Document:

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                                                                    EXHIBIT 10.1

                          SECURITIES PURCHASE AGREEMENT

         THIS SECURITIES PURCHASE AGREEMENT, dated as of May 26, 2005 (this
"Agreement"), is entered into by and between NEW VISUAL CORPORATION, a Utah
corporation with headquarters located at 305 NE 102nd Ave., Suite 105, Portland,
OR 97220 (the "Company"), and each individual or entity named on an executed
counterpart of the signature page hereto (each such signatory is referred to as
a "Buyer") (each agreement with a Buyer being deemed a separate and independent
agreement between the Company and such Buyer, except that each Buyer
acknowledges and consents to the rights granted to each other Buyer [each, an
"Other Buyer"] under such agreement and the Transaction Agreements, as defined
below, referred to therein).

                              W I T N E S S E T H:

         WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration for offers
and sales to accredited investors afforded, INTER ALIA, by Rule 506 under
Regulation D ("Regulation D") as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act"), and/or Section 4(2) of the 1933 Act; and

         WHEREAS, the Buyer wishes to lend to the Company, subject to and upon
the terms and conditions of this Agreement and acceptance of this Agreement by
the Company, the Purchase Price (as defined below), the repayment of which will
be represented by 7% Senior Secured Convertible Debentures Series 05-01 of the
Company (the "Convertible Debentures"), which Convertible Debentures will be
convertible into shares of Common Stock, $.001 par value per share, of the
Company (the "Common Stock"), upon the terms and subject to the conditions of
such Convertible Debentures, together with the Warrants (as defined below)
exercisable for the purchase of shares of Common Stock;

         NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:

         1. AGREEMENT TO PURCHASE; PURCHASE PRICE.

         a. PURCHASE.

         (i) Subject to the terms and conditions of this Agreement and the other
Transaction Agreements, the undersigned Buyer hereby agrees to loan to the
Company the principal amount set forth on the Buyer's signature page of this
Agreement (the "Purchase Price"), out of the aggregate amount being loaned by
all Buyers of US $3,500,000 (the "Aggregate Purchase Price"). The obligation to
repay the loan from the Buyer shall be evidenced by the Company's issuance of
one or more Convertible Debentures to the Buyer in such principal amount (the
Convertible Debentures issued to the Buyer, the "Debentures"). Each Debenture
(i) shall provide for a Conversion Price (as defined below), which price may be
adjusted from time to as provided in the Debenture, (ii) shall have the terms
and conditions of, and be substantially in the form attached hereto as, ANNEX I,
and (iii) shall be secured pursuant to the terms of the Security Interest
Agreement substantially in the form annexed hereto as ANNEX VIII (the "Security
Interest Agreement").(1)

__________________

(1) By signing this Agreement, the Buyer subject to acceptance by the Agent
named in the Security Interest Agreement, agrees to all of the terms and
conditions of, and becomes a party to, the Security Interest Agreement, all of
the provisions of which are incorporated herein by this reference as if set
forth in full.

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         (ii) The loan to be made by the Buyer and the issuance of the
Debentures and the Warrants (collectively, the "Purchased Securities") to the
Buyer are sometimes referred to herein and in the other Transaction Agreements
as the purchase and sale of the Debentures and the Warrants.

         B. CERTAIN DEFINITIONS. As used herein, each of the following terms has
the meaning set forth below, unless the context otherwise requires:

         "Affiliate" means, with respect to a specific Person referred to in the
relevant provision, another Person who or which controls or is controlled by or
is under common control with such specified Person.

         "Buyer Control Person" means each director, executive officer,
promoter, and such other Persons as may be deemed in control of the Buyer
pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act (as
defined below).

         "Certificates" means the (x) the original ink-signed Debentures and (y)
the original ink-signed Warrants, each duly executed by the Company and issued
in the name of the Buyer on the Closing Date.

         "Closing Date" means the date of the closing of the purchase and sale
of the Purchased Securities.

         "Company Control Person" means each director, executive officer,
promoter, and such other Persons as may be deemed in control of the Company
pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act.

         "Company Principal's Agreement" has the meaning ascribed to in Section
4(h).

         "Company's SEC Documents" means the Company's filings on the SEC's
EDGAR system which are listed on ANNEX VI annexed hereto, to the extent
available on EDGAR or otherwise provided to the Buyer as indicated on said Annex
VI.

         "Conversion Certificates" means certificates representing the
Conversion Shares.

         "Conversion Date" means the date a Holder submits a Notice of
Conversion, as provided in the Debentures.

         "Conversion Price" means the lower of (i) the Variable Conversion Price
or (ii) the Lowest Fixed Conversion Price.

         "Conversion Shares" means the shares of Common Stock issuable upon
conversion of the Debentures and/or in payment of accrued interest, as
contemplated in the Debentures.

         "Converting Holder" means the Holder of Debentures who or which has
submitted a Notice of Conversion (as contemplated by the Debentures).

         "Disclosure Letter" means a letter and any modifications thereof, the
latest of which is dated at least two Trading Days prior to the Closing Date,
from the Company to the Buyers; provided, however, that the Disclosure Letter
shall be arranged in sections corresponding to the identified Sections of this
Agreement, but the disclosure in any such section of the Disclosure Letter shall
qualify other provisions in this Agreement to the extent that it would be
readily apparent to an informed reader from a reading of such section of the
Disclosure Letter that it is also relevant to other provisions of this
Agreement.

         "Effective Percentage" means, initially, thirty percent (30%), which
percentage is subject to increase as provided herein.

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         "Effective Date" means the date the Registration Statement covering the
Registrable Securities is declared effective by the SEC.

         "Escrow Agent" means the escrow agent identified in the Joint Escrow
Instructions attached hereto as ANNEX II (the "Joint Escrow Instructions").

         "Escrow Funds" means the Purchase Price delivered to the Escrow Agent
as contemplated by Sections 1(c) and (d) hereof.

         "Escrow Property" means the Escrow Funds and the Certificates delivered
to the Escrow Agent as contemplated by Section 1(c) hereof.

         "Exercise Price" means the per share exercise price of the relevant
Warrant.

         "Finder" means Advisor Associates, Inc.

         "Holder" means the Person holding the relevant Securities at the
relevant time.

         "Issue Date Conversion Share" means the number of shares of Common
Stock equal to (x) the Purchase Price paid by the Buyer, divided by (y) the VWAP
for the three (3) Trading Days ending on the Trading Day immediately preceding
the Closing Date.

         "Last Audited Date" means October 31, 2004.

         "Lowest Fixed Conversion Price" means the lowest New Transaction Price
(as defined below; as that amount may subsequently be adjusted as provided in
the Debentures or herein).

         "Majority in Interest of the Holders" means one or more Holders whose
respective outstanding principal amounts of the Debentures held by each of them,
as of the relevant date, aggregate more than fifty percent (50%) of the
aggregate outstanding principal amounts of the outstanding Debentures held by
the Buyer and all Other Buyers on that date.

         "Material Adverse Effect" means an event or combination of events,
which individually or in the aggregate, would reasonably be expected to (x)
adversely affect the legality, validity or enforceability of the Purchased
Securities or any of the Transaction Agreements, (y) have or result in a
material adverse effect on the results of operations, assets, or financial
condition of the Company and its subsidiaries, taken as a whole, or (z)
adversely impair the Company's ability to perform fully on a timely basis its
material obligations under any of the Transaction Agreements or the transactions
contemplated thereby.

         "Maturity Date" shall have the meaning ascribed to it in the
Convertible Debentures.

         "New Common Stock" means shares of Common Stock and/or securities
convertible into, and/or other rights exercisable for, Common Stock, which are
offered or sold in a New Transaction.

         "New Investor" means the third party investor, purchaser or lender
(howsoever denominated) in a New Transaction.

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         "New Transaction" means, unless consented to by a Majority in Interest
of the Buyers (which consent is in the sole discretion of the Holders and may be
withheld for any reason or for no reason whatsoever), the sale of New Common
Stock by or on behalf of the Company to a New Investor in a transaction offered
or consummated after the date hereof; provided, however, that it is specifically
understood that the term "New Transaction" (1) unless consented to otherwise by
a Majority in Interest of the Buyers (which consent is in the sole discretion of
the Holders and may be withheld for any reason or for no reason whatsoever),
includes, but is not limited to, a sale of Common Stock or of a security
convertible into Common Stock or an equity or credit line transaction, but (2)
does not include (a) the sale of the Purchased Securities to the Buyer and the
Other Buyers, (b) the issuance of Common Stock upon the exercise or conversion
of options, warrants or convertible securities outstanding on the date hereof,
or in respect of any other financing agreements as in effect on the date hereof
and identified in the Disclosure Letter (provided the same is not amended after
the date of the Disclosure Letter) or in the Company's SEC Documents (provided
the same is not amended after the date hereof), (c) the issuance of Common Stock
pursuant to an Employee Stock Option Plan (an "ESOP") of the Company, such ESOP
having been properly approved by the shareholders of the Company, (d) the
issuance of Common Stock pursuant to a non-employee director stock option plan
of the Company, (e) the issuance of Common Stock pursuant to a consultants'
stock option plan of the Company, as in effect on the Closing Date, (f) the
issuance of Common Stock upon the exercise of any options or warrants referred
to in the preceding clauses of this paragraph (provided the same is not amended
after the date hereof), (g) the issuance of stock options or warrants to
employees, officers or directors of the Company, provided that all such shares
are or are made subject to a Company Principal's Agreement simultaneously with
such issuance, or (h) to a Strategic Partner.

         "Person" means any living person or any entity, such as, but not
necessarily limited to, a corporation, partnership or trust.

         "Principal Trading Market" means the Over the Counter Bulletin Board or
such other market on which the Common Stock is principally traded at the
relevant time, but shall not include the "pink sheets."

         "Registrable Securities" shall have the meaning ascribed to it in the
Registration Rights Agreement.

         "Registration Rights Agreement" means the Registration Rights Agreement
in the form annexed hereto as ANNEX IV as executed by the Buyer and the Company
simultaneously with the execution of this Agreement.

         "Registration Statement" means an effective registration statement
covering the Registrable Securities.

         "Reporting Service" means Bloomberg LP or if that service is not then
reporting the relevant information regarding the Common Stock, a comparable
reporting service of national reputation selected by a Majority in Interest of
the Holders and reasonably acceptable to the Company.

         "Securities" means the Purchased Securities and the Shares.

         "Shares" means the shares of Common Stock representing any or all of
the Conversion Shares, the Warrant Shares and the Payment Shares (as defined in
the Registration Rights Agreement).

         "State of Incorporation" means Utah.

         "Strategic Partner" means a third party, whether or not affiliated with
the Company as of the date hereof, which party (i) is engaged in a business
which is the business in which the Company is engaged or a similar, related or
complementary business, and (ii) subsequently purchases equity securities of the
Company (or securities convertible into equity securities of the Company), where
such purchase is accompanied or followed by one or more of the following: the
licensing by the Company of all or any portion of its technology to such third
party, the licensing by such third party of all or any portion of its technology
to the Company, or any other coordination of all or a portion of their
respective business activities or operations by the Company and such third
party.

         "Trading Day" means any day during which the Principal Trading Market
shall be open for business.

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         "Transaction Agreements" means this Agreement, the Debentures, the
Joint Escrow Instructions, the Registration Rights Agreement, the Disclosure
Letter, the Security Interest Agreement, and the Warrants, and includes all
ancillary documents referred to in those agreements.

         "Transfer Agent" means, at any time, the transfer agent for the
Company's Common Stock.

         "Variable Conversion Price" means (i) the VWAP for the five (5) Trading
Days ending on the Trading Day immediately before the Conversion Date,
multiplied by (ii) a percentage equal to (x) one hundred percent (100%), less
(y) the Effective Percentage.

         "VWAP" means the volume weighted average price of the Common Stock on
the Principal Trading Market for the relevant Trading Day(s), as reported by the
Reporting Service.

         "Warrants" means (i) the warrants referred to in Section 4 hereof and
(ii) the Additional Warrants (as defined below), if any.

         "Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.

         c. FORM OF PAYMENT; DELIVERY OF CERTIFICATES.

         (i) The Buyer shall pay the Purchase Price by delivering immediately
available good funds in United States Dollars to the Escrow Agent no later than
the date prior to the Closing Date.

         (ii) Within three (3) Trading Days after the Escrow Agent notifies the
Company that the Escrow Agent has on deposit cleared funds from or on behalf of
one or more Buyers an aggregate amount equal to the Aggregate Purchase Price and
the Company shall have accepted the Buyer's subscription hereunder, but in no
event later than the Closing Date, the Company will deliver the Certificates to
the Escrow Agent. Such Certificates shall be held in escrow as provided in the
Joint Escrow Instructions.

         (iii) By signing this Agreement, each of the Buyer and the Company,
subject to acceptance by the Escrow Agent, agrees to all of the terms and
conditions of, and becomes a party to, the Joint Escrow Instructions, all of the
provisions of which are incorporated herein by this reference as if set forth in
full.

         d. METHOD OF PAYMENT. Payment into escrow of the Purchase Price shall
be made by wire transfer of funds to:

            Bank of New York
            350 Fifth Avenue
            New York, New York 10001

            ABA# 021000018
            For credit to the account of Krieger & Prager LLP
            Account No.: [To be provided to the Buyer by Krieger & Prager LLP]
                         Re: New Visual 05 Transaction/[NAME OF BUYER]

         2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.

         The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:

<PAGE>

         a. Without limiting Buyer's right to sell the Securities pursuant to an
effective registration statement or otherwise in compliance with the 1933 Act,
the Buyer is purchasing the Securities for its own account for investment only
and not with a view towards the public sale or distribution thereof and not with
a view to or for sale in connection with any distribution thereof.

         b. The Buyer is (i) an "accredited investor" as that term is defined in
Rule 501 of the General Rules and Regulations under the 1933 Act, (ii)
experienced in making investments of the kind described in this Agreement and
the other Transaction Agreements, (iii) able, by reason of the business and
financial experience of its officers (if an entity) and professional advisors
(who are not affiliated with or compensated in any way by the Company or any of
its Affiliates or selling agents), to protect its own interests in connection
with the transactions described in this Agreement and the other Transaction
Agreements, and to evaluate the merits and risks of an investment in the
Securities, and (iv) able to afford the entire loss of its investment in the
Securities.

         c. All subsequent offers and sales of the Securities by the Buyer shall
be made pursuant to registration of the relevant Securities under the 1933 Act
or pursuant to an exemption from such registration.

         d. The Buyer understands that the Securities are being offered and sold
to it in reliance on specific exemptions from the registration requirements of
the 1933 Act and state securities laws and that the Company is relying upon the
truth and accuracy of, and the Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Buyer to acquire the Securities.

         e. The Buyer and its advisors, if any, have been furnished with or have
been given access to all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Purchased Securities which have been requested by the Buyer, including those set
forth on in any annex attached hereto. The Buyer and its advisors, if any, have
been afforded the opportunity to ask questions of the Company and its management
and have received complete and satisfactory answers to any such inquiries.
Without limiting the generality of the foregoing, the Buyer has also had the
opportunity to obtain and to review the Company's SEC Documents.

         f. The Buyer understands that its investment in the Securities involves
a high degree of risk.

         g. In connection with its purchase of the Securities, the Buyer has not
relied on any statement or representation by the Company or the Finder or any of
their respective officers, directors and employees or any of their respective
attorneys or agents or the Finder, except as specifically set forth herein. The
Finder is a third party beneficiary of this provision.

         h. The Buyer understands that no United States federal or state agency
or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities.

         i. This Agreement and the other Transaction Agreements to which the
Buyer is a party, and the transactions contemplated thereby, have been duly and
validly authorized, executed and delivered on behalf of the Buyer and are valid
and binding agreements of the Buyer enforceable in accordance with their
respective terms, subject as to enforceability to general principles of equity
and to bankruptcy, insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally.

         3. COMPANY REPRESENTATIONS, ETC. The Company represents and warrants to
the Buyer as of the date hereof and as of the Closing Date that, except as
otherwise provided in the Disclosure Letter or in the Company's SEC Documents:

         a. RIGHTS OF OTHERS AFFECTING THE TRANSACTIONS. There are no preemptive
rights of any shareholder of the Company, as such, to acquire the Purchased
Securities or the Shares. No other party has a currently exercisable right of
first refusal which would be applicable to any or all of the transactions
contemplated by the Transaction Agreements.

<PAGE>

         b. STATUS. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Incorporation and
has the requisite corporate power to own its properties and to carry on its
business as now being conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in each jurisdiction where
the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have or result in a Material Adverse Effect. The Company
has registered its stock and is obligated to file reports pursuant to Section 12
or Section 15(d) of the Securities and Exchange Act of 1934, as amended (the
"1934 Act"). The Common Stock is quoted on the Principal Trading Market. The
Company has received no notice, either oral or written, with respect to the
continued eligibility of the Common Stock for such quotation on the Principal
Trading Market, and the Company has maintained all requirements on its part for
the continuation of such quotation.

         c. AUTHORIZED SHARES.

     (i) The authorized capital stock of the Company consists of (i) 500,000,000
shares of Common Stock, $.001 par value per share, of which approximately
95,735,615 are outstanding as of April 18, 2005, and (ii) 14,704,014 shares of
Preferred Stock, $.01 par value, none of which is outstanding as of the date
hereof.

     (ii) There are no outstanding securities which are convertible into shares
of Common Stock, whether such conversion is currently exercisable or exercisable
only upon some future date or the occurrence of some event in the future. If any
such securities are listed on the Disclosure Letter but not in the Company's SEC
Documents, the number or amount of each such outstanding convertible security
and the conversion terms are set forth in said Disclosure Letter.

     (iii) All issued and outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and non-assessable. The Company
has sufficient authorized and unissued shares of Common Stock as may be
necessary to effect the issuance of the Shares on the Closing Date.

     (iv) The Shares shall have been duly authorized by all necessary corporate
action on the part of the Company, and, when issued on conversion of, or in
payment of interest on, the Debentures or upon exercise of the Warrants, in each
case in accordance with their respective terms, will have been duly and validly
issued, fully paid and non-assessable and will not subject the Holder thereof to
personal liability by reason of being such Holder.

         d. TRANSACTION AGREEMENTS AND STOCK. This Agreement and each of the
other Transaction Agreements, and the transactions contemplated hereby and
thereby, have been duly and validly authorized by the Company, this Agreement
has been duly executed and delivered by the Company and this Agreement is, and
the Debentures, the Warrants and each of the other Transaction Agreements, when
executed and delivered by the Company, will be, valid and binding obligations of
the Company enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors'
rights generally.

         e. NON-CONTRAVENTION. The execution and delivery of this Agreement and
each of the other Transaction Agreements by the Company, the issuance of the
Securities, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Debentures, the Warrants and the other
Transaction Agreements do not and will not conflict with or result in a breach
by the Company of any of the terms or provisions of, or constitute a default
under (i) the certificate of incorporation or by-laws of the Company, each as
currently in effect, (ii) any indenture, mortgage, deed of trust, or other
material agreement or instrument to which the Company is a party or by which it
or any of its properties or assets are bound, including any listing agreement
for the Common Stock except as herein set forth, or (iii) to its knowledge, any
existing applicable law, rule, or regulation or any applicable decree, judgment,
or order of any court, United States federal or state regulatory body,
administrative agency, or other governmental body having jurisdiction over the
Company or any of its properties or assets, except such conflict, breach or
default which would not have or result in a Material Adverse Effect.

<PAGE>

         f. APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the shareholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Buyer as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.

         g. FILINGS. None of the Company's SEC Documents contained, at the time
they were filed, any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading. Since April 1, 2004, the Company has filed all requisite forms,
reports and exhibits thereto required to be filed by the Company with the SEC.

         h. ABSENCE OF CERTAIN CHANGES. Since the Last Audited Date, there has
been no Material Adverse Effect, except as disclosed in the Company's SEC
Documents. Since the Last Audited Date, except as provided in the Company's SEC
Documents, the Company has not (i) incurred or become subject to any material
liabilities (absolute or contingent) except liabilities incurred in the ordinary
course of business consistent with past practices; (ii) discharged or satisfied
any material lien or encumbrance or paid any material obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business consistent with past practices; (iii) declared or made any
payment or distribution of cash or other property to shareholders with respect
to its capital stock, or purchased or redeemed, or made any agreements to
purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other material tangible assets, or canceled any material debts
owed to the Company by any third party or material claims of the Company against
any third party, except in the ordinary course of business consistent with past
practices; (v) waived any rights of material value, whether or not in the
ordinary course of business, or suffered the loss of any material amount of
existing business; (vi) made any increases in employee compensation, except in
the ordinary course of business consistent with past practices; or (vii)
experienced any material problems with labor or management in connection with
the terms and conditions of their employment.

         i. FULL DISCLOSURE. To the Company's knowledge, there is no fact known
to the Company (other than facts known to the public generally or as disclosed
in the Company's SEC Documents) that has not been disclosed in writing to the
Buyer that would reasonably be expected to have or result in a Material Adverse
Effect.

         j. ABSENCE OF LITIGATION. There is no action, suit, proceeding, inquiry
or investigation before or by any court, public board or body pending or, to the
knowledge of the Company, threatened against or affecting the Company before or
by any governmental authority or non-governmental department, commission, board,
bureau, agency or instrumentality or any other person, wherein an unfavorable
decision, ruling or finding would have a Material Adverse Effect or which would
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, any of the Transaction
Agreements. The Company is not aware of any valid basis for any such claim that
(either individually or in the aggregate with all other such events and
circumstances) could reasonably be expected to have a Material Adverse Effect.
There are no outstanding or unsatisfied judgments, orders, decrees, writs,
injunctions or stipulations to which the Company is a party or by which it or
any of its properties is bound, that involve the transaction contemplated herein
or that, alone or in the aggregate, could reasonably be expect to have a
Material Adverse Effect.

         k. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in Section 3(e)
hereof, no Event of Default (or its equivalent term), as defined in the
respective agreement to which the Company or its subsidiary is a party, and no
event which, with the giving of notice or the passage of time or both, would
become an Event of Default (or its equivalent term) (as so defined in such
agreement), has occurred and is continuing, which would have a Material Adverse
Effect.

<PAGE>

         l. ABSENCE OF CERTAIN COMPANY CONTROL PERSON ACTIONS OR EVENTS. To the
Company's knowledge, none of the following has occurred during the past five (5)
years with respect to a Company Control Person:

         (1) A petition under the federal bankruptcy laws or any state
         insolvency law was filed by or against, or a receiver, fiscal agent or
         similar officer was appointed by a court for the business or property
         of such Company Control Person, or any partnership in which he was a
         general partner at or within two years before the time of such filing,
         or any corporation or business association of which he was an executive
         officer at or within two years before the time of such filing;

         (2) Such Company Control Person was convicted in a criminal proceeding
         or is a named subject of a pending criminal proceeding (excluding
         traffic violations and other minor offenses);

         (3) Such Company Control Person was the subject of any order, judgment
         or decree, not subsequently reversed, suspended or vacated, of any
         court of competent jurisdiction, permanently or temporarily enjoining
         him from, or otherwise limiting, the following activities:

                  (i) acting, as an investment advisor, underwriter, broker or
                  dealer in securities, or as an affiliated person, director or
                  employee of any investment company, bank, savings and loan
                  association or insurance company, as a futures commission
                  merchant, introducing broker, commodity trading advisor,
                  commodity pool operator, floor broker, any other Person
                  regulated by the Commodity Futures Trading Commission ("CFTC")
                  or engaging in or continuing any conduct or practice in
                  connection with such activity;

                  (ii) engaging in any type of business practice; or

                  (iii) engaging in any activity in connection with the purchase
                  or sale of any security or commodity or in connection with any
                  violation of federal or state securities laws or federal
                  commodities laws;

         (4) Such Company Control Person was the subject of any order, judgment
         or decree, not subsequently reversed, suspended or vacated, of any
         federal or state authority barring, suspending or otherwise limiting
         for more than 60 days the right of such Company Control Person to
         engage in any activity described in paragraph (3) of this item, or to
         be associated with Persons engaged in any such activity; or

         (5) Such Company Control Person was found by a court of competent
         jurisdiction in a civil action or by the CFTC or SEC to have violated
         any federal or state securities law, and the judgment in such civil
         action or finding by the CFTC or SEC has not been subsequently
         reversed, suspended, or vacated.

         m. NO UNDISCLOSED LIABILITIES OR EVENTS. No event or circumstances has
occurred or exists with respect to the Company or its properties, business,
operations, condition (financial or otherwise), or results of operations, which,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed. There are no proposals currently under
consideration or currently anticipated to be under consideration by the Board of
Directors or the executive officers of the Company which proposal would (x)
change the articles or certificate of incorporation or other charter document or
by-laws of the Company, each as currently in effect, with or without shareholder
approval, which change would reduce or otherwise adversely affect the rights and
powers of the shareholders of the Common Stock or (y) materially or
substantially change the business, assets or capital of the Company, including
its interests in subsidiaries.

         n. NO INTEGRATED OFFERING. Neither the Company nor any of its
Affiliates nor any Person acting on its or their behalf has, directly or
indirectly, at any time since October 1, 2004, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under
Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.

<PAGE>

         o. DILUTION. The number of shares issuable on conversion of the
Debentures, upon exercise of the Warrants or pursuant to the other terms of the
Transaction Agreements may have a dilutive effect on the ownership interests of
the other shareholders (and Persons having the right to become shareholders) of
the Company. The Company's executive officers and directors have studied and
fully understand the nature of the Securities being sold hereby and recognize
that they have such a potential dilutive effect. The board of directors of the
Company has concluded, in its good faith business judgment, that such issuance
is in the best interests of the Company. The Company specifically acknowledges
that its obligation to issue the Conversion Shares upon conversion of the
Debentures, the Warrant Shares upon exercise of the Warrants or the Payment
Shares as provided in the Registration Rights Agreement is binding upon the
Company and enforceable regardless of the dilution such issuance may have on the
ownership interests of other shareholders of the Company, and the Company will
honor such obligations, including honoring every Notice of Conversion (as
contemplated by the Debentures), every Notice of Exercise (as contemplated by
the Warrants), and every demand for Payment Shares (as contemplated by the
Registration Rights Agreement), unless the Company is subject to an injunction
(which injunction was not sought by the Company) prohibiting the Company from
doing so.

         p. FEES TO BROKERS, FINDERS AND OTHERS. Except for payment of the fees
to the Finder's Compensation (as defined below) to the Finder, payment of which
is the sole responsibility of the Company, the Company has taken no action which
would give rise to any claim by any Person for brokerage commission, finder's
fees or similar payments by Buyer relating to this Agreement or the transactions
contemplated hereby. Buyer shall have no obligation with respect to such fees or
with respect to any claims made by or on behalf of other Persons for fees of a
type contemplated in this paragraph that may be due in connection with the
transactions contemplated hereby. The Company shall indemnify and hold harmless
each of Buyer, its employees, officers, directors, agents, and partners, and
their respective Affiliates, from and against all claims, losses, damages, costs
(including the costs of preparation and attorney's fees) and expenses suffered
in respect of any such claimed or existing fees, as and when incurred. The term
"Finder's Compensation" means, in connection with the consummation of the
transactions contemplated by this Agreement, the consideration contemplated by
the Joint Escrow Instructions.

         q. DISCLOSURE. All information relating to or concerning the Company
set forth in the Transaction Agreements or in the Company's public filings with
the SEC is true and correct in all material respects and have not omitted to
state any material fact necessary in order to make the statements made, in light
of the circumstances under which they were made, not misleading. No event or
circumstance has occurred or exists with respect to the Company or its business,
properties, prospects, operations or financial conditions, which under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company.

         r. CONFIRMATION. The Company confirms that all statements of the
Company contained herein shall survive acceptance of this Agreement by the Buyer
for a period of two (2) years from the Closing Date. The Company agrees that,
if, to the knowledge of the Company, any events occur or circumstances exist
prior to the Closing Date which would make any of the Company's representations,
warranties, agreements or other information set forth herein materially untrue
or materially inaccurate as of such date, the Company shall immediately notify
the Buyer (directly or through its counsel, if any) and the Escrow Agent in
writing prior to such date of such fact, specifying which representation,
warranty or covenant is affected and the reasons therefor.

         4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.

         a. TRANSFER RESTRICTIONS.

<PAGE>

         (i) The Buyer acknowledges that (1) the Securities have not been and
are not being registered under the provisions of the 1933 Act and, except as
provided in the Registration Rights Agreement or otherwise included in an
effective registration statement, the Shares have not been and are not being
registered under the 1933 Act, and may not be transferred unless (A)
subsequently registered thereunder or (B) the Buyer shall have delivered to the
Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any sale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such
Securities under circumstances in which the seller, or the Person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other Person is under any obligation to register the Securities
(other than pursuant to the Registration Rights Agreement) under the 1933 Act or
to comply with the terms and conditions of any exemption thereunder.

         (ii) In addition to the foregoing, and not in lieu thereof, the Buyer
agrees that, without the express written consent of the Company in each
instance, it will not transfer any of the Purchased Securities to any Person (x)
which is known to the Buyer to be in substantially the same business as the
Company or which the Company reasonably identifies as a competitor, or (y) which
is known to be a subsidiary or affiliate of such a Person.

         b. RESTRICTIVE LEGEND. The Buyer acknowledges and agrees that, until
such time as the relevant Shares have been registered under the 1933 Act, as
contemplated by the Registration Rights Agreement, and may be sold in accordance
with an effective Registration Statement or otherwise in accordance with another
effective registration statement, or until such Shares can otherwise be sold
without restriction, whichever is earlier, the certificates and other
instruments representing any of the Securities shall bear a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of any such Securities):

         THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
         1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
         SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
         STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
         ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

         c. FILINGS. The Company undertakes and agrees to make all filings it
deems necessary (based on the advice of Company counsel) in connection with the
sale of the Securities to the Buyer under any United States laws and regulations
applicable to the Company, or by any domestic securities exchange or trading
market, and to provide a copy thereof to the Buyer promptly after such filing.
Reference is made to the Section titled "Publicity, Filings, Releases, Etc."
below.

         d. REPORTING STATUS. So long as the Buyer beneficially owns any of the
Purchased Securities and for at least twenty (20) Trading Days thereafter, the
Company shall file all reports required to be filed with the SEC pursuant to
Section 13 or 15(d) of the 1934 Act, shall take all reasonable action under its
control to ensure that adequate current public information with respect to the
Company, as required in accordance with Rule 144(c)(2) of the 1933 Act, is
publicly available, and shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination. The Company will take all
reasonable action under its control to maintain the continued listing and
quotation and trading of its Common Stock (including, without limitation, all
Registrable Securities) on the Principal Trading Market or a listing on the
NASDAQ/Small Cap or National Markets and, to the extent applicable to it, will
comply in all material respects with the Company's reporting, filing and other
obligations under the by-laws or rules of the Principal Trading Market and/or
the National Association of Securities Dealers, Inc., as the case may be,
applicable to it at least through the date which is sixty (60) days after the
later of the date on which (x) all of the Debentures have been converted or have
been paid in full or (y) all of the Warrants have been exercised or have
expired.

<PAGE>

         e. USE OF PROCEEDS. The Company will use the net proceeds received
hereunder (excluding amounts paid as contemplated by the Joint Escrow
Instructions) (i) first, for repayment of the promissory notes listed on ANNEX
IX attached hereto, and (ii) then, for general corporate purposes.

         f. WARRANTS.

         (i) The Company agrees to issue to the Buyer on the Closing Date two
(2) separate transferable warrants (each, a "Warrant" and, collectively, the
"Warrants"), designated as Class 2005-A ("Class A") and Class 2005-B ("Class B")
Warrants, respectively.

         (ii) Each Class A Warrant shall be for the purchase the a number of
shares of Common Stock equal to one hundred percent (100%) of the Issue Date
Conversion Shares and each Class B Warrant shall be for the purchase the a
number of shares of Common Stock equal to fifty percent (50%) of the Issue Date
Conversion Shares, or a total of 150% of the Issue Date Conversion Shares for
all Warrants combined.

         (iii) Each Warrant shall have an exercise price (each, an "Exercise
Price") as follows: (i) Class A - two hundred percent (200%) of the VWAP for the
three (3) Trading Days ending on the Trading Day immediately preceding the
Closing Date; and (ii) Class B - one hundred percent (100%) of the VWAP for the
three (3) Trading Days ending on the Trading Day immediately preceding the
Closing Date; each such Exercise Price will be subject to adjustment as provided
in the Warrant.

         (iv) Each of the Warrants shall be exercisable commencing on the
Commencement Date specified in the Warrants. Each of the Warrants shall expire
at the close of business on its expiration date, which dates are as follows: (i)
Class A - the date which is the last day of the calendar month in which the
third annual anniversary of the Effective Date occurs; and (ii) Class B - the
date which is the last day of the calendar month in which the first annual
anniversary of the Effective Date occurs. Each Warrant shall have cashless
exercise rights as provided in the Warrant. Except as specified above, each
Warrant shall generally be in the form annexed hereto as ANNEX V.

         (v) The Warrant Shares shall be subject to the provisions of the
Registration Rights Agreement.

         g. CERTAIN AGREEMENTS.

         (i) For purposes of this Agreement, the following terms shall have
meanings indicated:

         (A) "New Transaction Period" means the period commencing on the Closing
         Date and continuing through and including the Final Lock-up Date.

         (B) "Final Lock-up Date" means the date on which the aggregate
         principal amount of all outstanding Debentures is one-third or less
         than the Aggregate Purchase Price.

         (C) "New Transaction Price" means the Basic New Transaction Price (as
         defined below) except that if the New Transaction Exercise Price is
         lower than the Basic New Transaction Price, it means the New
         Transaction Exercise Price.

<PAGE>

         (D) "Basic New Transaction Price" means, as may be applicable, on a per
         share basis, the lower of (1) the lowest fixed purchase price of any
         shares of the New Common Stock contemplated in the New Transaction, or
         (2) the lowest conversion price or put or call price which would be
         applicable under the terms of the New Transaction; in each such case,
         whether such purchase or conversion price or put or call price is
         stated or otherwise specified or is determined on the closing date of
         the New Transaction by the application of a formula set in the
         documents reflecting the New Transaction or could result from
         adjustments or revisions contemplated in the relevant agreements for
         the New Transaction and whenever such adjustment or revision would be
         applicable (and if no minimum purchase price, conversion price or put
         or call price, as the case may be, is set, it shall be assumed that
         such minimum purchase price or conversion price is $.01); and provided,
         further, that, if the securities issued in the New Transaction are
         issued at a Face Value Discount (as defined below), the New Transaction
         Price shall be adjusted to reflect such discount.(2)

         (E) "Exercise Threshold Price" means the then applicable Exercise
         Price.

         (F) "New Transaction Exercise Price" means the lowest exercise price
         per share applicable to the warrants, option or similar instrument
         (howsoever denominated; collectively, "New Transaction Warrants")
         included in such New Transaction, whether such exercise price is stated
         or could result from adjustments or revisions contemplated in the
         relevant agreements for the New Transaction and whenever such exercise
         price would be applicable (and, if no minimum exercise price is set, it
         shall be assumed that such minimum exercise price is $.01).

         (G) The term "New Transaction Effective Percentage" means the
         percentage equal to the excess, if any, of (x) one hundred percent
         (100%) over (y) the percentage equal to (1) the New Transaction Price,
         divided by (2) the VWAP for the five (5) Trading Days ending on the
         Trading Day immediately before the closing date of the New Transaction.

         (H) "Alternative Warrant Percentage" means (x) the number of shares
         which are eligible to be purchased under the New Transaction Warrants,
         divided by (y) the aggregate of the shares of New Common Stock issued
         or issuable in such transaction (excluding the shares issuable on
         exercise of the New Transaction Warrants).

         (I) "Outstanding Warrant Shares" means, for each class of Warrants or
         for any previously issued Additional Warrants (as defined below), the
         then outstanding number of Warrant Shares which would then be issuable
         upon the exercise in full of such class of Warrants (without regard to
         any limitations which may then restrict the Holder's full exercise of
         such Warrant at any time) or such Additional Warrants, if any, as in
         effect immediately prior to the relevant New Transaction.

         (J) "Original Warrant Shares" means, for each class of Warrants or for
         any previously issued Additional Warrants, the original number of
         Warrant Shares issuable on exercise of such class of Warrants on the
         Closing Date or as Additional Warrants, as the case may be (in each
         case without regard to any limitations which may then restrict the
         Holder's full exercise of such Warrant at any time), but excluding any
         Warrant canceled pursuant to the provisions of Section 4(o)(iii)
         hereof.

         (K) "Face Value Discount" means consideration less than, as the case
         may be, (x) the number of shares being issued multiplied by the stated
         purchase price, (y) the stated principal amount of a debenture, note or
         similar instrument or (z) the stated value of the shares of convertible
         stock.

         (ii) The Company covenants and agrees that, if, during the New
Transaction Period, without the prior written consent of a Majority in Interest
of the Holders in each instance (which consent is in the sole discretion of the
Holders and may be withheld for any reason or for no reason whatsoever), the
Company enters into a New Transaction, then

______________
(2) By way of illustration, if convertible preferred shares having a stated
value of $1 million and a fixed conversion price of $0.05 were sold for a
purchase price of $800,000, the effective New Transaction Price would be $0.04.

<PAGE>

         (A) the New Transaction Price shall be the Lowest Fixed Conversion
         Price for all Unconverted Debentures; provided, however, if there was a
         previous New Transaction Price, the Lowest Fixed Conversion Price shall
         be the lowest New Transaction Price(3); and

         (B) if the New Transaction Effective Percentage is higher than the then
         applicable Effective Percentage, the Effective Percentage shall be
         adjusted for all Unconverted Debentures to such New Transaction
         Effective Percentage; and

         (C) if the New Transaction Exercise Price of any of the New Transaction
         Warrants representing the first one hundred percent (100%) of the
         Alternative Warrant Percentage(4) (the "First New Transaction
         Warrants") is lower than the Exercise Threshold Price of the Class A
         Warrants, then the Exercise Price of the then outstanding Class A
         Warrants shall be adjusted to be equal to the New Transaction Exercise
         Price of such First New Transaction Warrants; and

         (D) if the New Transaction Exercise Price of any of the New Transaction
         Warrants representing above the first one hundred percent (100%) of the
         Alternative Warrant Percentage (the "Additional New Transaction
         Warrants") is lower than the Exercise Threshold Price of the Class B
         Warrants, then the Exercise Price of the then outstanding Class B
         Warrants shall be adjusted to be equal to the New Transaction Exercise
         Price of such Additional New Transaction Warrants; and.

         (E) if the provisions applicable to the convertible preferred stock,
         convertible debenture or similar instrument (howsoever denominated), if
         any, of the New Transaction are more beneficial to the holder of such
         instrument than the corresponding terms applicable to the Debentures or
         in or to the Warrants, as the case may be, or if the terms which are
         beneficial to the Company in the relevant Transaction Agreements are
         not included in the corresponding instrument in the New Transaction,
         then, unless waived by the Holder, the terms of the Transaction
         Agreements applying to the then outstanding Debentures or the Warrants
         or to the other Transaction Agreements, as the case may be, shall be
         modified to reflect similar terms (based, if relevant, on the Closing
         Date); provided, however, that nothing in this provision shall be read
         to mean that the Purchased Securities shall be changed to any other
         form of security;

         (F) if the Alternative Warrant Percentage is greater than one hundred
         fifty percent (150%), the Company shall issue to the Holder additional
         warrants ("Additional Warrants") for the purchase of the number of
         shares equal to the excess, if any, of

                           (1) (x) the Alternative Warrant Percentage,
                  multiplied by (y) (I) the Purchase Price, divided by (II) the
                  Conversion Price in effect on the Closing Date or on the
                  closing date of the New Transaction, whichever is lower,
                  multiplied by (y) a fraction, of which the numerator is the
                  Outstanding Warrant Shares for all classes of Warrants
                  (including previously issued Additional Warrants) and the
                  denominator is Original Warrant Shares for all relevant
                  classes of Warrants (including previously issued Additional
                  Warrants); over

                           (2) the aggregate Outstanding Warrant Shares for all
                  classes of Warrants Classes (including previously issued
                  Additional Warrants);

____________

(3) Any New Transaction Price shall be adjusted for subsequent events as
contemplated by the Debentures.
(4) If New Transaction Warrants have more than one exercise price, they shall be
ranked in priority order from lowest exercise price to highest exercise price.

<PAGE>

         two-thirds or such Additional Warrants shall be Class A Warrants and
         the balance shall be Class B Warrants; and the terms of such Additional
         Warrants (including, but not limited, to term of exercisability,
         exercise price, manner and limitations, if any, on exercise,
         registration rights) shall be the same as the shall be the same as the
         applicable New Transaction Warrants issued in such New Transaction.

         (iii) The Company covenants and agrees that, any of the foregoing
provisions of this Section 4(g) or any other provision of this Agreement or any
of the other Transaction Agreements to the contrary notwithstanding, without the
prior written consent of a Majority in Interest in each instance (which consent
is in the sole discretion of the Holders and may be withheld for any reason or
for no reason whatsoever),

         (A) during the New Transaction Period, the Company will not enter into
         any New Transaction where such transaction provides for a variable
         conversion price or a variable exercise price;

         (B) during the period commencing on the Closing Date and continuing
         through the Effective Date, the Company will not enter into any New
         Transaction whatsoever, and (C) during the period commencing on the
         Effective Date and continuing through the date which is the sixth
         monthly anniversary of the Effective Date, the Company will not enter
         into any New Transaction where such New Transaction provides for any
         registration rights (including, but not limited to demand or piggy-back
         registration rights) to any one or more of the New Investors in such
         New Transaction.

The Company acknowledges that each of the foregoing provisions is independent of
the others and that a breach of any of the foregoing provisions might result in
adjustments referred to in other provisions of this Section 4(g) and, in
addition (and not in lieu of such adjustments, if any) shall constitute an event
of default under the Debenture and the other Transaction Agreements. The Company
is aware that if such event of default occurs, a Holder of a Debenture will have
certain redemption rights contemplated by the Debenture.

         (iv) Nothing in the foregoing provisions reflects either an obligation
on the part of any Buyer to participate in any New Transaction or a limitation
on any Buyer from participating in any New Transaction.

         (v) Any of the foregoing provisions of this Section 4(g) or any other
provision of this Agreement or any of the other Transaction Agreements to the
contrary notwithstanding, the Company shall not engage in any offers, sales or
other transactions of its securities which would adversely affect the exemption
from registration available for the transactions contemplated by the Transaction
Agreements.

         (vi) The Company agrees that, prior to the Effective Date, the Company
will not file any registration statement for the sale of shares by the Company
or any other shareholder other than the Registration Statement contemplated by
the Registration Rights Agreement.

         h. COMPANY PRINCIPAL'S AGREEMENTS.

         (i) The Company hereby agrees that, no later than the Closing Date, the
Company will cause each of its principal officers and all of its directors
(each, a "Company Principal"), and certain Persons who are related to or
controlled by such Company Principal, to execute and deliver an agreement (each,
a "Company Principal's Agreement") regarding limitations on the sale or other
disposition of the shares of the Company's Common Stock (or instruments
convertible into or exercisable for such shares) held by such Company Principal
or other Principal (as defined in the Company Principal's Agreement), except
that, notwithstanding its terms, the Company Principal's Agreement will be
deemed not apply to the sale of shares of Common Stock bought by a Principal in
open market transactions. Subject to the foregoing, each Company Principal's
Agreement shall be substantially in the form set forth in ANNEX VII attached
hereto.

         (ii) In addition, under certain circumstances as contemplated by the
definition of "New Transaction" in this Agreement, certain future issuances by
the Company to persons identified in clause (g) of such definition are
conditioned on such shares being subject to a Company Principal's Agreement
being executed by the relevant party (who, whether or not included in the
definition of Company Principal in the preceding subparagraph (i), shall, for
purposes of this Section 4(h), be deemed to be a "Company Principal" identified
in such definition). The Company covenants that it will obtain such executed
Company Principal's Agreement from the relevant party no later than the issuance
of the relevant security to such party and that it will promptly provide a copy
thereof to the Escrow Agent on behalf of the Buyer and the Other Buyers.

<PAGE>

         h. AVAILABLE SHARES. The Company shall have at all times authorized and
reserved for issuance, free from preemptive rights, a number of shares (the
"Reserved Amount") at least equal to one hundred twenty-five percent (125%) of
the sum of (x) the number of shares of Common Stock issuable as may be required,
at any time, to satisfy the conversion rights of the Holders of principal on all
outstanding Convertible Debentures plus interest thereon through the Maturity
Date, plus (y) the number of shares issuable upon exercise of all outstanding
Warrants held by all Holders (in each case, whether any of such outstanding
Convertible Debentures or Warrants were originally issued to the Holder, the
Buyer or to any other party and without regard to any restrictions which might
limit any Holder's right to convert any of the Debentures or to exercise any of
the Warrants held by any Holder). The Reserved Amount shall be determined on the
first Trading Day after the end of each calendar quarter and the number of
shares to be reserved shall be based on (q) all outstanding Convertible
Debentures and the Conversion Price as of such date and (r) unexercised Warrants
as of such date. The Reserved Amount determined on such date shall remain the
Reserved Amount until the next quarterly determination.

         j. PUBLICITY, FILINGS, RELEASES, ETC. Each of the parties agrees that
it will not disseminate any information relating to the Transaction Agreements
or the transactions contemplated thereby, including issuing any press releases,
holding any press conferences or other forums, or filing any reports
(collectively, "Publicity"), without giving the other party reasonable advance
notice and an opportunity to comment on the contents thereof. Neither party will
include in any such Publicity any statement or statements or other material to
which the other party reasonably objects. In furtherance of the foregoing, the
Company will provide to the Buyer drafts of the applicable text of any filing
intended to be made with the SEC which refers to the Transaction Agreements or
the transactions contemplated thereby as soon as practicable (but at least three
(3) business days before such filing will be made) and will not include in such
filing any statement or statements or other material to which the other party
reasonably objects. Notwithstanding the foregoing, each of the parties hereby
consents to the inclusion of the text of the Transaction Agreements in filings
made with the SEC (but any descriptive text accompanying or part of such filing
shall be subject to the other provisions of this paragraph). Notwithstanding,
but subject to, the foregoing provisions of this Section 4(j), the Company will,
after the Closing Date, promptly issue a press release and file a Current Report
on Form 8-K or, if appropriate, a quarterly or annual report on the appropriate
form, referring to the transactions contemplated by the Transaction Agreements.

         k. INDEPENDENT NATURE OF BUYERS' OBLIGATIONS AND RIGHTS. The
obligations of each Buyer under the Transaction Agreements are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any Other Buyer under any
one or more of the Transaction Agreements. The decision of each Buyer or Other
Buyer to purchase Purchased Securities pursuant to the Transaction Agreements
has been made by such Buyer independently of any Other Buyer. Nothing contained
herein or in any Transaction Agreement, and no action taken by any Buyer
pursuant thereto, shall be deemed to constitute any two or more Buyers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Buyers are in any way acting in concert or as a
group with respect to such obligations or the transactions contemplated by the
Transaction Agreements. Each Buyer acknowledges that no Other Buyer has acted as
agent for such Buyer in connection with making its investment hereunder and that
no Buyer will be acting as agent of such Other Buyer in connection with
monitoring its investment in the Purchased Securities or enforcing its rights
under the Transaction Agreements. Each Buyer shall be entitled to independently
protect and enforce its rights, including without limitation the rights arising
out of this Agreement or out of the other Transaction Agreements, and it shall
not be necessary for any Other Buyer to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Buyers
has been provided with the same Transaction Agreements for the purpose of
closing a transaction with multiple Buyers and not because it was required or
requested to do so by any Buyer.

<PAGE>

         l. EQUAL TREATMENT OF BUYERS. No consideration shall be offered or paid
to any person to amend or consent to a waiver or modification of any provision
of any of the Transaction Agreements unless the same consideration is also
offered to all of the parties to the Transaction Agreements.

         m. INDEPENDENT INVESTMENT DECISION. No Buyer has agreed to act with any
Other Buyer for the purpose of acquiring, holding, voting or disposing of the
Securities purchased hereunder for purposes of Section 13(d) under the Exchange
Act, and each Buyer is acting independently with respect to its investment in
the Securities. The decision of each Buyer to purchase Purchased Securities
pursuant to this Agreement has been made by such Buyer independently of any
other purchase and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company or its subsidiaries which may have made or given by any
Other Buyer or by any agent or employee of any Other Buyer, and no Buyer or any
of its agents or employees shall have any liability to any Other Buyer (or any
other person) relating to or arising from any such information, materials,
statements or opinions.

         n. NASD RULE 2710. The Company is aware that the Corporate Financing
Rule 2710 ("NASD Rule 2710") of the National Association of Securities Dealers
("NASD") is or may become applicable to the transactions contemplated by the
Transaction Agreements or to the sale by a Holder of any of the Securities. If
NASD Rule 2710 is so applicable, the Company shall, to the extent required by
such rule, cooperate with any broker or selling shareholder in respect of any
consents, authorizations or approvals that may be necessary for the NASD to
timely and expeditiously permit the shareholder to sell the securities.

         5. TRANSFER AGENT INSTRUCTIONS.

         a. The Company warrants that, with respect to the Securities, other
than the stop transfer instructions to give effect to Section 4(a) hereof, it
will give the Transfer Agent no instructions inconsistent with instructions to
issue Common Stock from time to time upon conversion of the Debentures or
exercise of the Warrants or in connection with the issuance of Payment Shares,
as may be applicable from time to time, in such amounts as specified from time
to time by the Company to the Transfer Agent, bearing the restrictive legend
specified in Section 4(b) of this Agreement prior to registration of the Shares
under the 1933 Act, registered in the name of the Buyer or its nominee and in
such denominations to be specified by the Holder in connection therewith. Except
as so provided, the Shares shall otherwise be freely transferable on the books
and records of the Company as and to the extent provided in this Agreement and
the other Transaction Agreements. Nothing in this Section shall affect in any
way the Buyer's obligations and agreement to comply with all applicable
securities laws upon resale of the Securities. If the Buyer provides the Company
with an opinion of counsel reasonably satisfactory to the Company that
registration of a resale by the Buyer of any of the Securities in accordance
with clause (1)(B) of Section 4(a) of this Agreement is not required under the
1933 Act or upon request from a Holder while the Registration Statement is
effective, the Company shall (except as provided in clause (2) of Section 4(a)
of this Agreement) permit the transfer of the Securities and, in the case of the
Conversion Shares, the Warrant Shares or the Payment Shares, as may be
applicable, promptly instruct the Transfer Agent to issue one or more
certificates for Common Stock without legend in such name and in such
denominations as specified by the Buyer.

         b. (i) The Company understands that a delay in the delivery of
Conversion Certificates, whether on conversion of the Debenture and/or in
payment of accrued interest, beyond the relevant Delivery Date (as defined in
the Debenture) could result in economic loss to the Holder. As compensation to
the Holder for such loss, the Company agrees to pay late payments to the Holder
for late issuance of the Conversion Certificates in accordance with the
following schedule (where "No. Business Days Late" is defined as the number of
Trading Days beyond two (2) Trading Days after the Delivery Date):(5)

____________
(5) Example: Notice of Conversion is delivered on Monday, May 1, 2006. The
Delivery Date would be Thursday, May 4 (the third Trading Day after such
delivery). If the certificate is delivered by Monday, May 8 (2 Trading Days
after the Delivery Date), no payment under this provision is due. If the
certificates are delivered on May 9, that is 1 "Trading Day Late" in the table
below; if delivered on May 16, that is 6 "Trading Days Late" in the table.

                   [Balance of page intentionally left blank]
<PAGE>

                                              Late Payment For Each $10,000
                                              of Principal or Interest
No. Business Days Late                        Being Converted
--------------------------------------------------------------------------------
        1                                      $100
        2                                      $200
        3                                      $300
        4                                      $400
        5                                      $500
        6                                      $600
        7                                      $700
        8                                      $800
        9                                      $900
        10                                     $1,000
        >10                                    $1,000 + $200 for each Business
                                               Day Late beyond 10 days

The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Nothing herein shall limit the Holder's right to
pursue actual damages for the Company's failure to issue and deliver the
Conversion Certificates to the Holder within a reasonable time. Furthermore, in
addition to any other remedies which may be available to a Holder, in the event
that the Company fails for any reason to effect delivery of such Conversion
Certificates within two (2) Trading Days after the Delivery Date, the Converting
Holder will be entitled to revoke the relevant Notice of Conversion by
delivering a notice to such effect to the Company prior to the Converting
Holder's receipt of the relevant Conversion Certificates, whereupon the Company
and the Converting Holder shall each be restored to their respective positions
immediately prior to delivery of such Notice of Conversion; PROVIDED, HOWEVER,
that any payments contemplated by this Section 5(b) of this Agreement which have
accrued through the date of such revocation notice shall remain due and owing to
the Converting Holder notwithstanding such revocation.

         (ii) If, by the tenth Trading Day after the relevant Delivery Date, the
Company fails for any reason to deliver the Conversion Certificates, but at any
time after the Delivery Date, the Converting Holder purchases, in an
arm's-length open market transaction or otherwise, shares of Common Stock (the
"Covering Shares") in order to make delivery in satisfaction of a sale of Common
Stock by the Converting Holder (the "Sold Shares"), which delivery such
Converting Holder anticipated to make using the shares to be issued upon such
conversion (a "Buy-In"), the Converting Holder shall have the right to require
the Company to pay to the Converting Holder, in addition to and not in lieu of
the amounts contemplated in other provisions of the Transaction Agreements,
including, but not limited to, the provisions of the immediately preceding
Section 5(b)(i)), the Buy-In Adjustment Amount (as defined below). The "Buy-In
Adjustment Amount" is the amount equal to the number of Sold Shares multiplied
by the excess, if any, of (x) the Holder's total purchase price per share
(including brokerage commissions, if any) for the Covering Shares over (y) the
net proceeds per share (after brokerage commissions, if any) received by the
Holder from the sale of the Sold Shares. The Company shall pay the Buy-In
Adjustment Amount to the Holder in immediately available funds immediately upon
demand by the Converting Holder. By way of illustration and not in limitation of
the foregoing, if the Holder purchases shares of Common Stock having a total
purchase price (including brokerage commissions) of $11,000 to cover a Buy-In
with respect to shares of Common Stock it sold for net proceeds of $10,000, the
Buy-In Adjustment Amount which Company will be required to pay to the Holder
will be $1,000.

<PAGE>

         c. In lieu of delivering physical certificates representing the Common
Stock issuable upon conversion of the Debenture or exercise of a Warrant or at
the request of the Holder with respect to any Shares previously issued, provided
the Transfer Agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program, upon request of the Holder and the
Holder's compliance with the provisions contained in this paragraph, so long as
the certificates therefor do not bear a legend and the Holder thereof is not
obligated to return such certificate for the placement of a legend thereon, the
Company shall use its best efforts to cause the Transfer Agent to electronically
transmit to the Holder the Common Stock issuable upon conversion of the
Debenture or exercise of the Warrant or in replacement of any Shares previously
issued by crediting the account of Holder's Prime Broker with DTC through its
Deposit Withdrawal Agent Commission system.

         d. The Company shall assume any fees or charges of the Transfer Agent
or Company counsel regarding (i) the removal of a legend or stop transfer
instructions with respect to Registrable Securities, and (ii) the issuance of
certificates or DTC registration to or in the name of the Holder or the Holder's
designee or to a transferee as contemplated by an effective Registration
Statement. Notwithstanding the foregoing, it shall be the Holder's
responsibility to obtain all needed formal requirements (specifically: medallion
guarantee and prospectus delivery compliance) in connection with any electronic
issuance of shares of Common Stock.

         e. The Company will authorize the Transfer Agent to give information
relating to the Company directly to the Holder or the Holder's representatives
upon the request of the Buyer or any such representative, to the extent such
information relates to (i) the status of shares of Common Stock issued or
claimed to be issued to the Holder in connection with a Notice of Conversion or
a Notice of Exercise, or (ii) the aggregate number of outstanding shares of
Common Stock of all shareholders (as a group and not individually) as of a
current or other specified date. At the request of the Holder, the Company will
provide the Holder with a copy of the authorization so given to the Transfer
Agent.

         6. CLOSING DATES.

         a. The Closing Date shall occur on the date which is the first Trading
Day after each of the conditions contemplated by Sections 7 and 8 hereof shall
have either been satisfied or been waived by the party in whose favor such
conditions run.

         b. The closing of the purchase and issuance of the Purchased Securities
shall occur on the Closing Date at the offices of the Escrow Agent.

         c. Notwithstanding anything to the contrary contained herein, the
Escrow Agent will be authorized to release the Escrow Funds to the Company and
to others and to release the other Escrow Property on the Closing Date upon
satisfaction of the conditions set forth in Sections 7 and 8 hereof and as
provided in the Joint Escrow Instructions.

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

         The Buyer understands that the Company's obligation to sell the
Purchased Securities to the Buyer pursuant to this Agreement on the Closing Date
is conditioned upon:

         a. The execution and delivery of this Agreement by the Buyer on or
before the Closing Date;

         b. Delivery by the Buyer to the Escrow Agent by the Closing Date of
good funds as payment in full of an amount equal to the Purchase Price in
accordance with this Agreement;

<PAGE>

         c. The accuracy on such Closing Date of the representations and
warranties of the Buyer contained in this Agreement, each as if made on such
date, and the performance by the Buyer on or before such date of all covenants
and agreements of the Buyer required to be performed on or before such date; and

         d. There shall not be in effect any law, rule or regulation prohibiting
or restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained.

         8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.

         The Company understands that the Buyer's obligation to purchase the
Purchased Securities on the Closing Date is conditioned upon:

         a. The execution and delivery of this Agreement and the other
Transaction Agreements by the Company on or before the Closing Date;

         b. The delivery by the Company to the Escrow Agent of originals of each
of the Certificates in accordance with this Agreement;

         c. Delivery by the Company to the Escrow Agent of written confirmation
that there are no changes to the Disclosure Letter, a copy of which shall be
attached to such confirmation;

         d. Delivery by the Company to the Escrow Agent of the executed Company
Principal's Agreements from each Company Principal and the related Principals
(as defined in each Company Principal's Agreement) of such Company Principal;

         e. On such Closing Date, each of the Transaction Agreements executed by
the Company on or before such date shall be in full force and effect and the
Company shall not be in default thereunder;

         f. The accuracy in all material respects on such Closing Date of the
representations and warranties of the Company contained in this Agreement, each
as if made on such date, and the performance by the Company on or before such
date of all covenants and agreements of the Company required to be performed on
or before such date;

         g. The Buyer shall have received an opinion of counsel for the Company,
dated such Closing Date, in form, scope and substance reasonably satisfactory to
the Buyer, substantially to the effect set forth in ANNEX III attached hereto;

         h. There shall not be in effect any law, rule or regulation prohibiting
or restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained; and

         i. From and after the date hereof to and including such Closing Date,
each of the following conditions will remain in effect: (i) the trading of the
Common Stock shall not have been suspended by the SEC or on the Principal
Trading Market; (ii) trading in securities generally on the Principal Trading
Market shall not have been suspended or limited; (iii), no minimum prices shall
been established for securities traded on the Principal Trading Market; and (iv)
there shall not have been any material adverse change in any financial market.

<PAGE>

         9. INDEMNIFICATION.

         a. (i) The Company agrees to indemnify and hold harmless the Buyer and
its officers, directors, employees, and agents, and each Buyer Control Person
from and against any losses, claims, damages, liabilities or expenses incurred
(collectively, "Damages"), joint or several, and any action in respect thereof
to which the Buyer, its partners, Affiliates, officers, directors, employees,
and duly authorized agents, and any such Buyer Control Person becomes subject
to, resulting from, arising out of or relating to any misrepresentation, breach
of warranty or nonfulfillment of or failure to perform any covenant or agreement
on the part of Company contained in this Agreement, as such Damages are
incurred, except to the extent such Damages result primarily from Buyer's
failure to perform any covenant or agreement contained in this Agreement or the
Buyer's or its officer's, director's, employee's, agent's or Buyer Control
Person's gross negligence, recklessness or bad faith in performing its
obligations under this Agreement.

                  (ii) The Company hereby agrees that, if the Buyer, other than
by reason of its gross negligence or willful misconduct or by reason of its
trading of the Common Stock in a manner that is illegal under the federal
securities laws (in each case, as determined by a non-appealable judgment to
such effect), (x) becomes involved in any capacity in any action, proceeding or
investigation brought by any shareholder of the Company, in connection with or
as a result of the consummation of the transactions contemplated by this
Agreement or the other Transaction Agreements, or if the Buyer is impleaded in
any such action, proceeding or investigation by any Person, or (y) becomes
involved in any capacity in any action, proceeding or investigation brought by
the SEC, any self-regulatory organization or other body having jurisdiction,
against or involving the Company or in connection with or as a result of the
consummation of the transactions contemplated by this Agreement or the other
Transaction Agreements, or (z) is impleaded in any such action, proceeding or
investigation by any Person, then in any such case, the Company shall indemnify,
defend and hold harmless the Buyer from and against and in respect of all
losses, claims, liabilities, damages or expenses resulting from, imposed upon or
incurred by the Buyer, directly or indirectly, and reimburse such Buyer for its
reasonable legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith, as such expenses are incurred.
The indemnification and reimbursement obligations of the Company under this
paragraph shall be in addition to any liability which the Company may otherwise
have, shall extend upon the same terms and conditions to any Affiliates of the
Buyer who are actually named in such action, proceeding or investigation, and
partners, directors, agents, employees and Buyer Control Persons (if any), as
the case may be, of the Buyer and any such Affiliate, and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Buyer, any such Affiliate and any such
Person. The Company also agrees that neither the Buyer nor any such Affiliate,
partner, director, agent, employee or Buyer Control Person shall have any
liability to the Company or any Person asserting claims on behalf of or in right
of the Company in connection with or as a result of the consummation of this
Agreement or the other Transaction Agreements, except to the extent such
liability is based on a material misrepresentation made by the Buyer in Section
2 hereof or Buyer's material failure to perform any material covenant or
agreement of Buyer contained in the Transaction Agreements or the gross
negligence, recklessness or bad faith of the Buyer or its officers, directors,
employees, and agents, or Buyer Control Person, as the case may be, in
performing its material obligations under the relevant Transaction Agreement.

         b. All claims for indemnification by any Indemnified Party (as defined
below) under this Section shall be asserted and resolved as follows:

                  (i) In the event any claim or demand in respect of which any
Person claiming indemnification under any provision of this Section (an
"Indemnified Party") might seek indemnity under paragraph (a) of this Section is
asserted against or sought to be collected from such Indemnified Party by a
Person other than a party hereto or an Affiliate thereof (a "Third Party
Claim"), the Indemnified Party shall deliver a written notification, enclosing a
copy of all papers served, if any, and specifying the nature of and basis for
such Third Party Claim and for the Indemnified Party's claim for indemnification
that is being asserted under any provision of this Section against any Person
(the "Indemnifying Party"), together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such Third
Party Claim (a "Claim Notice") with reasonable promptness to the Indemnifying
Party. If the Indemnified Party fails to provide the Claim Notice with
reasonable promptness after the Indemnified Party receives notice of such Third
Party Claim, the Indemnifying Party shall not be obligated to indemnify the
Indemnified Party with respect to such Third Party Claim to the extent that the
Indemnifying Party's ability to defend has been prejudiced by such failure of
the Indemnified Party. The Indemnifying Party shall notify the Indemnified Party
as soon as practicable within the period ending thirty (30) calendar days
following receipt by the Indemnifying Party of either a Claim Notice or an
Indemnity Notice (as defined below) (the "Dispute Period") whether the
Indemnifying Party disputes its liability or the amount of its liability to the
Indemnified Party under this Section and whether the Indemnifying Party desires,
at its sole cost and expense, to defend the Indemnified Party against such Third
Party Claim. The following provisions shall also apply.

<PAGE>

         (x) If the Indemnifying Party notifies the Indemnified Party within the
         Dispute Period that the Indemnifying Party desires to defend the
         Indemnified Party with respect to the Third Party Claim pursuant to
         this paragraph (b) of this Section, then the Indemnifying Party shall
         have the right to defend, with counsel reasonably satisfactory to the
         Indemnified Party, at the sole cost and expense of the Indemnifying
         Party, such Third Party Claim by all appropriate proceedings, which
         proceedings shall be vigorously and diligently prosecuted by the
         Indemnifying Party to a final conclusion or will be settled at the
         discretion of the Indemnifying Party (but only with the consent of the
         Indemnified Party in the case of any settlement that provides for any
         relief other than the payment of monetary damages or that provides for
         the payment of monetary damages as to which the Indemnified Party shall
         not be indemnified in full pursuant to paragraph (a) of this Section).
         The Indemnifying Party shall have full control of such defense and
         proceedings, including any compromise or settlement thereof; provided,
         however, that the Indemnified Party may, at the sole cost and expense
         of the Indemnified Party, at any time prior to the Indemnifying Party's
         delivery of the notice referred to in the first sentence of this
         subparagraph (x), file any motion, answer or other pleadings or take
         any other action that the Indemnified Party reasonably believes to be
         necessary or appropriate protect its interests; and provided further,
         that if requested by the Indemnifying Party, the Indemnified Party
         will, at the sole cost and expense of the Indemnifying Party, provide
         reasonable cooperation to the Indemnifying Party in contesting any
         Third Party Claim that the Indemnifying Party elects to contest. The
         Indemnified Party may participate in, but not control, any defense or
         settlement of any Third Party Claim controlled by the Indemnifying
         Party pursuant to this subparagraph (x), and except as provided in the
         preceding sentence, the Indemnified Party shall bear its own costs and
         expenses with respect to such participation. Notwithstanding the
         foregoing, the Indemnified Party may take over the control of the
         defense or settlement of a Third Party Claim at any time if it
         irrevocably waives its right to indemnity under paragraph (a) of this
         Section with respect to such Third Party Claim.

         (y) If the Indemnifying Party fails to notify the Indemnified Party
         within the Dispute Period that the Indemnifying Party desires to defend
         the Third Party Claim pursuant to paragraph (b) of this Section, or if
         the Indemnifying Party gives such notice but fails to prosecute
         vigorously and diligently or settle the Third Party Claim, each in a
         reasonable manner, or if the Indemnifying Party fails to give any
         notice whatsoever within the Dispute Period, then the Indemnified Party
         shall have the right to defend, at the sole cost and expense of the
         Indemnifying Party, the Third Party Claim by all appropriate
         proceedings, which proceedings shall be prosecuted by the Indemnified
         Party in a reasonable manner and in good faith or will be settled at
         the discretion of the Indemnified Party (with the consent of the
         Indemnifying Party, which consent will not be unreasonably withheld).
         The Indemnified Party will have full control of such defense and
         proceedings, including any compromise or settlement thereof; provided,
         however, that if requested by the Indemnified Party, the Indemnifying
         Party will, at the sole cost and expense of the Indemnifying Party,
         provide reasonable cooperation to the Indemnified Party and its counsel
         in contesting any Third Party Claim which the Indemnified Party is
         contesting. Notwithstanding the foregoing provisions of this
         subparagraph (y), if the Indemnifying Party has notified the
         Indemnified Party within the Dispute Period that the Indemnifying Party
         disputes its liability or the amount of its liability hereunder to the
         Indemnified Party with respect to such Third Party Claim and if such
         dispute is resolved in favor of the Indemnifying Party in the manner
         provided in subparagraph(z) below, the Indemnifying Party will not be
         required to bear the costs and expenses of the Indemnified Party's
         defense pursuant to this subparagraph (y) or of the Indemnifying
         Party's participation therein at the Indemnified Party's request, and
         the Indemnified Party shall reimburse the Indemnifying Party in full
         for all reasonable costs and expenses incurred by the Indemnifying
         Party in connection with such litigation. The Indemnifying Party may
         participate in, but not control, any defense or settlement controlled
         by the Indemnified Party pursuant to this subparagraph (y), and the
         Indemnifying Party shall bear its own costs and expenses with respect
         to such participation.

<PAGE>

         (z) If the Indemnifying Party notifies the Indemnified Party that it
         does not dispute its liability or the amount of its liability to the
         Indemnified Party with respect to the Third Party Claim under paragraph
         (a) of this Section or fails to notify the Indemnified Party within the
         Dispute Period whether the Indemnifying Party disputes its liability or
         the amount of its liability to the Indemnified Party with respect to
         such Third Party Claim, the amount of Damages specified in the Claim
         Notice shall be conclusively deemed a liability of the Indemnifying
         Party under paragraph (a) of this Section and the Indemnifying Party
         shall pay the amount of such Damages to the Indemnified Party on
         demand. If the Indemnifying Party has timely disputed its liability or
         the amount of its liability with respect to such claim, the
         Indemnifying Party and the Indemnified Party shall proceed in good
         faith to negotiate a resolution of such dispute; provided, however,
         that it the dispute is not resolved within thirty (30) days after the
         Claim Notice, the Indemnifying Party shall be entitled to institute
         such legal action as it deems appropriate.

                  (ii) In the event any Indemnified Party should have a claim
under paragraph (a) of this Section against the Indemnifying Party that does not
involve a Third Party Claim, the Indemnified Party shall deliver a written
notification of a claim for indemnity under paragraph (a) of this Section
specifying the nature of and basis for such claim, together with the amount or,
if not then reasonably ascertainable, the estimated amount, determined in good
faith, of such claim (an "Indemnity Notice") with reasonable promptness to the
Indemnifying Party. The failure by any Indemnified Party to give the Indemnity
Notice shall not impair such party's rights hereunder except to the extent that
the Indemnifying Party demonstrates that it has been irreparably prejudiced
thereby. If the Indemnifying Party notifies the Indemnified Party that it does
not dispute the claim or the amount of the claim described in such Indemnity
Notice or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim or the amount of the claim
described in such Indemnity Notice, the amount of Damages specified in the
Indemnity Notice will be conclusively deemed a liability of the Indemnifying
Party under paragraph (a) of this Section and the Indemnifying Party shall pay
the amount of such Damages to the Indemnified Party on demand. If the
Indemnifying Party has timely disputed its liability or the amount of its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party shall proceed in good faith to negotiate a resolution of such dispute;
provided, however, that if the dispute is not resolved within thirty (30) days
after the Claim Notice, the Indemnifying Party shall be entitled to institute
such legal action as it deems appropriate.

         c. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar rights of the indemnified party against the
indemnifying party or others, and (ii) any liabilities the indemnifying party
may be subject to.

         10. JURY TRIAL WAIVER. The Company and the Buyer hereby waive a trial
by jury in any action, proceeding or counterclaim brought by either of the
Parties hereto against the other in respect of any matter arising out or in
connection with the Transaction Agreements.

         11. SPECIFIC PERFORMANCE. The Company and the Buyer acknowledge and
agree that irreparable damage would occur in the event that any provision of
this Agreement or any of the other Transaction Agreements were not performed in
accordance with its specific terms or were otherwise breached. It is accordingly
agreed that the parties (including any Holder) shall be entitled to an
injunction or injunctions, without (except as specified below) the necessity to
post a bond, to prevent or cure breaches of the provisions of this Agreement or
such other Transaction Agreement and to enforce specifically the terms and
provisions hereof or thereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity; provided, however that the
Company, upon receipt of a Notice of Conversion or a Notice of Exercise, may not
fail or refuse to deliver the stock certificates and the related legal opinions,
if any, based on any claim that the Holder has violated any provision hereof or
for any other reason, unless the Company has first posted a bond for one hundred
fifty percent (150%) of the principal amount and then obtained a court order
specifically directing it not to deliver said stock certificates to the Holder.
This provision is deemed incorporated by reference into each of the Transaction
Agreements as if set forth therein in full.

<PAGE>

         12. GOVERNING LAW: MISCELLANEOUS.

         a. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York for contracts to be wholly performed in
such state and without giving effect to the principles thereof regarding the
conflict of laws. Each of the parties consents to the exclusive jurisdiction of
the federal courts whose districts encompass any part of the County of New York
or the state courts of the State of New York sitting in the County of New York
in connection with any dispute arising under this Agreement or any of the other
Transaction Agreements and hereby waives, to the maximum extent permitted by
law, any objection, including any objection based on FORUM NON CONVENIENS, to
the bringing of any such proceeding in such jurisdictions. To the extent
determined by such court, the Company shall reimburse the Buyer for any
reasonable legal fees and disbursements incurred by the Buyer in enforcement of
or protection of any of its rights under any of the Transaction Agreements.

         b. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

         c. This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.

         d. All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.

         e. A facsimile transmission of this signed Agreement shall be legal and
binding on all parties hereto.

         f. This Agreement may be signed in one or more counterparts, each of
which shall be deemed an original.

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

         h. If any provision of this Agreement shall be invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.

         i. This Agreement may be amended only by an instrument in writing
signed by the party to be charged with enforcement thereof.

         j. This Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof.

         13. NOTICES. Any notice required or permitted hereunder shall be given
in writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of

                  (a) the date delivered, if delivered by personal delivery as
         against written receipt therefor or by confirmed facsimile
         transmission,

                  (b) the seventh business day after deposit, postage prepaid,
         in the United States Postal Service by registered or certified mail, or

                  (c) the third business day after mailing by domestic or
         international express courier, with delivery costs and fees prepaid,

<PAGE>

in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):

COMPANY:    At the address set forth at the head of this Agreement.
                           Attn: Chief Executive Officer
                           Telephone No.: (503) 257-6700
                           Telecopier No.: (503) 257-6622

                           with a copy to:

                           Aboudi & Brounstein
                           Attn: David Aboudi, Esq.
                           Rechov Gavish 3, POB 2432
                           Kfar Saba Industrial Zone 44641 Israel
                           Telephone No.: (011-972-9) 764-4833
                           Telecopier No.: (011-972-9) 764-4834

BUYER:      At the address set forth on the signature page of this Agreement.

                           with a copy to:

                           Krieger & Prager LLP, Esqs.
                           39 Broadway
                           Suite 1440
                           New York, NY 10006
                           Attn: Ronald J. Nussbaum, Esq.
                           Telephone No.: (212) 363-2900
                           Telecopier No.  (212) 363-2999

ESCROW AGENT:     Krieger & Prager LLP, Esqs.
                           39 Broadway
                           Suite 1440
                           New York, NY 10006
                           Attn: Samuel Krieger, Esq.
                           Telephone No.: (212) 363-2900
                           Telecopier No.  (212) 363-2999

         14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and the
Buyer's representations and warranties herein shall survive the execution and
delivery of this Agreement and the delivery of the Certificates and the payment
of the Purchase Price, for a period of two (2) years after the Closing Date and
shall inure to the benefit of the Buyer and the Company and their respective
successors and assigns.

                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]

<PAGE>

                 [SECURITIES PURCHASE AGREEMENT SIGNATURE PAGE]

                  IN WITNESS WHEREOF, with respect to the Purchase Price
specified below, each the undersigned represents that the foregoing statements
made by it above are true and correct and that it has caused this Agreement to
be duly executed on its behalf (if an entity, by one of its officers thereunto
duly authorized) as of the date first above written.

PURCHASE PRICE:                                        $________________________

                                     BUYER:

________________________________             ___________________________________
Address                                      Printed Name of Buyer
________________________________

                                             By: _______________________________
Telecopier No. _________________             (Signature of Authorized Person)

                                             ___________________________________
________________________________             Printed Name and Title
Jurisdiction of Incorporation
or Organization

                                    COMPANY:

NEW VISUAL CORPORATION

By:        __________________________

Title:     __________________________

<PAGE>

         ANNEX I           FORM OF DEBENTURE

         ANNEX II          JOINT ESCROW INSTRUCTIONS

         ANNEX III         OPINION OF COUNSEL

         ANNEX IV          REGISTRATION RIGHTS AGREEMENT

         ANNEX V           FORM OF WARRANT

         ANNEX VI          COMPANY'S SEC DOCUMENTS AVAILABLE ON EDGAR

         ANNEX VII         COMPANY PRINCIPAL'S AGREEMENT

         ANNEX VIII        SECURITY INTEREST AGREEMENT

         ANNEX IX          USE OF PROCEEDS<PAGE>
                                                                    EXHIBIT 10.2

                          REGISTRATION RIGHTS AGREEMENT

         THIS REGISTRATION RIGHTS AGREEMENT, dated as of May 26, 2005 (this
"Agreement"), is made by and between NEW VISUAL CORPORATION, a Utah corporation
with headquarters located at 305 NE 102nd Ave., Suite 105, Portland, OR 97220
(the "Company"), and each entity named on a signature page hereto (each, an
"Initial Investor") (each agreement with an Initial Investor being deemed a
separate and independent agreement between the Company and such Initial
Investor, except that each Initial Investor acknowledges and consents to the
rights granted to each other Initial Investor under such agreement).

                              W I T N E S S E T H:

         WHEREAS, upon the terms and subject to the conditions of the Securities
Purchase Agreement, dated as of May 26, 2005, between the Initial Investor and
the Company (the "Securities Purchase Agreement"; capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
Securities Purchase Agreement), the Company has agreed to issue and sell to the
Initial Investors the Debentures and the Warrants; and

         WHEREAS, the Debentures are convertible into shares of Common Stock
(the "Conversion Shares"; which term, for purposes of this Agreement, shall
include shares of Common Stock of the Company issuable in lieu of accrued
interest through the Maturity Date of the Debentures, as that term is defined in
and as contemplated by the Debentures) upon the terms and subject to the
conditions contained in the Debentures; and

         WHEREAS, the Warrant Shares may be issued upon the exercise of the
Warrants; and

         WHEREAS, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), with respect to the Registrable Securities (as defined
below);

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:

         1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:

                                       1
<PAGE>

         "Company Counsel" means Aboudi & Brounstein.

         "Effective Date" means the date the SEC declares a Registration
Statement covering Registrable Securities and otherwise meeting the conditions
contemplated hereby to be effective.

         "Held Shares Value" means, for shares of Common Stock acquired by the
Investor upon a conversion of a Debenture within the thirty (30) days preceding
the Restricted Sale Date, but not yet sold by the Investor, the principal amount
of the Debentures converted into such Conversion Shares; provided, however, that
if the Investor effected more than one such conversion during such thirty (30)
day period and sold less than all of such shares, the sold shares shall be
deemed to be derived first from the conversions in the sequence of such
conversions (that is, for example, until the number of shares from the first of
such conversions have been sold, all shares shall be deemed to be from the first
conversion; thereafter, from the second conversion until all such shares are
sold).

         "Increased Conversion Shares" means the good faith estimate of number
of shares which the Company anticipates will be issuable to the Holder as a
result of an adjustment to the Conversion Price resulting from the application
of Section 4(g) of the Securities Purchase Agreement.

         "Investor" means the Initial Investor and any permitted transferee or
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof and who holds Debentures or Registrable
Securities.

         "Other Issuable Shares" means (i) the Payment Shares, if any, issued or
issuable to the Holder as of the date of the filing of the Registration
Statement and any amendment thereto or any subsequent date, and (ii) the good
faith estimate of the Company of the number of the other Payment Shares or
Increased Convertible Shares, as the case may be, which the Company anticipates,
as of the date of the filing of the Registration Statement and any amendment
thereto, will be issuable to the Holder pursuant to the provisions of the
Transaction Agreements.

         "Payment Shares" means shares of Common Stock issued by the Company as
provided in Section 2(b) below.

         "Permitted Selling Shareholders" has the meaning ascribed to it in
Schedule 1 annexed hereto.

         "Permitted Suspension Period" means one or more periods aggregating not
more than fifty (50) days during any consecutive 12-month period during which
the Holder's right to sell Registrable Securities under the Registration
Statement is suspended, provided, however, that each of such periods shall
neither (i) be for more than twenty (20) days nor (ii) begin less than ten (10)
Trading Days after the last day of the preceding suspension period (whether or
not such last day was during or after a Permitted Suspension Period).

                                       2
<PAGE>

         "Potential Material Event" means any of the following: (i) the
possession by the Company of material information not ripe for disclosure in a
registration statement, which shall be evidenced by determinations in good faith
by the Board of Directors of the Company that disclosure of such information in
the registration statement would be detrimental to the business and affairs of
the Company; or (ii) any material engagement or activity by the Company which
would, in the good faith determination of the Board of Directors of the Company,
be adversely affected by disclosure in a registration statement at such time,
which determination shall be accompanied by a good faith determination by the
Board of Directors of the Company that the registration statement would be
materially misleading absent the inclusion of such information.

         "Register," "Registered," and "Registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the Securities Act and pursuant to Rule 415 under the Securities
Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the SEC.

         "Registrable Securities" means, collectively, the Conversion Shares,
the Warrant Shares, and the Other Issuable Shares.

         "Registration Statement" means a registration statement of the Company
under the Securities Act covering Registrable Securities on Form SB-2, if the
Company is then eligible to file using such form, and if not eligible, on Form
S-1 or other appropriate form.

         "Required Effective Date" means, initially, the Initial Required
Effective Date or the Increased Required Effective Date (as those terms are
defined below), as the case may be.

         "Required Filing Date" means the date as soon as practicable after the
Closing Date but no later than forty-five (45) days after the Closing Date.

         "Restricted Sale Date" means the first date, other than a date during a
Permitted Suspension Period (as defined below), on which the Investor is
restricted from making sales of Registrable Securities covered by any previously
effective Registration Statement.

         2. REGISTRATION.

         (a) MANDATORY REGISTRATION.

         (i) The Company shall prepare and file with the SEC, as soon as
practicable after the Closing Date but no later than the Required Filing Date, a
Registration Statement registering for resale by the Investor a sufficient
number of shares of Common Stock for the Initial Investors to sell the
Registrable Securities. Notwithstanding the requirement to register all
Registrable Securities, the Company's obligation to register the Registrable

                                       3
<PAGE>

Securities shall initially be satisfied by the registration of the Initial
Number of Shares to Be Registered (as defined below). The "Initial Number of
Shares to Be Registered" is a number of shares of Common Stock which is at least
equal to the sum of (x) one hundred fifty percent (150%) of the number of shares
into which the Debentures and all interest thereon through their respective
Maturity Dates would be convertible at the time of filing of such Registration
Statement (assuming for such purposes that all Debentures had been eligible to
be converted, and had been converted, into Conversion Shares in accordance with
their terms, whether or not such eligibility, accrual of interest or conversion
had in fact occurred as of such date) based on the Conversion Price in effect
on, or within three (3) Trading Days prior to, the date the Registration
Statement is filed (or subsequently amended), (y) the number of Warrant Shares
covered by the Warrants (assuming for such purposes that all the Warrants had
been eligible to be exercised and had been exercised for the issuance of Warrant
Shares in accordance with their terms, whether or not such eligibility or
exercise had in fact occurred as of such date), and (z) the number of Other
Issuable Shares as of the date of the filing of the Registration Statement or
any amendment thereto (provided, however, that for purposes of this provision,
the number of Other Issuable Shares shall not be greater than the number of such
shares which the SEC permits to be included in the Registration Statement).
Unless otherwise specifically agreed to in writing in advance by the Holder, the
Registration Statement (W) shall include only (1) the Registrable Securities,
(2) the shares issuable on exercise of warrants issued to the Placement Agent in
connection with the transactions contemplated by the Transaction Agreements, (3)
the shares of the Permitted Selling Shareholder listed on Schedule 1 annexed
hereto, and (X) shall also state that, in accordance with Rule 416 and 457 under
the Securities Act, it also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of the Purchased
Shares, exercise of the Warrants or issuances of Other Issuable Securities
covered by such Registration Statement to prevent dilution resulting from stock
splits, stock dividends or similar transactions.

         (ii) The Company will use its reasonable best efforts to cause such
Registration Statement to be declared effective on a date (the "Initial Required
Effective Date") which is no later than the earlier of (Y) five (5) days after
oral or written notice by the SEC that it may be declared effective or (Z)
ninety (90) days after the Closing Date.

         (iii) If at any time (an "Increased Registered Shares Date"), the
number of shares of Common Stock represented by the Registrable Securities,
issued or to be issued as contemplated by the Transaction Agreements, exceeds
eighty percent (80%) of the aggregate number of shares of Common Stock then
registered or sought to be registered in a Registration Statement which has not
yet been declared effective, the Company shall either

         (X) amend the relevant Registration Statement filed by the Company
         pursuant to the preceding provisions of this Section 2, if such
         Registration Statement has not been declared effective by the SEC at
         that time, to register the Increased Number of Shares to Be Registered
         (as defined below). The "Increased Number of Shares to Be Registered"
         is a number of shares of Common Stock which is at least equal to (A)

                                       4
<PAGE>

         the number of shares theretofore issued on conversion of the Debentures
         (including any interest paid on conversion by the issuance of
         Conversion Shares) and on exercise of the Warrants, plus (B) the sum of
         (x) one hundred fifty percent (150%) of the number of shares into which
         the unconverted Debentures and all interest thereon through their
         respective Maturity Dates would be convertible at the time of filing of
         such Registration Statement or amendment (assuming for such purposes
         that all Debentures, reduced by any previously converted Debentures,
         had been eligible to be converted, and had been converted, into
         Conversion Shares in accordance with their terms, whether or not such
         issuance, eligibility, accrual of interest or conversion had in fact
         occurred as of such date) based on the Conversion Price in effect on,
         or within three (3) Trading Days prior to, the date the amendment to
         the Registration Statement is filed, (y) the number of Warrant Shares
         covered by the unexercised Warrants (assuming for such purposes that
         all the Warrants, reduced by any exercised Warrants, had been eligible
         to be exercised and had been exercised for the issuance of Warrant
         Shares in accordance with their terms, whether or not such issuance,
         eligibility or exercise had in fact occurred as of such date), (z) the
         number of Other Issuable Shares as of the date of the filing of the
         Registration Statement or any amendment thereto (provided, however,
         that for purposes of this provision, the number of Other Issuable
         Shares shall not be greater than the number of such shares which the
         SEC permits to be included in the Registration Statement), or

         (Y) if such Registration Statement has been declared effective by the
         SEC at that time, file with the SEC an additional Registration
         Statement (an "Additional Registration Statement") to register the
         number of shares equal to the excess of the Increased Number of Shares
         to Be Registered (where the number of shares determined by clause (x)
         is based on the Conversion Price in effect on, or within three (3)
         Trading Days prior to, the date the additional Registration Statement
         (or any amendment thereto) is filed, over the aggregate number of
         shares of Common Stock already registered.

The Company will use its reasonable best efforts to cause such Registration
Statement to be declared effective on a date (each, an "Increased Required
Effective Date") which is no later than (q) with respect to a Registration
Statement under clause (X) of this subparagraph (ii), the Initial Required
Effective Date and (r) with respect to an Additional Registration Statement, the
earlier of (I) five (5) days after notice by the SEC that it may be declared
effective or (II) thirty (30) days after the Increased Registered Shares Date.

                                       5
<PAGE>

         (b) PAYMENTS BY THE COMPANY.

         (i) If the Registration Statement covering the Registrable Securities
is not filed as contemplated by this Agreement with the SEC by the Required
Filing Date, the Company will make payment to the Initial Investor in such
amounts and at such times as shall be determined pursuant to this Section 2(b).

         (ii) If the Registration Statement covering the Registrable Securities
is not effective by the relevant Required Effective Date or if there is a
Restricted Sale Date, then the Company will make payments to the Initial
Investor in such amounts and at such times as shall be determined pursuant to
this Section 2(b).

         (iii) The amount (the "Periodic Amount") to be paid by the Company to
the Initial Investor shall be determined as of each Computation Date (as defined
below) and such amount shall be equal to the Periodic Amount Percentage (as
defined below) of the Stated Value of the Holder's Purchased Shares for the
period from the date following the relevant Required Filing Date or the Required
Effective Date or a Restricted Sale Date, as the case may be, to the first
relevant Computation Date, and thereafter to each subsequent Computation Date
(each such period, a "Computation Period"). The "Periodic Amount Percentage"
means two percent (2) of the Purchase Price of all Debentures for each
Computation Period (and pro rata for any Computation Period which is less than
thirty [30] days). Anything in the preceding provisions of this paragraph (iii)
to the contrary notwithstanding, after the relevant Effective Date the Purchase
Price shall be deemed to refer to the sum of (X) the principal amount of all
Debentures not yet converted and (Y) the Held Shares Value. By way of
illustration and not in limitation of the foregoing, if the Registration
Statement is filed on or before the Required Filing Date, but is not declared
effective until seventy-five (75) days after the Initial Required Effective
Date, the Periodic Amount will aggregate five percent (5%) of the Purchase Price
of the Debentures (2% for days 1-30, plus 2% for days 31-60, plus 1% for days
61-75).

         (iv) Each Periodic Amount, if any, will be payable by the Company,
except as provided in the other provisions of the immediately succeeding
subparagraph (v), in cash or other immediately available funds to the Investor
on the third Trading Day after

         (A) with respect to Periodic Amounts for Computation Periods ending on
         or before the Effective Date, (i) the earlier of the Effective Date or
         the date which is one hundred eighty (180) days after the Initial
         Required Effective Date (the "First Specified Periodic Payment Date")
         and (ii) if relevant, the last day of each Computation Period after the
         First Specified Periodic Payment Date, and

         (B) with respect to all Periodic Amounts accruing after the Effective
         Date, the last day of the relevant Computation Period,

in each case, without requiring demand therefor by the Investor.

                                       6
<PAGE>

         (v) Notwithstanding the provisions of the immediately preceding
subparagraph (iv),

         (A) at the option of the Company, exercisable in its discretion on the
         date the Periodic Amount is due; provided, however, that the Company
         may exercise this discretion if, but only if the Effective Date is on
         or before the First Specified Periodic Payment Date and the
         Registration Statement covering the Payment Shares is then effective;
         or

         (B) at the option of the Investor, exercisable in its sole and absolute
         discretion by written notice to the Company at any time before the
         Periodic Amount is paid,

all or a portion of the Periodic Amount shall be paid by the issuance of
additional shares of Common Stock to the Investor ("Payment Shares") in an
amount equal to the Periodic Amount being paid thereby divided by the then
applicable Conversion Price; provided, further that the Delivery Date for the
Payment Shares shall be three (3) Trading Days after the date the Periodic
Amount is due (if the election is made by the Company) or after the Investor
gives the notice contemplated by clause (ii) of this subparagraph. The
provisions of Section 5(b)(i) of the Securities Purchase Agreement shall apply
to the delivery of the certificates of the Payment Shares based on the relevant
Periodic Amount.

         (vi) The parties acknowledge that the damages which may be incurred by
the Investor if the Registration Statement is not filed by the Required Filing
Date or the Registration Statement has not been declared effective by a Required
Effective Date, including if the right to sell Registrable Securities under a
previously effective Registration Statement is suspended or the shares of the
Company's stock are not listed on the Principal Trading Market, may be difficult
to ascertain. The parties agree that the amounts payable pursuant to the
foregoing provisions of this Section 2(b) represent a reasonable estimate on the
part of the parties, as of the date of this Agreement, of the amount of such
damages.

         (vii) Notwithstanding the foregoing, the amounts payable by the Company
pursuant to this provision shall not be payable to the extent any delay in the
filing or effectiveness of the Registration Statement occurs because of an act
of, or a failure to act or to act timely by the Initial Investor or its counsel.

         (viii) "Computation Date" means (A) the date which is the earlier of
(1) thirty (30) days after the Required Filing Date, the Required Effective Date
or a Restricted Sale Date, as the case may be, or (2) the date after the
Required Filing Date, the Required Effective Date or Restricted Sale Date on
which the Registration Statement is filed (with respect to payments due as
contemplated by Section 2(b)(i) hereof) or is declared effective or has its
restrictions removed or the shares of the Company's stock are listed on the
Principal Trading Market (with respect to payments due as contemplated by
Section 2(b)(ii) hereof), as the case may be, and (B) each date which is the
earlier of (1) thirty (30) days after the previous Computation Date or (2) the
date after the previous Computation Date on which the Registration Statement is
filed (with respect to payments due as contemplated by Section 2(b)(i) hereof)
or is declared effective or has its restrictions removed or the shares of the
Company's stock are listed on the Principal Trading Market (with respect to
payments due as contemplated by Section 2(b)(ii) hereof), as the case may be.

                                       7
<PAGE>

         (ix) Anything in the preceding provisions of this Section 2(b) to the
contrary notwithstanding, if, but only if, the Registration Statement is
declared effective within thirty (30) days following the Initial Required
Effective Date,

         (A) the provisions of Section 2(b)(i) shall not apply; and

         (B) the provisions of Section 2(b)(ii) shall not apply to the fact that
         the Registration Statement was initially declared effective after the
         Initial Required Effective Date;

and the Company will not have any obligation to pay any Periodic Amount to the
Investor with respect thereto; provided, however, that the provisions of Section
2(b)(ii) shall continue to apply to all other events described therein.

         3. OBLIGATIONS OF THE COMPANY. In connection with the registration of
the Registrable Securities, the Company shall do each of the following:

         (a) Prepare promptly, and file with the SEC by the Required Filing Date
a Registration Statement with respect to not less than the number of Registrable
Securities provided in Section 2(a) above, and thereafter use its reasonable
best efforts to cause such Registration Statement relating to Registrable
Securities to become effective by the Required Effective Date and keep the
Registration Statement effective at all times during the period (the
"Registration Period") continuing until the earlier of (i) the date when the
Investors may sell all Registrable Securities under Rule 144 without volume or
other restrictions or limits or (ii) the date the Investors no longer own any of
the Registrable Securities, which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;

         (b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement and the
prospectus used in connection with the Registration Statement as may be
necessary to keep the Registration Statement effective at all times during the
Registration Period, and, during the Registration Period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement;

                                       8
<PAGE>

         (c) Permit a single firm of counsel designated by the Initial Investors
(which, until further notice, shall be deemed to be Krieger & Prager LLP, Attn:
Samuel Krieger, Esq., which firm has requested to receive such notification;
each, an "Investor's Counsel") to review the Registration Statement and all
amendments and supplements thereto a reasonable period of time (but not less
than three (3) Trading Days) prior to their filing with the SEC, and not file
any document in a form to which such counsel reasonably objects;

         (d) Notify each Investor and the Investor's Counsel and any managing
underwriters immediately (and, in the case of (i)(A) below, not less than three
(3) Trading Days prior to such filing) and (if requested by any such person)
confirm such notice in writing no later than one (1) Trading Day following the
day (i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement is proposed to be filed; (B) whenever
the SEC notifies the Company whether there will be a "review" of such
Registration Statement; (C) whenever the Company receives (or a representative
of the Company receives on its behalf) any oral or written comments from the SEC
in respect of a Registration Statement (copies or, in the case of oral comments,
summaries of such comments shall be promptly furnished by the Company to the
Investors); and (D) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (ii) of any
request by the SEC or any other Federal or state governmental authority for
amendments or supplements to the Registration Statement or Prospectus or for
additional information; (iii) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any proceedings for that
purpose; (iv) if at any time any of the representations or warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated hereby ceases to be true and correct in all material respects; (v)
of the receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose; and (vi) of the occurrence of any event that to the
best knowledge of the Company makes any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. In addition, the Company shall communicate with the
Investor's Counsel with regard to its proposed written responses to the comments
contemplated in clause (C) of this Section 3(d), so that, to the extent
practicable, the Investors shall have the opportunity to comment thereon;

         (e) Furnish to each Investor and to Investor's Counsel (i) promptly
after the same is prepared and publicly distributed, filed with the SEC, or
received by the Company, one (1) copy of the Registration Statement, each
preliminary prospectus and prospectus, and each amendment or supplement thereto,
and (ii) such number of copies of a prospectus, and all amendments and
supplements thereto and such other documents, as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor;

                                       9
<PAGE>

         (f) As promptly as practicable after becoming aware thereof, notify
each Investor of the happening of any event of which the Company has knowledge,
as a result of which the prospectus included in the Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and use its best efforts promptly to prepare a supplement or
amendment to the Registration Statement or other appropriate filing with the SEC
to correct such untrue statement or omission, and deliver a number of copies of
such supplement or amendment to each Investor as such Investor may reasonably
request;

         (g) As promptly as practicable after becoming aware thereof, notify
each Investor who holds Registrable Securities being sold (or, in the event of
an underwritten offering, the managing underwriters) of the issuance by the SEC
of a Notice of Effectiveness or any notice of effectiveness or any stop order or
other suspension of the effectiveness of the Registration Statement at the
earliest possible time;

         (h) Comply with Regulation FD or any similar rule or regulation
regarding the dissemination of information regarding the Company, and in
furtherance of the foregoing, and not in limitation thereof, not disclose to the
Investor any non-public material information regarding the Company;

         (i) Notwithstanding the foregoing, if at any time or from time to time
after the date of effectiveness of the Registration Statement, the Company
notifies the Investors in writing that the effectiveness of the Registration
Statement is suspended for any reason, whether due to a Potential Material Event
or otherwise, the Investors shall not offer or sell any Registrable Securities,
or engage in any other transaction involving or relating to the Registrable
Securities, from the time of the giving of such notice until such Investor
receives written notice from the Company that such the effectiveness of the
Registration Statement has been restored, whether because the Potential Material
Event has been disclosed to the public or it no longer constitutes a Potential
Material Event or otherwise; PROVIDED, HOWEVER, that the Company may not so
suspend the right to such holders of Registrable Securities during the periods
the Registration Statement is required to be in effect other than during a
Permitted Suspension Period (and the applicable provisions of Section 2(b) shall
apply with respect to any such suspension other than during a Permitted
Suspension Period);

         (j) Use its reasonable efforts to secure and maintain the designation
of all the Registrable Securities covered by the Registration Statement on the
Principal Trading Market and the quotation of the Registrable Securities on the
Principal Trading Market;

                                       10
<PAGE>

         (k) Provide a transfer agent ("Transfer Agent") and registrar, which
may be a single entity, for the Registrable Securities not later than the
initial Effective Date;

         (l) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the Registration Statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts as the case may be, as the Investors may reasonably
request, and, within five (5) Trading Days after a Registration Statement which
includes Registrable Securities is ordered effective by the SEC, the Company
shall deliver, and shall cause legal counsel selected by the Company to deliver,
to the Transfer Agent for the Registrable Securities (with copies to the
Investors whose Registrable Securities are included in such Registration
Statement) an appropriate instruction and opinion of such counsel, which shall
include, without limitation, directions to the Transfer Agent to issue
certificates of Registrable Securities(including certificates for Registrable
Securities to be issued after the Effective Date and replacement certificates
for Registrable Securities previously issued) without legends or other
restrictions, subject to compliance with applicable law and other rules and
regulations, including, without limitation, prospectus delivery requirements;

         (m) Take all other reasonable administrative steps and actions
(including the participation of Company counsel) necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities pursuant to
the Registration Statement; provided, however, that the foregoing does not
require that the Company take any steps whatsoever regarding the identification
or selection of a broker to sell the Registrable Securities, the identification
of buyers of the Registrable Securities, or the negotiation of the sale terms of
the Registrable Securities; and

         (n) Not file any other registration statement (other than the
Registration Statement and amendments thereto) during the period commencing on
the Closing Date and ending on the Effective Date.

         4. OBLIGATIONS OF THE INVESTORS. In connection with the registration of
the Registrable Securities, the Investors shall have the following obligations:

         (a) Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement; and

         (b) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f), (g)
or (i) above, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(f), (g) or (i),
and, if so directed by the Company, such Investor shall deliver to the Company
(at the expense of the Company) or destroy (and deliver to the Company a
certificate of destruction) all copies in such Investor's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice.

                                       11
<PAGE>

         5. EXPENSES OF REGISTRATION. All reasonable expenses (other than
underwriting discounts and commissions of the Investor) incurred in connection
with registrations, filings or qualifications pursuant to Section 3, but
including, without limitation, all registration, listing, and qualifications
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company shall be borne by the Company. In addition, a fee for a single
counsel for the Investors (as a group and not individually) equal to $4,500 for
the review of each Registration Statement and $2,000 for the review of each
post-effective amendment to a Registration Statement shall be borne by the
Company.

         6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:

         (a) To the extent permitted by law, the Company will indemnify and hold
harmless each Investor who holds such Registrable Securities, the directors, if
any, of such Investor, the officers, if any, of such Investor, and each Buyer
Control Person (each, an "Indemnified Party"), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act,
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise,
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in the Registration Statement, or
any post-effective amendment thereof, or any prospectus included therein: (i)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereof or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
the final prospectus (as amended or supplemented, if the Company files any
amendment thereof or supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the statements
made therein, in light of the circumstances under which the statements therein
were made, not misleading or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation under the Securities Act, the Exchange Act or any state
securities law (the matters in the foregoing clauses (i) through (iii) being,
collectively referred to as "Violations"). Subject to clause (b) of this Section
6, the Company shall reimburse the Investors, promptly as such expenses are
incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a) shall not (I) apply to
any Claim arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company by or on
behalf of such Indemnified Party expressly for use in connection with the
preparation of the Registration Statement, any such amendment thereof or

                                       12
<PAGE>

supplement thereto or prospectus, if such prospectus (or supplement or amendment
thereto) was timely made available by the Company pursuant to Section 3(b)
hereof; (II) be available to the extent such Claim is based on a failure of the
Investor to deliver or cause to be delivered the prospectus made available by
the Company or the amendment or supplement thereto made available by the
Company; (III) be available to the extent such Claim is based on the delivery of
a prospectus by the Investor after receiving notice from the Company under
Section 3(f), (g) or (i) hereof (other than a notice regarding the effectiveness
of the Registration Statement or any amendment or supplement thereto), or (IV)
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld or delayed. The Investor will indemnify the Company and
its officers, directors and agents (each, an "Indemnified Party") against any
claims arising out of or based upon a Violation which occurs in reliance upon
and in conformity with information furnished in writing to the Company, by or on
behalf of such Investor, expressly for use in connection with the preparation of
the Registration Statement or the amendment or supplement thereto, subject to
such limitations and conditions as are applicable to the indemnification
provided by the Company pursuant to this Section 6. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
the Indemnified Party and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.

         (b) Promptly after receipt by an Indemnified Party under this Section 6
of notice of the commencement of any action (including any governmental action),
such Indemnified Party shall, if a Claim in respect thereof is to be made
against any indemnifying party under this Section 6, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume control of the defense thereof with counsel satisfactory to the
indemnifying party (provided such counsel shall not have a conflict of interest
with the Indemnified Party and provided that all defenses available to the
Indemnified Party can be maintained without prejudicing the rights of the
indemnifying party). In case any such action is brought against any Indemnified
Party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified,
assume the defense thereof, subject to the provisions herein stated and after
notice from the indemnifying party to such Indemnified Party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
Indemnified Party under this Section 6 for any legal or other reasonable
out-of-pocket expenses subsequently incurred by such Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation, unless the indemnifying party shall not pursue the action to its
final conclusion. The Indemnified Party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and reasonable out-of-pocket expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel as provided above. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Party under this Section 6, except to the extent
that the indemnifying party is prejudiced in its ability to defend such action.
The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable; provided, however, that the Investor shall not obligated to make any
indemnification payment to the Company under this Section 6 unless and until
there has been a final adjudication of liability on the part of the Investor.

         7. CONTRIBUTION. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; PROVIDED,
HOWEVER, that (a) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any seller of Registrable
Securities who was not guilty of such fraudulent misrepresentation; and (c)
except where the seller has committed fraud (other than a fraud by reason of the
information included or omitted from the Registration Statement as to which the
Company has not given notice as contemplated under Section 3 hereof) or
intentional misconduct, contribution by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.

         8. REPORTS UNDER SECURITIES ACT AND EXCHANGE ACT. With a view to making
available to Investor the benefits of Rule 144 promulgated under the Securities
Act or any other similar rule or regulation of the SEC that may at any time
permit Investor to sell securities of the Company to the public without
Registration ("Rule 144"), the Company agrees to:

         (a) make and keep public information available, as those terms are
understood and defined in Rule 144;

         (b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and

         (c) furnish to the Investor so long as the Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the Securities Act
and the Exchange Act, (ii) if not available on the SEC's EDGAR system, a copy of
the most recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company and (iii) such other information as may be
reasonably requested to permit the Investor to sell such securities pursuant to
Rule 144 without Registration; and

                                       14
<PAGE>

         (d) at the request of any Investor holding Registrable Securities (a
"Holder"), give its Transfer Agent instructions (supported by an opinion of
Company counsel, if required or requested by the Transfer Agent) to the effect
that, upon the Transfer Agent's receipt from such Holder of

         (i) a certificate (a "Rule 144 Certificate") certifying (A) that the
         Holder's holding period (as determined in accordance with the
         provisions of Rule 144) for the shares of Registrable Securities which
         the Holder proposes to sell (the "Securities Being Sold") is not less
         than (1) year and (B) as to such other matters as may be appropriate in
         accordance with Rule 144 under the Securities Act, and

         (ii) an opinion of counsel acceptable to the Company (for which
         purposes it is agreed that the initial Investor's Counsel shall be
         deemed acceptable if not given by Company Counsel) that, based on the
         Rule 144 Certificate, Securities Being Sold may be sold pursuant to the
         provisions of Rule 144, even in the absence of an effective
         Registration Statement,

the Transfer Agent is to effect the transfer of the Securities Being Sold and
issue to the buyer(s) or transferee(s) thereof one or more stock certificates
representing the transferred Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such
shares on the Transfer Agent's books and records (except to the extent any such
legend or restriction results from facts other than the identity of the Holder,
as the seller or transferor thereof, or the status, including any relevant
legends or restrictions, of the shares of the Securities Being Sold while held
by the Holder). If the Transfer Agent reasonably requires any additional
documentation at the time of the transfer, the Company shall deliver or cause to
be delivered all such reasonable additional documentation as may be necessary to
effectuate the issuance of an unlegended certificate.

         9. ASSIGNMENT OF THE REGISTRATION RIGHTS. The rights to have the
Company register Registrable Securities pursuant to this Agreement shall be
automatically assigned by the Investor to any transferee of the Registrable
Securities (or all or any portion of any unconverted Purchased Shares) only if
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, (b) the securities with respect to which such registration rights are
being transferred or assigned, and (c) written evidence of the transferee's
assumption of the Investor's obligations under this Agreement.

         10. AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and Investors who represent a Majority in
Interest of the Holders as of the relevant date. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and the Company.

                                       15
<PAGE>

         11. MISCELLANEOUS.

         (a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.

         (b) Notices required or permitted to be given hereunder shall be given
in the manner contemplated by the Securities Purchase Agreement, (i) if to the
Company or to the Initial Investor, to their respective address contemplated by
the Securities Purchase Agreement, and (ii) if to any other Investor, at such
address as such Investor shall have provided in writing to the Company, or at
such other address as each such party furnishes by notice given in accordance
with this Section 11(b).

         (c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

         (d) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York for contracts to be wholly performed in
such state and without giving effect to the principles thereof regarding the
conflict of laws. Each of the parties consents to the exclusive jurisdiction of
the federal courts whose districts encompass any part of the County of New York
or the state courts of the State of New York sitting in the County of New York
in connection with any dispute arising under this Agreement and hereby waives,
to the maximum extent permitted by law, any objection, including any objection
based on FORUM NON COVENIENS, to the bringing of any such proceeding in such
jurisdictions.

         (e) The Company and the Investor hereby waive a trial by jury in any
action, proceeding or counterclaim brought by either of the parties hereto
against the other in respect of any matter arising out of or in connection with
this Agreement or any of the other Transaction Agreements.

         (f) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.

                                       16
<PAGE>

         (g) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.

         (h) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.

         (i) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.

         (j) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by telephone line facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.

         (k) The Company acknowledges that any failure by the Company to perform
its obligations under Section 3(a) hereof, or any delay in such performance
could result in loss to the Investors, and the Company agrees that, in addition
to any other liability the Company may have by reason of such failure or delay,
the Company shall be liable for all direct damages caused by any such failure or
delay, unless the same is the result of force majeure. Neither party shall be
liable for consequential damages.

         (l) This Agreement (including to the extent relevant the provisions of
other Transaction Agreements) constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       17
<PAGE>

                  IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.

                                            INITIAL INVESTOR:

                                            ------------------------------------
                                            [PRINT NAME OF INITIAL INVESTOR]

                                            By: ________________________________
                                            Name: ______________________________
                                            Title: _____________________________

                                            COMPANY:
                                            NEW VISUAL CORPORATION

                                            By: ________________________________
                                            Name: ______________________________
                                            Title: _____________________________

                                       18
<PAGE>
<TABLE>
<S>  <C>

                                        SCHEDULE 1

                                               SHARES WHICH MAY BE INCLUDED IN
"PERMITTED SELLING SHAREHOLDER"                REGISTRATION STATEMENT
-------------------------------------------    --------------------------------------------

The Selling Shareholders named in the          Any shares included in such Registration
Company's Registration Statement on Form       Statement which are have not been resold by
SB-2 which was declared effective in August    the PermittedSelling Shareholder
2004 (as the same may be amended, but not
to add any additional shares thereto)
-------------------------------------------    --------------------------------------------
                                               SHARES ISSUABLE ON CONVERSION OF SERIES 03-2
                                               7% CONVERTIBLE DEBENTURES (INCLUDING ACCRUED
                                               INTEREST PAID IN SHARES OF COMMON STOCK IN
                                               ACCORDANCE WITH THE DEBENTURES) AND RELATED
                                               WARRANTS (NOT PREVIOUSLY REGISTERED):
Wayne Saker                                       736,666
Yokim Asset Management Corp.                      736,666
Alpha Capital AG                                1,473,334
David Klugmann Associates, Inc. Plan              736,666
Inglewood Holdings Ltd.                           736,666
Gross Foundation, Inc.                            736,666
                                               PLUS, for each of them any "Payment Shares"
                                               (as defined in the Registration Rights
                                               Agreement, dated as of December 31, 2003,
                                               between the Company and such Selling
                                               Shareholder), if any, issued or issuable as of
                                               the filing of the Registration Statement (or
                                               any amendment) and not included in the
                                               preceding item on this schedule
-------------------------------------------    --------------------------------------------
Clearview International Investments Limited    233,334 shares issuable on exercise of
                                               warrants (not previously registered)
-------------------------------------------    --------------------------------------------
Holders as of the Closing Date of outstanding  The shares of Common Stock issuable on
shares of the Company's Series B Preferred     conversion of such Series B Preferred Stock
Stock                                          (including dividends thereon paid in shares of
                                               Common Stock in accordance with the
                                               Certificate of Designations for such Series)
-------------------------------------------    --------------------------------------------
Advisor Associates, Inc.                       2,000,000 shares issued to the Selling
                                               Shareholder for services as a consultant to the
                                               Company
-------------------------------------------    --------------------------------------------
</TABLE>

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