thirty (30) calendar days
from the date of the Rights Notice,  and all of the terms and conditions thereof
and  proposed  definitive   documentation  to  be  entered  into  in  connection
therewith. The Rights Notice shall provide each Purchaser an option (the "Rights
Option")  during the fifteen (15) Trading Days following  delivery of the Rights
Notice (the "Option  Period") to inform the Company  whether such Purchaser will
purchase  up to its pro rata  portion  of the  amount  of the  securities  being
offered in such Subsequent  Financing on the same, absolute terms and conditions
as  contemplated  by such  Subsequent  Financing.  Each Purchaser  shall have an
additional  five (5) Trading Days to fund the purchase of the  securities  being
offered in such Subsequent Financing. If any Purchaser elects not to participate

                                      -19-
<PAGE>

in such Subsequent Financing, the other Purchasers may participate on a pro-rata
basis so long as such  participation  in the aggregate does not exceed the total
amount of the Subsequent Financing. For purposes of this Section, all references
to  "pro  rata"  means,  for  any  Purchaser  electing  to  participate  in such
Subsequent  Financing,  the  percentage  obtained by dividing (x) the  principal
amount of the Notes purchased by such Purchaser at each Closing by (y) the total
principal  amount  of all of the  Notes  purchased  by all of the  participating
Purchasers  at  each  Closing.  Delivery  of any  Rights  Notice  constitutes  a
representation  and  warranty  by the Company  that there are no other  material
terms and  conditions,  arrangements,  agreements or otherwise  except for those
disclosed in the Rights Notice, to provide additional  compensation to any party
participating in any proposed Subsequent Financing,  including,  but not limited
to, additional  compensation  based on changes in the Purchase Price or any type
of reset or adjustment of a purchase or conversion  price or to issue additional
securities at any time after the closing date of a Subsequent Financing.  If the
Company  does not  receive  notice of  exercise  of the Rights  Option  from the
Purchasers  within the Option Period,  the Company shall have the right to close
the  Subsequent  Financing  on the  scheduled  closing  date with a third party;
provided  that all of the material  terms and  conditions of the closing are the
same as those provided to the Purchasers in the Rights Notice. If the closing of
the proposed  Subsequent  Financing  does not occur on that date, any closing of
the contemplated Subsequent Financing or any other Subsequent Financing shall be
subject to all of the  provisions of this Section  3.19(a),  including,  without
limitation,  the delivery of a new Rights Notice. The provisions of this Section
3.19(a) shall not apply to issuances of securities in a Permitted  Financing (as
defined below).

(b)  For  purposes  of  this  Agreement,   a  Permitted  Financing  (as  defined
hereinafter)  shall not be  considered  a  Subsequent  Financing.  A  "Permitted
Financing" shall mean (i) securities  issued (other than for cash) in connection
with a merger, acquisition, or consolidation, (ii) securities issued pursuant to
a bona fide firm underwritten public offering of the Company's securities, (iii)
securities  issued  pursuant to the  conversion  or exercise of  convertible  or
exercisable  securities  issued or outstanding on or prior to the date hereof or
issued pursuant to this Agreement and the Notes,  (iv) the Warrant  Shares,  (v)
securities  issued in connection  with bona fide strategic  license  agreements,
partnering  arrangements or other consulting  services so long as such issuances
are not for the  purpose of raising  capital,  (vi) Common  Stock  issued or the
issuance  or grants of options  or  warrants  to  purchase  Common  Stock to any
employer,  officer,  director  or advisor of the Company for a period of two (2)
years following the date of this Agreement so long as the exercise price of such
options or warrants  is greater  than $0.75,  (vii) any  warrants  issued to the
placement  agent and its designees  for the  transactions  contemplated  by this
Agreement,  (viii) the payment of any accrued interest in shares of Common Stock
pursuant to the Notes; and (ix) securities issued to CNET Networks, Inc.

                                   ARTICLE IV

                                   CONDITIONS

Section 4.1.......Conditions Precedent to the Obligation of the Company to Close
and to Sell the Securities. The obligation hereunder of the Company to close and
issue and sell the  Securities  to the  Purchasers at each Closing is subject to
the  satisfaction  or waiver,  at or before each Closing of the  conditions  set
forth below.  These  conditions  are for the  Company's  sole benefit and may be
waived by the Company at any time in its sole discretion.

                                      -20-
<PAGE>

(a)  Accuracy  of  the   Purchasers'   Representations   and   Warranties.   The
representations  and warranties of each  Purchaser  shall be true and correct in
all  material  respects as of the date when made and as of each  Closing Date as
though made at that time,  except for  representations  and warranties  that are
expressly made as of a particular  date,  which shall be true and correct in all
material respects as of such date.

(b)  Performance  by  the  Purchasers.  Each  Purchaser  shall  have  performed,
satisfied and complied in all material  respects with all covenants,  agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Purchasers at or prior to each Closing Date.

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

(d) Delivery of Purchase Price. The Purchase Price for the Securities shall have
been delivered to the Company on each Closing Date.

(e) Delivery of Transaction Documents. The Transaction Documents shall have been
duly executed and delivered by the Purchasers to the Company.

Section  4.2.......Conditions  Precedent to the  Obligation of the Purchasers to
Close and to Purchase the Securities. The obligation hereunder of the Purchasers
to purchase the Securities and consummate the transactions  contemplated by this
Agreement is subject to the  satisfaction or waiver,  at or before each Closing,
of  each  of the  conditions  set  forth  below.  These  conditions  are for the
Purchasers'  sole  benefit  and may be waived by the  Purchasers  at any time in
their sole discretion.

(a)  Accuracy  of the  Company's  Representations  and  Warranties.  Each of the
representations  and  warranties of the Company in this  Agreement and the other
Transaction  Documents shall be true and correct in all material  respects as of
each Closing Date, except for  representations and warranties that speak as of a
particular date, which shall be true and correct in all material  respects as of
such date.

(b) Performance by the Company. The Company shall have performed,  satisfied and
complied in all material respects with all covenants,  agreements and conditions
required by this  Agreement to be  performed,  satisfied or complied with by the
Company at or prior to each Closing Date.

(c) No  Suspension,  Etc.  Trading  in the  Common  Stock  shall  not have  been
suspended by the Commission or the OTC Bulletin Board (except for any suspension
of trading of limited duration agreed to by the Company,  which suspension shall
be  terminated  prior to the  Initial  Closing),  and, at any time prior to each
Closing Date, trading in securities generally as reported by Bloomberg Financial
Markets  ("Bloomberg")  shall not have been  suspended  or  limited,  or minimum
prices shall not have been  established on securities  whose trades are reported
by Bloomberg,  or on the New York Stock Exchange, nor shall a banking moratorium
have been declared either by the United States or New York State authorities.

                                      -21-
<PAGE>

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

(e) No  Proceedings  or  Litigation.  No action,  suit or proceeding  before any
arbitrator  or any  governmental  authority  shall have been  commenced,  and no
investigation by any governmental authority shall have been threatened,  against
the Company or any Subsidiary,  or any of the officers,  directors or affiliates
of the  Company or any  Subsidiary  seeking to  restrain,  prevent or change the
transactions  contemplated by this  Agreement,  or seeking damages in connection
with such transactions.

(f) Opinion of Counsel. The Purchasers shall have received an opinion of counsel
to the Company,  dated the date of each  Closing,  substantially  in the form of
Exhibit H hereto,  with such  exceptions and  limitations as shall be reasonably
acceptable to counsel to the Purchasers.

(g) Notes and  Warrants.  At or prior to each  Closing,  the Company  shall have
delivered to the Purchasers the Notes (in such  denominations  as each Purchaser
may  request)  and the Warrants (in such  denominations  as each  Purchaser  may
request).

(h) Secretary's Certificate.  The Company shall have delivered to the Purchasers
a  secretary's  certificate,  dated  as of  each  Closing  Date,  as to (i)  the
resolutions  adopted  by the  Board  of  Directors  approving  the  transactions
contemplated  hereby, (ii) the Certificate,  (iii) the Bylaws, each as in effect
at the Closing,  and (iv) the  authority  and  incumbency of the officers of the
Company executing the Transaction  Documents and any other documents required to
be executed or delivered in connection therewith.

(i)  Officer's  Certificate.  On each  Closing  Date,  the  Company  shall  have
delivered to the  Purchasers  a  certificate  signed by an executive  officer on
behalf of the Company, dated as of each Closing Date, confirming the accuracy of
the Company's  representations,  warranties and covenants as of the Closing Date
and confirming  the compliance by the Company with the conditions  precedent set
forth in paragraphs  (b)-(e) and (l) of this Section 4.2 as of each Closing Date
(provided  that,  with respect to the matters in paragraphs  (d) and (e) of this
Section 4.2, such confirmation  shall be based on the knowledge of the executive
officer after due inquiry).

(j) Registration  Rights Agreement.  As of the Initial Closing Date, the Company
shall have  executed and  delivered the  Registration  Rights  Agreement to each
Purchaser.

(k) Security  Agreement.  As of the Initial Closing Date, the Company shall have
executed and delivered the Security Agreement to each Purchaser.

(l) UCC Financing Statements.  As of the Initial Closing Date, the Company shall
have filed all UCC financing  statements in form and substance  satisfactory  to
the  Purchasers  at the  appropriate  offices  to create a valid  and  perfected
security interest in the Collateral (as defined in the Security Agreement).

                                      -22-
<PAGE>

(m) Material  Adverse Effect.  No Material Adverse Effect shall have occurred at
or before each Closing Date.

(n) Transfer Agent Instructions. As of the Initial Closing Date, the Irrevocable
Transfer Agent  Instructions,  in the form of Exhibit G attached  hereto,  shall
have been delivered to the Company's transfer agent.

(o) Asia Pacific  Ventures.  All UCC financing  statements  listing Asia Pacific
Ventures as a secured party and the Company as debtor shall have been terminated
on or before the Initial Closing Date.

(p)  Registration  Statement  Filed.  With  respect to the Second  Closing,  the
Registration Statement shall have been filed with the Commission.

(q) Effective  Registration  Statement.  With respect to the Final Closing,  the
Registration Statement shall have been declared effective by the Commission.

                                   ARTICLE V
                               CERTIFICATE LEGEND

Section 5.1.......Legend.  Each certificate representing the Securities shall be
stamped or otherwise imprinted with a legend substantially in the following form
(in addition to any legend required by applicable state securities or "blue sky"
laws):
         THE SECURITIES  REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE
         NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
         "SECURITIES  ACT") OR ANY  STATE  SECURITIES  LAWS AND MAY NOT BE SOLD,
         TRANSFERRED  OR  OTHERWISE  DISPOSED  OF  UNLESS  REGISTERED  UNDER THE
         SECURITIES  ACT  AND  UNDER   APPLICABLE   STATE   SECURITIES  LAWS  OR
         FINANCIALCONTENT,  INC.  SHALL HAVE RECEIVED AN OPINION OF COUNSEL THAT
         REGISTRATION OF SUCH SECURITIES  UNDER THE SECURITIES ACT AND UNDER THE
         PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

         The Company agrees to issue or reissue certificates representing any of
the Conversion Shares and the Warrant Shares, without the legend set forth above
if at such time,  prior to making any transfer of any such Conversion  Shares or
Warrant  Shares,  such holder  thereof shall give written  notice to the Company
describing  the manner and terms of such transfer and removal as the Company may
reasonably  request.  Such  proposed  transfer  and removal will not be effected
until: (a) either (i) the Company has received an opinion of counsel  reasonably
satisfactory  to the  Company,  to  the  effect  that  the  registration  of the
Conversion  Shares or Warrant Shares under the Securities Act is not required in
connection with such proposed transfer,  (ii) a registration statement under the

                                      -23-
<PAGE>

Securities Act covering such proposed  disposition has been filed by the Company
with the Commission and has become effective under the Securities Act, (iii) the
Company has received other evidence reasonably  satisfactory to the Company that
such  registration  and  qualification   under  the  Securities  Act  and  state
securities  laws are not required,  or (iv) the holder provides the Company with
reasonable  assurances that such security can be sold pursuant to Rule 144 under
the  Securities  Act;  and (b) either (i) the Company has received an opinion of
counsel reasonably  satisfactory to the Company, to the effect that registration
or  qualification  under the  securities  or "blue sky" laws of any state is not
required in connection  with such proposed  disposition,  (ii)  compliance  with
applicable state  securities or "blue sky" laws has been effected,  or (iii) the
holder  provides the Company with  reasonable  assurances that a valid exemption
exists with respect thereto.  The Company will respond to any such notice from a
holder  within three (3)  business  days.  In the case of any proposed  transfer
under this Section 5.1, the Company will use  reasonable  efforts to comply with
any such applicable  state  securities or "blue sky" laws, but shall in no event
be  required,  (x) to qualify to do  business  in any state where it is not then
qualified, (y) to take any action that would subject it to tax or to the general
service of process in any state where it is not then  subject,  or (z) to comply
with state securities or "blue sky" laws of any state for which  registration by
coordination  is  unavailable  to the  Company.  The  restrictions  on  transfer
contained  in this  Section  5.1  shall  be in  addition  to,  and not by way of
limitation of, any other restrictions on transfer contained in any other section
of this Agreement.  Whenever a certificate representing the Conversion Shares or
Warrant Shares is required to be issued to a Purchaser without a legend, in lieu
of  delivering  physical  certificates  representing  the  Conversion  Shares or
Warrant Shares,  provided the Company's  transfer agent is  participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program, the
Company  shall use its  reasonable  best efforts to cause its transfer  agent to
electronically  transmit the Conversion  Shares or Warrant Shares to a Purchaser
by crediting the account of such  Purchaser's  Prime Broker with DTC through its
Deposit  Withdrawal  Agent  Commission   ("DWAC")  system  (to  the  extent  not
inconsistent with any provisions of this Agreement).

ARTICLE VI........

                                 INDEMNIFICATION

Section  6.1.......General  Indemnity.  The Company agrees to indemnify and hold
harmless the Purchasers (and their respective directors,  officers,  affiliates,
agents,   successors   and  assigns)  from  and  against  any  and  all  losses,
liabilities,  deficiencies,  costs,  damages and  expenses  (including,  without
limitation,  reasonable attorneys' fees, charges and disbursements)  incurred by
the   Purchasers   as  a  result  of  any   inaccuracy   in  or  breach  of  the
representations,  warranties  or  covenants  made by the  Company  herein.  Each
Purchaser  severally  but not jointly  agrees to indemnify and hold harmless the
Company and its directors,  officers, affiliates, agents, successors and assigns
from and against any and all losses, liabilities,  deficiencies,  costs, damages
and expenses (including, without limitation, reasonable attorneys' fees, charges
and  disbursements)  incurred by the Company as result of any  inaccuracy  in or
breach of the  representations,  warranties or covenants  made by such Purchaser
herein.  The  maximum  aggregate  liability  of each  Purchaser  pursuant to its
indemnification  obligations  under this Article VI shall not exceed the portion
of the Purchase Price paid by such Purchaser hereunder.

                                      -24-
<PAGE>

Section    6.2.......Indemnification    Procedure.   Any   party   entitled   to
indemnification under this Article VI (an "indemnified party") will give written
notice  to the  indemnifying  party of any  matter  giving  rise to a claim  for
indemnification;   provided,   that  the  failure  of  any  party   entitled  to
indemnification  hereunder  to give notice as provided  herein shall not relieve
the  indemnifying  party of its obligations  under this Article VI except to the
extent that the  indemnifying  party is actually  prejudiced  by such failure to
give notice. In case any such action,  proceeding or claim is brought against an
indemnified party in respect of which  indemnification is sought hereunder,  the
indemnifying  party  shall be  entitled  to  participate  in and,  unless in the
reasonable  judgment of the indemnifying party a conflict of interest between it
and the  indemnified  party exists with respect to such  action,  proceeding  or
claim  (in  which  case the  indemnifying  party  shall be  responsible  for the
reasonable  fees  and  expenses  of one  separate  counsel  for the  indemnified
parties), to assume the defense thereof with counsel reasonably  satisfactory to
the  indemnified  party.  In the event that the  indemnifying  party  advises an
indemnified  party  that it will not  contest  such a claim for  indemnification
hereunder,  or fails,  within thirty (30) days of receipt of any indemnification
notice to notify, in writing,  such person of its election to defend,  settle or
compromise,  at its sole cost and expense,  any action,  proceeding or claim (or
discontinues its defense at any time after it commences such defense),  then the
indemnified party may, at its option,  defend, settle or otherwise compromise or
pay such action or claim. In any event,  unless and until the indemnifying party
elects in writing to assume  and does so assume the  defense of any such  claim,
proceeding or action, the indemnified  party's costs and expenses arising out of
the defense,  settlement or  compromise of any such action,  claim or proceeding
shall be losses subject to  indemnification  hereunder.  The  indemnified  party
shall  cooperate  fully  with  the  indemnifying  party in  connection  with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information  reasonably available to
the indemnified  party which relates to such action or claim.  The  indemnifying
party shall keep the  indemnified  party  fully  apprised at all times as to the
status of the defense or any settlement  negotiations  with respect thereto.  If
the  indemnifying  party  elects to defend  any such  action or claim,  then the
indemnified  party shall be entitled to participate in such defense with counsel
of its choice at its sole cost and expense.  The indemnifying party shall not be
liable for any settlement of any action,  claim or proceeding  effected  without
its prior written  consent.  Notwithstanding  anything in this Article VI to the
contrary,  the  indemnifying  party shall not,  without the indemnified  party's
prior written consent, settle or compromise any claim or consent to entry of any
judgment  in  respect  thereof  which  imposes  any  future  obligation  on  the
indemnified party or which does not include,  as an unconditional  term thereof,
the  giving by the  claimant  or the  plaintiff  to the  indemnified  party of a
release  from all  liability  in  respect  of such  claim.  The  indemnification
obligations to defend the indemnified party required by this Article VI shall be
made  by  periodic   payments  of  the  amount  thereof  during  the  course  of
investigation  or defense,  as and when bills are  received  or  expense,  loss,
damage or liability is incurred,  so long as the indemnified  party shall refund
such moneys if it is ultimately determined by a court of competent  jurisdiction
that such party was not entitled to  indemnification.  The indemnity  agreements
contained  herein  shall be in  addition  to (a) any cause of action or  similar
rights of the indemnified  party against the indemnifying  party or others,  and
(b) any  liabilities  the  indemnifying  party may be subject to pursuant to the
law. No indemnifying  party will be liable to the  indemnified  party under this

                                      -25-
<PAGE>

Agreement to the extent,  but only to the extent that a loss,  claim,  damage or
liability  is  attributable  to the  indemnified  party's  breach  of any of the
representations, warranties or covenants made by such party in this Agreement or
in the other Transaction Documents.

ARTICLE VII.......

                                  MISCELLANEOUS

Section 7.1.......Fees and Expenses.  Each party shall pay the fees and expenses
of its advisors,  counsel,  accountants and other experts, if any, and all other
expenses,  incurred  by such party  incident  to the  negotiation,  preparation,
execution,  delivery and performance of this Agreement;  provided, however, that
the  Company  shall  pay all  actual  attorneys'  fees and  expenses  (including
disbursements  and  out-of-pocket   expenses)  incurred  by  the  Purchasers  in
connection with (i) the preparation,  negotiation, execution and delivery of the
Transaction  Documents  and  the  transactions  contemplated  thereunder,  which
payment shall be made at the Initial  Closing and shall not exceed $25,000 (plus
disbursements and out-of-pocket  expenses),  of which $5,000 has been paid prior
to the Initial Closing Date, and (ii) any amendments,  modifications  or waivers
of this Agreement or any of the other Transaction  Documents.  In addition,  the
Company shall pay all reasonable fees and expenses incurred by the Purchasers in
connection  with  the  enforcement  of  this  Agreement  or  any  of  the  other
Transaction Documents,  including, without limitation, all reasonable attorneys'
fees and expenses.

Section 7.2.......Specific Performance; Consent to Jurisdiction; Venue.
                  ----------------------------------------------------

(a) The Company and the Purchasers acknowledge and agree that irreparable damage
would occur in the event that any of the  provisions  of this  Agreement  or the
other Transaction Documents were not performed in accordance with their specific
terms or were  otherwise  breached.  It is  accordingly  agreed that the parties
shall be entitled to an injunction or injunctions to prevent or cure breaches of
the  provisions  of this  Agreement or the other  Transaction  Documents  and to
enforce  specifically the terms and provisions hereof or thereof,  this being in
addition  to any other  remedy to which  any of them may be  entitled  by law or
equity.

(b) The parties agree that venue for any dispute  arising  under this  Agreement
will lie  exclusively in the state or federal courts located in New York County,
New  York,  and the  parties  irrevocably  waive  any  right to raise  forum non
conveniens  or any other  argument  that New York is not the proper  venue.  The
parties  irrevocably  consent to personal  jurisdiction in the state and federal
courts of the state of New York.  The  Company  and each  Purchaser  consent  to
process  being served in any such suit,  action or  proceeding by mailing a copy
thereof  to such party at the  address  in effect  for  notices to it under this
Agreement  and agrees that such service  shall  constitute  good and  sufficient
service of process and notice thereof.  Nothing in this Section 7.2 shall affect
or limit any right to serve  process in any other  manner  permitted by law. The
Company and the Purchasers  hereby agree that the prevailing  party in any suit,
action  or  proceeding  arising  out  of or  relating  to the  Securities,  this
Agreement or the other Transaction Documents, shall be entitled to reimbursement
for  reasonable  legal fees from the  non-prevailing  party.  The parties hereby
waive all rights to a trial by jury.

Section   7.3.......Entire   Agreement;   Amendment.   This  Agreement  and  the
Transaction  Documents  contain the entire  understanding  and  agreement of the

                                      -26-
<PAGE>

parties with respect to the matters  covered hereby and,  except as specifically
set forth herein or in the other Transaction Documents,  neither the Company nor
any Purchaser make any  representation,  warranty,  covenant or undertaking with
respect  to such  matters,  and they  supersede  all  prior  understandings  and
agreements with respect to said subject matter,  all of which are merged herein.
No provision of this  Agreement may be waived or amended other than by a written
instrument signed by the Company and the Purchasers  holding at least a majority
of the principal amount of the Notes then held by the Purchasers.  Any amendment
or waiver  effected in  accordance  with this  Section 7.3 shall be binding upon
each Purchaser (and their permitted assigns) and the Company.

Section  7.4.......Notices.   Any  notice,  demand,  request,  waiver  or  other
communication  required or permitted to be given  hereunder  shall be in writing
and shall be  effective  (a) upon hand  delivery by telecopy or facsimile at the
address or number designated below (if delivered on a business day during normal
business  hours where such notice is to be received),  or the first business day
following such delivery (if delivered other than on a business day during normal
business  hours  where  such  notice  is to be  received)  or (b) on the  second
business day following  the date of mailing by express  courier  service,  fully
prepaid,  addressed to such  address,  or upon actual  receipt of such  mailing,
whichever shall first occur. The addresses for such communications shall be:

If to the Company:                  FinancialContent, Inc.
                                    400 Oyster Point Boulevard, Suite 435
                                    So.   San   Francisco,    California   94080
                                    Attention: Chief Executive Officer
                                    Tel.  No.:  (650)  837-9850  Fax No.:  (650)
                                    745-2677

with copies (which copies
shall not constitute notice)
to:                                 Dave Neville, Esq.

                                    Tel. No.:
                                    Fax No.:

If                                  to any  Purchaser:  At the  address  of such
                                    Purchaser  set  forth on  Exhibit  A to this
                                    Agreement,   with   copies  to   Purchaser's
                                    counsel  as set  forth  on  Exhibit  A or as
                                    specified in writing by such  Purchaser with
                                    copies to:

                                    Kramer Levin Naftalis & Frankel LLP
                                    1177 Avenue of the Americas
                                    New York, New York 10036
                                    Attention: Christopher S. Auguste
                                    Tel. No.: (212) 715-9100
                                    Fax No.: (212) 715-8000

                                      -27-
<PAGE>

         Any party  hereto may from time to time  change its address for notices
by giving written notice of such changed address to the other party hereto.

Section 7.5.......Waivers. No waiver by either party of any default with respect
to any provision,  condition or requirement of this Agreement shall be deemed to
be a  continuing  waiver  in the  future  or a waiver  of any  other  provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such right
accruing  to it  thereafter.  No  consideration  shall be offered or paid to any
Purchaser to amend or consent to a waiver or  modification  of any  provision of
any of the Transaction  Documents unless the same  consideration is also offered
to all of the parties to the Transaction Documents. This provision constitutes a
separate right granted to each Purchaser by the Company and shall not in any way
be construed as the  Purchasers  acting in concert or as a group with respect to
the purchase, disposition or voting of Securities or otherwise.

Section 7.6  Headings.  The  article,  section and  subsection  headings in this
Agreement  are for  convenience  only and  shall not  constitute  a part of this
Agreement  for any other  purpose and shall not be deemed to limit or affect any
of the provisions hereof.

Section 7.7  Successors and Assigns.  This  Agreement  shall be binding upon and
inure to the benefit of the parties and their successors and assigns.  After the
Closing,  the  assignment by a party to this  Agreement of any rights  hereunder
shall not affect the obligations of such party under this Agreement.  Subject to
Section 5.1 hereof,  the  Purchasers  may assign the  Securities  and its rights
under this  Agreement and the other  Transaction  Documents and any other rights
hereto and thereto without the consent of the Company.

Section 7.8 No 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.

Section 7.9 Governing Law. This Agreement  shall be governed by and construed in
accordance  with the  internal  laws of the  State of New York,  without  giving
effect to any of the  conflicts  of law  principles  which  would  result in the
application of the substantive law of another jurisdiction. This Agreement shall
not be interpreted or construed with any  presumption  against the party causing
this Agreement to be drafted.

Section 7.10 Survival. The representations and warranties of the Company and the
Purchasers shall survive the execution and delivery hereof and the Closing until
the second  anniversary of the Closing Date, except the agreements and covenants
set forth in Articles I, III, V, VI and VII of this Agreement  shall survive the
execution and delivery hereof and the Closing hereunder.

Section  7.11  Counterparts.  This  Agreement  may be  executed in any number of
counterparts,  all of which taken  together  shall  constitute  one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties  hereto,  it being  understood that all
parties need not sign the same counterpart.

Section 7.12 Publicity.  The Company agrees that it will not disclose,  and will
not include in any public announcement,  the names of the Purchasers without the
consent of the Purchasers,  which consent shall not be unreasonably  withheld or

                                      -28-
<PAGE>

delayed,  or unless  and until  such  disclosure  is  required  by law,  rule or
applicable  regulation,  including without limitation any disclosure pursuant to
the Registration Statement, and then only to the extent of such requirement.
Section 7.13  Severability.  The provisions of this Agreement are severable and,
in the event that any court of competent  jurisdiction  shall determine that any
one or  more of the  provisions  or part  of the  provisions  contained  in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other  provision or part of a provision of this Agreement and this Agreement
shall be reformed and  construed as if such invalid or illegal or  unenforceable
provision,  or part of such provision,  had never been contained herein, so that
such  provisions  would be valid,  legal and  enforceable  to the maximum extent
possible.

Section 7.14 Further Assurances. From and after the date of this Agreement, upon
the request of the  Purchasers  or the Company,  the Company and each  Purchaser
shall execute and deliver such instruments,  documents and other writings as may
be reasonably  necessary or desirable to confirm and carry out and to effectuate
fully the  intent  and  purposes  of this  Agreement  and the other  Transaction
Documents.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                      -29-
<PAGE>

         IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this Note and
Warrant Purchase  Agreement to be duly executed by their  respective  authorized
officers as of the date first above written.

                             FINANCIALCONTENT, INC.

                             By: /S/ Wing Yu
                             ---------------
                             Name:  Wing Yu
                             Title: Chief Executive Officer

PURCHASER:

                             By: /S/ David Propis
                             --------------------
                             Name:  David Propis
                             Title:    Manager, Jade Special Strategy

                                      -30-Exhibit 10.1

                               GRIFFON CORPORATION

                           2006 EQUITY INCENTIVE PLAN

1.   Purpose. The purpose of the Griffon Corporation 2006 Equity Incentive Plan
(the "Plan") is to attract and retain employees, consultants and non-employee
directors for Griffon Corporation and its subsidiaries and to provide such
persons with incentives and rewards for superior performance.

2.   Definitions. As used in this Plan, the following terms shall be defined as
set forth below:

     2.1. "Award" means any Performance Shares, Performance Units, Options,
Stock Appreciation Rights, Restricted Shares or Deferred Shares granted under
the Plan.

     2.2. "Award Agreement" means an agreement, certificate, resolution or other
form of writing or other evidence approved by the Committee that sets forth the
terms and conditions of an Award. An Award Agreement may be in an electronic
medium, or may be limited to a notation on the Company's books or records, but
shall be signed by a representative of the Company and the Participant unless
otherwise approved by the Committee.

     2.3. "Base Price" means the price used as the basis for determining the
Spread upon the exercise of Stock Appreciation Right.

     2.4. "Board" means the Board of Directors of the Company.

     2.5. "Cause" means, (a) if the applicable Participant is party to an
effective employment, consulting, severance or similar agreement with the
Company or any of its

<PAGE>

Subsidiaries, "Cause" shall have the same meaning as such term is defined
therein; (b) if the applicable Participant is not a party to an effective
employment, consulting, severance or similar agreement or if no definition of
"Cause" is set forth in the applicable employment, consulting, severance or
similar agreement, "Cause" shall have the same meaning as such term is defined
in the applicable Award Agreement; and (c) if the applicable Participant is not
a party to any effective employment, consulting, severance or similar agreement
or no definition of "Cause is set forth in the applicable employment,
consulting, severance or similar agreement, and no definition of "Cause" is set
forth in the applicable Award Agreement, the existence of "Cause" shall be
determined in good faith by the Committee from time to time as circumstances
dictate; provided that the Committee shall provide notice to the Participant of
such determination and an opportunity for the Participant to cure such event (if
the Committee determines such event is reasonably curable).

     2.6. "Change in Control" means, after the effective date of the Plan:

          (i) the acquisition, directly or indirectly, by a "person" (within the
     meaning of Section 13(d)(3) of the Exchange Act) (a "Person") of beneficial
     ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
     Act) of more than 20% of the combined voting power of the voting securities
     of the Company entitled to vote generally in the election of directors (the
     "Voting Securities"); provided, however, that the following acquisitions
     shall not constitute a Change in Control: (a) any acquisition by or from
     the Company or any Subsidiary, or by any employee benefit plan (or related
     trust) sponsored or maintained by the Company or any Subsidiary, (b) any
     acquisition by an

<PAGE>

                                       2

     individual who as of the effective date of the Plan is a member of the
     Board, (c) any acquisition by any underwriter in any firm commitment
     underwriting of securities to be issued by the Company, or (d) any
     acquisition by any corporation (or other entity) if, immediately following
     such acquisition, 65% or more of the then outstanding shares of common
     stock (or other equity unit) of such corporation (or other entity) and the
     combined voting power of the then outstanding voting securities of such
     corporation (or other entity), are beneficially owned, directly or
     indirectly, by all or substantially all of the individuals or entities who,
     immediately prior to such acquisition, were the beneficial owners of the
     then outstanding Shares and the Voting Securities in substantially the same
     proportions, respectively, as their ownership immediately prior to the
     acquisition of the Stock and Voting Securities; or

          (ii) the consummation of the sale or other disposition of all or
     substantially all of the assets of the Company, other than to a
     wholly-owned Subsidiary or to a holding company of which the Company is a
     direct or indirect wholly owned subsidiary prior to such transaction; or

          (iii) the approval by stockholders of the Company of a reorganization,
     merger or consolidation of the Company, other than a reorganization, merger
     or consolidation, which would result in the Voting Securities outstanding
     immediately prior to the transaction continuing to represent (whether by
     remaining outstanding or by being converted to voting securities of the
     surviving entity) 65% or more of the Voting Securities or the voting power
     of the voting securities of such surviving entity outstanding immediately
     after such transaction;

                                       3

<PAGE>

     or the approval by stockholders of the Company of a plan of complete
     liquidation or substantial dissolution of the Company; or

          (iv) the following individuals cease for any reason to constitute a
     majority of the Board: individuals who, as of the effective date of the
     Plan, constitute the Board and any new director (other than a director
     whose initial assumption of office is in connection with an actual or
     threatened election contest, including, but not limited to, a consent
     solicitation relating to the election of directors of the Company) whose
     appointment or election by the Board or nomination for election by the
     Company's stockholders was approved and recommended by a vote of at least
     two-thirds of the directors then still in office who either were directors
     on the effective date of the Plan or whose appointment, election or
     nomination for election was previously so approved or recommended; or

          (v) the sale, transfer, assignment, distribution or other disposition
     by the Company and/or one of its Subsidiaries, in one transaction, or in a
     series of related transactions within any period of 18 consecutive calendar
     months (including, without limitation, by means of the sale, transfer,
     assignment, distribution or other disposition of the capital stock of any
     Subsidiary or Subsidiaries), of assets which account for an aggregate of
     50% or more of the consolidated revenues of the Company and its
     Subsidiaries, as determined in accordance with U.S. generally accepted
     accounting principles, for the fiscal year most recently ended prior to the
     date of such transaction (or, in the case of a series of transactions as
     described above, the first such transaction); provided, however,

                                       4

<PAGE>

     that no such transaction shall be taken into account if substantially all
     the proceeds thereof (whether in cash or in kind) are used after such
     transaction in the ongoing conduct by the Company and/or its Subsidiaries
     of the business conducted by the Company and/or its Subsidiaries prior to
     such transaction; or

          (vi) notwithstanding Sections 2.6(i) through 2.6(vi) above, in the
     case of a distribution under the Plan of an amount which is subject to
     section 409A of the Code, an event which constitutes a "change in control
     event" as defined under Section 409A of the Code.

     2.7. "Code" means the Internal Revenue Code of 1986, as amended from time
to time and the regulations and other guidance issued thereunder.

     2.8. "Committee" means the Compensation Committee of the Board. The
Committee shall have at least two members, each of whom shall be a "non-employee
director" as defined in Rule 16b-3 under the Exchange Act and an "outside
director" as defined in Section 162(m) of the Code and the regulations
thereunder, and, if applicable meet the independence requirements of the
applicable stock exchange, quotation system or other self-regulatory
organization on which the Shares are traded.

     2.9. "Company" means Griffon Corporation., a Delaware corporation, or any
successor corporation.

     2.10. "Consultant" means an individual (other than an Employee or a
Nonemployee Director) who renders services to the Company or a Subsidiary,
including an independent contractor or an advisor.

                                       5

<PAGE>

     2.11. "Deferral Period" means the period of time during which Deferred
Shares are subject to deferral limitations under Section 9.

     2.12. "Deferred Shares" means an Award pursuant to Section 9 of the right
to receive Shares at the end of a specified Deferral Period.

     2.13. "Employee" means any person, including an officer, employed by the
Company or a Subsidiary.

     2.14. "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, including rules thereunder and successor provisions and rules
thereto.

     2.15. "Fair Market Value" means, on any given date, unless otherwise
determined by the Committee, the closing sale prices reported as having occurred
on the New York Stock Exchange (or other principal exchange or market on which
the Shares are traded or listed) on such date, or, if no sale was made on such
date on such principal exchange or market, on the last proceeding day on which
the Shares were traded or listed.

     2.16. "Grant Date" means the date specified by the Committee on which a
grant of an Award shall become effective, which shall not be earlier than the
date on which the Committee takes action with respect thereto.

     2.17. "Incentive Stock Option" means any Option which meets the
requirements of Section 422 of the Code and which is designated as an Incentive
Stock Option by the Committee.

                                       6

<PAGE>

     2.18. "Nonemployee Director" means a member of the Board who is not an
Employee.

     2.19. "Nonqualified Stock Option" means an Option that is not intended to
qualify as an Incentive Stock Option, and designated as a Nonqualified Stock
Option by the Committee.

     2.20. "Option" means any option to purchase Shares granted under Section 6.

     2.21. "Optionee" means the person so designated in an agreement evidencing
an outstanding Option.

     2.22. "Option Price" means the purchase price payable upon the exercise of
an Option.

     2.23. "Participant" means an Employee, Nonemployee Director or Consultant
who is selected by the Committee to receive Awards, provided that only Employees
may receive grants of Incentive Stock Options.

     2.24. "Performance Objectives" means the performance objectives established
in the sole discretion of the Committee for Participants who are eligible to
receive Awards under the Plan. Performance Objectives may be described in terms
of Company-wide objectives or objectives that are related to the performance of
the individual Participant or the Subsidiary, division, department or function
within the Company or Subsidiary in which the Participant is employed.
Performance Objectives may be measured on an absolute or relative basis.
Relative performance may be measured by a group of peer companies or by a
financial market index. Any Performance Objectives

                                       7

<PAGE>

applicable to a Qualified Performance-Based Award shall be limited to: specified
levels of or increases in the Company's, a division's or a Subsidiary's return
on capital, equity or assets; earnings measures/ratios (on a gross, net, pre-tax
or post-tax basis), including basic earnings per share, diluted earnings per
share, total earnings, operating earnings, earnings growth, earnings before
interest and taxes and earnings before interest, taxes, depreciation and
amortization; net economic profit (which is operating earnings minus a charge to
capital); net income; operating income; sales; sales growth; gross margin;
direct margin; Share price (including but not limited to growth measures and
total stockholder return); operating profit; per period or cumulative cash flow
(including but not limited to operating cash flow and free cash flow) or cash
flow return on investment (which equals net cash flow divided by total capital);
inventory turns; financial return ratios; market share; balance sheet
measurements such as receivable turnover; improvement in or attainment of
expense levels; improvement in or attainment of working capital levels; debt
reduction; strategic innovation; customer or employee satisfaction; individual
objectives; and any combination of the foregoing. If the Committee determines
that a change in the business, operations, corporate structure or capital
structure of the Company, or the manner in which it conducts its business, or
other events or circumstances render the Performance Objectives unsuitable, the
Committee may modify such Performance Objectives or the related minimum
acceptable level of achievement, in whole or in part, as the Committee deems
appropriate and equitable.

     2.25. "Performance Period" means a period of time established under Section
5 within which the Performance Objectives relating to Awards are to be achieved.

                                       8

<PAGE>

     2.26. "Performance Share" means a bookkeeping entry that records the
equivalent of one Share awarded pursuant to Section 5.

     2.27. "Performance Unit" means a bookkeeping entry that records a unit
equivalent to $1.00 awarded pursuant to Section 5.

     2.28. "Qualified Performance-Based Award" means an Award or portion of an
Award that is intended to satisfy the requirements for "qualified
performance-based compensation" under Code Section 162(m). The Committee shall
designate any Qualified Performance-Based Award as such at the time of grant.

     2.29. "Restricted Shares" mean Shares granted under Section 8 subject to a
substantial risk of forfeiture.

     2.30. "Shares" means shares of the Common Stock of the Company, $.25 par
value, or any security into which Shares may be converted by reason of any
transaction or event of the type referred to in Section 14.

     2.31. "Spread" means, in the case of a Stock Appreciation Right, the amount
by which the Fair Market Value on the date when any such right is exercised
exceeds the Base Price specified in such right.

     2.32. "Stock Appreciation Right" means a right granted under Section 7.

     2.33. "Subsidiary" means a corporation or other entity in which the Company
owns or controls directly or indirectly at least 50 percent of the total
combined voting power represented by all classes of stock issued by such
corporation, or in the case of a

                                       9

<PAGE>

noncorporate entity, at least 50% of the profits or capital interest in such
entity, at the time of such grant.

3.   Shares Available Under the Plan.

     3.1. Reserved Shares. Subject to adjustment as provided in Section 14, the
maximum number of Shares that may be (a) issued upon the exercise of Options or
Stock Appreciation Rights, (b) issued as Restricted Shares and released from
substantial risk of forfeiture, or (c) issued in payment of Deferred Shares or
Performance Shares, shall not in the aggregate exceed 1,700,000 Shares. Such
Shares may be Shares of original issuance, Shares held in Treasury, or Shares
that have been reacquired by the Company. In addition:

          (i) To the extent any Shares covered by an Award are not issued to a
     Participant (or, if applicable, his heir, legatee or permitted transferee)
     because the Award is forfeited or canceled, such Shares shall not be deemed
     to have been issued for purposes of determining the maximum number of
     Shares available for issuance under the Plan.

          (ii) Shares issued under the Plan in settlement, assumption or
     substitution of outstanding awards (or obligations to grant future awards)
     under the plans or arrangements of another entity shall not reduce the
     maximum number of Shares available for issuance under the Plan, to the
     extent that such settlement, assumption or substitution is a result of the
     Company acquiring another entity (or an interest in another entity).

                                       10

<PAGE>

     3.2. Reduction Ratio. For purposes of Section 3.1, each Share issued
pursuant to an Award other than an Option shall reduce the number of Shares
available for issuance under the Plan by two Shares. For example, if all Awards
under the Plan are in the form of Restricted Shares, 850,000 Shares are
available for issuance, subject to adjustment as provided in Section 14.

     3.3. ISO Maximum. In no event shall the number of Shares issued upon the
exercise of Incentive Stock Options exceed 600,000 Shares, subject to adjustment
as provided in Section 14.

     3.4. Maximum Annual Award. No Participant my receive Awards (including
performance-based Awards) representing more than 500,000 Shares underlying
Option grants (or 250,000 Shares underlying any Award, except for Options) in
any one fiscal year, subject to adjustment as provided in Section 14. The
maximum Qualified Performance-Based Award that may be granted to a Participant
in any one Performance Period is 250,000 Shares (subject to adjustment as
provided in Section 14).

4.   Plan Administration.

     4.1. Committee Administration. This Plan shall be administered by the
Committee. The interpretation and construction by the Committee of any provision
of this Plan or of any Award Agreement and any determination by the Committee
pursuant to any provision of this Plan or any such agreement, notification or
document, shall be final and conclusive. No member of the Committee shall be
liable to any person for any such action taken or determination, other than one
made in bad faith.

                                       11

<PAGE>

     4.2. Committee Powers. The Committee shall have full authority to interpret
the Plan; to establish and amend rules and regulations relating to the Plan; to
select the Participants and determine the type of Awards to be made to
Participants, the number of shares subject to Awards and the terms, conditions,
restrictions and limitations of Awards; and to make all other determinations as
are necessary or advisable for the administration of the Plan.

     4.3. Committee Delegation. The Committee may delegate to one or more
officers of the Company the authority to grant Awards to Participants who are
not subject to the requirements of Section 16 of the Exchange Act or Section
162(m) of the Code and the rules and regulations thereunder, provided that the
Committee shall have fixed the total number of Shares subject to such grants.
Any such delegation shall be subject to the limitations of Section 157(c) of the
Delaware General Corporation Law. The Committee may revoke any such allocation
or delegation at any time for any reason with or without prior notice.

5.   Performance Shares and Performance Units. The Committee may authorize
grants of Performance Shares and Performance Units, which shall vest and become
payable to the Participant upon the achievement of specified Performance
Objectives during a specified Performance Period, upon such terms and conditions
as the Committee may determine in accordance with the following provisions:

     5.1. Terms and Conditions of Performance Share/Performance Unit Awards.
Each grant shall specify the number of Performance Shares or Performance Units
to which it pertains. The Performance Period with respect to each Performance
Share or

                                       12

<PAGE>

Performance Unit shall commence on the Grant Date and may be subject to earlier
termination in the event of a Change in Control or other similar transaction or
event. Each grant shall specify the Performance Objectives that are to be
achieved by the Participant. Each grant may specify in respect of the specified
Performance Objectives a minimum acceptable level of achievement below which no
payment will be made and may set forth a formula for determining the amount of
any payment to be made if performance is at or above such minimum acceptable
level but falls short of the maximum achievement of the specified Performance
Objectives.

     5.2. Payment of Performance Shares and Units. Each grant shall specify the
time and manner of payment of Performance Shares or Performance Units that shall
have been earned, and shall be paid by the Company in Shares.

     5.3. Maximum Payment. Subject to Section 3.4 of the Plan, any grant of
Performance Shares may specify that the Shares payable with respect thereto may
not exceed a maximum specified by the Committee on the Grant Date. Any grant of
Performance Units may specify the number of Shares issued, with respect thereto
may not exceed maximums specified by the Committee on the Grant Date.

     5.4. Adjustment of Performance Objectives. The Committee may adjust
Performance Objectives and the related minimum acceptable level of achievement
if, in the sole judgment of the Committee, events or transactions have occurred
after the Grant Date that are unrelated to the performance of the Participant
and result in distortion of the Performance Objectives or the related minimum
acceptable level of achievement.

                                       13

<PAGE>

     5.5. Qualified Performance-Based Awards. In the case of a Qualified
Performance-Based Award the following provisions shall apply in addition to, and
where necessary, in lieu of other provisions of the Plan, including the
provisions of Sections 5.1 through 5.4:

          (i) Only Employees who are "Covered Employees" within the meaning of
     Section 162(m) of the Code shall be eligible to receive Qualified
     Performance-Based Awards. The Committee shall designate in its sole
     discretion which Covered Employees will be Participants for a Performance
     Period within the earlier of the (a) first 90 days of a Performance Period
     and (b) the lapse of 25% of the Performance Period.

          (ii) The Committee shall establish in writing within the earlier of
     the (a) first 90 days of a Performance Period and (b) the lapse of 25% of
     the Performance Period, and in any event, while the outcome is
     substantially uncertain, (x) Performance Objectives for the Performance
     Period, and (y) in respect of such Performance Objectives, a minimum
     acceptable level of achievement below which no Award will be made, and an
     objective formula or other method for determining the Award to be made if
     performance is at or above such minimum acceptable level but falls short of
     the maximum achievement of the specified Performance Objectives.

          (iii) Following the completion of a Performance Period, the Committee
     shall review and certify in writing whether, and to what extent, the
     Performance Objectives for the Performance Period have been achieved and,
     if so, to also

                                       14
<PAGE>

     calculate and certify in writing the amount of the Qualified Performance-
     Based Awards earned for the period based upon the Performance Objectives
     and the related formulas or methods as determined pursuant to Section
     5.5(ii). The Committee shall then determine the actual number of Shares
     issuable under each Participant's Award for the Performance Period, and, in
     doing so, may reduce or eliminate, unless otherwise and/or to the extent
     provided in the Award Agreement, the amount of the Award. In no event shall
     the Committee have the authority to increase Award amounts to any Covered
     Employee.

          (iv) Subject to Section 20.2, Awards granted for a Performance Period
     shall be made to Participants within a reasonable time after completion of
     the certification described in Section 5.5(iii).

     5.6. Other Awards. Any grant of an Award under Sections 6, 7, 8 or 9,
and/or the vesting or exercise thereof, may be further conditioned upon the
attainment of Performance Objectives established by the Committee in accordance
with the applicable provisions of this Section 5 regarding Performance Shares
and Performance Units.

6.   Options. The Committee may from time to time authorize grants of Options to
Participants upon such terms and conditions as the Committee may determine in
accordance with the following provisions:

     6.1. Number of Shares. Each grant shall specify the number of Shares to
which it pertains.

                                       15

<PAGE>

     6.2. Option Price. Each grant shall specify an Option Price per Share,
which shall be equal to or greater than the Fair Market Value per Share on the
Grant Date; provided that in the case of any Incentive Stock Option granted to a
person who on any given date owns, either directly or indirectly (taking into
account the attribution rules contained in Section 424(d) of the Code), stock
possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company or any Subsidiary, the Option Price shall not be
less than 110% of the Fair Market Value of a Share on the date of grant.

     6.3. Consideration. Each grant shall specify the form of consideration to
be paid in satisfaction of the Option Price and the manner of payment of such
consideration, which may include (i) cash in the form of currency or check or
other cash equivalent, in each such case as is acceptable to the Company, (ii)
subject to approval by the Committee, nonforfeitable, unrestricted Shares owned
by the Optionee, (iii) any other legal consideration that the Committee may deem
appropriate, including without limitation any form of consideration authorized
under Section 6.4, on such basis as the Committee may determine in accordance
with this Plan, or (iv) any combination of the foregoing.

     6.4. Payment of Option Price in Restricted Shares. On or after the Grant
Date of any Option other than an Incentive Stock Option, the Committee may
determine that payment of the Option Price may also be made in whole or in part
in the form of Restricted Shares or other Shares that are subject to risk of
forfeiture or restrictions on transfer. Unless otherwise determined by the
Committee, whenever any Option Price is paid in whole or in part by means of any
of the forms of consideration specified in this

                                       16

<PAGE>

Section 6.4, the Shares received by the Optionee upon the exercise of the
Options shall be subject to the same risks of forfeiture or restrictions on
transfer as those that applied to the consideration surrendered by the Optionee,
provided that such risks of forfeiture and restrictions on transfer shall apply
only to the same number of Shares received by the Optionee as applied to the
forfeitable or restricted Shares surrendered by the Optionee.

     6.5. Broker Assisted Exercise. To the extent such program is permitted by
the Company and permitted by applicable law, rule or regulations, the Option
Price may be satisfied from the proceeds of a sale through a bank or broker on
the date of exercise of some or all of the Shares to which the exercise relates
pursuant to a broker assisted exercise program provided by such bank or broker.

     6.6. Exercise Period. No Option granted may be exercised more than ten
years after the Grant Date; provided that in the case of any Incentive Stock
Option granted to a person who on any given date owns, either directly or
indirectly (taking into account the attribution rules contained in Section
424(d) of the Code), stock possessing more than 10 percent of the total combined
voting power of all classes of stock of the Company or any Subsidiary, such
Option shall be exercised within five years after the Grant Date.

     6.7. Disqualifying Dispositions of ISOs. Each Participant awarded an
Incentive Stock Option under the Plan shall notify the Company in writing
immediately after the date he or she makes a disqualifying disposition (as
defined in Section 421(b) of the Code) of any Shares acquired pursuant to the
exercise of such Incentive Stock Option. The Company may, if determined by the
Committee and in accordance with procedures established by it, retain possession
of any Shares acquired pursuant to the exercise of an

                                       17

Incentive Stock Option as agent for the applicable Participant until the end of
the period described in the preceding sentence, subject to complying with any
instructions from such Participant as to the sale of such Shares.

7.   Stock Appreciation Rights. The Committee may also authorize grants to
Participants of Stock Appreciation Rights. A Stock Appreciation Right is the
right of the Participant to receive from the Company an amount, which, shall be
determined by the Committee and shall be expressed as a percentage (not
exceeding 100 percent) of the Spread at the time of the exercise of such right.
Any grant of Stock Appreciation Rights shall be upon such terms and conditions
as the Committee may determine in accordance with the following provisions:

     7.1. Payment in Shares. Any amount payable upon the exercise of a Stock
Appreciation Right shall be paid by the Company in Shares. Any grant may specify
that the Shares payable upon the exercise of a Stock Appreciation Right shall
not exceed a maximum specified by the Committee on the Grant Date.

     7.2. Exercise Period. Any grant may specify (a) a waiting period or periods
before Stock Appreciation Rights shall become exercisable and (b) permissible
dates or periods on or during which Stock Appreciation Rights shall be
exercisable; provided that no Stock Appreciation Right granted may be exercised
more than ten years after the Grant Date. A grant may specify that a Stock
Appreciation Right may be exercised only in the event of a Change in Control or
other similar transaction or event.

                                       18

<PAGE>

     7.3. Base Price. Each grant shall specify in respect of each Stock
Appreciation Right a Base Price per Share, which shall be equal to or greater
than the Fair Market Value on the Grant Date.

     7.4. Deemed Exercise. The Committee may provide that a Stock Appreciation
Right shall be deemed to be exercised at the close of business on the scheduled
expiration date of such Stock Appreciation Right if at such time the Stock
Appreciation Right by its terms remains exercisable and, if so exercised, would
result in a payment of Shares to the holder of such Stock Appreciation Right.

8.   Restricted Shares. The Committee may also authorize grants to Participants
of Restricted Shares upon such terms and conditions as the Committee may
determine in accordance with the following provisions:

     8.1. Transfer of Shares. Each grant shall constitute an immediate transfer
of the ownership of Shares to the Participant in consideration of the
performance of services, subject to the substantial risk of forfeiture and
restrictions on transfer referred to in Section 10. Each grant may be made
without additional consideration from the Participant or in consideration of a
payment by the Participant that is less than the Fair Market Value on the Grant
Date.

     8.2. Dividends. Any grant may require that any or all dividends or other
distributions paid on the Restricted Shares during the period of such
restrictions be reinvested in additional Shares or held in cash, which
additional Shares or cash, as the case may be, may be subject to the same
restrictions as the underlying Award or such other restrictions as the Committee
may determine.

                                       19

<PAGE>

9.   Deferred Shares. The Committee may authorize grants of Deferred Shares to
Participants upon such terms and conditions as the Committee may determine in
accordance with the following provisions:

     9.1. Deferred Transfer of Shares. Each grant shall constitute the agreement
by the Company to issue or transfer Shares to the Participant in the future in
consideration of the performance of services, subject to the fulfillment during
the Deferral Period of such conditions as the Committee may specify.

     9.2. Consideration. Each grant may be made without additional consideration
from the Participant or in consideration of a payment by the Participant that is
less than the Fair Market Value on the Grant Date.

10.   Vesting.

     10.1. In General. Each grant of Options and Stock Appreciation Rights shall
specify the period of continuous employment by the Company or any Subsidiary, or
service to the Company or any Subsidiary (and in the case of a Nonemployee
Director, service on the Board), of the Participant that is necessary before
such Options or Stock Appreciation Rights, or installments thereof, shall become
exercisable. Each grant of Restricted Shares shall specify the period during
which such Restricted Shares shall be subject to a "substantial risk of
forfeiture" within the meaning of Code Section 83, and each grant of Deferred
Shares shall specify the Deferral Period to which such Deferred Shares shall be
subject. Each grant of such Award may provide for the earlier exercise of
rights, termination of a risk of forfeiture or termination of a Deferral Period
in the event of a Change in Control or similar transaction or event.

                                       20

<PAGE>

     10.2. Restrictions on Transfer of Restricted Shares. Each grant of
Restricted Shares shall provide that, during the period for which a substantial
risk of forfeiture is to continue, the transferability of the Restricted Shares
shall be prohibited or restricted in the manner and to the extent prescribed by
the Committee on the Grant Date. Such restrictions may include, without
limitation, rights of repurchase or first refusal in the Company or provisions
subjecting the Restricted Shares to a continuing substantial risk of forfeiture
in the hands of any transferee.

11.   Dividends and Other Ownership Rights.

     11.1. Restricted Shares. Unless otherwise determined by the Committee, an
Award of Restricted Shares shall entitle the Participant to dividend, voting and
other ownership rights during the period for which a substantial risk of
forfeiture is to continue.

     11.2. Deferred Shares. Unless otherwise determined by the Committee, during
the Deferral Period, the Participant shall not have any right to transfer any
rights under an Award of Deferred Shares, shall not have any rights of ownership
in the Deferred Shares and shall not have any right to vote such Shares.

12.  Transferability.

     12.1. Transfer Restrictions. Except as provided in Section 12.2, no Award
granted shall be transferable by a Participant other than by will or the laws of
descent and distribution, and Options and Stock Appreciation Rights shall be
exercisable during a Participant's lifetime only by the Participant or, in the
event of the Participant's legal

                                       21

<PAGE>

incapacity, by his or her guardian or legal representative acting in a fiduciary
capacity on behalf of the Participant under state law. Any attempt to transfer
an Award in violation of this Plan shall render such Award null and void.

     12.2. Limited Transfer Rights. The Committee may expressly provide in an
Award Agreement (or an amendment to an Award Agreement) that a Participant may
transfer such Award (other than an Incentive Stock Option), in whole or in part,
to a spouse or lineal descendant (a "Family Member"), a trust for the exclusive
benefit of Family Members, a partnership or other entity in which all the
beneficial owners are Family Members, or any other entity affiliated with the
Participant that may be approved by the Committee. Subsequent transfers of
Awards shall be prohibited except in accordance with this Section 12.2. All
terms and conditions of the Award, including without limitation provisions
relating to termination of the Participant's employment or service with the
Company or a Subsidiary, shall continue to apply following a transfer made in
accordance with this Section 12.2. In order for a transfer to be effective, a
Participant must agree in writing prior to the transfer on a form provided by
the Company to pay any and all payroll and withholding taxes due upon exercise
of the transferred Option. In addition, prior to the exercise of a transferred
Option by a transferee, arrangements must be made by the Participant with the
Company for the payment of all payroll and withholding taxes. Finally, the
Company shall be under no obligation to provide a transferee with any notice
regarding the transferred Awards held by the transferee upon forfeiture or any
other circumstance.

     12.3. Restrictions on Transfer. Any Award granted may provide that all or
any part of the Shares that are (a) to be issued or transferred by the Company
upon the

                                       22

<PAGE>

exercise of Options or Stock Appreciation Rights, upon termination of the
Deferral Period applicable to Deferred Shares or upon payment under any grant of
Performance Shares or Performance Units, or (b) no longer subject to the
substantial risk of forfeiture and restrictions on transfer referred to in
Section 10, shall be subject to further restrictions upon transfer, including
restrictions relating to any minimum Share ownership requirements imposed by the
Company with respect to a Participant.

13.   Award Agreement. Each grant under the Plan shall be evidenced by an Award
Agreement, which shall describe the subject Award, state that the Award is
subject to all of the terms and conditions of this Plan and contain such other
terms and provisions as the Committee may determine consistent with this Plan.

14.   Adjustments. The Committee shall make or provide for appropriate
adjustments in the (a) number of Shares covered by outstanding Options, Stock
Appreciation Rights, Deferred Shares, Restricted Shares and Performance Shares
granted hereunder, (b) prices per Share applicable to such Options and Stock
Appreciation Rights, and (c) kind of Shares covered thereby (including Shares of
another issuer), as the Committee in its sole discretion may in good faith
determine to be equitably required in order to prevent dilution or enlargement
of the rights of Participants that otherwise would result from (x) any stock
dividend, stock split, combination or exchange of Shares, recapitalization or
other change in the capital structure of the Company, (y) any merger,
consolidation, spin-off, spin-out, split-off, split-up, reorganization, partial
or complete liquidation or other distribution of assets (other than a normal
cash dividend), issuance of rights or warrants to purchase securities, or (z)
any other corporate transaction or event having an effect similar to any of the
foregoing. Moreover, in the event of any such transaction or event,

                                       23

<PAGE>

the Committee may provide in substitution for any or all outstanding Awards such
alternative consideration as it may in good faith determine to be equitable
under the circumstances and may require in connection therewith the surrender of
all Awards so replaced. The Committee may also make or provide for such
adjustments in each of the limitations specified in Section 3 as the Committee
in its sole discretion may in good faith determine to be appropriate in order to
reflect any transaction or event described in this Section 14. The Company shall
give each Participant notice of an adjustment hereunder and, upon notice, such
adjustment shall be conclusive and binding for all purposes.

15.   Fractional Shares. The Company shall not be required to issue any
fractional Shares pursuant to this Plan. The Committee may provide for the
elimination of fractions or for the settlement thereof in cash.

16.   Withholding Taxes. The Company shall be entitled to deduct from any
payment under the Plan, regardless of the form of such payment, the amount of
all applicable income and employment taxes required by law to be withheld with
respect to such payment or may require the Participant to pay to it such tax
prior to and as a condition of the making of such payment. In accordance with
any applicable administrative guidelines it establishes, the Committee may allow
a Participant to pay the amount of taxes required by law to be withheld from an
Award by withholding from any payment of Shares due as a result of such Award,
or by permitting the Participant to deliver to the Company Shares having a Fair
Market Value, as determined by the Committee, equal to the minimum amount of
such required withholding taxes.

                                       24

<PAGE>

     17. Certain Terminations of Employment, Hardship and Approved Leaves of
Absence. In the event of termination of employment by reason of death,
disability, normal retirement, early retirement with the consent of the
Committee, other termination of employment or a leave of absence that is
approved by the Committee, or in the event of hardship or other special
circumstances that are approved by the Committee, of a Participant who holds an
Option or Stock Appreciation Right that is not immediately and fully
exercisable, any Restricted Shares as to which the substantial risk of
forfeiture or the prohibition or restriction on transfer has not lapsed, any
Deferred Shares as to which the Deferral Period is not complete, any Performance
Shares or Performance Units that have not been fully earned, or any Shares that
are subject to any transfer restriction pursuant to Section 12.3, the Committee
may, in its sole discretion, take any action that it deems to be equitable under
the circumstances or in the best interests of the Company, including without
limitation waiving or modifying any limitation or requirement with respect to
any Award and providing for post-termination exercise periods with respect to
any Option or Stock Appreciation Right.

     18. Termination for Cause. A Participant who is terminated for Cause shall,
unless otherwise determined by the Committee, immediately forfeit, effective as
of the date the Participant engages in such conduct, all unexercised, unearned,
and/or unpaid Awards, including, but not by way of limitation, Awards earned but
not yet paid or exercised, all unpaid dividends and all interest, if any,
accrued on the foregoing.

     19. Foreign Participants. In order to facilitate the making of any grant or
combination of grants under this Plan, the Committee may provide for such
special terms for Awards to Participants who are foreign nationals, or who are
employed by or perform

                                       25

<PAGE>

services for the Company or any Subsidiary outside of the United States of
America, as the Committee may consider necessary or appropriate to accommodate
differences in local law, tax policy or custom. Moreover, the Committee may
approve such supplements to, or amendments, restatements or alternative versions
of, this Plan as it may consider necessary or appropriate for such purposes
without thereby affecting the terms of this Plan as in effect for any other
purpose, provided that no such supplements, amendments, restatements or
alternative versions shall include any provisions that are inconsistent with the
terms of this Plan, as then in effect, unless this Plan could have been amended
to eliminate such inconsistency without further approval by the stockholders of
the Company.

                                       26

<PAGE>

20.  Amendments and Other Matters.

     20.1. Plan Amendments. This Plan may be amended from time to time by the
Board, but no such amendment shall: (a) increase any of the limitations
specified in Section 3, other than to reflect an adjustment made in accordance
with Section 14, (b) change the class of persons eligible to receive grants of
Awards or the types of Awards available under the Plan, or (c) increase the
benefits to Participants under the Plan, in any such case without the further
approval of the stockholders of the Company. The Board will also condition any
amendment on the approval of the stockholders of the Company if such approval is
necessary with respect to the applicable listing or other requirements of a
national securities exchange or other applicable laws, policies or regulations,
and the Board may condition any amendment on the approval of the stockholders of
the Company if such approval is deemed advisable to comply with such
requirements.

     20.2. Award Deferrals. An Award Agreement may provide that payment of any
Award, dividend, or any portion thereof, may be deferred by a Participant until
such time as the Committee may establish. All such deferrals shall be
accomplished by the delivery of a written, irrevocable election by the
Participant prior to the time established by the Committee for such purpose, on
a form provided by the Company. Deferred Awards may also be credited with
interest, at such rates to be determined by the Committee.

     20.3. Conditional Awards. The Committee may condition the grant of any
Award or combination of Awards on the surrender or deferral by the Participant
of his or her right to receive a cash bonus or other compensation otherwise
payable by the Company or any Subsidiary to the Participant.

                                       27

<PAGE>

     20.4. Repricing Prohibited. No Award may be repriced, replaced, regranted
through cancellation, or modified, directly or indirectly, without the approval
of the stockholders of the Company, provided that nothing herein shall prevent
the Committee from taking any action provided for in Section 14.

     20.5. Amendments to Awards. Subject to the requirements of Section 20.4,
the Committee may at any time unilaterally amend any unexercised, unearned, or
unpaid Award, including, but not by way of limitation, Awards earned but not yet
paid, to the extent it deems appropriate (including for the purposes of
compliance with local laws and regulations or to avoid costly government
filings); provided, however, that except to the extent that the Committee
determines that an amendment is necessary to avoid a penalty tax under Section
409A of the Code, any such amendment which, in the opinion of the Committee, is
adverse to the Participant shall require the Participant's consent.

     20.6. No Employment Right. This Plan shall not confer upon any Participant
any right with respect to continuance of employment or other service with the
Company or any Subsidiary and shall not interfere in any way with any right that
the Company or any Subsidiary would otherwise have to terminate any
Participant's employment or other service at any time.

     20.7. Compliance with Section 409A of the Code. Notwithstanding any other
provision of the Plan to the contrary, (a) to the extent that any payment of or
in connection with an Award constitutes a payment under a "non-qualified
deferred compensation plan," as defined in Section 409A of the Code, such
payment shall be made in compliance with Section 409A of the Code and (b) any
adjustment of Shares or prices

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<PAGE>

per Share or substitution of Awards pursuant to Section 14 and any modification
of Awards pursuant to Section 17 shall not cause the affected Award to violate
the requirements of Section 409A of the Code.

21.   Change in Control. Except as otherwise provided at the time of grant in an
Award Agreement relating to a particular Award and subject to the requirements
of Section 14, if a Change in Control occurs, then:

     21.1. The Participant's Restricted Shares, Deferred Shares, Performance
Shares, Performance Units or other Share-based Awards that were forfeitable
shall, unless otherwise determined by the Committee prior to the occurrence of
the Change in Control, become nonforfeitable and, to the extent applicable,
shall be converted into Shares.

     21.2. Any unexercised Option or Stock Appreciation Right, whether or not
exercisable on the date of such Change in Control, shall thereupon be fully
exercisable and may be exercised, in whole or in part.

     21.3. Notwithstanding Sections 21.1 and 21.2, in the event of a Change in
Control, the Committee may in its discretion cancel any outstanding Awards and
(a) pay to the holders thereof, in cash or stock, or any combination thereof,
the value of such Awards based upon the price per share of Stock received or to
be received by other stockholders of the Company in the event or (b) arrange for
fully vested substitute awards to be granted to the holders thereof, denominated
in the equity of the acquirer or an affiliate thereof, provided such substitute
awards substantially preserve the value of the substituted Awards.

                                       29

<PAGE>

     21.4. If a Change in Control occurs during the term of one or more
Performance Periods for which the Committee has granted performance-based Awards
pursuant to the provisions of Section 5, the term of each such Performance
Period (hereinafter a "current Performance Period") shall immediately terminate
upon the occurrence of such Change in Control. Upon a Change in Control, for
each current Performance Period and each completed Performance Period for which
the Committee has not on or before such date made a determination as to whether
and to what degree the Performance Objectives for such period have been attained
(hereinafter a "completed Performance Period"), it shall be assumed that the
Performance Objectives have been attained at a level of one hundred percent
(100%) or the equivalent thereof. A Participant in one or more current
Performance Periods shall be considered to have earned and, therefore, be
entitled to receive, a prorated portion of the Award previously granted to him
for each such current Performance Period. Such prorated portion shall be
determined by multiplying the number of Performance Shares or Performance Units
(or other performance-based Awards), as the case may be, granted to the
Participant by a fraction, the numerator of which is the total number of days
that have elapsed since the beginning of the current Performance Period, and the
denominator of which is the total number of days in such current Performance
Period. A Participant in one or more completed Performance Periods shall be
considered to have earned and, therefore, be entitled to receive all the
Performance Shares or Performance Units (or other performance-based Awards), as
the case may be, previously granted to him during each such completed
Performance Period.

     21.5. Unless otherwise provided by the Committee, at any time, upon a
Change in Control, any Awards deferred by a Participant under Section 20.2, but
for which he or

                                       30

<PAGE>

she has not received payment as of such date, shall be paid by the 90th day
following the Change in Control.

22.   Effective Date. This Plan shall become effective upon its approval by the
stockholders of the Company.

23.   Termination. This Plan shall terminate on the tenth anniversary of the
date upon which it is approved by the stockholders of the Company, and no Award
shall be granted after that date.

24.   Arbitration of Disputes. Any and all disputes arising out of or relating
to the Plan or any Award Agreement (or breach thereof) shall be resolved
exclusively through binding arbitration in the State of New York in accordance
with the rules of the American Arbitration Association then in effect.

25.   Regulatory Approvals and Listings. Notwithstanding anything contained in
this Plan to the contrary, the Company shall have no obligation to issue or
deliver certificates of Shares evidencing Awards or any other Award resulting in
the payment of Shares prior to (i) the obtaining of any approval from any
governmental agency which the Company shall, in its sole discretion, determine
to be necessary or advisable, (ii) the admission of such Shares to listing on
the stock exchange or market on which the Shares may be listed, and (iii) the
completion of any registration or other qualification of said Shares under any
state or federal law or ruling of any governmental body which the Company shall,
in its sole discretion, determine to be necessary or advisable. The Committee
may, from time to time, impose additional restrictions upon an Award, including
but not limited to,

                                       31

<PAGE>

restrictions regarding tax withholdings and restrictions regarding the
Participant's ability to exercise Awards under the Company's broker-assisted
stock option exercise program.

26.   No Right, Title, or Interest in Company Assets. No Participant shall have
any rights as a stockholder of the Company as a result of participation in the
Plan until the date of issuance of a stock certificate in his or her name, and,
in the case of Restricted Shares, such rights are granted to the Participant
under the Plan. To the extent any person acquires a right to receive payments
from the Company under the Plan, such rights shall be no greater than the rights
of an unsecured creditor of the Company and the Participant shall not have any
rights in or against any specific assets of the Company. All of the Awards
granted under the Plan shall be unfunded.

27.   No Guarantee of Tax Consequences. Notwithstanding any other provision of
the Plan, no person connected with the Plan in any capacity, including, but not
limited to, the Company and its directors, officers, agents and employees, makes
any representation, commitment, or guarantee that any tax treatment, including,
but not limited to, federal, state and local income, estate and gift tax
treatment, will be applicable with respect to the tax treatment of any Award,
any amounts deferred under the Plan, or paid to or for the benefit of a
Participant under the Plan, or that such tax treatment will apply to or be
available to a Participant on account of participation in the Plan, or that any
of the foregoing amounts will not be subject to the 20% penalty tax and interest
under Section 409A of the Code.

28.   Governing Law. The validity, construction and effect of this Plan and any
Award hereunder will be determined in accordance with the laws of the State of
Delaware.

                                       32

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