Document:

Exhibit 10.1

                          SECURITIES PURCHASE AGREEMENT

         This Securities  Purchase  Agreement (this  "AGREEMENT") is dated as of
April 14, 2005, among RCG COMPANIES  INCORPORATED,  a Delaware  corporation (the
"COMPANY"), and the investors identified on the signature pages hereto (each, an
"INVESTOR" and collectively, the "INVESTORS").

         WHEREAS,  subject  to the  terms  and  conditions  set  forth  in  this
Agreement and pursuant to Section 4(2) of the  Securities Act (as defined below)
and Rule 506  promulgated  thereunder,  the Company desires to issue and sell to
each Investor, and each Investor, severally and not jointly, desires to purchase
from the Company certain  securities of the Company,  as more fully described in
this Agreement.

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

                                    ARTICLE I.
                                   DEFINITIONS

1.1 Definitions.  In addition to the terms defined  elsewhere in this Agreement,
for all purposes of this Agreement,  the following terms shall have the meanings
indicated in this Section 1.1:

                  "ACTION" means any action, suit, inquiry, notice of violation,
proceeding   (including  any  partial   proceeding  such  as  a  deposition)  or
investigation pending or threatened in writing against or affecting the Company,
any  Subsidiary or any of their  respective  properties  before or by any court,
arbitrator,   governmental  or  administrative   agency,   regulatory  authority
(federal,  state,  county,  local or foreign),  stock market,  stock exchange or
trading facility.

                  "AFFILIATE"  means any Person  that,  directly  or  indirectly
through one or more  intermediaries,  controls or is  controlled  by or is under
common control with a Person, as such terms are used in and construed under Rule
144.

                  "BUSINESS DAY" means any day except  Saturday,  Sunday and any
day which is a federal legal holiday or a day on which banking  institutions  in
the State of New York are  authorized  or required by law or other  governmental
action to close.

                  "CERTIFICATE  OF  DESIGNATION"  shall  mean a  Certificate  of
Designation  relating  to the  Shares to be filed  prior to the  Closing  by the
Company with the  Secretary of State of the State of Delaware  setting forth the
rights,  preferences  and  privileges  of the  Shares,  in the form  attached as
Exhibit A hereto.

                  "CLOSING" means the closing of the purchase and sale of Shares
and Warrants contemplated by Section 2.1.

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                  "CLOSING  DATE" means the Business Day  immediately  following
the date on which all of the conditions set forth in Sections 5.1 and 5.2 hereof
are satisfied, or such other date as the parties may agree.

                  "COMMISSION" means the Securities and Exchange Commission.

                  "COMMON  STOCK"  means the common  stock of the  Company,  par
value $.04 per share,  and any  securities  into  which  such  common  stock may
hereafter be reclassified, converted or exchanged.

                  "COMMON STOCK EQUIVALENTS" means any securities of the Company
or any  Subsidiary  which entitle the holder  thereof to acquire Common Stock at
any time,  including  without  limitation,  any debt,  preferred stock,  rights,
options,  warrants or other  instrument that is at any time  convertible into or
exchangeable  for, or otherwise  entitles the holder thereof to receive,  Common
Stock or other  securities  that  entitle  the holder to  receive,  directly  or
indirectly, Common Stock.

                  "COMPANY COUNSEL" means Katten Muchin Zavis Rosenman.

                  "COMPANY  DELIVERABLES"  has the  meaning set forth in Section
2.2(a).

                  "DISCLOSURE  MATERIALS"  has the  meaning set forth in Section
3.1(h).

                  "EFFECTIVE DATE" means the date that the initial  Registration
Statement required by Section 2(a) of the Registration Rights Agreement is first
declared effective by the Commission.

                  "EVALUATION DATE" has the meaning set forth in Section 3.1(r).

                  "EXCHANGE ACT" means the  Securities  Exchange Act of 1934, as
amended.

                  "FAREQUEST" means Farequest Holdings, Inc.

                  "FAREQUEST  NOTE"  means that  certain  promissory  note dated
February  1,  2004,  which the  Company  issued to the  Farequest  stockholders'
representative  in  connection  with that certain  Agreement  and Plan of Merger
dated  November  30,  2004 by and  among the  Company,  WTI  Acquisition,  Inc.,
Farequest and the other parties set forth therein.

                  "FAREQUEST   VOTING   AGREEMENT"  means  that  certain  voting
agreement and proxy, by and between the Investors' voting representative and the
Farequest  stockholders'  representative  as holder of the Farequest Note in the
form attached as Exhibit B hereto, dated as of April 14, 2005.

                  "FIRST MEETING" has the meaning set forth in Section 4.14(b).

                  "GAAP" means U.S. generally accepted accounting principles.

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                  "INTELLECTUAL  PROPERTY  RIGHTS"  has the meaning set forth in
Section 3.1(o).

                  "INVESTMENT AMOUNT" means, with respect to each Investor,  the
Investment Amount indicated on such Investor's signature page to this Agreement.

                  "INVESTOR  DELIVERABLES"  has the meaning set forth in Section
2.2(b).

                  "INVESTOR PARTY" has the meaning set forth in Section 4.7.

                  "KNOWLEDGE"  means  the  actual  knowledge  of  any  executive
officer of the Company after due inquiry.

                  "LIEN" means any lien, charge, encumbrance, security interest,
right of first refusal or other restrictions of any kind.

                  "LOSSES" has the meaning set forth in Section 4.7.

                  "MATERIAL  ADVERSE  EFFECT"  means any of (i) a  material  and
adverse effect on the legality,  validity or  enforceability  of any Transaction
Document,  (ii) a material  and  adverse  effect on the  results of  operations,
assets, prospects, business or condition (financial or otherwise) of the Company
and the  Subsidiaries,  taken as a whole, or (iii) an adverse  impairment to the
Company's  ability  to  perform  on a timely  basis  its  obligations  under any
Transaction Document.

                  "NEW YORK COURTS" means the state and federal  courts  sitting
in the City of New York, Borough of Manhattan.

                  "OUTSIDE DATE" means April 29, 2005.

                  "PERSON"  means an  individual  or  corporation,  partnership,
trust,  incorporated  or  unincorporated  association,  joint  venture,  limited
liability company, joint stock company,  government (or an agency or subdivision
thereof) or other entity of any kind.

                  "PLACEMENT AGENTS" means Roth Capital Partners, LLC and Bryant
Park Capital.

                  "PROCEEDING" means an action,  claim,  suit,  investigation or
proceeding   (including,   without  limitation,   an  investigation  or  partial
proceeding, such as a deposition), whether commenced or threatened.

                  "REGISTRATION  RIGHTS AGREEMENT" means the Registration Rights
Agreement,  dated as of the date of this  Agreement,  among the  Company and the
Investors, in the form of Exhibit C hereto.

                  "REGISTRABLE  SECURITIES"  means the  Warrant  Shares  and the
Underlying  Shares  issued  and  issuable  under the  Warrants  and the  Shares,
respectively  (without  regard to any exercise or conversion  caps  thereunder),
together with any securities  issued or issuable upon any stock split,  dividend

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or other  distribution,  recapitalization or similar event, or any conversion or
exercise price adjustments with respect to any such securities.

                  "REGISTRATION   STATEMENT"  means  a  registration   statement
meeting the  requirements  set forth in the  Registration  Rights  Agreement and
covering the resale by the  Investors of the  Underlying  Shares and the Warrant
Shares.

                  "RESET PERIOD" means the 20 Trading Days immediately following
the  filing by the  Company  of a  Current  Report  on Form 8-K  disclosing  the
effectiveness of the Reverse Stock Split on the American Stock Exchange.

                  "REVERSE  STOCK SPLIT" means a 1-10 reverse stock split of the
Company's Common Stock.

                  "RULE  144"  means  Rule  144  promulgated  by the  Commission
pursuant to the  Securities  Act, as such Rule may be amended from time to time,
or any similar rule or regulation  hereafter  adopted by the  Commission  having
substantially the same effect as such Rule.

                  "SEC REPORTS" has the meaning set forth in Section 3.1(h).

                  "SECURITIES"  means the Shares,  the  Underlying  Shares,  the
Warrants and the Warrant Shares.

                  "SECURITIES ACT" means the Securities Act of 1933, as amended.

                  "SHARES"  means the shares of Series C  Convertible  Preferred
Stock issuable to the Investors  pursuant to this Agreement,  having the rights,
preferences and privileges set forth in the Certificate of Designation.

                  "SHORT SALES" include,  without limitation,  all "short sales"
as defined in Rule 200 promulgated  under  Regulation SHO under the Exchange Act
and all types of direct and indirect  stock  pledges,  forward  sale  contracts,
options,  puts,  calls,  swaps and similar  arrangements  (including  on a total
return basis), and sales and other transactions through non-US broker dealers or
foreign regulated brokers.

                  "STOCKHOLDER  APPROVAL"  has the  meaning set forth in Section
4.14.

                  "SUBSIDIARY" means any "significant  subsidiary" as defined in
Rule 1-02(w) of the  Regulation  S-X  promulgated  by the  Commission  under the
Exchange Act.

                  "TRADING  DAY"  means (i) a day on which the  Common  Stock is
traded on a Trading Market (other than the OTC Bulletin  Board),  or (ii) if the
Common  Stock is not listed on a Trading  Market  (other  than the OTC  Bulletin
Board),  a day on which  the  Common  Stock is  traded  in the  over-the-counter
market,  as reported by the OTC Bulletin  Board, or (iii) if the Common Stock is
not quoted on any Trading  Market,  a day on which the Common Stock is quoted in
the  over-the-counter  market  as  reported  by the  National  Quotation  Bureau

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Incorporated (or any similar  organization or agency succeeding to its functions
of reporting prices);  provided,  that in the event that the Common Stock is not
listed or quoted as set forth in (i),  (ii) and (iii)  hereof,  then Trading Day
shall mean a Business Day.

                  "TRADING  MARKET"  means  whichever  of  the  New  York  Stock
Exchange,  the American Stock Exchange,  the NASDAQ National Market,  the NASDAQ
SmallCap  Market or OTC  Bulletin  Board on which the Common  Stock is listed or
quoted for trading on the date in question.

                  "TRANSACTION DOCUMENTS" means this Agreement,  the Certificate
of Designation,  the Registration  Rights  Agreement,  the Warrants,  the Voting
Agreement,  the Farequest Voting Agreement and any other documents or agreements
executed  by the  Company  in  connection  with  the  transactions  contemplated
hereunder.

                  "UNDERLYING  SHARES" means the shares of Common Stock issuable
upon conversion of the Shares.

                  "VOTING  AGREEMENT"  means  collectively  those certain voting
agreements and proxies, by and between the Investors' voting  representative and
the stockholders  identified therein, dated as of April 14, 2005, in the form of
Exhibit E hereto.

                  "WARRANTS"  means the Common  Stock  purchase  warrants in the
form of Exhibit F hereto issuable to the Investors at the Closing.

                  "WARRANT  SHARES"  means the shares of Common  Stock  issuable
upon exercise of the Warrants.

                                   ARTICLE II.
                                PURCHASE AND SALE

         2.1  Closing.  Subject  to the terms and  conditions  set forth in this
Agreement, at the Closing the Company shall issue and sell to each Investor, and
each Investor shall,  severally and not jointly,  purchase from the Company, the
Shares and the Warrants  contemplated  by Section  2.2.  The Closing  shall take
place at the offices of Bryan Cave LLP, 1290 Avenue of the  Americas,  New York,
NY 10104 on the  Closing  Date or at such other  location or time as the parties
may agree.

         2.2 Closing Deliveries.  (a) At the Closing,  the Company shall deliver
or  cause  to  be  delivered  to  each  Investor  the  following  (the  "COMPANY
DELIVERABLES"):

                  (i) one or more stock  certificates,  evidencing Shares with a
stated value equal to such Investor's Investment Amount,  registered in the name
of such Investor;

                  (ii) a  Warrant,  registered  in the  name of  such  Investor,
pursuant  to which such  Investor  shall have the right to acquire the number of
Warrant  Shares  equal to 40% of the  number  of  Underlying  Shares as would be
issuable  upon a conversion  in full of the Shares  issuable to such Investor in

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accordance  with  Section  2.2(a)(i)  (without  regard  to  any  limitations  on
conversion of the Shares);

                  (iii) a copy of the executed,  filed and effective Certificate
of Designation,  accompanied by a certificate  evidencing the acceptance thereof
by the Secretary of State of the State of Delaware;

                  (iv) the legal  opinion of Company  Counsel,  in agreed  form,
addressed to the Investors; and

                  (v) the Registration  Rights  Agreement,  duly executed by the
Company.

                  (b) At the Closing, each Investor shall deliver or cause to be
delivered to the Company the following (the "INVESTOR DELIVERABLES"):

                  (i) its  Investment  Amount,  in United States  dollars and in
immediately  available  funds,  by wire  transfer  to an account  designated  in
writing by the Company for such purpose; and

                  (ii) the Registration Rights Agreement,  duly executed by such
Investor.

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

         3.1 Representations  and Warranties of the Company.  The Company hereby
makes the following representations and warranties to each Investor:

                  (a)  Subsidiaries.  The  Company  has no  direct  or  indirect
Subsidiaries other than as specified in the SEC Reports.  Except as disclosed in
Schedule 3.1(a),  the Company owns,  directly or indirectly,  all of the capital
stock of each Subsidiary free and clear of any and all Liens, and all the issued
and  outstanding  shares of capital stock of each  Subsidiary are validly issued
and are fully paid, non-assessable and free of preemptive and similar rights.

                  (b)  Organization  and  Qualification.  The  Company  and each
Subsidiary are duly incorporated or otherwise organized, validly existing and in
good standing under the laws of the respective jurisdiction of its incorporation
or organization (as  applicable),  with the requisite power and authority to own
and use its properties  and assets and to carry on its respective  businesses as
currently  conducted.  Neither the Company nor any Subsidiary is in violation of
any  of  the   provisions  of  its   respective   certificate   or  articles  of
incorporation,  bylaws or other organizational or charter documents. The Company
and each Subsidiary are duly qualified to conduct its respective  businesses and
are  in  good  standing  as a  foreign  corporation  or  other  entity  in  each
jurisdiction in which the nature of the business  conducted or property owned by
it makes  such  qualification  necessary,  except  where  the  failure  to be so

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qualified or in good standing, as the case may be, could not, individually or in
the  aggregate,  have or reasonably be expected to result in a Material  Adverse
Effect.

                  (c) Authorization;  Enforcement. The Company has the requisite
corporate  power and authority to enter into and to consummate the  transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder.  The execution and delivery of each Transaction Document
by the  Company  and the  consummation  by it of the  transactions  contemplated
thereby have been duly  authorized  by all  necessary  action on the part of the
Company and no further action is required by the Company in connection with such
authorization other than the requirement that the Company obtain the Stockholder
Approval as contemplated  herein.  Each  Transaction  Document has been (or upon
delivery  will have been) duly  executed by the Company and,  when  delivered in
accordance  with the  terms  hereof,  will  constitute  the  valid  and  binding
obligation of the Company enforceable against the Company in accordance with its
terms,  except as such  enforceability may be limited by applicable  bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting  generally the enforcement of, creditors' rights and remedies or by
other  equitable  principles  of  general  application,  and except as rights to
indemnity and  contribution  may be limited by the federal  securities  laws and
underlying public policy.

                  (d) No Conflicts.  The execution,  delivery and performance of
the Transaction  Documents by the Company and the consummation by the Company of
the transactions  contemplated  thereby do not and will not (i) conflict with or
violate any  provision  of the  Company's  or any  Subsidiary's  certificate  or
articles of incorporation,  bylaws or other organizational or charter documents,
or (ii) conflict  with, or constitute a default (or an event that with notice or
lapse of time or both  would  become a  default)  under,  or give to others  any
rights of termination,  amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument  (evidencing  a Company or  Subsidiary  debt or  otherwise)  or other
understanding  to which the Company or any Subsidiary is a party or by which any
property  or asset of the Company or any  Subsidiary  is bound or  affected,  or
(iii)  result in a violation  of any law,  rule,  regulation,  order,  judgment,
injunction,  decree or other restriction of any court or governmental  authority
to which the Company or a  Subsidiary  is subject  (including  federal and state
securities  laws and  regulations),  or by which  any  property  or asset of the
Company or a Subsidiary is bound or affected;  except (A) in the case of each of
clauses (ii) and (iii),  such as could not,  individually  or in the  aggregate,
have or  reasonably be expected to result in a Material  Adverse  Effect and (B)
that  Stockholder  Approval will be required to honor  conversions of Shares and
exercises of Warrants and to effectuate the Reverse Stock Split.

                  (e)  Filings,  Consents  and  Approvals.  The  Company  is not
required  to obtain any  consent,  waiver,  authorization  or order of, give any
notice to, or make any filing or registration  with, any court or other federal,
state, local or other governmental  authority or other Person in connection with
the  execution,  delivery  and  performance  by the  Company of the  Transaction
Documents  other  than  (i)  the  filing  with  the  Commission  of one or  more
Registration  Statements in accordance with the requirements of the Registration
Rights  Agreement,  (ii) filings  required by state  securities  laws, (iii) the
filing of a Notice of Sale of  Securities  on Form D with the  Commission  under

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Regulation D of the Securities Act (iv) the filings  required in accordance with
Section 4.5, (v) the filing of proxy materials with the Commission in connection
with the Stockholder Approval,  (vi) the filing of an amendment to the Company's
charter  to reflect  the  Reverse  Stock  Split,  (vii)  filings,  consents  and
approvals  required by the rules and regulations of the American Stock Exchange,
and  (viii)  those  that have been  made or  obtained  prior to the date of this
Agreement.

                  (f) Issuance of the Securities.  The Securities have been duly
authorized and, the Shares,  Underlying  Shares and Warrant Shares,  when issued
and paid for in  accordance  with the  Transaction  Documents,  will be duly and
validly issued,  fully paid and nonassessable,  free and clear of all Liens. The
Company has reserved from its duly authorized capital stock the shares of Common
Stock issuable pursuant to this Agreement and the Warrants in order to issue the
Shares and the Warrant Shares.

                  (g) Capitalization.  Except as otherwise disclosed in Schedule
3.1(g), the number of shares and type of all authorized,  issued and outstanding
capital  stock of the  Company,  and all  shares of Common  Stock  reserved  for
issuance under the Company's various option and incentive plans, is disclosed in
the SEC Reports.  Except as have been waived,  no  securities of the Company are
entitled to preemptive or similar  rights,  and no Person has any right of first
refusal,  preemptive  right,  right of  participation,  or any similar  right to
participate  in the  transactions  contemplated  by the  Transaction  Documents.
Except  as  disclosed  in the SEC  Reports  or  Schedule  3.1(g),  there  are no
outstanding  options,   warrants,   scrip  rights  to  subscribe  to,  calls  or
commitments of any character  whatsoever  relating to, or securities,  rights or
obligations convertible into or exchangeable for, or giving any Person any right
to  subscribe  for or  acquire,  any  shares  of  Common  Stock,  or  contracts,
commitments,  understandings  or  arrangements  by  which  the  Company  or  any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights  convertible or  exchangeable  into shares of Common Stock.
Except as set forth in  Schedule  3.1(g),  the issue and sale of the  Securities
will not, immediately or with the passage of time, obligate the Company to issue
shares  of  Common  Stock or other  securities  to any  Person  (other  than the
Investors) and will not result in a right of any holder of Company securities to
adjust the exercise, conversion, exchange or reset price under such securities.

                  (h) SEC Reports;  Financial Statements.  The Company has filed
all reports required to be filed by it under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the twelve months
preceding the date hereof (or such shorter period as the Company was required by
law to file such reports) (the foregoing  materials being collectively  referred
to  herein  as the  "SEC  REPORTS"  and,  together  with the  Schedules  to this
Agreement (if any), the "DISCLOSURE  MATERIALS") on a timely basis or has timely
filed a valid  extension  of such  time of  filing  and has  filed  any such SEC
Reports prior to the expiration of any such  extension.  As of their  respective
dates, the SEC Reports  complied in all material  respects with the requirements
of the Securities Act and the Exchange Act and the rules and  regulations of the
Commission  promulgated  thereunder,  and none of the SEC  Reports,  when filed,

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contained any untrue statement of a material fact or omitted to state a material
fact required to be stated  therein or necessary in order to make the statements
therein,  in  light  of the  circumstances  under  which  they  were  made,  not
misleading.  The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting  requirements and the
rules and regulations of the Commission with respect thereto as in effect at the
time of filing. Such financial  statements have been prepared in accordance with
GAAP applied on a consistent basis during the periods involved, except as may be
otherwise  specified in such  financial  statements  or the notes  thereto,  and
fairly  present in all material  respects the financial  position of the Company
and  its  consolidated  Subsidiaries  as of and for the  dates  thereof  and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.

                  (i)  Material  Changes.  Since the date of the latest  audited
financial  statements  included  within the SEC Reports,  except as specifically
disclosed  in the SEC  Reports,  (i)  there  has been no  event,  occurrence  or
development  that has had or that could  reasonably  be  expected to result in a
Material  Adverse  Effect,  (ii) the Company has not  incurred  any  liabilities
(contingent or otherwise)  other than (A) trade payables,  accrued  expenses and
other  liabilities  incurred in the ordinary course of business  consistent with
past practice and (B)  liabilities not required to be reflected in the Company's
financial  statements  pursuant to GAAP or required to be  disclosed  in filings
made with the Commission,  and (C)  liabilities  that have not had or that could
not  reasonably be expected to result in a Material  Adverse  Effect,  (iii) the
Company has not altered its method of  accounting  except as required by GAAP or
the  identity of its  auditors,  (iv) the  Company has not  declared or made any
dividend  or  distribution  of cash or other  property  to its  stockholders  or
purchased,  redeemed or made any  agreements to purchase or redeem any shares of
its capital stock,  and (v) the Company has not issued any equity  securities to
any officer,  director or Affiliate,  except pursuant to existing  Company stock
incentive  plans.  The Company does not have pending  before the  Commission any
request for confidential treatment of information.

                  (j) Litigation. There is no Action which (i) adversely affects
or challenges the legality, validity or enforceability of any of the Transaction
Documents or the  Securities or (ii) except as disclosed in the SEC Reports,  is
reasonably expected to result in a Material Adverse Effect.  Neither the Company
nor any Subsidiary,  nor any director or officer thereof (in his or her capacity
as  such),  is or has  been  the  subject  of any  Action  involving  a claim of
violation of or liability  under federal or state  securities laws or a claim of
breach of fiduciary duty, except as disclosed in the SEC Reports.  There has not
been,  and  to  the  Knowledge  of  the  Company,   there  is  not  pending  any
investigation  by the Commission  involving the Company or any current or former
director  or  officer  of the  Company  (in his or her  capacity  as such).  The
Commission  has not  issued  any  stop  order  or  other  order  suspending  the
effectiveness  of  any  registration  statement  filed  by  the  Company  or any
Subsidiary under the Exchange Act or the Securities Act.

                  (k) Labor  Relations.  No material labor dispute exists or, to
the  Knowledge of the Company,  is imminent with respect to any of the employees
of the Company.

                  (l)  Compliance.  Except  as  disclosed  in the  SEC  Reports,
neither the Company nor any  Subsidiary  (i) is in default under or in violation
of (and no event has  occurred  that has not been  waived  that,  with notice or
lapse  of  time or  both,  would  result  in a  default  by the  Company  or any

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Subsidiary  under),  nor has the Company or any Subsidiary  received notice of a
claim that it is in default under or that it is in violation of, any  indenture,
loan or credit agreement,  debenture,  promissory note or any other agreement or
instrument  to which it is a party  or by which it or any of its  properties  is
bound  (whether or not such default or violation  has been  waived),  (ii) is in
violation of any order of any court,  arbitrator or governmental  body, or (iii)
is or  has  been  in  violation  of  any  statute,  rule  or  regulation  of any
governmental authority, including without limitation all foreign, federal, state
and local laws relating to taxes, environmental protection,  occupational health
and safety, product quality and safety and employment and labor matters,  except
in each case as could not, individually or in the aggregate,  have or reasonably
be expected to result in a Material Adverse Effect. The Company is in compliance
with all effective  requirements of the  Sarbanes-Oxley Act of 2002, as amended,
and the rules and  regulations  thereunder,  that are  applicable  to it, except
where such noncompliance could not have or reasonably be expected to result in a
Material Adverse Effect.

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

                  (n) Title to Assets.  Except as set forth in Schedule  3.1(n),
the Company and the Subsidiaries have good and marketable title in fee simple to
all real property owned by them that is material to their respective  businesses
and good and  marketable  title in all personal  property  owned by them that is
material  to their  respective  businesses,  in each  case free and clear of all
Liens,  except for Liens as do not materially  affect the value of such property
and do not  materially  interfere  with the use made and  proposed to be made of
such  property  by the  Company  and the  Subsidiaries.  Any real  property  and
facilities held under lease by the Company and the Subsidiaries are held by them
under  valid,  subsisting  and  enforceable  leases of which the Company and the
Subsidiaries  are in  compliance,  except as could not,  individually  or in the
aggregate,  have or  reasonably  be  expected  to result in a  Material  Adverse
Effect.

                  (o) Patents and Trademarks.  The Company and the  Subsidiaries
have,  or have rights to use,  all  patents,  patent  applications,  trademarks,
trademark  applications,  service marks, trade names,  copyrights,  licenses and
other similar  rights that are necessary or material for use in connection  with
their  respective  businesses  as  described  in the SEC  Reports  and which the
failure to so have could,  individually or in the aggregate,  have or reasonably
be  expected  to  result  in  a  Material  Adverse  Effect  (collectively,   the
"INTELLECTUAL  PROPERTY  RIGHTS").  Neither the Company nor any  Subsidiary  has
received a written  notice  that the  Intellectual  Property  Rights used by the
Company or any  Subsidiary  violates or infringes upon the rights of any Person.
Except as set forth in the SEC Reports,  to the  Knowledge  of the Company,  all
such  Intellectual  Property  Rights are  enforceable  and there is no  existing
infringement by another Person of any of the Intellectual Property Rights.

                                       10
<PAGE>

                  (p) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized  financial  responsibility  against such losses and risks
and in such amounts which are prudent and  customary in the  businesses in which
the  Company  and the  Subsidiaries  are  engaged.  The Company has no reason to
believe  that it will not be able to renew  its and the  Subsidiaries'  existing
insurance  coverage  as and when such  coverage  expires  or to  obtain  similar
coverage  from similar  insurers as may be necessary to continue its business on
terms consistent with market for the Company's and such Subsidiaries' respective
lines of business.

                  (q) Transactions With Affiliates and Employees.  Except as set
forth in the SEC Reports,  none of the officers or directors of the Company and,
to the  Knowledge  of the  Company,  none of the  employees  of the  Company  is
presently a party to any transaction  with the Company or any Subsidiary  (other
than for services as employees, officers and directors), including any contract,
agreement or other  arrangement  providing for the  furnishing of services to or
by,  providing for rental of real or personal  property to or from, or otherwise
requiring payments to or from any officer,  director or such employee or, to the
Knowledge of the Company, any entity in which any officer, director, or any such
employee  has a  substantial  interest  or is an officer,  director,  trustee or
partner.

                  (r)  Internal  Accounting   Controls.   The  Company  and  the
Subsidiaries  maintain a system of internal  accounting  controls  sufficient to
provide  reasonable  assurance that (i)  transactions are executed in accordance
with  management's  general or specific  authorizations,  (ii)  transactions are
recorded  as  necessary  to  permit  preparation  of  financial   statements  in
conformity with generally accepted  accounting  principles and to maintain asset
accountability,  (iii) access to assets is  permitted  only in  accordance  with
management's   general  or  specific   authorization,   and  (iv)  the  recorded
accountability  for assets is compared  with the existing  assets at  reasonable
intervals and appropriate  action is taken with respect to any differences.  The
Company  has  established  disclosure  controls  and  procedures  (as defined in
Exchange Act Rules  13a-15(e) and  15d-15(e))  for the Company and designed such
disclosure controls and procedures to provide reasonable assurance that material
information relating to the Company,  including its Subsidiaries,  is made known
to the certifying officers by others within those entities,  particularly during
the  period in which  the  Company's  Form 10-K or 10-Q,  as the case may be, is
being   prepared.   The  Company's   certifying   officers  have  evaluated  the
effectiveness of the Company's  disclosure controls and procedures in accordance
with Item 307 of Regulation  S-K under the Exchange Act as of the Company's most
recent fiscal quarter-end or fiscal year-end (such date, the "EVALUATION DATE").
The  Company  presented  in its most  recently  filed Form 10-K or Form 10-Q the
conclusions of the certifying officers about the effectiveness of the disclosure
controls and procedures  based on their  evaluations as of the Evaluation  Date.
During the  fiscal  quarter  ended on the  Evaluation  Date,  there have been no
significant  changes in the Company's internal controls (as such term is defined
in Item 308(c) of  Regulation  S-K under the Exchange  Act) or, to the Company's
Knowledge,  in other  factors  that could  significantly  affect  the  Company's
internal controls.

                  (s) Solvency.  Based on the financial condition of the Company
as of the Closing Date (and assuming that the Closing shall have occurred),  (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

                                       11
<PAGE>

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).

                  (t) Certain Fees.  Except as payable to the Placement  Agents,
no  brokerage  or  finder's  fees or  commissions  are or will be payable by the
Company to any broker, financial advisor or consultant, finder, placement agent,
investment  banker,  bank or  other  Person  with  respect  to the  transactions
contemplated  by this  Agreement.  The Investors  shall have no obligation  with
respect  to any fees or with  respect  to any  claims  (other  than such fees or
commissions  owed by an Investor  pursuant to  agreements  entered  into by such
Investor  which fees or  commissions  shall be the sole  responsibility  of such
Investor) made by or on behalf of other Persons for fees of a type  contemplated
in this Section that may be due in connection with the transactions contemplated
by this Agreement.

                  (u) Certain Registration Matters. Assuming the accuracy of the
Investors'  representations and warranties set forth in Section  3.2(b)-(e),  no
registration  under the  Securities  Act is  required  for the  offer,  sale and
issuance of the Securities by the Company to the Investors under the Transaction
Documents.  The Company is eligible to register  its Common  Stock for resale by
the Investors  under Form S-3  promulgated  under the Securities  Act. Except as
specified in Schedule 3.1(u),  the Company has not granted or agreed to grant to
any Person any rights (including  "piggy-back"  registration rights) to have any
securities  of  the  Company   registered  with  the  Commission  or  any  other
governmental authority that have not been satisfied.

                  (v) Listing and Maintenance Requirements.  Except as specified
in the SEC  Reports,  the Company has not, in the two years  preceding  the date
hereof,  received  notice from any Trading Market to the effect that the Company
is not in compliance with the listing or maintenance requirements thereof. Other
than as to stock  price and net  worth,  the  Company  is,  and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with the listing  and  maintenance  requirements  for  continued  listing of the
Common Stock on the Trading Market on which the Common Stock is currently listed
or quoted.  Except in connection with Section 4.14 herein, the issuance and sale
of the Securities under the Transaction  Documents does not contravene the rules
and  regulations  of the Trading  Market on which the Common  Stock is currently
listed or quoted,  and no approval of the stockholders of the Company thereunder
is required for the Company to issue and deliver to the Investors the Securities
contemplated by the Transaction Documents.

                                       12
<PAGE>

                  (w)  Investment  Company.  The  Company is not,  and is not an
Affiliate of, and  immediately  following  the Closing will not have become,  an
"investment  company" within the meaning of the Investment  Company Act of 1940,
as amended.

                  (x) Application of Takeover Protections. The Company has taken
all necessary action, if any, in order to render  inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company's
Certificate of Incorporation  (or similar charter  documents) or the laws of its
state of incorporation  that is or could become applicable to the Investors as a
result  of the  Investors  and  the  Company  fulfilling  their  obligations  or
exercising  their  rights under the  Transaction  Documents,  including  without
limitation the Company's issuance of the Securities and the Investors' ownership
of the Securities.

                  (y) No  Additional  Agreements.  The Company does not have any
agreement or  understanding  with any Investor with respect to the  transactions
contemplated  by the  Transaction  Documents  other  than  as  specified  in the
Transaction Documents.

                  (z) Disclosure.  The Company  confirms that neither it nor any
Person acting on its behalf has provided any Investor or its  respective  agents
or counsel with any information that the Company believes constitutes  material,
non-public information except insofar as the existence and terms of the proposed
transactions hereunder may constitute such information.  The Company understands
and confirms that the Investors will rely on the foregoing  representations  and
covenants in effecting transactions in securities of the Company. All disclosure
provided  to  the  Investors  regarding  the  Company,   its  business  and  the
transactions  contemplated  hereby,  furnished  by or on behalf  of the  Company
(including  the  Company's  representations  and  warranties  set  forth in this
Agreement)  are true and correct and do not  contain any untrue  statement  of a
material fact or omit to state any material fact  necessary in order to make the
statements  made therein,  in light of the  circumstances  under which they were
made, not misleading.

         3.2  Representations  and  Warranties of the  Investors.  Each Investor
hereby,  for itself and for no other  Investor,  represents  and warrants to the
Company as follows:

                  (a) Organization;  Authority.  Such Investor is an entity duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of the
jurisdiction  of its  organization  with the requisite  corporate or partnership
power  and  authority  to  enter  into  and  to  consummate   the   transactions
contemplated by the applicable  Transaction Documents and otherwise to carry out
its  obligations  thereunder.  The execution,  delivery and  performance by such
Investor  of the  transactions  contemplated  by this  Agreement  has been  duly
authorized by all necessary corporate or, if such Investor is not a corporation,
such partnership,  limited liability company or other applicable like action, on
the part of such Investor.  Each of this Agreement and the  Registration  Rights
Agreement has been duly executed by such  Investor,  and when  delivered by such
Investor in accordance with terms hereof,  will constitute the valid and legally
binding obligation of such Investor,  enforceable  against it in accordance with
its  terms,   except  as  such  enforceability  may  be  limited  by  applicable

                                       13
<PAGE>

bankruptcy, insolvency, reorganization,  moratorium, liquidation or similar laws
relating to, or affecting  generally the enforcement of,  creditors'  rights and
remedies or by other equitable principles of general application.

                  (b)  Investment   Intent.   Such  Investor  is  acquiring  the
Securities as principal for its own account for investment purposes only and not
with a view to or for  distributing  or reselling  such  Securities  or any part
thereof,  without prejudice,  however,  to such Investor's right at all times to
sell or otherwise  dispose of all or any part of such  Securities  in compliance
with applicable  federal and state securities  laws.  Subject to the immediately
preceding sentence, nothing contained herein shall be deemed a representation or
warranty by such Investor to hold the  Securities  for any period of time.  Such
Investor is acquiring  the  Securities  hereunder in the ordinary  course of its
business.  Such Investor does not have any agreement or understanding,  directly
or indirectly, with any Person to distribute any of the Securities.

                  (c) Investor Status. At the time such Investor was offered the
Securities,  it was,  and at the date hereof it is, and on each date on which it
exercises  Warrants  it will be, an  "accredited  investor"  as  defined in Rule
501(a) under the Securities Act. Such Investor is not a registered broker-dealer
under Section 15 of the Exchange Act.

                  (d) General Solicitation.  Such Investor is not purchasing the
Securities  as  a  result  of  any  advertisement,   article,  notice  or  other
communication  regarding the Securities published in any newspaper,  magazine or
similar media or broadcast over television or radio or presented at any seminar,
any registration  statement or prospectus,  or any other general solicitation or
general advertisement.

                  (e) Access to Information.  Such Investor acknowledges that it
has reviewed the Disclosure  Materials and has been afforded (i) the opportunity
to ask such  questions  as it has deemed  necessary  of, and to receive  answers
from,  representatives of the Company concerning the terms and conditions of the
offering  of the  Securities  and the  merits  and  risks  of  investing  in the
Securities;  (ii) access to information  about the Company and the  Subsidiaries
and their  respective  financial  condition,  results of  operations,  business,
properties,  management  and  prospects  sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or expense that
is  necessary  to make an  informed  investment  decision  with  respect  to the
investment.  Neither such inquiries nor any other investigation  conducted by or
on behalf of such Investor or its representatives or counsel shall modify, amend
or affect such Investor's right to rely on the truth,  accuracy and completeness
of the  Disclosure  Materials and the Company's  representations  and warranties
contained in the Transaction Documents.

                  (f) Certain Trading Activities. Such Investor has not directly
or  indirectly,  nor has any  Person  acting  on behalf  of or  pursuant  to any
understanding with such Investor,  engaged in any transactions in the securities
of the Company (including,  without  limitations,  any Short Sales involving the
Company's  securities)  since  the  earlier  to occur of (1) the time  that such
Investor was first  contacted by the Company,  any Placement  Agent or any other
Person  regarding an investment in the Company and (2) the 30th day prior to the
date of this Agreement.

                                       14
<PAGE>

                  (g) Limited  Ownership.  The purchase by such  Investor of the
Securities  issuable  to it at the  Closing  will not  result  in such  Investor
(individually  or  together  with  other  Person  with  whom such  Investor  has
identified,  or will have  identified,  itself as part of a "group"  in a public
filing made with the Commission involving the Company's  securities)  acquiring,
or  obtaining  the right to  acquire,  in excess of 19.999%  of the  outstanding
shares of Common Stock or the voting power of the Company on a post  transaction
basis that assumes that the Closing shall have occurred.  Such Investor does not
presently  intend to, alone or together  with others,  make a public filing with
the  Commission  to disclose  that it has (or that it  together  with such other
Persons  have)  acquired,  or obtained the right to acquire,  as a result of the
Closing (when added to any other  securities of the Company that it or they then
own or have the  right to  acquire),  in excess of  19.999%  of the  outstanding
shares of Common Stock or the voting power of the Company on a post  transaction
basis that assumes that the Closing shall have occurred.

                  (h)  Independent   Investment  Decision.   Such  Investor  has
independently  evaluated  the  merits of its  decision  to  purchase  Securities
pursuant to the Transaction  Documents,  and such Investor  confirms that it has
not relied on the advice of any other  Investor's  business and/or legal counsel
in making such  decision.  Such Investor has not relied on the business or legal
advice of any Placement  Agents or any of their  respective  agents,  counsel or
Affiliates in making its investment decision  hereunder,  and confirms that none
of such Persons has made any  representations  or warranties to such Investor in
connection with the transactions contemplated by the Transaction Documents.

The  Company  acknowledges  and agrees  that no  Investor  has made or makes any
representations  or  warranties  with respect to the  transactions  contemplated
hereby other than those specifically set forth in this Section 3.2.

                                  ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

         4.1 (a) Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of the Securities other
than  pursuant to an effective  registration  statement,  to the Company,  to an
Affiliate  of an  Investor or in  connection  with a pledge as  contemplated  in
Section 4.1(b), the Company may require the transferor thereof to provide to the
Company  an  opinion  of  counsel  selected  by the  transferor  and  reasonably
acceptable  to the Company,  the form and  substance of which  opinion  shall be
reasonably  satisfactory  to the Company,  to the effect that such transfer does
not require  registration of such  transferred  Securities  under the Securities
Act.

                  (b)  Certificates  evidencing the Securities  will contain the
following legend, until such time as they are not required under Section 4.1(c):

                  [NEITHER THESE  SECURITIES  NOR THE  SECURITIES  ISSUABLE UPON
                  [EXERCISE]   [CONVERSION]   OF  THESE   SECURITIES  HAVE  BEEN
                  REGISTERED]  [THESE  SECURITIES HAVE NOT BEEN REGISTERED] WITH
                  THE  SECURITIES  AND  EXCHANGE  COMMISSION  OR THE  SECURITIES
                  COMMISSION  OF ANY STATE IN RELIANCE  UPON AN  EXEMPTION  FROM
                  REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE

                                       15
<PAGE>

                  "SECURITIES  ACT"),  AND,  ACCORDINGLY,  MAY NOT BE OFFERED OR
                  SOLD EXCEPT  PURSUANT TO AN EFFECTIVE  REGISTRATION  STATEMENT
                  UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
                  FROM,  OR IN A  TRANSACTION  NOT SUBJECT TO, THE  REGISTRATION
                  REQUIREMENTS  OF THE  SECURITIES  ACT AND IN  ACCORDANCE  WITH
                  APPLICABLE  STATE  SECURITIES  LAWS  AS  EVIDENCED  BY A LEGAL
                  OPINION OF  COUNSEL  TO THE  TRANSFEROR  TO SUCH  EFFECT,  THE
                  SUBSTANCE  OF WHICH  SHALL  BE  REASONABLY  ACCEPTABLE  TO THE
                  COMPANY.  [THESE  SECURITIES AND THE SECURITIES  ISSUABLE UPON
                  EXERCISE  OF  THESE  SECURITIES]  [THESE  SECURITIES]  MAY  BE
                  PLEDGED IN CONNECTION  WITH A BONA FIDE MARGIN ACCOUNT SECURED
                  BY SUCH SECURITIES.

                  The Company  acknowledges and agrees that an Investor may from
time to time  pledge,  and/or  grant a security  interest  in some or all of the
Securities  pursuant to a bona fide margin  agreement in connection  with a bona
fide  margin  account  and,  if required  under the terms of such  agreement  or
account,  such  Investor  may  transfer  pledged  or secured  Securities  to the
pledgees or secured  parties.  Such a pledge or transfer would not be subject to
approval or consent of the Company and no legal  opinion of legal counsel to the
pledgee,  secured  party or pledgor  shall be  required in  connection  with the
pledge,  but such legal opinion may be required in connection  with a subsequent
transfer  following default by the Investor  transferee of the pledge. No notice
shall be required of such pledge.  At the appropriate  Investor's  expense,  the
Company will execute and deliver such reasonable  documentation  as a pledgee or
secured party of Securities may reasonably  request in connection  with a pledge
or  transfer  of the  Securities  including  the  preparation  and filing of any
required  prospectus  supplement  under Rule  424(b)(3) of the Securities Act or
other applicable provision of the Securities Act to appropriately amend the list
of selling stockholders thereunder.

                  (c) Certificates  evidencing the Underlying Shares and Warrant
Shares shall not contain any legend  (including  the legend set forth in Section
4.1(b)):  (i)  following  a sale of such  Securities  pursuant  to an  effective
registration statement (including the Registration Statement), or (ii) following
a sale  of such  Underlying  Shares  or  Warrant  Shares  pursuant  to Rule  144
(assuming the transferor is not an Affiliate of the Company), or (iii) once such
Underlying Shares or Warrant Shares are eligible for sale under Rule 144(k). The
Company may not make any  notation on its  records or give  instructions  to any
transfer  agent of the Company  that  enlarge the  restrictions  on transfer set
forth in this Section.

                  (d)  The  Investors  covenant  and  agree  that  in  order  to
effectuate  any  transfer  of their  Shares they must  deliver the  certificates
therefor  to  the  Company  or its  transfer  agent  for  registration  of  such
transferred Shares in the name of the transferee.

         4.2  Furnishing  of  Information.  (a) As long as any Investor owns the
Securities,  the  Company  covenants  to timely  file (or obtain  extensions  in
respect  thereof  and file  within the  applicable  grace  period)  all  reports

                                       16
<PAGE>

required  to be filed by the  Company  after  the date  hereof  pursuant  to the
Exchange Act. Upon request of any such Person, the Company shall deliver to such
Person a written certification of a duly authorized officer as to whether it has
complied with the preceding  sentence.  As long as any Investor owns Securities,
if the Company is not  required to file reports  pursuant to such laws,  it will
prepare and furnish to the Investors  and make publicly  available in accordance
with Rule 144(c) such  information  as is required for the Investors to sell the
Underlying  Shares and  Warrant  Shares  under  Rule 144.  The  Company  further
covenants  that it will take such further action as any holder of Securities may
reasonably  request,  all to the extent reasonably required from time to time to
enable such Person to sell the  Underlying  Shares and  Warrant  Shares  without
registration  under the  Securities  Act within the limitation of the exemptions
provided by Rule 144.

                  (b) Each Investor agrees to provide such information as may be
requested  by the  Trading  Market  or the  Commission  in  connection  with the
transaction contemplated hereby.

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

         4.4  Subsequent  Registrations.  Other than a  Registration  Statement,
prior to the Effective Date, the Company may not file any registration statement
(other than on Form S-8) with the  Commission  with respect to any securities of
the  Company,  except  that,  if (x) the  Company  shall have filed the  initial
Registration  Statement  required under Section 2(a) of the Registration  Rights
Agreement by the Filing Date (as defined in the Registration  Rights  Agreement)
and (y) 31 calendar  days shall have elapsed from the date of such filing,  then
the Company may only file another  registration  statement if required to comply
with  outstanding  registration  obligations to other Persons  following such 31
calendar  days and  prior to the  Effective  Date,  or if the  Company  has been
notified by the Commission that such initial Registration  Statement will not be
subject to further review or Commission  comment,  the Company may not file such
other registration statement until following the Effective Date.

         4.5 Securities Laws Disclosure; Publicity. By 9:00 a.m. (New York time)
on the Trading Day following the execution of this  Agreement,  and by 9:00 a.m.
(New York time) on the Trading Day following the Closing Date, the Company shall
issue press releases  disclosing the  transactions  contemplated  hereby and the
Closing.  On the Trading Day  following  the  execution  of this  Agreement  the
Company will file a Current  Report on Form 8-K disclosing the material terms of
the  Transaction  Documents  (and  attach as exhibits  thereto  the  Transaction
Documents),  and on the Trading Day  following the Closing Date the Company will
file an  additional  Current  Report on Form 8-K to  disclose  the  Closing.  In
addition, the Company will make such other filings and notices in the manner and
time required by the Commission and the Trading Market on which the Common Stock
is  listed.  Notwithstanding  the  foregoing,  the  Company  shall not  publicly
disclose  the name of any  Investor,  or include the name of any Investor in any

                                       17
<PAGE>

filing  with the  Commission  (other  than the  Registration  Statement  and any
exhibits  to filings  made in respect of this  transaction  in  accordance  with
filings  required  under the Exchange Act) or any  regulatory  agency or Trading
Market, without the prior written consent of such Investor, except to the extent
such disclosure is required by law or Trading Market regulations.

         4.6 Limitation on Issuance of Future Priced Securities.  During the six
months following the Closing Date, the Company shall not issue any future priced
securities other than in connection with business combinations.

         4.7 Indemnification of Investors. In addition to the indemnity provided
in the Registration  Rights  Agreement,  the Company will indemnify and hold the
Investors  and their  directors,  trustees,  officers,  stockholders,  partners,
employees  and agents  (each,  an "INVESTOR  PARTY")  harmless  from any and all
losses,  liabilities,  obligations,  claims,  contingencies,  damages, costs and
expenses, including all judgments, amounts paid in settlements,  court costs and
reasonable attorneys' fees and costs of investigation  (collectively,  "Losses")
that any such  Investor  Party may suffer or incur as a result of or relating to
any  misrepresentation,  breach or inaccuracy of any  representation,  warranty,
covenant  or  agreement  made by the  Company in any  Transaction  Document.  In
addition to the indemnity  contained  herein,  the Company will  reimburse  each
Investor Party for its reasonable  legal and other expenses  (including the cost
of any investigation,  preparation and travel in connection  therewith) incurred
in connection therewith, as such expenses are incurred.

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

         4.9 Listing of Securities.  Subject to obtaining necessary  Stockholder
Approval pursuant to and as defined in Section 4.14, the Company agrees,  (i) to
cause the  Underlying  Shares and the  Warrant  Shares to be duly  listed on the
Trading  Market,  (ii) if the Company applies to have the Common Stock traded on
any other Trading  Market,  it will include in such  application  the Underlying
Shares and Warrant  Shares,  and will take such other  action as is necessary or
desirable to cause the Underlying Shares and Warrant Shares to be listed on such
other Trading Market as promptly as possible,  and (iii) it will take all action
reasonably  necessary to continue the listing and trading of its Common Stock on
a Trading  Market and will comply in all material  respects  with the  Company's
reporting, filing and other obligations under the bylaws or rules of the Trading
Market.

         4.10 Use of Proceeds.  The Company  will use the net proceeds  from the
sale of the Securities hereunder in accordance with Schedule 4.10.

         4.11  Acknowledgment  of Dilution.  The Company  acknowledges  that the
issuance of Underlying  Shares upon conversion of Shares and Warrant Shares upon
exercise of  Warrants  will result in  substantial  dilution of the  outstanding
shares of Common Stock. The Company further  acknowledges that its obligation to

                                       18
<PAGE>

honor  conversions  under  the  Shares  and  exercises  under  the  Warrants  is
unconditional   and   absolute  and  not  subject  to  any  right  of  set  off,
counterclaim,  delay or reduction, regardless of the effect of any such dilution
or any claim that the Company may have against any Investor.

         4.12  Reservation of Shares.  The Company shall maintain a reserve from
its duly  authorized  shares  of  Common  Stock to  comply  with its  conversion
obligations  under the Shares. If on any date the Company would be, if notice of
conversion were to be delivered on such date,  precluded from issuing the number
of (i) Underlying  Shares,  as the case may be, issuable upon conversion in full
of the Shares or (ii) Warrant Shares, as the case may be, issuable upon exercise
in full of the  Warrants  (in each case,  without  regard to any  conversion  or
exercise caps or other limitation  thereunder),  due to the  unavailability of a
sufficient number of authorized but unissued or reserved shares of Common Stock,
then the Company  shall  promptly  prepare and mail to the  stockholders  of the
Company proxy materials or other applicable materials  requesting  authorization
to amend the Company's  certificate  of  incorporation  or other  organizational
document to increase  the number of shares of Common  Stock which the Company is
authorized  to  issue  so as to  provide  enough  shares  for  issuance  of  the
Underlying  Shares and Warrant  Shares.  In connection  therewith,  the Board of
Directors  shall (a) adopt proper  resolutions  authorizing  such increase,  (b)
recommend  to and  otherwise  use its best  efforts to promptly  and duly obtain
stockholder  approval  (including  the hiring of a nationally  recognized  proxy
solicitor firm) to carry out such resolutions (and hold a special meeting of the
stockholders  as soon as  practicable,  but in any event not later than the 60th
day after delivery of the proxy or other applicable  materials  relating to such
meeting)  and (c)  within  five  Business  Days of  obtaining  such  stockholder
authorization,  file an  appropriate  amendment to the Company's  certificate of
incorporation or other organizational document to evidence such increase.

         4.13 Conversion Procedures. The form of Exercise Notice included in the
Warrants sets forth the totality of the procedures  required by the Investors in
order to convert the Warrants. The Company shall honor exercises of Warrants and
shall deliver Warrant Shares in accordance  with the terms,  conditions and time
periods set forth in the Warrants.

         4.14 Stockholder Approval.

                  (a) The Company  covenants  and agrees to use its best efforts
to  obtain  the  approval  of its  stockholders  as  required  by the  rules and
regulations of the American Stock Exchange in order to issue  Underlying  Shares
and Warrant Shares and to otherwise perform its respective obligations under the
transactions contemplated by the Transaction Documents,  including (i) approving
the issuance of in excess of 19.99% of the shares of Common Stock outstanding on
the date of this  Agreement  and  (ii)  effectuating  the  Reverse  Stock  Split
(collectively "STOCKHOLDER APPROVAL").

                  (b) In  furtherance  of the  obligations  of the Company under
Section  4.14(a),  the Company shall use its best efforts to obtain  Stockholder
Approval in connection  with this Section 4.14,  and in pursuit  thereof (a) the
Board of Directors of the Company shall adopt proper resolutions authorizing the
actions set forth in  subsection  (a) above,  (b) the Board of  Directors of the
Company shall  recommend and the Company shall otherwise use its best efforts to

                                       19
<PAGE>

promptly and duly obtain stockholder  approval,  including,  without limitation,
soliciting  proxies from its  stockholders  in connection  therewith in the same
manner as all other management  proposals in such proxy statement and having all
management-appointed proxy-holders vote their proxies in favor of such proposals
to carry out such resolutions (and hold a special meeting of the stockholders as
soon as practicable, but in any event not later than the 60th day after delivery
of the proxy or other  applicable  materials  relating to such  meeting) and (c)
within three Business Days of obtaining such stockholder authorization, take all
actions necessary to effectuate the actions set forth in subsections  (a)(i) and
(a)(ii) above. If the Company does not obtain Stockholder  Approval at the first
meeting  (the  "FIRST  MEETING"),  the  Company  shall (1)  provided it has been
approved as required by the American  Stock  Exchange,  on the next Business Day
effect the  conversion  of the  Farequest  Notes into Common  Stock,  (2) and in
addition to satisfying  clauses (a), (b) and (c) as contemplated  above,  call a
special meeting of its stockholders as soon as reasonable  practicable but in no
event later than ninety (90) days  following  the First  Meeting,  and utilize a
record date therefor that would include all shares of Common Stock issuable upon
conversion of the Farequest  Notes to seek  Stockholder  Approval until the date
Stockholder  Approval is obtained.  The Company shall use its commercially  best
efforts  to hold the First  Meeting  as soon as  possible,  but in any event the
Company shall use its commercially  best efforts to hold the First Meeting prior
to the ninetieth (90th) day after the date of this Agreement.

         4.15 Limitation on Trading. Each Investor covenants that neither it nor
any Person  acting on its behalf or pursuant to any  understanding  with it will
engage  in or  close  out any  transactions  in the  securities  of the  Company
(including Short Sales) prior to the Trading Day following the Reset Period.

         4.16  Farequest  Note.  In the event that  Stockholder  Approval is not
obtained at the First Meeting, the Company shall irrevocably tender a conversion
notice with  respect to the  Farequest  Note  (which  shall be  contingent  upon
receipt of  stockholder  approval of such  conversion)  to the holder thereof to
become effective on the Business Day following the date of the First Meeting.

                                   ARTICLE V.
                         CONDITIONS PRECEDENT TO CLOSING

         5.1  Conditions  Precedent  to  the  Obligations  of the  Investors  to
Purchase  Securities.  The obligation of each Investor to acquire  Securities at
the Closing is subject to the  satisfaction  or waiver by such  Investor,  at or
before the Closing, of each of the following conditions:

                  (a)  Representations  and Warranties.  The representations and
warranties  of the  Company  contained  herein  shall be true and correct in all
material  respects as of the date when made and as of the Closing as though made
on and as of such date;

                                       20
<PAGE>

                  (b) Performance.  The Company shall have performed,  satisfied
and  complied  in all  material  respects  with all  covenants,  agreements  and
conditions required by the Transaction  Documents to be performed,  satisfied or
complied with by it at or prior to the Closing;

                  (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  that  prohibits  the  consummation  of  any  of  the  transactions
contemplated by the Transaction Documents;

                  (d)  Adverse  Changes.  Since  the date of  execution  of this
Agreement,  no event or series of events  shall have  occurred  that  reasonably
could have or result in a Material Adverse Effect;

                  (e) No  Suspensions  of  Trading  in  Common  Stock;  Listing.
Trading in the Common Stock shall not have been  suspended by the  Commission or
any Trading Market  (except for any  suspensions of trading of not more than one
Trading Day solely to permit dissemination of material information regarding the
Company)  at any time since the date of  execution  of this  Agreement,  and the
Common  Stock shall have been at all times since such date listed for trading on
a Trading Market;

                  (f) Company Deliverables. The Company shall have delivered the
Company Deliverables in accordance with Section 2.2(a);

                  (g) Voting  Agreement.  The Voting  Agreement  shall have been
duly executed and delivered by the stockholders identified therein;

                  (h)  Farequest  Note.  The  Company  shall  have   irrevocably
tendered a conversion  notice with respect to the Farequest Note (which shall be
contingent  upon  receipt of  stockholder  approval of such  conversion)  to the
holder thereof to become effective on the Business Day following the date of the
First  Meeting in the event that  Stockholder  Approval  is not  obtained at the
First Meeting;

                  (i) Farequest Voting Agreement. The Farequest Voting Agreement
shall have been duly  executed  and  delivered  by the  Farequest  stockholders'
representative;

                  (j) Stock Pledge Agreement. The Company shall have delivered a
stock pledge  agreement,  executed and  delivered by William  Goldstein  and the
investor representative signatory thereto; and

                  (k) Officer's Certificate. The Company shall have delivered to
the Investors a certificate executed by a duly authorized officer of the Company
certifying that (i) the  representations and warranties of the Company contained
herein are true and  correct in all  material  respects as of the date when made
and as of the  Closing as though  made on and as of such date,  (ii) the Company
has  performed,  satisfied  and  complied  in all  material  respects  with  all

                                       21
<PAGE>

covenants, agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by it at or prior to the Closing and (iii)
the items referenced in Sections 5.1(c)-(j) have been satisfied.

         5.2  Conditions  Precedent  to the  Obligations  of the Company to sell
Securities.  The obligation of the Company to sell  Securities at the Closing is
subject to the satisfaction or waiver by the Company,  at or before the Closing,
of each of the following conditions:

                  (a)  Representations  and Warranties.  The representations and
warranties  of each Investor  contained  herein shall be true and correct in all
material  respects as of the date when made and as of the Closing Date as though
made on and as of such date;

                  (b) Performance. Each Investor shall have performed, satisfied
and  complied  in all  material  respects  with all  covenants,  agreements  and
conditions required by the Transaction  Documents to be performed,  satisfied or
complied with by such Investor at or prior to the Closing;

                  (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  that  prohibits  the  consummation  of  any  of  the  transactions
contemplated by the Transaction Documents;

                  (d) Investors Deliverables. Each Investor shall have delivered
its Investors Deliverables in accordance with Section 2.2(b);

                  (e) Voting  Agreement.  The Voting  Agreement  shall have been
duly executed and delivered by the Investors' voting representative; and

                  (f) Farequest Voting Agreement. The Farequest Voting Agreement
shall  have  been  duly  executed  and  delivered  by  the   Investors'   voting
representative.

                                  ARTICLE VI.
                                  MISCELLANEOUS

         6.1 Fees and  Expenses.  Each party shall pay the fees and  expenses of
its advisers,  counsel,  accountants  and other  experts,  if any, and all other
expenses  incurred  by such  party  incident  to the  negotiation,  preparation,
execution,  delivery and performance of the Transaction  Documents.  The Company
shall pay all stamp and other  taxes and duties  levied in  connection  with the
sale of the Shares.

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

                                       22
<PAGE>

         6.3 Notices.  Any and all notices or other communications or deliveries
required or permitted to be provided  hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of  transmission,  if
such notice or  communication  is delivered via  facsimile  (provided the sender
receives a  machine-generated  confirmation of successful  transmission)  at the
facsimile  number  specified in this Section  prior to 5:30 p.m.  (New York City
time) on a Trading Day, (b) the next Trading Day after the date of transmission,
if such notice or  communication  is delivered  via  facsimile at the  facsimile
number  specified  in this  Section on a day that is not a Trading  Day or later
than 5:30 p.m.  (New York City time) on any  Trading  Day,  (c) the  Trading Day
following the date of mailing, if sent by U.S. nationally  recognized  overnight
courier service,  or (d) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and  communications  shall be
as follows:

         If to the Company:  RCG Companies Incorporated
                             6836 Morrison Boulevard, Suite 200
                             Charlotte, NC 28211
                             Attn:  Chief Financial Officer
                             Facsimile: (704) 366-5056

         With a copy to:     Katten Muchin Zavis Rosenman
                             525 West Monroe Street
                             Chicago, IL 60661
                             Attn.:  Matthew S. Brown
                             Facsimile:  (312) 577-8726

         If to an Investor:  To the address set forth under such Investor's name
                             on the signature pages hereof;

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

         6.4 Amendments;  Waivers; No Additional Consideration.  No provision of
this Agreement may be waived or amended except in a written instrument signed by
the  Company  and the  Investors  holding a majority  of the  Underlying  Shares
determined on an  as-converted  basis.  No waiver of any default with respect to
any provision,  condition or requirement of this Agreement shall be deemed to be
a  continuing  waiver in the future or a waiver of any  subsequent  default or a
waiver of any other provision,  condition or requirement  hereof,  nor shall any
delay or omission of either party to exercise any right  hereunder in any manner
impair the exercise of any such right. No consideration shall be offered or paid
to any Investor to amend or consent to a waiver or modification of any provision
of any Transaction Document unless the same consideration is also offered to all
Investors who then hold Shares.

         6.5  Termination.  This  Agreement may be  terminated  prior to Closing
only:

                  (a) by written agreement of the Investors and the Company;

                                       23
<PAGE>

                  (b) by the Company or an  Investor  (as to itself but no other
Investor) upon written notice to the other,  if the Closing shall not have taken
place by 6:30 p.m. Eastern time on the Outside Date; provided, that the right to
terminate this Agreement under this Section 6.5(b) shall not be available to any
Person whose  failure to comply with its  obligations  under this  Agreement has
been the cause of or  resulted  in the  failure  of the  Closing  to occur on or
before such time; or

                  (c) by an Investor (as to itself but no other  Investor) if it
concludes  in good  faith  that any of the  conditions  precedent  contained  in
Section 5.1 shall have been breached or shall not be capable of being  satisfied
by the Outside Date despite the assumed best efforts of the Company.

         Upon a termination in accordance with this Section 6.5, the Company and
the terminating  Investor(s) shall not have any further  obligation or liability
(including as arising from such  termination)  to the other and no Investor will
have any liability to any other  Investor under the  Transaction  Documents as a
result therefrom.

         6.6 Construction.  The headings herein are for convenience only, do not
constitute a part of this  Agreement  and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent,  and no
rules of strict  construction  will be applied against any party. This Agreement
shall be construed as if drafted  jointly by the parties,  and no presumption or
burden of proof shall arise favoring or  disfavoring  any party by virtue of the
authorship  of any  provisions  of  this  Agreement  or  any of the  Transaction
Documents.

         6.7  Successors and Assigns.  This Agreement  shall be binding upon and
inure to the benefit of the parties and their successors and permitted  assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written  consent of the Investors.  No Investor may assign any
or all of its rights or obligations  hereunder without the prior written consent
of the Company;  provided,  however,  that any Investor may assign any or all of
its rights under this  Agreement to any Person to whom such Investor  assigns or
transfers  any  Securities,  provided  such  transferee  agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to the "Investors."

         6.8 No  Third-Party  Beneficiaries.  This Agreement is intended for the
benefit of the parties  hereto and their  respective  successors  and  permitted
assigns and is not for the benefit of, nor may any provision  hereof be enforced
by, any other  Person,  except as otherwise set forth in Section 4.7 (as to each
Investor Party).

         6.9 Governing Law. All questions concerning the construction, validity,
enforcement  and  interpretation  of this  Agreement  shall be  governed  by and
construed and enforced in accordance  with the internal laws of the State of New
York,  without regard to the principles of conflicts of law thereof.  Each party
agrees that all  Proceedings  concerning the  interpretations,  enforcement  and
defense  of the  transactions  contemplated  by this  Agreement  and  any  other
Transaction  Documents (whether brought against a party hereto or its respective
Affiliates,  employees or agents) shall be commenced exclusively in the New York
Courts.   Each  party  hereto  hereby  irrevocably   submits  to  the  exclusive
jurisdiction  of the  New  York  Courts  for  the  adjudication  of any  dispute

                                       24
<PAGE>

hereunder or in connection herewith or with any transaction  contemplated hereby
or discussed herein (including with respect to the enforcement of the any of the
Transaction Documents),  and hereby irrevocably waives, and agrees not to assert
in  any  Proceeding,  any  claim  that  it is  not  personally  subject  to  the
jurisdiction  of any such New  York  Court,  or that  such  Proceeding  has been
commenced  in an  improper  or  inconvenient  forum.  Each party  hereto  hereby
irrevocably  waives  personal  service of process and consents to process  being
served in any such  Proceeding  by  mailing a copy  thereof  via  registered  or
certified  mail or overnight  delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this  Agreement and agrees that
such service shall constitute good and sufficient  service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve  process in any manner  permitted  by law.  Each  party  hereto  hereby
irrevocably  waives,  to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions  contemplated  hereby.  If either party shall
commence a Proceeding to enforce any provisions of a Transaction Document,  then
the prevailing  party in such Proceeding  shall be reimbursed by the other party
for its reasonable  attorneys'  fees and other costs and expenses  incurred with
the investigation, preparation and prosecution of such Proceeding.

         6.10  Survival.   The  representations,   warranties,   agreements  and
covenants  contained  herein  shall  survive the Closing and the delivery of the
Securities.

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

         6.12  Severability.  If any  provision of this  Agreement is held to be
invalid or unenforceable in any respect,  the validity and enforceability of the
remaining  terms  and  provisions  of  this  Agreement  shall  not in any way be
affected or impaired  thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor,  and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

         6.13 Rescission and Withdrawal Right.  Notwithstanding  anything to the
contrary  contained in (and  without  limiting  any similar  provisions  of) the
Transaction Documents, whenever any Investor exercises a right, election, demand
or option under a Transaction  Document and the Company does not timely  perform
its related obligations within the periods therein provided,  then such Investor
may rescind or withdraw,  in its sole  discretion from time to time upon written
notice to the Company,  any relevant  notice,  demand or election in whole or in
part without prejudice to its future actions and rights.

                                       25
<PAGE>

         6.14  Replacement  of  Securities.  If any  certificate  or  instrument
evidencing any Securities is mutilated,  lost, stolen or destroyed,  the Company
shall  issue or cause to be issued in  exchange  and  substitution  for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument,  but only upon receipt of evidence reasonably satisfactory to the
Company  of such  loss,  theft  or  destruction  and  customary  and  reasonable
indemnity,  if requested.  The  applicants  for a new  certificate or instrument
under  such  circumstances  shall  also  pay any  reasonable  third-party  costs
associated with the issuance of such  replacement  Securities.  If a replacement
certificate  or  instrument  evidencing  any  Securities  is requested  due to a
mutilation  thereof,   the  Company  may  require  delivery  of  such  mutilated
certificate  or  instrument  as a  condition  precedent  to  any  issuance  of a
replacement.

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

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

         6.17  Independent  Nature of  Investors'  Obligations  and Rights.  The
obligations of each Investor under any Transaction  Document are several and not
joint with the  obligations  of any other  Investor,  and no  Investor  shall be
responsible  in any way for the  performance  of the  obligations  of any  other
Investor  under any  Transaction  Document.  The  decision  of each  Investor to
purchase Securities pursuant to the Transaction  Documents has been made by such
Investor independently of any other Investor. Nothing contained herein or in any
Transaction  Document,  and no action  taken by any Investor  pursuant  thereto,
shall be deemed to constitute the Investors as a partnership,  an association, a
joint  venture  or any other kind of entity,  or create a  presumption  that the
Investors  are in any way acting in  concert or as a group with  respect to such
obligations or the transactions  contemplated by the Transaction Documents. Each
Investor  acknowledges  that no other  Investor  has  acted  as  agent  for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such  Investor  in  connection  with  monitoring  its
investment  in the  Securities  or enforcing  its rights  under the  Transaction
Documents.  Each Investor shall be entitled to independently protect and enforce
its  rights,  including  without  limitation  the  rights  arising  out of  this

                                       26
<PAGE>

Agreement  or  out of the  other  Transaction  Documents,  and it  shall  not be
necessary  for any other  Investor  to be joined as an  additional  party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Transaction Documents for the purpose of closing
a  transaction  with  multiple  Investors  and not  because it was  required  or
requested to do so by any Investor.

         6.18  Limitation of Liability.  Notwithstanding  anything herein to the
contrary,  the Company acknowledges and agrees that the liability of an Investor
arising directly or indirectly,  under any Transaction Document of any and every
nature  whatsoever shall be satisfied solely out of the assets of such Investor,
and that no trustee, officer, other investment vehicle or any other Affiliate of
such  Investor or any  investor,  stockholder  or holder of shares of beneficial
interest of such a Investor  shall be personally  liable for any  liabilities of
such Investor.

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                             SIGNATURE PAGES FOLLOW]

                                       27
<PAGE>

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

                                             RCG COMPANIES INCORPORATED

                                             By: \s\ Marc E. Bercoon
                                                 ------------------------------
                                                 Name:  Marc E. Bercoon
                                                 Title: Chief Financial Officer

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGES FOR INVESTORS FOLLOW]

                                       28
<PAGE>

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

                                      NAME OF INVESTOR

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

                                      By:
                                          --------------------------------------
                                          Name:
                                          Title:

                                      Investment Amount: $
                                                          ----------------------

                                      Tax ID No.:
                                                  ------------------------------

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                                      Attention:
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                                      Fax:
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                                      DELIVERY INSTRUCTIONS
                                      (if different from above)

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                                       29Exhibit 10.2

NEITHER  THESE  SECURITIES  NOR THE  SECURITIES  ISSUABLE UPON EXERCISE OF THESE
SECURITIES HAVE BEEN  REGISTERED WITH THE SECURITIES AND EXCHANGE  COMMISSION OR
THE  SECURITIES  COMMISSION  OF ANY STATE IN  RELIANCE  UPON AN  EXEMPTION  FROM
REGISTRATION  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED  (THE  "SECURITIES
ACT"),  AND,  ACCORDINGLY,  MAY NOT BE OFFERED  OR SOLD  EXCEPT  PURSUANT  TO AN
EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR PURSUANT TO AN
AVAILABLE  EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE  REGISTRATION
REQUIREMENTS  OF THE  SECURITIES  ACT AND IN ACCORDANCE  WITH  APPLICABLE  STATE
SECURITIES  LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH  EFFECT,  THE  SUBSTANCE  OF WHICH SHALL BE  REASONABLY  ACCEPTABLE  TO THE
COMPANY.  THESE  SECURITIES AND THE  SECURITIES  ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION  WITH A BONA FIDE MARGIN ACCOUNT SECURED
BY SUCH SECURITIES.

                           RCG COMPANIES INCORPORATED

                                     WARRANT

Warrant No.  C-[   ]                        Original Issue Date:  April 14, 2005

         RCG COMPANIES  INCORPORATED,  a Delaware  corporation  (the "COMPANY"),
hereby  certifies that, for value received,  [ ] or its registered  assigns (the
"HOLDER"),  is entitled to purchase from the Company up to a total of [ ] shares
of Common Stock (each such share,  a "WARRANT  SHARE" and all such  shares,  the
"WARRANT  SHARES"),  at any time  and  from  time to time  from  and  after  the
Automatic  Conversion Date (as defined in the  Certificate of  Designation)  and
through and including April 14, 2010 (the "EXPIRATION DATE"), and subject to the
following terms and conditions:

         1. Definitions. As used in this Warrant, the following terms shall have
the respective  definitions set forth in this Section 1. Capitalized  terms that
are used and not  defined  in this  Warrant  that are  defined  in the  Purchase
Agreement (as defined below) shall have the respective  definitions set forth in
the Purchase Agreement.

         "BUSINESS DAY" means any calendar day except  Saturday,  Sunday and any
calendar day that is a federal  legal holiday in the United States or a calendar
day on which  banking  institutions  in the State of New York are  authorized or
required by law or other government action to close.

         "COMMON  STOCK" means the common  stock of the Company,  par value $.04
per share,  and any  securities  into which such common  stock may  hereafter be
reclassified.

         "EXERCISE PRICE" means $0.55,  subject to adjustment in accordance with
Section 9.

<PAGE>

         "FUNDAMENTAL  TRANSACTION" means any of the following:  (1) the Company
effects any merger or  consolidation  of the Company with or into another Person
in which the Company is not the  survivor,  (2) the Company  effects any sale of
all  or  substantially  all  of  its  assets  in  one  or a  series  of  related
transactions,  (3) any tender offer or exchange offer (whether by the Company or
another  Person) is  completed  pursuant  to which  holders of Common  Stock are
permitted  to tender or  exchange  their  shares for other  securities,  cash or
property, or (4) the Company effects any reclassification of the Common Stock or
any compulsory share exchange  pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property.

         "ORIGINAL  ISSUE DATE" means the Original Issue Date first set forth on
the first page of this Warrant.

         "NEW YORK  COURTS"  means the state and federal  courts  sitting in the
City of New York, Borough of Manhattan.

         "PURCHASE  AGREEMENT" means the Securities  Purchase  Agreement,  dated
April 14, 2005, to which the Company and the original Holder are parties.

         "TRADING  DAY"  means (i) a calendar  day on which the Common  Stock is
traded on a Trading Market (other than the OTC Bulletin  Board),  or (ii) if the
Common  Stock is not listed on a Trading  Market  (other  than the OTC  Bulletin
Board),   a  calendar   day  on  which  the  Common   Stock  is  traded  in  the
over-the-counter  market, as reported by the OTC Bulletin Board, or (iii) if the
Common  Stock is not quoted on any Trading  Market,  a calendar day on which the
Common  Stock is  quoted  in the  over-the-counter  market  as  reported  by the
National  Quotation Bureau  Incorporated (or any similar  organization or agency
succeeding to its functions of reporting  prices);  provided,  that in the event
that the  Common  Stock is not  listed or  quoted as set forth in (i),  (ii) and
(iii) hereof, then Trading Day shall mean a Business Day.

         2.  Registration  of Warrant.  The Company shall  register this Warrant
upon records to be  maintained  by the Company for that  purpose  (the  "WARRANT
REGISTER"),  in the name of the  record  Holder  hereof  from time to time.  The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise  hereof or any  distribution to the
Holder, and for all other purposes, absent actual notice to the contrary.

         3.  Registration of Transfers.  The Company shall register the transfer
of any portion of this Warrant in the Warrant  Register,  upon surrender of this
Warrant,  with the Form of Assignment attached hereto duly completed and signed,
to the Company at its address  specified  herein.  Upon any such registration or
transfer,  a new Warrant to purchase Common Stock, in substantially  the form of
this Warrant (any such new Warrant, a "NEW Warrant"),  evidencing the portion of
this Warrant so transferred  shall be issued to the transferee and a New Warrant
evidencing  the remaining  portion of this Warrant not so  transferred,  if any,
shall be issued to the transferring Holder. The acceptance of the New Warrant by
the transferee  thereof shall be deemed the acceptance by such transferee of all
of the rights and obligations of a holder of a Warrant.

         4. Exercise and Duration of Warrants.

                                       2
<PAGE>

                  (a) This Warrant shall be exercisable by the registered Holder
at any time and from  time to time on or after  the  Automatic  Conversion  Date
through and including the Expiration Date. At 6:30 p.m., (New York City time) on
the  Expiration  Date,  the portion of this Warrant not exercised  prior thereto
shall be and become void and of no value.  Except as set forth in subsection (b)
below,  the Company may not call or redeem any portion of this  Warrant  without
the prior written consent of the affected Holder.

                  (b) Subject to the  provisions of this Section 4(b), if at any
time  following  the  Automatic  Conversion  Date,  (i) the closing price of the
Common Stock for each of the 20 consecutive  Trading Days (each  occurring after
the Automatic  Conversion Date)  immediately  prior to delivery of a Call Notice
(as defined below) is greater than $1.65  (subject to equitable  adjustment as a
result of intervening  stock splits and reverse stock splits),  (ii) the average
daily trading volume of the Common Stock during the entire 20 Trading Day period
referenced  in (i) above  through  the  expiration  of the Call Date (as defined
below) as reported by Bloomberg L.P. (the "CALL  CONDITION  PERIOD") shall be at
least 100,000 shares (subject to equitable adjustment as a result of intervening
stock  splits and reverse  stock  splits),  (iii) the Warrant  Shares are either
registered for resale pursuant to an effective registration statement naming the
Holder as a selling  stockholder  thereunder  (and the prospectus  thereunder is
available for use by the Holder as to all Warrant Shares) or freely transferable
without  volume  restrictions  pursuant  to Rule  144(k)  promulgated  under the
Securities  Act, as determined  by counsel to the Company  pursuant to a written
opinion letter addressed and in form and substance reasonably  acceptable to the
Holder and the  transfer  agent for the  Common  Stock,  during the entire  Call
Condition  Period,  and (iv) the Company  shall have  complied  in all  material
respects with its obligations  under this Warrant and the Transaction  Documents
and the Common Stock shall at all times be listed or quoted on a Trading  Market
during the Call Condition  Period,  then the Company may in its sole discretion,
elect to  require  the  exercise  of all (but  not  less  than  all) of the then
unexercised  portion  of this  Warrant,  on the  date  that is the  fifth  (5th)
calendar day after written  notice  thereof (a "CALL NOTICE") is received by the
Holder (the "CALL DATE") at the address last shown on the records of the Company
for the Holder or given by the Holder to the  Company for the purpose of notice;
provided,  that the  conditions  to giving  such notice must be in effect at all
times during the Call Condition Period or any such Call Notice shall be null and
void.  The Company and the Holder agree that, if and to the extent Section 11 of
this Warrant  would  restrict the ability of the Holder to exercise this Warrant
in the event of a delivery of a Call Notice,  then  notwithstanding  anything to
the  contrary  set forth in the Call  Notice,  the Call  Notice  shall be deemed
automatically  amended to apply only to such  portion of this  Warrant as may be
exercised by the Holder by the Call Date in accordance with such Sections as are
then in effect.  The Holder will promptly (and, in any event,  prior to the Call
Date)  notify  the  Company  in writing  following  receipt of a Call  Notice if
Section 11 would  restrict its exercise of the Warrant,  specifying  therein the
number of Warrant Shares so restricted. The Company covenants and agrees that it
will honor all Exercise  Notices tendered through 6:30 p.m. (New York City time)
on the Call Date.

         5. Delivery of Warrant Shares.

                  (a) To effect  exercises  hereunder,  the Holder  shall not be
required to  physically  surrender  this Warrant  unless the  aggregate  Warrant
Shares  represented  by this Warrant is being  exercised.  Upon  delivery of the
Exercise Notice (in the form attached  hereto) to the Company (with the attached
Warrant Shares Exercise Log) at its address for notice set forth herein and upon
payment of the Exercise  Price  multiplied by the number of Warrant  Shares that

                                       3
<PAGE>

the Holder intends to purchase hereunder,  the Company shall promptly (but in no
event  later than three  Trading  Days after the Date of  Exercise  (as  defined
herein)) issue and deliver to the Holder,  a certificate  for the Warrant Shares
issuable upon such exercise,  which,  unless otherwise  required by the Purchase
Agreement, shall be free of restrictive legends. The Company shall, upon request
of the  Holder  and  subsequent  to the date on which a  registration  statement
covering  the resale of the Warrant  Shares has been  declared  effective by the
Securities and Exchange  Commission,  use its reasonable best efforts to deliver
Warrant Shares hereunder electronically through the Depository Trust Corporation
or another established  clearing  corporation  performing similar functions,  if
available,  provided,  that, the Company may, but will not be required to change
its transfer agent if its current  transfer agent cannot deliver  Warrant Shares
electronically  through the Depository Trust  Corporation.  A "DATE OF EXERCISE"
means the date on which the Holder shall have delivered to the Company:  (i) the
Exercise  Notice (with the Warrant  Exercise Log attached to it),  appropriately
completed  and duly signed and (ii) if such Holder is not utilizing the cashless
exercise provisions set forth in this Warrant, payment of the Exercise Price for
the number of Warrant Shares so indicated by the Holder to be purchased.

                  (b) If by the third  Trading Day after a Date of Exercise  the
Company  fails to deliver the  required  number of Warrant  Shares in the manner
required  pursuant  to  Section  5(a),  then the  Holder  will have the right to
rescind such exercise.

                  (c) If by the third  Trading Day after a Date of Exercise  the
Company  fails to deliver the  required  number of Warrant  Shares in the manner
required pursuant to Section 5(a), and if after such third Trading Day and prior
to the receipt of such Warrant Shares,  the Holder  purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
sale by the Holder of the Warrant Shares which the Holder anticipated  receiving
upon such exercise (a  "BUY-IN"),  then the Company shall (1) pay in cash to the
Holder the amount by which (x) the  Holder's  total  purchase  price  (including
brokerage  commissions,  if any) for the  shares  of Common  Stock so  purchased
exceeds (y) the amount  obtained by multiplying (A) the number of Warrant Shares
that the Company was  required to deliver to the Holder in  connection  with the
exercise at issue by (B) the  closing bid price of the Common  Stock on the Date
of Exercise and (2) at the option of the Holder, either reinstate the portion of
the Warrant and equivalent  number of Warrant Shares for which such exercise was
not  honored or deliver to the Holder the number of shares of Common  Stock that
would have been issued had the Company  timely  complied  with its  exercise and
delivery  obligations  hereunder.  The Holder shall provide the Company  written
notice indicating the amounts payable to the Holder in respect of the Buy-In.

                  (d) The  Company's  obligations  to issue and deliver  Warrant
Shares in  accordance  with the terms  hereof are  absolute  and  unconditional,
irrespective  of any action or inaction  by the Holder to enforce the same,  any
waiver or consent  with  respect to any  provision  hereof,  the recovery of any
judgment  against any Person or any action to enforce  the same,  or any setoff,
counterclaim,  recoupment,  limitation or termination,  or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or any
violation  or alleged  violation of law by the Holder or any other  Person,  and
irrespective  of  any  other  circumstance  which  might  otherwise  limit  such
obligation  of the  Company to the Holder in  connection  with the  issuance  of
Warrant Shares.  Nothing herein shall limit a Holder's right to pursue any other

                                       4
<PAGE>

remedies  available  to it  hereunder,  at law or in equity  including,  without
limitation,  a decree of  specific  performance  and/or  injunctive  relief with
respect to the Company's  failure to timely  deliver  certificates  representing
Warrant  Shares or make book  entry upon  exercise  of the  Warrant as  required
pursuant to the terms hereof.

         6. Charges, Taxes and Expenses. Issuance and delivery of Warrant Shares
upon exercise of this Warrant shall be made without charge to the Holder for any
issue or transfer tax,  withholding tax,  transfer agent fee or other incidental
tax or expense in respect of the  issuance  of such  certificates,  all of which
taxes and expenses  shall be paid by the Company;  provided,  however,  that the
Company  shall not be required to pay any tax which may be payable in respect of
any transfer involved in the registration of any certificates for Warrant Shares
or  Warrants  in a name  other  than that of the  Holder.  The  Holder  shall be
responsible for all other tax liability that may arise as a result of holding or
transferring this Warrant or receiving Warrant Shares upon exercise hereof.

         7. Replacement of Warrant.  If this Warrant is mutilated,  lost, stolen
or  destroyed,  the Company  shall  issue or cause to be issued in exchange  and
substitution for and upon  cancellation  hereof,  or in lieu of and substitution
for this Warrant,  a New Warrant,  but only upon receipt of evidence  reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable  indemnity  (which shall not include a surety  bond),  if  requested.
Applicants  for a New Warrant  under such  circumstances  shall also comply with
such other  reasonable  regulations and procedures and pay such other reasonable
third-party costs as the Company may prescribe. If a New Warrant is requested as
a result of a mutilation  of this  Warrant,  then the Holder shall  deliver such
mutilated  Warrant to the  Company as a  condition  precedent  to the  Company's
obligation to issue the New Warrant.

         8. Reservation of Warrant Shares. The Company covenants that it will at
all times reserve and keep  available out of the aggregate of its authorized but
unissued  and  otherwise  unreserved  Common  Stock,  solely for the  purpose of
enabling  it to issue  Warrant  Shares upon  exercise of this  Warrant as herein
provided,  the number of Warrant Shares which are then issuable and  deliverable
upon the exercise of this entire  Warrant,  free from  preemptive  rights or any
other  contingent  purchase rights of Persons other than the Holder (taking into
account the  adjustments and  restrictions of Section 9). The Company  covenants
that all Warrant Shares so issuable and deliverable shall, upon issuance and the
payment of the applicable Exercise Price in accordance with the terms hereof, be
duly and validly authorized, issued and fully paid and nonassessable.

         9. Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon  exercise of this Warrant are subject to  adjustment  from time to
time as set forth in this Section 9.

                  (a) Stock  Dividends and Splits.  If the Company,  at any time
while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock
or otherwise  makes a distribution on any class of capital stock that is payable
in shares of Common Stock,  (ii) subdivides  outstanding  shares of Common Stock
into a larger number of shares, or (iii) combines  outstanding  shares of Common
Stock into a smaller number of shares, then in each such case the Exercise Price
shall be multiplied by a fraction of which the numerator  shall be the number of

                                       5
<PAGE>

shares of Common Stock  outstanding  immediately  before such event and of which
the  denominator  shall be the  number of shares  of  Common  Stock  outstanding
immediately after such event. Any adjustment made pursuant to clause (i) of this
paragraph  shall  become  effective  immediately  after the record  date for the
determination of stockholders entitled to receive such dividend or distribution,
and any  adjustment  pursuant  to clause (ii) or (iii) of this  paragraph  shall
become  effective  immediately  after the effective date of such  subdivision or
combination.

                  (b)  Fundamental  Transactions.  If,  at any time  while  this
Warrant is outstanding there is a Fundamental Transaction, then the Holder shall
have the right  thereafter to receive,  upon exercise of this Warrant,  the same
amount and kind of  securities,  cash or property as it would have been entitled
to receive upon the occurrence of such  Fundamental  Transaction if it had been,
immediately prior to such Fundamental  Transaction,  the holder of the number of
Warrant  Shares  then  issuable  upon  exercise  in full of  this  Warrant  (the
"ALTERNATE CONSIDERATION"). For purposes of any such exercise, the determination
of the Exercise Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such  Fundamental  Transaction,  and the Company
shall  apportion  the  Exercise  Price among the  Alternate  Consideration  in a
reasonable manner  reflecting the relative value of any different  components of
the Alternate Consideration.  If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it  receives  upon any  exercise  of this  Warrant  following  such  Fundamental
Transaction. At the Holder's option and request, any successor to the Company or
surviving entity in such Fundamental Transaction shall issue to the Holder a new
warrant  substantially  in the  form of this  Warrant  and  consistent  with the
foregoing provisions and evidencing the Holder's right to purchase the Alternate
Consideration for the aggregate Exercise Price upon exercise thereof.  The terms
of any agreement  pursuant to which a Fundamental  Transaction is effected shall
include terms  requiring any such  successor or surviving  entity to comply with
the  provisions of this paragraph (b) and insuring that the Warrant (or any such
replacement security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction.  Within five Trading Days after entering
into a definitive  agreement  with respect to a cash-out  merger (the  "CASH-OUT
MERGER"),  the Company shall deliver a notice to the Holder informing the Holder
of such transaction (such notice, a "CASH-OUT  NOTICE").  At 5:30 p.m. (New York
City time) by the twentieth  Trading Day after such Holder receives the Cash-Out
Notice ("CASH-OUT Date"), the Holder shall notify the Company of its decision to
either (1) exercise the portion of this Warrant not  exercised  prior thereto or
(2) to receive  from the  Company an amount in cash equal to the  product of (A)
the  difference  between  $1.65 and the Exercise  Price,  multiplied  by (B) the
number of Warrant Shares as to which this Warrant has not been  exercised  prior
thereto.  The  failure  of the  Holder to notify  the  Company  of its  election
hereunder by the Cash-Out Date shall be treated as an election  under clause (2)
in the  immediately  preceding  sentence,  and  this  warrant  shall  then  only
represent the right to receive such funds and shall no longer be exercisable for
Common Stock.  The cash payable to the Holder pursuant to clause (2) above shall
be paid to the Holder, against delivery of such Holder's Warrant to the Company,
as and when the  consideration  for the cash-out  merger is  distributed  to all
holders of Common Stock.  The foregoing  shall be contingent upon the closing of
the Cash-Out Merger.

                                       6
<PAGE>

                  (c)  Number  of  Warrant  Shares.   Simultaneously   with  any
adjustment  to the  Exercise  Price  pursuant  to this  Section 9, the number of
Warrant  Shares that may be purchased  upon  exercise of this  Warrant  shall be
increased  or  decreased  proportionately,  so that  after such  adjustment  the
aggregate  Exercise Price payable  hereunder for the adjusted  number of Warrant
Shares shall be the same as the aggregate  Exercise Price in effect  immediately
prior to such adjustment.

                  (d) Calculations.  All calculations under this Section 9 shall
be made to the nearest cent or the nearest  1/100th of a share,  as  applicable.
The  number of shares of Common  Stock  outstanding  at any given time shall not
include  shares  owned or held by or for the  account  of the  Company,  and the
disposition  of any such shares shall be  considered  an issue or sale of Common
Stock.

                  (e)  Notice  of  Adjustments.  Upon  the  occurrence  of  each
adjustment  pursuant to this Section 9, the Company at its expense will promptly
compute such adjustment in accordance with the terms of this Warrant and prepare
a  certificate  setting  forth such  adjustment,  including a  statement  of the
adjusted  Exercise Price and adjusted  number or type of Warrant Shares or other
securities  issuable upon exercise of this Warrant (as  applicable),  describing
the transactions giving rise to such adjustments and showing in detail the facts
upon which such  adjustment  is based.  Upon written  request,  the Company will
promptly  deliver  a copy of each  such  certificate  to the  Holder  and to the
Company's Transfer Agent.

                  (f) Notice of Corporate  Events. If the Company (i) declares a
dividend or any other  distribution  of cash,  securities  or other  property in
respect of its Common Stock, including without limitation any granting of rights
or warrants to subscribe for or purchase any capital stock of the Company or any
Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating
or  solicits  stockholder  approval  for any  Fundamental  Transaction  or (iii)
authorizes the voluntary  dissolution,  liquidation or winding up of the affairs
of the Company, then the Company shall deliver to the Holder a notice describing
the material  terms and conditions of such  transaction  (but only to the extent
such disclosure would not result in the  dissemination  of material,  non-public
information  to the  Holder) at least 10 calendar  days prior to the  applicable
record or  effective  date on which a Person  would need to hold Common Stock in
order to  participate  in or vote  with  respect  to such  transaction,  and the
Company  will take all steps  reasonably  necessary  in order to insure that the
Holder is given the practical opportunity to exercise this Warrant prior to such
time so as to participate in or vote with respect to such transaction; provided,
however, that the failure to deliver such notice or any defect therein shall not
affect the  validity of the  corporate  action  required to be described in such
notice.

         10. Payment of Exercise Price. The Holder may pay the Exercise Price in
one of the following manners:

                  (a)  Cash  Exercise.   The  Holder  may  deliver   immediately
available funds; or

                  (b) Cashless Exercise.  If during the Effectiveness Period (as
defined in the Registration  Rights Agreement),  an Exercise Notice is delivered
at a time when a  registration  statement  permitting  the  Holder to resell the
Warrant Shares is not then effective or the prospectus forming a part thereof is
not then available to the Holder for the resale of the Warrant Shares,  then the

                                       7
<PAGE>

Holder may notify the Company in an Exercise  Notice of its  election to utilize
cashless  exercise,  in which  event the  Company  shall issue to the Holder the
number of Warrant Shares determined as follows:

                    X = Y [(A-B)/A]

           where:

                    X = the number of Warrant Shares to be issued to the Holder.

                    Y  =  the  number  of  Warrant  Shares  with
                    respect  to  which  this  Warrant  is  being
                    exercised.

                    A = the  average of the  closing  prices for
                    the five Trading Days  immediately  prior to
                    (but not including) the Exercise Date.

                    B = the Exercise Price.

For purposes of Rule 144  promulgated  under the Securities Act, it is intended,
understood  and  acknowledged  that the  Warrant  Shares  issued  in a  cashless
exercise  transaction  shall be deemed to have been acquired by the Holder,  and
the holding period for the Warrant Shares shall be deemed to have commenced,  on
the date this Warrant was originally issued.

         11. Limitations on Exercise.  Notwithstanding  anything to the contrary
contained  herein,  the number of Warrant  Shares  that may be  acquired  by the
Holder upon any exercise of this Warrant (or otherwise in respect  hereof) shall
be limited to the extent  necessary to insure that,  following such exercise (or
other  issuance),  the total number of shares of Common Stock then  beneficially
owned by such Holder and its Affiliates  and any other Persons whose  beneficial
ownership of Common Stock would be aggregated  with the Holder's for purposes of
Section 13(d) of the Exchange Act, does not exceed 9.999% of the total number of
issued and  outstanding  shares of Common Stock  (including for such purpose the
shares  of  Common  Stock  issuable  upon  such  exercise).  For such  purposes,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange  Act  and  the  rules  and  regulations  promulgated  thereunder.  This
provision shall not restrict the number of shares of Common Stock which a Holder
may receive or  beneficially  own in order to determine the amount of securities
or  other  consideration  that  such  Holder  may  receive  in  the  event  of a
Fundamental  Transaction  as  contemplated  in Section 9 of this  Warrant.  This
restriction may not be waived.

         12. No Fractional  Shares.  No fractional shares of Warrant Shares will
be  issued in  connection  with any  exercise  of this  Warrant.  In lieu of any
fractional shares which would, otherwise be issuable, the Company shall pay cash
equal to the product of such  fraction  multiplied  by the closing  price of one
Warrant  Share as  reported  by the  applicable  Trading  Market  on the date of
exercise.

         13. Notices.  Any and all notices or other communications or deliveries
hereunder  (including,  without  limitation,  any Exercise  Notice)  shall be in
writing and shall be deemed given and  effective on the earliest of (i) the date
of  transmission,  if such notice or communication is delivered via facsimile at
the facsimile number specified in this Section prior to 5:30 p.m. (New York City

                                       8
<PAGE>

time)  on  a  Trading  Day,  (ii)  the  next  Trading  Day  after  the  date  of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile  number  specified  in this  Section on a  calendar  day that is not a
Trading  Day or later than 5:30 p.m.  (New York City time) on any  Trading  Day,
(iii) the  Trading Day  following  the date of  mailing,  if sent by  nationally
recognized  overnight courier service,  or (iv) upon actual receipt by the party
to  whom  such  notice  is  required  to  be  given.   The  addresses  for  such
communications  shall be: (i) if to the Company, to RCG Companies  Incorporated,
6836 Morrison Boulevard,  Suite 200, Charlotte, NC 28211, Attn: President, or to
Facsimile  No.:  (704)  366-5056  (or such other  address as the  Company  shall
indicate in writing in accordance with this Section),  or (ii) if to the Holder,
to the address or facsimile  number  appearing  on the Warrant  Register or such
other  address or  facsimile  number as the Holder may provide to the Company in
accordance with this Section.

         14. Warrant Agent.  The Company shall serve as warrant agent under this
Warrant.  Upon 10 calendar days' notice to the Holder, the Company may appoint a
new warrant  agent.  Any  corporation  into which the Company or any new warrant
agent may be merged or any corporation resulting from any consolidation to which
the Company or any new  warrant  agent  shall be a party or any  corporation  to
which the Company or any new warrant agent  transfers  substantially  all of its
corporate trust or shareholders  services  business shall be a successor warrant
agent under this Warrant  without any further act.  Any such  successor  warrant
agent shall  promptly  cause  notice of its  succession  as warrant  agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Warrant Register.

         15. Miscellaneous.

                  (a) This Warrant  shall be binding on and inure to the benefit
of the parties hereto and their  respective  successors and assigns.  Subject to
the  preceding  sentence,  nothing in this Warrant shall be construed to give to
any Person other than the Company and the Holder any legal or  equitable  right,
remedy or cause of action under this  Warrant.  This Warrant may be amended only
in  writing  signed by the  Company  and the  Holder  and their  successors  and
assigns.

                  (b)  All  questions  concerning  the  construction,  validity,
enforcement  and  interpretation  of  this  Warrant  shall  be  governed  by and
construed and enforced in accordance  with the internal laws of the State of New
York (except for matters  governed by corporate  law in the State of  Delaware),
without regard to the principles of conflicts of law thereof.  Each party agrees
that all legal  proceedings  concerning  the  interpretations,  enforcement  and
defense of this Warrant and the transactions herein contemplated ("PROCEEDINGS")
(whether brought against a party hereto or its respective Affiliates,  employees
or agents)  shall be commenced  exclusively  in the New York Courts.  Each party
hereto hereby irrevocably submits to the exclusive  jurisdiction of the New York
Courts for the adjudication of any dispute  hereunder or in connection  herewith
or with any  transaction  contemplated  hereby or discussed  herein,  and hereby
irrevocably  waives, and agrees not to assert in any Proceeding,  any claim that
it is not personally  subject to the jurisdiction of any New York Court, or that
such  Proceeding has been commenced in an improper or inconvenient  forum.  Each
party hereto hereby  irrevocably waives personal service of process and consents
to process  being  served in any such  Proceeding  by mailing a copy thereof via

                                       9
<PAGE>

registered or certified  mail or overnight  delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this  Warrant and
agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve  process in any manner  permitted  by law.  Each party hereto
hereby  irrevocably  waives,  to the fullest extent permitted by applicable law,
any and all right to trial by jury in any  legal  proceeding  arising  out of or
relating to this  Warrant or the  transactions  contemplated  hereby.  If either
party shall  commence a Proceeding  to enforce any  provisions  of this Warrant,
then the prevailing  party in such  Proceeding  shall be reimbursed by the other
party for its  attorney's  fees and other costs and expenses  incurred  with the
investigation, preparation and prosecution of such Proceeding.

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

                  (d) In case any one or more of the  provisions of this Warrant
shall  be  invalid  or   unenforceable   in  any   respect,   the  validity  and
enforceability  of the remaining  terms and provisions of this Warrant shall not
in any way be affected or impaired  thereby and the parties will attempt in good
faith  to  agree  upon a  valid  and  enforceable  provision  which  shall  be a
commercially  reasonable  substitute  therefor,  and  upon  so  agreeing,  shall
incorporate such substitute provision in this Warrant.

                  (e) Prior to exercise of this Warrant, the Holder hereof shall
not, by reason of by being a Holder,  be entitled to any rights of a stockholder
with respect to the Warrant Shares

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
                             SIGNATURE PAGE FOLLOWS]

                                       10
<PAGE>

         IN WITNESS  WHEREOF,  the Company  has caused  this  Warrant to be duly
executed by its authorized officer as of the date first indicated above.

                                             RCG COMPANIES INCORPORATED

                                             By:
                                                ------------------------------
                                              Name:  Marc E. Bercoon
                                              Title: Chief Financial Officer

                                       11
<PAGE>

                                 EXERCISE NOTICE
                           RCG COMPANIES INCORPORATED
                          WARRANT DATED APRIL 14, 2005

The  undersigned  Holder  hereby  irrevocably  elects to purchase  _____________
shares of Common Stock  pursuant to the above  referenced  Warrant.  Capitalized
terms used herein and not  otherwise  defined have the  respective  meanings set
forth in the Warrant.

(1)  The   undersigned   Holder   hereby   exercises   its  right  to   purchase
_________________ Warrant Shares pursuant to the Warrant.

(2) The Holder  intends  that  payment of the  Exercise  Price  shall be made as
(check one):

                     ____  "Cash Exercise" under Section 10

                     ____  "Cashless Exercise" under Section 10

(3) If the holder has elected a Cash  Exercise,  the holder shall pay the sum of
$____________ to the Company in accordance with the terms of the Warrant.

(4) Pursuant to this  Exercise  Notice,  the Company shall deliver to the holder
_______________ Warrant Shares in accordance with the terms of the Warrant.

(5) By its delivery of this Exercise  Notice,  the  undersigned  represents  and
warrants to the Company that in giving effect to the exercise  evidenced  hereby
the Holder will not beneficially own in excess of the number of shares of Common
Stock  (determined in accordance  with Section 13(d) of the Securities  Exchange
Act of 1934)  permitted  to be owned under  Section 11 of this  Warrant to which
this notice relates.

Dated:               ,                     Name of Holder:
       --------------  -------

                                           (Print)
                                                   -----------------------------
                                           By:
                                               ---------------------------------
                                           Name:
                                                 -------------------------------
                                           Title:
                                                  ------------------------------
                                           (Signature must conform in all
                                           respects to name of holder as
                                           specified on the face of the Warrant)

                                       12
<PAGE>

Warrant Shares Exercise Log

--------------------------------------------------------------------------------
Date         Number of Warrant       Number of Warrant         Number of Warrant
             Shares Available to     Shares Exercised          Shares Remaining
             be Exercised                                      to be Exercised
--------------------------------------------------------------------------------

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

                                       13
<PAGE>

                           RCG COMPANIES INCORPORATED
                    WARRANT ORIGINALLY ISSUED APRIL 14, 2005
                                WARRANT NO. C-[ ]

                               FORM OF ASSIGNMENT

         [To be completed and signed only upon transfer of Warrant]

         FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto    ________________________________    the   right   represented   by   the
above-captioned Warrant to purchase ____________ shares of Common Stock to which
such Warrant  relates and appoints  ________________  attorney to transfer  said
right on the  books of the  Company  with  full  power  of  substitution  in the
premises.

Dated: _____________, ____

                             ---------------------------------------
                             (Signature  must  conform in all respects to name
                             of holder as specified on the face of the Warrant)

                             ---------------------------------------
                             Address of Transferee

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

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

In the presence of:

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

                                       14

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